Haiti - Second Education Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2216-HA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF HAITI FOR A SECOND EDUCATION PROJECT February 8, 1978 This document has restted distIbtution and my be _ed bY reciPients only In the perfornce of their officil duies. Its contents may not ohwie be discsetd witho World Bank anthorlton.I  Currency Equivalents Calendar 1977 January 1978 Currency Unit = Gourde (G) G US$1 = G5.00 5.00 Gl = us$0.20 0.20 Fiscal Year October 1 - September 30 Measures 1 kilometer = 0.62 miles 1 sq. meter = 10.76 sq. feet Abbreviations CARE - Cooperative for American Relief to Everywhere CEP - Primary Education Certificate CIDA - Canadian International Development Agency CLAP - Center for Applied Linguistics CONADEP - National Council for Development and Planning CPFP - Pilot Center for Technical Training DARNDR - Department (Ministry) of Agriculture, Natural Resources, and Rural Development DEN - Department (Ministry) of National Education FAO - Food and Agriculture Organization IDB - Interamerican Development Bank ILO - International Labor Organization INFP - National Institute for Vocational Training INP - National Pedagogical Institute ONAAC - National Office for Literacy and Community Action UNDP - United Nations Development Programme UNESCO - United Nations Educational, Social, and Cultural Organization UNICEF - United Nations International Children's Emergency Fund  FOR OFFICIAL USE ONLY HAITI SECOND EDUCATION PROJECT Credit and Project Summary Borrower Republic of Haiti Beneficiaries: Departement de l'Education Nationale (Ministry of Education); Departement de l'Agriculture, Ressources Naturelles et Developpement Rurale (Ministry of Agriculture); Radio Nationale Amount: US$10.0 million equivalent Terms: Standard IDA Terms Project Description: The project would (a) continue and expand the Association's assistance in support of Haiti's efforts to correct inequalities in access to primary education, and to improve its relevance and internal efficiency, and (b) increase the supply of skilled and semi-skilled industrial workers, agricultural extension agents and rural community development agents. On completion, the project would provide physical facilities for about 19,500 primary school students and would improve the quality of primary education for more than 300,000 children in grades 1 - 4 in public schools. A UNDP grant of about US$0.5 million would help finance part of the technical assistance component. Project risks concerning financing of recurrent costs generated by the project would be minimized by proposed assurances providing for the allocation of suffi- cient funds for maintenance and operating costs, adoption of improved conditions of teacher service and reforms in the fiscal sector. Improved condi- tions of teacher service would help to attract and retain qualified teachers. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Costs: Item --- JS$ millions ------- Local Foreign Total Primary Education Physical Facilities 2.00 1.99 3.99 Quality Improvements 1.01 0.64 1.65 Vocational and Agricultural Education 0.98 1.14 2.12 Technical Assistance 0.06 1.06 1.12 Project Administration 0.13 0.06 0.19 Subtotal 4.18 4.89 9.07 Physical Contingencies 0.38 0.43 0.81 Price Contingencies 1.34 1.45 2.79 Total Project Costs 5.90 6.77 12.67 Financing Plan: US$ million Percentage IDA Credit 10.00 79% UNDP Grant .47 4% Government 2.20 17% Total $12.67 100% Estimated Disbursements: IDA/FY ---------------- $ thousands ------------- 1978 1979 1980 1981 1982 1983 Annual 75 865 2,355 2,940 2,545 1,220 Cummulatives 75 940 3,295 6,235 8,780 10,000 Staff Appraisal Report: Report No. 1813a-Ha dated February 8, 1978 Regional Projects Department Latin America and Caribbean Regional Office  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF HAITI FOR A SECOND EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed devel- opment credit to the Republic of Haiti for the equivalent of US$10.0 million on standard IDA terms to help finance a second education project. PART I - THE ECONOMY 1/ 2. The most recent economic report on Haiti, Report No. 1243-HA entitled "Current Economic Position and Prospects of Haiti" was distributed to the Executive Directors on December 15, 1976. Social and economic data are pre- sented in Annex I. A Bank mission is now in Haiti to update the Economic report. Its findings will be distributed next August. 3. Haiti is one of the poorest nations in the world, and one of two countries in the Western Hemisphere included in the U.N. list of least devel- oped nations. GNP per capita in 1976 stood at US$200. An infant mortality rate of about 150 per thousand live births, an average life expectancy of 50 years, low nutrition and sanitation standards (malnutrition and gastroenteric diseases account for over half the deaths in the country) and an adult illit- eracy rate of about 80 percent characterize the depressed living standards of the population. 4. In marked contrast to the 1960-67 period when the economy stagnated, Haiti enjoyed some growth in 1968-74. Expansion of small-scale manufacturing and assembly operations, tourism and construction led to real average annual increases of GDP of about 3.4 percent while population grew at an estimated annual rate of 1.6 percent. These activities contributed noticeably to improv- ing economic conditions in Port-au-Prince. Employment in assembly operations, for example, increased from 10,000 in 1971 to 19,000 in 1974. Agriculture, however, which constitutes the economic base of almost 80 percent of Haiti's population and accounts for about 42 percent of GDP and 55 percent of merchan- dise exports has, as yet, shown little dynamism. Progress in agriculture will require the adoption of improved production techniques, provision of greater incentives to farmers, as well as improvement of the transport infra- structure. 5. The economy's total output stagnated in 1975. Agricultural output declined mainly as a result of a severe drought which particularly affected the northwestern part of the country. World recession brought about declines in exports of mining products and manufactures as well as in industrial 1/ Reprinted verbatim from Report No. 2134-HA of December 1, 1977 (Haiti- Provincial Towns Water Supply Project).  - 2 - investment. Construction activity also slowed down significantly. However, mainly because of favorable bauxite and sugar prices, the country's terms of trade improved, thus allowing a moderate real increase in the Gross Domestic Income. In 1976, the economy recovered from the effects of the 1975 drought and world recession. Production growth was led by mining, manufacturing and construction, but agriculture also performed satisfactorily. Preliminary estimates point to a real growth of GDP of nearly 5 percent. This development was again accompanied by a substantial improvement of the terms of trade, mainly owing to a sharp increase in world coffee prices. Consequently, growth of Gross Domestic Income is estimated at about 10 percent. 6. During the first 4-5 months of 1977, the country was again hit by a very severe drought with strong negative impact on agricultural production (mainly domestic food crops), on power generation and consequently also on industrial production. These effects were reflected by a deceleration of GDP growth in 1977. A rough estimate points to an increase in real GDP of about 2.5 percent. The shortfalls in agricultural production caused serious supply shortages. The situation was relieved by food grants from multilateral and bilateral emergency programs and by direct Government imports. At the same time, the reduction in hydro-power generation led to the importation of generators, both by the Government and the private sector. Since the drought did not affect coffee production, increased earnings from coffee exports, resulting from further increases in coffee prices, offset the foreign exchange outflow caused by emergency imports. 7. After several years of continuously decreasing net international reserves, Haiti's balance of payments improved in 1976 and 1977, largely as a result of higher coffee prices. In September 1975, the net reserves of the banking system reached their lowest negative level of US$24 million. Since then, they increased to reach a positive level of about US$6.3 million as at the end of September 1977. 8. In the past three years, the Government has adopted several measures to encourage agricultural production. In 1973, the specific tax on coffee which, by absorbing a large share of export proceeds, weakened producer incen- tives when international prices were low, was replaced by a progressive ad valorem levy. In 1974, a nationwide five-year coffee production program was initiated with the support of USAID to provide small farmers with a package of credit, technology and training. A substantial increase in the domestic prices paid to farmers for sugarcane and to mills for sugar production was approved. The export tax on sugar was lowered from its previous rate which was as high as 80 percent at the margin. The tax on agricultural products marketed domestically, levied each time a commodity changed hands, was elimi- nated. 9. The Government is carrying out an important investment program in which infrastructure facilities, essential to the development of the directly productive sectors, occupy a central place. Public investment increased by about 68 percent in real terms during 1975 and again by some 35 percent in  -3- 1976. In the area of Port-au-Prince, projects are under way to expand and improve port facilities and the water and power supply systems. Major roads linking the northern and southern regions of the country were reconstructed, and the network of agricultural feeder roads is being improved. The current Five-Year Development Plan stresses regional development and it envisages the expansion of health, sanitation and education services to the population in rural areas and provincial towns. To meet even the most modest demand in these areas, public sector development expenditures will have to increase from about US$37 million per year in 1973-75 (or 5.1 percent of GDP) to about US$87 million per year in 1976-80 (or 7.2 percent of GDP) (all in current prices). 10. The successful execution of such a program will require a substan- tial increase in the flow of external assistance. In the early seventies, when the level of public investment was still low, net external lending accounted for only a fraction, less than one-tenth, of development expendi- tures. Grants financed another 37 percent of development expenditures. The share of external lending has grown to about 30 percent in 1975, with the remaining 41 percent financed from foreign grants, 16 percent from net internal borrowing and 13 percent from savings. On the basis of disbursements of loans already committed and of likely future annual commitment levels of US$45-US$50 million from official lending agencies, it is expected that the importance of foreign lending will increase and that it will finance about 40 percent of development expenditures in the 1976-80 period. Capital investment grants from bilateral agencies are expected to finance 5 percent of development expenditures. Other official grants and private donations are expected to continue to represent an important, albeit declining, share of development expenditures (about 20 percent). The remaining 35 percent will have to be financed internally, mainly through public sector savings. 11. The Government recently took some specific measures to increase revenues. Among these measures are the levy of an additional specific coffee export tax, which is applicable at prices above US$1.00 per kg, adoption of a new system of taxation of bauxite exports and the improved administration of import duties. Furthermore, a new income tax law which became effective October 1, 1977 increases the taxation of higher incomes, mainly received by members of the liberal professions. In addition to these measures, a compre- hensive tax reform is in preparation including action with the assistance of the IMF to subject various extra-budgetary accounts to normal budgetary procedures. Finally, the Government has allocated 50 percent of the profits of the Regie du Tabac, an autonomous public sector monopoly, to a National Investment Fund. 12. The growth of public savings will, nevertheless, be constrained by the need to increase substantially current budget expenditures in order to upgrade the quality of public administration and to meet sharply rising operating expenditures related to new development projects in agriculture, education, health, road maintenance and other sectors. In view of the extreme poverty of the country, its fragile balance of payments and the constraints to  -4- raising additional fiscal resources --- taxes already represent about 11 percent of GDP, no mean achievement for a cotntry as poor as Haiti -- the successful execution of the development plan will require external financing -- on con- cessionary terms -- covering a high share of the cost of development projects. In some sectors, financing of part of local costs would be necessary. 13. A High Level Commission for the Implementation of External Assist- ance to Haiti convenes twice a year to consider the country's economic situation and expected technical and financial assistance. The Commission, for which the organization of American States (OAS) provides Secretariat Services (including background reports), is composed of senior government officials and of representatives of the multilateral and bilateral aid agencies active in Haiti. The Government has proved to be receptive to advice from the Commission, which also serves to coordinate the efforts of participating agencies. 14. The country's balance of payments is very fragile, mainly because of high and rapidly increasing food imports which account for more than 25 percent of total merchandise imports. Although export performance in 1976 and 1977 has been satisfactory as a result of a sharp increase in coffee prices and rising earnings from manufactured exports and tourism, the deficit on the balance of goods and services has remained substantial; in 1976 it reached about 4 percent of GDP. This development reflects the country's increasing dependence on food imports and substantial investment programs (which, in the longer run, are likely to contribute to strengthen the economic structure and the export base). The strengthening of the country's external reserve position was made possible by improved coffee prices and by a large inflow of grants and official loans. 15. Since there has been relatively little net foreign borrowing other than on highly concessionary terms, the debt service ratio is relatively low (about 7 percent in 1976). Nevertheless, the balance of payments is likely to constitute a severe constraint to economic development in view of the limited growth prospects of Haiti's agricultural exports, and because export diversification through the development of manufacturing and tourism is still at an early stage. In view of the country's poverty and the depen- dence of its balance of payments on world demand for a few commodities, Haiti will continue to require external assistance on concessionary terms for a long time if it is to achieve a significant improvement in the standard of living of its population. PART II - BANK GROUP OPERATIONS IN HAITI 1/ 16. The Bank Group has had eight operations in Haiti. A US$2.6 million Bank loan (141-HA) was made in 1956 for highway rehabilitation and a US$350,000 1/ Reprinted from Report No. P-2134-HA and amended to include references to the Provincial Towns Water Supply Project (para 16 and Table 1) to the Second Education Project (para 21).  IDA credit (32-HA) was made in 1962 for highway maintenance. Two credits -- US$10 million (478-HA, Third Highway Project) in 1974 and US$20 million (556-HA, Fourth Highway Project) in 1975 -- were made for reconstruction of the Northern Road linking Port-au-Prince to Cap Haitien. In February 1976, a credit of US$5.5 million was made for a First Education Project (618-HA); in July 1976, a credit of US$16 million was made for a First Power Project (645-HA); in January 1977, a credit of US$10 million was made for a Rural Development Project in Haiti's Northern Department (675-HA) and a credit of US$6.6 million was approved in December 1977 for a provincial town water supply project. The Third and Fourth Highway Projects are making good progress, with disbursements ahead of appraisal estimates. The Power Project, after some delays, is proceeding substantially on schedule. The Rural Development Credit became effective on May 26, 1977 and is still at an early stage of execution. Annex II contains a summary statement of the Bank loan and IDA credits as of September 30, 1977, and notes on the execution of ongoing projects. 17. USAID is financing a road maintenance program, the improvement of feeder roads and the construction of secondary roads. IDB is financing con- struction of the Southern Road, linking the capital to the southern part of Haiti, and expansion of the Port-au-Prince harbour. France is financing con- struction of a road linking Jacmel to the Southern Road and is providing assistance to improve provincial airports. UNDP is financing the technical assistance component of the Third Highway Project (with the Bank as Executing Agency) including training of local contractors in administration, engineer- ing and management as well as a study of Haiti's transportation sector. This study has been completed. The Government organizes twice-yearly meetings to coordinate assistance to the transport sector. 18. Several other international and bilateral agencies are helping education in Haiti, including technical assistance from UNDP/UNESCO, for educational planning and for radio, non-formal, primary and agricultural education, UNDP/ILO, for vocational education; and UNDP/FAO, for agricultural education; financing from UNICEF, for radio and teacher education and for the supply of radios, France, for educational research and for vocational and technical education, CIDA, for agricultural and technical education and for construction of educational facilities, and IDB for rural, primary and agricultural education. 19. IDB has also made loans for agricultural and industrial credit and for improvement of Port-au-Prince's water supply. It is providing assistance to the Government for the preparation of integrated rural development projects in the Cul-de-Sac Plain. USAID has given assistance for Haiti's malaria eradication program, for community development, for a maternal child health and family planning program, and for modernization of the production and marketing of coffee. USAID is also providing assistance for integrated agricultural development in two regions; this activity will be gradually expanded to include other regions of Haiti and will also provide assistance for control of soil erosion and for impzovement of agricultural extension and research. Canada (CIDA) is supporting a rural development project in the southern peninsula and has undertaken a survey of Haiti's water resources for both irrigation and power production potential. The Federal Republic of  - 6 - Germany is providing financial and technical assistance for regional develop- ment in the Gonaives Plain. France is providing experts to assist in the implementation of the IDA-financed Rural Development Project, for which experts from the Federal Republic of Germany are also expected. 20. Prospective IDA operations take into account the ongoing and planned roles of other official lending agencies. In line with the Government's Five-Year Economic and Social Development Plan (1976-81) and with the priori- ties of Haiti's perceived needs, current and planned IDA operations are meant to support the improvement and expansion of basic infrastructure in transporta- tion and power; to expand educational opportunities and upgrade technical skills and to promote regional development both in rural areas (as in the Rural Development Project in the Northern Plain) and in provincial towns, as in the water supply project. Table 1: GRANT AND LOAN COMMITMENTS TO HAITI, 1966-77 (US$ million) IDA IDB Bilateral Total Agriculture 10.0 11.8 58.1 79.9 Industry - 4.5 3.3 7.8 Transportation 30.0 64.7 30.5 125.2 Education 5.5 20.5 6.6 32.6 Water and Sewerage 6.6 9.8 - 16.4 Power 16.0 - 5.5 21.5 Health - 6.3 26.5 32.8 Other /1 - - 47.8 47.8 Total 68.1 117.6 178.3 /1 364.0 /2 /1 Including general budgetary support. /2 Of which $113.3 million estimated to be in grants. 21. The second education project proposed for IDA financing is consistent with the high priority which the Government attaches towards improving the educational system and making it more relevant to Haiti's social and economic development needs. 22. The recently appraised Fifth Transport Project takes into account the recommendations of the sector study mentioned in paragraph 17, which emphasizes the rehabilitation of secondary roads and the development of coastal shipping. 23. The Bank is Executing Agency for a UNDP-financed power study which is presently under way. The study estimates energy supply/demand balances  and recommends investment priorities, taking into account the possibility of using Haiti's deposits of lignite as fuel for thermal plants as well as the country's hydropower potential determined on the basis of the CIDA-financed survey mentioned in paragraph 19. A second power project suitable for IDA financing will be identified as a result of the study and is scheduled for appraisal in July 1978. 24. The Bank Group's share in Haiti's public external debt outstanding and disbursed amounted to 17 percent at the end of 1976. The Bank Group's share of external public debt service in 1976 was about 0.3 percent. Its share of outstanding public external debt would rise to about 29 percent by 1980, raising its share of external public debt service to about 6 percent. PART III - THE SECTOR General 25. The Haitian education system is characterized by very high rates of repetition, dropout, and failure at all levels, extreme imbalances in educa- tional opportunities available to urban and rural areas, and curricula, syllabi and teaching methodologies which are not relevant to the Haitian environment. Public expenditure on education in 1976 was equal to 1 percent of GDP, a figure which is among the lowest in the world. To overcome these critical shortcomings, the Government has taken several key steps in recent years towards improving the system, which lay the basis for its becoming a more useful instrument to assist economic and social development. Primary Education 26. Issues and problems. Enrollment in rural primary education is equivalent to 41 percent of school age population compared to 176 percent 1/ in urban areas. Only 2 percent of rural compared to 27 percent of urban school children complete primary education. Overall, only 13 percent of primary school entrants complete the primary school course. In terms of structure and administration, rural schools are under the administration of the Ministry of Agriculture and follow a seven-year primary system, which includes an official enfantine or pre-school year compared to a six-year system in urban areas. Primary school curricula and syllabi encourage rote learning and passivity, and do not take into account the fact that the vast majority of children entering the system have no knowledge of French, which is the teaching and official language. Untrained teachers make up more than 75 percent of the teaching force; low teacher pay combined with lack of professional training has led to absenteeism, high teacher turnover, and utilization of teaching methodologies based on rote learning. With few exceptions textbooks are inappropriate to the Haitian context and too expensive for the average child to buy. Primary school facilities are non-functional, overcrowded, and ill-equipped. 1/ The figure is above 100 percent because it includes overaged children and rural children attending urban schools.  27. Government policies and proposals. Since signing of the First IDA Education Project Credit Agreement (February 1976), the Government has begun to attack the problems described above. With regard to administration, the Government is planning to transfer responsibility for rural primary education and teacher training from the Ministry of Agriculture (DARNDR) to the Ministry of Education (DEN) and thus to unify administration of the primary education system. The Government agreed to initiate action towards the transfer by October 1, 1978 (Section 3.06 of the Credit Agreement). With regard to school curricula and syllabi, the Government has established a 12-member Consultative Committee of educators to advise on administrative and pedagogical aspects of primary education and a five member Curriculum Unit to revise primary school curriculum and syllabi by October 1978. Both these groups are receiving financial support under the First Education Project. To further improve syllabi, the National Pedagogical Institute (IPN) and the Center for Applied Linguistics (CLAP) are planning to study issues regarding the appropriate use of Creole and French in the classroom. 28. With regard to primary teacher training, a new curriculum developed under the First Education Project, requiring two years of study and a full year of supervised teaching, is now in force throughout the country. Output of teachers will increase to 620 per year through expansion of teacher training schools supported under the First Education Project and through assistance from IDB. However, an additional output of a minimum of 120 teachers annually will be required to meet teacher needs in public primary education over the next ten years and the Government has, therefore, proposed construction of an additional teacher training school. To further improve teacher performance, the Government, with assistance from the proposed credit, is planning large scale in-service teacher training programs designed to strengthen knowledge of basic subjects, to improve methodology, and to introduce the new curriculum and syllabi. 29. The Government is also planning to prepare, test, produce and dis- tribute primary school textbooks for grades one to four. This program would build on existing experimental textbooks prepared by the IPN, but, because of needs for curriculum revision, language study, and testing of learning materials, would be progressively implemented on a large-scale starting only in 1981. 30. With the assistance of the Association and of other agencies, the Government has initiated work to enable new rural schools to be constructed in accordance with the concept of "nuclearization". A central school with additional workshop, home economics and agricultural facilities and capacity for six grades will serve several neighboring smaller schools with capacity of only four grades and will also provide non-formal education and training for adults. These ongoing and proposed programs show keen Government awareness that an integrated approach is necessary for the resolution of primary edu- cation problems. The proposed new programs are feasible since they build on activities already being undertaken by existing institutions. Urban Vocational Education 31. Seven lower secondary vocational schools enrolling 1,500 students prepare skilled workers in 14 industrial trades. These schools, directly  - 9 - administered by the DEN, have inappropriate curricula, underpaid and unqualified teachers, no modern equipment, a poor physical plant, an excessive number of students per workshop, a shortage of funds for operating expenses, and little or no contact with industry. Three schools in Port-au-Prince provide three year upper secondary courses to prepare industrial technicians. Two of these schools receive international assistance and provide good training. A National Institute for Vocational Training (INFP) was established in 1975 and is functioning well with ILO and French assistance to coordinate vocational training and ensure the participation of industry. The INFP is financed by a 1 percent payroll tax on industry. 32. The Government is now planning a major reform of lower secondary vocational education, including a complete revision of the curriculum, reduc- tion of the course from four to three years, and training of vocational teachers and administrative personnel. To initiate this program, an existing vocational school in Cap Haitien would be remodeled and re-equipped and a new vocational school would be established in Port-au-Prince. The INFP would be responsible for curriculum reform and teacher training for these schools. In addition the Government is planning to strengthen the linkages of the INFP with industry through construction of three small workshops to provide in-service training for factory workers in the Port-au-Prince area. Agricultural and Non-Formal Education 33. An agricultural school located in the suburbs of Port-au-Prince has been training about 30 extension agents per year in a two-year upper secondary course. This school will be strengthened through assistance from the Canadian Government and output will be increase'd to 50 per year. How- ever, to reach its long-term goals of one extension agent per 600 families (the ratio, at present, is roughly 1:1750), the Government has proposed construction of a new school, to be located in the Central Region, to train an additional 50 extension agents per year. In addition, the Government is proposing to increase significantly the number of rural community development agents employed by the National Office for Literacy and Community Action (ONAAC). To meet this need the proposed new agricultural school would train an average of 25 rural development agents per year. The school would also provide facilities for non-formal training of other rural development personnel. Radio Education 34. The Government initiated radio education programs for primary students and adults in 1975 in the DARNDR, and in 1977 established a national educational radio station. The aim of this station is to provide educational and cultural programs which reinforce national development efforts. To achieve these goals, the Government has requested the Association to finance additional studios and equipment as well as technical assistance and fellow- ships to improve production of educational programs. Education Finance 35. Public expenditure on education in Haiti was equivalent in 1976 to 1 per- cent of GDP and 13 percent of Government budgetary expenditure. Private expendi- ture accounted for an additional 0.6 percent of GDP for a total of 1.6, percent,  - 10 - which is among the lowest in the world. A 15-20 percent salary increase for civil servants in October 1977 alleviated salary problems somewhat by regaining the ground lost to inflation over the last two years. A study of conditions of service of primary teachers, to be financed under the First Education Project, is expected to be completed by mid-1978. This study would serve as the basis for the adoption by the Government by October 1, 1979, of financial and other incentives to attract and retain qualified primary teachers, (Section 3.08 of the Credit Agreement). Since the appraisal of the First Education Project in June 1975, the Government has prepared an education development plan as part of its second five-year economic development plan (1976-81). Government plans call for an investment of US$44 million with assistance from the Association, IDB, France and other sources. Government funds in support of these plans would be about US$7.5 million or an average of US$1.5 million per year. Government plans to increase primary and secondary school enrollment, reduce the student/teacher ratio in rural areas from 70:1 to 50:1, improve the quality of primary education, and implement a new salary scale will also require an increase in the recurrent education budget of about 10.7 percent per year in constant prices, from US$7.8 million in 1976/77 to US$13.0 million (in real terms) by 1981/82. On this basis education's share of total budget- ary recurrent expenditures would rise from 13 percent in 1977 to 17 percent in FY1982. The assumed growth rate of 10.7 percent is feasible provided that the Government implements the fiscal reforms discussed in paragraph 11. The Government has informed the High Level Commission (para. 13) that it intends to carry out those fiscal reforms and has agreed to present to the Commission periodic reports on progress in achieving announced fiscal objectives. In addition, specific assurances were obtained regarding the provision of ade- quate budgetary support for the project (Sections 3.01(a) and 4.03 of the Credit Agreement). Government and IDA Education Development Strategy 36. Government policy places emphasis on primary school quality improve- ment, urban vocational education, and expanded non-formal education. This is an appropriate strategy which provides a basis for the Association to continue and widen its support to correct the inequalities in access to primary educa- tion and for its qualitative improvement. A crucial assumption is that budgetary allocations for education would be increased with the training and upgrading of teachers. Government interest and action make it appropriate for the Association to assist in strengthening vocational, agricultural and non-formal education. This strategy has been carefully coordinated with the substantial assistance being provided and to be provided by other international and bilateral agencies (para. 18). Experience with First Education Project 37. The purpose of the First Education Project is to assist in primary education reform and expansion, especially in rural areas, and to provide limited assistance in non-formaleducation. Specifically, the Project includes construction of 65 rural basic schools/community learning centers in the North and Artibonite Departments, 10 urban primary schools/community learning  - 11 - centers, and two new and extension of one teacher training schools; provision of equipment for ONAAC; and nine man-years of specialist services and one man-year of fellowships. Implementation of the major project components has been proceeding with relatively minor delays; a study of teacher service conditions has been delayed by the time necessary to enter into a technical assistance agreement with UNESCO and by difficulties in recruiting experts; staffing weaknesses in ONAAC have slowed ONAAC's literacy and community development programs (Annex II). PART IV - THE PROJECT Oblectives 38. The proposed project has the two major objectives of (a) improving the relevance and efficiency and correcting inequalities of access to primary education, especially in rural areas, and (b) expanding the supply and improv- ing the productivity of skilled and semi-skilled industrial workers, agricul- tural extension and rural community development agents, and other agricultural workers. As to the needs of women, primary schools are coeducational. In addition, the strengthening of the health, nutrition and population aspects of teacher training are likely to have a greater impact on women than on men. Admission to vocational agricultural schools is open to both sexes and the agricultural school included in the project is expected to provide 30 dormitory places for women: the school will eventually develop home training courses. The urban vocational center under the project would provide in-service train- ing for factory workers, many of whom are women. Annex III contains a time- table of key events in project processing and a description of the special conditions of the proposed credit. The Staff Appraisal Report is being circulated separately to the Executive Directors. Elements of the Project 39. Primary Education Physical Facilities. The project would support the construction, furnishing and equipping of 31 new rural basic schools with 9,000 student places, providing four grades of education to children and literacy and training opportunities to out-of-school youths and adults. These schools would be located in the North, Central and Grande Anse Departments in areas of development potential and relatively low enrollment ratios. In addition to classrooms, schools would have simply equipped and designed workshop and home management areas. Housing accommodation would be provided for about 120 teachers in the 20 most remotely located schools. Initially enrollment would be restricted to grades I to 4; as retention rates improve, fifth and sixth grades would be introduced and schools would become centers of educational nuclei (para. 30). The project would also support construction, furnishing and equipping of 10 new urban primary schools with about 3,000 student places and providing six grades of education to children and literacy and training opportunities to out-of-school youths and adults. Facilities of the urban schools would be similar to those provided in rural schools except that there would be no housing units. Assurances were obtained regarding the employment of qualified teachers; the use of primary school facilities for after-hours adult education; maximum class size and the percentage of teachers who have received in-service training courses acceptable to the Association (Sections 3.05 and 3.07 of the Credit Agreement).  - 12 - 40. The project would support construction, furnishing, and equipping of a new rural primary teacher training college, to be located in the Central region, with enrollment of 240 students, 160 boarding places, and six staff housing units. Output of this school, together with that of the three schools being constructed under the First Education Project and of the IDB-assisted three existing rural teacher training schools, would be sufficient to meet the needs of public primary education over the next 10 years. Assurances were obtained regarding the use of a common teacher training curriculum, the employment of qualified teachers, and the establishment of conditions of service that would provide adequate incentives for teachers by October 1, 1979 (Sections 3.05(c), 3.07, and 3.08 of the Credit Agreement). 41. Educational Radio. The project would provide assistance to strengthen Radio Nationale's capacity to prepare and broadcast educational programs, with emphasis on broadcasting to primary school students and teachers. The project would support (a) construction, furnishing and equip- ping of five production studios and space for about 48 production personnel in Radio Nationale's headquarters in Port-au-Prince; (b) provision of a library to Radio Nationale; (c) provision of 1,700 radios and accompanying batteries to primary schools; (d) printing of about 5,000 teachers' manuals, and (e) provision to Radio Nationale of two vehicles to distribute and service radios. A condition of disbursement for the radio component would be that arrangements satisfactory to the Association have been made to upgrade the transmission capacity of Radio Nationale (Schedule 1, paragraph 4(d) of the Credit Agreement). The amount of the proposed Credit subject to this condition would be about $650,000. In addition, assurances were obtained regarding the administration of educational radio and the number of hours broadcast each week for primary and teacher training education (Section 3.09 of the Credit Agreement). 42. Vocational and Agricultural Education. The project would further the reform of formal secondary vocational education and improve the output of skilled workers through: (a) remodelling and re-equipping of an existing lower secondary vocational school in Cap Haitien with enrollment of 260 and output of 80 skilled workers per year; and (b) construction of a new secondary vocational school in Port-au-Prince with enrollment of 416 and annual output of 128 skilled workers per year. The project would finance the costs of expendable materials and of stipends to vocational school teachers during a training period to last 6 to 24 months before opening of the schools. The project would also provide assistance to construct, furnish and equip a small nonformal vocational training center, with workshop space for about 45 trainees, to provide in-service training to about 800 workers per year in assembly, manufacturing, and other industries in Port-au-Prince on a released time basis. The center would be under control of the INFP and would be located on the INFP site in Port-au-Prince. Assurances were obtained regarding administrative arrangements and INFP's role in curriculum development; employment of INFP- trained teachers; and the implementation of a tracer system (Sections 3.10 and 3.11 of the Credit Agreement). 43. With regard to agricultural education, the project would support the construction, furnishing and equipping of one school in the Central Region with teaching and boarding facilities to accommodate 150 full-time students and 25 short-term students and with housing for 11 teaching staff. The  - 13 - school would train 50 extension agents and 25 rural community development agents per year in two year upper secondary training courses and would also be the site for various short-term training courses to be provided to agricultural workers. Assurances were obtained regarding (i) the establishment of an administrative council for the agricultural training school by April 1, 1979, (ii) the appointment of senior staff, and (iii) the implementation of a tracer system (Section 3.12 of the draft Credit Agreement). 44. Primary Education Quality Improvement. The project would continue support for the Curriculum Unit established under the First Education Project, with emphasis on the development of a new primary school curriculum, for the Consultative Committee on primary education (para. 27), and for seminars, contracting of local consultants, and printing of draft curricula and syllabi. Assurances were obtained regarding: (i) appointment of Curriculum Unit members; (ii) the work program of the Unit; and (iii) annual reviews with IDA of the Unit's past and future work programs (Sections 3.13, and 4.02(b) of the draft Credit Agreement). 45. The project would support four types of in-service teacher training programs, as follows: (a) normal school equivalency training for about 400 teachers; (b) regular in-service training for about 2,100 teachers to develop basic academic skills, introduce the new curriculum, and improve teaching methodology; (c) crash courses in book utilization for about 3,500 teachers whose classes would receive textbooks under the proposed project; and (c) training of about 80 seminar leaders who would assist in implementing the in-service training programs. In addition the project would finance purchase of vehicles and of educational materials and equipment for urban and rural sub-regional inspectorates, and for the IPN and CLAP. A condition of dis- bursement for teacher training after October 1,'1979, would be the implementa- tion of terms and conditions of teacher service agreed with the Association (Schedule 1, paragraph 4(c) of the Credit Agreement). The amount of the proposed credit subject to this condition would be about $640,000. 46. The project would support the initiation of a national program to provide educational materials to primary school children, which would include the writing and testing of educational materials for primary education through grade four, and the printing and distribution on a large-scale basis of about 800,000 soft cover textbooks to students in first and second grades. Speci- fically, the project would finance local consultants, textbook writing, printing of books for experimental purposes, testing of books, and large-scale printing and distribution of books. A condition of disbursement for the large scale printing of textbooks would be the completion of a study on the possible use of Creole in primary education and the adoption of a national policy on the language of instruction at the primary level. The amount of the proposed Credit subject to this condition would be about $450,000. Assurances were obtained regarding administration of the textbook program and the training of teachers who would be using new textbooks (Section 3.14 and Schedule 1, paragraph 4(b) of the Credit Agreement). 47. The project would support studies on: (a) the effectiveness of teacher training, radio education and book utilization programs; (b) the appropriate roles of Creole and French in primary education; (c) ways of reducing primary school construction costs; and (d) measurement of the strength of Radio Nationale's signal in various geographical regions.  - 14 - 48. Technical Assistance. In order to ensure that the objectives of the project are met, the project would include 20 1/2 man-years of specialist services and 9 man-years of fellowships, as follows: primary school curriculum development, health education, and teacher training, 5 man-years; educational materials preparation and production, 3 man-years; radio education, 5-1/2 man-years; vocational and agricultural education, 3-1/4 man-years; education administration, 2 man-years; project unit assistance, 3/4 man-year; pre- investment studies, 1 man-year; fellowships in curriculum development, 2 man- years, in vocational and agricultural education, 2 man-years, and in radio education, 5 man-years. The Government has requested UNDP to finance 8 of the above 20-1/2 specialist man-years; the remainder would be financed under the proposed credit. Specialists and their terms of reference and service would be acceptable to the Association and candidates for the fellowship programs would be selected in consultation with IDA (Section 3.04 of the Credit Agreement). The cost per man/year of specialist services is estimated at US$50,000 and, for the fellowship program, US$10,000 per man/year. Project Costs 49. The total cost of the project is estimated at US$12.67 million, net of taxes: the project is exempt from applicable import duties. Local costs are estimated to amount to US$5.9 million, and foreign exchange costs, to US$6.8 million or 54 percent of total project costs. Physical contingencies represent 9 percent of base costs, and price contingencies, 28 percent of base costs plus physical contingencies. Total contingencies are US$3.6 million, or 28 percent of total project costs. 50. Financing of Project and Associated Costs. The proposed Credit of US$10.0 million would cover 79 percent of project costs. UNDP would finance US$470,000 for technical assistance. The Credit would be equivalent to 100 percent of foreign exchange costs excluding those financed by UNDP and US$3.7 million equivalent of local costs. IDA financing of local costs is justified in the light of Haiti's low per capita income, of an already substantial tax burden and of the major fiscal effort that the Government is expected to make in meeting sharply increased costs for current expenditures. The project would require the Government to provide about US$2.2 million over the five-year project period and would result in an increase in budgetary recurrent expenditures for education of 1.5 percent per year, or one-seventh of the expected growth rate of the recurrent budget for education. The Government undertook to provide sufficient funds for recurrent costs generated by the project and, as in the case of the First Education Project, the Govern- ment would annually review with the Association education reform plans and policies, including the availability of sufficient funds for the education sector (Sections 4.02(a) and 4.03(b) of the Credit Agreement). Project Implementation 51. The Project Unit, established under the Executive Secretary of CONADEP to implement the First Education Project, would be responsible for overall administration of the proposed Second Education Project and for  - 15 - liaison with other Departments and parties involved. Project staff would be augmented by additional personnel, and as under the First Education Project, a project implementation fund would be established to ensure the timely avail- ability of local funds for project execution. Consultants acceptable to the Association would be appointed for architectural design and construction supervision and for assistance in preparing and evaluating bids on civil works. Sites selected for all project institutions, except primary schools and the agricultural school, have been inspected, and are acceptable to the Association; they are owned by the Government. Sites for the primary schools and the agricultural school would be selected in accordance with criteria acceptable to the Association (Sections 3.02, 3.03 and 3.17 of the Credit Agreement). A condition of effectiveness of the proposed Credit would be the establishment of a project implementation fund and the deposit of US$200,000 equivalent in it (Sections 3.01(c) and 5.01 of the Credit Agreement). Assurances were obtained regarding adequate maintenance of school facilities and preparation of a Project Completion Report (Sections 4.03(a) and 3.16(c) of Credit Agreement). Procurement 52. Contracts estimated to cost US$3.0 million for the procurement of furniture, equipment, textbook printing, and bulk purchase of building materi- als and paper would be awarded on the basis of international competitive bidding in accordance with Bank/IDA guidelines, except that furniture and equipment which cannot be grouped in packages of at least US$25,000 would be procured on the basis of local procedures acceptable to the Association; procurement under these procedures would not exceed US$230,000. Local manufacturers would be allowed a preference margin of the lower of 15 percent of the CIF price or the applicable customs tariff. Orders to the value of about US$1.5 million are likely to be obtained by local suppliers under international competitive bidding. Civil works contracts to a value of US$4.9 million would, with the exceptions noted below, be awarded on the basis of competitive bidding advertised locally and in accordance with local proce- dures acceptable to the Association. Site development for rural basic schools would be undertaken by local communities under Project Unit supervision. In addition, as an experiment, up to five rural basic schools in areas of difficult access would be constructed under "force account" methods using community labor and on-site building materials, to a value of US$0.4 million. About US$4.1 million would be for professional and technical services and for activities undertaken by government agencies. Disbursements 53. Disbursements would finance 100 percent of foreign expenditures, or 85 percent of local expenditures for locally-procured equipment, furniture, and building materials; 100 percent of expenditures for technical assistance, studies, curriculum development, project administration, education materials and teacher training; and 64 percent of costs of site works, construction, and related professional services. Retroactive financing of US$200,000 would cover expenditures incurred in respect of professional services, studies, technical assistance and project administration from September 1, 1977.  - 16 - Benefits and Risks 54. The project would continue and expand the objectives of the First Education Project in correcting inequalities of access to education; improving the relevance and internal efficiency of primary education and increasing the number and productivity of skilled and semi-skilled industrial workers, agricultural technicians, community development agents and farm leaders. Project risks are moderate because the project would build on existing insti- tutions that have successfully initiated key programs and have been cooperating well with one another. Risks in the new educational materials program would be minimized through technical assistance and through careful preparation and testing of new materials. Moreover, complementary technical assistance from CIDA and ILO would help in the implementation of the vocational and agricul- tural education components of the project. The main risk, concerning financing of recurrent costs generated by the project, should not be considered excessive given the Government's willingness to accord the project high priority through allocation of funds for teacher salaries and maintenance and annual reviews of the adequacy of recurrent funds. The ongoing fiscal reforms should strengthen the Government's fiscal performance. PART V - LEGAL INSTRUMENTS AND AUTHORITY 55. The draft Development Credit Agreement between the Republic of Haiti and the Association and the recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement are being distributed to the Executive Directors separately. Special conditions of the project are listed in Section III of Annex III. 56. In addition to the features of the draft Credit Agreement which are referred to in the text and listed in Section III of Annex III, the following features are of particular interest: (a) an additional condition of effec- tiveness would be that the Government has deposited an amount equivalent to US$200,000 in the project implementation fund (Section 5.01 of the Credit Agreement); (b) conditions of disbursement would be that: (i) no payments would be made for large scale printing of textbooks until the results of a study on issues regarding the language of instruction in primary education have been made available to the Association and a national policy on the subject has been established (Schedule 1, paragraph 4(b) of the Credit Agree- ment); (ii) payments for in-service teacher training incurred after October 1, 1979 would not be made unless new terms and conditions of teacher service satisfactory to the Association had been introduced (Section 3.08 of Schedule 1, para 4(c) of the Credit Agreement), and (iii) no payments would be made for civil works, furniture or equipment under the radio component, unless arrangements satisfactory to the Association had been made to upgrade the transmission capacity of the national radio to 20 kW (Schedule 1, para. 4(c) of the Credit Agreement).  - 17 - 57. I am satisfied that the proposed Credit vould comply vith the Articles of the Association. . PART VI - RECOMMENDATION 58. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments February 8, 1978   ANNEX I TABLE 3A Page 1 of 4 pages HAITI - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2)