Afghanistan - Second Education Project

Document of ~~BU~~ ~~ The World Ban IFOIR OIF]FffC]AL USE ONLY Ileport No. P-1959-AF REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF AFGHANISTAN FOR A SECOND EDUCATION PROJECT December 13, 1976 This document has a restricted distribution and maiy be used by recipients only in the performance of their orcficll duties. ls contensb may not otGerwise be disclosed without World IBnnls authorliztion.  CURRENCY EQUIVALENTS Currency Unit Afghani (Af) US$1 Afghanis (Afs) 44.o Af. 1 = us$o.02273 Af. 1,000 = US$22.73 Af. 1 million = US$22,727 FISCAL YEAR March 21 to March 20 GLOSSARY OF ABBREVIATIONS IDBA Industrial Development Bank of Afghanistan IHAS Institute of Higher Agricultural Studies PIU Project Implementation Unit  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF AFGHANISTAN FOR A SECOND EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Afghanistan for the equivalent of US$6 million on standard IDA terms to help finance a second education project. PART I - THE ECONOMY General 2. A report entitled "Afghanistan: Economic Memorandum (1030-AF)" dated June 7, 1976 has been distributed to the Executive Directors. A re- connaissance mission preparatory to the forthcoming basic economic mission visited Afghanistan in August 1976. The following analysis reflects the findings of this mission. Country data sheets are attached as Annex I. Economic Structure 3. Afghanistan is an extremely poor, landlocked country with severe structural, fiscal, and debt service problems. With a population variously estimated at between 13 and 18 million and a per capita income of around US$130 in 1975, it is one of the largest countries designated as "least developed" by the United Nations. The country's prospects for development are limited by a rugged physical terrain, arid conditions, and a paucity of physical and skilled human resources. The adult literacy rate is only about 10 percent and the availability of physicians and hospital beds are one per 16 thousand and 6 thousand persons, respectively. Agriculture accounts for over half of GDP and engages about two-thirds of the population. Nomads constitute an estimated 16 percent of the population, and an estimated 18 percent of the total population live in the cities. Other structural fea- tures of the economy are: the low degree of monetization, a low share of government revenues in national income, heavy dependence on foreign assis- tance for financing the public investment program and the relatively heavy burden of servicing foreign debts. 4. Since the establishment of the Republican Government in July 1973, Afghanistan has made significant economic progress. This has also been accom- panied by a degree of political stability which has permitted the Government to initiate major socio-economic changes such as land reform and a graduated land tax aimed at highly skewed agricultural incomes which have been hitherto untaxed. Indicative of the Government's determination to pursue land reforms This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 2 - has been the recent announcement requiring a declaration of land holdings. The necessary cadastral survey is continuing and a new department of land reform has been established in the Ministry of Finance. 5. There has been an improvement in public administration particuLarly in relation to development planning and project implementation (e.g., reorga- nization of the Ministry of Planning, creation of the semi-autonomous Water and Power Authority which has recently been upgraded as the Ministry of Water and Power, establishment of a new Secretariat for the High Economic Council in the Prime Minister's office). Attempts are also being made to improves the institutional support for the country's export trade. An Export Promotion Bank has been recently established and two international trucking companies are being established for efficient transport of goods to USSR and continental Europe. Some promotional efforts have also been aimed at encouraging private industrial investment (e.g., 1974 General Customs Tariff and 1976 Investment Tariff). The Government has recently drawn up a Seven Year Development Plan for the period 1976/77 to 1982/83 (see paragraph 13). Recent Economic Developments 6. Afghanistan's economy suffered a major setback from the droughts in 1970 and 1971 followed by the severe winter of 1971/72 which caused declines in wheat, fruit and livestock production, and especially heavy losses in the livestock population. The recovery of agricultural output since then has been at a sustained pace due to improved weather conditions and increased use of farm inputs. Agricultural output during the fiscal year 1975/76, particularly wheat and cotton, was at a record level with an estimated increase of 7 per- cent over 1974/75, which in itself was already a very good crop year. The high level of agricultural production has also stimulated domestic manufactur- ing which depends on the former for raw materials. Large-scale manufacturing, though contributing only about 5 percent of GDP, has been performing quite well. The country's sole fertilizer plant (urea) is estimated to have pro- duced during the last fiscal year, the second year of operation, about 72,000 tons (about 70 percent of its installed capacity). Since the expected pro- duction volume is above the country's current distribution target for urea, exports of around 15,000 tons have been programmed in 1976/77. Admittedly, the distribution target could have been higher but for the inadequacies of complementary facilities such as extension and credit. Other industries, cotton textiles, and cement, are also performing well, the estimated growth rates for the 1975/76 fiscal year being around 10 percent and 7 percent respectively. 7. The Bank Group has recently conducted a sector survey on industry reflecting on its problems and prospects. The modern sector is dominated by the public sector with very little private sector participation. The problems of the public sector are, briefly, over-centralization of the man- agement structure, lack of proper financial control, and inadequately trained management personnel. The private sector, comprised almost entirely of  - 3 - import-substituting consumer goods industries 1/, is currently stagnating because of disincentives, including the appreciation of the domestic currency, and various practices such as export restrictions on textiles and the punitive application of income tax regulations without an adequate appeals procedure and statute of limitations on past liabilities. It is also being hampered by lack of a clear Government policy with regard to the role of the private sector in industrial development. The findings of the Bank study, including various recommendations of possible policy measures to deal with these problems, will be submitted to the Government shortly. 8. Afghanistan, during 1975/76, has successfully continued its effort to mobilize domestic resources. Public revenue increased by about 18 percent over the previous year 2/ while the current surplus exceeded the amount esti- mated in the budget by about 19 percent. Consequently, the Government paid off around Afs. 1.5 billion of its debt to the central bank. Development expenditures, although falling 38 percent short of the budget estimate for 1975/76 still increased by about 25 percent over the 1974/75 level. Net dis- bursements of foreign aid in 1975/76 increased by about 107 percent over the previous year. 9. Despite the decline in public borrowing, money supply still in- creased by about 17 percent during 1975/76, reflecting entirely the increase in foreign assets (see para 10). Since the increase in the price level has been only about 6.6 percent, it is probable that a large part of the increase in currency in circulation and money supply has been principally for the purpose of asset-accumulation particularly accentuated by the appreciation of the domestic currency (see para 10). 10. With regard to foreign trade, during 1975/76 exports increased by around 6 percent while imports increased by around 8 percent and the conse- quent trade deficit was around $32 million. The balance-of-payments situa- tion was, however, comfortable, the increase in foreign exchange reserves being around $62 million, equivalent of about 3 months of current import payments. This was principally due to two factors. Firstly, the increased gross inflow of foreign aid, $94 million during 1975/76, compared to $62 million in 1974/75, as well as a considerable reduction in amortization payments following the rescheduling of USSR debt. Secondly, there have been significant purchases of foreign exchange by the central bank from the 'bazaar' (i.e., free foreign exchange market) in response to demand pressures on money supply caused, inter alia, by sizeable remittances by Afghans working abroad, and the consequent appreciation of the Afghani. During the current fiscal year the central bank had, until lately, suspended its buying activi- ties in the 'bazaar' and this had led to a resumption of the appreciation of the Afghani during the six months ending September 1976 from Afs. 55 : US$1 to Afs. 40 : US$1. Exports were, however, insulated from this appreciation 1/ There is some exportable surplus in textiles. 2/ The increase in 1974/75 was 46 percent mainly due to the collection of arrears.  - 4 - through export earnings being converted at the rate which prevailed in February 1976, Afs. 56 : US$1. Since September 1976, the central bank has resumed its buying activity in the 'bazaar' and by end-October 1976 the 'bazaar' rate has increased to Afs. 48 : US$1, as a consequence of purchases of about $6 million. Simultaneously, however, the central bank has reduced the export exchange rate to Afs. 50 : US$1. These actions to reduce the spread between the 'bazaar' rate (i.e., at which the central bank sells foreign exchange to the private sector) and the export exchange rate (i.e., at which it purchases foreign exchange from the private sector), will sub- stantially reduce the budgetary burden which is incurred on this account. Apart from the impact on Government budget, the appreciation of the export exchange rate by about 11 percent could seriously affect export incentives. The IMF is reviewing this question with the Government and will be holding Article XIV consultations in early 1977. Development Prospects and Constraints 11. The large undeveloped human, agricultural and mineral resources of Afghanistan provide the basis for a favorable assessment of the country's long-term development potential. The commitment of the Government to devel- opment and economic and social reforms gives rise to hope that this potential can be realized. Recent offers of aid, notably from the Islamic oil producing countries, are likely to further increase the external capital flow into the country in the near future. 12. The realization of the development potential of the country, how- ever, requires timely and vigorous action to remove a number of obstacles that severely inhibited the country's economic and social development in the past. Included among these are: (a) Inadequacies in project preparation and the resulting shortage of projects to be financed relative to potentially available external economic assistance; (b) inadequacies in public administration and manpower development which have led to inefficiencies in the implementation of policies and projects; and (c) absence of a well-defined framework for the examination and coordination of policies. The Government is well aware of these problems and has already taken some actions aimed at eventual solutions. Particular attention is being given to the improvement of the taxation system. Organizational changes as men- tioned in paragraph 5 are also indicative of this awareness. Much, however, remains to be done and will be focused on in the forthcoming basic economic report. 13. The Government has recently drawn up a seven year development plan (1976/77-1982/83). The plan has an estimated expenditure total of Afs. 174 billion ($3.9 billion) thus envisaging a more than three-fold rise in the  - 5 - average annual development expenditure as compared to 1975/76. The plan aims at an annual rate of growth in GNP of about 6 percent. With population expected to grow at about 2 percent per annum, the per capita income growth is expected to be around 4 percent. However, in its present form, the Plan is better viewed as a shopping list of projects providing a range of choice to donors than as a feasible program. The Plan probably exceeds the feasible limits to the country's ability to prepare and implement projects. The indi- cations are that the availability of resources will be a lesser constraint and could be directly determined by the country's ability to prepare and implement projects. The constraint with regard to the availability of domestic resources would still be considerable because of likely shortfalls in Government revenue compared to the Plan's projections. Greater recourse to deficit finance may be undesirable since money supply has already been increasing at around 17 percent in 1975/76. At present, there is significant hoarding of currency by the public particularly in view of the appreciation of the domestic currency. Consequently the 'effective' money supply is lower than the nominal level of money supply. Any decline in the propensity to hoard will, however, cause the effective money supply to increase, thus endangering price stability. External Debt 14. During the period between 1972/73 and 1974/75, over 65 percent of public investment in Afghanistan has been externally financed with gross aid inflows ranging from about $60 to $95 million annually. As of March 31, 1976 Afghanistan's external debt amounted to $1,597.1 million of which $786.7 mil- lion was disbursed. The major creditors are the USSR (73.2 percent of the outstanding debt), the USA (12.4 percent) and the Federal Republic of Germany (8.3 percent) while IDA holds about 2.3 percent of the outstanding debt. The People's Republic of China, a relatively new creditor, holds 2.0 percent of the loans. Loans from governments account for about 97.0 percent of all dis- bursed external public debt. Afghanistan concluded, in July 1972, an agree- ment with the USSR to reschedule $30.2 million of some $152.4 million in debt service obligations coming due during 1972/73-1976/77. In addition, in early 1973, the USSR agreed to convert some $16.5 million of loan commitments into grants. In February 1975, an agreement was concluded on the rescheduling of another $136 million of debt obligation due during 1975-1980. Meanwhile Afghanistan has also received substantial aid offers from a number of oil- producing countries, notably Iran and Saudi Arabia. No estimates can be given at this time for the commitment for project aid that may eventually result from these offers. 15. With the emphasis on long-gestation infrastructure projects with little export-generating or import-saving impact the growth of the debt- servicing capacity has not been commensurate with that of the debt-servicing obligations. Thus, although most of the borrowing over the past 20 years was on quite soft terms, the impact of debt service has become heavy and in the recent past had to be mitigated by large-scale rescheduling. The debt-service ratio in 1975/76 was 10 percent, as against 17 percent in 1974/75, but the decline was entirely the effect of the 1975 rescheduling of the debt-service  - 6 - payments to USSR, the principal lender. Given the country's debt burden, its poverty and its development stage, Afghanistan does not have the capacity to service external borrowing on conventional terms. It is estimated that even with highly concessionary borrowing as in the past, Afghanistan's debt-service ratio will rise to about 17 percent in 1982/83. (Repayments to IDA will be slightly above one percent in 1982/83 while the IDA share of the debt out-- standing will be around 8 percent.) Afghanistan also requires special conI- sidertion from external lenders, including IDA, in financing the local costs of development projects, in view of its relatively narrow tax-base and low domestic savings capacity. PART II - BANK GROUP OPERATIONS IN AFGHANISTAN 16. IDA has provided twelve development credits totalling US$97 milLion (net of cancellations) to Afghanistan. IFC invested $0.3 million in the Industrial Development Bank of Afghanistan in July 1973. Annex II contains a summary statement of IDA credits and IFC investments as of October 31, 1976 and notes on the execution of the ongoing projects. 17. Bank lending in Afghanistan began in 1964 with a $3.5 million credit (Cr. 68-AF) for an education project, but in July 1970, before any construction took place, a major portion of the credit was cancelled at the request of the Government following education policy changes (para. 31). A resident mission was established in Kabul in 1969 and since that time, with a considerable input of staff time and effort on project preparation, the Bank Group has provided financial assistance to Afghanistan at an average level of about $12 million annually. IDA has made five credits totalling $57 million in the agricultural sector, three credits totalling $19 million in the transportation sector, one credit of $2 million for an industrial development bank project, one credit of $9 million for a water supply project, and one credit of $10 million for a thermal power project. The proposed credit would effectively be the first for the education sector. 18. Difficulties were experienced in disbursing proceeds of the IDA credits made since 1971. The main reasons have been substantial delays in fulfilling effectiveness conditions, slow progress with the selection of con- sultants, minor project changes and, in the case of the Industrial Development Bank (IDBA) Project, a lack of sub-projects. In most cases these problems have now been corrected satisfactorily, with the assistance of the Bank's resident mission in Afghanistan, but the delays incurred aggravated the effect of very heavy inflation on project costs particularly in the case of the irrigation and livestock projects. Disbursements under the aviation and highway credits are now proceeding on a normal schedule. With regard to the Industrial Development Bank, its efforts to identify suitable sub-projects eventually resulted in the Government's submission for IDA approval of the Badghis Cotton Ginning Project, which, with a total cost of $3.8 million, will use up the entire $2 million IDA credit (Cr. 380-AF). The Executive Directors of the Association approved this sub-project in early September  --7 - this year. In close cooperation with IDA staff, the Government is trying to remove potential obstacles to satisfactory project implementation for those projects currently being prepared. For instance, preparation for the estab- lishment of the Project Implementation Unit (PIU) (para 44) for the proposed project was well advanced even before the start of negotiations. The Govern- ment has also gained useful experience during the implementation of earlier projects, and continues its efforts both to increase the administrative capabilities of the project authorities concerned and to streamline its own procedures. 19. The Bank Group's lending strategy recognizes that special efforts are required to help Afghanistan which is among the 29 least developed coun- tries designated by the United Nations. Its landlocked position, its extreme poverty and difficult economic problems, the structure of its political and economic system, the underdeveloped state of physical resources and shortage of trained manpower impose severe limitations on the country's absorptive capacity and thus inhibit its development. Considerable staff time is re- quired, therefore, to help identify, prepare and implement future projects. We expect to establish a basis for financing about two or three projects each year, which would assist in institution building, expand production, increase the foreign exchange earning capacity, improve absorptive capacity and enlarge government resources for development. To that end, technical assistance will continue to be an important feature of most future projects. 20. A feasibility study is in an advanced stage of preparation for the second phase of the Khanabad Irrigation Project, which is expected to be ready for consideration by the Executive Directors in 1977. Another likely proposal for lending in the near future is a further credit to the Agricul- tural Development Bank of Afghanistan. Also under consideration is an agro- industries project to promote fruit and vegetable exports. Other projects are less advanced in preparation. Consultants to complete a feasibility study for a third road maintenance and improvement project are in the field. A water supply and sewerage project is at an early stage of preparation. Preparation of a second Industrial Development Bank project will depend on the formulation of industrial investment policies by the Government, partic- ularly for the private sector. Satisfactory financing arrangements with other donors are being sought for the construction costs of a new airport near Kabul. PART III - THE EDUCATION SECTOR IN AFGHANISTAN 21. A modern formal education system was non-existent in Afghanistan until the early 1930's. For more than 500 years before this time, Koranic instruction by religious teachers (Mullahs) had been the only schooling available in Afghanistan. Even now, about 90 percent of the urban popula- tion and more than 95 percent of the rural population are illiterate. 22. Attempts have been made to improve this situation, but the lack of resources and of comprehensive educational policies with clearly defined objectives and priorities in the context of the socio-economic development  - 8 - goals of the country have always hampered the systematic development of an educational system. Low efficiency of schooling at all levels, an urban/rural enrollment imbalance, an extremely low enrollment rate of girls, irrelevant curricula and inadequate facilities have been major chronic weaknesses of the education system. The Republican Government which came into power in July 1973 made a significant first step towards developing a comprehensive educa- tional policy and a program of reforms by issuing, in early 1975, the draft National Education Development Plan for 1975/76-1982/83 within the context of the national development plan (para. 13). The major objectives included in the Plan are: (a) provision of a solid base of primary schooling by doubling total enrollments and increasing the share of girls' enrollments; (b) improving curriculum and school facilities at all levels with a particular emphasis on the primary level; (c) increasing the output of agricultural and technically oriented secondary school graduates to meet national development needs; (d) improving the teacher preparation system to meet the increasing demands from primary and secondary schools with more emphasis on practical subjects; (e) improving school management and textbook production; and (f) improving the quality of adult literacy programs. 23. The current formal education structure consists of primary education (grades 1-6), beginning at the age of seven, secondary education (grades 7-12) and higher education (grades 13 onwards). Pre-schooling is almost non- existent. In 1974, primary schooling was provided to about 644,000 pupils or about 27 percent of the relevant age-group, and 171,000 pupils or about 8 percent of the relevant age-group, were enrolled in secondary schools. In 1974, the enrollment of girls accounted for only 4 percent and one percent of the relevant age-groups in primary and secondary education respectively. Rural schools make up about two thirds of Afghanistan's primary schools. Most have facilities to offer schooling at best only through the fourth grade. The majority of primary schools are located in mosques, converted stores and houses; about 5 percent of them have no buildings at all. In addition, over half of the primary teachers and three quarters of secondary teachers are unqualified. Repeater and dropout rates are high at all levels of education. In addition, there is a great urban/rural imbalance. Urban areas, accounting for only about 18 percent of the total population enjoy better access to schools, better trained teachers and account for more than 40 percent of all enrollments. The draft plan envisages extending free compulsory primary education from six to eight grades and establishing the secondary education level from grades nine through twelve. 24. Curricula are heavily literary, and science teaching, when available, is theoretical due to a severe lack of appropriate teacher training, teaching aids and practice laboratories. Primary schooling is too literary and ill suited to meet the practical needs of school leavers. Secondary level schools oversupply arts graduates, while less than 30 percent of the national demand for graduates with an agricultural orientation is met. Specifically, the new national development Plan, requires an annual output of 890 middle level technicians but currently only about 260 per annum are being produced.  - 9 - 25. Higher education is provided at the University of Kabul, the Institute of Higher Agricultural Studies (IHAS), the Institute of Industrial Management, and the Teacher Training Colleges of which there are ten in the country. The university has twelve faculties including the polytechnic institute, and accomodates about 7,500 students. It has spacious buildings and good facilities for undergraduate students. Post-graduate studies are not yet offered at the university. The Institute of Industrial Management has about 250 places and runs three year post-lycee courses resulting in the award of a Bachelor of Arts degree. The Teacher Training Colleges have about 1,200 places and provide courses up to the 16th grade. One college (the Academy for Teacher Educators) provides a 17th grade course for about 30 teacher trainers. In 1974, less than one percent of the total relevant age-group received higher education and girls participation at this level was negligible. 26. The Ministry of Education is responsible for the formal school system. This includes the small private school sector which represents only about 0.2 percent and 1.3 percent of primary and secondary enrollment respec- tively. Administration remains centralized and, only limited responsibility is delegated to the 28 regional offices. The Ministry is also responsible for the operation of the only educational printing facility in the country with the equipment and expertise to print educational materials in their own scripts in the two main languages, Farsi and Pashtu. 27. An efficient agricultural education/training system responding to the country's development needs is still to be developed in Afghanistan. There is a good working relationship between the Ministry of Agriculture and Ministry of Education and the Ministry of Education has responsibility for pre-service training for agricultural staff. However, agricultural education is currently taught at only three agricultural secondary schools with a total of about 1000 places and a teaching staff of 55. Moreover, dropout rates are high averaging 32 percent over the three year cycle, because of the very poor facilities, an almost complete lack of agricultural texts and the poor quality of the teachers. About 20 percent of the agricultural teachers are untrained. In 1974, about 220 students graduated from these secondary insti- tutions, of which about 190 were employed by the Ministry of Agriculture and about 30 proceeded to higher learning institutions. 28. Higher agricultural education is conducted at the university and the Institute of Higher Agricultural Studies. The latter conducts several two-year courses for a total of about 250 students in veterinary science, credit/cooperatives and forestry. The average dropout rate is about 38 percent, although entrance is highly competitive. About 95 percent of the staff are part-time and the institute has no equipment and no farm laboratory land. The University of Kabul offers a limited number of places (about 180) for plant science, animal science, credit cooperatives and agricultural engineering. The average dropout rate at the University is about 40 percent. Practical work is limited, with virtually no student practice on farm lands.  - 10 - 29. Short in-service agricultural courses are sporadically arranged by the Ministry of Agriculture for its staff. Farmer training is at an embryonic stage but is being expanded through direct contact by the extension staff of the Ministry of Agriculture, the Rural Development Department of the Office of the President, the Agricultural Development Bank, the Afghan Fertilizer Company, the Herat Livestock Development Company, the Helmand Valley Authority and other regional land development authorities. 30. The Republican Government is emphasizing the importance of rural development and improving conditions of small farmer families, and has taken some positive measures towards implementing them including the establishment of the Rural Development Department within the Office of the President. How- ever, the absolute shortage of trained manpower to staff adequately both the development institutions referred to and the training institutions as well as the poor coordination among the institutions hinders the development of an efficient farmer training system. The draft National Education Development Plan contains short-term measures for agricultural training to meet the more immediate needs of the public agencies as well as long term measures to introduce agriculture into the primary school curriculum and to expand places in agricultural secondary schools to meet the long term middle level manpower requirements of the economy. The Government, particularly through the Minis- tries of Education and Agriculture and the Rural Development Department of the President's Office, has given high priority to more systematic and practical agricultural education and training in the country. PART IV - THE PROJECT The First Education Project (Cr. 68-AF) 31. A $3.5 million credit for the First Education Project, signed in November 1964, was intended to help construct and equip seven teacher train- ing, agricultural and electro-mechanical schools. UNESCO and the Government of the Federal Republic of Germany were to provide expatriate teachers and technical school equipment. A 15 month delay in meeting the credit effec- tiveness conditions was caused by complicated land legislation which made difficult acquisition of school sites and other administrative and legisLa- tive inefficiences. Architectural designs for the school complexes were not completed until three years after the signing of the credit. During this period, IDA staff attempted to expedite the project through frequent corres- pondence and visits, but in the meantime, the closing date had to be post- poned by two years. At the same time, the Government began to question the electro-mechanical school component of the project because of its high cost, its restrictive pupil entry requirements and its overly sophisticated train- ing programs. Furthermore, the Government felt that, after the long interval of time since appraisal, it should re-examine educational needs and establish clearly its human resource development priorities before implementing any education project of a significant size. IDA offered to re-appraise the  - 11 - project, but, in July 1970, before any construction took place, the Govern- ment formally requested cancellation of the credit. Under these circum- stances, IDA agreed to cancel $3.2 million of undisbursed funds. About $0.3 million of funds already disbursed was refinanced under the FY71 credit for the Khanabad Irrigation Project (Cr. 248-AF). Project History 32. Efforts to establish priorities among the country's educational needs were renewed after the change in the Government in July 1973. A UNESCO mission was invited to Afghanistan in September 1973 to identify priority needs and possible project items. Its report was submitted to the Government in February 1974. Following a review period during which the Government re- assessed its educational development strategy while continuing its dialogue with IDA, an IDA reconnaissance mission agreed with the Government a tenta- tive project composition in December 1975. In February 1976, an IDA mission discussed with the Government the project composition in the context of the country's development needs, and assisted the Government in preparing a project for IDA appraisal. In order to expedite project preparation, an advance of $200,000 was made from the Project Preparation Facility in May 1976. The project was appraised in May 1976, and negotiations were held in Washington from November 1 to November 5, 1976. The Afghan delegation was led by His Excellency, M. E. Abdullah Malikyar, Ambassador to the USA, and included the representatives of the Ministries of Planning and Education. The Project 33. The project would consist of the following components: (a) construction, furnishing and equipping of 4 new agricultural secondary schools; (b) extensions to and furnishing and equipping of 3 existing agricultural secondary schools; (c) pre-investment designs for: (i) a national educational materials and services center, (ii) a national teacher training complex, (iii) five regional teachers training institutes; and (d) related technical assistance. 34. The project would help to meet the urgent needs for middle-level extension agents in the agricultural sector by expanding existing and estab- lishing new training facilities and introducing a more practical oriented curriculum in the training of agricultural technicians. It would in addition help to correct the urban/rural schooling imbalance by making more secondary  - 12 - agricultural schooling available in the rural areas and linking the agricul- tural secondary schools with local extension and adult education programs. Finally, it would assist the Government to prepare a possible follow-up project in the education sector by providing funds for the preinvestment design oE facilities for primary and secondary teacher training, curriculum development and the integration of education materials and services. To complement the project, the Canadian International Development Agency has agreed in principle to finance new facilities for printing and binding textbooks and six regional book distribution centers. This would help alleviate the current severe bottlenecks in the production and distribution of school textbooks and other educational materials at primary and secondary levels. The Credit and Project Summary in Annex III describes the major features of the project. The Appraisal Report (Report No. 1286-AF) entitled "Appraisal of a Second Education Project in the Republic of Afghanistan" is being distributed separately to the Executive Directors. 35. One of the major objectives of the draft National Education Develop- ment Plan is to provide an education more relevant to the national development needs. As part of this effort the government proposes to increase the numbers of secondary pupils following technical courses. In line with this the project schools would provide four grades of general agricultural education for a minimum capacity of about 6,200 students. More than half of the course time would be devoted to agricultural subjects, compared with one-third under the existing agricultural program; students would select optional courses in specific agricultural practices in the final two years of their course. Each school would be provided with a school farm of about 100-150 acres and about two-thirds of agricultural teaching time would concern practical work on the farm, compared to less than 10 percent in the existing courses. Each project school would have an adult education unit with refresher courses for agricul- tural extension staff and for farmers, including literacy training. 36. Students for the project schools would be recruited from among eighth grade primary school leavers in rural areas. The average age of new entrants is expected to be about 17 years, and therefore, given a course length of 4 years and assuming a low repetition rate in the project schools, the average age of successful graduates from the project schools would be about 21 years. The majority of graduates during the plan period will be employed by the Government as urgently needed project staff, for extension and rural development work, and as teachers of agricultural subjects which are being introduced into primary schools. About 15 percent of all graduates would continue to the university level. After the plan period, an increasing number of the project school graduates would go into the private sector or become settlers under the new land settlement schemes, since the 1975 Land Reform Act stipulates a first priority status for these graduates for access to new land and agricultural credit. The Ministry of Education would insti- tute a graduate tracer system (Section 3.06, Development Credit Agreement). 37. Recruitment of general subject teachers for the project schools presents no problem. However, there is no ready supply of trained agricul- tural teachers and 268 such teachers would be required by the end of 1980  - 13 - under the Project (63 in 1978, 90 in 1979 and 115 in 1980), to match increas- ing annual pupil enrollments. To meet this need, the Government is mounting a special agricultural teacher training program. The first step in the pro- gram is training of teacher educators who will carry it out, the beginning of this work would be a condition of effectiveness. The Government has already taken certain steps towards the training of the teacher educators. It has designated the Institute of Higher Agricultural Studies as implemen- tation agency of the program under the auspices of Ministry of Education, and has selected eight of the best qualified teachers of agricultural subjects to be trained as teacher educators during the first six months of 1977. 38. The Government will soon select the first groups of 65 trainees to be enrolled in a nine months course under the teacher training program beginning in the fall of 1977 to be organized partly at the Institute and partly at Darwishan agricultural secondary school in the Helmand Valley. The Govern- ment has agreed to give top priority to the recruitment of graduates from the university and the Institute for the program. It is planned that about 35 percent of the trainees will come from university agricultural graduates, 45 percent from graduates of the Institute and 20 percent from amongst the best graduates of the agricultural schools. 39. To assist in organizing and executing the teacher training and in- structional materials preparation program, the project would include assis- tance to provide an expatriate, teacher training coordinator for 36 man-months, a farm mechanics teacher trainer for 24 man-months and short term consultancies of altogether 12 man-months for various other teacher training specializations and for advice on the preparation of teaching materials. Fellowships of about 60 man-months would be provided for Afghan staff to study agricultural curri- culum development, and to make study visits outside Afghanistan. 40. The proposed project schools would be distributed widely throughout the country and would be located in areas undergoing active agricultural development. They would all be in close proximity to existing government farms or agricultural research stations. All sites for the new schools have been selected; all are already Government property and would be transferred to the Ministry of Education prior to the scheduled start of construction. 41. The project would also include preinvestment designs including detailed cost estimates, for a possible future project. The designs would be for: (i) a national teacher training complex, (ii) five regional teacher training institutions and (iii) a national educational materials and services center. The existing teacher training facilities in the Kabul area are in- adequate and dispersed and need to be integrated to achieve better teacher preparation and curriculum development, and to experiment with new educational subjects for girls. At the same time, to expand teacher training opportuni- ties, particularly for girls, in rural areas, and to introduce training for craft teachers, teacher training institutes would be established in five widely distributed regions in the country. The materials and services center would integrate all the present inadequate and dispersed facilities of the  - 14 - audiovisual, science, school broadcasting centers and the adult education department. The Government has provided an assurance that the preinvest:ment designs would be sent to IDA for comment within 18 months of the signing of the Development Credit Agreement (about June 30, 1978; Section 3.07, Develop- ment Credit Agreement). 42. In addition to the technical assistance described in para 39 above, the project would also include the financing of one architect for three man- years and one civil/structural engineer for one man-year both to assist in the Project Implementation Unit of the Ministry of Education. Project Cost and Financing 43. The estimated total cost of the project is $11.48 million, net of customs duties and taxes, of which the foreign exchange component is about $4.99 million, or about 43 percent. Details of the costs are given in Annex III. The proposed IDA Credit of $6 million would finance the full foreign exchange costs and $1.01 million of the local costs, and would be equivalent to about 52 percent of the total cost. The Government would be the borrower. The remaining funds needed to finance the project would come from the Government. Organization and Execution 44. The President of the Department of Construction in the Ministry of Education would have the overall responsibility for the project and for liaison with IDA. Under the Department of Construction, a Project Imple- mentation Unit would be established which is to be headed by a full-time senior official as its director (Section 3.08(a), Development Credit Agree- ment). This director would report to the President of the Department of Construction and would be responsible for day-to-day management, coordina- tion and supervision of the project and for reviewing the work of consultant architects for the project institutions. The director would be assisted by an architect and a civil or structural engineer, financed by the project. The establishment of the Unit with a full time director assisted by a Local architect with suitable experience and qualifications would be a condition of effectiveness of the credit. 45. In order to expedite the preparation for the project, an advance of $200,000 was made in May 1976 from the Project Preparation Facility for the appointment of experts to complete preparatory architectural designs for the project schools, and to prepare bid documents. A local consulting firm has been engaged and preliminary building designs are expected to be completed on time. Technical assistance consultants referred to in paragraphs 39 and 44 above are expected to be deployed during the first quarter of 1977, and school construction is expected to start during the third quarter of 1977.  - 15 - Procurement 46. Foreign contractors are unlikely to be interested in bidding for civil works contracts for the simple, small, one-storey secondary school structures, sited typically in remote rural locations without paved roads. Civil works contracts for these structures therefore would be awarded on the basis of local competitive bidding acceptable to IDA. There are sufficient experienced local building contractors able to construct effectively the new schools and extensions to existing schools. Detailed lists of furniture and equipment would be prepared by consultant experts under the Project Prepa- ration Facility advance and are expected to be completed by March 1977. They would be presented for the Association's review and approval prior to procure- ment. Furniture and equipment contracts would be awarded on the basis of international competitive bidding in accordance with IDA guidelines. Items would be grouped to the extent possible to form sizeable packages to permit bulk procurement under international competitive bidding except for items which can only be grouped in small packages (under US$50,000), items which must be compatible with other equipment procured under international competi- tive bidding and items of such specialized nature that such procedures would not be practicable. These latter items would be procured under normal gov- ernment procurement procedures after obtaining price quotations from at least three manufacturers or suppliers and would not exceed an aggregate total of US$1.5 million or about 44 percent of total furniture and equipment cost. Local manufacturers of equipment participating in international competitive bidding would be allowed a margin of preference equal to the existing rate of custom's duty applicable to competing imports or 15 percent of CIF price, whichever is lower. Disbursements 47. Consistent with the financial plan for the project which envisages IDA financing of 100 percent of foreign exchange cost and 16 percent of local costs, disbursements from the proposed IDA Credit would be made on the basis of: (i) 100 percent of the foreign exchange cost of imported furniture and equipment, 100 percent of the ex-factory price of locally manufactured furni- ture and equipment, or 80 percent of total expenditures for imported but locally procured goods; (ii) 32 percent of total expenditures for civil works; (iii) 85 percent of total expenditures for technical assistance for the Project Implementation Unit; and (iv) 100 percent of foreign expenditures or 20 percent of total expenditures for the consultant fees for pre-investment studies. Disbursements by IDA are expected to be completed by the end of 1980. The estimated annual disbursement schedule for the credit is given in Annex III. 48. No retroactive financing is contemplated under the proposed credit. However, the credit provides for the financing of repayment of the principal amount (US$200,000) of the advance made under the Project Preparation Facility and charges thereon.  - 16 - Benefits and Risks 49. The major benefits to be attained under the project are as follows: (a) graduates from the project schools would meet urgently needed middle-level manpower requirements of the Ministry of Agri- culture, Rural Development Department of the Office of the President and other agricultural organizations and of the Ministry of Education. This would be vital for achieving various targets set out in the new 7 year National Develop- ment Plan for the agricultural sector, the county's most important sector. (b) a more practical agricultural training, which includes exposure to local non-formal education, extension staff training programs and village development activities, would be introduced. This would be more appropriate for extension staff working with farmers, livestock owners and other agri- cultural workers; and (c) systematic training of agricultural teachers would be devel- oped, and agricultural training opportunities would become more widely available in rural areas. 50. The most serious risk under the project is whether enough competent agricultural teachers can be trained in a timely manner or not. Viability of the project would depend heavily on the successful recruitment of about 270 agricultural teachers. The outline of the training program and a timetable for the implementation of the program have been extensively discussed and agreed between the Government and IDA and commencement of the training of teacher trainers under the program has been made a condition of effectiveness. However, there are inherent risks in the implementation of such a program for the first time by the Government even if it is assisted, as planned, by expert consultants. Other project risks are considered easier to manage because agricultural schools of reasonable designs and construction standards have already been built by the Government, including some in remote rural areas, and given the limitation of the existing curriculum, the related agricultural program is already being supervised efficiently. With the additional archi- tectural and civil engineering experts being made available to the Minisl:ry of Education under the project, possible risk of delay in implementing the project would still exist but would be reduced considerably. Some delay, may occur due to the unfamiliarity of the staff of the Ministry of Education with IDA procedures since this is effectively the first education project in Afghanistan to be financed by IDA. Special attention would be given by [DA staff to this matter.  - 17 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 51. The draft Development Credit Agreement between the Republic of Afghanistan and the Association, the Recommendation of the Committee provided for in Article V, Section I (d) of the Articles of Agreement of the Associa- tion, and the text of a Resolution approving the proposed Development Credit are being distributed to the Executive Directors separately. 52. Features of the Development Credit Agreement of special interest are listed in Section III of Annex IV. 53. Special conditions of effectiveness of the credit are as follows (Section 5.01, Development Credit Agreement): (a) that the Project Implementation Unit has been duly established within the Department of Construction of the Ministry of Education of the Borrower; (b) that a director and an architect with suitable experience and qualifications have been appointed to the Project Implementation Unit; and (c) that the training of agricultural teacher educators has begun. 54. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART IV - RECOMMENDATION 55. I recommend that the Executive Directors approve the proposed development credit. Robert S. McNamara President Attachments December 13, 1976   Ngs 1 of 41 psgea TABLE 3A AFGHANISTAN - SOCIAL INOICATORS DATA SHEET LANO AREA (THOU KN2) --------------- ~~~~AFGHANISTAN REFERENCE COUNTRIES (1970) TOTAL t47.5 MOST RECENT AGRIC. ..1960 1970 ESTIMATE NEPAL SUDAN SflAN ARAB.=P*~ GNP PER CAPITA (USBIOZ 6 --.0 -80.0 1-3-0-.0 80.0-- 340.0 POPULATION ANO VITAL STATISTICS POPULATION (MID-YR, MILLION) 12.0 15.0 16.7 11.1 14.0 6.3 POPULATION DENSITY PER SQUARE KM. 19.0 23.0 26.0 79.0 6.0 34.0 PER SQ. KM. AGRICULTURAL LAND . 102.0 . 272.0 43.0 56.0 VITAL STATISTICS AVERAGE BIRTH RATE (/THOU) 49.0 48.7 419.2 44.7 418.9 47.6 AVERAGE DEATH RATE 1/THOU) 34.1 2 7. 6 23.8 24.6 20.2 16.2 INFANT MORTALITY RATE (/THOU) . 182.0 * 200.0-300.0 . 93.0 LIFE EXPECTANCY AT BIRTH (YRS) 32.8 31.8 410.3 40.6 46.1 51.3 GROSS REPRODUCTION RATE . 3.4 3.4 3.0 3.4 3.5 POPULATION GROWTH RATE (31 TOTAL 2. 2 a 2. 2 * 2.2 1.8a 2.2 /b 3 .3 URBAN 5.2 5.2 5.1 4.0 5.5 4.8 URBAN POPUILATION (3 OF TOTAL) 8.0 10.7 12.3 4.0 11.8 42.9 AGE STRUCTURE. (PERCENT) a TO 14 YEARS 41.9 43.2 44.2 . 45.0 49.0 15 TO 64 YEARS 54.8 54.2 53.2 . 52.0 47.0 65 YEARS AND OVER 3.3 2.6 2.6 . 3.0 AGF DEPENDENCY RATIO 0.8 0.8 0.9 . 0.91. ECONOMIC CEPENOENCY RATIO .. 1.5 Ia . 1.5 /c 2.5 FAMILY PLANNING ACCEPTCFS (CUMULATIVE. THOU) ... 11.0 86.5 USERS IX OF MARRIED) WOMEN) . .. EMPLOYMENT TOTAL LABOCR FORCE ITHOUSAND) .. 5310.0o. 4500.0 1500.0 /a LABOR FORCE IN AGRICULTURE (2) .. 62.0 . 80.0 49.0 7. UNEMPLOYED (3 OF LABOR FORCE) ~ 7.0 . .6.0 INCOME DISTRIBuTION % OF PRIVATE INCOME REC-D BY- HIGHEST 53 OF HOUSEHOLDS . .. HIGHEST 202 OF HOUSEHOLDS 4.. . . 19.2 LOWEST 202 OF HOUSEHOLDS 5.. . . . d~ LOWEST 403 OF HOUSEHOLDS . .. 11. d DISTRIBUTION OF LAND OWNiERSHIP 3 OWNED BY TOP 103 OF OWNERS . .. 3 OWNED EY SMALLEST 103 OWNERIS . . HEALTH AND NUTRITION POPULATICN PER PHYSICIAN 27250.0 /a 18110.0 16310.0 lb 49770.0 Ia 14200.0 3850.0 POPULATION PER NURSING PERSON 23700:0C/* 19580.0~ 19000.0 7r.d 35600.o 7a-.b 17`40.0 4460.0 POPULATION PER HOSPITAL BED 722.7 6030.0- . 6750.0 930.0OIe 1010.0 PER CAPITA SUPPLY OF - CALORIES (2 OF REQUIREMENTS) 86.0 80.0 8.0 93.0 98.0 102.0 PROTEIN (RM PE DA)6. 580 58.0 /e52.0 63.0 70.0 -OF WHICH ANIMAL AND PULSE .. 11.0 ..t1.0 24.0 / 16.0 lb DEATH RATE I/HOU) AGES 1-4 . .. EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 8.0 Ic d 22 0/c d 2 7 0 31.0 I 33. o 8. SCNAYSCHOOL 1.0 ~6.0o7d 8:0 LL,. 7.0 6.0 39. YEARS OF SCHCOLING FROVIDEC D 3. (FIRST AND SECOND LEVEL) 12.0 12.0 12.0 10.0 12.0 12.0 VOCATIONAL ENROLLMENT 12 OF SECONDARY) 11.0 4.0 3.0/, 6.0 1.0/A 3.0/c ADULT LITERACY RATE 1%) 8.0 10.0 . 14.0 15.0 40.0 HOUSING PERSONS PER ROOM (AVERAGE) .. .. f. . OCCUPIEC DWELLINGS WITHOUT PIPED WATER (2) ... . 36.0 aif. ACCESS TO ELECTRICITY 13 OF ALL DWELLINGS) .. . . 26.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (3) . .. CON SUMPTI ON RADIO RECEIVERS (PER THOU POP) 2.0 16.0 . 5.0 . 224.0 PASSENGER CARS (PER THOU POP) 1.0 2.0 3.0 /b 0.4 20 5.0 ELECTRICITY (KWH/YR PER CAP) 9.0 23.0 26.0 6.0 .. 151.0 NEWSPRINT (KG/YR PER CAP) . 0.011 0.06 0.2 0.2