Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 24247

IMPLEMENTATION COMPLETION REPORT(IDA-28310; TF-29177)

ON A

CREDIT

IN THE AMOUNT OF SDR 67.3 MILLION

TO THE

PEOPLE'S REPUBLIC OF CHINA

FOR A

THIRD BASIC EDUCATION PROJECT

June 25, 2002

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective As of June 30, 2002)

Currency Unit = Chinese Yuan-RMBYRMB 1.00 = US$ 0.12

US$ 1.00 = RMB 8.3

FISCAL YEARJanuary I December 31

ABBREVIATIONS AND ACRONYMS

BEIII - Third Basic Education ProjectCAS = Country Assistance StrategyCEP = Chinese Experts Panel

EMIS = Education Management Information SystemFILO = Foreign Investment and Loan OfficeGOC = Govemment of ChinaIDF = Institutional Development FundMOE = Ministry of EducationMOF = Ministry of FinanceNYCE = Nine-Year Compulsory Education ProgramSAR = Staff Appraisal ReportSEdC = State Education CommissionTTL = Task Team LeaderUBE = Universal Basic EducationWBOB = World Bank Beijing Office

Vice President: Jemal-ud-din Kassum

Country Manager/Director: Yukon Huang

Sector Manager/Director: Emmanuel Y. Jimenez

Task Team Leader/Task Manager: Halsey L. Beemer, Jr.

CHINACN-BASIC ED. POOR III

CONTENTS

Page No.I. Project Data I2. Principal Performance Ratings I3. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 35. Major Factors Affecting Implementation and Outcome 86. Sustainability 97. Bank and Borrower Performance 108. Lessons Learned 129. Partner Comments 1310. Additional Information 14Annex 1. Key Performance Indicators/Log Frame Matrix 15Annex 2. Project Costs and Financing 17Annex 3. Economic Costs and Benefits 19Annex 4. Bank Inputs 20Annex 5. Ratings for Achievement of Objectives/Outputs of Components 22Annex 6. Ratings of Bank and Borrower Performance 23Annex 7. List of Supporting Documents 24Annex 8. Borrower's ICR Contribution 25

Project ID: P036950 Project Name: Third Basic EducationTeam Leader: Halsey L. Beemer TL Unit: EASHD

ICR Type: Core ICR Report Date: June 25, 2002

1. Project Data

Name: Third Basic Education LIC/TFNumber: IDA-28310; TF-29177Country/Department: CHINA Region: East Asia and Pacific

RegionSector/subsector: EP - Primary Education

KEY DATES

Original Revised/ActualPCD: 06/07/1995 Effective: 07/16/1996 07/16/1996

Appraisal: 10/19/1995 MTR: 10/01/1998 09/12/1998Approval: 03/21/1996 Closing: 12/31/2001 12/31/2001

Borrower/lImplementing Agency: PRC/SEDCOther Partners:

STAFF Current At AppraisalVice President: Jemal-ud-din Kassum Russell J. CheethamCountry Manager: Yukon Huang Nicholas C. HopeSector Manager: Emmanuel Jimenez Joseph R. GoldbergTeam Leader at ICR: Halsey L. Beemer Halsey L. BeemerICR Primary Author: Sandra F. Erb

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S S

Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:Context. In 1995, the Chinese Ministry of Education (MOE) and the World Bank began work on whatwas to be the third basic education project in a program of basic education projects. When theidentification and design work began for the Third Basic Education (BEIII) Project, the government'spolicies continued to place greatest priority on the achievement of universal basic education (UBE) by theyear 2000 or as soon as it was practical in poor and remote areas in order to support China's goal ofdevelopment, modernization and eliminate illiteracy. This government priority drove both targeting anddesign issues and, after working with the Bank project development team, enabled the MOE to set theproject objectives which were to: (a) support the attainment of universal primary education and theexpansion of coverage of lower secondary education in poor and minority areas, and (b) build strongerinstitutions responsible for education delivery.

These objectives reflected MOE policies to accelerate education decentralization by establishing broadprinciples to guide provincial and local governments in developing their county and village level educationservices; to implement the Compulsory Education Law using the resources available, and pursue their owneducational targets, according to their own means. Important in this process was improving the targeting ofeducation financing to the poorest populations in a province, increasing the efficiency of the use of thesefunds, and utilizing available intergovernmental transfer mechanisms to achieve these objectives. Theobjectives also fit squarely within Bank's Country Assistance Strategy (CAS) which gave attention to: (a)efficient resource use, including utilization of teachers and facilities; (b) more equitable fundingmechanisms, targeted to basic education in poor rural areas; and (c) support for institution building toincrease the capacity of education authorities at all levels to carry out their responsibilities within anincreasing operational decentralization.

3 2 Revised Objective:

Not applicable

3.3 Original Components:

Component 1: Institutional DevelopmentCost: US$ 142.5 millionThe institutional development component included facilities upgrading, improvement in instructionalequipment within primary and junior secondary schools, and training of classroom teachers, schoolprincipals and local education administrators to provide better instruction in and leadership of the educationinstitutions at the provincial, county and village levels. This component also supported the procurement oftent schools and the development of a distance education system in Qinghai Province in order to meet thespecial characteristics and needs of the nomadic peoples on the Tibetan Plateau.

Component 2. Management ImprovementCost: US$ 1.2 millionThe management improvement component was to develop management capabilities for the educationsystem at the central, provincial, county and institutional levels through staff training, the provision ofequipment and expert services. Training was provided to local education management authorities and localproject implementation staff. There was also a provision for the development of an education managementinformation system (EMIS).

Component 3. Central ComponentCost: US$ 4.7 million

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The central component supported national level management training for provincial trainers, educationmanagers and administrators and project implementation staff; dissemination of good results of previouseducational experiments; a national level study of student assessment; monitoring of the most efficient wayto establish a student assistance program and the activities of the Chinese Experts Panel (CEP).

The design of the three components was clearly linked to the objectives described above. The creditfocused on the improvement of facilities to address access issues in poor and remote areas and training atall levels of the education systems in an effort to strengthen the institutions responsible for the delivery ofeducation. In addition, the credit gave local education authorities the opportunity to disseminate goodresults of educational experiments related to enrollment, retention and quality improvement in theclassroom.

3.4 Revised Components:Component Cost RatingINSTITUTIONAL COMPONENT $142,500,000.00 SMANAGEMENT IMPROVEMENT COMPONENT $1,200,000.00 SCENTRAL COMPONENT; $4,700,000.00 S

3.5 Quality at Entry:Quality at entry, as assessed by the peer reviewers, was satisfactory based on (i) consistency of objectiveswith the priorities of the Ministry of Education (MOE); (ii) successful experience and lessons learned bythe first two basic education project which were being implemented at the time of project design; (iii)demonstrated capacity of the Foreign Investment and Loan Office (FILO)/MOE to implement previousprojects; and (iv) project design that was related to MOE decentralization policies and practices.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:The achievement of objectives and physical outputs under the Third Basic Education (BEIII) project issatisfactory. The project took place during and in support of the government's own massive effort duringthe 1990s to accelerate the achievement of the national nine-year compulsory education goals. The projectobjectives were broad and flexible enough to allow provinces and counties to implement the CompulsoryEducation Law and to accelerate the completion, at the county level, of the government's Nine YearCompulsory Education (NYCE) program. All of this in accordance with China's unique minority andregional characteristics and within the context of a rapidly decentralizing basic education system. In theend, the MOE reported that the project accelerated, in some cases by two years, the achievement ofuniversal primary education in 18 of the 124 project counties (14.5 percent) and the achievement ofnine-year compulsory education in 99 (79.8 percent) of the counties. The project also assisted five of theseven provinces to reach the two basics which are: nine year compulsory education and elimination ofilliteracy among the young and middle-aged adults. The MOE uses a rigorous review methodology in orderto certify an individual county's achievement of either primary or basic education goals. This methodologynot only uses reported educational data but also makes use of site visits to the counties under review. Thecertification methodology has been reviewed and reported on by the Institute of Higher Education at PekingUniversity and the Shanghai Academy of Educational Research, found to be reliable and provides anaccurate description of an individual county's achievement of either the six or nine year compulsoryeducation goals.

The physical output targets for all provinces in primary and junior secondary were met and in some casesexceeded. During the project period, project-supported primary school enrollment rates increased from88.3 to 95.2 percent and lower secondary enrollment rates increased by 66.3 percent to 87.9 percent.

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Output indicators showed robust improvements in safety of buildings, supply of teaching materials,enrollment of children, and qualifications of teachers and principals. There has been the institutionalizationof a systematic management system for the delivery of education services at the local level. Thedissemination program met expectations in spreading of provincial based research results to project schoolsin areas such as girls education, multi-grade teaching and prevocational education in lower secondaryschools. The heavy poverty focus and the success in securing adequate counterpart funding for studentassistance funds allowed for large numbers of poor children to enroll and stay in school. The projecthelped minority education in Qinghai province by the development and distribution of minority languagetextbooks and teaching materials and providing training for minority teachers and principals, the provisionof environmentally and culturally appropriate classrooms and teaching spaces, and the development of adistance education system using both Tibetan and Han language teaching materials.

During the implementation of the project there was a strong emphasis by the project provinces oninvestment inputs. Project design and the Chinese policy for expanding education in poor rural areasplaced heavy weight on increasing inputs which would help ensure increased access with less regard toeducational outcomes. However, this project also included the first learning achievement indicators, basedon pass rates of grade six children, to be included in any of the Bank-supported basic education projects inChina, and over the life of the project they have shown steady improvement with mathematics pass ratesincreasing from 88.0 to 96.2 percent and Chinese pass rates from 89.9 to 97.1 percent. Anecdotalevidence shows that these increases can be attributed to improved teaching due to improvements in teacherqualification rates, 79.9 to 94.9 percent over the life of the project, and improved materials i.e. books andteaching equipment.

4.2 Outputs bY components:Institutional Component (US$ 142.5 million SAR, US$206.99 million Actual)The overall rating for this component is satisfactory. This component was 96 percent of base costs andsupported the following: (a) facilities upgrading; (b) instructional equipment, furniture and books; and (c)staff upgrading.

Facilities Upgrading. Facilities upgrading was highly successful. The project supported the newconstruction and replacement of 4,695 new primary and lower secondary schools and repair of 2,966 moreschools. In all provinces there was successful completion of the civil works portion of the project with allproject provinces meeting or slightly exceeding their original targets for new construction, rehabilitationand elimination of dangerous buildings. Site visits by Bank supervision missions and civil worksspecialists from the Chinese Experts Panel (CEP) showed that on average overall quality of constructionwas good to very good with little extra funds spent on decoration and substantial attention given toindigenous designs to deal with local climatic, physical and cultural conditions. The new buildings haveprovided adequate, safe and hospitable space for village children to attend school, and the parents, teachersand principals interviewed indicated that the new buildings encouraged children to attend and stay inschool. Maintenance plans, most for the five years after project completion, have been developed by allproject provinces and are well documented in their individual provincial project completion reports. Theplans have designated an annual allocation that seems to be adequate to cover the maintenance cost of thenewly constructed schools. In addition, the central government has also recently initiated the NationalSchool Construction Fund and some of these resources will be eannarked for maintenance of thesebuildings and thus sustain the investments made by this project.

Instructional equipment, furniture and books. This subcomponent is rated satisfactory. Prior to theBEIII project, schools in the project areas had been seriously disadvantaged because there had been noinvestments in teaching equipment for 10 years. This project was able to provide approximately 16,000

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primary and lower secondary schools with MOE [formnerly State Education Commission (SEdC)] standardequipment levels, or 100 percent of the Staff Appraisal Report (SAR) target. (MOE classifies equipmentneeds ("Standard Levels") by school size, centrality and teacher training responsibility, conducts periodicsurveys to assess current levels and new procurement needs, and did, for this project identified specificrequirements for project supported schools.) Even though the schools have achieved great progress inmeeting the MOE standards, the utilization rate of books and equipment needs to be increased. Scienceteachers and librarians have been trained but there is still reluctance on the part of principals and teachersto use the equipment and books for fear equipment will be broken and books lost or destroyed. Theseattitudes will need to be changed through continued principal and teacher training as well as assurance thatadequate resources will be made available to the school principals to replace damaged materials.

Staff Upgrading. This subcomponent is also rated satisfactory although there were weaknesses in designand delivery of these services. Teacher and education administrator training goals were exceeded by 36and 5 percent respectively. Project indicators show that all the project provinces have experiencedincreases - 18 percent on average above SAR targets - in the qualification rate of teachers which has meanta reduction in the number of minban teachers. (Minban teachers are hired and paid by the localcommunities, generally village education committees, and generally do not have the years of formaleducation and training that governnent teachers do. The Ministry of Education, working closely withprovincial education bureaus, has over the recent years upgraded the quality of the minban teachers byspecial training and other upgrading programs and have all but eliminated this type of teachers in theprovinces supported by this project.) Whereas numerical targets were met or surpassed, trainingmethodology and pedagogy have been recognized as problematic. Training programs are generally set byformulae provided by the province which often follow the national standards and show little understandingof the deeper sense of innovative teacher behavior or teaching theories. School principals have little contactwith the normal schools and colleges which provide the training. Normal schools and 2-3 year teacherscolleges which are responsible for teacher training services are generally run by prefecture educationbureaus and four year colleges by the province. Therefore horizontal linkages between the supply anddemand of the services at the county or village level is lacking and training services often ill designed orpoorly delivered. Cascade system of teacher training services demonstrate their inherent weaknesses insuch cases. However, as the project was ending, a new national curriculum along with new trainingmaterials and delivery mechanisms were being prepared. The training materials and delivery mechanismshave been prepared with the assistance of international organizations and will be used in rural areas to giveteachers the appropriate skills to better teach in their local environment. This will have tremendous impactat the local level as provinces and counties begin to use the new materials.

Principal training targets also met or exceed targets. Principal training conducted at the national level wasreported to have had a substantial impact on broadening the thinking and experience of rural schoolprincipals. Anecdotal evidence shows that school management was improved as a result of training.

Management Improvement Component (US$ 1.2 million SAR, US$ 1.41 million actual)The overall rating of this component is highly satisfactory. This component was designed to developmanagement capabilities for the education system at the central, provincial and institutional levels throughstaff training and the development of Education Management Information Systems (EMIS). Theeducational management system introduced by the project consisted of national, provincial and county levelproject implementation units. These units were responsible for project design issues during preparation,project procurement and financing issues during implementation and project monitoring and reportingthroughout implementation. Provision of adequate levels of counterpart funding were the responsibility ofthese implementation units at the provincial and county level. Project planning and decisions on stafftraining were handled by these units. Gathering data for mid-term and final reviews was carried out by

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these units as well as reviewing progress toward achieving objectives. Project implementation training notonly gave the local staff adequate skills to implement the project but also institutionalized a system ofmanagement for the delivery of education services at the local level. This was judged by the Government ofChina (GOC) and the provinces during the final ICR mission as one of the major contributions of thisproject. Because of the improved capacity of the project staff, the seven project provinces are usingimplementation staff and offices for the implementation of the Chinese govemment's own Nine YearCompulsory Education Program - Phase Two (2001-2006) (NYCE-II) as well as other provincial andcounty level poverty-alleviation focused activities both within and outside the education sector. Thisutilization of Bank and MOE trained provincial staff in activities outside the education sector should beseen as a major contribution to provincial level institutional capacity building. In addition, severalprovinces have reported the introduction of World Bank procurement and disbursement procedures intotheir own provincial procedures as the result of the training in and utilization of these procedures during theimplementation of the Third Basic Education Project.

In addition to project-supported training, the provincial implementation staff were trained through an IDFgrant-supported Economics of Education Network (the Network) which provided them with knowledge onmodem techniques and methods in education management and resource utilization. This training utilizedinteractive computer-based study modules developed by the East Asia Human Development Sector Unit(EASHD) and the World Bank Institute (WBI) for analyzing provincial level education financing options.As a result of all of the training, provincial education managers are demonstrating a more thoroughunderstanding of how better to manage their education finance systems, although it is less clear that thenetwork has yet had substantial impact at the county level.

EMIS was organized in each province, region and municipality, equipment bought and installed andtraining was completed. It is evident from the increasingly improved statistical reporting provided the Bankduring project implementation, that the equipment, software and training have had a strong impact onprovincial project implementation. However, utilization of data for analytical purposes and to informpolicy making at the local level is not yet obvious. Additional work needs to be done in this area, but ashas been demonstrated in earlier Bank-supported education projects, full, useful and sophisticatedutilization of education statistics depends largely on the needs for and uses made of this data by educationadministrators. Without the appropriate incentive structure for the demand of proper data reporting therewill be little change in this area.

Central Component. (US$ 4.7 million SAR, US$ 5.24 million actual)

The overall rating for this component is satisfactory. This component was designed to: (a) provide nationallevel management training for local education; (b) support dissemination of good results of previouseducational experiments; (c) carry out a national level study of student assessment; (d) monitor the mostefficient way to establish a student assistance program; and (e) support activities of the Chinese ExpertsPanel (CEP).

Pupil Learning Achievement Study. This sub-component is rated marginally satisfactory. The studyassessed grade five learning achievement in Mathematics, Chinese and General Knowledge (regardinghealth, safety, and labor). The study attempted to associate differences in learning achievement withregion, place of residence, family background and teaching practices. However, the sampling techniquesused were questionable. Sampling was not random. Tests were administered in two counties in eachprovince. County officials were asked to choose teachers with more than five years experience whosestudents would then be tested. Comparability and objectivity in the study were therefore compromisedsince there was no way to know if counties choose the best, the worst, or a representative sample of

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teachers. Even so, a number of useful conclusions emerged which the provinces reportedly have taken intoconsideration when designing their own education development programs. These new designs include: (a)more investments in schools and teachers in the poorer and more remote areas; (b) teacher trainingprograms which encourage addressing a special problem identified in the study, the finding that studentswho struggle in Mathematics also struggle with Chinese language; (c) more extracurricular activities andhomework assignments because the report found that students with more extracurricular activities andhomework had higher achievement levels; and (d) more focus on parental participation in their children'slearning because the study showed that students whose parents have high expectations of them tended toperform better than students whose parents had lower expectations.

Dissemination Program. This sub-component is judged to be satisfactory. The dissemination programwas designed to spread knowledge and experience and use the results from successful pilot programs andresearch. All provinces participated in the dissemination program and experienced success in spreadingtheir findings on programs related to education for disabled children, bilingual education, girls education,multi-grade education and prevocational education in lower secondary schools. In one province,dissemination funds were used to spread a UNICEF-sponsored initiative to create "parent schools" thathelped teach parents about the importance of schooling as well as how to help their children in their schoolwork. The dissemination of "parent schools" is also directly related to the findings of the above mentionedpupil learning achievement study.

Chinese Experts Panel. This sub-component is rated satisfactory. The Chinese Experts Panel (CEP)consisted of five educators who provided ongoing guidance and advice to MOE and the provinces onproject implementation and policy issues related to the project. The CEP played an important role inproject implementation by participating in semi-annual site visits, providing policy advice on such things asteacher education as well as assisting provinces in redirection of resources when their local situationwarranted changes. Several provinces specifically commented on the instrumental work of the CEP in theintroduction of distance learning programs (Qinghai) and primary school management (Fujian).

Student Assistance Programs. This sub-component is rated satisfactory. Counterpart funds for thissub-component were put into a trust fund and the interest proceeds from the trust fund were to be used toprovide assistance to approximately 230,000 primary and lower secondary students from poorbackgrounds. Students were not to receive cash payments, but rather depending on individual need, theyreceived varying amounts of reduction in their payment for school textbook costs, miscellaneous schoolfees and other schooling related costs. However, the trust funds were small and over the life of the projectinterest rates decreased substantially which meant that fewer students were assisted through the accruedinterest payments than was originally anticipated. Despite the decrease in interest payments the overallnumber of students assisted by the provinces through some form of student assistance did increase toapproximately 364,000 over the life of the project. This was due to the fact that provinces provide moredirect government support. The successful rating of this sub-component is not based on how well the trustfunds operated but rather the recognition by provinces that education fees are a substantial part of thehousehold financial burden of education for poor families, and that the provinces increasingly recognizedthat the provision of direct assistance is necessary to keep children in school. The project thus, helpedestablish and institutionalize regular systems of student assistance, largely financed by provincial andcounty recurrent budgets and social donations which allowed, and will continue to allow, more childrenfrom poor households to enroll in and complete primary and lower secondary education programs.

Since BEIII was designed and implemented the GOC designed its own NYCE-I1, which is anintergovernmental grant program, and has allocated a larger percentage of their resources to studentassistance. There is a growing recognition in China that student fees are a key factor in low enrollment and

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high drop rates and therefore, they have made a larger commitment to reduce the household burden ofeducation in the rural areas.

4.3 Net Present Value/Economic rate of return:Not Applicable

4.4 Financial rate of return:Not Applicable

4.5 Institutional development impact:The institutional development impact was satisfactory. The BEIII project was used by the MOE as areference for the development and implementation of the Nine-Year Compulsory Education Program(1995-2000) (NYCE-I) which was supported by the intergovernmental transfer system. The NYCE-IIcontinued the work of NYCE but changed its distribution percentages for project components. TheNYCE-I1 has allocated a much higher percentage for student assistance based on the initial findings in thehousehold survey conducted in BEIII as well as the student assistance component initiated under thisproject. This project also institutionalized an education management system in the project provinces thatwill continue to be responsible for the delivery of education as well as other social services. In addition, 94percent of the project-supported counties have been able to build their primary education systems so thatthey meet, and in some cases exceed, the MOE minimum services standards for delivery of education. Thisallowed project-supported counties to accelerate by as much as two years achieving universal primaryeducation as defined by the Central government and was a project goal, and in approximately 78 percent ofthe counties, NYCE which is now a national education goal.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementinig agency:Currency fluctuation of the SDR reduced the overall level of funding available from the Credit. Althoughthis did not have a negative impact on project implementation, it did require additional counterpart moneythereby placing some additional burden on poor counties to cover the costs of the exchange rate losses inorder to achieve the various numerical and quality input targets set during project design. All counterpartfunding targets were met or exceeded although as a disproportionately heavy burden on county finances asopposed to provincial or national finances.

5.2 Factors generally suibject to government control:Project implementation went well with few problems encountered. Project management at all levels wasstrong and efficient. This can be seen by the fact that at mid-tenn disbursements had reachedapproximately 76 percent of the IDA funds and project indicators for other deliverables were substantiallyahead of schedule. However, the process by which the Ministry of Finance (MOF) responded toreimbursement requests from counties could have been improved and the delivery of this serviceaccelerated. It was reported that some counties, during the life of the project, borrowed from commercialbanks in order to cover expenses due to long lags in the reimbursement process. Poor counties have fewresources and borrowing at short-term commercial rates offsets any potential benefit from an IDA credit.During the implementation of the project, the National Audit Bureau and the individual provincial auditdepartments improved their audit coverage providing both the MOE's national implementing unit and theBank supervision teams with additional tools with which to monitor the financial flows of the project thusreducing the incidence of misuse of project funds and the periodic shortfalls in counterpart fundingprovision. The strengthening of the national and provincial audit system was an important element of thegovernment's ongoing concern to improve the quality of provincial and county level implementation of

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Bank-supported projects.

5.3 Factors generally subject to implementing agency control:Strong commitment and efficient and good leadership with effective problem solving demonstrated byMOE/FILO provided the foundation for implementation to continuously exceed SAR targets with regard tohuman resource development, performance monitoring and project coordination. FILO has a long historyof effective project implementation and was able to work with provinces and counties to institutionalizestrong project management units. The CEP consistently added value to supervision in such areas asteacher training activities and advice on reallocating project resources when local situations warranted suchchanges.

5.4 Costs andfinancing:By the completion of the project, the project disbursed 67.07 million SDRs of the original 67.3 millionSDRs. SDRs 228,011.64 or US$ 289,066.32 equivalent were not disbursed and cancelled effective May3, 2002. In addition, the fluctuations of the US Dollar exchange rate with the SDR during the projectmeant that the total US Dollars disbursed from the credit were US$91.8 million and not the US$100million estimated at appraisal.

The current project cost, US$ 213.63 million, is somewhat higher than the SAR estimate of US$ 191.8million. Most of the increase in the project cost is a reflection of the fact that Henan Province almostdoubled its counterpart funding from the planned amount of US$ 21.8 million. All the other projectprovinces increased their counterpart funding but only to make up for the dollar losses in project financingwhich resulted from SDR:US$ exchange rate losses during the project. Counterpart funding for projectinvestments came from the province, prefecture and county and the amount of counterpart funding raised,except in the case of Henan, seemed to be at a level that was based on the financial analysis conductedduring project preparation.

6. Sustainability

6.1 Rationale for sustainability rating:The provinces have recognized the need for continuing support of the project schools from the inception ofthe project by providing a yearly maintenance plan for civil works, equipment and teachers training. Futuresustainability plans have been provided by each province as an annex to the borrower portion of the ICR.The project has demonstrated the usefulness of project development and implementation approach modeledafter Bank methods for the support of the government's own nine-year compulsory education program.With participation of these provinces in later Bank-supported projects as well as the MOE NationalNine-Year Compulsory Education Project - Phase Two (2001-2006) and the National SchoolRehabilitation program, there is a high assurance that they will continue to support the project schools inthe coming years. Due to the low population growth in China there will not be a rapid increase in theprimary and lower secondary school enrollments; therefore more attention can be given to maintenance ofthe system rather than expansion of the system.

Throughout the project implementation the provinces and counties proved their commitment to the projectby giving their financial support and management support to all the project activities. However, newchanges in the county level revenue system which eliminate education surcharges in favor of acomprehensive country-wide tax system has had a negative impact on education financing at the countylevel. This is being monitored carefully by the State Council, Ministry of Finance (MOF) and MOE so thatappropriate adjustments in intergovernmental transfers can be made so as to offset some of the negativeimpact of the new tax system.

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6.2 Transition arrangement to regular operations:All project activities have been fully integrated into the regular operations of the provinces and counties.This project was designed to fit into the MOE's overall plans to achieve NYCE therefore, there is no needfor special transition arrangements. The Government of China's (GOC) goals for achieving NYCE arewell articulated and resources, both human and financial, have been allocated within the GOC to continueand expand their efforts. The GOC has just launched a 10 year program for the development of the"Western Areas" and these project provinces and their educational needs fit squarely within the WesternAreas Development Program.

7. Bank and Borrower Performance

Bank7. 1 Lending:Bank lending in this sector, as well as AAA work, has covered all education sub-sectors and provided thefoundation for ongoing policy dialogue and guidance for the whole sector. The Bank's focus on basiceducation, which has been programmatic in its coverage but project focused in its delivery, has been able tosupport incremental steps forward in reforming and improving education financing, poverty targeting, andthe design of poverty focused projects. Working with the borrower on assessment of these issues has keptthe Bank engaged in this sub-sector where the borrower has said that project financing is less importantthan access, at the provincial level, to new ideas and relevant international experience. Bank lending hasalso provided incremental additional funding for the challenges of increasing educational access for poorand minority children in the poorest parts of China where the costs for providing that access is high andavailability of local funds, especially at the county level, problematic.

7.2 Supervision:Bank supervision has been robust, focused and diligent, identifying and resolving educational as well asfinancial management and procurement problems. Cluster supervision of currently implementing basiceducation projects and heavy use of WBOB staff have brought both efficiencies and synergies to thesupervision process. The mission's heavy reliance on county and provincial audit materials and reportsaugmented the supervision process in a way that strengthened the local government's own responsibility formanaging and implementing these projects. The pace of the Bank's supervision missions slackenedsomewhat during the final stages of the project. At mid-term, in September 1998, 75.4 percent of theproject credit had been disbursed. By May 1999 more than 90 percent had been disbursed and an equalpercentage of project activities completed. During FY00 lack of EASHD budget caused the cancelation ofa scheduled supervision mission and by January 2001, 97 percent of the project was completed. Thelessened level of supervision during the latter stages of the project does not seem to have negatively affectedthe quality of project implementation.

7.3 Overall Bank performance:

The Bank's overall performance was satisfactory. In lending activities, comprehensive teams were fieldedwith many members maintained throughout supervision. Supervision missions included the requiredexpertise and local staff monitored project activities when necessary.

Borrower7.4 Preparation:

The Department of Finance of MOE coordinated with the Provincial, Municipal and County EducationBureaus to carefully develop proposals and collect the necessary data and informnation for projectpreparation. They also fielded a comprehensive team of Chinese experts that comprised educators andspecialists with previous Bank project implementation expertise to assist in the development of the project.These individuals continued to provide advise to MOE during implementation as members of the Chinese

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Experts Panel. Government of China goals for this project were clearly articulated from the start andconsistently supported by the Ministry of Education, the Ministry of Finance, the State Planning (andDevelopment) Commission and all the provincial and county units with which the preparation team worked.

7.5 Governmnent implementation performance:The overall government implementation performance was highly satisfactory. The Government of China,at both the national and provincial levels, has 20 years experience with implementation of Bank-supporteducation projects. GOC at all levels within MOF and MOE has established institutions that understandthe intricacies of Bank-supported projects which facilitates the smooth implementation of educationprojects. The borrower also provided the necessary counterpart funds to complete all project-supportedactivities. The flow of reimbursements through the finance bureaus at the provincial and county level couldhave been quicker. This would have eliminated the need for poor counties to borrow at commercial rates topay for outstanding contractual commitments. Of special note is the proactive way in which the MOE,working in consort with the MOF and the State Audit Bureau, identified and took corrective action when itbecame evident that a case of misuse of project funds was discovered. The misuse of project funds wasrevealed in provincial audits which listed an incident of use of project funds to pay for non-project cadre,economic development projects and the construction of non-project schools. The diversion of project fundswas of short duration [three months] but this forced county level implementation units into the commercialbanking sector to borrow to pay for civil works contracts. When the misuse was discovered, the MOF andAudit Bureaus at national and provincial levels forced the return of the funds and the resumption of normaldisbursement cycles.

It is interesting to note that the MOE, during project implementation, worked with the Ministry of Financeto develop an intergovernmental transfer system which provided central education budget funds directly totargeted poor counties. In so doing, the MOE and Ministry of Finance (MOF) took the model of the WorldBank's project design, development and implementation and applied it to the design of their own povertyfocused education fund, requiring counties and provinces to prepare project proposals which includededucation and financing targets, monitorable indicators and annual review of action plans and budgets.This design, which is largely consistent with project development models from the World Bank, remains inplace and has been expanded to an additional central intergovernmental transfer progran, started in 2001,which deals specifically with school repair and construction in poor areas.

7.6 Imnplementing Agency:The overall performance of the implementing agency was highly successful. The implementing agency atthe center - the MOE's FILO and their partners at the provincial level - the Provincial World BankProject Implementation Units - provided consistently good direction and support for the implementation ofthe project. FILO organized and ran, with help from the World Bank Office Beijing (WBOB) staff, anumber of provincial level training programs for procurement and financial management. Several of thesetraining programs had to be repeated because of staff changes in the provincial level implementing units.FILO worked closely with the WBOB and the Task Team Leader (TTL) to develop and implement a priorreview system of procurement which was highly successful and produced a virtually flawless procurementprocess with no mis-procurements. Likewise, working closely with the WBOB staff and the TTL and theState Audit Bureau, FILO was able to monitor closely the flows of project financing and ensure that casesof misuse of project funds were dealt with quickly and successfully. In addition, FILO's monitoring of thecounterpart provision was persistent and ongoing with good results. Toward the end of the project thedirect and personal involvement of the FILO Deputy Director in the supervision of the project was awelcome addition in that it helped sustain provincial attention on the need to maintain implementation rigorup until the final days of the project. All in all, the service of the implementing agency was excellent.

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7.7 Overall Borrower performance:The borrower's overall performance was satisfactory. In line with a good record in designing, preparingand implementing the IDA assisted education project, the MOE demonstrated satisfactory performance inpreparing and implementing this project.

8. Lessons Learned

* Poverty focused social service delivery projects should be increasingly targeted at the township ratherthan the county level. With more than half of China's absolute poor living outside the 592 nationallydesignated counties, targeting at the poor township level will more effectively include largerpercentages of the absolute poor. However, in that townships lack the adequate administrative capacityto manage such poverty targeted projects, the counties should be given chief administrativeresponsibility for such projects;

* Policy changes and institutionalization of programs, such as student assistance programs, can berealized when the appropriate survey work is conducted and pilot programs are developed and testedbased on survey work. This project contributed to the recognition by provinces that education fees area substantial financial burden on households and that provinces needed to provide direct assistance tostudents in order to keep them in school. It also contributed to the recognition at the national level thattheir own NYCE-II program should include a larger percentage of the fund to student assistancesupport;

* Limited use of library books and teaching equipment, even after training librarians and teachers on theuse of the books and equipment, is a problem in many project-supported schools. Librarians andteachers must be released from the personal responsibility for the books and equipment if the fullutilization of these materials are to be realized.

* Project management training can contribute to the institutionalization of a system of management whensuch training is conducted over the life of a project. This Bank-supported project provided suchtraining and gave local staff skills to implement this project, the government's own NYCE-I1 programand county level poverty alleviation projects;

* The key issue in developing education projects at the provincial, county and township levels is toconvince the Chinese preparation teams that focusing on development outcomes is more important thenemphasis on investment inputs;

* Establishing experts panels with a broad range of educational skills from the start of the targetingexercise ensures the project of some balance in educational, financial and staffing needs. These panelsare useful in reviewing provincial proposals, supervising the implementation of projects, assessingprogress at mid term and with the final completion reports. Responsible to the provincial and/ornational education authorities, they can be used to do studies which can change the direction of projectsunder implementation, give added emphasis to an element and provide technical advice to county andschool level educators;

* Teacher and staff training components have been chronically weak in Bank supported basic educationprojects. Training programs are generally set by formulae which follow national standards rather thanprovincial needs. School principals have little contact with the normal schools and colleges whichprovide the training. Normal schools have few horizontal links with the counties and villages where the

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of the services comes from. This should be considered carefully in the development of any new project.

* Monitoring and Evaluation (M&E) are critical aspects of any project and in education projects,educational outcomes should play a strong role in any M&E system. Bank-supported educationprojects in China, from the start of Basic Education I through the preparation of Basic Education IV,have increasingly moved away from only monitoring inputs, but not enough progress has been made ininstituting a rigorous evaluation system which takes educational outcomes as the predominantmonitoring factor. This should change in any future education projects, and a more rigorous evaluationsystem put in place with a strong focus on education outcomes.

* Education Management Information Systems (EMIS) are only useful when data gathered is accurateand is used by decision makers. The current system in China provides perverse incentives for thereporting of such data (i.e., initial enrollments are exaggerated to achieve targets set by provincial andnational govemments; local cadre's job reviews report on achievement of enrollment targets rather thaneducational outcomes). Much of the data reported in the EMIS system does not seem to be used bygovernment officials at the provincial and county levels because it is so soft as to make the use suspect.Without changes in the incentive systems, the current EMIS system is seriously flawed and should bereformed.

* Because of US$:SDR exchange rate fluctuations during the implementation of the project, provincesand counties had to provide increased amounts of counterpart funding over and above the amountsproposed during project appraisal in order to fully finance project investments. The additionalfinancial burden on the poor provinces and counties could be eliminated if the central governmentassumed responsibility for exchange rate risks.

9. Partner Comments

(a) Borrower/implementing agency:All project components were accomplished and satisfactory. The implementation of the project has greatlyimproved the school conditions and teaching quality in poor and minority areas, and has played animportant role in the acceleration of the universalization of nine-year elementary compulsory education inpoor areas. The project was carried on smoothly during the implementation period and the implementationquality was generally good. All project output targets were met and some were even exceeded.

The Foreign Investment and Loan Office (FILO/MOE) strengthened the national level management trainingearly in the project, in which FILO not only invited the staff from the Basic Education projects such asEDPP Project to introduce their experiences and lessons on project implementation, but also invited theexperts from the Ministry of Education to give lectures on the theories and practices of educationmanagement and reform. FILO also organized the study tours, and provided a lot of guidance to theproject provincial dissemination programs and project procurement of civil works and goods. FILOfulfilled its task in project supervision, providing constructive suggestions and recommendations to projectunits, and having good coordination with departments concemed. On the whole, the Ministry of Educationhas fulfilled its duties in project implementation and management.

The World Bank (WB) officials and consultants sent to China are all possessed with high professional andmanagement ability. They had worked harmoniously with the Chinese Counterparts. FILO/MOE havevery good cooperation with the Bank in implementation period. From the beginning of the project, the taskmanager of the World Bank and Bank consultants have been paying much attention to the quality of theproject. They provided lots of valuable suggestions and recommendations during the site visits to the

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project provinces and helped provinces solve problems appeared in the implementation period, whichguaranteed the smooth implementation of the project.

(b) Cofinanciers:

Not Applicable

(c) Other partners (NGOs/private sector):

Not Applicable

10. Additional Information

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Annex 1. Key Performance Indicators/Log Frame Matrix

This project was developed prior to the new logframe indicator format and therefore the indicators listedbelow do not fit the new logframe format. However, this project was the first basic education project inChina to include achievement indicators thereby giving a limited view of project outcomes. Indicators tomeasure individual provincial education progress rather than overall project indicators were developed atthe start of implementation. Therefore, project indicators provided below are indicative, taken from onlyone project province, Hebei Province. Other specific provincial indicators can be found in the provincialICR reports submitted March 2002 and located in the project files.

Indicators Baseline Completion Target1993 2001

PROJECT OBJECTIVE l.A: SUPPORTTHE ATTAINMENT OF UNIVERSALPRIMARY EDUCATION AND EXPANSIONOF LOWER SECONDARY EDUCATION INPOOR AND MINORITY AREAS.

School Primary School IndicatorsAttendance Enrollment Rate:Improved School Aged Children (%) 94.5 99.5 99.0

School Aged Girls (%) 93.7 99.3 98.4

School Aged Minorities (%)Dropout rate:

Grade I (%) 2 0.5 0.7Girls in Grade I (%) 2.1 0.5 0.7

Repetition rate:Grade I (%) 8.4 1.1 1.7Girls in Grade I (%) 8.3 1.1 1.7

Completion Rate of 15 yr. old population (%) 90.4 99.2 98.615 yr. old girls 90.3 99.2 98.6

Number of Students receiving student assistance 900 1410Transition Rate

Right Aged Children (%) 76.0 98.5 89.0Right aged girls (%) 74.5 98.4 89.0

Lower Secondary School IndicatorsDropout Rate (%) 6.8 1.9 2.4

Girls (%) 6.9 1.9 2.4Completion Rate of 17 yr. old population 87.0 98.0 95.0

17 yr. old girls 86.0 98.0 95.0Number of students receiving student assistance 300 620

Primary School IndicatorsLearning Chinese Language Pass Rates of Grade 6 (%) 95.4 99.2 98.4Achievement Pass Rates for Girls (%) 94.5 99.1 98.1Increased Math Pass Rates of Grade 6 (%) 94.6 99.1 98.2

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Pass Rates for Girls (%) 94.0 99.0 97.9PROJECT OBJECTIVE 1.B: BUILDSTRONGER INSTITUTIONSRESPONSIBLE FOR EDUCATIONDELIVERY

Full-time Qualification Rate:Teachers Primary Schools (%) 82.1 96.0 91.4Skills Lower Secondary Schools (%) 43.1 85.0 76.7Improved Qualification Rate in Bilingual education:

Primary Schools (%) 0.0 0.0 0.0

Lower Secondary Schools (%) 0.0 0.0 0.0

Facilities Dilapidated building rate:Improved Primary Schools (%) 32.0 3.0 9.0

Lower secondary Schools (%) 21.0 3.0 8.0Rate of schools w/standardized sets ofequipment:

Primary Schools (%) 62.8 96.8 96.3

Lower Secondary Schools (%) 47.1 93.0 92.3Sufficiency rate of school furniture:

Primary Schools (%) 92.1 100.0 100.0Lower Secondary Schools (%) 93.6 100.0 100.0

Average books per student:

Primary Schools 4.2 9.2 6.0Lower Secondary Schools 8.4 15.0 10.3

1/ Hebei has no minority group and therefore no special category for minority enrollments.2/ Hebei Province has no bilingual education teachers or teacher training programs.

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)- . .' - .~,. .... -Appraisal Actual/Latest Percentage of' -~ -- -:: ~ - Estimate Estimate Appraisal

Project Cost By Component . US$ million. US$ millionINSTITUTIONAL COMPONENT

a. Facilities Upgrading 94.90 147.29 155.21b. Instructional Equipment/Books/Fumiture 36.20 45.96 126.96c. Staff Development 11.40 13.74 120.53

MANAGEMENT COMPONENTa. Management Training 0.20 0.29 145b. Expanding Education MIS 1.00 1.11 111

CENTRAL COMPONENTa. National Training 0.30 0.28 93.33b. Research Dissemination Program 1.30 1.69 130c. Stipend Program 2.70 2.87 106.3d. Study Tours 0.30 0.30 100e. Experts Panel 0.08 0.08 100f. Studies 0.03 0.02 66.67

Total Baseline Cost 148.41 213.63Physical Contingencies 14.90 0.00Price Contingencies 28.50 0.00

Total Project Costs 191.81 213.63Total Financing Required 191.81 213.63

Physical contingencies and price contingencies were allocated to the various project components under theactual estimates column.

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

' ' - ' . -' Procurement Method- -Expenditure Category .ICB - - . NCB --.- Other . ; N.B.F. Total Cost

1. Works 0.(00 92.7(0) 28.00 0.00 120.70:)(0.00) (52.50) (15.70) (0.00) (68.20)

2. Goods 0.00 43.70 5.70 0.00 49.40(0.00) (19.90) (2.60) (0.00) (22.50)

3. Services 0.00 0.00 5.80 0.00 5.80Consultant Services (0.00) (0.00) (2.40) (0.00) (2.40)4. Training 0.00 0.00 15.90 0.00 15.90

(0.00) (0.00) (6.90) (0.00) (6.90)5. Miscellaneous 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)6. Miscellaneous 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)Total 0.00 136.40 55.40 0.00 191.80

(0.00) (72.40) (27.60) (0.00) (100.00)

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Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

; . v . Procurement Method d... .Expenditure-Category ICB NCB O N.B.F. TotalCost

1. Works 0.00 103.15 44.14 0.00 147.29

(0.00) (53.69) (9.48) (0.00) (63.17)2. Goods 0.00 38.40 8.67 0.00 47.07

(0.00) (18.58) (2.06) (0.00) (20.64)3. Services 0.00 0.00 5.24 0.00 5.24Consultant Services (0.00) (0.00) (1.80) (0.00) (1.80)4. Training 0.00 0.00 14.03 0.00 14.03

(0.00) (0.00) (6.31) (0.00) (6.31)5. Miscellaneous 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)6. Miscellaneous 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)Total 0.00 141.55 72.08 0.00 213.63

(0.00) (72.27) (19.65) (0.00) (91.92)

Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.2 1Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremcntal operating costs related to (i)managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Financer (in US$ million equivalent)

Fjincer Appraisal Estimate ActualULatest Estimat | . App?raisal,__________________ IDA Gt.... CoF. IDA :'GovLt 'CoF. :IDA 'Govt. . CoF.,..

Chinese Government 91.80 121.70 132.6IDA 100.00 91.93 91 9

The actual IDA disbursement level is less than the original US$100 million due to the SDR/US$ currencyfluctuations. In addition, US$ 289,066.32 were not disbursed from the special account.

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Annex 3. Economic Costs and Benefits

Not Applicable. This project conducted a Financial Analysis to ensure that the project was feasible duringthe project years and that the project effectiveness is sustained after project completion. Three types offinancial analyses were conducted: feasibility analysis, sustainability and assessment of the availability ofcounterpart funding.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating

(e.g. 2 Economists, I FMS, etc.) Implementation DevelopmentMonth/Year Count Specialty Progress Objective

Identification/Preparation3/95 4 2 General Educators, I S S

Operations Analyst, I UNICEFEducator

6/95 6 2 General Educators, I S SOperations Analyst, I UNICEFEducator, I Architect, IEducation Economist

Appraisal/Negotiation10/95 6 2 General Educators, 2 S S

Operations Specialist, IEducation Economist, IMinority EducationSpecialist

2/96 6 2 General Educators, I S SOperations Analyst, IDisbursement Officer, 2 Lawyers

Supervision5/96 Project 5 1 General Educator, I S SLaunch Operations Analyst, I

Operations Officer, IProcurement Specialist, IDisbursement Specialist

1/97 3 1 General Educator, I Operations S SAnalyst, I ProcurementSpecialists

3/97 3 1 General Educator, I Operations S SOfficer, I Procurement Specialist

1/98 2 1 General Educator, 1 Operations S SAnalyst

4/98 3 1 General Educator, I Operations S SOfficer, I ProcurementSpecialists

9/98 Mid-term 4 2 General Educators, I S SOperations Analyst, I EducationSpecialists

5/99 4 I General Educator, I Education S SSpecialist, I Operations Officer,I Procurement Specialist

10/99 3 1 General Educator, I Education S SSpecialist, I Operations Officer

1/01 2 1 Lead General Educator, I S SOperations Officer

ICR3/02 2 1 General Educator, I S S

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I I I (Operations Officer

This information is based on project preparation and supervision aide-memoires.

(b) Staff:

Stage of Project Cycle Actual/Latest Estimate

No. Staff weeks US$ ('000)Identification/Preparation 38 160,000Appraisal/Negotiation 16 70,000Supervision 107 362,200ICR 6 35,000Total 167 627,200

These figures are based on the project preparation file information, supervision aide-memoires, 590 formsand staff salary information that is available.

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)Rating

OMacro policies 0 H O SU * M 0 N 0 NAFSector Policies O H O SU * M O N O NAF Physical O H *SUOM 0 N O NAO Financial 0 H *SUOM O N 0 NAN Institutional Development 0 H 0 SU O M 0 N 0 NAFI Environmental 0 H OSUOM 0 N * NA

Social• Poverty Reduction 0 H OSUOM 0 N O NAO Gender 0 H *SUOM 0 N O NALI Other (Please specify) 0 H O SU 0 M 0 N 0 NA

LI Private sector development 0 H O SU O M 0 N 0 NALI Public sector management 0 H O SU O M 0 N 0 NArl Other (Please specify) 0 H 0 SU 0 M 0 N 0 NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

• Lending OHS OS OU OHU• Supervision O HS * S OU OHU• Overall OHS OS OU O HU

6.2 Borrower performance Rating

X Preparation O HS * S O U 0 HUF Government implementation performance 0 HS 0 S 0 U 0 HUX Implementation agency performance 0 HS * S 0 U 0 HUZ Overall OHS OS OU O HU

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Annex 7. List of Supporting Documents

Ministry of Education, Implementation Completion Report - May 2002 (including data tables)Hebei Province - Implementation Completion Report - March 2002Qinghai Province - Implementation Completion Report - March 2002Jilin Province - Implementation Completion Report - March 2002Gansu Province - Implementation Completion Report - March 2002Anhui Province - Implementation Completion Report - March 2002Fujian Province - Implementation Completion Report - March 2002

Henan Province - Implementation Completion Report - March 2002

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Additional Annex 8. Borrower's ICR Contribution

CHINATHIRD BASIC EDUCATION PROJECT

(Cr. 2831-CHA)

IMPELMENTATION COMPLETION REPORT

Project Division, Foreign Investment and Loan Office (FILO)Ministry of Education (MOE)People's Republic of ChinaMay, 2002

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CHINATHIRD BASIC EDUCATION PROJECT

IMPLEMENTATION COMPLETION REPORTCONTENTS

1 Project Overview

2. Project Implementation2-1 Disbursements/Reimbursements2-2 Project Efficiency Indicators2-3 Civil Works2-4 Goods Procurement2-5 Management Information System (MIS)2-6 Provincial Level Staff and Teacher Training2-7 Student Assistance Program2-8 Pupil Achievement Study Program2-9 Dissemination Program2-10 Centrally-Managed Activities2-11 Chinese Experts Panel (CEP)

3. Main Experience and Recommendations

4. Project Sustainability Plan/ Next Step

5 Data FormsAnnex 1 Counterpart Funds PaymentAnnex 2 Credit Funds PaymentAnnex 3 Sources of Project InvestmentAnnex 4 Civil Works ProgressAnnex 5 Equipment ProcurementAnnex 6 Furniture and Library Books ProcurementAnnex 7 Teacher TrainingAnnex 8 Project/ Education Management Staff TrainingAnnex 9 MIS ProcurementAnnex 10 Dissemination of Research Studies OutputsAnnex 11 Student Assistance in Poverty-stricken AreasAnnex 12 School Building MaintenanceAnnex 13 Summary of Project Costs by CategoryAnnex 14 Summary of Project Cost by ComponentAnnex 15 Financmg PlanAnnex 16 Summarv of Procurement ArrangementAnnex 17 Project Sustainability for TrainingAnnex 18 Project Sustainability for FinancmgAnnex 19 Selected Efficiency Indicators for Project Counties

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CHINA

THIRD BASIC EDUCATION PROJECT(Cr. 2831-CHA)

IMPLEMENTATION COMPLETION REPORT

1. PROJECT OVERVIEW

1-1. The Credit Agreement of the above project, signed by the World Bank and the Chinese Government onApril 17, 1996, became effective onJuly 16, 1996. The project is schedule to be completed byJune 30, 2001,with a closing date of December 31, 2001. The Bank provides SDR67.3 mlllion (100 million equivalent then) forthis project. The beneficiaries of the project include 124 project counties of seven provinces, which are Anhui,Fujian, Gansu, Hebei, Henan, Jilin, Qinghai.

1-2. The main project objectives are to: (a) support the attainment of universal primary education and theexpansion of coverage of lower secondary education in poor and minority areas; and (b) build strongerinstitutions responsible for education delivery.

1-3. The project will have a direct impact on approximately 46,000 schools and 448,000 teachers and staff,and will provide varying lengths of training for approximately 138,000 teachers and education managers.

2. PROJECT IMPLEMENTATION

Overall Status

The implantation life of the project was five years, which occurred coincidentally with The NinthFive-Year-Plan For Chinese Education Development. The general goals of educational development during theNinth Five-Year-Plan were formulated as follows: to conscientiously and fully implement the Guidelines forEducation Reform and Development in China and to give high priority to the universalization of 9-yearcompulsory education and the eradication of illiteracy among young and middle-aged adults. In order toaccomplish the goals and to carry on the foreign funds utilization in educational areas, the Chinese Govemmentsuccessfully lunched and implemented the Third Basic Education Project, on the base of the successfulimplementation of the first basic education project (EDPP) and the second basic education project (BEII).

Based on the provincial implementation completion reports submitted by project provinces, virtually allinput indicators are running well ahead of project targets and all project goals are fully achieved. Five years intothe project implementation greatly improved the school conditions and accelerated the universalization ofnine-year compulsory education in poor and minority areas. As of December 31, 2001, all project provinces hadexceeded the total planned construction square meters in the planned number of schools and all equipment andbooks procured had been delivered to project schools and in use. Provincial management training and teacherstraining had surpassed their targets.

According to the reimbursement data provided by the Ministry of Finance, as of the end April 2002, thedisbursed amount by project provinces is SDR67.19 milion, accounting for 99.84 percent of total credit 67.30million. Counterpart funds accumulation, allocation and utilisation are running at 132.56 percent of total projecttarget. The Chinese Experts Panel (CEP) played an important role in the review of Dissemination Programs, theadvice on rational reorganization of educational resource of the provinces and the education quality aspects of

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the project, and they provided guidance for provinces to implement the project. The World Bank's supervisionmissions made lots of valuable recommendations and contributed to the success of the project implementationin the past five years. As the implementation agency, the Foreign Investment and Loan Office (FILO) ofMinistry of Education (MOE), had fully conducted the central activities (including seminars and study tours inabroad), co-ordinated and organised relevant agencies from the abroad and the domestic and supervised theproject. On the whole, the Ministry of Education has fulfilled its duties in project unplementation andmanagement.

As a whole, the progress in the seven project provinces has been substantial The project goals, which areconcerned not only project activities but also with efficiency indicators, were achieved.

2-1 Disbursement and Reimbursement

The provinces reported that by the end of November 2001, RMBY 1.01 billion counterpart funds hadbeen collected, allocated and utilised, accounting to 132.56% of the total plan. The collection of individual rangefrom 99.71% for Qinghai to 208.97 % for Henan.

As the reimbursement were partially dependant on the current US dollar exchange rate of the SDR,currency fluctuation of the SDR reduced the overall level of funding available from the Credit, 67.30 millionSDR was equivalent to US$100 million at project appraisal period, but now its equivalence is less than 100million US dollar. About 99.84 planned SDRs had been reimbursed so far. US$91.93 million had been disbursedfor all provinces by December 31, 2001, making up 91.93% of the total planned US dollar. The mdividual levelof credit (SDR) disbursement ranged from 92.97% for Gansu to 102.87% for Anhui. In the projectimplementation, MOE, Ministry of Finance (MOF) and State Audit Office (SAO) further strengthen thesupervision of project disbursement and solved the problems in time. The following is SDR data on the overalldisbursements by project provinces as of May 2002, which is provided by Ministry of Finance.

Provinces Disbursed SDRs Percent DisbursedHenan 14,970,521.98 99.70Jilin 3,314,126.78 98.49Gansu 11,894,222.27 97.27Anhui 12,821,249.86 102.87Qinghai 5,389,527.98 100.10Hebei 13,991,802.18 99.00Fujian 4,812,202.18 102.15

Total 67,193,653.23 99.84

Province Gansu Qinghai Hebei Anhui Fujian Jilin Henan TotalCategory1. OriginaUy 7,849,645 3,100,000 8,872,672 8,048,689 3,163,483 2,223,371 9,472,140 42,730,000

Mud-tern 8,333,737 3,616,694 8,872,670 8,779,999 3,459,773 2,324,921 10,123,831 45,511,623Disbursed 8,237,974.15 3,664,186.64 9,340,629.05 9,101,085.57 3,590,513.66 2,368,371.12 10,099,993.79 46,402,753.98

2. Originally ,527,035 862,683 3,053,183 2,583,124 879,104 690,872 3,513,999 14,110,000

Mid-ten 2,690,625 1,121,029 3,667,945 2,583,081 879,104 771,250 3,563,968 15,277,003Disbursed 2,740,244.46 1,134,994.47 3,347,549.6 2,752,724.64 947,721.68 759,454.19 3,624,564.01 15,307,253.05

3 Originally 339,450 109,364 380,640 310,357 104,910 75,764 289,515 1,610,000Mid-term 268,995 109,361 380,645 310,384 104,910 75,779 69,029 1,319,104

Disbursed 262,028.70 103,924.66 181,936.23 182,343.17 36,525.70 14,775.83 58,905.01 840,439.304. Originally 864,440 278,505 969,332 790,350 267,163 192,940 737,270 4,100,000

Mid-term 34,922 536,858 1,211,589 790,363 267,163 193,014 1,258,362 5,192,270Disbursed 653,974.96 486,422.21 1,121,687.30 785,096.48 237,441.14 1 171,525.64 1,187,059.17 4,643,206.90

5. Originally 647,709 1,033,390 857,022 731,307 296,290 182,017 1,002,265 4,750,000Mid-term .00 0.00 0.00 00 0.00 0 00 0.00 0.00Disbursed 0.00 0.00 0.00 0.00 0.00 0.M 0.00 0.00

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6. Originally 12,228,279 5,383,942 14,132,849 12,463,827 4,710,950 3,364,964 15,015,189 67,300,000M,d-t nn 12,228,279 5,383,942 14,132,849 12,463,827 4,710,950 3,364,964 15,015,189 67,300,000

Disburmed 11,894,222.27 5,389,527.98 13,991,802.18 12,821,249.86 4,812,202.18 3,314,126.78 14,970,521.98 67,193,653.23Total

Note:* Unit: SDRs

Category 1: Civil Works; Category 2: Goods; Category 3: Consultant Service;Category 4: Training and Study Tour; Category 5: Contingency; Category 6: Total

Generally speaking, the provinces paid attention to accelerating their reimbursement process, and eachannual reimbursement was well ahead of the SAR percentage target for each year. But the provinces had also tobear the loss caused by exchange rate under the circumstance of strong US dollar, which, to a certain extent,brought additional pressure for the counterpart funds accumulation.

2-2 Project Efficiency Indicators

According to the data provided by project provinces, virtually all project efficiency indicators targetshave been achieved or exceeded, and the incdcators show substantial progress since 1993. Especially impressiveare the girl's enrolment rates (both in primary and lower secondary schools), transition rate from primary tolower secondary schools and Completion Rate for Primary School Children, which have imnproved substantially.Through the procurement for civil works, equipment and books, percentage of dangerous buildings decreasedand equipment percentage achieving MOE standard increased in all projects provinces. Training programimproved the percentage of qualified teachers greatly. See details in Table 19 attached.

2-3 Civil Works

By the end of December 2001, 7542 project school Building was built, accounting for 106.95% of thetotal plan. The total areas of all kinds of construction are estimated at 3.00 million square meters or 116.19% ofthe planned total areas, with disbursement of US$ 63.17 million credit funds and RMB 700.43 million, whichrespectively accounts for 93.42% and 146.81% of the planned.

New Building, Rebuilding, Major Middle and Minor RepairingNo. of Schools Areas (Square Meters)

Provinces Planned Finished % Planned Finished %nhul 2504 2504 100 563372 563372 100

Fujian 189 189 100 171226 196415 114.71

Gansu 1241 1241 100 547940 547913 99.99Hebei 1698 1704 100.35 505800 521600 103.12Henan 877 1357 154.73 558300 959783 179.91Jilin 173 171 98.84 90577 92678 102.32Qinghai 370 376 101.62 113900 115738 101.62Total 7151 7542 105.47 2221155 2997499 117.50

Under this project, all project irnplementing agencies at county level procured all the civil works throughNational Competitive Bidding (NCB) and National Shopping (by using force account). The procurement for civilworks had been carried out quickly. All the project provinces had completed about 100% of the planned targetin the first four years. The principle of "Quality First" was strictly followed in all the civil constructions in allproject provinces.

During the supervisions, judged from the contract review, it was considered that the civil works in

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general had been progressing smoothly and very efficiently, and the provmces strictly followed the Bank'sprocurement guwdelines and procedures. The quality-monitor station at the county level sent special staff to the

field to monitor the quality of construction when the building was being constructed, and the county level

project officers often went to the construction field to ensure the quality of the buildings. The final checking andacceptance for civil works had been jomtly done by the county construction quality inspection station,construction commission and education commission. During site visits by FILO/MOE, CEP and Bankmissions, quality of the construction showed good and the Bank's procurement guidelines and procedure were

strictly followed in all provinces. Teachers and student families were satisfied with the school buildings.

It was a hlghlight that the maintenance of the school building was paid more to by each of the provinces.They all worked out the maintenance plans and carried out accordingly. While in site visit, the supervision

missions were please to learn in some counties the annual budget allocation of RMB 20 yuan per square meter ofschool building maintenance. In the sustainability plan for the next five years, each province promised to furtherallocate money for civil works maintenance in order that the investment will continue to provide economic andefficient buildings well mto the next century.

2-4 Goods Procurement

Through NCBs, goods procurement had been fully completed. The procurement of project equipmentand library books was carried out by the provincial FILO through NCB procedures. Project counties conductedthe bidding procurement and the distribution of desks and chairs. The equipment, furniture and books had beendistributed to the project counties and schools.

Up to now, the investment in equipment counts RMB 121.75 million (108.80% of the total, the samebelow) for the counterpart funds and US$ 12.34 million (89 89%) for the credit funds. Altogether 15,996 project

schools (102.55%1) had been equipped by 180,300 (100.32%1) pieces/sets of equipment.

RMB 43.27 million (119.03%) for counterpart funds and US$ 3.28 million (83.83%1) for credit funds hadbeen paid for furniture, with 19,791 schools (101.86%) equipped by 782,300 sets (109.72%).

RMB 45.98 million (107.18%) and US$ 5.03 million (98.89%) had been paid for books, with 18,109schools (102.36%) equipped by 11,914,700 volumes (105.57%).

Some provinces, such as Hebei, thought that the NCB procurement fully displayed the advantage ofpublic bidding which has brought remarkable economic return, and they actually saved 18.6 percent of total

estimated funds in their second NCB. During the supervisions, the supervisors found the procurement in the

project provinces has been progressmg smoothly and the provinces had strictly complied with the Bank's

procurement guidelines and procedures, which could reflect the whole picture of the project goods procurement.

Under the organization of Qinghai Educational Department, Qinghai had procured 5,200 sets ofdistance equipment with total funds of RMB 1.91 million, as a result, 58 ground satellte stations and 160

projection points were set up. Qinghai is one of the western provinces in China and has been benefited by the

Strategy of Western Development of China. In order to carry out this strategy, MOE will take measures to speedup the reform and development of western education, and one of the important contents is to stress the distance

education system of western areas. So, the project benefits for Qinghai distance education will be longer-lasting

and sustaimng.

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2-5 Management Information System (MIS)

The project supports establishing Education Management Information Systems (MIS) for the provinces.The MIS construction had cost RMB 9.35 million of counterpart funds, which is 101.22% of the planned. Allthe 124 project counties as well as 8 non-project counties were equipped with 341 computers (117.59% of thetotal plan) of type 586 or higher level, and some of the counties were equipped with printers, duplicatingmachines and fax machines. The relevant training had also been improved. For example, Gansu TV Universityhad carried out the training for operators accordmg to the training guidelines and teaching materials. Anhui MIShad managed to connect with MOE, Provincial Government and prefectures had realized being on line withInternet and continuously connected with the project counties, and the MIS on county level had also been set up.According to the reports presented by the provinces, the MIS system was working properly and playmg animportant role in upgrading the project management. On this basis, the project provinces and counties shouldexplore and expand the utilization of the system broadly as their next step in the following years of projectsustainability.

2-6 Provincial Level Staff and Teacher Training

Training ExpenditureProject / Magt Training Teacher / Principal Training

Credit Funds Counterpart Credit Funds CounterpartUSS 259,150(112.54%) RMY 1,259,710(117.22%) US$ 6,051,430(85.19°/.) RMY 64,185,110(108.66'/')

Note: The percentage in the bracket is the completed as percentage of the total planned

So far, there are 130,200 persons time (103.52% of the total plan) that had completed the trainingfor teachers and principals, and their abilities on Academic qualifications, Certificate qualification, Bilingualteaching, Multigrade teaching, Laboratory instructions, Librarianship, Teaching materials & methodology hadbeen upgraded. From the second half of the project life, all the provinces have quickened their pace on thetraining process. The result was that all the training tasks had been completed in the provinces in time, and theprovinces had paid more attention to the quality of the training.

As for the process of training, the provinces paid attention to the establishment and utilization oftraining network. They used different training network-station to train trainees at different levels, for example,the county teachers' schools trained the village primary school teachers, the prefecture teachers' schools tramedthe township junior high school teachers, while the prefecture teachers' college trained the school principals, andthe provincial education units were responsible for the training of certificate qualifications, and the training ofprincipals and directors of county education bureau. As for the training method, the provinces adopted thecombination of full-time training, part-time training and in-service training. As a result of this action, theprovinces not only increased the training number but also saved money.

2-7 Student Assistance Program

The influence of the Student Assistance Program, which is not on the money amount from the interestsof foundation----contrarily the interest rates decreased substantially over the project life, but on formation ofstudent assistance concept, had exceeded its original goal. So far, the total investment of student assistance isestimated at 30.35 million and altogether 364,908 students are benefited from the investment. Because of theinterest decreased and the gross interest reduced, the Student Assistance Program had overrun its own outlinedmeaning (net interest) during the appraisal period, and all kinds of assistance sources had been covered in theprogram. As for the detailed method of the assistance, tuition or miscellaneous fees were reduced / remitted forthe poor students instead of providing them with cash.

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2-8 Pupil Achievement Study Program

Hosted by the National Center of Education Development Research (NCEDR) of MOE, PupilAchievement Study had been finished. The main task of this program covered two aspects: first, they did aresearch on the implementation of Teaching Outlines of Mathematics and Chinese Language in poverty areas.Second, they conducted testmg of Mathematics, Chinese Language and General Knowledge in Henan, Jilin,Anhui, Qinghai and Fujian, which involved ten counties, twenty townships, forty vlllage's primary schools and1,558 students. So, the testing was comparatively representative. NCEDR had reported their research andfindings to project provinces and received good feedback.

2-9 Dissemination Program

There had been US$1.68 million credit funds paid for the Dissemination Program, accounting for97.93% of the total plan, 77 project counties have been involved in thls program. The program was strictlyfollowed the implementation guidelnes in SAR. The Bank and MOE were responsible for the supervision ofthis activity. The proposed dissemination programs plans prepared by the Provincial Education Department andsent to the Chinese Experts Panel (CEP) for their review and approval. In the first half of 1996, the CEPapproved the programs and sent its recommendations to the World Bank for their review and approval. Soon,the Bank approved the program. The provinces had held the symposium on initiating dissemination programwithin the provinces, the annual work meetings of the dissemnnation, and the expert group meetings of theproject. Meanwhile, they had also held training classes for the project admirmstrative personnel, the leadingteachers of special education as well as the headmasters of the schools concerned, and conducted theinvestigations and researches in the project counties. In order to ensure the work to go smoothly, the projectcounties and provincial project groups were all equipped with information system including computers andprinters In some provinces, training bases had been set up for the students and teachers. In conclusion, theDissemination Program had been developed extensively in each province and gained achievement. For example,Qinghai's Bilingual Education was innovative from its content to its form, and very helpful for Tibetan childrenin learning the basic Chinese Language, and can improve their ablity of listening and reading comprehension ina short time. Qinghai had disseminated this program with all Tibetan primary schools in the province. In May2000, FILO of MOE held a seminar on this program to summarize and exchange experiences. The programtopics iS listed below:

Province TopicAnhui Girls Education

Integrated Education Program for Mentally Handicapped Children.Fujian Three Dimensional Cultivation and BreedingGansu Education for Girls and Minorities

Prevocational Education in Lower Secondary SchoolsHebei Prevocational Education in Lower Secondary Schools

Special Education of Disabled ChildrenHenan Prevocational Education in Lower Secondary Schools

Multigrade TeachingTriple Link Education

Jiln Division of Lower Secondary SchoolsQinghai Girls Education

Bilingual EducationPrevocational Education in Lower Secondary Schools

2-10 Centrally-Managed Activities

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So far, hosted by FILO of MOE, 24 domestic seminars had been conducted as centrally-managed, withtotal number of 1,307 participants from the provinces and counties. Eight overseas training and study tours hadbeen conducted, with participation of 72 people. In the domestic seminars, the leaders from relevantdepartments of MOE and experts from universities and provinces research institutions were invited as trainers,and each trainee was required to submit a training report by the end of the seminar. As for the overseas tours,each group was required to work out a study outline, to make a close working schedule and to carry out activitiesaccordingly, and when they returned from abroad, they must submit a report. According to the feedback fromthe provinces, this training method is rewarding and very helpful to the project. The data below summarizes thedetails.

2-10-1 Domestic Seminars

Type of Training No. Of Trainees

(1) Civil Works Procurement (I) 28(2) Civil Works Quality Supervision (II) 70(3) Equipment Procurement (I) 28(4) Books Procurement Mangers (1) 28(5) Provincial / County project Administrator (I) 28(6) Financial Management and Disbursement (1) 28(7) Project County Education Bureau Administrator (1) 124(8) Training Method of Laboratory Staff (II) 127(9) Training Method of Project School Principals (IH) 248(10) Educational Supervisor (I1) 61(1 1)Resource Allocation and Investment Efficiency of

Nine-Year Compulsory Education(II) 112(12)Construction of Campus and School Building 62(13)Research Dissemination Program 113(14)Training Materials and Method of Teachers(V) 250Total 1307

Note: Figures in the parenthesis refer to seminar numbers.

2-10-2 Study Tours

(1) Management of Education Financing United States, February 1997 / UK, November, 1999(2) Investment Efficiency of Basic Education UK and Germany, March. 1998(3) School Planning and Management Australia, April 1998(4) Teaching Methodology Research Japan, May 1998 / Canada, September 1999(5) World Bank Project Management United States, October 1998, September 2000

2-11 Chinese Experts Panel (CEP)

CEP was formed in May 1996 at the project lunch workshop held in Henan Province. Also the firstpanel meeting was held during the workshop. The chairman of the panel is Mr. Geng Xuechao, director ofBeijing Municipal Education Commission. The other panel members include: Mr. Wei Xin, Vice-director ofHigher Education Institution of Beijing University; Zhou Yuanwu, Vice-director of Hubei Provincial EducationDepartment; Zhu Disheng, former principal of the Middle School Affiliated to People's University. The

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secretariat of CEP was set up at Enghsh Department of Capital Normal University to deal with daily affairs for

the panel.

Every year, CEP held meetings and made site visits to project provinces to provide consultative services

on the project implementation. CEP members played an important role in project supervision and particularly

provided advice to the quality of the project. CEP's contributions to the project helped the provinces to better

implement their programs and solved the issues existed m the project implementation.

3 MAIN EXPERIENCE AND RECOMMENDATIONS

3-1 The social development projects, such as education development projects, have no economic return and

financial return, but they also have the risks of exchange rate, interests rate and unexpected events, which could

affect the utilzation of the project funds. BEIII Project is a very good example. So, it is necessary for the project

managers both the domestic and the abroad to pay close attention to the risks all the tme in the project

implementation life and provide constructive suggestions and recommendations. For instance, the influence of

flood and exchange rate risk on BEIII Project should be considered whle doing credct funds reallocation at the

mid-term review.

3-2 As the project implementation and funds disbursement were managed by different departments ---- an

implementation model of all basic education projects from EDPP to BEIII, good cooperation, coordmation as

well as communication between the departments at each level is a very important factor to guarantee the smooth

implementation of the project.

3-3 For a long time, it remained a focus how to build an evaluation system to assess the quality of training,

especally the principal training. It is certamly a trustworthy standard to combine the project training with the

national certificate qualifications training, then, to appraise the project training level from teachers' (principals')

schooling records. But in the mountainous areas where most project schools are loaded in poverty counties,

there is a question for discussion of how to set up a system in accordance with the local characterisucs----the

appraisal object includes not only the teachers (principals) but also the students, so as to reflect the real quality of

training.

4. PROJECT SUSTAINABILITY PLAN / NEXT STEP

The importance of the post-closure management and sustainable development has been realized by the

administrative authorities at all levels. The MOE requires each local government to make its own project

sustainable development plan based on the summary of the project. The overall sustainable development plan of

the project is drawn up mainly on the basis of plans and policies on education development for the next a few

years, as well as the development plan of the local government. The basic elements of the plan are:

4-1 to urge the government at all levels to maintain steady investment in the project m order to consolidate

and expand the achievement;

4-2 to make full use of the exemplary function of this basic education project, applying its successful

methods in other educational projects;

4-3 to spread the research results of the studies such as Student Assistance Program;

4-4 to implement the funds investment plan at provincial, municipal and county level on civil work

maintenance, teacher traing and other aspects of the project;

4-5 to continuously conduct training for all kinds of staff and teacher;

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4-6 to increase investrnent in MIS at county level and gradually build up a multi-level(state-province-prefecture-county) MIS network;

4-7 to maintain the stability of project management personnel in management institutions of all levels,making full use of the constant effects of human resource.

5 DATA FORMS

See World Bank Project Files

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IMAGING

Report No.: 24247Type: ICR