Papua New Guinea - Education Development Project

Document of The World Bank FOR OFFICIAL USE ONLY MICROFICHE COPY Report No. 10640-PNG Report No.: 10640-PNG Type: (SAR) 1itle: EDUCATION DEVELOPMIENT PROJECT uAuthor: REFE. WILLIAM Ext.:f1210 Room:E9 033 Dept.:ASTPH STAFF APPRAISAL REPORT PAPUA NEW GUINEA EDUCATION DEVELOPNT PROJECT OCTOBER 6, 1992 Country Department III East Asia and Pacific Regional Office nt has a restricted distributiont antd rtyseb ticsed without World BakBtOia .. thi duie. it otns m'  CURRENCY EQUIVALENTS Currenc: Unit - Papua New Guinea Kina (K) US$1.00 = KO.95 (September 1992) WEIGHTS AND MEASURES Metric System FISCAL YEAR January i - December 31 ACADEMIC YEAR January - December ABBREVIATIONS ADB - Asian Development Bank CHE - Commission for Higher Education CODE - College of Distance Education DOW - Department of Works ESR - Education Sector Review ICB - International Competitive Bidding LCB - Local Competitive Bidding NDOE - National Department of Education NHEP - National Higher Education Plan NHS - National High School NTP - National Training Policy PCC - Project Coordinating Committee PCR - Project Completion Report PEOF - Program in Education for Overseas Funding PETT - Pre-employment Technical Training PHS - Provincial High School PIP - Public Investment Program PIU - Project Implementation Unit PPAR - Project Performance Audit Report PNG - Papua New Guinea REU - Research and Evaluation Unit SOE - Statements of Expenditure UPE - Universal Primary Education UPNG - University of Papua New Guinea  FOR OFFICIAL USE ONLY PAPUA NEW GUINEA EDUCATION DEVELOPMENT PROJECT Table of Contents Page No. LOAN AND PROJECT SUMMARY . . . . . . . . . . . . . . . . . . . . .iii I. ISSUES AND POLICIES IN THE EDUCATION SECTOR . . . . . . . . . . . . .1 A. Introduction .1......... ... ... ... ... . . . B. Issues ........................... . 2 C. Policies and Plans . . . . . . . . . . . . . . . . . . . . . 10 D. Bank's Experience in Education . . . . . . . . . . . . . . . . 16 E. Donor Assistance to Education ................ . 18 II. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 A. Origin of the Project . . . . . . . . . . . . . . . . . . . . . 19 B. Project Rationale and Objectives . . . . . . . . . . . . . . . 19 C. Project Description . . . . . . . . . . . . . . . . . . . . . . 20 III. PROJECT COSTS. FINANCING AND IMPLEMENTATION . . . . . . . . . . . . . 24 A. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 B. Financing .27 C. Project Management and Implementation .28 D. Environmental Impact .34 E. Impact on Women .34 IV. BENEFITS AND RISKS .34 A. Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 B. Risks ....................34 V. AGREEMENTS REACHED AND RECOMMENDATION ..34 This report is based on the findings of a preappraisal mission which visited Papua New Guinea (PNG) during November 1991 and an appraisal mission consisting of Messrs. W.E. Rees (task manager), M. Turner (consultant), and Ms. R. Montague (architect) which visited PNG during February 1992. Peer reviewers were Mr. T. 3chmidt (SAlPH) and Ms. L. Dove (ASTPH). The project was endorsed by Mr. Clifford Gilpin, Chief, EA3PH, and Mrs. Marianne Haug, Director, EA3. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -ii- Page No. TABLES IN TEXT 3.1 Summary of Project Costs by Component . . . . . . . . . . . . . 25 3.2 Summary oi Project Costs by Category of Expenditure . . . . . . 26 3.3 Financing Plan . . . . . . . . . . . . . . . . . . . . . . . . 28 3.4 Project Expenditure by Procurement Category . . . . . . . . . . 31 ANNEXES 1. Structure of the Education System 2. Enrollments by Education Level 3. Education Recurrent Expenditures 4. Provincial Recurrent Expenditures Per Student 5. Program in Education for Overseas Filancing - Summary 6. Donor Assistance to Education 7. Appointment of New Staff 8. Technical Assistance and Fellowships 9. Action Plan for Implementation of the Policy Studies 10. Project Expenditure by Year and Purpose 11. Summary of Project Costs 12. Implementation Schedule 13. Estimated Schedule of Disbursements 14. Selected Documents Available in the Project File MAP: IBRD No. 24164  -iii- PAPUA NEW GUINEA EDUCATION DEVELOPMENT PROJECT Loan and Proiect Summary Borrower: Independent State of Papua New Guinea Amount: US$35 million equivalent Terms: Repayable in 20 years including 5 years of grace at the Bank's standard variable interest rate Proiect Description: The overall objective of the project is to assist the Government to implement its education sector policies and investment plans. More specifically, the project would: (a) increase access to upper secondary education through expanding enrollments in grades 11 and 12 and in the business studies course and through repair of school facilities (baseline cost, US$19.1 million); (b) improve educational quality through expanding the supply of textbooks, strengthening school inspection and guidance and improving school libraries (baseline cost, US$21.5 million); and (c) strengthening institutional management through the appointment and training of regional planning and management advisors and policy studies to develop strategies to improve the cost-effectiveness of education, increase edutcational opportunities for girls and strengthen teacher education (baseline cost, US$0.9 million). Benefits and Risks: The project would lead to an increase in grade 12 graduates thereby easing the shortage of entrants to higher education, especially with regard to females. The project would also assist in improving the quality of education through the provision of teacher support, improved planning, textbooks and other relevant inputs. Policy and planning would also be strengthened in relation to female participation in education, teacher education and the cost effectiveness of the education system. In view of the involvement of the provincial education divisions in implementing parts of the project, the major risk concerns the local capacity to implement the project satisfactorily. This potential risk would be reduced through the operation of the Project Coordinating Committee and the establishment of a well-staffed Project Implementation Unit (PIU) which would include an experienced project coordinator.  -iv- Project Costs: Local Foreign Total -------US$ million------- Incree.sing access 9.1 10.0 19.1 Improving quality 5.3 16.2 21.5 Strengthening institutional management 0.6 0.3 0.9 Project management and evaluation 0.6 0.3 0.9 Baseline Cost 15.6 26.8 42.4 Contingencies: Physical 1.0 2.2 3.2 Price Increase 2.8 2.9 5.7 Subtotal 3.8 5.1 8.9 Total Project Cost aL 19.4 31.9 51.3 a/ Includes local taxes estimated at US$670,000 equivalent. Financing Plan: Local Foreign Total -------US$ million------- Government 16.3 - 16.3 IBRD 3.1 31.9 35.0 Total 19.4 31.9 51.3 Estimated Disbursements: Bank FY 1993 1994 1995 1996 1997 1998 --------------US$ million-------------- Annual 2.4 4.7 10.1 11.0 5.8 1.0 Cumulative 2.4 7.1 17.2 28.2 34.0 35.0 Economic Rate of Return: Not applicable MAP: IBRD No. 24164  PAP-uA NEW GUINEA EDUCATION DEVELOPMENT PROJECT I. ISSUES ANP POLICIES IN THE EDUCATION SECTOR A. Introduction 1.1 The expansion of modern education in Papua New Guinea (PNG) began only about three decades ago as the country started to move towards self- government and independence. This relatively late start is reflected in the low educational status of the population in general and of the workforce in particular. The national literacy rate is estimated at only about 45% and among citizens in formal employment, almost a half have less than a primary education, only about a quarter have completed primary or have had some secondary education, about a fifth have completed lower secondary school, about 4% have a full secondary education and a mere 1% have a university degree. The underdeveloped state of PNG's human resources constitutes one of the major constraints to the country's development and the shortage of trained and educated citizens has led to the continued reliance on substantial numbers of expatriates (currently about 17,000) to fill managerial and technical positions. 1.2 Nevertheless, since independence was achieved in PNG in 1975, progress has been made in expanding education at the primary (grades 1-6) and lower secondary (grades 7-10) levels.l/ During the period 1975-90, primary enrollments increased from 238,000 to 413,000 or at about 3.8% p.a. and lower secondary from 27,500 to 53,100, an increase of 4.5% p.a. Gross enrollment ratios also have shown steady growth from 56% of the primary age group in 1975 to about 73% in 1990 and for the lower secondary age group from 12% to 16% in the same period. Enrollment patterns have shown considerable improvement for girls whose enrollment grew from 37% to 44% of total enrollments. at the primary level during 1975-90 and from 30% to 39X in the lower secondary schools. Enrollments at the upper secondary level (grades 11-12) have more than doubled to 1,970 since independence but from the low base of about 850 in 1975. However, this trend tends to obscure the fact that upper secondary enrollments were fairly stagnant through most of the 1980s and this had a retarding effect on enrollments in higher education especially in the universities, which have averaged around 3,900 equivalent full-time students in recent years. 1.3 The expansion of the education and training system has been support-d by relatively generous budgetary allocations since independence, with the sector receiving consistently around 15-20% of the recurrent budget which represents about 5-6% of GNP. This has placed PNG among the leaders in countries at comparable levels of development in terms of educational investments and on a par with some of the richer countries of Asia. However, the relatively high level of budgetary support has been necessary to finance a high-cost education system which is due mainly to generous student/teacher I/ See Annex 1 for a cbhrt depicting the structure of the education system in PNG and Annex 2 for enrollments by education level.  -2- ratios, large-scale provision of student boarding and high teacher salaries. The latter are a crucial determinant of overall costs in a labor-intensive activity like education.91 The high expenditure/high-cost relationship has inevil:ably led to PNG's educational achievements being considerably below those of Asian countries in general.3/ Nevertheless, although the overall level of budgetary support for education has benn relatively generous, annual allocations have reflected a lack of uniformity in the Government's support for the sector. In the decade following independence, education was given a high priority and this was reflected in budgetary expenditures on education which averaged around 19-20% annually. In the mid-eighties, a new Government gave lower priority to education and annual .d.1getary allocations to education fell to around 17%. The present Government has again raised education's priority and has attempted to susta. increased resource flows to the sector. However, recent economic constraints have made this difficult and education's share of the budget has !3pttled at around 16% (Annex 3). 1.4 Accompanying the expansion of education in recent years have been problems of quality which have arisen at all levels of the system. Although assessing educational quality in the PNG context raises special problems, not least of which is the tendency to compare local standards with those of richer and more advanced neighbors, there is nevertheless a widespread belief that the quality of education in PNG is low. In addition, the internal efficiency of the system is low while unit costs are among the highest in the region. There is also a need to improve equity in the provision of education and training, especially in relation to opportunities for females. Planning for the expansion and improvement of education is made more difficult by the division of responsibilities betwaen the national and provincial governments. In general, the provinces are responsible for primary, lower secondary and vocational education while the national government is responsible for curriculum development at these levelq and for all aspects of upper secondary education, the technical colleges and nongraduate teacher training. The priority given to education varies between provinces with the result that resource allocations, and consequently educational outcomes, differ between provinces. These issues are dealt with in more detail below together with an assessment of the poli_ies the Government has formulated in response to the issues. B. Issues 1.5 Access and Relevance. Over the past decade enrollments in primary schools have increased at nearly 4X p.a. (para 1.2) This has slowly raised the gross enrollment ratio to 73% of the 7-12 years age group, although this figure is rendered less meaningful by the substantial number of overage students enrolled in grades 1-6. The rate of growth of the 7-12 years age VJ Primary teacher salaries in PNG are 6.8 times per capita GNP compared with 2.6 times for 14 Asian countries. The figure for secondary teachers in PNG in 10.0 compared with 3.3 for Asia. J.P. Tan and A. dingat, Educational Develomnent in Asia: A Comiarative StudY Focusuins on Cost and Financing Iasues, World Bank, October 1989. p. 65, Table 3.5. V/ Tbid. p. 9, Table 1.1.  .3- group is uncertain due to inadequate census data, but has been estimated at around 2.8X p.a. Thus. primary enrollments are growing only marginally faster than estimated population growth, which puts the achievement of universal primary education (UPE) well beyond the target date of 2000. At the lower secondary level, enrollments have increased at around 3.9X p.a. during the 1980s. The gross enrollment ratio was only 16% in 1990. This low rate of increase has resulted from the inability of the system to raise the key transition rate of students between grade 6 and grade 7. The rate actually declined from 37% in 1981-82 to 351 in 198Q-89. Thus, about two-thirds of all gr-de 6 leavers are forced out of the system on completion of the primary cycle. At the other end of the lower secondary cycle, only about 35X of grade 10 leavers are accepted for entry tc grade 11 in the national high schools (NH!) or to other post-secondary institutions, cauaing another major forceout. "hus, the pyramid of access to educational opportunity is very narrow in PNG aind is reflected in the low level of educational achievement in the population in general (para 1.1). 1.6 On current trends in PNG, out of every 100 students who enroll in grade 1, fewer than 2 will graduate from grade 12 due to dropout and forceout along the education path. Therefore, the basic question to be answered in education is--education for what? This follows from the inherent tension in the education system between the need to educate a relatively small number of individuals for employment in the formal sector of the economy and the need to impart to the great majority of students the knowledge, skills and attitudes necessary for economic and social life in the non-formal, mainly rural, sector. Education requirementa for the formal sector are academically oriented and are being increasingly inflated as employers and higher education institutions seek better educated entrants. Non-formal employment, while placing less emphasis on specific levels of education, nevertheless requires adequate achievement in numeracy and literacy. Thus, PNG faces the difficult situatien of trying to meet two different educational objectives and recently proposed structural changes in the education system (para. 1.26) are aimed at addressing this issue. 1.7 Enrollment Disparities. Significant disparities continue to exist in enrollment rates among provincns. These tend to reflect historical experience, with those provinces wiiich had early contact with church missions- -the original providers of education--being still the most advantaged while the provinces which had later contact are still lagging behintd. Thus enrollment levels are considerably higher in the Islands and coastal Papuan provinces than in the H.'ghlands. In 1990, gross enrollment rates in primary education ranged from almost 1001 in Manus to 64X in the Southern Highlands. The pattern is similar at the lower secondary level in the provincial high schools with gross enrollment rates ranging from 341 in Manus to less than 121 in Enga. The long term trend in enrcllment rates is one of steady improvement especially in the disadvantaged provinces which have achieved substantial increases in enrollment rates ove -ne past decade. On current trends, this improvement is likely to be sustained. The major problem to be faced is retention and the need to deal with high dropout rates (para. 1.10). 1.8 Gender disparities also exist in the school system and become more marked at each successive level. In 1990, females accounted for 441 of enrollments at the primary level, 391 at lower secondary and 291 at upper  .4- secondary. This pattern is reflected in higher education where the overall female enrollment rate is 32%. However, this pro?ortion is exaggeratod by enrollments in the nursing, technical and teachers' colleges where females comprise 73%, 48% and 40%, respectively. On the other hand, female enrollment is only about 15% in bachelors' degree courses in the universities. These trends reflect societal attitudes which traditionally have devalued the need for educating females. Although these attitudes appear to be changing, as evidenced by higher growth rates for female than male enrollments in primary schools, gt ls are still leaving school at disproportionate rates as they progress through the system.' 1.9 Ouality. The quality of education at all levels in PNG has been debated frequently in recent years. Discussion has focused on the prevailing standards of education and whether or not they are declining. The debate has also addressed the issue of how to define and apply standards which are appropriate to PNG rather than to mora advanced countries. The debate continues, but in one respect at least, there is widespread belief that many school leavers are inadequately prepared to undertake further education and training or to perform effectively in the modern sector workforce. Poor quality and low student achievement are endemic to the education system at all levels. The causes of poor quality are familiar from many other developing countries and include inadequately prepared teachers, insufficient supply of learning materials, lack of effective management and leadership in the schools etc.11 In PNG, as budgets tightened in recent years, two particular problems emerged which have had a :significant effect on reducing educational quality. First, the supply of textbooks, which are one of the greatest contributors to educational quality, has not been maintained. Following completion of the Primary and Secondary Projects, which had substantial textbook components, funds were not available to keep up the flow of textbooks to the schools with resulting negative effects on classroom learning. Second, poor scchool maintenance has also reduced quality. Malfunctioning water and sewage systems lead to health hazards and school closings, which results in loss of learning time. Poorly maintained buildings, especially teacher housing, reduce the morale of students and teachers, with negative effects on education quality.hW External factors also reduce quality and achievement such as frequent absences from the classroom due to the needs of home and family, school closures due to local law and order problems, poor health and nutrition 4/ A recent study concluded that the three most important factors affecti , the enrollment and retention of girls in primary schools were: parental attitudes towards the stt.;s of women and the cost- effectiveness of educating girls; the teacher's level of skill and professionalism and the ability to create a stimulating learning environment; and the girl's level of motivation and her vision of her role, status and potential. L. Yeoman, Factors Affectina the Enrollment and Retention of Girls in Pavua New Guinea Communitv Schools, EU/DOE, November 1985. ~/ For province-level views on quality issues see: M. Gibson and S. Weeks, Im rovina Education in the Western Province, Research Report No. 64, DER/NRI, June 1990; and G. Vulliamy, School Effectiveness and Provincial Hish Schools in Papua New Guinea, Report No. 57, ERU/UPNG, October 1987. The latter report relates to provincial high schools in West New Britain. 6/ Poor maintenance also reduces access to schooling. Although no reliable data exist, anecdotal evidence, e.g., in the local press, indicates that school closings due to the breakdown of facilities are quite common.  -5- status especially among primary school students, etc. The problem of poor quality which develops in the primary schools becomes c_..ulative as it is transmiPted upwards through the system with negative effects on secondary and higber Aducation. 1IO Efficiency. Many of the factors mentioned above which impair the quality of education also influence the decisions of students to drop out oz. school. This is reinforced by the low level of student achievement itself which leads to difficulty in meeting academic standards, especially in higher- level courses, and subsequent dropout. Thus low internal efficiency, as manifested in high dropout rates, is found at most levels of the education system. In primary education, 45% of the entering class ..rop out before completing grade 6 and the rate haL been increasing each year. In lower secondary schools, the dropout rate is about 33% over the cycle and has remained fairly steady in recent years. In contrast, the dropout rate at the upper secondary level is only 3% which reflects the rigorous selection of entering students. In higher education and training, attrition rates are high in many institutions reflecting inadequate academic preparation especially in English, mathematics and science. For example, program attrition rates reach 50-70% in the universities, and in the nursing and allied health colleges, attrition rates of 30-50% are not uncommon. 1.11 In contrast to low levels of internal efficiency in higher education, external efficiency is high. This is to be expected to some extent because many higher-level institutions are run by government departments and the majority of their graduates are targeted for departmental employment. High employment levels would also be expected given the general scarcity of citizens with higher education. This is borne out by a tracer stuAdy of 1987 graduates of the University of Papua New Guinea (UPNG) which showed that nearly 80% were in employment immediately after graduation or were intending to pursue further study. Over 90% of the employed were in jobs relevant to their training.11 However, the situation elsewhere is less clear. About one-third of the graduates of pre-employment technical training programs do not find employment, although there is also evidence of significant shortages of skilled manpower in the private sector. For the grade 10 graduates of the lower secondary schools, which number about 10,000 annually, only about 35% gain places in upper secondary and higher education and the rest enter the labor market. Although employment data are unreliable, even the more optim:.stic estimates show that the growth of wage employment in the 1980s was less than 2% p.a. Nevertheless, there is little firm evidence of significant unemployment among grade 10 school leavers. This ..ay mean that leavers are enteriig the non-formal sector, or that "capital-<-epening" is taking place witb better educated workers replacing the less well-educated. Z/ For a full discussion of in-school and out-of-school factors affecting dropout see: M. Bray, Drorning Out of Community Schools: The Extent. the Causes and Possible Rem(%dies, Report No. 49, ERUWUPNG, August 1984. ADB, Higher Education and Human Resource Develonment in Papua New Guinea, 1987, p. 151.  -6- 1.12 Inadeguate Canacity in I1igher Education. Seventeen years after independence, PNG's low level of human resource development 3tands out as one of the major constraints to the country's social and economic advancement. In the post-independence period, the education and training system has been unable to meet the demand for skilled and educated personnel, with the result that despite long-standing policies of localization, the modern sector workforce is still heavily dependent on expatriates to fill a broad range of managerial and technical positions. A major constraint that has restricted the capacity of the higher education system to meet the demand for highly trained personnel has been the inability of the secondary schools to supply adequate numbers of graduates at grades 10 and 12 with sufficient academic achievement to enter higher level courses. Outputs from grade 10 in recent years (about 10,000 p.a.) have been adequate in quantitative terms t"' meet the needs of certificate and diploma programs in the higher-level educatffn and training institutions. The bottleneck at this level has been qualitative. Fewer than half of the grade 10 graduates have achieved a sufficient level of academic performance to meet the minimum requirements of the institutions. Consequently, the institutions have been reluctant to enroll students who do not meet minimum standards with the result that there is considerable under- enrollment in a number of them. Some institutions have tried to make up the shortfall by recruiting grade 12 graduates but the severe scarcity at this level has offered little scope for success. 1.13 For grade 12 outputs from the national high schools, the problem is both quantitative and qualitative. The expansion of upper secondary schooling has been restricted in part by the shortage of high-quality grade 10 entrants but also by the desire to avoid educated unemployment. This cautioua approach to expanding enrollments, when combined with the rising demand from employers for the direct employment of grade 12 graduates, has greatly reduced the flow of qualified entrants to higher education. Employers in both the public and private sectors are increasingly recognizing grade 12 as the minimum educational level for employment in clerical, secretarial and mid-level technical positions. At the same time, quality deficiencies in grade 10 graduates have led some government departments to try to raise entry levels to grade 12 for training courses which have traditionally sought grade 10 entrants, e.g., the community teachers' colleges. This rising demand has put increasing pressure on the relatively modest pool of grade 12 graduates which numbers only about 950 p.a. The problem of quality is less acute among entering students in the national high schools, as might be expected, since entrants to grade 11 are drawn from the top 10-15 of grade 10 graduates. Nevertheless, the high turnover rate of the largely expatriate teachir,g staff (401 p.a.) and a heavy curriculum load for which even the best grade 10 students are relatively poorly prepared, combine to reduce student achievement levels. Thus after two years of intensive education, many grade 12 graduates are not well-equipped to enter the more rigorous courses in higher education. This is especially evident in the universities where high attrition rates are common, particularly in math/science-based courses. 1.14 Planning and Coordination. The division of responsibility for the school system between the provincial and national governments makes planning and coordination of education more difficult (para. 1.4). This is a problem intrinsic to a decentralized system in which the provinces have one set of responsibilities and the national government a different set. Under such a  -7- system, coordination between the two levels becomes vital and consequently, two coordinatirg mechanism* have been established, namely, the Conference of Ministers of Education and the Senior Officers Conference. Unfortunately, these bodies meet only occasionally and have not served as useful forums for policy discussion and as guides to education planners. Although education planning has been given considerable emphasis in PNG and received considerable impetus under the Pr'.mary Education Project (Credit 1087-PNG/Loan 1934-PNG), momentum has not been sustained with the result that very few trained education planners are now employed. This lack is particularly acute in the provinces. Furthermore, the National Education Board and the Provincial Education Boards, which have overall responsibility for national and provincial education plans, have not been effective in the planning field and consequently there are at present no up-to-date operational plans in existence to guide longer-term educational development.2/ The result of decentralization is that it is difficult for national education authorities to set overall priorities and goals with the expectation that the provinlces will meet them. Provinces have their own priorities, which often reflect local social pressures, and allocate resources accordingly (para. 1.18). 1.15 Although the situation is changing, planning for the development of higher education and training still doos not exist in any meaningful sense in PNG. This is largely the result of the highly fragmented riature of the system in which 55 institutions are under the authority of more than two dozen government departments and other public and private agencies. Fragmentation in the management and delivery of higher education leads to an inherent inflexibility in the system which precludes development of the basic tools for planning. Under these conditions, it is difficult to specify overall objectives for higher education, allocate resources and measure progress in achieving these objectives. The different administering authorities tend, understandably, to define their objectives in terms of the narrow focus of their own needs. Since resources are allocated according to these different sets of objectives, the development of a "higher education" budget has not been possible. Evaluation criteria which would measure progress towards improving quality, relevance and efficiency sector-wide also do not exist. Moreover, although higher education is supposed to serve the manpower needs of the economy, there is no effective mechanism for measuring these needs and relating them to the enrollments and outputs of the higher education institutions. 1.16 The above situation led for a number of years to calls for the rationalization of the higher education system but in the face of bureaucratic inertia and departmental self-interest, little was achieved. However, in the 1980s, the cost effectiveness of higher education came under increasing scrutiny as budgetary constraints tightened. Consequently, an important first step towards reform and rationalization was taken in 1983 with the establishment of the Commission for Higher Education. The CHE has an advisory role which includes advising the Government on the allocation of budgetary 2V P.C. Russell, Management of the Education System in Panus New Guinea, World Bank/UNESCO, February 1987. The exception is the recently drafted Enra Six Year Education Plan 1992-97. Its implementation status is not clear at this stage.  -8- resources to institutions and policies regarding the award of scholarships within PNG and overseas. It also administers the National Tertiary Scholarship Scheme. However, CHE has no direct responsibility for the operations of individual institutions and thus cannot compel them to conform to its recommendations. The influence of CHE, as it currently exists, is thus potential rather than real. A second step was recently undertaken with the approval of the Natiotal Higher Education Plan (NHEP). This contains a number of recommendations which would strengthen the planning and coordination of higher education including an expanded role for CHE (para. 1.31). 1.17 Education Expenditures. As noted previously (para. 1.3), the education system has received relatively generous resource allocations in recent years but due to the high cost of providing education in PNG, educational achievements have not been commensurate with the level of resource provision. The expansion of enrollments (para. 1.2) has been accompanied by increases in recurrent budgetary expenditures in current terms. Although the increase has been erratic from year-to-year (Annex 3), overall expenditure on education in current terms expanded at 5.2% p.a. during 1985-91. Expenditures on primary and secondary education by NDOE and the provinces increased at about 6.0% p.a. in this period in contrast to expenditure increases on higher education of 3.5% p.a. Total education expenditure as a proportion of the national budget has declined from 18.1% in 1985 to 16.1% in 1991 although the proportion has remained largely constant at just over 16% during 1988-91. The latter reflects the present Government's attempt to maintain education expenditure levels in the face of increasing overall budget constraints. Education expenditures as a proportion of GDP also show a somewhat erratic pattern declining overall from 6.5% of GDP in 1985 to 6.2% in 1991 but falling to 5.6% in 1988 and peaking at 6.6% in 1990. However, in real (constant 1985 kina) terms, a different picture emerges. Increases in recurrent expenditures on primary and secondary education averaged only about 0.5% p.a. during 1985- 91 and expenditures for higher education declined in real terms at -1.7% p.a. during the same period. Total expenditure on education declined in real terms by -0.2% p.a. during 1985-91. 1.18 Recurrent expenditures per student reflect these trends. In primary and lower secondary education, per student expenditures in current terms increased from K 254 in 1985 to K 300 in 1991 (Annex 3). In constant 1985 terms this represents a decline from K 254 to K 227 in the same period. In view of the preponderance of salaries in the education budget (over 90%), this decline in real expenditures has impacted mainly on the supply of teaching materials and textbooks and on the maintenance of school buildings. Such trends will clearly reinforce declining quality in the education system. Per student expenditures on primary and lower secondary education in the provinces also reflect these trends (Annex 4'. Moreover, provincial per student expenditures also emphasize the di ferent priorities placed on education by the provinces. Education expenditures per student in 1990 ranged from K 163 in Enga to K 298 in the Gulf while averaging K 204 in 19 provinces. In constant 1985 terms, real per student expenditures declined by -4.2% p.a. in the provinces during 1985-90. Within this trend, only four provinces had real increases (in the range 1-2% p.a.) during the period. In current terms, provincial education expenditures increased at 0.7% p.a. during 1985-90.  .9- 1.19 Costs and Financing of Higher Education. The fragmented nature of higher education has resulted in many institutions enrolling relatively few students. Thus the system has not been able to benefit from economies of scale. Fifteen nursing schools have an average enrollment of only 64, eight teachers colleges, 206, and seven primary industry colleges, 85. Four university campuses enroll only about 3,900 equivalent full-time students. With low enrollments and relatively generous staffing levels, student/staff ratios are also low, averaging around 8:1 in the nursing schools, 12:1 in the teacher's colleges, 6:1 in the primary industry colleges and 8:1 in the universities. There is still heavy dependence on expensive expatriates, especially in the two universities, where they account for about 60% of the academic staff. Furthermore, there is extensive underutilization of facilities throughout the system. This has resulted in part from an early expansion of institutional capacity to meet the anticipated strong demand for high-level personnel in an independent PNG, combined with an inadequate flow of graduates from the secondary schools to fill the places ir. the institutions. High attrition rates have also reinforced the underutilization problem. It has been further exacerbated in recent years, particularly in those institutions serving mainly the public sector, by declining demand for trainees as departmental recruitment has been cut and layoffs instituted in response to budgetary constraints. 1.20 These factors have given PNG one of the highest-cost higher education systems in the developing world.I.V Moreover, high cost levels are made higher by generous student subsidies. Cost sharing in the system is almost nonexistent and student subsidies increase with the level of training. In vocational centers, fees account for about 5% of unit costs; in the technical and teachers' colleges there are no fees and students receive a stipend. In the universities, fees are paid by the government and a higher stipend is paid to students. Bonuses are paid to scholarship holders who achieve academic distinction. Public subsidization of higher education is near total. The high cost/low enrollment combination also results in one of the largest expenditure gaps between levels of education in the developing world. A student-year of technical education costs 25 times as much as a year of primary education and 10 times ;he cost of a year of lower secondary schooling. One student-year at university costs 53 times as much as a year in primary school and 5 times as much as one year of upper secondary schooling. Apart from a strong commitment to training by the larger enterprises and a modest involvement in the apprenticeship scheme, cost sharing with the private sector is negligible. Smaller, enterprises have little incentive to invest in training. In the face of widespread skill shortages in the labor market, employers face high mobility among skilled workers and this reduces the return to any investment in training. Furthermore, although employers have access to the public sector training institutions, they have reservations about the quality of the product. This is illustrated by the modest use that employers have made of the technical colleges and the apprenticeship scheme whose programs have a strong private sector orientation. 1LV Unit operating cost in higher education as a percentage of per capita GNP is nearly 7 times as high in PNG an the average for 14 Asian countries. Tan and Mingat, op. cit., p. 60. Table 3.2.  -10- 1.21 In-Service Training. In-service training is widespread in the public sector although lack of data precludes the development of a more precise picture of in-service training efforts. The large departments with extensive field services such as Education and Agriculture, have specialized institutions for in-service training. Other departments seem to have less formal approaches to in-service training but appear to be equally committed to raising the performance of their employees through training. Little is known about the quality of in-service training but it is generally thought to be quite low due to lack of resources and competent trainers. Planning and coordination are also weak but this situation should begin to improve with the implementation of the National Training Policy (NTP - para. 1.33). Data on in-service training in the private sector are also scarce. However, it is clear that there ig a strong commitment to training among the large firms especially in mining, banking and commerce, and numerous examples of successful training programs exist.11' Large firms have the resources to train their employees and can offer them attractive career opportunities which help to build company loyalty and reduce labor turnover. On the other hand, the commitment to training among smaller firms is much weaker because they lack the resources and the incentives to invest in training. Although tax deductions exist for apprenticeships and for trainees in approved institutions, this incentive is weakened by the high turnover among skilled workers. W It is too early at this stage to determine the effect of the recently introduced training levy on private sector training efforts. C. Policies and Plans 1.22 In the past, any attempt to analyze education policies in PNG was difficult because of the lack of a comprehensive statement of education policies and priorities which reflected a national and provincial consensus on educational development. Policies were set out in a number of annual planning and budget documents and were addressed in periodic studies under the auspices of NDOE. While the NHEP and the NTP provided a policy/planning framework for higher education and in-service training, such a framework was lacking in relation to the formal school system. There was a piecemeal approach to formulating education policies with the result that they always seemed to be in a state of flux. This situation resulted largely from the failure of the policy and planning bodies to take a leadership role (para. 1.14). However, the situation has recently improved with the completion of the Education Sector Review (ESR) by NDOE. The ESR provides a review of policies and strategies for the long-term development of primary, secondary, nonformal, vocational/technical and teacher education together with cost estimates of some of the proposals. It also analyses the major problems in education such as high dropout rates, low female enrollment and retention rates, weak planning and management, poor teacher quality, etc. and makes recommendations to address these problems. 1J/ See for example, Post Courier, Supplement, Training - Buildinx for the Future, Auguat 29, 1989, pp. 15-28. W P.A. McGavin, The Labor Market in Panua New Guinea: A Survey and Analvasl, IRA, Port Moresby, September 1986.  -11- 1.23 For many years the Government has given priority to increasing access to primary education to achieve UPE by 2000. This policy remains in place but the goal of UPE is receding in the face of only modestly increasing enrollments and high dropout rates. Thus for the policy to be successful, annual increases in enrollments must rise and dropout rates decline. The former requires an expansion of physical capacity and an increase in the supply of trained teachers. The ESR points out that primary education is a provincial responsibility and provinces vary in their commitment to expanding primary education. It recommends as a solution the reintroduction of the Provincial Primary Education Fund to provide tied grants to the provinces to establish primary schouls.1W Following past policies, resources for primary school expansion should continue to be directed towards the disadvantaged provinces, i.e., those whose overall and female enrollment rates are below the national average. This will ensure that over time, enrollment disparities by province and gender will be erased. Urgent attention also needs to be given to the supply of teachers from the community school teacher training colleges and this is highlighted in the ESR. With the introduction of the additional thiru year to the training cottrse in 1991, there will be no graduates in 1992 and a reduction of about one-third in future outputs from current capacity. Furthermore, the wastage rate among community school teachers is around lOZ p.a. The teacher requirements for replacement of wastage and to cover enrollment increases are already well in excess of teacher supply--l.243 against 545, respectively, in 1993 acco.rding to ESR estimates. Thus the teacher supply issue has to be addressed as a crucial component of the strategy for achieving UPE. 1.24 The ESR, although identifying problems of auality in primary education, does not propose any specific strategies to alleviate the situation. Qualitative improvement requires a combination of inputs - the recruitment of more highly trained teachers, an improved and more relevant curriculum, adequate supplies of educational materials and higher standards of school management. The Government is proposing to address these issues through the five-year Community Education Phase 2 project estimated to cost K 13.0 million. The project includes a number of components that address the needs outlined above such as in-service teacher training, overseas training of administrators, textbooks and teaching materials, equipment, etc. Raising the quality of education and increasing its relevance will also contribute to raising the internal efficiency of primary education by reducing dropout rates. Achieving the latter will be difficult because of the complex nature of the problem. Dropout is caused by socioeconomic factozs beyond the influence of the schools as well as by internal factors (para. 1.9). The ESR emphasizes boredom and a sense of lack of achievement as important causes of dropout. It recommends that the first three years of schooling should be taught in the local vernacular to anchor education in the village environment and make it more relevant to students and their parents. It also recommends that repeating grades be allowed, to prevent students being promoted beyond their achievement levels thereby losing confidence and dropping out. However, the ESR also recognizes that the causes of dropout are diverse and recommends 13/ The Provincial Primary Education Fund was introduced successfully under the Bank-assisted Primary Education Project and focused on raising primary enrollments in disadventaged provinces. It lapsed following project completion.  -12- that each province draw up enrollment retention programs relevant to their particular circumstances. 1.25 Government policy towards the exRansion of secondary education has been ambivalent. While recognizing that relatively few Papua New Guineans have had the opportunity to pursue secondary education to grade 10 and that there is a general dearth of educated citizens, concern has also been strong regarding the lack of employment opportunities and the concomitant problem of educated unemployment. Current policy calls for increasing the transition rate between grades 6 and 7 from 3rX at present to 50% over the next decade. This would imply an annual enrollment increase of 5.6% p.a.14W compared with the growth of 3.9% p.a. achieved during the 1980s. The ESR calculates that to meet this growth 144 new high schools would need to be constructed and 1,952 new teachers trained. The requirement for new schools could be reduced by expanding the capacity of existing schools, introducing double shifts in urban schools and reducing the number of boarding places. Teacher requirements could be reduced by raising the present quite generous student/teacher ratio of 26:1. To offset this, however, replacement of teacher wastage of about 9% p.a. would be necessary. Present plans call for the construction of seven new lower secondary schools by 1995 which would add about 3,000 places to student capacity. This may reflect current budgetary constraints but is well below the construction level required to meet the planned enrollment growth. Therefore urgent attention should be given to the expansion of existing schools, double shifts and reduced student/teacher ratios. 1.26 Hovever, structural changes recommended in the ESR would change radically the above situation.IW Extending the primary cycle to grade 8 would solve the grade 6 forceout problem whereby two-thirds of grade 6 graduates leave the system (para. 1.5). Apart from the implications of a longer primary cycle on achieving the already receding goal of UPE, the grade 6 forceout problem would be merely postponed for two years. This would have some advantage in terms of student maturity but may not be a better use of resources than focusing on raising the throughput from grade 6 to grade 7 from 35% to 50%, as currently planned, and maximizing the number of grade 7 entrants who can complete the lower secondary cycle and graduate from grade 10. 1.27 There is widespread recognition that expansion of upper secop4ary education in the national high schools is one of the highest priorities a a prerequisite for expanding higher education, especially the universities. Current policy calls for the transition rate between grades 10 and 11 to 14/ This figure assumes a steady primary gross enrollment rate of about 73X and is therefore conservative. Using the same assumption, 7,100 additional places would be needed in each of grades 7-10 to accomnodate a 50X transition rate to grade 7. 1_/ Proposed structural changes call for 9 years of basic education comprising 3 years of elementary education (preparatory through grade 2) to be offered in village elementary schools and taught in the vernacular. This would be followed by 6 years of primary educ&'.on (grades 3-8), two years of lower secondary (grades 9-10) and two years of upper secondary education (grades 11-12). Lower secondary schools would offer strong vocational options. Primary and secondary education would be taught in English.  -13- increase from the present 10% to 25% by 2000. This implies an enrollment in the NHS system of about 5,000 with outputs of around 2,400. Present plans call for the construction of five new national high schools with a capacity of 1,900 places. This would increase total capacity in the NHSs to around 4,000 and provide outputs of nearly 2,000. This is a feasible target in terms of the likely availability of qualified entrants from grade 10 and the likely availability of teachers. At present about 56% of the staff in the NHSs is expatriate and possible canstraints on recruiting expatriates under present employment conditions must be recognized. Another issue is the cost of constructing a national high school. The Government has recognized that the existing design for a NHS is too expensive and cheaper alternatives must be found if planned expansion is to be affordable. A lower cost design has been developed and will be used in construction of the proposed new NHSs. In addition, the ESR proposes other lower-cost alternatives such as day schools in urban areas and the addition of facilities for grades 11 and 12 to existing provincial high schools, as the only affordable way to achieve the long term plan of extending grades 11 and 12 to each province to achieve total outputs of 5,000 p.a. The proposed project would finance the first day NHS and the first additions of grades 11 and 12 to two provincial high schools. 1.28 The large number of expatriates occupying professional and managerial positions is one indicator of the inability of the universities to meet the demand for high level personnel. The failure of the universities to expand in recent years has been due partly to lack of qualified entrants but also due to stagnation in the real level of financial support to the universities over the past decade.16' Current policy, under the NHEP, calls for at least a 50% increase in the numbers of graduates by 1999. About 770 graduates were produced Fy the two universities in 1990 and plans call for an annual output of at least 1,150 graduates by the end of the decade. This is a relatively conservative target, but is consistent with likely availability of qualified grade 12 entrants. To ensure this outcome or preferably to exceed it, the universities will need to reduce dropout rates, improve discipline and reduce incidents of disorder on the campuses. 1.29 The question of the mix of graduates, the NHEP leaves to the universities themselves. While there is widespread acceptance in PNG that the universities should give priority to supplying the highly-trained personnel required to support the country's development efforts, adequate guidance has not been given to the universities on overall manpower needs so that enrollments can reflect these needs. National manpower assessments and rate of return studies have been produced but methodological weaknesses have reduced their impact. However, the situation is beginning to improve with the establishment of the Human Resources Planning Branch in the Department of Finance and Planning. This should be fully staffed as a uatter of priority and its work quickly focused on overall employment issues, skill needs analysis and the linkages between labor market needs and the education system. Current concern for a more rigorous treatment of rate of return issues will reinforce employment and skills analyses. W 1L6/ Conrad Blyth, Government Expenditure in Panus New Guinea: Human Canital FormatM.., IRA, Port Moresby. March 1991, p. 14. _2/ See for example, T. Curtin, The Economics Of Public Investment in Education in Panua New Guinea. UPNG, Occasional Paper No. 1. Port Moresby, 1991.  -14- 1.30 NDOE recognizes substantial shortcomings in education Dlanning which have arisen following promising initiatives under the Primary Education Project. The Education Act (1983) requires that a national education plan and provincial plans be formulated and implemented. This has never been achieved, partly due to lack of policy guidance from the Government and the National and Provincial Education Boards but also due to a lack of planning expertise in NDOE and especially in the provinces. There is a clear need for an explicit and detailed statement of education policies by the Government and the translation of these policies into national and provincial plans. The ESR provides a coherent statement of education policies which should provide appropriate guidance for education planners to proceed with the formulation of plans. However, the problem of lack of planning expertise remains. The ESR calls for the training of provincial planning staff and the preparation of provincial education plans. It also recommends that the ESR itself should become the basis of a national education plan. 1.31 In higher education planning, the recently-approved National Higher Education Plan provides a framework for transforming the present fragmented, expensive and inefficient system of higher education into a more rational, better-managed and cost effective system more responsive to meeting PNG's high-level manpower needs. The NHEP calls, inter alia, for: (a) the restructuring of higher education into a system with fewer institutions, more economically viable in size; (b) the development of a national higher education budget under the auspices of the Commission for Higher Education; (c) reform of the system of student financing to ensure a closer fit between student performance and assistance and to improve equity and efficiency; and (d) establishment of professional institutes to control standards in teacher education, technical education and primary industry training. The CHE will be responsible for the implementation of the NHEP and, in order to play this role, it will be strengthened under an Asian Development Bank (ADB) project (para. 1.42). 1.32 Some actions have already been taken under the NHEP. Rationaliza- tion of primary industry training is underway with the proposed transfer of Vudal Agricultural College and Bulolo Forestry College to the University of Technology. An agricultural training institute is to be converted into a national high school. The study on student financing has been completed and is at present under consideration by the Government. Its major recommendation is that students be responsible for payment of fees in higher education with free tuition available only to those of outstanding academic merit. The study also recommends that stipends to assist in covering living expenses should be paid to individuals rather than to the institutions, work-study programs and student loans schemes be developed and a private market in student accommodation be encouraged. CHE has formulated a higher education budget covering the universities and the other higher education institutions which previously were the responsibility of the government departments. This has now been formalized as an annual exercise and gives CHE the authority to advise the Government on the resource needs of higher education. Also contributing to improved planning in higher education has been the  -15- establishment of the Human Resources Planning'Branch in the Department of Finance and Planning (para. 1.29). 1.33 The vital co-.tribution of in-service training to improving the productivity of employees has been recognized through the introduction of the National Training Policy in 1989. Under the NTP, all public agencies and private firms are required to produce rolling three-year training plans which cover recruitment, training and localization proposals. These plans are reviewed by the Department of Personnel Management (public sector) and the Department of Labor and Employment (private sector) which are being strengthened under the Public Sector Training Project (Loan 3290-PNG) to improve their capacity to promote, coordinate, monitor and evaluate in-service training. The NTP has also established the National Training Council which is responsible for advising the Government on training pVlicies, priorities and resource requirements. This advice will be based on analyses of the three- year training plans. The NTP also calls for the strengthening of the Administrative College to play a pivotal role in in-service training in the public sector. In addition to providing a wide range of skills courses, the College will provide executive development courses and place more emphasis on research, curriculum development and the training of trainers. 1.34 Summary Assessment. The Government's present policies and plans for the education sector are, in general, relevant to the major issues being faced in education. In some areas, such as the expansion of upper secondary and university education, they reflect a pragmatic view of what can be achieved in the face of budgetary and implementation constraints. However, in other areas (UPE and lower secondary expansion) the targets are unrealistic in terms of the time scale for achievement and the likely availability of teachers and budgetary resources. Throughout the ESR, there is clear recognition that the quality and relevance of education must be improved and the inputs necessary to achieve this have been identified. However, it must be recognized that such issues as quality improvement are not susceptible to quick solutions and require sustained efforts over the long term. The Government also recognizes that the efficiency of the education system must be raised. This will require a much stronger commitment to planning in the school system to ensure that resources are allocated more efficiently to achieve physical expansion targets and qualitative improvements. In higher education, planning has gained momentum from the initial efforts to implement the NHEP but its full implementation in the long term will depend upon strong leadership from CHE. To provide this, CHE will need to be strengthened well beyond its current capacity. 1.35 Underlying all this is recognition that PNG's educational achievements fall well below countries at similar stages of development and that no country has pursued successful development without adequate investment in its human resources. The Government has given high priority to education and is trying to maintain adequate resource flows in the face of difficult macroeconomic conditions and tight budgetary constraints. Donor agencies can help to sustain these efforts by placing a similarly high priority on the development of education and allocating assistance accordingly. The preparation of the ESR and the recently completed Program in Education for Overseas Funding (PEOF) provide the initial guidance in this effort. The PEOF covers a wide range of needs in education and is summarized in Annex 5. It  -16- comprises a large number of projects covering expansion and quality improvement in primary, secondary and vocational education. Projects are included for strengthening regional planning, curriculum development and teaching materials, school maintenance, teacher support services, etc. The aim of the PEOF is to provide guidance for the donor community in making decisions on external assistance to education. The total program cost is estimated at around K 261 million over the period 1992-99. Clearly, a program of this magnitude will requiLre long-term support from donors. Donor programs are at present fully committed and there is little scope in the short term for donors to begin picking up components of the program. Nevertheless, donors have emphasized education as a priority and they should use the program to guide their long-term assistance to education. 1.36 For its part, NDOE should move beyond the ESR, whi-ch provides a policy framework and some useful operational guidance, to draw out some of the strategic issues which run through the education system. These issues - such as female education, teacher shortages, cost effectiveness - are common to all levels of education and need to be treated tnematically. This process has already started with NDOE's working group on teacher issues and will continue under the proposed project, which will finance further policy studies related to the education of females and the cost effectiveness of education. NDOE also needs to move towards specific planning exercises which will link needed investments in capacity expansion with quality improvement issues, teacher supply, etc. This is the logical next step in moving beyond the analysis of issues and policies contained in the ESR. The Government must also come to grips with the long-term resource needs for education.18/ The priority for educational expansion is now widely accepted. But it will be costly. Every effort should be made to make the current system more cost effective through a more efficient deployment of teachers and better organization of classes, rationalization of institutions, etc. It should also be recognized that education is highly labor intensive and that plans for expansion of teacher supply must be linked to issues of teacher remuneration. There is a strong case for increased allocations of resources to education anH fear investments would bring greater returns. However, the case for additional resources would be greatly strengthened if clear attempts are being made to ir,crease efficiency and contain costs within the system. D. Bank's ExRerience in Education 1.37 The Bank's lending strategy in the education and training sector has been consistent with the Government's priorities and has been supported by four lending operations. The first (Credit 661-PNG in 1976) focused on strengthening training for middle and higher level personnel in agriculture, health, teacher training and technician training for industry. The project performance audit report (PPAR No. 5126, June 1984) concluded that while project implementation was satisfactory, enrollment and employment targets IJ/ Although the ESR provides cost estimates for its recommendations in a number of areas (e.g.. for primary and secondary school expansion), there is no attempt to cost the entire set of recommendations in the ESR. Thus there is no clear picture, at this stage, of the total long-term resource implications of the ESR.  -17- were not reached due primarily to changing skill requirements and the lack of qualified secondary school entrants to the training courses. These outcomes indicate that project design should have paid greater attention to estimates of human resource requirements and the likely level of outputs from the secondary school system. In the case of technician training, inadequate attention was given to the relative lack of incentives for employers to release and pay trainees and to the opportunity cost of training to the self- sponsored trainees. Nevertheless some success was achieved in the teacher training component. Although output targets were not achieved, the actual outputs did lead to a substantial replacement of expatriate teachers in the provincial high schools with a concomitant reduction in recurrent costs. 1.38 The second project (Credit 1087-PNG/Loan 1934-PNG in 1981) assisted in strengthening management of the education system, improving quality in primary education through curriculum development and expanding textbook supply, strengthening student assessment and teacher training and expanding primary schooling in under-served provinces. The Project Completion Report (PCR No. 8968, August 21, 1990) for the project indicates that enrollment targets were exceeded and substantial progress was made in reducing enrollment disparities among provinces. However, the project was not successful in improving retention rates. Localization of staff in the teacher training colleges was improved and substantial numbers of personnel were trained in various fields of educational development. Textbooks were produced in record volumes but there were problems in ilistributing the materials. The PCR concludes that institution building related to the strengthening of curriculum, examinations and project monitoring and evaluation was successful and sustainable. The project's contribution to institutionalizing planning procedures represented a first step in what must be a long-term process. However, this achievement was weakened by the drift of trained planning personnel into other fields of education. Project management was highly satisfactory. 1.39 The third project (Loan 2395-PNG in 1984), which was recently completed successfully, responded to the need to expand secondary education and improve its quality. The draft PCR (May 15, 1992) indicates that enrollment expansion targets were met in the secondary schools and targets for the supply of textbooks and learning materials were exceeded. However, a problem arose in relation to retention of textbooks in the classrooms. Although the reason is unclear at this stage, significant numbers of books disappeared from classrooms. The teacher upgrading component was generally successful, although there was under-enrollment in one diploma course. A fourth project (Loan 3290-PNG in 1991) is assisting in the implementation of the National Training Policy and financing overseas fellowships for training in key policy, planning and technical areas not currently available in PNG. Project implementation has been slowed by a number of changes in the top management of key departments being strengthened under the project. This has adversely affected the working of the Project Coordinating Committee which has not provided effective support to project management. Top departmental management has now been stabilized and project implementation is regaining momentum. 1.40 Although only three projects have been completed in the education sector in PNG, the Bank's lending has probably had more influence on  -18- educational development that the small number of operations might imply. The primary and secondary education projects have had some sector-wide impact on improving management, planning and the quality and relevance of education, and are contributing to the development of a more efficient and cost-effective education system. This impact has been reinforced by sector work on the financing of education (Report No. 6767-PNG, June 1987) which the Ministry of Education has described as a valuable input to policy formulation. A similar contribution has been made by the extensive treatment of human resource issues in recent country economic reports (Report Nos. 7121-PNG, April 19, 1988, 9396-PNG, May 1, 1991 and 10319-PNG, March 31, 1992). The Bank has been asked by the Government to take the lead role among donors in the education sector. The Bank has responded through recent sector work, noted above, and it will continue to provide analyses of sector issues and policies and reviews of resource allocations recommended in the annual budget and PIP documents. It is expected that the Bank's views will be disseminated to other donors by the Government. Future Bank lending in education will be consistent with the policies and priorities approved by Government. E. Donor Assistance to Education 1.41 A number of donors have been actively assisting education in recent years (Annex 6V. An important focus of this assistance has been to provide overseas education and training opportunities in fields that are not adequately served in PNG. Assistance has also been provided to strengthen in- country training in priority areas such as agriculture, forestry and fisheries. Support has also been given to secondary education through provision of overseas study awards aimed at increasing the supply of well- educated secondary graduates. Australia has provided broad-based support for overseas study ranging from undergraduate and graduate degree programs to short-term job attachments. Substantial support is also being given to raising the quality of community teachers' college lecturers. Continued future support is planned for these areas. New Zealand has provided assistance for overseas training and for secondary education. Emphasis has also been placed on upgrading training in key primary industry sectors namely agriculture, livestock and forestry. The general education sector has been supported through the school journals project and the non-formal education project. Future plans call for continued assistance in these areas. 1.42 Japan has assisted fisheries and language training in the past but at present is focusing its priority for human resource development on the provincial hospitals development program. Japan has been requested to provide future assistance for the development of the NHSs. China has agreed to finance most of the construction of two new NHSs. The United States has assisted the development of science education through radio and also provided support for technical education and training in health and agriculture.. Limited assistance will be provided in some of these areas in future years. The Commission of the European Communities is a recent, and potentially major, donor to the education sector. Substantial support for the maintenance and rehabilitation of secondary school and university buildings is available in 1992 and further longer term assistance to the universities is planned. The ADB has assisted technical education and plans two further technical and vocational education projects. ADB assistance is also planned for the institutional strengthening of the two universities and CHE. The project is  -19- expected to finance staff development programs and strengthen management of the three bodies. The capacity to plan, monitor and evaluate higher education development will also be strengthened in CHE. II. THE PROJECT A. Origin of the Proiect 2.1 The Government requested the proposed project during discussions with the Bank in December 1990. This request had its origin in the Government's proposal in 1989 that the Bank take the lead role among donors in the education sector. A mission identified and started preparation of the project in July 1991. The project was preappraised in November 1991 and appraised in February 1992. B. Project Rationale and Objectives 2.2 The low level of educational achievement in PNG continues to act as a major constraint to the country's development. In response, the present Government is giving high priority to expanding and improving the quality of education. In the face of increasingly difficult macroeconomic conditions, resource constraints have tightened and the Government has been barely able, in recent years, to maintain a constant real level of recurrent budget allocations to the sector (para. 1.17). NDCE's recurrent budget estimates for 1992 are projected to increase in real terms by abuut 5% although its share of the 1992-96 Public Investment Program is substantially lower than in the previous PIP. It is important to maintain momentum in support for education in the face ,of the critical need for human resource development. Project design has also provided an opportunity for the Bank to play a leadership role in encouraging NDOE to prepare a coherent statement of educational policies and strategies (the ESR) and for the preparation of an education investment program (the PEOF). These activities will provide guidance to donors where they claimed it did not exist before and should result in a more rational approach to supporting the development of education. 2.3 The basis for the design of the proposed project is the Program in Education for Overseas Funding, which was prepared by NDOE as a guide to the donor community for identifying assistance to the education sector. The PEOF focuses on issues of access, relevance and quality improvement and identifies specific investment needs in primary, secondary, vocational and non-formal education. Total investment n-eeds in the PEOF are estimated at US$261 million during the period 1992-99. The proposed project would comprise seven components which NDOE has defined as the highest priorities in the PEOF, together with a policy studies component. The overall objective of the project is to assist the Government to implement its education sector policies and investment plans through assistance for increasing access, improving quality and strengthening institutional management. More specifically the project aims to: (a) increase access to upper secondary education through expanding enrollments in grades 11 and 12 and in the business studies course and through repair of school facilities; (b) improve educational quality  -20- through expanding the supply of textbooks, strengthening school inspection and guidance and improving school libraries; and (c) strengthen institutional manageu.ent through the appointment and training of regional planning and management advisors and carry out policy studies to develop strategies to improve the cost-effectiveness of education, increase educational opportunitie3 for girls and strengthen teacher education. C. Project DescriRtion Increasing Access 2.4 Expansion of Upper Secondary Enrollments (estimated baseline cost US$10.8 million). The Government's priority for expanding enrollments in grades 11 and 12 in a more cost-effective way (para. 1.27) would be assisted through the construction, furnishing and equipping of a day NHS in the Gerehu suburb of Port Moresby and the addition of facilities for grades 11 and 12 in two provincial high schools (Hoskins and Malala). Gerehu NHS would have an enrollment capacity of 500 of which half would be females.19' The PHS extensions would each have a capacity of 250 with 50% of places reserved for females. Thus total additional enrollment capacity in grades 11 and 12 would be 1,000, which represents a 50% increase over present NHS enrollments. Adequate numbers of qualified grade 10 graduates, including girls, would be available to fill the entering grade 11 class scheduled to start in 1994. Additional teacher requirements would be 40 comprising 28 for the NHS and 12 for the PHS extensions. It is estimated that 50% of teacher requirements would be expatriate. Current efforts to recruit expatriate teachers are hiLghly successful and therefore teacher recruitment for the project schools is not expected to pose problems.LO Land is available for the PHS extensions. The site for the Gerehu NHS has been tiansferred to NDOE. 2.5 Development Maintenance (estimated baseline cost US$8.0 million). Grants for development maintenance (e.g., for upgrading school water systems, toilet and washing facilities) would be provided during the four project years to the provincial high schools, national high schools, vocational centers and College of Distance Education (CODE) centers. The vocational centers and CODE centers would be provided directly with maintenance grants and those for the NHSs would be channelled through the Department of Works (DOW). Funds for the PHSs (about 85% of the total) will be provided through maintenance offices and accounts to be established in each province. W Provinces which establish this maintenance system would be fully in charge of allocating maintenance funds. In order to avoid delay in the allocation of maintenance grants in provinces in which maintenance systems are not yet operational, NDOE would identify school maintenance needs and allocate funds directly to the recipient 19/ This compares with a female enrollment rate of 29Z in the NJS system as a wbole. 20/ A summary of new staff to be appointed under the project is given in Anne- 7. 21/ The model for establishing this system is the one which is currently operating successfully in the Central Province.  -21- schools. The main incentive for provinces to establish the maintenance system is that it gives provincial authorities full control of maintenance operations rather than having then determined by national authorities. 2.6 Certificate of Business Studies (estimated baseline cost US$0.3 million). This certificate program is offered by CODE and aims at improving the skills of small business operators and office workers. The part-time course, which is regarded as a crucial activity for strengthening the small business sector, covers business communications, office procedures, business English and mathematics, and book-keeping. The project would finance stages 2 and 3 of the program. Stage 1 has been offered over the last few years but lack of resources prevented completion of stages 2 and 3. There has been a strong demand for Stage 1 even though there has been no possibility of advancing to Stage 2. Enrollment in Stage 1 is currently 540. The project would finance the writing, editing and printing of course material for stages 2 and 3 and the purchase of two personal computers and a laser printer. Course structure has already been determined and qualified writers and editors are available. Improving Ouality 2.7 Textbook SUDly and Development (estimated baseline cost US$16.2 million). Textbooks are issued free in PNG, a policy that is justified in a country in which 80X of the population lives in rural areas, 50X of the population are subsistence dwellers and school fees are relatively high (K50 - K(300 p.a. depending upon grade). The project, which would continue assistance in the supply of textbooks provided under the Primary and Secondary Education Projects, would finance the resupply of existing textbooks and related teaching materials (baseline cost US$11.2 million) for community schools and PHSs. The project would also finance the development and distribution of new or revised textbooks to reflect ongoing curriculum changes (US$2.2 million). In the past, experience has shown that lack of funds for transport and storage has been a major cause of late-arrival or non-arrival of books and materials at provincial centers and schools. The project would thus include funds (US$2.0 million) for distribution, storage and security of books and materials. Curriculum development would be strengthened through the financing of a curriculum development coordinator, writers' fees, workshops, trialling and evaluation (US$0.8 million). Terms of reference for the coordinator have been agreed. During negotiations, the Government agreed to appoint the coordinator by March 31, 1993. Experience under Loan 2395-PNG (para. 1.39) showed retention of textbooks in the classrooms to be a problem. The project would therefore finance a pilot program to address the issue of book retention and security. The program, to be implemented during 1993-95, would include training in materials management, care and storage. 2.8 Inspection and Guidance (estimated baseline cost US$2.7 million). Inspectors and guidance officers provide advisory, evaluation and counselling services to all schools on a regular basis. The project would strengthen the system and raise the quality of services through the financing of training, salaries, housing and transport for 11 additional inspectors and 5 additional guidance officers. These officers, for whom new positions must be created, would allow the present level of service to be maintained in schools with rapidly expanding enrollments and upgrade services where they are currently  -22- inadequate. During .iegotiations, the Government agreed to create additional positions for five inspectors and two guidance officers by September 30, 1993 and make appointments to these positions by January 31, 1994; create additional positions for three inspectors and one guidance officer by September 30, 1994 and make appointments to, them by January 31, 1995; and create additional positions for three inspectors and two guidanoe officers by September 30, 1995 and make appointments to them by January 31, 1996. Housing is an important element of the component and would allow officers to be posted outside the major housing markets. A total of 25 houses would be constructed under the project - 16 for the newly recruited officers, 6 for officers already appointed but lacking housing and 3 for officers to be recruited in 1998, the year following project completion. All houses would be built on land owned by existing educational institutions. Standard designs are available for the houses. Transport in the form of vehicle hire would be financed over 4 years to ensure that the officers have the mobility to visit regularly all the schools under their control. A staff development program would also provide the opportunity for 24 serving officers to undertake three- month overseas attachments to study advisory, evaluation and guidance practices. W A schedule for the attachments has been agreed. 2.9 Library Grants (estimated baseline cost US$2.6 million). A library development plan, which was drawn up in 1983 and updated in 1989, aims at establishing new libraries and improving existing ones so as to strengthen literacy development in the community schools and broaden access to knowledge at the secondary level. In support of this, .he project would finance grants to develop libraries in community schools, PHSs, vocational schools and CODE centers. Only about 25X of the 2,600 community schools currently have libraries. Almost all 135 PHSs and 20 CODE centers have libraries but most are understocked. None of the 110 vocational centers has a library. Grants would be channelled to schools through the National Library which identifies suitable materials for the different types of schools and procures the materials. The National Library also distributes these materials to the schools. Grants to community schools and PHSs would be on a matching kina- for-kina basis in order to ensure continued community involvement in providing funds for library development. Full grants would be made to vocational schools to assist them in establishing new libraries and to CODE centers to permit them to expand their libraries to support adult communities in general, in addition to servicing distance education students. To place the library development program on a sound basis and to assist in implementation of the grant program, the project would also finance the employment of two library advisors and a support librarian to be located in the National Library. During negotiations, the Government agreed to create the first position of library advisor'and fill it by April 30, 1993 and to create positions for the second library advisor and the support librarian and fill them by April 30, 1994. Terms of reference for the advisors have been agreed. Strengthening Institutional Management g/ A su*mary of training fellowships and technical assistance Is given in Annex 8.  -23- 2.10 Regional Planning and Management Advisors (estimated baseline cost US$0.6 million). There is widespread recognition that the planning and management capacities of the provincial education divisions need strengthening. This would permit provincial education plans to be drawn up and implemented, strengthen financial management and improve phystcal implementation capacity. Regional planning advisors were introduced under the Primary Education Project but the program lapsed when the follow-up Bank project was cancelled by the Givernment. The proposed project builds on previous experience. It wousld finance a special advisor on planning and management for 3-1/2 years and three regional advisors. The special advisor would train, supervise and support the regional advisors and prepare planning and management manuals. Terms of reference for the special advisor have been agreed. During ..egotiations, the Government agreed to employ the special advisor by June 30, 1993. Terms of reference for the regional advisors have been agreed. The regional advisors would undertake a one-year associateship under the special advisor followed by formal university training overseas. Houses for two of the advisors would be financed under the project. The project would also finance vehicle hire, personal computers and required office materials for the advisors. A schedule for the appointment and training of the advisors has been agreed. Since new positions would be required for the three regional advisors, the Government agreed, during negotiations, to create the first position by September 30, 1993 and fill it by January 31, 1994. Similar actions would be taken for the remaining advisors to be appointed in 1995 and 1996. To ensure that the full bene.-its would be gained from the advisor program, the three regional advisors would occupy their positions for an appropriate period of time after completion of training. 2.11 Policy Studies (estimated baseline cost US$0.3 million). The ESR analyses problems and presents recommendations for their alleviation in community, secondary, vocational, technical, teacher and nonformal education. The ESR also throws up several key strategic problems, sometimes implicitly rather than explicitly, which cut across the education subsectors. These need to be analyzed further, policies proposed for their solution and strategies developed to implement these policies. It is proposed that studies be carried out on the following topics: (a) Female participation in education. Female enrollment rates decline rapidly at successive levels of education. Policies/strategies need to be developed and implemented which would lead to increased access and improved retention of females at all levels of schooling; (b) Cost effectiveness of education. PNG has one of the highest-cost education systems in the developing world. There are a number of factors intrinsic to PNG (geographical dispersion of population, need to employ expensive expatriates, high internal wage/cost structure, etc.), which explain part of the high cost problem. However, there are options available to reduce unit costs and policies and strategies need to be developed which would address such issues as appropriate student/teacher ratios, need for student boarding and possible alternatives, classroom utilization rates, multigrade teaching, etc.  -24- (c) Teacher education. If targets for enrollment expansion are to be met, the present inadequate teacher education capacity must be addressed. Policies need to be developed to expand training places and also to address issues of recruitment, posting and retention, optimal teacher/student ratios, terms of employment, etc. The studies would be undertaken by task forces comprising NDOE staff assisted by consultants, financed under the project, in accordance with an agreed action plan (Annex 9). During negotiations, the Government agreed to carry out the studies and implement their recommendations according to the action plan. III. PROJECT COSTS. FINANCING AND IMPLEMENTATION A. Costs 3.1 The total cost of the project is estimated at US$51.3 million equivalent. The estimated cost by project component is summarized in Table 3.1 and by category of expenditure in Table 3.2. (Detailed project costs by year, purpose and component are given in Annexes 10 and 11.)  -25- Table 3,1: SUMMARY OF PROJECT COSTS BY COMPONENT K million USS million Foreign as Local Foreign Total Local Foreign Total X of total Increasing access: Upper secondary expansion 4.4 5.9 10.3 4.6 6.2 10.8 57 Development maintenance 4.2 3.4 7.6 4.4 3.6 8.0 45 Certificate of business studies 0.1 0.2 0.3 0.1 0.2 0.3 74 Subtotal 8.7 9.5 18.2 9.1 10.0 19.1 52 Improving quality: Textbook supply and development 3.4 12.1 15.5 3.5 12.7 16.2 78 Inspection and guidance 1.3 1.2 2.5 1.4 1.3 2.7 47 Library grants 0.4 2.1 2.5 0.4 2.2 2.6 86 Subtotal 5.1 IL4 20.5 5.3 16.2 21.5 75 Strengthening institu- tional management: Regional advisors 0.3 0.2 0.5 0.3 0.3 0.6 47 Policy studies 0.2 0.1 0.3 0.3 0.0 0.3 22 Subtotal Q., O3 0.6 0.3 0.9 38 Project management and evaluation 0.6 03 0 6 0.3 0.9 31 Baseline cost 14.9 255 26.8 42.4 63 Contingencies: Physical 0.9 2.1 3.0 1.0 2.2 3.2 69 Price increase 2.6 2.9 5.5 2.8 2.9 5.7 52 Subtotal 3 5 5.0 3. 38 51 8. 57 Total project cost/a 18.4 30.5 48.9 19.4 31.9 51.3 62 /a Includes local taxes estimated at US$670,000 equivalent.  -26- Table 3.2: SUMMARY OF PROJECT COSTS BY CATEGORY OF EXPENDITURE K million US$ million X Local Foreign Total Local Foreign Total Foreign Civil works: Schools/housing 2.6 4.8 7.4 2.7 5.1 7.8 65 Development maintenance 4.2 3.4 7.6 4.4 3.6 8.0 45 Subtotal 6.8 8.2 15.0 7.1 8.7 15.8 55 Equipment, books, educa- tional materials and delivery 3.2 15.3 18.5 3.4 16.0 19.4 82 Furniture 0.2 0.2 0.4 0.2 0.2 0.4 35 Technical assistance: Project support ' 0.5 0.2 0.7 0.5 0.2 0.7 34 Capacity building 0.2 0.1 0.3 0.2 0.1 0.3 35 Policy development 0.1 0.1 0.2 0.1 0.1 0.2 20 Subtotal 0.8 0.4 1.2 0.8 0.4 1.2 32 Overseas fellowships 0.0 0.2 0.2 0.0 0.2 0.2 94 Local training and workshops 0.4 0.1 0.5 0.5 0.1 0.6 20 Related salaries 2.2 0.9 3.1 2.3 1.0 3.3 29 Student costs 0.5 0.1 0.6 0.5 0.1 0.6 20 Incremental operating costs 0.8 0.1 0.9 0.8 0.1 0.9 20 Baseline cost 14.9 25.5 40.4 _5.6 26.8 42.4 63 Contingencies: Physical 0.9 2.1 3.0 1.0 2.2 3.2 69 Price increase 2.6 2.9 5.5 2.8 2.9 5.7 52 Subtotal 35 5.0 . 3.8 5. 89 57 Total project cost/-a 18.4 30.5 48.9 19,.4 31.9 51.3 62 Ia Includes local taxes estimated at US$670,000 equivalent.  -27- 3.2 Baseline costs are estimated at September 1992 prices. Civil works costs are based on the latest DOW estimates. Equipment and furniture costs were based on detailed lists drawn up and.on prices currently being paid for similar items. Equipment, books and educational materials imported under the project would be exempt from duties and taxes. Duties on imported construction materials average about 9%. Overseas training was estimated at K18,000 per year with local training and workshop costs varying depending on the type of training being given. Salaries, office expenses, student costs and travel costs were based on standard allowances. The estimated costs of expert services are based on unit costs of similar services and activities in programs currently being implemented in PNG. 3.3 Project costs include a contingency allowance for unforeseen physical conditions and for estimated price increases. Physical contingencies are estimated at 10% for civil works for schools and housing, equipment and furniture and at 5% for all other categories cxcept for the library grants where no physical contingencies are provided. Price increase contingencies were estimated on the basis of the implementation schedule (Annex 12) and on expected annual price increases of 5.5% annually for local costs and 3.7% annually for foreign costs. Accordingly, total contingencies represent about 21% of baseline costs and aggregated price increases about 13% of baseline costs plus physical contingencies. 3.4 The foreign exchange component of US$31.9 million (about 62% of total estimated project costs) has been calculated on the basis of the following estimated foreign exchange percentages: civil works for schools and housing--65%; development maintenance funds--45%; equipment, books, educational materials and printing--90%; furniture--35%; overseas fellowships- -90%; expatriate consultants recruited locally--40%; local delivery of books and educational materials, local consultants and salaries, local training and workshops, local travel, student costs and office expenses--20%. B. Financing 3.5 The proposed Bank loan of US$35.0 million equivalent would finance about 70% of total estimated project costs (excluding about US$670,000 equivalent of estimated taxes), including 100% of the foreign exchange cost of the project (US$31.9 million) and 16% of the local cost of the project (US$3.1 million). (See Table 3.3 below).  -28- Table 3.3: FINANCING PLAN (USS million) Government IBRD Total IBRD share (X) Civil works 6.3 11.5 17.8 65 Equipment, books, educational materials and delivery 2.2 19.5 21.7 90 Furniture 0.5 0.5 0 Technical assistance - 1.4 1.4 100 Overseas fellowships - 0.3 0.3 100 Local training and workshops 0.6 - 0.6 0 Related salaries 3.9 - 3.9 0 Student costs 0.7 * 0.7 0 Incremental operating costs 1.2 - 1.2 0 Unallocated 0.9 2.3 3.2 72 Total 16.3 35.0 51.3 68 Recurrent Expenditures 3.6 The project wouLd g&-aerate incremental recurrent expenditures related mainly to salaries, stv4ent costs for the new NHS and the PHS extensions, library grants and~ cransport for inspection, guidance and planning staff. When fully operational, the project's recurrent expenditure requirements would amount to K2.9 million p.a. which is equivalent to about 1.8% of the total budget appropriation for NDOE and the provincial education divisions in 1992. This additional expenditure should be accommodated by Government without difficulty. C. Proiect Management and Implementation 3.7 Overall responsibility for coordinating project implementation would rest with a Project Coordinating Committee (PCC). A similar committee successfully coordinated the Primary and Secondary Education Projects. The Secretary for Education would chair the PCC and the Deputy Secretary would be a member. Other Departments, to be represented by their Secretaries or their nominees, would include Works and Finance. The project would be implemented by existing line agencies at national and provincial levels. The Curriculum Development Center would handle the re-issue and distribution of textbooks and learning materials and the development of new materials. The National Library would administer the library grants, CODE would be responsible for establishing the certificate of business studies program and the DOW would implement the construction components, including the new national high school and the extensions to the two existing PHSs, as well as development maintenance at the four existing NHSs. Maintenance offices would be  -29- established in each province to handle the development maintenance grants for the provincial high schools (para. 2.5) while the CODE and vocational centers would manage their own development maintenance funds. NDOE's Research and Evaluation Unit (REU) would be responsible for evaluation of the project and task forces would be established by the Secretary for Education to undertake the two policy studies. 3.8 Project implementation would be the responsibility of the Project Implementation Unit (PIU) within NDOE's Policy, Planning and Budget Division. The PIU existed previously to implement Bank and ADB projects but following completion of recent projects, most staff were absorbed elsewhere in NDOE. Only the position of civil works manager currently exists and this will form the nucleus of the reconstituted PIU. An experienced officer has been appointed to the position. New positions in the PIU for a project coordinator, procurement manager and maintenance manager have been approved by the Department of Personnel Management within NDOE's manpower ceiling for 1993. Agreement was reached during negotiations to fund these positions in the 1993 budget and that staff would be appointed to fill them by March 31, 1993. Agreement was also reached during negotiations to create the position of project accountant, fund it in the 1994 budget and fill it by March 31, 1994. In view of the priority being given to education by the donor community, a rising volume of project activity is likely to eventuate and NDOE will face an increasing demand to implement additional projects. The PIU must be able to expand to meet these responsibilities in due course. The Government has indicated that the PIU would be responsible for implementing all future donor-assisted projects within NDOE and that its staffing and budgetary resources would be increased in line with this task. 3.9 Two regional implementation workshops would be held in each year during 1993-96. The Bank would supervise the project twice yearly around March and September coinciding as far as possible with the preparation of the semi-annual progress reports (para. 3.16). A mid-term reviei- of project implementation would take place around September 1994. Regional average coefficients would be applied for allocating resources to project supervision. Overall implementation issues would be handled by the task manager, assisted by an architect for civil works and procurement activities. 3.10 Previous implementation experience offers several major lessons of relevance to the design of the proposed project. First, textbook production must be accompanied by efficient procedures for the timely distribution of the books. The proposed project recognizes that while arrangements for the physical distribution of textbooks are adequate, past experience has shown that lack of significant funding has delayed distribution. The project therefore allocates to distribution activities about 13X of the funds for textbook provision. Second, textbooks tend to disappear from classrooms. To address this issue, the project would include a pilot program aimed at providing solutions to book retention and security problems. Third, planning activities are greatly weakened if trained planning staff are not retained in key planning positions. Project design therefore specifies that the planning advisors, to be trained under the project, would be retained in their positions for an appropriate period of time. Fourth, effective implementation depends upon strong project management arrangements. Project design would replicate the arrangements used for the successful implementation of previous  -30- education projects and would consist of a high-level PCC and a well-staffed PIU assis@;ed by evaluation officers from the REU to monitor ongoing implementation activities .W Status of Project Preparation 3.11 A list of the textbooks and learning materials to be re-issued has been drawn up and publishers will be contacted in the near future in order to schedule the reprinting planned for 1093. The DOW will also be officially contacted by NDOE and requested to arrange for the design and construction of the new national high school and the extensions to the existing PHSs. Standard designs exist for the NHS buildings but some modest modifications will be necessary for the administration and library blocks. The NHS site has been transferred to NDOE and the site plan has been prepared. A draft contractor prequalification questionnaire for the new NHS, and the schedule for bidding and construction and draft bid documents for the new NHS and the PHS extensions are under preparation. Detailed equipment lists for the new NHSs and the PHS extensions have been drawn up and costs estimated. The , provinces have already been notified about the need for them to establish maintenance offices in order to participate in the development maintenance scheme, and several have responded favorably. Terms of reference for the two policy studies have been agreed. Procurement 3.12 Procurement arrangements are shown in Table 3.4 below: _41 PNDO's performaze in Implementing previous projects has been highly satisfactory. in contrast to absorptive capacity problems which have delayed project implementetion in other sectors In PRG.  -31- Tab.le :3.4; PROJECT EXPENDITURE BY PROCUREMENT CATEGORY (US$ million) Total cost Procurement method including Category of expenditure ICB LCB Other LA NBF contingencies Civil works: Schools/housing 5.3 3.2 1.0 9.5 (3.4) (2.1) (0.6) (6.1) Development maintenance 1.0 8.5 9.5 (0.7) (5.5) (6.2) Equipment, books, educational materials and delivery 4.0 2.7 16.6 23.3 (3.6) (2.4) (14.9) (20.9) Furniture 0.5 0.5 (0.0) (0.0) Technical assistance 1.5 1.5 (1.5) (1.5) Overseas fellowships 0.3 0.3 (0.3) (0.3) Local training and workshops 0.6 0.6 (0.0) (0.0) Related salaries, student costs, incre- mental operating costs 6.1 6.1 (0.0) (0.0) Total LA 6.9 27.9 7.2 51.3 (7.0) (5.2) (22.8) (0.0) (35.0) Note: Figures in parentheses include contingencies and are the amounts to be financed by the Loan. NBF - not Bank-financed. Includes international and local shopping, direct contracting or purchase, purchase through Government Stores and Supply, selection of consultants following Bank Guidelines, selection of fellows using existing Government administrative procedures, reprinting of books under existing contracts and force account for minor civil works.  -32- 3.13 The contract for construction of the new national high school near Port Moresby (estimated value, US$5.3 million) would be awarded on the basis of international competitive bidding (ICB). Contracts for the extensions to the two PHSs (estimated value, US$2.6 million) would each be awarded on the basis of local competitive bidding (LCB) procedures acceptable to the Bank. Contracts for construction of the houses (estimated value, US$1.6 million) would also be awarded on the basis of LCB. However, in remote areas where local contractors do not operate, houses may be constructed by DOW force account through hiring local day labor for the period necessary to complete the construction, up to an aggregate total value of US$1.0 million. Contracts for upgrading at the NHSs under the development maintenance component (para. 2.5) (estimated value, US$1.0 million) would be awarded on the basis of LCB. Other development maintenance construction (estimated value, US$8.5 million) representing very small works (average contract, US$30,000) would be procured by the beneficiary institutions in accordance with local regulations and with approval from the DOW or the provincial maintenance officer. Because of the small size, full LCB would not be justified, and contracts would be awarded to qualified contractors after comparing at least three quotations. Contracts expected to cost less than US$40,000, however, may be procured by direct contracting, subject to an aggregate total of US$4.0 million. If no local contractors are available, this construction would be carried out by force account. 3.14 The bulk of the textbooks and educ.ational materials to be provided under the project (estimated value, US$13.7 million) would be reprinted by placing additional orders under co-publishing agreements with overseas publishers which are already in place. These contracts were awarded under a previous education project following Bank Guidelines. Publishing and printing of the textbooks and materials being developed under the project (estimated value, US$2.9 million) would be awarded on the basis of ICB, while all distribution and delivery contracts for services within PNG (estimated value, US$2.5 million) would be awarded on the basis of LCB procedures acceptable to the Bank. Library books and computer sof-ware (estimated aggregate value, US$2.8 million) would be procured through direct purchase after negotiating for discounts with the publishers or their authorized distributors. Equipmert items for the new NHS, the extensions to the PHSs and the business studies program would be grouped in packages estimated to cost US$100,000 or more (estimated value, US$1.1 million) and awarded on the basis of ICB procedures while miscellaneous items which cannot be so grouped (estimated value, US$0.2 million) would be awarded on the basis of LCB procedures acceptable to the Bank. Goods manufactured in PNG and bid under ICB would be granted a margin of preference of 15 percent of the CIF price of imported goods or the prevailir% customs and import duties, whichever is lower. Miscellaneous equipment items not exceeding US$50,000 in value and subject to an aggregate total of US$0.1 million, could be procured through prudent shopping on the basis of competitive price quotations from at least three suppliers, eligible under Bank guidelines. Furniture would be financed and procured by the Government using its own procedures. Specialists would be selected in accordance with Bank Guidelines for the Use of Consultants. 3.15 Prior review by the Bank of bidding documents and contract award recommendations would be required for all contracts for civil works, equipment, books and educational materials expected to cost more than  -33- US$100,000 equivalent. It is anticipated that all contracts awarded as a result of ICB would be above this limit. Thus about 20 percent of the total value of this procurement under the project would be subject to prior review. Other contracts would be subject to selective post-review. Disbursements 3.16 The proposed loan of US$35 million equivalent would be disbursed over a period of five years (Annex 13). The disbursement schedule is based largely on the implementation schedule and on past experience with the NDOE (para. 3.9), and, as a result, is somewhat ahead of the disbursement profile for projects in all sectors in PNG. Disbursements are expected to be completed by the December 31, 1997, closing date and would be made against the following categories of expenditure: (a) civil works--65X of expenditures; (b) equipment, books and educational materiais including delivery--100% of foreign expenditures for directly imported equipment, books and educational materials, 100l of local expenditures (ex-factory cost) for locally manufactured items, and 85% of expenditures for locally procured equipment, books and educational materials and for delivery; and (c) technical assistance and fellowships--l00X of total expenditures. Full documentation would be required by the Bank to support withdrawal applications for all technical assistance and overseas fellowships and for all other contracts above US$100,000 equivalent. Disbursements for civil works, equipment, books, educational materials and related delivery contracts below US$100,000 equivalent, would be made on the basis of itemized statements of expenditure (SOEs). The documentation for SOE expenditures would be retained by the PIU and made available for review as requested by visiting Bank missions. 3.17 To facilitate disbursements, a special account would be established and maintained in US dollars at the Bank of Papua New Guinea. The initial deposit would be in the amount of US$2.4 million to cover project expenditures for the next four months, and would be used to make payments in all categories of less than US$240,000 equivalent, for both local and foreign expenditures. All other expenditures above this amount could be submitted directly to the Bank for payment. Replenishment of the special account would be made on a monthly basis or whenever the available balance in the account drops below 50% of the authorized initial deposit, whichever occurs first. Accounts. Audits and ReRorting 3.18 The PIU would establish a separate account for all project expenditures, to be maintained in accordance with sound accounting practices. Project accounts iould be audited in accordance with Bank guidelines. Within nine months of the end of the Government's fiscal year, the Bank would be presented with an audit report of such scope as the Bank may reasonably request, including a separate opinion by the auditor on disbursements against certified SOEs. The PIU would also monitor progress in project implementation and submit semi-annual reports to the Bank around March and September each year.  -34- D. Environmental Impact 3.19 The project would not have any adverse impact on the environment. The development maintenance component would have a strong focus on the rehabilitation of school water supply and sewage systems which have often deteriorated badly in recent years. Thus the project would contribute to a healthier environment for school communi ies and reduce waste pollution. E. ImDact on Women 3.20 The project would provide expanded opportunities for the enrollment of girls in grades 11 and 12 which in turn would increase the number of girls qualified for entry to the universities. At present, female enrollment in the national high schools is only 29X and the new day NHS and extensions to the two PHSs would have 50X female enrollment. The additional 500 places for girls would be equivalent to an increase of 88X over the 1990 female enrollment level. The policy study on female education would review the impediments to the educational advancement of women, propose appropriate policies and implement these policies according to an acceptable action plan. The policy study, by focusing on the particular needs of women, would lead to enhanced educational opportunities for them in the longer term. IV. BENEFITS AND RISKS A. Benefits 4.1 The project would lead to an increase in grade 12 graduates thereby easing the shortage of qualified entrants to higher education, especially with regard to females. The project would also assist in improving the quality of education through the provision of teacher support, improved planning, textbooks and other relevant inputs. Policy and planning would also be strengthened in relation to female participation in education and the cost effectiveness of the education system. In addition to the benefits to be derived from Bank financing, the project design process encouraged the preparation of detailed statements of education policies, strategies and investment needs which are available to guide the future education investment decisions of the donor community. B. Risks 4.2 In view of the involvement of the provincial education divisions in implementing parts of the project, there is some risk regarding local capacity to implement the project satisfactorily. This potential risk would be reduced through the operation of the PCC and the establishment of a well-staffed PIU which would include an experienced project coordinator. V. AGREEMENTS REACHED AND RECOMMENDATION 5.1 The Government has agreed to the following:  -35- (a) appoint the curriculum development coordinator by March 31, 1993 (para. 2.7); (b) create additional positions for five inspectors and two guidance officers by September 30, 1993 and make appointments to these positions by January 31, 1994; create additional positions for three inspectors and one guidance officer by September 30, 1994 and make appointments to them by January 31, 1995; and create additional positions for three inspectors and two guidance officers by September 30, 1995 and make appointments to them by January 31, 1996 (para. 2.8); (c) create and fill the first position of library advisor by April 30, 1993 and create positions for the second library advisor and the support librarian and fill them by April 30, 1994 (para. 2.9); (d) employ the special planning advisor by June 30, 1993, create the position for the first regional planning advisor by September 30, 1993 and fill it by January 31, 1994. Carry out similar actions for the remaining two regional advisors to be appointed in 1995 and 1996 (para. 2.10); (e) carry out the policy studies and implement their recommendations according to the action plan (para. 2.11); and (f) fund positions in the 1993 budget for the project coordinator, procurement manager and maintenance manager, and fill these positions by March 31, 1993. Create the position of project accountant, fund it in the 1994 budget and fill it by March 31, 1994 (para. 3.8). 5.2 Subject to the above conditions, the project constitutes a suitable basis for the Bank loan of US$35 million equivalent to Papua New Guinea for a term of 20 years, including 5 years of grace at the Bank's standard variable intereit rate.  PAPUA NEW GUINEA EDUCATION DEVELOPMENT PROJECT Structure of the Education System Provitncial High Schools Universities ~~~~~~~~~~~High Sdmol itas_ Other Post-SecondaCerifiate Comnnjnity Schoods C*fia Tchnical CouRges College of External Studies Vocational <o tCerters Employment Minimum Age 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 1 I I - I I I I I I I I I I I I '6to 12 weeks over a 2 to 4 year period. apus142s~~~~~~~~~~~~~  - 37 - AEX 2 PAPUA NEW GUINEA EDUCATION DEVELOPMENT PROJECT Enrollments by Education Level (1990) Level Total Female X Female Primary Grade 1 99,166 44,907 45.3 2 82,795 36,720 44.4 3 69,515 30,908 44.5 4 60,985 26,638 43.7 5 52,766 23,179 43.9 6 47.862 20.,85 43.6 Subtotal 413,089 183,204 44.3 Lower Secondary Grade 7 16,366 6,392 39.1 8 14,542 5,711 39.3 9 11,893 4,646 39.1 10 10.288 3.798 36.9 Subtotal 53,089 20,547 38.7 UDRer Secondary Grade 11 1,006 286 28.4 12 962 283 29.4 Subtotal 1.968 569 28.9 TOTAL 468,146 204,320 43.6 Higher Education/a Universities,& 3,967 774 19.5 Technical Colleges 1,489 721 48.4 Teachers Colleges 1,645 660 40.1 Nursing Schools 826 604 73.1 Para-Medical Colleges 291 128 44.0 Primary Industry Colleges 593 56 9.4 Other 467 46 TOTAL 9,278 2,989 32.2 ta Data are for 1989. Lb Enrollments are equivalent full-time student units.  PAPUA NEW GUINEA EDUCATION DEVELOPMENT PROJECT Education Recurrent Exgenditures (K million) Growth Rates 1985-91 1985 1986 1987 1988 1989 1990 1991 Nominal Real Primary/Secondary Provincial 26.6 24.2 26.6 29.0 33.6 40.5 37.0 5.7 0.4 NDOE 74.5 78.4 86.4 94.4 102.4 102.5 106.2 6.1 0.7 Higher Education 55.5 55.9 549 52,5 580 60.9 68.2 3.5 -1.7 1 Total 156.6 158.5 167.9 175.9 194.0 203.9 211.4 5.2 -0.2 X National Budget 863.8 920.2 971.8 1,092.0 1,188.3 1,250.0 1,310.0 7.2 1.7 Education as Z 1X.1 17.2 17.3 16.1 16.3 16.3