Nicaragua - Basic Education Project

Document of The World Bank Report No.13705-NI STAFF APPRAISAL REPORT NICARAGUA BASIC EDUCATION PROJECT FEBRUARY 22, 1995 Country Department II Human Resources Operations Division Latin America and the Caribbean Regional Office  CURRENCY AND EQUIVALENT UNITS US$1.0 = 6.6 Nicaragua C6rdoba (C$) (December 1994) SDR1.0 = US$1.472 FISCAL YEAR January 1 - December 31 ACADEMIC YEAR February 1 - November 30 ACRONYMS AND ABBREVIATIONS BASE MED/USAID Basic Education Project CA Autonomous Secondary School, Centro Aut6nomo CNU National University Council, Consejo Nacional de Universidades ERC Economic Recovery Credit (Cr. 2302, 1991) FISE Emergency Social Investment Fund project (Cr. 2434, 1993) ICB International Competitive Bidding IDA International Development Association INATEC National Technological Institute INSSBI Nicaraguan Institute of Social Security LCB Local Competitive Bidding LSMS Living Standards Measurement Study MEC Municipal Education Council MED Ministry of Education MIS Management Information System MOF Ministry of Finance NGO Nongovernmental Organization PAHO Pan American Health Organization PCU Project Coordination Unit PPU Project Preparation Unit SIMEN UNESCO/Dutch Project for Improvement of Nicaraguan Education SOE Statement of Expenditure UCA Central American University UNA National Agricultural University UNAN National Autonomous University of Nicaragua UNI National Engineering University UNESCO United Nations Educational, Scientific and Cultural Organization UNICEF United Nations International Children's Education Fund USAID U.S. Agency for International Development WFP World Food Programme  NICARAGUA BASIC EDUCATION PROJECT ST'AFF APPRAISAL REPORT TABLE OF CONTENTS Page I. THE ECONOMIC AND SOCIAL CONTEXT ........................ 1 II. THE PRIMARY EDUCATION SYSTEM ................ 3 A. Overview of the Education Sector .............. 3 B. Issues in Primary Education ............................... 5 (1) Inefficiency in Student Flows .......................... 5 (2) Poor Quality and Educational Inputs .......... ........... 6 (3) Inefficient Administration of the Education Sector ..... ........ 9 (4) Lack of Active Community Participation ....... ........... 10 (5) Inadequate Sector Financing .......................... 10 C. Govermnent Strategy for the Education Sector .................... 11 (1) Education Decentralization Strategy ..................... 12 (2) Curriculum Reformn ...... 14 (3) Textbook Availability and Distribution ...... 14 (4) Expanding and Strengthening Pre-primary Education .... .. 15 (5) Improvement of Teachers' Compensation System ... ... 15 (6) Rehabilitation of Infrastructure ...... 15 D. Lessons Learned from Past Experience .. . ... 16 E. Rationale for IDA Involvement .. . ... 17 III. THE PROJECT ...... 18 A. Project Concept and Objectives ...... 18 B. Project Components ...... 18 C. Other Related Donor Programs ...... 19 D. Project Description .................................... 19 Component 1 - School Decentralization ...... 19 Component 2 - Educational Materials ...... 24 Component 3 - Expansion of Pre-primary Education ...... 25 Component 4 - Infrastructure ...... 28 IV. PROJECT COSTS, PROCUREMENT, DISBURSEMENT,AND AUDITS .29 This report is based on the findings of the appraisal mission that visited Nicaragua in June, 1994. The mission was composed of Mmes./Messrs. Manuel Vera (mission leader), Clemencia Chiappe, Rosita Estrada (LA2HR), Marta Molares (LEGLA), Robert Kanchuger, Nancy Gillespie, Blanca Hermosilla, and Viola Espinola (consultants). Vinh Nguyen, Kevin Rost, Claudia Otero, Elizabeth Waters, Diane Steele, Eleanor Schreiber and Laura Arias (LA2HR) contributed to the report at headquarters. Peer reviewers are Donald Winkler (LATAD) and Luis Pisani (LAJHR). Messrs. Edilberto L. Segura and Kye Woo Lee are the Department Director and Division Chief, respectively, for this operation.  - 11 - A. Project Costs and Financing ........................... .. . 29 B. Procurement. .................................. 31 C. Disbursements ....................... ..... .... ... . ...34 D. Accounts and Audits . .................................. 35 V. PROJECT MANAGEMENT AND SUPERVISION ....... ........ . . . . . 36 A. Project Readiness for Implementation ......................... 36 B. Project Monitoring and Supervision .......................... 37 C. Annual Implementation Reviews ............................ 37 D. Mid-term Review . .................................... 38 VI. PROJECT BENEFITS AND RISKS .............. ................ 38 A. Project Benefits ....................................... 38 B. Impact on Women . .................................... 39 C. Environmental Impact . ................................... 40 D. Project Risks ........................................ 40 E. Program Objective Category ............................... 41 VII. AGREEMENTS REACHED AND RECOMMENDATION .... ........... 41 ANNEXES ................................................ 43  - 111 - NICARAGUA BASIC EDUCATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: The Republic of Nicaragua Beneficiary: Ministry of Education Poverty: Program of Targeted Interventions. The project will target poor children in the rural and urban marginal areas for the pre-primary education component, and will select locations for infrastructure investments by poverty indicators developed and used by the Government for poverty alleviation programs. Amount: SDR 23.1 million (US$34.0 million equivalent). Terms: Standard IDA terms with 40 years maturity including 10 years grace period. Commitment Fee: 0.50% on undisbursed credit balances, beginning 60 days after signing, less any waiver. Financing Plan: See para. 4.4. Net Present Value: Not applicable. Map IBRD-24714  - iv - NICARAGUA BASIC DATA SHEET Nicaragua Year Source A. General Country Data GNP per Capita (US$) 422 1992 IDA Est Area (thousands of square kilometers) 130 N/A WDR Population Estimate 4.3 1993 GON Est Urban Population (% of total) 61.0 1992 UNFPA Population Projection, Year 2000 5.2 1990 PAHO B. Social Indicators Crude Death Rate 7.0 1991 WDR 93 Average Annual Rate of Population Growth (%) 3.4 1991 GON Est Total Fertility Rate 5.1 1991 WDR 93 Infant Mortality Rate (per 1000 live births) 72 1990 IDA Est Life Expectancy at Birth (years) 67.0 1992 UNFPA Adult Illiteracy Rate (% of persons 10 and over) 23.0 C. Education Statistics 1993 MED Preschool Enrollment Rate (Ages 3-6) (%) 14.5 Total Preschool Enrollment (Thousands) 79.5 Non-formal Preschool Enrollment (Thousands) 19.1 Gross Primary Enrollment Rate (Grades 1-6) (%) 103.6 Net Primary Enrollment Rate (Ages 7-12) (%) 80.3 Gross Secondary Enrollment Rate (Grades 7-11) (%) 37.7 Net Secondary Enrollment Rate (Ages 13-17) (%) 21.2 Total Primary Enrollment (thousands) 730.0 Public (%) 85.1 Subsidized (%) 7.8 Private (%) 7.1 Primary School Efficiency Data Number of Teachers (thousands) 19.4 Student/Teacher Ratio 37.0 Student/Classroom ratio 47.0 Incomplete Schools (% of all primary schools) 32.0 Unitary Schools (% of all primary schools) Repetition Rate (%) 16.6 First Grade Repetition Rate (%) 30.2 Rural Repetition Rate (%) 20.5 Urban Repetition Rate (%) 8.9 Dropout Rate (%) 13.2 Completion Rate (%) 17.4 Average Years to complete Primary 11.1 Education Expenditure Data Total Public Education Spending (% of GDP) 4.0 Public Education Spending (% of Total Government Expenditures) 18.0 Public Primary Education Spending (% of Education Expenditures Among Levels) 38.2  EDUCATION GLOSSARY Completion Rate For six-year primary education, the ratio between the number of students exiting grade 6 in a given year T and the number of students entering grade 1 in year T-6, as a close approximation of the percentage of students of a given cohort to complete six- year primary school. Dropout Rate Percentage of students who abandon the system without completing the education cycle, e.g., primary school. Educational Attainment Number of formal school years achieved by a person. Educational Achievement Magnitude of achievement in any subject area, generally measured on the basis of national curriculum learning objectives. Enrollment Rate Percentage of children of a given age group enrolled in schools at a particular level of education. Incomplete School Primary school with fewer than the six official primary education grades. Multigrade Classroom A classroom where children of several different grades are taught by one teacher. Net Enrollment Rate Percentage of children of a given age group enrolled in their corresponding grade level. Promotion Rate Percentage of the students enrolled in a given grade who enroll in the next higher grade the following year. Repetition Rate Percentage of the students enrolled in a certain grade who are not promoted to the next grade and who therefore enroll again in the same grade the following year. Transition Rate Percentage of the students completing one school cycle (e.g., primary) who enroll in the first grade of the next upper cycle (e.g., secondary) the following year.   NICARAGUA BASIC EDUCATION PROJECT STAFF APPRAISAL REPORT I. THE ECONOMIC AND SOCIAL CONTEXT 1.1 Nicaragua is one of Latin America's poorest countries with a per capita GDP estimated at US$422 in 1992, substantially lower than the US$850 prevailing in the late 1970s. When the current Chamorro Government took office in April 1990 after a decade of civil strife, it had to transform the centrally planned economy into a market-oriented system. In 1991-1992, the Government successfully implemented a comprehensive stabilization and adjustment program supported by the International Monetary Fund Stand-by arrangement and an IDA Economic Recovery Credit (ERC, September 1991). Inflation was reduced to single digit annual rates, and GDP recorded modest growth in 1992. 1.2 Despite the progress that was made, the political situation began to deteriorate in the second half of 1992, leading to a deepening political impasse in 1993. Under these circumstances, it became very difficult for the Government to achieve and sustain the necessary consensus to carry forward its stabilization and reform programs. Attempted fiscal adjustment measures were met with violent strikes and demonstrations leading to their withdrawal. The turbulent political environment was accompanied by economic deterioration. GDP declined by 0.7 percent and net international reserves fell to about two weeks of imports. In addition to political problems, the economic deterioration was caused by a marked drop in comrnodity prices, adverse weather, and credit bottlenecks. The situation was exacerbated by the suspension of bilateral aid flows, leading to a tightening of credit that added further uncertainty to the business climate. 1.3 Although reliable trend data are not available, it seems certain that there has been little progress in reducing poverty or improving social conditions over the past three years, and that they may have even worsened. A recent IDA Poverty Profile1' found that slightly over half of the population is poor and close to one-fifth of the population falls below the extreme poverty line. Poverty is deeper and more severe in rural areas and in the Northern and Segovias regions of the country. GDP per capita fell by 9.4 percent during 1990-1993 and the official rate of unemployment increased from 11 to 16 percent. Underemployment in 1992 was estimated to range between 38 and 44 percent. 1.4 Education, health, and basic services indicators reflect the country's poverty.2' Overall levels of education are low with educational attainment highly correlated to poverty and rural location. Nationally, 23 percent of the population age ten and older is illiterate. Among the extremely poor in rural areas this figure is 50.7 percent. The average number of years of schooling is 4.5 nationally, but extremely poor urban dwellers average only three 1' Nicaragua. Poverty Profile. Preliminary Findings of the 1993 Living Standards Measurement Survey (LSMS), World Bank, LA2HR, Paris, June 16, 1994. 2' Republic of Nicaragua - Review of Social Sector Issues. World Bank Report No. 10671-NI, February 3, 1993.  - 2 - years of schooling and in rural areas the figure falls to 1.6 years. The use of health services among the poor is low, malnutrition widespread, and prenatal and birth care limited. Only about half of all children under age six reporting diarrhea or other illnesses sought health care. Sick adults and children six and older reported seeking health care less often. Over 28 percent of the children under age five suffer from some form of malnutrition. Malnutrition levels among extremely poor children are almost double those of the rest of the population. Approximately one-half of all poor women received no prenatal care during their pregnancy and 23 percent of extremely poor women in rural areas give birth without benefit of any health care personnel. Poor households have limited access to basic services. Only about 20 percent of the rural poor are connected to running water and virtually none are served by sewers, septic tanks, or cesspools. Only about one-fifth of the extremely poor in rural areas have electricity. 1.5 During 1993 the donor community clearly signalled that further assistance to Nicaragua would depend on the Government's ability to continue economic reforms and forge a political consensus to support the effort. As a result of this, and a growing national awareness that the confrontational politics of 1993, if continued, would lead to chaos, the political situation stabilized in the closing weeks of 1993. It now appears that the political impasse has been sufficiently overcome, so that the Government now has an opportunity to implement the strong stabilization and adjustment measures that are necessary to maintain stability and revive economic growth. 1.6 However, to reinforce this emerging consensus and sustain social cohesiveness and support for the adjustment program, the Government must move quickly to strengthen its social sector programs to efficiently provide the basic social services such as health, nutrition, and education, to increase the earning capacity of the relatively poor, and to take social safety measures. The Government strategy for alleviating poverty and improving living standards focuses on creating the conditions for a resumption of economic growth, strengthening the provision of basic social services to the poor, and maintaining safety net programs while the economy continues to adjust. 1.7 The Government has made considerable efforts to protect the poor during adjustment, by establishing targeted safety net mechanisms and attempting to protect resource allocations to the social sectors from budget cuts. The share of social sector spending in the Central Government budget increased from 36 percent in 1992 to 46 percent in 1993 and is budgeted to remain at about that level in 1994. IDA issued a Social Sector Issues Paper in early 1993, and helped the government to conduct a Living Standards Measurement Survey (LSMS) later in the year. Based on the latter effort, a Poverty Assessment was prepared. The results of these efforts should assist the Government in refining its strategy and developing more accurate social targeting mechanisms. The IDA helped the Government of Nicaragua to mobilize co-financing of other donors and financed the Emergency Social Investment Fund (FISE) project (Cr. 2434-NI) in 1992, and is now assisting the Government in preparing a second FISE project. 1.8 As part of the long term strategy to develop the local capacity to address the structural poverty situation, the Government requested a Health Sector Reform credit, and the Association approved it in late 1993 (Cr. No. 2556-NI). In the same vein the Government asked for IDA support for an education sector credit, which would address the  - 3 - need for basic education, especially the need for improving its quality, efficiency and management, complementing assistance being provided by other donors, in particular USAID, UNESCO and the Dutch. The proposed project is in response to this request. II. THE PRIMARY EDUCATION SYSTEM A. Overview of the Education Sector 2.1 Education in Nicaragua is a public service provided primarily by the Ministry of Education (MED), and to a lesser extent by the private sector, at the levels of pre-primary, primary, secondary and teacher training. Technical vocational training is provided by the National Technological Institute (INATEC). Higher education is provided by four national and 12 private universities of which four receive government subsidies. Higher education is coordinated by a National University Council (CNU), which also decides on the allocation of public funds among the member universities. Table 1 - NICARAGUA Students and Teachers in the Education System, by Levels, 1993 Students Teachers School Count Enrollment Students per Level (grades) Count ('000) Rate Count Teacher Pre-primary (1 - 3) 1,403 80 15 2,500 32 Primary (1 - 6) 4,714 737 104 19,440 38 Secondary (7 - 11) 338 191 28 6,200 30 Teacher Training (10-12) 8 2 0.4 Higher (3 - 6 years) 16 39 1,590 25 Note: Includes both public and private schools. 2.2 Pre-primary Education comprises a three-level program for children of ages 3 to 6. Approximately 80,000 children, or 15 percent of the age-group population, attend pre- primary classes, 70 percent of them in the 3rd level. Pre-primary classes are taught by 2,500 teachers. Seventy-six percent of the classes operate in urban areas. Thirty-six percent of pre-primary students are in privately operated schools, one-third of which receive some government subsidy. Some 19,000 children (about 25 percent of total enrollment) attend non-formal programs operated by MED and the Nicaraguan Institute of Social Security (INSSBI) using community facilities and volunteer untrained teachers. Some of these programs are combined with health and nutrition programs, using the same facilities. 2.3 Primary Education (grades 1-6) enrolls approximately 720,000 students in a six- grade program. Girls make up slightly more than 50 percent of enrollment. An additional 17,600 students attend special classes for over-age children with a three-year accelerated program.  - 4 - 2.4 Children are admitted to primary schools at the age of seven, but six-year-olds are allowed to enroll if they have had at least one year of pre-primary. Nicaragua has achieved a relatively high enrollment rate in primary education, and primary school services are reasonably well distributed among the departments and between urban and rural areas (Annex 1). Gross enrollment is 104 percent including a substantial number of over-age students (about 15 percent of total enrollment). Net enrollment rate (students in the age bracket 7-12 currently enrolled in primary school) is around 80 percent, lower than most other Latin American countries (Table 2 and Annex 2). Table 2 Primary Education 2.5 Most of the primary students (85 percent) Net Enrollment Rates in Latin attend public schools, and an additional 8 percent American Countries attend privately operated schools partially subsidized by the MED. Only 7 percent of the Year Rate students attend privately financed schools. Approximately 19,400 teachers serve the primary Nicaragua 1993 80 school system, of which 16,300 (84 percent) are Costa Rica 1986 88 in the public sector. On average there are 37.5 Honduras 1990 86 students per teacher in public and subsidized Mexico 1986 97 schools, and 31.5 in private schools. The overall Panama 1986 89 student/teacher ratio has increased in Nicaragua Chile 1984 92 from 32 in 1986 to 37 in 1993, and is higher than Colombia 1986 73 in most other Central American countries (Annex Paraguay 1986 85 3). Student/teacher ratios are generally higher in Peru 1985 97 the urban areas, with an average of 41.4 students Uruguay 1986 92 per teacher. The rural areas have lower ratios Venezuela 1985 86 (34.3 students per teacher on the average) because many classrooms in small communities must function with fewer than 40 children, even in multigrade classes. 2.6 Secondary Education (grades 7-11) enrolls about 136,000 students in regular day classes. An additional 50,000 attend evening classes, and 5,000 enroll in distance education classes. The program is five years for general education. No vocational courses are offered by the secondary schools. A three year program of teacher training is offered in eight "Normal Schools" to students who have completed three years of general secondary school (grades 7-9). The average gross enrollment rate of 27 percent of the age group 13 to 17 includes about 30,000 students (22 percent of the total) over age 18, making the net enrollment rate only 21 percent. More students of secondary school age are enrolled in primary schools than in the secondary schools (Annex 2). Coverage varies widely among the departments, from 42 percent in Masaya to 5 percent in Rio San Juan. Nearly 60 percent of the total enrollment is in urban areas. There are a total of 338 secondary schools, of which 191 are public schools operated by the MED. Of the 147 private secondary schools, 62 receive a MED subsidy through payment of some teacher salaries in exchange for catering to low-income students. 2.7 There are nearly 6,200 secondary teachers in regular and evening schools, of which 2,900 (47 percent) are untrained. The average student/teacher ratio of 30 (Annex 5) is adequate, but some schools (4) have between 45 and 50 students per teacher while a considerable number (26) have less than 20 students per teacher.  2.8 Vocational Training is delivered by the National Technological Institute (INATEC). INATEC has at various times been affiliated with the MED, but is at present an independent decentralized institution of the central government. INATEC is financed through a 2 percent tax on the payrolls of employed workers, along with limited donor contributions and some user fees. It offers a range of technical career preparation programs lasting between 2 and 3 years for adolescents aged between 13 and 21. There were about 64,000 trainees enrolled in the programs and about 12,000 trainees graduated from the programs in 1993. 2.9 Higher Education is delivered by the universities, which have autonomy under the Nicaraguan Constitution and are governed by the CNU. Four public (UNAN Managua, UNAN Le6n, UNI, UNA) and four private (UCA, UPOLI, IAG, EAG) universities (Annex 6) are members of the CNU and are entitled by law to receive 6 percent of the public sector budget, which is equivalent to about 47 percent of the MED budget and 31 percent of total sector expenditures. Enrollment in these eight universities is about 33,000 students. Eight other privately funded universities have opened in recent years and enroll another 6,000 students approximately. Annex 6 shows the distribution of higher education enrollment by universities. B. Issues in Primary Education 2.10 The following are the most important issues relative to the Nicaragua educational system, and to primary education in particular: (a) inefficiency in student flows; (b) poor quality and inadequate educational inputs; (c) inefficient administration of the education sector; (d) lack of active community participation; (e) inadequate sector financing. A discussion of these issues follows. (1) Inefficiency in Student Flows 2.11 Most Nicaraguan children enroll in primary schools but their high dropout and repetition rates yield low effective educational progress. As a result of a policy to expand free access to education, school enrollment increased from 80 percent in 1978 to universal enrollment by 1983. The growth in rural areas was particularly impressive (18 percent annual growth over the 1978-1983 period). However, a low percentage of Nicaraguans complete primary school. For the population as a whole, the average educational attainment is estimated at about four years. Only 17 percent of the students entering the first grade in a given year graduate six years later. Grade repetition and dropout rates are high, particularly in the early grades. Nearly 30 percent of the students repeat the first grade (34 percent in rural areas) and only 53 percent are promoted to the second grade. Dropout and repetition rates continue to be high throughout the school cycle, and for each student that graduates the system must finance 11 student years instead of 6 (Annex 4). The country is paying 1.7 times more than it would for an efficient school system. A recent study financed by USAID (Proyecto ABEL) reveals that these repetition rates are underestimated and the actual rates may reach 40 percent.2' The study shows that repetition is the most critical efficiency 3' Gargiulo, Carlos and Crouch, Luis A. Nicaragua. Escolaridad, Repetici6n y Deserci6n Escolar. Resultados de una Encuesra Nacional. Research Triangle Institute, Marzo 1994. Financiado por USAID/Nicaragua bajo el Proyecto ABEL.  - 6 - problem affecting the first grade. School failure, that is, poor quality of schooling, is shown by the study as the major cause of repetition, although health and other social factors are also important. 2.12 The USAID study concludes that about 50 percent of repetition is due to the poor economic condition of the students. But the other 50 percent of the repetition rate is due to the poor quality of education, which is associated with the lack or poor quality of educational inputs. Critically absent are a dynamic curriculum closely related to the needs of society, trained teachers, and good textbooks. Inadequate physical facilities and multigrade teaching are also mentioned as possible causes. 2.13 Although poor economic conditions which lead to nutritional deficiencies and the need to work for the family account for some of the dropout rate, low quality of educational delivery is equally responsible for the poor performance of the school system. Low student achievement forces grade repetition and eventually discourages students from staying in school. Low quality is due mainly to lack of educational materials and to poorly trained teachers. (2) Poor Quality and Educational Inputs 2.14 Curriculum - Low Achievement of Basic Skills. First grade students' achievement in reading, writing, and mathematics is often below stated first grade curricular objectives. This fact is seen by many parents and teachers as a major explanation of the repetition rates: they assume that repeaters are children who require more than one year to perform in reading and writing. 2.15 However, there is no standardized evaluation system of student achievement to provide empirical evidence in support of this statement. High repetition rates indicate that either the curriculum is too demanding, or teachers and textbooks are not contributing enough to produce adequate levels of achievement. USAID's Basic Education (BASE) project (para. 3.5) will support a curricular reform of the lower primary grades (1 to 4), focusing on the acquisition of basic skills and development of an achievement evaluation system. 2.16 Incomplete and Multigrade Schools. A significant number (32 percent) of the primary schools offer three grades or less, with rural areas affected the most (35 percent of rural schools fall in this category as opposed to 13 percent of urban schools). Nineteen percent of rural children attend multigrade schools. Multigrade school teachers lack specific training in multigrade teaching. They and their students also lack specialized educational materials and physical facilities. The curricular reform, supported by USAID, will address the special requirements of multigrade teaching. 2.17 Low Quality of Teachers. An estimated 36 percent (50 percent in rural areas) of all primary teachers (about 6,000 teachers) are untrained (empificos). The problem is aggravated by the fact that some 20 percent of total classes are multigrade (3,905, of which 3,780 are in the rural areas) which are usually assigned to the younger, least trained teachers. The MED maintains a program of teacher accreditation with Saturday and Summer classes, but has not been able to keep up with high turnover of trained teachers due to low  - 7 - salaries. Approximately 4,800 teachers attend these classes per year, but the annual attrition rate reaches 3 percent of the total primary teaching force. A new teacher training program is being launched by the MED with USAID grant support, including distribution of Basic Education Guides, training of master teachers, and establishment of demonstration schools in teacher training institutions. In-service teacher training is also being conducted by the MED in relation to the curriculum development program supported by a grant from the Dutch Government with UNESCO assistance. But training alone is not likely to reduce teacher turnover as long as salaries remain low. Decentralization is expected to generate additional resources to provide incentives for trained teachers to stay in the system. The quality of the teaching staff is generally low because of an inadequate supply of properly trained teachers and deficiencies in both the pre-service and in-service stages of training. (a) Pre-Service: Due to the explosive rise in school enrollments during the 1980's, need for new teachers (520 per year) far exceeded the increase in the annual supply of qualified teachers (about 400 per year from 12 pre-service training centers, Escuelas Normales). To cope with this shortage, the MED employed large numbers of unaccredited teachers, the "empiricos," mostly primary school graduates with some short training. Thirty- six percent of teachers fall in that category. In order to address this issue, the BASE project will provide accreditation training to all the untrained teachers and strengthen pre-service training in the Normal Schools during the period 1994-1999. (b) In-Service Teacher Training: Currently it is almost non existent. The central MED cannot simultaneously handle the accreditation training of unqualified teachers, a curricular reform, and the development of an in-service teacher training program. Thus, on an experimental basis and with limited coverage (800 teachers), beginning in 1994, a UNESCO-Dutch project (para. 3.6) has produced and distributed self-teaching modules for in-service training. In addition, the BASE project will provide classroom guides for all teachers and train cadres of master teachers for in-service training. 2.18 Shortage of Textbooks and Other Educational Materials. During the past three years, the MED has made considerable efforts to provide textbooks to primary school students. Textbooks for language arts and mathematics are now provided by the MED to students in grades 1 through 6. The availability of free textbooks has contributed significantly to improve the learning environment in the schools, but teachers need to be trained in the proper use of the materials, and the program, financed by a grant from USAID since 1991, is being discontinued as of 1994. The MED lacks budget resources to continue providing textbooks, and is trying to develop a sustainable textbook policy that would ensure textbook availability for all students. Currently, about one-third of the 720,000 students in primary schools do not have access to textbooks.4' Few students can afford commercially available textbooks. 2.19 While textbooks were initially given to students each year without charge, they are now distributed on a loan basis. Thus only partial replenishment is made annually of 15 percent to 20 percent of the supply of books to replace those damaged or lost. Books are the property of the school, rather than the student. While it would be desirable from a pedagogical point of view for the student to own the books, the cost of free distribution 41 Nicaragua. Living Standards Measurement Survey (LSMS). World Bank, 1993.  - 8 - would not be financially sustainable in Nicaragua. The MED has adopted a policy of school ownership of the textbooks, and will introduce a system of partial cost recovery in the proposed project. 2.20 Past experience with textbook cost recovery schemes has shown that parents were willing to pay, and they did. However, transferring the resources collected to the central level proved to be the least efficient way to use these additional resources. Schools lost interest in collection, knowing that they were unable to use the resources locally. Moreover, it is claimed that resources collected were lost, and it was extremely difficult to carry out the auditing process. 2.21 The proposed project will: (a) strengthen MED's capacity to define textbook policy, and to plan, implement and monitor a textbook program; (b) finance the production and distribution of textbooks; and (c) support a cost recovery mechanism based on two criteria: (i) that fees be established according to students' economic capacities and (ii) that the resources collected stay in the schools (paras. 3.20-3.25). 2.22 Inadequate Pre-primary Services. Research has shown that first grade repetition rates can be successfully reduced through the provision of effective pre-primary education programs. Since in Nicaragua, one out of three children repeats the first grade, an adequate and cost effective pre-primary program could make a substantial contribution to reducing repetition rates and thereby improving overall education system efficiency. The proposed project will support the expansion of pre-primary services, especially those using a non- formal model which relies on community educators, targets the poor, and uses infrastructure provided by the community (para. 3.27). 2.23 Nicaragua has developed a large formal pre-primary program which enrolls 15 percent of the age bracket 3-6, including 32 percent of 5 year olds. Private schools absorb approximately 35 percent of the enrollment. Annual cost per student in state financed schools is about US$58, compared to US$42 per primary student. Although the program lacks educational materials, in-service training, and supervision, it is still relatively expensive, as it intensively uses formally trained teachers and physical infrastructure. Given current financial constraints, further expansion of the formal pre-primary program is not advisable. 2.24 At present, the formal pre-primary program is primarily urban in coverage, and uses no mechanism to target the poor. The result is that only the relatively well to do families benefit from the program. Those children who are most disadvantaged - coming from the lower economic strata, with uneducated parents, and living in rural and marginal urban areas - are the least likely to benefit from the formal pre-primary program. 2.25 The MED currently operates a small non-formal pre-primary program. This program is more of a day care program than an educational program, however; its educational content is minimal. Like the formal pre-primary program, the non-formal program lacks educational materials, in-service training for the community educators, and supervision. The proposed project will expand and improve the non-formal program targeting five year old children in rural and urban marginal areas (paras. 3.26-3.34). - - - - - - - - - - ~ ~ ~  - 9 - 2.26 Dilapidated Physical Facilities. A recent study financed by IDA5' determined that approximately 9,000 out of a total of 12,700 public primary school classrooms in 4,288 school buildings needed rehabilitation or replacement. Regular maintenance of school buildings has been long neglected due to budgetary constraints. Sanitary facilities are generally in bad condition, posing a health hazard for students in addition to a negative educational environment. The cost of rehabilitating the school physical plant was estimated at US$58 million. 2.27 The Emergency Social Investment Fund (FISE), partially financed by IDA, has made a substantial contribution to school rehabilitation since it started its operations in 1991. Nearly 400 schools were repaired or replaced between 1991 and 1993 with an investment of approximately US$12 million. An additional US$8 million has been budgeted by FISE to rehabilitate about 300 primary and pre-primary buildings in 1994. FISE responds to requests from the MED, municipalities, community groups and nongovernmental organizations (NGOs) for construction or repair of schools mainly in rural areas. All projects are cleared by the MED to ensure that teacher salaries and other current expenses are provided for, and norms and standards set by the MED are met. Minimum eligible project size for FISE financing is US$10,000. 2.28 The MED has neither the financial nor the institutional capacity to manage a significant program of school construction or maintenance. Budget resources allocated to school maintenance amount to less than US$0.5 million per year. An undetermined amount is raised by the schools from parents and community contributions for minor maintenance and repairs. The MED's only other source of infrastructure investment finance is a grant from Luxembourg of US$1 million, of which approximately US$0.5 million was invested in 1993 to build 2 secondary schools and repair another five. 2.29 The proposed project would address the problem of physical infrastructure by financing rehabilitation or replacement of primary schools, upgrading all sanitary facilities in primary schools, and providing resources to promote local responsibility for routine maintenance and repair in decentralized schools and municipalities (para. 3.18). (3) Inefficient Administration of the Education Sector 2.30 The administration of the education sector is characterized by: (a) inefficient administration of human and financial resources; (b) lack of accountability for the administration of human resources; (c) lack of adequate equity and efficiency criteria for budget allocation; (d) lack of a reliable management information system (MIS); and, (e) a weak inspectorate function. 2.31 As a consequence, schools suffer inequities in resource allocation, receive an inadequate non-wage budget, show an inappropriate staffing mix (surplus or shortage of teachers and administrators), and face enormous delays in solving personnel administration matters (e.g. replacements for sick leave, maternity leave, etc.). In sum, the current financial and human resources administration is not able to meet school demands. 1' LAMSA Ingenieros Consultores, Estudio de Microlocalizacion de Centros Escolares, Ministerio de Educaci6n, Managua 1993.  - 10 - 2.32 The proposed project will support: (a) administrative reforms to delegate management functions to the school level (for secondary schools) and to the municipal level (for primary schools); (b) establishment of budget allocation procedures based on equity and efficiency criteria, at the central (Ministry) and school levels; (c) reforms of school inspection procedures to include the community (School and Municipal Councils) and the municipalities as part of the Inspection body. Several functions will be given to the community to increase their involvement in school inspections and in overseeing the use of human and financial resources allocated to schools (paras. 3.12-3.14). (4) Lack of Active Community Participation 2.33 There is little tradition of community participation or community based decision making in Nicaraguan education. Parent associations exist, but have a passive role, limited to assisting with fund raising school activities. Both administrative and pedagogical authority are centralized in the MED, which has an inadequate management capacity to monitor compliance with system rules, teaching quality, student performance or staff discipline. As a consequence, inefficiency in student flows and low levels of quality follow. Community participation is being promoted to some extent, albeit outside the education system, by the FISE program, which encourages presentation of school rehabilitation projects by community groups and municipalities. But still, parents and other community members have no voice in shaping what happens inside the schools. 2.34 In the proposed project, parent and community participation will be ensured through support of the Government's decentralization strategy and establishment of autonomous schools and municipal education councils to assume responsibility for school administration (para. 3.14). (5) Inadequate Sector Financing 2.35 In absolute terms, education financing in Nicaragua is low (Annex 7, Table 3). On a per capita basis, current public financing of primary education in 1993 was only US$42 per student per year, whereas the pre-primary and secondary programs received US$22 and US$43 per student per year, respectively. This compares with about US$100 in other countries of Central America. The MED budget has been almost entirely devoted to recurrent expenditures during the 1990s, which jumped from a 92 percent share of the total budget in 1991 to 96 percent in 1994 (Annex 7, Table 4). Although significant education construction and rehabilitation would be financed by FISE, further school maintenance and rehabilitation is urgently needed. Moreover, textbooks and teacher training and other educational materials should be provided to improve the efficiency and quality of education. Further, teacher salaries are relatively low (141 percent of GDP per capita, which compares unfavorably with about 300 percent in other countries in Latin America and the Caribbean region). Teacher demands for salary increases absorb enormous time and energy of sector managers at the expense of educational policy and program formulation and implementation. Teacher salaries are adjusted uniformly, and there is no incentive for teachers to excel in their performance. 2.36 Nicaragua's precarious economy severely limits prospects for increased sector financing via the central government budget. Nevertheless, resources are required in order  - 11 - to provide adequate non-wage recurrent budget resources to the schools and to improve teacher salaries, especially at the primary level. Currently, the non-wage recurrent budget is only 16 percent of the total. Moreover, not all schools receive an equitable share. There are no efficiency and equity criteria guiding the allocation of teachers and the non-wage budget on a school by school basis. Increased student enrollment does not lead to an equivalent increase of teachers, and fewer students do not result in a reduction of the teaching staff. 2.37 A detailed analysis of education sector financing in Nicaragua is presented in Annex 7. Total public financing of the education sector during the 1990s has fluctuated moderately as a share of central government expenditures (Annex 7, Table 1). While sector financing was 17.3 percent of central government expenditures in 1991, this level rose to 18 percent in 1993 and is programmed at 16.5 percent for 1994. Sector financing as a share of GDP has declined over the same period, from 4.5 percent of GDP in 1991, to 4 percent in 1993, with the same share programmed for 1994. This decline relative to GDP primarily reflects the smaller share of the central government in the economy. Overall financing shares are well within the range of other Central American countries (Annex 7, Table 2). Therefore, the low level of public expenditure per student can be ascribed mainly to the low level of GDP per capita. 2.38 The proposed project will support an administrative decentralization strategy that can generate additional resources for schools. Although it is difficult to estimate exactly at this time how much can be mobilized through user fees and community contributions, preliminary findings from autonomous schools suggest that the potential is very significant. Cost recovery from the lease of textbooks will provide another source of funds. Schools will be allowed to collect and use these funds on condition that they meet efficiency and equity criteria to be defined and monitored by the MED (student/teacher ratio, teachers to administrative staff ratio, etc.), and that communities and municipalities have a strong oversight role in budget execution (paras. 3.14-3.15). In addition, the proposed project will provide for a teacher incentive system, so that teachers can receive merit increases, and teachers in remote and difficult conditions can receive special allowances (para. 3.17). The project provides for equitable budget allocations based on rationalized unit costs, and a compensatory mechanism to balance differences in regional economic capacity. C. Government Strategy for the Education Sector 2.39 The Government's educational policy clearly points to an improvement of the quality and efficiency of primary education. Key elements of the Government's strategy to achieve this objective include increased financial resources available to the primary schools through decentralization of educational management, an improved primary curriculum, better trained teachers, making primary textbooks available to all students, expanding pre-primary services to the poor with an emphasis on school readiness, and rehabilitating the physical infrastructure of primary schools. The Government's policy is summarized in the Policy Letter, dated June 1, 1994 (Annex 8), and is consistent with the recommendations of a 1993 Bank study of social sector issues.