Somalia - Education Project

RESTRICTED Report No. P-932 FILE CY This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR AN EDUCATION PROJECT May 10, 1971 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMIMENDATION OF THE PRESIDENT TO THE EECUTIVE DIRECTORS ON A PROPOSED DEV'ELOPMENT CEDIT TO THE SOMALI D1OCRATIC REPUBLIC FOR AN EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed credit in an amount in various currencies equivalent to US$3.3 million to the Somali Democratic Republic to assist in financing an education project. PART I - INTRODUCTION 2. tn gaining independence in July 1960 Somalia faced a bleak economic future. The economy was at a very early stage of development, the resource base was poor, and the new Government inherited a large recurrent deficit and a weak balance of payments. More daunting perhaps was the task of building a new state out of the previous British Protectorate in the North and the Italian Trust Territory, formerly colony, in the South. Somalia has the rare asset of a population largely united by common ethnic origin, the same spoken language, religion and culture. On the other hand, the colonial powers had introduced two separate languages (the Somali language is still not written), legal systems and civil service procedures. Much of the effort of Government during the first decade of independence has had to be devoted to reconciling and adapting the best features of these two systems into a new Somali pattern. 3. The education systems in Somalia were very backward in 1960 and education was,one of the sectors in which unification presented particular difficulties. During the past decade, Somalia has made a major effort to improve and expand its education within the constraints imposed by financial stringency and the shortage of skilled personnel. However, largely because of these constraints, Somalia's educational facilities are still extremely limited. Only a very small proportion (about 7%) of the population of school age (7-18 years) can find places in school and very few children go beyond elementary school. Standards are low and few teachers are qualified. The Goverment is, however, under less popular pressure than in many other African countries to expand education rapidly since only a small proportion of the population is urbanized and has thus been free to lay its plans carefully and take due account of budgetary constraints. The Government's policy is to provide for only a gradual expansion in the proportion of the relevant age groups attending primary and secondary schools, to emphasize improving the quality of education through an increase in the number of qualified teachers and more equipment, and to provide industrial and agricultural training suited to the needs of the country. - 2 - PART II - HISTORICAL 4. With the assistance of a Unesco project preparation mission, the Government drew up an education project, including technical assistance for project implementation, teacher training and curriculum development, and requested the Association for financial support in April 1970. An IDA/FA0 mission appraised the proposed project in August/September 1970. 5. Negotiations were held in Washington from March 2-10, 1971. The delegation was led by H.E. Ibrahim Megag Samater, Secretary of State for Finance, and also included Mr. Abdinur, Director of Planning Depart- ment, Ministry of Education. 6. The following is a summary of IDA credits to Somalia as of April 30, 1971. Amount (US$ million) No. Year Borrower Purpose Bank IDA Undisbursed 7h-SO 1965 Somalia Highway . 6.20 123-SO 1968 Somalia Highway - 2.30 1.0c S5-SO 1969 Somalia Port of Mogadiscio - 0.55 0.06 (Eagineering and Accounting Services) Total 9.05 1.06 7. The 1965 and 1968 highway credits financed the construction of the 200 km Afgoi-Baidoa Road, as part of a joint financing with the European Development Fund (FED) and the UNDP. A FED grant of $4.85 million helped to finance construction and also provided for highway maintenance equipment and offices for the Highway Department. The UNDP, with the Bank as executing agency, provided $2.6 million for consulting services, training for the Highway Department and transportation studies. After substantial initial delays including the need to arrange additional financing, construction started in fall 1968 and is now largely completed. The training programs were also delayed but UNDP technical assistance, which was initially scheduled to end in August 1970, has been extended for three years. 8. The detailed engineering studies for a new port of Mogadiscio and modern accounting services for the Somali Port Authority (SPA) have been substantially completed. The installation and effective operation of the new accounting system were delayed by the changes in SPA management following the 1970 change of Government and completing the appraisal of the port construction project has had to be delayed until adequate and up-to-date financial and traffic data are available. -3- 9. In addition to the port of i"cgadiscio project, which, it is hoped, would be a joint financing operation with the FED, two other lending proposals for Somalia are at various stages of consideration. They are a road project in which the African Development Bank (ADD) is expected to participate, and a livestock project which the Bank's Permanent Mission in Eastern Africa is helping to prepare. PART III - DESCRIPTION OF PRCJECT 10. Borrower: Somali Democratic Republic Purpose: To provide additional facilities for teacher training, secondary education, technical education and agricultural training, together with related technical assistance. Amount: Various currencies equivalent to US$3.3 million. Amortization: In 50 years including a 10-year period of grace, through semi-4annual installments of 1/2 of 1% from June 1, 1981 through December 1, 1990 and 1-1/2% from June 1, 1991 through December 1, 2020. Service Charge: 3/4 of 1%. PART IV - TEE PRIJJCT 11. An appraisal report entitled "Appraisal of an Education Project in Somalia" (PE-23a) dated May 7, 1971 is attached. 12. The project consists of three parts: (a) the construction, furnishing and equipping of an extension to the National Teacher Edu- cation Center, a new secondary school, extensions to ten secondary schools and extensions to a technical school and a technical and commercial school; (b) the provision and equipping of eight mobile units for farmer training; and (c) technical assistance for project implementation, teacher training and curriculum development. 13. A Project Unit would be responsible for project implementation. This Unit would consist of a senior officer of the Ministry of Education as Project Director, a Deputy Project Director (for the day-to-day manage- ment of this unit), a Project Architect and a Procurement Officer. The establishment of the Unit and the appointment of the Project Director, Deputy Project Director and the Project Architect would be a condition of effectiveness of the proposed credit. 14. The Somali educational system consists of three levels, elemen- tary, intermediate and secondary, each of four years. Arabic is the language of instruction in elementary schools, where English is taught as a second language. English will also be the common medium of instruction at intermediate and secondary levels, replacing Italian where that is still in use. There are three public technical schools, giving courses at post-intermediate level for surveyors, mechanics and carpenters. An agricultural secondary school is being built and is expected to be in full operation by 1974. The National Teacher Education Center and the National University are the only post-secondary insti- tutions in the country. 15. Curricula are highly academic at all levels of education. Recently, a major curriculum reform was initiated, whereby elementary and inter- mediate education would become two cycles of primary education, and secondary education would offer a diversified curriculum with practical subjects. 16. The Governmentts educational development plan envisages the expansion of elementary and intermediate education, the improvement of secondary education, the reform of the training methods of technical education, the reorganization of administration, and the application of cost saving techniques. The planned rate of expansion is based on achieving enrollment targets for elementary, intermediate and secondary (including technical) education for 1980-81 which would approximate the supply estimated as needed to meet the man-power demand at that time. 17. The proposed project is designed to improve the quality of edu- cation, reduce wastage and achieve economies through consolidating existing institutions. The project would provide Somalia with (i) its only facilities for training teachers for elementary and intermediate schools; (ii) the science laboratories, workshops, commercial and home economics rooms, and libraries required for the new diversified second- ary school curriculum; (iii) expanded and upgraded technical and commercial education; and (iv) mobile units for training farmers in improved methods of agriculture and livestock production. 18. The total cost of the project is estimated at US$3.7 million equivalent. No import duties or import taxes are payable except on items costing less than $1,000. The proposed credit of US$3.3 million equivalent would cover all the estimated foreign exchange costs (US$2.6 million equivalent) and approximately $700,000 equivalent of the local expendi- tures. Thus, the Association would finance 90% of the project cost and the Government the remainder. The justification for local expenditure financing is discussed in paragraph 25 below. 19. Civil works contracts would be awarded and equipment and furni- ture procured on the basis of international competitive bidding. For civil works, bids would be invited for groups of schools or for single units to allow bidding by both foreign and Somali contractors in one single unit or several units within the group. It is expected that local con- tractors will obtain a substantial share of the contracts. Local suppliers of furniture and equipment would be allowed a 15% margin of preference. - 5 - PART V - LEGAL YISTRUTS AND AUTHORITY 20. The draft Development Credit Agreement between the Somali Demo- cratic Republic and the Association, the Recommendation of the Committee provided for under Article V, Section 1 (d) of the Articles of Agreement of the Association and the text of a resolution approving the proposed credit are being distributed to the Executive Directors separately. 21. The draft Development Credit Agreement conforms generally to the pattern of recent agreements for education projects. PART VI - THE EC ONOMIY 22. A report entitled "Economic Development Prospects in Somalia" (AE-10) was distributed to the Executive Directors on January 15, 1971. A basic data sheet is attached. 23. Somalia is one of the poorest countries in Africa, with a largely undeveloped economy based almost wholly on agriculture, principally the production of livestock. The potential for quick economic growth is limited not only by the poor resource base of the country, but by the technical and administrative capacity of government, the scarcity of good development projects, and the shortage of public savings and adequate funds to finance recurrent expenditures in support of development. Most of the Somali people depend upon livestock and subsistence crop product- ion for their livelihood, and income levels are very low. As a result the monetary sector of the economy provides a market for only the most ele- mentary types of industry, and offers few job opportunities for the increasing numbers of young people seeking to escape the harsh conditions under which the typical nomadic family lives. 24. Although there is no immediate prospect of a dramatic improve- ment in Somalia's economic position, the recent economic mission concluded that there is potential for faster development in various sectors of the economy, particularly agriculture. To realize this potential, however, the Government will need to concentrate its resources on only the most promising development projects, and even then progress is likely to be slow. In agriculture, a number of possibilities for growth have been examined, but each one requires a period of study and careful project pre- paration to ensure success. Similarly, in mining, several recent dis- coveries offer hope of successful exploitation in the future, provided feasible projects can be prepared, the necessary infrastructure can be provided, and appropriate institutions built up. All these priorities will need a continued flow of external financial assistance combined with technical assistance in project preparation and project management. Over the last ten years Somalia has received a high level of external aid, but the experience has not always been happy or the aid particularly produ- ctive. The new Government has placed great emphasis on the need for self- help and is expected to be more cautious in its attitude to foreign assistance. - 6 - 25. Faced since independence with a severe financial constraint, Somalia has had to rely on external sources not only for the whole of its development budget but also to finance a large part of its recurrent budget. It is to Somalials credit that much progress has been made towards reducing budgetary deficits, and it now looks possible that the Government will soon be able to eliminate its recurrent budget deficit, provided the present tough and pragmatic policies are continued. With a careful husbanding of its resources the Government should be able to cover the increase in its recurrent expenditure arising from the development program over the period 1971-75. However, Somalia will still have to rely on external sources of capital to finance virtually the whole of the capital costs, foreign and domestic, of its development. In these circumstances, including local expenditure, which brings the financing up to 90% of project cost, is considered justified. PART VII - COILIANCE WITH ARTICLES OF AGREEMENT 26. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VIII - RECOPMENDATION 27. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachment Washington, D.C. May 10, 1971 Annex SOMALIA BASIC DATA Currency and Exchange Rate: The basic monetary unit is the Somali shilling, which is on a par with the shillings used in Kenya, Tanzania and Uganda. Sh.1 = US$o.14 US$1 = Sh.7.1h3 Area: 637,000 square kilometers (246,000 square miles) Population: 1970 estimate - 2.8 million Rate of growth approximately 2-1/2 percent Population density - 4.4 per square kilometer Political Status: Independent Republic since July 1960; associate member of the European Economic Community; applicant for membership of the East African Economic Community. Gross Domestic Product and National Income: There are no national accounts available for Somalia. Livestock and subsistence crop production contribute the largest proportion of national income. Per capita income is estimated to be between US$50-60. Money and Credit: Sh. Million Rate of Growth 1963 1965 1969 1963-69 Total money supply T=79 .5 7.4 77/72T Domestic credit: to Government 34.3 38.5 64.2 11 % to Private Sector 90.9 177.9 233.9 17 % Prices: No comprehensive price indices are available for Somalia. The cost of living index for Mogadishu, however, rose ten percent for the period 1966-1970. -2- Public Sector Operations: Sh. Million 1963 1965 1969 Total government revenues 1T0.5 177.4 272.3 Total government expenditures 201.6 218.6 289.1 Budget deficit $1.2 41.2 16.8 Budget deficit as % of government expenditures 2$.4% 18.8% 5.8% External Public Debt - (Incomplete Statement): Debt outstanding December 31, 1968 US$79. million Debt service payments (1969) US$ 2.0 million Debt service ratio (approximately) 6 percent Balance of Payments: Sh. Million 1963 1965 1969 Merchandise exports 199 240 242 Merchandise imports 315 410 367 Net services -40 -h 0 Net transfers 10$ 111 84 Balance on current account -103 -1- Mar. 1963 1965 1969 1970 Foreign assets (net) 77.8 5. 51.5 76.6 Concentration of Exports: Percentage of Eports 1963 1969 Bananas 7 Live animals and hides and skins 46 65 IMF Position: US$ Million Quota 15.0 SDR's 2.5 Drawings outstanding (February 1971) nil External Assistance, 1960-1969: US$ Million Grants 239.7 Loans 147.9 38-7-. Major Donors: Multilateral: US$ Million UN 27.3 IDA 8.5 EEC 27.3 -3- Major Donors: (Continued) Bilateral: US$ Million Italy 112.4 U.S.A. 70.9 U.S.S.R. 53.1 Federal Republic of Germany 29.2