Colombia - Higher Education - Improving Access Project

Document of The World Bank Report No: 23993 PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$200 MILLION TO THE REPUBLIC OF COLOMBIA FOR A HIGHER EDUCATION - IMPROVING ACCESS PROJECT Colombia, Venezuela, Mexico Country Management Unit Latin America and Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective November 2002) Currency Unit = Pesos ($) $1000 = US$0.359 US$1 = $2,783 FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS ASCUN Asociaci6n Colombiana de Universidades CAS Country Assistance Strategy CNDM Comisi6n Nacional de Doctorados y Maestrias CE Centers of Excellence CNA Consejo Nacional de Acreditaci6n COLCIENCIAS Instituto Colombiano para el Desarrollo de la Ciencia y la Tecnologia DANE Departamento Adm inistrativo Nacional de Estadistica DES Direcci6n de Educaci6n Superior DNP Departamento Nacional de Planeaci6n ECES Exdmenes de Calidad de la Educaci6n Superior EMP Environmental Management Plan EPP Emerging Post-Graduate Programs ESW Economic and Sector Work FEDESAROLLO Fundaci6n para la Educaci6n Superiory el Desarrollo FMR Financial Management Report FNG Fondo National de Garantias FODESEP Fondo de Desarrollo de Educaci6n Superior GSE Graduate Schools of Excellence GOC Government of Colombia GDP Gross Domestic Product ICFES Instituto Colombiano para el Fomento de la Educaci6n Superior ICETEX Instituto Colombiano de Credito Educativo y Estudios Tecnicos en el Exterior IDBIIADB Inter-Amencan Development Bank HE Higher Education LMO Labor Market Observatory MEN Ministerio de Educacion Nacional M&E Monitoring and Evaluation MSI Millennium Science Initiative NER Nuclei for Excellent Research PCU Project Coordination Unit QA Quality Assurance SNIES Sistema Nacional de Informaci6n de la Educaci6n Superior S&T Science and Technology TA Technical Assistance Vice President: David de Ferranti Country Director: Olivier Lafourcade Sector Director: Ana-Maria Arriagada Task Manager: Lauritz Holm-Nielsen  COLOMBIA HIGHER EDUCATION - IMPROVING ACCESS CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 5 3. Sector issues to be addressed by the project and strategic choices 10 C. Project Description Summary 1. Project components I1 2. Key policy and institutional reforms supported by the project 11 3. Benefits and target population 12 4. Institutional and implementation arrangements 13 D. Project Rationale 1. Project alternatives considered and reasons for rejection 14 2. Major related projects financed by the Bank and other development agencies 16 3. Lessons learned and reflected in the project design 16 4. Indications of borrower commitment and ownership 18 5. Value added of Bank support in this project 18 E. Summary Project Analysis 1. Economic 18 2. Financial 19 3. Technical 19 4. Institutional 20 5. Environmental 23 6. Social 23 7. Safeguard Policies 25 F. Sustainability and Risks 1. Sustainability 25 2. Critical risks 25  3. Possible controversial aspects 26 G. Main Loan Conditions 1. Effectiveness Condition 27 2. Other 27 H. Readiness for Implementation 27 I. Compliance with Bank Policies 27 Annexes Annex 1: Project Design Summary 28 Annex 2: Detailed Project Description 31 Annex 3: Estimated Project Costs 41 Annex 4: Cost Benefit Analysis Summary, or Cost-Effedtiveness Analysis Summary 42 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 52 Annex 6: (A) Procurement Arrangements 53 (B) Financial Management and Disbursement Arrangements 61 Annex 7: Project Processing Schedule 62 Annex 8: Documents in the Project File 63 Annex 9: Statement of Loans and Credits 66 Annex 10: Country at a Glance 65 Annex I 1: Targeting Mechanisms for Low Income Students 67 Annex 12: References 69 MAP(S)  COLOMBIA Higher Education - Improving Access Project Appraisal Document Latin America and Caribbean Region LCSHE Date: November 22, 2002 Team Leader: Lauritz B. Holm-Nielsen Sector Director: Ana-Maria Arriagada Sector(s): Tertiary education (100%) Country Director: Mark V. Hagerstrom Theme(s): Education for the knowledge economy (P) Project ID: P074138 Lending Instrument: Specific Investment Loan (SIL) Project Financingr Data [X] Loan []Credit [ ] Grant [ ]Guarantee [] Other: For Loans/Credits/Others: Loan Currency: United States Dollar Amount (US$m): US$200.00 million Borrower Rationale for Choice of Loan Terms Available on File: Z Yes Proposed Terms (IBRD): Fixed-Spread Loan (FSL) Grace period (years): 7 Years to maturity: 13 Commitment fee: 0.85% for the first 4 years, 0.75% Front end fee (FEF) on Bank loan: 1.00% thereafter. Initial choice of Interest-rate basis: Auto. Rate Fixing by period 6 months Type of repayment schedule: [X] Fixed at Commitment, with the following repayment method (choose one): customized [ ] Linked to Disbursement Conversion options: [X]Currency [X]Interest Rate [ ]Caps/Collars: -Finacn PaIU"m"Sore- oa :!,Foreigni Total BORROWER 87.72 0.00 87.72 IBRD 193.76 6.24 200.00 Total: 281.48 6.24 287.72  Borrower: GOVERNMENT OF COLOMBIA Responsible agency: INSTITUTO COLOMBIANO DE CREDITO EDUCATIVO - ICETEX INSTITUTO COLOMBIANO DE CREDITO EDUCATIVO - ICETEX Student Loan Institute (Instituto Colombiano de Credito Educativo y Estudios Tecnicos en el Exterior, ICETEX) Address: Carrera 3A No. 18-32 Piso 2 Contact Person: Mrs. Marta Lucia Villegas Directora General - ICETEX Tel: (571) 284 4081/334 4515 Fax: (571) 286 6257 Email: mlvillegas@icetex.gov.co Other Agency(ies): MINISTERIO DE EDUCACION (MEN) Address: Can Avenida El Dorado, Bogota D.C., Colombia Contact Person: Mr Javier Botero, Vice Minister of Education Tel: (571) 315 7777 Fax: (571) 222 4676 Email: jbotero@mineducacion.gov.co INSTITUTO COLOMBIANO PARA EL DESARROLLO DE LA CIENCIA Y LA TECNOLOGIA - COLCIENCIAS Address: Transv. 9a. Bis #132-28, Bogota D.C., Colombia Contact Person: Dra. Margarita Garrido, Directora General Tel: (571) 625 8280 Fax: (571) 625 1788 Email: mgarrido@colciencias.gov.co Estimated Disbursements ( Bank FY/US$m): FY 2003 2004 2005 2006 2007 2008 Annual 7.20 27.10 40.30 38.60 53.90 32.90 Cumulative 7.20 34.30 74.60 113.20 167.10 200.00 Project implementation period: 6 years Expected effectiveness date: 03/31/2003 Expected closing date: 12/31/2008 OCS PAt) Fam Rew M.h 2Y2 -2 -  A. Project Development Objective 1. Project development objective: (see Annex 1) The objective of the Project is to improve the quality and equity of the Borrower's Tertiary Education system through sub sector's response to society's needs for high quality human capital that will enhance Colombia's competitiveness in the global market. The project will make the Colombian tertiary education system more responsive to demand, and promote greater equity and quality in the preparation of tertiary education graduates. It is expected that the project will accomplish the following: * Increase Equity by redesigning and expanding the student loan scheme to enable needy but qualified students to attend (i) undergraduate university education of good quality and relevance, and (h) tertiary level technical and short cycle programs of high relevance for skill enhancement. * Improve Quality by establishing competitive grants to (i) improve Post-graduate programs in Colombia, and (ii) encourage talented young Colombians to pursue advanced degrees. * Support Coherence and Efficiency by (i) enhancing the legal and technical framework, (ii) consolidating and organizing the Quality Assurance System in a manner that promotes quality enhancement and institutional commitment, and (iii) building capacity for strategic planning and management in the Ministry of Education and other governing bodies. 2. Key performance indicators: (see Annex 1) Progress toward the development objective and outputs will be monitored and assessed based on key performance indicators shown in Annex 1. The key performance indicators for this project are: Objectives Output Indicators Reach equitable * Access to ternary education for * Increased transition rate from Secondary education access to relevant academically qualified but financially * Increased number of students obtaining loans study programs of needy students * More students from lower socioeconomic backgrounds good quality * More effective and financially receiving aid sustainale student loan and grant * Increased coverage of tertiary education in lower suogramsta e socio-economic groups programs * Increased number of students enrolled in technical programs * Decreased administration costs and default rate for student loan program Expand * Cntical mass of excellence * Increased number of post-graduate students in Colombian post-graduate * Reduction in Brain Drain programs programs . Four rounds of competition Improve coherence * Labor Market Observatory to track * Publication of unemployment rates and wages by discipline and efficiency in Graduates and market needs and area tertiary education * Coherent and effective QA system * Increased number of accredited and evaluated programs * Articulated institutional and M&E * Revision of Ley 30 arrangements B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex I) Document number: 17107 CO, 10/15/97 Date of latest CAS discussion: 11/18/99 The CAS identified the following six strategic areas as important for Colombia: (p. 10, para. 20): (i) promoting peace and development, (ii) promoting rural development, (iii) developing human capital, (iv) attaining public sector responsiveness and efficiency, (v) improving infrastructure services, and (vi) -3-  ensuring sustainable development. Taken together, these six strategic areas addressed the two main objectives of the CAS, which were to: (a) achieve poverty reduction and social development, and (b) achieve sustainable growth. The proposed project would support three of the six identified strategic areas: (I) developing human capital, (2) attaining public sector responsiveness and efficiency, and (3) ensuring sustainable development. Support for a tertiary education project in Colombia fits well into the overall Bank and Country Assistance Strategy as well as the Government strategy for improving the entire sector. Furthermore, the proposed project builds upon three recently completed World Bank reports: Constructing Knowledge Societies: New Challenges for Tertiary Education, the World Bank Strategy for Science and Technology in Development, and Closing the Gap in Education and Technology. The new CAS, scheduled for Board presentation on January 16, 2003, includes this student loan project in its pipeline. As a rule, a project would not be brought to the Board until after the new CAS was presented. This project is being put forth for consideration early given the need of the Colombian Government to launch this important program to coincide with the beginning of the school session in January. They have requested Bank commitment at this critical time and the assurances of long-term funding for the program in order to enhance the participation of targeted low income students and to get the program off to a successful start. Developing Human Capital: The Colombia Country Assistance Strategy Progress Report (report no. 19805 dated November, 1, 1999) states that the original CAS goals of "expanding coverage and improving the quality of [basic] education" is key to economic competitiveness and growth, reducing poverty and inequity in income distribution, and building a peaceful society (p. 15, para. 46). This statement is known to be true for all levels of education. (Tertiary Education - Lessons of Experience, World Bank 1994). In recent years the World Bank has supported a number of education projects in Colombia, such as a Rural Education Project and the Antioquia and Pasto Education projects, which support decentralization in basic and secondary education, emphasizing quality, and efficiency. This project will add to Colombia's advanced human capital by increasing access to quality tertiary education at both university and non-university institutions for academically able but financially needy students through an improved student aid system and by improving post-graduate programs in Colombia and encouraging talented, young Colombians to pursue advanced degrees via competitive grants to post-graduate programs. Attaining public sector responsiveness and efficiency: The project will improve effectiveness and efficiency of the public student loan system through capacity building, supervision, and increased demand side financing. Through introducing and financing improvements to the quality assurance system in tertiary education, institutions will be compelled to become more responsive to demand from their clients (students and their families) by improving the quality of their offerings. Several studies have documented that quality assurance systems have caused institutions to give greater attention to issues of effective teaching and learning, brought about improvements in degree completion rates and in institutional management, strengthened strategic planning, and encouraged institutions to become more responsive to changing needs (El-Khawas, et. al., 1998). Moreover, the increased demand side financing from student loans will expose public education institutions to increased competition and thereby induce greater responsiveness and efficiency. Ensuring Sustainable Development: "In the last decade, Colombia enjoyed clear improvements in educational attainment, both in level and equity. However, there is an increasingly frustrating and inequitable queue at the entrance of post-secondary education" (p. 26, Colombia Poverty Report 2002). "in order to alleviate the impact of the current economic crisis on the poor, and at the same time, to reduce structural poverty, and to establish the basis for sustainable economic development, human capital will need to be expanded through continued efforts to improve systems for the provision of -4-  education" (p. 2, para.5, Colombia CASPR). The proposed project will aid in improving the provision of tertiary education by expanding equitable access and enhancing the responsiveness of the sector, thus establishing a basis for sustainable development. As a Sector Investment Loan the proposed project would be part of the lo'ng-term focus on education that would improve the performance of the existing investments in human capital and provide the means for additional investments, financed mostly by individuals rather than the government. 2. Main sector issues and Government strategy: This section builds upon the sector study "Colombia: Tertiary Education, Paving the Way for Reform", Report # 23935 CO, April 2002. Backg round: Colombia has a long, rich tradition in tertiary education in Latin America dating back over a century. The privilege of attaining tertiary education was reserved for the wealthy and secondary school served primarily as a preparation for tertiary education. But with the passage of Ley 30 in 1992, the tertiary sector was modernized so that today, Colombia has a relatively well diversified tertiary education system with both public and private provision of tertiary education in university and non-university institutions. Additionally, Colombia has experimented with a variety of quality assurance mechanisms to improve the sector and has also, in accordance with best practices, re-prioritized education spending so that public expenditures on tertiary education are approximately 16 percent of total public education expenditures. Issues specific to tertiary education may be found in the section entitled "Main Sector Issues." The last two decades have brought fundamental changes in the Colombian society and in the context of the Colombian tertiary education sector: Continued and progressive development of primary and secondary education have produced a substantially expanded pool of candidates for tertiary education. In 1988, only 44 out of 100 children completed secondary education. A decade later, this share increased to 63, significantly increasing the demand for tertiary education. These potential students and their families - believing in the right to equal opportunities - expect the State to secure access to quality, tertiary education. However, in the same time-span the continuation rate from secondary to tertiary education nearly halved - from around 60 percent in the late 1980s to 37 percent in 1999 and 2000. Emergence of a global, knowledge-based economy has become a driving force pushing for tertiary education reform. The demands of the labor market for technology and the speed with which technology changes, required - and requires now even more - a growing pool of flexible workers that have the skills to select, adapt, and apply existing technologies and remain active, lifelong learners. Trade-liberalization and the introduction of skill-biased technological change have strengthened the value of tertiary education. In Colombia, workers with tertiary education was the only group to experience a wage increase in the last 10 years. A worker with tertiary education typically earns 2.4 times more than a worker with secondary schooling, which exceeds the level found in most other countries. The private sector sites the scarcity of skilled workers as the largest obstacle to innovation and it is therefore a major obstacle to a more dynamic Colombian economy. Thirty-eight years of civil war has brought about intolerance and social disintegration and has, within the universities, led to frequent shutdowns, interruption of classes, and a hostile atmosphere that is neither conducive to learning nor to the spread of democratic values. - 5 -  The sector's structural weaknesses were further compounded by the worst economic recession in Colombia in over 60 years which culminated in 1999 with an economic retraction in GDP of -4.5 percent. While recent figures show a modest recovery in 2001 and 2002, the decline influences nearly all other areas of the economy. The gains that were made in terms of poverty reduction since the 1970s have been partially lost. The crisis has also had a negative impact on education at all levels. The National Planning Department estimates that enrollment of 7-11 year old children from the poorest families declined from 87.3 percent in 1996 to 83.2 percent in 1998. In tertiary education, the crisis resulted in a most unfortunate reversal from an increase in entrants to tertiary education to a decline amounting to 100,000 students during the three years of crisis and perhaps a decrease in the quality and relevance of programs as well. The proposed project in tertiary education fits well into the overall Bank and Country Assistance Strategy as well as the Government strategy for improving the entire sector. Currently, the Bank has seven active projects in Colombia that seek to improve the access to and quality of primary and secondary education, improve retention at these levels, provide support to at risk youth, aid institutional strengthening, and build capacity (see list of projects in section D2). The Bank has had a long standing commitment to provide technical and financial support to the education sector beginning with its first education project in 1968, and has made the development of human capital through education a central priority in the Country Assistance Strategy for Colombia. A tertiary system that functions well has the dual function of satisfying demand for advanced human capital from all sectors as well as of being a crucial element for improving lower levels of education by providing qualified teachers, innovation, etc. A. Main Sector Issues: (further detail on the main sector issues presented in this section may be found in the Bank's recent Education Sector Work, Colombia: Tertiary Education, Paving the Way for Reform, Volume I: Policy Briefing, April 2002): Growing demand for equitable access to tertiary education: Secondary education expanded rapidly in the 1990s implying a growing potential demand for tertiary education. However, tertiary education institutions have not expanded in a comparable way; a decade ago 55 percent of graduates from secondary education continued to tertiary, while only 37 percent continued in 1999. However, Colombia has not yet achieved equitable access to its tertiary education system. The fundamental reasons for inequalities in the sector have to be found outside of the tertiary education system, in particular in the basic education system, including early childhood education. In 1980, 134,000 (26 percent) graduates from secondary school took the entry exam for tertiary education out of a cohort of 17 year-olds of 523,000 and were hence eligible for tertiary education. As of 2000, this had increased to 583,000 (60 percent) graduates of out of a cohort of 752,000 implying that the tertiary education sector currently stands a better chance of improving the sector's equity than previously (ICFES and DNP data). The substantial improvements in equity and efficiency in basic and secondary education in the 1990s are creating an inequitable bottleneck at the gate of post-secondary education. Inadequate Financing: In 1992, approximately two percent of the relevant age-cohort from the poorest quintile was enrolled in some form of tertiary education compared to 20 percent of those in the wealthiest quintile. As the education system expanded in the 1990s, the inequality in access to tertiary education grew in absolute terms. The largest gains in coverage occurred in the fifth quintile where net coverage rose from 23 percent to 40 percent. However, relative to the starting point, the highest growth rate took place among the poorest, the first quintile, where the number of students expanded by 170 percent. Yet, less than six percent of the 18-24 year-olds from the first quintile attend tertiary education institutions and overall coverage is just 15 percent. This evolution, of increasing access disparities, corresponds to the international experience in countnes that have introduced or raised fees and where no effective or well-targeted student aid mechanism exists. Concurrently, the growing potential demand has increased -6 -  competition for entry into the less-expensive public sector, increasing the incidence of rationing. The severe economic recession and the fiscal adjustments in the last four years have reduced both the treasury's and individual households' ability to invest in tertiary education. Public institutions have increasingly shifted their revenue base towards cost-recovery; as of 2000, 22 percent of revenues came from students, which is unique among the large countries in the region. As a consequence, the number of entrants into tertiary education decreased from a high of over 256,000 in 1997 to just over 200,000 in 1999, a decline of 19 percent. Consequently, students from lower socioeconomic strata who do not have access to high quality (i.e. private) secondary education and who cannot afford preparation courses, lose out. The current inequity will have a negative impact in the future, as the high pecuniary gains from tertiary education imply that the existing difference in access translates into high income inequality in the future. Improving access to tertiary education for lower and middle-income groups is therefore an important remedy to mitigate future inequalities Relevance is low and Colombia has unbalanced enrollment in both Technical and Graduate Education. Unemployment in Colombia rises with education levels until secondary education, where unemployment is over 20 percent, and then falls slightly to around 18 percent for workers with tertiary education. International experience from Chile and Venezuela, as well as the little evidence available for Colombia, suggests that the employment prospects of tertiary graduates depends upon the type of tertiary education acquired. Graduates from Colombian technical institutions seem to experience difficulties finding a job after graduation due to the low relevance of skills taught and the inferior quality of some of the educational institutions. Such labor market outcomes suggest that the present system is failing to respond to the needs of the country. Given the expansive growth Colombia experienced during the beginning of the last decade, it would be expected that enrolment in technical institutions would have also risen but only 11 percent of Colombian undergraduates are enrolled in these institutions. This compares to 27 percent in Chile and 25 percent in OECD countries. A similar low priority to technical disciplines are apparant in enrolment in graduate programs where, in 1996, less than 15 percent of students at the Master's level were enrolled in the natural sciences, engineering, and agricultural sciences, compared to 34 percent for the LAC region, and 39 percent for the US. At the graduate and post graduate levels domestic capacity is very modest, especially in the sciences and engineering. Data from ICFES/SNIES show that in 1999, there were a total of 46,106 students enrolled in graduate programs with only 4,341 (9.4%) enrolled in master's programs and 192 (0.4%) enrolled in Doctoral level studies. The yearly production of PhDs is one (1) per one-million inhabitants, among the lowest for the region's larger countries, and severely limits Colombia's R&D and technological capacities, and raises concerns as to the availability of qualified candidates to replace current faculty members in tertiary institutions as they retire. Public institutions have assumed the main responsibility for educating PhD-students, with seven out of ten doctoral candidates attending public universities. In addition to low output of graduate and post-graduate degree holders, evidence suggests that Brain drain is a very serious issue in Colombia. Carrington and Detragiache (1999) estimated Brain Drain based on 1990 US Census data for US immigrants by education level and found in almost all cases, individuals with tertiary education formed the highest percentage of immigrants. More recent reporting on brain drain from Colombia suggests that the Colombian economy has suffered a substantial loss of advanced human capital. While no systematic data is available it was estimated in 1999 that approximately 1.1 million Colombians had left the country and that the Colombian-American community, which numbered over 430,000, is rapidly growing. Fragmented and Underdeveloped Quality Assurance System: There are a number of government agencies involved in the quality assurance system for tertiary education: While the Ministerio de Educaci6n Nacional (MEN) and the Direcci6n de Educaci6n Superior (DES) regulate tertiary education in Colombia by formulating the policies, plans, programs, and objectives for the sub-sector, with respect - 7-  to QA, the two government organizations having the largest role are the'lnstituto Colombiano para el Fomento de la Educaci6n Superior (ICFES) and the Consejo Nacional de Acreditaci6n (CNA). ICFES: (i) supervises tertiary education institutions and assures that they operate in compliance with the objectives set out in the regulations; (ii) collects, analyzes, and disseminates information concerning tertiary education via the National tertiary education Information System; and (iii) supports the Ministry and the Consultative Commission in the accreditation and approval process of teaching institutions through Acreditacion Previa. The CNA is responsible for the design and approval of accreditation mechanisms of tertiary education programs. All types of tertiary institutions may apply for accreditation. In addition to ICFES and the CNA, the Comision Nacional de Doctorados y Maestrias (CNDM) evaluates and approves graduate and post-graduate programs; Consejo Nacional de Educacio'n Superior (CESU) works with MEN to develop tertiary education regulations, procedures, and mechanisms to evaluate the quality of tertiary education; and the Comision Consultiva de Instituciones de Educaci6n Superior serves as a consultative body to the Ministry in matters related to the creation of new tertiary education institutions, the expansion of existing institutions, and the transformation of technical/technological institutions into university institutes. There are also a variety QA mechanisms. Some apply to institutions, some to programs (both undergraduate and graduate) and some to individuals and they range from simple registration of programs to full-blown "Accreditation of Excellence." Despite the positive impacts the QA system has had on the tertiary education sector, there are some underlying problems: (i) the number of accredited programs is quite small, and (ii) there seem to be many QA organizations doing similar things, or the same organization attempting to carry out many different functions Ambiguous Governance: The following characteristics tend to fragment governance in Colombian tertiary education: (i) an overlap in governance functions - the large number of government departments and agencies that guide and regulate tertiary education are not well articulated and often overlap in their functions, resulting in a lack of clarity in the roles of the governing agencies and duplication of responsibilities; (ii) a tendency to create additional institutions/mechanisms to address new problems rather than reform existing institutional structures; (iii) a lack of transparency in the selection of members to policy design and oversight organizations where selection is not guided by clear criteria and appointments are often politically motivated impacting institutional autonomy; and (iv) a lack of a coherent sector plan which has resulted in the proliferation of similar disciplines, insufficient graduates from technological programs, and the concentration of institutions in Bogota, Medellin, Cali and Barranquilla. Also, innovation and meaningful reform in response to changes in the tertiary education environment are inhibited because Rectors are subject to term limits. The Monitoring and Evaluation system is inadequate. Provision of tertiary education has increasingly been subject to market forces. This has especially been the case in Colombia, where private providers enroll more than 2 out of 3 students. In order to facilitate smooth functioning of the market, information has to be made available to students to allow them to choose the education program with highest quality and relevance for a given tuition level. Currently, the national information system for tertiary education, SNIES, collects a limited number of input indicators, but no systematic information exists on output or impact. For instance, no systematic data on unemployment by discipline or on drop out rates exist. Aside from few well-renowned universities, students lack information concerning the quality of the education being bought which can lead to sub-optimal outcomes, such as inferior quality and reduced enrollment. -8 -  B. Government Strateg.y: The Government strategy for tertiary education is to increase the number of students enrolled in technical, technological, and professional programs in Colombia, favoring those with limited income and directing them towards programs in high demand by the productive sector. The government plans on meeting this general objective through the following activities: * developing a broader based student credit (loan) system to assist financing tuition, especially for poorer students; * improving research capacity by providing incentives for doctoral students and young faculty to engage in research that is relevant for economic and development needs of Colombia; * improving relevance by developing a mechanism that will identify programs with strong linkages to the labor market and that meet regional needs; * improving the quality and relevance of tertiary education through a variety of mechanisms, such as (i) expanding and improving the accreditation system, (ii) developing and administering exit examinations, (iii) improving the current Management Information System so students and their families can be better informed about the quality, costs, employment outcomes, etc. of the various tertiary education institutions, (iv) reforming the current legal framework to stiffen the requirements for creating programs, and (v) creating new standards to better characterize the four types of tertiary education institutions; and * strengthening institutional capacity through the use of a management information system, through improved legal tools, and through better articulation between primary, secondary, and tertiary education. The Government of Colombia has made progress in some of these areas already. For example, laws have been enacted to require the design and implementation of certain elements of a quality assurance system. Measures taken thus far include accreditation of programs, rooted in self-evaluation and site visits, the development of an exit exam in mechanical engineering and health, and setting minimum standards for a limited number of programs. The Government plans to expand their quality assurance mechanisms to include all programs and institutions. In the area of access, ICETEX has a limited number of grants and loans available targeted at the very poor. It is hoped, with World Bank assistance, to expand this so that access will be expanded to those least likely to attend tertiary education. In the areas of governance and finance, efforts in capacity building of the agencies regulating the tertiary education sector will be undertaken. The Government anticipates that as a result of implementing their strategy they will achieve the following results: an increase in coverage for low and middle income population between the ages of 10 - 22 years old; improved quality; higher incomes for those receiving student aid; improved retention rates in tertiary education; and improved output in the number of Doctoral candidates and their research output. The World Bank has been an active partner in this strategy. The World Bank co-financed and planned along with the government (DNP and ICFES) and the universities (ASCUN) a policy workshop in January, 2002 in Bogota. The workshop contributed to the emerging sectoral consensus for reforms. In the months prior to the workshop, the Bank team conducted background assessments, and a series of policy papers were commissioned from relevant experts. Economic Sector Work for the sector has been completed and released by the government for public dissemination (Report # 23935 CO). This work brought into focus the main issues that Colombia must address to achieve the progress it seeks in the sector. The recommendations from the sector work are: (i) ensure clear and progressive governance; (ii) induce and assure quality; (iii) provide financing for equitable and expanded access; and (iv) promote strategic levels of education. -9-  3. Sector issues to be addressed by the project and strategic choices: The needs of the tertiary education system could be supplied by a spectrum of strategies ranging from: (i) expanding and improving the provision through a direct supply-side investment to (ii) stimulating demand by a student loan project. Because Colombia has many of the elements of a well functioning market for tertiary education, the project will (iii) follow an intermediate strategy, which will strengthen the govemment's legitimate role in setting the framework for the sector, stimulate demand and address a critical bottleneck in quality. Therefore the project has three aegis: Reach equitable and expanded access to relevant study programs of good quality. The project seeks to increase the access of youth from lower socioeconomic strata by expanding tertiary education enrollment through a targeted student aid scheme. The choice to support a student aid scheme stems from its implications not only for access, but also for equity and quality. Furthermore the student aid program will be targeted to accredited and pertinent study programs which will include short cycle technical programs and post-secondary education offered by Esculelas Nornales. Improve quality in tertiary education by expanding post graduate programs. The project will address the problem of low post-graduate output through providing loans for graduate study and competitive grants for excellence which will encourage talented, young Colombians to pursue advanced degrees, and improve quality by stimulating competition for building excellent graduate programs. Improve coherence and efficiency in tertiary education. The project will address several critical elements in the governance system of the sector to assure high quality, relevant, and efficient expansion in the sector and improve sectoral articulation with the productive sector. Specifically the project will: (i) establish a Labor Market Observatory (LMO); (ii) strengthen the Quality Assurance system; and (iii) articulate government agencies involved in regulating tertiary education, provide technical assistance for adjusting the legal framework, and build capacity for monitoring and evaluation. - 10-  C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):