Colombia - Second Subsector Project For Primary Education

Document of The World Bank FOR OFFICLAL USE ONLY Repot No. P -4821-CO MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$100 MILLION TO THE REPUBLIC OF COLOMBIA FOR A SECOND SUBSECTOR PROJECT FOR PRIMARY EDUCATION November 21, 1988 This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENCY UNITS Currency Unit - Colombian Peso (Col$) Col$1.OO - US$0.0033 (July 1988) US$1.00 - Col$305.0O (July 1988) ABBREVIATIONS FONDO/MEN - Development Fund of the Ministry of Education HEN - National Ministry of Education FISCAL YEAR January 1 - December 31 SCHOOL YEAR February 1 - November 30 (September 1 - June 30,-in some regions)  FOR OFFICIAL USE ONLY COLOMBIA SECOND SUBSECTOR PROJECT FOR PRIMARY EDUCATION Loan and Project Sumnary Borrower: Republic of Colombia Beneficiarys Ministry of Education (MEN) Amount: US$100 million equivalent Terms: Payable in 17 years, including a 5-year grace period, at the Bank's standard Variable interest rate. Financing Plant Local Forei8n Total --- US$ Millions ------ Central Government 56.6 - 56.6 Departments 2.5 - 2.5 Municipalities 10.1 - 10.1 Bank 77.0 23.0 100.0 Total 146.2 23.0 169.2 Economic Rate of Returns Not Applicable Staff Appraisal Report: Report No. 7265-CO Maps IBRD 21089 Colombia This document has a restricted distrbution and may be used by recipients only in the performa |of their official duties. Its contents may not otherwise be disclosed without World Bank authorizati:i  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANE FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS 04 A PROPOSED LOAN TO THE REPUBLIC OF COLOMBIA FOR A SECOND SUBSECTOR PROJECT FOR PRIMARY EDUCATION 1. The following memorandum and recommenlation on a proposed loan of US$100.0 million equivalent to the Republic of Colombia is submitted for approval. The proposed loan would be repayable over a period of 17 years, including 5 years of grace at the Bank's standard variable interest rate, and would help finance a second subsector project for primary education. 2. Background. Over the past two decades, Colombia has experienced significant economic growth and recent performance has been strong, with a 5S increase in 1987. Social progress, aided by a decline in the population growth rate from 3.7? during 1964-78 to less than 1.8? during 1978-85, has also been steady. Nonetheless, the distribution of the benefits of growth remains highly skewed, and severe poverty continues to affect a quarter of the population. The Government recognizes that sustained growth with equity depends in significant degree on actions to raise the productivity and income-earning potential of the poor. Among supporting measures, the expansion and upgrading of education services, through appropriate policies of management and finance, is, in all likelihood, the most cost-effective. 3. Colombia's education system has grown impressively since the early 1960s. Enrollments in primary education (grades 1-5) doubled and the participation rate reached 902 (including over-aged children), divided about equally between males and females. Enrollments in secondary education (lower secondary, grades 6-8; upper secondary, grades 9-11) increased by a factor of six and incorporate nearly 502 of the age-group; and enrollments in higher education (universities and a few institutions offering programs at the subprofessional level) increased some fifteen-fold and cover about 102 of the age-group. The private sector contributed to this growth and accounts for 15S of primary, 40? of secondary and 60? of higher education enrollments. 4. Despite these quantitative gains, education in Colombia remains, by and large, of low quality; suffers from uneven development; and continues to face major obstacles. Though no nationwide achievement tests exist at the primary and secondary levels, results on secondary and university admissions examinations indicate that children are acquiring, on average, less than 40? of expected knowledge; primary participation rates as low as 602 are reported in some rural areas and only 20Z of rural (compared with 602 of urban) students complete the cycle; secondary education is still largely available only in urban areas. More positively, a revised rural primary curriculum, the Escuela Nueva, used in about half of rural schools by 1987, has proved effective in raising both student achievement and completion rates. Across the system, however, policies for resource use and management continue to conflict with objectives for improving quality and coverage of education. The personnel-related share (99?) in recurrent expenditures for primary and secondary education, and the central government share in total public expenditures (97?) at these levels are excessive; the costs per graduate are high owing mainly to frequent repetition (30? per year in the prima_-y cycle) and dropout (15? per year in the first four primary grades); mobilization of resources, both public and private, is  -2- inadequate to meet requirements; and the share of public resources available for basic education (primary and lower secondary) has suffered a modest decline over the past decade. Despite recent improvements in planning, weaknesses in budgeting, financial management, and program implementation reinforce inefficiencies in resource use. 5. A major objective of the Government that assumed power in 1986 is to raise the standard of living of the poor by, among other measures, improving and expanding access to basic social services, including education. Decentra- lization of responsibility for education, accompanied by administrative and financial strengthening of the municipalities, are important corollary priorities. The plan for educational development gives top priority to strengthening and expanding basic edrication. Corresponding adjustments in financing policies -- to improve the composition and use of recurrent resources, to increase the share of local financing in educational expenditures, and to raise investment levels -- are also proposed. 6. Rationale for Bank Involvement. The proposed project forms an integral part of the Bank's overall country strategy, which assigns priority to poverty alleviation investments and to improved efficiency in key sectors. The project not only supports increased investments in the education sector, but also addresses sector-specific issues of financing and management, including expenditure composition, central-local cost sharing and development of key sector institutions for planning, administration and evaluation. Bank involvement has been instrumental in the elaboration of key sector policies and tasks (many of which were jointly defined and documented in a recent sector review, Report No. 6587-CO of April 1987). The Bank has previously extended three loans for development of upper secondary education in Colombia. The proposed project is based on a fourth, and more recent loan (2192-CO), which expanded the Escuela Nueva program in primary education in rural areas. Lessons of implementation experience, which highlight needs to clarify project implementation responsibilities and simplify processes, to improve financial management and control and to strengthen support for central as well as decentralized implementation, are incorporated in the proposed project. 7. Proiect Obiectives. The main objectives of the proposed project, which focuses mainly on rural areas, are to improve resource management and mobilization for primary education, and to raise educational quality at this level while further expanding access to school-aged children. These objectives form the focus of a six-year investment program (1989-94) planned by the Government for the subsector. Specific policy targats for primary education aim to: increase (to 32) the share of recurrent expenditures for non-personnel items; reduce costs per graduate (by nearly 302); and increase local cost- sharing for primary education (from about 3? to 10? of school investments). In addition, the project would increase from about 20S to 35? the share of public education investment for the primary level during 1988-94, and direct 75? of investment for primary education to disadvantaged rural areas. 8. ProJect Description. The subsector project incorporates the planned investment program for primary education and consists of three main components. The policy component (23? of total costs) centers on measures to achieve improvements in resource use and mobilization. These include: (a) transfering about 5,000 vacant and excess urban teachers' posts to deficit (mainly rural), areas and providing incentives (housing loans and health insurance) to retain teachers in remote areas; (b) raising the share of non-personnel inputs in recurrent expenditures; (c) introducing a flexible student promotion policy to reduce repetition, dropouts and costs per graduate; (d) introducing a cost- sharing scheme for facilities upgrading to raise municipal and departmental  -3- contributions for investment to the targetted level, based mainly on additional revenues from a value added tax to be allocated to the municipalities; and (e) undertaking studies on the future financing of higher education, with emphasis on cost-recovery. The management development component (22 of costs) would finance consultant services and staff training to (a) complete an improved management information system and to strengthen planning and policy monitoring for education; (b) develop budgeting and financial management skills within the Ministry of Education (MEN) system; and (c) develop central technical support capacity and decentralized implementation capabilities, including municipal capacity for management of civil works to correspond with recen%. laws. The primary education development component (75? of costs) would provide financing for (a) provision of learning materials and school libraries for about 4,000 rural schools, and in-service training for about 20,000 rural teachers to introduce, or complete the introduction of, the Escuela Nueva program; and replacement of educational materials at about 25,000 rural schools; (b) basic school furniture for about 13,000 rural schools and upgrading of facilities for about 4,300 rural schools to support the new curriculum and improve access; (c) about 3.3 million textbooks, training for about 6,500 teachers, materials for about 30,000 classrooms, and furniture for about 2,100 schools to support an improved primary curriculum in marginal urban areas; and (d) a system to assess student achievement in .iimary education and a pilot project and study related to the future expansion and development of secondary education. 9. The MEN would be responsible for overall management of the project; experienced semi-autonomous entities (primarily the Banco Central Hipotecario) would generally be responsible for administering the civil works component; works would be carried out under contract by corstruction firms or individuals. The professional staff of existing project coordinating units at the center, including the National Executive Secretariat and the Development Fund of the MEN (FONDO/MEN), has been increased from about 13 to 30 to strengthen procurement, financial and implementation support capabilities. With these additions, and a new system for accounts introduced in September 1988, the MEN would have adequate capacity to manage the project. The total cost of the project is estimated at US$169.2 million, with a foreign exchange component of US$23 million (142). To facilitate project start-up, the project incorporates retroactive financing for eligible school investments incurred after June 1, 1988 and not exceeding US$5 million in value. A breakdown of costs and the financing plan are shown in Schedule A, and amounts and methods of procurement and of disbursements, in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Colombia are given in Schedules C and D, respectively. A map and the Staff Appraisal Report, No. 7265-CO, dated November 2, 1988, are also attached. 10. Actions Agreed: Annual reviews of progress would be conducted jointly by the Bank and the Government by September 30 each year. These reviews would aim to ensure appropriate investment levels for primary education overall and by department in light of available resources and implementation advances; they would include assessment of progress towards meeting the project's policy and institutional objectives as reflected in a letter on subsector policy and a related action plan, dated October 7, 1988, and signed by the Minister of Education. Based on these annual reviews, a detailed investment program for Bank approval would tnen be prepared by November 30 each year. Investment criteria and limits, guidelines and procedures for project implementation, as well as draft terms of reference for project studies, were reviewed by the Bank and incorporated in a project operating manual. The planning and project management components of the MEN's management information system would be introduced by December 31, 1989; the system for evaluating student achievement  - 4 - in primary education would be put in place by December 31, 1991, and results would be used to strengthen primary education; and directors with qualifications and experience satisfactory to the Bank would be maintained in the National Executive Secretariat and the FONDOIMEN throughout project implementation. As conditions for disbursement, the Government would provide evidence of completed project contracts between the HEN and participating departments in the case of provision of materials, furniture and teacher training, and among the HEN, the departments, and the municipalities in the case of provision of civil works. 11. Proiect Benefits. The project would raise the overall ecolomic and social prospects of Colombian youth by substantially improving the quality of primary education, particularly in rural areas where the completion rates for students should rise from 2O2 to 60S. The project's focus on improved use and mobilization of resources for primary education would not only contribute to long-term gains in efficiency and quality in the sector, but should also help to ensure the availability of adequate public resources for the videspread extension of basic education beyond the primary cycle. In addition, the planned improvements in sector management would help build decentralized plamning and implementation capacity, including municipal capacity to manage educational investments. 12. Project Risks. 'While the project counands a high level of coumitment, it faces a risk of implementation delays owing to the magnitude of planned investment and the addition of municipal participation in civil works. To reduce this risk. the build-up of implementation activities would be gradual, with investments peaking during the middle of implementation (years three through five) at about twice the current level. The central project management team and implementation responsibilities and processes have already been substantially strengthened, and management contracts with experienced semi- autonomous entities would be used to support the execution of civil works. There is a related risk that the cost-sharing ; krget established for the municipalities and the departments may prove difficult to achieve due to variations in financing capacity. To minimize this risk, targetted contributions have been conservatively e',timated, amounting to less than 102 of munir'-al revenues from the value-added tax, and would be continuously monitored. 13. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the executive Directors approve the proposed loan. Barber B. Conable President Attacbments Washington, D.C. November 21, 1988  -5- COLOMIA SECOND SUBSECTOR PROJECT 101 PRIMARY EDUCATION Estimated Costs and Financins Plan Estimated CostsslI 21 Local ForeiRn Total -------- US$ Millions -------- Policy Component Teacher Salaries & Incentives 34.0 - 34.0 Studies 0.1 - 0.1 Subtotal 34.1 - 34.1 Management Development Component Staff Training and Technical 1.1 0.1 1.2 Assistance Studies 1.1 0.0 1.1 Subtotal 2.2 0.1 2.3 Primary Education Development Component Materials 11.7 3.9 15.6 Teache: Training 2.2 0.1 2.3 Furniture 40.6 5.0 45.6 Classroom Upgrading 31.2 10.4 41.6 Studies and Testing 2.5 0.1 . 2.6 Subtotal 88.2 19.5 107.7 Total Base Cost 124.5 19.6 144.1 Physical Contingencies 5.0 0.8 5.8 Price Escalation 16.7 2.6 19.3 Total Prolect Cost 146.2 23.0 169.2 1/ Exclusive of taxes and duties, vhich are negligible. 2/ Figures rounded. Financing Plant Local Foreign Total ------- USs Millos -------- Central Government 56.6 - 56.6 Departments 2.5 - 2.5 Municipalities 10.1 - 10.1 Bank 77.0 23.0 100.0 Total 146.2 23.0 169.2  -6- SCHEDULE 5 COLCSISX SOCOUD SUISUOTOR PIOJUCT FOR PRIEmA ZDDCATION METHOD it AND DISIURSNMYB (US$ Millions) Procurement Method Total Project Element ICB LCB Other N.A. Cost 21 Civil Works 50.2 50.2 (27.4) (27.4) Materials and Furniture 39.1 33.0 72.1 (35.2) (29.7) (64.9) Consultant Services 8.5 8.5 and Training (7.7) (7.7) Teacher Salaries and 38.4 38.4 Incentives (0.0). (0.0) Total 39.1 83.2 8.5 38.4 169.2 (35.2) (57.1) (7.7) (0.0) (100.0) _/ Numbers in brackets reflect Bank financing. 2/ Including contingencies, rounded. Disbursements (US$ Millions) Category Amount Percentage Civil Works 23.5 55S Furniture and Materials 60.0 1OOS foreign, 901 local Training 3.7 1002 foreign. 90? local Technical Assistance 4.1 1OOZ foreign, 90S local Unallocated 8.7 Estimated Bank Disbursements: BANK FISCAL YER 1989 1990 1991 1992 1993 1994 1995 1996