China - Vocational and Technical Education Project

Document of The World Bank FOR OFFICIAL USE ONLY R.won No. 7672-CHA STAFF APPRAISAL REPORT CHINA VOCA"IONAL AND TECHNICAL EDUCATION PROJECT MAY 15, 1989 Population, Human Resources Urban Development end Water Supply Operptions Division Country Departmentt111 Asia Regional Office This document has a restricted clistribution and may be used by reipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorzation.  CURRWNC US$1.0 - Yuan (Y) 3.7 Yl - us$ 0.27 (May 1989) January 1 - December 31 ACADEMIC YEAR September 1 - August 31 ABBREVIATIONS FILO - Foreign Investment and Loan Office FRG - Federal Republic of Germany GSS - General Secondary School MEdC - Municipal Education Commiss. - MOL - Ministry of Labor PEdC - Provincial Education Commission PIO - Project Implementation Office PPI - Proposed Project Institution R&D - Research and Development SEdC - State Education Commission SOE - Statement of Expenditure STS - Secondary Technical School SVS - Secondary Vocational School SWS - Skilled Workers School TA - Technical Assistance TTC - Technical Teacher Training College TTD - University Technical Teacher ':raining Department UBE - Universal Basic Education VTC - Vocational Training Center VTE - Vocational and Technical Education GLOSSARY Key Provinces: Municipalities of Beijing, Shanghai and Tianjin, and Provinces of Jiangsu and Liaoning are called Key Provinces in this report.  aL _ t,, ,AL L UNILY CHINA VOCATIONAL AND TECHNICAL EDUCATION PROJECI STAFF APPRAISAL REPORT Table of Contents Page No. BASIC DATA ......................................................... . ...... iv CREDIT AND PROJECTSUAY .......................................... v I. VOCATIONAL AND TECHNICAL EDUCATION SYSTEM .................. 1 A. Overview ................................................ 1 B. Secondary Vocational and Technical Education ............ 2 Secondary Technical Schools ............................. 3 Skilled Workers Schools ................................. 3 Secondary Vocational Schools ............................ 3 Demand and Supply of VTE Graduates ...................... 3 C. Technical Teacher Training System ....................... 4 D. Vocational and Technical Education Research ............. 4 E. Issues in the Vocational and Technical Education System ...................................... 5 11tii7t4ninv rnf nA-il1i-4pq. 5 Availability of Equipment .................... .......... 5 Teacher Qualifications and Utilization .................. 5 School Administration ................................... 6 Curriculum. .......... 6 Industrial Liaison. 7 Manpower Forecasting. 7 F. Public Expenditure on Education. 7 G. Government Strategy and Objectives. 8 H. Bank Group Strategy. 8 I. Rationale for Bank Group Involvement. 9 J. Experience with Past Lending .. ......................... 10 This report is based on the findings of a preappraisal mission which visited China in October/November 1988 comprising M.H. You (mission leader and senior economist), R. Montague (architect), J. Stewart (technical educator and engineer-consultant), C. Yang (general educator-consultant), J.K. Lee (information system specialist-consultant), R. Ritchie (technical educator- consultant); and an appraisal mission which visited China in January/February 1989 comprising M.H. You (mission leader), J. Steward, C. Yang, and J.K. Lee. 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 disclosed without World Bank authorization.  - ii - PwN. II. THE PROJECT ............................................... 10 A. Project Objectives .................... 10 D. Project Component. 11 Vocational Training Cnters. 11 Technical Teacher Training Colleges and University... Technical Teacher Training Departmnts .15 VTE Research and Development Centrs .17 Training for Management of VTE System .18 Project Concentration on the Key Provinces .19 Project-Supported Improvements of VTE System 20 III. PROJECT COSTS. FINANCING. AND IMPLMENTAHION .23 A. Costs .23 Summary of Costs .23 Basis of Cost Estimates .24 Foreign Exchange Component .25 Contingency Allowances .25 B. Financing .25 Capital Costs .25 Operating Costs. 2 C. Implementationp. 2 Project Monitoring and Evaluation. 28 Status of Project Preparation .29 D. Procurement .29 E. Disbursements .31 F. Accounts ard Audits. 3 IV. BE_EFITS AND RISKS ..33 A. Benefits .33 B. Risks .34 V. AGREEMENTS REACHED AND RECOMMENDATIONS .34 LISTS OF TABLES IN MAIN REPORT 2.1 Vocational Training Centers - Enrollment Expansion Under Different Modes of Training 2.2 TTCs and TTDs - Enrollment Expansion Under Different Modes of Training 3.1 Summary of Project Costs by Component 3.2 Summary of Project Costs by Category of Expenditure 3.3 Overall Financing Plan by Category of Expenditure and Source of Funds 3.4 Procurement Arrangements 3.5 Disbursement Forecast  - iil - ANNEXES 1. The System for ProvLding Technieal/Vocational Education at the Secondary Level 2 YVocational and Technical Education System 3. basic Project Instit4tionx Data, VTCU, 1988 4. Technical Asistance Program 5. Basic Project Institutions Data, TTCs and TTDs, 1988 6. Projections of Vocatlonal and Technical .ubject Teacher Demand by Province, 1988-94 7. Plan for Establishing Research Centers 8. Project Concentration on Five Key Provinces 9. Project Costs by Component and Category of Expenditure 10. Government Administrative Structure for Project Implementation 11. Project Implementation Schedule 12. Kay Implementation Dates 13. Estimated Schedule of Project's First Year Activities 14. Project Monitoring Indicators 15. Selected Documents and Data Available in Project Files MAP IBRD No. 21582 - Location of the Project Institutes  - {v - CHIN VOCATIONAL AND TECHNICAL EDUCTION PROJECT Basic Data (1986) Population 1.06 billion Adult Literacy rate 80% (1987) Per capita income US$300 JA Education Lower Post PrimaXy secondary URRer secondary secondary Grades 1-5 or 6 7-9 10-12 13-16+ Enrollment (million) 132 41 8 4 Gross enrollment ratio (%) 107 52 16 4 Vocational and Technical Ecducation Subsector (1987) No. of TvpXe of institution institutions Enrollment Teacher Training Schools Technical Teacher Training College 12 16,400 Preservice Secondary Schools Secondary Technical Schools (STSs) 2,854 1,222,000 Skilled Workers Schools (SWSs) 3,548 1,040,000 Secondary Vocational Schools (SVSs) 8,381 2,676,000 ExRenditure on Education (1986) Total education expenditure as % of GNP: 2.8% Gov't education expenditure as % of total government expenditure: 11.4% Distribution of public recurrent exp. on education: Primary 33.0% Secondary 46.0% Higher 21.0% /a The 1988 World Bank Atlas.  -V VOCAT OALAD EHNCL DCATION Credit and ProietsGw_arvU Borr,over: People's Republic of China Ffletsrvsficiax: State Education Comission and Provincial/Municipal/ Government Amount: SDR 38.5 million (US$50.0 million) ITems: Standard with 35 year maturity Relending Terms: Annual interest rate of 2.5%, repayable over a period of 20 years, including a 5 year grace period Proiect Obiectives and Description: Project objectives are to expand and upgrade the secondary vocational and technical education (VTE) system and the technical teacher training syscem that provides teachers to secondary VTE schools. Thc project emphasizes improvements in the quality of the prLject institutions and institution building in the VTE system at all levels, concentrating on five highly industrialized provinces and municipalities. The project has four components: (a) assist 59 secondary VTE schools in 10 provinces and 3 municipalities to develop into vocational training centers (VTC) which would serve as models for further development of VTE; (b) assist 9 technical teacher training colleges (TTCs) and 3 university technical teacher training departments (TTDs) to expand enrollments and upgrade the quality of laboratory and workshop instruction; (c) establish a national and 2 region VTE research and development (R&D) centers to resee zh and recommend policy measures to improve the quality. efficiency, and cost- effectiveness of the VTE system and to develop inexpensive teaching materials and equipment for the VTE schools; and (d) improve the management capability of the VTE system. The proposed project would provide construction, instructional equipment, books and teaching materials, and related technical assistance (TA). Parallel financing (approximately US$7.0 m) by the Federal Republic of Germany (FRG) would finance equipment and TA required for the establishment of the R&D centers.  - vi - Benefits and Risks: The principal aneafit4 of the proposed project would be an improvement in the quality of VTE in China through an expansion in enrollment and improvement in quality and cost-effectiveness of the VTE schools selected to become MsCs; their subsequent wide demonstration effect throughout the project provinces and muricpalities; and enhanced planning and management capability in the VTE system, particularly through development of a sorely needed R&D capability concerned only with VTE. The project would have an especially strong impact on five heavily industrialized key provinces by concentrating 58% of the proposed Credit and the contributions of the Federal Republic of Germany (FRG) in those provinces. The major risk of the project would lie in the inexperience of provincial and municipal VTE authorities in the implementation of a Bank Group-financed project. Project implementation risks would be reduced considerably by the participation of the State Education Commission (SEdC) which is experienced in the implementation of six Bank Group-financed education projects. There is also a risk that over the long-term new project approaches may not be sufficiently replicated because of financial constraints in some provinces. Prospects for new forms of financing from industry vould be studied under the project. The Bank Group would support this work by synthesizing relevant lessons oL international experience.  *viL Estimated Cost: Local Foreign Total -- (US$ million) ------ Vocational Training C-nters (59) 28.6 20.0 48.6 Technical Teacher Training Colleges (9) and Departmnts (3) 10.9 8.9 19.8 Training for Management of VTE System 0.1 0.3 0.4 base Cost 3LZ 68 Physical Contingencies 3.7 2.8 6.5 Price Contingencies 7.4 1.3 8.7 Total IDA Financed Project Cost 0 7 AAA VTE R&D Centers (3) - FRG financed 1.5 5.5 7.0 Total Proiect Cost 52.. 291 Financing Plan: IDA 16.7 33.3 50.0 Government 34.0 0.0 34.0 FRC 1.5 5.5 7.0 Total 52.2 38.8 91.0 Estimated Disbursements: Bank FY 1990 1991 1992 1993 1994 1995 --------------- (US$ million) --- Annual 2.5 25.5 14.0 6.0 1.6 0.4 Cumulative 2.5 28.0 42.0 48.0 49.6 50.0 Economic Rate of Return: Not Applicable Note: Figures in parenthesis deaote the number of project institutions.  - 1 - CHINA VOCATIONAL. AND TECHNICAL EDUCATION PROJECT I. VOCATIONAL AND TECHNICAL EDUCATION SYSTEM A. Overview 1.1 The 'Compulsory Education Lawo of 1986 mandated universal basic education (UBE) through grade 9 in cities and coastal areas by 1990, in towns and villages with a medium level of develupment by 1995, and in more remote areas at a rate commensurate with their economic development. The additional impetus thus given to rapid expansion of the lower secondary school system (grades 7-9) will subsequently generate increased pressure for admission to upper secondary schools (grades 10-12). If the bulk of these applicants to upper secondary schooling were to be accommodated in general secondary schools (GSS), which prepare students for the national college entrance examination and do not equip students with specific skills useful for employment, the result would be great numbers of upper secondary school leavers who would be unable to gain admission to any form of higher education and who might experience difficulty in gaining employment. Yet at the same time, the national economy is experiencing serious shortages of manpower with technical skills. 1.2 The Government therefore has increasingly emphasized the development of secondary vocational and technical education (VTE) to provide the technical manpower required by the rapidly expanding national economy. This emphasis has resulted in a 3.13 m increase in VTE annual enrollment during 1980-87 from a base of 2.46 m in 1980. The Government's increasing emphasis on VTE is further evidenced in the following objectives of the Education Reform of 1985 (Annex 1): (a) to attain a goal of 502 of all entrants to upper secondary schooling in VTE by 1990 to meet the needs of social and economic development; (b) to link general education with the specialized courses in VTE; (c) to give "full play" to the initiatives of enterprises in developing VTE; and (d) to develop programs to correct the serious shortage of specialized teachers in VTE. 1.3 A World Bank sector report 1/ questioned the rationale for the unl.form 50Z VTE enrollment and examined in detail the financial implications of enrolling 50? of all upper secondary school students in China in VTE and l/ Technical/Vocational Education for China's Development, August 7, 1987 (Report No. 6789-CHA).  - 2 - concluded that the costs would be prohibitively high. The Government has since com to the same conclusion and is proceeding to increase the percentage of upper secondary school students enrolled in VTE at a more deliberate pace than required by the 1990 target, consistent vith the financial capabilities of the provinces and municipalities to fund the incremental costs of VTE, the existing differences in development of secondary education, and labor market requiremn ts among the various provinces and municipalities. 14 Human resource statistics available from the key industrial provinces indicate a serious shortage of technical manpower. For example, engineers and technicians comprise only 4.3Z of the five million employees in the machine building industry. In addition, there are imbalances among levels of technical manpower. For example, the current ratio of engineers to technicians in industry, 7:1, is almost the reverse of what is found in industrialized nations. In general, the skill level of Chinese workers is low. Among 40 m technical workers in China in 1986, low level skilled workers (grades 1-3 in an eight-grade scale) accounted for 71Z; middle level (grades 4-6), 26Z and high level (grades 7-8), only about 3!. This distribution is too skewed to the lower end of the skills spectrum to constitute a labor force commensurate with the nation's economic development objectives.2/ The Government has set the goal of training 8 m new technicians and skilled workers during the Seventh Five-Year Plan period (1986-1990). B. Secondary Vocational and Technical Education 1.5 The VTE system is designed to prepare secondary school students for employment, and consists of three types of schools (Annex 2): secondary technical schools (STSs); skilled workers schools (SWSs); and secondary vocational schools (SVSs). These schools accounted for about 40Z of the upper secondary school enrollment in i987. The VTE schools are operated and funded by a variety of types and levels of Government agencies and state enterprises. This diversity of sponsorship is due to the Government decision that individual provinces and municipalities and some larger enterp.,ises are primarily responsible for operating their own schools as a means of obtaining the required manpower. 1.6 The Central Government, however, plays no direct role in assuring that the supply of VTE graduates is commensurate with labor market demands at the local level. The SEdC, the Central Government's agency responsible for education and training, is concerned primarily with maintaining standards of quality of the VTE system, as it is for all forms of primary and secondary education. Because the responsibility for financing and operating VTE schools rests with the provincial and municipal governments, assisted in many instances by local enterprises, it is at these levels that decisions regarding increasing or decreasing enrollments in various specializations are made. Economic forecasting data are, however, provided by the Central Government to the provincial and municipal planning and education authorities as an aid in planning economic and manpower development. 2/ By comparison, the skill levels are represented in the United States labor force in the ratio of 10:57:33, respectively.  - 3 - 1.7 Secondary Technical Schools (STSs). The STS was originally designed to enroll mainly upper secondary graduates to be trained as cadres and technicians. These schools have recently been instructed by the State Education Coission (SEdC) to enroll mostly lower secondary graduates. Upper socondary programs are for two or three years, depending on the specialization, and lower secondary schools programs are three _o four years. The longer length of the lower secondary school courses is intended to provide a measure of the general education which the student would have received if he/she had enrolled in a GSS. Graduates of STSs are guaranteed employment and are assigned to jobs by the agency or enterprise that operates the school. Under the broad supervision of the SEdC, the schools are operated by the central technical ministries and their provincial and municipal bureaus, and provincial or municipal education commissions (PEdCs or MEdCs). In 1987, 1.22 m students were enrolled in 2,854 STSs. 1.8 Skilled Workers Schools (SWSs). The SWS is designed to produce middle level skilled workers at entry level, which encompasses grades two to four on an eight-grade scale. Applicants are generally lower secondary school graduates. Course durations are three years for lower secondary graduates and two years for upper secondary graduates. Graduates are well qualified in narrow skills and are guaranteed employment by the Ministry of Labor (MOL) which regulates admissions to conform to sponsored positions and provides overall supervision of the schools. The SWSs are managed by central technical ministries, provincial and municipal labor bureaus and large enterprises, with about half of their resources coming from enterprises. The schools have close linkages with employers and generally arrange substantial internships in the sponsoring industry for their students prior to graduation. In 1987, 1.04 m students were enrolled in 3,548 SWSs. 1.9 Secondary Vocational Schools (SVSs). The SVS is designed to produce middle level technicians and skilled workers. The SVSs have developed into two distinct types of schools: agricultural schools, and predominantly urban vocational schools. Most courses last three years, although some are for two years. Although graduates are not guaranteed employment, demand for admission is high and in some cities the ratio of applicants to admissions is seven to one. local education authorities under the guidance of SEdC usually operate these schools, but somie are operated by enterprises and some jointly by local technical bureaus and local education commissions. In 1987, 2.3 m upper secondary and 0.4 m lower secondary students were enrolled in 8,381 SVSs, a 16Z increase over the 1985 enrollment. The SVS system is expected to continue to be the fastest growing portion of the VTE program, as additional upper GSSs will be corverted into SVSs. 1.10 Demand and Supply of VTE Graduates. Labor market demands and the supply of STS and SWS graduates are maintained in an apparent balance as a result of the system of sponsorship and employment guarantees and the manpcwer forecasting methods employed. The numbers of students admitted to the STSs are determined on the basis of manpower estimates prepared through surveys of local enterprises or by industrial liaison committees, where they exist. The MOL regulates admissions to the SWS to conform to the numbers and types of positions that enterprises have agreed to sponsor. Because course durations range from two to four years in the STS and two or three years in the SWS, one year forecasts of demand have obvious limitations. Moreover, as the STS and  - 4 - SWS graduates are guaranteed employment in their specializations, manpower estimates that determine the volume of admissions to these schools tend to be conservative. This system protects against an over-supply, but evidences of under-supply abound. 1.11 The situation at the SVS level is dramatically different. Estimates of the types of specialized skills most likely to be needed in the local labor market are prepared in the same manner as above, but these estimates tend to be more optimistic and influenced by the national objective of increasing the percentages of secondary school students enrolled in VTE (para. ..2). As the SVS students are not given as intensive training in specializations as the STS and SWS students and many are in the service sectors, it is believed that the training in the SVS will make them adaptable to the labor market's needs and, although not guaranteed employment, they will be able to find employment in China's rapidly developing economy either in, or closely allied with, their fields of training. C. Technical Teacher Training System 1.12 The technical teacher training system of China consists of 12 technical teacher training colleges (TTCs) and technical teaciler training departments (TTDs) of various universities and normal colleges. The TTCs were established and are operated by PEdC/MEdC with the approval of the SEdC. National direction and coordination are provided by the SEdC and, in the case of the Tianjin TTC, also by the MOL. The TTC and TTD offer three types of programs: (a) training for specialized theory teachers in a four-year B.S. degree program; (b) two years of skill training leading to a certificate for laboratory and workshop instructors; and (c) inservice training, typically two years, for VTE teachers. In 1988, the TTCs, TTDs, and other higher institutions produced about 10,000 new specialized teachers and workshop instructors, corresponding to about 172 of the estimated annual requirements of the VTE system for specialized teachers. The technical teacher training system is in need of upgrading. As much as 65? of the course work is conducted in classrooms or lecture halls, largely due to serious shortage of trained teaching staff and appropriate instructional equipment and materials. D. Vocational and Technical Education Research 1.13 Until the " Education Reform" of 1985 (para. 1.2), VTE research in curriculum and other important issues related to VTE (paras. 1.15-1.23) was only conducted on policy by government sectors. Since then, some measures have been taken to develop VTE research, but the process is still in early stages. A Division of VTE has been established within the Acaaemy for Educational Research in Beijing with a professional staff of 13. Their activities have been concentrated on theoretical issues in VTE, rather than on operational research. The provinces and municipalities have established their Institutes for Educational Science, which thus far have displayed little interest in VTE and have not influenced VTE development in the provinces and municipalities. Consequently, at a time when the VTE system is beset Dy a host of growing problems, (paras. 1.15-1.24) the research capability to assist in the development of appropriate solutions to these problems is woefully inadequate.  -5- E. Issues in the Vocational and Technical Education System 1.14 The issues affecting the development of VTE in China were first identified by Bank staff in the VTE sector report (para. 1.3) and were later confirmed by the Bank preappraisal and appraisal missions. Discussions by these latter missions with officials of the SEdC, PEdCs, MEdCs, and each of the proposed project institutions revealed a keen awareness of the problems confronting the VTE system. The understanding of issues by these key officials, together with their avowed intentions to correct these shortcomings, constitutes a fertile environment for effective Bank Group assistance. 1.15 Utilization of Facilities. In all three types of VTE schools and in the TTCs and TTDs as well, a classroom is generally reserved for the exclusive use of one section of students, consistent with the present practice of scheduling all classroom activity in the mornings and all workshop/laboratory activizies in the afternoons. This practice results in an uneconomical use of space, as classrooms are vacant in the afternoons and workshops and laboratories are vacant in the mornings. Classroom, laboratory, and workshop periods need to be rescheduled to ensure the most efficient utilization of equipment and space. In some instances, if all rooms were fully utilized, the number of teaching spaces would be sufficient to accommodate planned increases in enrollments. 1.16 Availability of Equipment. The shortage of equipment that exists in all three types of VTE schools, TTCs, and TTDs is a more serious problem in the short-run than even the overall shortage of qualified teachers. In schools fortunate enough to have qualified teachers in adequate numbers, the teachers are unable to work to full potential because they lack necessary equipment. The percentage of required laboratory experiments and workshop exercises that can be performed with available equipment is reported to be about 50 to 60Z across the provinces. The availability of relevant equipment to enable students to conduct the full range of required laboratory experiments and to practice on workshop equipment is an absolute prerequisite for the development of the quality VTE system that China requires. 1.17 Teacher Qualifications and UTtilization. Teachers of general subjects are generally well-qualified, but many of the teachers of technical subjects and workshop instructors are much less qualified. This is especially true cf teachers in the SVSs that have been recently converted from GSSs; many have been transformed into technical teachers without adequate preparation. Strenuous efforts are being made to upgrade the technical capabilities of these teachers through inservice training programs, but the number of teacher who require such training far exceeds the capacity of existing programs. 1.18 The number of teachers, without regard to qualifications, employed in the VTE system appears to be more than adequate. Student-teacher ratios in the three types of VTE schools (paras. 1.7-1,9) are extremely low, ranging from 5:1 to 10:1, compared with international standards for these types of schools of about 14:1. Such low student-teacher ratios and low average weekly teaching hours result in uneconomical use -f teachers. Weekly teaching hours per teacher average only 6 to 8 in the STSs and SWSs, 8 to 10 in the SVSs and 4 to 6 in the TTCs and TTDs. In add4tion, the balance between general subject  teachers and specialized teachers is often not appropriate. The result is that general subject teaching is increased (Annex 2) or teachers with general subject qualifications are required to teach specialized subjects. In either case, the technical standards of the graduates suffer. 1.19 School Administration. Although dedicated to the task of improving the standards of their respective VTE schools, many of those in chargn of the recently converted SVSs are former GSS principals or vice-principals with no previous experience or training in VTE. These administrators require considerable training and practical experience to be able to carry out new responsibilities such as curriculum organization, selection of new technical teachers, employn3nt of workshop technicians, efficient use of workshops and laboratories, ,.nd liaison with industry. In particular, leadership is needed to generate and implement new ideas. The PEdC and MEdC therefore need to review the credentials and performance of the VTE administrators within their jurisdiction and to devise comprehensive training programs for those administrators identified as not having the appropriate qualifications and training. 1.20 The number of non-teaching staff in many VTE schools is very large; in some cases, greater than the teaching staff. Overall, in 1987 non-teaching staff comprised about 402-55Z of the total VTE staff, much higher than international standards (about 25Z). Also, in many schools the average salary of non-teaching staff is higher than that of teachers. The result is that the funds being provided by provincial and municipal governments are not channelled into the most important function of the schools: the teaching program itself. 1.21 Curriculum. In most countries, the foundation of all VTE is basic trade courses. Many of China's VTE schools place more emphasis on the service sector of industry, rather than on basic trade courses. This is due to the additional cost of basic trade courses and greater difficulty in recruiting qualified teachers. Specialized theory and practice courses, which typically represent about 50-70Z of the VTE curriculum (Annex 2), are much less uniform alxd standardized than the general education portion because they are developed from a variety of sources. Greater consistency in the content and interpretation of specialized courses would be achieved if teachers taught both the theory and related practical work or supervised practical work instruction. This, together with better design of courses by te3chers trained in methodology, would help to reduce the present variations in the standards of graduates among the provinces and municipalities. 1.22 Job descriptions in industry are narrow, requiring proficiency in a relatively few tasks. Curricula in all types of VTE schools are correspondingly narrow and, in varying degrees, are both the cause and result of the narrow job descriptions in industry. This narrow training reduces the flexibility of graduates to cope with innovation and technology changes and also reduces their mobility from one kind of job to another. The narrow curriculum also does not provide a sufficient base for the more advanced training which will be required as advanced technological processes are introduced into the future industries of China.  -7- 1.23 Industrial Liaison. Efforts are made in varying degrees by the provincial and municipal authorities to determine the needs of local industrial enterprises on a year to year basis in order to determine the number of students to be admitted to various fields of training offered by the local VTE school. A much broader effort is also required to ascertain whether the curriculum is appropriate to produce a graduate with all the skills that future employers would require. The need for improved linkages with industry is especially critical because of the narrowness of the training provided in typical VTE schools. Industrial liaison committees, which exist in one form or another at the national, provincial/municipal, and institutional levels, need to be strengthened to ensure that the school's curriculum is well- targeted to the actual needs of industry. Properly designed tracer studies of VTC graduates would produce the type and volume of data that would enable the VTE authorities to determine the degree to which their training matched employers' needs and would be of valuable assistance to the industrial liaison committees' deliberations on desired curricula changes. 1.24 Manpower Forecasting. The Labor Contract System, which will allow employment of workers on a contract basis, will have serious repercussions on the present system of determining admissions to the STS and SWS if it gains widespread adoption, as expected. The present sponsorship system would be undermined if sponsoring firms are not assured that STS and SWS graduates would remain employed in the spcnsoring firms. The MOL, which regulates admissions to the SWS completely on the basis of sponsorship (para. 1.8), would be most seriously affected. Employers of STS and SWS graduates could experience shortages of skilled workers if the graduates should transfer to another employer. This will produce a heightened demand for regional, longer term manpower forecasting, as opposed to the present short term forecast based upon individual firms' willingness to sponsor trainees. Such improved manpower forecasting will be possible only with the participation of broader based, more effective industrial liaison committees above, aided by the improved long range forecasting techniques to be introduced through the proposed project and to be adapted to the Chinese environment by the project R&D centers. F. Public Expenditure on Education 1.25 From 1980 to 1986, China increased public recurrent and capital expenditures for education by 152 and 21? per year, respectively. During the same period, the share of the total education expenditures (recurrent and capital) as a percent of the total national budget 3/ averaged 11.62. Education expenditures at all levels comprised only 1.82 of GNP in 1986, (almost constant during 1980-86), which is much smaller than those in other developing countries (about 41 - 52) and developed countries (62 or higher). The State Council recently proposed increases in the level of education expenditures that would increase education's share of GDP as follows: 1988, 3Z; 1990, 42; and 1995, 5Z. The People's Congress will review this proposal in March/April, 1989. In 1986, about 46Z of recurrent expenditures in education was allocated to secondary education. It is estimated that about 10 of the total secondary recurrent expenditures was allocated to VTE. Recurrent expenditures per VTE student in 1987 averaged about Y 876 (Y 480 for 3/ The national budget includes expenditures by the central, provincial, municipal and prefecture governments.  -8- SVS, Y 1,000 for SWS, and Y 1,200 for STS). and about Y 2.200 for TTC.4/ The costs of the VTE schools are kept high by low student-teacher ratios and low average weekly teaching hours (para. 1.18) and high proportion of administrative and support staff relative to teaching staff (para. 1.20). These issues will be futher explored in a seminar on education finance to be conducted in China in July, 1989, organized by the Bank Group and SEdC. G. Government Strategy and Objectives 1.26 The Government recognizes that the VTE sector is the weakest link in China's education system. The Seventh Five-Year Plan gives top priority to the development of the VTE sector, and the next plan is also expected to accord high priority to VTE. To alleviate the shortage of intermediary level manpower, the Education Reform of 1985 identified secondary VTE education as bearing a major burden in the preparation of technicians and skilled workers (para. 1.2). The Government has made several major policy changes to achieve its objectives in meeting the demand for technicians and skilled manpower. The policy changes include "training before empJoyment" as a principle which shifts responsibility for training from the enterprises to schools and individuals. In still another major policy change, the 1986 regulations on recruitment by state enterprises established standards for employment of persons through the "Labor Contract System." These standards allow the employment of workers, on a contract basis, using employment criteria based solely on the workers' skill levels. The reg lations are expected to create an upward spiral of demand for technical manpower, which will have a major impact on the development of VTE. The Government recognizes that success in development of VTE will be crucial in provIsion of trained technical manpower in quantities adequate to meet the requirements of China's growing economy. H. Bank Group Strategy 1.27 To date, the Bank Group has focused much of its attention in the education sector on higher education, in accordance with the Government's earlier priorities. Since the announcement of the wEducation Reform' in 1985, the Bank Group's lending strategy has evolved around three principal Government objectives: (a) to universalize nine-year basic education; (b) to expand upper secondary VTE enrollment; and (c) to improve the efficiency of current enrollment planning, job assignment, and management of higher education. The Bank Group's involvement in basic education began with the education component of the Garnsu Provincial Development Project and a sector report on the production and distribution of textbooks and preparation of a project in this area. The Bank Group has recently approved a Teacher Training Project (Credit 1908-CHA) to assist the Government in its effort to achieve UBE directed at the expansion and improvement of inservice training of lower secondary school teachers (73Z of teachers are currently unqualified). In addition, in view of pressing needs for scientific and professional manpower, the Bank Group will continue its strategy of further strengthening higher education through development of key research laboratories. 4/ Unit recurrent cost is average cost of 27 VTCs and 8 TTCs of the project.  -9- 1.28 The proposed first VTE project in China, as part of the Bank's lending strategy above, is designed to assist the Government in its efforts to expand and upgrade the VTE system to meet the growing demands for technical manpower. Under the *Compulsory Education Law' of 1986, local governments are responsible for achieving UBE and financing UBE and secondary VTE education. The Bank Group assistance is therefore directed at provincial and municipal governments, as in the teacher training project. However, as policies in VTE are decided and prescribed at the national level, planned actions leading to greater cost-efficiency and effective management would be instituted also at the national level. Hajor planned improvements in vocational and technical teacher qualifications and utilization, secondary VTE and technical teacher training curriculum, equipment and facilities utilization, and VTE management capabilities will be critical to achievi1ig increased cost-efficiency and responsiveness of the VTL system to changing needs in key economic sectors. 1.29 Accordingly, the Bank Group would focus its support on: (a) conversion of selected VTE schools to serve as vocational training centers (VTCs) which would become models for future development and investment in VTE; (b) improvement and expansion of technical teacher training institutions to help alleviate the shortage of trained technical teachers and to upgrade the level of teaching in VTE schools; (c) establishment of research and development (R&D) capabilities in VTE at national and regional levels; and (d) institution building, focusing on management, planning, pedagogy, curriculum development, student counseling, and coordination with industries/employers. I. Rationale for Bank Group Involvement 1.30 As part of its support to help China's success with its ongoing economic reforms, the Bank Group has identified the rapid growth and qualitative improvement of the VTE system as one of the critical elements for smooth progress in implementating the reforms. The Bank Group's extensive international experience in VTE, knowledge about the Chinese educational system through six education projects under implementation, and its recent policy dialogue through the VTE sector work (paras. 1.3 and 1.14) puts it in a unique position to l;elp the Government in its efforts to expand and improve the VTE system rapidly. Since VTE development is largely a provincial/ municipal responsibility, the Bank Group involvement will allow stronger coordination among governmental bodies, particularly SEdC, provincial/ municipal autnorities, and MOL, which will have their role to play in improving the quality of the VTE system and its responsiveness to changing skill needs.  - 10 - 1.31 Through this project, the Bank Group is beginning the development of a new strategy for supporting education in China. Previous projects implemented by SEdC have typically spread resources relativaly equally among provinces and municipalities. In a departure from these practices, the present project would focus on five highly industrialized provinces and municipalities (Liaoning, Jiangsu, Beijing, Tianjin and Shanghai), hereafter referred to as the key provinces, which will serve as models for VTE develop- ment and effective use of resources in the VTE system. J. Experience with Past Lending 1.32 Nine Bank Group-financed projects in China have supported education under three ministries. Six are being implemented through the SEdC. The first project, the University Development Project (Loan 2021/Credit 1167-CHA, US$200 m), assisted 28 major national universities in the fields of science and technology. It was approved in 1981 and was satisfactorily completed. The Project Completion Report (PCR) dated September 30, 1987 indicates that the project met its objectives of increasing enrollments and enhancing the quality of graduates in science and engineering, and helped to improve the quality of university management. Another project was approved in 1983 for the development of polytechnic and television education (1411-CHA, US$85 m). The Second University Development Project (Credit 1551-CHA, US$145 m approved in 1985) is helping to strengthen education in engineering, economics and finance in 35 universities. In 1986, the Ptovincial Universities Project was approved (Credit 1671-CHA, US$120 m) to expand enrollmenits and improve the quality and management of provincial higher education programs with special emphasis on teacher education programs in normal universities. Under the Ministry of Agriculture, Animal Husbandry and Fisheries, two loans/credits were extended in 1982 and 1984 for the development of professional agricultural manpower (Credit 1297-CHA, Loar 2444/Credit 1500-CHA, total US$144 m). A Rural Health and Medical Education Project approved in 1984 (Credit 1472-CHA, US$85 m) included about US$43 m for support of medical universities under the Ministry of Public Health. The Gansu Provincial Development Project approved in 1987 (Loan 2812/Credit 1793-CHA) has an education component (US$20 m) that will assist the province to meet cbjectives for the education reform. It is also the first operation specifically focussing on basic education, followed by a Teacher Training Project in 1988 (Credit 1908-CHA, US$50 m) to support UBE in 14 selected provinces and three municipalities. Implementation of the projects is satisfactory. Policy initiatives are being implemented as agreed and other quantitative and qualitative targets in ongoing projects are generally being achieved as scheduled by provincial and municipal education commissions. II. THE PROJECT A. Project Objectives 2.1 The objective of the proposed project is to assist the Government in its efforts tc expand and improve the secondary VTE system and thereby provide qualified manpower required for key economic sectors. Emphasis is on improving the quality of the VTE schools and teacher training systems and on  - 11 - institution building. The project would also focus on formulation and implementation of measures to make the VTE system more efficient, cost effective and responsive to changing manpower needs of the economy. The specific project objectives are to: (a) develop selected VTE schools to become 'centers of excellence" (VTCs) and to serve as models for other VTE schools in the provinces and municipalities in which they are located; (b) increase the output of urgently needed middle level technicians and skilled workers and qualified technical teachers; (c) upgrade the quality of the secondary VTE school system and related technical teacher training institutions; (d) establish a research and development (R&D) capability in VTE; and (e) strengthen the management capability of key VTE administrators in SEdC, PEdC, MEdC, and project institutions. B. Proiect Components 2.2 The proposed project would comprise the following components: (a) construction, laboratory and workshop equipment, library books and teaching materials, and related technical assistance (TA) for 59 VTCs, 9 TTCs, 3 TTDs, and 3 VTE R&D centers; and (b) TA to strengthen the management of the VTE system at all levels. Vocational Training Centers (VTCs) 2.3 Fifty-nine VTE schools, selected from the key STSs, SWSs and SVSs in 10 provinces and 3 municipalities (see Table 2.1), would be developed under the proposed prcject into VTCs with the following objectives: (a) to upgrade the q_ality of curricula, teaching, and laboratory and workshop exercises while increasing the numbers of graduates; (b) to serve as model for future development of the VTE institutions within the province or municipality where the VTCs would be located by demonstrating the effectiveness of the above improvements; and (c) to multiply the benefits of the better equipped laboratories and workshops by providing inservice training and extending facility use on a part-time basis to substantial numbers of students and their instructors in nearby VTE schools. 2.4 The VTCs would offer three types of training programs: (a) three-or four-year programs for lower secondary school graduates;  - 12 - (b) long-and short-term inservice training (one year or several months or weeks) for enterprise employees to upgrade their technical skills; and (c) part-time training of students and teachers from nearby VTE schools. 2.5 The proposed project institutions were selected on the basis of two distinctly different objectivest one was concerned with the long term; the other, the short term. Consequently, 31 VTCs would be concentrated in the five heavily industrialized provinces (key provinces) where demand for technically trained personnel is acute. Efforts in these areas are expected to produce an immediate impact upon the supply of skilled workers. One of the 10 VTCs to bs established in Liaoning Province would serve as an audio-visual center for the five key provinces by producing and distributing VTE audio- visual teaching aids. Conversely, 28 VTCs are proposed to be located among 8 provinces. While satisfying manpower needs within the area of the VTCs, they are intended to provide a demonstration role of the VTC as a model for center of excellence' and experience in VTC training to the provincial decision makers. Project provinces/municipalities were selected on the basis of the stage of development of their economies and education systems, their interest in and commitment to the VTC concept, commitment to project-supported measures to improve VTE systems (para. 2.29), ability to defray the incremental recurrent costs of the VTCs and to repay in foreign exchange their share of the proposed Credit. Within these parameters and the limitation imposed by the amount of the Credit, project institutions were selected by the SEdCs, PEdCs, and MEdCs on the basis of their ability to meet the following requirements: (a) strong leadership dedicated to the improvement of VTE; (b) sufficient development in terms of teaching staffs and facilities to be able to benefit fully from the project; (C) geographical location that would facilitate provision of inservice training to employees of enterprises and part-time training to students from nearby VTE schools; and (d) curriculum of training programs that would have a direct impact on the improvement of the labor force in the major economic sectors in the province or municipality. 2.6 With the assistance to be provided by the proposed project, the 59 VTE schools selected to become VTCs would be greatly improved over the typical VTE schools. All VTCs, unlike many VTE schools, would possess all the classrooms, laboratories, and workshops required by the curricula. Every VTC would be provided with a sufficient quantity of up-to-date equipment to enable students to perform all the laboratory experiments and workshop exercises prescribed by the curricula, as opposed to the low percentages in these activities in other VTE schools (para. 1.16). Because of the need for better trained teachers to utilize the more expensive and sophisticated equipment to be provided by the project, priority would be given to the participation of the VTC technical teachers in the project's extensive teacher upgrading programs (para. 2.11) and to the recruitment by VTCs of technical teachers from the expanded and upgraded technical teacher training (para. 2.12) to be provided by the project. The curricula would be updated and made more  - 13 - relevant to the needs of industry through the efforts of the proposed R&D centers (para. 2.17) and through the increased effectiveness of provincial and municipal industrial liaison committees concerned with VTE (para. 2.29(f)). The combination of all of these improvements--better facilities and equipment, better teachers, and better curricula--would produce graduates better able to perform the tasks required at present and eventually able to perform a wider variety of tasks than now required. 2.7 Quantitative Expansion. The proposed project would enable the 59 VTCs not only to improve the quality of their training programs but also to increase greatly the number of students to whom they could offer cuch improved training. Table 2.1 summarizes the present enrollments and planned expansion of the proposed VTCs under different modes of training (See Annex 3 for more details).  - 14 - Table 2 1 VOCATIONAL TRAINING CENTERS - ENROLLMENT EXPANSION UNDER DIFFERENT MODES OF TRAINING 1988 1994 province/ No. of Regular Inserv. Regular Inserv. municipality VTCr enroll- student enroll- student ment annual ment annual total total Beijing 8 5,294 5,989 8,890 13,985 Tianjin 2 1,539 166 2,400 1,920 Shanghai 2 862 0 2,000 440 Liaoning /a 10 6,991 1,256 11,430 4,524 Jiangsu 9 7,149 702 9,749 5,505 Key provinces subtotal 31 21,835 8,113 34.469 26.374 Annual increase 8.0% 22.02 Shandong 4 3,355 70 5,700 4,716 Hubei 6 4,903 160 6,160 2,105 Hunan 4 3,526 375 4,700 390 Zhejiang 2 1,323 477 2,200 1,240 Sichuan 6 3,785 1,599 6,620 2,765 Shaanxi 2 2,543 414 3,100 300 Fujian 2 1,227 0 1,770 300 Guangdong 2 1,468 699 2,100 2,490 Subtotal 28 22,132 3,794 32,350 14,306 Annual increase 7.02 25.02 Total 59 43,967 11,907 66,819 40,680 Annual increase 7.0% 23.OZ 5 Key provinces as Z of total 53Z 502 68Z 522 65Z La One of the 10 VTCs would serve the key provinces as an audio-visual center (para. 2.5). 2.8 The combined enrollments of students in the regular full-time programs of the 59 project VTCs would increase from 44,000 in 1988 to a planned 66,800 in 1994, a 522 increase. Both the existing and planned enrollments will be divided about equally between the key provinces and the other 8 provinces that comprise the network for future expansion of the VTC concept.  - 15 - 2.9 In addition, as part of the effort to utilize more fully the existing facilities and the equipment to be provided under the proposed proiect, these centers would expand the number of part-time training programs that enroll workers already employed in industry. The number of such inservice trainees is projected to increase from the present 11,900 to 40,700 annually in 1944. an increase of almost 2422. These programs would be mostly offered in the evenings. 2.10 Nearby VTE school students, together with their laboratory and workshop instructors, would perform laboratory experiments and workshop exercises in the VTCs under the tutelage of VTC instructors on equipment that is not available in their cwn schools. The program's objectives are to achieve a modest percentage increase, in the neighborhood of 202 to 602, in the experiments and workshop practices required by the curriculum that the visiting students wouid be able to perform. The experiments and workshop exercises would complement those performed in the visiting students' own schools, but in most cases would not be sufficient to meet 100Z of the curriculum requirements. Because of scheduling constraints VTCs are likely to have difficulties in accommodating much more than about 50Z of their full-time students enrollments. This would translate into an average of about five nearby VTE schools per VTC, with a total of about 21,200 students to receive instruction annuallly under this p.ogram in the VTCs. A detailed plan that would include daily schedules for the use of VTC laboratories and workshops by students from nearby schools would be prepared by each VTC principal by June 1990. These would be reviewed by the SEdC and representative samples would be forwarded to the Association for comment. 2.11 Technical Assistance. TA (Annex 4) would be included in the project to assist in upgrading the specialized knowledge, pedagogical and management skills of the VTC staff. Sixteen staff-months of international expert services would be provided to assist in the upgrading of the teaching staffs of all VTCs. Pedagogical experts in machine shop work, building construction trades, electrical technology, electronics, food processing, finance and accounting management, audio-visual technology and computer application would conduct week-long or month-long seminars in four strategically-located centers. With an average group size of 30 trainees, approximately 640 VTC staff are expected to benefit from this program. The project would also include two months' pedagogical courses to be offered to 840 VTC teachers. These courses would be taught by 298 local experts. In addition, approximately 1600 VTC staff would b, enrolled in one-year programs in pedagogy, and vocational specialization in the local TTCs, TTDs, and 330 and 55 supervisory staff (including TTC/TTD supervisors) would be provided with one and three months of management train- ing, respectively. Three hundred and sixty VTC practice instructors would be sent to factories and companies for two months for upgrading training in their specializations and practical knowledge. A substantial overseas training program would be included in the project to allow 86 teachers and supervisory staff to study for one year as visiting scholars in overseas universities to upgrade knowledge of their fields and to become more familiar with vocational training methodologies used in industrialized countries. Technical Teacher Training Colleges (TTCs) and University Technical Teacher Training DePartments (TTDs) 2.12 As the viability of the proposed VTC concept is heavily dependent upon an adequate supply of well-trained technical teachers, the proposed  - 16 - project would upgrade nine technical teacher training colleges (TTCs) and three technical teacher training departments (TTDs) in parallel with the conversion of the 59 project VTE schools into VTCs. Through the provision of additional facilities, instructional equipment, teaching materials, and TA, the proposed project would enable these institutions to complete 1002 of all labGratory experiments and workshop exercises prescribed by the curriculum, and to improve the quality of their instructional programs while greatly increasing their enrollments. Like the VTCs, the project TTCs and TTDs would aultiply the benefits of the better equipped institutions by extending their use to a substantial number of students under different modes of training. 2.13 Table 2.2 summarizes the present enrollments and planned expansion of the proposed TTCs and TTDs under different modes of training (see Annex 5 for more details). Table 2.2: TTCs and TTDs - ENROLLMENT EXPANSION UNDER DIFFERENT MODES OF TRAINING 1988 1994 Regular Inserv. Regular Inserv. enrollment student Enrollment student TTCs and TTDs Beijing United University, TTC 1,178 0 1,800 760 Dandong Normal College, TTD 400 400 700 440 Changzhou TTC 478 400 1.850 650 Tianjin TTC 1,277 500 1,200 730 Shanghai TTC 1,820 0 2,500 1,080 Key provinces Subtotal 5,153 1,300 8.050 3,660 Annual growth rate 82 192 Nanchang TTC 1,724 150 2,630 730 Hebsi TTC 1,001 60 2,320 500 Hunan TTC 445 50 1,500 500 Henan TTC 1,333 180 3,000 2,500 Jilin TTC 1,221 505 2,900 1,300 Zhejiang Engineering College (TTD) 329 33 400 280 Shandong Agr. Mech. College (TTD) 315 0 700 500 Subtotal 6,368 978 13,450 6 310 Annual Growth Rate 132 362 Total 11,521 2.278 21,500 9,970 112 282 Key Provinces as Z of total 45Z 57Z 372 372  2.14 Quantitative Expansion. With an annual growth rate of 8?, the regular student's enrollment in the TTD and TTCs in the five key provinces will increase from 5,200 in 1988 to 8,000 in 1994. The regular student's enrollment in 1994 in the TTCs and TTDs in the other seven project provinces will increase by 7,082 students with an annual growth rate of 13X. By completion of the project, enrollments in all project TTCs and TTDs will increase by 861 to a total enrollment of 21,500 in 1994. The capacity of inservice teacher training programs in the project TTCs and TTDs would be drastically increased. The TTCs in the fivs key provinces would expand their inservice training by two folds. In the other seven provinces, inservice teacher training would grow at a rate of 36Z annually and reach about 6,310 trainees by 1994. By opening their facilities to non-project TTCs and TTDs and other secondary VTE institutions in the vicinity, the project TTCs and TTDs would offer the benefit of using their advanced equipment to a substan- tial number of students and VTE teachers in the 12 provinces. The 12 project TTCs and TTDs would also provide training for the less developed provinces and minority regions by enrolling 'TE teacher trainees from those provinces and regions. The estimated such enrollment would be more than 5,000 annually by 1994. 2.15 Technical assistance would include a large overseas and domestic staff development program (Annex 4). The overseas program would comprise 7 study tours of about 20 days each to enable 16 VTE administrators to become familiar with the operation of similar institutio.as in industrialized countries and 42 scholarships of one year duration for university studies in the teachers' fields of specialization. The domestic training program would include participation by 314 teachiers in two months' pedagogical training courses and 401 teachers in one year university pedagogical training courses. In addition, 66 workshop instructors would receive two months of training in local industries. Sixty local experts would conduct 3-month management and pedagogy training courses. Seventeen foreign experts would visit China in one-month terms to conduct weekly or monthly seminars in management and pedagogy. VT! Research and Development (R&D) Centers 2.16 The objective of this project component is to develop an R&D capability that would address the problems besetting the VTE system (paras. 1.15-1.24), including uneconomical use of facilities and equipment, imbalances between teaching and ncn-teaching staff, and inadequate link with industry, and narrow and flexible curriculum. The proposed project would assist in the establishment of a national center to be located in Beijing as part of the Academy for Educational Research under the SEdC, a regional center on the campus of the Tianjin TTC under the MOL, and a regional center in Shanghai on a site to be determined. Each regional center would have ready access to the parent institution's laboratory and workshop equipment, but would have its own office space, office and research equipment, and research, adminiAtrative, and support staff. No new construction would be required, as the parent institutions would provide existing space to the centers. The project would provide the centers with office and specialized equipment, books and international periodicals, and related TA.  - 18 - 2.17 Roles and functions of the proposed national and regional R&D centers, areas of R&D activities, and division of specific responsibilities among the three centers are detailed in Annex 7. Major activities of the centers include reviewing with industry the desirability of broadening the curricula to increase the versatility of VTE graduates, and proposing measures and timing for accomplishing such revisions, where deemed desirable. The Steering Committee would be established in the national R&D center to ensure smooth and effective interagency coordination (Annex 7, page 3). The MOL would be an important member of the Committee, as it will be responsible for the administration of the regional R&D center in Tianjin. This center would provide several important services including job analysis, development of training programs and materials, and equipment studies (Annex 7, page 4). The directors of the three centers have been named. There are 13 and 35 researchers at the national and Tianjin regional R&D centers, respectively, tat no researcher has yet been appointed at Shanghai Regional RED center. The recruits are expected to come from university and college faculties, industry, ard fellows who have recent'y completed overseas training in some VTE special- izat'on. 2.18 The Federal Republic of Germany (FRG) has provided a commitment to provide parallel financing for the costs of equipment, local and overseas training, and foreign specialists required for the R&D centers to assume the roles and functions described in Annex 7. A FRG mission to China in April/May prepared terms of reference for the Steering Committee and detailed action plans for each R&D center. The agreement on the action plans by the Government of China, the FRG and the Association, and the completion of all necessary arrangements for the provision of the FRG grant would be the condi- tions for the Credit effectiveness. Detailed costing of the various elements of the program has not yet been completed, but the program is expected to amount to approximately US$7 m. Training for Management of VTE System 2.19 The primary objective of this proposed component is to improve the management capability of the VTE system at the national, provincial, municipal, and project institution levels. This component would concentrate on management principles and techniques applicable to the following functions and aim exclusively at the top VTE echelons at all levels: (a) VTE enrollment planning and statistical data processing and analysis; (b) VTE financial and personnel management; (c) evaluation of VTE curriculum in terms of changing skill requirements; (d) evaluation of VTE institutions and monitoring standards of VTE graduates; and (e) planning for physical facility and instructional equipment and utilization. 2.20 This project component would provide extensive local and overseas training programs for VTE administrators at all levels and specialist services. Under the domestic training program, 25 SEdC and PEdC/MEdC administrators, and 55 TTC/TTD administrators would be sent to selected local  - 19 - universities for three-month training courses covering various aspects of VTE management. Another 90 administrators selected from SEdC and PLdC/MEdC, and 330 administrators selected from the project institutions would participate in one-month seminars conducted by foreign management specialists (10 staff- months) on management skills at local universities. Fifty-four staff-months of local experts services would also be provided to SEdC, PEdCs/MEdCs, and the project institutions to assist them in modernizing VTE management. Under the overseas staff development program, month-long study tours would be organized for seven VTE managers in SEdC, 12 PEdC/MEdC administr-tors, and 16 selected TTC presidents and VTC principals to learn experiences of similar type of overseas' institutions in administration, financing, and utilization of facilities and equipment. In addition, six TTC/TTD and VTC administrators would be sent abroad for one-year study program to learn specifically modern management including VTE management information system. 2.21 The SEdC, PEdCs, and MEdCs have prepared detailed action plans including implementation timetables and TORs for the proposed TA for the VTCs, TTCs!TTDs, and VrE management'. These were discussed during negotiations, and the Govertment provided assurances that. it would carry out the TA programs (Annex 4) as agreed with the Association. Proiect Concentration oa the Key Provinces 2.22 Previous Bank Group-financed education projects in China provided assistance to institutions in a large number of provinces and municipalities to achieve a wide geographic effect. In a departure from this practice, it was decided to concentrate a major share of the proposed Credit in a limited number of provinces and municipalities to achieve a greater immediate impact that would stimulate a duplication effect. To be selected as a key province, each province or municipality had to: (a) be already heavily industrialized with an urgent need for greater numbers of trained technical personnel; (b) have a relatively well developed primary and secondary school system, and; (c) have the financial resources to make an early beginning in replicating the improvements in VTE agreed between the Government and IDA for the proposed project (para. 2.29), once these benefits have been demonstrated. 2.23 The selected key provinces satisfy the above criteria (Annex 8). They have greater percentages of their populations with higher educational achievements and, most importantly, have higher proportions of students in the lower and upper secondary school levels at which the proposed project is targeted. In each key province, the industrial sector dominates all other economic activities, ranging from 52Z to 732 of the national income. Their combined industrial output represents 33.8Z of China's gross value of industrial output. This level of industrial output helps to ensure that the key provinces have the financial resources to replicate the project improvements in VTE. 2.24 Thirty-one VTE schools would be converted into VTCs in the five key provinces to produce a significant increase in enrollment. Their combined enrollments in the regular programs are expected to rise from 21,800 in 1988 to 34,500 in 1994, an increase of 58Z. Inservice student enrollments are planned to increase about three fold during the same period. Of equal importance would be the higher standards of training that would result from the project and which would have wide demonstration effects. The major  - 20 - specialties to be assisted in the five key provinLes are machining, electrical installation and repair, electronics, chemical engineering, printing, computer technology, food processing, materials technology and accounting/financial management. 2.25 One of the 31 VTCs in the key provinces would serve as an Audio- Visual Center and would be established in Dalian, Liaoning province. This center provided with appropriate equipment and TA would develop educational audio and visual tape. based on the curriculum developed and tested by the R&D centers (para. 2.17) and disseminate them to the project institutions within the key provinces. 2.26 Each of the key provinces has its own TTC or TTD which it can regulate to keep pace with the expansion of the VTE system. These are included in the proposed project. Regular enrollments in these institutions are planned to increase from 5,200 in 1988 to 8,000 in 1994, a 56Z increase (Table 2.2). Enrollments in inservice study programs are expected to increase from 1,300 to 3,660, about twice more. Ifn addition to the provision of much needed instructional equipment, these institut`.ons would benefit from the upgrading of tha technical and pedagogical qualifications of their teaching staff that would be made possible by the large local and overseas training programs included in the TA portion of the proposed project (Annex 4). 2.27 The decision to locate the three proposed R&D centers in Beijing, Shanghai, and Tianjin lends further importance to these key provinces. The innovative concepts in VTE that would be conceived and developed in the R&D centers (Annex 7) would be tested in pilot projects in the 30 VTCs to be established and 5 TTCs/TTD to be upgraded in the key provinces. In addition, project-supported improvements in the VTE system, such as strengthening VTC ties with industry and improving the effectiveness of industrial liaison committees (para. 2.29(f)), would also be field tested in these industrial key provinces. 2.28 The concentration of such a large share of the proposed Credit and FRG contributions (about 592 of US$57.0 m equivalent in total external financing) in these five key provinces is expected to result in a significant increase in over a short period in the number of students enrolled in VTE. This allocation would direct resources where demand for better trained personnel is greatest. Morever, such concentration would produce an integrated package of relevant institutions and pilot projects - VTCs, TTCs and TTDs, R&D centers, and audio-visual center - that would result in a coordinated development of VTE in the key provinces. Expected success of the proposed project in the key provinces would generate wide demonstration effects not only for the key provinces but also other 12 project provinces. Project-Supported Improvements of the VTE System 2.29 The SEdC, project PEdCs and MEdCs have agreed to undertake during project implementation period (1989-94) the following measures to make the VTE system at all levels more efficient, cost-effective and responsive to changing needs:  - 21 - (a) to ensure that high utilization rates would be realized to make more effective use of facilities and instructional equipment, starting September 1990 the VTCs, TTCs, and TTDs would abandon the present practice of scheduling classes only in the mornings and laboratories and workshop activities in the afternoons (para. 1.15). Instead, all the activities would be scheduled in both mornings and afternoons throughout the school year. All non-project VTE schools would also implement the above measure by 1997; (b) the VTCs, TTCs and TTDs would be unable to fund from their present budget the additional recurrent costs incurred by participating nearby secondary VTE schools (para. 2.10) and others (para. 2.14) for maintenance, repair, and spare parts for the newly equipped laboratories and workshops. Arrangements to share these costs by assessing users' fees upon participating schools would be cumbersome and could result in lower rates of participation because of insufficient funds in participatIng schools. The participating provincial and municipal governments would increase the recurrent btudgets of VTCs, TTCs and TTDs to cover these additional costs, including foreign exchange as needed to purchase spare parts for imported equipment; (c) the SEdC, project provinces and municipalities would increase the minimum weekly teaching hours (para. 1.18) per VTC teacher to 12-14 hours (SWSs and STSs to 12 hours and for teachers in SVSs to 14 hours) by 1995. The measure will cover 4,700 of the project VTCs teachers in 1988 and about 6,000 in 1994. Similar increases would be applied to non-project VTE schools (338,300 teachers at 6,200 schools) by 1997. Consequently, the average student-teacher ratio at the project VTCs will be increased from the present 9:1 to 11:1 by 1995 and will reduce the demands on the technical teacher training system. The number of VTCs teachers needed to cater for the enrollment expansion of 52Z in the project provinces and municipalities will be an increase of only 30Z. The TTCs and TTDs would also increase the minimum weekly teaching hours per teacher from the present low average of only four to six hours (para. 1.18) to a minimum of 10 hours per teacher. This would increase the student-teacher ratio from the present 5:1 to 6:1, 5/ and the planned 862 increase in enrollments would require only a 482 increase in the number of teachers required; (d) the SEdC would establish by December 31, 1989 teacher qualification standards against which teachers in the project institutions would be evaluated by the PEdCs and MEdCs. These commissions have agreed to upgrade by 1993 all teachers in project institutions who do not meet the qualification criteria. Teachers in need of training in either pedagogy, technical specialization, or industrial experience, would be sent to short-term or long-term training courses as appropriate; (e) as an additional economy measure and to demonstrate to the other VTE schools the savingb that could be realized by a better balance 5/ This ratio dres not take into account the greatly increased inservice training (6.7 times) which is also taught by the VTC teachers.  - 22 - between the numbers of teaching and non-teachina personnel, the SEdC, project provinces and municipalities would reduce the current large number of non-teaching personnel in the VTCs, TTCs, and TTDs (para. 1.20). An experimental program to achieve this objective is underway in Beijing and would be adopted by other project provinces/ municipalities if proven to be effective. Other possible measures include halting all recruitment of non-teaching personnel, redeployment of existing non-teaching personnel, and not replacing such staff when they retire; (f) to ensure that the changing needs for skills would be reflected in the development of the VTE curriculum, the provincial and municipal authorities would increase the effectiveness of industry liaison committees (para. 1.23) by improving the composition of these committees to reflect better the major employers in the province or municipality and by improving operating procedures so that the views of such emplovers would be made effective. SEdC has agreed to provide guidelines for the composition and operation of these coumnittees. As a further aid, tracer studies would be conducted by each VTC yearly beginning 1990 (para. 1.23). In addition, regiona. long-term manpower forecasting techniques would be introduced through the proposed project and adapted to the Chinese environment by the project R&D centers (para. 1.24). (g) to adapt to the new job allocation policy and development of a market economy, each project VTC would set up a Student Counseling Office staffed by a trained counselor who would be familiar with placement issues and the job market. The SCOs would be responsible for organizing pre-semester study/training orientations and pre- graduation seminars for career choice. The project TTCs and TTDs would add 'counseling" as a teaching subject in order to train student counselors beginning 1991 school year; (h) the project would help improve the opportunity for technical teacher training for less developed non-project provinces and autonomous regions by setting aside student places each year in the project- sunported TTCs and TTDs (para. 2.14). Exact number of student places will be determined at the SEdC's June 1989 meeting on VTE project implementation; (i) as an economy measure, the proposed project TTCs in Shanghai and Jiangxi province and TTD in Beijing would gradually reduce the number of students enrolled in the departments/sections that now train teachers of general subiects such as languages and basic sciences by at least 50, in order to concentrate all of their resources and energies solely on training technical teachers; (j) as a measure to improve consistency in the content and interpretation of specialized course, VTC teachers would teach both the theory and related practical work or supervise the practical work instruction (para. 1.21) beginning 1990 school year; and (k) each project provincial and municipal authorities would provide additional funds each year starting 1991 specifically to upgrade equipment in non-project VTE schools progressively so that teachers  - 23 - completing the improved VTE teacher training programs in project TTCs and TTDs could teach the more advanced and modern practices to students of non-project schools. 2.30 An agreement to undertake the above actions by the provincial and municipal governments is a condition for inclusion in the proposed project established by the SEdC. The Government has prepared detailed action plans including implementation timetables (1989-1995) for the above measures which were discussed at negotiations. The Government assured the Association that it would ensure these measures are carried out, based on the understandings reached. II!. JECTCOSTS ING AN IMPLEMEhTAUT0O A. Costs Suamary o2Lf osts 3.1 The total cost of the project including contingencies is estimated at Y 339 m or US$91 m equivalent. The estimated cost by major project components is summarized in Table 3.1 and by category of expenditure in Table 3.2. Detailed costs by component and category of expenditure are shown in Annex 9. Table 3.1: SUMMARY OF PROJECT COSTS BY COMPONENT Foreign Local Foreign Total Local Foreign Total as % of ---- (Y million) ---- --- (US$ million) --- total VTCs (59) 106.1 74.0 180.1 28.6 20.0 48.6 41 TTCs (9) and TTDs (3) 40.8 33.1 73.9 10.9 8.9 19.8 45 Training for VTE Management 0.4 1.0 1.4 0.1 0.3 0.4 75 R&D Cen'ers (3) (financed by FRG) 5.5 20.5 26.0 1.5 5.5 7.0 79 Total base cost 152.8 1286 281.4 41 1 34.7 75.8 46 Contingencies: Physical 14.1 10.4 24.5 3.7 2.8 6.5 42 Price increase 27.8 5.3 33.1 7.4 1.3 8.7 16 Total IDA financed project costs 194.7 144.3 3390 5.2 2 8 91 0 43  -24- T-ble32a: SUMKARY OF PROJECT COSTS BY CATEGORY OF EXPENDITURE Foreign Local Foreign Total Local Foreign Total as s of ---- (Y *llion) ---- --- (US$ *illion) --- total Civil works 47.6 5.3 52.9 12.8 1.4 14.2 10 Furniture 7.9 0.9 8.8 2.1 0.2 2.3 9 Equipment 76.6 92.7 169.3 20.5 25.2 45.7 55 Books and teaching materials 2.2 0.9 3.1 0.6 0.2 0.8 25 Overseas training 0.4 6.8 7.2 C.) 1.8 1.9 95 Local training 11.8 0.0 11.8 3.2 0.0 3.2 0 Foreigzl specialists 0.2 1.5 1,7 0.1 O. C . 90 Local specialists 0.6 0.0 0.6 0.2 0.0 0,2 0 Totdl Base Cos Ji.3 1CL 1 55.4 3I9l 222 8 . 42 Contingencies: Physical 14.1 10.4 24.5 3.7 2.8 6.5 42 Price increase 27.8 5.3 33.1 7.4 1.3 8.7 16 Total IDA Funded 189.2 123.8 313.0 50Z LI 84.0 40 Proiect Costs R&D Centers (FRG-financed) 5.5 20.5 26.0 1.5 5.5 7.0 79 Total Project Cost 339.0 "d.0 Basis of Cost Estimates 3.2 Base costs refer to actual costs or to estimated costs as of May 1989 prices.i/ Costs of civil works have been estimated on the basis of unit costs per o2 in recent buildtng contracts awarded by the provincial and municipal governoents, taking Into account the types of building to be constructed and the regional cost differences. Space requirements have been based on SEdC standards.2/ Equipment costs are based on bid prices for recently imported similar equipment and on recent local prices for miscellaneous items included in the equipment list for each type of institution. Local training costs are based upon current costs at Chinese universities, appropriately adjusted for the shorter lengths of the training sessions and for the travel and I/ Date of negotiations. 2/ The Finance and Planning Department of SEdC sets standards for the unit area per student for different levels of education. These standards are reasonable and are used throughout China to allocate capital expenditures for enrollment increases.  -25- subsistence costs required to bring vocational and technical teaching staff to central locations for the pedagogical inservice and upgrading specialization courses and for industrial experience. The visiting scholar program has been estimated at US$12,000 per year, and overseas study tours at US$7,000 per tour. Costs of foreign specialists have been estimated at an average of US$8,000 per man-month for fees and per dies, plus US$600 for travel within China, and US$2,000 for travel to and from the home office. Foreign Exchange Comonn 3.3 The foreign exchange component is estimated as follows: civil works and furniture, 10%; instructional equipment, 55%; books and teaching materials, 30%; overseas training, 95%; specialists, 90%; and local training and local specialists, 0%. The foreign exchange component of instructional equipment and books and teaching materials is based upon an assessment of the probability of foreign suppliers winuiing equipment procurement contracts, and the probable proportion of books and teaching materials that will be foreigrn- produced. ^