dd ee zz riri oo hh utut AA Document of e e rr The World Bank uu ss oo clcl ss DiDi FOR OFFICIAL USE ONLY c c blibli uu PP Report No: 46823-JO dd ee zz riri oo hh utut AA e e urur ss oo PROJECT APPRAISAL DOCUMENT clcl ss DiDi c c ON A blibli uu PP PROPOSED LOAN IN THE AMOUNT OF US$25 MILLION dd ee zz riri oo TO THE hh utut AA e e HASHEMITE KINGDOM OF JORDAN rr uu ss oo clcl FOR A ss DiDi c c blibli HIGHER EDUCATION REFORM FOR THE KNOWLEDGE ECONOMY PROJECT uu PP April 21, 2009 dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli Human Development Sector uu Middle East and North Africa Region PP This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 9, 2009) Currency Unit = Jordanian Dinar (JD) JD 0.71 = US$1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ABU Al'Balqa Applied University M&E Monitoring and Evaluation BOT University Boards of Trustees MENA Middle East and North Africa Region CAS Country Assistance Strategy MIS Management Information System CBJ Central Bank of Jordan MoF Ministry of Finance CC Community College MoHESR Ministry of Higher Education and Scientific Research CFC Competitive Fund Coordinator MoL Ministry of Labor CIDA Canadian International Development Agency MoPIC Ministry of Planning and International Cooperation CPI Corruption Perceived Index NAC National Assessment Center CQS Selection based on Consultant's Qualifications NCB National Competitive Bidding DA Designated Account NCHRD National Center for Human Resource Development DoS Department of Statistics OECD Organization of Economic Cooperation and Development EMIS Education Management Information System OM Project Operational Manual ESW Economic Sector Work PAD Project Appraisal Document ETF European Training Foundation PAP Policy Analysis and Planning Unit EU-AA European Accession Accord PDO Project Development Objective FBS Fee-Based Services PDU Program Development Unit FM Financial Management PER Public Expenditure Review FO Financial Officer PFM Public Financial Management GoJ Government of Jordan PFS Project Financial Statement HEAC Higher Education Accreditation Commission PICC Project Implementation Coordination Committee HEC Higher Education Council PMO Project Management Office HEDF Higher Education Development Fund PMOC PMO Coordinator HEDP Higher Education Development Project PSC Program Steering Committee HEI Higher Education Institute QA Quality Assurance HERfKE Higher Education Reform for the Knowledge Economy QCBS Quality- and Cost-Based Selection HERMC Higher Education Reform Monitoring Committee QE Quality Enhancement ICB International Competitive Bidding SAA Student Aid Agency ICR Implementation Completion and Results Report SBD Standard Bidding Document ICT Information, Communication and Technology SE Student Evaluation IFMCA Institutional Financial Management Assessment SG Secretary General IFR Interim Un-audited Financial Report SIL Specific Investment Loan ISA International Standards on Auditing SOE Statement of Expenditures JD Jordanian Dinar STC Special Tender Committee JICA Japan International Cooperation Agency TA Technical Assistance LC Liaison Committee TFP Total Factor Productivity LCS Least-Cost Selection TVET Technical and Vocational Education and Training LM Labour Market US FTA United States Free Trade Agreement LMIS Labour Market Information Systems WA Withdrawal Application Vice President: Daniela Gressani Country Director: Hedi Larbi Sector Director: Steen Jorgensen Sector Manager: Mourad Ezzine Task Team Leader: Ghassan N. Alkhoja FOR OFFICIAL USE ONLY JORDAN Higher Education Reform for the Knowledge Economy CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE...............................................................................1 A. Country and Sector Issues................................................................................................................1 B. Rationale for Bank Involvement......................................................................................................5 C. Higher Level Objectives to which the Project Contributes..............................................................6 II. PROJECT DESCRIPTION..........................................................................................................7 A. Lending Instrument..........................................................................................................................7 B. Government Program Objective and Phases....................................................................................7 C. Project Development Objective and Key Indicators........................................................................8 D. Project Components.........................................................................................................................8 E. Lessons Learned and Reflected in the Project Design...................................................................10 F. Alternatives Considered and Reasons for Rejection......................................................................11 III. IMPLEMENTATION.................................................................................................................11 A. Partnership Arrangements (if applicable)......................................................................................11 B. Institutional and Implementation Arrangements............................................................................12 C. Monitoring and Evaluation of Outcomes/Results..........................................................................13 D. Sustainability.................................................................................................................................14 E. Critical Risks and Possible Controversial Aspects........................................................................15 F. Loan/Credit Conditions and Covenants.........................................................................................16 IV. APPRAISAL SUMMARY..........................................................................................................16 A. Economic and Financial Analyses.................................................................................................16 B. Technical........................................................................................................................................17 C. Fiduciary........................................................................................................................................18 D. Social.............................................................................................................................................19 E. Environment...................................................................................................................................21 F. Safeguard Policies..........................................................................................................................21 G. Policy Exceptions and Readiness...................................................................................................21 Annex 1: Country and Sector or Program Background..............................................................................22 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies........................................39 Annex 3: Results Framework and Monitoring............................................................................................41 Annex 4: Detailed Project Description.......................................................................................................47 Annex 5: Project Costs................................................................................................................................57 Annex 6: Implementation Arrangements....................................................................................................59 Annex 7: Financial Management and Disbursement Arrangements...........................................................63 Annex 8: Procurement Arrangements.........................................................................................................73 Annex 9: Economic and Financial Analysis...............................................................................................82 Annex 10: Safeguard Policy Issues.............................................................................................................96 Annex 11: Statement of Sector Policy........................................................................................................97 Annex 12: Project Preparation and Supervision.......................................................................................105 Annex 13: Documents in the Project File.................................................................................................107 Annex 14: Statement of Loans and Credits..............................................................................................109 Annex 15: Country at a Glance.................................................................................................................110 Annex 16: Map IBRD 33424....................................................................................................................112 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. JORDAN HIGHER EDUCATION REFORM FOR THE KNOWLEDGE ECONOMY PROJECT APPRAISAL DOCUMENT MIDDLE EAST AND NORTH AFRICA MNSHD Date: April 21, 2009 Team Leader: Ghassan N. Alkhoja Country Director: Hedi Larbi Sectors: Tertiary education (100%) Sector Manager/Director: Steen Lau Jorgensen Themes: Education for the knowledge economy (P) Project ID: P102487 Environmental screening category: Not Required Lending Instrument: Specific Investment Loan Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 25.00 Proposed terms: Variable-Spread Loan (VSL) with level repayments for 22 years maturity, including a grace period of 6 years. Financing Plan (US$m) Source Local Foreign Total Borrower 9.00 1.00 10.00 International Bank for Reconstruction and 0.90 24.10 25.00 Development Financing Gap 14.00 16.00 30.00 Total: 23.90 41.10 65.00 Borrower: Ministry of Planning and International Cooperation P.O. Box 555, Amman, Jordan 11118 Tel: (962-6) 462-9305 Fax: (962-6) 465-8231 Responsible Agency: Project Development Unit, Ministry of Higher Education and Scientific Research PO Box 138, Jordan Tel: (962-6) 535-0967 Fax: NA [email protected]. Ministry of Higher Education and Scientific Research Amman, Jordan 11121 Tel: (962-6) 535-9464 Fax: (962-6) 533-7938 Estimated disbursements (Bank FY/US$m) FY 2010 2011 2012 2013 2014 2015 2016 Annual 0.60 3.80 7.00 5.70 5.00 2.40 0.50 Cumulative 0.60 4.40 11.40 17.10 22.10 24.50 25.00 Project implementation period: Start July 1, 2009 End: June 30, 2015 Expected effectiveness date: July 1, 2009 Expected closing date: December 31, 2015 Does the project depart from the CAS in content or other significant respects? Ref. [ ]Yes [X] No PAD I.C. Does the project require any exceptions from Bank policies? [ ]Yes [X] No Ref. PAD IV.G. [ ]Yes [X] No Have these been approved by Bank management? Is approval for any policy exception sought from the Board? [ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? [X]Yes [ ] No Ref. PAD III.E. Does the project meet the Regional criteria for readiness for implementation? Ref. [X]Yes [ ] No PAD IV.G. Project development objective Ref. PAD II.C., Technical Annex 3 The proposed project will support the Government’s program to improve equitable access for male and female students to a higher education system that is financially and institutionally sustainable, with incentives to improve system quality and relevance. The project will support policy reforms that will: (i) improve the Government’s capacity to diversify and improve financing mechanisms; (ii) modernize the governance and management efficacy of the sector; and (iii) strengthen quality assurance and accreditation mechanisms. Project description [one-sentence summary of each component] Ref. PAD II.D., Technical Annex 4 Component 1: Sustainable Financing for Quality. The objective of this component will be to build the capacity of MoHESR to introduce new funding mechanisms to promote transparency, innovation and effective resource management, including support for competitive program funding and establishing a Student Aid Agency. The project will finance training, consulting services, and goods for the development of the funding formula; establishment and operation of the competitive fund; and the establishment of the student aid agency. Component 2: Modernize Governance, Accountability and Management Systems. This component aims to strengthen the management performance and accountability of universities and the overall sector by strengthening the transparency and quality of decision making. The project will finance training, consulting services, and goods for the establishment of the education management information system; establishment of the Higher Education Council’s Policy Analysis and Planning Unit; and the establishment and operation of the Project Development Unit. Component 3: Strengthen Quality Assurance and Accreditation. This component aims to improve the employability of men and women graduates of university and community colleges programs, and to help enhance the international competitiveness of higher education institutions in Jordan, through more effective quality assurance mechanisms and accreditation standards. The project will finance training, consulting services, and goods for the development of accreditation standards and capacity building for program review, assessment, and quality assurance at the national and at the university level. Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10 Not Applicable Significant, non-standard conditions, if any, for: Ref. PAD III.F. Board presentation: Not Applicable Loan/credit effectiveness: Submission to the Bank of the Project Operational Manual. Covenants applicable to project implementation: Not Applicable I. STRATEGIC CONTEXT AND RATIONALE A. Country and Sector Issues Country Context: 1. Despite a limited natural resource base and regional conflict, Jordan’s economy has performed well over the past five years with a growth rate of 5-7 percent. Comprehensive structural reforms over the last decade have underpinned its good economic performance. This growth has been broad-based, supported by exports and manufacturing expansion. 2. In terms of human development indicators, Jordan ranks above average with respect to lower middle-income countries. The 2006 Household Income and Expenditure Survey conducted by the Department of Statistics (DoS) estimated the incidence of poverty to stand at 13 percent. Education indicators have improved consistently since the mid-nineties; the illiteracy rate is 8.9 percent, the third lowest illiteracy rate in the Arab world; the primary gross enrollment ratio has increased from 71 percent in 1994 to 98.2 percent in 2006; the transition rate to secondary school has increased from 63 percent to 97 percent over the same period; and transition rates to higher education have varied between 79 percent and 85 percent of secondary school graduates over the past five years. The university gross enrollment rate for the population between 18 and 25 years has increased from 18.5 percent in 2001 to 22 percent in 2006, among the highest in the Arab world. 3. Alongside good economic performance, Jordan continues to face challenges, including a tight fiscal situation requiring fiscal discipline, oil prices that are putting pressure on inflation, unemployment, particularly among the young, and geographically uneven economic development. The influx of an estimated 500,000 displaced Iraqis during the last two years is another challenge. Unemployment has been hovering between 13 and 15 percent of the labour force in the last four years, around 12-13 percent for males and 20 percent for females. Furthermore, as pointed out by the recent World Bank Labour Market Report,1 Jordan’s economy has indeed created jobs, but the majority of those jobs demand low skills. Unemployed Jordanians appear hesitant to take such jobs, indicating a high reservation wage, leading many to be unemployed rather than take lower paying jobs. Instead, those jobs are filled in by immigrants; a huge influx of workers, mostly from neighboring countries, has been recorded. Jordan’s economy is yet to put itself on a growth path that would create higher productivity jobs. 4. At 2.7 percent annually, Jordan’s population growth is among the highest in the region and nearly 70 percent of the population is under the age of 30. Projections indicate that about 80,000 new jobs and continued strong growth of 7 percent or more would be needed each year to avoid higher levels of unemployment and increasing poverty. Unemployment of university graduates for the past four years has remained about 14.7 percent and 22 percent for women. For community college (CC) graduates, it is 11 percent and 31 percent for women. Poverty reduction and job creation remain Jordan’s most important challenges. 5. The recent Bank study “Investing in Jobs for Jordan” shows that Jordan’s future growth is likely to come from manufacturing exports to markets outside the region and service exports to regional markets. The EU-AA and the Free Trade Agreement (FTA) with the US will continue to open large and deep markets to Jordanian exporters. Jordan has a clear advantage in tourism and an edge in the region in medical services and private provision of higher education. In the Information and Communication Technology (ICT) sector, in addition to activities aimed at increasing Internet 1 Jordan’s Labour Paradox of Concurrent Economic Growth and High Unemployment, World Bank, 2007. 1 penetration, the Information Technologies and Business Process Outsourcing and the international call center industry are growth poles. Substantial investments, an improved investment climate, and an enabling legal and regulatory framework are needed to consolidate those trends. 6. A focus on making Jordan an attractive location for knowledge-based private investment in order to support job creation is a key element of the Government’s National Agenda. The National Agenda aims to ensure greater policy and operational consistency between the numerous programs and policies directed to support the private sector to invest in Jordan. Improving the quality of labour is key to raising employment opportunities and thus improving the links between education and labour markets, and putting in place policies to improve Jordanians’ capacity to get jobs at both the high and low end of the skill scale. To this end, the National Agenda seeks to align the post-secondary education sector with the needs of a knowledge-based economy by improving the quality and relevance of programs, and the employability of young Jordanians. 7. In 2005, Jordan allocated about 15 percent of public expenditures to education, representing about 4.5 percent of GDP, although the proportion to higher education is low compared to international averages. Higher education receives only 14.7 percent of total education expenditures or equivalent to 0.65 percent of GDP which is low when compared to other middle-income countries and to the Organization of Economic Cooperation and Development (OECD) average of 1.6 percent of GDP. Public financing for higher education has been declining over the past five years. Transfers to universities have declined from JD 60.4 million in 2004 to JD 52.6 million in 2007 and JD 45 million in 2008, representing a decline of 14 percent per year since 2004. Sector Issues: System Expansion and Financing Constraints and their Impact on Quality and Equity 8. Jordan’s higher education system has evolved over the past five years but not fast enough to meet the needs of a high growth knowledge-based economy. Demand for university education has grown rapidly between 2000 and 2007, with enrollments almost tripling between 2000/2001 and 2006/2007, or growing at an annual rate of 14 percent from 77,841 to 218,900 students, and the number of public universities has increased from 7 to 10. Over the same period, enrollments in 12 private universities grew by about 18 percent annually from 36,642 to 55,744. Enrollments in CCs, however, declined slightly from 30,000 to 26,215, indicating a bias to 4-year university education in Jordan. CCs, due to social, financial, and regulatory constraints, have not been able to put in place a system which trains young people with the technical skills necessary for a knowledge-based economy. 9. Rapidly growing demand for university education is driving the system. The demand for higher education is forecast to grow much more rapidly than in the past due to: (i) the rapid growth of school-aged population; (ii) improvements over the past five years in secondary enrollment rates and improving completion rates for primary and secondary levels; and (iii) the rising incomes in Jordan which have increased the demand for higher education. Projections of future enrollments in higher education, taking into consideration these factors, show that the numbers of students entering university will increase to 92,000 per year by 2013 up from 50,469 in 2005. Currently, the regulatory framework for private universities (with a cap on enrollment) is highly restrictive, limiting their ability to respond to the influx of students. 2 Reforming Higher Education in Jordan: A Unique Window of Opportunity A unique window of opportunity currently exists for the implementation of deep reforms in the sector. The system in Jordan is characterized by very high demand for higher education, with high expected returns both socially and financially. As such, the system is subject to pressures from multiple sources within the country (and externally as evident by the demand for jobs in the Gulf). The GoJ has been keen to undertake reforms that will increase the quality, equity and relevance of higher education. However, the complex political economy around the sector has meant that progress has been slow. A brief timeline of key developments is presented below: • A clear call for reform was initiated at the Higher Education Development Forum held at the Dead Sea in February 2007. The Forum was held under the auspice of H.M. the King, and the discussion clearly indicated the need for reforms in the sector, as reported in the Forum’s final statement. • While high hopes emanated from the Forum, the follow-up on establishing a clear mechanism for initiating and implementing the reforms was not carried through comprehensively, despite a cabinet retreat in May 2007 on higher education, from which the 2007-2012 Strategy for Higher Education was developed. • A ministerial change took place in November 2007. While reforms continued to be widely discussed in various forums, other priorities seem to have taken over the main reform agenda. • Managed by the Project Development Unit, technical work to provide practical, yet strategic policy solutions continued into the summer of 2008, specifically for the sector’s financing strategies, the governance structures, the equity (in-equity), and the quality assurance and accreditation mechanisms. • The technical discussion and reports clearly indicated the need for immediate reform of the system to save it from an ongoing and increasing decline. A strong response was evident in H.M. the King’s call to the Presidents of the public universities (in a meeting held at the University of Jordan on September 14, 2008) to assess progress in implementing the 2007-2012 Strategy for Higher Education and to propose measures to accelerate reforms. This culminated in the preparation of the Higher Education Policy Framework (Annex 1) by a task team composed of university and government officials. A presentation by the Director of the Project Development Unit to H.E. the Prime Minister on September 25, 2008 of all the reforms that need to be undertaken in the sector elicited high level government support. • Subsequent discussions within the Cabinet and the Finance Sub-committee of the Cabinet took place, with endorsement provided to move forward on the reforms. In December 2008, H.E. the Prime Minister presented the reforms in a two-day session at Parliament, which included a lively discussion of issues, and further calls for reforms. Most recently, a Cabinet Sub-committee, headed by the Prime Minister, and composed of the Ministers of Higher Education, Finance, Education, and Justice was convened to review and revise higher education legislation towards ensuring the implementation of the reforms. • It is at this point that the Government’s reform plan stands, with a clear and unique window of opportunity for introduction of substantive reforms, as buy-in is clear from the highest level in the country, particularly following the endorsement by Cabinet of the Statement of Sector Policy (Annex 11). Given the shifting priorities and the regional geo-political situation, it is important to grasp this window of opportunity at this time, and to provide steady leadership over the medium- to long-term at all levels of the system to ensure that policy goals are reached. 10. Financing constraints on higher education are arguably the biggest challenge for the future. Due to the declining government transfers, the rapidly increasing student enrollments, and a cap on raising student fees, universities introduced parallel fee-paying programs in the late 1990s. Regular tuition fees for students admitted based solely on grades in the high school exit exam (Tawjihi), are on average JD 1,000 for tuition only. In 2001, student fees accounted for about 64 percent of university operating costs and government transfers provided 36 percent. By 2005, student fees for both regular and parallel programs covered 78.2 percent of operating costs. Student faculty ratios have worsened from 23 in 2000 to 31 in 2004 and 30 in 2007 in public universities. The same trend is occurring in private universities 3 with ratios going from 23 to 1 to 25 to 1 between 2000 and 2007. Universities have not reduced their non- academic staff to absorb expenditure cuts and the non-academic to academic staff ratio in public universities has worsened to 2.8 to 1, far worse than international averages. 11. Government’s financing strategies do not promote a culture of quality in post-secondary education. The resource management system in higher education does not create an environment that permits a transparent funding formula which aligns key sector priorities with budget decisions. Negotiating budgets on an annual basis does not provide an environment conducive for universities to plan strategically and operate effectively as predictable medium-term financing frameworks would. Thus, the degree to which the Ministry of Higher Education and Scientific Research (MoHESR) can influence decision-making at universities and community colleges (CCs) is highly limited. 12. This has led to the perception of a declining quality in public higher education. As a consequence of the impact of the parallel fees on the quality of the student body and the lack of recurrent funds to update faculty and curriculum, there is a strong perception that the quality of higher education is deteriorating. There is also concern about the quality of graduates from the rapidly growing private higher education system. The accreditation system, under the Higher Education Accreditation Commission (HEAC), has applied only to private higher institutions and is focused mainly on licensing of programs. The Government of Jordan (GoJ), in April 2008, expanded the autonomy of HEAC and established it with responsibility to both the public and private universities. 13. The relevancy of CCs is essential for the economic diversification and growth of Jordan’s economy, and will need to be significantly restructured. CCs have long suffered from frequent changes in leadership, the absence of clear policy objectives for the system, lack of commitment to building the required institutional infrastructure, weak employer community linkages, an academically oriented-faculty profile with a low level of practitioner experience, deviation from the CC mandate in terms of high numbers of students transferring to university programs, program quality, and no performance accountability mechanisms, in addition to a large and growing number of redundant administrative staff. However, recent indicators are slightly positive. Unemployment rates of CC graduates have improved over the past three years, reaching 12.7 percent in 2007. In addition, the relevance of CCs has been strengthened as the curricula of 10 out of 11 programs (a total of 92 specialties) offered have been revised, updated and tested in collaboration with enterprises. However, structural issues around management, governance, and composition of faculty will continue to put negative pressure on the CCs and on the quality of their programs. 14. The affordability of higher education for those wishing to have a higher degree is creating an equity imbalance. The increasing enrollments rates in secondary education, and the higher transition rates, mean that more students from lower income households will go to university and thus the question of equity is raised. As things stand now, the most affordable option for poor families is CCs and this suggests that reforming and improving the relevance of CC programs could be a pro-poor policy option for Jordan. 15. Enrollments of students from the richest wealth quintile represent over three times those from the poorest wealth quintile. In 2002, the top two quintiles benefited from 58 percent of public expenditures in higher education and the poorest quintile received only 11 percent (World Bank, Public Expenditure Review, 2004). Because student exit exam scores, in general, are correlated with socioeconomic status, there is a risk that many of the less advantaged meritorious students will not be able to access to higher education. Frequently, those same students are compelled to enter a lower fee program (e.g., humanities), leading to much reduced prospects for future employment. A robust student aid program can help to reward institutions for good quality by allowing students to apply for financial aid to attend the institution of their choice. However, with improved means-testing and targeting capacity and 4
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