Document of The World Bank FOR OFFICIAL USE ONLY F : Report No. 37 (Ob-PH PHIL IPP INES STAFF APPRAISAL REPORT VOCATIONAL TRAINING PROJECT August 26, 1982 Projects Department East Asia and Pacific Regional Office 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. CURRENCY EQUIVALENTS FY81/82 US$1 = Pesos 8.3 Pesos 1 = US$0.120 Pesos 1,000,000 = US$120,000 ABBREVIATIONS ADB - Asian Development Bank BLE - Bureau of Local Employment ILO - International Labor Organization MEC - Ministry of Education and Culture MOLE - Ministry of Labor and Employment MOT - Ministry of Trade and Industry MSSD - Ministry of Social Services and Development NMYC - National Manpower and Youth Council ONFE - Office of Nonformal Education PMU - Project Management Unit RMTC - Regional Manpower Training Center UNDP - United Nations Development Program UNIDO - United Nations Industrial Development Organization SMI - Small and Medium Scale Industry FISCAL YEAR January 1 to December 31 SCHOOL YEAR July - April FOR OFFICIAL USE ONLY PHILIPP INES VOCATIONAL TRAINING PROJECT Table of Contents Page No. BASIC DATA ....... .. .. .. .. .. .. . . . ... . . . . i 1. INDUSTRIAL DEVELOPMENT STRATEGY AND MANPOWER REQUIREMENTS. 1 Industrial Development .1. . . .. . . . . . . . . . . . . . . I Industrial Development Issues and Strategy for the 1980s . . . 1 The Labor Force and Employment .............. . . 3 Skill Requirements. 4 2. VOCATIONAL EDUCATION AND TRAINING: AN OVERVIEW . . . . . . . . . 10 Vocational Education and Training Agencies .10 Financing of Vocational Education .13 Management Weaknesses .13 Relevance of Programs to Current Industrial Development Strategy .... . . . . . . . . .... . . . . 15 Quality of Trainees Produced by the System .16 Recent Developments and Training Strategies for the Future . . . . . . . . . . . . . . . . . . . . . . . 17 The Bank's Role .18 3. THE PROJECT .......... . 21 Objectives and Scope . . . . I . . . . . . . . . . . . . . . 21 Management of Industrial Training ............. . 21 Strengthening Industrial Training ............. . 24 Trade Testing and Certification ... . . . . . . . . . . . 30 4. PROJECT COST, FINANCING AND IMPLEMENTATION ... . . . . . . . . 32 Project Cost . .... ........ 32 Project Financing . . : . . . . . . . . . . . . . . 36 Recurrent Cost Implications ..36 Project Implementation ..38 Disbursements ..40 This report is based on the findings of an appraisal mission which visited the Philippines during May 1981. The mission comprised R.J. Hemingway (Technical educator and mission leader), Ms. Y. Jones (economist), K. Bahr (Economist - Unesco) and G. Ziogas (Architect - Unesco). In August 1981, the project was further reviewed in the field by Messrs. R.J. Hemingway and N. Sidek (Loan Officer). 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 - Page No. 5. BENEFITS AND RISKS . . . . . . . . . . . . . . . . . . . . . . 42 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 43 6. AGREEMENTSREACHEI).. ..................... . 44 TABLES IN TEXT 1.1 Overseas Contract Workers by Major Occupational Group, 1975-80 .................... . ... 4 1.2 Skill Attainment of the Labor Force in 1975, 1980 and 1986 . 6 1.3 Estimated Annual Number of Persons Requiring Training for Industrial Occupations in the Industry and Services Sectors (1980-86). 7 1.4 Estimated Annual Output of Formal and Nonformal Technical/ Vocational Education and Training (1975 and 1980) . . 8 1.5 Annual Training Requirement 1980-1986 by Category of Worker and Priority Subsector. . . . . . . . . . . . . . . . . , . 9 2.1 Annual Output from Vocational/Industrial Courses . . . . . . . 11 2.2 Public Expenditure on Occupation-Oriented Human Resource Development . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.3 Summary of Foreign Assistance to Help Implement Main Strategies in the Technical/Vocational Education Subsector. 19 3.1 Sector Specific Training Scheme: Four-Year Outline Training Plan, 1982-86 . . . . . . . . . . . . . . . . . . . 25 3.2 New Training Centers and Additional Equipment for Existing Regional Manpower Training Centers . . . . . . . . . 29 3.3 Technical Assistance . . . . . . . . . . . . . . . . . . . . . 31 4.1 Cost Summary by Project Component . . . . . . . . . . . . . . . 32 4.2 Cost Summary by Category of Expenditure . . . . . . . . . . . . 33 4.3 Annual Escalation Rates . . . . . . . . . . . . . . . . . . . . 35 4.4 Financing Plan . . . . . . . . . . . . . . . . . . . . . . . . 36 4.5 Sector Specific Training Scheme: Total Four-Year Cost of Stipends and Tuition Fees. . . . . . . . . . . . . . . 37 4.6 Basis for Estimating Training Costs . . . . . . . . . . . . . . 37 4.7 Recurrent Cost - 1986 . . . . . . . . . . . . . . . . . . . . . 38 4.8 Schedule of Disbursements . . . . . . . . . . . . . . . . . . 41 ANNEXES 1. Comparative Education Indicators . . . . . . . . . . . . . . . . 45 2. Summary of Estimated Project Costs . . . . . . . . . . . . . . . 47 3. Selected Documents and Data Available in the Project File. . . . 48 4. Indicators of Educational Outcomes . . . . . . . . . . . . . . . 49 - iii - Page No. CHARTS 1. Organization of the Secretariat of the National Manpower 50 and Youth Council 2. Implementation of Training Action 51 3. Implementation Schedule 52 MAP Map of the Philippines (showing project institutions) 53 PHILIPPINES VOCATIONAL TRAINING PROJECT Basic Data (1980) General Population (millions) 48.3 Annual growth (%) 2.5 Labor force (millions) 18.5 Participation rate (%) 64 Employment by sector (%) Agriculture 53 Industry 15 Services 33 GNP per capita (US$) 690 Education Enrollments in Formal Secondary Vocational Schools /1 394,806 Percentage enrollment in private schools 17 Percentage of total secondary enrollment 12 Output from Formal Industrial Vocational Schools 24,700 Output from NonFormal Vocational Training Schemes 319,800 (i) National Manpower and Youth Council (NMYC) /1 110,300 (ii) Bureau of Apprenticeship /1 17,800 (iii) Ministry of Education and Culture /2 171,600 (iv) Others /1 20,100 Education Resources /1 Total national education expenditure P 4,540 million Total expenditure for vocational education P 923 million Vocational education expenditure as a percentage of total education expenditure 20% (i) NMYC (as a percentage of total education expenditure) P 36.8 million (0.8%) (ii) Bureau of Apprenticeship (as a percen- tage of total education expenditure) P 0.78 million (0.0002%) (iii) Ministry of Education vocational educa- tion expenditure (as a percentage of total education expenditure) P 259 million (6%) /1 1979 figures /2 1978 figures 1. INDUSTRIAL DEVELOPMENT STRATEGY AND MANPOWER REQUIREMENTS Industrial Development 1.01 The manufacturing sector plays a major role in the development of the Philippine economy and accounts for 25% of GDP. The sector is highly dualistic. The unorganized sector, defined as manufacturing establishments with less than ten workers, employs about two thirds of the manufacturing work force, but produces less than 5% of total manufacturing output. The organized, or factory sector, employs the remaining one-third of the manu- facturing work force and produces 95% of total manufacturing output. Although nontraditional manufactured exports grew rapidly during the 1970s, industries producing primarily for the domestic market (home industries) account for about 75% of total manufacturing output. The regional distri- bution of industries is very uneven. In 1975 (latest available data), more than 70% of manufacturing value added and 65% of manufacturing employment originated in the Greater Manila area. Only the resource-based food and wood industries have a wide geographical dispersion. Small and medium- scale industries, on which much of the future of economic and social devel- opment depends, generally use simple technologies. Much of their equipment is outmoded. Technological know-how is largely outdated. These factors are major causes of low labor productivity. 1.02 Employment creation in the manufacturing sector has been slow because of the relatively low growth rate of the sector and the capital intensity of home industries and commodity export processing. Employment in manufacturing has expanded at an average annual rate of about 3.1% in 1975-80, creating approximately 50,000 jobs per annum but absorbing less than one-tenth of the annual increase in the labor force. Accordingly, an extremely high proportion (more than 80%) of the additional labor force has been absorbed by the agriculture sector and the services sector. Under- employment has remained high, and was estimated to be around 25% in the mid-1970s. Industrial Development Issues and Strategy for the 1980s 1.03 The Government's industrial development strategy, as outlined in the Five-Year Development Plan (1978-1982) and the subsequent Industrial Development Strategy, aims at accelerating manufacturing output, sustaining the high growth of manufactured exports, processing of domestic raw materi- als, increased employment generation, particularly within small- and medium- size enterprises/l, investment in selected large-scale projects, and promo- tion of regional dispersion of industry. /1 Defined as less than 200 employees. - 2 - 1.04 The Government has begun to implement policies emphasizing regional development, but progress has been constrained by lack of skilled manpower, remoteness from markets, lack of experienced entrepreneurs, insufficient infrastructure and inadequate tax incentives. In the major regional centers (Cebu, Northern M4indanao, Central Visayas), where industrial development has progressed, inadequate infrastructure and the low level of industrial skills constrain further development. Plans are underway to develop 12 industrial estates, as well as export processing zones and smaller industrial villages throughout the major islands. Export promotion policies will encourage dispersion of export-oriented industries to benefit from the low labor costs outside Manila. 1.05 The Government's industrial development strategy focuses on: (a) nontraditional manufactured export industries (e.g., garments, electronics, leather and leather products, travel goods, relatively simple mechanical engineering items), (b) selected labor intensive industries which could be assisted as part of the small industry and regional dispersion program (furniture and small-scale power loom weaving); and (c) industries requiring new investment and rehabilitation with the aim of improving capital efficiency, labor utilization and production costs (mechanical engineering, steel rolling, and textiles and cement rehabilitation). 1.06 In 1973, the Government began a major industrial reform program, under which manufacturing employment is expected to increase by 4.8% per year over the medium-term. At this rate, the manufacturing sector would generate an average of 100,000 new jobs per year during the 1980s and account for about one sixth of the job creation in the economy as a whole. This would be two times the number of jobs currently added in manufacturing each year. Domestic market oriented industries and nontraditional export industries would each generate about half the projected increment in employment growth. 1.07 The most important SMI subsectors, in terms of number of firms and employment, are food processing, the garment industry, footwear and furniture making, and mechanical engineering. The small and medium-scale industries also include many small service workshops. SMIs and the cottage sector will continue to play a significant role in employment and in regional diversification of development. The Government seeks to relate the activities of the SMIs more closely to the general industrial development program, particularly in industries where SMIs complement large-scale firms. To counteract the technical, financial and organizational problems facing the SMI sector, the Government has established an institutional framework for technical assistance in the establishment and operation of small and - 3 - medium-scale industries. The Government is also providing increased access to financing, assistance in the organization of cooperatives (for acquisition of common facilities such as pool purchasing of raw materials, pool marketing of finished products) and promotion of subcontracting, to link small and medium-scale enterprises with larger industries for better operating and production efficiency. The success of these measures will to a large extent depend upon the availability of adequately trained skilled manpower. The Labor Force and Employment 1.08 The working age population in the Philippines is growing by 3.5% per year, which is the highest rate in East and Southeast Asia. The growth of the labor force is the result of the high fertility rate in the 1960s and an increase in the labor force participation rate. The labor force is expected to continue to grow by 3.5% p.a. between 1980 and 1986, from 18.5 million to 21.6 million persons. As a result, an average of 670,000 new jobs are needed annually. 1.09 Export of Skilled Manpower. Export of skilled manpower is an increasingly important characteristic of the Philippine labor market. Demand from abroad for trained manpower grew rapidly from 12,500 persons in 1975 to 142,000 in 1980, an average increase of 64% p.a. During the six-year period, a total of almost 355,000 persons were employed abroad; of these, more than 80% went to the Middle East. Seventy five percent were professional and technical workers, craftsmen, production process and similar workers (Table 1.1). 1.10 While demand has rapidly increased in the past six years, it is unlikely to continue to grow at the same pace due to variations in the earnings of labor importing countries in the Middle East. Between 1980 and 1986 the increased demand for overseas workers will stabilize at approxi- mately 147,000 workers per year (Table 1.3). 1.11 The outflow of workers has some positive aspects. It reduces unemployment and underemployment. It also contributes to foreign exchange earnings (some $664 million in 1980), which, in turn, create domestic purchasing power. Additionally, there will be long-term benefits to the economy from an influx of well experienced manpower when the temporary emigrants return to the Philippines. However, manpower export creates a serious skill-drain, particularly among professionals, technicians and skilled workers, who accounted for about three quarters of the total man- power export (or over 266,000 persons) from 1975 to 1980. The construction sector has been especially hard hit by this exodus. As a rule, Filipino overseas contract workers are recruited from among the employed rather than from among the unemployed and usually belong to the core group of workers having acquired specific skills and high levels of work experience over a period of several years, often working in the same occupation and in the -4- Table 1.1: OVERSEAS CONTRACT WORKERS BY MAJOR OCCUPATIONAL GROUP 1975-80 (Excluding Seamen) Departures Blue collar White collar Blue collar as % of Year occupations /a occupations /b Total total 1975 9,800 2,700 12,500 22 1976 11,200 8,000 19,200 42 1977 12,500 24,100 36,700 65 1978 21,200 29,800 51,000 59 1979 36,200 57,300 93,500 61 1980 53,000 88,700 141,700 63 Total 143,900 210,600 354,500 59 Source: Mission estimates. /a White collar occupations include: professional, technical managerial, executive, administrative, clerical, sales and service workers. Professional/technical workers accounted for 54.6% of all white collar emigrants and for 23.3% of all emigrants in 1975-79. /b Blue collar occupations include: craftsmen, production-process workers, transport equipment operators and laborers, agricultural husbandry, forestry workers and fishermen. Emigrants from the whole agriculture group accounted for 3.1% of blue collar emigrants and 1.8% of all emigrants in 1975-79. same firm. Their loss poses problems to the sector, affecting quality and competitiveness. Replacing them by other workers, through lengthy and unorganized learning on-the-job, is costly and slow. Efforts to organize specialized, nonformal training are called for, not only for the construc- tion industry, but also for other industries such as metals and engineering, and wood products, which are increasingly hard hit by the manpower export drain. Skill Requirements 1.12 The average skill level of the Philippine labor force is very low. In the 1975 population census, as little as 8% of the labor force, or 1.2 million out of 15 million persons, were registered as having undergone some kind of formal or non-formal vocational education or industrial training at the technician level and below (Table 1.2). About 2.5% of the labor force, or 374,000 persons, possessed industrial skills relevant to the mining, manufacturing, construction and utilities sectors. By 1980, an estimated 11% of the labor force, or 1.9 million persons, had undergone formal or nonformal skills training. Of these, however, only 0.5 million (3% of the labor force) possessed industrial skills. 1.13 The regional distribution of skills is uneven, with particularly low levels of industrial skills in Regions II, Northern Luzon (1.3%), VIII, Eastern Visayas (1.4%); IX, Western Mindanao (1.6%) and X, Northern Mindanao (1.6%). Whereas the other nine regions have regional manpower training centers (RMTCs), no centers have been established in these four regions. 1.14 Demand. Implementation of the new industrial development strategy requires modernization of equipment and provision of modern technical know- how, and, as a result, that an increasing proportion of the workforce be equipped with industrial skills. The lack of adequately skilled workers is a major bottleneck to industrial development, especially in machine construction and maintenance, construction, automotive and transport industries, and textile and garment making. Employers in these industrial subsectors are experiencing difficulty in finding and retaining suitably skilled workers. The overall manpower requirement (employment growth plus attrition and emigration) in the industrial and services sectors is estimated at 681,000 persons per year between 1980 and 1986 (Table 1.3). Approximately 120,000 new entrants would require training each year. In addition to new entrants, about 360,000 workers already employed would require skills upgrading each year. The total training demand is approximately 480,000 persons p.a (Table 1.3). The training of these individuals would increase the number of persons in the labor force possessing industrial skills from 500,000 in 1980 to about 2.4 million in 1986, bringing the overall industrial skill ratio up to 10% (Table 1.2). 1.15 Supply. The country's overall output from all kinds of formal and nonformal vocational education and industrial training courses has increased rapidly in recent years, from 27,000 persons in 1975 to 765,000 persons at the end of the 1980 school-year (Table 1.4), reflecting the Government's growing concern for skill training. The output from industry-oriented courses rose from 12,000 persons in 1975 to almost 345,000 persons by 1980. However, only 66,000 persons (20%) acquired employable industrial skills. Most of those with employable skills were new entrants to the labor force. The gap between demand and supply for job entry training is therefore about 54,000 persons per year. At present, there is no organized in-plant train- ing for employed workers. Demand for upgrading is 360,000 workers per year (para. 1.17). Employers therefore have to engage unskilled workers and need to embark on a program of on-the-job training. Table 1.2: SKILL ATTAINMENT OF THE LABOR FORCE IN 1975, 1980 and 1986 (in '000) 1975 1980 1986 (Estimate) (Target) 1. Labor Force 14,700 18,500 21,600 2. Number of skilled persons in the labor force /a 1,230 1,900 3,700 /c 3. Overall skill ratio (line 2 as % of line 1) 8.3 10.8 17.0 4. Persons possessing industrial skills in labor force/b 374 498 2,400 5. Industrial skill ratio (line 4 as % of line 1) 2.5 2.8 10.0 /a Includes all persons who have received some form of formal or non- formal vocational education or industrial training at the technician level and below. /b Persons at the technician level and below possessing industrial skills relevant to the mining, manufacturing, construction and utilities sectors. /c Skill Ratio = Registered number of workers who have undergone formal or nonformal training -t labor force. Source: NCSO. 1975 Population Census and mission estimates. -7- Table 1.3: ESTIMATED ANNUAL NUMBER OF PERSONS REQUIRING TRAINING FOR INDUSTRIAL OCCUPATIONS IN THE INDUSTRY AND SERVICES SECTORS (1980-86) (in '000) Average 1980 base growth p.a. New /b Total year em- (new en- Annual entrants Upgrading training ployment trants + Manpower total new requiring require- require- Sectors and subsectors figures replacements) export /a entrants training ments /c ments Industrial Sector Mining & quarrying 90.0 3.3 5.2 8.5 2.6 7.3 9.9 Manufacturing Metals & engineering 63.0 6.5 4.0 10.5 3.1 4.5 7.6 Garments 292.0 29.7 18.5 48.2 14.5 20.9 35.4 Shoes & leather goods 50.0 4.1 - 4.1 1.2 3.3 4.5 Wood products 71.0 5.7 4.5 10.2 2.0 3.0 5.0 Other subsectors 1,630.0 72.6 36.7 109.3 32.8 133.0 165.8 Construction 568.0 36.7 35.0 71.7 21.6 30.7 52.3 Electricity, gas, water 63.0 2.2 3.5 5.7 1.7 5.1 6.8 Subtotal 2,764.0 160.9 107.4 267.2 79.6 207.8 287.4 Services Sector Automotive 60.0 4.9 3.6 8.5 3.4 5.4 8.8 Hotels and restaurants 23.0 1.6 - 1.6 0.3 1.0 1.3 Other subsectors 6,000.0 366.0 36.4 404.4 36.6 146.5 183.1 Subtotal 6,083.0 372.5 40.0 412.5 40.3 152.9 193.2 Total 8,902.0 533.4 147.4 680.8 119.9 360.7 480.6 Source: Mission estimates. /a In general, manpower export is calculated at 5% p.a. of the subsectoral labor force, with the exception of "Manufacturing - Other Subsectors" where the rate is assumed to be 2% p.a. and "Services - Other Subsectors" where the estimated rate is 0.005% p.a. /b The number of new entrants to the industrial sector requiring training is, on average, 30% of the annual total of new entrants except in the wood products subsector where it is 20%; in the services sector, 40% of entrants to the automotive subsector, 25% to the hotel and restaurant subsector and 10% to other subsectors require training. /c Upgrading requirements have been calculated on the basis of the number of workers who would have to be trained to bring the industrial skill ratio in the labor force to 10% in 1986. Upgrading includes apprentices receiving training in their second year. - 8 - 1.16 The Government has decided to focus initially on the development of small and medium size firms and on nontraditional, export-oriented, growth industries in the manufacturing subsector. Four manufacturing industries have been selected for assistance: metals and engineering; garments; shoes and leather goods; and wood products. In addition, Government has identified the construction, automotive, and hotel and restaurant industries as growth industries which have a large proportion of small firms and for which training of skilled manpower is a prerequisite to further expansion. Table 1.4: ESTIMATED ANNUAL OUTPUT FROM FCR,MAL AND NONFORMAL TECHNICAL/VOCATIONAL EDUCATION AND TRAINING -- 1975 and J.980 1975 1980 1. Overall output from all formal and nonformal technical education & vocational training courses /a 26,800 765,000 2. Overall output from industrial courses /b 12,100 344,500 3. Employable output from industrial courses Ic 2,000 65,900 /a Output from clerical, household and industrial courses. /b Includes household skills (dressmaking, tailoring, weaving, basketwork, etc.) and industrial skills (automechanics, machine shop, electricity, electronics and building, etc.) /c Industrial skills only (automechanics, machine shop, welders, etc.) Sources: Figures were derived from annual reports compiled by the MOE, MOLE, MSSD and NMYC. - 9 - 1.17 Individuals Requiring Training for the Seven Priority Subsectors. Three basic groups require training: (a) registered apprentices, for whom job entry level and advanced skills training are required; (b) employed adult workers, for whom advanced skills training is required to increase their productivity and promotion possibilities; and (c) supervisors, who require instruction in pedagogical techniques (in order to effectively carry out on-the-job training) and refresher skills training courses. Table 1.5 shows the estimated numbers of workers requiring training in each category during the period from 1980 to 1986. Table 1.5: ANNUAL TRAINING REQUIREMENT 1980-86 BY CATEGORY OF WORKER AMD PR.IORITY SUBSECTOR New entrants/a Total requiring Upgrading requirements training Priority training Adult Super- require- subsector (apprentices) workers/a,/d visors/b ments Metals & engineering 3.150 4,500 570 8,220 Garments /c 14,500 20,940 2,700 38,140 Shoes & leather aoods 1,230 3,300 350 4,880 Wood products 2,040 3,000 480 5,520 Construction 21,600 30,700 2,900 55,200 Automotive 3,400 5,400 1,200 10,000 Hotel & restaurant /c 330 1,030 1,300 2,660 Total 46,250 68,870 9,500 124,620 /a From Table 1.3. /b Assuming one supervisor to be trained for every 10 workers added to the work force. /c Off-job-training to be limited to supervisors. Others to be trained on-the-job by supervisors. /d Includes apprentices receiving training in their second year. - 10 - 2. VOCATIONAL EDUCATION AND TRAINING: AN OVERVIEW 2.01 Vocational/technical education, public and private, experienced tremendous growth in the ten years from 1969/70 to 1978/79. During this period there was an overall 100 percent increase in enrollments; a 47 per- cent growth in the number of private institutions; and a 10 percent growth in the number of public institutions. While the growth in institutional capacity has been impressive, the system has not responded to the changing needs of the economy, and qualitative aspects have been neglected. The main problems have been identified as: (a) management weakness in the planning and organization of training; (b) the lack of relevance of training programs to current industrial needs; and (c) the low quality of trainees produced by the system. Vocational Education and Training Agencies 2.02 The Ministry of Education and Culture (MEC) offers four-year trade technical secondary courses in 129 National Schools of Arts and Trades. In addition there are 1,163 vocational schools in the private sector. Output from both public and private schools in technical courses (mechanical, electrical and construction trades) in 1980 was 24,700 (Table 2.1). Through the Office of Nonformal Education (ONFE), MEC offers short vocational courses to out-of-school youth. Output reached 172,000 in 1978. Courses are oriented towards household skills (dressmaking, tailoring, weaving, woodwork and cement craft) and it is estimated that some 90% of trainees would be self employed after graduation. 2.03 The National Manpower and Youth Council (NMYC) was created in 1969 as a tripartite /1 policy making authority responsible for manpower planning and development, and it was later (1974) given a mandate to establish training institutions and ensure efficient development of the nation's manpower and out-of-school youth. It is an agency within the President's Office and operates 10 Regional Manpower Training Centers (RMTCs) and 14 Regional Manpower Development Offices. RMTC training courses focus mainly on the needs of out-of-school youth, and total output in 1980 was about 110,000 (Table 2.1), of which 36,000 were in industrial skills. Courses vary in length from a few weeks to nine months duration. The dropout rate is about 10%. /1 Council members include representatives of the Ministries of Labor and Employment, Education and Culture, Trade and Industry, Agriculture, The National Economic and Development Authority, employers and labor. - 11 - Table 2.1: ANNUAL OUTPUT FROM VOCATIONAL/INDUSTRIAL COURSES Agency Output Formal Training Vocational/Technical schools (public and private) 24,700/a (1980) Nonformal Training National Manpower and Youth Council (NMYC) 110,300 (1980) Ministry of Education and Culture (MEC) - Office of 171,600 (1978) Nonformal Education Ministry of Labor and Employment (MOLE) - 17,800 (1980) Bureau of Apprenticeship Ministry of Trade and Industry (MOT) 7,400 (1978) Ministry of Social Services and Development (MSSD) 12,700 (1979) Total 344,500 /a This covers Trade-Technical courses of the public schools and Practical Arts and Technical-Vocational courses of the private schools (not included are Agriculture; Fisheries; Business and Commerce; and Beauty & Fashion courses). Sources: For figures on formal training: Preliminary Report of the Project Staff of the Presidential Study Committee on Vocational/Technical Education, June 1980. For nonformal training: Latest available Annual Reports of NMYC, MEC, MOLE, MOT, MSSD. - 12 - 2.04 NMYC, through th2 Industrial Manpower Development Division is also responsible for managing the industry board and tralning tax incentive schemes. Industry boards were organized to encourage employer participation in the planning and organization of industrial training. Six industry boards, nominally composed of representatives of government, employers and workers, were established by NMYC between 1976 and 1980 in the automotive, textile, land transportation, power, construction and hotel and restaurant subsectors. Responsibilities of the industry boards include the planning and organization of training in their subsectors. To provide financial incentives for employer participation in training, a tax rebate scheme was introduced in 1978 permitting the deduction of half the cost of training from taxable income. 2.05 Other NMYC activities include: (a) Development of Training Materials. This activity is centralized in Manila where occupational analyses are carried out, training modules developed and field tested and support material such as film strips and slides produced. (b) Trade Skill Standards. Development of standards for various trade skills is the responsibility of a National Committee on Trade Skill Standards Testing and Certification. Subcommittees of experts are appointed to advise the National (Gomittee on the content of the standards and appropriate trade tests. Trade skill standards are divided into three classes, and testing is regionalized. A division of NMYC provides technical secretarial services for the committees. (c) Vocational Guidance. This activity is regionalized and is carried out with the objectives of channelling unemployed manpower to appropriate occupations and of ensuring optimum use of existing training facilities. In order to publicize NMYC's services and the training schemes available to employers, a periodical entitled "Industry Manpower Network" is published quarterly. (d) Research Studies, Work has been done on the role of women in the labor force and their income-generating skills. NMYC has also completed a manpower resource inventory and an ind-ustry occupational survey of employment and wages. Research tends to be divorced from operational activities. 2.06 The Bureau of Local Enployment - BLE (formerly the Bureau of Apprenticeship) of the Ministry of Labor and Employment is responsible for organizing the Apprenticeship System, which was established in 964. Since then 536 occupations have been declared apprenticeable by the lfinis Cry of Labor and Employment. Of the total of 17,785 certificates awarded in 1980. 50% were in industrial trades. The Apprenticeshnip Agreement negotlated with the employer by the Bureau of Local Employment specifies duration. - 13 -- theoretical study, on-the-job training requirements and the graduated wage rate. Registration and supervision are the responsibility of the Bureau. Due to resource constraints, no field supervision is carried out nor are advisory services provided to employers. Thus apprenticeship has become a source of low cost labor for employers, rather than a skills development program for young workers. 2.07 Other agencies offering industrial training programs (handicrafts) include the Ministry of Trade and Industry and the Ministry of Social Services and Development. Financing of Vocational Education 2.08 The increasing government concern for occupation-oriented human resource development is reflected in the growth of expenditure from P 314 million in 1978 to P 923 million (20% of the total education budget) in 1980 (Table 2.2). The maior increases have been a doubling of the budget from P 155 million to P298 million (6% of total education budget) for agricultural education and extension (Ministries of Education and Agriculture) and a twenty-two fold increase from P 21 million to P 458 million (10% of total education budget) for community development and self-employment (MEC, MSSD, MOT and the Ministries of Human Settlements and Local Government and Community Development). Resources provided for industrial vocational education and non-formal training are channelled through MEC, NMYC and the Bureau of Apprenticeship (now the Bureau of Local Employment), which had budgets of P 130 million (14% of the occupation- oriented human resource development budget), P 37 million (4% of the budget) and P 0.78 million (0.001% of the budget), respectively, in 1980. While MEC's industrial education and training budget experienced a 30% increase (in nominal terms), the budgets of NMYC and the Bureau of Apprenticeship remained static during the three year period. Expenditure of the available resources on community development and on the training of very large numbers of out-of-school youth in household skills left inadequate resources for industrial education and training. The resulting shortage of funding is a major factor contributing to the prevailing low skill attainment of the industrial labor force. Management Weaknesses 2.09 Manpower Planning. Although the National Manpower and Youth Council is responsible for overall manpower planning, its present capability for policy oriented planning needs strengthening. While the Planning Division within the Office of Manpower Planning and Development of NMYC is professionally qualified to undertake manpower planning, it is understaffed, is insufficiently assisted by data processing services and lacks the political support required to make an impact on human resource policy and planning. Analysis of the National and the Regional Manpower Plans 1978-82, prepared by NMYC, shows that manpower planning in the Philippines is still rudimen- tary. Plan figures are straight-line projections of 1970 or 1975 census - 14 - Table 2.2: PUBLIC EXPENDITURE ON OCCUPATION-ORIENTED HUMAN RESOURCE DEVELOPMENT (P '000) 1978 1980 A. Formal System Industrial Vocational Education (MEC) 100,023 127,918 Agricultural Vocational Education (MEC) 79,876 128,136 Subtotal 179,899 256,054 B. Nonformal System National Manpower and Youth Council 36,696 36,778 Office of Nonformal Education (MEG) 1,500 2,600 Ministry of Human Settlements 1,900 58,933 Bureau of Agricultural Extension (MOA) 75,589 169,840 Ministry of Social Services and Development 6,358 116,588 National Media Production Center 152 678 Ministry of Local Government and Community Development 983 280,433 Bureau of Apprenticeship (MOLE) 600 780 Schools of Cottage and Home Industries (MOT) 10,641 n.a. Subtotal 134,419 666,630 Total 314,318 922,684 Source; General Appropriations Act. data (based on sectoral and occupational structures of the labor force and employment), applied to estimated population growth and assuming an increase in the labor force participation rate. Unemployment is assumed to be con- stant and low throughout the plan period. Thus, the plan is little more than an aggregate forecast of labor supply, not categorized by education or skill attainment. It neither provides forecasts of manpower demand, nor addresses the issue of underemployment. Only recently have the NMYC Council and NMYC senior management given priority to the development of manpower planning as a tool to implement national and regional economic and social development policies, including the new industrial development strategy. - 15 - 2.10 There is a serious lack of data, both on requirements for and on supply of skilled manpower. Inadequacy of the data base is, to a large extent, due to insufficient coordination and cooperation of the Government services directly concerned with human resources development, including NMYC, the National Census and Statistics Office (NCSO), and the Ministries of Labor and Employment, Education and Culture, Social Services and Development, and Trade and Industry. The Government intends to improve NCSO services, including employment statistics, but this will take some time. 2.11 Agency Coordination. Coordination is limited under the present framework, with competition among agencies, duplication of effort, and geographical and functional overlap. The National Manpower and Youth Council (NMYC), which is responsible for manpower development policies, has been unable to coordinate the activities of the relevant government entities involved in training. This is due, in part, to a lack of clear definition of the area of responsibility of each of the principal agencies involved, in part to the preoccupation of NMYC with out-of-school youth and in part to the absence of a central administrative authority for vocational education in the Ministry of Education and Culture (MEC) with which NMYC could inter- act. To rationalize activities at the national level, the Government must clarify the responsibilities of the agencies involved and improve coordina- tion among them. Relevance of Programs to Current Industrial Development Strategy 2.12 Target Groups. Greater emphasis on the training of employed work- ers is required. The four-year secondary vocational courses organized by the Ministry of Education and Culture have the twin objectives of preparing students for job entry and for the next level of education. Because of their desire for higher levels of education, however, 90% of the output go on to further education, while only 10% (2,500 per year) enter training-related employment. The nonformal vocational training system (MEC Office of Nonformal Education, NMYC and others) focusses mainly on the needs of out-of-school youth, stressing development of household skills. Only recently has attention turned to job entry training in employable skills. There has been no program for the training of employed workers. In order to meet the manpower requirements of the small and medium scale, labor intensive, export oriented industries, the industrial education and training system will require refocussing on specific categories of employed workers (para. 1.17). 2.13 Curricula. NMYC is in a better position to respond to changes required in training curricula than is the MEC vocational system. Course offerings at MEC vocational/technical schools are biased towards the needs of large-scale enterprises and have not begun to respond to the emphases of the new industrial development strategy. Lack of curricular flexibility is inherent in the school system, where there is very limited opportunity for - 6 1 employers to exert influence. The short-term nonformal courses organized by MEC's Office of Nonformal Education are mainly in household skills and are oriented to self employment. Follow-up courses have not been developed. By contrast, industrial courses developed by NMYC are based on skill analysis at the job site and are arranged in short modules of employable skills aimed at easing entry into the job market. Further skill development along alter- native paths is possible, as the need arises, by taking more advanced modules. 2.14 Employer Participation. To ensure that industry specific needs are met, it is important to have the active participation of employers in the planning, organization and implementation of training. The industry board scheme (para. 2.04), started by INMYC in 1976, aimed at promoting employer participation and coordination with the apprenticeship scheme of the Ministry of Labor and Employment. NMYC provided start up funds, expect- ing the boards to organize their own finances, but the employers gave little support and no steps were taken to cooperate in the apprenticeship scheme. Thus, the impact of the boards has been minimal. To further promote employer involvement, the tax rebate scheme (para. 2.04) was started in 1978. However, the incentives were too small/l, as over 75% of the training costs were borne by employers, thus discouraging their participation. Additional financial incentives will have to be provided and training services improved if active involvement of employers, particularly in the small and medium scale industry sectors, is to be obtained. Quality of Trainees Produced by the System 2.15 In the formal school system, vocational/technical education has retained a second class status vis-a-vis academic secondary schools,and the nonformal system caters to dropouts. Thus less able students enter the vocational/technical programs with consequent lower achievement levels. The situation is exacerbated in the formal system due to a shortage of technical teachers. There are about 7,000 technical teachers and the class size for practical work is about 30. This is too high for effective instruction in trade skills, where a group of 12 to 15 is more appropriate. Furthermore, most schools have inadequate equipment and insufficient funds for consumable materials. 2.16 The job entry skills of trainees from the system are varied and in general low, with only 20% of the output from industrial training courses in 1980 sufficiently skilled to enter formal employment (Table 1.4). Employers do not consider that certificates issued by individual schools are a guarantee that graduates have the skills for the particular trade for which they were trained. The skill testing system established by NMYC in /I Training costs are shared equally between Government and employers in many countries. - 17 - 1975 covers only 13 trades, with a modest 920 workers certified in 1979 and has not yet been accepted by the other uraining agencies. Furthermore no strategy exists for advanced training after entering employment. Apprern- ticeship is time serving, adult workers have few opportunities for trainlrp: and supervisors and foremen do not consider training to be their responsibility. 2.17 In order to achieve a permanent improvement in the skill attainment of the labor force, a series of policy and management actions are required. At the policy level, a long-term strategy for the promotion of on-the-job training in enterprises should be established. At the management level, the NMYC's training activities should be expanded and made more relevant to key industry needs; the apprentice training scheme should be restructured; and the NMYC skills testing and certification system should be strengthened and expanded into a national system with increased coverage of occupations. Recent Developments and Training Strategies for the Future 2.18 In 1979, the Government, conscious of the inadequacies of the present system of vocational education and training, set up a Presidential Commission to analyze the structure and operation of the existing system. The Commission's recommendations emphasized three basic areas: (i) the need for changes in training courses; (ii) the need for alterations in the organizational structure of vocational/technical training; and (iii) the need to establish new institutions to overcome weaknesses in the present system. With respect to item (i) the Commission recommended that (a) long-term formal courses at the secondary level be replaced by prevocational courses and (b) short, job-entry level courses, to be taught in the nonformal system, be established to meet the skilled labor requirements of small- and medium-scale industries. Regarding changes in the existing organizational structure, the Commission endorsed increased involvement of employers in the management of training, the organization of group schemes, and the provision of incentives for training. The Commission's proposal for the establishment of a Bureau of Technical and Vocational Education in the MEC has recently been implemented. In order to alleviate existing weaknesses it was also recommended that a nationally accepted skill certification system be developed to address qualitative problems and that a labor market information and placement service be established to provide training needs information for the training agencies. 2.19 The replacement of vocational courses by prevocational courses should enable improved and expanded occupational orientation to take place at the secondary level. Greater flexibility and better resource utilization should result from the transfer of job entry training to the nonformal system. Such courses should be linked with apprentice training and form the basis of structured career development in employment. The establishment of a Bureau of Technical and Vocational Education in the Ministry of Education and Culture will provide a focal point for the industry boards, NMYC and the other agencies and facilitate program development and implementation. - 18 - 2.20 Within the broad context of the strategy outlined by the Presiden- tial Commission, NMYC plans to (a) restructure and strengthen the training management system with the objective of making manpower planning an effective tool for the organization of training and fulfilling the mandate for the coordination of industrial training at the national level; (b) expand and improve the relevance of training to the industrial development strategy by organizing sector specific training schemes which would also provide incen- tives for employer involvement and improve facility utilization; and (c) address qualitative aspects by promoting on-the-job training schemes, the expansion of the skill testing and certification system into a fully recognized national scheme, and providing additional equipment to existing RMTCs for skill testing. 2.21 The Government will be assisted in the attainment of some of these goals through external financing. Table 2.3 summarizes the main strategies and sources of assistance. Past assistance was provided by UNDP/ILO (US$3.7 million) between 1969 and 1979 to establish NMYC, organize the secretariat to provide planning, coordinating and evaluating services at the national level, and to promote trade standards and testing. The project complemented IBRD Credit No. 349-PH which assisted the establishment and initial operation of 10 RMTCs. In addition NMYC has received technical assistance from the Colombo Plan and the Japanese Government. The Bank's Role 2.22 The Bank's lending to the Industrial Sector (channeled through the Development Bank of the Philippines, Private Development Corporation of the Philippines, Philippines Investments Systems Organization, the Industrial Guarantee and Loan Fund and the Central Bank of the Philippines) has amounted to fourteen loans totaling $837.4 million, including $242 million specifically for small- and medium-scale industry (SMI) financing. 2.23 In 1979, the Bank reviewed its operational program in the industrial sector in the Philippines and reached the conclusion that, while the Bank's past lending to individual development finance companies had largely achieved its institution-building objectives, industrial and financial sector policy improvements should be the major objectives of future Bank lending. llajor changes in industrial and trade policies were subsequently supported by the first Structural Adjustment Loan (Loan No. 1903-PH). In addition, the Government in 1980 and 1981 introduced far-reaching policy and institutional changes in the financial sector. These were supported by the Bank through the Financial Sector (APEX) loan. - 19 - Table 2.3: SUMMARY OF FOREIGN ASSISTANCE TO HELP IMPLEMENT MAIN STRATEGIES IN TECHNICAL/VOCATIONAL EDUCATION SUBSECTOR Main strategy: Institutional Quality development Relevance Improvement Implementing agency: IBRD /a Manpower planning; Training for seven Equipping RMTCs coordination, staff priority sectors (NMYC); promo- strengthening; (employed workers) tion of on-the information systems (NMYC); textile job-training in (NMYC). training (MOT); enterprises incentive schemes (NYMC); Expan- to ensure sion of skills employer partici- testing and pation (NMYC); certification improve facility system (NMYC). utilization (NMYC) ADB /b Technician training - Equipping post- panels (MEC). secondary tech- nician institu- tions. Two centers for tech- nical teacher training (MEC). UNIDO /c Training for pri- ority sectors. Leather goods training centers (MOT/NMYC). GOP ALONE Ic Bureau of Voca- Revision of tional and Tech- secondary voca- nical Education tional education (MEC); Labor mar- (MEC). ket information and placement service (MOLE). /a Proposed. lb Approved. /c On-going. - 20 - 2.24 The Bank's future lending program would assist Philippines indus- trial development through: (a) further structural adjustment lending, associated, inter alia, with industrial policy reforms in such areas as investment incentives, tariffs, and export promotion measures; (b) indus- trial finance projects to support complementary financial policy and institutional reforms; (c) individual subsector loans that would assist in the development and restructuring of major industries including support initially for textiles and, possibly the mechanical engineering subsectors; (d) broadened institutional support for employment-creating activities, including particular attention to SMI; and (e) training. 2.25 The Bank has financed seven education projects in the Philippines for a total of US$208.7 million. Of these, one project (Credit 349-PH, dated 1973) was aimed at the industrial sector, emphasizing pre-employment training for skilled workers and technicians. Assistance was provided for the establishment of 10 Regional Manpower Training Centers and three Technical Institutes. The project was completed in December 1978. After a slow start, due to inadequate recurrent cost financing and construction delays, the RMTCs trained 20,000 persons in 1980. The three technical institutes initially experienced difficulties in recruiting candidates for admission because of the unclear role of technicians in the industrial sector. However, enrollment is increasing slowly, and an output of 516 was achieved in 1980. Target output is 840 per year. 2.26 The Project Completion Report on Credit 349-PH identified the main problems encountered during implementation as inadequacy of operating bud- gets, insufficient staff incentives and absence of detailed project engin- eering before negotiations. The proposed project includes provisions which would mitigate these problems (paras. 4.19 and 6.01(c) and (f)). - 21 - 3. THE PROJECT Objectives and Scope 3.01 The proposed project is an integral component of Bank assistance in support of the Government's industrial development program (para. 1.03) and would address the major policy and management issues affecting industrial training (paras. 2.09 to 2.17). Its main thrust would be to broaden and strengthen the infrastructure of national industrial training. In particular, it would: (a) strengthen the NMYC management system, enabling it to improve both manpower planning and the organization and administration of training schemes at the national level; (b) establish a system of contracting for sec- tor specific training to serve the needs of employed workers in seven priority subsectors; and (c) expand the skill testing and certification system. 3.02 To achieve these objectives, the project provides for civil works, furniture, equipment, technical assistance and operating costs to: Management of industrial Training (a) Reorganize and strengthen the NMYC Secretariat (b) Improve NMYC manpower planning and training evaluation (c) Establish a Management Information System and an Equipment Maintenance Service. Strengthening Industrial Training (a) Establish and implement a Sector Specific Training Scheme to provide training for 76,000 industrial employees (b) Expand training facilities. Trade Testing and Certification (a) Develop additional training standards and a data bank of trade tests (b) Establish trade testing facilities Management of Industrial Training (Proposed outlay US$2.5 million, including technical assistance) 3.03 Reorganization and Strengthening of NMYC Secretariat. To improve NMYC's capacity to plan, coordinate and direct the development of industrial manpower at the national level, the project would assist NMYC to reorganize its management system and strengthen its Secretariat. The staff of the Industrial Manpower Development Division would be increased and Sectoral Training Units would be established for seven industries and in all of the Regional Manpower Development Offices. A Training Contracts Committee would be set up by NMYC. The staff of the Trade Skills Standards Division 22 - would also be increased. NMYVC's manpower planning and training evaluation would be improved, and a Management Information System and an Equipment Maintenance Service would be established. The project would finance local consultants, consultancy contracts, and overseas fellowships. 3.04 To improve NMYC's capacity to manage i-ndustrial training at the national level, its organization and management system would be evaluated to determine communication weaknesses and overlapping of functions. A new structure would be formulated, positions identified and Job descriptions prepared under a consultancy contract administered by the Project Director, who would submit reconmendations to the Director General of NMYC. The NMYC would then be assisted in establishing the new structure. The project would finance the consultancy contract (equivalent to about two man-years of foreign specialist services and two man-years of fellowships). The Goverrneent gave assurances during negotiations that it would submit to the Bank for review. (a) the proposed terms of reference for the contract; (b) the proposed contract; and (c) the recommendations of the consultants. 3.05 To enable NMYC's Industrial Manpower Development Division to man- age a new program of sector specific training, ttie Division would be assis- ted in establishing seven Sectoral Training Units composed of training officers, together with local consultants drawn from experienced technical personnel in each of seven industries: metals and engineering, shoes and leather goods, wood products, construction, automotive, garments, and hotel and restaurant. Unit staff would be responsible for developing annual training action plans (para. 3.12) and negotiating draft training contracts (para. 3.18) in consultation with employers, industrial organizations and training entities (para. 3.19). They would also supervise implementation of training (Chart 2), provide advisory services to enterprises and participate as required in the training of supervisors. The Industrial Manpower Develop- ment Division would maintain liaison with the Ministries of Trade and Indus- try, Labor and Employment, Education and Culture, the industry boards, the industrial and trade associations and the recently established Construction Manpower Development Foundation. Technical staff in the Division would be increased from 6 to 21 with a consequent increase in support staff. The project would finance the salaries of 42 man-years of local consultants and two man-years of fellowships to strengthen the Division (Table 3.3). The Government gave assurances at negotiations that the Technical Staff in the Industrial M1anpower Development Division would be increased by about 15 qualified trainirng officers in accordance with an agreed timetable. 3,06 In order to insure objectivity in awarding training contracts (para. 3.18), a Training Contracts Committee has been established, with the responsibility for approving training contracts and awarding them to training entities (para. 3.19) on behalf of participating employers. The Committee comprises representatives of employers, labor, NMYC, and the Ministry of Labor and Employment, and will be assisted by the IRAYC Secretariat. - 23 - 3.07 To enable NMYC to develop and administer an expanded system of National Trade Skills Standards (para. 3.25) and an increased number of testing facilities and trainees tested (para. 3.26), the professional staff of the Trade Skills Standards Division would be increased by 30, with appropriate additional support staff. At negotiations the Government gave assurances that the Technical Staff in the Trade Skills Standards Division would be increased by about 30 in accordance with an agreed timetable. 3.08 Mlanpower Planning and Training Evaluation. To improve manpower planning and the evaluation of training, the project would assist the NMYC to: (a) collect data on the existing stock of skilled manpower, install a system for the continuous assessment of training needs, and devise means of channelling information to all training agencies for use in their planning. Data would also be collected on the present capacity and output from the vocational education and training system; (b) study the effectiveness of the present system of monitoring and evaluation of training so as to assist NMYC in developing a low-cost scheme to measure the internal and external effectiveness of all training, with special emphasis on the project components. All aspects of the industrial training program (paras. 3.10-3.24) would be evaluated. The project would finance two consultancy contracts (equivalent to about five man-years of foreign specialist services and three man-years of fellowships). The Government gave assurances during negotiations that it would submit to the Bank for review: (a) the proposed terms of reference for the consultancy contracts; (b) the proposed consultancy contracts; (c) the consultants' recommendations; and (d) the evaluation reports as of December 31, 1984 and by each December 31 for three years thereafter during the project. 3.09 lManagement Information System and Equipment Maintenance Service. To assist NMIYC to administer its training programs, a management information system and an equipment maintenance service would be established. The management information system would provide electronic processing of data on manpower planning, training programs, trade testing, inventory control, procurement and maintenance of equipment, personnel and financial management. The equipment maintenance service would reduce machine breakdown time and improve utilization. The project would include: (a) technical assistance consisting of 3 man-years of foreign specialists, 12 man-years of foreign fellowships and 6 man-years of local consultants (Table 3.3); (b) a mini- computer with software and related training; (c) tools and spare parts for maintenance of training equipment; and (d) contracts with contributors to the N1YC quarterly publication entitled "Industry 'Manpower Network," to enable it to disseminate more extensive information on employment opportunities, salaries and training activities. - 24 - Strengthening Industrial Training (Proposed outlay US$21.2 million, including technical assistance) 3.10 Sector Specific Training Scheme. To improve the quality of the work force in key industries and the relevance of training, the project would assist NMIYC to establish and implement a Sector Specific Training Scheme. The Scheme would be administered by the Sectoral Training Units set up in NMYC's Industrial Manpower Development Division (para. 3.05) and would be carried out through a system of training contracts under which approved training entities would provide specified training for employees of partici- pating enterprises. Training courses would be improved by restructuring and by development of additional training modules. Training facilities would be expanded by establishment of five new training centers and provision of additional equipment to nine existing centers. Additional mobile training units would be provided. Management and financial responsibilities for the Scheme would be shared between Government and employers. 3.11 NMYC has prepared four-year outline training plans (Table 3.1), in consultation with representatives of the respective industrial organizations and taking into account the skilled manpower requirements of the industrial development strategy. Under these plans, training would be provided for 25,000 apprentices, 28,000 adult workers and 16,150 supervisors, in seven specific sectors (para. 3.05). This training would meet 13% of the need for apprentice training, 10% of the need for training adult workers and 43% of the supervisor upgrading needs in these sectors over the four year period (para. 1.17). The additional training needed to reach the projected skill ratios by 1986 (Table 1.2) would be achieved through on-the-job training carried out by the supervisors and foremen trained under the project, and through other training schemes. 3.12 To serve as the basis for implementation of the Sector Specific Training Scheme, annual training action plans for each subsector would be developed by training officers in the Sectoral Training Units, in consulta- tion with employers and training entities (para. 3.19). These plans would be developed within the framework of the four-year outline plans (Table 3.1). Each annual plan would specify (a) the participating enterprises/industrial associations and training entities; (b) the numbers of persons to be trained by category, specialty and geographic location (courses would not be organized for less than 12 trainees); training objectives, courses proposed, duration, tuition fees and stipends payable; and (d) the schedule of the various training activities. The Government gave assurances during negotiations that NMYC would submit the annual training action plans to the Bank for review and approval, commencing on or before April 1, 1983 and by each April 1 thereafter until project completion. 3.13 To improve apprentice training, the courses at present under the Bureau of Local Employment of the Ministry of Labor and Employment would be restructured by the Sectoral Training Units (para. 3.05). To assist the restructuring, the project would finance two man years of foreign specialist services and four man years of fellowships. Table 3.1: SECTOR SPECIFIC TRAINING SCHEME: FOUR-YEAR OUTLINE TRAINING PLAN 1982-1986 Metals Shoes and and leather Wood Hotel and Unidentified Total by Year engineering Garments goods products Construction Automotive restaurant sectors year Registered Apprentices Basic (job entry) training 1982/83 600 - 200 300 1,000 600 - - 2,700 1983/84 1,000 - 300 500 3,000 1,000 - - 5,800 1984/85 1,000 - 400 600 4,000 1,000 - - 7,000 1985/86 1,200 - 400 700 6,000 1,200 9,500 Subtotal 3,800 - 1,300 2,100 14,000 3,800 - - 25,000 Employed Adult Worker Skill Upgrading 1982/83 500 - 500 500 1,000 500 - - 3,000 1983/84 800 - 800 600 3,000 1,500 - - 6,700 1984/85 1,200 - 1,000 1,100 3,000 2,000 - - 8,300 1985/86 1,500 - 1,200 1,300 4,000 2,000 - - 10,000 Subtotal 4,000 - 3,500 3,500 11,000 6,000 - - 28,000 Employed Supervisors Upgrading 1982/83 200 500 100 50 600 300 200 - 1,950 1983/84 300 1,500 200 150 1,000 500 500 - 4,150 1984/85 300 1,500 200 200 1,000 600 700 - 4,500 1985/86 300 2,000 200 250 1,200 800 800 - 5,550 Subtotal 1,100 5,500 700 650 3,800 2,200 2,200 - 16,150 Grand Total 8,900 5,500 5,500 6,250 28,800 12,000 2,200 7,000 76,150 - 26 - (Table 3.3). Periods of off-the-job training would be integrated with organized on-the-job training to promote career development within the subsector. The Bureau of Local Employment would retain responsibility for the administrative arrangements with employers for the registration of apprentices, while the Sectoral Training Units would implement the training by arranging training contracts. A memorandum of agreement between the Ministry of Labor and Employment and NMYC dividing responsibility for apprentice training has been signed. 3.14 In order to upgrade adult workers identified by their employers as lacking appropriate skills, off-the-job training courses would be arranged by the Sectoral Training Units. All courses would aim at upgrading the worker to the next level of competence established in the training standards (para. 3.25). In addition, on-the-job training would be provided for adult workers in factories. This training would be provided by supervisors. 3.15 In order to equip supervisors to provide on-the-job training for apprentices and adult workers, an extensive program of supervisor training, emphasizing their training responsibilities, would be undertaken. Courses for this training would be developed and arranged by the Sectoral Training Units. The objective would be to provide a network of on-the-job trainers in each industry. 3.16 In the garment and hotel and restaurant industries, training would be limited to supervisors. In the garment industry, due to the dispersion of firms and the desire of employers to conduct training on factory premi- ses, mobile units represent the most efficient means of training delivery. The proposed project would provide seven mobile units comprising equipment, trailers and traction units. Each unit would have a capacity for 12 train- ees and an annual output of about 190. The units would be based at Regional Manpower Training Centers (RMTCs) at Manila (2), Guiguinto (2), Davao (1), Cebu (1) and Batangas (1) where employment in the garment industry is concentrated. Management of the units and their itineraries would be the responsibility of the Sectoral Training Units described in para. 3.05. The Hotel and Restaurant industry subsector is in the process of developing an appropriate training strategy. To help this subsector identify its training needs and structure an appropriate training scheme, a foreign specialist for 1-1/2 years a one man fellowship have been provided in the project (Table 3.3). 3.17 All off-the-job courses would be arranged in short modules to facilitate attendance by employees and promote flexibility in horizontal movement within a group of occupations, as needs for skilled workers change. NMYC is already using the modular system and has a stock of 204 modules, mainly in the construction, metals and engineering and automotive fields. An estimated additional 448 modules would be required to satisfy further - 27 - needs in the existing fields, plus modules for sec-ors where none presently exist. These would be developed and reproduced under the project by NMYC's Curriculum and Training Aids Division. 3.18 To implement the Sector Specific Training Scheme, an innovative system of training contracts would be established. These contracts would obligate approved training entities to provide specific kinds of training for specified periods, to specified numbers and kinds of trainees; while participating employers would be obligated to pay stipends to trainees and tuition costs (para. 3.20). The contracts would be negotiated by training officers of Sectoral Training Units (para. 3.05) on behalf of participating employers and would be awarded to approved training entities by the Training Contracts Committee (para. 3.06). The contracts would be signed by the training entity and the emnpleyer, and endorsed by the Nirectnr Generql of NMYC. 3.19 Contracts for training would be negotiated by the Sectoral Training Units with approved training entities. Such entities could include public and private trade schools, training centers and colleges, public agencies such as the Metals Industry Research and Development Corporation, and industrial enterprises. Selection would be based on: (a) the existence of suitably qualified and experienced staff to organize and implement the training; (b) the availability and suitability of equipment for training; (c) the existence of a training program and the acceptance of national standards where applicable; and (d) the establishment and maintenance of training records. During negotiations, the Government gave assurances that training entities would be selected in accordance with criteria satisfactory to the Bank and that a list of these entities would be attached to the annual training action plans (para. 3.12). 3.20 The employers would be responsible for the full cost of stipends and tuition fees on behalf of their trainees during off-the-job training. Stipends would be paid for time spent off-the-job on full-time training (6 hours per day). For periods of less than six hours, payment would be proportionately reduced. Attendance at evening or weekend courses would not qualify for stipends. The NMYC would subsequently reimburse employers for the tuition fees paid for trainees who pass the specified trade test. The amount of reimbursement by NMYC for tuition fees would be reduced during the project as employers assume an increasing share of the cost. The percentage to be reimbursed by NMYC would be negotiated annually and reflected in the training contracts (para. 3.18). By project completion, it is estimated that the few larger structured enterprises in the SMI sector would be financing about 50% of annual training costs. However, it is not expected that the smaller firms would contribute more than the cost of the stipends (30% of training cost). As the projected increasing share of training costs to be paid by employers is experimental, its effect on participation by employers would be closely monitored, and would be taken into account in subsequent contract negotiations. As an incentive to employers in small and medium-scale enterprises (less than 200 employees) to participate, the NMYC would, in addition, finance for such employers 100% of stipend costs for apprentices and supervisors in the first year of the project and 50% in the second year. By project completion it is estimated that the few larger structured enterprises in the SMI sector would be financing about 50% of annual training costs. However, it is not expected that the smaller firms - 28 - would contribute more th,an the cost of stipends. Over the project period, employers would thus finance about 30% of the cost of off-the-job contract training, while the project would finance the remaining 70% by means of IZMYC's reimbursements to employers. 3.21 Expansion of Training Facilities. To complete the existing net- work of training centers and increase the range of courses available and the quality of training in existing centers, the project would include the con- struction, furnishing and equipping of four new Regional Manpower Training Centers (RMTCs) and additional equipment for nine existing RMTCs (Table 3.2). Because of transportation problems and the need to extend the catchment area of the four new RMTCs, boarding accommodation would be included for about 40% of their trainees. The project would also include the construction, furnishing and equipping of (but no boarding accommodation for) a Construction Industry Training Center (CITC) in Manila (Table 3.2). The location of the new centers is based on needs assessments carried out by NMYC (para. 1.13). All the centers would be administered by NMYC and would give priority to contract training of employed workers under the Sector Specific Training Scheme (para. 3.10). In addition, except for the CITC, they would provide regular courses for out-of-school youths. CITC would be fully utilized in training personnel employed in the construction industry. Training would be available in the fields of machineshop, welding, sheetmetal, plumbing, electricity, auto mechanics and farm equipment repair, cabinet making, refrigeration, electronics and construction. The minimum requirements for admission would be to have reached 15 years of age and be able to read and write. The total capacity of the 14 new and expanded training centers would be 2,955 (Table 3.2). Assuming two-shift operation, their annual output would be about 20,000 trainees. All the centers would be administered by NMYC in cooperation with Local Manpower and Youth Committees (para. 3.23). Placement of graduates from the regular courses would be the responsibility of the Bureau of Local Employment of the Ministry of Labor and Employment. 3.22 The new training centers would require about 106 trade instructors (50 in 1983 and 56 more in 1984). Candidates would be recruited from among skilled workers and foremen in industrial occupations with preference given to those who have successfully passed a first class trade test. They would attend the instructor training course of 720 hours given at the RMTC Taguig, Manila. This course includes 440 hours of skills upgrading and 280 hours of methodology, and costs pesos 6,200 per participant. The cost of instructor training has been included in the project. 3.23 The NMYC has established in each region, Local Manpower and Youth Committees composed of industrialists and local Government officers to provide a forum for the discussion of local manpower trainirg needs, course relevance, training finance, placement problems and any other pertinent matter. The Local Manpower and Youth Committee will also provide planning information to the training officers from the Sectoral Training Units (para. 3.05) and operational advice to RMTCs both established and new. The Government gave assurances that it would maintain established Local Manpower and Youth Committees and establish new committees as required to provide operational advice to existing and new RMTCs. - 29 - Table 3.2: NEW TRAINING CENTERS AND ADDITIONAL EQUIPMENT FOR EXISTING REGIONAL MANPOWER TRAINING CENTERS Places Training centers Existing Planned Total New Centers Cagayan de Oro RMTC - 165 165 Tacloban RMTC - 165 165 Tuguegarao RMTC - 120 120 Zamboanga RMTC - 150 150 Manila - Construction Industry TC - 180 180 Existing Centers Mariveles RMTC 150 150 300 Guiguinto RMTC 100/a 150/a 250 Pili RMTC 50 180 230 San Fernando RMTC 90 140 230 Iligan RMTC 115 125 240 Davao RMTC 85 120 205 Talisay RMTC 100 150 250 Cebu RMTC 100 140 240 Batangas RMTC 80 120 200 Total 870 2,055 2,925 /a Mission estimates. 3.24 To extend training to rural areas on an experimental basis, the project would assist NMYC to establish a pilot rural mobile training pro- gram. The project would provide equipment for nine units, four vehicles and a boat. The units, each consisting of a container of equipment and an instructor, would be based at the existing and proposed RMTCs, which would organize and administer the program in conjunction with the Local Manpower and Youth Committee assisted by the Municipal Manpower Officer who would determine the training needs of out-of-school youth in the locality. Instructors required to implement the program would be assigned from an existing roster. The itineraries of the mobile units would be planned on the basis of the training needs. Elementary courses would be given in the use of tools in the electrical, carpentry, auto repair and food processing fields and would last about four weeks. Each unit would have a capacity of 12 places and train about 100 persons per year. Output would reach about 1,400 in 1986. Admission requirements to courses would be a minimum of - 30 - 15 years of age and an ability to read and write. A certificate would be issued at the end of each course, and graduates would be urged to take a trade test. The program would be evaluated to determine the viability of extending it to other regions (para. 3.08). Trade Testing and Certification (Proposed outlay US$3.2 million) 3.25 Development of Training Standards and Data Bank. In order to improve the quality of production and the productivity of workers, the project would assist NMYC to expand the existing trade testing system into a nationally recognized and accepted scheme. The number of National Trade Skill Standards would be increased from 13 to 55 and a Data Bank of Trade Tests developed during the same period. The additional 42 Standards would be in these industries: metals and engineering (7); garments (3); shoes and leather goods (3); wood products (1); construction (11); automotive (13); and hotel and restaurant (4). About ten new Standards would be developed in each project year. The project would include 14 man-years of local consulting services and 5 man-years of overseas fellowships to assist NMYC to develop the standards and expand the skill testing system (Table 3.3). 3.26 Establishment of Testing Facilities. To expand trade testing, the project would include the construction, furnishing and equipping of two Trade Test Units in Manila and Davao (75 and 45 places respectively) and provide equipment for establishing independent testing places in seven RMTCs located in Mariveles, Pili, San Fernando, Iligan, Talisay, Cebu and Batangas (15 places per center = 105 testing places). The new testing places at these nine locations would total 225 and would make possible an increase in the number of workers tested each year from 14,700 in 1982/83 to 20,200 in 1983/84; 26,500 in 1984/85; and 30,000 in 1985/86. Technical Assistance. 3.27 Each project component above gives a description and the the cost of the technical assistance to be provided. The aggregate of 6-1/2 man-years of foreign specialist services, consultancy contracts equivalent to about 7 man-years of foreign specialist services, 29 man-years of overseas fellowships, and 62 man-years of local consultant services is shown in Table 3.3. Support to the Project Management Unit (Proposed Outlay US$0.3) 3.28 The project would include equipment, local specialist services and recurrent costs for preparation of future industrial training projects by the project management unit in NMYC. - 31 - Table 3.3: TECHNICAL ASSISTANCE Total Man-Years of Technical Assistance Foreign Local Project Description of technical Special- Fellow- Consul- Components assistance ists ships tants Management Assistance to NMYC in improving of Industrial overall organization and Training management 2/a 2 Expansion and reorganization of NMYC's Industrial Manpower Development Division 2 42/c Improvement of NSYC's manpower planning and training evaluation 5/a 3 Establishment of Management Information System in NMYC: System analysis 1 2 6/c Computer science 1 2 Equipment maintenance 1 2 Information services 2 Statistical analysis 2 Manpower guidance 2 Subtotal 10 19 48 Strengthening Restructuring apprenticeship Industrial scheme 2 4 Training Hotel and restaurant training strategy 1-1/2 1 Subtotal 3-1/2 5 Trade Testing Development of Training Element, Skills and Certifica- Standards and Data Bank - 5 14/e tion Subtotal 5 14 GRAND TOTAL 13-1/2/b 29/d 62 Total Cost (US$'000) 2,242 Cost (US$'000) 955 580 707 /a Consultancy contracts expressed as equivalents of man-years estimated at US$70,000 per year. /b Estimated at US$6,000 per month. /c Estimated at US$830 per month. /d Estimated at US$1,650 per month. /e Estimated at US$1,350 per month. - 32 - 4. PROJECT COST, FINANCING AND IMPLEMENTATION Project Cost 4.01 Summary. The total cost of the project is estimated to be P 342.8 million or US$41.7 million equivalent, including the front-end fee of US$0.4 on the Bank loan. The estimated cost by project component is shown in Annex 2 and summarized in Table 4.1. Table 4.1: COST SUMMARY BY PROJECT COMPONENT /a Peso (million) US$ (million) Component Local Foreign Total Local Foreign Total Management of Industrial Training Reorganization and strength- ening of NMYC Secretariat 3.7 4.1 7.8 0.4 0.5 0.9 Establishment of management information system 0.5 12.4 12.9 0.1 1.5 1.6 Subtotal 4.2 16.5 20.7 0.5 2.0 2.5 Strengthening Industrial Training Sector specific training scheme 80.5 9.7 90.2 9.7 1.2 10.9 Expansion of training facilities 32.7 52.6 85.3 4.0 6.3 10.3 Subtotal 113.2 62.3 175.5 13.7 7.5 21.2 Trade Testing and Certification Training standards 1.9 1.6 3.5 0.2 0.2 0.4 Testing facilities 2.7 20.5 23.2 0.3 2.5 2.8 Subtotal 4.6 22.1 26.7 0.5 2.7 3.2 Support to Project Management Unit 2.4 0.2 2.6 0.3 0.0 0.3/b Base Cost 125.1 100.1 226.0 15.1 12.2 27.3 Contingencies Physical 14.3 14.3 28.6 1.7 1.7 3.4 Price 61.7 26.5 88.2 7.4 3.2 10.6 Front-end fee on Bank loan 0.4 0.4 Total cost including front-end fee 201.1 141.7 342.8 24.2 17.5 41.7 Less Customs Duties and Taxes 11.3 - 11.3 1.4 - 1.4 Total net project cost 189.8 141.7 331.5 22.8 17.5 40.3 /a Figures may not add due to rounding. /b US$250,000 has been included for future project preparation. - 33 - 4.02 The estimated project cost by category of expenditure is summarized in Table 4.2. Table 4.2: COST SUMMARY BY CATEGORY OF EXPENDITURE /a Peso (million) US$ (million) Category of expenditure Local Foreign Total Local Foreign Total Civil Works Construction 27.5 14.1 41.6 3.3 1.7 5.0 Site development 3.0 1.6 4.6 0.4 0.2 0.6 Professional fees 3.3 0.4 3.7 0.4 0.1 0.5 Subtotal 33.8 16.1 49.9 4.1 2.0 6.1 Furniture and equipment Furniture 1.5 0.8 2.3 0.2 0.1 0.3 Equipment 0 67.5 67.5 0 8.1 8.1 Subtotal 1.5 68.3 70.8 0.2 8.2 8.4 Teaching materials 0 4.1 4.1 0.0 0.5 0.5 Foreign Technical Assistance Specialist services 0 7.9 7.9 0 0.9 0.9 Fellowships 0 4.8 4.8 0 0.6 0.6 Subtotal 0 12.7 12.7 0 1.5 1.5 Local technical assistance 6.1 0 6.1 0.7 0 0.7 Operating Costs Sector Specific Training 80.5 0 80.5 9.7 0 9.7 Staff Training 0.7 0 0.7 0.1 0 0.1 Project Unit 2.4 0 2.4 0.3 0 0.3 Subtotal 83.6 0 83.6 10.3 0 10.1 Base Cost 125.1 100.1 226.0 15.1 12.2 27.3 Contingencies Physical 14.3 14.3 28.6 1.7 1.7 3.4 Cost escalation 61.7 26.5 88.2 7.4 3.2 10.6 Subtotal 76.0 40.8 116.8 9.1 4.9 14.0 Front End Fee on Bank Loan: 0.4 0.4 Total Cost Including Front End Fee 24.2 17.5 41.7 Total Project Cost 201.1 141.7 342.8 24.2 17.5 41.7 /a Figures may not add due to rounding. - 34 - 4.03 The cost of civil works was determined by: (a) estimating the required teaching and communal facilities for planned enrollment and staff; (b) assessing minimum boarding requirements as a function of planned enrollment, trainee catchment areas, area requirement/trainee, and the availability of alternative lodging; and (c) establishing the appropriate area unit cost of recently constructed facilities under the Fourth Education Project and other comparable facilities. 4.04 Base costs per square meter of gross floor area are estimated at an average of US$154 for covered sheds, US$280 for teaching and communal facilities and US$321 for boarding facilities. These unit prices are reasonable for the intended purpose of the buildings. Cost adjustments for location have been added to the building cost of individual project items. Estimated site development costs range from 10% to 15% of building costs and are based on costs at comparable sites under previous Education Projects. 4.05 The cost of professional services has been determined by using the applicable fee scale of the Philippine Institute of Architects, which amounts to about 8% of construction costs. Supervision costs amount to an additional 3%. Furniture costs are based on analyses of recent bid results in comparable teaching institutions and estimated at 6% of the building costs. Equipment cost estimates are based on detailed equipment lists. Foreign fellowship costs have been estimated at about US$1,650 per man-month and foreign specialist costs at US$6,000 per man-month inclusive of allowances, benefits and international travel. Local consultants costs range from $830-$1,350 per month, depending on the length of assignments. 4.06 The cost of the facilities of the four Regional Manpower Training Centers (RMTCs) compares well with the cost of similar training facilities under earlier Bank-financed projects (RMTCs under the Second Education Project, Credit 349-PH). The teaching and communal areas per training place would range from 17.3 to 19.1 sq. m. in each of the four new RMTCs, compared to the areas per student place of the 10 RMTCs built under the Second Education project, which range from a low of 10.00 to a high of 23.5 sq m per place. The cost per place ranges from US$10,600 to $12,100 for the four new RMTCs, and US$8,762, $5,781 and $6,552 for the Construction Industry Training Center, the Taguig Trade Test Station and the Davao Trade Test Station respectively. 4.07 Customs Duties and Taxes. All items specifically imported for the proposed project would be exempted from direct customs duties and taxes. Materials acquired locally would, however, be subject to taxation. Major levies include the following: (a) 20% customs duty on c.i.f. prices for imported items; (b) 3% on the gross value of construction as the con- tractor's tax; (c) 4% on payable wages as the employer's contribution to - 35 - social security; and (d) 5% sales tax on imported and locally produced items. On the estimated civil works cost, therefore, about 14%, or US$1.3 million equivalent, would represent customs duties and taxes. The total customs duty/tax component of the project is estimated to be about US$1.4 million. 4.08 Contingency Allowances. The contingency allowance of US$14.0 mil- lion includes: (a) physical contingencies estimated at an average of 12.7% of the base costs of the project; and (b) price contingencies estimated at an average of 39.0% of the base cost. Estimated price increases from the base cost date (April 1982) are based on the implementation schedule shown in Chart 3 and the annual escalation rates shown in the following table: Table 4.3: ANNUAL ESCALATION RATES Local technical assistance and operating costs Imported equipment Civil works included in and foreign tech- Escalation year furniture the project nical assistance 1982 10% 10% 8.0% 1983 8% 8% 8.0% 1984 8% 8 7.5% 1985 8% 8 7.0% 1986 8% 8 6.0% 4.09 Foreign Exchange Component. The foreign exchange component of the various categories of expenditure has been estimated by determining the foreign exchange content of each of the following subcomponents of locally procured goods and services: taxes, profits, overhead, materials, equipment and labor. The resultant foreign exchange content of each category of expenditure is as follows: (a) civil works, 34%; (b) furniture, 34%; (c) equipment, vehicles and materials, 100%; (d) local design services, 10%;(e) foreign technical assistance (specialist services, consultancy contracts, and fellowships) 100%; (f) local technical assistance and recurrent expenditure included in the project, 0%. - 36 - Project Financing 4.10 The total project cost of US$41.7 million, including the front- end fee of US$0.4 on the Bank loan, would be financed as follows: (a) the proposed Bank loan of US$24.4 million (60% of total project cost net of taxes and duties) would meet 100% of the foreign exchange cost and US$7.0 million equivalent (30%) of local cost; and (b) the Government would finance the remaining cost of US$17.3 mil- lion. Retroactive financing up to a maximum of US$300,000 would be allowed after December 31, 1981, to permit establishment of the PMU (para. 4.13), preparation of architects briefs, schematic drawings, preliminary drawings, equipment and furniture lists and the five of seven sectoral annual training plans. Details of the financial plan are given in Table 4.4. Table 4.4: FINANCING PLAN US$ million equivalent Government Bank Total Category Civil works and professional services 4.5 3.0 7.5 Furniture - 0.4 0.4 Equipment 1.4 8.7 10.1 Materials 0.1 0.5 0.6 Technical assistance (foreign and local) - 2.9 2.9 Operating costs included in the project 6.5 6.5 13.0 Unallocated 4.8 2.0 6.8 Total cost of project components 17.3 24.0 41.3 Front-end fee on Bank Loan - 0.4 0.4 Total cost, including front-end fee 17.3 24.4 41.7 Recurrent Cost Implications 4.11 The total cost of stipends and tuition fees in pesos of the four year outline training plan and the proposed cost sharing scheme are given in Table 4.5. Table 4.6 shows the basis of the costing. Details are included in the working papers. - 37 - Table 4.5: SECTOR-SPECIFIC TRAINING SCHEME: TOTAL FOUR-YEAR COST OF STIPENDS AND TUITION FEES (in 000 Pesos) Maximum Government Minimum Employer Contribution Contribution Sector/subsector (Included in (Not included in project costs) project costs) Metals and engineering 10,128 3,325 Garments 1,838 1,129 Shoes and leather goods 4,809 1,653 Wood products 6,306 2,175 Construction 33,798 12,239 Automotive 11,661 3,957 Hotel and restaurant 721 464 Unidentified Sectors (10%) 6,917 2,128 Total 76,178 26,980 Table 4.6: BASIS FOR ESTIMATING TRAINING COSTS Tuition Stipend Cost per Rate Category of trainee Course duration trainee hour Period per day (in pesos) (in pesos) Registered Apprentice- Job Entry Training 350 hours 4.87 12 weeks 10.64 Adult Worker - Upgrading 120 hours 4.87 15 days 15.96 /a Supervisors - Upgrading 50 hours 5.39 10 days 25.6 /a Not included in Government financing. 4.12 The additional annual operating costs to be incurred by the com- pleted project when in full operation in 1986 are estimated at US$5.0 million equivalent (including contingencies) (Table 4.7). These costs represent a 110% increase in NMYC's 1980 budget, but only a 4% increase in the total budget for occupation oriented human resource development. In addition to this the employers would finance about US$2.0 million (including contingen- cies) of operating costs annually in connection with the project, through the proposed cost sharing scheme (para. 3.20). - 38 - Table 4.7. RECURRENT COST - 1986 US$'000 /a % of total Management of Industrial Training 4 Strengthening of Industrial Training /b 4,430 88.0 Trade Testing and Certification 449 9.0 Project Management Unit 135 3.0 5,018 100.0 /a Includes contingencies. /b Includes cost of training contracts and operating cost of new RMTCS and Rural Mobile units. Project Implementation 4.13 Administration. NI4YC would be responsible for the implementation of the project and would provide the required administrative and technical support through its central and regional services. A project management unit (PMU), headed by the Deputy Director of NMYC, has been created in the central N1MYC office (Taguig) in metropolitan Manila. This unit forms an integral part of the administrative structure of NMYC. An accounting system satisfactory to the Bank would be established in the PMU with the assistance of the Commission on Audit. The PMU would coordinate all activities concerning the implementation of the project. It would be responsible for implementing all physical aspects, exercising financial control during implementation and maintaining liaison with the Bank. In addition, it would maintain the indicators of educational outcomes (Annex 4). Training activities organized under the project would rely heavily on existing technical support services of N4YC, the Bureau of Local Employment and the Ministry of Labor and Employment. Due to uncompetitive salary scales, key staff are being lost to better paying entities, both public and private. To mitigate this problem Government provided assurances at negotiations that an incentive package sufficient to ensure retention of personnel would be provided to NI4YC and the Bureau of Local Employment. 4.14. Physical Design Services. The design of the buildings of the project are being carried out by private local architects under the super- vision of M1YC. Construction supervision would be carried out by the same architects. Design and cost planning guidelines and criteria as well as architects' briefs for each of the project buildings were developed by NMYC with the assistance of a local consultant. - 39 - 4.15 Sites. Suitable sites for construction of all project buildings have been acquired. 4.16 Maintenance. A maintenance plan and cost estimates would be pre- pared by the consultant architects for each building to be constructed under the project. The proposed project would also include the establishment of an equipment maintenance service (para. 3.09). The Government confirmed at negotiations that an adequate budget would be provided for maintenance of project buildings and equipment. 4.17 Implementation Period. The memorandum of agreement between the Ministry of Labor and Employment and NMYC has been signed, and the Training Contracts Committee established. Detailed lists of equipment have been prepared, tendering of equipment will begin in October 1982 and procurement is expected to end in Mlarch 1984. Tendering for construction is planned for January 1983 and the buildings are expected to be completed by November 1984 (Chart 3). The project is scheduled for completion by December 31, 1986. 4.18 Procurement. Contracts for civil work in an aggregate of US$8.5 million (92% of the total value of civil works) and equipment total- ling US$11 million (90% of the total value of equipment), as well a con- tracts for furniture, materials and vehicles, would be grouped to the maxi- mum extent possible to form attractive bid packages. All contracts for the above would be awarded on the basis of international competitive bidding in accordance with Bank Group Guidelines for Procurement except for: (a) civil works contracts (aggregating about US$0.7 million or 8% of the total value of civil works) costing less than US$500,000 equivalent (which are unlikely to arouse the interest of international construction companies); and (b) bid packages for equipment (aggregating about US$1.2 million or 10% of the total value of equipment), and furniture and teaching materials estimated to cost less than US$100,000 each. Contracts for items procured under (a) and (b) could be awarded on the basis of local competitive bidding procedures in accordance with government pro- curement practices which are acceptable to the Bank. Foreign bidders would be allowed to participate. In addition, miscellaneous items under (b) above, in contracts not exceeding US$25,000 equivalent and subject to an aggregate total of US$500,000 equivalent, could be purchased on the basis of a minimum of three price quotations. A preference margin of 15% of the c.i.f. price of imported goods or the prevailing customs duty, whichever is lower, will be extended to eligible local manufacturers when comparing evaluated bids obtained through international competitive bidding. - 40 4.19 Bank Review and Approval. Design criteria, architects' briefs, preliminary drawings, and tender documents have been approved by the Bank. Tender evaluation documents for civil works contracts estimated to cost more than US$250,000 and furniture, equipment, vehicles and teaching materials contracts exceeding US$100,000 equivalent would be reviewed by the Bank prior to the award of contracts (see Implementation Schedule). 4.20 Accounting and Auditing. The PMU would establish and maintain separate project-related accounts at NMYC headquarters. These would be operational from the commencement of project implementation. Accounts would be maintained in accordance with sound and generally recognized accounting principles and practices satisfactory to the Bank to enable the PMU to provide interim and annual financial statements to reflect the financial performance and position of the project. These accounts, together with disbursement documents, would be audited annually by the Commission on Audit, in accordance with standard government practices. In addition, separate accounts, a separate audit and a separate report would be provided for expenditures on account of which disbursements are requested on the basis of statements of expenditure (para. 4.21(f)). A physical audit would take place to determine the amount of training accomplished and spot checks would be made to verify payment of stipends to trainees. Unaudited annual financial statements would be provided to the Bank within four months of the close of each fiscal year, and an opinion and report of the Commission on Audit on such statements would be provided within seven months of the close of the fiscal year. The foregoing accounting, financial reporting and auditing arrangements would provide adequate and timely information to the Bank for supervision of the disbursements and general project implementation. Disbursements 4.21 The proposed loan of US$24.4 million would be disbursed over a period of five years. Disbursements would be made as follows: (a) 40% of the cost of civil works and professional fees; (b) 100% of foreign expenditure for directly imported equipment, vehicles, furniture and materials; (c) 100% of the ex-factory cost of locally manufactured equipment, vehicles, furniture and materials; (d) 65% of the invoiced cost of locally procured equipment, vehicles, furniture, and materials; (e) 100% of the total cost of specialist services, consultancy contracts, and overseas training; - 41 - (f) 50% of Government expenditures for tuition fees, stipends, staff training, preparation of teaching materials, and salaries of PMU technical staff. Withdrawal applications would be supported by full documentation except for operating expenditures incurred in respect of Item (f) above, which would be reimbursed subject to submission of statements of expenditure. Supporting documents would be retained by the implementing agencies and made available for inspection by Bank supervision missions. To ensure cash flow, claims would be submitted quarterly (Chart 2). Disbursements are expected to be completed by June 30, 1987. The schedule of disbursements is shown in Table 4.8. This table is based upon the average disbursement profile of other projects in the education sector in the region. It projects relatively slow implementation during the first years, due to changes in NMYC and the new project management unit's lack of previous experience with Bank projects. Table 4.8: SCHEDULE OF DISBURSEMENTS (US$ million equivalent) IBRD fiscal Disbursements Disbursement profile/a year and This Regional average semester Semester Cumulative project education projects/b 1983 1st 0.4 0.4 2nd 0.3 0.7 2.9% 0.9% 1984 1st 0.5 1.2 2nd 1.0 2.2 6.1% 3.1% 1985 1st 2.0 4.2 2nd 2.0 6.2 16.4% 11.0% 1986 1st 3.0 9.2 2nd 4.0 13.2 28.7% 16.7% 1987 1st 6.0 19.2 2nd 5.2 24.4 45.9% 27.0% /a The profile shows percentages disbursed in a given year. /b The regional profile includes 30 education projects with at least 2 years of implementation activity. It tapers off to include 17 projects with at least 6 years of implementation. - 42 - 5. BENEFITS AND RISKS Benefits 5.01 The proposed project forms an integral part of the Government's industrial development strategy focussing on regional diversification and the training needs of small- and medium-scale export oriented industries. It would strengthen the national management of training, improve the relevance of training to industrial needs, and improve the skill profile of the labor force. 5.02 The institutional developments proposed would reorganize and strengthen the management of industrial training, broaden the data base for overall planning, improve coordination at the national level and reduce management costs. Manpower planning would be revitalized to enable NMYC to fulfill its mandate and exert a greater influence on the national planning of technical education and vocational training. The evaluation system would be strengthened, external effectiveness of training measured and the findings fed back into the training system. 5.03 Relevance would be improved by the participation of employers in the planning, organization and financing of training. Incentives built into the cost sharing scheme would attract the smaller enterprises. Responsi- bility for training costs would then be transferred gradually from the Government to the employer. Initially the employers would finance 30% of training costs. By project completion, the larger structured enterprises in the SMI Sector would be financing about 50% of costs. Interaction between the sectoral training units (para. 3.05) and the employers would ensure flexibility, guarantee the technical relevance of courses and improve the utilization of existing facilities in schools, training centers and enterprises. 5.04 Targetted mainly on employed workers in the smaller enterprises, the project would train about 76,000 persons, meeting 43% of the needs for supervisor training, 10% of the needs for worker upgrading and 13% of the needs for apprentice training. Supervisor upgrading would establish on-the-job training as a permanent management tool for improving quality and output on the factory floor. An additional 160,000 workers could benefit from this strategy. Restructured apprenticeship would promote industry based career development for job entrants. Increased opportunities for trade testing and the availability of a wide range of trade standards developed in consultation with the industries concerned would have a major upgrading and standardizing effect on the industrial labor force in the seven selected subsectors, enabling employers to identify their needs more easily, and would provide a yardstick for workers in negotiating wage differentials. 5.05 Out-of-school youth would also benefit under the project from the additional industrial training opportunities in the four new RMTCs, as well as the expanded pilot rural mobile training scheme. Furthermore, they would benefit from improved teaching materials and expanded trade testing opportunities. - 43 - Risks 5.06 Employers have been somewhat reluctant to finance the training of workers on a scale necessary to meet current and future demands. The underlying rationale for the project is to demonstrate to employers the benefits to be derived from training; and additional incentives to partici- pate are provided to employers in small and medium size enterprises, in the first two years of the project. Nevertheless, the success of the proposed project depends on the employers' perceptions of the benefits to be derived from training and the adequacy of the financial incentives incorporated in the training contracts. Little difficulty is anticipated in obtaining participation by large and medium size enterprises. Employers in the smaller enterprises, however, may be less eager to participate after the initial subsidy, because of the cost and the fear that better trained workers may demand higher wages or leave for better paying jobs elsewhere. 5.07 The proposed system of contractual training is new in the Philippines and may not find as great an acceptance as projected. 5.08 Among the various conditions for the success of the project, the availability of competent professional staff is most important. Recently NMYC has been losing a tew competent staff to other better paying employers. The implementation of the project will rely heavily on existing units of NMYC. Should NMIYC continue to lose key personnel, project implementation may be impaired. 5.09 As the project implementation unit would be a new one, some diffi- culties due to lack of experience with Bank procedures could occur. Due to the innovative nature of the proposed project, initial training of project staff and frequent supervision may be necessary. - 44 - VI. AGREEMENTS REACHED 6.01 The Govermnent gave assurances during negotiations that it will: (a) cause MIYC to increase, in accordance with a timetable satisfactory to the Bank, the technical staff (i) in the Industrial Manpower Development Division by about 15 training officers (para. 3.05) and (ii) in the Trade Skills Standards Division by about 30 testing officers (para. 3.07); (b) cause NIAYC to submit to the Bank for review the evaluation reports as of December 31, 1984 and by each December 31 for three years thereafter during the project (para. 3.08). (c) cause NMYC to submit the annual training action plans to the Bank for review and approval commencing on or before April 1, 1983 and by each April 1st thereafter during the project (para. 3.12), to whiclh would be attached a list of training entities satis- factory to the Bank (para. 3.19); (d) cause 1iMYC to maintain established Local Manpower and Youth Committees at existing training centers and create new Committees as required within six months of the commissioning date of new training centers (para. 3.23). (e) provide an incentive package sufficient to ensure retention of personnel of NMYC and Bureau of Local Employment (para. 4.13); and (f) make sufficient budgetary allocation for full utilization and maintenance of project buildings and equipment (para. 4.16). 6.02 With the above assurances, the project constitutes a suitable basis for a Bank loan of US$24.4 million equivalent (including a front- end fee of US$0.4 million) to the Goverrment of the Philippines for a term of 20 years including a 5-year grace period. *-45- COM?AAATI'-E EDUCATION INDICArORS ANNEX I .............................Page 1 JUNE 21.-1982 I I ZCENTRAL: I I I S 5 I : I GOVT. : : s z I I 2 I : ~ ~~~ IEX?. oNI : I. PRI- ZRECURRENT I :SEC.I 5 * * ~ ~~~ IEDU. A45 EDUCATION ;LITER- ICR1. :C34MPLE- ZRU LIHIT COST:PROr3RFSS-: SEC. : s ru- ?NIGHF;, I I IX TTL. RECURRENT :ACY :ENROLL11ION :VENTStPRIM. ED. ZION RATE ;ENROLL:DENTS:ENR0L~_ I GNP/ IX G NP :CENTRAL:EXP ALLOCATEDZ. RATE !RATIO :RATE FOR!PER !AS % GNP/LFROM PRI. IRATTO :PER :RATIO IASEIPOP. :CAPITA: DEvurED1 GOVT. TO: :z% OFI NET tPRI.SCH. 'EALH- CAPITA :TO SEC. H ET [TEACH- GkOSBi: YRtMILLS.: (US$): TO EDU.I EXP. IPRI. SEC. NI.IADULTS): (%) :CYCLE(t):F.R I (%) I(X) :ER Cl) SIv79);(1979)l S (1976) 1 I1 I I : I 1 1 1 1 (1) 1 (2) (3) (4) 1 (5) 1 (6) t (7) t (Si 1 (9) 1 (10) ( 11) (12) 1(13) :(14) DEVELOPED COUNTR IES AUSTRALIA 50 14.6 8,870 6.3A 14.6
Группа Всемирного банка · Staff Appraisal Report
Philippines - Vocational Training Project
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