Ireland - Education Project

REST R ICT ED fILE coPY Report No. P-982 This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorization. Thc Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO IRELAND FOR AN EDUCATION PROJECT July 21, 1971   INTERNATIONAL BANK FOR RECONSTRUCTION AilD DEVELOPMENT REPORT AND RECOMMENDATION OF TIlE PRESIDENT TO TIIE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO IRELAN'D FOR AN EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed loan to Ireland for the equivalent of US$13 million to assist a phase of the reform of the Irish education system thirough a project consisting of construction and equipment of general secondary schools, technical colleges, and agricultural centers and related technical assistance. The loan would have a term of 20 years, including five years of grace, with interest at 7-1/4 percent per annum. PART I -- INTRODUCTION 2. The proposed loan would be the Bank's fourth operation in Ireland and the first for education. The Bank began lending to Ireland only in 1969. Several requests by the Irish Government for loans during the mid- sixties had to be deferred partly hecause the projects then proposed were not of a character suitable for Bank financing and because at that time it was difficult for the Bank to raise sufficient funds in the capital markets. This made it necessary for the Bank to curtail lending to the relatively more developed countries. It also was felt that Ireland's economic and financial position might allow the country to raise money in the markets itself on rea- sonable terms. It became however apparent that despite its continuing ef- forts, Ireland was not able to raise increasing amounts on the capital market which it required to pursue its long-tern development policy. 3. A summary statement of Bank loans to Ireland is attached at Annex I. Two loans were mnade to the Electricity Supply Board (ESB) for power projects, the first in FY 1969 amounted to $14.5 million. Performance under this loan has been entirely satisfactory and there are no outstanding problems. The second power loan of $20 million was made in March 1971. The most recent loan, $10 million to The Industrial Credit Company, Limited (ICC), a de- velopment finance company, was approved by the Executive D)irectors in May 1971. The Bank is at present considering a thircl power project later for this fiscal year. In a preliminary stage of preparation is a livestock de- velopment project. Ireland became a member of IFC in September 1958. IFC has not been active in Ireland so far, and no projects are presently under active consideration. 4. Bank operations in Ireland aim to support the country's effort to overcome critical constraints to development. Lending is oriented to- wards industry as the most significant growth sector and focuses on credit, power supply and skilled manpower. Bank lending in agriculture is intended to induce more economically oriented policies to develop the beef cattle in-  - 2 - dustry and to improve tle education of farmers to increase tileir productiv- ity and ultimately lielp to re<luce rural migration. Ireland('s eclucatioin system has not been well adapted to tihe needs of the ra1idly modernizing economy. In recognitioon of this, the Irish authorities have becn undertalc- ing an overall e(ducational reform to mlzake it more eff Icient, to iniprove the quiality of its outp1t, make it nore adaptable to chlanges in the economy, and bring about a better distributi-on of educational opportunities. It is in this context that an Uducation project has been incorporated in thie Bank's lending program. 5. A Bank imission visited Irelancd in March 1970, to idenitify educa- tion projects suitable for hank financing. The findings were discussed with the Government and in August the Government requested 13anlk assistance for (i) reformi and consolidation of general secondary and vocational educa- tion; (ii) expansion of secondary level technical and agricultural educa- tion; and (iii) expansion of higher level technical and commercial educa- tion. The project was appraised in November-D)ecember 1970. Negotiations for the proposed loan were held in Washington in June 1971. The borrower's delegation was headed by 'fr. Sean F. Murray, Assistant Secretary in the Departnieint of Finance, and included also representatives of the Departments of Education and Agriculture and Fishieries. PART II -- TilE ECONOMIY 6. A report entitled 'Current Economic Position and Prospects of Ireland" (EMA-2), and an updating memorandum (LMA-23a) , were distributed to the Executive Directors on December 13, 1968 and on July 27, 1970, re- spectively. A Country Data slieet is attached as Annex II. An economic mission is scheduled for Autumn 1971. 7. After the adoption in 1958 of the First Program of Economic Ex- pansion and the implementation of outward-looking economic policies, the Irish economy showed satisfactory growth. Economic policies were based on industrial developmenit geared to export markets and a system of grants and tax incentives to attract foreign enterprises. The Anglo-Irish Free Trade Agreement signed in 1965 provides for free trade. with th-ie United Kingdom by 1975. Application for full membership in thie 'EEC has also been made and ne-otiations have reached an advanced stage. 't'he Government has been imple- menting a policy of modernization and reorganization of industry to increase its competitiveness in the enlarged market which may emerge. 8. Since 1958 Ireland's GNP in real terms has grown at an average annlual rate of about 4 percent. Investment h)as been rising rapidly and its ratio to GNP increased from 13 percent in 1958 to 22 percent in 1970. Since the early sixties the population has ceased to decline. Unemployment and emigration have been falling but the unemployment ratio remained at 6-7 percent which is high in relation to that in other Western European countries. Labor has little mobility between different occupations mainly because of th-e absence of an industrial tradition and inadequate training opportunities.  -3- 9. Fluctuationis partLcularly in the demand for e.xport s have affecLted the balance of payments. A restrictive credlt and] budgetary policy re- stored external equilibrium following tle inflationary pressures of Ltle mid-60's. With relaxation of that policy in 1966 the economy regainled momen- tum and rising economic activity created again inflacionary pressures, inten- sified by the growth of wage incomes. Exports, while increasinig rapidly, have been outpaced by import growth and the balance of payments deficit on current account increased. 10. The rate of economic expansion fell to 1.5 percent in 1970 and un- employment rose to 7.2 percent. Labor disputes and a slowdown in earnings from tourism underlay the fall in the rate of growthi, and wage increases af- fected the growth of profits adversely. Prices continued to rise fairly rapidly. The Government reacted to this situation witlh rcstrictive fiscal policies, the full impact of wlhich cannot be gauged at present. 11. A continued growth of exports and some recovery in consumption is expected to raise tLle rate of economic expansion to just under 3 percent in 1971. A substantial balance of payments deficit in the order of $180 mil- lion ($31 million higher than the 1970 deficit) is likely. It now appears probable that the developments forecast in the 1969-72 Program for Eco- nomic Expansion will not be realized and that the growth of production will be slower. 12. The demand for foreign investment capital will remain high despite substantial efforts to raise domestic savings. Between 1960 and 1970 gross national savings increased from 16 percent to an estimatecd 20 percent of GNP. The total outstanding external public debt was $431 million on Decem- ber 31, 1970 and the debt service in 1970 was about 2 percent of estimated exports of goods and net services. 13. In spite of low debt service requiremenits, Ireland has experienced difficulty in borrowing abroad. The difficulty arose in part from the coun- try's insufficiently known credit standing and in part from the tight condi- tions which prevailed in international markets during the second half of the sixties. Nevertheless Ireland has been increasingly successful in securing a growing part of its capital needs from overseas financial markets. Prior to 1966 net private capital inflow, largely for direct investment, accounted for by far the greater part of thie total net inflow. Starting in that year, eight issues totalling $145.6 million lhave been made on external markets of which five were made since February 1969; the latest a $25 million Eurodollar issue at 8-1/4 percent interest in February 1971. Direct investment added a furthier $173 million to end 1969. Prospects for a significant increase in direct investment are limited. Since the funds Ireland can raise in capital markets are not sufficient, together with thle increasing domestic savings, to meet investment requirements, I believe that the Bank is justified in hielping to bridge the gap. With an excellenit pavment record and very small debt ser- vice, Ireland's creditworthiness is not in question.  - 4 - PART III -- T'IE EDUCAflON SECTOR 14. 'lhe education system provIdes for six years of primary courses, followed by a three-year junior and a two-year senior cycle of secondary eduication. Higher education ranges from two to seven years at universities and other ilnstitutions. Education is free and compulsory between the ages of 6-14. 15. The enrollment in primary schools was 383,000 children in 1963/69. The primary school system is educationally well developed. In secondary schools 185,000 pupils were enrolled or 70 percent of that age group. Eighteen percent of the same age group was enrolled in vocational schools or continuationi schools offering pre-vocational or technical edlucation. During the last few years, seven regional colleges withi a planned total capacity of 8,000 students have been added to the system offering courses on industrial, commercial and service subjects at both secondary and hiigh- er levels. 16. Hligher education is in great demand and in 1963/69 22,200 stud- ents were enrolled representing 7 percent of the age group 17-23. Enroll- ments for 1980 are projected to be 38,000 students. This growth will re- quire reorientation and reorganization which is the task of the Higher Education Authority. 17. Agricultural education is offered in 13 colleges mainly at sec- ondary level with a total enrollment of 700. Agricultural training is mainly offered by the agricultural extension services in 20 existing agri- cultural education centers with a capacity of about 1,100 persons or in rented premises. 18. Financial responsibility for education rests primarily with the central governnment. Local authorities, however, contribute to the financ- ing of vocational education. Public expenditure on education has increased over the last decade annually by 13.4 percent and reached $169 million or 4.9 percent of CNP in 1969/70, whiclih is comparable to other European coun- tries at the same stage of deveLopment. 'This growth was much faster than the increase of total public expenditure and GN1P. In 1969/70 recurrent ex- penditures on edlucation represented about 12 percent of current revenues and capital expenditures accounted for 7 .9 percent of the capital budget. 19. Despite considerable improvements over the past ten years, the Irish education systen is still inadequate for the developmnent needs of the country, both in qualitative and quantitative terms. There are too few sclhools of the kind needed and funds for building schools are lacking. Curricula are too academic and fail to provide training in technical skills and in mnanagement. Ireland's educationi strategy is therefore to promote greater eFficiency and productivity of the system while providing students with a better education. The emplhasis oln vocational and technical educa- tion and reform and consolidation of general education is consistent with  - 5 - the plans for social and economic development and with the projected pattern of growth. The Bank's assistance would facilitate and accelerate these en- deavors. 20. Primary education efficiency is being increased by having fewer but larger schools and introducing school bus services. As more secondary schools become available, the period of compulsory schooling will he ex- tended gradually from six to nine years which should provide thie basis for a better educated, more adaptable labor force. 21. The present secondary school education no longer provides adequate training. The curriculum is traditional and academically oriented towards university entrance and is taught in uneconomically small schools separated into sclhools for boys and girls generally operated by religious orders. School buildings are often outmoded, witlh inadequate space and equipmnent for teaching science and practical subjects. A pilot program comprising four coeducational comprehensive schools incorporating pre-vocational training with academic courses, each with 500-600 students, was started by the Depart- ment of Education in 1966 to modernize general education and to coordinate the education work of the Government, local authorities and religious orders. In view of the program's success, the Government's long-term policy for general secondary education is to develop the comprehensive school concept further and to reform and consolidate the entire general secondary school system accordingly. The major objective of this reform is to make students more fit for their subsequent studies and employment. 22. Expansion and reorientation of technical education is needed to meet internal structural chlange and international competition. The present system of alternative work and study programs for basic training is grad- ually being replaced with a network of regional secondary and post-secondary technical colleges offering non-degree courses. In addition, the Government expects to retrain and upgrade the labor force in special training centers operated by the Industrial Training Authority. Industry will also partici- pate more. In agriculture, the Government is anxious to increase the amount and effectiveness of education and training with special emphasis on improv- ing the professional preparation of established farmers and the 4,000 persons annually entering agriculture. PART IV -- THLE PROJECT 23. A detailed description of the proposed project is given in the re- port entitled "Appraisal of an Education Project in Irelaind" (PE-31a), wlhich is being distributed separately. A Loan and Project Summary is at Annex III.  - 6 - 24. 'he proposed project -- with an estimatedl total cost of US$33 litil- lion -- would have the objectives of supporting the reform of general second- ary education and the expansion of agricultural as well as secondary anld higher level techlnical education. It would also Introduce a systemns approach to school building design anid conistruiction, together witlh use of industrial- ized building conmponenits. The ma-in components of thie project are described below. 25. Compreliensive Secondary Schools. 'I'lie project would provide build- ings and equipment for six new state and 13 new comimini ty coeducational com- prehensive sclhools. Five schools wouldl be in new locations and 19 would replace 46 old and ineffic[entl y smaLl general secondary institutions wlhichi would be close(l. The project schools WOuld provide about 10 percent of the expected increase of student capacity between 1970 and 1975. 26. Technical Education. Thc manpower requiremaents projected for 1980 show a shortage of skilledl workers, technicians and business graduates beyond that whicth cxists at presenit. The threc technical institutions in- cluded in the project would supply about half of the estimatccl deficiency of slcilled workers and middle level technicianis by 1980 and cover about 15 percent of the shortage of highiter technicians and business graciuates. (a) Regional Technical College, Cork. Under the proposed project all its activities now scattered in seven old buildings would be consolidated wiithini one institution, with the advantages of economies of scale, central administration, integrated staffing and common services. The College's planned enrollment of 2,700 would increase the present enrollment by 1,300 and 4,000 addi- tional students would be enrolled in evening courses. Thle main programs would he apprenticeship and midldle and lhigher level technician courses. (b) Senior Secondary Technical School, Limerick. The school would be provided with imio(dern buildings and equipmient to replace the present collection of dispersedl temporary or renteci quarters. Its capacity would increase to 800 places (450 replacement) for technical programs at senior secondary and junior techni- cian level (partly post-second1ary) and apprentice training. Evening programs would provide supervisory and management courses. (c) College of Commerce, Ballymun, Dublin. Th1e Dublin Vocational Education Committee lhas proposed the establishment of a new post-secondary College of Technology and Commerce to avoid further unplanned expansion of the existing overcrowded three multi-level institutions who enroll about 4,800 students. The first phase of the development would be the College of Commerce. The phased development of the colle-e complex allows a speedy response to the idlentifie(d slhortages at skilled labor and man- agers in the commercial sector. Deferment of the technical-  - 7 - industrial phase will permit better evaluation of the impact on higher education of the regional technical colleges and the comprehensive secondary schools now under development. The curriculum would include full-time programs in business studies, personnel management, data processing and commercial art for about 400 students and part-time courses for another 1,200 students. 27. Agricultural Education. The project would provide 30 agricul- tural education centers in addition to the existing network of 20. To upgrade the training of farmers, these centers would offer introduc- tory courses to school leavers and also farnm management courses for prac- ticing farmers. The centers are expected to be used intensively on an ad hoc basis for meetings, lectures and seminars on matters of agricultural interest. The programs of the centers are geared to local agricultural needs and interests. 28. Technical Assistance. The proposed project would incorporate important new features in educational construction in Ireland. The intro- duction of more efficient school sizes and standards (the 24 comprehensive secondary schools would be built according to 4 basic types only) and the existence of a well developed building industry making rapid strides in technology would allow the use of designls suitable for modern teaching meth- ods and teacher time-saving equipment. A systems approach to design and construction would be introduced under whichi building components would be assembled in a factory rather than at thie site with substantial potential savings in cost and time and with quality improvements. Technical assis- tance would be provided under the project to assist in this approach. 29. Project Administration. A Project Administration Unit is being established within the Building Unit of the Department of Education to supervise the project's implementation, coordinate activities within the Government and with private bodies, and provide liaison with the Bank. Its key staff would be the Principal Officer of tlhe Building Unit, who would serve as Project D)irector on a part-time basis; a Liaison Officer representing the Department of Agriculture and Fisheries pnrt-time; and a Deputy Project Director, a Project Archiitect, and a Project Educator, ap- pointed on a full-time basis. The establishment and operation of this Unit would be a conclition of effectiveness of the Loan Agreement. 30. crocurement. Contracts for civil works and for equipment and furniture would be awarded on the basis of international competition. Items would be grouped so as to encourage foreign as well as local contractors and equipment producers to participate in the bidding. Local manufacturers of furniture and equipment would he allowed a 15 percent preference in bid coI)1- parison or the import duty, whichever is lower. 31. Project Costs and Dlisbursement. The total cost of the project (including contingencies) is estimated at US$33 million, of which US$13 million in foreign exchange. A detailed brealdown of the costs is given  - 8 - in Annex III. The proposed loan would cover the total foreign exchange com- ponent and would be equivalent to about 40 percent of the estim1ated project cost. It would be disbursed on the basis of 100 percent of the CIF costs of imported furniture and equipment and technical assistance costs and 32 percent of the costs of civil works contracts and locally manufactured fur- niture and equipment. Ireland would finance the local currency cost of the project of about US$20 million equivalent and the annual recurrent cost of the project institutions estimated at about US$10.8 million equivalent. PART V -- LEGAL INSTRUMENTS AND AUT1iORITY 32. The draft Loan Agreement between the Bank and Ireland, the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement and the text of a resolution approving the proposed loan are being distributed to the Executive Directors separately. The draft Loan Agreement conforms to the normal pattern for loans for education projects. 33. I am satisfied that the proposed loan would comply witlh the Articles of Agreement of the Bank. PART VI -- RECOMN4ENDATION 34. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachmients July 21, 1971  ANNEX I STATEMENT OF BANK LOANS TO IRELAND AT JUNE 30, 1971 Loan Amount (US$ million) Number Year Borrower Purpose Total Undisbursed 591 IRE 1969 Electricity Supply Board Power 1h.5 7.3 726 IRE ].971 it It it 20.0 20.0 744 IRe 1.971 The Industrial Credit Company, Ltd. Industry 10.0 - Total now outstanding h4.5 Less: Amount Sold 0.9 Total now held by Bank 43.6 Total undisbursed 27.3 Not yet effective.   ANNEX II IRELAND - COUNTRY DATA Area 27,100 square miles Population (1970) 2.9 million Rate of growth 1949-61 -0.4 percent Rate of growth 1962-70 0.4 percent Density (per square mile) 106 Political status Republic Gross national product (1970) ML,398 million Real rate of growth (1966-70) 3.7 percent Real rate of growth (1970) 1.7 percent Per capita GNP (1970) Lh82 ($1,17) Net damestic product at factor cost (1969) L1,070 million of which, in percent: Agriculture, forestry and fishing 1.7 Industry 36.0 Distribution, transportation and communication 17.8 Public administration and defense 6.2 Other 21.3 Percent of GNP at market prices (1970) Gross investment 21.5 Gross national savings 18.8 Private consumption 67.4 Money and Credit Annual rate of increase December 1969 1964 - 1969 (millions of L) Money supply 386.o 6.3 percent Claims on private sector 446.0 9.7 percent Claims on public sector, net 167.0 28.6 percent Rate of increase in 1969-1970 1966 - 1970 Consumer price index 8.2 percent 5.3 percent Government finance (millions of L) 1970-1971 1971-1972 actuals Bwdget estimates Current expenditure 1/ 471 533 Current revenue 501 573 Surplus 30 40 Capital program 2/ 125 138  ANNEX II Page 2 External public debt (millions of US $) Total debt outstanding; Dec. 31, 1970 430.8 Net of undisbursed 354.4 Net conmitments obtained during 1970 75.6 Total annual debt service 1970 29.9 Debt service ratio 2.1 percent of exports of goods and net services Balance of payments (millions of n) 1269 0 Exports of goods, f.o.b. 371 31 Imports of goods, c.i.f. 589 654 Trade deficit -218 -223 Balance on services 149 161 Balance on goods and services - 69 - 62 Commodity concentration of exports 1 969 (percentage of total exports) Live animals 14 Meat and meat preparations 18 Other food 19 Total food 7 Net foreign exchange reserves (March 31, 1971) $800 million (6 months imports of goods) IMF position (million of US $) March 31, 1971 Quota 121 Net drawings/Fund sales (-) Bank position (million US $) June 30, 1971 Total loans outstanding 43.6 of which undisbursed 27.3 Exchange rate US $1 =. o.4167 Irish h = US $2.40 TT Central Government only T.' Entire public sector; includes local Governments and State enterprises July 21, 1971  ANNEX III IRELAND LOAN AND PROJECT SUMMARY Borrower: Ireland Amount: US$13 million equivalent. The proposed loan would fully cover the project's estimated foreign exchange component. Terms and Conditions: Payable in 20 years with 5 years grace at 7-1/4 percent interest per annum. Project: FIRST EDUCATION PROJECT A) Construction of and furniture and equipment for (i) 6 state and 18 community comprehensive secondary schools; (ii) 1 regional technical college; (iii) 1 secondary technical school; (iv) 1 college of commerce, and (v) 30 agricultural education centers. B) Two man/years of technical assistance to provide specialists in educational facility planning and construction systems development. Special Project Features: (a) Support of the structural reform program of the Irish education system; (b) As a result of secondary education reform, more efficient school sizes and building standards would be introduced, which would allow development of a systems approach to design and building and use of industrial- ized building components.  ANNEX III Page 2 Cost of Project: (US$ million) Local Foreign Total State Comp. Schools 3.0 1.9 4.9 Community Comp. Schools 9.0 5.7 14.7 Regional Technical College, Cork 3.1 2.3 5.4 Secondary Techinical College, Limerick 0.9 o.6 1.5 College of Conunerce, Dublin 0.7 o.4 1.1 Agricultural Education Centers 0.8 o.5 1.3 Technical Assistance 0.0 0.1 0.1 Contingencies 2.5 1.5 4.0 Total Project Cost 20.0 13.0 33.0 The following categories of expenditures are involved: Construction 16.1 7.7 23.8 Furniture and equipment 1.h 3.7 5.1 Technical Assistance 0.0 0.1 0.1 Contingencies 2.5 1.5 4.0 20.0 13.0 33.0 Financing: IBRD Loan 13.0 13.0 Local Sources 20.0 20.0 20.0 13.0 33.0 Procurement Arrangements: International competitive bidding for construction, equipment and furniture Estimated (US$ million) Disbursements: 1972 1973 1974 1975 1976 1.3 4.3 2.8 2.7 1.9 Consultants: Architects for the design and supervision of school construction and specialists in educational facility planning and construction systems development. Appraisal Report: Report No. PE-31a; July 19, 1971 Education Projects Department.  EDUCATION PROJECTC-- dMC LO)CATION OME *STATE COMPREHTENSIVE SCHOOLSI 2 CA-,.G,l (DIo.6,TOT - CAd' 5 B.h.,'b" (0,4 C UOT4NITY COMTFREHENSIVT SCHOO1SG 10 T.1I,'0L (DAbl.A DAblO R2 l-. d-'d (DARBI~ Cm AI%.,O. 2 ROFT,OT CDk6I,' DAbiI,' M M.,',I..Id (C'A C,,,) C I,k L5i 00l ELAST 15 ATlIT KML,' 17 Ad.. LAI IFM=o, Rh,- C.'A~A0( is TAIl11 CoT,',' 21 T.11.M, OlfFAT ,, 22 B.", Offol, 23 C-AO Co-MA 24 ANFIO. W.-TOOIF *REGIONAL TECHNICAL COLAEGE 25 CA,k CA,k CA5,LEBLAX I 25 V,1 AA 4 SENIOR TECTHNICAL SCHOOLrLOWR1II N- O SCHOOL Of COMMERCE 'qI5 - - I VIC,L 27 DAbII,' DAb. 2 T,,- *AGSRICMLTLJRAL EDLUCAT ON CEA4TERS 0 24 MA-B. ."R,' ,,o 31 MII.R., C.,4 32 M,LT4.,,- (AIR 33 M0AO.- CA,k _ LOL - 38 DN.,'odL L-RO1, LI A,Tl 39 T-RAI T N.,,SA 42 E--,,AI,T W-.TodAM R 1 44 MoII,', Co, 43 R-d-', C.k N' 4 0,11,',,.,R34 SC L- iPL,d L, f,dg,, r __AT 32 5I Bollo, MT, 32 Co,;IIbI-,', M-..4h.. 53 T~T,'eOfToT, 34 R='sR-''.o 55 Th.d,., TIR.I-, N.11,30 NSAHT W 56 W..To,d W..To,4 37N.. Ro.. W.APd 43 A H 20 30 40 50 64 20~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~HRLS LII le AFRIL 1971 T4RT03305A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-