Nepal - Engineering Education Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-5084-NEP MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 8.8 MILLION TO THE KINGDOM OF NEPAL FOR AN ENGINEERING EDUCATION PROJECT May 26, 1989 This document has a restrited distribution and may be used by recipients only in tbe perfonnance of their official dutes. Its contemts may not otherwise be disclosed witbout World Bank authorization.  CURRENCY EOUIVALENTS (At Appraisal October 1988) Currency Unit - Nepal Rupee (NRP) US$1 - NRP 24.3 NRP1 - US$0.041 Fiscal YeAr July 16 - July 15 School Year January - November/December Academic Year - Institute Of Engineering July - May Principal Abbreviations and Acronyms Used ADB - Asian Development Bank CIDA - Canadian International Development Agency IOE - Institute of Engineering SDC - Swiss Development Cooperation UNICEF - United Nations Children's Fund USAID - United States Agency for International Development  FOR OFFICIAL USE ONLY KINGDOM OF NEPAL ENGINEERING EDUCATION PROJECT Credit and Proiect Sumuary Borrower K Kingdom of Nepal Beneficiary Institute of Engineering (IOE) of Tribhuvan University Amount . SDR 8.8 Million (US $11.4 Million equivalent) Terms . Standard with 40 years maturity Financing Plan . (in US$ million) Government 2.11 Canadian International Development Agency (CIDA) 3.95 Swiss Development Cooperation (SDC) 8.53 IDA 11.40 Total 26.00 Economic Rate of Return: Not Applicable Staff Appralsal ReDort: Report No. 7555-NEP Map IBRD 21597 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disckosed without World Bank authorization  -1- MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECITTIVE DIRECTORS ON A PROPOSED CREDIT TO THE KINGDOM OF NEPAL FOR AN ENGINEERING EDUCATION PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Kingdom of Nepal for SDR 8,8 million (US$ 11.4 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and wo-.ld heip finance an engineering education project. The project would be cofinanced on a 8rant basis by the Canadian International Development Agency (CIDA) for US$ 3.95 million and the Swiss Development Cooperation (SDC) for US$8.53 million equivalent. IDA will act as the administrator for the SDC grant. 2. Background. Nepal is one of the poorest and least developed countries in the world. About 90% of Nepal's population lives in rural areas, with agriculture being the main source of livelihood. Per capita income is estimated at US$ 160 (1986), and health and education standards are below the average for South Asia. Life expectancy at birth is only about 53 years and infant mortality is high at about 135 per thousand. In the 2C years from 1965 GDP grew at an annual rate of 2.6% barely exceeding the 2.4% annual population growth rate. Prospects for significant increases in the per capita income are poor. Sustained longer term growth will depend on sound macroeconomic management, appropriate investments in social and economic infrastructure, continued efforts to improve public administration and increased investments in human resources development. 3. His Majesty's Government (HMG) has recognized the benefits of investments in education and skills development. As a result of Government's efforts the education system has expanded at all levels. The gross primary enrollment ratio has risen from 21% in 1972 to the current 83X Lower secondary enrollment has risen from 7X to 31% over the same period. Tnis augurs well for continued improvement in the literacy rate, currently about 35X compared to 5.3% in 1954. Low literacy among rural women, 16% in 1986, coupled with high school dropout rates for girls is a cause for concern. A lack of strategic planning for skilled labor needs has resulted in only 5% of university students studying agriculture and engineering. As a result, higher education, although growing rapidly, has not contributed the skilled workforce necessary for Nepal's technological advancement. In fact available indicators show that there are shortages of skilled labor, particularly in engineering. These shortages of trained engineers tend to thwart efficient and timely execution of development projects. Moreover, HMG has planned important investments in agriculture (irrigation projects), in electric power and infrastructure (including the rehabilitation of roads, water supply and storage facilities) and in the expansion of communication& and transport systems. These will require engineering personnel currently not available. 4. On the basis of available information on the labor market for engineering skills, the performance of the ec omy and the priorities for infrastructure investments, the effective demand for engineers and technicians is estimated to grow by about 4% per annum. The capacity of the Institute of  -2- Engineering (IOE) of Tribhuvar University to meet the projected demand is inadsquate. The IOE is the only Institute to provide engineering e*ucation in Nep.i. snd graduates about 300 techniciAns in a range of engineering subject. and aDout 55 civil engineers annually. This level of output, particularly of engineers, is insufficient to meet existing and projected demand and as a consequence Nepal remains dependent on foreign-trained engineers mostly financed by donors. Moreover, opportunities for Nepali students to obtain good-quality engineering training in neighboring countries are diminishing and becoming more costly. The nature of Nepal's development efforts, combined with technological change throughout the formal sector, requires that the spectrum of engineering skills available to the economy as well as the supply of engineers and technicians be increased. 5. Rationale for IDA Involvement. Past investments ln the IOE provide a basis for the expansion and further improvement of engineering education in Nepal. IDA has had a long association with the IOE and is in a unique position to provide continued support for expansion and institutional reforms initiated under the First and Second Education Projects (Credits 772-NEP and 1198-NEP). To date IDA has been the key donor in providing support for engineering education. Other donors are assisting with improving secondary education, expanding technical education and strengthening sector management. In addition, IDA and UNICEF are jointly supporting the expansion of primary education (Credit 1463-NEP), and IDA with USAID is financing the training of higher-level agricultural manpower (Credit 1534-NEP). 6. Project Objectives. The project is designed to: (a) expand IOE's enrollment capacity of the technician program from 1,370 to about 1,700 students and that of the engineering degree program from 360 to about 920 students through construction, rehabilitation and maintenance of facilities; (b) improve the quality of engineering education through training of staff, improving curricula, providing educational materials and raising admission and examination standards; and (c) improve IOE's management through strengthening the Office of the Dean, training managerial and administrative staff, developing a Management Information System and establishing a Manpower Development Unit. 7. Project Description. The project would: (a) finance a program of construction, rehabilitation and maintenance of facilities at the three IOE campuses, Pulchowk and Thapathali in Kathmandu and Pokhara in the Western Region; (b) finance staff development for about 125 teaching, support and administrative staff; (c) assist with the improvement of existing curricula and the development of new ones, which would include reforms of admission and examination standards; and (d) finance management development, including the strengthening and reorganization of the senior management structure, establishing executive and governing committees and training of managerial and administrative staff. The project, to be carried out over eight years, would finance civil works, furniture, equipment, training, experts, books and incremental maintenance, salaries ana services. The total cost of the project is estimated at US$ 26.0 million equivalent, with a foreign exchange component of US$ 17.8 million (68X). A breakdown of the costs and financing plan, with cofinancing, is shown in Schedule A. Amounts and methods of procurement and disbursement and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Nepal are given in schedules C and D respectively. A map is also attached. The Staff Appraisal Report No. 7555-NEP dated May 15, 1989 is being distributed separately.  -3- 8. Agreed Actions. The Government has agreed on the following key actions and policy changes. At negotiations, it provided evidence of: the establishment of maintenance teams, programs and budgets for each campus; the approval of changes in academic regulations pertaining to teaching load, leave and sabbatical; and, the approval of the new management organization of the IOE. During negotiations the Government agreed to: require applicants for the degree program to sit for a comon admission test by July 1993; carry out the management reorganization in accordance with a program and timetable satisfactory to the Association; and, incorporate academic regulations by July 31, 1993 that require students to pass the examination(s) of prerequisite courses before they are allowed to take follow-up courses. As conditions for credit effectiveness, the Government has agreed to establish the key positions in the new management organization of the three Associate Deans and appoint qualified staff to these positions by July 15, 1989; obtain formal agreements from the CIDA and SDC; and establish and staff the Project Implementation Unit by July 15, 1989. 9. Benefits. The project would assist the IOE to acquire the capacity to offer Bachelor of Science degree programs and certificate programs in Civil, Electrical, Electronics and Mechanical Engineering and in Architecture and Rural Planning and meet about 90% of the projected demand for engineers and technicians. With skills tailored to the particular needs of Nepal, these engineers and technicians wouijd be trained to design, operate, supervise and maintain the country's economic infrastructure and assets. A manpower unit would be established to improve manpower forecasting, training and deployment. The project would achieve cost savings for the economy by substituting locally trained engineers for higher paid expatriate ones. Moreover, unit training costs would be lowered by increasing class size and teaching loads and through better utilization of staff and facilities. 10. Risks. The major risk concerns the possibility of a flagging commitment within the Government to meaningful reforms of staff regulations, management, maintenance and accreditation procedures. To address this risk, the GoveLnment provided evidence during negotiations that it has approved such reforms. It also agreed to appoint key management staff by July 15, 1989. Because of the current impasse between India and Nepal oni reaching new agreements on trade and transit, it is possible that there may be delays and increased costs for this project. However, HMG is making every effort to resolve this issue, and the financial contingencies provided in the cost estimates for this project are expected to cover any cost increases caused by delays. 11. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D.C. May 26, 1989  -4. zSchdulg A Pap 1 EML IGINEERING EDUCATION PROJECT ESTMAEDCOSTS AND FINANCING PIA?' Estimated Costs Local Foreign Tot, --.---- (US$ million) .- A. Facilities DevelgIment: Pulchowk 3.45 6.38 9.83 Thapathal) 0.71 1.28 1 99 Pokhara 0.92 1.i 1.22 Subtotal /A 5.08 8.72 13.80 B. Staff and Curriculum DeveloRment: Pulchcwk 0,82 4.97 5.80 Thapathali 0.11 0.24 0.34 Pokhara