Romania - Education Reform Project

Docimtn of The World B-nk FOR OMCAL USE ONLY AAJ 3 72'!2 t/t,= Repwt No. P-6084-RO MEMORANDUM AND RECOMMENDATION OF TEE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS -ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$50.0 MILLION TO ROMANIA FOR AN EDUCATION REFORM PROJECT MARCH 1, 1994 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwi' be disclosed without World Bank authorization.  CURRECY EOUIVALENIS Currency Unit = Leu (Plural Lei) EXCHANGE -ATES 1221 1922 ApV 1223 Jan.1994 US$1.00 = 76 308 600 1350 ABBREVIATIONO AND ACRONYMS EU Commission of the European Union IES Insdtute for Education Sciences MOE Ministry of Education OECD Organization for Economic Cooperation and Development PCU Project Coordination Unit SSC Sector Steering Committee ROMANIA - FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY ROMANIA EDUTCATION REFORM PROJECT Loan and Project Summary Borrower: Romania Beneficiary: Ministry of Education (MOE) Amos'nt: US$50.0 million equivalent Terms: Twenty years, including a five-year grace period at the IBRD standard variable rate Flnancinn Plan: Loc Foreign Total US$ Million- Govermnent of Romania 14.6 8.9 23.5 1BRD 24.5 25.5 50.0 Total Financing Requirements _ _4 43.5 Economic Rate of Return: Not applicable Poverty Category: Not applicable Staff Appraisal Report: No. 11931-ROM MkU: IBRD 24949 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.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONS7RUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO ROMANIA FOR AN EDUCATION REFORM PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan to Romania for the equivalent of US$50.0 million to help finance an Education Reform Project. The loan would be at the Bank's standard variable interest rate, with a maturity of twenty years, including a five-year grace period. 2. Country and Sector Context. Vital to Romania's transition is an education system that prepares youth for a dynamic labor market and a more open and democratic society. As in other post-socialist countries now several years into the reform proce:s, the transition in Romania is proving more difficult than first thought. From 1989 through 1993, the country's economic output fell by 30 percent, with industrial output down 50 percent. Unemployment has risen to 10 percent of the labor force (January 1994). One factor in these difficulties is the inheritance of an education system that cultivated skills, knowledge and values for functioning in a centrally planned economy and under Ceausescu's totalitarian regime. Sustaining the delivery of education and other basic social services during the transition-and within tight fiscal constrain's-is important but not sufficient. If Romania is to restore economic growth and achieve competitiveness in international markets, it is essential that its education system be strengthened to improve the relevance of what is learr-ed to what is required in Romania's new market-oriented economy, and to introduce management of education that reflects Romania's move to more democratic and decentralized governance. 3. Reforming education to support the transition is a major task. With a population of 23 million, Romania is the second largest country in Central and Southern Europe. It is also the second poorest, with a GDP per capita of US$1080 (World Bank Atlas Methodology, 1992). As elsewhere in the region, Romania's once enviable education system was configured by several decades of central planning to train most youth, beginning at age 14/15, in narrow technical areas and to "supply" labor through scliools linked to local state-owned enterprises and farms. Chronic underinvestment further eroded the education system. Low levels of spending, combined with extreme ideological rigidity and isolation during the previous regime, have left Romania with: (i) a school system that is severely lacking in up-to-date resource materials and equipment for teaching; (ii) teachers, researchers and education policymakers who have long been out of contact with professional developments in OECD countries; (iii) school infrastructure that is in many cases dysfunctional; and (iv) governance structures from the past which constrain innovition, efficiency, and local and private initiatives in education.' 4. Despite these problems, Romania has sustained a well-developed structure for delivering education and shares positive characteristics of education in OECD countries (e.g., high participation rates and low repetition rates in basic education, and strong teacher training in subject matter). Yet, the system does not reflect major lessons and directions of education elsewhere. Experience has shown that a strong general preparation of students is a far more cost-effective public investment than I/ Anmal expenditure on education as a percet of GDP averanged 2.4% during 1985-1989. Expenditure n 1992 was 3.9% which remains low by rost intertional conwarisom.  early vocational training. In OECD cour.tries, curriculum and teaching approaches aim increasingly at developing a student's cognitive abilities and problem-solving, rather than rote mastery of factual material, which remains central to schooling in Romania. National examinations are used almost exclusively as a selection mechanism in Romania. In other countries, testing is regarded more broadly as an important tool for assessing or certifying education and training outcomes, monitoring school performance, ensuring accountability to the public, and supporting educational change. Decision-making in Romania's education system is' highly centralized, whereas in other countries school-based professionalism and flexibility in resource management have proven more conducive to effective schools. 5. Rationale for WYorld Bank Involvement. It is widely recognized in Romania that the education system does not yet reflect the country's new social, political and economic environment. Early last year, the Government released a White Paper on education which acknowledged that reforms in the sector, especially at the basic and secondary levels, had been largely ad hoc and marginal during the initial years of the transition.2 The paper focused the. medium- and long-term reform effort on three objectives: restructuring, modernization, and measures to address critical material shortages. Key elements include: (a) reorientation of education to "lifelong learning" and provision of general education up to age 16; (b) updating of the content o-^ education (as reflected in curriculum, textbooks and examinations); (c) reorganization of both pre- and in-service teacher education; (d) restructuring of secondary te4hnical and vocational education that will consolidate secondary schools under the Ministry rf Education (MOE), eliminate the specialized occupational training from the secoidary level and provide a common core of general training in all secondarv schools; (e) abolition of the state monopoly on textbooks and fostering of diversity of educational materials in classrooms, with redirection of the textbook subsidy to the school level; (i) decentralization of administration; (g) accreditation mechanisms for both public and private educational institutions; and (h) an increase in the resource base for education in order to improve the conditions of service for teachers and raise the level of investment and operating expenditures on school buildings and educational materials. A Country Assistance Strategy (CAS) is scheduled for presentation to the Board on April 5, 199'., with the Romania Petroleum Sector Rehabilitation Project. The proposed Education Reform Project is consistent with this strategy in addressing issues of relevance of education to the needs of a new market-oriented economy, and improvements in sectoral resource management. A Country Assistance Strategy (CAS) is scheduled for presentation to the Board on April 5, 1994, with the Romania Petroleum Sector Rehabilitation Project. The proposed Education Reform Project is consistent with this strategy in addressing issues of the relevance of education to the needs of a new market-oriented economy, and improvements in sectoral resource management. 6. The formulation of this strategy and its approval by the Council of Ministers represent progress in building awareness, consensus and commitment to change. Formal policy decisions and institutional reform to implement the strategy are just now advancing. New legislation on education is being drafted. A Secretary of State for Reform was appointed in MOE to head a department that will oversee education reform programs. Along with these initiatives, institutions and education professionals in Rumania need external funding and technical support if the reforms they envisage- ambitious by any standard-are to be implemented. External support has so far been piecemeal, and at The Refom of Education in Romania: Conditions and Prospet", MiNriry of Education and Instite for Education Sciences, Bucharce, 1993.  the levers of change in the school system are mainly in central, public institutions rather than decentralized, autonomous institutions, as is the case in higher education. Further delay in the updating, reorientation and investment in these lower levels of schooling, from which the majority of Romanian youth enter directly into the labor market, could further constrain the improvement in labor productivity that is essential for economic growth in Romania. 7. The World Bank's relationship with Romania in education has been developing since 1990. After an initial sector review and formal Govenment request, Projec: development began in late 1991.3 Bank involvement in the education sector has leveraged resources for technical preparation from the Japan Grant Facility, U.K. Know-How Fund, British Council, EU/PHARE and the Governments of the Netherlands, France and U.S. These donors also supported technical assistance and training activities, organized by the Bank during Project preparation, to increase knowledge of international experience and the capacity of Romanian institutions. The proposed Project will continue to build the capacity of these institutions in the context of advancing reform implementation. 8. Prject Objectives. The Project will support the Government's strategy for reform of pre- university (basic and secondary) education. The specific Project objectives are to: (a) update and improve the quality of basic and secondary education by strengthening curriculum and teacher training, assessment and examinations, and textbook quality; and (b) develop and introduce measures that will increase efficiency in management of public resources for education. 9. Project Description.4 The Project is designed to help reform and strengthen the professional capacity of central institutions and support implementation of curriculum reform. Subsequent Bank operations could finance more district, local or school-based initiatives for quality improvement. The Project will provide textbooks, resource materials and equipment for schools, computer hardware and software, facilities rehabilitation, technical assistance, training, and preparation of studies. 10. Parallel Project in Secondar= Technical/Vocational Education. Development of the proposed Bank-financed Project included technical preparation and appraisal of a component for restructuring secondary vocational education. This component was designed to advance curriculum development of secondary technical education programs and their implementation in pilot schools throughout the country. At the time of loan negotiations in December 1993, the Commission of the European Union and the Romanian Department of European Integration indicated that this component would be financed by parallel EU/PHARE grant funding of approximately ECU 25 million. 11. Component I: Raising Ouality of Basic and Secondary Education (US$55.7 million). This component will assist reform of the major levers of educational change at the national level. It will reorganize the mechanism for curriculum revision in general education so that teachers, subject 3/ Ronania: Human Resoures and thc Tramnsition to a Market Economy, A Worl Bank Country Study, ISBN O-8213-2084*X, 1992. I Tis operstion has been developed in paallel with an Enploynent and Social Protectio Project, which will have closely rlated componets in adult training and in career information and counseing. The Bank is also wodring with the Ministry of Education and universities, Minisy of Science and Technology, and Academy of Sciences, to develop a strategy for reform and invetment in higher education, which could be supported by furher World Bank financial assistance to the sector.  -4 - matter specialists and curriculum specialists can produce and validate new curricula more efficiently. In teacler training, the component will provide technical assistance for the restructuring of pre-service programs, and strengthen the capacity of in-service training institutions to support the introduction of new curricula, teaching approaches and related reforms. An assessment and examinations subcomponent will revise the two major exan. nations presently in use, develop a cadre of professionals in learning assessment, and establish a National Assessment and Examinations Service. To help ensure that technical and vocational training are well-founded on knowledge and skills used in the workplace, promote labor mobility and are comparable to practices in OECD countries, this component will establish a Council for Occupationaal Standards and Assessment that will adapt standards and skills assessment tools from other countries. In conjunction with the approval of new curricula, textho will be produced through a mechanism that Frovides for competition among publishers and school-based ehoice of textbook options. 12. Component n: Improving Education Finanicing and Manaement (US$6.9 million). This component will introduce mechanisms to increase efficiency in resource allocation, management and mnoblization. Budget appropriation formulas for pre-university education will be revised, ard the expenditure authority of inspectorates and schools will be increased. The inspectorate staff in each judet will be trained and equipped to strengthen their financial analysis and management capacities. Resource centers for education managers will be developed at the regional level in existing institutions. A school monitoring system will be introduced to improve data collection and analysis for feedback to schools and as an input to policy-niking. Feasibility studies will be carried out to formulate new policies on resource mobilization ani cost recovery in education. This component will also provide support to the MOE Project Coordination Unit (PCU) in developing its capacity for reform coordination and project manaQemnA. 13. Project Implementation. The Project will be implemented over five years by MOE in close cooperation with its affiliated Institute for Education Sciences (YES) and the existing 41 district school inspectorates. The coordination of Project activities will involve three distinct implementation agents: (a) the PCU established in the MOE and responsible for the general administration ( f the loan (mcluding loan accounting, coordination of procurement activities, and management of disbursement procedures) and logistical support; (b) line departments within the MOE responsible for detailed implementation of each subcomponent; and (c) a Sector Steering Committee (SSC), comprised of representatives from the PCU, each line department and the YES. The SSC will be chaired by the Project Director to help ensure coordination of activities among the various components of the education system, as well as effective communication of information across Project subcomponents. 14. Project Sustainability. The main recurrent costs that will need to be sustained after Project implementation are associated with operation of the ass2ssment institutions, and these are expected to be partially offset by introduction of user fees. Overall, the recurrent costs associated with the Project will be modest in relation to the existing total government budget for primary and secondary education, with the average annual incremental recurrent cost during the Project equivalent to less than 1% of the estimated total recurrent expenditures in education in 1993. Institutional structures under the Project (boards, working groups and their secretariats) are initially rooted in existing departnents and set up to rely on existing civil servants of national institutions or teachers and local specialists who can be called upon for services as needed rather !han recruited permanently. Reforms in education management and finance should result in incentives and autonomy for districts  -5 - and schools to improve efficiency of their student:teacher ratios and help shift education expenditures to non-salary items and investments. 15. Program Objective Categories. The Project supports the Government's effort to reorient education in support of economic and social transition, to shift away from subsidized state monopoly producers (of textbooks) and thus encourage private sector activity, and to improve public sector management. The following categories are therefore applied: ED (Education) - 60 percent; PV (Private sector development) - 30 percent; and PB (Public sector institutions) - 20 percent. 16. Environmental Considerations. The Project has been classified as C: "No appreciable environmental impact". There wiil, however, be improved coverage of environmental matters in the revised curricula for both general and vocational subjects, in development and review of new textbooks, and in the selection of supplementary materials for teacher training institutions. 17. Agrcements Reached. During negotiations, the Government gave assurances that: (a) the development of upgraded textbooks will not be contracted to any publishers which are beneficiaries of budgetary subsidies; (b) MOE will prepare and furnish to the Bank every six months (i.e., by March 31 and September 1 of each year) a report on the progress achieved in the carrying out of the Project, according to performance indicators agreed with the Bank; and (c) a mid-term project review will be conducted, according to terms of reference agreed with the Bank, in November 1996. As a condition of effectiveness, the Government will confirm the establishment of a fully functInning PCU with staff and other resources satisfactory to the Bank. A condition of disburserent for the Occupational Standards subcomponent will be the establishment (through the signing of a protocol) of the Counc:l on Occupational Standards and Assessment. 18. Benefits. The Project is expected to yield the following major benefits: (a) zeformed institutional structures and processes that can contribute to ongoing improvement and change in education, specifically: (i) more reliable and valid school-leaving examinations, student selection mechanisms, snd occupational certification delivered in a manner that offers a fair chance to all candidates and increases public accountability in education; (ii) greater diversity, durability and higher quality of textbooks in all schools throughout the country; (iii) open competition in the private sector for publishing, printing and distribution of textbooks; and (b) more rational allocation and use of scarce fiscal resources for education and greater transpar-,ncy, equity and incentves for efficiency in budgeting mechanisms for schools. 19. Risk. The major risks to project implementation and success are: (a) the weak institutional capacity of MOE to implement highly interdependent reform components in an efficient and well-integrated manner; (b) fiscal tightening beyond that contemplated in the Stand-By Agreement/Systemic Transformation Facility now being finalized and/or unanticipated price increases that could lead to frther deterioration in resources for education; and (c) resistance to change at the national and local level if the rationale, programs and process of educational reform are not based on broad participatory involvement, openly communicated and implemented in a transparent manner. To help mitigate risks of institutional capacity, extensive long-term technical assistance will be provided to assist the PCU and key im.plementing units. Technical assistance contracts will be packaged across subcomponents wherever possible to help ensure coordination of effort. Actual and projected counterpart funding expenditures under the Project will be carefully monitored and reviewed regularly  -6- with the MOE and the Ministry of Finance. Governing institutions and decision-making processes for the various reform initiatives are constituted so as to increase accountability to the public. Dissemination of information throughout the school system and more publicly will feature in all components. Recmnmendation 20. 1 am satisfied that the proposed Loan will com?ly with the Atticles of Agreement of the Bank and recommend that the Executive Directors approve it. Lewis T. Preston President Atachments Washington, D.C. March 1, 1994  Shedule-A Page 1 of 1 ROMANIA EDUCATION REFORM PROJECT Estimated Project Costs V L I Foteign Tal U ~US$ Million-- I. Raising Quality of Basic and Secondary Education A. Curriculum Development 1.4 1.4 2.8 B. Teacher Training 1.2 4.2 5.4 C. Assessment and Examinations 3.1 3.1 6.2 D. Occupational Standards and Assessment 1.0 1.0 2.0 E. Textbooks 15 22 Sub-total 25.5 55.7 H. IMroving Education Financing and Managmer' A. Resource All.,cation, Management and MobilizaLion 2.5 2.8 5.3 B. Reform Coordination and Implementationi 1.1 I. Sub-total 3.0 3.9 6.9 Total Base Costs 33.2 29.4 62.7 Physical Contingencies 2.6 2.5 5.1 Price Contingencies 3.2 2.5 5.7 Total Project Costs 329. M3.4 Financing Flan Government of Romania 14.6 8.9 23.5 v World Bank 24.5 25.5 50.0 Total Financing Requirements 39.1 34.4 73.5 I/ Figures may not tot exactly due to rounding. Z/ Including duta and taxes of US$0.2 million equivalent.  Page 1 of 2 ROMANIA EDUCATION REFORM PROJECT Pocurement Methods and Disbursements Summary of Proposed Procurement Arrangements" (US$ million) ______ Prourermen Method___ ICB LCB Other NBF b/ 1oal 1. Civil Wods - 0.2 0.2 2. Goods 2.1 Equipmnt & Matrias 7.5 0.8 8.3 (7.3) (0.8) e1 d/ (8.0) 2.2 Textbooks 22.4 19.1 41.4 (22.4) (22.4) 2.3 Furir 0.1 0.1 2.4 Vehicle 0.1 0.1 (0.1) d/ (0.1) 2.5 Comqute 2.8 0.3 3.1 (2.8) (0.3) of (3.1) 3. Cosukanies and Tmainig 3.1 Impmenatio Support 9.0 9.0 (9.0) (9.0) 3.2 Instuonl Develpnt 0.5 0.5 (0.5) (0.5) 3.3 Studies 0.1 0.1 (0.1) (0.1) 3.4 Truning 5.8 5.8 (5.8) (5.8) 4. IXneental Opertting Costs 1.0 e/ 3.9 4.9 (1.0) (1-0) TOTAL 10.2 22.4 17.6 23.3 73.5 (10.1) (22.4) (17.5) (50.0) Note: Figures in parentheses are the respective amounts financed by IBRD. a/ Figures may not add to totals due to rounding. b/ Non-Bank Financed; financed 100 percent by the Government. c/ International and local shopping - US$0.7 million and US$0.5 million aggregate, respectively. d/ Contracts for goods which the Bank agrees are of proprietary nature may be awarded after direct negotiation with suppliers, in accordance with procedures acceptable to the Bank. e/ Includes overhead for project management support, etc.  Schedule B Page 2 of 2 ROMANIA EDUCATION REFORM PROJECT Disburse ents- C^ATEGORY AMOVPiT % TO BE FINANCED (US$ million) 1. Goods 30.5 100% of foreign expen- ditures, 100% of local (a) For Part A(S) 0.5 expenditures (ex-factory of the Project cost and 95 % of local expenditures for other items (b) For all other procured locally parts of the Ptoject 30.0 2. Consutants' services, studies, research and training 13.5 100% (a) For Part A(S) of the Proiect 1.5 (b) For all other parts of the Project 12.0 3. Incremntal Operating costs 1.0 IW% 4. Unallocated S.0 TOTAL 50.0 Estimated Disbursements 2/ (US$ million) IBRD PY FY95 FY96 FY97 FY98 FY99 FY2000 Annual 0.2 1.5 7.0 13.5 18.5 9.3 Cumulativd 0.2 1.7 8.7 22.2 40.7 50.0 Cumulative as % of total 0 3 17 44 81 100 1/ Figures may not total exactly due to rounding. 2/ Assumes project eftfctiveness by thW quater FY95.  &ASblC Page 1 of I ROMANIA EDUCATION REFORM PROJECT Timetable of Key Prolject Processing Events (a) Time taken to prepare : 16 months (b) Prepared by : Terrice Bassler (Task Manager) Sabrina Huffman (Program Assistant) Jean-Christophe Laederach (Sr. Imple-.. ntation Specialist) David Fretwell (Sr. Employment and Training Specialist) (c) First Bank mission : November 1991 (d) Appraisal mission departure : March 1993 (e) Negotiations : December 1993 (f) Planned date of effectiveness : September 1994 (g) List of relevant PCRs and PPARs Not applicable m:wrw.educ\9ar~schcds.mop  Schedule D Page 1 of I THE STATUS OF BANK GROUP OPERATIONS IN ROMANIA A. STATEMENT OF BANK LOANS (as of December 31, 1993) Amount ($ million) Fiscal (lsg cancellation) Loan No. Year Borrower Purpose Bank Undisbursed Twenty-six non-pooled loans and seven pooled loans 2182.22 0.00 were committed from FY74 to FY82. These loans were fully disbursed by end-FY87 and fully prepaid by FY89. 3363-RO 1991 Romania Technical Assistance 180.00 72.45 and Critical Imports 3409-RO 1992 Romania Health Rehabilitation 150.00 118.48 3481-RO 1992 Romania Structural Adjustment 400.00 151.48 3486-Ro 1992 Romania Private Farmer Support 100.00 86.03 3593-RO 1993 Romania Transport 120.00 118.48 TOTAL 950.00 546.92 THE STATUS OF BANK GROUP OPERATONS IN ROMANIA B. STATEMENT OF IFC INVESTMENTS (as of December 31, 1993) Amount (Smillion) DATE BORROWER PURPOSE Loan Equity Total 1992 Alcatel Communication 5.47 0.69 6.16 Total Gross Commitments 5.47 0.69 6.16 Less: Cancellations, Terminations, Exchange, Adjustments, Repayments, Write-offs & Sales 0.33 0.00 0.33 Total Commitments now by IFC 5.14 0.69 5.83 Total Undisbursed IFC 3.60 0.00 3.60 Total Outstanding IFC 1.54 0.69 2.23 S \IAM\SCHED-D  1 / \ 22' . 26' 30 U KRA INE ROMANIA To Cernovcy -EDUCATION REFORM PROJECT 9 ,, wr \ Major Caso Corpului Didactica >otu N Suceovo 0 a Botosanit (Teachers Center) H U NG A RY Mr Baia Mare University Centers for Vocational Teacher Training To Debre 0Ord Del~ .0 / Orodea | Bistritn 0 Towns and Cities R X Roman0 /Piatrai National Capital ~~~~~HOR ~~~~~~~~~~~~~~~Piatro - - NapoClua Neamt .. District (Judet) Boundaries Turdoo BcauO Internotional Boundaries To Szeged_ ARAD OMures -~N' -~- Rivers 0 Arad irlad 46' N ~~~~~~~~~~~~~~~~~~~~~~-46- Medias . 4 - - Deva - TIM/S- ~"-' Sbi -- -6 Sfintu \ GLT %imisoara Hunedoara A iu _ - Gheorghe Focsonio ''Brasoy G al .0 Petrosant; Bu,ou Resit Braila Belgrode S-ef 6Tirguiiu Rimnicu, - T auceC SEVE-R/N Vi;t~/ TULCEA A> Pitesti - Ploiesti Drobeta Tirgovi