Nepal - Engineering Education Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7555-NEP STAFF APPRAISAL REPORT NEPAL ENGINEERING EDUCATION PROJECT May 26, 1989 Population & Human Resources Division Country Department I Asia Region This document has a restricted distribution and may be used by redpients only in the performance of their officeal duties. Its contents may not otherwise be disclosed without Wodd Bank authorization.  CPWECY EOUIVALENTS (At Appraisal October 1988) Currency Unit - Nepal Rupee (NRP) US$1 - NRP 24.3 NRPl - US$0.041 Weights and Measures 1 meter (m) - 3.28 feet (ft)' 1 kilometer (km) - 0.62 mile (mi) Fiscal Year July 16 - July 15 School Year January - November/December Academic Year - Institute Of Engineering July - May Principal Abbreviations and Acronyms Used ADB - Asian Development Bank BNS - Basic Needs Strategy CIDA - Canadian International Development Agency HMG - His Majesty's Government IOE - Institute of Engineering JICA - Japanese International Cooperation Agency MOEC - Ministry of Education and Culture NORAD - Norwegian Assistance for Development NPC - National Planning Commission PCE - Proficiency Certificate in Engineering PCS - Proficiency Certificate in Science PIU - Project Implementation Unit PPU - Project Preparation Unit SATA - Swiss Association for Technical Assistance SDC - Swiss Development Cooperation SLC - School Leaving Certificate SOEs - Statements of Expenditures TU - Tribhuvan University UNICEF - United Nations Childrer.'s Fund UNDP - United Nations Development Program USAID - United States Agency for International Development  ANN . A 12 75 Page 3 (e) Academic Programs and Records--an office which maintains students' academic records and can assess performance and progress under the Institute's academic regulations. This type of office is required for: (i) the degree programs at Pulchowk; (ii) the certificate , programs at Pulchowk and Thapatali; and (iii) the certificate and trade programs at Pokhara. In addition, a central office is proposed to deal systematically with the matters of admissions, examinations, and aspects of financial support for registered students, i.e. tuition fee stipends, other stipends, awards and scholarships. (f) Computer Services--a unit responsible for the management and operation of IOE's common computer facilities and related equipment. Computer Services would also assist with treining of personnel using the equipment, and would provide software support. The unit would serve all campuses. (g) Library Services--this is a standard unit responsible for books and periodicals that constitute the library holdings. A main library is envisaged at Pulchowk, with branch libraries at the other campuses, all administered by a Chief Librarian. (h) Printing--suitable printing and copying equipment is needed in the Institute. Sophisticated facilities are now common and would likely be acquired in this project. The facilities should be managed and operated by personnel with appropriate skills. All photocopying equipment should probably be the responsibility of a central office. (i) Instructional Equipment--equipment required for learning and teaching purposes would be managed by this unit. Most of the equipment is portable, e.g. projectors, PA systems, VCRs and monitors. The office would be responsible for stocking and servioing the components, making them available as required, and operating some of the equipment when used in teaching. (j) Bookstore--this is clearly a separate operation that should be handled by business people. The bookstore has a role to play in the Institute by providing educational reference texts and learning material that is particularly suitable, and available to students at minimum cost. It should allow trading-in and selling of second-hand textbooks. Also, the bookstore provides a mechanism whereby the academic staff can market scholarly and professional material. (k) Liaison and Information Analysis--as part of a management information system, this unit would be responsible for general technology and information transfer (external), liaison with government, industry, and professional organizations. It would monitor certain Institute operations, relevant market trends, and would advise regarding manpower needs, special training requirements, and market developments to which the Institute might respond. This function would be incorporated into the Office of Manpower Development which will be established in the project.  ANNEX 12 76 Page 4 (1) Campus Planning--this unit would be concerned primarily with the planning and construction of new physical facilities, major renovation projects, plant upgrading, and primary technical services and facilities. Technical Services 7. The need to establish a separate maintenance and technical services unit is based on the following considerations. In engineering universities and colleges, a great deal of laboratory equipment, instruments, testing facilities, mechanical, electrical and electronic control systems are acquired and used. In addition, aids, data-handling systems, and digital computers are used for scientific or academic purposes and increasingly for administrative services. The maintenance and servicing of much of this equipment is beyond the capability of regular technical staff. In many universities, service contracts are widely used next to specialized technical services units. The need for effective maintenance and repair of equipment is expected to grow substantially in the IOE. It would therefore be necessary to appoint a Director of Maintenance and Technical Services who would manage a number of technical staff specifically for Technical Services. Library Services 8. Library services is another area where a separate management function is required. A Chief Librarian should head the library services and manage the library, including branch libraries. He or she should interact with Tribhuvan University's library service and library administration. The IOE would also need effective library facility at Thapatali and Pokhara. Management Information System (MIS) 9. The proposed management information system (Liaison and Market Studies, Information Analysis) would be established and report primarily to the senior management of the Institute. The MIS unit would be handled by a manager who could also be responsible for Campus Planning.  NOW I s~~~~~~~~~~~~~~~~~~~~~~~I -L~~~~y ~ - P~~~~~~~~~~~~~~~~~~~~~g~~~~~~~~~~~D~U*W&*k&r kw4mgk ~~~~F____ .* ~~~~~~~~p wmwu p I _ e.0 ca E s. r~~~~~ ,rem lb Lr--------n 1~,, ,(2) ,-- _1 1' -i 0* - - k~~~~~~~AIvurd I~~~~~~~~~~~~~~w~~~i~~~~e ~ ~ ~ ~ ~ crfd tob SAM ot -f (4)- w 4 . - - Ag* f I as Ks _ _* .. 1 S-otO mcds I-tlh d _ ___.. amahe - FEta t21bWolwd bbs-eIA S - Accxuff -Pogo Of ox" thgkS>C@ U It "Kd - Accmxft ~ ~ ~ ~ ~ ~  ANNEX 13 78 Page 1 NEPAL ENGINEERING EDUCATION PROJECT Selected Documents in Project File Nepal Second Education Project (Technical and Vocational Training) Staff Appraisal Report No. 3558-NEP, Education and Agricultural Institution Division, South Asia Projects Department, The World Bank. Tribhuvan University, Institute of Engineering, An Introduction, Lalitpur 1987. N. McEvers, Manpower Implications of Education and Training Development in the Kingdom of Nepal, The International Development Association, May 1983. Nepal: Policies for Improved Growth and Alleviating Poverty. World Bank 1988. Educonsult Ltd and the University of Calgary, Engineering Education Development Project, A Feasibility Study, Institute of Engineering, Tribhuvan University, Nepal, May 1987, Ten Year Development Plau for IOE, Institute of Engineering Consultancy Services, Kathrnandu, Nepal, September 1985. Maintenance Management Plan for Institute of Engineering, Tribhuvan University, Institute of Engineering, Project Preparation Unit, P.B. Shrestha; P.N. Marky September, 1988. Maintenance Inventory Work Report for Project Preparation Unit, 1988, Tribhuvan University, Institute of Engineering Pulchowk Campus. A Report on the Design Proposal for Pulchowk and Thapathali Campuses, September 1, 1988, PPU Institute of Engineering, Pulchowk, Lalitpur Reports and Proposal Drawings, Pokhara Campus Development Project Institute of Engineering, August 1988. Progress Reports on Rules and Regulations, Institute of Engineering, June 1984.  80. 82- 04 86. S 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -j0, /Y S > 4 < \NEPAL ! -f _ J > I > 8 ^ ^ ENGINEERING EDUCATION PROJECT ,*+t t FAR-ESTERN_ M WESTERN ,,; v .t<e T I ( 2 , | * r*~~~~~~~~~~~~~~~~ * *~~ Inslihdte of Engineering f~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~eeIpnn Reio So* md,_ e \ ( -. - ~~~~~~~~~~~~~~~~~~~~~~~~~~Admnistrative Zone 8@unWhies \ 2 . )_ ~~~~B H E R , _ <' -.-I.ow -.R A P T I G A N A KC v (s.6 * P ok howEsroRN Pkera A/ A I N . .r . *PuIchoY cam.s. s LUM aI NI Thop **l 4 IE A u e, I m p tf ,STERN / V ) 4 g '-- g - >< t K ( S I 20 40 so 80 IX .*Jt' q, KtiLOMSTKS A '-'-'- .. M.C 7h i.0d. *W 'v ta,Mw* t1 E W 8 o no Kwd SW* a _ p of * _. 11 80 T 6 ~ &W lt c 8A* a * 2 (M n 0 af $pS- adwo m -1 su* raeOIF b --dS so 0vbbtl6irar r_I ._  , trliutku Lizf .L n NEPAL ENGINEERING EDUCATION PROJECT Table of Contents Page No. BASIC DATA ........................................................... iii CREDIT AND PROJECT SUMMARY ........................................... iv I. ECONOMIC DEVELOPMENT AND DEMAND FOR SKILLED LABOk .... ......... 1 A. Economic Development, Employment and the Demand for Skilled Labor ......................................... 1 B. The 'ducation System and Issues in the Supply of Engineering Personnel ................................. 8 C. Government Policies in Education and Skilled Labor Development ..................................... 15 D. External Financing of Education and Skilled Labor Development ........................................... 16 E. IDA Strategy and Rationale for Involvement ................. 18 F. Previous IDA Lending Experience in Education ............... 19 II. THE PRO ECT .................................................... 20 A. Origin of the Project ...................................... 20 B. Project Objectives and Scope ............................... 20 C. Project Description ........................................ 21 D. Technical Assistance ....................................... 23 III. PROJECT COSTS. FINANCING AND IMPLEMENTATION .................... 24 A. Costs ...................................................... 24 B. Financing .................................................. 26 C. Project Management and Implementation ...................... 27 D. Environmental Impact ....................................... 32 E. Impact on Women ............................................ 32 IV. BENEFITS AND RISEKS ............................................. 33 A. Benefits ................................................... 33 B. Risks ...................................................... 33 V. AGREEMENTS REACHED ............................................. 34 This Report is based on the findings of an appraisal mission to Nepal in September/October 1988. Mission members included Messrs. Joseph Bredie (Mission Leader), Roland Bachmann, Gunnar Berg, Tom Coyle, Ian Morris and Robert Jourdain (Consultants). This document has a restricted distribution and may be used by re,ipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - TABLES IN TEXT 1.1 Numbers of Regular Government Employees by Grade and Class 1984/85 ......................................... 4 1.2 External Assistance to the Education Sector 1981/82 - 1986/87 ............................................... 17 3.1 Cost Summary .................................................... 24 3.2 Financing Plan Summary .......................................... 25 3.3 Procurement Methods ............................................. 27 ANNEXES 1. The Education System in Nepal 2. Economically Active Population 1971 and 1981 3. Engineering Manpower Demand and Supply Estimates 4. Technical Assistance Summary 5. Detailed Project Costs 6. Area and Unit Capital Cost 7. Implementation Schedule 8. Project Management and Implementation Capability 9. Improvements of the IOE Physical Facilities 10. Building Maintenance 11. Staff Requirements and Training 12. Managemen. and Administration of the IOE 13. Selected Documents in the Project File  - iii - NEPAL BASIC DATA POPULATION Estimate (1988) 17.5 m Annual Growth Rate 2.7X Average density 119 per sq km Literacy rate (1986) 34.81 GDP per capita (1987/88) US$160 ,EDUCATION School Enrollments Total Male Female 1 female (1987) (1,000s) (1,000s) (1,000s) Primary (grades 1-5) 1,912.5 1,327.8 583.7 31 Lower secondary (grades 6-7) 281.5 207.9 73.6 26 Secondary (grades 9-10) 278.0 209.9 68.1 24 Higher (2ost grade 10): _a Certificate 53.8 - - Diploma 21.9 Degree 4.7 - Public Lxpenditure on Education (1986-87) As a percentage of GDP 2.1 As a percentage of Total Public Expenditure 11.0 Percentaga of Approximate recurrent Education budget cost per student 1987/88 1986/87 Rupees US$ Primary 38 252 10 Secondary 13 362 15 Tertiary 25 5,981 245 Other Z4 /a Includes 17,372 studencs enrolled in private campuses.  - iv - NEAL ENGINEERING EDUCATION PROJECT Credit and Project Summary Borrower : Kingdom of Nepal Beneficiary : Institute of Engineering (IOE) of Tribhuvan University Amount : SDR 8.8 million (US$11.4 million equivalent) Terms : Standard with 40 years maturity Cofinanciers : The Canadian International Development Agency (CIDA) will provide a grant equivalent to US$3.95 million. The Swiss Development Cooperation (SDC) will provide a grant equivalent to US$8.53 million. Proiect Desexiption : The project aims to broaden the spectrum of engineering skills that will be available to the economy and increase the supply of engineers snd technicians. It will redress the current imbalances in the supply of engineering man- power, reduce the current shortages and meet the demand generated by the Government's investments in hydropower, infrastructure and industry. In order to meet about 90X of the projected demand and to train engineers and technicians specifically for Nepal's needs the project will: (a) expand the capacity of the IOE to train technicians from 1,370 to about 1,700 places and that for engineers from 360 to about 920 places through construction and rehabilitation of facilities at existing IOE campuses; (b) raise the quality of engineering education through training staff, improving curricula, providing educational materials and raising admission and examination standards; and, (c) improve management through strengthening the Office of the Dean, training managerial and administrative staff, developing a Management Information System and establishing a Manpower Development Unit. The project will be implemented over a period of eight years. To assist with the implementation, a total of about 175 study-years of fellowships and about 26 staff-years of visiting specialists will be provided. CIDA will finance a consortium of six universities to provide assistance with the expansion of the engineering degree programs and the improvements in management and academic affairs. SDC will finance construction, technical assistance for construction management, architectural services and maintenance, and technical assistance for the expansion and improvements of the certificate technician programs and for project monitoring.  Rlika : The project will assist in maklig the JOE the one institute in Nepal capable of offering B.Sc. degree programs in Civil, Electrical, Electronics and Mechanical Engineering, and in Architecture and Rural Planning, that meet international standards and are geared to Nepal's requirements. The IOE will also produce more technicians with skills tailored to the needs of the economy. Cost savings will be achieved by substituting locally trained engineers for higher paid expatriate ones and by lowe-ring the cost of training through increased class size and teaching loads and better utiliza- tion of staff and facilities. The major risk concerns the possibility of flagging commitment within the Government to carry through agreed reforms of management, staff regula- tions and accreditation by external examiners. To reduce this risk the Government agreed during negotiations to change strategically important academic regulations and appoint key management staff as a condition of effectiveness.  - vi - Prolect Cost: 1,ocal ForLwdz Total ------ (US$ million) ------- A. Facilities Development: Pulchowk 3.45 6.38 9.83 Thapathali 0.71 1.28 1.99 Pokhara 0.92 16 Subtotal La 5.08 8.72 13.80 B. Staff and Curriculum Development: Pulchowk 0.82 4.97 5.80 Thapathali 0.11 0.24 0.34 Pokhara P04.71 Subtotal /- 1.23 5.62 6.85 C. Management Development: Pulchowk 0.36 0.41 0.77 Thapathali 0.01 0.04 0.04 Pokhara .Q 0.06 Subtotal 0a 0.37 0.49 0.87 Baseline Cost 6.69 14.83 21.52 Contingencies: Physical 0.58 1.21 1.80 Price 04 1.74 2.68 Total Project Cost /a /b 8.21 17.79 26.00 Financing Plan: Local Forei Total -(US$ million) - Government 2.11 - 2.11 CIDA - 3.95 3.95 SDC 3.35 5.19 8.53 IDA i.7 8.6 11.40 Total Q 17.79 26.00 Estimated Disbursements: IDA FY 1990 1991 1992 1993 1994 1995 1996 1997 ---------------------- US$ million ------------------ Annual 1.20 2.18 3.50 3.28 0.48 0.46 0.26 0.04 Cumulative 1.20 3.38 6.88 10.16 10.64 11.10 11.36 11.40 Economic Rate of Return: Not applicable. flg: IBRD No. 21597 La Figures may not add due to rounding. 1k Includes US$0.95 million in identifiable taxes.  NEPA ENGINEERING EDUCATION PROJECT I. ECONOMIC DEVELOPMENT AND DEMAND FOR SKILLED LABOR A. Economic Development. Emloyment and the Demand for Skilled Labor Economic Development 1.1 Nepal's per capita GDP of US$160 places it among the very poorest countries in the world. Despite developmental efforts over the past two decades, sustained growth of per capita GDP has not been achieved. During the Sixth Plan (1980-85) there was a surge in public expenditures aimed at accelerating the pace of development by improving the provision of social and economic infrastructure together with an expansion of the already considerable government involvement in productive activities. This response to lagging economic growth was not sustainable because of: (i) the ensuing large budget and current account deficits (the latter resulting in a substantial fall in international reserves); (ii) weaknesses in public administration; and (iii) shortages of skilled labor. 1.2 In 1985, the first year of the Seventh Plan (1985-90), His Majesty's Government (H1MG) implemented a fiscal stabilization program supported by an IMF Standby Arrangement. Together with both the IMF and the World Bank, it began implementing a concerted Structural Adjustment Program (SAP) in 1986 to address a range of longer-term constraints to growth. Simultaneously, the Government also launched an ambitious Basic Needs Strategy (BNS) aimed at alleviating poverty and reaching "Asian Standards of Living" by the year 2000. As a result of these policies economic performance has improved. During the last three years GDP is estimated to have grown at over 4Z per annum despite erratic weather in 1986-87 which resulted in drought followed by floods which damaged transport and irrigation facilities. Over the ten years prior to the SAP (1974-85) GDP had averaged 3.81 growth. 1.3 Sustained longer-term growth will depend on a range of important factors including: (i) a continued sound policy response to changing macro economic conditicns (including continued constraint on regular budget expen- ditures); (ii) appropriate economic and social infrastructure investments designed to support growth (particularly in the agricultural sector and sectors which support agriculture); (iii) continued efforts to improve general public administration and the efficiency of institutions supporting the development effort; and (iv) continued investment in human resources designed to raise the general level of education and reduce specific technical workforce constraints. 1.4 HMG efforts to address these development problems have been reflected in the sectoral allocations of the development budget in the Seventh Plan. Considerable efforts have been made to both rehabilitate existing irrigation facilities and extend the capacity of the irrigation system in order to reduce the dependence of agricultural output on the timing of the monsoon. Efforts have also been made to improve the level and quality of other direct inputs to  - 2 - the agricultural sector and to improve and extend the transport system by the continuation of a significant roads and bridges infrastructure program. Hydropower investments have also been made. The emphasis on these sectors in the Seventh Plan have been reinforced by the 1988-89 budget allocations. The development budget has been increased by 50X to NRP 13.4 billion. In the key economic sectors, irrigation's allocation was increased by 1401 to NRP 1.7 billion; road allocations were expanded 901 to almost NRP 2.0 billion and ag-iculture by 80% to reach NRP 1.4 billion. Further, with the support of major donors, the Government has agreed on the Arun III hydropower project (402 MW) as the appropriate next investment in new generating capacity to meet Nepal's demand for power. This project, to be commissioned in the late 1990s, would increase Nepal's production of power by more than 200X. The plans for the key sectors are ambitious but they will contribute to maintaining current GDP growth rates. They will also have important implications for the demand for skilled labor. The expansion of Nepal's basic economic infrastructure included in the plan will moreover require a commensurate expansion of the country's capacity to maintain its infrastructure in terms of both financial resources and skilled labor. population. Labor Force and Emplovment 1.5 The 1981 census indicated that Nepal's population increased by 301 to 15 million over the decade 1971-81 and the annual rate of population growth over this period was 2.66%. The population was comparatively young as indicated by the fact that 41% was aged 14 years and below. Official estimates of the labor force are based on the population aged 10 years and above which was 10.5 million in 1981. The economically active population was estimated at 6.9 million, with a male participation rate of 83% and a female participation rate of 46%. Over the decade 1971-81 the economically active population increased by 2 million or at about 200,000 per annum. Nepal's population is currently estimated at 17.5 million and is growing at about 2.7% per annum. Even under the most optimistic World Bank population projection scenario, total population is expected to be more than 24 million by 2000 and about 30 million 10 years later. This momentum of population growth has profound implications for the future growth of the labor force. Optimistic World Bank projections of the labor force (defined here as 100% of males and 60% of females aged 15-59 years) indicate that it will reach 10.3 million in the year 2000 (1985, 6.7 million) and the growth will be about 600,000 per annum. 1.6 Nepal is essentially an agrarian society. Agriculture contributed 57% of GDP and employed 91% of the workforce in 1981. Of the non-agricultural sectors of the economy, community services (dominated by Government) accounted for 7% of GDP and 4.6% of employment; and commerce for 3.5% of GDP and 1.6% of employment. The non-agricultural sectors combined accounted for just over 30% of GDP but less than 3% of employment. Manufacturing and construction which accounted for 11% of GDP employed less than 1% of the workforce. The National Planning Commission (NPC) anticipates that employment in agriculture will grow at 3.5% and in the non-agricultural sectors by more than 8% per annum to the year 2000. These rather optimistic projections of non-agricultural employment growth still imply that agriculture would absorb about 81% of the economically active population by the year 2000.  - 3 - 1.7 Although currently reported unemployment rates are low (some 51 of t'he workforce) there is substantial underemployment particularly in the agri- cultural sector. Underemployment has been estimated at 41X of person-days available in rural areas and some 25X in urban areas. The BNS recognized this and paid special attention to the alleviation of unemployment and underemployment. A range of measures is being adopted to support the expansion of employment in all sectors. The measures include formal consideration of the employment implications of macro-economic decision- making, the expansion of irrigation facilities (but with a shift in emphasis toward smaller, less capital-intensive schemes), and an emphasis on labor- , intensive crops (foodgrains, sugar cane, tobacco) with multiple cropping where possible. OccuRational and Educational Profile of the Laborforce 1.8 The occupational breakdown of the laborforce shows that in '.981 only 600,000 of the economioally active population were engaged in non-agricultural occupations (see Annex 2). Professional and technical workers accounted for less than 11 of the laborforce (64,000) or about 111 of those engaged in non- agricultural occupations. About 36X of professional and technical workers had a tertiary education and the largest proportion of tertiary-educated persons were found in administrative occupations (611 of 6,200). Persons with a primary education or less are predominant in all other occupational groups. 1.9 Government is the single largest wage sector employer in Nepal. In 1985, total publ4c sector employment was about 203,000 made up as follows: civil service 61,000, education 80,000, casual workers 22,000 and public sector enterprises 40,000. (The first year of the Seventh Plan - 1985 - is the latest year for which reasonably comprehensive data on employment is available and is used here only as an order of magnitude estimate.) The number of regular civil service employees by grade and employment class for 1984-85 is shown in Table 1.1. The importance of educational qualifications required for civil service employment is evident. The minimum qualifications appears to be the completion of lower secondary (grade 8 pass). Almost 851 (45,059) of the regular government employees have completed secondary or higher education programs. HMG now requires that all school teachers have the School Leaving Certificate (SLC) and the Ministry of Education and Culture is not renewing the contract of teachers without this qualification.  -4- Tablg 1.1: NUMBERS OF REGULAR GOVERNMENT EMPLOYEES BY GRADE AND CLASS 1984-85 Class Entry Oualifications Numbers Gazetted Special 43 I 511 II 1,788 III Bachelor Degree 8.083 Total 8,425 Nongazetted I Proficiency Certificate 14,039 II School Leaving Certificate (SLC) 22,595 III Grade 10 pass 10,580 IV Grade 8 pass 5.559 Total 52,773 Source: Strategies for National Manpower Development in Nepal. ILO, Kathmandu, 1986, p. 94. Shortages of Technical Labor 1.10 The development effort in Nepal with its emphasis on a reduction of unemployment and underemployment through support for the agricultural sector and the establishment of basic economic infrastructure for the development of other sectors has been constrained by skilled labor shortages. Skill shortages together with inadequate manpower planning and associated inefficiencies in labor force utilization have been a major contributing factor for the delays experienced with the implementation of development projects in all sectors of the economy. The skill shortages or in many sectors skill imbalances result from the traditional concentration on civil engineering occupations in manpower planning, training and public sector employment to the detriment of the needs for mechanical and electrical engineering personnel in the water resources, power and communication sectors. Evidence collected from project managers indicates that shortages of trained engineering personnel tend to thwart efficient and timely execution of projects in these sectors. The lack of skilled engineering personnel has also been one of the principal reasons for the poor maintenance of infrastructure and capital equipment. More generally, technical skill shortages throughout the economy have constrained growth and expansion of employment opportunities. 1.11 While it is difficult to build up a comprehensive picture of the skilled labor market in Nepal because of a lack of basic employment and labor market data, available indicators strongly suggest that there are severe shortages of skilled personnel--particularly engineering/technical personnel.  (An important element of the present project - the Office of Manpower Development - is expected to significantly improve information available for technical manpower planning.) In 1981, for example, 27X of paid employment in the industrial sector (74,000 workers) were expatriates, many at the supervisory level. Within the Government sector many technical posts (Gazetted and Non-gazetted), which are important to the implementation of key development projects remain unfilled. In 1981, the National Planning Commission (NPC) reported a shortage of middle and higher level professional and technical workers of about 201 of the available stock. Amongst these, the greatest shortage (641) was reported for engineers. NPC estimates of technical and professional workforce shortages at the start of the Seventh Plan (1985) indicated that shortages had risen to 301 of available stock. 1.12 A range of labor market indicators confirm official estimates of skilled workforce shortages. A sample survey of university graduates in 1983 indicates that 771 of all employed graduates got their job within 6 months (only 4.3X took more than 1 year). While the level of unemployed graduates was almost 24X of the sample, the vast majority were graduates of less than two years standing. Further, 861 of the unemployed had a non-technical education while only 14X had a technical/vocational qualification (agriculture, engineering and education). Of the unemployed group, 301 were graduates of the Institute of Commerce and Management, and 141 were from the Institute of Science and Technology. 1.13 A more recent survey of 15 firms (public and private) with almost 3,000 employees indicated that: (i) all but three firms had trouble finding technical personnel particularly medium and high level technical personnel (ii) thirteen firms expressed the need for further improvement in the skills and knowledge of their employees particularly in the mechanical and electrical areas; and (iii) technical personnel received more salary even though their years of schooling were equal to that of non-technical personnel. Inducements were usually given in the form of housing and dearness allowances and through higher grading of staff. Employers agreed that they needed to do this to keep experienced workers (in the face of high demand). Recruitment of skilled personnel by firms is usually through advertisement--at least for permanent posts. An analysis of responses to advertisements in a sample of firms indicated that: (i) significantly more applicants apply for non-technical posts; and (ii) the level of over-qualified graduates applying for posts is significantly less for technical posts. 1.14 The most recent data on pressures in the labor market for technical personnel confirms earlier trends. During the first three years of the Seventh Plan (i.e. 1985-88), HMG has approved and financed 330 degree level engineering posts in the civil service (a 151 expansion in the total stock) and 1,012 certificate level posts (221 expansion). An NPC review of these new posts in July 1988 indicated that 20% of both categories were unfilled apparently because of a lack of supply. These figures do not cover posts existing at the start of the Seventh Plan and it is estimated that there is an overall vacancy rate of 111 for degree level posts and 121 for certificate posts within the civil service (Annex 3). 1.15 The apparent shortage of engineers and technicians is a reflection of Nepal's past inability to develop an appropriate stock of technical personnel The actual proportion of engineering personnel in the economically active population is smaller than in other countries in the region. Nepal currently  -6- has about 2,700 engineers and 5,500 technicians. This is about 0.9X of the economically active population in the non-agricultural sectors. This level is extremely low compared to Bangladesh where 3.8% (1981) of the modern sector labor force was comprised of engineers and technicians, of which 35X were university graduates. Projected Demand for Engineering Personnel 1.16 The current shortages of engineering personnel are expected to increase according to projections prepared by the NPC. The projections are based on the investment program of the Seventh Plan (1985-90), the workforce required by public sector agencies to manage planned investments, and the need of the private sector. They indicate that the demand for engineers would increase by 9.81 per annum during the plan period and technicians by 11.31 per annum. According to the Mid-Term Review of the plan (1985-88), realized (effective) demand has grown at 4.81 for engineers and 6.91 for technicians although the number of posts being approved in the engineering cadre by the central agencies of HNG has been constrained by concerns over the lack of supply of engineering personnel. Earlier projections made in an 1983 engineering personnel study estimated that the demand for engineers and technicians would grow at 8X and 9.21 respectively per annum. iowever, these projections were based on an annual average rate of expansion of the public sector engineering cadre of 8.31 between 1978-83 and a projected rate of expansion of government expenditure in excess of 131 per annum over the period 1983-95. 1.17 Having reviewed available information on (a) the labor market for engineering personnel, including the small but growing private sector demand; (b) the most recent and prospective performance of the economy; (c) the ability of the government to mobilize domestic revenues and finance public expenditures; and (d) government priorities for infrastructure investments and support of the BNS, the mission has estimated that the effective demand for engineers will grow at about 41 per annum over the period 1988 to 1992 and 3.5% to the year 2000, while that for technicians would grow 41 over the period 1988-2000. (See Annex 3 for a more detailed discussion of engineering manpower projections.) Type of Engineering Personnel Required 1.18 The nature of the development effort means that Nepal requires technical personnel in the four basic engineering disciplines: civil, mechanical, electrical, electronics and in architecture and rural planning. In 1983, the public sector stock of 1,890 engineers was broken up as follows: 66X civil, 61 mechanical, 101 electrical and 18Z other (survey officers, electronics; telecommunications; aeronautical, mining, chemical and mstallurgical engineers). While this distribution reflects in many ways the nature of the past development programs in Nepal, it has also been influenced by the nature of the past supply position which has not accurately reflected either the past or present demand position. Further, the nature of technological change throughout the formal sector is having an important impact on trends in the demand for technical personnel and is expected to raise the demand for electrical, electronics and mechanical engineers in relation to civil engineers. Indications of this are evident from a number of  -7- observations. For example, the World Bank projects that the domestic demand for power will grow by 9-12X per annum, largely as a result of growth and changes in technologies of production and consumption. (NeDal Power Subsector Review. The World Bank Report No. 68792-NEP, January 15, 1988.) Also, while there are no immediate plans to undertake large scale public sector telecommunications investmenta, there has been significant growth in local area networks as the formal business sector strives to reduce the transaction costs of doing business. Given these developments in power and communications, the demand for electrical and electronic engineering personnel is expected to grow significantly. 1.19 Further, while it is not currently fully reflected in the budget, there is a clear need to increase allocations for the maintenance of public sector assets. Economic infrastructure assets--particularly in agriculture- -must be maintained and extended. Continuing improvements in the productivity of agriculture will also involve considerable expansion of agricultural industry inputs. For this to happen, transportation, infrastructure and services must also be maintained and extended. This will require technical personnel in electrical and mechanical engineering presently not available. 1.20 A review of the labor market also indicates that the technical skills need to be better tailored to the requirements of Nepal. Employers have generally been satisfied with the technicians trained in Nepal but the Government--the major employer--has not been satisfied with the quality of many (particularly degree level) graduates who have returned from training overseas. In many cases accreditation of these graduates has been a major problem--particularly those from programs in eastern Europe. While there is clearly a common core of technical knowledge in basic engineering programs, there are country-specific considerations which need to be taken into account in designing a national curriculum. These include: the educational background of students entering the programs; the specific range of technical skills required in Nepal on the basis of existing work practices; the nature of engineering problems given Nepal's topography; and the range of engineering tasks being undertaken as part of the national development efforts.  - 8 - B. The Education System and Issues in the Sumgly of Engineering Personnel Overview 1.21 The formal educational system of Nepal is managed by the Ministry of Education and Culture (MOEC) and provides for five years of primary education; two years of lower secondary education; and three years of (upper) secondary education. A national examination--the School Leaving Certificate (SLC)--is held at the end of grade 10 and is a minimum requirement for entry to tertiary studies and for most career positions in the public service including the teaching service. The largely autonomous multi-campus Tribhuvan University (TU) is responsible for all tertiary education except Sanskrit education which is provided by the Sanskrit University created in 1987, with an enrollment of under 500 students. The academic program covers a wide spectrum of subjects. Individual programs range from two to eight years but the majority of students (65Z) are enrolled in Proficiency Certificate programs usually of two years' duration. 1.22 The period from 1971 to the mid 1980's has been characterized by rapid quantitative expansion at all levels of education. Total education enrollments of about 0.5 million in 1971 had expanded to 2.4 million students in 1987-88 attending about 17,500 schools and educational institutions throughout the country. Currently, there are 1.9 million students at the primary level (301 female); 281,500 at the lower secondary level (261 female) and 278,000 at the secondary level (251 female). These advances have been the result of expanding public sector support for the education system together with strong social demand and considerable efforts to enhance the mobilization of private finance for education. Despite the rapid increase in enrollments, overall literacy rates are still low at 351 (52X males, 181 females) and female enrollments are lagging. 1.23 In 1985, National Planning Commission data indicated that the gross enrollment ratio was 82X for the primary age group (521 female); 311 at the lower secondary level (191 female), and 201 at the secondary level (121 female). As a result of using different population estimates, the primary age group figure used by MOEC for 1985 is 771. Net enrollment ratios are expected to be significantly lower. However, the rate of expansion of the primary education system since the mid 1980s has been less than the rate of population increase indicating that the gross enrollment rate may decline and improvements in literacy rates achieved in the past decade stagnate. Expansion of enrollments at the secondary level may increase modestly in the near future. University enrollments have increased to about 82,500 (including 17,372 private campus students) by 1988. The rate of increase has been 81 per annum since 1982. The increase has been largely in private campuses, the growth in public campuses has only been 3.81 over the same period. This rapid growth in enrollments has been driven by a strong private demand for tertiary education. A lack of strategic planning for labor force needs in the economy has resulted in current enrollments being very skewed with humanities and law having 481 of students and management 231 while engineering with 31, medicine  - 9 - 2X, and agriculture/forestry 21, account for a relatively small share of total enrollments. The Institute of Engineering 1.24 Engineering education is provided by the Institute of Engineering (IOE) of the University. It provides proficiency level studies (which are of three years' duration) in a range of engineering subjects and a bachelors level degree program (of four years' duration) in civil engineering for students with a proficiency certificate in either science and technology or engineering. The IOE is also responsible for a small trades' program which is part of the technical educacion system. The system of technical schools at the secondary level is largely the responsibility of MOEC. Moreover, other Ministries provide specialized and lower-level technical education programs. 1.25 The IOE has three campuses, Pulchowk (the main campus) and Thapathali in Kathmandu and Pokhara in the Western Region. It had an errollment of 1,727 students in 1988 of which 21Z are degree level students, 701 certificate level and 91 trades level. Students are being prepared primarily for jobs as civil works overseers, mechanical, electrical and electronic supervisors, refrigeration and air-conditioning technicians, architectural draftsmen and civil engineers. Currently the IOE is graduating about 300 technicians each year at the three campuses. The degree program in civil engineering was developed (largely in response to demand by donors involved in the financing of Nepal's infrastructure program) at the main campus at Pulchowk and has a capacity to graduate about 55 annually. The IOE also trains about 100 craftsmen in a one-year program for the Western Region in Pokhara. Recently HMG has decided that the training of craftsmen will be transferred in the mid 1990's to MOEC as part of reforms in technical and higher education. 1.26 Past investments in the IOE provide a basis for the expansion of engineering education in Nepal. Existing programs are the result of a series of efforts over a number of years designed to meet labor market requirements. These efforts have met with mixed success. Capacity has been expanded but not sufficiently to meet the demand. Curricula have been upgraded several times in cooperation with engineering specialists and major employers but without inputs from comprehensive job analysis. A range of factors impinge on the design of programs and on the ability of the IOE to meet future skilled workforce needs. These include academic, capacity and managerial constraints which are discussed below. The Strong Demand for Engineering Education 1.27 The demand for engineering education is strong and is expected to increase with the projected growth in qualifying students. In 1988, the number of students applying for a seat in the IOE's engineering education programs was about ten times larger than the admission capacity. For the technicians program admission requires completion of secondary education (Grade 10) and passing of the SLC examination. Approximately 50,000 students  - 10 - were enrolled in Grade 10 in 1987. About 49,350 of these sat for the SLC and 17,200 or 35X passed the eram. Students who fail the SLC may sit for it again (without repeating grade 10) in later years. This adds significantly to the total potential supply of SLC graduates wanting to enter the university. From those who passed, about 4,560 applied for the 528 seats available in the technician programs at the IOE. Admission to the civil engineering program currently requires a Proficiency Certificate in Engineering (PCE) from the three-year IOE program or a Proficiency Certificate in Science (PCS) from the two-year science and technology programs. More than 5,300 students are enrolled in the science and technology program and about 1,200 in the engineering program. In 1988 there were more than 800 applications for the IOE's civil engineering degree program (total 72 places in 1988) comprising 500 from a PCS program and more than 300 from the PCE program. The strong demand for degree level engineering education is expected to continue, particularly from the ranks of science and technology graduates. Students from the PCS programs express a strong preference to enter either the medical or the engineering degree program. Given the strong demand the IOE will continue to have a sufficiently large pool of applicants even if it would increase its admission capacity by 50X as is planned in this project. Academic Background of Students and Admissions 1.28 Admission to certificate programs is competitive and based on the applicants' academic background. There is no separate entrance test to determine aptitude for technological courses. Admission requires: (a) a pass in all nine SLC subjects; (b) an average of 601 in maths and English; and (c) an average for all SLC subjects plus maths and English score of 501 or more. Specific requirements above a pass are not made for science. The quality of students particularly their proficiency in mathematics, science and English tends to be inadequate and is one of the factors responsible for the low pass rates at examinations and the high examination repetition rates within the certificate program. Currently students who fail examinations do not retake courses but progress to the next semester and subsequently retake examinations of previous semester courses until a course is passed. This phenomenon is known as backsitting and implies that there are no pre-requisite courses in the certificate programs as presently constituted. Few SLC holders achieve high scores in science and mathematics which are optional subjects within the secondary school curriculum because of the lack of science and mathematics teachers, books and materials in the schools. However, the ADB currently has a project focused on improvements of science education in secondary schools. While the IOE gives priority to students with the appropriate background, with the current admission standards it is necessary to teach remedial programs (particularly in science) to bring student understanding up to the level required for the PCE program. The extent and scope of remedial requirements in the curriculum needs to be reviewed in the context of an overall review of the curriculum content based on analysis of job requirements in the economy. The admission standards and the effectiveness of remedial programs also need to be improved, and with the assistance of IDA, the IOE is establishing a computer based facility to teach remedial science, mathematics and in the future, English.  - 11 - 1.29 Admission to the civil engineering degree program is divided 50/50 between applicants from the PCS and PCE streams and is based on achievement at the proficiency certificate exam (50X) and the result of an entrance test (501). The IOE administers separate entrance tests for candidates from the two streams. The test for candidates from the PCS program focuses on Science and English while for candidates from the PCE program it focuses on Engineering and English. The pass rate in both tests is 30X but the standards in the PCS stream appear to be more clearly defined and more appropriate for degree level engineering education than that for the PCE stream. From an analysis of the PCE program curriculum it is also evident that the science content is significantly lower than in the PCS program. In addition, applicants from the PCE stream may have graduated several years earlier from courses significantly different from those currently taught. To rectify this situation, the IOE adjusts the nature of the entrance exam according to the specific year(s) the student studied at the IOE. Two separate merit lists are produced to fill the available number of places according to the 50/50 quota. Thus students with very different academic backgrounds enter the civil engineering program. The current entrance test do not adequately evaluate applicants in areas crucial to success in the degree program. These include aptitude in engineering, communication skills, and above average knowledge in mathematics, physics and chemistry. As a result, marny students admitted under the current admission procedures are weak particularly in the latter three subjects. The appropriateness of the present admission standards need to be reviewed in the light of the objectives of the degree program. Enrollment of Women 1.30 The IOE reserves 101 of student places for women but has difficulty filling this quota. Of the 4,560 applicants for certificate programs in 1988, only 69 were women. The quota was 53. That same year there were only two women among the first 24 on the merit list for the degree program in civil engineering. There are presently 111 female students (6.41 of the total) enrolled in IOE programs of whom 104 are in the certificate programs, i.e., almost 101 of enrollments in the certificate program are women, with a much higher proportion being enrolled in architecture. Very few women appear to seek a career in the areas of mechanical or civil engineering. In the civil engineering degree program which has an enrollment of 237, only five students are women. The lack of appropriate accommodation for women at the IOE has often been cited as a constraint to enrolling more women. Curriculum 1.31 The curriculum for the technicians programs at the IOE has been revised several times. In 1986, the length of all technician programs was extended from 2.5 to 3 years. The past revisions have not been based on actual surveys of job requirements and work practices in either the public or private sectors. The current curriculum content emphasizes classroom instruction which takes up 811 in the first year and 601 in the second and third years. Relatively little time is spent on technology applications, workshop experience and skill development. This would not seem to be consistent with the changing nature of many of the jobs for which technicians are recruited. There is strong evidence to suggest that improved understanding of technology applications and enhanced technical/manual skills  - 12 - would improve the external efficiency of current programs. This would require a structural change in the curriculum by increasing the time spent in laboratories and workshops. The curriculum would also be enhanced by allocating more time to maintenance and repair issues. Presently, many of those responsible for curriculum development, as well as many students in the certificate programs, see the program as preparation for subsequent degree studies in engineering. The guiding force for the technicians programs should, however, be to satisfy requirements for the labor market not to serve as a preparation for degree programs whose entry requirements demand among other things high proficiency in science, mathematics and English. 1.32 The civil engineering degree program generally reflects patterns typical of accredited programs in North America. It has a satisfactory content in basic sciences e.nd engineering sciences but does not sufficiently cover the relevant civil engineering subjects. The deficiencies in civil engineering subjects are caused in part by a lack of appropriate laboratory facilities. The curriculum adequately covers the particular engineering requirements of Nepal. Periodic analysis of trends in employment and technology should continue to guide further enhancements of the program. Pressures to lower curriculum standards and admit students not sufficiently competent in the basic sciences and mathematics should continue to be resisted. Examinations 1.33 The format and procedures for performance evaluation of students have received considerable attention at the IOE. Final course grades comprise two elements. First, students must pass an internal course assessment which accounts for 20X of the final grade. Second, a final three-hour closed book examination accounts for 80X of the final grade. An important problem with the current student evaluation process--particularly at the technician level- -is that not enough attention is paid to practical or skill related aspects of the curriculum which cannot be examined under current procedures. Academic Regulations 1.34 The present IOE regulations do not specify prerequisite or co-requi- site courses. Students failing a course are permitted: (a) admission to subsequent semester courses; and (b) an unlimited number of attempts at passing failed courses by repeating final exams which are scheduled annually. There is no time limit to graduation in a program (para. 1.28). These procedures are recognized as undesirable from an educational standpoint. A set of academic regulations is needed which would ensure that only academically qualified students can progress from year to year, and that realistic time limits are specified for graduation. Competence of Staff 1.35 There is an adequate supply of qualified staff within the IOE (Annex 11). Many are highly qualified academically--particularly those currently involved in civil engineering and architecture. The majority of staff are involved in the teaching of certificate programs. Their technical  - 13 - and professional engineering experience appears to be limited. It is also necessary to improve the attitudes of staff towards the principal function of the IOE--teaching. The observed lack of motivation to perform teaching duties appears to be related to the cumbersome administration and the highly centralized management of the IOE. Instructional Materials 1.36 There is an inadequate and in some cases inappropriate supply of instructional materials and consumable supplies at the IOE. This is particu- larly evident in laboratories and workshops supporting the technician program where consumable supplies and parts are lacking. The current supply of text- books, teacher guides and learning materials to support the curriculum is also inadequate and complicated by the fact that many students are not strong in English. Teaching staff in the technician program need to provide lecture notes and handouts often in both Nepali and English. The IOE has a range of audio visual aids but these are not being used regularly since many classrooms are not equipped for their use. On the other hand, the civil engineering program has an adequate supply of textbooks and reference materials within the library, but there is no campus bookstore to supply students with affordable and appropriate textbooks for private use and to keep for their professional working life. Capacity Constraint 1. 37 The current capacity in Nepal to train engineering personnel is inadequate in terms of student numbers and enrollment distribution particular'y at the degree level. Nepal is almost totally dependent on overseas training for its engineers. Since 1986 the IOE has had a capacity to produce about 55 civil engineers annually. At full enrollment in 1990, the output would increase to about 88. But in the other three basic areas of engineering -- electrical, electronic and mechanical -- and in architecture and rural planning, Nepal remains completely dependent on overseas training. The number of degree level graduates being trained overseas presently is insufficient. Moreover, the opportunities at good quality engineering institutes in the region are diminishing because of the high indigenous demand for engineering education in these countries. Further, donors have been expressing reluctance to continue to finance the high cost of overseas training for engineers. 1.38 The annual number of engineering fellowships has steadily declined from about 130 in 1980 to less than 90 in 1987. However, a small number of students obtain privately financed engineering education in the region. A number of problems have been identified with overseas training which affect the efficiency, quality and cost effectiveness of continued reliance on overseas training to meet labor force ,.equirements. Specifically: (a) studies overseas are often prolonged because of language proficiency requirements; (b) qualifications from certain countries are not fully recognized in Nepal; (c) few foreign programs currently available focus on the nature of engineering problems faced in Nepal particularly in the areas of hill irrigation, suspension bridges, hydropower, water supply management and mountain road construction; and (d) overseas training is costly relative to domestic training. The current operating cost per student per year at the IOE  - 14 - in 1987 was NRP 10,137. The average cost of regional fellowships in the region is NRP 27,000 and in North America or United Kingdom it is of the order of NRP 206,000 per year. Academic Management and Administration 1.39 As an Institute of Tribhuvan University, the IOE is subject to the rules and policies under which the University operates. Tribhuvan provides highly centralized management control for 69 campuses all over the country. While university enrollment has tripled between 1975-85, the management organization has not developed at the same pace and Tribhuvan is finding it difficult to provide adequate management support for all campuses and institutes. Recently, the Univarsity :ias begun to delegate some management responsibilities to the technical institutes including the IOE. However, the present management structure vI the IOE tends to concentrate decision-making regarding academic affairs at. "dministration in the Dean's Office. Considerable delegation of decision-making to department heads, separation of academic and administrative functions, an effective advisory role for staff, and a management structure which encourages academic leadership are needed if the IOE is to take on more management responsibilities. 1.40 The primary function of IOE is teaching. To support the teaching function there is a need for effective administration of key areas including budgeting, staffing and support services. A lack of appropriately skilled personnel for administration, particularly in plant and facilities maintenance, purchasing and stores, record keeping, data collection and analysis and management information, hampers the development of effective administrative support in the IOE. Financing Education 1.41 Since 1971 the share of public expenditure on education as a propor- tion of GDP has risen from less than 11 to 2.1X in 1986-87. The share of education in total government expenditure has remained constant at around llX for more than a decade. The largest determinant of resources available for the further development of education in Nepal (given the poverty of the majority of the population) is the potential to expand public resources devoted to education. Historic trends and the long-term domestic resource mobilization outlook indicate that the public budget is unlikely to grow significantly faster than the economy; and competition for budget resources from other Government programs would seem to indicate that the share of education in the budget is unlikely to iLcrease significantly without a conscious change in public expenditure policy. This implies that the public resources available for education are likely to grow at a rate largely determined by the performance of the economy. Most recent Bank projections suggest GDP will grow at 4.51 per annum over the period 1988-92 and that public expenditure will expand at a slightly higher rate. 1.42 The BNS has placed strong emphasis on the achievement of universal primary education and there is a strong private demand for secondary and university education. Thus, there will also continue to be strong competition for resources within the education sector. In 1987-88, NRP 1.6 billion was allocated to education. The share of the budget allocated to primary  - 15 - education has been expanding since 1980-81 and has risen from 26Z to more than 401 in 1987-88. The share of the budget allocated to secondary education has fallen from 18.51 to 13.21 over the same period. Enrollments have continued to grow as a result of private financing of secondary education. The share of the education budget devoted to the University has also fallen significantly during the 1980s from 351 to 23.4X in 1987-88. The IOE's budget accounts for 5.21 of the University's budget and 1.21 of the education budget. There are no private campuses providing engineering programs. 1.43 The IOE's total budget in 1987-88 was NRP 19.7 million with a recur- rent budget of NRP 15.8 million. The average recurrent cost per student per year in 1987 was NRP 10,137 or US$417.2. Measure.; planned by the IOE to improve efficiency would reduce the unit cost to NRP 9,527 (US$392.0) by 1996. This level of unit costs is low compared to the unit costs of secondary (basic) level technical education programs in Nepal where unit costs of between US$399 and US$655 have been calculated for the year 1985. C. Government Policies in Education and Skilled Labor Development 1.44 HMG has recognized the potential development benefits from investment in education and labor force development. Specifically, HMG has emphasized primary education while also devoting resources to secondary, technical/ vocational education and higher education to meet the skilled labor force requirements of the economy. The rapid quantitative expansion of the education system was a result of Government efforts, particularly the imple- mentation of the National Education System Plan in 1971 and the acceptance of responsibility for a significant share of the financing of education beginning in 1975-76. Primary education and textbooks for grades 1-3 are now provided free of charge, although communities remain responsible for school buildings and a large proportion of additional materials required by schools. In secondary education HNG provides grants for 751 and 501 of teacher salaries at the lower and upper levels, respectively. The rest of the funds are to be raised from students fees and the local community. In higher education, which is financed for more than 95% by the government, the emphasis is to expand the output of engineering, medical, agricultural and forestry graduates. 1.45 HMG's specific targets for the education sector are reflected in the Seventh Plan and with respect to the longer-term development of primary education in the BNS. The Seventh Plan has a target of achieving a gross enrollment ratio at 87% for primary schools by 1990 (82% in 1985). With the launching of the BNS, HMG has decided to provide universal primary education by the year 2000 and expand the currently modest adult literacy program. While the targets of the BNS are overly ambitious (enrollments of boys would need to expand 64% and girls 2411 over the period 1985-2000 and the primary education budget would need to expand at about 7% per annum), the direction of the policy thrust is sound. 1.46 At the secondary level, the Seventh Plan proposes to integrate the two levels of secondary education and increase enrollments. Gross enrollment ratio targets have been specified for lower secondary and secondary at 451 and 351 respectively. This is to be achieved by encouraging the establishment of new schools and the expansion of existing schools. HMG is also concerned about the quality of secondary education which provides the foundation for  - 16 - both higher level education and employment. Specific efforts are being made to reduce the number of untrained teachers and improve the quality of science education. 1.47 The MOEC is implementing plans for the future development of vocational/technical education. The existing seven technical schools under MOEC have a capacity to train no more than 835 students. With the support of the ADB, HNG is planning to construct four new schools to improve the regional coverage of technical education (currently biased towards Kathmandu Valley) and meet basic level labor force needs. The primary emphasis for higher education as reflected in the Seventh Plan is to (a) improve quality by strengthening the existing campuses of the University; (b) expand the capacity and range of offerings of the technical institutes in line with skilled labor force requirements; and (c) encourage the private provision of university level programs under the general umbrella of the university. D. External Financing of Education and Skilled Labor Development 1.48 A number of donors have been active in supporting education. The flow of external assistance to the education sector has expanded significantly from 9.51 of total expenditure in 1975 to 17.91 in 1986 but fell to 13.31 in 1987. Over the six-year period 1981-87 more than 16% of education expenditures and about 201 of development expenditure was financed by external assistance as shown in Table 1.2. Loan assistance, wnich only began in 1978-79, has grown considerably and in 1986-87 it was significantly larger than the grant aid but grant aid remains the most important component in the 1980's constituting about 571 of total external assistance disbursements. 1.49 Each level of education has several donors involved. Co-ordination between donors is however not very strong partly because of HMG's preference to deal with donors incividually and partly because of the absence of a strong public expenditure planning system which can focus individual donor activities. The local UNDP office has taken a major interest in co-ordinating the donors in the sector. IDA with its expanded involvement in the sector will continue to work with HMG and donors to improve the effectiveness of assistance to the education sector. IDA is in the process of finalizing an overall strategy for its involvement in the social sectors.  - 17 - Table 1.2: EXTERNAL ASSISTANCE TO THE EDUCATIOW SECTOR t1981/82-1986/87) NRP million 1981/82 1982/83 1983/84 1984185 1985/86 1986/87 Total expenditure 519.1 734.0 815.8 825.8 1,087.0 1,278.8 Devetopment expenditure pj 412.3 604.6 678.6 644.2 879.4 1,036.5 Aid disbursements: Loan 27.1 27.4 57.9 52.7 74.1 122.4 Grant 49.7 140.5 80.9 49.2 120.5 47.5 Total 76.8 167.9 138.8 101.9 194.6 169.9 Total aid disbursements as: X of Total expenditure 14.8 22.9 17.0 12.3 17.9 13.3 X of Developnent expenditure 18.6 27.8 20.5 15.8 22.1 16.4 Source: Ministry of Fiance, Economic Survey 1987/88 (various tables). Development expenditure as defined by HNG includes almost all expenditures for primary education. 1.50 The major donors in the general education sector are IDA, ADB, USAID, and UNDP. Within the occupational training sector IDA, the Swiss Association for Technical Assistance (SATA), and ADB have played an important role. The focus of external assistance in general education has been to support expansion of the system and improve the quality of the delivery. In this regard USAID has been assisting in expanding literacy (PVO-World Education, 1987-90, US$0.6 m) and training primary school teachers through a radio education project (RETT-II, 1984-89, US$6.2 m). IDA together with UNDP and UNICEF is supporting primary education (Cr. 1463-NEP, 1984-89, US$12.3 m). UNESCO is also supporting teacher training and the development of textbooks (1984-89, US$1.2 m), UNICEF/UNESCO and the Norwegian Assistance for Development (NORAD) are involved in a project to improve the access of women (1978-98, US$1.6 m). UNICEF/UNESCO and UNDP are financing an Education for Rural Development Project (1981-86, US$1.3 m). Secondary education is being supported through the ADB Science Education Project (1983-89, US$9.9 m). 1.51 Within the occupational training sector SATA is financing three technical schools (1980-90, US$3.0 m). SATA has also supported the Education Faculty of Tribhuvan University (1975-87, US$0.5 m). IDA is assisting the Institute of Engineering w'th the First Education project (Cr. 772-NEP, 1978-85, US$6.5 m) complet-d in 1987, and the Second Education Project (Cr. 1198-NEP, 1985-90, US$14.3 m) which is currently under implementation. IDA is also assisting the Institute of Agriculture and Animal Science with the Agricultural Manpower Project (Cr. 1534-NEP, 1985-91, US$8.4 m). USAID is also providing support for the same institute (1985-91, US$16.5 m). The Japanese International Cooperation Agency (JICA) is giving assistance to the Institute of Medicine (1980-88, US$1.6 m) which is also receiving technical assistance from the University of Calagary (Canada) which is financed by CIDA.  - 18 - 1.52 In 1986, USAID financed a study designed to improve the efficiency and management of the education sector which was completed in 1988 (IEES, 1984-88, US$0.3 m). Partly building on this study, IDA has undertaken a review of the social sectors and poverty in Nepal. This will provide a basis for IDA's continued involvement in the sector and support efforts to coordinate assistance in the sector. 1.53 Several projects are under preparation. At the secondary level the ADB is preparing a Technical School Project (US$11.8 m) and a Teacher Education Project (US$15.0 m). In higher education, the Government of India is discussing a women's Polytechnic Project (US$4.7 m). In addition to the Engineering Education Project, IDA is planning a Basic Education and a Poverty Alleviation Project. E. IDA Strategy and Rationale for Involvement 1.54 IDA has reviewed the overall status of human resource development in Nepal and the nature of its contribution to the development effort. The long- term development of Nepal is critically dependent on: reducing population growth; upgrading the human resource base; removing specific skill constraiuts; improving agricultural productivity and creating income opportunities. Investment in the education sector is of strategic importance and there is a need for external financing. The general level of basic education needs to be improved significantly in order to meet basic needs, support efforts to reduce population growth rates and raise the general level of productivity of the labor force in the agricultural sector. In addition, specific skill constraints need to be removed in order to provide the workforce in support of the national development effort, particularly those which support agriculture and the engineering personnel required for water resources hydropower, roads and bridges and telecommunications. 1.55 Government efforts with donor support have been addressing these objectives. IDA support for education was initially focussed on developing the capacity to train skilled technical personnel (technical education and agricultural training) with three projects from 1978. An Education Sector Memorandum in 1981 recommended that further involvement concentrate on support for primary education, secondary science, vocational training and engineering education. As a result, a major ongoing Primary Education Project was initiated in 1984. The ADB extended support for secondary science and SATA for vocational training (paras. 1.50 and 1.51). The Engineering Education project builds on past investments by IDA in the IOE and has been designed to meet the needs for highly skilled labor force crucial to the development efforts in the productive sectors.  - 19 - F. Previous IDA Lending Exoerience in Education 1.56 The First Education Project (Cr. 772-NEP) was designed to expand capacity and improve quality at the Pulchowk campus of the IOE. The Second Education Project (Cr. 1198-NEP), was designed to establish a new IOE training facility at Pokhara to train technicians for the Western Development Region. The Third Education Project (Cr. 1463-NEP) aims to improve the quality of primary education, expand primary school enrollment and improve retention in 700 schools in six districts. The Fourth Project (Cr. 1534-NEP) aims to expand the capacity and quality of training programs at the Institute of Agriculture and Animal Sciences. 1.57 The First Education Project, completed in 1987, took about two years longer than planned because of weak contractor and project management perform- ance. According to the Project Completion Report (Report No. 7172, Sec. M88-340), some aspects of educational quality did not reach the standards expected at appraisal. The reasons included frequent changes in curriculum, underutilization of the staff development program and inadequate preparation of incoming students. However, most of the students who completed the program have found jobs readily and perform to the satisfaction of their employers according to a tracer study conducted in 1984. Progress with the civil works of the Second Education Project was initially delayed by weak project management, compounded by the contractors inability to complete the work on schedule. In 1986, new IOE management took effective measures to avoid further delays. Construction, equipment and furniture installation were basically completed in 1987. The education components, including the training of trade trainees and technicians, staff training, and curriculum and learning materials development are progressing well. 1.58 Implementation of the Third Education Project has been mixed with training programs and development of instructional materials progressing well but with civil works experiencing some delays due to difficulties with construction in mountainous areas. Full use has not been made of IDA funds for important technical assistance because of HMG reluctance to use IDA funds for this. Despite these problems, preliminary evidence suggest that more students are entering and staying in school in the project area, compared to other areas, as a result of project activities. The Agricultural Nanpower project has made significant progress. Key elements of the teaching program are now fully operational. 1.59 Important lessons concerning deficiencies in project management, maintenance and implementation learned from previous projects have been taken into account in designing the Engineering Education project. To alleviate these deficiencies, the Project Implementation Unit (PIU) will be strengthened with the addition of an experienced international construction manager, maintenance teams will be set up at each campus and a consortium of universities will assist with project implementation, particularly improving academic quality and strengthening management of the IOE.  20 - II. THE PROJECT A. Origin of the Project 2.1 The project was identified in May 1983, when an IDA mission reached an understanding with HMG regarding the need to establish the capacity to train engineers in Nepal and to increase the output and quality of technician training at the IOE. Project preparation was lengthy because policy decisions required consensus from the public and private sector agencies which are represented on tne Council of Tribhuvan University. These agencies had at times, different interests and objectives regarding the IOE. In 1985, the IOE submitted its Ten-Year Development Plan which included a proposal for a project to construct a new campus for training engineers. The plan was accepted in principle by the Government, but HMG and IDA suggested that the IOE should develop an alternative lower-cost proposal for the training of engineers. 2.2 During 1986, the IOE prepared a more economical alternative, with the assistance of CIDA-financed consultants, focussing on more efficient use and expansion of existing capacity. A feasibility study was submitted in May 1987. The IOE also prepared plans for the improvements of staff development, management, maintenance, and finance. On the basis of the feasibility study and the plans, the project was preappraised in June 1987. The preappraisal mission estimated that the costs to upgrade all campuses would be US$35 million and that recurrent expenditures would increase by 27% annually. To make the proposed project more affordable and sustainable in view of the limited growth of the economy and the government's budget for the social sectors, an IDA mission in January 1988, working with HMG, reduced the scope and the cost of the project. In June 1988, a Project Preparation Unit (PPU) was established to prepare for the appraisal which was undertaken in September 1988. B. Project Obiectives and ScoRe 2.3 The project will gradually increase IOE's capacity to train engineers and technicians in order to alleviate shortages of engineering personnel and to supply about 90% of the projected demand for engineering personnel which will be generated by the Government's investment program in hydropower, infrastructure and industry. The project builds on previous investments in the IOE and continues the improvements in quality and efficiency started in the previous projects. It also aims to enable the IOE to develop expertise and provide professional services in engineering problems typical to Nepal. Project Obiectives 2.4 The proposed project will assist in: (a) expanding the enrollment capacity of the technician training programs from 1,370 to about 1,700 students and that of the engineering education programs from 360 to about 920 students through construction, rehabilitation and maintenance of facilities;  - 21 - (b) raising the quality of engineering education through training of staff, improving curricula, providing educational materials and rais- ing admissions and examination standards; and (c) improving management through strengthening the Office of the Dean, training managerial and administrative staff, developing a Management Information System, and establishing a Manpower Development Unit. C. Proiect Descrigtion 2.5 The capacity expansion, academic improvements and institutional development objectives will be achieved through a combination of three com- ponents implemented over a period of eight years. The components and related technical assistance will be implemented accord'ng to the schedule shown in Annex 7. More detailed implementation schedules for maintenance, staff and management development activities are presented in the Maintenance Plan, Staff Development Plan and Management Plan prepared by the IOE. The project components include: Construction. Rehabilitation and Maintenance of Facilities. (Estimated base line costs, US$13.80 million) 2.6 At the Pulchowk campus, the project will include the construction of facilities and the renovation of the existing classrooms, laboratories and workshops. The new and ren. vated buildings will be furnished and educational equipment would be installed. At the Thapathali campus, additions to the classrooms, laboratory, workshops, student center and hostel facilities will be constructed. The existing library, classrooms, laboratories and main workshop will be renovated. Site improvements will be made to alleviate current flooding problems. Furniture and equipment in these buildings will also be provided. At the Pokhara Campus, additional laboratories, workshops, staff houses, girls hostel and audio-visual resource center will be constructed, furnished and equipped. Other facilities will be modified to accommodate the expansion of technician enrollment. The PPU established in June 1988 completed the campus plans and preliminary design drawings for each of the three campuses before negotiations. Local architectural consulting firms will be contracted to prepare the detailed construction working drawings and provide full supervision of the construction and renovation work. To assure proper maintenance, a campus maintenance manager and maintenance crews have been recruited for each campus to execute effective programs for the maintenance and repair of buildings as well as equipment. Additional funding for maintenance activities will be provided in the recurrent budget. At negotiations the Government provided assurances that proper maintenance crews, programs and budgets have been established according to the Maintenance Plan agreed to by the Association.  - 22 - Staff and Curriculum DeveloRment (Estimated baseline costs, US$6.85 million) 2.7 For staff develooment, the project will provide international, regional and local fellowships for post-graduate education and advanced tech- nical training for the teaching staff, particularly those who will be teaching the new degree programs. Preference will be given to female faculty members. It will also provide visiting professors and instructors and the financing of salaries for temporary staff. To improve staff utilization and alleviate absenteeism, regulations governing teaching load, leave and sabbaticals will be better enforced and/or changed if necessary. The Executive Committee of Tribhuvan University approved the necessary measures and changes in the IOE's regulations. They were presented during negotiations and are satisfactory to the Association. Curriculum development will be strengthened by providing assistance from local consultants, technical assistance specialists and visiting professors to the faculty committees. Curriculum development will be undertaken for the existing certificate and civil engineering degree programs, the new architecture and rural planning program and for the three new engineering degree programs. The first year of the ergineering degree programs will be common and there will be a substantial common core in the second year. Assistance will also be provided for the improvement of admission standards and procedures as well as for the development of better assessment and examination procedures, and academic regulations. At negotiations, the government agreed that: (a) by July 1993 admission to the degree program which is open to proficiency certificate holders, will require applicants to pass a common admission test; and (b) by July 31, 1993, academic regulations will provide that in the degree and certificate programs, students shall have passed the examination(s) of prerequisite courses before they are allowed to take follow-up courses. These agreements have been incorporated in the IOE's regulations. Funds will be provided for the preparation, printing and distribution of instructional materials, books and program prospectuses in Nepali. Management Development (Estimated base line costs US$0.87 million) 2.8 The office of the Dean will be strengthened through reorganization of the senior management structure. In order to separate academic and administrative responsibilities, positions will be established for two Associate Deans for academic affairs--one responsible for the training of technicians, the other for the education of engineers, and one Associate Dean for services and planning (administration). The Dean and the Associate Deans will form an Executive Committee, which will be responsible for managing the Institute. At negotiations the Government gave assurances that Tribhuvan University has approved the new management organization described in a Management Plan which is acceptable to the Association. Appointment of the three Associate Deans would be a condition for credit effectiveness. A Governing Committee (currently called Advisory Committee) with wide representation will also be established to increase IOE's responsiveness to the needs of the community. Further training will be provided for managers and administrators in new and existing functions and a Management Information System will be developed to facilitate institute-wide budget, income and expenditure control and performance monitoring. An Office of Manpower Development will be set up by June 30, 1990 staffed by a part-time manager under the Associate Dean for services and planning, to monitor the demand and supply of engineering personnel in Nepal, provide a permanent link between IOE  - 23 - and the labor market, and examine the ability of students to pay for higher education. During negotiations, it was agreed that heads of Departments will be appointed at each campus with full responsibilities for academic and administrative operations reporting directly to the Associate Deans. The main administrative facilities will be renovated and additional equipment and furniture provided. The reorganization of the management structure will be implemented according to a program and timetable satisfactory to the Association. D. Technical Assistance 2.9 The project will provide a total of 173.5 study-years of fellowships and 26.5 staff-years of visiting specialists in a number of key areas. This level of support is considered necessary on the basis of an assessment of the IOE's project implementation capability. The assessment indicated that assistance will be necessary for architectural design and the management of civil works, developing curricula and determining equipment specifications. On the basis of an analysis of the teaching requirements of existing and new programs it was determined that 94 teaching staff and 25 support staff (including four administrators) will need to be trained. In addition, 13 visiting professors will be required to teach the new degree programs while IOE faculty is being trained. 2.10 For the construction, renovation and maintenance of facilities, SDC will finance the assistance of an architectural specialists for about three staff months, a construction manager for three staff-years and a maintenance specialist for one-half staff-year, as well as one study-year for a building maintenance fellowship. 2.11 For the curriculum and staff development, CIDA will finance assistance for the engineering degree programs for improvements in admissions, curriculum and examinations, preparation of equipment lists and lab layouts, and the teaching of the degree level courses. The assistance will be provided by a consortium of six Canadian Universities and include 8 study-years of technical training, 72 study-years of graduate and post-graduate fellowships and 16.37 staff-years of visiting specialists. CIDA will also assist with the development of a system of accreditation. SDC will finance 41 study-years of regional fellowships for staff who would be teaching in the degree programs and 13 study-years of technical training for support staff. SDC will also finance assistance for admission, curriculum, and examination improvements and staff training for the technician certificate programs which will include 37 study-years of fellowships and 3.6 staff-years of visiting specialists. 2.12 For the management development, the project will finance a local consultant to develop a Management Information System. In addition, CIDA will finance one and a quarter staff-years for three visiting specialists from the consortium to assist with the development of administrative services, management and class scheduling. CIDA would also finance one and a half study-years for administrative fellowships. SDC will finance seven staff months for a specialist to assist with the development of a project planning, monitoring and evaluation system.  - 24 - III. PROJECT COSTS. FINANCING AND IMPLEMENTATION A. Costs 3.1 The total cost of the project is estimated at US$26.0 million equivalent. A summary of the estimated costs by component is provided in Table 3.1 and by category of expenditure in Table 3.2 (detailed costs by component and category and project expenditure by year and purpose are presented in Annex 5). Tabte 3.1: SUJSARY OF PROJECT COSTS BY COHPONENT NRP mllion j m"i ion Foreir as X of Total Caqwonent Locat tore gn TotaL ocat Toregn oa X of otal base cost A. Facilitiess developmoent- - Degree Pulchouk 74.80 130.33 205.13 3.08 5.36 8.44 64 39 Certificate, Putchowk 9.10 24.59 33.68 0.37 1.01 1.39 73 7 Certificate, Thapathali 17.14 31.11 48.24 0.71 128 1.99 649 - Certificate, Pokhara 22.6 255 481 0.92 1.0 1.99 5 Subtotal La 123.49 211.87 335.36 5.08 8.72 13.80 63 o4 S. Staff and curricultm development - Degree Pulchouk 10.84 98.35 106.19 0.45 4.05 4.49 90 21 - Certiftcate, Pulcho k 9.16 22.54 31.69 0.38 0.93 1.30 71 6 Certificate, Thsoathali 2.56 5.76 8.32 0.11 0.24 0.34 69 2 Certifiate, P 39 928 030 0.41 0.71 57 subtotal a 29.94 136.53 166.47 1.23 5.62 6.85 82 32 C. Management development Degree Pulchowk 8.67 9.95 18.62 0.36 0.41 0.77 53 4 - Certiffcate, Thapathali 0.16 0.92 1.07 0.01 0.04 0.04 85 0 - Certificate, Pokhara 0.27 1.15 1.42 0.01 0.05 0.06 I1 Q Stbtotal LS 9.10 12.02 21.11 0.37 0.49 0.87 57 4 Total Baseline Costs 162.53 360.41 522.95 6.69 14.83 21.52 69 100 Physical contingencles 14.14 29.50 43.64 0.58 1.21 1.80 68 8 Price contingencies 22.80 42.31 65.11 0.94 1.74 2.68 65 12 Total Project Cost La 199. 432.22 631.70 8.21 17.79 26.00 _ 121 /a Figures may not add due to rounding.  - 25 - Table 3.2: SUMMARY OF PROJECT COSTS BY CATEGORY OF EXPENDITURE NRP miltion US mii Foreign as X of Total Component Locai- -F~IF ion o rFriatTotaL X of total base CSt 1. Investment Costs: A. Civit works 87.53 57.09 144.61 3.60 2.35 5.95 39 28 B. Furniture 12.45 8.11 20.56 0.51 0.33 0.85 39 4 C. Professional services 9.99 - 9.99 0.41 - 0.41 - 2 9. International fellowships - 44.91 44.91 - 1.85 1.85 100 9 E.Rgmal fellowships 23.49 23.49 0.96 0.97 100 5 F. Local traifning 14.72 14.72 0.61 0 0.61 - 3 G. Local specialists 4.50 - 4.50 0.19 - 0.19 1 H. Foreign specialists - 62.03 62.03 - 2.55 2.55 100 12 I. Equipment 15.88 139.82 155.70 0.65 5.75 6.41 90 30 J. ok 2.79 24.57 27.35 0.11 1.00 1.13 90 5 K. Consumable materials 1.64 0.40 2 04 0.07 0.02 0.08 Total Investment Cost - 149.49 360.41 509.90 6.15 14.83 20.98 71 98 It. Recurrent Costs: A. Maintenance 3.64 - 3.64 0.15 - 0.15 - 1 B. Staff salaries 4.71 - 4.71 0.19 - 0.19 - 1 C. Materials and Services 3.10 - 3.10 0.13 - 0.13 - 1 D. Utilities 1.60 1.60 0.07 _ 0.07 - Total Recurrent Costs /a 13.04 - 13.04 0.54 - 0.54 - Total Baselire Costs /a 162.53 360.41 522.95 6.68 14.83 21.52 69 100 Physical contingencies 14.14 29.50 43.63 0.58 1.21 1.80 68 8 Price contingencies 22.80 42.31 0j3j1 0.94 1.74 2.68 65 12 Total Project Costs /a 199.47 432.22 631.70 8.21 17.78 26.00 68 121 a Figures may not add due to rounding. 3.2 Baseline costs have been estimated on the basis of October, 1988 prices. Civil works costs are based on actual construction costs for similar facilities in Nepal. Furniture costs are estimated at 15X of building costs. Equipment costs have been estimated on the basis of actual costs of equipment for similar types of facilities at other institutions, and include allowances for transportation and installation. Unit area and capital costs per student place are reasonable compared to Bank-wide averages (Annex 6). Unit costs for local training, international and regional fellowships, and foreign specialists have been based on standard rates used by international agencies for similar services on projects in Nepal and elsewhere in the region. 3.3 Custom Duties and Taxes will be applied to goods not specifically imported for the project. Civil works include a tax component estimated at US$0.84 million. Instructional equipment, furniture, books and consumable materials imported specifically under the project will be subject to a tax of  - 26 - 1Z. Total estimated duties and taxes amount to US$0.95 million. The Government provided assurances that it would take the necessary steps to ensure efficient customs clearance, including payment of such taxes. 3.4 Contingency allowances of US$4.48 million (about 21% of baseline costs) have been included to account for unforeseen physical conditions and estimated price escalation. Physical contingencies were estimated at 10% of baseline costs for civil works, furniture, equipment and books, and at 51 for all other categories. Price contingencies were estimated for both local and foreign costs on the basis of projected average annual rates of price escala- tion of 41 for foreign rates and 6X for local rates. 3.5 The foreign exchange component of US$17.78 million (about 681 of the total estimated project costs) has been calculated on the basis of the follow- ing foreign exchange percentages: civil works - 401; furniture - 40%; equip- ment and books - 90%; foreign specialists, regional fellowships and international fellowships - 1001; and consumable materials - 20%. B. Financing 3.6 The proposed IDA Credit of US$11.4 million plus grant c-'financing on a parallel basis from CIDA and SDC totalling US$12.49 million will finance about 91.91 of the total estimated project costs. A cross-effectiveness condition between the IDA Credit and the cofinanciers' grants is included in the Credit Agreement. IDA will act as the administrator for the SDC grant. HMG will be responsible for the remaining 8.11 of the project costs, amounting to about US$2.11 million equivalent (Table 3.3). The IDA Credit will cover about 48.61 of the estimated foreign exchange cost of the project, while the cofinancing grants will cover the remaining 51.41. Indications of intent from the cofinanciers were presented during negotiations. Recurrent Expenditures 3.7 The project will generate additional recurrent expenditures for salaries, operations and maintenance resulting from the nominal increase in the number of staff and the substantial increase in the provisions for learning materials, supplies, utilities and maintenance. The recurrent expenditure budget is estimated to increase from NRP 20.1 million in 1988-89 to 25.7_mil:lion by 1996-97 (1988-89 prices) after which it is expected to remaifi more or less at the same level. The average annual increase in 1988-89 prices is NRP 705 thousand or 3.131. The increase in recurrent expenditures is primarily due to substantial increases in the provision of learning materials and funds for repair and maintenance of 501 and 2001 respectively. Despite a 50% increase in enrollments the increase in salary costs is relatively small (15X), thanks to better deployment of staff and higher student/teacher ratios. Unit recurrent costs actually decline from NRP 11 thousand to NRP 9.5 thousand over the life of the project (1989-97).  - 27 - labtl 3: FINANCING PLAN - us# million) AHtG AID1A PtA SCTotaltR I tem mt. X Am. at. -X Ii. Amt b4 Investment Costs A. Civil works 1.40 20.0 - - 5.61 80.0 7.01 27.3 S. Furniture 0.05 5.0 0.98 95.0 - - - - 1.03 4.0 C. Professional services - - - - - 0.46 100.0 0.46 1.8 D. International fellowships 0.00 0.00 - - 2.00 90.9 0.20 9.1 2.19 8.5 E. Regional fellouships 0.00 0.00 - - - - 1.12 100.0 1.12 4.4 F. Local training - - 0.80 100.0 - - - 0.80 3.1 G. Local specialists 0.23 100.0 - - 0.23 0.9 H. Foreign specialists - - - - 1.96 63.3 1.14 36.7 3.10 12.0 1. Equ1pment 0.21 2.6 7.58 97.3 - - - 7.78 30.3 J. Books 0.01 1.0 1.41 99.0 - - - - 1.43 5.5 K. Consumable materials O.O 1O.0 0.l0 90.0 - - - - O.11 0.4 Recurrent Costs A. Naintenance 0.12 58.8 0.09 41.2 - - v 0.21 0.8 B. Staff salaries 0.14 55.0 0.12 45.2 - - - 0.26 l.0 C. Materisls and Serv. O.1O 58.0 0.07 41.9 - - O.l8 0.7 0. Utilities 0.05 56.9 0.04 43.0 - - - - 0.09 0.4 Total Project Costs /g 2.11 8.1 11.40 43.9 3.95j/15.4 8.53 32.8 26.00 100.0 Less taxes and duties 0.95 0.95 Total Net Project Cost /S 1.16 4.5 11.40 43.9 3.95j/15.4 8.53 32.8 25.00 100.0 :a Figures may not add due to rounding. /1 Excluding the cost of overhead and aduininstration of CIDA ard the executing agency. C. Project Management and Imniementation 3.8 Project management and implementation will be undertaken by a Project Implementation Unit (PIU) which will be established by the IOE. Implementation will be done according to the schedule shown in Annex 7 which was discussed and agreed upon during appraisal. The PIU will consist of full- time staff dedicated to specific project activities, but who will be integrated as regular members of the IOE's administrative structure. PIU senior staff will include: a Project Coordinator; Project Architect; Project Engineer; Education Officer; Procurement Officer; Administrative Officer; Fiscal Officer; and, Site Supervision Officers. These staff will be assigned to operating units in the IOE with related administrative responsibilities (as indicated in the organizational chart in Annex 12). The selection of staff for the PIU positions will be based on professional qualifications and experience with similar project responsibilities and would be open to  - 28 - candidates both from without and from within the IOE. The establishment and staffing of the PIU as an integral component of the new IOE senior management structure will be a condition of effectiveness. 3.9 The PIU will be responsible for procuring and directing the services of civil works consultants and specialists to be provided under the technical assistance program. The fellowship program will be implemented according to administrative procedures acceptable to the Association, with the PIU having a monitoring and coordinating role. The PIU will use the assistance of specialists to carry out the Technical Assistance program. Procurement of furniture, books and teaching materials for the project will be undertaken by the PIU on the basis of specifications and tender documents to be drawn up and executed by them. The PIU will use the assistance of specialists (Equipro) to carry out the procurement of equipment for the project. The PIU will review and approve the master plan and preliminary drawings prepared by the Project Preparation Unit (PPU) for each campus with the assistance of a specialist architect. These documents will constitute the facilities program and design brief for the architectural consultants to prepare the detailed design and working drawings for the new construction and renovation work required at the three campuses. The PIU will select on a competitive basis following World Bank guidelines for the Use of Consultants, architectural consultants from a short-list of prequalified registered consulting firms. The contracts for architectural consulting services will include responsibility for the preparation of detailed design drawings and cont-.act documents, as well as full supervision of the works. The PIU's project management capabilities will be strengthened through the addition of a foreign construction management specialist who will assist in the review of civil works contract documents, construction scheduling, and site supervision activities. Also a specialist architect will be provided to review the design and detailed construction drawings. A Project Liaison Committee, consisting of key IOE administrative and academic staff, will be established for each campus to work with the PIU in the implementation of the project. 3.10 The project will be implemented over a period of eight years, starting in mid-1989. Full enrollment will be achieved and all project components will be completed by June 30, 1997. The Closing Date will be December 31, 1997. (The project implementation schedule is shown in Anmex 7.) Status of Proiect Prenaration 3.11 The IOE established a PPU in February 1988, which has prepared draft master plans and preliminary design drawings for the renovation work and new buildings required for the program changes at all three campuses. These plans were reviewed and revisions were agreed to at app_...isal. The PPU is proceeding with the finalization of the master plan and preliminary design documents. Management, Staff Development, Maintenance, and Finance Plans have also been prepared. The necessary revisions of these plans were discussed during appraisal. The revised plans, which were ready by December 1988 and reviewed by IDA, include timetables setting out the implementation schedule for the activities and reforms contained in the plans. The curricula outlines for the new degree programs have been reviewed and will be further revised by the IOE Subject Committees prior to effectiveness.  - 29 - Procurement 3.12 Procurement arrangements are shown in Table 3.4 below. Table 3.4: PROJECT EXPENDITURE SY PROCUREMENT CATEGORY (USS million) Total cost Procurement tethod including Category of expenditure ice L u U ther pg N/A contingencies Civil works 4.21 2.80 - 7.01 Professional services - 0.35 0.11 - 0."6 - (0.35) (0.11) - (0.46) Furniture 0.41 0.62 - 1.03 (0.41) (0.57) - - (0.98) Equipment books and consua6le materials 8.29 1.01 - - 9.30 (8.29) (0.78) - (9.07) Technical assistance: Specialists - 3.10 3.10 Fellowships - - 3.31 - 3.31 Local experts and training - - 1.03 - 1.03 - -C(1.03) -(.03) /I Recurrent costs - - - 0.74 0.74 - - - (0.32) (0.32) Total /b 12.91 4.78 7.55 0.74 26.00 (8.70) (1.69) (1.14) (0.32) (11.85) Lg Includes international shopping direct purchase, and technical assistance contributions by CIDA and SDC. b Figures may not add due to rounding. /c- Inctudes US0.15 million to cover the cost of transporting student to training sites, Note: Figures in parenthesis are the amounts financed by the Credit.  - 30 - 3.13 The contracts for civil works at the three campuses will be awarded on the basis of ICB procedures in accordance with World Bank Guidelines. In order to facilitate scheduling of the renovation work and to minimize disruptions to existing academic activities, contracts for this work will be organized into smaller components and awarded using LCB procedures. Equipment will be tendered under ICB and LCB procedures. Books will be procured on the basis of direct purchase from publishers or authorized distributors at the lowest possible price on the basis of at least three price quotations if applicable. Equipment, furniture and consumable materials will be divided into two main groups: those items to be procured in large quantities (e.g. value greater than US$200,000) will be secured through ICB procedures; and, those items involving smaller quantities (e.g. value less than US$200,000) will be procured using LCB. Minor and/or specialty items of equipment, furniture, educational materials and books estimated to cost less than US$5,000 each and aggregating to less than US$50,000 equivalent will be purchased by international shopping on the basis of quotations from a minimum of three suppliers. Agreement would be reached before Credit effectiveness on a standard bidding document to be used for all ICB procedures. Since a standard bidding document will be used, only technical specifications, modifications to the standard document and proposed contract awarding will be subject to prior review by the Association. Specialists will be selected in accordance with Association Guidelines for the Use of Consultants. 3.14 In view of the anticipated complexity of the equipment procurement activity, involving several financial contributors and much specialized equip- ment for the new degree programs, it is planned that specialist services of the International Labour Office- -Technical Cooperation Equipment and Subcontracting Branch (Equipro) be used to manage and implement according to AssociationL Guidelines the equipment procurement process, covering ICB as well as international shopping. Procurement services to be provided by Equipro will include arrangements for insurances, shipping, transportation to sites, installation, commissioning, training and warranty confirmation. Disbursement 3.15 The proposed credit of US$11.4 million equivalent will be disbursed over a period of eight years (Annex 5). Since civil works and procurement which amounts to almost 90X of the credit are scheduled to be completed in four years, almost 90% of the credit is scheduled to be disbursed in the same period. Thus, the disbursement profile differs from the standard disbursement profile for education projects in Nepal, which shows a 10 year disbursement period and projects that 30% of the proceeds is disbursed after five and 75X after seven years. The standard profile is based on previous projects in Nepal which have suffered from considerable delays primarily with civil works. Such delays are not expected in the proposed project because the Institute of Engineering, the executing agency, has gained considerable experience with project implementation in two previous IDA projects (Cr. 772-NEP and Cr. 1198-NEP) and one ADB project. This experience is likely to reduce the possibility of implementation delays. In addition, to avoid delays with civil works, a provision has been made for a construction management specialist to assist with construction scheduling and management.  - 31 - 3.16 Disbursement would be made as follows: (a) civil works--80X of total expenditures; (b) equipment, furniture and consumable materials--lOOX of foreign expenditures--1001 of local expenditures ex-factory, and 701 of other local expenditures; and (c) professional services, local training, local experts and books --100 of total expenditures. In addition, disbursement will be made for WOI for the first two fiscal years of the borrower and for 601, 401, and 201, respectively, for each of the next two years for incremental recurrent costs for maintenance, staff salaries, materials, student services, utilities, operation and maintenance of vehicles, printing and office supplies. Disbursements for expenditures covering professional services and specialists will be against full documentation. Full documentation will also be required for all other expenditures related to contracts greater than US$200,000. For contracts below US$200,000, itemized statements of expenditures (SOEs) will be used. Itemized statements of expenditure will also be used for all expenditures covering fellowships, local experts/training and recurrent and other costs. Documentation in support of these SOEs will be retained by the PIU and made available to IDA supervision missions on request. To the extent possible, withdrawal applications should be consolidated into amounts totalling US$50,000 or more prior to submission to the Association. Snecial Accounts 3.17 In order to facilitate disbursements, two Special Accounts will be established at the Nepal Rastra Bank, representing an estimated average of four months expenditures: an Association Special Account with an authorized allocation of US$500,000 and a Swiss Special Account with an authorized allocation of SF 600,000. Accounts. Audits and ReRorting 3.18 The PIU will establish and maintain separate accounts for all project expenditures. The accounts will be maintained in accordance with sound accounting practices. The executing agency, IOE has several accounting officers who have managed the accounts of the two previous IDA projects. Their experience is expected to be utilized in the proposed project. It has been agreed during appraisal that the accounts will be maintained and audited according to the practice established in the previous projects which is satisfactory to the Association. Auditing of the accounts would be performed annually by HMG's Accountant General's Office in accordance with procedures acceptable to the Association. The Special Accounts and accounts supporting SOE activity would be audited annually by independent auditors acceptable to IDA. The SOE audit should contain a separate opinion from the auditor as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. An audit report will be submitted to the Association within twelve months of the end of the Government's financial year. The Association may at times request other information concerning the project records and accounts, certified by an independent auditor. Such information should be submitted not later than six months after the end of the particular fiscal year. The PIU will also monitor progress in project implementation and report to the Association each semester. Within twelve months of the Closing Date, the PIU will submit a project completion report to the Association.  - 32 - D. Environmental Impact 3.19 The project is expected to have a positive impact on the environment. The engineers and technicians trained under the project will learn about ways to preserve and improve the environment in a course on environmental engineering which is already included in the program. They will also study the engineering aspects of water supply, sanitation and waste disposal systems and learn about the maintenance of existing systems. The maintenance of systems which help to keep the environment clean, has not received sufficient attention in Nepal. Upon completion of their studies, a significant proportion of the engineers and technicians, particularly the civil engineers and the architects and rural planners, are expected to be employed on public sector projects in irrigation, water supply and sanitation and the planning of urban and rural settlements. The IOE has already taken the initiative to upgrade its waste management system at the new campus in Pokhara and similar systems will be installed at the other two campuses. Also, landscaping and site improvements to prevent erosion during the monsoon will be undertaken at each campus as part of the project. E. Imnact on Women 3.20 The IOE reserves 10 of the seats in the technician certificate and in the engineering degree program for qualifying women. In the technician program the impact of this measure is encouraging. In 1988, more than 101 of the student enrollment in the technician certificate program were women. In the civil engineering degree program the percentage of women is much lower, around 2X which may partly reflect the traditionally limited interest women currently have in construction work but also the lack of appropriate accommodiations for them at the IOE campuses. 3.21 In addition to reserving seats for women, three additional measures to increase the enrollment of women will be implemented in the project. First, separate hostel facilities for women will be constructed at each campus. On the basis of discussions with women students and women faculty members, the mission expects that the availability of these facilities will cause more women to enroll in engineering education. Second, at least two of the engineering degree programs that will be established under the project, electronics and architecture and rural planning, are expected to attract women. This has been the experience in India, Bangladesh and other countries in the region. Finally, qualified female faculty would be given preference for the graduate and post-graduate fellowship training program in the project. Raising the qualifications and status of the female faculty is expected to have a positive impact on the acceptability of women in engineering and to provide role models to women students.  - 33 - IV. BENEFITS AND RISKS A. Benefits 4.1 The major benefits of the proposed project will be: (a) The Institute of Engineering will acquire the capacity to offer B.Sc. degree programs and certificate programs in Civil, Electrical, Electronics and Mechanical Engineering, and in Architecture and Rural Planning, that meet international quality standards and are geared to Nepal's requirements; (b) The IOE will produce engineers and technicians in sufficient numbers to meet about 90X of the projected demand. With skills tailored to the particular needs of Nepal these engineers and technicians will be trained to design, operate, supervise and maintain the country's economic infrastructure and assets; (c) For the economy at large, cost savings will be achieved by substituting locally trained engineers for higher paid expatriate ones. Moreover, unit training costs will be lowered by increasing class size, teaching load, school time, and through better utilization of staff and facilities; (d) In addition, the project is expected to put the IOE on a sound management basis. B. Risks 4.2 The major risk concerns the possibility of a flagging commitment within HMG to meaningful reforms of staff regulations, management, maintenance and accreditation procedures. To address this risk, HMG has provided evidence during negotiations that it has approved such reforms. Also, the appointment of key management staff is a condition of effectiveness. Because of the current impasse between India and Nepal on reaching new agreements on trade and transit, it is also possible that there may be delays and increased costs for this project. However, HMG is making every effort to resolve this issue, and the financial contingencies provided in the cost estimates are expected to cover any cost increases caused by delays.  - 34 - V. AGREEMENTS REACHED AND RECOMMENDATIONS 5.1 At negotiations, the Government provided the following: (a) Evidence of the establishment of proper maintenance crews, programs and budgets according to a Maintenance Plan agreed to by the Association (para. 2.6). (b) Regulations approved by Tribhuvan University pertaining to teaching load, lease and sabbaticals, satisfactory to the Association (para. 2.7); (c) Regulations approved by Tribhuvan University concerning the establishment of the new management organization described in the Management Plan satisfactory to the Association (para. 2.8); (d) Letters of intent from the cofinanciers (para. 3.6);. 5.2 At negotiations the Government provided assurances that it has incorporated the following changes in the IOE's regulations: (a) By July 31, 1993 admission to the degree program will require applicants to pass a common admission test (para. 2.7); (b) By July 31, 1993, academic regulations will provide that in the degree and certificate programs, students will have passed the examination(s) of prerequisite courses before they are allowed to take follow-up courses. (para. 2.7). 5.3 The Government also agreed that it will carry out the reorganization of the management structure in accordance with the program and timetable satisfactory to the Association (para 2.8). 5.4 As conditions for credit effectiveness, the Government agreed that it will (a) establish the positions for the three Associate Deans and appoint staff to these positions with experience and qualifications acceptable to the Associations by July 15, 1989 (para. 2.8); (b) obtain formal agreements from the Canadian International Development Agency to provide technical assistance and from the Swiss Development Cooperation to finance civil works and technical assistance (para. 3.6); and (c) establish and staff the PIU by July 15, 1989 (para. 3.8). 5.5 Subject to the above conditions, the project constitutes a suitable basis for an IDA Credit of SDR 8.8 million (US$11.4 million equivalent to the Kingdom of Nepal on standard IDA terms with 40 years maturity.  NEPAL EDUCATION SYSTEM low Scr c semt somt r es e H r--Sod_ ~~erwf swod nmkt l d lg d Schoto Shd inn si bhsDoxe