Document ofThe World Bank

Report No: 20804-GZ

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED TRUST FUND CREDIT

IN THE AMOUNT OF US$7.0 MILLION

TO THE

WEST BANK AND GAZA

FOR AN

EDUCATION ACTION PROJECT

May 3, 2001

Human Development SectorMiddle East and North Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 24, 2001)

Currency Unit = ILS (Israeli New Sheqalim)ILS 1 = US$0.24US$1 = ILS4.174

FISCAL YEARJanuary 1 to December 31

ABBREVIATIONS AND ACRONYMSAWPB Annual Work Plans and BudgetsCAS Country Assistance StrategyCDF Comprehensive Development FrameworkEAP Education Action ProjectEHRP Education & Health Rehabilitation ProjectFMM Financial Management ManualEMIS Education Management Information SystemFMS Financial Management SystemGER Gross Enrollment RateILS Israeli New SheqalimMIS Management Information SystemMOE Ministry of EducationMOEA Ministry of Environmental AffairsMOF Ministry of FinanceMOHE Ministry of Higher EducationMOPIC Ministry of Planning and International CooperationMOSA Ministry of Social AffairsNER Net Enrollment RateNGO Non-governmental OrganizationPA Palestinian AuthorityPCBS Palestinian Central Bureau of StatisticsPECDAR Palestinian Economic Council for Development and ReconstructionPIP Planned Investment ProgramPMR Project Management ReportPPF Project Preparation FacilityPST Project Support TeamQIAC Quality Improvement Advisory CommitteeQIP Quality Improvement ProjectTATF Technical Assistance Trust FundTFC Trust Fund CreditTFGWB Trust Fund for Gaza and West BankUNDP United Nations Development ProgrammeUNRWA United Nations Relief and Works AgencyWHO World Health Organization

Vice President: Jean-Louis SarbibCountry Manager/Director: Nigel Roberts

Sector Director: Jacques BaudouyTask Team Leader: Luis Guillermo Hakim

WEST BANK AND GAZAEDUCATION ACTION PROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 22. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 22. Main sector issues and Government strategy 33. Sector issues to be addressed by the project and strategic choices 7

C. Project Description Summary

1. Project components 82. Key policy and institutional reforms supported by the project 93. Benefits and target population 1 04. Institutional and implementation arrangements 10

D. Project Rationale

1. Project altematives considered and reasons for rejection 1 12. Major related projects financed by the Bank and other development agencies 123. Lessons learned and reflected in proposed project design 134. Indications of borrower commitment and ownership 135. Value added of Bank support in this project 13

E. Summary Project Analysis

1. Economic 142. Financial 143. Technical 154. Institutional 155. Environmental 166. Social 177. Safeguard Policies 18

F. Sustainability and Risks

1. Sustainability 192. Critical risks 203. Possible controversial aspects 21

G. Main Conditions

1. Effectiveness Condition 212. Other 21

H. Readiness for Implementation 21

I. Compliance with Bank Policies 21

Annexes

Annex 1: Project Design SummaryAnnex 2: Detailed Project DescriptionAnnex 3: Estimated Project CostsAnnex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis SummaryAnnex 5: Financial Summary for Revenue-Earning Project Entities, or Financial SummaryAnnex 6: Procurement and Disbursement AnrangementsAnnex 7: Project Processing ScheduleAnnex 8: Documents in the Project FileAnnex 9: Statement of Loans and CreditsAnnex 10: Country at a GlanceAnnex 11: Assessment of Institutional CapacitiesAnnex 12: Teacher Development Issues in Palestine and Rationale for Project ComponentsAnnex 13: World Bank Assisted Education Project Pilot Project Component on SecondaryVocational Education

MAP(S)

WEST BANK AND GAZA

Education Action Project

Project Appraisal Document

Middle East and North Africa RegionHuman Development Sector

Date: May 3, 2001 Team Leader: Luis Guillermo HakimCountry Manager/Director: Nigel Roberts Sector Director: Jacques BaudouyProject ID: P065593 Sector(s): EY - Other EducationLending Instrument: Specific Investrnent Loan (SIL) Theme(s):

Poverty Targeted Intervention: N

Project Financing Data[ ] Loan [ ] Credit [ ] Grant [ ] Guarantee [X] Other:

For Loans/Credits/Others:Amount (US$m): 7.0

Financing Plan: Source Local Foreign TotalBORROWER 0.63 0.00 0.63

SPECIAL FINANCING 3.22 3.78 7.00

Total: 3.85 3.78 7.63Borrower: PALESTINE LIBERATION ORGANIZATION*Responsible agency: MINISTRY OF EDUCATION OF THE PALESTINIAN AUTHORITY

*PALESTINE LIBERATION ORGANIZATION (For the Benefit of the Palestinian Authority)Address: P.O. BOX 576, RAMALLAH, PALESTINEContact Person: Mr. Basri Saleh, Director General for PlanningTel: 972-2-298-3256/7 Fax: 972-2-298-3222 Email: Ac-Moe@palnet.com

Estimated disbursements ( Bank FYIUS$M):FY 2002 2003 2004 2005

Annual 0.60 1.90 2.40 2.10Cumulative 0.60 2.50 4.90 7.00

Project implementation period: 2001 -2004Expected effectiveness date: 07/31/2001 Expected closing date: 09/30/2004

C PAD F- Rev Ma, ~O

A. Project Development Objective

1. Project development objective: (see Annex 1)

The project primarily aims to strengthen the capacity of the Ministry of Education (MOE) to manage theeducation system more effectively through improving policy-making, planning and budgeting at central anddistrict levels. It would also support the implementation of activities in targeted domains included in ag-eedannual departmental workplans derived from the Five-Year Education Plan (2001-2005) This should leadto improved utilization of funding from the budget and international donors. The project will be involved inareas where efficiency gains are most expected, including: (i) training, (ii) school construction, (iii)vocational training, and (iv) overall sectoral management.

2. Key performance indicators: (see Annex 1)

Indicators for monitoring progress towards improved education system management

Components leading to Output Indicators Expected Outcomesdevelopment objective

Improve policy making, planning, Annual workplans based on agreed criteria are used More effective management of theand financing to prioritize donor funded activities and the sector;

Palestinian Authority's (PA) education program.Enhanced civic support for th, sector;

Intended activities are implemented within budget(difference between expenditures and budgeted More rational and persuasive budgetaryamounts is within a 10 % range) and on schedule by processes for the sector; andthe end of the project.

Improved utilization of funding fromFunctioning EMIS at central level and in at least budget and international donors.50% of the districts.

Central finance department computerized. This decision support system wouldenhance the planning process throughthe utilization of different modelingschemes.

Activities in targeted domains Number of schools engaged in school improvement Information from student and :eacheractivities through management program. assessments is incorporated into school

and teacher perfornnance reviews.Number of teachers receiving training throughschool-based training grant scheme.

Number of students enrolling in secondary vocationalprogram by gender.

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B. Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: R98-96 Date of latest CAS discussion: 05/28/98

The project supports two of the strategic themes of the World Bank group assistance strategy for the WestBank and Gaza: (i) capable public sector management, governance, and institution building, and (ii)adequate investments in human resource development.

Links between the MOE Five-Year Plan and the Country Development Framework (CDF) strategyincluded in the CAS discussions are: (a) access and equity - increasing access to vocational education andsupporting a financially viable system that would provide access to all; (b) quality - supportingprofessional development for teachers, school-based quality improvement and secondary vocationalcurriculum; (c) govemance and management - improving management capacity through the development ofan Education Management Information System (EMIS) and computerizing the financial managementsystem (FMS).

2. Main sector issues and Government strategy:

Context Building a strategic framework: Since the initial peace accords in 1994, the investment budgetfor the MOE has been financed largely by donor grants and two World Bank trust fund credits. For thepast two years, the MOE has been developing a Five-Year Plan for education, which provides a frameworkfor identifying priorities consistent with the overall framework for govemance being created by thePalestinian Authority (PA). The foundation of an improved delivery service system in the social sectors,which has been identified as a national priority, rests on the ability of the PA to create and work within asound budgetary framework which addresses priority issues, but also works within budgetary constraints.There is substantial donor consensus on the need to work with the ministry to support this effort. Thecomprehensive development framework is being developed collaboratively with the MOE and donors. Itwould be used as a parallel tool and links between the CDF and the MOE Five-Year Plan indicators ofprogress would be developed in this planning and budgeting exercise.

A system with potential: The Palestinian education system has been revitalized since the PA wasestablished in 1994. It has achieved almost universal basic education. The PA has focused its scarcefinancial resources on the recurrent costs of providing basic education (grades 1-10) and secondaryeducation (grades 11-12), using substantial donor support for investment purposes. UNRWA alsoprovides basic education, enrolling nearly 25.8 percent of Palestinian students in grades 1-9, with PAschools providing education for refugee children for grades 10-12. The MOE is discussing the eventualintegration of the UNWRA system with the formal education system as part of the planning process.Private schools enroll 6.4 percent of students in grades 1-12. The context of the West Bank and Gaza(WBG) -- no natural resources, relatively high wages, expensive and small internal market, and thecomplications of the Israeli and Palestinian relationship-requires high levels of human capital to strengtheneconomic growth.

The Strategy for education of the PA is outlined in the first Five-Year Plan for basic and secondaryeducation (2001-2005). It identifies three main goals: (a) maintain the current enrollment rate for basiceducation; (b) expand enrollment at secondary level; (c) improve the quality of education provided. Themain sector issues for basic and secondary education which need to be addressed to achieve these goalshave been identified in collaboration with the PA and donor agencies, especially during the PublicExpenditure Review in 1998 and discussions on the Comprehensive Development Framework (CDF) overthe past year. Across all ministries, the CDF exercise reflects the serious work being undertaken with the

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Bank and donor community to put in place policies and programs to form the basis of a sound nationalplan.

Possibilities for coordinated donor support of the MOE's Five-Year Plan and annual work plans.Probably the most powerful incentives for the MOE to take the actions required to meet the project'sdevelopment objectives lie in the possibilities for coordinated donor funding of the Five-Year Plan.Coordinated donor funding is advantageous for both the MOE and the donors. If procedure. andrequirements are harmonized, the transaction costs for both parties are significantly reduced. Donorfunding is also more predictable and smoother across time, allowing the MOE to plan better. If someportion is 'basket' or 'pool' funding, the MOE can move money to its highest priorities. The donors havestarted discussing coordinated funding, organized around the Five-Year Plan. The Education PActionProject (EAP) targets those managerial actions that would reassure the donors that they can trainsfersubstantial control to the MOE, setting priorities, policy analysis and planning.

The CDF for pretertiary education: The objective of the CDF exercise in WBG is to int;-gratesector-specific CDFs into the Ministry of Planning and Intemational Cooperation's (MOPIC) overallPlanned Investment Program (PIP), which is the basis for donor discussions and pledges. In the past year,the donors have let it be known that they are unwilling to support PIPs of poor quality, such as those ofprevious years. MOPIC and thus the line ministries have an incentive to prepare a PIP that reflects c,earerpriority-setting and performance measures. In constructing its CDF, each line ministry is asked to identifykey constraints to sectoral performance, and the key actions that should be taken to address theseconstraints, specify indicators that can be used to measure progress, and compile an inventory of vxho isdoing what to address the key constraints. The CDF has been acknowledged by donors to be a usefu. toolfor coordination programming, and would continue to develop to reflect the needs and goals of the MC)E.

Sector Issues and PA Strate2v The main sector issues are:

* Fiscal Sustainability* Management: Access* Quality and Relevance

Fiscal Sustainabilitv

Main issue: how to maintain fiscal equilibrium in the face of growing demand, needed qualityimprovements, and uncertain resource mobilization: At 4.5%, the population growth in WBG is high,and conservative estimates indicate that the basic-school-age population would increase by 30 percentbetween 2000 and 2005, requiring a major increase in recurrent expenditures to simply maintain ciurrentlevels of enrollment (see Annex 4). In addition, the PA. has established the goal of increasing secondarygross enrollments from 56 to 68 percent which would require additional recurrent and capital expend; ture.Needed improvements in education would add to this financing need. However, the share of PA's currentbudgets for basic and secondary education (nearly 17 percent of PA total current expenditure) is less likelyto increase. Donor funding for new construction, operation and maintenance (including textbooks) is alsolikely to be at the same level as recent years or decline. While the education system at present is fiscallysustainable, increasing demand together with constrained resources would threaten this sustainability.

Strategy of the PA: The PA is working with civil society and the private sector to finance schoolconstruction and to accept the retention of double shift school programs to respond to growing demand.Other strategies to improve fiscal sustainability included in the Five-Year Plan are: improvement ofplanning and budgeting, implementation of standards to monitor school performance, administrativetraining for all levels, and improvement of analysis and use of data for decision making. In addition, the

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Five-Year Plan includes the expansion of the private school system.

Management

Main issue: weak management capacity.

* Organization: The MOE Directorates carry out their regular duties well, but activities could be bettercoordinated. There are overlaps in responsibilities between Directorates as well as unclear mandates.The Functional Audit and the immediate implementation of its recommendations is expected to assist inovercoming such overlapping and inefficiencies. In addition, the final draft of the Five-Year Plan hasconsidered more realistic costing and targets and should help to rationalize and justify recent increasesin the teaching force. The Education Action Project (EAP) is also expected to contribute to furthercapacity building in the mentioned areas. The Directorate of Financial Affairs is not computerized andhas no clear mandate to analyze and consolidate expenditures. The Palestinian Bureau of Statisticsproduces impressive data, but these data are not used by the MOE to their full advantage to prioritizeand plan, and the Planning Department team needs support. These overall weaknesses are beingaddressed in the Five-Year Plan, which prioritizes and justifies activities. Top MOE staff are aware ofthese issues, but capacity needs to be built at operational levels of the organization.

* Financial Management: There is little capacity and few incentives for the Ministry of Finance (MOF)and the MOE to assess budget proposals in light of available funding and program characteristics. Thebudgeting process for the PA is neither contestable, nor transparent. There is no sound fiscal analysison which to base a clear rationale for funding sector activities. The current PA education budget is notbased on comprehensive knowledge of all the funding available for education investments andinformation is either unavailable or not available from certain sources (e.g. donors) in a timely enoughfashion to be integrated into the budgetary cycle.

3 Incentives: The incentive system for encouraging good perfonnance, sharing information andcoordinating programs is weak. Although promotion based on seniority is still the dominant form, andsalaries are low, there are cases of promotion based on competent skills. Young high performers leaveMinistry programs for the private sector. There is no budgetary reward for the MOE to submit wellplanned yearly proposals as other Ministries are not required to do this. Civil society has always beeninvolved in providing financimg for school construction, but until recently has not been a powerfulinfluence on the quality of the education system. Data could be better used to inform consumers ofsystem performance and provide incentives for improvement. The management of the PA expendituresis gradually improving through work with the IMF, but much remains to be done.

Strategy of the PA: The MOE has carried out a functional analysis to ascertain where responsibilities foreducation functions should lie. It aims to introduce new administrative and financial management systems,computerize the accounting system of the MOE, develop planning and monitoring capacity at all levels; andfurther decentralize education system fimctions. The MOE also recognizes that more needs to be done toinvolve civil society in ensuring the quality of the system. Human resource development would be achievedthrough developing staff management and leadership capacity; strengthening educational supervision;reinforcing the role of schools as education development units; and promoting cooperation with the localand the international community in the education sector. Standards for headteachers and accompanyingtraining for diploma certification would be developed.

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Access

Main issue: maintaining the current levels of enrollment for basic education and at the same timeincreasing the enrollment and retention at higher grades: Palestinians have 98 percent gross enrollmentrates (GER) in basic education (grades 1-10) for both boys and girls and 96 percent net enrollnent rates(NER). Enrollments begin to decline slightly at grade 7. At upper secondary (grades 11-12) the GER is 56percent and NER 43 percent. Given natural increases in school-age populations and higher enrollment :-atesat basic and secondary levels, the MOE projects that primary enrollments would increase by 39 percentbetween 2000 and 2005 for basic education and 66 percent for secondary education. The challenge is tomaintain the basic NER at grades 1-6 and gradually increase the completion rates for basic education atgrade 10 in the face of high population growth rates. The role of the private sector in education remainsundeveloped, both in formal and non formal sectors. There is an increasing rate of drop out througlh theupper grades of primary and secondary schools, both for boys and for girls. Access to secondary schoolingis inadequate, and with rising enrollments would become a more visible problem.

Strategy of the PA: The MOE aims to maintain universal access to basic education and increase thesecondary gross enrollment ratio to 68 percent by constructing more schools and utilizing existing buildingsmore effectively. It plans to implement micro-planning based on school mapping, which was started uaderthe Education and Health Rehabilitation Project funded by the World Bank. The MOE also support. thedevelopment of private schools, and the expansion of access. It also emphasizes the gradual increase ir. theprovision of secondary places and greater balance between general and secondary vocational places.

Oualitv and Relevance

Main issue: improving weak performance in the foundation skills (verbal, mathematical, and science)and in higher order cognitive (problem-solving) skills indicated by the limited evidence on students'learning achievements. In 1992, the International Assessment of Educational Progress found that WestBank students in Israeli-controlled, UNRWA, and private schools achieved the lowest scores on tests ofmathematics and science. Students in the 1998 assessment of the leaming performance of 6th graders in asample of public, UNRWA, and private schools achieved the lowest scores on verbal and analyicalproblems. Only 59 percent obtained passing scores of 50 percent or more in Arabic, the worst perform-.ncebeing in the application and synthesis of information. Analyses of just-administered assessments of studentlearning Arabic, mathematics, and science in grades 4 and 10 show similar patterns. Although impressivestrides are being made to upgrade the teaching force, it is largely young, and relatively untrained. Formany years, two curricula, the Jordanian and the Egyptian, were used in the WBG respectively.

Strategy of the PA: The PA completed and authorized the first Palestinian Curriculum Plan in 1998. 'Thisis a major effort to improve the quality of education. It defines subjects in each grade of basic andsecondary general and vocational education and the number of hours per week per subject. Implementadionof the first curriculum is planned to be phased over the next 5 years with the printing and development ofassociated new textbooks, learning materials, the development of an assessment system, and the upgracdingof school facilities such as laboratories and libraries. The Five-Year Plan also includes improved teacherin-service and pre-service training.

The MOE plans to develop a new vocational curriculum for the secondary level and increase the proportionof vocational secondary schools. The PA is establishing a single vocational/technical education systemunder the auspices of three ministries (Ministries of Education, Higher Education, and Labor) and theprivate sector to provide vocational/technical training for all Palestinians. The student body, curricula andinfrastructure would be rationalized across the three sector ministries and the public and private sectors.

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Investments under the project are to form part of a system that would allow flexibility in further educationoptions for students choosing vocational courses at the secondary level.

3. Sector issues to be addressed by the project and strategic choices:

Management: In order to improve management, the MOE needs (a) to divide labor effectively andinstitutionalize the division of labor in an organizational structure that clearly reflects the location of, andboundaries among, key functions, and (b) to introduce in each function effective management practicesthrough strengthening "management units" and ensuring that managers follow effective managementpractices. The latter mnight include developing clear job descriptions and terms of reference for staff andsupport for improved functions such as planning and budgeting, and for managers in : a) the formulation ofa strategic vision, the setting of objectives, and the monitoring of activities aimed at achieving theseobjectives; b) planning and programming; c) managing fnancial, human and material resources; and d)practices such as coordinating activities and conducting meetings.

The project would consider the recommendations and findings of the Functional Audit, from which it wouldinclude a variety of activities aimed at further improving these practices.

Fiscal Sustainability: To ensure fiscal sustainability, the MOE needs to implement a fiscally realisticscenario of the Five-Year Plan which is being finalized in light of a macroeconomic framework. The MOEneeds to: (a) prepare annual workplans within the framework of the Five-Year Plan, and (b) monitor theirimplementation to feed the results into ongoing review and planning process.

Strategic choices

* Improving planning and policy making: The project design encourages the MOE to continuedeveloping a coherent education strategy, with an emphasis on the annual planning process. Given theextensive commitments of other donors, a small well-targeted project supporting the Five-Year Plangoals was considered the most suitable investment.

3 Emphasis on management andfinancing: Given the constraints of PA budget, the MOE needs toimprove its ability to use domestic and donor funds more strategically and to improve planning andpolicy making. The development of annual workplans is expected to gradually incorporate improvedstrategic thinking arising from the planning process. Capacity building and targeted investment areasare linked. For example, the development of the EMIS would contribute to improved school mapping.This should enable improved planning for resource allocation.

* Funding vocational secondary education: At present there is an inadequate supply of qualityvocational technical education. The project would support the efforts of the PA to provide acoordinated approach by the MOE, MOHE and Vocational Expert Team to training and skillsdevelopment and increase the number of places available for vocational secondary courses. In theintegrated strategy, these would lead to appropriate further education and training (see Annex 13).Pilot programs in vocational secondary education were selected for funding in order to improve accessto secondary education overall, to broaden the curricula options for students in light of a new and moreflexible approach to integrating vocational education and training across basic and higher education,and to improve the possibilities for employment in a difficult labor market. The selection of the pilotprograms also reflects a least-cost analysis (see Annex 4). The programs would be delivered atexisting academic secondary schools with a few additional vocational/technical workshops (i.e.,comprehensive secondary school system). By sharing land, facilities, general teachers andadministrators with academic programs, the pilot programs would be much less costly than theapproach of the separate vocational/technical training school system.

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Targeting improvements

(a) In addition to working with a number of centralized departments, the project specifically focuses onimproving the use of data by planning departments in District Offices and at Central level. At pre 3ent,District Offices do not provide coherent linkages between the MOE and schools, and vary in their cap tcityto implement new strategies. Although their roles and functions might be clear, it should be developed tothe level of providing the coherent linkage between the MOE and schools.

(b) Targeting under the project includes:* gender: secondary school girls for vocational training,* poverty: vocational school sites would target areas of relative deprivation.

C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):

Indicative Bank- ~~% odfComponent JSecto~ ~~r Costs % of fnnig Bank-

1. Strengthening Capacity of MOE InstitutionalDevelopment

1.1 Policy, Planning and Financing Institutional 1.47 19.3 1.39 19.9Development

1.2 Support for Implementation Institutional 0.28 3.7 0.26 3.7Development

2. Targeted Interventions2.1 General Education Other Education 3.13 41.0 2.92 41.72.2 Vocational Secondary Education Secondary 2.75 36.0 2.43 34.7

Education

Total Project Costs 7.63 100.0 7.00 100.0

Total Financing Required 7.63 100.0 7.00 I00.0

*w. MY et dd wP dwe Se din

Component 1: Strengthen Capacity of MOE (US$1.76 million)

Sub-component 1.1 Policy. planning. and financing (US$1.47 million!. This sub-component would supportthe preparation and evaluation of Annual Work Plans and Budgets (AWPB) to operationalize the prioritiesof the Five-Year Plan plan. The project would support five key Directorates of the MOE (Planning,Buildings and Works, Training, Vocational Secondary Education and District Development) in developingand selecting detailed proposals for activities in the annual plans. The quality and coverage of the annualworkplans and budget proposals are expected to improve gradually over the project period. Specificactivities under this component are:

* putting in place an EMIS including school mapping facilities and extending this to all Districtoffices;

* computerizing the MOE financial management system;* building a two story vertical extension to the MOE's annex;

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* providing training, scholarships and workshops for MOE staff and stakeholders (in management,planning, economic and financial analysis); and

* providing technical assistance to support capacity building.

Activities under this component are intended to provide sustainable support to the MOE management team.Thus, computerizing the financial management system not only fulfills World Bank requirements, but itimproves the longer term financial management capacity of the MOE.

The workplans should be developed in a timely fashion to allow for consultations with the Bank andintegration into the annual budget cycle.

Sub-component 1.2. Support for project implementation (US$0.28 million!. This sub-component coversthe costs associated with improved management of financial and procurement systems to implementTFC-funded activities, and the hiring of extemal expertise to support and mentor MOE staff.

Component 2: Targeted Interventions (US$5.88 million)

This component would support the implementation of activities in the Five-Year Plan and AWPB preparedunder sub-component 2.1. Activities would include sub-components for general and vocational education.

Sub-component 2.1 General Education (US$3.13 million). This sub-component includes (a) the extensionof a program for school improvement through staff review and school development program (including afund for training); and (b) the development of professional standards for headteachers.

Sub-component 2.2 Vocational Education (US$2.75 million). This sub-component includes (a) supportingthe MOE to develop and pilot the curriculum and materials for the secondary vocational stream (e.g., onoffice equipment maintenance, hotel and restaurant services, tourism) and: (b) establishing pilot units forvocational secondary classrooms and workshops attached to existing general secondary schools.Additional construction and equipping of annexes and extensions to existing schools, within the frameworkof the project, may be considered.

These activities match the goals of the Five-Year Plan and the MOE objective of improving themanagement and financial sustainability of the system. The table below shows the relationship between thegoals of the Five-Year Plan, and projects activities for the first year. See also Annex 2 for a more detailedanalysis of how the project activities fit into Five-Year Plan activities.

TARGETED Maintain or Improve access to Improve Management Improve qualityAREAS WITHIN improve access to secondary educationTHE FIVE-YEAR basic educationPLANComponent 1: EMIS Financial management

development upgrading

Development of Annualworkplans

Component 2: Construction of Development of School Improvement Throughvocational secondary standards for Review and Developmentworkshops attached to headteacherspilot general secondary Development of pilot secondaryschools vocational curriculum

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2. Key policy and institutional reforms supported by the project:

A full review of needed institutional changes is outlined in Annex 11.

Policy reforms sought are based on the assumption of a rationalized use of funding for the education sectorthrough improved management and use of data in planning. The Policy and Planning sub-componentwould support the implementation of: (a) rationalized school construction on the basis of school mapping;(b) improved use of data for policy making and strategic planning through the implementation of an EMIS;(c) improved financial management through upgrading and computerization of the financial managementsystem; (d) improved management through support for formalizing the policy function, with a re-alignmnentof the functions of the planning committee; and (e) support for the development of annual departmentalworkplans.

Other implicit policy-based activities are support for (a) school based management, and b) improvedvocational secondary schooling.

3. Benefits and target population:

* Administrators: These include administrators at national and local levels whose incentives andneeds for improved performance would need to be fully analyzed and addressed. This group would betinefitfrom management training, upgraded information systems and financial data.

a Teachers: The burden placed on teachers is high in terms of salary and working conditions, socialexpectations and lack of a career structure. They would benefit from improved incentives for betterperformance through the linkage of the school planning program to job evaluations and training, andthrough the development of professional standards.

* School Level Stakeholders: Over the long term, the final beneficiaries are school-aged children andtheir families who would benefit from an improved education system with better learning outcomes. Oneimmediate outcome of the project should be a larger nurnber of girls and boys given the opportunity towork in vocational occupations on an equal basis.

4. Institutional and implementation arrangements:

Project Management: The MOE would be the executing agency of the project (See Annex 2) which wouldbe imnplemented over a three-year period (2001-2004). Since the activities of this project would be a subsetof the five-year education plan (as developed with the assistance of UNESCO/IIEP), the project would becarried out through existing MOE channels.

The Project Support Team (PST) would consist of a small core administrative team headed by a ProjectDirector, and would comprise newly recruited specialists placed in key positions in the MOE rather thar, ina stand alone unit. These specialists are expected to provide the professional strength and expertise lack:ngin the MOE and to mentor staff working on all project activities. In addition, some MOE staff would beassigned to specific new responsibilities as needed for the project. The MOE has experienced staff to assi gnfor the key positions in the PST, which would comprise: Project Director, Financial Specialist,Procurement Specialist and administrative support. The recruiting process for PST staff would startimmediately after Negotiations and the hiring process would be completed before effectiveness.

Financial Management: The MOE's Financial Management System (FMS) has been reviewed to assessits planning, budgeting, accounting, financial reporting, intemal controls, and auditing arrangements todetermine whether the MOE has the capacity to generate timely, accurate, and reliable financial reports.

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Some insufficiencies were identified during the review, including non-computerization and integration ofthe accounting system, no official written definition of the financial management procedures, and the lackof an independent competent external auditor. A financial management action plan, agreed upon with theMOE, has been developed to rectify these weaknesses before disbursement takes place and thecommencement of project implementation. The first phase of the action plan should be completed by boarddate, the second by effectiveness, and the third during the lifetime of the project. In order to complete thefirst phase of the action plan the MOE will hire a consultant specialized in accounting and financialmanagement to assist in the preparation of the Financial Management Manual (FMM) for the project andother areas. This FMM would be issued before effectiveness of the project.

Accounting and Financial Reporting: The PST director would ensure the issuance of the transitionalperiod reports, the annual project financial statements, and the quarterly project management reports(PMR) on a timely basis to the World Bank and to the auditors. Procedures for accounting and financialreporting would be developed by qualified specialists and would aim to conform to the World Bank'srequirements.

Audit: MOE would appoint, before effectiveness, a private independent auditor acceptable to the Bank tocarry out an annual audit in accordance with the International Standards on Auditing. The appointment ofthe auditor would be in accordance with the Bank's guidelines and Terms of Reference (TOR) acceptable tothe Bank. The auditor would express a professional opinion on the annual project financial statements andwould submit to the Bank an annual audit report, including the Management Letter, within four monthsafter the end of the fiscal year. Auditors for the first year would be appointed before effectiveness of theProject.

Disbursements: Disbursements from the Trust Fund Credit would be initially made on the basis of thetraditional system (replenishments to the Special Account and reimbursements with full documentation andagainst Statements of Expenditure (SOEs) and direct payments). Disbursements against PMRs will beconsidered after the reassessment of the financial management system and the issuance of a certificationensuring that this system is operating satisfactorily. The target date for providing quarterly PMRs is April1, 2002.

Project Monitoring and Evaluation (M&E): The PST would be responsible for coordinating monitoringreports from the MOE line Directorates on progress against agreed-upon performance indicators (SeeAnnex 1). For this purpose, it would develop and maintain a project information system which wouldgenerate annual progress reports for the PA and relevant donors, including the World Bank. The MOE'stechnical units (and district offices) responsible for implementing each project component would providethe PST with quarterly progress reports summarizing the current status of project implementation,including financial records, explanations for deviations from agreed-upon implementation plans, constraintsand corrective measures to be taken, and a workplan for the subsequent six months. The PST would alsocontract independent technical auditors to undertake a technical review of each project component. Thesereports would be consolidated by the PST and included in the quarterly PMR and Annual ProgressReports.

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D. Project Rationale

1. Project alternatives considered and reasons for rejection:

* An altemative project design considered a more important expansion of vocational education torespond to the growing demand for secondary education. Such a design would have implied increasedproject resources for civil works and equipment, and less resources for capacity building. It w(uldhave also rendered more difficult to mrinimize the differences between the general and vocationalstreams of secondary education. The risk of two separate systems of secondary education would havebeen much greater. A gradual increase in the supply of vocational education allows for thedevelopment of synergies between the two streams, and for the development of a more relex antvocational education.

* It was also considered whether to finance activities in all MOE directorates or in just a selected grc:upof directorates. It was decided to concentrate on MOE directorates which were either involvecd inmaking strategic choices (i.e., the planning department) or whose expenditures were amongst thehighest for the MOE (i.e., Buildings and Equipment, Vocational Secondary Education and Training).This choice avoids diluting resources in too many different directorates and thus improving hepotential impact of the project.

2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).

I : ff ; :1 ; : 9 : ff E:0i Latest SupervisionSector tssue P (PSR) Ratings

______________________________ ___________V ____________ Bank-financed projects onIyvImplementation Development

Bank-financed Progress (IP) Objective (DO)

Emergency rehabilitation of schools, Education & Health S Sprovision of textbooks and equipment, Rehabilitation Project; closingtogether with expansion of MOH June 30, 2001delivery system. Donor co-financing Education:has supported curriculum development, US$12 million TFGWBinfrastructure construction and US$10 million Saudi Arabiarehabilitation, and special needs US$7.65 million Italyeducation. US$0.5 million Australia

Health:US$8 million TFGWBUS$10 million Saudi ArabiaUS$ 1.0 million Italy

Support to NGOs involved in social The Palestinian NGO Project S Sservices, including community school US$10 million TFGWBbuilding and health care. US$2.5 million Saudi Arabia

US$2.5 million Italy

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Improvement of social and economic Community Development S Sinfrastructure services in small Projects I and IImunicipalities and villages, includingrehabilitation of local schools, clinicsand roads.

Other development agenciesEducational activities UNICEF, UNDP

US$191,000Books, book production and evaluation Italy, Belgium

US$4.95 million

Supplies and equipment for MOE Italy, Norway, EU, Spain,UNESCO, Saudi Arabia, MOFUS$6.4 million

Development of district schools, Arab Fund, Saudi Arabiaincluding furniture US$17.06 millionSchool construction Italy

US$3.3 million

Total funding mid-June 2000 US$31.2 millionAverage annual funding 1998-2000 US$38.4 million

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

Donor Coordination essential: At the present time, the MOE relies on donor funding to finance investmentcosts. The table in section D.2 demonstrates a high level of donor activities (see full table in PIP).However, despite a good donor coordination committee and efforts by the MOE to coordinate donorinvestments, the extent of the reliance of the MOE on external funds has made coherent strategies forutilizing funding difficult. The MOE has taken the initiative to address this problem in its five-yearplanning process, and there is significant donor support for moving towards coordinated funding. The EAPwould help the PA to improve its planning and implementation capacities.

Timely use of technical assistance (TA) is essential: Donor-funded TA has not always been available whenthe MOE could make effective use of it. In some cases, the MOE has not been clear about its needs, sotechnical consultants could not customize their help effectively. In other cases, the MOE has not had thein-house staff time or capacity to make effective use of the TA that was needed. MOE leadership and theWorld Bank have agreed that this project would work to include both timely and appropriate TA andtraining activities.

PSTs separated from the line functions of a ministry do not build capacity within the ministry: Experiencein other countries shows that a PST that is totally separated from the routine operations of a ministry oftendoes not leave sustainable capacity for continued implementation after the project has closed. A small PSTwould be developed, integrated as much as possible within the line directorates in the MOE. The projectdirector would likely be attached to the Planning Department, the financial manager to the Directorate forFinancial Affairs, and the procurement officer to the Building and Works Department.

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4. Indications of borrower commitment and ownership:

In the five-year planning process, the MOE has powerfully demonstrated its commitment to improvedmanagement of the sector's resources. It consistently attempted to involve stakeholders in the dialogue, andtook calculated risks in inviting international and local participation in a workshop to openly discuss theresults. Following this workshop, the MOE itself suggested donor responsibility for specific follow-upactivities by theme, and the World Bank and UNESCO were asked to play a role in capacity building, todemonstrate that the MOE is prepared to use institution-building assistance effectively. The five-yearplanning process has changed the culture of the MOE. There is an eagerness to capitalize on the progressmade thus far. The efforts made to achieve a realistic scenario for education services in a complicatedeconomic situation are impressive and are expected to continue. Activities outlined in Section C2,providing incentives for the institutional and policy reforms, also strongly demonstrate ownership of projectactivities.

In addition, the careful consideration given to the appropriateness of this credit demonstrates theseriousness of the MOE's intent. The MOE feels strongly that borrowed money, as opposed to grantfunding, should be used wisely, and technical assistance should be well targeted (see D3).

5. Value added of Bank support in this project:

The World Bank mobilizes substantial international technical knowledge to support the implementationchallenges that lie before the MOE. In particular, the World Bank can assist its clients to allocateresources efficiently. This project would help develop the capacity of the MOE to assess fiscalsustainability, search out least-cost alternatives, track implementation progress relative to performanceindicators, and evaluate the effectiveness of selected investments.

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4):o Cost benefit NPV=USS million; ERR = % (see Annex 4)o Cost effectiveness* Other (specify)

The economic soundness of the overall project design is ensured by basing the project concept on the WorldBank Assistance Strategy and Comprehensive Development Framework, which identifies management,efficiency and financing issues as priorities for change. Cost-benefit analysis was also used to justify amajor investment program of component 1, the extension of the MOE building (20 percent of costs). Theproposed investment would have a reasonable internal rate of return (14 percent), assuming that thediscount rate is 10 percent and the life span of the building is 30 years. For selection of targetedsubprograms under component 2, economic justification would be promoted in the improved plannmngprocedures. The targeted subprograms are expected to address the priority objectives of the Five-YearPlan, which would contribute to poverty reduction and the growth of the economy such as maintaining fullaccess to grades 1-6, increasing enrollments for grades 7-12, improving equity of access to secondaryeducation, and improving quality of teaching. The proposed secondary vocational activity is justified onthe grounds of cost effectiveness. For example, a proposed establishment of two vocational/technicalworkshops for an existing academic secondary school is estimated to require recurrent costs per additionalstudent much lower than a new industrial secondary school (50 percent of costs). Overall, the MOE hasbeen finalizing the Five-Year Plan by prioritizing activities which are more effective and efficient. Thuis,the selection of target subprograms within the framework of the Five-Year Plan should be justifiable. Theproject preparation has been also assisting the MOE in strengthening the capacity for economic analysis,

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especially through a workshop for economics of education and technical assistance for an assessment offiscal affordability of the Five-Year Plan. The project would continue supporting capacity building byimproving the management information system and the utilization of data for planning, monitoring, andreviewing programs.

2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)

Financial Structure, Efficiency, and Viability of the Project Entity:

Given the worsening macroeconomic situation, immediate attention is needed to identify strategies to placethe system on a more realistic footing. As for the rest of the PA, the MOE financial and accountingsystems are on a cash basis and are highly centralized and rigidly controlled. As a result, the existingmanagement system is unable to identify inefficiencies or make a reasonable estimation of future resourcerequirements. There is an urgent need to establish a sound accounting and financial management system onan accrual rather than cash basis. The basic education system is reasonably efficient, but there arequestions regarding the size of the teaching force.

Fiscal Impact:

The impact of the project on the PA finances is assessed. The analysis uses: a) data from the MOF; b) theIMF's medium-term macroeconomic frameworks; and c) the MOE's efforts, assisted by UNESCO/REP andthe World Bank, to develop a fiscally realistic scenario for its Five-Year Plan. The total project costs areUS$7.63 million over the three-year implementation period. The project's recurrent costs would be 4percent of the costs (US$0.3 million), a very small percentage of projected total education recurrentexpenditures (less than 0.05 percent). The incremental recurrent costs of the project seem affordable, sincethe project would support the implementation of the MOE's annual plans/budgets that would have beendeveloped within the expenditure framework of a prioritized final scenario of the Five-Year Plan. Theproject would ensure fiscal feasibility by (i) supporting an improved capacity of the MOE to develop andimplement its annual plans/budgets and associated EAP annual workplans; and (ii) monitoring theimplementation of the annual plans/budgets. Thus, sustainability would depend upon the ability of MOEstaff to integrate proper planning and budgeting processes into their routine planning operations. Thedetailed fiscal impact analysis is provided in Annex 4.

3. Technical:

The project builds upon the technical capacities that already exist within the MOE, with emphasis ontaking incremental steps to further expand these capacities.

Component 1 activities would build upon the strategies and interventions that have been developed andidentified in the Five-Year Plan. Overall, the project design minimizes the risk of introducing complextechnical programs, thereby allowing the MOE to focus on institutionalization and integration of modemmanagement capacities into its organizational structure through technical assistance, training, and possibletwinning arrangements with other similar agencies or ministries. This capacity building would include: (i)consolidation of functional facility standards already developed over the last four-year experience; and (ii)development and use of an effective GIS-based school mapping and decision support system, ensuringequitable distribution of resources and thus ensuring support from district authorities, central coreministries, and the trust of donors, fiurther increasing the potential for greater donor financial support.

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Component 2, the proposed annually funded activities would depend on the MOE's priorities in eachagreed annual work plan. However, any anticipated activities would be within the technical capability ofthe MOE, which has already demonstrated its capacity to implement larger and more complex technicalassistance and training programs as well as the procurement of works and goods for various donors.

4. Institutional:

4.1 Executing agencies:

The executing agency is the MOE. Institutional assessment points to four areas that require particularattention in terms of ensuring effective project implementation:

* the need to improve coordination and communication between the different units within MOE.* the lack of a forum for coordinating activities and sharing information with the other education

providers (NGO/private and UTNRWA). To address these issues, a Project CoordinationCommittee (PCC) would be established to provide policy guidance, oversee MOE/PSTmanagement of day-to-day project operation, and facilitate the coordination of activities among thevarious MOE units as well as with outside agencies involved in the project, including the donors

i the need to clarify the roles and responsibilities of District offices so they become an effectiveliaison between schools and the MOE.

- ensure that such units are complementary and coordinated closely. The introduction of a moredecentralized management system, supported by improved communication and information systembetween various departments and facilities under the MOE supervision, may help mitigate some ofthe difficulties created by these restrictions.

4.2 Project management:

The existing MOE staff has gained considerable experience in project management through its jointimplementation with the Palestinian Economic Council for Development and Reconstruction (PECDAR) ofthe ongoing EHRP over the last four years. The existing staff include a competent team of architects andcivil engineers, and financial management and procurement specialists who would forrn the core staff of aunit within the MOE and have responsibility for the management and implementation of the project. Theproject would enhance the MOE's capacity through the recruitment of additional staff, as needed, tostrengthen financial management and procurement as well as coordination of technical assistance andtraining programs. As part of the pre-implementation activities, the MOE would receive technicalassistance in reviewing and updating the existing financial management systems and procedures in order todevelop a computerized Project Management Information System that would generate the quarterly ProjectManagement Reports (PMRs) and establish auditing arrangements. An action plan would be prepared andagreed upon during appraisal with the MOE to ensure that the financial management and procurementsystems are in place and ready for disbursement by the project's start date.

4.3 Procurement issues:

The procurement capacity in the MOE has been assessed. The MOE has considerable experience in theimplementation of donor-funded projects. All necessary documentation for all first year activities has beenprepared and is satisfactory.

4.4 Financial management issues:

The financial management arrangements proposed in the agreed time bound action plan would, ifsuccessfully implemented, enable the project to release reliable and timely financial reports.

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5. Environmental: Environmental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) and the significant issues and their treatment emerging from this analysis.

The potential environmental impacts are limited to issues involving civil works associated with five specificbuildings: a vertical extension of the MOE, and four building additions to existing secondary schools forvocational training facilities. During the architectural and engineering design phase for these structures, theenvironmental impact of each school will be screened by the MOE/PST staff so that any issues related tothe World Bank's social and environmental safeguard policies can be identified. For example, screeningwill take place to ensure adequate potable water supply, connection to wastewater sewer mains, storagefacilities for solid waste, adequate safety and ventilation measures for installation of industrial trainingequipment, and any other potential enviromnental issues.

5.2 What are the main features of the EMP and are they adequate?

Since construction would take place at existing sites, and involves only extensions to existing buildings, andno significant environmental siting or pre-design issues have been identified during preparation, a separateEMP is not appropriate nor required prior to appraisal or prior to World Bank Board presentation.

5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: not applicable

5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describe mechanismsof consultation that were used and which groups were consulted?

The public participation approach with stakeholders undertaken for this project is described in Sections 6.2and 6.3 below.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?

MOE is arranging for short-term technical assistance to focus on the design aspects related to therehabilitation and construction of the facilities funded by the project. During the architectural andengineering design phase for civil works contracts, adequate technical specifications would be prepared tomitigate environmental issues such as: proper water supply, connections to wastewater main sewers,storage of solid waste, adequate installation designs for safety and ventilation of industrial trainingequipment, disposal of construction waste and other associated environmental issues. These specificationsfor environmental mitigation would be reviewed and approved by the Bank prior to release of biddingdocuments and prior to signature of construction contracts.

The major environmental issue during operation of the new vocational training facilities would be thedisposal of limited amounts of chemicals and materials to be used for teaching purposes. For these wastematerials, an acceptable mitigation measure is to include disposal of chemicals and similar materials aspart of the supplier's contract.

During project supervision, the Bank team would report annually on the status of implementation of theenvironmental mitigation measures for the phases of design, construction and operation of the five buildingstructures funded by the project.

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6. Social:6.1 Sunimarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.

The strains imposed by physical and economic isolation of the WBG population are well documented.WBG is not the poorest area by comparison with other IDA clients. However, the social structure ofWBG, constrained by the tensions and conflicts between Israel and the Palestinians, is undergoing furtherstrains during the uncertainty of the peace process and the transition to statehood. Expectations for a highstandard of living, derived from close affiliations with Israel and from Palestinians living in the diaspora,create unrealistic expectations for economic progress. Surveys have shown that education and health arepriorities for the average family. However, expectations for the quality of service delivery are unrealistic.Unemployment leading to family stress and the lack of mobility within the country and abroad, posesignificant problems for traditional social structures. In addition, there are differences between the WVestBank and Gaza populations that reflect different historical affiliations and relative isolation from outsidecontacts.

The high birth rates as of 1995, 7.4 percent TFR for Gaza and 5.6 percent for West Bank, wouldexacerbate these tensions in the coming years. They would further strain the education system andtraditional social structures. Young people unable to find sufficient employment will need high skill levelsin order to compete elsewhere for work. The high levels of poverty force young people out of school andinto the labor market, possibly increasing the number of child labor issues and increasing the need forimproving retention rates.

6.2 Participatory Approach: How are key stakeholders participating in the project?

Primary beneficiaries and other affected groups: The Five-Year Plan was developed in a participatoryfashion with working groups comprised of NGO representatives and other stakeholders. A largeintemational workshop to discuss this plan was developed in a highly participatory fashion, and publicdiscussion on the plan has been encouraged and contributed to the MOE asking for World Bamkinvolvement. A second intemational seminar took place in October 2000 to present and discuss an updatedversion of the plan. The MOE is aware that stakeholders should be consulted on a regular basis and ihisapproach of asking for inputs from stakeholders is expected to continue throughout the project. For theschool-based management program, consultation with teachers and school staff would be essential.

6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?

The project mainly targets education administrators. In discussions on improving the use of data and in -hedissemination of data to stakeholders, the project is recommending to the MOE that it should strengthendiscussions of education issues with representatives from local NGOs, particularly on community andparent interaction with schools. Included in standards for headteachers would be ways in which schoolmanagement can increase the involvement of parents and communities. NGO representatives are part ofthe consultation process for the overall Five-Year Plan.

6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?

By improving the management of the education system and the production of socially relevant data linkedto education needs, the project should increase the ability of MOE staff to target low income and othervulnerable groups. The availability of secondary vocational programs for girls would assist in raising theinvolvement of women in the labor force.

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6.5 How will the project monitor performance in terms of social development outcomes?

Social development outcomes from this short-term project are unlikely to be measurable during the courseof the project. However, an improved data base would capture indicators leading to analysis of socialissues, such as drop outs, enrollment of girls, qualifications and length of service of teachers.

7. Safeguard Policies:7.1 Do any of the following safeguard policies apply to the project?

P6lcY AppltobillhEnvironmental Assessment (OP 4.01, BP 4.01, GP 4.01) * Yes 0 NoNatural habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes * NoForestry (OP 4.36, GP 4.36) 0 Yes 0 NoPest Management (OP 4.09) 0 Yes * NoCultural Property (OPN 11.03) 0 Yes 0 NoIndigenous Peoples (OD 4.20) 0 Yes 0 NoInvoluntary Resettlement (OD 4.30) 0 Yes 0 NoSafety of Dams (OP 4.37, BP 4.37) 0 Yes * NoProjects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes 0 NoProjects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) 0 Yes 0 No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

As the project would use public land already owned by the municipalities for construction of buildings, andduring project preparation no other issues related to OD4.30 Involuntary resettlement were identified, thisOD4.30 is not applicable to the project.

The implementation of environmental mitigation measures related to OP/BP/GP4.01 would be monitoredduring Bank supervision missions.

F. Sustainability and Risks

1. Sustainability:

The incentives required to sustain institutional changes (Component 1) are discussed in section C.2. andAnnex 11. In summary, the intensive effort to better plan and budget for the next five years should resultin a sustainable system. Analyses show that priorities within agreed departmental work plans (Component2) are a core component of the project. Issues of fiscal sustainability are integrated into the project designand have been described under technical assessment. The project was prepared during a time of anticipatedpolitical stability. At the time of negotiations this has changed, and clearly political instability may affectthe implementation of project activities in the short term if the situation does not change (see Annex 4).

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2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):

Risk Risk Rating Risk-Mitigathon MeasureFrom Outputs to Objective1. Incentives for behavioral changes at S Donor requirements for moving to coordinatedthe MOE and Districts to plan, improve funding; participatory approach to devel opingthe cost-benefit/cost-effectiveness basis planning and data utilization strategies; trainingfor selecting programs, assess the fiscal on EMIS and analytical techniquessustainability of initiatives, and to monitorthe implementation and evaluate theimpact of programs are not put in place.2. The MOF does not allocate sufficient S PDP, Donor discussions and CDF activi :iesfunds or devolve financing to MOE in a create constructive environment for effic tenttimely fashion. national planning and budgeting3. Trained staff leave Ministry service in S Minimizing the risk here depends on willingnesslight of low salaries. of PNA to work on civil service reform andTeacher/administrative staff ratio remains restrict public service hiring.the same or declines4. Political instability in the short term S Baseline surveys of employment needs andprevents constructive administrative tracer studies enable pilot program to bechange and students from vocational re-assessed and changed to meet labor marketsecondary programs are not employed needs.after graduation.5. Teachers object to new management M Consultation with teachers on incentives andtraining and strategies. new training creates consensus on approaches6. Coordination between departments at S Clear roles and responsibilities are outlined withthe MOE and the Districts is not accountability built into performanceimproved in planning process. assessments

From Components to Outputs1. School management outcomes do not M School based planning enables school staff toimprove. make better use of resources, training provides

incentives for staff to teach better.

2. Students do not enroll in pilot M Community awareness/participation in schoolvocational schools. site identification improve community view of

vocational education.3. Construction of new administrative M Joint donor review of construction and overallbuilding does not reduce operations & planning and budgeting strategy place increasedmaintenance costs and does not free emphasis on rational use of space.resource for other educational activities.4. Headteachers do not enroll in courses. M Involvement of headteachers in development of

training programs.

Overall Risk Rating S

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

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3. Possible Controversial Aspects:

The project may seem controversial to MOE employees - requiring changes in behavior and managementpractice, at all levels of the education system. Some donors may be unwilling to move from a project to aprogran approach to facilitate programmed use of funds by the MOE.

G. Main Loan Conditions

1. Effectiveness Condition

a) The MOE will have developed prototype annual workplans for the five departments benefiting from firstyear project activities.

b) The MOE will establish a financial management system according to the Financial Management Plan.

c) The MOE will hire a Project Support Team comprising a project director, a procurement specialist, afinancial management specialist and support staff.

d) The MOE will hire an independent extemal auditor.

2. Other [classify according to covenant types used in the Legal Agreements.]

H. Readiness for Implementation

1 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.

2 1. b) Not applicable.

Z 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

E 4. The following items are lacking and are discussed under loan conditions (Section G):

1. Compliance with Bank Policies

Z1 1. This project complies with all applicable Bank policies.1] 2. The following exceptions to Bank policies are recommended for approval. The project complies with

all other applicable Bank policies.

Vuis Guillrmno'akim a Naudouy \ N obTeam Leader Secto r Director M w

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Annex 1: Project Design SummaryWEST BANK AND GAZA: Education Action Project

Key PrformanceHierarchy of ObjtivesE; Indicators Monitoring& Evaluation Critical Assumptions

Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)

Public Sector management and Improved efficiency and *Budget circular *Economy improves and providesisiuinlcapacity budn rnprnyo ulcopportunities for the educated toinstitutional capacitybuilding rmanagement, especially *Audit report of budgetary earn incomes.

managemnt, espcially:process

p. Transparency in budgetary *National and ministerial *Political stability is gained andprocess and practice. bdesmaintained during p -oject

2. Improved educational prooutcomes as measured by *National and international *Emphasis on good dataappropriate indicators (test assessment data. Data collection is maintai t ed andscores, enrollments, improved collection from statistical govermment participates inteacher performance) over the department. international assessmentlong term.

Human resource development Efficiency of MOE personnel *National Statistical Reports on *Teacher/administratrve staffmanagement increased staffing numbers and ratio remains the same or(rationalized and fiscally expenditures declinessustainable hiring, deployment,and wage increase)

Project Development Outcome I Impact Project reports: (from Objective to Goal)Objective: Indicators:Improve the capacity of MOE to *More effective management of *Sector work *The PA allocates adequatemanage and plan for an effective sector improvement *Five-Year Annual Workplans budget for implemen ing theeducation system *Enhanced civic support for the *udgetYeprA ofive year plan.

sector; *Budget reports *The PA approves the annualbudget on time and funding is

*More rational and persuasive eJoint Donor Monitoring reports transferred to MOE firombudgetary processes for the Ministry of Financel sector * Financial managemer t system

* Increased and better-used improvedinternational aid resources, *Coordination and joir t

*InforTnation from student and monitoring of donor fanding fortenfmache n from asestents are education sector acti'ities isteacher assessments areageduoincorporated into school and agreed upon.teacher performance reviews.

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Key PerfonnanceHierarchy of Objectives Indicators Monitoring & Evaluation Critical Assumptions

Output from each Output Indicators: Project reports: (from Outputs to Objective)Component:1.1 Improved policy making, * Annual workplans that are * Supervision reports * Incentives for behavioralplanning, and financing increasingly based on agreed changes take place among MOE

criteria are used to prioritize * Annual work plan and District staff enabling themdonor funded activities and PA to use data appropriately.education program. *Workshop evaluations from

* Difference between budgeted local and national level, s Trained staff stay in MOEamounts and actual donorlNGO committee meeting service in light of low salariesexpenditures is within 1O% minutesrange

*EMIS updated and utilized atcentral and district offices inannual and multi-year planningand monitoring planimplementation

*Financial management systemcomputerized and operationalby January 2002

*Lessons leamed from planningprocess are assessed,disseminated, and discussed atworkshops and regularly heldplanning commnittee meetingsand sector working group(Donor/NGO) meetings

1.2 PST established and oTimeliness of Project * Supervision reports *PST adequately staffedoperational procurement;

*Timeliness of Projectimplementation reports;

oTimeliness of preparation ofnecessary Projectdocumentation.

2 Targeted activities *Detailed planning for selected * Annual work plans * Coordination betweenimplemented according to annual pilot activities is based on * Supervision reports departments at the MOE andworkplans adequate financial and oEducational data system, the Districts is improved in

educational data. (e.g., financial reporting system. planning process.proposals for new school *Monitoring reports, projectconstruction, using data from management informationEMIS) system.

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2.1 Targeted activities *Training of head teachers in *School based planning wouldimplemented for general modem school management - improve school maragementeducation 30% each year as of September and incentive strucrJre.

30, 2001. *Joint donor review, :f* Number of training funds construction and ov, rall

utilized; 20% first year. planning and budgeing strategy*Number of schools engaged in place increased emrhasis on

school improvement activities rational use of spact%through management programreaches 1,600 by end of year2004.

*Number of teachers receivingtraining through school-basedtraining grant scheme reaches550 by end of year 2004.

* Information from student andteacher assessments isincorporated into school andteacher performance reviews.

*Modernized and expandedschool facilities and improvedtheir use.

2. 2 Targeted activities *Number of students enrolling in * Annual work plans oLabor market more, .uicklyimplemented for vocational secondary vocational programs * Supervision reports absorbs better trained students.secondary education by gender reaches 7.5% of total * Educational data system,

secondary enrolment by year financial reporting system.2004. * Monitoring reports, project

management informationsystem.

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Key Perlo. ancaHierarchy of Objectives Ind tors Monitorng & Evaluaffon Crtical Assumptions

Project Components I Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)

1. Strengthen capacity of MOE * US$1 .76 million *Financing statement *District level MOE offices*Progress report cooperate in decentralized*Procurement management reporting and monitoring

1. 1. Policy, Planning and report activitiesFinancine * Semi annual project supervision*Monitoring implementation of report

selected activities: TA/training *Monthly disbursement summary*Data-based pilot policy making *Quarterly PMR:

process (e.g., efficient use of eAnnual audit reportsschool facilities): TA/training

*Data-based educational annualworkplan and budgetformulation processTA/training

*Educational and financialmanagement informationsystem:equipment/goods/training/TA

*Statistics and informationdissemination and consultation:TA/training

* Vertical addition to MOEbuilding

1.2. Proiect Suwonrt Team*Support MOE core project

management staff*Training for project

management and financial andprocurement management.

* Operational support for projectmanagement activities.

2. Targeted Interventions * US$5.88 million *Progress reports/Bank *Acceptance of standards bysupervision reports teachers/headteachers

2.1 General Education *Midterm review report *Capacity of the MOE to expand*Monitoring the implementation ICR to desired number of schools

of selected activities: *Baseline data and periodic *Availability of trainingTA/training surveys

*(a) School improvement throughreview and development[SIRD]; (b) Headteacherstandards

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2.2 Vocational Secondary * Acceptance and u':ilization ofEducation *Progress reports/Bank the new vocational courses by* Development of a pilot supervision reports the business comrnunity

secondary vocational training *Midterm review report * Acceptance by parents of girlsprogram for: Office equipment ICR entering the labor force.maintenance, hotel and oBaseline data and periodicrestaurant services, tourism, surveys

* Construction of four vocationalannexes to general secondaryschools (2 boys and 2 girls)

* Baseline study on labor marketrequirements.

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Annex 2: Detailed Project DescriptionWEST BANK AND GAZA. Education Action Project

The project's development objective is to strengthen the capacity of the Ministry of Education (MOE) tomanage the education system more effectively. The project seeks to assist MOE to:

(i) Improve planning and policy making: The project design encourages the MOE to continue developinga coherent education strategy, with an emphasis on the annual planning process. Given the extensivecommitments of other donors, a small well-targeted project supporting the Five-Year Plan goals wasconsidered the most suitable investment.

(ii) Strengethen management and financing: Given the constraints of PA budget, the MOE needs toimprove its ability to use domestic and donor funds more strategically and to improve planning and policymaking. The development of annual workplans is expected to gradually incorporate improved strategicthinking arising from the planning process. Capacity building and targeted investment areas are linked. Forexample, the development of the EMIS would contribute to improved school mapping. This should enableimproved planning for resource allocation.

(iii) Support vocational secondara education: At present there is an inadequate supply of qualityvocational technical education. The project would support the efforts of the PA to provide a coordinatedapproach by the MOE, MOHE and Vocational Expert Team to training and skills development andincrease the number of places available for vocational secondary courses. In the integrated strategy, thesewould lead to appropriate further education and training (see Annex 13). Pilot programs in vocationalsecondary education were selected for funding in order to improve access to secondary education overall, tobroaden the curricula options for students in light of a new and more flexible approach to integratingvocational education and training across basic and higher education, and to improve the possibilities foremployment in a difficult labor market. The selection of the pilot programs also reflects a least-costanalysis (see Annex 4). The programs would be delivered at existing academic secondary schools with afew additional vocational/technical workshops (i.e., comprehensive secondary school system). By sharingland, facilities, general teachers and administrators with academic programs, the pilot programs would bemuch less costly than the approach of the separate vocational/technical training school system.

The project has two complementary components. The first provides assistance to develop strategies thatfacilitate planning and policy making and support for the project management unit, the second financesspecific investments to support access and quality in education.

By Component:

Project Component 1 - US$1.76 million

Capacity Building, Ministry of Education

Sub-component 1-1. Policy, Planning and Financing US$1.47 million

This sub-component would support the preparation and evaluation of AWPB to operationalize thepriorities of the Five-Year education Plan. The project would support four key Directorates (Planning,Buildings and Works, Training and Vocational Secondary Education) in selecting and developing detailedproposals for activities in the annual plans. The quality and coverage of the annual workplans and budgetproposals are expected to improve gradually over the project period. The activities to be financed underthis sub-comnponent include:

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* putting in place an EMIS including school mapping facilities and extending this to all District offices;* building a vertical extension to the MOE annex to rationalize the use of space and discontinue renting

buildings;* technical assistance to support capacity building.

Sub-Component 1-2. Support for Implementation US$0.28 million

This sub-component would include financing the PST staff, consultants and an operational budget throughthe life of the project. PST staff would be located in relevant MOE departments while reporting to aProject Director located in the Planning Department. Staff would include financial and procurementspecialists and administrative assistants. The MOE has already considerable knowledge of implementingdonor projects.

Project Component 2 - US$5.88 million

Targeted Interventons

Sub-component 2-1. General Education US$3.13 million

This sub-component would support the implementation of activities prepared under sub-component 1-1funding selected activities in the AWPB.

a) School improvement through review and development (SIRD): This component builds upon andrefines a project to put in place school-based planning which has been undertaken in 400 schools. Over thecourse of the project the program would be extended to all schools at a rate of some 270 schools per year,building on existing expertise. The SIRD component would initially target schools in areas which arerelatively deprived. The ongoing program would continue to focus on school-based planning and teacherinputs to that planning. It would add the extra dimension of using teacher performance assessment to thatprocess. The performance results from the planning exercise would be incorporated into the inspectoratelevel review of teacher performance. There are two aspects of this sub-component to be funded:

- Strategic subject training: In order to provide teachers with improved skills to implement their plans,the sub-component would refine and re-print 10 Issues Overviews on strategic topics previouslyidentified by teachers as being key knowledge areas, and train 50 trainers (a mix of external andinternal staff) to deliver these at school level.

The subjects covered would be as follows:

1. Teaching and Learning: Differentiation of teaching strategies and using pupil-level assessment data toinform teaching plans.

2. Human Resource Management: Ensuring that the results from a variety of staff and schoolassessments are used to create a coherent performance management strategy.

* School Improvement/Training Fund& Schools would be provided with a small fund to identify teachersto receive training or to purchase other training/school improvement activities to meet their needs.Funds would be given to schuis for staff development on the basis of proposals evaluated accordin.g toagreed upon evaluation criteria. Proposals would emanate from schools on the basis of a program

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manual and be reviewed by a committee at the MOE. Funds would be sent directly to school accounts(detailed description in the PIP).

b) Headteacher standards: The project would undertake a review of current best practice in thedevelopment of standards for headteachers, and provide funds to develop national Palestinian standards forheadteachers, and design a masters level diploma program for the new qualifications.

A second phase of this program would use the standards to form the basis for a request for bids fromuniversities and colleges to develop a masters level diploma program for new qualification, and a secondyear program for those wishing to undertake higher level skills. If the program becomes viable during thesecond year of the project, stipends would be provided to teachers to enable thern to undertake the trainingto become headteachers.

Sub-component 2-2. Vocational Education US$2.75 million

The MOE is working with the.Inter-Ministerial Committee on Technical/Vocational Training to puttogether a coherent national strategy for this topic. The Five-Year Plan supports a gradual increase in theavailability of places in vocational secondary schools to 7.5% of the secondary school population. Thiswould expand the range of options in secondary schools within a broad overall curriculum that would allowfor return to higher education or further vocational qualifications. The proposed construction consists ofannexes to existing general secondary schools.

The proposed subjects for which new curricula would be developed, including tourism and serviceindustries, would partly be selected as a result of a baseline tracer study of secondary school students andpartly as subjects which would be locally acceptable for secondary school girls. The gross enrollment ofgirls at secondary school level was 56.9% in 1999/2000, up from 51.6% in 1997/98. At present, there arevery few facilities where girls can receive the training to become skilled laborers. Attaching vocationalunits to general schools would enable staff teaching general subjects to be shared across school units. Aspart of the proposed expansion of secondary vocational training in the Five-Year Plan, this sub-componentwould support the preparation of:

a) the development and printing of selected trial curricula for vocational secondary education (e.g., officeequipment maintenance, hotel and restaurant services, tourism);b) the construction of four pilot vocational school annexes to existing secondary schools (two for girls andtwo for boys). These would be annexes to existing general secondary schools to provide a variety ofoptions at the secondary level, particularly for girls, for whom the options in vocational schools are atpresent restricted. Additional construction and equipment of annexes and extensions to existing schools,within the framework of the project; may be considered.

The project in the context of the Education Five-Year Plan:

This project supports the work already undertaken by the Ministry of Education (MOE) in the developmentof a Five-Year Plan and long-term education strategy. Over the next three years it would support theimplementation of Five-Year Plan activities through working with specific directorates (planning,vocational secondary education, training, buildings and works) in the planning process. The MOE hasworked extensively with a range of donors on planning activities over the past two years. These efforts arepaying off in terms of the development of more strategic thinkting in allocating education resources.However, the pressures on the education system, including a difficult economic and social situationcombined with population growth, are considerable. The MOE would be hard pressed simply to maintain

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its already good basic enrollments, let alone make the improvements envisaged in the Five-Year Plan. Thetable below outlines the components of the Five-Year Plan to be addressed by the project.

Five-Year Plan Objective Project Activities 2000-2004

Goal One - Provide Access to Education for AllChildren

1.1.* Provide full access to Grade 1 (for 100% of a.* Carry out micro-planning (based on scho.olschool entrance age population) mapping and geographic information system GIS)

Goal Two - Improve the Quality of Education

2.3/5.2 Improve the quality of teachers a. Prepare and carry out in-service teacher trainiigprograms

2.4 Modemize and add school facilities and improve Revitalize existing school facilities through replacingtheir use obsolete premises and 5% of furniture per year,

renovate old buildings and upgrade existingvocational schools.

2.6 Strengthen the assessment and evaluation system c. Develop headmasters capacities to support teacherswork in assessment and evaluationd. Train teachers in the use of assessment means inthe schools

Goal Three - Develop Formal and Non-FormalEducation

3.2 Develop Basic Education d. Development and application of special programs(including teacher training special syllabus andteaching/learning materials)

3.3 Develop a diversified secondary education and Conduct feasibility study on the development ofupgrade effectiveness of academic, technical and secondary vocational schools (increasing the share ofvocational schools vocational school enrollment to 7.5% of total

secondary enrollment by 2004).

Based on the results of the feasibility study f;rsecondary vocational schools: (i) development ofcurricula; (2) provision of facilities.

Goal Four: Develop Management Capacity inPlanning, Administration and Finance

4.1 Develop Management capacities for all a. Review and improve the organization frameworkmanagement functions (personnel, finance, budget through defining roles, responsibilities and structuresetc.) at all levels (school, district and central) at all levels

d. Review and further develop the managementinformation system (EMIS) and ensure disseminationof information to all levels

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4.2 Develop the planning and monitoring capacities a. Develop and implement a framework forfor all functions at all levels preparing, implementing and following up on

coordinated annual plans (with correspondingrecurrent and capital budgets) at the three levels(MOE, districts, schools) by providing necessarytools and mechanismsc. Strengthen the planning functions at all levels.

Goal Five: Develop Human Resources of theEducation System

5.6 Develop the school as a unit for development a. Develop the capacity of school staff to build,implement, monitor school plans, including staffdevelopment and mobilization of communityresources.

Note: * Numbering is taken from the latest version of the Five-Year Plan.

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Annex 3: Estimated Project CostsWEST BANK AND GAZA. Education Action Project

1. Strenthening Capacity of MOE 0.001.1 Policy, Planning and Finance 0.70 0.65 1.351.2 Support for Project Implementation 0.21 0.04 0.252. Targeted Interventions 0.002.1 General Education 1.40 1.42 2.822.2 Vocational Education 1.18 1.35 2.53

Total Baseline Cost 3.49 3.46 6.95Physical Contingencies 0.26 0.22 0.48Price Contingencies 0.10 0.10 0.20

Total Project Costs 3.85 3.78 7.63Total Financing Required 3.85 3.78 7.63

Identifiable taxes and duties are 0.63 (US$m) and the total project cost, net of taxes, is 7 (US$m). Therefore, the project cost sharing ratio is 100% of totalproject cost net of taxes.

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Annex 4

WEST BANK AND GAZA: Education Action ProjectEconomic and Fiscal Analysis

1. The Education Action Project (EAP) would support the implementation of a five-year educationdevelopment plan (Five-Year Plan). The objective of the project is to improve the management capacity ofthe education system to deliver quality services in a fiscally feasible manner. The project has twocomplementary components. The first directly supports strengthening the management capacity of theMOE for policy, planning and budgeting across departments. The second supports specific investments intargeted programs in line with the objectives of the MOE's Five-Year Plan.2. The economic soundness of the project design is ensured by: (i) basing the project concept on theCountry Assistance Strategy (CAS) and Comprehensive Development Framework (CDF); (ii) assessing therationale for public intervention; (iii) selecting an economically justified option for a major investmentprogram of component 1; MOE building extension; (iv) requiring economic justification for selection ofsubprograms of component 2; and (v) ensuring affordability of the project while strengthening the capacityof MOE for using fiscal and economic analysis in its planning and budgeting process.

1. Project Concept is based on Economic and Sector Work (ESW)

3. The objective of the project addresses two of the four strategic themes for the World Bank Strategyfor the West Bank and Gaza and a Request for a Replenishment of the Trust Fund for Gaza and the WestBank (1998, and a revision of 1999): (i) building capable public sector management and institutions forgood govemance; and (ii) developing human resources.

4. The Palestinian Authority (PA) and the World Bank have also identified, through piloting the CDF,that the govemance/management, efficiency and financing issues in the education sector are priorities forwhich the World Bank can help the PA with a comparative advantage and in a partnership with otherbilateral and multilateral donors. There is growing donor support for moving to "basket funding" (i.e.,pooling), creating both pressure on, and incentives for, the MOE to complete their Five-Year Plan and toproduce their annual work plan around which donor support can be organized. It also requires the MOE toimprove the implementation and monitoring procedures which could be shared by several donors, startingfrom coordination of major program areas such as school construction. The project supports theimplementation of improved rules, norms and procedures, especially in three program areas whereimprovements in management could improve the effectiveness and efficiency of work practice: (i) training;(ii) school construction; and (iii) vocationalltechnical education.

5. Improving the management capacity of the education sector should lead to the strategic allocationof public funds. The education sector's contribution to poverty reduction - universal primary education,equitable provision of basic and secondary education, and improved quality of education for economic andsocial needs - are important elements of the sectoral strategy in WBG. In addition, the EAP would providefunds for the implementation of targeted subprograms, including school-based training programs for about200 schools where headmasters and teachers have special problems in teaching students in relatively poorareas (e.g., low attendance, overage and low learning support from families).

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11. %a4ionae tor hubl)c Intervention

6. Given the high rates of population growth, both in the West Bank and in Gaza, maintaining c Trrentenrollment levels is a challenge. MOE's Five-Year Plan, and the project in particular, play an importantrole in reducing inequality, in opening opportunities for the poor, particularly given market failures inlending for education. The project supports the education sector, especially basic and secondary education,not only by allowing additional investments, but also by improving the efficiency of expenditures ineducation. Basic and secondary education receive high financial commitment from the central authorities:basic and secondary education account for 16% of the total central authorities recurrent budget in 2000.Between 1994 and mid-1999, it is estimated that more than US$97 million in donor assistance wereallocated to constructing 152 new schools and renovating 374 schools, resulting in the addition of at least3,764 new classrooms (Aid Effectiveness 2000). While there is no systematic data on financialcontributions from local authorities and communities, their role is considered significant, especially in theWest Bank. It is estimated that the local authorities and communities contributed to about 1,317 newclassrooms built from 1994 to 1999 in the West Bank. These public and private commitrnents havesupported a 36% increase in enrollments in basic and secondary schools, from 608,718 in 1994/95 to812,722 in 1998/99. For higher education, most institutions are not run by the PA (only one university issupervised by the PA) and student fees cover nearly half of the recurrent expenditures.

7. A high population growth still requires continuous strong financial commitment from the PA andprivate sector for basic and secondary education in WBG, especially for ensuring compulsory :asiceducation. MOE has projected public expenditure needs for the Five-Year Plan by taking intoconsideration other players: private sector and NGOs (UNRWA). MOE assumes that the share of schloolssupported by the PA in educational provision would remain almost constant (about 35%). In other words,enrollment in those schools would increase at the same pace as PA-supported schools. MOE is consultingwith these representatives during preparation of the plan so that the future plan would not exclude thepublic sector. The regulatory framework for private schools is flexible (e.g., there is no regulation of fees).

I=. Capacity Development Activities (component 1) Apply Economically Justified Approaches

8. A major activity of component 1-addition of two floors to the MOE building, representing 20%of costs of component 1 (estimated at US$420,000 for construction and US$110,000 for furniture andequipment) is appraised on the basis of: (i) rationalization of administration facilities and (ii) cost-benefitanalysis.

(i) Rationalization of administration facilities. The objective of this program is to improve the facilities forthe central MOE staff for better work practice. MOE owns a main building for 175 staff. There are fourdepartments and about 70 staff (see Table 1) located in rented premises outside the central location. Theproposed extension of the central building would provide additional spaces for those in rented spaces. Thisis expected to increase effectiveness and efficiency of communication, collaboration, and managementinformation flow among units. Improved communication is a basic requirement for a move from a verticalproject-driven approach towards a horizontal and objective/output-driven program approach inimplementing the Five-Year Plan and anmual workplans. Altemative communication enhancing strategieswithout extension of the MOE building are rejected because distances between buildings are not reasonablefor frequent travel which is also difficult because of security reasons, and modem communicationtechnologies (e.g., LAN, intranet and e-mails) are not available. In addition, increased face-to-faceinteraction opportunities are considered critical for this learning phase when MOE administrators are

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strengthening their management skills through preparation and implementation of the first Five-Year Plan.

Table 1. Office Management Plan for Central MOE

2000 2003Estimate

'Space facilities (sqm)MOE central building 2,967 2,967Proposed extension (2 Not applicable 1,100

floors)Rented premises 1,700 0

Total 4,667 4,067No. of staff located*MOE central building 167 167Proposed extension (2 Not applicable 73

floors)Rented prernises 73 0

Total 240 240

Note: *The increase of administrators from 2001 to 2003 is notconsidered for calculation.

(ii) Cost-benefit analysis. The investment is expected to save costs by not renting offices and occupyingschool facilities as administration offices. In addition, it would save staff working time and transportationcosts for day-to-day management meetings and information exchange. A cost-benefit analysis wasundertaken using measurable monetary benefits (saved yearly rents) and costs (construction and annualbuilding maintenance costs). Table 2 summarizes the information and results used for the analysis.Assuming that a discount rate is 10% and that the life span of building is 30 years, the proposed investmentwould have a reasonable return. The internal rate of return (IRR) would be 14% and the net present value(NPV) would be US$152,896. The sensitivity analysis also considers the effect of cost overruns and theeffect of annual rent increases. If the rent increases by 5% annually after the current contract period (by2001), the IRR would increase to 19%. On the other hand, if the cost overruns by 10%, the IRR woulddecrease to 13%.

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Table 2. A Costs and Benefits of Proposed MOE Building ExtensionInformationCostsConstruction US$420,000Maintenance (annual) US$8,400(2% of construction)BenefitsBy not renting offices

Measurable benefit US$63,000 (yearly)-Classrooms occupied by administrators would be used by schools-Administrators would save time to attend meetings and exchange

Other benefit informationSource: MOE

Table 2. B Costs and Benefits of Propo ed MOE Building Ex ension-ResultsBase scenario $152,896 14%Sensitivity analysis

Cost overrun 5% $130,846 13%Cost overrun 10% $108,796 13%Increase rent 5% yearly $506,918 19%Increase rent and cost overrun 10% $462,818 18%

Note* It is assumed that discount rate is equal to 10%;

IV. Selection Procedures for Targeted Interventions (component 2) Promote Economic Justificationof Choices

9. The project supports building management capacity of MOE for planning, implementation andmonitoring. It would support gradual improvement and standardization of formats and procedures forplans and budgets. Component 2 provides funds to subprograms which are prepared according to theimproved procedures. The procedures would form the basis for subprogram preparation by the beneficiaryunits, appraisal by the project management team, and approval by the project supervisory committee. "heprocedures would require information for economic/fiscal, technical, social and/or institutional justificationof proposed subprograms (c.f., see annexes 11-13 for technical, social and institutional justification).While information required for economic justification would depend on the type and scope of thesubprograms, a proposal is expected to provide information for the following basic questions: (i) whetherthe proposal would address the priority objectives of the Five-Year Plan and (ii) whether the propo:salwould give consideration to a cost-effective or least-cost approach.

Would a proposal address priority objectives of the Five-Year Plan?

10. A proposal for subprograms to be funded under EAP should address one or more of the prio,ityobjectives of the Five-Year Plan. These priorities are selected according to the expected impacts onpoverty reduction and growth of the economy, as discussed below.

(i) Access. The priority specific objectives are to: (a) maintain full access to grades 1-6; (b) increaseenrollments for grades 7-12; and (c) improve equity of access to general and technical/vocational (VT)

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secondary education (grades 11-12). Universal basic education for all is an internationally agreed prioritypolicy goal associated with poverty reduction. International evidence suggests that completion of primaryeducation has a very high social rate of return. While PA has provided, together with UNWRA, nearlyuniversal access to basic education, high population growth (3.5% for West Bank and 4.2% for Gaza peryear) requires continuous commitment to universal access to basic education, especially in the first sixgrades, in efficient ways. In WBG, enrollments begin to decline at grade 7. Improving equity of access tosecondary education for targeted groups, such as girls and children in poor areas, could be an incentive forthem to complete basic education.

The activities (programs) to reach the priority objectives could include: plan of inputs (i.e., classrooms,teachers, textbooks learning materials) for accommodating projected enrollments; utilization of existingschool facilities; construction of new classrooms; development and deployment of teachers; and provisionof teaching/learning materials.

(ii) Quality. The priority specific objectives are to: (a) develop, update, and apply new curriculum to meetthe needs of society and the labor market and (b) improve the quality of teachers and principals. WBG hasno natural resources and a small internal market. Its economic growth depends highly on its human capital,which must be locally and internationally competitive.

The activities (programs) to reach the priority objectives could include: development of strategies fortraining of teachers, principals and supervisors; provision of in-service teacher training; provision ofprofessional training to principals and supervisors; provision of school-based training; and developmentand implementation of pilot curricula for technical/vocational secondary education.

11. Table 3 summarizes the linkage between priority objectives and subprograms which have beenselected for the first year of EAP.

Table 3. Priority Objectives and Sub-Programs of EAP First-Year

School as a unit of training Pilot VT section in generalprogram secondary school

Access(a) Full access to grades 1-6 X(b) Increase access to grades 7-12 X(c) Improve equity to grades 11-12 XQuality(a) Improve curriculum x(b) Improve quality of teachers and xprincipals

Would a proposal give consideration to a cost-effective or least-cost approach?

12. A proposal for subprograms should be prepared and selected after consideration of cost-effectiveand/or least-cost approaches. For example, the establishment of the vocational/technical (VT) workshopsfor each of the two existing academic secondary schools (comprehensive system) has been selected for thefirst year of EAP after comparing the recurrent cost implications with the alternative (separate VT schoolsystem).

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13. The proposed workshops in academic secondary schools would provide practical training withinthe new Palestinian curriculum in industrial occupations, and general/theoretical classes would be providedby general teachers from the academic schools. Table 4 summarizes the least-cost analysis of twoapproaches for increasing VT classes, using data from the MOE proposal for the establishment of the newworkshops and data from one of five existing VT secondary schools (Nablus industrial secondary school).The proposed approach would require much lower recurrent costs per additional student (by 50%) thanbuilding entirely new industrial secondary schools. By sharing land, facilities, general teachers andadministration with academic schools, the proposed approach would be much less costly.

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Table 4. Fiscal Impact Analysis of Vocational/Technical Secondary Education Program

Proposed General/VT VTComprehensive system separate system

Investment 2 workshop units to existing general New industrial secondary schoolsecondary school building (12 regular classrooms, 12

workshop units, 2 labs, library, stockroom)

EffectWorkshop, classes 2 workshops, 4 classes 12 workshops, 24 classesEnrollments 70 students 400 studentsRecurrent InputPersonnel 2 VTE teachers 5 administrators

1.5 general teachers (to be shared with 25 VTE teachersacademic courses) 8 general teachersTotal 3.5 staff 5 service staff

Total 43 staffOperations Materials, training, etc. Materials, training, etc.Estimated impact Personnel: US$21,000 Personnel: US$258,000on major recurrent Operations and maintenance: Operations and maintenance:costs* US$3,725 US$22,000

TOTAL US$24,725 TOTAL US$280,000Recurrent cost per US$353 US$700student I_I_I

Source: MOE, Department of VocationalVTechnical EducationNote: * It is assumed that the average monthly salary is US$500. Each VT workshop receives 5,000 ILS (aboutUSS1,250) for operations and maintenance from the PA. Student fees are 70 ILS (about US$17.5) for VTclasses.

14. International evidence suggests that a high unit cost per student for VT education is a major reasonwhy a cost-benefit analysis favors academic secondary education over VT secondary education. Ifgraduates from both streams receive the same level of wages, the higher cost of VTE would reduce returnsto education. The flexibility of VT curricula to meet labor market needs is another critical issue forincreasing probabilities that graduates from specific occupational courses could find jobs in the relatedfields. Occupations for the proposed workshops would be chosen based on local employment opportmitiesthrough ongoing consultation with communities and employers, and collaboration with other ministries andspecial attention to occupations with a high information technology. By minimizing costs and applying theinnovative curriculum development process, the proposal is fiscally justified. In addition, the proposedapproach fits the special context of WBG, where student population is relatively small, and logisticalproblems do not necessary allow a VTE school to enroll an adequate level of students by traveling.

Ongoing capacity building process

15. As discussed above, the information requirements for justification of proposed subprogramsdepend on their type and scope. However, in general, the information could be provided and analyzed ateither or both stages: one for overall approaches of a program area (e.g., teacher training program), and theother for a specific subprogram or activity within the program area (e.g., one week of in-service teachertraining for 2002/2003). The ongoing process of the formulation of the Five-Year Plan corresponds to thefirst stage. MOE staff have been trained and have received technical assistance for analyzing technicalquality, effectiveness and costs of major program areas, such as school construction, teacher training and

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vocational education, to prioritize programs in the Five-Year Plan. Thus, the selection of targetsubprograms within the framework of the Five-Year Plan should be justifiable. For the second stage theMOE is also building capacity through preparation of implementation plans or detailed action plans of theFive-Year Plan. The detailed planning process for each specific subprogram and/or annual workplanswould require: (a) adapting the selected approach to specific subprograms as needed; (b) monitoring theimplementation to feed into ongoing review and planning process; and (c) reviewing alternatives to adjust aselected approach in light of lessons learned from experiences and the changing educational and economiccontexts. Project preparation has been assisting the MOE in strengthening the planning capacity. Aworkshop for economics of education was held for central and district staff in June 2000. The projectpreparation grants also supported technical assistance for assessment of fiscal affordability of theFive-Year Plan. The project would continue supporting capacity building by improving the educationaland fimancial management information system and the utilization of data for planning, monitoring, andreviewing programs.

V. Overall Fiscal Impact of the Project is Affordable

Macroeconomic trend and medium-term framework

16. Table 5 summarizes the trend of selected economic indicators over the past five years. TrhePalestinian economy went into deep recession in 1995 and 1996, and began to recover in 1997. GrossDomestic Product (GDP) is estimated to have increased by around 6% in 1999 in real termns, with growthparticularly in construction and tourism. The current revenues (i.e., excluding donor aid) also increasedfrom 19% of GDP in 1996 to 23% in 1999. Both domestic tax and clearance revenues recorded stronggrowth. In addition, donor aid for the development plan has been substantial, contributing US$400-500million annually. The total donor disbursements for the development plan in 1999 were roughly estimatedat US$416 million (10% of GDP), modestly higher than in 1998, but still significantly below the amoumtreceived in 1996-97. While public recurrent expenditures have maintained a share of GDP at around 22%over the past five years, the level of expenditures has increased by more than US$100 million. Theincrease was initially justified by the expanded responsibilities of the PA and strong political pressures toreduce unemployment by public hiring. But the recent growth in public employment appears to be morethan can be justified, and continues to impair the recurrent expenditure management (e.g., roughly 6,000people were added to the payroll in the fourth quarter of 1999, four times as many as planned).

17. To assess the fiscal viability of public expenditures for basic and secondary education (MOE) overthe next three years, the macroeconomic framework projected by MOF and the IMF was used (preliminaryprojections for 2000 to 2002, as of May 1999) for a base case scenario. GDP is projected to grow at 5%per year in real terms. This projection corresponds approximately to a moderate scenario (scenario A)provided in the PDP 1999-2003. The level of public expenditures is projected to be almost constant at thelevel in 2000 in real terms, while its share of GDP would slightly decrease from 22.4% in 2000 to 20.5% in2002. For a high case scenario, it is assumed that the public expenditure's share of GDP would increase to24.5% in 2002.

18. The official projection of public recurrent expenditures by sector or ministry is not yet available.Thus, this analysis assumes that the MOE's share of central current expenditures would stay at its1998-2000 average of nearly 17% for base and high cases, given that the PA financial commitment hasbeen high and there is general consensus among PA officials on financial requirements for increasingschool-aged population. For capital expenditures, this analysis assumes that donor funding for PAsupported basic and secondary schools (projects/programs under MOE) would account for about 8% oftotal donor committnents (US$35 million per year). This assurnption is close to the projections provided in

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the PDP 1999-2003 (8.3%) and to an average of the estimated yearly spending for the past four years(US$33 million). In addition, the contributions from local authorities and communities are expected to besubstantial, especially for classroom construction in the West Bank. Roughly estimated local andcommunities' contributions for school construction are US$11 million per year, using data from the MOEon classrooms built by communities from 1994 to 1999. This estimate, however, should be carefullyconsidered. Since some classrooms constructed by local communities could be below standards, the MOEand other agencies would need to carry out finishing work for these classrooms (e.g., 30% of classroomsbuilt by communities from 1994 to 1999 in the West Bank). This analysis assumes that communitycontributions would remain at the same level as the average for the past years (US$10 million) for a highcase, and that they would be half of the average (US$5 million) for a base case.

Table 5. Trend of Selected Economic Indicators

Flscal Year 4/PreL Proj. Proj. Proj. Proj. 5i

1996 1997 199h 1999 2000 2001 2002 2003GDP (millions US$, mnid-1999 price) 3,681 3,857 4,127 4,375 4,594 4,828 5,069 5,323

Real GDP growth (annual% change) 1/ -3.2 4.8 7.0 6.0 5.0 5.1 .0( 5.0

Fiscal OperationsRevenue(%ofGDP)-Basecase 18.9 21.6 22.0 23.4 21.9 2i. 21.4 2 9

Revenue (% of GDP) -Hdgh case ''4.0 25.0 25.0Current expenditure 2/ (/ of GDP)-Base case 22.9 22.7 21.4 22.3 22.4 71 3 V0.5 20.5Current expenditre 2/ (% of GDP)-High case 23 24.5 24.5

Current expenditure (millions US, mid-1999 price)-Base case 842 875 885 977 1,031 1,027 1,038 1,089Current expenditure (millions USS, mid-1 999 price)-lgh case 1,110 1,242 1,304Donor financing 3/ (millions US$) 735 716 549 594 601 599 603 603

of which: development plan 3/ 539 489 382 416 430 427 430 430Donor financing for development plan (% of GDP) 14.9 12.8 9.7 9.9 9.6 9.1 8.5 8.5

MOECurrent expenditure (millions US$, mid-1999 price)-Base ease 123 125 149 165 170 175 176 185

Current expenditure (millions USS, mid-1999 price)-High case 189 211 222

Donor financing (millions US$) 34 15 49 31

Donor financing (millions US$, mid-1999 price)-BaselHigh case 35 35 35Local and community contributions (millions US$, mid-1999 price)-Base case 5 5 5

Local and community contributions (millions USS, mid-1999 price)-High case 10 10 10

Current expenditure (% ofgovernment expenditure) 14.6 14.3 16.9 16.8 16.5 17.0 17.0 17.0Donor financing (% of total donor finmcing for dev plan) 7.0 4.0 11.9 7.2 8.2 8.1 8.1

Sources: Ministry of Finance, Ministry of Planning and Intemational Cooperation (MOPIC),

and IMF staff estimates and projections. MOE's 1996 data are estiamted using the 1999 budget book.MOE's 1997 - 1999 data are from MOE Departnent of Planning.

Notes: U1 IMF staffestimates based en data from the PCBS.2/ On a comnuitnent basis.3/ Total donor financing includes disbursements through the development plans plus donor support for UJNRWA's operationalbudget and to NGOs outside of the development plan. The development plan refers to all aid recorded by MOPIC.4/ While a fiscal year starts in January, a school year starts in September. This analysis assumes 1999/00 as 2000.The same assumption is applied for all yeams in this analysis.

5/ Por projection of fiscal operation, the projecion is assuned the same as 2002.

Medium-term expenditure requirements for basic and secondary education

19. The MOE has made progress over the past two years in the formulation of the Five-Year Plan(2000/01-2004/05). The formulation of the Plan is an ongoing and dynamic process which involves awhole range of stakeholders such as MOE staff of all levels, Ministries of Planning and Finance, donors,UNRWA, and NGOs. During the initial phase of the planning process, the MOE focused on articulatingall educational objectives, targets, and activities. It faced a large amount of financing requirements. Tomake the Five-Year Plan a practical framework for domestic and donor finds, the MOE has beenprioritizing objectives and activities and developing a fiscally realistic scenario in light of a macroeconomicframework. The current scenario would require US$1,208 million for recurrent expenditures (92% are for

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salaries and wages) and US$226 million for the capital expenditures for the total five years. While themain objectives, such as targeted GERs for basic (98%) and secondary education (68%), are the samebetween the initial scenario (highest case) and the current scenario (case in progress), the costs of thecurrent scenario are 75% of the initial scenario (90% for recurrent and 42% for capital costs). As Table 5shows, the current scenario reflects more cost-effective measures such as high utilization of school facilities(e.g., 33% of classes would be double-shifting) than the initial scenario. In addition, the current scenarioassunes that communities would continue shanng costs through student registration fees, examination fees(45% of the estimated cost-recovery), textbook sales (14% of the estimated cost-recovery), and donations.A fiscally realistic and efficient scenario is also required in preparing a system for a future anticipatedincrease of students' population due to refugees' returns as well as a natural population growth.

Table 6 Selective Indicators from Projections of Costs forthe Five-Year Education Development Plan

Initial Scenario Current ScenarioHighest Case Case in Progress

Targets for Activities(for government schools)For 200412005Student-class ratio-basic 36 38Share of double-shift classes 0% 32.6%Forfive years _Additional posts-general education 10,684 9,000XAdditionalposts-VTE _ 0 - = = 1,458 540New classrooms-general education 8924 3,400Now classrooms-VTE 435 130Costs for five years in million US$ at mid- __1999 price (average per year, US$)__ __ _Recurrent expenditure 1,329 (266) 1,208 (242)Of which, salary 1,216 (243) 1,122 (224)Capital expenditure 537 (107) 226( 45)Total expenditure 1,866 (373) 1,433 (287)

Source: MOE "Five-Year Education Development Plan 2000/2001 - 2004/2005" (Draft as of June 28, 2000)

Fiscal impact of the EAP

20. The total project costs are US$7.63 million over the three years of the implementation period. Theproject recurrent costs would be 3% of the costs (US$0.21 million), a very small percentage to theprojected total MOE recurrent expenditures (less than 0.05%). The incremental recurrent costs of theproject are estimated to be affordable given that the project would support implementation of the MOEannual plans/budgets to be developed within the expenditure framework of a realistic final scenario of theFive-Year Plan. The fiscal affordability of a final scenario of the Five-Year Plan (i.e., rate of costs of thescenario to the projected fiscal envelope for MOE provided in Table 5) is being ensured in the processdiscussed in the above section. The current scenario still has a financing gap or the fiscal affordabilityabove 100%, especially for recurrent requirements as compared to the available funding in the base casefiscal scenario. The projected financing gap is US$30-55 million per year for recurrent costs and US$2*-6mnillion for investment costs. The projected financing gap in the high fiscal case scenario is very modest(the fiscal affordability is around 100%). The ongoing final stage of the formulation of the Five-Year Planis expected to review this issue. The project would also ensure fiscal feasibility by (i) continuing support

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for the capacity building of the MOE for developing and implementing MOE annual plans/budgets andassociated EAP annual workplans and (ii) monitoring the implementation of the annual workplans. Thus,fiscal sustainability would be dependent on the ability of the MOE staff to absorb and undertake ongoingimprovements for a proper planning and budgeting process.

21. Since September 2000, the fiscal situation has deteriorated sharply. Revenues have fallen by morethan half, and while much of this shortfall has been cushioned by Donor's emergency funds, the PA hasbeen forced to reduce current expenditures by more than 11%. Prospects are uncertain for the next 6months, and a new six-month emergency spending plan has been fonnulated in coordination with the IMF.The PA has expressed its commitrnent to secure adequate allocations for the social sectors, includingeducation. This revenue shortfall has compelled PA agencies to plan and utilize domestic and donor fundsmore strategically and effectively. Projet Component One will enhance MOE program and financialplanning capacities at a time when this skills are crucially important. The ongoing political instability maylimit the availability of materials for civil works/construction and the availability of internationalconsultants to provide services. The project provides support for the Five-Year Plan under broadcategories, thereby allowing for flexible adjustments if the political crisis is of long duration. Componentsand activities that are less susceptible to the effects of closure and on-going instability would be prioritizedfor implementation until the situation stabilizes.

Table 7. Fiscal Impact of Project_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ __ Fiscal Year 3/

Projected Projected Projected Projected! _____________________________________________ 2001 2002 2003 2001-03MOE Expenditure Requirements (US$ ml) 1v 244 265 287 796Recurrent 202 221 241 664of which, salary 188 205 223 616Investment 42 44 46 132Financial Affordability for MOE (°) 2vBase case Riscal scenarioRecurrent 116% 125% 130% 124%Investment 105% 110% 115% 110%

High case fiscal scenarioRecurrent 107% 105% 109% 107%Investment 93% 98% 102% 98%

Project Costs (USS ml) 0.81 2.37 2.82 6.00Recurrent 0.01 0.07 0.12 0.20Investment 0.80 2.30 2.70 5.80

Project Costs (% of MOE Expenditure Requirements)Recurrent 0.01% 0.03% 0.04% 0.03%Investment 0.33% 0.87% 0.94% 0.73%1

Sources: MOE, Department of PlanningNotes: 1/ Expenditure requirements for the current scenario of the Five-Year Plan as of June 28, 20002/ Ratio of MOE expenditure requirements to the projected financial envelope for MOE using a macroeconomic framework(c.f. Table 5)3/ While a fiscal year starts in January, a school year starts in September. This analysis assumes 1999/00 as 2000.The same assumption is applied for all years in this analysis.

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Annex 5: Financial SummaryWEST BANK AND GAZA: Education Action Project

[US$ million]

Implementation Period Operational Period2001/02 2002/03 2003/04 2004/05 Total 2005/06 2006/07 2007/08

Project CostsInvestaent Costs 0.80 2.30 2.70 1.48 7.28 - - -

RecurrentCosts 0.01 7 0.12 0.15 0.35 0.13 0.13 0.14Total 0.81 2.37 2.82 1.63 7.63 0.13 0.13 0.14

Financine Sources(Amounts)

TFGWB 0.75 2.20 2.65 1.40 7.00 - - -

PalestinianAuthority 0.06 0.17 0.17 0.23 0.63 0.13 0.13 0.14

Total 0.81 2.37 2.82 1.63 7.63 0.13 0.13 0.14

Financing Sources(as % of Project Costs ner Year)

TFGWB 93% 93% 94% 86% 92% 0% 0' / 0%Palestinian Authority 7% 7%/ 6% 14% 8% 1000/0 100%/o 100%

Total 100%/e 100% 100% 100% 100% 100% 10O'e 100%

Note: Figures may not add up due to rounding

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Annex 6: Procurement and Disbursement ArrangementsWEST BANK AND GAZA. Education Action Project

Procurement

1. The Trust Fund Credit (TFC) would finance civil works, consultant services and training.Procurement would be in accordance with IDA guidelines for "Procurement under IBRD Loans and IDACredits", January 1995 (revised in January and August 1996, September 1997, and January 1999); as wellas those for "Selection and Employment of Consultants by World Bank Borrowers," January 1997 (revisedSepternber 1997 and January 1999).

2. Procurement Responsibilities. The Ministry of Education (MOE) would have primaryresponsibility for procurement under the Education Action Project (EAP). On a day-to-day basis, theoverall project implementation would be managed by a Project Director and support staff of the ProjectSupport Team (PST). All procurement would be managed by the Procurement Section in the MOE.During project implementation one additional procurement expert experienced in the procurement of goodswould be assigned to the Procurement Section in the MOE. The Terms of Reference (TOR) for specifictasks would be prepared by the relevant MOE departments. Based on these TORs the Procurement Sectionwould prepare the tender documents and Request for Proposals (RFP). With modifications acceptable tothe World Bank, the Bank's standard bidding documents for International Competitive Bidding (ICB)would be used for National Competitive Bidding (NCB). For National and International Shopping andsmall-value consulting contracts, simplified documents would be prepared for use under the Project.

Procurement methods (Table A)

3. Procurement arrangements are described below and summanzed in Table A. Thresholds forprocurement methods and prior review anrangeznents are summarized in Table B. A detailed procurementplan for the first year of project implementation has been prepared for all TFC-funded activities.

4. Civil Works (US$2.72 million). TFC-financed Civil Works would include: two-story extension tothe MOE with an estimated value of US$430,000, construction of four new vocational schools attached toan existing building with a total value of US$1.38 million and rehabilitation of existing schools. Allcontracts are similar in value. No ICB procurement of works would be feasible since the estimated contractvalue and geographic dispersion of the contracts would not likely attract international contractors.Contracts would be procured using NCB procedures and documents acceptable to the World Bank andwould require advertisement in at least two national newspapers.

5. Goods (US$1.49 million). Goods would include: Office equipment, computer hardware andsoftware, educational equipment and furniture. To the extent possible, procurement of goods andeducational leaming materials would be grouped together in lots of similar items. Packages with a contractvalue of more than US$200,000 would be procured through ICB and would require advertisement in theUN Development Business. Other packages, including supplies, at an estimated cost values of more thanUS$100,000 but less than US$200,000 would be procured using NCB procedures and documentsacceptable to the World Bank. These contracts would require advertisement in at least two nationalnewspapers. The procurement of goods valued at US$100,000 or below would be procured throughNational (NS) or International Shopping (IS) and would use simplified documents and procedures forsoliciting, receiving and evaluating competitive quotations from a minimum of three qualified local orinternational suppliers. The aggregate amount of these contracts would not exceed US$630,000.

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6. Consultant Services (US$1.37 million). Services would include consultant services forarchitectural supervision, two service contracts, one to develop and implement a financial managernentsystem (FMS) and one for an educational management information system (EMIS), and short-term,long-term international and national technical specialists. The contracts for the FM and EMIS systemswould be contracted with a consulting firm and have an estimated cost of more than US$100,000. Bothcontracts have an aggregated amount of US$400,000 and would be procured using the Quality andCost-Based selection method. For other architectural/engineering consultancies above an estimated contractvalue of US$50,000 equivalent or specialized consulting assignments and short-term, low-cost contractswith consultants, the selection would follow Quality-Based (QBS) methods, Consultant'sQualifications-Based (CQ) or Single-Source Selection (SS), depending on the nature of the TORs, whichwould precede all selections. For contracts valued at more than US$100,000, an expression of interestwould be advertised in the UN Development Business.

7. Training Activities (US$0.83 million). Workshops and study visits have been estimated on thebasis of unit cost per trainee, which includes: training fees, handouts, training material or supplies, traveland daily subsistence allowance. Trainers or coordinators would be recruited following CQ procedares.The project would strengthen necessary skills required for management to carry the reform process. Thiswould include htaining in implementation, procurement and financial management. The training programalso includes in-service teacher training activities and training of head teachers. TA and training would becontracted in accordance with TOR, budget and implementation schedule agreed with the Bank during thereview of the Annual Work Plans.

8. School Improvement and Training Fund (US$0.92 million). A school improvement and trainingfund with an aggregated amount of US$920,000 would be available for targeted school training activities.Enrolled schools may apply for a grant up to US$2,000. These schools would be able to select theirtraining activity from a list of activities and finance these with the available funds. TA and training wouldbe contracted in accordance with TOR, budget and implementation schedule agreed with the Bank dunngthe review of the Annual Work Plans.

9. Operatine Expenditures and Maintenance. Recurrent costs attributed to operation aidmaintenance directly related to the project would be financed through the TFC.

10. Prior Review. For all prior review arrangements see table B.

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Procurement methods (Table A)

Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

Procurement Method

Expenditure Category ICB NCB 0I2~ tBN.EF. Total Cost1. Works 0.00 2.72 0.00 0.00 2.72

(0.00) (2.31) (0.00) (0.00) (2.31)

2. Goods 0.48 0.24 0.77 0.00 1.49(0.42) (0.20) (0.69) (0.00) (1.31)

3. Services 0.00 0.00 1.37 0.00 1.37(0.00) (0.00) (1.37) (0.00) (1.37)

4. Training 0.00 0.00 0.83 0.00 0.83(0.00(0.0.00) (0.83) (0.00) (0.83)

5. Training Fund 0.00 0.00 0.92 0.00 0.92(0.00) (0.00) (0.92) (0.00) (0.92)

6. Operating Expenditures and 0.00 0.00 0.30 0.00 0.30Maintenance (0.00) (0.00) (0.26) (0.00) (0.26)

Total 0.48 2.96 4.19 0.00 7.63(0.42) (2.51) (4.07) (0.00) (7.00)

" Figures in parenthesis are the amnounts to be financed by the Bank Other (Specify). All costs includecontingencies.

21 Includes civil works and goods to be procured through national shopping, consulting services, services ofcontracted staff of the project management office, training, technical assistance services, and incrementaloperating costs related to (i) managing the project, and (ii) re-lending project funds to local units.

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Prior review thresholds (Table B)

Table B: Thresholds for Procurement Methods and Prior Review

1. Works >200,000 NCB All contracts<200,000 NCB No prior review

2. Goods >200,000 ICB All contracts>100,000 and <200,000 NCB First two contracts

<100,000 IS and NS All contracts3. ServicesFirm: >100,000 QCBS All contracts

<100,000 QCBS, QBS, QC All TORs, RFPs, finalEvaluation Reports and

contraci:

Individual: >50,000 see section V of Guidelines All TORs, CVs, EvaluationReports and contracts

<50,000 see section V of Guidelines First three contracts4. School Training Fund DC First ten contracts

Total value of contracts subject to prior review:

Overall Procurement Risk Assessment

Low

Frequency of procurement supervision missions proposed: One every 6 months (includes specialprocurement supervision for post-review/audits)This frequency is based on the procurement assessment report. Staff would be trained under the project inprocurement planning.

11. Summary of Procurement Assessment. Since it was established, the MOE has been working bilaterally with a number of donor countries and international agencies including the Bank. It has capable andexperienced staff who have carried out and performed procurement processes in accordance with donor'sdifferent rules and regulations. Under the on-going EHRP Project, the staff performed satisfactorily. Theoverall environment is positive and conducive to effective procurement. The risk for failure ormisprocurement is low. However, since the staff would operate with the Bank's new financial managementsystem, the prior review thresholds have been set on the low side to ensure that the system is introducedwithout any disruption or major mistakes. It is advisable that training of staff on the Bank's StandardBidding Documents and on the new financial system is done shordy before or immediately after Boardapproval to ensure that the staff is familiar with and able to manage the system accurately andappropriately. Early Bank supervision missions can help to ensure this.

Thresholds generally differ by country and project. Consult OD 11.04 "Review of ProcurementDocumentation" and contact the Regional Procurement Adviser for guidance.

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Disbursement

Allocation of other (specify) proceeds (Table C)12. The TF Credit of US$7.0 million would be disbursed during Project implementation according toTable C. The Credit is expected to disburse over a period of three years. The estimated TF Creditdisbursements over the three-year period are presented on page 2 of this Project Appraisal Document. Allproject activities are expected to be completed by March 31, 2004, and the TF Credit will close onSeptember 30, 2004. The relative short implementation and disbursement period is feasible due to the factthat all activities are part of the PA's overall Five-Year Plan. Preparation and submission of disbursementapplications would be the responsibility of the PST.

Table C: Allocation of Other (Specify) Proceeds

Expenditue Category Amount In USSmllfion Financing Percentage1. Civil Works 2.35 85%

2. Goods 1.30 100% of all foreign expenditures;100% local (ex-factory cost);

85% local3. Consultants Services 1.00 100% of all expenditures

4. Training 0.80 100% of all expenditures

5. School Improvement and Training 0.65 100% of all expendituresFund6. Operating Costs and Maintenance 0.20 85% of all recurrent cost7. Unallocated 0.70

Total Project Costs 7.00

Total 7.00

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Use of statements of expenditures (SOEs):

13. Until a new automated FMS is in place [see section on financial management], all disbursementsclaimed under applications for replenishment to the Special Account and reimbursement for contracts thatare not subject to Bank prior review would be made on the basis of Statement of Expenditures (SOE.s).The PST would claim reimbursement on SOE for US$200,000 for goods and works, US$100,000 forconsulting firms, US$50,000 for individual consultants, training activities and grants under SchaolImprovement and Training Fund, and for operating expenditures and maintenance. During negotiations,assurances have been given that supporting documentation would be maintained in MOE and be madeavailable for review by Bank staff during supervision missions. Documentation relating to SOEs would beretained for up to one year after the final withdrawal from the TFC.

Special account:14. To facilitate project implementation and timely payments of the Bank's share of eligibleexpenditures to contractors, suppliers, consultants and others, the Borrower may open and maintair. aSpecial Account (SA) in a commercial bank, on terms and conditions acceptable to the Bank. The PSTwould have access to, and manage, the SA. Disbursements will be made by the PST directly from the SA.T'he authorized allocation of the SA would be equal to four months estimated expenditures, equivalent toUS$700,000. At the start of the project, the initial deposit to the SA would be limited to US$300,000. Theremaining amount of the authorized allocation may be requested only after cumulative disbursements reachthe equivalent of US$1.2 million. Requests for replenishment of the SA would be submitted on a monthlybasis.

Financial Management

A. Financial Management Assessment

1. The MOE maintains detailed accounting records, books of accounts, competent staff, and a systernof internal controls that consists of many layers. Also, the MOE has relative pertinent experience in projectimplementation (through projects funded by other development partners). However, some inefficiencieswere identified during the review, in particular, the inadequate integration of the accounting systems(central, district, and schools level), and lack of definition in writing of the financial management andinternal control procedures. This is in addition to inadequate reporting arrangements, which are based cnbudget compliance requirements and lack of capacity to generate meaningful reports for projectmanagement purposes.

The main characteristics of the MOE fnancial management system are as follows:

2. Oreanizational Structure. The central finance department consists of fourteen accountantsheaded by a finance director. The section heads are generally experienced accountants. Assistants andclerks have less than three years experience, on average. The department is organized into six sections(accounting, compliance, projects, treasury, procurement and budgeting). All six sections have informalworkflow written descriptions prepared by the head of each section in the central level. All sixteen districts(except Areeha) have small accounting units, with about thirty accountants in all districts, to handle theaccounting function at the district level and to monitor the book-keeping process at the school level.

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3. Accounting System. A cash-basis accounting system, which is maintained manually, is in place.However, Excel sheets are used for the analysis of accounts. The MOE Accounting Department isorganized in three levels, i.e. center, district, and school level, and operates through six sections:

i) Accounting Section, records transactions funded by the MOF and donations received from schools,prepares monthly trial balance, bank reconciliation, and MOF reports.

ii) Projects Section, records transactions of projects funded by external parties (i.e., donors), monitorstheir bank balances and prepares monthly bank reconciliation (more than 30 bank accounts).

iii) Treasury Section, receives and delivers cash and checks from/to various parties, has custody ofletters of guarantee received from contractors and records cash in/out entry in the cash register.

iv) Budgeting Section, monitors transactions recording and budget allocations at the district level andparticipates in the preparation of the annual budget, based on adjusted historical data. After theMOE has prepared its budget, it is reviewed with the General Budget Departmnent (GBD). Basedon the budgets of each Ministry, GBD prepares the general budget and submits it to the MOF forfurther processing. The general budget is then discussed by the council of ministers and submittedto the Palestinian Legislative Council for review and approval (usually taking several months).Finally, it is forwarded to the chairman of the PNA for final approval and issuance. Budgetrevenues and expenditures are subject to continuous monitoring throughout the year by the MOF(through regular review of all revenues and expenditures of the MOE. Moreover, MOE reportsmonthly on their actual expenditures to the MOF) and Treasury Department (through verificationof the monthly requests for funds submitted by the MOE). As for school budgets (i.e., how schoolsallocate their own internal revenue from donations and school cafeteria) the budgeting sectionsupports the district in the process of monitoring the schools.

v) Compliance Section, reviews all transactions before payment to ensure proper supportingdocumentation and authorization, prepares payment vouchers and later checks.

vi) Procurement Section, handles the procurement function for the MOE, whether relating to donorsor locally funded.

4. Internal Control. A set of policies and procedures that should be followed by the MOE is includedin a formal memorandum that is released on an annual basis. This memo is general in nature, and isdistributed to districts and schools, and covers policies relating to schools' donations, schools' budgetspreparation, schools' cafeteria, books sales, and handling of the fund for improvement in the districts. TheMOE has recently formed a committee for Finance, Internal Audit, and Administration departments. Thiscommittee has the objective of improving communication and harmonization of efforts between the threedepartments. An education management information system is also being developed. Finally, the MOEmonitors its financial and administrative activities through the compliance section (reviews the financedepartment at the central level), budget section (reviews the districts and schools budget preparation andallocation), internal audit department (reviews the districts and schools), MOF (reviews documentssupporting expenditures funded by the ministry), ministry auditors (reviews the ministry in general) andaudit firms (reviews donor's funded projects). In addition, there is a monitoring and evaluation section thatis responsible for overseeing the physical output performed.

5. Audit Process of MOE operations is undertaken at two separate levels:

i) External Audit. The budget department is subject to an annual external audit by the Public ControlCommission (PCC). The PCC does not perform audits on a regular basis, and during the past five yearsPCC staff have visited the MOE only once and no formal report was issued. On the other hand, donor'sfunded transactions are audited by private sector auditors. Reputable audit firms, such as internationalaudit firms with local representatives in PNA territories, apply International Audit Standards as required bytheir internal rules.

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ii) Internal Audit MOE's Internal Audit Department (LAD) is located at headquarters with representativesat the district level, and reports to the Deputy Minister of Education. LAD is responsible for auditing thefinancial and administrative functions of schools and district offices, and performs financial andcompliance audits. The LAD employs 39 staff (9 at headquarter, 30 in the districts), and is represented bysections in all districts (except Areeha- because of its size). LAD work is limited to districts and schools,and does not audit the finance department at the center.

B. Financial Management Arrangements

6. The MOEs finance department would handle all the financial managernent of the project, using itsexisting FM procedures, which would be upgraded gradually through three successive phases; an ActionPlan (par. 8 below) for this purpose is agreed with the MOE's senior management and has been confimiedduring Negotiations: in the first phase, the existing MOE's FM procedures would be complemented anddocumented/updated as needed; this would include the development of interim procedures required toenable the management, accounting and reporting related to the project funds, during the period leading tothe full implementation of the new FM systems as envisaged by the Action Plan; this phase will becompleted before Effectiveness. In the second phase, the objective would be to complete the systems thatare required to enable the production of reporting for the management of the project (PMR); it is expecledthat this phase would be completed in about one year from Effectiveness (a sample of PMRs are attached).During those two phases, the financial department would be supported by the PST's core financial team(FT), who would assist the department in its day-to-day operations related to the project financialmanagement and oversee the implementation of the Action Plan. The objective of the third phase is tocomplete the other parts of the FM system as described in the institutional building component of theproject.

7. Agreement was reached at Negotiations with the MOE's management that the following measureswould be completed by Effectiveness: (a) the employment of a specialized consultant who, in conjunctionwith the FT, would prepare the TORs, tasks and job descriptions of the FT, and develop the intermfinancial management procedures as described above; (b) appointment of the core Financial Team (FT)members; and (c) appointment of the auditor of the first fiscal year of project accounts, ( i.e. agreementwith IDA on the selection process, short list and TORs).

8. Action Plan. The following plan was discussed and agreed with MOE's senior management andhas been confirmed during Negotiations.

Phase 1- Before Effectiveness:

* Identify and hire the Project Support Team (PST) headed by the Project Manager.The PST would also include two other positions, finance officer and procurement officer. TORs would

be drafted and reviewed by the Bank representative.

* Updating, complementing, and documenting MOE's financial policies and procedures.A Financial Management Manual (FMM) for the MOE should be issued according to TOR;s

acceptable to the Bank. The FMM should include the following:

(viii) the flow of funds and levels of authority(viii) the financial and accounting policies(viii) the accounting system and internal control mechanisms, including the documentation of the

accounting and reporting software

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(viii) the chart of accounts adapted to the project(viii) financial reporting, including formats of PMRs, the reporting required from each level, and the

frequency of each report(viii) auditing arrangements, including a standard TOR(viii) budgeting(viii) organization and staffing for financial management functions

The FMM should include interim procedures required to enable the management, accounting and reportingrelated to the project funds, during the period leading to the full implementation of the new FM systems.

* Hire a competent and independent external auditor

Phase 2: After Effectiveness

* Select an integrated accounting package.The MOE's accounting system should be able to provide accurate, reliable, and timely accounting

information on projects' funding sources and uses for the whole project as well as each individualcomponent and sub-component of the project. It should also provide a regular reconciliation of the TFC'sSpecial Account (SA) with World Bank records. To allow for more prompt and accurate monitoring offinancial, procurement, and monitoring and evaluation output indicators, an accounting software should beselected to integrate financial, progress and procurement reports into a PMR based on the model developed.The package should be tailored to meet the exact needs of the MOE on the central and district level, and becompatible with systems under development by the MOF.

- Acquire needed hardware for the finance team in the PST and MOE (central/districts).This action would start at the PST and MOE central level to allow the launching of the training

program and improvement of staff computer skills. The purchased hardware specifications should besuitable for the new accounting package.

* Create the Project Management Reports (PMRs) taskforce to issue PMR.The taskforce would include representatives from finance, procurement, MIS, international

cooperation, planning, budgeting, monitoring and evaluation and PST. The taskforce's main objective is toissue the quarterly PMRs.

* Enhance the planning and budgeting system.Budget prepared for the project should be linked to the annual work plan, the procurement plan, and

disbursement schedules (ensuring proper costing assumptions). The system should be capable ofgenerating accurate and timely cash forecasts.

* Institute a training program.This action should include specific training sessions for procurement, disbursement, project

management, accounting, and financial management. The program should include all staff involved in theproject implementation as well as back-up staff. The level of each staff member in terms of capacity,background, and experience has to be taken into consideration in order to meet the MOE's needs.

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9. TimetableAssuming a board presentation on May 31, 2001, the MOE would be held to the following schedule forimplementing the financial management action plan for the first year of project implementation.

Action Output Responsibility Deadline

By Board DateIdentify PST members and prepare The three members (project director, MOE April 15,2001the relevant TORs finance officer and procurement

officer) are hired

Employment of a specialized A competent consultant is hired MOE April 1, 2001consultant in accounting and finance

Launch the process of hiring a Procurement process in progress MOE April 15, 200 icompetent and independent extemalauditor based on a reviewed TOR

Before Effectiveness

Hire an external auditor Engagement letter is signed MOE June 30, 200]

Issue a FMM A complete manual for accounting, MOE, PST, and July 15, 2001budgeting, and procurement policies consultantand procedures.

After EffectivenessSelect an integrated accounting An accounting package is selected MOE and PST Aug. 1, 2001package that is capable of generating reliable

and timely PMRs

Acquire needed hardware Reception of the equipment MOE and PST Aug. 15, 2001

Create the PMR taskforce Organization chart and roles PST Aug. 15, 2001description

Develop the reporting system Format and content of PMR PMR taskforce and Aug. 30, 200]PST

Institute a training program for Program (contents and timetable) MOE and PST Sept. 15, 2001finance, planning, and budgetingfunctions

Install an integrated accounting Computerized accounting package MOE, PST, and Nov. 15, 2001package installed and operational at the vendor

center and district levels

Enhance the accuracy of the Annual work plan, procurement plan MOE, PST, and PMR Nov. 30, 2001budgeting, costing, and planning based on accurate costing task forcesystem assumptions are issues for the

project

Implement the PMR Setup of the output and testing PMR taskforce, PST, Dec. 15,. 200].process and consultant

Review training progress Report on the training PST Dec. 31, 2001

Issue the draft first PMR Integrated management reports PMR taskforce, PST, Feb. 1, 2002and consultant

Training completion Training performance report PST March 15,2002

Issue of the final first PMR Final PMR PMR taskforce, PST, April 1, 2002and consultant

Evaluation of the Financial Financial management assessment World Bank May 15, 2002Management System report

- 54 -

10. An extemal, competent, and independent auditor acceptable to the Bank will be hired before projecteffectiveness. The selected auditor would audit the accounts for the first year of project operations. Theauditor would also be assigned the review of internal control and accounting systems being developed toverify compliance with the financial and procurement reporting requirements. The auditor would submit tothe Bank annual project financial statements within 6 months of the close of the fiscal year. The TORswould be agreed upon with the Bank and included in the FMM1.

11. The audit would be comprehensive and cover all aspects of the project (i.e., all sources andutilization of funds and expenditures incurred). The audit would be carried out in accordance withInternational Standards on Auditing. TORs for this assignment should cover an audit of financialtransaction, and an assessment of the financial management system, including a review of internal controlmechanisms. Each unit (center, district, and school) would provide the auditor with access toproject-related documents and records, and information required for the purposes of the audit. The auditorwould carry out a concurrent audit during the fiscal year to bring to management's attention any issueswhich need to be addressed. This would strengthen internal controls and facilitate early completion of theannual audit.

D. Financial Management Reports

12. Transitional Reporting, i.e. during phases 1 and 2 the Borrower would submit to the Bank thefollowing reports:

- Sources and Uses of Funds (Report 1-A, see below);* Procurement management reports (Report 3-A, 3-B, 3-C, and 3-D, see below).

In addition, audited Project Financial Statements (PFS) would be submitted on an annual basis to the Bank(see below).

13. After the Transitional Period - Ouarterlv PMRs for the project via the computerized financialmanagement system would be management-oriented and would be used for project monitoring andimplementation. The PMRs should include the 3 following parts:

(i) Financial Reports that include:

i-a Project Sources and Uses of Fundsi-b Uses of Funds by Project Activityi-c Project Balance Sheeti-d Project Cash Withdrawals (Disbursement)i-e Special Account Statementi-f Project Cash Forecast

(ii) Proiect Progress Reports that include:

ii-a Output Monitoring Report (Contract Management)ii-b Output Monitoring Report (Unit of Output by Project Activity)

(iii) Procurement management report that include:

iii-a Procurement Process Monitoring - Goods and Worksiii-b Procurement Process Monitoring - Consultants' Services

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iii-c Contract Expenditure Report - Goods and Worksiii-d Contract Expenditure Report - Consultants' Services.

The format of the reports would be included in the Financial Management Manual.

14. AnnuaLy audited Project Financial Statements (PFS) would be submitted to the Bank. PFS, wouldinclude:

(i) a statement of sources and utilization of funds or Balance Sheet, indicating funds received frcmvarious sources, project expenditures, assets and liabilities

(ii) appropriate schedules classifying project expenditures by components, expenditure categories aidsector

(iii) a Special Account Reconciliation Statement(iv) a Statement of Withdrawals made on the basis of Statements of Expenditure (SOEs).

- 56 -

Report on the Assessment of Project for PMR-Based Disbursements

Ineligible for PMR-Based Disbursements

Part I - Financial Management System:

I have reviewed the financial management system relating to this project. The objective of the review was todetermine whether the project has in place an adequate financial management system as required by theBank/IDA under OP/BP 10.02.

My review, which included visits to the project implementing agency, was based on the Bank's guidelinesfor "Review of Financial Management System", and focused on the assessment of the project's accountingsystem, internal control, planning, budgeting and financial reporting system, selection of an auditor as wellas the format and contents of the Project Management Report (PMR) to be submitted by the borrower insupport of Withdrawal Applications.

I confirm that the project satisfies the Bank's minimum financial management requirements. However, inmy opinion, the project does not have in place an adequate project financial management system that canprovide, with reasonable assurance, accurate and timely information on the status of the project (PMR) asrequired by the Bank/IDA for PMR-Based Disbursements.

I have detailed in the attachment the inadequacies that I found in the system together with an agreed actionplan by the borrower to remedy the situation.

To be signed by:Sr. Financial Management Specialist, (FMS-OPR) 1V5L M/ao

Hisbm Waly, MNACS Daw

Part II -Procurement/Contract Management System

I have reviewed the procurement/contract management system relating to this project. The objective of thereview was to deternnine whether the procurement/contract management system adopted by the projectconforms to the Bank's guidelines for procurement in investment projects.

My review was based on the Assessment of Agency's Capacity to Implement Project Procurement, Settingof Prior Review Thresholds and Procurement Supervision Plan" guidelines issued by the Bank.

I confirm that the project satisfies the Bank's minimum procurement management requirements. However,in my opinion, the project does not have in place an adequate procurement/contract management systemthat can provide the appropriate data on major procurement and contract management (PMR - Section 3)as required by the Bank/IDA.

I have detailed in the attachment the inadequacies that I found in the system together with an agreed actionplan by the borrower to remedy the situation.

To be signed by:Operations Officer

Gemt Ad,Fad. 7N SIF

Part III: Physical Monitorable Indicators and Overall Assessment

- 57 -

Part III: Physical Monitorable Indicators and Overall Assessment

I have reviewed the project's system for monitoring physical implementation progress, including itsmonitorable indicators for major outputs. In my view, the system cannot provide the appropriate data onphysical progress (PMR - Section 2) required by the Bank/IDA.

I have detailed in the attachment the inadequacies that I found in the system together with an agreed actionplan by the borrower to remedy the situation.

Also, based on the assessments of the FMS-OPR and PS, and/or considering my overall assessment of theproject, I am of the view that this project is not suitable for PMR-based disbursements.

To be signed by:Task Team Leader /0l

L s Guillermo Hakiim, MNSHD Date

Part IV: Concurrence of LOA for Eligibility of Project for PMR-Based Disbursements

I have conducted a reasonable review of the process followed by the Task Team in assessing the project.and I concur with its recommendation that this project is not eligible for PMR-Based Disbursements.

Signed by:FMS-LOA/DO

Thao Le Nguyen, LOAEL Date

Andrina A. Ambrose-Gardiner, LOAEL Date

- 58 -

Annex 7: Project Processing Schedule

WEST BANK AND GAZA: Education Action Project

Project Schedule Planned ActualTime taken to prepare the project (months) 7 17

First Bank mission (identification) 10/18/99 10/18/99Appraisal mission departure 10/14/2000 06/01/2000

Negotiations 10/23/2000 03/19/2001Planned Date of Effectiveness 07/31/2001

Prepared by:

Ministry of Education

Preparation assistance:

Japanese Grant Fund

Bank staff who worked on the project included:

Name SpecialityEluned Roberts-Schweitzer Senior Education SpecialistSue Ellen Berryman Senior Education SpecialistVasilios C. Demetriou Senior Implementation SpecialistHisham Ahmed Waly Sr. Financial Management SpecialistTakako Yuki Operations Analyst/Education EconomistVivian Nwachukwu-lrondi Team AssistantHans Korb Implementation SpecialistGeorge Nasri Awwad Operations OfficerKrisztina Mazo Program AssistantChristina Djemmal Operations AnalystCeline Gavach Program AssistantLuis Guillermo Hakim Senior Human Resources Economist

- 59 -

Annex 8: Documents in the Project File*

WEST BANK AND GAZA: Education Action Project

A. Project Implementation Plan

1. Description of components2. Overall schediile of activities for the life of the project3. First year detailed schedule of activities4. Terms of reference for consultants for the first year5. Financial management assessment6. Terms of reference for financial audit7. Action plan for financial management8. List of equipment9. Procurement plan and packaging

10. Implementation arrangements and organizational chart11. Procurement assessment report12. Action plan for procurement13. Costing of the project (COSTAB)14. Procurement reporting table15. Disbursement per year16. Monitoring and evaluation guideline and monitoring indicators17. Bank's role on supervision18. Environmental management plan

B. Bank Staff Assessments

* Aide-Memoire for the mission in February 2000* Draft Project Description Summary* Draft General Education Comprehensive Development Framework* Draft Vocational Training CDF* Aide Memoire for the mission in June 2000* Report of Joint Donor Supervision for Education Construction (upcoming - to be held August 2000)

C. Other

* Establishment of a multi-purpose vocational education and training facilities in the West BankImplementation Plan

* Reference Paper on the National Palestinian Vocational Technical Education and Training Strategy* Vocational Technical Education and Training in Palestine A Proposal for a National Strategy* 5 year education plan* 5 year education plan Matrix* 5 year education plan Model Plan Scenario* Linkage between MOE and MOHE* Plan for MOHE* Five Year Plan for UNWRA* First Palestinian Curriculum Plan 1998* Management Audit at the District Level - Technical Report* Education Statistical Yearbook 1998/1999 MOE

- 60 -

* Aid Effectiveness in the West Bank and Gaza June 2000* National Palestinian Vocational Technical Education and Training Strategy in Palestine Implementation Plan* Proposed Direction for Palestinian Higher Education: A Vision for the Future* West Bank and Gaza Service Delivery Survey - Health and Basic Education Services* Palestinian Development Plan 1999-2003* Linkage between the Plans of the Ministries of Education and Higher Education in Palestine - Working Draft* Strengthening Palestinian Public Institutions - The Rocard-Siegman Report and the Palestinian Response

*Including electronic files

- 61 -

Annex 9: Statement of Loans and Credits

WEST BANK AND GAZA: Education Action ProjectMar-2001

Difference between expectedand actual

Original Amount in US$ Millions disbursements

Project ID FY Purpose IBRD IDA SF Cancel. Undisb. Orig Frm Rev'dP054051 2001 GZ-SOLID WASTE & ENVIRONMENTAL MNGMNT. 0.00 0.00 9.50 0.00 8.40 0.67 0.00

P053892 2000 GZ-HEALTH SYSTEM DEVELOPMENT I 0.00 0.00 7.90 0.00 7.24 2.20 0.00

P058683 2000 GZMIDPII 0.00 0.00 7.50 0.00 7.50 1.17 0.00

P040508 2000 GZ-ELEC.SEC.INV.& MGMT 0.00 0.00 15.00 0.00 12.03 5.77 0.00

P058684 1999 GZ-COMMUNrTY DEV. II 0.00 0.00 8.00 0.00 2.29 1.13 0.00

P051t64 1999 GZ-SOUTHERN AREA WATER 0.00 0.00 21.00 0.00 16.49 7.00 0.00

P053985 1999 GZ-BETHLEHEM 2000 0.00 0.00 25.00 0.00 4.20 24.53 0.00

P040503 1998 GAZA INDUSTRIAL EST. 0.00 0.00 0.00 1.00 6.88 6.94 0.00

P047067 1998 GZ: PALESTINIAN NGO PROJ 0.00 0.00 10.00 0.00 1.82 6.80 10.47

P040505 1997 GZ-WATER & SAN. SERVICESIGAZA 0.00 0.00 25.00 0.00 0.32 25.00 0.00

P043338 1997 GZ-HOUSING 0.00 0.00 25.00 0.00 24.30 21.84 0.00

P047065 1997 GZ-MICROENTERPRISES-IFC 0.00 0.00 5.00 0.00 2.65 5.00 4.84

P047111 1997 LEGAL DEVELOPMENT 0.00 0.00 5.50 0.00 3.39 5.42 0.00

P043339 1996 GZ-MUNICIPAL DEVELOPMENT 0.00 0.00 40.00 0.00 4.95 40.00 0.00

P035996 1995 EDUC. & HEALTH REHAB 0.00 0.00 20.00 0.00 0.00 20.00 20.00

Total: 0.00 0.00 224.40 1.00 102.47 173.46 35.31

- 62 -

WEST BANK AND GAZASTATEMENT OF IFC's

Held and Disbursed PortfolioMar-2001

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1994 APIB 0.00 3.73 0.00 0.00 0.00 3.73 0.00 0.001997 Arab Bank 0.00 0.00 3.00 0.00 0.00 0.00 0.90 0.002000 Cairo Amman Bank 2.50 0.00 0.00 0.00 0.00 0.00 0.00 0.001997 ComBank Palestin 0.00 0.00 1.50 0.00 0.00 0.00 0.58 0.001997 Jordan National 0.00 0.00 3.00 0.00 0.00 0.00 2.00 0.001997 PIEDCO 8.00 1.00 0.00 0.00 1.00 1.00 0.00 0.001999 PMHC 0.00 4.00 0.00 0.00 0.00 2.23 0.00 0.001998 PTF 0.00 12.60 0.00 0.00 0.00 4.55 0.00 0.001998 PTF-Mgt Co. 0.00 0.20 0.00 0.00 0.00 0.04 0.00 0.001999 PTIC 8.00 1.35 0.00 0.00 8.00 1.35 0.00 0.001998 SEF Al-Ayyam 1.80 0.00 0.00 0.00 1.80 0.00 0.00 0.001997 SEF Arab Concret 0.80 0.00 0.00 0.00 0.80 0.00 0.00 0.001999 SEF Cold Storage 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.001999 SEF JerichoMotel 1.10 0.00 0.00 0.00 1.10 0.00 0.00 0.001997 SEF Nabahin 0.50 0.00 0.00 0.00 0.50 0.00 0.00 0.00

Total Portfolio: 22.90 22.88 7.50 0.00 13.40 12.90 3.48 0.00

Approvals Pending Commitment

EY Approval Company Loan Equity Quasi Partic1999 PMHC 15000.00 0.00 0.00 0.00

Total Pending Commitment: 15000.00 0.00 0.00 0.00

- 63 -

Annex 10: Country at a GlanceWEST BANK AND GAZA: Education Action Project

West M. East Lowsr-POVERTY and SOCIAL Bank & North middie-

& Gaum Africa Jncome Devolopment diamond

Pnnilation. mid-veer fmi,ilonal h A 7 91 9 054 Life expectancyGNP oar cooft lAtts method. USS Ja 1i.800 2.060 1.200f.NP (Atias method. USS biilonsl la I t 99 79.513

Averace annuali rowth. 110103J90

Pnnulatinn ff%t A. 1 IiLebor foca 5. 30 1.2 GNP Gross

per I primaryMost recent estimat flatsot vear available. 1993-S91 capita -onrn.lrnm

Povertv `% of ooculaticn befow national ooverv lie)d 23I lrhan nnnul*tinn 1% of total oooulstfont 70 SR6 43Life exnectanev at birth (veaa) 71 68 69Infant mffntiltlv (oaf 1.000 l,ve bfithf 75 4S R8Dhilri malrihtrtinn tX of children under 51, 15 1 Access to safe waterAccess to kiwm ved water source (% of ooouatfori 9, go 71 aslilitarenvy I of oooulatlon e 154 3\ 16 - s BGross ofimarv enrollment /% of school-a. oooulnitn 91 5 114 WeSt Bank and Gaza

UMin :1 107 11 - Lower-middle-income groupFemale 97 aa 11fi

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1079 19 19 loss 1999Economic ratlos

GOP fWS billions) : 4.1 4' 'f rnAe rinmestin invaomentiflnP 39 7 3TaFanorts nf rnods And aarvlnax/GlIP 17 A 17.5 TradeGross domestie savinas/GOP -21.2 .18.5Arnea nAtlnnxi savinna/0,t17P .? 1MtA

Current account balan.eIGDP -33.5 -27 6inteorest rnvmontWlP ()D n. 8 0 DomesticmeTntal dehttlrnP 4 A 75 3 Savings tntTotal debt aivice/esxortsaPresent vwlue n drahtmnrv,PPresent value of debtexsoorts

Indebtedness100 §79-80; 1f980.03 1998 1909 1900-03

(avfreoe annual hlwhr4ifP: 31 A Isi at -9 West Bankand Gaza

P cnltE .I 11 S 7 8 ----- Lower-middle-income arouoExnorts of ooods and sorvcs 1.4 6.6 4 0

STRUCTURE of the ECONOMY1979 1989 1998 1999 Growth of Investment end GDP (%)

(% Of GDPI 1Anriciiltijr R 7 AR 10.-Industr 29.6 29.8 s

Maninfecltrina 17.7 17.5

Services . 61.7 61.6 0 84 t v " as 9Privrtd consirmntion 97 3 ',t 7 5Gnnaral novernmnt *nnnCImntinn 7.' a9 7R.l4 GDI ' GDPImoorts of noods and services 7. 3 754

(averace annual orowthli 1979-89 1989-99 1998 1999 Growth of exports and imports (%)

Anrlciltirn -44 4 A 3 4 10Industrv - 1.5 10.8 5.2

MAni,fanturlnn 4 R 107 3 7 0Services 3 R R 7 4.4 97 95 so

Private cnnsijmntinn 7 fi a0 S n O Glnarel nwvomment onsRumntinn 13.1 70 11 7Gross domestic Investment 4.9 7.1 6.2 20Imnnrts of nonds and servircs 417 7 4 R 0 Exports -ImportsGross national oroduct 5.0 12.7 6.8

Note: 1999 data are preliminary estimates.

The diamonds show four kev indicators In the countrv tin bold) comoared with its income-oroun averaeo. If data are missina the diamond willhe inenmnlete

-64-

West Bank and Gaza

PRICES and GOVERNMENT FINANCE1979 1989 1998 1999 Inflation (%)

Domnesfc prices(% change)Consumer prices 5.6 5.5 10Implicit GDP deflator , 7.9 4.9

Govemment finance(% of GDP, includes current grants) oCurrent revenue 24.7 28.9 94 95 go 97 98 9Current budget balance 1.0 1.1 GOP defator OCPI

Overall surplus/deficit -0.4 -1.5

TRADE

(USS millions) 1979 1989 1998 1999 Export and Import levels (USS mill.)Total exports (fob) 714 720 3,000

n.a.n.a. . .* ,0Manufactures ,0

Total imports (cif) 2,839 2,791Food100Fuel and energy ,*Capital goods.. . .. . 0

93 94 98 99 97 98 99ExDort Doce index (1995=100)Imnort orice index M995=1001 ,, *Exports I ImportsTerms of trade (1995=100)

BALANCE of PAYMENTS

(USS millions) 1979 1989 1998 1999 Current account balance to GOP (%)Exports of goods and services 727 733 0Importsofgoodsandservices 3,192 3,138 3Resource balance -2,465 -2,405 10

Net income 828 875Net current transfers 0 0 272 379 - -. 'l lCurrent account balance -1,365 -1,152

Financing items (net) 1,365Changes in net reserves 0 _-40o

Memo:Reserves includina nold (USS millionsl ..Conversion rate (DEC. locallUSS) 3.8 4.1

EXTERNAL DEBT and RESOURCE FLOWS1979 1989 1998 1999

(USS millions) Composition of 1998 debt (US$ mill.)Total debt outstanding and disbursed , 197 305

IBRD ,, 0 0IDA 146 239

E: 51Total debt service ,E

IBRD , ,IDA

Composition of net resource flowsOfficial grants ,.Official creditors ,Private creditorsForeign direct investment ,: -- _ . B 146Portfolio equity

World Bank programCommitments 35 44 A - IBRD E - eilateraDisbursements 39 93 B - IDA D - Other mulilateral F - PdvatePrincipal repayments 0 0 C - IMF G -Short-ternNet flows 39 93Interest payments 0 0Net transfers 39 93

Development Econormics 9/13100

-65-

AdditionalAnnex 11

Assessment of Institutional Capacities

The fundamental development objective for this project is to strengthen the sector's processes ofpriority-setting, policy analysis and planning, financial management, policy frameworks for intervent.ons,implementation, and monitoring and evaluation. These processes are expected to be developed ir. thecontext of selecting and implementing funding priorities for the project on an annual basis.

This assessment provides the context for the project's institutional development focus. However, itsmain objective is to evaluate the sector's capacities to realize the project's development objective. Thesecapacities are a function of the organizational and institutional arrangements in the sector. "Organizationalcapacity" refers to the functional structure of the sector and the skills and number of staff. "Institutionalcapacity" refers to the rules that govern the distribution of responsibilities and resources, includingdecision-making powers, within and among functional units, between various governing levels, and betweenthe sector and those outside the sector, such as the Ministry of Finance (MOF), Ministry of Planning andInternational Cooperation (MOPIC), and donors. The term "institutional capacity" is used to refer to thesetwo dimensions of the sector, its organization and rules of the game.

Consistent with the pretertiary focus of the project, the assessment is restricted to the preter:iarylevel of education.

Context

As table 1 shows, the Palestinian Authority (PA), the United Nations Relief and Welfare Agency(UNRWA), the Israeli civil authority in East Jerusalem, the private sector, and NGOs provide educationalservices at the pretertiary level. Private provision occurs at all pretertiary levels, with the private sector andNGOs providing all pre-school services. The PA and, in East Jerusalem, the Israeli civil authority focus onbasic and secondary education. UNRWA provides basic education services to refugee students only, withthe PA assuming responsibility for their education for grades 10-12.

Table I shows multiple funders (PA, donors-directly and indirectly through UNRWA, Israelicivil authority, NGOs, and families). Families contribute at all levels, especially at the preschool level. Ofthe estimated total costs of basic and upper secondary education in FY97, excluding the costs of privateschooling, the PA paid two-thirds; UNRWA, about 30 percent; parents, 2 percent; and, for schools in EastJerusalem, the Israeli civil authority, an estimated 0.8 percent. The PA and IJNRWA regulate the provisionof education. Regulatory frameworks are relatively well developed for basic and secondary levels, ancd thePA's Ministry of Education (MOE) is beginning to develop a regulatory framework for preschools. The PAprovides considerable public statistical information on basic and secondary education, regardless ofauthority (PA, UNRWA, or private sector), but thus far not on indicators particularly germane toperformance accountabilities--learning outcomes and educational finance (costs and cost recovery).

- 66 -

Table 1. Roles of the PA, UNRWA, Private Sector, NGOs, and Users in Pretertiary Education

Level of Education Player

PA UNRWA Private Sector/NGOs/Other

Preschool (MOE) regulation. The No provision; no Provision (1/3PA is setting up financing except that private-for-profit; 2/3licensing criteria and UJNRWA lends money to NGO); NGOs co-financeprocedures. It is starting 3-4 private with users; school-levelto coordinate with kindergartens in Gaza regulation; informationpreschool curriculum City under commercialproviders to increase the conditions; nocontinuity between the regulation; nocurricula of the infornationpre-school and earlyprimary gradesinformation

Basic Education MOE provision of Provision for refugee Private sector and NGOs(grades 1-10) grades 1-10 for students (grades 1-9); (including the Wajk in

non-refugee students and financing by donors; East Jerusalem):grade 10 for refugee enforcement of MOE or provision; limitedstudents; financing; UNRWA-specific financing; school-levelregulation; information regulations (e.g., regulation; information.

personnel policies; Israeli civil authority:international safety and provision of basic andconstruction standards); secondary education ininformation East Jerusalem;

financing; regulation;information

Secondary Education No role Provision; limited(grades 11-12) financing; school-level

regulation; information.See previous entry forIsraeli civil authority.

Functional Organization of the Ministry of Education

Figure I shows the functional organization of the MOE. Figure 4 shows the functionalorganization of the 16 district education offices. UNESCO has completed a management audit of thedistrict level, and plans a similar audit of the central MOE this summer that would yield detailedinformation about the functional organization of the MOE.

The central ministy is not well structured to realize the objectives of the project.

Public administration studies have identified the organizational structures and arrangements thatfacilitate the development of the management practices targeted by the project. These include across-departmental body that sets strategic and annual funding priorities, with final decisions in theminister's hands. Such a body has to be chaired by an individual(s) superordinate todepartmentally-specific interests to force the setting of priorities that are in the interests of the sector rather

- 67 -

than specific departments. Frequently the position that chairs is that of deputy minister. Across-departmental body normally has small working groups that focus on particular issues in the sector,for example, infrastructure. These subgroups usually include junior as well as senior staff.

Supporting the policy-making body is a technical secretariat that has no policy-making powers and,in order to remain credible as a technical arm, stays clear of policy making. Commonly, its functiom areones such as these:

* conduct the policy and economic analyses required to defne economically viable and equitablepriorities, and the policy frameworks for programmatic interventions;

* monitor implementation; and* evaluate the outcomes of interventions relative to their objectives.

Even a cursory examination of Figure 1 raises immediate questions about how well the MOE isstructured to realize the project's development objectives.

* The functional organization of the MOE is fragmented among a large number of separate directoratesthat all report to the deputy minister. Greater fragmentation complicates the task of setting sector-widepriorities. The functional rationale for some of these separate directorates is not obvious. For example,three directorates deal with goods (textbooks, educational technology, supplies and equipment).Although these are different goods, integrating responsibility for them within a single department wouldencourage the development of coherent policy that reflects analyses of complementarities and trade-offsamong them (e.g., textbooks versus computer-based instruction). Internationally, the functions ofexaminations and assessments are normally integrated into a single unit because both require the sameor similar technical skills and administrative processes.

* Functional fragmentation occurs not just among the directorates, but also internally within theindividual directorates. The MOE's choices about "make", rather than "buy", unduly fragmentdirectorates internally. The General Directorate of Textbooks and Printing is an example (see Figure2).

- 68 -

Organisational Stndure of the Palestinian Ministry of Education

-. _t. : ;: ;-Bi$-. t i........................................... :. P.................. J .*..> .,.

... .. . .... .. . . . . .. . .. .

EdicE~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ofic*a omi 29

Advisom'- . E.............................................. .. _j

|trrctnil uum Edcto Ex7 |barringtion1

02

_.3 I o

I~~~~~~~~~~~~I

K| d, i

I~~~~~~~~~~~~~~~~~~~ _ L _ -1 I I _

West Bank Directorat df Educatbon Gaza Drdorates of EduccaJon

JERUS%LM HEBR;ON RAF AMM AH 10iaANYOLINIS |NORH | GAZA

JERUSALEM HEBRON JAAIYA SALFEETHEBRON_ GAB___ _____ YZ

PAMAUAAH BETbHLEHEM ACIAJqIUA 1uWrM

JERICHO

SCHOOLS

Figure 1.1 Project Support Team

Project Support Team (PST)[located in the Directorate for Planning and Development

and other Departments]

Consultants Project Director

| Staff Assistant -1 7 -

-70 -

Figure 2. Functional Organization of the General Directorate of Textbooks and Printing

X, ': ; 0ew.(

Assistant DirectorGenera(

Textbook Print!n

DWector andAssistant Director

Textbook Ducstional Warehouse Diyision and Distributiona

Textbook Division He~~~~Asisant Westertor

Assistant Head Assistant Head Assistant Head Head HeadAdm sisten He d Administrative Saf[ Admnin,stfmiv t,a' f Assistant Head Assistant Head

Administrative Staff[21 ]Staff 1S Administrative Staff[f] Administrative Staff[3]

* Although 3 committees that report directly to the deputy minister constitute priority-setting andplanning bodies (educational services, administrative, and technical), each of these comnittees focuseson a subset of the pretertiary sector. For example, the administrative committee focuses on issues suchas budgeting, finance, and personnel. The table of organization shows no priority-setting and planningcommittee that cuts across the MOE. This kind of committee is required if the MOE is to conductpriority-setting for the whole pretertiary system. The Five-Year Plan Committee has been perforningthis function. However, the fact that it is not represented on the table of organization suggests that theMOE sees it as an ad hoc committee. The Five-Year Plan Committee is not chaired by an individual(s)superordinate to the directors general that constitute the committee.

* The deputy minister, a position that is normally key to effective sector management, has 43 directreports: 16 directorates, 3 departments, 6 committees, 2 assistant deputy ministers, and 16 directors ofdistrict education offices. International studies on effective span of control indicate that this number ofdirect reports is unmanageable, the nunber normally thought to allow proper span of control being14-15.

* The General Directorate for Educational Planning and Development is not shown as reporting to thepriority-setting commnittees, as well as to the deputy minister. One of the most important functions ofthis directorate is to serve as the technical secretariat to policy bodies.

Although Figure I does not show this, the MOE has not had a minister since August, 1998. Thisabsence distorts the functional organization of the MOE. The deputy minister has to serve as ministerwithout portfolio or the legitimacy that arises from formal appointment. The role of deputy minister isusually a managerial one: leadership and management of the ministry's daily responsibilities and strategicdirections. The same individual rarely plays both the external political role of minister and the internal

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managerial role of deputy for the simple reason that both are extremely demanding positions, and there arenot enough hours in the day to play both well. Given the huge number of direct reports to the deputyminister, the fact that one person has to handle the dual positions of minister and deputy minister is e venmore problematic.

If the MOE five-year planning process continues and matures, some directorates would have to changetheir organizational structures, and still more would have to change their skill mix. Since it would assumethe function of technical secretariat to policy makers, the General Directorate of Education Planning andDevelopment is particularly critical to realizing the project's development objectives. It would carry thetechnical burden of planning, financial management, monitoring, and evaluation. Figure 3 displays thefunctional organization of this Directorate. Relative to the functions that this Directorate is assuming widerthe new planning processes of the MOE, interviews with staff find a range of organizational problems.Functions are missing; staff are being used for functions that might be better outsourced; and staffingnumbers are inadequate for discharging responsibilities that can be expected to increase. For example:

* There is no financial management unit that can cost policy alternatives, and the capacities of existingstaff to cost are rudimentary.

* There is no evaluation unit in the Department. The studies unit mnight absorb this function. Howe ver,even if evaluations were contracted out to universities, this directorate would need to hire staff trainedin the specialized design and analytic methods required to tender for and monitor evaluation contracts.

* Market competition for skilled computer experts produces high turnover in the computer unit. The initneeds to consider the possibility of contracting out some of their functions, with the MOE primarilytendering and enforcing the contracts. The MOE already outsources data entry tasks.

* In theory the studies unit could conduct the policy analyses and studies necessary for priority-setting bypolicy makers and the development of policy frameworks for different investments, however, it onlyhas one person. Even if some of these studies were contracted out to university faculty, one person isnot even enough to handle the contracting out, monitoring, and dissemination activities that have to bedone in-house. And since the MOE policy makers would need fast turnaround in some cases, anin-house fast response capacity for policy analysis is needed.

* A unit is being set up in the Department to monitor the progress of donor-funded projects. However, itis not yet organized to monitor the MOE's progress toward achieving the perfornance goals of annualwork plans and its Five-Year plan.

* There is no unit trained to help other directorates develop feasible detailed action plans.

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Figure 3. Functional Organization of the General Directorate of Educational Planning andDevelopment

s Assistante Director General l

Dlrndo an DiracorJr*l DiarandAsslstant Director Assisawt Dlredor Assistant Dhldetr

] Adsifn.StHsaff| | ssistatH9ad | AssMantHrl | Admin. Staff | | Assistantd | | Adrdn. SAtstHaffe| Admaidn.dtStaSffd |

The districts are not well-structured to realize the objectives of the project

Figure 4 shows the functional organization of each of the 16 district offices. Since it mirrors theorganization of the MOE, it is similarly fragmented, and the two positions of assistant or deputy director(administrative and technical) were introduced to help the director manage the resulting administrative load.It is not clear that these positions would be required if functions were less fragmnented.

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Figure 4. Functional Organizational of District Education Offices

A~ t D Sn

I rkXd X X XW IIE Ha H t

iManagerial and educational objectives of the district are not clearly defined. Written job descriptions eitherdo not exist, or are only partial descriptions, having been written by the individual general director ateswithout regard to overlaps and gaps among job responsibilities. De facto, the main responsibility for thedistricts appears to be implementing central level instructions, as conveyed by the separate generaldirectorates to individual units of the district office. These instructions are numerous, sudden, urgent,poorly coordinated, and sometimes conflicting. The central and district levels make about 80 percent of thedecisions that affect the level below them (district and school, respectively).

The district prepares an annual plan, but without knowledge of, or coordination with, the generaldirectorates' annual plans. The absence of an integrated MOE annual plan makes it difficult for districtoffices to organize their implementation resources around a coordinated set of targets.

Actual, as opposed to formal, reporting relationships undermine coherent operations at the district level.Figure 4 indicates that district functional units report to their respective assistant directors, who in tarnreport to the district director. However, functional units at the district level in fact tend to interact with theircounterparts at the central level, thus effectively undercutting district-wide planning and management bythe district director and assistant directors. For example, the division of projects and buildings tends towork with the Directorate for Buildings and Architectural Projects at the central level.

International studies of implementation show that those who carry the implementation burden have beinvolved in, and contribute to, policy planning if they are to understand the context for, and commit to, theinitiatives that emerge from this planning. In the Palestinian case, the implementation of most initiatilvesdepends on the districts and the schools. Although the central ministry has held workshops with hedistricts and schools on the Five-Year Plan, the central level is the first to acknowledge that these levels ofgovernment have not been well integrated into the five year planning process being conducted at the centrallevel.

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Policy and Institutional Reforms Sought

Policy/Institutional Reforms Sought Activities toSustainReforms

Formalizing the Policy Function: A Ministry council or strategy committee, Auditconsisting of the directors general and deputy minister and involving the districtdirectors:

1. is established as a permanent committee of the Ministry2. meets regularly to conduct its work3. forwards its recommendations to the Minister

The strategy committee is chaired by an individual positioned to represent the interests Auditof the sector, rather than those of specific functional units

The General Directorate of Educational Planning and Development operates as the Audit, EAPtechnical secretariat to the strategy committee and its working groups, perfonning thefunctions of statistical analysis, policy analysis, economic analysis and costing,planning, monitoring, and evaluation

Sector develops and periodically updates a strategy that identifies a limited number of MOE, donors,priorities relative to goals for the system and data on gaps between goals and status CDF

Improved utilization of data for strategic planning: Through analyses performed EAP, donorsby the General Directorate for Educational Planning and Development, strategicpriorities are:

1. costed and economically justified (e.g., cost-effectiveness analyses; cost-benefitanalyses, including "make" versus "buy" decisions; analyses of least cost alternatives;analyses of fiscal sustainability)2. socially justified by analysis of impacts on disadvantaged groups3. associated with realistic performance targets

Strategy committee prepares annual workplan: EAP, donors,CDF

1. with specific investmnents consistent with the strategy2. that builds on annual workplans of the districts3. with policy frameworks guiding specific investments4. whose specific investments are economically and socially justified5. that has feasible implementation plans, including task schedules that allow districtsand the Ministry to monitor progress

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Policy/Institutional Reforms Sought Incentives to Sustain Reforms

Reducing Fragmentation between Mnistry and AuditDistrict, and within the MOE: Functionalfragmentation at central and district levels is reducedand the number of direct reports is rationalized byreducing functional fragmentation and delegatingmanagerial powers to subordinates

Distribution of responsibilities and decision making MOE, audit, EAPpowers between center, district, and school levels isrationalized, relative to these broad criteria:

1. central ministry leads the sector's improvement in thecontext of managing scarcity; sets learning standardsand assures educational quality; monitors and publishesinformation on performance; assures educationalfairness.2. the district office functions as the coherent planning,costing, and implementing center for the district, basedon MOE annual plans that reflect district annual plans3. schools have the autonomy, capacity, andaccountability needed to improve student learning.

Increasing the involvement of stakeholders (donors, EAP, donorscommunities, district staff): General Directorate forBuildings and Architectural Projects and their districtcounterparts use the school mapping data base torationalize the selection of sites for new buildings,school extensions, and closures

Central and district staff-policymakers, managers, and MOE, audit, EAPjunior staff-use those capacities of the EMIS relevantto their jobs

In collaboration with MOPIC, MOE uses the CDFPalestinian Investment Plan (PIP) submitted to thedonors to showcase its comprehensive developmentframework (CDF) .

The MOE and donors move towards coordinated MOE, EAP, donors, CDFfunding of the MOE's strategic priorities and annualplans

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Rules of the Game

What incentives exist at central, district, and school levels of the MOE, at MOPIC, the MOF, and amongthe donors to take actions that would support the development objectives of the project? As noted, thefundamental development objective of this project is to strengthen the sector's capacity to deliver bettereducational services. It targets several managerial processes: priority-setting, policy analysis and planning,financial management, policy frameworks for interventions, implementation, monitoring, and evaluation.Most of the project funds are used to support the implementation of specific educational programs, but inthe context of exercising better management practices.

The tasks of setting priorities, policy analysis and planning, financial management, policy frameworks forinterventions, implementation, monitoring, and evaluation are not incentive-neutral for any level ofgovernment.

The required effort:* They require significantly higher levels of coordination among functional units within a level of

government and between levels than current organizational structures and processes allow.* Unless combined with intensive training, they threaten staff because they use concepts unfamiliar to the

staff in the sector and demand skills that many do not have.* Priority-setting creates conflict among players with different interests; using policy analysis to select

among altematives implies losers; realistic costing can slow down the pursuit of priorities; monitoringintroduces performance accountabilities; and the analytic results of evaluations can be negative,threatening those with an interest in continuing the evaluated initiative.

These realities underscore the need to address incentives for taking the actions required to meet the project's development objectives. Potentially, five mechanisms can help create positive incentives for players totake actions that result in better management:

3 UNESCO management audits.* Civil service reform.* The comprehensive development framework (CDF) for the sector, integrated into MOPIC's

cross-sectoral Planned Investment Program (PIP).3 Public sector medium-term expenditure framework (MTEF).* Coordinated donor support of the program.

Two of these mechanisms (civil service reform and a cross-sectoral MTEF) are not under the control of theMOE and are unlikely to materialize in the foreseeable future. The MOE could construct a sector-specificMTEF. However, it is the cross-sectoral MTEF process, usually managed by the MOF, that creates themost powerful incentive for line ministries to improve their management Only two of these mechanisms areunder the control of the MOE (acting on the UNESCO management audits and working with donors tocreate coordinated donor funding). One is partly under its control (sectoral CDF).

UNESCO management audits of the district and central levels could be used to redefne roles,responsibilities, and decision-making powers.

This annex identifies a number of organizational impediments to better management. When completed, theUNESCO management audits of the district and central levels would provide a basis for redefining (withinand between governing levels) roles and responsibilities; decision-making powers; structures and staffing;

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and rules, regulations, and procedures.

For example, the sector is not currently structured to realize the maximnum and unique contribution thateach level of government can make to deliver high quality and efficient educational services. Too manydecisions are being made at the wrong level, with a variety of consequences. It separates authority fromresponsibilities. It overburdens the level making decisions that should be made elsewhere, shortchangingthe decisions properly made at that level. The concentration of direct reports at the level of deputy ministerand the monopoly on decision-making at the center relative to the districts and at the districts relative tc theschools are all instances of the same problem.

The project includes support for implementing a reorganization of the sector, based on the sector's reviewof the management audits.

Civil service reforms support better management.

Modem civil service reforms support better management among the line ministries. They address thedistribution of functions, criteria for hiring (competitive and merit-based), wages sufficiently competitive toattract and retain talent, political protection of technical staff, and the development of the generic functionsof policy analysis and planning, financial management, and human resource management. Unfortunately,despite efforts of the World Bank and the donors to initiate civil service reform, this lever for improving thepublic management of the different sectors is not yet available.

The education CDF in the context of the PIP can increase donor support for the sector.

The CDF, whether sector-specific or cross-sectoral, requires some of the actions targeted by the project.These include:

* identifying key constraints to sectoral performance;a identifying key actions that should be taken to resolve these constraints;* specifying indicators that can be used to measure progress; and* compiling an inventory of who is doing what to address the key constraints.

The objective of the CDF exercise in West Bank and Gaza is to integrate sector-specific CDFs intoMOPIC's overall Planned Investment Program (PIP). The PIP is the basis for donor discussions andpledges. In the past year the donors have let it be known that they are unwoulding to support PIPs of thepoor quality of previous years. MOPIC and the line ministries have an incentive to prepare a PIP thatreflects clearer priority-setting and performance measures.

The CDF for pretertiary education and the MOE's Five-Year Plan are consistent with each other, althoughthe former has a longer strategic timeframe.

A MTEF can act as a budget incentivefor better management of the education sector.

A medium-term expenditure framework, or MTEF, is usually initiated by the MOF and integrates capiraland recurrent budgets. It requires the line ministries to identify priorities, cost them in terms of capital anddownstream recurrent costs, specify performance indicators, and submit data on performance trends. Sinceministries that effectively participate in the MTEF exercise receive more financing, it creates strongincentives for the line ministries to plan, cost, and monitor. From this point of view it is unfortunate thatthe MOF has not yet started a MTEF process.

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Coordinated donor support of the sector's Five-Year Plan creates incentivesfor better management.

Perhaps the most powerful incentives for the MOE to take the actions required to meet the project'sdevelopment objectives lie in the possibilities for coordinated donor funding of the Five-Year Plan.Coordinated donor funding is advantageous for both the MOE and the donors. If procedures andrequirements are harmonized, the transaction costs for both parties are significantly reduced. For example,instead of multiple donors sending separate supervision teams, a single coordinated donor team supervisesthe implementation of the annual plan. Donor funding is more predictable and smoother across time,allowing the MOE to better plan. If some portion is "basket" or "pool" funding, the MOE can move moneyto its highest priorities.

The donors have started discussing coordinated funding, organized around the Five-Year Plan. To thatend, the Finns have financed analyses of how the procedures and requirements of different donors might beharmonized.

The Education Action Project (EAP) is explicitly structured to foster coordinated donor support. It targetsthose managerial actions that would reassure the donors that they can transfer substantial control to theMOE for setting priorities, policy analysis and planning, financial management, policy frameworks forinterventions, implementation, monitoring, and evaluation. It is flexibly structured and covers identificationand costing only of activities for year one. It releases funds in years 2 and 3, contingent upon thedevelopment of annual workplans that reflect improved priority-setting and economic and socialjustifications. These triggers are fairly standard among donors, and as the MOE begins to show that it canmeet them, the donors should become more comfortable with the idea of coordinated funding.

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AdditionalAnnex 12

Teacher Development - Issues in West Bank and Gaza and rationale for Project Components

Introduction:

1.0 Training and Continuing Professional Development of Serving Teachers

1. I The Palestinian commitment to improving education through the training and professional developmentof its teachers, principals and administrators is clearly articulated and is being followed with energy andenthusiasm. There is a clear recognition that improving the quality of education and the standards ofachievement of all its people are essential to the successful development of the Palestinian community in thehighly competitive, rapidly changing world of the 21st century.

1.2 Recognition of the need to upgrade the skills of its workforce was confirmed in 1994 when the newMinistry of Education (MOE) set about upgrading and training its teachers. Thus from May 1995 toDecember 1998 it trained 28,300 teachers and administrators through in-service workshops, while schoolprincipals received some 90 hours of training over the same period.

1.3 From 1997 to 1998, the MOE developed the Palestinian Curriculum Plan and in 1999 the full range ofactivities being undertaken within the MOE, including the development of the curriculum, was broughttogether in the Five-Year Plan. Within Objective 5 of this Plan, reference is rnade to the needs to improvethe professional competence of teachers, the leadership and management abilities of headteachers/principals, and the management and administrative ability of supervisors and ministerial and district teams.

The curriculum plan, as described in General Objective 2 of the Five-Year Plan, has since its inceptionacted as the unifying force around which the majority of the training activity, identified in Objective 5, hasbeen focused. Thus successive missions by Norway, Italy, Finland, UK, UNESCO and others have soughtto provide a range of sustainable training and development activities all aimed at building the competenceand confidence of the education workforce - particularly teachers.

2.0 Training and Continuing Professional Development of Serving Supervisors

2.1 Recently the main focus of effort has been on two separate but related training programs for servingteachers, together with further training for headteachers/principals. The first program for teachers isoutlined in Objectives 2-3 of the Five-Year Plan and consists of a fully articulated strategy for training allteachers in the new curriculum and its related assessment. This program is now in its early imnplementationstage for teachers in grades I and 6 and is being funded by the Italians, while training in assessment wouldbe funded by the Finns. A draft proposal for funding training for grades 2 and 7 teachers in 2001-02 hasbeen submitted by the Belgians, together with a proposal to fund the publication and printing of thetextbooks to be used with the new curriculum in grades 2-5 and 7-12.

2.2 Alongside the centrally directed program of trainer training, followed by cascade teacher training, todeliver national initiatives, is a second school-based program. This started as a program of School Reviewand Development Planning (SRDP) which has now been followed by a second program called The Schoolas the Unit for Training (SUT) A separate, but related, third program on Appraisal is now being piloted.To date, 80 percent of publicly funded schools have been involved in aspects of the SRDP/SUT programs,and 25 percent are in the SUT program.

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2.3 The SRDP and SUT programs are organized around school review and annual development planning.Within this, the training and development needs of teachers are identified alongside the objectives andtargets for school development. The quality of external and internal input to this program has been highand teachers and headteachers are very appreciative of what has been done so far.

2.4 Through the allocation to schools of funds for implementation of the school development plan, theprogram has enabled the schools involved to purchase training to meet identified needs. This has causedthe schools to engage in the planning process with enthusiasm and commitment thus increasing the potentialof the program to embed the concepts of evaluation, planning and professional development into theirnormal planning cycle. In addition, these school-based programs are self-sustaining and build capacitywhere it is needed most: i.e. at school level.

3.0 Training for Serving Headteachers

3.1 Over the last 5 years there have been many workshops for serving headteachers in relation to aspectsof school administration and management. Headteachers interviewed reported 'many, many good courses'and it appeared in discussions that they had gained much from these workshops, particularly from suchtopics as managing finance; ICT in school management; links with the community; the head as residentsupervisor.

3.2 The SRDP and School as the Unit of Training programs have also provided important opportunitiesfor those heads to gain further management and leadership training. Indeed, the current program (fundedby DflD), suitably revised, has the potential to provide all serving headteachers with management andleadership training which links strategic planning, standard setting, performance management - includingappraisal, needs analysis, and supervisor- reporting on the progress of individual staff. A suitably revisedprogram would deliver not only headteacher improvement but teacher and school improvement as well.

4.0 Training for Aspiring Headteachers

4.1 Less has been achieved in the training of those aspiring to be headteachers. Objective 5.5 of theFive-Year Plan identifies 'the development of educational leadership programs in cooperation with otherinstitutions' as a priority and within this, certificate professional training for those wishing to beheadteachers, would be high on the list.

4.2 In view of the relatively low morale among teachers, there is a need to address the issue of providingan appropriate career structure for the profession, with opportunities for certification and recognition, nowrather than in 2003 and this report proposes, in section 10, paragraphs 10.1-10.3, the development of onerung of this career ladder targeted at aspiring headteachers.

5.0 Pre-Service Training

5.2 Objective 5.2 of the Five-Year Plan specifies the improvement of pre-service teacher training programswith an implementation calendar indicating completion by 2004. To date nothing has been done nationallyto improve either content or quality of these pre-service courses. Successive consultants have pointed outthe urgent need to take action on this front, not least because the achievement of the Five-Year Plan would

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entail recruiting 12,087 additional teaching staff alongside a current annual student intake of approximately337 on higher diplomas and 8,446 on bachelors degrees.

5.3 Whatever the reasons for inactivity on this front there is now an urgent need for the reports of recentconsultancies outlining a draft strategy (UNESCO/IIEP/Ireland) to be brought forward for considerationwithin a clear timetable for implementing a new BEd (primary) program and a new postgraduate diplomaprogram.

5.4 If it proves possible to establish joint MOE/MOHE Task Groups to address these proposals, it wouldbe important for the MOE to ensure that both the revised BEd and Postgraduate Diploma have a strongprofessional dimension and are firmly rooted in school and classroom practice. The Ireland Aidconsultancy report points out that 'within the institutes of teacher education, there is inadequate emphasison the practicum experience [and that] even teaching methods courses can be unduly academic.

5.5 The division of functions between MOE and MOHE advocated in the consultants' report to IrelandAid suggests that the MOHE should set down the objectives and content of teacher education programs andspecify the requirements for entry. This recommendation requires further deliberation, not least becauseentry requirements, objectives and content should reflect the professional (rather than academic) demanidswhich need to be met. These proposed functions should be transferred to MOE or, at the very least,decided jointly.

5.6 The discussion of capacity building in higher education omits one important aspect to which urgentconsideration should also be given: that is the need to provide lecturers in teacher education in universitiesand colleges with immediate, relevant experience of working in schools. The introduction of new teachin1gmethods demanded by the new curriculum and associated assessment makes it doubly important that thoseengaged in pre-service training of teachers know what is happening in schools and classrooms first hand,and have practical, hands-on experience in delivering the new requirements.

6.0 Teacher Recruitment, Retention and Supply

6.1 Passing references are made in consultancy reports to recruitment issues usually in relation to theMOE's policy of recruiting 20% of its new teachers each year from lower diploma holders. This practiceraises issues about the effectiveness of one fifth of the annual intake recruited in this manner.

6.2 In addition, MOE officials confirmed that while recruitment overall was buoyant, there was growin-gdifficulty in recruiting well-qualified teachers, especially men, in the fields of mathematics, physics,chemistry and foreign languages at secondary level. Failure to recruit high quality teachers at this levelwould make it difficult to drive forward the educational reform and improvement agenda.

6.3 In the absence of improvements in salary levels, plans are needed for incentivizing the teachirgprofession through the creation of a clear career structure through which teachers can chart their progressto new pedagogic or managerial levels. In addition, systems of recognition and reward are needed whic hconfirm, in teachers' own minds, that they do indeed belong to a profession which is valued by society. Asystem of paying salary premia to graduates with the revised (new) teaching degree and postgraduatediploma could, with the modifications suggested in paragraphs 8.6 and 8.7 below, be the first rung on anew career development ladder for teachers. It could also begin to improve teacher morale.

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7.0 Additional Training Needs

7.1 The Five-Year Plan refers to the need to train administrators both in the Ministry and in the Districts.The training needs of both groups are professional, managerial and administrative in nature. To date someprogress has been made in training school supervisors and in improving administrators understanding ofprofessional matters, not least through involving some of them in the delivery of new training to heads andteachers.

7.2 Less has been done in relation to improving the understanding of lower grade administrators of currentpractices in project management, of the use of Information and Communication Technology (ICT) formanagement purposes, or of how to improve their office management skills. Similarly, senioradministrators need further training in the use of ICT in administration and in what, in the long run, mustbe their new roles: i.e. as strategic planners and as supporters of schools and their improvement, rather thanas deliverers of services to those schools.

7.3 For the Director and Deputies, the time to undertake training has been very limited indeed since mostof their efforts have had to be directed at delivering new training strategies to others. However, now that acadre of trainers has been developed, the time is right for a reappraisal of Directorate roles in order toreposition individuals away from being the hands-on deliverers of training services and more towards beingthe developers of the strategies which others then implement. They also need further experience in applyingthe concepts involved in monitoring and regulating the training system, and those delivering it, and in thedisciplines of contract management.

7.4 A further, important ability needed by all senior administrators in the Education Department is thecapacity to develop annual work plans which derive from the Five-Year Plan and which are consistent witheach other. Without this capacity it is difficult to see how priorities for funding can be determinedrationally year to year so that the problems associated with the current project fumding arrangementsdescribed in paragraph 8.1 below can be overcome.

8.0 The Annual Plan

8.1 The MOE and donors are aware of the need to develop annual workplans to rationalize available donorfunding. Funds do not always arrive in an appropriate sequence; some projects are overfunded and othersunderfunded. As a result, MOE officials have needed to focus efforts on project specification and securingfunding rather than on creating a coherent annual work plan covering all aspects of the Five-Year Plan.

8.2 Five-Year Plan additions: Recruitment, Retention and Supply: (i) identify likely specialist demandsfor primary and secondary teachers; (ii) identify the likely supply projections particularly in shortagesubjects of mathematics, physics, chemistry and English; (iii) create incentives to attract high qualitygraduates into teaching; (iv) identify and publicize the benefits of a career in teaching for able graduates;(v) build a career progression ladder for teachers tied to classroom performance as monitored in annualappraisal and from evidence of successful participation in CPD.

8.3 Pre- Service or Initial Teacher Training: The MOE needs to create as requirements to be met by allproviders of pre-service training, national standards for entry into the profession based on: (i) the subjectknowledge/understanding and pedagogic skills needed to deliver in the classroom and on other, generalprofessional expectations; (ii) require providers to develop new course content for the post-graduatesecondary diploma and for a new undergraduate BEd course based on these professional standards; (iii)

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consolidate all professional pre-service training as either concurrent academic studies and professionaltraining: i.e. a four year BEd or as a one year diploma course following a three year subject specialist BAor B.Sc. degree; (iv) extend the school-based element of the new course to secure a greater emphasis onpractical skills development; (v) accredit colleges/universities to run these programs and set up newmonitoring arrangements to review this accreditation in the light of the quality of course delivery by theuniversity or college; (vi) develop a new instrument for assessing trainees' competence upon completion oftraining, additional to any academic assessment by the university or college for the award of the acadernicelement of the degree.

8.4 Extend and Develop the Existing Induction Program for Teachers: (i) develop, on the basis of exislingworkshops, a national induction program for teachers; (ii) integrate supervisors assessments into acomprehensive, school-managed, performance assessment of newly qualified teachers to be based on theirperformance in the classroom; (iii) develop a certificate of professional competence designed to recognizethe progress which the newly qualified teacher has made in their induction year. This certificate should betheir license to teach. Once teachers have achieved this license, they should be placed on a main gradeprofessional register after which they become eligible for salary increments.

8.5 Develop a Career Ladder for the Teaching Profession: establish four specific rungs on this careerladder. The first at the end of induction: i.e. at License Level (in effect a license to practice); the second atMaster Teacher Level: i.e. after not less than four successive years worth of excellent reports on the teac herfrom the school supervisor and from the annual appraisal evidence presented by the teacher'sheadmaster/mistress; the third rung at Management Level for heads of subject departments (primary orsecondary) to be awarded again on the basis of annual reporting by supervisor and headteacher; the fourthat Diploma Level for senior teachers aspiring to headship; attach salary increments to the achievement ofeach of these four steps.

9.0 Recommendation One: School Improvement through Review and Development

9.1 To date the main focus of the Training Directorate's effort has been to build the numbers and capacityof the trainers in order to deliver training in the new curriculum and related assessment to all servingteachers in West Bank and Gaza schools. This trainer training has been well-planned and received, and theDirectorate is now ready to cascade the National Curriculum training to all teachers in the relevant primarygrades.

9.2 The Directorate recognizes, however, that sustainable, long-term capacity building in the teaching forcerequires a second approach to training, one in which teachers and principals/heads of schools takeresponsibility for their own development and improvement in the light of national requirements, but a.sohaving regard for schools needs and the development needs of individual teachers. In this approach trainingbecomes only a part, albeit an important part, of the continuing professional growth of all staff.

9.3 The need to create effectively functioning schools where review, improvement and development are thenorm, has led to the introduction of SUT. The current program, funded by the Norwegians, established bythe end of this year in some 320 schools and the new program would fund the continued roll out of thisprogram, subject to the modifications listed below, over a three year period.

9.4 The proposed new program has seven components. They are:

* engage an extemal Technical Assistant (TA) to rewrite the SUT guidelines currently used to introduceschools to the review and development process. This rewrite is designed to align the guidelines w1th

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current thinking on school improvement and performance management and would involve placinggreater emphasis on two areas. The first is teaching and learning where two issues need to beaddressed: differentiation of teaching strategies to meet the needs of the least and most able; and usingpupil level data derived from assessment to inform teaching plans for groups and individuals. Thesecond is human resource development where there is a need to ensure that the results of annual staffappraisals are used in conjunction with the reports on staff prepared by school supervisors, and withthe findings of the school review, to create a coherent performance management strategy which has theimprovement of performance of staff and pupils at its core;

* attach a locally based assistant to the TA and retain the services of that assistant once the rewrite iscompleted so that the work of dissemination to district supervisors may take place;

* instruct the local assistant to familiarize district supervisors with the revised SUT guidelines so thatthey can support schools entering the program in the review and planning process, helping them toidentify appropriate objectives and targets for inprovement, and the training needed to support it.

* use local TA support to write, review and print 10 training modules on school development andimprovement themes to meet the demands of schools on the program once they have identified theirneeds. The content of the modules should be determined in part on the basis of demands identified byschools already on the DflID and Norwegian program, and in part to reflect the new emphases onperformance management and enhancement. Issues to be addressed should include: changemanagement; staff appraisal; improving student achievement; the use of performance indicators toinform planning; differentiation and the use of ICT in curriculum delivery. Schools in the programshould also be able to seek training on topics not covered in the training modules, providing the districtsupervisor is content that the training would contribute to improved pupil and teacher performance;

* train 60 trainers to deliver these 10 training modules to 600 trainee trainers (4 per topic per district) sothat the requests from schools for training can be met;

- admit some 270 schools per year for three years to the program. Priority should be given in the firstinstance to schools in the Hebron and Gaza areas and to rural schools elsewhere;

e release funds to the school to enable it to purchase training from whichever source it chooses.once thedistrict supervisor is satisfied that the school's development plan and its associated trainingrequirements are realistic and would improve pupil and teacher performance.

10.0 Recommendation Two: Creating incentives for the Teaching Force

10.1 The current remuneration arrangements provide few incentives for teachers to improve their subjectknowledge or their pedagogic, management and leadership skills. Salaries are low and increments few;much is expected of teachers on a good will basis only; there are no career ladders for teachers and nosystem of professional recognition, through certification or otherwise, for excellent practice, nor forevidence of successful engagement in continuing professional development.

10.2 The program would fund the establishment of one rung in a ladder of career development for teachersthrough the provision of a national, practically based professional qualification for teachers aspiring toheadship and through supporting 150 of these teachers on scholarships to obtain the qualification atdiploma level in those universities which bid successfully to participate in the scheme. Care would need to

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be taken to ensure that only those universities willing to design a new course to meet new nationallydetermined requirements, as set out by MOE, should be invited to participate.

10.3 The project would have three main components. They are:

* establishing, on the basis of reviewing current best international headteacher training practice, nationalPalestinian standards for headship. These would to form the basis on which universities and collegeswould be invited to bid by tender to prepare a one-year, practice-based diploma program for the newqualification, and a second-year program to masters level for those wishing to extend further theirstudies in leadership and management;

* selecting, by MOE and the successful universities, the 50 serving teachers to be awarded scholarshipsin the first year;

* securing national recognition for the achievement of those teachers who successfully complete iheprogram and providing them with some salary enhancement once the qualification has been achievedand a headship post secured.

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AdditionalAnnex 13

World Bank Assisted Education ProjectPilot Project Component on Secondary Vocational Education

In sum, the TVET strategy in its current form is reasonable in the present highly uncertain economic andpolitical environment. It offers clear directions for public policy and investment in TVET over the next5-10 years, including expansion of the system. The strategy is innovative in addressing presentfragmentation of TVET through an integrated framework of inter-ministerial cooperation and a newmodular Palestinian TVET curriculum that would be used in all schools, in colleges and in labor trainingcenters. The curriculum development process itself is quite innovative in integrating technical skills withbasic core skills such as critical thinking and problem solving. An implementation plan for the strategy,while ambitious, addresses key issues in system development in ways that are consistent with intemationalexperience.

The proposed World Bank assisted project component would finance a pilot test of placing vocationalworkshops on the campuses of two academic high schools. One pilot site would be a boys school in theNorth; the second would be a girls school in the South. As will be discussed, the pilot component isjustifiable on equity and cost-effectiveness grounds within the overall TVET strategy.

TVET Strategv Context

Key characteristics of the labor market and the present system provide a framework for reviewing thestrategy.

Prospects for Skilled Employment are Uncertain. The prospects for Palestine's economy are tied to thehighly uncertain political context. Labor mobility is tightly constrained by the lack of contiguity ofPalestinian territories. Water and electricity supply is severely constrained under current arrangementswith Israel. Political risk constrains direct foreign investment. On the positive side, the work force as awhole is comparatively well educated and there is an abundant supply of trained engineers. Improvementsin commercial law could unlock domestic capital for investment. Infrastructure development is underwaywith broad donor support.

Unemployment and underemployment are high, most acutely so in Gaza. The population is growing atmore than six percent annually. Employment is overwhelmingly found in small enterprises, mostemploying fewer than five workers. For data cited see Meeting the Challenge. Vocational Training:Current Status and Future Prospects. Palestinian Ministry of Labor and Swiss Agency for Developmentand Co-Operation. June, 1996. While the rate of employment of vocational school graduates is not known,it is known that most of those who find a job do so in less than three months after graduation. Theemployment rate within a year of individuals completing vocational taining courses ranges from 50 to 75percent. Available data also show that employment opportunities by skilled occupation vary greatly acrossPalestine's 13 govemorates. Combined with restrictions on labor mobility, this factor suggests the potentialvalue of structuring vocational education and training to fit with local factors.

Overall, data suggest that in crude terms the supply of skilled workers is adequate for the size of thepresent economy and the current structures of production. As is usually the case, quality can be improvedand the occupational structures of training made more relevant to local employment opportunities. If theeconomy grows, employment opportunities would increase and the structure of occupations would change.

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The TVET System is small, fragmented and inefficient. There are 20 vocational secondary schools.The Ministry of Education (MOE) supervises all and directly manages 13 institutions, with the balancebeing done by private. There are 11 industrial schools, 33 commercial schools and 2 agricultural schools.Together, these schools enroll 2, 200 students in two-year programs, or three percent of total secondaryenrollments. About 22 percent of vocational students are female, and these are concentrated in commercialcourses. The Ministry of Higher Education (MOHE) is responsible for technical education that is providedin 16 conmmunity colleges, of which five are government colleges, three are operated by UNRWA; the r estare private. These colleges enroll about 5,000 students, half of whom are female, and graduate about1,500 per year. Approximately 3,300 students, about 40 percent female, complete training in vocationaltraining centers, of which 13 are managed by the Ministry of Labor and 7 by various private and charitableorganizations. Several hundred more charitable and public organizations provide a variety of short coursetraining. There is no overall training policy, and the three main ministries did not cooperate in the past.

Vocational secondary schools and vocational training centers are comparatively small (schools enroll anaverage of 200 students). Curricula inherited from Jordan are 25 years old. Secondary vocationalteachers are well educated; many are engineers, but pre-service training for vocational teachers is -iotprovided. Vocational trainers are less well qualified. Advancement to post-secondary education is anoption for vocational graduates, and 15-20 percent take advantage of this each year, principally going tocommunity colleges. Post-secondary education is not an option for vocational training graduates, in partbecause of the lack of theoretical components in the largely practical skills training curriculum. Teacherpay is low and turnover, especially of qualified engineers, is reported to be high.

Both vocational schools and vocational training centers are operating below capacity with attendmtinefficiency. Data shows the average capacity utilization rates for most VTC courses to be around 50percent. Secondary vocational schools operate with very low class size standards (usually 15), operate 6hours a day and class size in less popular occupations falls as low as 3 in the second year due to lowenrollments and dropout. Varying utilization rates lead to equally wide variation in unit costs, with the unitcosts of low utilization courses reaching 4 times the level of full enrollment courses.

Donor Support is Also Fragmented. Donors have provided important and effective support for thedevelopment of TVET in Palestine. Most of this support has been for individual institutions or for specificfunctions, such as teacher training and library development (see attachment 2 for a list of donor projecis).Mounted quickly after the formation of the Palestinian Authority, this assistance matches the fragmentationof the system as a whole. The exception to this pattern has been support from the Swiss Agency :orDevelopment and Cooperation for the fornation and operation of the Expert Team in the Ministry ofLabor. This team of Palestinian experts has made important contributions to building the cooperationamong the three ministries engaged in skills development that is the foundation for the Palestine NationalStrategy for TVET.

The National TVET Strategy

The broad goal of the national strategy is to develop a unified TVET system that is flexible in respondingto changes in employment demand. This strategy is integrated with the National Five-Year Plan lorEducation. The unified system would provide high quality skills development, offer pathways topost-secondary and higher education for vocational graduates, be efficient in the use of resources, and gesupported by diversified sources of finance, including public, employers via a training levy, student fees,income generating activities and grants and donations from national and international sources. "VocatioralTechnical Education and Training in Palestine: national Strategy."

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Upgrading of current institutions, combined with a new Palestinian TVET curriculum and adjustment in theoccupations offered to align more closely with demand, offers the opportunity to increase utilization in bothvocational schools and vocational training centers.

In addition to reforming the present system to improve quality, efficiency and financing, the Strategy alsoenvisages expansion of vocational secondary education. Initially, expansion to enroll 25 percent ofsecondary students in vocational courses was set as a target. Subsequent feasibility and cost analyses, andreflection within the MOE, has reduced this target to 7 percent, or double the present share held byvocational enrollments in five years. Expansion would be done in such a way as to reduce unequal accessamong govemnorates. When this target is achieved the vocational education enrollment share would still bequite low by comparison with other countries. The risks associated with expansion of vocationaleducation under present economic and employment conditions are well understood, and indeedconsideration of these risks contributed to the substantial reduction of initial targets. That training does notcreate jobs is also explicitly recognized.

The modest expansion strategy is, in practical terms, justified in two ways. First, the present level ofvocational enrollments is low relative to optimistic (if uncertain) expectations for economic andemployment growth. In addition, as political uncertainties are resolved, employment in the Israeli labormarket could increase. Second, constraints on labor mobility and uneven geographical distribution ofsecondary vocational schools leads to inequitable opportunities of access among the govemorates,contributing further to disparities in access between girls and boys.

Moreover, as discussed below, the Palestinian vocational curriculum that is being developed would offerstudents substantial preparation in core basic skills, such as critical thinking and problem solving, thatincrease individual potential for the continuing acquisition of skills in employment and through continuingeducation. Narrow traditional occupations in low demand are being replaced by new and broaderoccupations in increasing demand. While not offering a precise economic rationale, these justifications,combined with a now modest expansion target, provide a reasonable social and educational basis for theexpansion strategy.

The strategy would be implemented along three lines: structural changes to build a unified system, capacitybuilding for system development and monitoring, and change projects aimed at specific reform objectives.The observations offered below are selective but are intended to reflect key issues associated with strategyimplementation.

Building a Unified System. It is intended that a unified system would be achieved through coordinationand agreement on common curricula and student pathways rather than through organizational change. Inthe first phase of implementation (1999), a VTET Higher Council, chaired on a rotating basis by the MOEand MOHE, was formed to oversee policy development. Executive functions are carried out by a SteeringCommittee at the Deputy Minister level. The Committee is supported by the Technical Support Team ofthe MOL - a step towards institutionalization of the expert team supported by Swiss Co-operation.Broadly put, the Technical Support Team would carry out the professional functions required for a unifiedsystem: planning, monitoring, standards and curriculum, and research and evaluation. These functionswould be performed for all three Ministries.

The recent decision by the MOE to create a Directorate for Vocational Education, and the appointmnent of a

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Director-General, are reported to have made positive contributions to the effective functioning of theSteering Committee.

The new Palestinian curriculum is a key to a coordination approach. The MOE and the Ministry of Laborhave agreed to use the same curricula and learning materials. This would lead to standardization of thepractical workshop skills components of the curricula, reducing investment costs and improving the accessof students from both vocational schools and vocational training centers to post-secondary education.

The curriculum development process also indicates that the unified approach would improve the quality oflearning and flexibility of graduates of both systems. Development of an occupationally-specificcurriculum based on job analysis is the first step. Once this is developed, a second component ofproblem-solving and team work skills is built in through the design of learning activities for the applicationof learned skills. The process has been completed for automotive mechanics and materials as a model, ,ndmaterials are available.

The curriculum is modular, making it possible for students in different kinds of institutions to compietecourses at different rates over time. Generic modules provide foundation skills; advanced modules morespecific skills. This allows continuing curriculum revision in response to changes in technology and workpractices.

A comnmon curriculum should also have positive impact on the quality and efficiency of in-service nmdpre-service training for teachers, trainers and administrators.

Comments. The level of cooperation achieved among the three ministries is quite unusual from theperspective of intemational experience. The question is whether it can be sustained. The approach tocreating a unified system structure has been endorsed by the Cabinet. Lacking legal status beyond cabinetapproval it is vulnerable to political change. The incentives for inter-ministerial cooperation appeai atpresent to consist largely of shared professional vision and strategic agreement, bolstered by the fact thatimplementation of change projects and programs would remain with the appropriate ministry. For example,vocational secondary education development would be managed by the MOE; improvements in vocationaltraining by the MOL; development of community colleges by the MOHE.

Incentives for effective inter-ministerial cooperation are likely to be affected by the mechanisms throughwhich expanded resources from diversified sources are allocated. The Strategy identifies multiple sourcesof financing for TVET in addition to government budgets, including a training levy on employers andnational and international donations. An overall Training Fund to channel these additional resources to theunified system is under discussion. The govemance arrangements and allocation mechanisms of the Fund,or of any system-wide resource development and allocation mechanism, would be crucially important tomaintaining and strengthening cooperation.

An issue also worth reflection is the status of the Technical Expert Team. Presently this group is emploN edby the MOL. Many countries have created a professional and technical support agency for vocationaleducation and training with similar functions to those now being carried out by the team in Palestine.These take various forms. Often, as in Korea, Philippines, and Thailand, they are independent governmentagencies with broadly representative boards and separate budgets. They can also be organized witlinuniversities. To the extent that such a unit is expected to provide neutral and objective support andassessment for a unified system, its ownership by one of the cooperating ministries may prove problematic.As the unified system develops, it would be useful for Palestinian authorities to consider altemative ways inwhich this crucial function can be further strengthened and sustained.

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Building Capacity for Developing a Unified System. Officials identify four "steady state" issues orcapacities needed for effective implementation of change in the unified system: curriculum development,human resource development (including training), development of physical resources (buildings,equipment), and development of management and monitoring systems, including labor market monitoringCommon reliance on these core systems of professional and technical development and support is a keyelement of the implementation strategy. This can reduce duplication, thereby increasing efficiency in bothinitial development the continuing development and improvement in all areas that is important to systemflexibility in the face of changes in the labor market.

These capacities would be developed by and within the Technical Expert Team. While the objectives andinitial cost estimates have been provided for capacity building in these four areas, lacking is a plan for thedevelopment and financing of the Technical Expert Team. Authorities are discussing a "Center forOccupational Research" as a way of institutionalizing these key functions. Swiss Cooperation isconsidering supporting the team for another three years beyond the year 2000. If this support materializes,it would provide an opportunity to build the capacities of the team itself.

Implementing Change Projects. As currently configured, individual ministries would implement changeprojects for the institutions under their management, within the overall strategy for a unified system.Change projects would be coordinated through the TVET Council and Steering Cormnittees, with technicalsupport from the Technical Expert team.

It appears likely that most donor agencies supporting TVET in Palestine would prefer to continue financingpieces of the system - institutions or capacities - through the participating ministries. This is presently thecase for the World Bank. In the medium tenn, as cooperation becomes institutionalized, and as such issuesas the status and function of the Technical Expert Team becomes clear through experience, options such asa Training Fund for the development of the unified system may become feasible. In the interim, the Expertteam is preparing a matrix which would link current and prospective donor assisted projects to theobjectives of the unified system and the structures of reform implementation. This matrix would help bothPalestinian authorities and donors to avoid duplication and to identify gaps in intemational support for thereforms.

World Bank Assistance

As proposed to the World Bank, the pilot project would finance the establishment of four vocationalworkshops on the campuses of each of two academic secondary schools. The workshops would providepractical training within the new Palestinian curriculum in industrial occupations; theoretical classes wouldbe provided in the academic schools. Students in the pilot catchment areas would thus have two choicesafter completing the 10 year basic education curriculum: an academic program or a vocational program,both of which (under the proposed TVET strategy) would provide for entrance to post-secondary andtertiary education, or to the labor market. By sharing land, facilities, teachers and administration thisapproach would be less costly than building entirely new schools.

These pilot sites would be selected in areas where access to vocational options are comparatively low.Occupations for the pilots would be chosen based on local employment opportunities, and special attentionto occupations with a high information technology component, such as computer maintenance.

The pilots would use the new Palestinian curriculum. The curriculum would be developed over three yearsfor 60 industrial, commercial and agricultural occupations. It is anticipated that six industrial occupations

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would be offered through the pilots (that is, some occupations would be offered at both sites). Thecurriculum would be developed by the Expert Team, financed by the project component, under thesupervision of the MOE Curriculum Development Department. Printing costs are not included incurriculum development costs.

Curriculum development for the six occupations chosen for the pilot projects would receive early priority toensure that the learning materials and teacher training programs are available when pilot schools open. Amonitoring and evaluation plan for the pilot project apparently remains to be developed. A plan formonitoring implementation against schedules, enrollments, dropouts, graduates and costs should beprepared by the MOE prior to appraisal. Although the three year span of the project is limiting, the planshould also provide for tracer studies of graduates.

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