Turkey - Second Industrial Training Project

Document of The World Bank FOR OFFICIAL USE ONLY LASJ - Z77 Report No. P-4754-TU MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$115.8 MILLION TO THE REPUBLIC OF TURKEY FOR A SECOND INDUSTRIAL TRAINING PROJECT March 7, 1988 This document has a restricted distribution and may be used by rec?iens only In the performance of thewr official duties. Its contents may not otherwise be disclosed without Wodd Bank authorzation.  CURRENCY EQUIVALENTS Currency Unit = Turkish Lira (TL) US$1.00 = TL1120 (February 1988) FISCAL YEAR January 1 - December 31 PRINCIPAL ACRONYMS USED MOEYS Ministry of Education, Youth and Sports NOT Ministry of Culture and Tourism MOS Ministry of State UhK Council for Higher Education SPO State Planning Organization TTC Technician Training Center TTU Technician Training Unit ITU Industrial Training Unit VSHE Vocational School of Higher Education FTVE Faculty of Technical and Vocational Education FTE Faculty of Technical Education FVE Faculty of Vocational Education TUREM Tourism Training Center PBIT Policy Board for Industrial Training  FOR OMCIL USE ONLY REPUBLIC OF TURKEY SECOND iNDUSTRiAL TRAINING PROJECT Loan and Proiect Summary Borrower: The Republic of Turkey Beneficiaries: Council of Higher Education (YoK), Ministry of Culture and Tourism (MCT) Amount: US$115.8 million equivalent Terms: Seventeen years including a four-year grace period, at the Bank's standard variable interest rate. On-Lending Terms: Not applicable US$ MILLION Financing Plan: Government 50.0 IBRD 115.8 TOTAL 165.8 Economic Rate of Return: Not applicable Staff Appraisal Report: Report No. 7038-TU Map: IBRD No. 19975 FThis document has a restricted distribution and may be used by recipients only in the perff rmiance of their official duties. Its contents may not otherwise be disclosed without World Bank aut' orizatio.,  MEMORANDUM AND RECOMMEDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TURKEY FOR A SECOND INDUSTRIAL TRAING PROJECT 1. The following report on a proposed loan of US$115.8 million equivalent to the Government of Turkey, is submitted for approval. The proposed loan would be for a term of seventeen years, including four years grace, at the Bank's standard variable interest rate, and would help finance an industrial training * project. 2. Background. Industrial production and, in particular, manufactured * exports have been the mainstay of the sustained economic growth experienced since 1981. Between 1980 and 1985, manufactured exports grew by almost 41 percent per year, which doubled industry's share in exports from 36 percent to 75 percent. However, the industrial sector faces major technological problems that could jeopardize future export growth and the competitiveness of Turkish goods in European and other overseas markets. These problems which include low labor productivity, poor product quality, low design and engineering capability, weak production management skills, and poor preventive maintenance of plants and equipment, are linked to the serious shortage of highly skilled technicians and specialized manpower in the country. Industrial employers frequently report that well-trained technicians, particularly in exporting industries which require high standards of quality control, modern production techniques and specialized machinery, are in short supply. These qualitative labor market signals have been confirmed by an industrial training needs survey conducted in early 1986 to assess the demand for technicians in export-oriented manufacturing industries. Survey results indicate that a minimum of 12,500 additional higher-level technicians would be required by manufacturing industries in Turkey during the five-year period 1986-90. 3. The scarcities of skilled technical manpower in Turkey point to insufficient investments in human resource development in general, and to inadequate industrial training in particular. Programs for the training of bona fide technicians are qua'litatively and quantitatively lacking both within the formal education system and in the private sector. The Council of Higher Education (YhK) is the key Government agency responsible for training higher-level technicians in Turkey through its system of two-year, post-secondary Vocational Schools of Higher Education (VSHEs). These VSHEs suffer, however, from an over-formalized approach to training, inadequate premises, out-dated curricula, almost no equipment and a shortage of appropriately-trained instructors. Furthermore, YiK has limited institutional capacity to carry out effectively coordinated planning and supervision of the technician training system. 4. A scheme is now being implemented by YoK to upgrade systematically selected VSHEs so that they are more capable of meeting the needs of industry. As a first step, eight VSHEs are being developed into industrially-oriented Technician Training Centers (TTCs) with assistance from the Bank under the ongoing Industrial Training Project (Loan 2399-TU). Although total annual output from these eight TTCs would be about 1,200 technicians from 1991 onwards, the results cf a pre-investment study included in the same project indicate that further expansion of the technician training system is neccessary to meet projected requirements for technicians in industry. Based on the findings of this pre-investment study, the Government has requested further Bank assistance in developing an additional 20 TTCs.  -2- 5. One of the priority areas identified for action in the Bank's 1986 survey of the education and training sector was selective expansion of the technical/vocational training system in accordance with skilled manpower noeds. However, both ongoing and planned training efforts are constrained by the severe shortage of instructors and qualified senior staff in skill training institutions. The Government concurs with the Bank that this shortage must be addressed through qualitative and quantitative improvements to technical and vocational teacher training. 6. Scarcity of trained manpower is also constraining the expansion of the tourism sector which is becoming an increasingly important source of foreign exchange earnings. The Ministry of Culture and Tourism (MCT) has projected additional needs for about 1,800 skilled workers per year in hotel, catering and tourism occupations based on the anticipated increase in the capacity of licensed accommodations (100,000 hotel beds by 1989). 7. Prolect Obiectives. Project objectives include assistance to YoK in: (a) strengthening its institutional capacity to plan and coordinate technician and technical/vocational teacher training programs; (b) alleviating scarcities of technicians in industry through the development of pre-service technician training programs targeted to produce about 3,100 graduates per year by 1996; and (c) meeting a projected shortfall of over 13,700 technical and vocational teachers by 1991 through the expansion and improvement of training programs at three Faculties of Technical Education and one Faculty of Vocational Education. In addition, the project would support MCT in developing and implementing a national training plan for tourism occupations. 8. Project Description. The project, to be carried out during 1988-1995, would support four components as follows: (a) management of industrial training at UoK; (b) industrial technician training at 20 TTCs; (c) vocational and technical teacher training at four Faculties of Technical/Vocational Education; and (d) hotel, catering and tourism training at 10 Tourism Training Centers (TUREMs). Specifically, component (a) would include technical assistance for strengthening and expanding the existing Technician Training Unit (TTU) in YUK to enable it to undertake additional responsibilities in respect of coordination of technical/vocational teacher training. Component (b) would support curricula and subject development for 20 TTCs, a fellowship training program for instructors, equipment, furniture and renovations or extensions to existing TTC buildings. The proposed fellowship training program (US$12.8 million) in the most expeditious and effective way of producing instructors for the 20 new TTCs, given the Government's strong commitment to starting up priority technician training programs with the minimum of delay. Longer term needs for such instructors would be met through project support to strengthen the Faculties of Technical/Vocational Education (FTVEs). Component (c) would provide technical assistance for developing new, improved and shorter training programs at the FTVEs to attract a broader group of entrants. This component would also support the establishment of a Technology Department, a Technical/Vocational Education Department, and a Development and Instructional Support Unit at each faculty to improve the pedagogical and technclogical content of existing programs, and ensure the quality of new programs. Support for upgrading teacher training facilities and improving faculty administration would also be included. Finally, component (d) would provide technical assistance, equipment, furniture, renovations and/or extensions for upgrading 5 existing TUREMs and developing 5 new ones. 9. The total cost of the Project is estimated at US$165.8 million equivalent, with a foreign exchange component of US$115.8 million equivalent (70 percent). A breakdown of costs and the financing plan are shown in Schedule A.  -3- The amounts and methods of procurement and disbursements, as well as the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Turkey are given in Schedules C and D, respectively. A map showing the location of project-assisted institutions is also attached. The Staff Appraisal Report, No. 7038-TU dated March 7, 1988 is being dist_ibuted separately. 10. Rationale for World Bank Involvement. Continued export growth and technological advancement in Turkey is dependent upon an adequate supply of highly skilled technical manpower. One of the major priorities for the education and training sector is therefore to upgrade technical and industrial training to improve the supply of skilled workers and technicians for industry. Since 1971, the Bank has assisted the Government in addressing this need through four loans aimed at increasing and upgrading capacity to train technicians and skilled workers. In particular, the ongoing Industrial Training Project (Loan 2399-TU) is helping the Government develop a pre-service technician training system through support to an initial group of 8 TTCs. However, given the size of Turkey's industrial sector and its anticipated rate of growth, there is a continued need for Bank assistance, both to expand training and to retain the overall framework for training which has been created under previous Bank-assisted projects. In addition, it is important for the Bank to assist YoK, which is a relatively new agency, in its future development as an institution responsible for the planning and coordination of post-secondary technician training. Finally, given the increasing importance of the tourism sector to the economy, Bank assistance to MCT in expanding its manpower development programs is both timely and essential. 11. Agreed Actions. The Government has agreed to provide the following assurances: (a) that it would allocate funds for creating additional staff positions for instructors in order that there would be 1 instructor for every 12 trainees in the 20 new technician training centers; (b) that it would establish by March 31, 1989, a Department of Technical Education in the Faculties of Technical Education at Gazi, Firat and Marmara Universities, and a Department of Vocational Education in the Faculty of Vocational Education at Gazi University to provide the pedagogical focus to teacher training programs; (c) that: (i) it would establish a Policy Board for Industrial Training (PBIT) by March 31, 1989 under the chairmanship of the YoK member responsible for industrial training and technical/vocational teacher training; (ii) the PBIT would have representation from the entities concerned with the development and management of technical education and training; and (iii) the existing Technician Training Unit responsible for project implementation would be expanded into an Industrial Training Unit having a full-time coordinator (who would also serve as secretary to the PBIT), and a full complement of key staff by March 31, 1989; (d) that: (i) it would establish by March 31, 1989, a Regional Advisory Board at each Faculty of Technical/Vocational Education to advise the dean, the faculty council and the faculty executive committee on requirements for teachers of technical subjects, requirements for teacher training courses in new specializations and on curriculum  -4- development issues; and (ii) membership of this Board would include local technical and vocational schools, regional universities, TTCs and industry; 12. Justification. By increasing the output of well-trained technicians and instructors, the project would improve industrial productivity leading to higher output and increased foreign exchange earnings. The 20 project-assisted TTCs would produce about 3,100 graduates per year by 1996; this output would meet the projected annual demand for about 2,500 higher-level technicians in manufacturing industries, and, in addition, be available to other employer groups such as the power and services sectors. Through the provision of post-secondary training programs in commercial studies, financial administration and tourism that are attractive to women (estimated 80 percent of enrollment in these fields), the proposed project would increase the labor force participation rate of women in these areas. Finally, the 10 project-assisted TUREMs would produce about 1,800 skilled workers for the tourism sector which is anticipated to have foreign exchange earnings amounting to US$1.6 billion in 1988. 13. Risks. There is a risk that TYK may not be able to bring on board as fast as needed, the specific skills required to manage the industrial training system on a continuing basis. To minimize this risk, the proposed project would assist YoK in strengthening and expanding its existing TTU into an Industrial Training Unit to enable it to undertake additional responsibilities in respect of technical/ vocational teacher education. There is a risk that training programs may be compromised by an overly academic orientation due to the attachment of TTCs to universities. This risk would be diminished by the strong commitment of YoK to make training programs relevant to the needs of industry and by existing cooperative arrangements for this training with industry. Since many FTVE graduates currently prefer to work in industry, there is a risk that the Ministry of Education (MOEYS) may not be able to attract sufficient FTVE graduates to teach in its secondary schools. To alleviate this risk, the MOEYS has proposed to improve the terms of service for technical and vocational teachers. The Bank fully supports the recommendations of the MOEYS which are being considered seriously by the Government in view of the critical shortage of teachers in technical/vocational institutions. The proposed project would assist in improving recruitment and retention rates of teachers through: (a) re-orienting FTVE programs towards teacher education to ensure that the end-products are trained to teach and not serve as engineers; and (b) improving teacher quality and involving the MOEYS in curriculum development and standards setting for teacher training, thereby eliminating the need for an external examination in which the passing rate is only about 50 percent. The MOEYS would also simplify recruitment procedures for teachers in order to shorten the waiting period for candidates. In respect of the MCT, there is a risk that project activities may not be implemented in a timely fashion. To reduce this risk, disbursements against expenditures incurred under the tourism training component will not start until the Bank has reviewed and agreed on the details of an implementation program for the component. 14. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. Attachments Barber B. Conable Washington, D.C. President March , 1988  Schedule A REPUBUC OF TURKEY SECOND INDUSTIAL TRAINNG PROJECT Estimated Proiect Costs a/ - US$ MILLION---- Project Component Local Foreign Total 1. Management of Industrial Training Coordination of Technician Training 0.2 1.1 1.3 Coordination of Vocational/Technical Teacher Training 0.1 0.4 0.5 Subtotal 0.2 1.5 1.7 2. Industrial Technician Training Curricula and Subject Development 0.2 1.1 1.3 Training of Trainers 0.8 12.0 12.8 Technician Training Centers 27.1 51.9 79.0 Subtotal 28.1 64.9 93.0 3. Vocational and Technical Teacher Training Technology Departments 0.3 2.7 3.0 Technical Education Departments 0.4 4.6 5.0 Development and Institutional Support Units 0.1 1.2 1.4 Teacher Training Facilities 7.1 16.6 23.8 Subtotal 7.9 25.2 33.1 4. Tourism Sector Training 2.2 4.9 7.1 TOTAL BASELINE COSTS 38.5 96.4 134.9 Physical Contingencies 3.0 7.6 10.6 Price Contingencies 8.5 11.8 20.3 TOTAL PROJECT COSTS b/ 50.0 115.8 165.8 a/ Individual numbers may not add up to totals because of rounding. b/ Project costs include US$18.9 million equivalent of taxes and duties. Financing Plan Local Foreign Total -------US$ Million Government 50.0 - 50.0 IBRD 115.8 115.8 Total Financing 50.0 115.8 165.8  Schedule b Page 1 of 2 REPUBLIC OF TURKEY SECOND INDUSTRIAL TRAIIG PROJECT Amounts and Methods of Procurem6nt a/ Procurement Methods----- Expenditure Categories ICB LCB Other b/ Total