Tanzania - Post - Primary Education and Training : Investments, Returns and Future Opportunities

CONFIDENTIAL Report No. 15327-TA Post-Primary Education and Training in Tanzania: Investments, Returns and Future Opportunities June 12, 1996 Population and Human Resources Division Eastern Africa Department F EV Acknowledgements This report was prepared by a team led by Amit Dar (PSP) and Ruth Levine and comprising of Issa Omari (Consultant) under the supervision of Jacob van Lutsenberg Maas (Division Chief, AF2PH) and Jane Armitage (Manager, PSP). A team of consultants, A. Abayo, M. Assad, M. Baisi, G. Fimbo, E. Galaitsi, H. Mosha, E. Kaijage, N. Kessy, P. Materu, U. Mbamba, R. Mushi, K. O-saki, D. Olomi, S. Sumra, prepared the background studies and data for this report. We would like to thank the Tanzanian Ministry of Science Technology and Higher Education (MOSTHE) for their continued support and assistance in this task. In particular we would like to thank Mr. Ngororo (Principal Secretary, MOSTHE) and Mr. Bilal for their guidance. We are grateful to the secretariat chaired by T. Mteleka and comprised of E. Malangalila, P. Materu, P. Mdemu, R. Ntuah, and I. Omari for their assistance and comments. We would also like to thank Luisa Ferreira, Indermit Gill, Charles Griffin, Steve Heyneman, Nancy McInerney Lacombe, Peter Moock, Zafiris Tzannatos, Yang Ro Yoon, Shahid Yusuf and participants at workshops in Morogoro, Tanzania and Dar Es Salaam, Tanzania for their valuable comments and guidance at various stages in the preparation of this study. Acronyms FDC Folk Development College IDM Institute of Development Management IFM Institute of Financial Management IIT Institute of Information Technology LFS Labor Force Survey MATI Ministry of Agriculture Training Institute NSWTI National Social Welfare Training Institute PPET Post-Primary Education and Training SUA Sokoine University of Agriculture TTC Teacher Training College TTI Tanesco Training Institute UDSM University of Dar Es Salaam VTC Vocational Training College VETA Vocational Education and Training Authority Currency Equivalent (1995): 550 Tsh = US$1.00 Table of Contents Executive Summary i-x I. Introduction 1 Objectives 2 Scope of the Study 3 Methodology 3 Organization of the Report 4 II. Basic Features of the Post-Primary Education and Training Sector 5 Institutional Structure 5 Types and Numbers of Post-Primary Education and Training Opportunities 5 Access Challenge 8 Labor Market Conditions 9 Conclusions and Recommendations 11 III. Costs and Financing of Post-Primary Education and Training 13 Introduction 13 Allocation of Public Expenditure at the National Level 13 Unit Costs 16 Cost-Sharing 23 Conclusions and Recommendations 26 IV. Returns to Education 32 Conclusions and Recommendations 33 V. Institutional Case Studies 35 Conclusions and Recommendations 38 VI. Policy Reforms and Their Implementation 39 Policy Framework 39 Issues and Actions 40 Legal Constraints to Implementation 47 Simulations and Projections 48 Conclusions 50 VII. Selected References 52 Appendices 54 Appendix 1.1: Background Studies 54 Appendix 3.1: Recurrent Expenditures on Education and Training in Tanzania 1993 55 Appendix 3.2: Determinants of Unit Costs 56 Appendix 4.1: Earnings Functions 57 Appendix 4.2: Alternative Estimates of the Rates of Return 58 EXECUTIVE SUMMARY Introduction 1 Tanzania faces a genuine crisis in the education sector. Primary enrollment rates are only 69 percent and the quality is declining. For those completing primary school, few opportunities exist for further education at the post-primary level. Only about 5 percent of school-age population attend secondary school and at the higher levels --university and technical-college level --opportunities are even more tightly rationed. Many of the opportunities that exist are in institutions unable to meet or maintain basic standards of instruction. Parents and students are increasingly feeling alienated from the school system. 2 Simultaneously, the government is under a tight budget constraint. Unit costs of education in publicly run institutions are extremely high, boosted by excessive and inefficient spending on student welfare and wages. While society may benefit from an increasing pool of skilled workers, these benefits are partially offset due to the high costs incurred by the government in skills which are of low quality. 3 The government has realized that it must move away from its traditional role of provision and financing of training and education at the secondary and tertiary level, towards a role of facilitating access to these opportunities. It recognizes the merits of acting in partnership with the private sector, to expand access to post-primary education and training opportunities, while putting the sector on a firmer financial footing. To inform policymaking, the government requested the World Bank to collaborate on a targeted study of the post-primary education and training sector. 4 The main objectives of this study are to (a) provide information relevant to public resource allocation in the post-primary education sector in Tanzania; and (b) identify levers for high-return, sustainable investments in human capital through policy reform in this sector. 5 The post-primary education and training sector consists of lower and upper secondary schools, universities and training institutions at the secondary and tertiary levels. 6 The study has aimed to achieve these objectives by answering the following five questions: (a) What type of education and training opportunities are available and to whom are they available; (b) How efficiently and equitably are public and private training institutions providing education and training services; (c) How successful are the financing strategies being implemented by the government and by individual institutions; (d) What are the returns to investment in post-primary education; and (e) What policy, legal and organizational constraints and opportunities influence the supply, efficiency, financial sustainability and demand sensitivity of education and training at the post-primary level? 7 This study concludes that the government of Tanzania has the potential to greatly increase the number and quality of opportunities for post-primary education and training, and to improve the "match" between acquired skills and labor market demand. However, to realize this potential it is important to understand the weaknesses of the current system, and to commit to a restructuring of the financing and operation of the post-primary education and training policies. Faced with stagnant public financial resources, growing private and social demand, and virtually no incentive to produce more and better with less, the current system of public financing and provision of post-primary education and training services fails to meet the country's needs for effective human capital investments. 8 The main recommendations of the report can be briefly summarized as follows: first, many institutions produce graduates of poor quality and are a burden in the face of a tight and inefficiently allocated budget. Those institutions can be closed down or turned over to the private sector, with the resulting savings being allocated to high priority activities. Second, the government should improve the system's internal efficiency by improving the input mix. Given current expenditure levels, the public sector could achieve more and higher quality education with better use of funds. This will involve rationalizing expenditures on personnel and student welfare. Third, the government should make a strong effort to open the door to private sector provision and financing of training. There is a tremendous potential for the private sector to respond to the demand for education and training. While the expansion of the role of the private sector by no means guarantees high quality, greater private sector involvement is likely to lead to greater consumer choice, upward pressure on quality in all types of institutions, and greater responsiveness to the needs of the labor market. 9 A restructured post-primary education and training sector will be beneficial to students as well as the government. From the perspective of the consumer -- the student and his or her parents -- a greater number and wider variety of opportunities will be available. The consumer is going to benefit from programs that are designed to prepare them for formal or informal private sector needs at an affordable cost. From the government's perspective, a restructured sector would allow government agencies to procure necessary training services as required with a far reduced budgetary and administrative burden than at present. Main Issues and Recommendations 10 The five main issues in restructuring the post-primary education and training sector are those of institutional-level efficiency, equity, labor market-training linkages, role of donors and rationalization of the post-primary sector (These are summarized in Table 1). Recommended short term (to be implemented within 2-3 years) and medium term actions for restructuring of the sector are put forward here. 11 Institutional-Level Efficiency: Currently, public resources - taxpayer and donor contributions - - are spread over about 350 post-primary education and training institutions, including secondary schools. Annual government expenditures for secondary and university education are 10 times and 143 times the expenditures on primary education respectively. Most segments of the sector suffer from an inefficient allocation of resources, and resulting poor quality and tightly rationed access. Currently, in public secondary and tertiary institutions, between 80 to 90 percent of expenditures are spent on personnel and student welfare expenditures and less than twnty percent of expenditures are spent on quality enhancing teaching and learning materials. On the other hand, private sector institutions, especially at the tertiary level, are providing education which is relevant to the needs of the market, and at costs far lower than those in public sector institutions. Short Term Actions: Recommendation 1: To relieve the budget constraint facing the government, very poorly performing public institutions - for example, those which have very high unit costs, institutions that duplicate the programs of better performing institutions and those which produce workers no longer in demand in the market - should be identified. Updated data on use of government funds should be available for all institutions so that the government can make informed decisions about investments. Government funding for poorly performing institutions should be cut or eliminated. ii Recommendation 2: Till such time that remaining government run institutions can become fully independent, the management of these institutions be given greater autonomy in decision making. Expenditures on catering and student welfare in these institutions can be reduced by improving the procurement methods for food services, and the wage bill by retrenching academic and non- academic staff on the basis of clearly defined criteria. A portion of the reductions in expenditures brought about by these actions can be channeled back into quality enhancing expenditures on books, equipment, and other teaching and learning materials. These expenditures should be subject to regular audits. Recommendation 3: Part of the high expenditures borne by the government on secondary education are due to high costs of supporting students who are sent to regions far away from their homes on the basis of a selection process that is inefficient. The selection procedure into secondary schools needs to be made more transparent. Students should be informed about their results and placement criteria by which they are assigned to schools in different regions. Only students willing to pay should be sent to schools in regions away from home. Medium Term Actions: Recommendation 4: All public tertiary training institutions should be encouraged to generate revenues from a combination of external scholarships (e.g. donors, private companies) and private fees. Government funding, in the form of input based budget transfers, should be gradually phased out. Recommendation 5: Instead of providing training for government workers in public institutions, which is usually expensive and of low quality, the government should develop a mechanism, based on a criteria of cost-effectiveness, to contract out to the private sector for some training services. 12 Equity: Inspite of high private returns to girls education, female enrollment rates remain much lower than those for men, especially at the post-primary level. While 50 percent of entrants at the primary level are girls, this proportion falls to 43 percent at the lower secondary, 33 percent at the upper secondary and 11 percent at the university level. Simultaneously, the poor have lesser access to educational opportunities than the rich. While the government has instituted a loan scheme that is supposed to help poor students meet their education expenses in an era of increased cost-sharing, the scheme is flawed as even in the best case scenario the government is expected to recoup less than 20 percent of its expenses. Short Term Actions: Recommendation 1: Even though private and social returns to girls education are high, this is not fully realized by communities. Community awareness programs aimed at educating the public (and girls parents) about the value of girl's education should be instituted and scholarship schemes for low-income and female students at the secondary and tertiary levels need to be introduced. Recommendation 2: As the ability of grassroots institutions such as a village government to assess a student's ability to pay at the secondary school level is questionable, the assessment of a household's wealth by an institution such as a cooperative society should be taken into iii consideration. Recommendation 3: The current student loan scheme should be discarded. It can either be replaced by a scheme where universal grants are provided to students, in order to minimize administrative costs, or by a scheme whereby smaller universal grants are provided along with scholarships targeted strictly on the basis of some merit cum need criteria. The costs implications of alternative funding strategies should be studied in detail. Medium Term Actions: Recommendation 4: Over time, it is important to build a database on students, from the time they enter primary school, containing information on characteristics of the students household including wealth. This can be continually updated so as to determine if the student needs financial aid. Long Term Actions: Recommendation 5: Setting up a viable loan scheme in a situation where the credit markets are not fully developed, as in Tanzania, is unrealistic. With the development of credit markets over the next few decades, the government should aid commercial banks to set up their own schemes. Participating tertiary institutions can provide valuable information relating to the identity of students and their parents and tracing of graduates to decrease the risk of default. Administration of these schemes by private institutions will not be enough. Clear incentives to collect also need to be established. Commercial banks should share in the risk of the program and the government's guarantee should be reduced so that the banks have an incentive to collect from debtors. Furthermore interest rates need to be tied to an indicator of inflation or commercial borrowing rates in order to reduce hidden subsidies to students. However, with its underdeveloped credit markets, Tanzania will not be able to set up a viable loan scheme at least within the next ten to fifteen years. 13 Labor Market and Training Linkages: While comprehensive data on the labor market is not available, anecdotal evidence points to the fact that in an economy relying less on the government to generate employment, the skills provided by public sector training institutions are not in demand in the labor market. 14 In 1995 the Tanzanian government also sent up a body, the Vocational Education and Training Authority (VETA) which is expected to provide training to meet the training needs of the economy. VETA is going to be financed through a two percent payroll tax on employers. Research and experience from other countries, however, indicates that these taxes end up inhibiting employment growth. Short Term Actions: Recommendation 1: A favorable policy environment should be created whereby private training institutions are encouraged. Privately provided and financed training is market driven and responsive to the needs of the employers. Recommendation 2: While publicly provided training is generally unresponsive to the needs of the market, employers are aware of their skill requirements and can either train or purchase iv training services accordingly. As there are externalities to training, fiscal incentives should be provided in order to encourage enterprise based training. Within the budget constraint facing governments, employer based training provides an encouraging and flexible alternative for equipping workers with job skills. Properly designed public subsidies, tax deductions or rebates of training expenses will result in increased firm-based training and in shared benefits between employers and society. Recommendation 3: To alleviate the shortage of labor market information, the government should initiate surveys which regularly provide details on wages, employment and unemployment. Regular cost-benefit evaluations of public training programs should also be conducted. This will ensure availability of accurate and timely information on labor market trends and aid in identifying poorly performing institutions. 15 Role of Donors: Donors bear a significant proportion of the non-recurrent, developmental expenditures on education in Tanzania. Donor funding is concentrated at the post-primary level -- inspite of low primary enrollment rates, over 90 percent of donor funding goes to the post-primary sector. Coordination among donors and between donors and the government is consistently lacking. Short Term Actions: Recommendation 1: Donor assistance should be reoriented towards greater aid for primary and general secondary education, investments in poorly performing tertiary institutions should be reduced or eliminated. Recommendation 2: Donors can also provide assistance to the government in strengthening its regulatory role, while ensuring that regulations and registration requirements do not constrain private sector development. Recommendation 3: To the extent possible, donors should work with the authorities to arrive at a strong and coordinated education sector policy. Medium Term Actions: Recommendation 3: In the long run, as institutions that are currently public become financially and legally independent, they can qualify for borrowing funds directly from domestic and foreign banks, as well as institutions such as the IFC or other donors to meet their requirements to expand or upgrade their capital infrastructure. 16 Rationalization: Provision of education and training spread out among many ministries and parastatal organizations who are uncoordinated. Almost all ministries and parastatals operate training enterprises. There is no coordinating mechanism or central allocation of resources. Short Term Actions: Recommendation 1: A coordinating body with a limited life should be established to oversee and be accountable for the operation of training institutions that are currently under several ministries and to enforce changes in the functioning of these institutions. This body should be given a clear v mandate to close down non-performing institutions using the criteria of cost-effectiveness. It should also be given complete authority to ensure that institutions receiving government support will be rationalized to ensure fiscal sustainability. This body should also be responsible for setting and enforcing minimum student:teacher ratios, revise curriculum as deemed necessary and review the provision of teaching and learning materials (these functions may be of a longer-term nature). It will be responsible for ensuring that the transition of the government's role from that of provision and financing post-primary education and training to mainly that of regulation takes places in an orderly fashion. 17 This report has identified some issues that are of pressing concern in the post-primary education and training sector. Tanzania can move towards its goal of achieving greater, more equitable and more effective investment in human capital if it addresses these issues and restructures the post-primary education and training sector in such a manner that is sustainable in the long run and can accommodate a much larger proportion of the population with high quality services. vi Table 1: Post-Primary Education in Tanzania: Issues, Recommendations, Actions and Outcomes Main Issues Policy Recommendations Actions Outcomes 1. Institutional Efficiency High costs and poor quality of education in Only well performing public institutions Short Term: Using cost-benefit criteria Reduction in government budget burden at public post-primary institutions should be supported identify and close down non-performing the post-primary level allowing it to focus institutions. Information on institutional on improving access to basic education. expenditures should be regularly collected. Only institutions responding to market demand will survive. To make operations of some institutions Short Term: Give viable institutions greater Public expenditures used more efficiently in viable again, reduce expenditures on autonomy in decision making. viable institutions while quality of education personnel and student welfare while is enhanced. increasing expenditure on learning and Short Term: Improve procurement method developmental materials. for food services to reduced welfare expenditures. Reduce wage bill by retrenching staff on the basis of well defined criteria. Recycle portion of money saved by these actions into quality enhancing expenditures -- books, equipment etc. Medium Term: Introduce greater cost- Government will be able to reduce per sharing in viable institutions by gradually student expenditures. Savings can be used transferring costs of education to to increase enrollments and quality at the students/parents and phasing out input-based primary and general secondary levels. government spending. Training provided in government and Make training more responsive to market Medium Term: Based on criteria of cost- Expansion of private sector provision of parastatal institutions is often expensive and needs. effectiveness, government can contract out training. Greater competition among not providing skills needed by employers. some of training currently provided under training providers ensures that training is ministries and parastatal institutions to the demand driven. private sector. Short Term: Establish transparent license Increased recognition of skills at a national and accreditation of private institutions. level. Secondary school selection process is Increase transparency in secondary school Short Term: Students should be informed of Students admitted to schools on the basis of flawed and also contributes to high public selection process. their examination scores as well as criteria clearly specified criteria. Reduction in expenditures on education. for being sent to particular schools. Only government expenditures. those willing and able to pay transportation costs should be sent to schools in different regions. vii Main Issues Policy Recommendations Actions Outcomes 2. Equity Low level of female enrollments; poor have Improve targeting of public funds to lower Short Term: Introduce scholarship schemes More equitable distribution of educational lesser access to educational opportunities. income and female students. for low income and female students; target opportunities. grants and loans by gender criteria Medium Term: Improve means testing Misuse of scholarship funds reduced. procedures by creating a database with information on household wealth. Inspite of high returns to women's Encourage parents to invest in girl's Short Term: Institute community awareness Female (and overall) enrollment rates will education, enrollment rates remain low. education and make them aware of high programs about the value of girls education. increase, especially at the secondary level. returns to girls education. Reallocate public expenditures from tertiary to secondary levels and spend resources on girl's education. Loan scheme instituted to help poor in Design alternative mechanisms to aid poor Short Term: Discard current loan scheme. Aid targeted to the poor. tertiary institutions is flawed students. Replace with either a universal grant to all students which will be cheaper to administer or with a smaller universal grant and a financial aid package, where scholarships are strictly targeted on a merit cum need basis. The cost implications of various alternatives have to be studied in detail. Long Term: With development of credit Creation of an education credit market and markets, commercial banks should be aided the imposition of fiscal discipline. in setting up their own loan scheme with government assisting in providing information about student borrower. Loans should be lent at interest rates pegged to inflation, tightly targeted and accompanied by credit education for students. viii Main Issues Policy Recommendations Actions Outcomes 3. Labor Market-Training Linkages Poor match between labor market demands Increase responsiveness of training Short Term: Encourage establishment of Greater competition ensures that training and skills imparted in public training institutions to labor demand. private training institutes. becomes more demand driven and relevant institutions. to the needs of the labor market. Avoid payroll taxes to fund public training Short Term: Design public subsidies and Increased firm-based training. Benefits of institutions as it inhibits employment growth tax rebates to encourage firms to provide training shared by employers and society. in the formal sector and may lead to training. training not needed by employers. Labor market information is dated and of Improve quality and timeliness of labor Short Term: Government should initiate Accurate and timely information available poor quality. market information surveys to provide timely information on on labor market trends. wages and unemployment and conduct regular evaluations of public training programs. 4. Role of Donors Majority of donor lending goes to the post- Direct funding to priority areas. Short Term: Reorient spending towards Increase in primary enrollment rates. primary sector inspite of less than universal primary education and cut funding to poor primary enrollment. performing institutions. Donors are uncoordinated. Improve coordination between donors and Short Term: To the extent possible, strong Effectiveness of donor assistance greater responsiveness to government and coordinated donor assistance which maximized. policies. matches government priorities in the sector should be formulated. Privatization of training institutions Medium Term: To assist government in its facilitated. goal of encouraging greater privatization, donors should provide technical assistance to institutions to aid them in reducing dependency on government. ix Main Issues Policy Recommendations Actions Outcomes 5. Rationalization Little coordination or central allocation of Improve coordination to reduce overlap and Short Term: Coordinating body created to Rationalization of public expenditures in the resources among various public sector wastage. oversee all training institutions currently post-primary sector. Overlap and wastages bodies providing education and training. under different ministries and enforce minimized. Orderly transition to a more changes necessary to improve perfromance competitive and market based system. of sector. Body is to be given a clear mandate to close down all non-performing public institutions and ensure that surviving government institutions are rationalized to ensure financial sustainability. X I. INTRODUCTION 1 The education and training system in Tanzania--a vast network of primary schools, very limited access to academic secondary and tertiary education, and a large number of training institutions designed to prepare individuals for government service--is a legacy of Tanzania's development from the early- 1970s to the mid-1980s. Early in its history as an independent nation, Tanzania's government concentrated resources on educating and training personnel for public sector employment, especially in the social sectors and the many state-owned enterprises (Box 1.1). Supported by donors, a large number of training institutions were created to produce the workers required by a rapidly growing civil service. 2 In the mid-1970s, universal primary education was adopted as a policy direction resulting in initiatives which led to an expansion in access to primary education, and resulted in dramatic increases in the number of children attending primary school. The manpower planning models adopted by the central planning system in place did not call for independent entrepreneurs for whom general secondary education may be useful. There was also the view that widely available secondary education would create a socially and politically dysfunctional elite. Box 1.1: Education in Tanzania: A Historical Context At Independence in 1961, Tanzania inherited a model of education with four years of primary education, four years of middle school, four years of secondary education and two years of higher secondary school-all of which could be done locally--and a minimum of three years of university education which could only be obtained outside of the country (for example, at Uganda's Makerere University). With a tiny enrollment of about 22,980 students in mission secondary schools and a dozen university graduates, Tanzania found itself without a university or other tertiary institution. Thus, it depended heavily on British expatriates to staff the upper levels of the civil service. The new government realized that it could not keep relying on expatriates to fill these positions. Therefore, in 1966, the government launched an ambitious program of Africanization of the civil service. In 1967, it declared a new policy of socialism and self-reliance, whose tenets included centralized state control of much of the economy and public financing and ownership of health, education and other social services. For strategic and legitimation purposes, the state embarked on crash programs to educate and train a credible local workforce for the management of a young state. The government encouraged the expansion of higher levels of education. This included the establishment of a university, civil service training institutions, and related technical and service institutions. Given the prevailing policy of government intervention to ensure equity in access and participation, all schools and tertiary institutions became state-owned and/or -controlled. Parastatal institutions were encouraged to establish their own training facilities. As a result, state-financed and -operated institutions designed to train government workers proliferated. At the same time, general secondary educational facilities were not expanded. International donor agencies, encouraged by a government policy on education emphasizing self-reliance, production and work, contributed greatly to the development of education. Major contributions included capital inputs for universities, folk development colleges, extension education, vocational training institutions, technical colleges, adult and worker education facilities, and other specialized institutions. Source: Omanri (1995) 3 Past actions conformed to the logic of a state in which the economy was centrally planned, and the government took responsibility for all social services and most non-subsistence production. As economic policies have become more market-oriented, however, progress in the future depends on the country's ability to be flexible and adapt to new conditions. 4 At present, Tanzania faces a genuine crisis in its education sector. At the primary level, quality is declining, personnel costs crowd other inputs out of tight budgets, and increasingly parents and students are alienated from the school system. Only 70 percent of school-age children attend primary school, students start at relatively advanced ages, and many leave before finishing the seven-year primary school cycle as demonstrated by enrollment rates of below 50 percent for the two highest grades in primary school (Ministry of Education and Culture, 1994). 5 For those students who do complete primary school, very few opportunities are in fact available for education or training at the post-primary level. As a result, a mere 5 percent of the school-age population attends secondary school or training institutions at the secondary level, compared to 17 percent in the rest of sub-Saharan Africa and 41 percent in low income countries, on average (World Bank, 1995). Many of the opportunities that do exist are in institutions that are unable to meet or maintain basic standards of instruction. At the higher levels of education and training--university- or technical college- level--opportunities are even more tightly rationed. 6 On the other hand, the sector is financially strapped. Boosted by large and inefficient overall spending on student welfare and wages, unit costs of secondary and tertiary education are extremely high. Even though society may benefit from an increasing pool of skilled workers, these benefits are minimized due to the high costs of providing these skills. Facing an increasingly constrained budget, policymakers must weigh investments in higher education and training against lower cost investments in basic education that yield higher social returns. 7 The government has realized that it must move away from its traditional role of provision and financing of training and education at the secondary and higher levels, towards a role of facilitating access to these opportunities. It recognizes the merits of acting in partnership with the private sector, to expand access to post-primary education and training opportunities, while at the same time putting the sector on a firmer financial footing. To do this, the government has requested that analytic work be prepared to inform policymaking. The Ministry of Science, Technology and Higher Education asked the World Bank's Eastern Africa Population and Human Resources Division to collaborate on a targeted study of the post-primary education and training sector, and to contribute to the discussions currently underway about the future of secondary and higher education and training. B. Objectives 8 The study, and this summary report, have the following objectives: (a) To provide information relevant to public resource allocation, including analyses of secondary and tertiary education and training in Tanzania; the current functioning and financing approaches; the returns on investment; and alternative strategies for sector organization and financing. (b) To identify levers for high-return, sustainable investments in human capital through policy reform in the post-primary sector, rationalization of spending, coordination of donor inputs, and targeted interventions. 2 C. Scope of the Study 9 The study covers a limited set of important aspects of the post-primary sector, defined as secondary, tertiary and university education, and vocational and technical training. The study emphasizes the financing and organization of the post-primary education and training sector, and attempts to bring together information about the supply of services with data on the private demand for those services. Because of the breadth and heterogeneity of post-primary education and training activities, the study does not go deeply into any one component. Rather, it seeks to present an overall, or holistic view of the formal ways in which Tanzanians can obtain knowledge and skills after primary school. 10 The questions addressed in the study are: (a) What type of education and training opportunities are available--and to whom are they available? (b) How efficiently and equitably are public and private institutions providing education and training services? (c) How successful are the financing strategies being implemented by the government as a whole, and by individual institutions? (d) What are the returns to investments in post-primary education and training for individuals and the society? (e) What policy, legal and organizational constraints and opportunities influence the supply, efficiency, financial sustainability and demand-sensitivity of education and training? D. Methodology 11 The sector analysis prepared is composed of a set of smaller studies, each one conducted by a team of researchers (Appendix 1.1). Thirteen background studies were commissioned, covering the topics discussed in this report. Of those, 10 were conducted by Tanzanian specialists; the others were prepared by World Bank staff. As shown, methods for each of the background studies varied, depending on topic. The individual studies are available upon request.' 12 As described in many of the background papers, considerable data limitations hamper full analysis of the sector. First, the main sources of financial information are ministry and training institution budgets. While useful, the most recent budgets reflect allocations rather than expenditures. Even the statements of actual expenditure may understate or overstate spending, because of incompletely documented mid-year transfers. Second, classification of institutions is a complex task, for which information is not complete or fully consistent. The government supports more than 150 distinct types of training programs, across 14 ministries. Due to variation in reporting systems among the programs, classification of programs and estimates of total enrollments are based on imperfect data. 13 The heterogeneity of the post-primary education and training sector has required researchers carrying out background studies to be selective in their choice of institutions for case studies and other data collection. To the extent possible, the researchers have attempted to pick a sample that is representative. For some important types of programs--secondary schools, teacher training and health In Tanzania, the individual background studies may be obtained from the Social Sectors Officer, World Bank Resident Mission, Box 2054, Dar es Salaam. The papers may also be obtained from Mr. Amit Dar, World Bank, 1818 H Street NW, Washington, DC 20433. 3 worker training--we have full enrollment and basic budget data. However, for the vocational and technical training sub-sector, we rely on inferences drawn from relatively small sample sizes. In the text, we indicate the sources of the information, and are conservative in our generalizations from small and non-random samples. Full details of the sampling plans are in the background reports. E. Organization of the Report 14 This report is organized as follows: In Section 2, we summarize the structure of the post-primary education and training sector, describing the limited number of opportunities available to students after primary school under the current system. We describe the labor market conditions facing students. In Section 3, we focus on costs. We present findings on overall government spending and spending per student-year. We highlight differences across programs and institutions, drawing on institution-level budget analyses. In Section 4, we turn to benefits of education and training. While recognizing that there are other important type of benefits, we concentrate primarily on economic returns to individuals and society. In Section 5, in an attempt to understand the institutions' opportunities and constraints, we describe how various public and private training institutions function. In Section 6, we describe the current policy framework, propose a set of reforms, identify legal constraints to implementation of key reforms, and set out policy simulations to show what the results of the reforms could be. 4 II. BASIC FEATURES OF THE POST-PRIMARY EDUCATION AND TRAINING SECTOR A. Institutional Structure 1 The two ministries most visible in the post-primary education and training sector are the Ministry of Education and Culture, with direct responsibility for secondary education and teacher training, and the Ministry of Science, Technology and Higher Education, under whose auspices. operate three universities and three technical colleges. However, vocational and technical training is supported under most other ministries, and 12 ministries and most parastatal enterprises operate training institutions, which were established under a series of Acts of Parliament. There is no overall coordinating mechanism, nor central allocation of public resources (Fimbo, 1995). B. Types and Numbers of Post-Primary Education and Training Opportunities 2 Despite the ambitious government efforts in the 1960s and 1970s, and a proliferation of state- owned training institutions in the years following Independence, there are a very small number of opportunities for formal education and training beyond the primary level in the state-owned sector. Opportunities have been tightly rationed based on public sector personnel requirements, tend to favor education for males, and typically are available only to better-off segments of the population2. In this section, we describe the basic components of the sector, and highlight some of the main access-related challenges. (a) Classification 3 To simplify an extraordinarily complex array of programs and institutions, we have categorized the available programs on the basis of their pre-requisites: completion of primary school; completion of lower secondary school (Form 4); or completion of upper secondary school (Form 6). Thus, we refer to institutions as post-primary (or post standard 7), post-Form 4, and post-Form 6.1 Table 2.1 shows the total enrollments and female participation at each level in public institutions.4 It is clear that while enrollment rates are not high even in primary institutions -- gross enrollment rates at the primary level are only about 70 percent -- they fall dramatically for post-primary education. Comparably reliable figures at the post-primary level are not available for private institutions. This is especially true of private vocational training institutes. 2 As data on income is not available this refers to those better off in terms of consumption. 3 Some programs do not correspond well to this designation, but they are few in number and insignificant in enrollment. 4 In this table "other" refers to training institutions at either the post-primary, post junior secondary or post-senior secondary levels. Thus for instance, FDC's are included among the "other" post-primary institutions, while TrC's are included among the "other" post lower secondary institutions. 5 Table 2.1. Enrollments in Public Education and Training Institutions, early 1990ss Program Number of Students in Government Enrollment Rates Females as Share of Institutions Entrants (%) No. of students Total Enrollment entering yearly Post Form Six University 2000 5700 11.3 Others 3200 6200 27.0 Post Form Four 2 Upper Secondary 4300 8300 32.2 Other 5500 14900 34.0 Post Primary 3 Lower Secondary 20000 73000 43.5 Other 10200 29500 Primary 1800000 69 50.0 Source: Bureau of Statistics (1993), Education and Training Statistics; Ministry of Education and Culture, BEST 1994 (b) The Education and Training Pyramid at the Post-Primary Level 4 Post-Standard 7. Each year, there are about 20,000 public and 26,000 private lower secondary school places for the 360,000 students completing primary school. In addition, there are about 10,200 places in government-owned vocational training institutions that accept people who have completed only primary school. In total, there is one formal education or training opportunity in public institutions for every 12 primary school completers (or 1 place in public and private institutions for every 6.4 students completing primary school). At this level, as at all others, the opportunities to continue on with study in a government institution is determined by a centrally organized selection procedure (see Box 2.1). 5 Post-Form 4. For the approximately 35,000 students who complete Form 4 each year, there are about 4,300 public and 2,200 private places in Form V, the first year of upper secondary school. Thus, for every upper secondary school spot, there are 5.5 potential candidates. Individuals who have completed lower secondary school can also be selected as one of the 5,500 trainees starting vocational and technical training programs, such as those for teachers, health workers, agriculturalists, secretaries, engineers and a vast array of other occupational groups. In total, there is one formal education or training opportunity for every 3 students completing Form 4. 6 Post-Form 6. In recent years, about 6,000 students have taken the Form 6 examination each year. For those individuals, there are approximately 2,000 university-level spots, or one for every 3 students. After Form 6, students may also enter diploma or similar programs in various higher-level public institutions, such as the Institute for Finance Management, the Ardhi Institute, Dar es Salaam Technical College, and some teacher training colleges. Each year, there are about 3,200 spots in these post-Form 6 institutions. In addition, with funding from embassies and international organizations, a small number of Tanzanian students go abroad for study every year. In all, almost all individual finishing Form 6 have the opportunity to continue on with academic or professional training. All data except for secondary schools (upper and lower) apply to 1991-92; data for secondary schools apply to 1993-94 6 Box 2.1: The Selection Process By far the most important examination in the school system is the Primary School Leaving Examination, taken by more than 360,000 pupils in a single day each year. On the basis of that examination, students are selected into government secondary schools; the examination is also used as an entry exam for many private secondary schools. The selection process is extraordinarily competitive: only 5.9 percent of the pupils were selected to government secondary schools in 1994,while 7.4 percent were selected to join private secondary schools. The examination is composed of three papers of 50 points each--math, languages, and general knowledge, whose validity and reliability have not been comprehensively documented. The secondary school selection process has multiple steps. First, the government has established regional and district quotas, based on enrollments and available places in so-called national schools. There are also gender- based quotas, to equalize the numbers of boys and girls selected. Following selection for the so-called national schools which are boarding, there is selection for regional (mostly day) schools. While some private schools conduct their own examinations, virtually all other private schools select last (a few prestigious seminaries are exceptions to this rule). At higher levels, selection is based on the results of the national Form 4 examination. The selection process is not transparent. Pupils and parents are not provided information about their scores. Thus the students cannot choose but are assigned schools by the government. As a result, some students may be sent to schools in regions far away from home. While this is supposed to foster a sense of national unity, once in school, a large number of students from poor families cannot afford to return home during holidays and have to be either sent home or supported during vacations at government expense. This is often cited as one of the factors contributing to the high public unit costs of post-primary education. Source:O-saki (1995) 7 There were approximately 547 secondary schools in Tanzania in 1994, 344 of which were private, mostly at the lower secondary level (Kaijage and Abayo, 1995). There are a total of about 350 public vocational and technical training institutions at the post-primary and post-secondary levels. While private training institutions also exist, their numbers are undocumented. Tanzania also has three universities, all of them public. (c) Time Trends 8 The number of students finishing secondary school has been increasing at a reasonably steady pace since the mid-1980s, largely due to the rapid expansion of private schools -- since 1987 the number of public schools has doubled while the number of private schools has increased 150 percent. The number of individuals sitting for the Form IV examination increased by 63.0 percent between 1985 and 1993, from 21,497 to 35,025, while the number taking the Form VI exam increased by 70 percent over the same period, from 3,703 to 6,289. 9 A similar increase in outputs was realized in other parts of the government's post-primary sector. Overall,6 the number of students completing the tertiary level increased by about 45 percent between 1985 and 1991, the most recent year for which reasonably complete data are available. The increase was driven almost exclusively by very large expansion of the teacher and health worker training programs-- large components of the sector, which grew by about 66 and 69 percent, respectively. There was virtually no increase in the number of students graduating from the universities. 6 Excluding basic vocational training, for which historical data were not available. 7 C. Access Challenges (a) Gender Balance 10 While opportunities are limited overall, women face the most severe constraints, particularly at the tertiary level. Female students make up about 43 percent of students in lower secondary school, but only 32 percent of students in upper secondary. In vocational and technical training, about 34 and 27 percent of the students are female in lower and upper level programs, respectively. At the universities, about 11 percent of the students are female (Bureau of Statistics, 1993). The level of female participation at the university level is strikingly low compared to other African nations, including Kenya (26.2 percent), Malawi (27.5), Sudan (30.5) and Botswana (40.1). 11 Not surprisingly, training enrollment patterns show high levels of segregation by gender. For example, about 91 percent of secretarial trainees are female, but less than 10 percent of non-degree engineering, transport and other technical trainees are women (Bureau of Statistics, 1993). In Folk Development Colleges, about 85 percent of female students are in the home economics training program, while less than 1 percent of males are in the home economics program; virtually all the men are in the vocational and agriculture programs, which enroll 81 percent of male and 15 percent of female trainees, respectively (Mbilinyi, 1991). (b) Opportunities by Economic Group 12 Available data strongly indicate that the students who enter secondary school, and therefore those eligible for most vocational, technical and university slots, disproportionately represent upper income households (Table 2.2).' About 36 percent of the students in government secondary schools are from the upper 20 percent of the welfare (expenditure) distribution; 60 percent are from the upper 40 percent in terms of expenditure. Only 8 percent of the students in secondary school come from the poorest 20 percent of households. As in most countries worldwide, the composition of the student body in mission and other private secondary schools is even more highly skewed toward the upper expenditure brackets (World Bank, 1995). If secondary school students are better off than average then, by implication, students in higher-level institutions are likely to be at least as privileged. Table 2.2: Economic Status of Secondary School Students Expenditure Level Share of Public School Share of Private School Total Students Students Poorest 20% 7.6 4.2 5.5 20-40% 12.7 12.9 12.8 40-60% 19.1 17.1 17.8 60-80% 26.6 26.7 26.6 Richest 20% 34.1 39.1 37.2 Total 100.0 100.0 100.0 Source: Human Resources Development Survey 1993/94 13 A very interesting point that emerges from this table is that the poor are almost equally represented in private and public secondary schools. As education costs are higher in private schools, Strictly speaking, household consumption, not income, was measured in the survey which yielded these data. 8 this implies that the poor are willing to pay for education and bolsters the belief that there is a considerable amount of unmet demand for secondary education in Tanzania. D. Labor Market Conditions 14 The previous sections have analyzed conditions facing students who want to enter the post- primary education and training system. In this section we examine the labor market prospects of graduates from this system. Box 2.2: Student's Labor Market Perceptions A recent survey of secondary and tertiary 15 While labor force data are extremely institution students aimed at analyzing their perceptions limited and somewhat dated, it is possible to get about the labor market concluded that students were well an idea of the labor market conditions facing aware of the difficulties in finding employment -- over 60 graduates from the education and training system. percent of secondary students thought it would take over In the past, the vast majority of students who a year to find a suitable job. While they were aware of the civil service reform being currently undertaken by the completed primary school and then could not go government, a majority of students would prefer to work on to additional formal education or training in the public sector, the main reason being the high level subsisted on agricultural work and labor-intensive of job security associated with public sectorjobs. Those informal sector activities. The same holds true who preferred to work in the private sector today. Those few individuals who obtained post- acknowledged its lack of job security but were attracted primary education and training opportunities were by the high salary levels. generally able to find secure work in the civil Source: Sumra (1995) service. Recently, however, public sector employment guarantees have been eliminated, private sector opportunities are slowly emerging, and students and trainees face markedly changed labor market conditions. Tanzania is undergoing structural economic changes with reforms aimed at liberalizing the economy, reducing government involvement, and encouraging the growth of the private sector. These reforms are likely to result in the need for the education system to become more responsive to the changing needs of the labor market. 16 Currently the formal sector constitutes less than 8 percent of total employment. Till the late 1980s, Tanzania relied heavily on the public sector to generate formal employment. Public sector employment guarantees led to overstaffing in the sector, and, as wages were higher than market wages - - in stifling private sector growth along with creating a unsustainable wage bill. Liberalization and civil service reform policies adopted in the mid 1980s encouraged private sector growth and led to a decline in the government's importance as a major employer. While the government still remains a major employer with 65 percent of formal employment, the private formal sector has grown at close to 10 percent annually since 1984, from being 23 percent of total formal employment in 1984 the private sector has grown to 35 percent in the early 1990s (Table 2.3). Section IV discusses returns to formal employment in greater detail. 17 A majority of employment is concentrated in the agricultural sector, with over 80 percent of the workforce engaged in agricultural activities. The non-agricultural informal sector is small but growing rapidly. About 10 percent of total employment in Tanzania is in this sector. Formal skill needs and education levels of workers in both these sectors is low. In fact, close to 90 percent of workers in the informal sector are either self-taught or learn on the job. 9 Table 2.3: Formal Wage Employment Sector Employment ('000) % Annual Change 1978 1984 1991 1978-84 1984-91 1978-91 Private 150.1 145.7 275.2 -0.5 9.5 4.8 Government 186.2 302.1 331.6 8.4 1.3 4.5 Parastatals 199.6 185.6 185.6 -1.2 0.0 -0.6 Total 535.9 633.4 792.4 2.8 3.2 3.0 Source: Abe (1995) 18 What are the prospects of employment for graduates of post-primary education and training institutions? While public sector employment is likely to remain stagnant, the private sector is expected to grow reasonably rapidly with tourism, mining and construction appearing to be the sectors which are likely to generate the most rapid growth. However there does not exist high demand in the private sector for graduates emerging from government tertiary institutions and universities, reflected in current unemployment rates of around 20 percent for educated youth as compared to 10 percent till a few years ago when the government was the major employer of these graduates (Omari 1994). While studies have not been conducted to examine demand for these trainees in the private sector, informal interviews with employers and studies of training institutions suggest that these institutions are not providing skills that are in demand in the labor market. Graduates of private training institutions, on the other hand, are finding it easy to get jobs (See Box 2.3). Box 2.3: Labor Market Opportunities for Trainees While tracer studies to examine the labor market demand for trainees from public and private sector institutions have not been conducted in Tanzania, a recent study looking at differences between public and private training institutions sheds some light on this issue. This study examines the characteristics of five training institutions - three of them public and one each semi- autonomous and private respectively (Olomi and Assad, 1995). All graduates from the private training institutions and most of the graduates from the semi-autonomous institution were hired by the time they completed their training. The picture was far less rosier for public training institution graduates. While in the past these individuals had been automatically employed in the government, with the abolishment of government employment guarantees in the early 1990s, graduates of the sampled government institutions were finding it increasingly difficult to gain employment in the private sector. Not surprisingly, this study also found that their was a high demand for entrance into the private and semi-autonomous training institutions while fewer people were interested in joining public sector training institutions. This evidence is corroborated by another recent though less reliable study (ESAURP, 1992). Using manpower projections, this study estimates that in 1993 the supply of graduates from technical training institutions in Tanzania in the industrial, mining, transportation and agricultural fields would far exceed the demad. However this study does not distinguish between graduates from private and public institutions. Source: Olomi and Assad (1995); Esaurp (1992) 19 Faced with a low demand for their skills in the private sector, anecdotal evidence indicates that many graduates from the public training institutions are either joining the informal sector or the ranks 10 of the unemployed. However the skill requirements in the informal sector are generally low and the training acquired in public institutions is not useful for these jobs and it is not evident that training programs are responding to these realities. E. Conclusions and Recommendations 20 Education and Training Providers. Along with the Ministry of Education and Culture and the Ministry of Science, Technology and Higher Education, which are the major providers of education beyond the primary level, almost all other ministries and parastatals operate training enterprises. There is no coordination mechanism or central allocation of resources. 21 A coordinating body with a limited life should be established to oversee and be accountable for the operations of training institutions which are currently spread out among various ministries. This body should be given a clear mandate to close down non-performing institutions. It should also be fully responsible for ensuring that institutions that receive government support will be rationalized to ensure financial sustainability. Other functions to be performed by this body are the setting of minimum student:teacher ratios, revision of curriculum as deemed necessary, and reviewing the provisison of teaching and learning materials. This body will be responsible for the transition of the government's role from that of providing and financing post-primary education and training to mainly that of regulating and ensuring that private sector development is not constrained. 22 Education and Training Opportunities. For every five students completing primary education, only one joins a lower secondary level institution. Almost 70 percent of lower secondary completers go on for education at a higher secondary institution and almost all upper secondary graduates proceed to tertiary institutions. A majority of these opportunities are not available at schools and universities but in training institutions. 23 There are imbalances in educational opportunities for women. In public institutions, female enrollment rates decline with education level -- they are close to 50 percent at primary level but just above 10 percent at the university level. 24 Poorer households are also inequally represented - less than 20 percent of students are from the poorest 40 percent of society. However, the share of poor students is similar across private and public schools implying that the poor are willing to pay for education. This implies that there is considerable unmet demand for secondary education. 25 To make education opportunities more equitable, scholarship schemes should be specifically targeted at low-income and female students. This will also lead to an increase in enrollment rates. As will be demonstrated in Section IV, the social returns to female education are higher than those to men's education. 26 Selection Process. The process through which students are selected into secondary education is not transparent. The validity and reliability of the examination is not documented and school assignment done by the government often leads to students being sent far from home and contributes to the high unit costs of education. 27 It is extremely important to increase the transparency of this process. Students and parents should be provided with the scores in the examination and should be informed of the basis for being selected to 11 attend particular schools and the justification for being sent to schools in other regions. While sending pupils to different regions is supposed to foster national identity, it is inefficient as it adds to public expenditure on education. The costs and benefits associated with this action should be studied in greater detail. It may turn out that an efficient solution is to only send students who are willing and able to pay to other regions. 28 Labor Markets Linkage. Less than 10 percent of the labor force is in the formal sector, primarily in the public sector. While graduates of public training institutions were previously employed in the public sector, civil service reform has led to the elimination of public sector employment guarantees and graduates of these institutions now have to search for employment in the private or informal sectors where their skills are not in demand. However, graduates of private training institutions are able to find employment more easily. 29 A favorable policy environment should be created that will allow the establishment of private training institutes. As private institutions are responsive to the needs of the market, training will become demand driven and relevant. To alleviate the shortage of good quality data, regular labor force surveys need to be conducted which will provide timely information on wages, employment and unemployment trends. 12 III. Costs and Financing of Post-Primary Education and Training A. Introduction 1 In Tanzania, the government has historically been the major financier of secondary and tertiary education, with some assistance from donor agencies. This approach has been working poorly, especially over the last decade, as both private and social demand have escalated while government resources have remained constrained. 2 Two major policy shifts have resulted from the recognition that the government could be neither successful in fully financing education at the higher levels nor efficient in its use of resources. First, private secondary schools and training institutions have been allowed to open and operate, thereby meeting some of the pent up demand. The result has been a rapid increase in the number of private secondary schools and, to a lesser extent, training centers. Second, some government-owned institutions have begun to institute cost-sharing by charging fees for instruction, boarding and lodging. This step will lead to a decline in the public expenditures for education on a per student basis. 3 These steps signal an awareness that the government cannot do it all. The sector still faces many problems due to inefficient allocation of resources leading to extremely high unit costs of education, especially at the tertiary level. However, there is good reason to believe that even with their current limited resources, the government institutions could be more productive than they presently are. 4 This section examines public expenditure patterns across the different levels of post-primary education and training, highlights the main components of this expenditure by focussing on a few representative institutions, and discusses the government's efforts to introduce greater cost-sharing. 5 This section primarily focusses on recurrent expenditures. While we have not discussed non- recurrent expenditures in great detail, such developmental expenses are provided by donors to a large extent (Box 3.1). B. Allocation of Public Expenditures at the National Level 6 In FY1995/96, the Government of Tanzania plans to spend upwards of Tsh 23 billion (about US$46 million, or 2 percent of budget expenditures) on recurrent costs for its post-primary education and training institutions, which are currently training about 150,000 individuals. While provisional, this figure is close to the amount spent in recent years in the sector. In 1993/94, public recurrent expenditure on the post-primary sector accounted for 47 percent of total recurrent expenditure on education. 7 Of the total recurrent post-primary education and training (PPET) spending, 64 percent, or close to Tsh 15 billion, is devoted to institutions in the academic track--government secondary schools, universities, and higher level technical colleges under the Ministry of Science, Technology and Higher Education (Table 3.1). Less than half of the Tsh 15 billion is devoted to secondary education (31 percent) while a substantial portion is spent on the universities; of the total spending on post-primary education and training, about 31 percent is allocated to secondary education, and another 26 percent is allocated to the universities. By far the single most costly institution (in terms of total expenditure) is the University of Dar es Salaam, which absorbs a full 20 percent of all post-primary education and training spending (Appendix Table 3.1). 13 8 Approximately 36 percent of the recurrent PPET spending is divided among the many vocational Box 3.1: Donor Contribution to Education The education sector in Tanzania is dominated by a few Scandinavian countries, namely Denmark (Tsh. 4.5 billion in 1993), Sweden (Tsh. 4 billion in 1993) and Norway (Tsh. 4 billion in 1993) as well as other European countries such as Germany, United Kingdom, France, Ireland and the Netherlands. Multilateral agencies such as the World Bank (Tsh 1.5 billion in 1993) and UNICEF (Tsh. 1 billion in 1993) have also been involved in this sector. The government has become largely dependent on donors for its non-recurrent capital expenditures. Donors mainly lend for activities in the post-primary sector where they fund developmental activities such as staff development, infrastructural creation and rehabilitation, provision of educational materials, curriculum development and technical assistance. Their activities are concentrated in a few institutions such as UDSM, SUA, Ardhi Institute, IDM, TTCs and VTCs. The aid is also concentrated geographically to Dar es Salaam, Morogoro, Kilimanjaro, Zanzibar, Tanga and Mbeya. Donor Funding to Post-Primary Education and Training, (bill. Tsh.) 1991-93 Sector 1991 1992 1993 Secondary education 3.0 5.2 9.1 Tertiary education 3.1 3.7 3.9 Vocational training 4.0 4.8 4.0 Non-Formal training 2.1 2.1 1.5 More than one sector 3.7 3.9 3.0 Total Funding of the PPET Sector 15.9 19.7 21.5 Donor Funding of PPET as a % of Total Donor Contribution to Education 98.5 94.5 91.7 Inspite of large amount of donor contributions, there are many constraints to their effectiveness. Some of the main constraints have been - (a) Lack of coordination among donors and between donors and institutions; (b) Use of project mode as opposed to sectoral modes of intervention resulting in heavy administrative burden on already thin local staff; (c) Excessive dependency on expatriate staff for management and implementation leading to the creation of a parallel management structure which is not coordinated with local management and contributes to lack of sustainability in project implementation. At the World Summit for Social Development in 1995, donors, as well as other participants, strongly stressed universal primary education as one of the goals. Given that primary enrollment is only around 75 percent in Tanzania it is surprising that over 90 percent of donor spending is going into the post-primary sector. A reorientation is donor funding towards primary education is clearly called for. Source: Materu and Omari (1995) and technical training institutions operated by several parastatals, and by the Ministries of Health, Education and Culture, Home Affairs, Agriculture, Labor, Community Development and others. For the budgeted 1995/96 expenditures, among the various vocational programs, teacher training absorbs the single largest share of recurrent spending, closely followed by training programs in the Ministry of Health. Combined, all other ministries and parastatals account for about 20 percent of the total spending 14 at the post-primary level.' Within the post-primary subsector, there has been little change in spending patterns in the recent period. 9 While there is considerable variation among institutions, the major expenditures typically are on personnel emoluments (both teaching and administration), boarding and student welfare. Increasingly over time, personnel costs have squeezed out other inputs, and now account for about 50-60 percent of total recurrent government spending on post-primary education and training. Student board and welfare accounts for another 30-40 percent of recurrent expenditures. Table 3.1: Actual and Budgeted Recurrent Expenditure on Education and Training (Millions of Tsh.)' 1993/94 1995/96 Program Actual Share of Share of Budget Share of Share of Exp. Total (%) PPET (%) Exp. Total (%) PPET (%) Primary Education 23997 53 NA 45766 66 NA Secondary 6741 15 31 7310 11 31 Education Voc. Trg. in Govt. 8251 18 36 8271 12 36 and Parastatals Technical Trg. 1106 2 5 1124 02 5 under MOSTHE Universities 5772 13 26 6512 09 28 Total PPET 21870 47 100 23217 34 100 Source: Appendix Table 3.1 10 Only a small fraction of resources cover expenses on teaching and learning materials, operations and maintenance, travel, exams, and other miscellaneous inputs (Table 3.2). Table 3.2: Percentage Share of Budgeted Recurrent Spending by Input, 1995/96 (Selected Programs) Institution Personal Emoluments Student Welfare Other (%) (%) (%) Secondary bducatnon Technical 35 43 22 Commercial 60 27 13 Agriculture and Home Economics 52 32 16 Teacher Training 53 33 14 Health Worker Training 21 47 32 Technical Colleges under MOSTHE 19 19 62 University of Dar es Salaam10 68 20 12 Source: Budgeted Recurrent Expenditures from Ministry & Regional Recurrent Budgets; Kaijage and Abayo (1995) Appendix Table 3.1 gives a detailed breakdown of recurrent expenditures by Ministry. 9 These expenditures do not include donor contributions. 1o Personnel emoluments include entire central administration expenses. 15 C. Unit Costs (a) All Institutions 11 The cost of educating one student varies widely across programs and institutions. As shown in Table 3.3, the per student-year cost incurred by the government in any type of post-primary education or training is at least seven times the comparable cost for primary school. Although this in itself is not surprising, given the more costly personnel and inputs required for higher levels of education, some of the unit public expenditures are extremely--and unsustainably--high. For example, the cost of a year of university-level education in Tanzania is 143 times the cost of a year of primary school, and about 19 times the cost of a year of secondary school (about US$3,000 for university, compared to US$154 for secondary and US$21 for primary school). Table 3.3: Actual Recurrent Expenditure per Student in Selected Government Programs, 1994/95 (Thousands of Tsh.) Program Recurrent Multiple of Multiple of Expenditure per Expenditure on Expenditure on Student Primary Education Sec. Education Prunary Education 12.5 1 NA Secondary Education 92.7 7.4 1 Teacher Training 131.7 10.5 1.4 FDC's and other training institutions under MCD 267.6 21.4 2.9 Health Worker Training 415.9 33.3 4.5 Technical Training under MOSTHE 937.4 75.0 10.1 University Education 1793.7 143.5 19.3 Source: Same as Table 3.2 12 Post-primary education is an expensive venture in any setting, but it is particularly costly in Tanzania (see Box 3.2). Many of the government-financed and operated alternatives to lower or upper Box 3.2: Costs of Post-Primary Education senary to ar fr mor secondary education are far more Due to high and inefficient expenditures on wages and costly than secondary schooling itself. student welfare, public expenditures per student for higher education For example, technical training in were 44 times that for primary education in Africa in 1990. In government institutions is about 10 comparison, this ratio was 14 in Asia, 8 in Latin America and the times more costly than government Middle East and Northern Africa and just 2.5 in OECD countries. secondary school. Vocational training While unit expenditures on post-primary education have gone down over time inefficiencies still persist: governments of African in Folk Development Colleges, whose countries still fund just one student for every four in Asia. primary intake are individuals who do The disparity is exacerbated in the case of Tanzania. In not do well enough on national 1992/93 the unit public expenditures in higher education were about examinations to gain entrance into 143 times as high as primary education. The very large difference secondary school, is nearly three times between higher and primary education unit cost provide ample more costly per student-year than ground for claims of misallocation of public funds across education secondary schools. In spite of the high sub-sectors and gross underfunding of primary education. unit costs of education, the quality of Source: World Bank (1995) instruction at many institutions remains low. 13 Overall, the government experiences high costs in the post- 16 primary sector because it is the main (and in many programs, the sole) financier. Cost sharing would, by definition, reduce the financial burden on the state. However, regardless of the source of financing, there is good reason to believe that many types of training in Tanzania cost more than is necessary. 14 What accounts for the high cost of training? The answer seems to lie in the following related factors: low capacity utilization; low student:faculty ratios; large commitments to student boarding and welfare; and large wage bills Box 3.3: Student-Teacher Ratios (despite low salaries) due to overstaffing. The government absorbs all these costs as the Though tertiary student to teacher ratios are proportion of costs borne by students is still quite low in Africa as compared to the rest of the world, the small. situation is Tanzania is particularly troublesome. Student-Teacher Ratio (1990) 15 Low Capacity Utilization. Many training Secondary Higher institutions in Tanzania are operating at a low Region Education Education level, with only about 50 percent of available Africa 24.1 13.6 places filled according to a 1992 study -- at least Tanzania 17.0 7.0 Latin America 20.0 13.1 5,000 student spaces go unfilled each year Middle East 19.0 14.7 (ESAURP, 1992). More recently, Mukyanuzi Asia 23.0 15.4 (1994) showed that at the Muhimbili College of Healh Sienes par ofthe nivrsiy o Da es In secondary education too, Tanzania compares Health Sciences (part of the University of Dar es unfavorably to the rest of the world. In fact, over the Salaam), capacity utilization was 51 percent. past few years the situation has further worsened as Recent data from agricultural training institutions student-teacher ratios have declined from 17:1 in 1990 to in particular show a large decline in enrollments 14:1 in 1995. (Omari, 1994b). Source: Galaitsi (1995) 16 Low Student:Staff Ratios. The student:faculty ratios in government secondary and tertiary institutions are low across the board, relative to international standards (Box 3.3). This is a legacy of the policies of guaranteed employment and no retrenchment of public sector employees. While these policies have been revoked, retrenchment has not occured in the education sector. In government secondary schools, there are about 17 students per teacher compared to 24 in the rest of sub- Saharan Africa and 28 as advised by the government. While this is a low ratio, many of the vocational and technical training institutions have far lower ratios. In many vocational training institutions, there are 10 or fewer students per tutor. At the Institute for Rural Planning in Dodoma and many agricultural training centers, the student:faculty ratio is 1:1. In the technical colleges operated under the Ministry of Science, Technology and Higher Education, the average student:faculty ratio is 8.8:1 and at the National Social Welfare Training Institute the ratio is 8:1. Most strikingly, at the University of Dar es Salaam, there are about four students per faculty member (and only one student per non-teaching staff member). The student:staff ratio is so low at the university, in fact, that an informal estimate yields the alarming result that the university is not currently projected to be able to educate even all the children of current faculty members, were they to seek admission. By employing fewer teachers and administrators, the institutions would be able to allocate resources to critical non-personnel inputs that improve achievement, such as textbooks and equipment. In other words, institutions could save money and improve outputs by increasing their student teacher ratios. 17 Although the problem of low student:tutor ratios is endemic throughout the state-owned post- primary education and training subsector, student:tutor ratios tend to be far lower in small public 17 institutions than in larger ones. Consequently, the per-student costs in small institutions exceed those in larger ones - often by enormous margins. In teacher training colleges, for example, those with fewer than 200 students enrolled have an average of only 8 pupils per tutor, while the larger institutions (those with more than 300 enrollees) have more than 14 pupils per tutor, on average (Table 3.4). As a result, public colleges with enrollment of between 200 and 300 students are 26 percent more costly per student than the larger colleges; the smallest colleges (under 200 students) are 71 percent more expensive to operate, proportionately, as are the largest colleges. Similarly, health training institutes with less than 30 students are 133 percent more expensive to operate than the largest ones. Table 3.4: Actual Expenditures per Student in Public Teacher Training Colleges and Health Training Institutions by Size, 1993/94 Size of Institution (students) Number of Colleges Student:Tutor Estimated Expenditures per Student-Year ('000 Tsh) Teacher Training Colleges 100-199 14 8.5:1 111 200-299 18 14.1:1 81 300+ 18 16.2:1 65 Health Training Institutions 5-29 11 4:1 757 30-59 18 5:1 695 60-90 12 10:1 379 100+ 17 14:1 325 Source: Levmne and 'hoflhas (1994) 18 It would, however, be incorrect to attribute these declining costs to economies of scale. Discussions about economies of scale Box 3.4: Student Welfare Expenditure imply that institutions are operating in an efficient manner. However, as is evident from the issues Most African countries devote large shares of mentioned in this section - low student teacher their recurrent expenditures on post-primary education to ratios, poor capacity utilization, and excessive and student boarding, lodging and other aspects of student rati, p rpacity utiliation and esve welfare. In the face of tight budgets, this is often at the inefficient expenditures on welfare and personnel expense of other inputs for teaching and learning. - this is not likely to be the case for public institutions in Tanzania. As a matter of Share of Budgets Devoted to Student Welfare comparison, it should be pointed out that in some Country Secondary Tertiary Burkina Faso 35.0 79.0 private institutions sampled (see Section V), costs Mali 19.0 66.8 in small institutions are much lower than in their Mauritania 18.6 56.9 public sector counterparts and even lower than in Niger 22.7 59.5 large sized public institutions. This is because Sahel Average 18.1 56.5 Tanzania 33.0 30.0 private institutions are likely to be operating more Asia Average .1. efficiently than government run institutions. Even though exhaustive quality comparisons have not In contrast to Asian countries that devote an been made, it is likely that the private institutions average of 5.1 percent of secondary level spending and offer education of a better quality than public 7.2 percent of tertiary level spending to student welfare, sub-Saharan African countries contribute 18 percent and institutions. 56 percent respectively of their secondary and tertiary education spending to student welfare. Tanzania is no 19 Spending on Boarding and Student exception, devoting about a third of post-primary Welfare. Excessive spending on student welfare education recurrent budgets to these expenditures. (mainly boarding, lodging and transportation) in Source: Galaitsi (1995) endemic in sub-Saharan Africa as well as in 18 Tanzania (Box 3.4). As noted earlier (Table 3.2), a significant share of the funds invested in education and training in all institutions are used for non-teaching related inputs. As a result of government policy to heavily subsidize education at all levels, across the board expenditures on student welfare take up at least one-quarter of the budget for education and training at each level. At the secondary school level, student welfare expenses account for one-third of all resources devoted to the recurrent budget. Though the government has begun to institute cost-sharing measures, which will shift a proportion of the expenditures to the households, welfare expenditures still comprise a significant proportion of recurrent expenditures. Increased efficiency in spending on catering and boarding will lead to an even greater reduction in welfare expenditures. 20 Spending on Wages and Salaries. As shown in Table 3.2, more than 50 percent of recurrent expenditures at almost all levels are spent on salaries. While teachers and other non-academic staff are not overpaid relative to other civil servants in Tanzania, overstaffing in this sector (relative to the number of students) has contributed to the high wage bill for teachers. Thus the high proportion of expenditure on salaries is directly related to the low student to staff ratios. Another cause for the high wage bill is the large proportion of other allowances and benefits available to teachers (as well as other civil servants) in the form of house rents, medical allowances, travel allowances, etc. The civil service reform currently underway is in the midst of monetizing and rationalizing these benefits. (b) Select Institutions 21 Some of the issues discussed above can be illustrated by examining the components of unit costs at the institutional level. While it is difficult to get a detailed breakdown of recurrent expenditures by expenditure type for all institutions in Tanzania, in an attempt to analyze the main determinants of recurrent" public expenditures on education (See Appendix 3.2), the expenditure patterns of 17 secondary and tertiary institutions were thoroughly examined. The sample consisted of 6 secondary schools, 10 tertiary training institutions and 1 university. Two of the secondary schools and one of the 10 tertiary level institutions were private while the others were public institutions. While choosing these institutions care was taken that they had, as far as possible, the representative characteristics of the respective groups that they belonged to.12 However caution should be used in interpreting these results as the number of sampled institutions is small. While unit costs for the sampled institutions are likely to be different than those in Table 3.3 (because of the small sample size), the proportion spent on various components is not likely to vary considerably. In this section we attempt to describe the main determinants of unit costs for these institutions. It should be noted that it was difficult to get a breakdown of all cost components even for this sample. 22 Secondary Schools." Table 3.5 (all expenditure data in Tables 3.5 and 3.6 are in real 1992/93 Tsh.) summarizes the recurrent expenditures for secondary schools. The first striking fact is the higher student to teacher ratio is private secondary schools. This ratio is about 20 percent higher in the private In this analysis, capital expenditures, such as depreciation, are excluded as data on these are not readily available. However it should be mentioned that they do form an important component of total unit costs. Thus the analysis here underestimates total unit costs. 12 The selected institutions were chosen in order to capture variations in size, ownership and location in the institutional universe in Tanzania. 1 The secondary schools were: Pugu, Maneromango, St. Anthony's and Jangwani in Dar Es Salaam and Lutheran Junior Seminary and Kigunmyembe in Morogoro. St. Anthony's and Lutheran are private. 19 schools sampled. 23 In public secondary schools, over 90 percent of recurrent government expenditures are spent on staff salaries and allowances and student welfare. Cost-sharing measures introduced by the government have led to a decline in public expenditures on student welfare by over 20 percent, at least for the government secondary schools examined here.'4 Table 3.5: Recurrent Expenditures (Selected Secondary Schools) Public Schools Private Schools 1992/93 1993/94 1992/93 1993/94 Enrollment 2205 2188 1520 1595 Academic Staff 146 150 80 89 Non-academic Staff 72 64 60 54 Academic Student Staff Ratio 15.1 14.6 19.0 17.9 Non-academic Student Staff Ratio 30.6 34.2 25.3 29.5 Total Student Staff Ratio 10.1 10.2 10.9 11.2 Expenditures (million Tsh) Staff... Salaries 27.9 (18) 27.4 (20) 14.4 (22) 13.7 (21) Other Allowances 13.6 (8) 18.4 (13) 14.3 (22) 14.5 (22) Total 41.6 (26) 45.9 (33) 28.7 (44) 28.3 (43) Students.... Food and Boarding 105.6 (68) 79.4 (56) 14.5 (22) 14.7 (22) Other Welfare 1.5 (1) 1.0 (1) . 9.6 (1) 0.7 (1) Total 107.0 (69) 80.4 (57) 15.4 (23) 15.4 (23) Other Expenditures... Teaching/Learning Materials 6.0 (4) 9.3 (7) 13.9 (22) 15.9 (24) Otherss 1.6 (1) 4.4 (3) 7.4 (11) 6.7 (10) Total 7.6 (5) 13.7 (10) 21.3 (33) 22.6 (34) Total Expenditures 156.3 (100) 140.0 (100) 65.6 (100) 66.4 (100) Expenditure/Student .070 .064 .043 .041 Note: Numbers in parentheses are as a percent of total expenditure Source: Kaijage and Abayo (1995) 24 Private schools spend about 65 percent of their expenditures on personnel remuneration and student welfare. While private schools spend approximately the same amount as government schools on staff remuneration (per staff member), a striking difference arises in the expenditures on students welfare. Private schools spend roughly one fourth on student welfare (per student) as compared to government schools. This is because private schools subsidize student food and boarding to a much smaller extent than do public schools. 25 Private schools spend more than government schools on teaching and learning materials. Thus, " Data on amount of private expenditures have not been collected so it is not possible to get information on the exact amount collected through cost-sharing. " These include expenditures on utilities, general transportation and other administrative expenses. 20 for example, in 1993/94, while public secondary schools in this sample spent Tsh. 4,300 per student on such materials, private secondary schools spent just over Tsh. 10,000 per student. 26 While expenditures per student (unit costs) are over 30 percent lower in private secondary school, they spend more on quality enhancement than public secondary schools. The main saving in expenditures for private schools comes from reduced spending on student catering and boarding expenses which are passed onto the student's households while public secondary schools -- which also predominantly cater to students from middle and upper income households -- continue to devote large sums to student welfare expenditures, often at the expense of inputs necessary for teaching and learning. However, it must be mentioned that not all private schools are functioning well. A number of these schools apparently have poor infrastructure and low quality teachers which result in poor quality of education. 27 Tertiary and Higher Level Institutions.'6 Table 3.6 summarizes the recurrent costs for public tertiary institutions and the University of Dar es Salaam (UDSM).17 For the sake of comparison, unit costs in a private computer and accountancy training institution (Microtex) have also been listed. Microtex offers both short-term diploma courses (few weeks to few months duration) and long-term degree courses (2-3 years). As the short term courses are offered repeatedly during the year with roughly similar enrollments every time they are offered, we assume that the annual enrollment at Microtex is equivalent to enrollment at any point in time. 28 As in secondary schools, staff salaries and student welfare expenses constitute about 80 percent of total expenditure. The student to staff ratio is low in all public tertiary institutions -- and seem to be declining in the two years for which the data are available for these institutions. In UDSM the student to staff ratio is absurdly low mainly due to the large number of non-academic staff on its payroll. 29 Unlike secondary schools, in public tertiary institutions, teacher salaries and allowances account for the largest proportion of the recurrent education budget. In 1993/94, over 42 percent of the recurrent budget for the nine public tertiary" institutions and 70 percent of the budget in UDSM went into staff salaries and allowances. In comparison, in the private institution analyzed, less than 30 percent of the recurrent budget went into staff salaries. A significant reason for these differences is likely to lie in the fact that the public tertiary institutions and to a much greater extent, UDSM, are overstaffed, while Microtex is unlikely to be overstaffed". Thus the wage bill will form a larger proportion of total expenditures in public training institutions. 30 The second large expenditure item for the public institutions analyzed here is student welfare. In 1993/94, about a third of recurrent expenditures in the public tertiary training institutions were spent on student welfare expenses -- a bulk of that for catering and boarding. Microtex does not provide catering for students; hence, expenditure on student welfare is less than 15 percent of total recurrent 16 The tertiary institutions sampled were - In Dar es Salaam: The Institute of Financial Management, Rwegarulila Water Resource Institute, Dar es Salaam Teachers College, Forodhani Hotel Management School, Changombe Vocational Training Center, FDC Kisarawe, East Africa Statistical Training Center, Microtex Computers Training Center, and UDSM; and in Morogoro: Institute of Development Management, and Public Health Nursing Institute. 17 The Costs of UDSM are analyzed separately as it is a university while the other tertiary institutions are training institutes. Is We have included costs of central administration in staff remunerations. 19 Lack of data on staff size for Microtex makes it impossible to unequivocally make this statement. 21 expenditure. While UDSM also spends only 15 percent of its recurrent budget on student welfare, this is more due to the fact that the contribution of the wage bill to total expenditure is high rather than low or efficient per capita student welfare expenditures -- while Microtex spends less than Tsh. 30,000 per student on welfare expenditures, UDSM spends over Tsh. 150,000 per student. 31 Unlike secondary schools, where expenditure on student welfare has declined over time, our sample suggests that these expenditures have increased significantly for public tertiary institutions. This may be in line with the phased cost-sharing approach adopted by the government -- cost-sharing schemes had not been implemented at post-secondary levels by 1993/94. Table 3.6: Recurrent Expenditures (Sampled Tertiary Institutions) Tertiary Training Institutions UDSM Microtex 1992/93 1993/94 1992/93 1993/94 1992/93 Enrollment 3192 3529 3025 2937 445 Academic Staff 415 497 493 489 NA Non-academic Staff 162 155 2160 2160 NA Academic Staff Student Ratio 7.7 7.1 6.2 5.7 NA Non-academic Staff Student Ratio 19.7 22.8 1.4 1.4 NA Total Staff Student Ratio 5.5 5.4 1.1 1.1 NA Expenditures (million Tsh.) Staff... Salaries 378.0 (23) 410.8 (24) 716.4 (25) 565.2 (18) 8.3 (10) Other Allowances 341.6 (20) 318.2 (19) 1483.4 (51) 1650.1 (53) 16.1 (19) Total 719.6 (43) 729.0 (43) 2199.9 (76) 2215.3 (71) 24.4 (29) Students.... Food and Boarding 304.8 (18) 340.0 (20) 289.4 (10) 401.4 (13) 0.0 (0) Other Welfare 177.3 (11) 242.1 (14) 47.1 (2) 52.7 (2) 11.9 (15) Total 482.1 (29) 582.2 (34) 336.6 (12) 454.1 (15) 11.9 (15) Other Expenditures... Teaching/Learning Materials 83.3 (6) 77.4 (5) 67.2 (2) 100.6 (3) 28.1 (34) Others 354.9 (22) 316.0 (18) 296.4 (10) 317.5 (11) 18.4 (22) Total 438.2 (28) 393.5 (23) 363.6 (12) 418.2 (14) 46.6 (56) Total Expenditures 1640.0 (100) 1704.8 (100) 2900.2 (100) 3087.7 (100) 82.9 (100) Expenditure/Student 0.513 0.483 0.958 1.051 0.186 Note: Numbers in parentheses are as a percent of total expenditure Source: Kaijage and Abayo (1995) 32 Due to high expenditures on the overall wage bill and student welfare, public tertiary institutions, especially UDSM, spend only a small proportion of their total recurrent budget on teaching materials (less than 5 percent). In comparison, Microtex, realizing that its ability to attract students depends crucially on the quality of materials and equipment provided, spends 35 percent of its recurrent budget on such items." 33 For the public tertiary training institutions as well as UDSM, unit public expenditures have 2 In 1992/93 Microtex spent an average of Tsh. 35,000 on teaching materials and other developmental expenses. In comparison UDSM spent Tsh. 2,000 per student. These figures are approximations however, as it is frequently difficult to differentiate between expenditures on teaching and learning materials from other expenditures in the case of tertiary institutions. 22 remained high across the two years - both due to the increase in staff remunerations and to sharp increments in student welfare expenditures. In comparison, unit costs in Microtex are a third of what they are in public institutions. While this is partly due to the fact that Microtex incurs no catering expenses, it also points towards efficient allocation of resources by Microtex. Indeed, if Microtex provided catering at the same level as other tertiary institutions, its unit costs would go up to Tsh 280,000, still far below that of publicly-funded tertiary institutions. D. Cost-Sharing 34 Recognizing the dire financial constraints facing the public sector, over the past few years the government has gradually introduced cost-sharing schemes especially at the secondary and university levels. This section examines the sources and amounts of parental contribution to public education at different education levels and compares this spending with the government's contribution to education. (a) Sources of Revenue 35 Secondary Schools. Cost-sharing has been in place in secondary school since the late 1980s when schools started charging nominal tuition fees. However, since 1993/94, in addition to paying part of the tuition fees, students in day and boarding secondary schools are required to buy their own uniforms, stationery, books, personal hygiene items as well as bedding (for boarding school students). Students are also expected to bear their transportation costs and part of the catering expenses (Table 3.7). Table 3.7: Sources and Potential Amount of Revenue in Public Institutions Secondary Schools Tertiary Trg. Inst. of Higher Learning Sources of Revenue... Tuition Parent/Govt. Parent/Govt. Govt. New Construction Parent Govt. Govt. Transportation Parent Parent Parent Catering/Food Parent/Govt. Parent/Govt. Parent/Govt. Bedding Parent Parent Parent Salaries Govt. Govt. Govt. Utilities Govt. Govt. Govt. Teaching/Material Parent/Govt. Govt. Govt. Expenditures Borne by Parents (1sh. 000).2l.. Tuition 8-15 0-60 0 Food/Clothing./Trans 120-140 50-90 300 Others 20-50 50 50 Total 145-205 100-200 350 Source: Mushi (1995) 36 Tertiary Institutions. While there is no official policy on cost-sharing for these institutions, in the face of severe budget constraints many institutions have themselves instituted cost recovery schemes. In most of these institutions, costs of transportation, stationery, uniforms, bedding and personal hygiene are borne by the students. In some institutions, students are required to pay examination and registration fees. They also bear part of the catering expenses. 21 These numbers are notional. 23 37 Higher Learning Institutions. Cost sharing was introduced in these institutions in 1994. Students are currently required to meet some of their non-tuition expenses. However, in most of these institutions (except the Open University of Tanzania) the government still bears the entire tuitions costs, except that of privately sponsored students who comprise about 5 percent of the student body. 38 In tertiary institutions and institutions of higher learning, the government has recently (1994/95) instituted a loan scheme through which students of certain groups, especially the economically disadvantaged, can pay for the tuition and living expenses (see below). (b) Potential Direct and Indirect Revenue Collected Through Cost-Sharing 39 The direct revenue that government collects through cost-sharing is out of tuition charges and other fees. Indirect revenues are not collected by the government but refer to spending by parents (or students) on other items (e.g. food, clothing and transportation) -- and while these will not accrue to the government, they can be seen as a form of savings to the government arising out of the policy of cost- sharing. 40 To get an idea of the proportion of revenues raised through cost-sharing we have computed the potential proportion of expenditure that is being borne by parents in public institutions. We have also looked at how this compares with the spending for children in private institutions. Table 3.8 provides two interesting comparisons: how parental spending on children's education in public institutions compares with the total expenditure (parental + government) and (b) how parental expenditures on public education compare with those for private education. 41 Two points should be noted while computing the potential household contribution. First, on the basis of evidence gathered from a small sub-sample of institutions, there is likely to be a high rate of default (at least 20 percent) on tuition and living expenses in public institutions (Mushi, 1995). While an option is to send defaulting students back home, schools are generally reluctant to do this, in some cases probably because they would also have to pay the transportation costs for the students who are unable to pay. Second, the cost of administering these schemes are also significant. 42 Cost-sharing is most significant at the secondary level, with about 37 percent of the total expenditure in public institutions being potentially borne by parents. However, at higher levels of education, the proportion of costs shared declines. It is around 17 percent at the tertiary level and falls to 16 percent for institutions of higher learning. In comparison, households absorb 62 percent of educational expenditures at the secondary level in Kenya (World Bank, 1995) and at the tertiary level, household contribution to public education is 22 percent in Vietnam while subsidies for student meals have been eliminated in Ghana and Botswana. It is clear that there is ample scope for greater cost-sharing at all levels of education in Tanzania (Galaitsi, 1995). 43 Comparing cost recovery in public and private institutions is also revealing. Not surprisingly, 2 It is conservatively estimated that the cost of administering these schemes is Tsh. 47 million for secondary day schools, Tsh. 78 million for secondary boarding schools and Tsh. 10 million for tertiary institutions and universities (the government loses interest on loans it is giving students in tertiary institutions to the tune of another Tsh. 591 million). These administration costs include the bookkeeper's salary, purchase of receipt books, and other overhead costs. 23 Potentially, because a significant proportion of parents (over 20 percent) default on making all or part of these payments. 24 education in private institutions generally requires higher personal expenditures. While it is not specified in this table, the main cause for the difference in parental contribution between public and private institutions is fees: on average private institutions charge fees of Tsh. 50,000 more than public institutions at secondary levels, about Tsh. 400,000 more at training institutions and Tsh. 750,000 more for university education.' Thus while parental contribution to private secondary education is about 30 percent greater (per student) than the contribution to public education, at tertiary levels private students pay more than three times as much as do students in public institutions. Table 3.8: Parental and Government Expenditures on Public and Private Education 1993/94 Public Education Private Education Secondary Schools Contribution/Students ( '000) 170 225 As a % of Total Expenditure 36.5 100.0 Tertiary Training Institutions Contribution/Student ('000) 141 545 As a % of Total Expenditure 17.0 100.0 Institutions of Higher Learning Contribution/Student ('000) 345 1097 As a % of Total Expenditure 16.3 100.0 Source: Mushi (1995) 44 It should be pointed out that notwithstanding the increased scope of cost-sharing, more efficient use of government funds will also result in substantial savings for the government. (c) Strategies for Cost-Sharing 45 In the face of tight budget constraints, cost-sharing measures have been introduced in both secondary and tertiary institutions. As we have seen in Section II, richer segments of society have greater access to post-primary education and training opportunities. To ensure that the economically disadvantaged do not suffer even further in their attempts to obtain an education, in its attempt to institute greater cost-sharing, the government has tried to initiate means testing and loan schemes for secondary and tertiary students respectively. Furthermore, to fund the national vocational training centers the government has recently set up a scheme which will generate revenues by imposing payroll taxes on private firms. Here we briefly discuss these schemes in the Tanzanian context. 46 Means Testing. To make education user charges workable, students with lesser means should be exempted in one form or another. However, the cost of obtaining information to differentiate between students who are poor and students who are relatively wealthy is often prohibitive. The most common problem associated with means testing in a society where income is difficult to measure is that it is difficult to identify students (parents) who have the ability to pay. Means testing has been implemented at the secondary level in Tanzania where schools rely on grassroots level institutions to identify parents with ability to pay (Mushi, 1995). 2 There are no private universities in Tanzania. These expenditures refer to the fees charged for privately sponsored students in public institutions. 25 47 If a student cannot pay the fees he or she applies to the village government for exemption. If the village government determines that the student is unable to pay, then the village government is required to foot the bill and this is the stage where the system is prone to abuse. However, if the village government is also unable to pay, it passes the burden to the district council. The main problem with this procedure has been that the village governments have tended to approve almost all applications that have been submitted to them even when their resources are limited, thus passing the burden onto the district councils. Thus the government ends up paying, often for students who can pay themselves. 48 Government Student Loan Scheme. In response to growing student unrest over the policy of cost- sharing, the government of Tanzania started a student loan scheme in 1994/95. The scheme covers students enrolled in tertiary institutions and is designed to help meet meal and accommodation expenses of students who cannot afford to pay. Students are supposed to fill an application form which declares their sources of income and this form has to be endorsed by local district commissioners. These forms are the basis upon which decisions to grant loans are made. Forms submitted by students are equivalent to legally executable contracts. The repayment terms are generous, the loans are interest free and can be repaid up to 16 years after graduation. Assuming yearly repayments, a student who borrowed Tsh. 200,000 in 1994/95 would end up paying only Tsh. 33,000 given the current rate of inflation -- a repayment of just 16 percent in real terms. Thus, even in the best case scenario, with no default and low administrative costs, the government will only be repaid a small fraction of the loans. 49 Even though the scheme is meant to aid poor students, currently almost all students are receiving loans. This implies that the information collection procedure is not working. Furthermore, the loan collection procedure is not in place. The mechanisms by which the government plans to trace students and recover the loans after they leave the institutions have not been spelt out and thus is seems very likely that a high proportion of students will default on the loans. 50 The problems faced in administering this loan scheme are similar to those faced in many other developing countries where the loan schemes have proved highly unsuccessful (Box 3.5). In reality, the Tanzanian loan scheme appears to be a grant program. It is doubtful that any money will be recovered as there does not seem to be any desire to collect these loans nor any mechanisms in place through which these loans are supposed to be accumulated. 51 Vocational Education and Training Authority (VETA). To fund public training, in 1995, Tanzania has set up an independent body: the Vocational Education and Training Authority (VETA). VETA is expected to provide basic specialized training to meet the training needs of both the formal and informal sector. This training is going to be financed through a payroll levy on firms' which equals "two percent of gross emoluments payable by the employer to all employees". However, government organizations and non-profit making public institutions are not subject to this levy. E. Conclusions and Recommendations 52 Who bears education expenditure? While the government bears most of the recurrent expenditures of post-primary education, donors contribute a substantial proportion of developmental expenditures. Over 90 percent of donor funding goes to the post-primary sector out of which over 70 percent goes to 2 This levy applies to all firms with four or more employees. 26 the tertiary sector. Howevere poor coordination between the donors and the government leads to inefficient allocation of these expenditures. Given low primary and secondary enrollment rates it is clear that donors should be placing increasing emphasis on primary and general secondary education. Greater coordination among donors and between donors and government is necessary to increase the efficiency of donor investments. 53 Share of expenditures on inputs. On average, over 80 percent of government expenditure at the post-primary level goes into teacher emoluments and student welfare expenditures. As a result, expenditures on developmental expenses, which are necessary for improving the quality of education are minimal. 54 Unit Costs. Post-primary education is far more expensive than primary education. This is mainly due to a large wage bill due to overstaffing and high and inefficient expenditures on student welfare. Furthermore, public training institutions, created to ration access to secondary education and provide students with employable skills, are significantly more costly than secondary schools while providing low quality education. While the skills provided in these institutions are not in demand in the labor market, in the past graduates from these institutions were absorbed into the public sector in an era of employment guarantees. This is no longer the case as the government has appropriately removed such guarantees. Clearly, a significant number of these institutions are a drain on the government's meager resources and should be identified and closed. 55 A large wage bill caused by overstaffing in the sector and high expenditures on student welfare, contribute to excessive public unit expenditures on post-primary education. Improving food procurement methods in public institutions will lead to a decline in expenditures on student welfare. The most effective way to reduce the wage bill is to implement the civil service reform already underway in the education sector and retrench staff -- both academic and administrative -- on the basis of some clearly defined criteria. For instance, teachers should be made to appear in a competency examination and only the best should be retained. Further, cost-sharing policies adopted by the government, if administered correctly, will transfer some of the education costs to the students and their parents and are an effective means of reducing government expenditure. 56 Data on costs in public institutions. Lack of complete and updated information on expenditures for a majority of public institutions is a serious drawback. For the purpose of public budget allocations, it is crucial that this information be available. Each institution should be asked to maintain a clean record of its sources and uses of funds each year. Institutions not maintaining proper records should be penalised through a reduction in government funding. This information is invaluable to governments in making efficient decisions on which institutions it should close down and which institutions it should support. 57 Costs in public and private institutions. Due to lack of data on expenditures this study has relied on evidence from a sample of secondary schools and tertiary training institutions. This evidence indicates that private institutions allocate resources more efficiently than public ones. Unit costs are generally significantly lower in private institutions mainly due to lower expenditures on student welfare. However, private tertiary institutions spend more on developmental and teaching related expenses. This generally translates into students of better quality than in public institutions which are insulated to the needs of the market, and also leads to a greater likelihood of absorption into the labor market (See Section V). This provides a strong rationale, on efficiency grounds, for the government to withdraw from the provision and financing of post-primary, and particularly tertiary education and encourage the provision of private 27 education. This can be a gradual process with viable government training institutions given greater autonomy in decision making and encouraged to generate revenues from student fees, government contracts, private fund raising and scholarships. Government funding, in the form of input-based budget transfers should be phased out over five to 10 years so that the institutions become autonomous. Institutions responsive to changing market demands will be able to survive. Simultaneously, the budget constraint facing the government will be relieved and it will be able to focus its attention in improving access to and quality of basic education. 58 Cost-sharing. Under an optimistic scenario, less than a quarter of expenditures at the post- primary level, in public schools will be borne by households in the current year mainly in terms of boarding expenses and, to a much lesser extent, tuition expenses. Greater cost-sharing can be achieved over the next few years if real fees reflecting full operating costs are put in place in public higher education and training institutions. As richer households currently reap the benefits of post-primary education this is a viable measure. However, simultaneously, schemes to help the economically disadvantaged -- like means testing and loan schemes - should be introduced to ensure that they can have greater access to post-primary education. 59 Public secondary schools have used means testing in order to differentiate among students. However, due to poor information about student's family wealth the system is subject to abuse with the government frequently paying for students who are able to pay themselves. In an attempt to improve information gathering, grassroots institutions such as a village government should continue to assess a student's ability to pay. However, in addition, the assessment of a household's wealth by an institution such as a cooperative society should also be taken into consideration. Over time it is important to build up a database for students from the time they enter primary school which includes information on family welfare and wealth and which can then be continuously updated and used to determine if the student needs aid. 60 The student loan scheme that has recently been set for students of tertiary institutions is flawed. It is highly subsidized and poorly administered with the loan being able to everyone regardless of need. The possibility of high default rates exists as collection mechanisms have not be thought through nor put in place. The current loan scheme is a poorly disguised grant scheme with high administrative costs. To minimize the potential for large-scale loss, the loan scheme has to be discarded. It can be replaced by a variety of funding instruments such as - (a) offering a universal grant to all students. In this case the administrative costs are going to be minimized; or (b) a student financial aid scheme where a smaller universal grant is provided along with scholarships that should be targeted strictly by income and the ability to meet some minimum academic standards. The scholarship aid would make education affordable for students from poor households. The cost implications of this scheme will have to be studied in greater detail as it involves setting up a successful means testing procedure which is not a simple task in the Tanzanian context as the experience with secondary schools and loan schemes seems to show. 61 Setting up another loan scheme at present in Tanzania, a country with high inflation and underdeveloped credit markets is completely unrealistic. In the long term, over the next few decades, when credit markets have developed, commercial banks should be helped to set up their own student loan schemes. The government will help in supplying the bank with information on the identity of students and tracing of graduates to decrease risk of default. The institutions themselves will provide most of this information to the banks as they have a vested interest in the success of the loan scheme - with declining financial support from the government these institutions will rely more on student fees which in turn will be financed by these loans. In addition, continuous credit education should be provided to students so 28 as to inform them of their rights and responsibilities regarding the loan and provide information about repayment options. Administration of the loan scheme by private banks will not be enough. For instance, reliance on the government for a loan organization's budget or a full guarantee on loans will undermine incentives to follow up on delinquent students. Commercial banks should share in the risk of the program and the government's guarantee should be reduced so that the banks have an incentive to collect from debtors. However, as mentioned previously, a viable loan scheme can only be set up once credit markets are further developed and, as shown, in Box 3.5, even in highly developed countries such as the U.S. and Canada, where such schemes have been in existence for a few decades, and where administrative capacity and credit markets exist, government losses are significant. Losses in Tanzania are likely to be far greater. 62 Payroll Taxes. Since 1995, payroll taxes are being levied on employers to fund public training through VETA. The money raised will be used both to upgrade existing public institutions and create new ones. It is believed that these levies are borne by the enterprises themselves making these taxes appear to be fair. However, research done in developed countries seems to suggest that these taxes are borne by labor. As payroll levies are a tax on labor they tend to raise the price of labor relative to capital. Thus, by encouraging a shift to more capital-intensive techniques, payroll levies may end up inhibiting employment growth. The desirability of these taxes to finance training is also contingent on the stage of a country's development, as in low income countries, such as Tanzania, these taxes may be administratively difficult to administer. Enterprises are also likely to resist this levy. Preliminary evidence indicates that this is already happening in Tanzania where the larger firms are resisting paying the levy. This puts small firms, which in general do not require significant amounts of training for their employees at a disadvantage and may cause them to leave the formal sector and join the unregulated informal sector. Furthermore, given that public institutions are not subject to this levy, the private sector is in effect subsidizing their training -- something which private employers will be unwilling to do. 63 Tanzania would be well advised to move away from the VETA scheme. There is a need to find as many ways as possible to encourage more skills training by employers and private sector training institutions. Private training by enterprises and that paid for by individuals tends to be demand-driven and efficient as employers know what sort of skills their workers need and individuals are willing to pay for training only if they know that the skills they receive are in demand in the labor market. Private provision and financing of training will also ensure that scarce public funds are diverted to more productive uses - e.g. general education and basic health. 64 Overwhelmingly, international experience indicates that publicly-owned vocational and technical training institutions are inefficient. They are expensive and lose relevance as production technologies and product mix change rapidly while the institutions being unresponsive to market demand have no incentive to remain abreast of these changes. Within the budgetary constraints facing governments in most developing countries employer-based training provides an encouraging and flexible alternative for equipping workers with job skills. Private training can be expanded and improved by creating a favorable policy environment. When designed well, public subsidies, tax deductions or rebates of training expenses seem to have increased firm-based training. Scholarship schemes can also be designed where training programs for targeterd groups are auctioned to private providers. Chile's SENCE scheme offers tax incentives to enterprises to invest in worker training and also regulates the auctioning of training programs (see Box 3.6). Given the dominance of agriculture and small scale firms, the scholarship scheme may be more suitable for the Tanzanian economy. 29 BOX 3.5: EFFECTIVENESS OF STUDENT LOAN SCHEMES The financial efficacy of a loan program can be assessed on the basis of the loan recovery ratio, or the extent to which the loan is repaid in full. Loan programs, in general, have not been cost-effective, mainly because of high level of: government subsidization; default rates and administration costs. It is apparent that government run student loan programs generally suffer the same problems which afflict all other politically directed credit schemes as well. High level of government subsidization. Student loans are subsidized by the government if the interest rates they charge are below market rates. The amount of the subsidy is based on the real interest rate charged and the length of repayment. In countries with high inflation rates, real interest rates of student loans have often been negative, reaching -35 percent in Brazil in 1983 when the inflation rate was 50 percent and -23 percent in Venezuela in 1991 at a time when inflation was 27 percent. The inflation rate in Tanzania is also quite high -- over 20 percent. High default rates of students. The record of students meeting their payment obligations has, in general, been very poor, resulting in very low loan-recovery ratios. In Kenya, 81 percent of all higher education students (all students are entitled to loans) do not repay their loans. The default rate in the otherwise very innovative cost-recovery scheme in Chile is 40 percent, while in Jamaica it is 38.8 percent. High administration costs. Establishing and implementing a loan scheme is not costless. Administrative costs typically run at 10-12 percent of total loan programs and can be as high as 30 percent (Honduras). These costs tend to increase in countries with large populations and informal sectors that require greater efforts to monitor. Around the world there has been a poor record of cost-recovery in loan schemes especially those administered by the government (directly or through autonomous public sector bodies). Government Losses on Selected Loan Programs Hidden grant to Govt. loss Govt. loss with Admig Country students as % of loan with default (%) def. and admin. costs (%) Colombia 73 76 87 Govt. Indonesia 57 61 71 Umdy Jamaica 56 62 70 Govt. Kenya 70 94 103 Bank Venezuela 93 98 108 Govt. USA 29 41 53 Bank Canada (Quebec) 31 31 37 Bank Improved performance of loan can be achieved by: Better targeting loan support. Support those deemed most deserving of support identified either through means testing or even on the more stricter criteria of merit cum need. For instance in the U.S., relatively high default rates stem from the fact that support is not tied to student performance. Further, support should not be open ended but available only for a fixed period of time. Reducing Hidden Subsidies. Tie interest rates to an indicator of inflation or commercial lending rates. Repayment schedules could also be restructures so that initial repayments, when the graduates earning power is low, are smaller than later ones. This will reduce the risk of default. Minimizing Evasion. Choosing an appropriate collection agency is central to effective recovery. While autonomous public sector bodies may possess comparative advantage in selecting students and targeting support, it is less clear that they have the capacity to collect repayments. Commercial banks typically possess the infrastructure that other institutions lack. Canadian banks have established a data base to keep better tracks of students whereabouts once they leave institutions. Furthermore clear incentives to collect need to be established. The U.S. government does not fully guarantee the loan which ensures that commercial banks have the incentive to collect from debtors. Credit Education for Students. Schools participating in the student loan program in the U.S. are required to conduct entrance and exit interviews with students in order to educate students as to their rights and responsibilities regarding the loan, provide information regarding repayment options and have borrowers sign documents which make it clear when repayment commences, the amount of repayment and its periodicity. Source: Ziderman and Albrecht (1995) ; and Galaitsi (1995) 30 Box 3.6: MAINTAINING RELEVANCE OF WORKERS' TRAINING THROUGH PRIVATE SECTOR PARTICIPATION: CHILE'S SENCE SCHEME Chilean Municipal Employment Offices use an enterprises program via a tax credit system, and a scholarships program to encourage workers' training. The training in both cases is at least partially funded by the government of Chile, executed by the private sector through Organizations for Technical Education (OTEs), and regulated by a National Service of Employment and Training (SENCE). The OTEs can be vocational schools, private foundations, municipal schools, technical institutes, universities, etc., but they must be recognized by SENCE. Under the enterprises program, firms are allowed a tax credit -- which has as an upper limit a fixed fraction of payroll - if they can demonstrate that they have spent this amount on workers' training, or have made contributions to intermediary training organizations (such as CODESSER, the Corporation for Rural Development), or have employed apprentices from SENCE's programs. SENCE plays a regulatory role in training provision, and ensures compliance with tax credit laws. Under the scholarship scheme, training programs for targeted groups are auctioned to private institutions. While in the past SENCE auctioned the provision of specific courses, SENCE now auctions programs for targeted groups in specific locations. SENCE also requires that a minimum fraction of trainees find employment within a stipulated period. Failure to meet this minimum implies that the OTE will not recover all of the training cost from the Municipal Employment Office. This ensures that OTEs do thorough market analysis while designing the course. The enterprises program is procyclical, which is not surprising because the benefits associated with investments in training are procyclical. It is likely that the effectiveness of the scholarship program is also procyclical, since it is easier to predict skill requirements and ensure placement of trainees when employers plan to hire workers in the near future. The enterprises program is also more popular among large firms: While small and medium sized firms used about 30 percent of the tax credit allowance, large firms used almost 60 percent. In fact, the distribution of training beneficiaries through the enterprises program is clearly skewed towards sectors of the Chilean economy dominated by large firms. Employment Enterprises Scholarships Sector Distribution (%) Program (%) Prozram (%) Agriculture 17.1 2.5 20.2 Mining 2.0 16.3 NA Industry 17.0 24.6 32.0 Commerce 17.7 13.0 12.2 Financial Serv. 4.9 21.6 NA All Others 41.3 21.9 NA The condition of Tanzania's economy and employment structure seems to be better suited for the scholarship scheme than the enterprises program, given the dominance of agriculture and small-scale firms. Adapted from Gill (1995). 31 IV. RETURNS TO EDUCATION 1 Costs are just a part of the picture. To get an idea of the returns derived by individuals and society from education, it is also necessary to examine the benefits from education. The most tangible benefits to education is the higher earnings that accrue to individuals with greater education. The rate of return to any level of education can be computed by comparing the present value of the earnings differentials between two levels of education with the economic (out of pocket and opportunity) cost incurred in obtaining the higher education. On the benefits side, social returns should include intangible externalities such as general increase in societal welfare, reduction in crime rates, better public health and hygiene and lower fertility rates and so on. While it is impossible to quantify these benefits, they are significant. On the cost side, social returns should take into account government subsidies. 2 Keeping this in mind we turn our attention to the empirical analysis of private and quasi-social -- as private benefits are being compared to costs -- rates of return in Tanzania. Furthermore, these results should be interpreted with extreme caution for the following reasons. First, the number of observations, particularly at the university level, are few. Second, due to data limitations this analysis is confined to formal sector workers who account for less than 10 percent of the overall workforce. This is likely to bias upwards the rates of return, especially at lower levels of education. Third, the rates of return may also be biased because over 65 percent of the sample analyzed is employed in the public sector where pay scales are set administratively and may have little relationship to productivity. However, it should also be stated that the general trends of this rate of return analysis are similar to those found for other countries (Psacharopoulos, 1993). 3 Private rates of return to education have been computed by estimating an earnings function, which controls for human capital characteristics (education and training) along with individual, regional and labor market characteristics (Appendix 4.1 and 4.2). The rates of return are shown below (Table 4.1). Table 4.1: Private and Quasi-Social Annual Rates of Return to Education and Training Education Level Training Group Primary Secondary University Vocational On the Job Private Rates... All 3.6 6.9 9.0 19.4 35.2 (2113) (609) (41) (814) (514) Male 1.9 6.6 9.9 17.8 33.0 (1612) (360) (28) (523) (416) Female 10.8 9.0 11.4 20.2 35.0 (501) (249) (13) (291) (98) Quasi-Social Rates... Al 3.6 1.5 0.0 0.0 Note: Numbers in parentheses-are the number of observations. Source: Calculations based on the 1990-91 Tanzania LFS 2 We assume the duration of primary, secondary and university education are approximately seven, six and three years respectively. For training, we assume that the duration of vocational training courses is approximately two years on average. While the duration on the job training is unknown, usually these are short courses and we have assumed that the average duration of these courses is about 6 months. 32 4 How can these rates be interpreted? A rate of return of 3.6 percent on primary education implies that if the individual invests Tsh. 100000 on an additional year of primary education, that year of primary education will yield a benefit of Tsh. 3600 annually over the working life of the individual, over and above what the individual would have earned without the investment.27 5 Private rates of return increase sharply with education, especially for males. While the rates of return are higher for women than for men at all three levels of education, they are fairly constant across education levels. On-the-job training, usually relevant to the current needs of the employer, has the highest returns. Both men and women apparently get higher returns to vocational training than to general education. As is the case with general education, the rates of return to training are also higher for women than for men in Tanzania. This has not been fully realized by communities which is part of the reason that enrollment rates are low for women. 6 Taking into account the costs incurred by the government, rough estimates of the quasi-social rates of return have also been computed. As can clearly be seen, the social rates of return are negligible for secondary education, and zero for vocational training and higher education. This is mainly due to the high public expenditures per pupil (unit costs) in post-primary education as a result of inefficient resource allocation. Thus the economic cost of public provision and financing of vocational training and higher education are as great as the net present value of economic benefits. B. Conclusions and Recommendations 7 Private and Social Rates of Return. Private rates of return increase with education levels, especially for men, with the rates of return to training being the highest. However, in large part due to excessive and inefficient spending on public post-primary education in Tanzania, quasi-social rates of return are highest for primary education, while they are negligible for secondary education and zero for vocational and higher education. This implies that the government is reaping no tangible benefits for its investment in post-primary education. 8 These results are not surprising. International experience indicates that public provision and financing of training is only cost-effective when employment is expanding rapidly, especially in the formal wage sector. In a stagnant or slow growing economy, such as Tanzania, the returns to vocational education and training are low and even negative. For example, during periods of rapid growth in Malaysia and Brazil these programs exhibited social rates of return in excess of twenty percent, while in Togo and Cameroon less than a quarter of graduates ended up finding jobs during stretches of slow growth in the 1980s. In Thailand, 33 percent of vocational trainees were unemployed a year after graduation in the mid-1980s during a period of slow growth but there were more jobs than graduates after 1989 when Thailand started growing rapidly. Furthermore, the effectiveness of vocational education and training in providing relevant skills for the formal sector is unproven; general skills, combined with a favorable environment for the informal sector are believed to be more effective in ensuring relevant skills are available for informal activities. 9 In economies where employer and private training institutions are still not well established, the public sector may have a role in increasing investments in job-specific skills. However to ensure that 27 Normally rates of return are given for education levels, not an year of education. Thus, for instance the rate of return to secondary education in Tanzania would be 41.4 percent (=6.9 annual rate of return multiplied by 6 years of secondary education). 33 these institutions are sensitive to employer needs and to guarantee higher social rates of return, cost- sharing with employers and their involvement in curriculum design has proved to be a successful strategy. 10 In an era of tight budget constraints, the government has to rationalize its expenditure on education so that social returns are maximized. As quasi-social rates decline by education level, efficiency gains will be realized if the government progressively increases cost-sharing (and hence reduces its investment) at higher levels of education and continues to invest more of its scarce resources at lower education levels." At the same time the government should foster private and employer-based training which is more relevant to market needs. 11 Returns by gender. Private rates of return to education are significantly higher for women than for men. However this has not been realized by communities leading to extremely low enrollment rates for women. This implies that parent's should be made aware of and invest more in their daughter's education. However, the government also has a role to play, at least at the margin. As the quasi-social rates of return are also higher for women than for men (because private rates of return are higher for women and costs of education are roughly identical for men as well as women), at the margin, the government should invest each additional dollar on improving women's access to education. 28 A case can be made for greater investment in higher education by arguing that the intangible benefits of higher education outweigh those at other levels of education and hence the "true" social rates of return are greater for higher levels of education. However, evidence does not exist to either support or refute this hypothesis. Thus conclusions are based on the quasi-social rates of return. 34 V. INSTITUTIONAL CASE STUDIES 1 The previous sections have illustrated that unlike public sector training institutions, which are neither cost-effective nor responsive to the demands of the labor market, private training institutions are more efficient in allocating their expenditures while provide relevant education of higher quality. By providing an in-depth analysis of five tertiary institutions in Tanzania, this section illustrates these points. These institutions have been studied in detail with respect to their financing strategies, management styles, and input and output indicators. The selection of these institutions was based on the criteria that they should be from various sectors of the economy and different geographical regions. To make the analysis meaningful, government, parastatal and private training institutions were included in the sample. 2 General Characteristics. On the basis of these criteria, five institutions were chosen to be analyzed. They were: (a) The Institute of Information Technology (IIT) - A privately owned institution offering short and long term computer training programs leading to internationally accredited certificates. (b) The Institute of Financial Management (IFM) - A semi-autonomous training institution offering short and long-term programs in the areas of finance, accountancy, banking, taxation and social security. Though this institution is financed by the government, the governing council enjoys full autonomy in decision making. (c) The National Social Welfare Training Institute (NSWTI) - A government-owned institution offering certificates and diplomas in social welfare. (d) The Ministry of Agricultural Training Institute - Ilonga (MATI-Ilonga) - A government-owned training institute offering diplomas and certificates in agriculture and livestock management. (e) Tanesco Training Institute (TTI) - A parastatal training institute (owned by Tanesco - Tanzania's power company) offering in-house training to its employees. TTI is fully funded and managed by Tanesco and thus only indirectly run by the government. 3 Table 5.1 displays some of the general characteristics of these institutions. Except for IIT, all are fairly well established. In IIT and IFM, the two institutions which are not under the control of the government (IFM is semi-autonomous), teachers as well as support staff are fully qualified (in terms of having the minimum required qualifications for the job) and staff-student ratios are adequate. On the other hand, the three public sector institutions are overstaffed and fewer academic and support staff are qualified in general. Table 5.1: General Characteristics of Institutions Characteristic IT IFM NSWTI MATI TTI Year Established 1991 1972 1974 1972 1974 Ownership Private Semi-auto. Govt. Govt. Parastatal Qualified Teachers % 100 100 88 86 79 Qualified Support Staff All All Some Some All Enrollment 168 1237 224 98 100 Staff/Student Ratio 1:16 1:18 1:8 1:5 1:4.5 Source: Olonu and Assad (1995) 35 4 Financing Strategies. The main sources of funding for these institutions are fee incomes, government assistance, grants and self-generated incomes. IIT, IFM and to a lesser extent NSWTI obtain a majority of their incomes from fees. On the other hand, MATI and TTI are almost wholly dependent on the government (or on Tanesco which is dependent on the government, in the case of TTI) for their revenues which is proving to be unsustainable (Table 5.2). 5 Salaries and administrative expenses constitute a major expenditure" item for all institutions. Expenditures on student welfare are also significant, especially in MATI and TTI. This leaves little room for teaching and learning materials in all institutions except IIT which devotes about 40 percent of its expenditures to these quality enhancing items. Private training institutions aim to keep abreast of latest technological advances in order to maintain their niche in the market. Public training institutions have no incentive to do so as they do not have to be responsive to market demand to survive. Table 5.2: Sources and Uses of Funds (%) ]IT IFM NSWTI MATI TTI Sources of Funds... Government 17 28 89 98 Fees 90 78 60 1 1 Others 10 5 12 10 1 Total 100 100 100 100 100 Uses of Funds... Salaries and admin. 58 70 69 44 60 Student Welfare 2 23 23 50 33 Other 40 7 8 6 7 Total 100 100 100 100 100 Source: Ooni and Assad (1995) 6 Management and Marketing Practices. Management and marketing practices differ markedly across institutions (Table 5.3). IIT is managed by an entrepreneur and enjoys full autonomy in decision making. There are just three levels of hierarchy between staff and the policy making level, ensuring efficiency in the functioning of the organization. IFM is managed by a governing body made up of Chief Executives of various shareholders who enjoy a high level of autonomy in decision making. The NSWTI is also managed by a Board of Governors. However, these are mainly members of government who have little direct stake in the institution and possess limited authority when it comes to decision making. MATI and TTI are both run directly by the governing public institution and the staff involved in the daily operations of the institution have no autonomy in making decisions regarding hiring or firing of personnel or altering the curriculum to reflect changing labor market needs. 7 Dependent on public funding, the three government-run institutions see no need to have any marketing strategy. This is in marked contrast to IIT and IFM, both of which market aggressively to 2 It is difficult to get a good idea of expenditures as only UT and to a lesser extent IFM have this data readily available. 36 attract more students. Both these institutions promote their programs via advertising in newspapers and through brochures. Furthermore, both have fostered links with internationally accredited academic institutions"o to ensure the quality of instruction remains high. Pricing has also been used as a successful competitive tool by both these institutions. To generate greater demand for its diploma programs IIT recently reduced its fees. IFM consistently underprices its main competitors (e.g Dar es Salaam School of Accountancy, College of Business Education, etc.). Table 5.3: Management and Marketing Practices Characteristic ]IT IFM NSWTI MATI TTI Management Governance Entrepreneur Council Board of Min. of Agri Tanesco Degree of Autonomy Full High Medium Low Low Levels of Authority 3 5 5 9 6 Annual Reports Available Available Some Not Available Not Available Marketing Promotion Yes Yes No No No Pricing Yes Yes No No No Linkage with other bodies Yes Yes No No No Source: Oomi and Assad (1995) 8 Performance Indicators. It comes as no surprise that IIT and IFM have the best qualitative performance indicators. These programs are in great demand as the as the job placement rates are high. However demand for programs in the other three institutions are low as the graduates do not see many employment opportunities. As these institutions are insulated from the market due to complete government support, the management sees no need to alter the courses to meet the demands of the labor market (Table 5.4). Table 5.4: Performance Indicators ]IT IFM NSWTI MATI TTI Program Demand High High Low Low Low Job Placement High High Low Low NA Audit Reports Clean Clean Clean In Arrears In Arrears Management Reports Available Available Some Not Available Not Available Funds From Operations (Tsh. 42272000 10205000 -9365000 NA NA Returns on Assets % 58 -2 -6 NA NA Source: Olonu and Assad (1995) 3 IIT is affiliated to the Pitman Examinations Institute and the National Computing Center, both of the U.K. while IFM is collaborating with the University of Strathclyde. 31 Over 98 percent of TTI students are Tanesco employees which the other two percent are sponsored by other organizations. 37 Conclusions and Recommendations 9 Public vs Private Training Institutions. While only a select number of institutions were examined, a clear picture emerges. Well performing institutions are generally private or semi-autonomous and not reliant on the government for funding, and relatedly the management of such institutions has a high degree of autonomy and flexibility with regards to policy decision making. The organizational structure has few levels and policy making bodies are composed of individuals who have a vested interest in the success of the organization. Such institutions have close links to the market and because of their flexible structure can easily respond to the needs of the market. 10 These findings strengthen the conviction that public tertiary training institutions should be granted autonomy and government funding should be gradually withdrawn over the next five to ten years. Institutions should be assisted with the formulation of business plans to articulate their mission, market niche and management and marketing strategies. With the phasing out, the institutions will be released from civil service and other government regulations restricting flexibility. Given its massive purchasing power in the Tanzanian economy, the government could also provide a big boost to the private sector by contracting out for training services of better quality and at lower unit costs than can be achieved in public institutions. 38 VI. POLICY REFORMS AND THEIR IMPLEMENTATION A. Policy Framework 1 Policies relevant to post-primary education and training in Tanzania have undergone major changes recently. On the macro-level, policies of the past supported a state-centered economy and trade was restricted. Universal subsidies were provided across many sectors. Most private sector enterprises, including those delivering health and education services, were nationalized or prohibited. Since the late 1980s, however, public sector reforms have been instituted to stimulate the private sector to produce and deliver goods and services, including social services. There is a reorientation of state spending to core public sector functions, such as public safety, regulation, and some aspects of the social sectors. 2 At the sectoral level, the most recent policies represent a shift in the state's conceptualization of its role. The Education and Training Policy of 1995 emphasizes the government's continued responsibility in the provision and financing of more and better basic education opportunities. At the same time, it calls for a reduction in untargeted subsidies through increased cost sharing, liberalization of private education and training at all levels, and decentralization of authority. The Higher Education Policy highlights the importance of rationalizing government's contribution to higher education, fostering competition for grants to institutions, and introducing significant cost sharing and a student loan scheme. 3 The implications for post-primary education and training of these macro and sectoral policies are three-fold: * Removal of Public Sector Employment Guarantees. The overall shift from state-centered to private sector-centered development implies that individuals will no longer seek education and training simply for guaranteed public sector jobs. Those jobs will be fewer in number, and eventually will be less attractive than private sector opportunities. * Rationalization of Expenditures. The targeting and rationalization of public spending implies that many of the training institutions that have been sustained unconditionally on government monies will be required to seek other sources of support. Increasingly, public spending will be contingent on the institutions' productivity and social benefits. * Increased Competition Among Training Providers. Liberalization within the education and training sector will allow competition between public and private institutions. The competition is likely to be most active among lower- and mid-level vocational and technical training programs, in which there will be a market for skills that have immediate payoff in the labor market. Given this future competition, survival of training institutions in both sectors will depend on their efficiency and responsiveness to demand. 4 The government now has the chance to position itself to move forward on its new policies. As we have seen in the preceding analysis, there are many opportunities for the government to improve the yield on its investments in post-primary education and training, and help the development of a workforce for the future. By implementing key reforms that open the door to private sector response to existing and future demand, the government can greatly increase total investment in human capital. 5 To contribute to a productive discussion of the options facing policymakers in Tanzania, we offer the following: 39 0 An outline of the main issues facing the post-primary education and training sector that need to be addressed and that support the general policies already adopted along with a description of priority actions that can be taken to resolve these issues. Recognizing that all the reforms cannot be implemented at once we have attempted to, as far as possible, prioritize them. Thus short term reforms are those which should be implemented rapidly over the next 2-3 while medium term reforms will follow logically and can be implemented within a few years time. In some cases long term reforms have also been specified. The government should currently devote lowest priority to such actions as they may be infeasible currently. * An analysis of the legal constraints to implementing the actions. * A quantitative projection of the impact of these actions on enrollments. B. Issues and Actions 6 A general recommendation of the study is that the government should examine expenditures on the education sector as a whole and cannot view post-primary education and training expenditures in isolation. While post-primary and especially tertiary education and training programs tend to have greater private rates of return than primary education, their quasi-social returns are lower as public expenditures on these programs are far greater than on the more basic ones. Given that resources are limited and primary enrollment rates are low, Tanzania would best benefit from a shift toward greater private support for tertiary education, and a shift toward greater public support for primary and secondary education. 7 The main issues raised in this report can be clasified under five main headings: efficiency, equity, labor market-training linkages, role of donors and rationalization. This section discusses these issues as well as the policies required to address them. 8 As noted above, the actions specified in this section will have to be implemented gradually over a period of a few years and will require piloting to ensure that they are successful in reforming the post- primary education and training sector in Tanzania. Issue 1. Institutional-Level Efficiency: Large and inefficient allocation of public expenditure on post-primary education and training institutions. 9 Currently, public resources-taxpayer and donor contributions-are spread over about 350 post- primary education and training institutions, including secondary schools. Annual government expenditures for secondary and tertiary education are 10 times and 143 times the expenditures on primary education respectively. Most segments of the sector suffer from a tight budget constraint caused by an inefficient allocation of resources. This results in poor educational quality and tightly rationed access. Excessive expenditures on wages, caused by overstaffing and high spending on students boarding and welfare and poor capacity utilization have resulted in very high unit costs while simultaneously education quality has suffered due to low expenditures on developmental and learning items. * Actions 10 In the short run the government should focus on reducing institutional-level expenditures. This will involve closure of non-performing institutions, giving remaining institutions greater autonomy in 40 management and rationalizing expenditures on student welfare and staff remuneration. In the medium to long term, the government should focus on increasing the market responsiveness of institutions. (a) Short Term Actions 11 o There are two approaches to easing the budget constraint facing the post-primary sector: The first option is that of reallocation of funds from other sectors, such as parastatal enterprises or defence; and/or borrowing the resources from a development bank, such as the World Bank, the African Development Bank, or Germany's KFW. Though attractive because they require no internal restructuring of the sector, these approaches are likely to be untenable in the medium- term or long run. The demand for post-primary education, particularly secondary education, is large and growing so rapidly that the magnitude of additional resources required is beyond the scope of the possible or reasonable. The second option is that of shifting expenditures from some programs to others. This option is administratively and politically challenging. Its implementation requires significant leadership and willingness to take risks. However, it is the option that has the greatest chance of success in reorienting the sector to greater overall productivity and is thus most viable in the long run. 12 In line with the second option, identify very poorly performing public institutions -- for example, those which have very high public unit costs; institutions that duplicate the programs of better performing institutions; those which produce workers no longer in demand in the market -- and eliminate government funding for those institutions. This action would be coordinated with the civil service reform process currently underway, to ensure that the displaced workers had the same protection as other civil servants. Lack of updated information on expenditures for a majority of public institutions is a drawback that needs to be rectified rapidly in order for the government to be able to make its investment decisions. 13 o Turn over the infrastructure of the public training institutions no longer being publicly supported to private organizations or others interested in using them for educational or training purposes. 14 o Till such time that viable public institutions can become fully independent, give the management of these institutions greater autonomy in decision making. This will allow them more freedom to make decisions with regards to curricula content, hiring of personnel and student welfare expenditures. 15 Efficiency in public secondary schools and training institutions can be improved by rationalizing expenditures on welfare and personnel remuneration. Expenditures on catering and student welfare in these institutions can be reduced by improving the procurement methods for food services. Reduce the wage bill by retrenching academic and non-academic staff on the basis of clearly defined criteria. For example, while using the principle of last in first out can lead to the removal of competent staff, poorly qualified teachers or those who perform below a certain level in a competency exam should be retrenched. Part of the reductions in expenditures brought about by these actions can be channeled back into quality enhancing expenditures on books, equipment and other teaching and learning materials. 16 o It is extremely important to increase the transparency of the secondary school selection process. Students and parents should be provided with the scores in the examination and should 41 be informed of the basis for being selected to attend particular schools and the justification for being sent to schools in other regions. This is inefficient as it adds to public expenditure on education as schools are forced to support poor students who cannot afford to travel home during holidays. Students should be sent to other regions strictly on the basis of willingness and ability to pay for transportation. (b) Medium Term Actions 17 o Convert financing for all remaining government-operated institutions to an output basis, whereby the institutions are paid based on enrollments (capitation system) and/or through scholarships targeted by need or merit. This mechanism would make it relatively easy for the government to discern whether it was getting more for its money from public or private institutions. It would encourage government institutions both to hold to their budgets, and to expand enrolment. For such a system to work, however, would require that institutional administrators be made fund-holders and released from many of the bureaucratic requirements, so that they are able to adjust personnel and other inputs as required to achieve a balanced budget. 18 o Encourage all public tertiary training institutions to generate revenues from a combination of external scholarships (e.g. from donors and private companies), and private fees which reflect full operating costs in the institution, and indicate that government funding will be phased out over a period of 5 to 10 years. While the phasing out occurs, the institutions would be released from civil service and other regulations restricting flexibility. 19 o Based on the criteria of cost-effectiveness, the government can develop a mechanism to contract out to the private sector for some training services. Criteria for training for government workers would be targeted to specific job requirements and strict guidelines would be used. While the private training sector currently is still small, the mere creation of such a mechanism will, over a relatively short period of time, induce existing private institutions to expand, and stimulate entrepreneurs to invest in training facilities while simultaneously establishing a transparent accreditation and licensing procedure for private training institutions. * Outcomes 20 The tight budget constraint facing the government will be slackened and it can focus on improving access to and quality of basic education. By rationalizing expenditures on student welfare and personnel, unit costs will decline while educational quality in these institutions will improve due to increased expenditures on teaching and learning materials. 21 By fostering competition among training providers, only those institutions which are responding to market demand in a cost-effective manner will survive. Furthermore, by contracting out its training needs to the private sector, the government will give a boost to the growth of private training providers while simultaneously lowering its expenditure on training. Accreditation and licensing of training institutions will ensure that skills are recognized at a national level and will make labor more geographically mobile. Issue 2. Equity: Females and students from poor households are under represented in post primary education and training. 42 22 Inspite of high private returns to girl's education female enrollment rates remain much lower than those for men. Simultaneously, the poor have lesser access to educational opportunities than the rich. While, the government has instituted a loan scheme that is supposed to help poor students meet their education expenses in an era of increased cost-sharing, the scheme is flawed. * Actions 23 Short term measures include increasing community awareness about the value of girls education and better targeting public funds to lower income and female students. Medium term measures involve improved information gathering about students and their households particularly household wealth. In the long run, with improved credit markets, the government can redesign a student loan scheme that is commercially viable. (a) Short Term Actions 24 o Institute community awareness programs aimed at educating the public (and girls parents) about the value of girl's education. With lower quasi-social returns to tertiary education, public expenditures must be reoriented towards general secondary education. As the quasi-social rates of return to women's education is higher than to men's, a greater proportion of this expenditure should be spent on girl's education. 25 o Introduce scholarship schemes for low-income and female students at the secondary and tertiary levels. 26 o The ability of grassroots institutions such as a village government to assess a student's ability to pay at the secondary school level is questionable. Thus, the assessment of a household's wealth by an institution such as a cooperative society should be taken into consideration. 27 o Disband the current loan scheme. It can be replaced by a universal grant scheme which will be cheaper to administer but will not result in much savings for the government. Another option can be a student financial aid scheme where a smaller universal grant is provided along with scholarships strictly targeted on a merit cum need basis. The cost implications of all alternative schemes have to be studied in detail prior to implementation. (b) Medium Term Actions 28 o It is important to build a database on students from the time they enter primary school containing information on characteristics of the students household including wealth. This can be continually updated so as to determine if the student needs financial aid at the secondary level or tertiary level. (c) Long Term Actions 29 o Setting up a viable loan scheme currently in a situation where credit markets are underdeveloped is unrealistic. Once credit markets have developed over the next decade or two the government should help commercial banks to set up their own schemes. Banks usually have the necessary infrastructure to collect repayments which autonomous bodies or tertiary institutions 43 lack. The government can provide valuable assistance to the banks in the form of information relating to the identity of students and their parents and tracing of graduates to decrease the risk of default. The participating tertiary institutions will have an incentive to provide the banks with this information--with declining governmental support these institutions will rely to a larger extent on student fees which will in turn be financed by these loans. Commercial banks should share in the risk of the program and the government's guarantee should be reduced so that the banks have an incentive to collect from debtors. Furthermore interest rates need to be tied to an indicator of inflation or commercial borrowing rates in order to reduce hidden subsidies to students. However, owing to the slow development of credit markets in Tanzania, this measure may only be taken in the distant future. * Outcomes 30 These actions will lead to a more equitable distribution of educational opportunities and an increase in female enrollment at the post-primary level. Issue 3. Labor Market and Training Linkages: Skills provided in public training institutions are not relevant to the requirements of the labor market. 31 While comprehensive data on the labor market is not available, anecdotal evidence points to the fact that in an economy relying less on the government to generate employment, the skills provided by public sector training institutions are not in demand in the labor market. 32 In 1995, Tanzania also set up an independent body, the Vocational Education and Training Authority which is expected to provide training to meet the training needs of the market. VETA is going to be financed through payroll taxes on employers. Research and experience from other countries indicates that these taxes end up inhibiting employment growth. * Actions 33 Short term actions should be aimed at removing constraints to greater private sector and employer involvement in training so as to ensure training is responsive to the needs of the market. The government should undertake improving the quality of labor market information. (a) Short Term Actions 34 o Create a favorable policy environment whereby private training institutions are encouraged. Privately provided and financed training is market driven and responsive to the needs of the labor market. 35 o Instead of financing training through payroll taxes, employer based-training should be encouraged. While publicly provided training is generally unresponsive to the needs of the economy, employers are aware of their skill requirements and can either train or purchase training services accordingly. Within the budget constraint facing governments, employer based training provides an encouraging and flexible alternative for equipping workers with job skills. Fiscal incentives such as properly designed public subsidies, tax deductions or rebates of training expenses will result in increased firm-based training. 44 36 o To alleviate the shortage of high quality labor market information, the government should initiate surveys which regularly provide details on wages, employment and unemployment trends. Evaluations of the cost-effectiveness of public training institutions also needs to be carried out consistently. * Outcomes 37 Increased firm-based and private training is market responsive and will also alleviate the government's budget constraint as the government's role as training provider and financier will decline. Regular labor force surveys will provide accurate and timely information on labor market trends. Evaluations of the cost-effectiveness of training institutions will provide a valuable tool to policymakers while arriving at investment decisions. Issue 4. Role of Donors: Donors aid is generally uncoordinated and unresponsive to crucial needs of the education sector. 38 Inspite of primary enrollment rates around 70 percent, donor funding has been concentrated at the post-primary level. Donors are usually uncoordinated and distort government spending priorities. * Actions 39 In the short run donors should focus on policies aimed at retargeting spending to primary and general secondary education, reducing support to non-performing institutions and greater coordination between themselves and with the government in order to ensure greater effectiveness of aid. In the medium term the donors can provide support to institutions that will be in the process of reducing their dependence on the government. (a) Short Term Actions 40 o Donor assistance should be reoriented towards greater aid for primary and general secondary education and assistance for the tertiary sector must be based on an output basis. 41 o While it may not be easy as donor priorities are diverse, to the extent possible strong sector donor coordination policies that are in line with government priorities should be devised. 42 o Investments in low yielding institutions should be reduced or eliminated. 43 o Donors should be invited to invest in the rehabilitation and equipping of the institutions which are no longer being publicly supported to bring them up to adequate standards, or to provide other incentives for private investment. 44 o Donors should provide assistance to the government in strengthening it's regulatory role, while ensuring that regulations and registration requirements do not constrain private sector development. (b) Medium Term Actions 45 o Once institutions currently operated and financed by the public sector become financially and legally independent they will qualify for borrowing funds directly from domestic and foreign 45 banks as well as institutions such as the IFC or other donors to meet their requirements to expand or upgrade their capital infrastructure. * Outcomes 46 Reorienting donor funding towards primary education will lead to increased enrollment and improvement in education quality in primary institutions. 47 Greater coordination among donors will ensure greater effectiveness of donor aid. 48 By converting their post-primary funding to an output basis, the number of trainees per donor dollar spent will increase. Further, technical assistance to public training institutions and the government will aid in the process of privatization. Issue 5. Rationalization: Provision of education and training spread out among many ministries and parastatal organizations who are uncoordinated. 49 Almost all ministries and parastatals operate training enterprises. There is no coordinating mechanism or central allocation of resources leading to a great degree of overlap and wasteful expenditure among public training providers. * Actions (a) Short Term Actions 50 o A coordinating body with a limited life should be established to oversee and be accountable for the operations of training institutions which are currently spread out among various ministries and to enforce reforms in the functioning of institutions in this sector. This body should be given a clear mandate to close down non-performing institutions. It should also be fully responsible for ensuring that institutions that receive government support will be rationalized to ensure financial sustainability. Other functions to be performed by this body (and which may be of a long-term nature) are the setting and enforcement of minimum student:teacher ratios, revision of curriculum as deemed necessary, and reviewing the provisison of teaching and learning materials. This body will be responsible for the transition of the government's role from that of providing and financing post-primary education and training to mainly that of regulating and ensuring that private sector development is not constrained. * Outcomes 51 Investing an accountable body with the responsibility of running training institutions will ensure that overlap and wastage is minimized in public provision of training. Government spending will be rationalized and greater effort will be focussed on providing higher quality education. 52 The creation of the coordinating body will ensure that the transition to a more competitive and market based education and training system occurs in an orderly manner. 46 D. Legal Constraints to Implementation 53 In this section we use a recent review of the legal framework of post-primary education to answer some basic questions about the regulations affecting the sector. What legal constraints stand in the way for private and public institutions seeking to respond to a changing policy and economic environment? The answer is that there are in fact very few constraints, despite the fact that the Acts of Parliament are not attuned to the economic liberalization policies of recent years. While institutions were established on the premise of central control and full state funding. However, in theory legally there is considerable flexibility, primarily because the relevant legislation is silent on (i.e., does not prohibit) some innovation in governance and finance. However there are clearly areas in which legal reform would be required to protect institutions from heavy state involvement in institution-level decision making. (a) Establishment 54 Does an institution have the power the merge with another? This question would be relevant, for example, if merger were a means of achieving greater efficiency through a reduction in costs. While many of the Acts of Parliament establishing specific types of institutions are silent on this specific question, the general legal opinion is that there are no barriers to mergers or cooperative agreements between institutions. However such mergers have not been undertaken as yet. 55 Can the government dissolve a state-owned institution and/or transfer ownership to private interests? Legally, most state-owned institutions can be dissolved or privatized through an Act of Parliament. It is also possible to privatize an institution by setting up a contract between the government and a private party. There are a few exceptions to this rule, such as the institutions that are jointly funded with other governments (ESAMI, etc.). 56 Can the government take over or dis-establish a private education institution? This is a somewhat contentious legal question, with two opposing views. In policies specific to the education sector, the article in the Education Act of 1978 that gave rise to nationalization was repealed in 1992. Thus, one could argue that there is no legal ground for government take-over of a private institution. However, Article 24 of the Constitution is also in force, and states that a person may be deprived of his property by the government as long as there is fair and adequate compensation. Therefore current law does not rule out the government takeover of a private institution. (b) Governance 57 Can the government override decisions of the governing body of a state-owned institution? Generally, the state reserves the right to intervene and override decisions of the governing body. For some of the institutions, the legislation establishing the institution explicitly gives the Minister of the relevant ministry the power to give directions to the governing council. For other institutions, the legislation is silent. Fimbo (1995) provides an inventory of these two types of institutions (Annex 6.1). 58 Does the governing body have the power to appoint or discipline the chief executive of the institution? In general, the appointing authority and the authority over disciplinary measures lies with the state. 59 Do members of the public participate in the management of the institution? In the three universities, a small minority of the members of governing councils are members of the public (4 our of 47 26 at the University of Dar es Salaam, 4 out of 44 at Sokoine University of Agriculture, and 1 out of 20 at the Open University). Very few of the other post-primary training institutions have representation from the public on their governing bodies. However academic staff and students are represented in the governing body of most institutions. 60 Does the institution possess internal autonomy with regard to the academic programs and examinations, and admission of students? This type of autonomy varies greatly as shown in Section V. At ESAMI, for example, the governing board is able to make virtually all important decisions with respect to the academic program and other features of the school. Similarly, at the Cooperative Colleges and the National Institute of Transport, the governing bodies are vested with the power to make regulations on the qualifications necessary for entry, courses of instruction, and so forth. Many other institutions, however, have closer control from their home ministries. (c) Financing 61 Does the institution have the power to undertake consultancy or other income-generating projects? Receive grants, donations or gifts? Or borrow? For the most part, state-owned institutions are allowed under current law to seek a variety of sources of capital and recurrent funding. In some cases, the ability to do so is explicitly stated in the establishing legislation; in others, the legislation is silent on the question. E. Simulations and Projections 62 Increasing enrollment rates remains an important priority for the government. However, it is equally clear that, given the budget constraint, this objective cannot be achieved if the government does not reduce unit costs and does not actively encourage the private sector in the provision of training. 63 The simulations below try and illustrate these points. Table 6.1 examines government recurrent expenditures in cases where the government vigorously implements a policy of increasing enrollment while not altering the current cost structure over the next five years. This table assumes that the unit costs remain the same in the year 2000 as they are today while enrollments have been adjusted taking into account population growth rates (assumed to be 2.8 percent per annum). 64 The government will be placed in a precarious financial situation if it tries to increase enrollments. Assuming that the government doubles secondary enrollment rates (without altering tertiary enrollment rates and assuming fixed expenditure per capita on tertiary education"), its recurrent expenditure on post-primary education will increase by 59 percent (in real terms). If both secondary and tertiary enrollments are doubled, then costs will rise by 138 percent (to Tsh. 55 billion). The financial situation becomes even more bleak if the government tries to increase enrollment rates further -- real costs will rise by 272 percent if secondary and tertiary enrollment rates are both tripled by the year 2000. 65 Under what conditions can the enrollment rates increase while the government does not become even more resource constrained? Some simple simulations illustrate the potential impact of budget reallocation on the number of individuals who could have access post-primary education (especially 32 Even though tertiary enrollment rates remain constant, total tertiary enrollment will rise slightly simply due to population growth. Thus while per capita expenditures remain fixed, overall expenditures on tertiary level education will also rise. 48 secondary education). In the simulations described here, the impact of reallocations from tertiary vocational/training institutions and the university to secondary education is first considered. This is followed by examining the impact of reducing unit costs on enrollments. In all the simulations total expenditure on post-primary education remains constant. Table 6.1: Increasing Enrollment Rates without Altering Unit Costs Scenarios Enrollment Total Costs As a % of Current Costs (million Tsh.) Current Situation 146058 23217 100 Alternative Scenarios. in 2000.. Doubling Secondary 273085 37075 159 Doubling Secondary and Tertiary 354660 55336 238 Tripling Secondary 368965 45944 198 Tripling Secondary and Tertiary 539749 86555 372 Source: Own Computations based on Government expenditure and enrollment data 66 Scenario A: The government reallocates half its budget currently devoted to tertiary training institutions, and a third of its budget at the university level to general secondary education. This will involve closing down some institutions which are a drain on government resources and investing the money into secondary education. Even though the enrollment in public tertiary institutions will decline, the private sector can step in and supply training if demand exists. If the current cost structure is maintained, secondary school enrollments will approximately double. 67 Scenario B: More efficient use of teaching staff and a reduction in government contribution towards student boarding and welfare could potentially reduce government recurrent expenditures per student by 20 percent at the secondary level and close to 40 percent at the tertiary level. If these efficiency gains were achieved, enrollments would increase at all levels. However this scenario may prove the least beneficial and most costly in the long run - the government would be forced to support an even greater number of poor quality tertiary institutions. 68 Scenario C: If both changes were made - reallocation and increased efficiency -- Tanzania could afford to educate nearly 112000 more secondary students, while keeping university enrollments at the current level and reducing enrollments in training institutions. Again, if demand exists, we assume that, the private sector will step in and provide training services. 49 Table 6.2: Increasing Enrollnents Through Reallocation Program Current Scenario A Scenario B Scenario C Policies Changes NA I. Resources shifted I. Cost sharing I. Resources shifted to secondary II. Efficient welfare, to secondary II. Close infeasible personnel exp. II. Close infeasible institutions institutions m. Encourage m. Cost sharing private training IV. Efficient welfare and personnel exp. V. Encourage private training Enrollments... Secondary 79027 153394 98784 191743 Tertiary Training 63011 31506 90106 45168 University 4020 2680 5950 3966 Total 146508 187580 194839 240877 % change in enrollments... Secondary NA 94 25 142 Tertiary Training NA -50 43 -29 University NA -33 48 -2 Total NA 28 33 64 Rec. Exp. (Mill. Tsh) 23217 23217 23217 23217 % change in Rec. Exp NA 0 0 0 Source: Own Computatons based on Government expendiure and enrollment data 69 In all three scenarios, recurrent expenditures on education remain constant while enrollments rise. Out of the scenarios listed here, moving in a direction such as that implied by scenario C seems to be the most optimal. The government would significantly increase secondary enrollments, while simultaneously closing down tertiary institutions which are proving to be a drain on their resources (Table 6.2). F. Conclusions 70 The main message of this study can be summarized succinctly: The Government of Tanzania has the potential to greatly increase the number and quality of opportunities for post-primary education and training, and to improve the match between the "skills" acquired and market demand. Realizing this potential is dependent on understanding the weaknesses in the current system, and committing to a restructuring of the financing and operation of post-primary education and training services. 71 The central weaknesses in the current system have been documented in this study. Faced with a tight budget constraint, increasing private and social demand, and virtually no incentive to produce 50 more and better with less, the current system of public financing and provision of post-primary education and training services fails to meet the country's needs for effective human capital investments. 72 The principal recommendations for restructuring of the sector have also been presented in this report. In short: 73 The government should assess the cost-effectiveness of programs it supports. It is likely that this assessment will reveal that some -- and perhaps many -- of the institutions produce graduates of poor quality and are a burden to an extremely tight budget. Those institutions can be closed down or turned over to the private sector, with the resulting savings being allocated to high priority activities. 74 The government should improve the system's internal efficiency by improving the input mix. Given current expenditure levels, the public sector could achieve more and higher quality education with better use of funds. 75 The government should make a strong effort to opening the door to private sector provision and financing of training, and remove any regulatory constraints that hinder a greater role for the private sector. As has been seen with the recent expansion of private secondary schools, there is a tremendous potential for the private sector to respond to growing demands for other types and levels of education and training. While the expansion of the role of the private sector by no means guarantees high quality, greater private sector involvement is likely to lead to greater consumer choice, upwards pressure on quality in all types of institutions, and greater responsiveness to the needs of the labor market. 76 What could a restructured post-primary education and training sector look like? From the perspective of the consumer -- the student and his or her parents - there would be a greater number and wider variety of opportunities. The consumer would benefit from programs that are designed to prepare them for formal or informal private sector needs at an affordable cost. From the government's perspective, a restructured sector would allow government agencies to procure necessary training services as required with a far reduced budgetary and administrative burden than at present. 51 VII. SELECTED REFERENCES" Abe, Y. (1995). The Labor Market in Tanzania: The Status of Unemployment and the Prospects for Employment Growth. Working Paper, The World Bank. Buberwa, S.B. (1994). The Labor Market (draft). World Bank. ESAURP (1992, 1994). Tertiary Training Capacity in Tanzania. Planning Commission. Fallon, P. (1992). Labor Markets Trends and Policies in Tanzania. Working Paper, The World Bank. Gill, I. (1994). Egypt: Meeting Private Sector Skill Needs. The World Bank. Government of Tanzania (1974). Vocational Training Act. Government of Tanzania Planning Commission, Bureau of Statistics, and Ministry of Labor and Youth Development (1991), Labor Force Survey. Government of Tanzania (1992). Tanzania: The Informal Sector Survey 1991. Government of Tanzania (1992). Tanzania Mainland 1990/91 Labor Force Survey. Government of Tanzania Planning Commission, Bureau of Statistics (1993). Education and Trianing Statistics 1991. Government of Tanzania Ministry of Education and Culture (1993). Basic Eduction Statistics in Tanzania, 1988-1992. Government of Tanzania (1994). Vocational Education and Training Act. Government of Tanzania Ministry of Education and Culture (1994). Integrated Education and Training Policy. Government of Tanzania (1995). National Employment Policy. Haque, A.U. (1994). A Review of Selected Training Institutes and Design of Cost-Effectiveness Study (draft). World Bank. Keigaru, K. (1995). Civil Service Reform Program: Progress, Constraints and the Way Forward. Government of Tanzania Document. Levine, R. and Tsoflias, L. (1994). Human Resource Issues in the Education Sector. World Bank. Makange, A.A. (1994). Enterprise-based Training (draft). World Bank. 3 These references are in addition to all the papers mentioned in Appendix 1.1. 52 Mason, A. and Khandker, S. (1995). Household Schooling Decisions in Tanzania. Working Paper, The World Bank. McMahon, W.W. (1987). Externalities in Education, in G. Psacharopoulos (ed.), Economics of Education, Pergamon Press. Mbilinyi, M. et. al (1991). Education in Tanzania with a Gender Perspective. SIDA. Monji, R.G. (1994). Ministry of Labor and Youth Development. A Study of Its Organization, Mandate and Future Role (draft). World Bank. Mukyanuzi, F. (1994a). Undergraduate Training and Muhimbili University of Health Sciences (draft). World Bank. Mukyanuzi, F. (1994b). Training Issues in the Health Sector (draft). World Bank. Mukyanuzi, F. (1994c). Training Issues in the Education Sector (draft). World Bank. Mushi, R. (1994). Employment and the Labor Market. University of Dar es Salaam. Omari, I.M. (1994a). Cost Sharing and Student Loans in Higher Education in Tanzania. University of Dar es Salaam. Omari, I.M. (1994b). Government-Financed Training in Tanzania (draft). World Bank. Psacharopoulos, G. (1987). The Cost-Benefit Model, in G. Psacharopoulos (ed.), Economics of Education, Pergamon Press. Psacharopoulos, G. (1993). Returns to Investment in Education: A Global Update. WPS 1067, The World Bank. Saint, William (1992). Universities in Africa: Strategies for Stabilization and Revitalization. World Bank. Sarris, A. and R. Brink (1991). Economic Policy and Household Welfare During Crisis and Adjustment in Tanzania. Cornell Food and Nutrition Policy Program. Steptoe and Johnson (1993). Report on Tanzanian Labor Law. World Bank. World Bank (1995). Tanzania Social Sector Review. World Bank (1994). The Role of Government: Public Expenditures Review for Tanzania. Ziderman, A. and Albrecht, D. (1995). Financing Universities in Developing Countries. The Stanford Series on Education and Public Policy: The Falmer Press. 53 Appendix 1.1: Backgrounds Studies (Authors and Methods) Title Author(s) Main Methods Government-Financed Training in I.M. Omari Macro-level budget analysis, Tanzania document review, interviews Post-Primary Education Institutions G.M. Fimbo Document review, interviews in Tanzania: Diversity and State Dominance through Law Institutional Governance, H.J. Mosha Document review, interviews Structures and Issues Economic Efficiency of the E.S. Kaijage and A.G. Macro- and institutional-level Secondary and Tertiary Education Abayo budget and cost analysis and Training Sector in Tanzania Curriculum and Quality in the Post- K.M. 0-saki Document review, institution-level Primary Sector assessments Cost-Sharing Schemes and R. Mushi, M. Baisi Document review, institution-level Financing Strategies in the Post- and U. Mbamba assessments, budget analysis Primary Education Sector Students, Parents and Employers S. Sumra School-based survey data analysis, Attitudes Towards Education and interviews Careers Institutional Case Studies D.R. Olomi and M.J. Institution-level budget analysis, Assad interviews Donor Participation in Post-Primary P.N. Materu and I.M. Document review, interviews, Education and Training in Tanzania Omari institutional assessments Public Expenditures N. Kessy and I.M. Macro-level budget analysis Omari Gender-Related Issues in Post- E.C. Galaitsi Document review, interviews Primary Education in Sub-Saharan Africa International Experiences in E.C. Galaitsi Document review, interviews Organization, Governance and Financing of Post-Primary Education Labor Markets in Tanzania A. Dar Household survey data analysis, document review 54 Appendix 3.1: Recurrent Expenditures on Education and Training in Tanzania, 1993/94 [millions of Tanzanian Shillings] 1993/94 1995/96 Program Actual Share of Post-Primary Budgeted Share of Post- Expenditures Education and Primary Education Training and Training Prnmary Education 23997 45766 Secondary Education Technical 1411 0.06 1735 0.07 Commercial 2524 0.12 2639 0.11 Agricultural and Home 2806 0.13 2936 0.13 Economics Teacher Training Colleges 2000 0.09 1778 0.08 Health Worker Training Institutions 653 0.03 1653 0.07 Ministry of Home Affairs Training 1002 0.05 487 0.02 Institutes President's Office-Civil Service 824 0.04 658 0.03 Ministry of Transport and Communication 434 0.02 359 0.02 Ministry of Water, Energy and Minerals 135 0.01 108 0.0 Training Institutes Ministry of Finance Training Institutes 841 0.04 1327 0.06 Ministry of Natural Resources, Tourism 75 0.0 11 0.0 and Environment Ministry of Lands, Housing and Urban 100 0.0 519 0.02 Development Ministry of Labor and Youth Development 372 0.02 321 0.01 Training Ministry of Agriculture and Livestock 918 0.04 748 0.03 Ministry of Trade and Industries 99 0.0 80 0.0 Technical Colleges (under MOSTHE) 1106 0.05 1124 0.05 University of Dar es Salaam 3864 0.18 4560 0.2 Sokoine University of Agriculture 1767 0.08 1451 0.06 Open University of Tanzania 141 0.01 501 0.02 FDCs and other training institutions under 798 0.04 222 0.01 the MCD Total Post-Primary 21870 1 23217 1 Sources: Recurrent Budgets for Ministries and Regions 55 Appendix 3.2: Determinants of Unit Costs In this study, cost analysis has been done on the basis of recurrent costs. Recurrent costs can be broken down into four main components: - (a) Staff Costs composed of salaries and other benefits (e.g. transport, housing, medical, cost of living allowances) of academic and non-academic staff; (b) Student welfare costs primarily consisting of public expenditures on catering, boarding, transportation, books and recreation expenses for students; (c) School running costs consisting of expenses related to the running of schools (e.g. materials, utilities, equipment); and (d) Miscellaneous Expenses. Cost Components Recurrent Expenditure (Tsh.) 1. Staff Costs... Salary Expenses ...........al......... Transport Allowances ...........a2......... Housing Allowances ...........a3......... Responsibility Allowances ...........a4......... Leave Travel Allowances ...........a5......... Medical Allowances ...........a6......... Meal Allowances ...........a7......... Cost of Living Allowances ...........a8......... Teaching Allowances ...........a9......... Social Security Allowances ...........al0....... Staff Development Allowances ...........all....... Other Allowances ...........al2........ Total Staff Costs A =Sum(al.a12) 2. Student Welfare Expenses... Catering ...........b......... Transport of Pupils ...........b2......... Welfare and Recreation ...........b3......... Boarding ...........4......... Other expenses ...........b5......... Total Welfare Expenses B =Sum (BlI. BS) 3. School Running Expenses... Utilities ...........scl. Laboratory Materials ...........c2......... School Materials ...........c3......... Other Expenses ...........c......... Total School Running Expenses C =Sum (cl.c4) 4. Miscellaneous Expenses... Total Miscellaneous Expenses D Total Cost T=A+B+C+D Number of Students N Unit Costs UC=T/N 56 Appendix 4.1: Earnings Functions Variable All Female Male (1) (2) (1 ) ( 2) (1) (2) Constant 1.641" 1.366" 0.467" 0.032 2.130" 1.877" Male 0.133" 0.092" - - - - Age 0.047" 0.062" 0.078" 0.099" 0.036" 0.048" Age*Age(*10) -0.005" -0.006" -0.007" -0.001" -0.003" -0.004" Education... Primary Inc. 0.153" 0.203" 0.924" 1.000- 0.019 0.061 Primary Comp. 0.250" 0.366" 0.756" 0.912" 0.131** 0.228* Secondary (F) 0.365- 0.554" 1.009- 1.231" 0.248" 0.418" Secondary (F) 0.587" 0.853" 1.144" 1.433" 0.459- 0.703" Secondary (F6) 0.665" 0.927" 1.296" 1.641" 0.530" 0.756" University 0.935" 1.236** 1.638" 2.003" 0.825" 1.092" Training... On the job 0.176" - 0.175" - 0.165" - Vocational 0.387" - 0.415" - 0.357" - Region of Residence... Municipal -0.139" -0.121" -0.185" -0.184- -0.111" -0.089" Other Urban -0.294" -0.263" -0.138" -0.100' -0.337" -0.311" Rural -0.275" -0.266" -0.175" -0.120" -0.290- -0.290' Local LM Conditions... Prop. Pub Sec. 0.783* 0.740" 0.019 0.017 0.900" 0.929" Prop. Agri. -0.091 -0.075 -0.340" -0.325" -0.075 -0.073 No. of Obs. 2972 2972 802 802 2170 2170 Weighted Obs. 951020 951020 223100 223100 727920 727920 Significant at the 10% level Significant at the 5% level. Source: Calculations based on the 1990-91 Tanzania LFS 57 Appendix 4.2: Alternative Estimates of the Rates of Return Another recent study which has looked at the rates of return for primary and secondary education (Mason and Khandker, 1995) arrives at different reults for the rates of return. According to the Mason and Khandker study, the private rates of return to a year of secondary education are 8.1 percent for males and 13.0 percent for females , as compared to 6.6 and 9.0 percent for males and females respectively as stated in Section IV of this study. There are several reasons as to why these results are different. First, the sample size in the two studies is not identical. Secondly, and more importantly, the specification of the two models is different. The results arrived at in Section IV arise from an earnings function specification that also controls for training in addition to the variables used in the Mason and Khandker study. As some individuals have had training in addition to education, some of the returns attributed to education may, in fact, be actually attributable to training. Thus with the inclusion of training in the analysis, estimates of the rates of return to education are be lower in this study than in the Mason and Khandker study. Another point that needs to be mentioned is that care must be taken while drawing inferences from the results in Section IV, expecially those for university education. While it is most likely, as in most other countries, that the private rates of return to university education are high in Tanzania, the small sample of individuals with university education -- 41 out of a total sample of 2,763 - imply that the magnitudes of the rates of return to university education must be interpreted with caution. 58 CATALOGUERS/FILE CONFIDENTIAL Report No: 15327 TA Type: SR