Mozambique - Education Sector Strategic Program Project (ESSP)

Document of The World Bank Report No: 1868 1-MOZ PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF 5 1.1 MILLION SDR (US$ 71 MILLION EQUIVALENT) TO THE REPUBLIC OF MOZAMBIQUE FOR AN EDUCATION SECTOR STRATEGIC PROGRAM (ESSP) JANUARY 22, 1999 Human Development 1 Country Department 2 Africa Region  CURRENCY EQUIVALENTS (30 November 1998) Currency Unit = Meticais US$ 1.00 = M 11,655 SDR 1.0 US$1.38621 MEASURES Metric System FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS ADB African Development Bank BM Banco de Mocambique (Bank of Mozambique) CC Conselho Consultivo do Ministdrio (Consultative Council of the Ministry) CIDA Canadian International Development Agency DANIDA Danish International Development Agency ERC Economic Recovery Credit ERP Economic Rehabilitation Program ESAF Enhanced Structural Adjustment Facility ESRP Economic and Social Rehabilitation Program ESSP Education Sector Strategic Program EU European Union FINNIDA Finnish International Development Agency GER Gross Enrollment Rate GDP Gross Domestic Product HIPC Highly Indebted Poor Countries IAP Instituto de Aperfeicoamento do Professor (Teacher In-service Training Institute) IDA International Development Association IMAP Instituto de Magisterio Primario (Teacher Training Institute) INDE Instituto National do Desenvolvimento de Educacao (Institute for the Development of Education) NEPS National Education Policy and Strategy MAE Ministerio da Administracao Estatal (Ministry of State Administration) MINED Ministerio da Educacao (Ministry of Education) MTEF Medium Term Expenditure Framework MPF Ministerio do Piano e Financas (Ministry of Planning and Finance) PIP Project Implementation Plan SIDA Swedish International Development Agency SNAAD System for the Non-Administrative Allocation of Foreign Exchange UEM Universidadc Eduardo Mondlane (Eduardo Mondlane University) WFP World Food Program ZIP Zona de Influencia Pedagogica (Pedagogical Support Zone) Vice President Callisto Madavo Sector Manager Ruth Kagia Country Director Phyllis Pomerantz Task Team Leader Donald B. Hamilton  Mozambique Education Sector Strategic Program Table of Contents A. PROGRAM DEVELOPMENT OBJECTIVE . .. . . . .. 1. Background and introduction ...................................... 1 2. Program development objective ................................2 .................................2 3. Key outcome and performance indicators ..................................... 2 B. STRATEGIC CONTEXT .. 3 1. Sector-related CAS goal supported by the program ..................................... 3 2. Main sector issues and Government strategy .......................... 3 3. Sector issues to be addressed by the program and strategic choices ......8............8 C. PROGRAM DESCRIPTION SUMMARY .9 1. Program components ........................................................ 9 2. Key policy and institutional reforms supported by the program ....................... 12 3. Benefits and target population ................... ..................................... 13 4. Institutional and implementation arrangements .............................I.................. 14 D PROGRAM RATIONALE .................2.................. ............. .. .... 20 1. Program alternatives considered and reasons for rejection ............................ _.. 20 2. Major related projects financed by the Bank and other development agencies .. 21 3. Lessons learned and reflected in program design ...... ......... ............................. 22 4. Indications of borrower commitment and ownership ...................... .................. 24 S. Value added of Bank support in this program .......................................... ....... 24 E: SUMMARY PROGRAM ANALYSIS .. ..5 1. Economic and financial. ....................................................... 25 2. Technical ....................................................... 28 3. Institutional .................................................. ...... 29 4. Social ....................................................... 30 5. Environmental assessment ....................................................... 30 6. Participatory approach ....................................................... 30 F. SUSTAINABILITY AND RISKS . 31 1. Sustainability ....................................................... 31 2. Critical risks ....................................................... 32 G. MAIN CREDIT CONDI'InIONS .. 34 1. Conditions of effectiveness ................. ................................. . ... 34 2. Other conditions ....................................................... 34 H. READINESS FOR IMPLEIMEINTAIION ... 35 I. COMPLIANCE WIT-I BANK POLICIEs .........................O..S.............................................. 35  Annexes Figure 1 Structure of the Education System Annex 1. Program Design Summary Annex 2. Detailed Program Description Annex 3. Program Cost Annex 4. Economic and Financial Analysis Annex 5. Financial Management Annex 6. Procurement and Implementation Arrangements Annex 7. Program Processing Budget and Schedule Annex 8. Documents in Project File Annex 9. Status of Bank Group Operations in Mozambique Annex 1O. Mozambique at a Glance Annex 11 Curriculum Development Annex 12. Institutional Development Annex 13. School Construction Annex 14. Letter of Sector Policy Annex 15. Summary of Environmental Assessment Annex 16. Teacher Training Map - IBRD Reference Number 30047  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Africa Region Country Department 2 Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Date: January 22, 1999 Task Team Leader: Donald Hamilton Director: Phyllis Pomerantz Sector Manager. Ruth Kagia Project ID: 1786 Sector: Education Program Objective Category: Poverty Reduction Lending Instrument: Sector Investment Program Program of Targeted [XI Yes No Credit Intervention: Project Financing [I Loan [x ] Credit [ I Guarantee I I Other [Specify] HIPC/Grant Data For Loans/Credits/Others: Amount (US$ m/SDRm): US$ 71 million/SDR 51.1 million Proposed terms: [x Multicurrency X 1 Single currency, specify Grace period (years): 10 H Standard I l Fixed [ I LIBOR-based Variable Years to maturity: 40 Commitment fee: 0.50% Service charge: 0.75% Financing Program (US$ m): Source Total Government 444.6 Cofinanciers 118.8 IDA Credit 71.0 NGOs 30.0 Community Contribution (in cash or in kind) 5.0 Contingencies 47.8 Total 717.2 Borrower: Government of Mozambique Guarantor: NA Responsible agency(ies): Ministry of Education (MINED) Estimated disbursements (Bank FY/US$ M): 1999 2000 2001 2002 2003 Annual 1.0 11.0 20.0 21.0 18.0 Cumulative 1.0 12.0 32.0 53.0 71.0 For Guarantees: NA I Partial l ] Partial risk credit Program implementation period: 1999-2003 Expected effectiveness date: 6/1/99 Expected closing date: 06/30/04  A. PROGRAM DEVELOPMENT OBJECTIVE 1. Background and introduction After two decades of civil strife and economic stagnation, Mozambique is experiencing rapid economic growth. Following the peace agreement in 1992 and the liberalization of the economy, growth has averaged about 10% annually over the past three years, peaking at 12.4% in 1997. The prospects for continued sustained economic growth are good, given Mozambique's relatively untapped natural resources in agriculture, energy, and tourism. Currently only about 10% of agricultural land is under cultivation, although about 75% of the labor force is in the agriculture sector. In addition, the current increase in foreign direct investment and the country's favorable geographical location offer a window of opportunity for the Mozambican people. Despite these favorable circumstances, Mozambique is still one of the poorest countries in the world (estimated per capita GDP for 1998 was US$ 140), and long-term economic growth and investments are threatened by the low level of education and skills of the population. This is fully recognized in Mozambique, and various governments since independence have given high priority to the development of education. Following independence in 1975, the education system expanded rapidly, and the gross admission rate into lower primary education surpassed 100% during the 1978-1980 period. These achievements were possible because of the strong demand for education, which was met through a combination of public investment and community efforts. These gains, however, were quickly eroded during the civil war that followed almost immediately after independence, when over 3,400 schools wcre destroyed or closed. Approximately 58% of the lower primary school network and over 1.3 million pupils were affected by the war between 1983 and 1991. After the 1992 peace agreement the Government, again with the collaboration of communities, moved quickly to improve education services. Enrollment in primary cducation has increased sharply over the past five years, partly as a result of the rapid expansion in the number of primary school classrooms, mostly built by rural communities. Despite serious weaknesses, the quality of education also began to improve when resources shifted to school inputs and school schedules returned to normal. Now the Government is addressing the wide disparities between rural and urban areas and among regions by gradually shifting the allocation of resources, increasing gender sensitivity, and decentralizing education management and budget allocations. The Government is determined to continue its efforts to dcvelop the education system for two key reasons. First, higher education levels will improve prospects for long-term growth. Increasing the number and quality of primary school graduates will increase productivity in agriculturc and other sectors, improve social indicators, and provide the well-documented positive externalities associated with education for girls. The expansion of secondary education will provide middle level personnel, as well as qualified candidates for further education and training, and thus gradually raise the low level of education and skills of the labor force. Second, in addition to promoting cconomic growth (a prcrequisite for poverty reduction), broadly based basic education will specifically help the poorer scgmcnts of society. Equitable expansion of the education system will provide a wider segment of the population with the foundation necessary to participate in the expanding economic opportunities in Mozambique, and it will thus help to consolidate peace and democracy.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 2 In 1997 the Government translated its broad goals into a comprehensive Education Sector Strategic Program (ESSP), which sets forth objectives, activities and resource requirements for the sector. This plan was prepared by the Government in collaboration with donors, civil society and agencies/institutions in the education sector. During the assessment of the plan in May, 1998, Government and donors agreed to commit all future funds for the education sector, for 1999-2003 within the context of the ESSP, which will guide the process of decentralization of MINED, as well as the nature of donor support to the sector The proposed operation would be IDA's contribution to the financing of the ESSP. The ESSP is seen as a rolling plan to be revised annually. The plan is complemented by the development of a Medium Term Expenditure Framework to ensure that intemal financing is adequate and to assess the magnitude of external funding. This will be updated annually. 2. Program development objective The objective of the ESSP is to provide increased and equitable access to higher quality education through improvement in the management of education in order to promote economic and social development inMozambique. IDA funding would initially support the implementation of ESSP activities related to primary and secondary education and the strategic planning for other sub-sectors. The Government has yet to finalize a revised strategic framework for the dcvelopment of technical and vocational education, adult literacy, and higher education. After the strategy is prepared, the Government and donors will discuss specific plans for the development and integration of these sub-sectors into the program. 3. Key outcome and performance indicators Program outcome indicators agreed with MINED to be achieved between 1999 and 2003 include the following: 1. Increased proportion of students passing key primarv and lower secondary examinations: (i) Grade 5 from 54% to 75%; (ii) Grade 7 from 37% to 60%; (iii) Gradc 10 from 33% to 55%. 2. A reduction in the average repetition by half for primary and lower secondary education. 3. An increase in gross enrollment rates: (i) Grades 1-5 from 67% to 86%; (ii) Grades 6-7 from 15% to 30%. 4. An increase in enrollment in the schools and districts where classrooms are built, equivalent to at least 75% of the new capacity created. 5. Implementation of at least 80% of the work program for each year, measured by the physical targets and the budget spent for program and routine activities. 6. Achievement of the agreed rate of decentralization of management to the provinces and districts, as defined in the schedule to be included in the Program Implementation Manual (PIM). These indicators have been selected based on the availability of relevant data, and consistency with the ESSP, to promote a common approach among donors. With reference to the end-of-cycle examinations, they are currently the best indicator of student achievement and quality, although they need to be improved. The internal efficiency targets are a bit ambitious given the conditions in Mozambique. However, many of  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 3 the reasons for low internal efficiency, such as incomplete schools, poor physical facilities in community built schools, inadequate teacher support, and limited community involvement in management of schools, can be improved fairly rapidly by the proposed program interventions. These in turn will help change the attitudes of teachers and parents with respect to repetition and drop-out. Program Performance Monitoring will be carried out using a Program Monitoring Reporting (PMR) system to be introduced during the first 12 months of program implementation. This svstem will link expenditures, outputs and schedule of implementation, including procurement, for each component at quarterly intervals. B. STRATEGIC CONTEXT 1. Sector-related CAS goal supported by the program CAS document number: 17180 Date of latest CAS discussion: December 18. 1997 The Bank's CAS supports the Government's objective of reducing poverty through (a) promoting rapid, broad-based private sector led growth, (b) capacity building and developing human resourccs; and (c) strengthening development partnerships. As a contribution to reaching the CAS goal of "capacity building and developing human resources," the proposed program will support the expansion of basic education services while improving quality. The program will improve the learning achievements and levels of attainment of Mozambican childrcn, including those from the most vulnerable groups and underserved regions. It will also enhance productivity, income and capacity in later life by providing the basis for further education and training. Bringing education closer to parents and the commnunity means that the management skills of local education officials and communities will be upgraded, and that accountability, relevance and learning outcomes will be enhanced. Upgrading of these skills in the communities will enhance their performance in other areas. In addition, by raising the educational level of children and families, the program will improve their quality of life and help decrease child morbidity, child mortality, and fertility rates. 2. Main sector issues and Government strategy The accelerating national effort in education since the end of the war has demonstrated strong public and private sector commitment to education. Mozambique has begun moving beyond the period of massive disruption in regular school activities, when programs and institutions deteriorated or simply halted their operations. The Government aims to energize communities by helping them to organize and coordinate their efforts in establishing schools and improving education services. In this changing environment, the Government will need to address the following major issues of the sector. (a) Low quality ofprimary and secondary education. The Government, donors and civil society at large are optimistic that schools will gradually build on recent gains. But low quality continues to constrain the efficiency of the system and limit the number of well-qualified students graduating from each level. Only 54% and 37% of students pass the grade 5 and grade 7 examinations, respectively. Although improving, internal inefficiency remains apparent in high repetition and dropout rates and low completion rates. Barely 25% of students who enter the first grade successfully complete the five grades of lower primary, and only 7% of the cohort complete grade 5 without repeating. Even those students who manage to stay in school are not learning enough because inadequate, bare facilities do not create a classroom environment conducive to learning, and multiple shifts reduce learning time. The number of learning hours per pupil per  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 4 year has decreased by about 30% (from 850 to 595 hours) in lower primary education in recent years in some schools because of the way double and triple shift are implemented. This is lower than the modest 780 hours recommended by UNESCO. The system's inefficiencv reflects several weaknesses, discussed below: i) The teachingforce is not well trained or supported, especially in rural areas where it is difficult to assign and retain teachers. About a quarter of all teachers in lower primary schools are untrained, and another 40% have only six years of schooling and one year of professional training Teachers need more pedagogical support as well as training to build their confidence and skills (ii) The curriculum is inadequate to meet students' needs and lacks relevance for Mozambicans who live in rural areas. The Government is merging lower (grades 1-5) and upper (grades 6-7) prriary schools, and the system also needs a single integrated, unified curriculum that allows students to progress at an uninterrupted pace. (iii) Textbooks and learning materials are provided in insufficient quantities. Although the Government has made steady progress in procuring increased numbers of books in recent years. successful distribution of books to all schools is yet to be achieved. This is being addressed through decentralization of distribution to the districts To ensure a steady supply of textbooks in the medium term, the Government plans to commercialize the publication of textbooks over time. (iv) Assessment of students in the classroom and through end-of-cycle examinations is inadequatc and often arbitrary, and as a result many pupils graduate from the system without being properly qualificd. The Government is introducing a system that allows for longer "cycles of leaming" than a single year can provide, and is working on examinations reformn. (v) Centralized control over resources has resulted in inadequate supplies to the classroom and hinders involvement and ownership by local education providers and communities. Individual school leaders are eager to assume more responsibility but lack the skills to do this well. (b) Limited and inequitable access to primary and secondary education. The trend and momentum in school enrollment are positive. The gross enrollment rate (GER) for lower primary increased from 54% to 67% between 1992 and 1997, and for upper primary from 14.4% to 16%.- Nevertheless, primary school enrollment rates remain well below those achieved in the years after independence. Enrollments in secondary school have risen, from 34,000 students in 1994 to about 52,000 in 1997. Despite these gains, the school population distribution is wide at the bottom with about 1.7 million children in lower primary education (grades 1-5), and narrow in the middle and top, with only 11,000 in upper secondary education (grades 11-12), and only about 7,000 students enrolled in tertiary education institutions as illustrated in the Figure below. . The population estimates underlying these figures are extrapolations from the 1980 Census. Preliminary results from the 1997 Census indicate that population figures are significantly lower than current estimates, hence, school enrollment rates may be higher than those presented here.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 5 Figure: Enrollment Distribution by Level of Education - 1997 I Trtiar- lISG2 (r.r I 1 12) I }SGil (g,r 8-() 10) - l112 (gr 6-7) I ~gr. ... . ... | () 5))((i ()()().000OVU .50().000 2.000.000 E ti rol I n c it Source: MOE Statistics 1997. Access to education is particularly restricted for certain groups. The colonial school network favored urban rather than rural areas, southern rather than central and northern regions. and coastal rather than interior areas. For example. the primary education enrollment rates of the three southern provinces of lnhambanie. Gaza. and Maputo are about 50% higher than the average for the central and northern provinces. A 1996/97 national household survec (IAF) found that in villages without schools, the main reason the poorest rural households did not send children to a primary school was that the school was too far away. There are several key issues related to equitable access: (i) The main issue is an inadequate number of school places. thus either preventing children from enterinig into the school system or for about 30% of the children, enrolling them into "incomplete schools" with Iess than five grades Also. while the school population was rising steadily, about 58% of the school network was destroyed during the war. The Government's priority is to rebuild the syvstcm and increase the number of school places. (ii) In addition to expanding the school system. the Govemment will also have to increase the size of the teaching fbrce. particularly qualified teachers. as enrollment expands. Average pupil-teacher ratios are already high: in lower primary it is 61 1. (iii) Though private education. has grown by more than 500% over the past years, its coverage nationally is very low (about 2% in 1995) and is concentrated mainly in urban areas. The private sector continues to face difficulties in mobilizing investment funds. In view of this, the Government proposes to help communities become more efficient in collecting and using their resources for educational development.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 6 (iv) Girls are less likely to attend and finish school than boys. In 1997, girls accounted for about 41% of the 1.9 million pupils enrolled in lower and upper primary schools. In lower and upper secondary, girls represented about 40% and 35% of the students, respectivelv. The problem is particularly acute in the northern and central provinces and among the poorest families. (v) Enrollment in nonformal education has collapsed. Although the number of people attending literacy classes exceeded 415,000 in 1980, it had dropped to 27,000 by 1995. This decline was due not only to the war, but also to the rigid formality of the programs and the use of Portuguese as the teaching medium. Only 15% of poor rural women can read and write (vi) Students with special needs are largely left out of the system, a problem the Government is now addressing. The ctvil war left many children handicapped bv mines and other weapons of war. Children with learning disabilities need special attention. (c) Low institutional capacity for education system management. Thc historically centralized management of education is no longer capablc of efficientlv delivering education to the whole country The Government is therefore decentralizing functions and has made capacity building in strategic planning and management at all levels a national priority Towards this end MINED has, over the last three to four years, been implementing an overall institutlon building program. There are four main issues related to MINED's institutional capacity: (i) MINED's organizational structure and management system is weak. The central MINED units, provincial and district authorities, schools and communities are not yet ready to assume new responsibilities. Roles and job duties are not clearly defined, management skills are weak, although the Ministry is now developing a svstematic human resources development program. The MINED program is addressing these problems through upgrading staff levels at the center and in the provinces and districts, as well as introducing a new svstem for human resource management. (ii) The Ministry's capacity for policy and planning at the center has improved substantially over the last few years, and played a major role in the preparation of the ESSP. However, this capability has not yet been developed in the provinces and districts. Rural districts and individual schools need the capacity to efficiently collect, analyze and use data and better integrate into MINED's planning process a system for the exchange of information. This is likely to be facilitated by increasing computerization of planning functions which will also be reinforced under the program. (iii) The system offinancial management, which is mainly manual, is out-of-date and staff skills need to be upgraded to support crucial functions, especially those that are to be decentralized. MINED staff at all levels, especially those at the provincial, district and school levels need training in program budgeting, accounting, computerized information systems, and procurement. A training program is being prepared for about 16 recently recruited staff who will be deployed to carry out administrative and financial functions in the provinces. (iv) MINED does not have an adequate system of monitoring and evaluation to track the progress of its massive effort to improve education, despite the recent introduction of annual work-program preparation based on inputs from the provinces and annual reviews to evaluate progress. The proposed implementation structure for the ESSP, including the requirements for consultations and reporting, will provide an effective framework for getting feedback on implementation. This will help steer the course  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 7 of policies and programs. Results from this process will be further enhanced by upgrading and training of staff. (d) Non-responsive technical and vocational education. The system of technical and vocational education is too closely tied to the public service and is not responsive to the needs of the private sector. The Government is eager to modernize these schools and make them more dynamic in reacting to the needs of the labor market, but development of policies and programs is yet to be completed. (e) Inefficient higher education. The internal efficiency of post-secondarv institutions is low. Relatively few students complete their academic programs each year. and few women enroll in these institutions (female students are about 25% of total enrolments). A strategy for higher education needs to encompass both private and public institutions within the framework of the ESSP. l;) Inadequatefunding and inefficient allocation of resources. Per pupil spending in Mozambique (US$14) is below most other low enrollment countries and well below the sub-Saharan Africa average of about US$70. This is partly due to the wide use of double and triple shifts in schools, which lowers unit costs. As stated earlier, schools operating on a shift schedule allow only 3 hours a day per class, lower than the recommended average. This practice has limited how much children can learn, leading to low internal efficiency. The high direct and opportunity costs facing parents under these circumstances, particularly the poorest, have led to low attainmcnt levels, high dropout rates and high wastage of resources in the system. Government Strategy The broad issues described above provide the justification for Government strategy and related projects and programs. In 1995 the Mozambique Assembly of the Republic (Parliament) approved the National Education Policy and Strategies for Implementation (NEPS), which formed the basis of the Education Sector Strategic Plan. The priorities of the NEPS are to move toward universal primary education and gradually eliminate illiteracy. The Government also recognizes the need to develop a strong secondary education system to provide workers for the labor market and candidates for further education and training, including teacher training. (a) According to the NEPS, the Government aims to improve the quality of education by: (i) developing relevant and feasible schemes for pre- and in-service training of teachers; (ii) developing other forms of incentives for the teaching profession, which aim at uplifting the motivation and morale of teachers, particularly by creating improved working conditions; (iii) combating school failure through curricular changes which aim at making the curriculum more relevant and flexible; (iv) increasing efforts to ensure that school books are provided to all students; (v) stimulating the involvement of private companies in the production and sale of school materials; and (vi) establishing an efficient staff of inspectors and pedagogical supervisors. (b) MINED's strategy is also to expand access and equity by: (i) expanding the network of institutions and providing financial and material assistance to the poor; (ii) the promotion of increased participation of women,  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 8 (iii) the integration into the education system of children who are in difficult circumstances and children with learning difficulties; (iv) supporting initiatives by private entities and other social forces which aim at expanding the network of educational institutions of any type and level; and (v) supporting the expansion of the school network through distance learning. (c) To meet its other goals, MINED will enhance education system management bv strengthening the system and its institutional capacity by creating local technical and administrative abilities in order to gradually introduce a process of administrative decentralization to the local power structure and to increase the intervention of the community in the decision-making process in the school. (d) On the issue of technical and vocational education, MINED will adapt technical and professional education to the developmental requirements of the country. by carrying out studies and implementing measures and programs aimed at restructuring this level of education to support further development and privatization of the economy. 3. Sector issues to be addressed by the program and strategic choices Program coverage. The ESSP is based on a sector-wide conceptual framework which includes technical education and vocational training as well as higher education, with priority given to basic education. However, because of the sizeable nature of the task to develop investment programs for all sub-sectors concurrently, the decision was made to first complete the programs for basic education. The investment program for technical education and vocational training is expected to be completed in the first half of 1999. IDA funding in this operation will therefore be related mostly to basic education and development of strategies for the other sub-sectors. When the strategies for the remaining sub-sectors are ready, the Sector Investment Program (SIP) would be broadened to integrate programs for these sub-sectors. Option to expand upper primary education separately. Upper primary schools (grades 6 and 7) are usually separate schools where teaching is done by subject specialist teachers. Expanding the second cycle of primary education as currently designed would have resulted in high costs for opening schools and hiring teachers who may not be fully utilized. Therefore this was rejected in favor of MINED's proposal to unify the two cycles by adding grades 6 and 7 to lower primary schools. The teacher training program for the integrated primary education (for grade 10 graduates) would require teachers to specialize in more than one subject for grades 6 and 7, and these teachers would also be qualified to teach from grades 1-7. This system will also make it easier for grade 5 graduates to continue to grades 6 and 7. Cycles of learning. To improve the internal efficiency and unclog the system at the primary level, the option of introducing automatic promotion was considered. This was rejected because a low-quality system with poorly qualified teachers, many with limited commitment, would provide no checks on student achievement. However, to reduce the burden of excessive examination, a new system will be introduced to assess student achievement at specific points. This change will organize the school system according to cycles of learning instead of grades to permit a better timeframe for curriculum development and learning outcomes. Primary school construction. The possibility of using large contractors for school construction was considered and rejected because of the difficulty in attracting these contractors to work in areas far from the main towns and the very high costs incurred when they do so. The community approach to construction  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 9 is more promising as it has been successful in many areas and it helps promote ownership and infusion of resources in the communities. C. PROGRAM DESCRIPTION SUMMARY 1. Program components (see Annex 2for a detailed description and Annex 3 for a detailed cost breakdown) The program's components cover the quality of education, access to education, and MINED's institutional development. The Government has already begun implementation with assistance from donors. The components of the entire ESSP program, funded by Govemment and donors, are described below. Sub- components that IDA will fund are noted in the summary cost table (p.1 1). (a) Quality of education. To improve the quality of education, the ESSP will support the following sub- components: (i) 7eacher training-expand enrollment of pre-service teacher training programs by constructing 5 IMAPs (Teacher Training Institute), upgrading 15,000 underqualified teachers, and by running in- service training programs through distance education in areas of special need. (ii) Pedagogical support for teachers-revitalize the network of ZIPs (teacher support zones or clusters) as the basis for providing pedagogical support to new, serving and untrained teachers, support supervision and school inspection services, and promote school community relations (840 ZIPS revitalized in the first phase). (iii) Curriculum transformation-transform the curriculum: to reflect the integration of the first and second cycles of primary education (grades I to 7), to integrate covered materials across grades and subjects, to promote values that will support democracy and national reconciliation, and to make the curriculum more sensitive to national culture and regional diversity. (iv) Learning materials-supply about 43 million textbooks and other teaching materials, improve book distribution, and develop commercial publishing of textbooks. (v) Assessment and examinations-improve classroom assessment practices and end-of-cycle examinations and gradually introduce an assessment system to monitor the quality of the education system. (vi) Direct support for schools-create a School Quality Improvement Fund to provide grants for quality improvements directly to schools to underpin the decentralization of resource administration. (vii) School director training-finance the provincial-level training of over 6,000 school directors in education and school management, including accounting, supervision of teachers, data collection and use, and school-community relations. (b) Access to education. To increase access and improve equity in the distribution of school places, the ESSP will support the following sub-components:  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 10 (i) School and classroom construction and rehabilitation-expand the number of places in primary schools by building and rehabilitating about 12,000 classrooms and related school facilities partly through a low-cost community building program. These facilities will also include water supply and sanitary facilities. Secondary schools would be expanded through construction of 25 ESG I and 4 ESG2 schools. (1i) Girls education initiatives-reduce the direct and opportunity costs of education in part by providing 22,000 scholarships to girls; creating a more gender-sensitive school curriculum and environment; and by promoting community awareness about the benefits of girls' education. (iii) Non-formal education - complete and implement a strategy for expanding non-formal education, including literacy training for girls, school drop-outs. and adults. (iv) Special education (SL) develop and test a model for providing education to children with special needs in 4 schools, develop training programs and teaching tools for special education teachers, rehabilitate 11 SE schools and construct 3 new SE schools. (c) MINED institutional capacity. To strengthen management capacities, the ESSP will fund the following sub-components: (i) Organizational structure and decentralization build capacity to coordinate ESSP implementation and further expand organizational development and training at all levels to improve the effectiveness of delivery of education. (ii) Policy and planning-- strengthen the central, provincial and district ability to plan and develop policies and programs. (iii) Financial management-- establish an improved financial and procurement management system, through training, and computerized record keeping at all levels. (iv) Monitoring and evaluation-strengthen the information systems and processes used for monitoring and evaluation, including the establishment of the PMR. Implementation of this component will be flexible and based on improved practices, better allocation and use of resources and realistic scheduling of activities. (d) Technical and vocational education strategy. The ESSP includes estimates of expenditures (US$ 42 million) for developing and operating the technical and vocational system during the program period. These are indicative figures from donors who would be willing to invest in the sector once a strategic plan for the sub-sector has been agreed. (e) Higher Education. The immediate priorities for higher education are to enhance quality and efficiency, because of the currently tight labor market for university graduates and the low intemal efficiency of the sub-sector. In order to develop appropriate strategic plans for quality improvement, and gradual expansion/diversification to match the needs of an expanding economy, higher education will be included in the study of costs and financing of education planned for early in 1999.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 11 Program Cost Summary by Component l % Total IDA Base Costs Base Funding (US$ '000) Costs (US$ '000)* A. Quality of Education A. 1. Teacher Training 24,700.9 4 6,000.0 A.2. Pedagogical Support for Tcachers 17,699.4 3 6,150.0 A.3. Curriculum Transformation 7,071.0 1 1,000.0 A.4. Learning Materials 39,896.3 6 6,450.0 A.5. Assessment & Examinations 2,369.0 - 300.0 A.6. Direct Support for Schools 13,640.8 2 4,950.0 A.7. Training of School Directors 3,125.7 - 950.0 Subtotal Quality of Education 108,503.1 16 25,800.0 B. Access to Education B. l. School Construction & Rehabilitation 177,225.2 27 31,800.0 B.2. Girls Education Initiatives 8,938.6 1 4,350.0 B.3. Nonformal Education 5,511.3 1 250.0 B.4. Special Education 1,639.1 - - Subtotal Access to Education 193,314.2 29 36,400.0 C. MINED Institutional Capacity C. . Organizational Structure & Decentralization 318,532.9 49 4,100.0 C.2. Policy & Planning 1,619.0 - 1,000.0 C.3. Financial Management 3,085.9 - 2,200.0 C.4. Monitoring and Evaluation 2,200.0 - 1,000.0 Subtotal MINED Institutional Capacity 325,437.8 49 8,300.0 D. Voc/Tech Education Strategy D. 1. Vocational/Technical Education 42,111.2 6 500.0 Subtotal Voc/Tech Education Strategy 42,111.2 6 500.0 Total Baseline Costs 669,366.2 100 Physical Contingencies 20,720.9 Price Contingencies 27,081.7 Total 717,168.8 71,000.0 *IDA funding (rounded) includes contingencies.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 12 The estimated cost of the ESSP including contingencies is US$717.2 million. As a comprehensive plan for the sector, the ESSP includes the costs of salaries (US$293) and other recurrent costs including operation and maintenance. Of total costs, the Government would finance an estimated US$ 444.6 million, NGOs US$ 30.0 million, communities (in kind or in cash) US$ 5.0 million, IDA US$ 71 million, and other donors US$ 118.8 million. IDA will maintain a presence in strategic components, as shown in the preceding table. IDA will finance core activities in the sector that would ensure that progress is being made in the core areas while other donors finalize their programs. These activities would consist of: quality of education (US$ 25.8 million). pre-and in-service teacher training. pedagogical support for teachers, curriculum tran.sformation, learning materials, examinations and assessment, grants for schools and training of school directors, access to education (US$ 36.4 million), school construction, girls education, and non- formal education, capacity building (US$ 8 3 million), organizational structure and decentralization, policy and planning, financial management, and monitoring and evaluation, and finally, development of strategies for technical education, vocational training, and higher education (US$ 0.5 million). 2. Key policy and institutional reforms supported by the program The program will support introduction of the following key policies. Quality of education (a) Teacher incentives will be enhanced by: (i) a new policy of teacher career path with improved grade structures, salaries, benefits and promotion criteria, as well as faster processing of promotions; (ii) provision of staff houses with community support to attract teachers to rural areas; (iii) salary and other career incentives to teachers who participate in in-service teacher training programs; and (iv) integrating pedagogical support and teacher supervision within the ZIPs. (b) The two cycles of primary education would be unified to form one cycle of primary education. To achieve this, the curriculum will be revised and the examinations at the end of lower primary will be dropped and new tests will be introduced to match the cycles of learning to be introduced in the primary school system. (c) The use of the mother tongue will also be used as the medium of instruction in grades I and 2. (d) To increase availability of textbooks, MINED will pursue: (i) liberalization of textbooks publication and distribution and (ii) decentralization of selection, procurement and distribution of textbooks to districts. (e) Free textbooks will be provided to students in grades 1 to 7 on a 1:1 ratio.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 13 Access to education (a) A low-cost school construction, rehabilitation and maintenance strategy will be introduced to pernit construction of durable schools and extend the life of education assets. (b) The Government will introduce a package of measures (monitored by new national and provincial Gender Units) to bring gender-sensitivity into the mainstream and increase the participation and achievement of girls in the education system. (c) Government will provide school inputs such as teachers, textbooks and training for educational personnel for schools built and operated by communities and the private sector. MINED institutional reform To strengthen policy formulation, monitoring and evaluation, including the mobilization and the use of resources, a structure for coordination of these activities will be established, as defined in section C.4 on implementation arrangements. (a) A new decentralized structure for the management of education will be adopted to increase the involvement of provinces, districts. communities and schools in the management of the system. (b) Financial management systems will be developed to support the process of decentralization. (c) Donor procedures for supervision, reporting, financial management and auditing will be harmonized. It is also expected that when the new financial system being prepared under the Civil Service Refonn is in place, it will serve as the framework for management of donor financing. 3. Benefits and target population Benefits Higher labor productivity will result from improved quality of education, and increased number completing schooling. Comparing the proposed program to the without-program situation, it can be shown that an additional 260,000 workers (those graduating from upper primary) will increase their lifetime carnings by 18.5%, and another 15,000 workers will increase their lifetime earnings by 14% (those graduating from lower secondary). Overall, compared to the current enrollment, an estimated 1.4 million primary students and about 560,000 girls will be absorbed into the system between 1999 and 2003 as a direct result of the program. Improved understanding and participation in the activities contributing to social development and in the process of peace consolidation and national reconciliation will promote stability, which will substantially benefit individuals, communities and the country as a whole. National reconciliation and peace consolidation facilitated by a larger share of the population being educated which enable them to better understand and participate in activities that promote social stability. Living conditions, beyond those resulting directly from higher income, will accrue to individuals receiving additional and better education. Increasing enrollment and improving retention and repetition rates will ultimately improve the quality of life, particularly for girls, by reducing fertility, maternal mortality and  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 14 child mortality rates; improving nutrition and health standards, and making it more likely that the children of direct beneficiaries will in tum receive a better education. A reduction in imbalances in economic opportunities and cultural and social benefits between the South and other regions of the country will result from more equitable access to education. The program will also promote greater equity in access to education for girls. Girls will also benefit from a gender-conscious strategy for all areas of education when possible Improved responsiveness resulting from the decentralization of education management will lead to more appropriate solutions for communities and more effective deliver'. Local providers will have greater input in decision making, giving them a greater stake and interest in the success of schooling Along with the planned incentives to encourage nonpublic participation in education. decentralization will encourage communities to increase their contributions to education financing. Target population The program will target (a) children of school age not enrolled, especially those in disadvantaged and rural areas who will have better opportunitv to receive education. (b) children currentlv inside the system but receiving a substandard education who will become better educated, (c) teachers, who will benefit as individuals and as a professional group, and (d) adults and drop-outs who participate in nonformal education. The components and activities supported by the program will also be directed to (e) staff and managers of MINED at the central, provincial and district levels, and to (f) schools and local communities organized to support the school programs. About 2 million pupils currently enrolled in the system and an estimated 1.4 million children that will be absorbed into the svstem between 1999 and 2003 will benefit from the improvcments in quality and access 4. Institutional and implementation arrangements Implementation Period: Five Years Executing Agency: Ministry of Education (MINED) Implementing Agencies: Central Education Agencies, Provincial and District Education Offices and autonomous agencies of MINED. Program oversight and policy guidance. The existing coordinating and advisory body of MINED, the Conselho Consultivo do Minist6rio, will be responsible for policy guidance. The CC comprises the Minister, the Vice-Minister, the Permanent Secretary and the heads of all national directorates and departments. The CC meets regularly to review the Ministry's programs, a task that in the recent past has included preparation of the ESSP and coordination with donors. The CC will also meet every three months specifically to review progress and to resolve any issues impeding the achievement of program objectives. Organizational structure at the center. The guiding principle for implementing this program is that the Govemrnent will implement the program with existing structures of the Ministry of Education. The ministrv has established an Installation Conmnittee (Commisao Installadora), headed by the Vice-Minister, with responsibilities for proposing implementation arrangements for the ESSP. The overall proposed structure for implementation is as follows: (i) A Steering Committee (Comite Paritario de Acompanhamento, COPA) will be the main vehicle for ensuring donor coordination and for monitoring and evaluating implementation progress of the ESSP.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 15 The committee is headed by the Minister of Education and its members represent key ministries and external partners. (ii) A Technical Committee (TC) of the ministry will deal with technical issues. The TC will be headed by the Vice-Minister and composed of national directors, the chairs of the working groups, and qualified individuals nominated by the Minister. The Executive Secretary will also be a member of the TC. No donors will be represented on this committee. (iii) Working Groups (WGs) will be responsible for dealing with technical issues related to the various components, including the preparation of technical papers. annual work plans, annual review of implementation, and advice on changes in the design or policies related to the various components. The seven Working Groups cover education quality, access and gender. institutional development; vocational/technical education; adult education; higher education and research; and finance and procedures. (iv) A Secretariat, composed of an Executive Secretary and a few support staff, will provide administrative services to the COPA, TC, and WGs in coordinating and monitoring implementation of the program, including day-to-day donor coordination. (v) A Financial Management Committee (reporting to the TC) will review quarterly program management reports produced by M[NED's Department of Finance and Administration (DAF). The report will cover finances, outputs and procurement. Within this framework, the MINED line departments and provincial and district offices will take responsibility for program implementation. The oversight and monitoring structure will provide the necessary guidance and resources to implement the programs and ensure that MINED units meet the reporting, financial and auditing requirements. The formal decree for establishing this structure was approved in August 1998.. Organizational structure in the provinces and districts. The Government is gradually shifting responsibility for developing annual work plans and implementing the program to the provincial and district offices. Because capacity at these levels is weak and the procedures and regulations under which they operate are still evolving, MINED will phase in decentralization gradually. Decentralization will start with three districts out of 10 in the first year, and expanded as capacity is built in the regions and regulations for their operations are established. This process will include development of clear procedures for operations and staff training. Procurement Arrangements Procurement arrangements refer to the IDA financed share of the Program and are further described in detail in Annex 6. Organizational structure. Procurement under the program will be decentralized to the provinces, although this process is still at an initial stage. The center will carry out all ICB procurement and consultant selection under the program, coordinate all activities at provincial level, and assist the provinces with standard bid documents, construction plans and technical advice. To strengthen the center's perfornance, an experienced executive secretary has been appointed, experienced staff from GEPE (the former project  Project Appraisal Documen' Mozambique Education Sector Strategic Program (ESSP) Page 16 implementation uni), have been incorporated into MINED central functions, and an advanced procurement course will be held In March 1999 in Maputo. At the provincial level, only three pilot provinces will manage their own procurement in the first year of the program. Each of the provinces will establish program implementation arrangements based in the provincial MINED offices. supported through capacity building. The provincial MINED office will implement procurement of small works, furniture, and educational materials using National Competitive Bidding (NCB) and will assist rural districts to utilize community participation in school construction. The MINED offices will be encouraged to delegate management and supervision of works to more experienced local consulting firms. A detailed list of actions to be taken by central and provincial MINED offices prior to program implomcntatiori have been agreed. Procurement of wo?c.s Thec ivil works component under the program relates mostlv to construction and rehabilitation of rural primary school classrooms, Packaging these structures into larger lots is often impractical, and these small construction wvorks will not attract the interest of large contractors given their remote location. MINED will therefore rely on commriunity participation and the use of small, local contractors engaged under simplified bidding procedures used for small works. Contracts for these structures, of an estimated value of $50,000 to $100,000. will be widely advertised under NCB. National procurement regulations were reviewved by the Bank and considered adequate for NCB with minor modifications. Wihenever possible, construction of larger structures (such as secondary and pre-university schools) will be coupled wvith that of primarv schools in order to attract large contracting firms. International contractors will be allowed to bid for any contract both below and above the threshold established for International Competitive Bidding (ICB). Procurement of good.. ICB will be used for most procurement under the Program and carried out by MINED at the central Ievel IAPSO may be used for purchase of office equipment (individual units) under conditions specified in the Development Credit Agreement (DCA). Contract packages of goods available locally such as fuirniture and educational materials, below the estimated value of US$200,000 per contract, will be purchased through National Competitive Bidding (NCB). Purchase of specialized goods, such as textbooks, software and equipment may be purchased by Intemational Shopping (IS) and Limited Intemational Bidding (LIB) procedures for individual contracts below the threshold of US$50,000 and US$100,000 equivalent, respectively, up to the aggregate amount not to exceed US$250,000 and US$1,000,000 respectively. Purchase of off-the-shelf items under the individual contract amount of $20,000 equivalent and, up to an aggregate amount of $250,000 equivalent may be purchased under National Shopping procedures. Simple construction materials to be used under comrnunity participation works will be purchased locally inder procedures specified in a manual of procedures. Consulting services. MINED center will have the main responsibility for drafting Terms of Reference (TORs) and selecting suitable consultants following IDA guidelines. The Quality and Cost Based Selection (QCBS) will be used for most consultinig firm assignments, though other methods may also be used as specified in the DCA. Implementation manuals and standard documents. Bank Procurement Guidelines and standard bidding documents (SBDs) will be used for all ICB procurement. A manual of simplified construction techniques and procurement proceduires for use by the communities and NGOs at the district level. Prior and post review of procurement. Contracts for works over US$200,000, contracts for goods over US$ 100,000, the first five works and goods contracts in each province, and requests for the use of direct  Project Appraisal Document Mozambique Education Sector Strategic Program; (ESSP) Page 17 contracting will be subject to IDA's prior review. All other procurement will be subject to post-review of a representative sample of contracts on a yearly basis. TORs for all consulting assignments and training contracts, and contracts for consulting services above the threshold of US$ 1 00,000 equivalent, will be subject to prior review. Procurement schedules. MINED center will have the responsibility to coordinate and maintain a general implementation schedule for the whole program. Each of the provincial offices, however, will be required to maintain a bar chart of the procurement activities under their adrinistration. Harmonization of donor's procurement procedures. The ESSP has attracted the interest of a large number of donors currently supporting the Education sector in Mozambique. Harmonization of procurement and disbursement procedures is feasible under the Program and has been the subject of a detailed study by IDA. It is expected that some of the donors will agree on common thresholds for procurement under NCB ; the use of post-review and of reporting formats. Donors may also agree on the use of standard documents and procedures for advertising, evaluating and awarding the contracts. IDA procedures and documentation will be followed for all ICB procurement. GOM procurement regulations may be used for NCB contracts, provided that IDA procurement regulations would prevail in case of conflict . Accounting, financial management, and auditing functions. MINED's Directorate of Administration and Finance (DAF) will be responsible for overall management and reporting of the principal financial resources for the ESSP: (a) Government funds., (b) funds from extemal partners through the new ESSP financing "basket," and (c) other "non-basket" support within the ESSP scheme from external partners. In the short to medium term, the DAF and provincial education offices (DPEs) will manage these funds. The Financial Management System will be computerized and integrated, and it will support the phased decentralization of financial management, beginning with three pilot provinces. Every quarter, the Financial Management Committee (reporting to the Technical Committee) will review DAF's program management report. Independent auditors acceptable to IDA will audit program accounts annually and provide a management letter that recommends improvemerts to the financial management system. In the medium to long term, the Government proposes to introduce a new financial management system (FMS), as part of the overall civil service reform program. The Government will keep the funds from IDA and each other donor in separate accounts but will move toward common procurement, financial management and auditing procedures acceptable to all partners. Financial statements will show ESSP basket expenditures as well as the source of the funds. Donor agencies support the gradual transfer of funds to MINED through budget support as its financial management capacities improve. For IDA and counterpart funding, DAF will maintain accounting records in respect of the following three bank accounts: (a) the current account in meticais into which the Government will deposit its counterpart funding, (b) the Special Account in US-dollars; and (c) the IDA Loan/Credit Account, including meticais, dollar and SDR movements. In line with good accounting practice, the accounting records for each bank account will be reconciled monthly by DAF with the bank statements for each of the three accounts upon their receipt. Technical assistance (including a financial controller and a deputy controller) will support DAF. The program will stren.gthen DAF to provide general financial management of the central Ministrv directorates and agencies, the provincial and district directorates, and schools. The flow of IDA funds related to textbooks and school materials, grants to schools and community school construction will be modeled on the existing Caixa Escolar (school fnd) system, vwhich the Governnent  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 18 established in 1989 to support education at the communitv level. This system is now being used primarily for the procurement and distribution of leaming materials. Under the Caixa Escolar system, annual budgets and distribution plans are prepared at the district level in collaboration with schools and communities, and approved by MINED and the Ministry of Planning and Finance. Separate bank accounts (administered by a provincial treasurer) are established for each province, and sub-accounts are established for districts with local capacity. Allocated funds are distributed through the provincial directorates of planning and finance (DPPFs) to the DPEs (Caixa Escolar accounts) for disbursement at the school level. The Caixa Escolar is audited annually. Disbursement of IDA fnds. Disbursement from IDA will be made on the basis of incurred eligible expenditures. IDA will make advance disbursement from the proceeds of the Credit by depositing into a Borrower-operated Special Account to expedite program implementation. The advance to a Special Account is to be used by the Borrower to finance IDA's share of program expenditures under the Credit. Another acceptable method of withdrawing funds from the Credit is the direct payment method, involving direct payments from the Credit to a third partv for works, goods, and services upon the Borrower's request. Payments may also be made to a commercial bank for expenditures against IDA special commitments covering a commercial bank's letter of credit. IDA's Disbursement Letter stipulates a minimum application value for direct payment and special commitment procedures. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for: (i) works under contracts not exceeding $200,000 equivalent (ii) goods under contracts not exceeding $100,000 equivalent, (iii) consultants' services (firms) under contracts not exceeding $100,000 equivalent, (iv) consultants' services (individuals) under contracts not exceeding $50,000 equivalent, and (v) operating costs and training under such terms and conditions as the Association shall specify by notice to the Borrower. ESSP will use a simplified Special Account (SA) disbursement procedure which allows decentralized program implementation. The Govemment will open a Special Account in for example the Standard Totta Bank of Mozambique. The Special Account will be operated by designated officials of MINED. The decentralization of program accounts would be introduced initially on a pilot basis in three Provinces. Following agreement between the Government (schools, DDEs, DPEs, DAF, DP, DPPF, MPF) and cooperating partners on the annual work program and budget, procurement would be organized through the three DPEs in accordance with ESSP's procurement procedures. Each of the three participating DPEs would operate 2 bank accounts as follows: (a) A current account in meticais into which counterpart funding by the Govemment would be deposited on a replenishment basis - with an opening two months float and supported by monthly replenishment requests of prior month expenses to DPPF. (b) A sub-account in dollars of the Maputo Special Account with, for example, Standard Totta Bank of Mozambique, to which dollars funding from IDA would be deposited on a replenishment basis - with an opening 2 months float, and supported by monthly replenishments of prior month expenses. The operation of the sub-Special Account would ease the burden on GOM of having to pre-finance activities in the provinces where most program activities would be implemented. All payments made from the sub-SA would have full supporting documentation including, if appropriate, evidence of goods received. Both bank accounts would be reconciled monthly, and those reconciliations should be reviewed and approved by DPPF and DAF as part of the replenishment process.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 19 Upon Credit effectiveness, MINED will submit a withdrawal application for an initial deposit to the Special Account, drawn from the IDA Credit, in the amount agreed to in the DCA. Replenishment of funds from IDA to the Special Account will be made upon evidence of satisfactory utilization of the advance, reflected in the SOEs and/or on full documentation for payments above the SOE thresholds. Replenishment applications should be submitted regularly - ideally every month but not exceeding three month intervals. If ineligible expenditures are found to have been made from the Special Account, the Borrower will be obligated to refund the same. If the Special Account remains inactive for more than six months, the Borrower may be requested to refund to IDA amounts advanced to the SA. Monitoring and evaluation arrangements. MINED will monitor and evaluate the program within the structure set up for implementation and using detailed terms of reference for key units within this structure. Monitoring and outcome indicators (see Annex 1) will allow MINED to measure progress and will form the basis for joint supervision with other donors. Each unit involved with implementation will develop instruments for monitoring its respective component, while the Planning Unit and the DAF will consolidate and analyze statistical, financial, and physical data on the rate of implementation. The new PMR system will provide information on output indicators such as expenditures, units built and number of teachers trained. Capacity will be built in the provinces for collecting monitoring data. The Executive Secretary (responsible to the Technical Committee and CC) will synthesize the results. The donor group will coordinate and manage donor-related matters, such as the preparation of statements of donor contributions, to minimize MINED's time-consuming task of dealing with individual donors. Formalized supervision will take place twice a year to review progress in implementation. Government and donors will jointly prepare the terms of reference and participate in the mission. The Government and each of the provinces will prepare annual progress reports that not only assess overall progress but also highlight components or districts with bottlenecks or weak performance. MINED's information-gathering activities will be the basis of the reporting requirements for the joint annual review meetings with donors. This review will be carried out immediately following MINED's annual meeting with provincial and district directors. The first annual review, to be held in May 2000, will be the basis not only for review of past activities but for spending priorities for the following phase of the program. A midterm evaluation of the program will be held no later than 30 months after program effectiveness, in accordance with terms of reference agreed upon by MINED and the donor community. The possibility of introducing a new five- year program, possibly supported by an additional IDA credit, encompassing vocational, technical and higher education in addition to general education, will be discussed during this midterm review. An Implementation Completion Report (ICR) will be prepared within six months after the closing of the IDA credit. MINED will contribute to the ICR with its own evaluation of the program and operational plan. MINED will commission special studies on difficult issues or problems specific to certain areas, including education costs and financing, detailed capacity building strategies, a vocational and technical education strategy, and improvements of quality and efficiency in higher education. The various units will carry out these studies, with consultant help where appropriate. Independent consultants will also carry out technical audits of the program starting in the second year to assess the quality of implementation and to make recommendations on how strategies for dealing with technical issues may be improved. During Negotiations, the Government gave assurances that it would implement policies and procedures to enable adequate program monitoring and evaluation in accordance with agreed indicators and (i) to prepare a report by June 30 each year beginning in 2000 on monitoring and evaluation activities during the previous year and recommendations for the following year; (ii) prepare a midterm report on or about December 31, 200 1; and (iii) discuss these reports with the Bank within three months after they are prepared.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 20 D. PROGRAM RATIONALE The option of using a standard investment project as a lending instrument was considered and rejected because it was thought that the impact would be more limited than a sector investment program for Mozambique at this time. Mozambique experienced an influx of donor aid following the peace agreement in 1992, and has struggled to ensure that these funds are focused on priorities, and complement each other. The burden of managing a multiplicity of donor accounts also challenged the administrative capability of MINED. In the context of continued stability and good prospects for economic growth, it also seemed opportune to define and implement a strategic approach to development of human resources. In light of these considerations, Government and donors decided the time was ripe to use a SIP for development of the education sector. 1. Program alternatives considered and reasons for rejection A SIP approach would normally require that the policy and investment program covers the entire sector from the start. In this case, although a broad policy framework had been defined for the sector, it was decided that the investment program be carried out in phases, starting with basic education, followed by technical education and vocational training and higher education. The basic education sub-sector is the highest priority, strategies for investment at that level are well defined and there is common agreement on how to proceed. On the other hand options for the other two sub-sectors require more careful reflection, given the choices that have to be made regarding design of training programs, and the roles of the public and private sectors. Discussions are ongoing on how these issues should be resolved. Lending instrument. The lending instrument for financing the IDA share is a Sector Investment Program (SIP). This approach captures the essential principles on which the ESSP was developed; a sector wide policy approach and close collaboration between Government and donors in the preparation of the program. At the joint Assessment in May 1998, donors agreed to channel their support to the education sector in the context of the ESSP and to agree on revision and further development of the ESSP through joint annual reviews. There was also agreement on working towards comnmon implementation procedures. The possibility of using an Adaptable Program Lending (APL) approach was explored during appraisal. The APL would have been structured with the program for basic education as the first phase, followed by technical education and vocational training, and higher education in the second phase. This phasing would have required defining the total investment for the sub-sectors in the second phase, and committing IDA to a specific level of contribution in the investment program. GOM and donors were uncomfortable with this approach because they did not want to commit to specific levels of funding for technical education and vocational training, and higher education, prior to completion of the strategies for investment in these sub- sectors. This was especially the case as there was a need to discuss the external efficiency and financing of these sub-sectors in the context of the rapid changes in the Mozambican economy. Moreover many donors are just starting to review their positions on technical and tertiary education. IDA commitment to levels of funding prior to full discussion of these issues could have pre-empted examination of all options for these sub-sectors and undermined the collaborative approach used in developing the ESSP.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 21 2. Major related projects financed by the Bank and other development agencies (completed, ongoing and planned) (a) Bank-financed projects Sector Issue Project Latest Supervision (Form 590) Ratings Implementation Development Progress (IP) Objective (DO) Quality, access and management of Education and Manpower HS S education. Primary education only. Development Project: Cr. City of Maputo only. 1907-MOZ. Signed in 1988: closed in 1995. Project Cost: $17.96 IDA Credit: US$ 15.9 Quality, access and management of Second Education Project: education. Primarv and higher Cr. 2200-MOZ. Signed in S S education. Nationwide. 1991: closed in 1998. Project Cost: US$ 67.9 IDA Credit: US$ 53.7 Quality, access and management of Capacity Building Project; S S education. Secondary and higher Cr. 2436-MOZ. Signed in education. Nationwide. 1993: will close in 1999. Project Cost: US$ 60.28 IDA Credit: US$ 48.6 IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory). U (Unsatisfactory), HU (Highly Unsatisfactory) (b) Ongoing projects financed by other development agencies Agency Sector Issues Activities and Focus ESSP Commitments* (US$ Million) UNDP Quality of education Pre- and in-service teacher training, 4.7 pedagogical support (cofimances the Second Education Project). UNICEF Access to education Classroom construction and girls' 11.8 education (cofmanced by CIDA). UNESCO Quality and Technical assistance in informal 0.2 management of education, sector planning and curriculum education development. Netherlands Quality of education Learning materials. Main donor of 20.8 textbooks program via the Caixa Escolar system. CIDA Access to education Girls' education program (cofinanced by 11.8 UNICEF). Learning materials (parallel financing of textbooks). SIDA Quality and Learning materials. Lead donor in the 18.1 management of sector. (Cofinances textbooks via the education Caixa Escolar system.) Capacity building technical assistance  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 22 Agency Sector Issues Activities and Focus ESSP Commitments (US$ Million) DANIDA Quality, access and Exclusive activities in the province of 13.3 management of Tete. Program encompasses all areas in education primary education. FINNIDA Access to education Exclusive activities in the province of 20.5 Manica Secondary education classroom construction EU Access to education Finances numerous operations 20.3 exclusively through NGOs WFP Access to education Primary education classroom 21.0 construction (cofinances the Second Education Project) Ireland Quality of Education Textbooks, Budgetary Support 5.8 JICA Access to Education Teacher Training College 7.5 IDB Access to Education Rehabilitation of Schools, Studies 5.6 ADB Quality of education Finances construction of teacher training 16.0 institutes France, UK, Quality of education Largely language-related initiatives. 9.5 Spain and Portugal (via Gulbenkian Foundation) _ * Includes indicative amounts for possible budgetarv support. The above projects are consistent with the objectives and strategies of the ESSP, and implementation of thc program was initiated through these efforts after the approval of the NEPS in 1995. Donors have agreed to conforn to the common administrative mechanisms and implementation procedures that are being developed under ESSP, and future funding of the sector will bc consistent with the joint Government and donor review of the annual work plan and budget. 3. Lessons learned and reflected in program design Lesson 1. The Government must develop a comprehensive and coherent strategy for the sector that provides the basis for all donor intervention. This strategy must reflect consensus among the various stakeholders in the sector. = The Government has developed a coherent strategy, especially for primary and secondary education. It has done so in consultation with local provincial and district stakeholders, and in close collaboration with donors. Lesson 2. Good implementation should not be dependent only on the quality of staff at an implementation unit, but on all relevant departments in the Ministry of Education. => Line directorates and units of MINED will carry out the program with guidance, monitoring and technical support from the organizational structure established for implementation. For dealing with  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 23 Bank procurement regulations, they will be strengthened and draw on the experience of the previous project implementation unit (GEPE). Lesson 3. Before appraisal, a detailed implementation plan must be developed for at least the first year of operation. This will guide implementation and build momentum, as well as make up for shortcomings in managerial skill. To maintain momentum and assist with evaluations and monitoring exercises, annual reviews should be instituted. = An annual plan for 1998 was developed and is being implemented. The plan for 1999 is being finalized. Annual reviews by Government and donors have been included as part of the supervision requirements to review progress during implementation and take corrective action if necessary. Lesson 4. Realistic objectives are an important factor in program success, especially when capacity is limited. This implies that the program should not require excessive amounts of foreign technical assistance but rather be adapted to the existing level of capacity in the country or region. = The program design has been developed to build on existing programs. Where innovations or changes in scale are envisaged, these will be phased in gradually while the Ministry is being strengthened to ensure sustainability. Staff capacity will be developed to reduce dependence on extemal TA. Lesson S. Outside Project Implementation Units create a parallel structure with activities often implemented with a lack of coordination with main line programs of the national directorates. This also denies the opportunity for long term capacity building within the Ministry. = The implementation structure for the program will build on existing organizational structures at central, provincial and district levels and activities will be implemented through the national directorates. Lesson 6. The use of large construction contractors for small scale school construction in rural and remote areas is costly and inefficient and has limited options for community participation and the use of local capacity and resources. => The program will focus on supporting the use of local capacity and resources for primary school construction through the Community School Program. This will help develop local capacity, promote ownership of schools and inject additional resources into the local economy. Lesson 7. The management of school construction with the participation of communities or small scale contractors requires adequate technical skills, capacity to manage procurement of construction materials, and process disbursement or procurement requests at central, provincial, district and school levels. > The program will promote skills development and building local capacity (artisans). In addition the program will focus on repeated training activities for key staff in the area of procurement, disbursement and management of construction. A procurement specialist will initially be hired to assist the Government in preparing and clearing its initial tender documents. Procurement schedules and a community school construction manual will be developed.  Proiect Appraisal Document Mozambique Education Sector Strategic Pn3grarr (ESi) Page 24 Lesson 8. The managemeit of coenm'ni>y school corstruction requires close monitoring and regular supervision of construction sites tc. ensure inir minum standards are met. => Construction schedules will be dnevioped and monitored regularly. In addition a network of district or provincial supervisors withf teclhnical skills will be trained and put into place before construction is begun on a location, to complement on-site supervision by the communitv or small scale contractor. 4. Indications of borroweir commifitaienit and, ownership The Council of Ministers approved the National Education Policy and Strategy (NEPS) in August 1995 (Resolution no. 8/95), and the ESSP ini November 1997. The Government's socio-economic plan for 1999 is also based on the ESSP. Both the NEPS and the ESSP are regularly referred to in Government policv statements. The ESSP was prepared with the participation of the provincial and district education offices. and has been widely discussed by all stakeholders in education. During the assessment in May 1998 the Ministry of Planning and Finance made a presentation supporting the ESSP and affirmed the Ministrv's commitment to meeting the broad parameters set for financing the sector Stakeholder consultations will continue as detailed plans for implementation are finalized and implementation starts. MINED has also taken a proactive position in setting up arrangements for program implementation, including coordination of donors, and work is continuing to finalize the work programs and budget for implementation. MPF has given undertakings on the availability of Government recurrent and investment resources for the program in the Letter of Sector Policy. 5. Value added of Bank support in this program During program preparation, the Baank has been instrumental in two main areas: (a) technical advice in education, financing and management issues, (b) strategic advice for mobilizing donor support and facilitating consensus around an acceptable program, and (c) providing a predictable and flexible source of funds to ensure that the core program will be financed while other donors firm up their contribution to ESSP. The Bank has also supported the Governmert in programnming the strategy and has produced background documents to support MfNED's analvsis of constraints and alternative solutions (including Situation Analysis of Education, Education Sector Expenditure Review, Benefits of Learning Study, and Education Sector Management Review). The Bank is also helping to develop conmnon procedures for financial and procurement management to be used by Govemment and donors. During program assessment, the Banik played a major role in ensuring that a coherent program was established and that steps were taken to establish an adequate implemcntation framework for the program. In preparation for the assessment, the Bank provided critical technical assistance to help finalize the documents. During program implementatior, the Bank will fund elements of the ESSP's core program to ensure it moves forward. Bank experience is expected to play a key role in providing technical advice in program implementation and in helping to establish a decentralized system of management in the sector. The Bank will also make major contributions in finalizing the common monitoring and reporting arrangements. The Bank will assist in harmonizing arrangements and procedures for program implementation.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 25 E: SUMMARY PROGRAM ANALYSIS (detailed assessments are in the program file, see Annex 8) 1. Economic and financial [X] Cost-Benefit Analysis: NPV=NA; Social IRR: Grade 1: -7.8% Grade 7: 17.3% [X] Cost-Effectiveness Analysis: 20% savings with a reduction by half in repetition and dropout rates. [XI Sensitivity analysis: Private and social rates of return will double when repetition and dropout rates are reduced by 50%. [XI Benefit Incidence Analysis: Increased investments in primary education will have a pro-poor income distributing effect. The economic and financial analysis (in Annex 4) conducted for the ESSP consists of (i) demand analysis and rationale for public intervention; (ii) cost-benefit analysis, including sensitivity analysis- (iii) fiscal analysis; and (iv) analysis of cost-effectiveness measures. The analysis is summarized below. (i) Rationale for public intervention Universal basic education (complete primary in low income countries, lower secondary in middle-income countries) is a principal precondition for sustained economic growth. It increases labor force productivity in existing jobs; it enables the labor force to move more easily to new jobs associated with higher levels of economic development; it is the prerequisite (for a segment of the population) for advancement to middle level and higher level professions; it induces reduction in undesirably high fertility rates; it helps improve the health status of the population; it builds up a strong national identity via the use of a common language and common cultural values; and it increases social cohesion by demonstrating to disadvantaged population strata that they too belong in the social mainstream. Empirical research in countries covering the entire spectrum of social and economic conditions supports these arguments. Retums to education investment arc strongly positive, and typically retums for basic education are higher than for middle and higher education. Mozambique is no exception to this rule, as shown in the next section (ii). Given the critical importance of education, particularly basic education, to long-term economic growth, the state has a strong interest in promoting the necessary investment in the sector. In practical terms, this means that the state will have to secure almost the entire financing of necessary investments from local public revenues and external aid flows to the public sector. Given widespread poverty, private education can be expected to cover only limited numbers of the school age population and only among high-income households (currently, private schools enroll about 2% of primary school students). With reference to "necessary" investments, the foregoing argument suggcsts that they are the sum of investments needed to (a) attain universal primary education, (b) secure sufficient secondary education graduates for filling middle level positions and advancing to university studies, (c) secure sufficient university graduates for filling high level positions, and (d) cmbark upon a massive literacy campaign targeted to young people who never enter school or drop out of the education system too early and stay illiterate. Availability of public resources determines the pace at which education investment will take place. Projected resource availability (section (iii) below), combined with the difficulty of forcing the rate of progress beyond technically imposed limits, has determined that at the end of the five-year program  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 26 (assuming that all planned activities to improve internal efficiency are realized), Mozambique's primary education system (grades 1-7) will graduate about 25% of the corresponding school population, as opposed to the desired 100%. Thus, the proposed program constitutes an early step in a long process of building up Mozambique's human capital from a very low base: According to the 1996/97 national Household Survey (IAF), only 17.2% of Mozambicans aged 18-65 had completed 5 years of education, while the corresponding number for women was 10.4% and for the poor 13.9%; currently onlv 49.2% of children 7- 11 years old attend school, while the corresponding number for girls is 39% and for the poor 41 7%, and lastly the main reasons of non-attendance in rural areas were the cost of education to households, children's need to work, and the absence of a school in the village (ii) Cost-benefit analysis Rate of return analysis and sensitivity analysis. A simple rate-of-return calculation was used to estimate the current returns to one additional year of schooling from grade 1 to 7. It is assumed that the market wage increase, as a proxy for the marginal product of the accumulation of human capital, is nil after two years of primary schooling. In other words, most children leaving the school system after two years will not be able to acquire higher paid jobs or improve productivity. Costs to the parents are school materials and fees as it is assumed that the opportunity costs from lost work is marginal for young children. Unit costs formn the basis of the calculation of the social rate of return. The results show a negative private and social rate of return after one year of schooling, a situation that reflects currently high dropout rates and very low attaiment and the limited benefits accruing to the society as a whole from individuals dropping out of schools after one year of education. But rates of return increase rapidly after more than two years of schooling, reaching a value of 18.5% for households and 17.3% for society at large in grade 7. Simple Rates of Return at Current Levels of Attainment (1997) Level of Schooling Monthly Wage/ Completed Income Private Return Social Return Illiterate $17.4 Grade 1 $17.4 -1.5% -7.8% Grade 5 $27.8 15.6% 14.0% Grade 7 $34.7 18.5% 17.3% The sensitivity analysis reveals a clear need to improve internal efficiency throughout the system. By reducing repetition and dropout rates by 50%, a target set under the new program, both the social and private IRR will double . It should be noted that the computed rates of return do not attempt to capture the higher productivity of graduates expectedfrom the better quality of education resultingfrom the envisaged improvements. Better quality of graduates would tend to raise IRR over the estimated value. These results are reinforced by computations donc by Mozambican researchers based on the 1996-97 Household Survey. Thus, a female completing Grade 7 increases household per capita consumption by 36% in rural areas and 25% in urban areas. Also, children of literate mothers are significantly better nourished, are more likely to complete necessary vaccinations, and more likely to be issued health cards. Impact on poverty. The benefit incidence analysis revealed a pattern common among developing countries. Under the ESSP program, marginalized groups, including girls and the poorest, will particularly benefit from the ESSP as targeted increased investments in primary education will have a pro-poor income distributing effect. This will be reinforced by the planned increase in education expenditure per student.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 27 (iii) Fiscal analysis Fiscal impact. The total program for the five-year period 1999-2003 is costed at US$717'million. This amount covers capital as well as recurrent expenditure for primary education (grades 1-7), secondary education (grades 8-12) and technical education, but excludes expenditures on higher education and the effects of planned public sector salary decompression on education costs. An additional expenditure of US$101 million and US$100 million (for the period 1999-2003) is estimated for salary decompression and for higher education respectively. Thus, the total projected cost (capital and recurrent) for the provision of education services at all levels could amount to about US$91 8 million in 1999-2003, or US$818 million without higher education. The fiscal viability of education sector expansion plans can be checked by comparing the above figures to macroeconomic projections worked out by Bank and IMF staff in collaboration with Mozambican authorities. The Government will have to allocate up to 16% of projected public expenditures (US$918 million over US$5,767 million) to meet the public sector financed costs of this program (including higher education) over the 1999-2003 period. The Minister of Finance, in his Letter of Sector Policy to the Bank, commits the Govemment to allocate up to 21 % of public expenditures to the education sector by the year 2003. The fiscal viability of the proposed program of education sector expansion is ensured both in termns of the country's economic prospects and the Government's commitment to the sector's development. Also, education (including universities) would absorb an average of 4.4% of GDP per annum in the period 1999- 2003, which is modest in view of the high percentage of school-age children and the need to rebuild infrastructure badly damaged during the war. Impact on unit costs. Education expenditures in Mozambique, measured either as a share in GDP or in total public expenditures, remain below the Sub-Saharan Africa average. Under the new program unit costs will increase as a result of the increase in salaries, the increase in spending on school materials (a one-to-one pupil-textbook ratio) and the increase in spending on pedagogical training. Per student costs of primary education are estimated to increase by 40% from US$14 to about US$ 19. While the unit cost will increase considerably at primary level, it will only change slightly for lower secondary education (from US$65 to about $70 per pupil) as the program will increase the student-teacher ratio from about 22 to 28, thus partially offsetting increases in teacher salaries. Primary teacher salaries (EP I: US$37 per month; EP2: US$78) are below the Sub-Saharan average of about US$70 for primary education, but will also increase under the proposed program as a direct result of the salary decompression and upgrading program. Sub-sectoral allocation of resources. Under the program, allocations to the sub-sectors will be improved following the trend since 1994. Before 1994 primary education received less than 40% of the total education budget, while at the same time the administrative overhead of the system was very high at 21 %. By the year 2001, without an introduction of new programs for technical and vocational training and higher education, administration will absorb 12% of total public expenditures on education, primary education 49%, secondary education 14%, teacher training 6%, technical and vocational training 4%, tertiary education 12% and others 3%.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 28 (iv) Cost-effectiveness analysis An attempt has been made to compute the cost savings from improvements introduced through the proposed program (mainly, a reduction in the dropout rates and repetition rates, which reach up to 50%). The method adopted and the full results of these computations are presented in Annex 4. In sumimary, because of the lack of some necessary data, two approximations were made. First, numbers of graduates over a number of years at the various levels of primarv and secondary education were related to education expenditures in those same years instead of, as they should be, to expenditures in the vears that these graduates were going through the education system. Second, per unit costs of graduates at the various levels were approximated by relative teacher costs for these levels The computations based on these approximations indicate that the cost savings from policv reforms and other interventions promoting internal efficiency amount to about 20%. In other words, the required expenditure for producing the specified numbers of graduates at the various levels of primary and secondary education is expected to be 20% less than it would be if dropout rates and repetition rates remained unchanged at their 1996 levels, even though cost per student is expected to rise as mentioned in section (iii) above. 2. Technical School construction. The Govemment has stressed the need to place the school at the center of the education system. Traditionally, school places have been expanded in two wa's. Communities build schools at very low cost using locally available materials and methods, without any Government financial or technical support. In addition, the Government normally built schools of cement blocks through contractors, often at very high cost. To expand the school system as much as possible within the budget envelope available, the program will gradually introduce a Community School Program (CSP) that puts the community at the center of school construction and maintenance. The design of primary school classrooms will be based on cost-effective models used in Mozambique and in the region, which are suitable for construction by communities as well as contractors (see Annex 13 for details). About 5,000 classrooms will be built through the CSP over five years. Demand and supply for teachers. MINED recognizes that the current number of pre-service teacher training graduates will be inadequate to cover the proposed expansion and improvements to the education system and therefore relies on an expanded in-service teacher training program. Overall about 8,500 teachers without pre-service training will have to be hired from the 10th grade and trained through this in- service training program. At the moment the expansion in the number of teachers and the hiring of 1 0th grade graduates is viable from both a fiscal and supply side. The pressure on the system will be further eased if the proposed improvements in the internal efficiency are implemented for both basic education and the teacher training system. In the ESSP scenario (Table 7 (b) in Annex 4), the population census for 1997, which estimates overall population at about 20% below the estimations based on the 1980 census, has been used. Under this scenario the proposed expansion of the education system becomes more feasible, as the need for teachers will go down by about 30%, easing the pressure of hiring 10th grade graduates and making the upgrading of untrained teachers viable within 5-6 years. This will reduce the overall costs of the program in the later years, as the initial investments for the first years will remain the same. The analysis of teacher training is described in detail in Annex 16. Expansion of upper primary education. Upper primary schools (grades 6 and 7) are usually separate schools where teaching is done by subject specialist teachers. It is normally difficult to establish these schools because of a lack of adequately qualified teachers and the need for a minimum number of students  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 29 to make the school viable. Expanding the second cycle of primary education as currently designed was rejected because of the potentially high cost of opening schools and hiring teachers who may not be fully utilized. The decision was therefore to unify the two cycles by adding grades 6 and 7 to lower primary schools. This system will make it easier for grade 5 graduates to continue to grade 6. It will also make better use of specialist teachers, who may be underutilized in separate upper primary schools. Teacher training and support. The Government proposed to replace the three-year teacher training program for 7th grade graduates (7+3) with a two-year program for I 0th grade graduates ( 10+2). However, because of the shortage of 10th grade graduates to enroll in teacher training programs, the Government has decided to continue the 7+3 programs in the short term. At the same time, it will expand places for the 10+2 program and gradually introduce a new, accelerated training program (called 10-+ 1 + 1). The second year of this new program will be spent as full-time supervised teaching. In addition, 15.000 teachers with fewer than three years of training after the 7th grade will be upgraded through the in-service training program provided by the Instituto de Aperfeicoamento de Professor (IAP - the Teacher In-service Training Institute). The IAP program is one successful example of distance education reaching large numbers of highly dispersed learners at a relatively low cost. The program would also emphasize dynamic teacher support and school operations by rebuilding the ZIP system. These ZIPs would link schools with pre- and in-service teacher training, allow for regular teacher seminars, provide pedagogical support to schools, and help develop school-community relations. (See Annex 16 for more information about teacher training). Learning materials. At the moment, the Government-owned textbooks procurement unit, Diname, is the country's only publisher of textbooks. The planned transition from state monopoly to competition in publishing will be phased in roughly by the end of the program period. There is concern that opening the market for textbook publishing will initially reduce the availability of textbooks and other learning materials in the schools. Publishing skills are limited, and the market for printed materials in Mozambique is relatively small. The issue of textbook availability is complicated by the proposed policy of cost- recovery for students in grades I to 5, which could seriously limit book sales (because poverty is widespread, the Government will continue to provide free books to students up to grade 5 and to disadvantaged students through the Caixa Escolar). In the higher grades, the Government will introduce progressive cost-recovery for textbooks. The Government will follow a carefully planned program of transition to privatization following the steps outlined in the report on textbooks publication, to ensure continued provision of books in schools while the private sector develops its capacity. These transition arrangements will also include a buffer fund for the purchase of books during the transition. Cycles of learning. To improve the internal efficiency and unclog the system at the primary level, the option of introducing automatic promotion was considered. This was rejected because a low-quality system with poorly qualified teachers, many with limited commitment, would provide no checks on student achievement. However, to reduce the burden of excessive examination, a new system will be introduced to assess student achievement at specific points. This change will organize the school system according to cycles of learning instead of grades to permit a better timeframe for curriculum development and learning outcomes. 3. Institutional Capacity building. Mozambique's administration system has traditionally been centralized, and the implementation of the strategic plan under a policy of decentralization will impose new challenges. Decentralization in the management of education will be achieved by establishing an appropriate  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 30 administrative framework for the central, provincial, district and school levels, including regulations relating to interaction among them. The qualifications and grade levels of staff will be upgraded to meet the new responsibilities. To address these issues, the program will develop and gradually implement a capacity building strategy. Within the Government. the program will increasingly incorporatc district proposals into the planning process. Annex 12 contains a discussion on issuies, progress so.far and future plans for institutional development 4. Social Gender. The program will help implement MINED's plan of action for incorporating gender initiatives in the ESSP (prepared February 1998). The 1996/97 national Household Survey (IAF) found that education for women in rural areas was associated not only with higher household consumption but also with social benefits related to the health, nutritional status and schooling of their children But socioeconomic, geographical and cultural constraints cause great variance in girls' enrollment and completion rates across regions. Girls' share of total enrollment in lower primary, upper primarv and secondarx education is, respectively, only 30%, 27% and 21% in the North, and 36%. 29% and 31% in the Center Dropout ratcs are similar for boys and girls at each grade level, but repetition rates are significantly higher for girls in every grade and every region. MINED's report recommends incorporating the gender dimension into policy and planning, developing MINED capacity to "mainstream" gender issues in the ESSP, cnsuring equitable access to recruitment and promotion, and increasing the number of female students and teachers Gender Units will monitor such initiatives as providing scholarships for girls, providing safe boarding facilities for female students and incorporating gendcr concerns into the curriculum and teacher training Vulnerable groups. The program targets activities to rural areas and to underserved provinces where the incidence of poverty is substantially above average Activities across the program's components specifically emphasize the necds of poorer regions and households. Most of the construction and rehabilitation program will concentratc on rural areas The Government will address the shortage of qualified teachers in rural areas through qualifications upgrading, incentives and improved facilities. The Caixa Escolar will ensure that the poorest sections of society rceive educational matcrials, and the revised curriculum will better reflect rural needs and realities. The shift in management responsibility and resourccs, along with accompanying skills development, will give rural communities greater control. 5. Environmental assessment Environmental Category: I I A I 1 B [XI C There will bc no environmental problems arising from the program. The program will build schools in rural areas. Water, soil, sand and othcr local materials will be used for construction. Sanitation facilities will be built at a number of schools, and these will bc sited to avoid contaminating water supplies. The program will provide water to schools where possiblc to improve health conditions. The program will also promote environmcntal awareness through the curriculum and education materials. 6. Participatory approach Primary beneficiaries and other affected groups. The Govemnment's Strategic Plan was developed with the participation of a full range of stakeholders including parents, local communities employers, NGOs, and religious organizations. This was achieved through: (a) bringing teachers and staff into the decision- making process, through the various working groups, (b) increasing representation of actors at the  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 31 provincial, district, and school levels in the planning process, (c) strengthening ZIPs and training school directors to interact more effectively with communities; and (4) holding consultative sessions with civil society. Specific consultative meetings included: (i) April 1998 - a seminar opened by the Prime Minister on the main objectives and strategies of the Education Sector Strategic Plan, especially on technical education and vocational training, with participants from Government ministries, private sector, higher education institutions, trade unions, and NGOs. (ii) May 1998 - The Prime Minister and the President addressed a seminar on the ESSP and strategies for translating its objectives into practice, for central, provincial and district level directors, and key staff. (iii) May 1998 - a seminar attended by representatives from national and intemational NGOs, churches, trade unions and educators on the ESSP and strategies for community participation in the ESSP implementation. (iv) August 1998 a seminar for about 40 top officials from the 11 provinces and the HQ in Matola, on organizational change and leadership for the ESSP implementation. Similar workshops are planned for the future. F. SUSTAINABILITY AND RISKS 1. Sustainability The proposed program and expansion ($818 million) including salary decomposition of US$ 101 million will require public expenditures for education, excluding higher education, to rise by about 10% annually, mainly to cover the increased salary costs of the greater number of teachers and the salary decompression of about 29%. As a share in total recurrent expenditures the share will increase from 15% in 1998 to 18.7% by year 2003. Measured against GDP the share will remain constant at 4.4% including higher education. These ratios are consistent with the targets set out in the HIPC Decision Paper. In view of projected increases in public resources, and the Government's pledge to gradually raise education's share of public expenditures up to 21% by year 2003, the program is fiscally feasible. Although the projected flows of foreign aid imply that the program will continue to rely on donors' assistance, long-term sustainability of the program seem ensured cven if donor assistance were to stabilize at current levels. The country's prospects for cconomic growth are good and the Government is committed to increasing the share of education in the budget.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 32 2. Critical risks Risk Risk Rating Risk Minimization Measure The macroeconomic situation M In support of Government's reform program donors might deteriorate, preventing the have agreed to move gradually toward increased Government from fully budgetary support, which would give the Government implementing the planned greater flexibility in making adjustments if public program. resources are constrained. Market conditions in the rapidly M Inflation is being successfully contained. Also, the expanding Mozambique proportion of imported materials in construction is low economy might cause prices to and the use of local materials is maximized Donor rise-for example, for assistance is available for importing textbooks. construction materials or textbooks. The pace of Government S HR constraints in central MINED and the provinces decentralization and capacity will continue to be addressed by reforming building might be too slow to management systems and strengthening line units. The allow MINED to reach its capacitv building program will pay particular attention program targets. to improving financial management, procurement, school operations, and support for teachers in the provinces and districts. Full commnitment to this process will speed up implementation. Low salaries and low staff M The Government will implement salary decompression. morale might undermine the Teachers will also benefit from improved teaching effectiveness of the program. conditions resulting from re-activation of the ZIPs, improved tcacher support and school facilities, and the provision of housing, especially in rural areas. Community involvement in school management would also help support teachers in areas where the public sector efforts are constrained Inadequate donor coordination M MINED is leading donor coordination through its might delay implementation. Stcering Committee (COPA) and M&E structure to monitor progress and to share information. Project implementation might bc S Donors and Government have agreed to follow delayed because of MINED's common implementation guidelines and procedures to relative unfamiliarity with Bank the extent possible (donor harmonization). Until this is and other donor financial and achicvcd, procedures will be based on existing procurement guidelines. Govcrnment arrangements, modified as necessary. Training will also be provided prior to Effectiveness.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 33 Risk Risk Rating Risk Minimization Measure Provision of textbooks and M The transition to private publication of textbooks will teaching materials might be be gradual and implemented in parallel with a program delayed during the transition to for the continued provision of existing textbooks. A an open market in the policy statement and action plan for privatization will publication of school textbooks. also be a condition for effectiveness. MPF processes related to H The program will strengthen MINED procurement and financial management and financial management skills in the provinces and procurement may delay districts, and MINED is working with MPF in implementation. reforming the Government's financial management and procurement system. Communities might not respond M ZIPs will help organize and mobilize communitv rapidly enough to the school efforts. The Community School Program will provide construction program or follow substantial technical supervision, close financial school design models. control and widely used designs, adapted to the needs of the various communities. Institutional and behavioral H Program activities target many of the causes of constraints might prevent internal inefficiency. These activities include MINED from reaching its increasing the number of complete schools, raising targets for improvement in teacher salaries, giving grants directly to schools, internal efficiency (dropout and providing support through ZIPs, close monitoring and repetition). evaluation, and community involvement in school management. Overall Risk Rating S The program is demand driven and based on the perccption of thc benefits of more and better quality cducation by Government and civil society. Design of components and management of resources rely on approaches that will be led and adopted by communities and which will yield lasting benefits. The cost-effectiveness of the approach will ensure financing for similar activities by agencies not formally involved in the program. Risk Ratings - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 34 G. MAIN CREDIT CONDITIONS 1. Conditions of effectiveness (a) Submission of the Program Implementation Manual, including detailed designs of all components as well as schedule and costs for the first two years of implementation. (b). Completion of the Financial Procedures Manual. (c) Completion of the procurement plan for the first two years. (d) Appointment of the Financial Controller and the Deputy Financial Controller. 2. Other conditions (a) Submission of a plan for the involvement of communities in the establishment and running of schools by December 31, 1999. (b) Completion of a census of ZIPs and a plan for expansion of their activities by December 31, 1999. (c) Joint annual Program implementation reviews in May aimed at: (i) documenting progress toward objectives; (ii) identifying and resolving obstacles to Program implementation; and (iii) adjusting targets and corresponding programs to reflect progress achieved in the implementation of the program in prior years and ensuring responsiveness to changes to effectively achieve the objectives of the program. (d) Submission annually by October 1, of an annual work program and budget (AWPB) consistent with the program which will form the basis of the annual review. (e) Submission by the end of the first and third quarters of each year, of a progress report including information on agreed outcome and performance indicators based on data from the Program Monitoring Reporting system. The report would include, inter alia, a summary statement on the status of implementation of each component, including compliance with project covenants and progress in meeting agreed policy objectives. (f) Submission by May 31, 2001, of a mid-term report integrating the results of the monitoring and evaluation activities of the program on the progress achieved during the period from program effectiveness, and a work program covering the period until project completion. (g) Submission by June 30, 2000, of a policy strategy and work program for privatization of textbook publication. (h) Submission by December 31, 1999, of an action plan for the improvement of internal efficiency (dropout and repetition). (i) Submission by December 31, 1999, of a specific plan and procedures for the management of direct grants to schools.  Project Appraisal Document Mozambique Education Sector Strategic Program (ESSP) Page 35 0) Submission by June 30, 2000 of a study and recommendations for improving time on task in schools and implementation of specific measures promptly following agreement with IDA. H. READINESS FOR IMPLEMENTATION [x] The engineering design documents for the first year's activities are complete and readv for the start of program implementation. [ Not applicable. [x] The procurement documents for the first year's activities are complete and readv for the start of program implementation. [x] The draft Program Implementation Plan has been appraised and found to be realistic and of satisfactory quality. [ ] The following items are lacking and are discussed under loan conditions (Section G): 1. COMPLIANCE WITH BANK POLICIES [x] This program complies with all applicable Bank policies. [ ] [The following exceptions to Bank policies are recommended for approval: The program complies with all other applicable Bank policies.] Donald Hamilton. Task Team Leader Ruth Kagia. Sector Manager Phyllis Ponerantz. Countrvyector  23 6 ( EXIT TO WORKMARKET W 22 6 IIJ LI -; REGULAR AVENUE J s O 2t 4 -J __ ALTERNATIVE AVENUE > 4 21 4 C.) 20 3 TEACHER TEMPORARY SOLUTION J u 201 9 2 ACHER - E 19 2 O ~~~~~~TRAINING| ___ 18 1