ASIAN DEVELOPMENT BANK RRP: MON 31213

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

BOARD OF DIRECTORS

ON A

PROPOSED LOAN

TO

MONGOLIA

FOR THE

SECOND EDUCATION DEVELOPMENT PROJECT

July 2002

CURRENCY EQUIVALENTS

(as of 1 July 2002)

Currency Unit – togrog (MNT) MNT1.00 = $0.0009

$1.00 = MNT1,103

ABBREVIATIONS ADB - Asian Development Bank AOM - Academy of Management CIDA - Canadian International Development Agency CCU - Construction Client Unit ESDP - Education Sector Development Program ESS - Education Sector Strategy (2000-2005) GDP - gross domestic product GER - gross enrolment rate ICT - information and communications technologies JICA - Japan International Cooperation Agency MOECS - Ministry of Education, Culture and Science M & E - monitoring and evaluation NDF - Nordic Development Fund PMU - Project Management Unit SEDP - Second Education Development Project SWAP - sector-wide approach TA - technical assistance UNDP - United Nations Development Programme UNICEF - United Nations Children’s Fund

NOTES

(i) The school year (SY) commences in September and ends in June of the following year

(ii) The fiscal year of the Government ends on 31 December (iii) In this report, "$" refers to US dollars.

CONTENTS

Page LOAN AND PROJECT SUMMARY ii

MAP v I. THE PROPOSAL.............................................................................................................. 1 II. INTRODUCTION.............................................................................................................. 1 III. BACKGROUND................................................................................................................ 1

A. Sector Description: Preschool, Primary, and Secondary Education 1 B. Government Policies and Plans 7 C. External Assistance to the Sector 9 D. Lessons Learned 10 E. ADB's Sector Strategy 11 F. Policy Dialogue 11

IV. THE PROPOSED PROJECT ......................................................................................... 12 A. Rationale 12 B. Objectives and Scope 12 C. Technical Justification 17 D. Cost Estimates 18 E. Financing Plan 18 F. Implementation Arrangements 19 G. The Executing Agency 21 H. Environmental and Social Measures 22

V. PROJECT JUSTIFICATION........................................................................................... 22 A. Financial and Economic Analyses 22 B. Social Dimensions 23 C. Impact on Poverty 24 D. Risks 24

VI. ASSURANCES............................................................................................................... 25 A. Specific Assurances 25 B. Conditions for Loan Effectiveness 25

VII. RECOMMENDATION..................................................................................................... 26 APPENDIXES 1. Project Framework 28 2. Education System Structure, 1999/2000 32 3. Management Structure of the Education System 33 4. Overview of the National Education Policies and Strategies 35 5. Externally Supported Education Projects 37 6. Selection Criteria for Project Schools 39 7. Project Cost Estimates and Financing Plan 40 8. Procurement Packaging 42 9. Outline Terms of Reference for Consultants 43 10. Initial Social Assessment 48 SUPPLEMENTARY APPENDIXES (available upon request) A. Architectural and Structural Issues in Primary and Secondary Schools B. Environmental Assessment C. Arrangements for Construction and Rehabilitation of Education Facilities

LOAN AND PROJECT SUMMARY Borrower Mongolia Project Description

The Second Education Development Project (SEDP) will improve access to, and quality and sustainability of, preschool, primary, and secondary education in poorer rural and urban communities by (i) rehabilitating and constructing schools to increase capacity, and improving learning and residential environments including developing sustainable energy systems; (ii) modernizing science education, providing learning materials, training teachers, and integrating information and communications technologies and vocational education into secondary education; and (iii) improving education management at provincial, district, and school levels. The Project will also provide implementation support to the Ministry of Education, Culture and Science (MOECS).

Poverty Classification

Poverty Intervention.

Thematic Human development. Environmental Assessment

Category C. Environmental implications were reviewed and no significant adverse environmental impacts were identified.

Involuntary Resettlement

Category C. There will be no involuntary resettlement effects.

Indigenous Peoples

Category C. No adverse impact.

Rationale The SEDP is required to support ongoing national efforts to promote

economic growth and reduce poverty through education. In particular, it will address the need to build on reforms and activities commenced under the Asian Development Bank (ADB) financed Education Sector Development Program (ESDP) to increase access to quality primary and secondary education, especially in rural areas and in poorer urban communities. It will also continue ESDP activities for improving efficiency in the sector, including support for greater institutional and financial stability. The SEDP will support the achievement of the Millennium Development Goals for Mongolia, and the social capital development objectives under the Poverty Partnership Agreement between ADB and Mongolia.

Objectives and Scope

The main objective of the SEDP is to promote human development through universal access to education. Its secondary objective is to reduce income and deprivation poverty by improving access to quality preschool and basic education in poorer rural and urban communities. Specific objectives will include (i) improving access to services (kindergartens and schools), including for children with disabilities; (ii) improving the quality and relevance of education services; (iii) improving the efficiency and effectiveness of education management; and (iv) enhancing the efficiency of public resource allocation for education

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by reducing recurrent financing requirements for the operation and maintenance of education facilities, expanding the textbook rental scheme, and improving accountability in education management.

Cost Estimates The total project cost is $68.5 million equivalent, of which $43.2 million equivalent is the foreign exchange cost and $25.3 million equivalent the local currency cost.

Financing Plan ADB will provide a loan of SDR 10.806 million ($14 million equivalent).

The Government of Japan will provide grant financing of $45 million equivalent, and the Nordic Development Fund (NDF) will provide a concessional loan of $4.8 million equivalent. The balance of $4.7 million equivalent will be provided by the Government. The ADB loan will include financing of the interest charge.

Loan Amount and Terms

The proposed ADB loan is for SDR 10.806 million ($14 million equivalent) from its Special Funds resources. The loan will have a maturity of 32 years, including a grace period of 8 years. Interest will be charged at 1% per annum during the grace period and 1.5% thereafter. The Borrower will be Mongolia.

Period of Utilization

30 June 2008.

Executing Agency MOECS Implementation Arrangements

MOECS will be the Executing Agency, with primary responsibility for overall planning and coordination of SEDP activities, for implementing ADB and NDF-financed SEDP activities, and executing agency responsibilities for the urban school development activities to be financed by the Government of Japan. The deputy minister, MOECS will be the project director, with responsibility for providing the policy and strategic direction for ADB and NDF-financed activities. School boards will also be consulted in planning SEDP activities in schools. A multisectoral steering committee has also been established to provide policy guidance and to oversee implementation of the ADB and NDF-financed activities. A project management unit (PMU) has been established to support MOECS in achieving SEDP objectives. The PMU is headed by a project manager who will be responsible for day-to-day implementation of ADB and NDF-financed SEDP activities. ADB and the PMU will coordinate with the Japan International Cooperation Agency (JICA) Mongolia office during implementation to ensure coordination among the respective SEDP components.

Procurement All procurement to be financed from the ADB loan proceeds will be carried out in accordance with ADB’s Guidelines for Procurement. Procurement under the Japanese and NDF parallel cofinanced activities will be carried out in accordance with their respective procedures.

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Consulting Services

ADB will finance 21 person-months of international consulting services and 459 person-months of domestic consulting services. International and domestic consultants will be selected and engaged in accordance with ADB’s Guidelines on the Use of Consultants and other arrangements for the selection and engagement of domestic consultants satisfactory to ADB. Advance action will be taken to select ADB-financed consultants to facilitate the start-up arrangements for the SEDP. NDF will finance 19 person months of international consulting services and 284 person-months of domestic consulting services, in accordance with its own procedures on the recruitment of consultants. The Government of Japan will also finance long- and short-term consulting services in accordance with its own procedures on the recruitment of consultants.

Estimated Project Completion Date

31 December 2007.

Project Benefits and Beneficiaries

The principal benefit of the SEDP will be to safeguard access for at least 87,000 children of kindergarten and school age, and to restore access for a further 8,000, including children with disabilities. The Project will also enhance the external efficiency of both primary and secondary education programs and their relevance to the emerging social and economic context. At least 140,000 children of kindergarten and school age are expected to benefit. The Project will also have a significant impact on public expenditure by improving efficiency in the development and management of educational institutions, particularly with respect to energy costs. By introducing new technologies and techniques, over $3.2 million equivalent is expected to be saved annually. The SEDP’s support for improved facilities planning and management–-including maintenance –-is also expected to have a significant impact on reducing capital expenditures for repairs and construction of facilities in the medium to long term.

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on a proposed loan to Mongolia for the Second Education Development Project.

II. INTRODUCTION

2. In 1999, the Government of Mongolia asked the Asian Development Bank (ADB) to support a second education development project (SEDP) as a follow-up to the ongoing Education Sector Development Program (ESDP).1 ADB subsequently approved project preparatory technical assistance (TA)2 for the proposed SEDP. Following the submission of the consultant report in February 2001, the Canadian International Development Agency (CIDA) provided funding for a feasibility study3 to refine selected aspects of the proposal. The SEDP is included in the 2001 country strategy and program update as a firm project loan of $14 million equivalent for 2002 and is classified as an intervention focusing on the promotion of human development. The project framework is in Appendix 1.

III. BACKGROUND

A. Sector Description: Preschool, Primary, and Secondary Education

1. Sector Overview

3. Education was one of the country’s principal achievements in the socialist era. As part of the Government’s goal to eliminate illiteracy and to achieve universal education to grade 8 before 1940, modern school and dormitory facilities were established in all soum (district) centers, allowing all children, including those from remote nomadic families, to obtain a basic education. The results were impressive. Gross enrolment rates (GER)4 in primary and secondary education reached 99% by 1990, a remarkable achievement given the country’s geographic and sociocultural (i.e. nomadic) characteristics. This is evidenced by very high literacy rates, which stood in 2000 at 98% of the total population aged over 15, with only minor differences between urban and rural areas. Notable also is the equality of educational participation and achievement among Mongolia’s over 16 recognized clans (para. 79) and ethnic groups. In addition, by 1990 a network of over 900 kindergartens had been established providing places for over 97,000 children and playing a vital role in allowing women to participate freely in the labor force. 4. The decline of the state economy in the 1990s impacted negatively on the education system, particularly in the early transition years and especially in rural Mongolia. State education expenditures were massively reduced. Without finance for essential maintenance and repairs, school facilities deteriorated and many were forced to close. Preschools were worst affected with 244 kindergartens closing between 1990 and 2001. Availability of learning materials dwindled and teachers’ real salaries eroded markedly. By 1996, the GER had fallen to 82% and dropouts5 rose by 2,300% between school years (SYs) 1988/89 and 1992/93.

1 Loan 1507/1508-MON: Education Sector Development Program, approved 19 December 1996 for $15.15 million. 2 TA 3351-MON: Second Education Development Project, approved 20 December 1999 for $0.55 million. 3 CIDA Mongolia School Rehabilitation and Construction Feasibility Study, 2002 4 Enrolment in primary and secondary schools divided by the school age population (8-15 years). 5 Defined by MOECS as a pupil who has missed a year of school.

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5. Education indicators have, however, improved markedly in recent years. Wide-ranging reforms to focus state resources have allowed real funding of primary and secondary education to increase. Significant levels of private financing for education was mobilized with 38 private schools operating alongside state schools by 2001, and cost recovery measures, including textbook rentals, helped to supplement overstretched public budgets. In addition, a program of consolidation of the extensive education infrastructure under the ESDP–-including merging and closing of schools as well as staff reductions–-improved the efficiency and affordability of the sector and freed resources for increasing financing for essential items, such as teachers’ salaries,6 which helped to maintain educational quality. By SY1999/2000, the national GER in primary and secondary education had risen to over 90% again. Improvements in rural areas have, however, lagged behind. In 203 of the total 342 districts, the GER was lower than 80%.7 Progress in restoring access to preschool education was also remarkable with over 83,000 children enrolled in kindergartens in 2001, a substantial increase from 1995, when only 64,100 children were enrolled.

2. Structure and Participation

6. Formal education in Mongolia commences with up to 4 years of noncompulsory preschool education, which comprises kindergarten and nursery school, and provides a solid educational foundation for primary school. Most children enter primary education at the age of eight. This stage lasts for 4 years and is followed by 4 years of lower secondary education. Primary and secondary education are seen as a whole and together comprise compulsory or basic education. This stage is then followed by 2 years of upper secondary education, which is a prerequisite for university admission. The structure of the education system is in Appendix 2. In April 2002, the Law on Education was amended to provide for 5 years of primary education; it will be implemented progressively from 2002 to 2005. 7. Before 1990, enrolment in preschool education was compulsory. In the early transition years, enrolment rates in kindergartens fell from 97,200 in SY1990/91 to just 64,100 in SY1995/96. Since that time, however, enrolment has been rising steadily and stood at 78,630 in SY1999/2000 in a total of 650 kindergartens. However, enrolment rates in nursery schools are still well below levels seen prior to the transition as a result of the dissolution of many of the enterprises to which they were attached. Whereas 21,600 children were enrolled in formal nursery schools in SY1990/1991, this figure had fallen to just 1,600 in SY1998/99, with few nursery schools remaining in rural areas: the number of such institutions fell from 441 to a mere 34. The relatively high cost of preschool education prevents many children from participating; annual costs exclusive of clothing amount to approximately $55 equivalent per child,8 which is beyond the abilities of poor families. Government policy is to restore services by supporting the establishment of private-sector institutions. The Ministry of Education, Culture and Science (MOECS) estimates that today only 28% of primary school pupils have received a preschool education. With higher dropout rates linked to nonparticipation in preschool education, restoring services is a vital task. 8. In SY1999/2000, 470,038 pupils were enrolled in 668 primary and secondary schools. Of these schools, 128 offered only primary education, 216 offered combined primary and lower secondary education, with the remaining 324 offering the full 10 grades of primary and secondary education. As with preschool education, enrolment rates dropped sharply after 1990, 6 School teachers today typically earn over $100 monthly, well above the average for Asian transition countries. 7 School attendance varies widely by region: the lowest rate of 36.3% is in Uvurhangai, while Selenge records 49%.

In urban areas, figures are 58% in Ulaanbaatar, 56.3% in Orkhon, and 55.8 % in Darhan-Uul. 8 Comprising 50% contribution to food costs and learning material costs.

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falling from a total of 446,665 pupils in SY1989/90 to a trough of 370,302 in SY1993/94 before recovering. In 1999, the GER stood at 103.8%9 for grades 1 to 4, 76.8% for grades 5 to 8, and 34.1% for grades 9 to 10. However, widening gender disparities are widening, with boys accounting for only 40% of enrolment in upper secondary education.10 3. Educational Infrastructure 9. A major constraint to increasing the GER–-and education quality–-is the capacity limitation of school facilities, many of which have deteriorated markedly in the transition period. The problem has been particularly acute in rural provinces where resources for maintenance and rehabilitation, as well as technical expertise, are scarce. Mongolia has 511 rural schools comprising of over 800 buildings, including teaching facilities, dormitories, and heating plants. Of these, 409 schools and 278 dormitories across rural Mongolia have been prioritized for significant repair work by MOECS. MOECS and CIDA estimate that about 30% of these schools are in danger of collapse if rehabilitation work is not undertaken within the next 2 years. 10. Large-scale internal migration into urban centers has also greatly tested the capacity of schools in areas witnessing high population inflows.11 With most of the 189 urban schools operating on a three-shift basis, assistance is urgently need to maintain and develop capacity to provide educational services for migrant children. This will require expansion of existing facilities as well as construction of new schools in districts that have grown most rapidly. 11. Building construction and technology is based on 30-year old construction standards that are inefficient in terms of use of materials, structural capacity and energy performance.12 This system is based on prescriptive rules and codes, rather than on a more appropriate centralized research and decentralized performance evaluation basis. Particular weaknesses of Mongolian schools are the preponderance of flat roofs (especially prone to leakage), the high propensity of walls for moisture and water intake, and poor heating systems. Insulation in schools is usually minimal, causing huge heat losses and extremely high heating costs. Despite this, MOECS’s traditional approaches to this problem stress increasing heat supply to address deficits, rather than increasing efficiency of energy utilization by improving heating systems and insulation. School foundations are also prone to structural failure due to the freezing of excessive moisture intake as a result of inadequate storm water drainage. Other systemwide problems include the almost complete lack of fire-safety systems, widespread use of toxic lead-based paint, as well as problems with ventilation and air quality, especially with increasing recourse being made to wood-and coal-burning stoves in school dormitories. 12. Electrical supply is often erratic in schools and kindergartens, especially in rural areas. Power is sourced either from the national grid or connection to a district power plant operated by diesel. Where the latter is used, power cuts are frequent as many communities face difficulties in meeting the expense of diesel fuel. Alternative energy sources such as wind or solar power

9 The GER can exceed 100% when children who are outside the normal age group enroll in a particular grade (e.g.,

when 9 year olds enroll in grade 1, which is intended for 8-year olds) 10 A gender gap in favor of female enrolments is rather unique to Mongolia, and in part reflects perceived opportunity

costs, as school time conflicts with boys’ ability to contribute to household income by working as herders. 11 From 1995 to 2000, 181,000 people over 5 (4.7% of the total) became internal migrants, with Ulaanbaatar alone

experiencing a net gain of 75,000 people. Other areas experiencing net inflows included the mostly urbanized Darhan-Uul and Orkhon aimags with net inflows of 4,900 and 9,700 persons respectively. (Source: National Survey Office Population and Housing Census 2000, National Results)

12 Many rural schools rely on inefficient coal-fired heating; daily use per school can be as high as 7 tons of coal. Generally, coal dust is used which must be transported at great expense over vast distances.

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are used only to a small degree, despite high suitability for Mongolian conditions,13 due to lack of resources for the necessary capital investment. Within schools, electrical systems are often defective due to their exposure to moisture. As wiring is generally embedded in solid concrete, its repair and replacement is practically impossible. Schools generally respond by installing exposed impromptu wiring, which is usually extremely dangerous and a clear fire hazard. 13. Poor water supply is another major systemic deficiency. Piped systems are rare and water is normally delivered to school tanks by animal, by truck or by hand. Few schools–-including boarding schools–have functioning internal plumbing. Hot water is not generally available for washing, and lavatory facilities are normally pit latrines located in the school grounds. This lack of sanitary facilities poses significant hygienic problems, especially for the residents of school dormitories. In addition, the inconvenience posed by lack of sanitary facilities–-in boarding schools in particular–-can be a significant factor in a student’s decision to drop out of school. 14. The building stock is also being eroded by the lack of any systematic approach to capital maintenance or repair. Lack of funds and low technical expertise have led to ad hoc approaches to tackle individual problems after they occur. However, as architectural, structural, mechanical and electrical problems are often interrelated a piecemeal approach will be inadequate to fully address a building’s problems. As such there needs to be a shift toward a holistic system for problem identification, repair and maintenance to successfully rehabilitate and improve longevity of Mongolia’s schools. A full analysis of the needs and constraints of Mongolia’s school facilities is in Supplementary Appendix A. 4. Educational Quality and Attainment 15. Principal constraints on improving educational quality include the high proportion of teachers who are employed without the training or credentials for the level or subjects that they are teaching. This is particularly true in rural aimags (provinces) where the proportion of teachers without appropriate training is over 18% in Dornod, Umnogobi, and Selenge. By comparison, rates in Ulaanbaatar are just over 4%. Rates also vary greatly by subject, with high proportions of uncertified teachers employed for English (15%) and Kazakh languages14 (19%), as well as for the vocationally oriented labor training (41%). Shortages in these areas are often due to the inability of the education sector to compete with the private sector to employ personnel with these skills. Continued emphasis, therefore, needs to be placed on improving teachers’ remuneration and working conditions, but also to provide support for upgrading the qualifications and skills of the nonprofessional teachers currently employed. 16. The Mongolian academic curriculum comprises 18 different subject areas. Pupils in primary education participate in up to 10 subject areas, including Mongolian language, mathematics, natural sciences, history and social studies, as well as music and fine arts. In secondary education, pupils participate in up to 14 subject areas, which include sciences, languages, humanities, arts, and informatics. This complex curriculum requires an extensive and varied resource base including teachers, learning materials, and learning resources such as science laboratories and information and communication technologies (ICT) facilities. Ensuring the full complement for schools in rural provinces proves difficult given reduced public expenditure, as compared with when the overall curriculum was designed; unwillingness of

13 Many parts of Mongolia receive over 300 days of sunlight annually, providing excellent potential for solar power. In

addition, schools located in the relatively open steppe areas stand to benefit from wind power systems. 14 Approximately 5% of the Mongolian population are Kazakhs, who live mainly in Bayan Olgii and Nalaikh.

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teachers to work in remoter areas and in difficult conditions; and physical constraints such as lack of electricity, and poor learning and residential conditions in schools. The result is that educational attainment of rural pupils is 18% lower than their urban counterparts.15 Attainment levels of pupils living at home exceed those of children living in school dormitories, largely because of the very difficult living conditions in the latter, which acts against children from poorer families who comprise the majority of dormitory residents. 17. As most school graduates do not proceed to vocational training or higher education, it has become especially important to attune the academic curriculum to labor market needs. This is particularly true for science education, which could be given a more practical orientation and use more student-centered methodologies. In addition, the Government has identified a demand for vocational education to be integrated within the academic curriculum, to better prepare graduates for finding employment and to retain boys in secondary education. 18. Availability of textbooks and learning materials is another key factor underlying educational quality. In the past decade Mongolia has become the forerunner among Asian transition countries in education publishing with excellent progress made in developing new titles characterized by high technical and pedagogical quality, and depoliticization of content, and undertaken in partnership with the private sector. Private sector publishing is relatively well developed for a post-socialist country but is still limited, with a total of 6 publishing houses and 6 combined publishers and printers. Lack of funding has meant, however, shortages of textbooks in schools are serious. In SY1999/2000, for example, 7 of 34 planned new titles were not published. Textbook distribution has major problems, with aimags responsible for collecting their allocations from Ulaanbaatar directly, a system that imposes the highest costs on the remotest, and often poorest, regions. 5. Education Planning, Management, and Finance 19. Overall responsibility for the delivery of education services rests with MOECS, which is mainly involved in policy and planning. Management and administration of the school system is undertaken by province, city, and district governments. A depiction of the sector’s management structure as well as the MOECS organization chart is in Appendix 3. 20. Mongolia’s education expenditure is among the highest of the transition countries, partly because of the high costs of delivering services in a vast, sparsely populated territory with extreme climatic conditions. The Education Law of 1995 provides for at least 20% of total budget revenue to be allocated for education. However, this has not been achievable given tight budgetary constraints. Although education expenditures have been rising, they have yet to reach levels experienced in 1996. Education expenditures over time are provided in Appendix 3. State education expenditure amounted to 19.1% of total public outlays in 2000, or 7.9% of gross domestic product (GDP). Local governments, particularly at the aimag level, play a dominant role in financing education, accounting for 68.7% of total public education expenditure, compared with 31.3% allocated from the central Government budget. Primary and secondary education received the largest share of funding among education subsectors, at 48.8% of the total, with preschool education receiving 17.6%. Higher education and vocational education accounted for 17.8% and 2%.

15 Ministry of Education, Culture and Science (MOECS) of Mongolia/United Nation Children’s Fund (UNICEF)/ United

Nations Educational, Scientific, and Cultural Organization (UNESCO), 2000. Monitoring Learning Achievement Study.

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21. To promote universal access, basic education in Mongolia is free. With most poor children already enrolled in education, the Government has not specifically adopted propoor resource allocation strategies for formal education, although it has increased funding shares to basic education more than all other sectors with the exception of higher education; increasing expenditures 154% from 1996 to 2000. However, to reach out-of-school children the Government has adopted pro-poor planning in its Education Sector Strategy 2000-2005 (ESS), with $1.4 million foreseen from 2000 to 2005 for this purpose. 22. Within preschool, primary, and secondary education, the central budget finances textbook publishing and printing, stipends, pupils’ participation in international competitions and final examination costs. Local government budgets finance preschool, primary, and secondary education. Expenditure projections are calculated on the basis of a standard variable cost per pupil,16 factoring in expected enrolment rates. If local governments experience shortfalls in expected budgetary revenue for education, they are entitled to receive grants from the central Government to fill these gaps. However, funds are provided on a block grant basis, which commonly leads to these additional revenues being spent for sectors other than education, thereby exacerbating the budget deficits being experienced by the education sector. Concern about the equity of local financing for education, must be addressed in the context of wider budgetary and governance reform measures. 23. Schools have substantial autonomy in managing their own financial affairs within the confines of approved budgets and actual cashflow. The bulk of their expenditure is for salary and utility costs, including heating. The latter typically accounts for 40% plus of school budget expenditure due to strong demand for heating combined with very poor efficiency in energy utilization. Few funds remain for physical investment or maintenance (excluding equipment), and in 1998 just $520,000 was spent in Mongolia’s 18 rural aimags, far below the levels needed to maintain Mongolia’s extensive education infrastructure. 6. Demographic Situation 24. Projections of future enrolments are critical for effective education planning. In 1998, the estimated population of Mongolia was 2.4 million of whom 36.6% were between 5 and 19 years of age. In the same year, population growth was estimated at 1.4% per annum, a sharp fall from 2.7% in 1990. This decrease implies that the preschool-age population will fall from today’s 233,000 to just 185,000 in SY2004/05. Plans for restoring access to preschool education will, therefore, need to reflect the decreasing number of children in this age group. 25. New enrolments in primary education are also expected to fall from 56,497 in SY2000/01 to 46,054 in SY2004/05. However, an increase can be expected in secondary education enrolment from SY2000/01 to SY2003/04 of over 30,000 new pupils. Thereafter, enrolments are expected to decline. These trends can be expected to reduce pressure on primary education, but to further strain the capacity of the secondary education subsector, which is comparably more resource intensive. 26. Recent large-scale internal migration from rural areas to towns and cities has caused major imbalances in educational service provision. Schools in urban centers have seen demand for services increase substantially, while many rural schools are now operating well below

16 The aggregate unit cost for primary and secondary pupils in 1999 was $61 equivalent (disaggregated statistics are

not available). For preschool children, the unit cost was $132 equivalent. This compares with $155 equivalent and $103 equivalent in higher and vocational education.

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capacity as a result of the outflows from their catchment areas. The result is a major distortion in the geographical provision of education services, which should now be reoriented to focus more on the increasing population centers and outlying areas. To allow this, substantial additional investments in education facilities in areas of increasing demand are essential.

7. Socioeconomic Context 27. In 1990, Mongolia initiated far-reaching economic reforms, linked to its overall political and social transformation. The Government established private property rights, privatized state assets, and liberalized prices and trade. By 1993, 90% of livestock had been privatized. The shock of the reforms, combined with the withdrawal of aid from the Soviet Union–-amounting to the equivalent of 30% of GDP–-as well as the loss of concessional supplies of raw materials and the guaranteed Council for Mutual Economic Cooperation (COMECON) export markets resulted in a dramatic decline in all economic indicators in the early years of the transition. GDP fell by over 9% in both 1991 and 1992. The 1989 GDP per capita figure of $1,645 fell to $329 by 1995 and had risen only to $450 by 1998 when early transition declines began reversing as macroeconomic stability took hold and limited economic growth returned. Agricultural output diminished by 50% between 1990 and 1993, while industrial output fell by 33%. Inflation reached 325% in 1993. Government revenues shrank. And real wages in industry and agriculture fell by 20% and nearly 33%. 28. The economic contraction and the concomitant decline in social sector expenditures have had a profoundly negative impact on the lives of most Mongolians. Prior to the transition, poverty was considered to be low in Mongolia, although specific data were not collected. In contrast, in 1995, 36.3% of the population lived below the national poverty line of $17 per month.17 About 50% of those living in poverty (about 18 % of the total population) subsisted on a monthly income below $10. Recent figures suggest that while the growth in poverty levels has stabilized, those living in poverty are becoming poorer. The vulnerable include herding households with less than 100 livestock,18 the unemployed, those without a basic education, the elderly, the disabled, street children, orphans and households headed by single parents with many children. Women are disproportionately represented in the last category. In 1998, the number of households headed by women comprised 10.2% of all households, 25% of all very poor households, and 18.3% of poor households. The number of single mothers with children aged below 16 grew from 32,377 in 1995 to 40,653 in 1999, an increase of 26%.19 B. Government Policies and Plans

29. The ESS20 provides the principal policy and planning framework for the education sector. Its stress on universal access to education, including free basic education, has a strong pro-poor bias. The ESS builds on ESDP policy reforms as well as on other national strategies, described in Appendix 4. Priority areas include (i) alleviation of deficiencies with educational facilities; (ii) teacher training and retraining; (iii) curriculum development, and (iv) provision of textbooks and learning materials. These priorities are appropriate for tackling the problems that the sector faces in restoring universal primary enrolment rates, improving and modernizing educational content and services, as well as improving the sustainability of a system that is proving expensive to maintain in a liberalized economy and society. The ESS calls for

17 Government of Mongolia. Living Standards Measurement Survey, 1996. 18 An estimated 85% of herders have a herd size barely large enough to sustain livelihood. 19 Gender Briefing Kit, United Nations Development Programme (UNDP). 2000. Ulaanbaatar. 20 Supported by TA 3174-MON:Education Sector Strategy Study, approved on 12 March 1999 for $150,000.

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investment of at least $35 million equivalent in preschool, primary and basic education21 over its five-year implementation period to implement its outline strategies for priority areas. Although, substantial support has been secured, many aid-financed interventions are still undertaken outside the ESS framework, thereby reducing potential for effective coordination. The SEDP as the single largest aid or externally-financed intervention will provide a major boost to the ESS framework and should act as a catalyst for other development agencies to ensure that assistance is provided within this common policy framework. 30. Under the ESS, with support from the ESDP and other projects, good progress has been made in promoting teacher training, improving educational quality, and improving the sustainability of educational infrastructure by a program of closing and merging primary and secondary schools. This has resulted in the creation of the “complex” and inter-soum school forms.22 The result has been to reduce the dilution in education financing. However, major additional investment is still required for the remaining schools. About 30% of rural schools are in dangerous condition and over 80% need major repairs. In urban areas, new facilities are needed to cater for demand increases as a result of the heavy net migrant inflows. These problems have arisen due to a lack of domestic investment funds, as well as the inability of most active assistance agencies to mobilize adequate levels of financing for civil works. Another root cause is the sheer unsustainability of maintaining current facilities, which were built using imported standard designs, often poorly suited for Mongolia’s climatic conditions. With large-scale internal migration in recent years, many schools in rural areas are now operating below capacity and repair is now uneconomic. With many schools coming to an end of their life spans, the development of a new generation of school facilities should begin. These should offer good learning and residential environments, be energy efficient, be appropriate to Mongolian climatic conditions, and be easy to maintain. In the growing urban areas, a parallel need is to develop new facilities designed according to new, more efficient building standards and stressing energy efficiency and direct accessibility to the new, usually poorer, migrants. 31. The ESS provides a good overall framework for ongoing development and operation of the education sector until 2005. Within this framework more systematic policy development and planning is needed for individual aspects of the education sector, including (i) facility maintenance and development, (ii) provision of learning materials (especially to foster the role of the private sector), (iii) staff recruitment and management, (iv) quality assurance systems, and (v) equity of financing systems for pro-poor resource allocations. These issues need to be addressed in the ESS’s successor, for which preparation will commence in 2003. 32. The amendment to the Law on Education in 2002 has led to a fundamental policy change with a move to an 11-year system of basic education based on 5 years of compulsory primary education, 2 years of compulsory lower secondary, and 2 years of upper secondary education. This reform will bring the education system more in line with neighboring countries, especially the transition countries, and will bring down the starting age for primary school to 7, which is more in accordance with international standards. 33. The proposed amendment also envisages integration of vocational education subjects into mainstream education. With a 50% reduction in demand for programs in the traditional vocational education and training subsector since 1990, providing modernized and more

21 Comprising (i) $25 million for school facilities and equipment, (ii) $4.3 million for teacher training, (iii) $1.2 million for

educational quality, and (iv) $1.6 million for educational research, for expenditures up to 2005. 22 “Complex” schools typically provide services at the aimag level and “Inter-soum” schools cater for multiple soums.

Previously, education policy was to maintain one school for each soum.

9

relevant services to match the changing demand patterns has become a high priority. However, this reform has been hindered by the inability of vocational training institutions to reorient themselves for the more flexible needs of the market-driven labor markets and their services still tend to be excessively specialized and formalized. In response, the Government has signaled its willingness to enter into partnerships with the private sector to develop and deliver training for adults, for which it is receiving support under the ADB-financed Social Security Sector Development Program.23 At the same time, the Government is aiming to meet the demand for initial vocational education services by integrating such programs into general education curricula, given the increasing value placed on general competencies in the developing labor markets, as well as to improve the financial sustainability of vocational education services. C. External Assistance to the Sector

34. ADB has been a major provider of assistance to basic education since the early 1990s. Three TAs have been financed for policy, strategy development, and capacity building. The ongoing ESDP (footnote 1) has financed school rationalization and upgrading, textbook provision, teacher training, and capacity building. During the implementation of the ESDP and starting from the conceptualization of the SEDP scope, ADB has maintained close cooperation with the Embassy of Japan and the Japan International Cooperation Agency (JICA) regarding grant assistance from the Government of Japan to the education sector. ADB has also worked closely with the Nordic Development Fund (NDF) in design and development of SEDP. NDF is currently financing the modernization of the vocational training system in the framework of the Social Security Sector Development Program. The Government of Japan is financing the upgrading of urban schools, as well as support for policy development and ICT. ADB has also worked very closely with CIDA whose feasibility study into school construction and rehabilitation contributed extensively to the SEDP’s design. The Canada Fund is also piloting approaches to rural school rehabilitation, which will yield vital information for the SEDP. The United Nations Children’s Fund (UNICEF) is active in school rehabilitation, nonformal education, and development of community-based approaches to primary education. The Danish Agency for International Development Assistance has financed the development of 40 rural schools, although additional support is not planned. The Soros Foundation has an ongoing program for modernizing teacher training, educational publishing, and ICT development; much of this support has been implemented in close concert with related ESDP activities. The World Bank has financed small-scale renovations of schools under the Poverty Alleviation Program, as well as a number of policy-oriented, cross-cutting interventions including a public expenditure review and development of the poverty reduction strategy paper. In other subsectors, Germany is providing support for modernizing vocational training and the European Union has provided support for quality improvement of higher education. An overview of externally-financed projects in the education sector is in Appendix 5. 35. To date, externally financed projects have been planned and executed on a bilateral basis between the respective development agencies and Government, limiting coordination and coherence between the different projects and raising transaction costs. During a meeting of agencies providing assistance to education hosted by the ADB Resident Mission in February 2002 during SEDP appraisal, an understanding was reached that cooperation mechanisms needed improving and that interventions should be fully in accordance with Government policies and under their leadership. At the initiative of ADB, World Bank and UNICEF supported the proposal to gradually move to introduce of sector wide approaches (SWAPs) in the education

23 Loan Nos. 1836/1837 Social Security Sector Development Program, approved on 28 August 2001, for $12 million.

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sector. The planned Third Education project preparatory technical assistance (PPTA) will work with the Government and other agencies to develop a successor to the current ESS. 36. The SEDP will be implemented by three of the principal development agencies in the education sector. It will also build closely on the partnership established with the Soros Foundation during the ESDP in capacity building and quality improvement. The SEDP will coordinate closely with UNICEF, which is financing small-scale renovations of rural schools. ADB will also coordinate with the World Bank, which is preparing an advisory program for education. ADB and the World Bank have commenced discussions on fielding joint missions and other means of information exchange to ensure maximum transparency and cooperation, with the aim of achieving the most optimal allocation of resources between the two institutions. D. Lessons Learned

37. The SEDP design reflects the extensive experience gained in implementing the successful ESDP and from other interventions.24 The success of the ESDP can largely be attributed to the excellent working relationship with MOECS and other development agencies; the high performance standards of the project implementation unit and high commitment levels by the political establishment, government, and civil society. General lessons learned include the need to maintain a transparent and inclusive approach to project implementation to ensure appropriate design of project activities and continued public support; this was particularly true in the case of the agreed redundancies of education staff under the ESDP, to which many sections of Mongolian society reacted critically as a result of inadequate public consultation and information. As many ESDP activities were enhanced through cooperation with Soros Foundation activities in the fields of publishing, teacher training and utilization of ICT in schools, it will be important for ADB to build on such partnerships and to expand coordination with other externally financed activities. In the case of the SEDP, the cofinancing arrangement with the Government of Japan and NDF brings together the three major development partners who are working to develop educational infrastructure, a partnership that will bring substantial economies of scale as well as opportunities for information exchanges and technology transfer. Another factor learned from the ESDP was that its adherence with national legislation and policy ensured sustained political support. Another lesson learned is the need to include support for preschool education with that for primary and secondary education. As Mongolian children do not start school until the age of 7 or 8, kindergarten provides a vital educational foundation in the child’s early years, and is equivalent to the primary school program in many countries. Despite this, support for kindergartens has been limited, resulting in continued shortages of these essential services. The ESDP and other interventions have also revealed the need to include rural areas in projects. Finally, large-scale internal migration necessitates revising the geographical distribution of educational services. With a move away from more remote soums, targeting of project activities must anticipate the likely ongoing demographic movements. 38. Specific lessons learned will be applied for the rehabilitation of schools. These include the need for a more comprehensive approach to rehabilitation to permit a more substantial extension of the school’s lifespan. Even if initial costs will be higher with this strategy, reduced energy and maintenance costs as well as lower replacement costs will ensure that this is the most economic approach in the medium to long term. Valuable lessons were also learned in the field of educational publishing: although the quality of new ESDP titles was high, the limited

24 As confirmed by education studies in Mongolia including The Education Sector Strategy Study 2000-2005 (footnote

20) and CIDA’s Mongolia School Rehabilitation and Construction Feasibility Study of 200 and MOECS’s 2001 comprehensive inventory of educational assets.

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private sector involvement in this field limits greater diversity and higher quality in publishing. The SEDP will, therefore, promote further private sector involvement in textbook provision. Another valuable lesson relates to the introduction of ICT within the education sector. Although this is of high priority to the Government and the general public, the impact has been limited by the lack of a definitive concept or strategy for ICT integration into education. Through innovative approaches to ICT adoption and dialogue with other development agencies on lessons learned, the SEDP will help to support this critical process of defining priorities and viable strategies. E. ADB's Sector Strategy

39. The SEDP’s focus on basic education is fully in line with ADB’s long-term strategic framework’s objective of contributing to the Millennium Development Goals, which aim to achieve universal primary education in all countries by 2015. The Poverty Partnership Agreement signed by Government and ADB on 24 March 2000 earmarks ADB investment in the social sector as a means to maintain and improve the competitiveness of the labor force. These priorities are reflected in the country strategy and program update (2002 to 2004), which calls for improving access to educational services for the poor by developing/rehabilitating schools, improving delivery mechanisms, and maintaining/enhancing the quality of educational services. These provisions are fully in line with the ESS. 40. Operating within this policy framework, the SEDP will support the development of educational services both in rural and urban areas facing challenges in educating migrant children. Support for developing school infrastructure will allow increased participation in education, especially for children from poor families who rely on dormitory accommodation to attend school. Improved quality of education will also lead to increased enrolments, as the long-term benefits accruing from education rise as compared to the short-term benefits from entering the labor market. Lastly, improving education management will allow for more sustained provision of quality educational services. 41. In cooperation with other development partners and under Government leadership, ADB will seek to develop a new pro-poor medium- and long-term policy and planning framework for education to succeed the ESS, with the intention to gradually move to SWAPs. TA to support this process is planned for 2003. F. Policy Dialogue

42. ADB has maintained a close policy dialogue with the Government since the early 1990s, which has, inter alia, resulted in the adoption of the current ESS, which defines the objectives and priorities for the SEDP. The ongoing dialogue also contributed to the adoption of the 1995 Law on Education, and the ESDP financed major reforms to school forms and education programs within that framework. ADB was also consulted in the amendment of the Law on Education in 2002, which provides for an expansion of primary education from 4 to 5 years in line with neighboring transition countries. ADB has been requested to support the implementation of this new policy. ADB has also explored the potential for privatization in the education sector with the Government, supporting initiatives to explore contracting out selected ancillary services but advising caution on the extent of privatization, especially in poor rural areas where provision of such services is unlikely to be profitable. With agreement on overall policy directions, the focus of dialogue in recent years has also shifted to more specific aspects of the education sector.

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43. This has resulted in an understanding of the need to develop new approaches to development and utilization of educational facilities, including the introduction of new, more efficient and affordable building standards and integration of different forms of education services in schools. Policy dialogue is ongoing on the issue of textbook provision and the need to promote private sector involvement, liberalize markets, and promote cost recovery in textbook provision in secondary education. Discussions have also commenced on the role of ICT as one set of tools to advance specific objectives for improving education. 44. ADB also initiated a proposal to move toward a SWAP, to improve the efficiency of resource mobilization and utilization. MOECS has supported this move, as have other major agencies, including World Bank, UNICEF, and Soros Foundation. ADB has proposed to MOECS and other agencies that a new sector strategy, to succeed the current ESS, become the major framework for the development of the SWAP.

IV. THE PROPOSED PROJECT

A. Rationale 45. The SEDP is required to support ongoing national efforts to promote economic growth and to reduce poverty through the provision of education for all in the framework of the Government’s ESS. It will address the need to continue activities commenced under the ESDP to increase access to quality preschool, primary, and secondary education in poorer urban and rural areas. It will also continue ESDP activities to improve efficiency in the sector, including support for greater institutional and financial stability. The SEDP is also required to support the achievement of the Millennium Development Goals, as well as the achievement of social capital development objectives under the Poverty Partnership Agreement. 46. The SEDP’s approach is fully in line with Mongolian education policy and will benefit from experience gained during ESDP implementation. Its implementation in conjunction with other major development partners will allow it to benefit from these agencies a substantial experience in education sector development. It will maintain reforms commenced under the ESDP, including focusing investment on a more streamlined network of education facilities and by further supporting the development of private sector educational publishing to increase the quality and diversity of learning materials. Commitment of Government, Parliament, and civil society to educational reform and development is strong and institutional capacity has proven itself sufficient for the management of major projects. B. Objectives and Scope

47. The main objective of the SEDP is to promote human development by developing universally accessible education services, and strengthening these services. Its secondary objective is to reduce income and deprivation poverty by improving sustainable access to quality preschool and basic education in poorer rural and urban communities. Specific objectives will include (i) improving access to services (kindergartens and schools), including children with disabilities; (ii) improving the quality and relevance of education services; (iii) improving the efficiency and effectiveness of education management; and (iv) enhancing the efficiency of public resource allocation for education services by reducing recurrent financing requirements for operation and maintenance of education facilities, expansion of the textbook rental scheme, and improved accountability in education management.

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48. Specifically, the SEDP will finance the improvement of educational services in poorer rural areas, where quality of and access to education have lagged behind other areas. The SEDP will address these issues by supporting the renewal of school and kindergarten facilities, which are accessible to the poor, to improve learning environments, guarantee operations during winter, and provide decent accommodation for boarding pupils. The SEDP will also directly tackle the major shortages in educational services in rapidly growing urban areas by building new schools, that will directly serve–-and be located in–-poorer communities and will set new standards in performance and efficiency. In addition, the SEDP will improve the quality of educational services to the poor by addressing shortages of learning materials, improving the integration of ICT into education, modernizing science education, integrating vocational education, and by improving teacher training services. The sustainability of educational services will also be addressed through a capacity building program for education administrations. 49. SEDP activities will be implemented nationwide, with the greatest emphasis on improving educational services to the poorest communities. The SEDP will have three components: school and kindergarten development, quality improvement, and education management.

1. School and Kindergarten Development

a. Urban School Development (Government of Japan)

50. To resolve problems posed by insufficient and deteriorating educational facilities in the nation’s three major urban centers, schools in Darhan-Uul, Orkhon, and Ulaanbaatar were identified for improvement. The Government of Japan is financing the upgrading of 16 schools in Ulaanbaatar. Works at seven schools have been completed and are under way in five others. In 2000, the Mongolian Government asked the Government of Japan to finance the rehabilitation of a selected number of schools in the major cities in Darhan-Uul and Orkhon. JICA completed the final due diligence (the detailed basic design) on the requested school rehabilitation for implementation during 2002-2004. 51. The new schools developed under this component will be built to far more economical standards than with existing designs, requiring 60% less floor space for the same student capacity, cutting back on per student operating and maintenance costs, while also improving the learning environment. The emphasis on reduced energy consumption and maintenance requirements will result in lower operating costs and maintenance requirements allowing for more sustained education provision. To ensure sustainability of building designs, requirements will be based on locally available materials. Technologies and designs introduced in this subcomponent will serve as models for the development of new education facilities in Mongolia.

b. Rural School Rehabilitation–-Combined Primary and Secondary (ADB/Government)

52. At least 60 combined primary and secondary schools in poorer rural provinces will be comprehensively rehabilitated and furnished under the SEDP to improve learning environments, allow year-round operation, reduce expenditures on energy costs, and ensure acceptable living conditions in school dormitories. Rehabilitation works will include provision for heating systems and insulation, pitched roofs, sanitary systems, electrical systems as well as replacement of doors and windows. Consulting services will be provided to support MOECS in planning, designing, and supervising rehabilitation works to ensure their quality. School staff will be involved in the planning and supervisory process to ensure the relevance of support provided.

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Community representatives and parents will be consulted to ascertain the scope for direct community support for school development, including provision of labor and materials for simpler maintenance and rehabilitation works. Works will be timed to coincide with the long summer holidays to minimize disruption to the school’s operations. To facilitate access for students with physical disabilities, facilities will also be adapted where practicable including provision of civil works, furniture, and equipment as required. MOECS has provided an indicative list of schools to be rehabilitated. Final selection will, however, be made on a rolling annual basis by MOECS, with ADB concurrence, given the prospects for changing situations of individual schools during SEDP implementation. Works will be implemented on a region by region basis for maximum efficiency. Final school selection will be made using the criteria in Appendix 6. Support will also be provided for minor renovation works – not exceeding $20,000 - to at least 20 schools to improve learning environments and operating efficiency.

c. Rural School and Kindergarten Rehabilitation and Renewable Energy Conversion (NDF/Government)

53. At least 40 kindergartens and combined primary/secondary schools in poorer rural provinces will be comprehensively rehabilitated and furnished, and be converted to renewable energy systems (including solar and wind power systems). This will permit improved learning environments, allow year-round operation, reduce expenditures on energy costs, and ensure acceptable living conditions in school dormitories. Rehabilitation works will include provision for heating systems and insulation, pitched roofs, sanitary systems, electrical systems, and replacement of doors and windows. A study will be conducted of energy needs and renewable energy systems provided as applicable to substitute systems based on fossil fuels. Consulting services will be provided to support MOECS in planning, designing, and supervising rehabilitation works to ensure their quality. To facilitate access for students with physical disabilities, facilities will also be adapted where practicable including provision of civil works, furniture, and equipment as required. Other arrangements will be as with the rehabilitation of rural primary and secondary schools (para. 52). MOECS has provided an indicative list of schools to be rehabilitated. Final selection will, however, be made on a rolling annual basis by MOECS with ADB and NDF concurrence, given the prospects for changing situations during the SEDP. Works will be organized on a region by region basis for maximum efficiency. Final selection of schools will be made using the criteria detailed in Appendix 6.

d. Construction of Kindergartens and Schools (ADB/Government)

54. At least 6 new energy-efficient, modern kindergartens/primary schools will be constructed in towns where existing capacities cannot meet the demand for educational services. These new schools will serve as models in developing a new generation of facilities to gradually replace the current Soviet-style institutions. New institutions will be designed to be accessible to students with physical disabilities. To ensure affordability, school designs will make maximum use of local materials, be compatible with local climatic and geographical conditions, and stress low maintenance technologies. Design works will be contracted to private sector firms and consulting services provided to ensure that international experience in cold-weather educational facilities’ design can be taken into account. Extensive supervision services will also be provided to promote quality of works rendered by contractors. MOECS has provided an indicative list of sites for construction of new institutions. Final selection of sites will, however, be made on a rolling annual basis by MOECS with ADB and NDF concurrence, given the prospects for changing circumstances of individual communities in the lifetime of the SEDP. Final selection of sites will be made using the criteria detailed in Appendix 6.

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e. Capacity Building for Education Facilities’ Management (ADB/Government/Government of Japan)

55. To enhance the quality of civil works in the education sector, the capacity of the Construction Client Unit (CCU) in MOECS for assessment, design, supervision, and maintenance of civil works will be strengthened. This will include international and local training of key personnel, including one postgraduate scholarship, supported by on-the-job training from resident advisers. This will include training on needs of students with physical disabilities. CCU will also receive specialist equipment for use in its design and supervisory operations. To improve planning for the education network, the SEDP will support the development of a pro-poor, short-, medium-, and long-term costed facilities plan in conjunction with other development agencies, to ensure that education services can be provided to the poorest communities on an affordable, sustainable basis. A comprehensive maintenance program will also be developed for national education facilities, including training of school and provincial staff to impart maintenance skills. ADB-financed consultants will coordinate with the Japanese Overseas Cooperation Volunteers, comprising five architects and engineers, to improve the design of schools by updating building standards and improving supervision and evaluation capacities.

2. Quality Improvement

a. Teacher Training (ADB/Government) 56. The Project will continue activities commenced under the ESDP for the development of overall in-service training systems, with emphasis on the needs of teachers in rural areas. TA will be provided to improve quality of training provision, including methodological and material support, and introduce enhanced quality assurance systems. Teacher training advisers will address the needs of unqualified teachers as well as prepare teachers for integrating children with disabilities into mainstream education. At least 5,000 teachers from kindergartens and primary and secondary schools will receive training under the SEDP for their respective subject areas. The training systems will be maintained at low cost with maximum recourse made to local personnel, especially teachers selected on a competitive basis as teacher trainers, and materials and resources to ensure that programs can be maintained after SEDP completion in their developed forms. TA will also be provided to develop medium- and long-term action plans for teacher training, including identification of recurrent and investment costs for the development and operation of the training system. The subcomponent will be implemented in coordination with the Soros Foundation and UNICEF.

b. Learning Materials’ Provision (ADB/Government)

57. The SEDP will support policy development and capacity building for a more diverse and liberalized educational publishing system, including opening up the market for commercial sales of textbooks. This will include TA for publishing personnel, including training of writers, illustrators, and editors, as well as legal and regulatory assistance. The SEDP will assist the Government in expanding the current textbook user charge system for secondary education–-with exemptions for poor students–-to increase the system’s financial sustainability. At least 900,000 new textbooks and teachers’ guides, comprising reprints and new titles, and supplementary learning materials will be provided to primary and secondary school pupils. After piloting, a program of familiarization will be launched for teachers who will be working with the new titles. Learning materials and toys will also be provided for at least 150 kindergartens. To enhance the quality and diversity of new titles, private sector publishers will be involved in the development process of new learning materials. SEDP support for this process will include

16

capacity building of MOECS, as well as training for writers, illustrators, and editors from the private sector.

c. Information and Communication Technologies Integration (ADB/Government/Government of Japan)

58. A comprehensive review of ICT utilization in secondary education will be conducted by MOECS with support from a team of specialists. The results of the review will be utilized to develop a draft ICT policy, in cooperation with JICA25, to integrate ICT into the educational process, including a detailed and costed concept and strategy. In line with the SEDP’s aim to facilitate access to education for children with disabilities, the policy will contain measures for strengthening the utilization of ICT in integrating children with disabilities into mainstream education provision. The policy will aim to incorporate ICT into education programs, with emphasis on rural areas. The SEDP will also strengthen the informatics curriculum for grade 8 to 10 students to make it more relevant to actual labor market needs. To prepare teachers for ICT, preservice teacher training programs will be strengthened at the Pedagogical University in Ulaanbaatar through staff training, provision of ICT equipment and materials, as well as specialist advisory services. In-service training programs will also be developed at SEDP sites and support provided for development of ICT facilities in at least 40 combined primary and secondary schools. Prior to the installation of ICT facilities, extensive training will be provided to pedagogical staff and principals in ICT applications.

d. Science Education Modernization (NDF/Government) 59. A comprehensive review will be undertaken of science curricula26 in both primary and secondary education to assess the appropriateness of its objectives, content, and methodology for the needs of students in the context of changing labor market conditions. Based on this assessment, a comprehensive science education strategy and action plan will be developed and will include recommendations for revising the curriculum and syllabi, and adapting materials, facilities, and methodologies in accordance with newly identified needs. Based on the plan’s provisions, the SEDP will provide a flexible and comprehensive program of support to modernize and reform science education including upgrading staff training services, providing learning materials and equipment, and revising of curricula and science programs, if needed. At least 120 schools will be included in this subcomponent.

e. Vocational Education Integration (NDF/Government) 60. The SEDP will pilot a program to restore vocational education by integrating vocationally oriented subjects into the curriculum of selected secondary schools. This will promote increased enrolment rate of boys, in particular, in secondary education. This subcomponent will include an assessment of the needs for vocational education, as well as an evaluation of the capacity for providing appropriate programs in selected schools. Based on the results of the assessment, a pilot program will be implemented in at least 20 general secondary schools including advisory services for program development, teacher training, learning materials, basic learning equipment, and furniture. The results of the pilot will be assessed and recommendations provided for the dissemination of the vocational education integration program in a vocational education strategy paper, which will provide a framework for expansion, if applicable.

25 This includes a Japanese adviser who will formulate an ICT program for the education sector to complement the

ADB ICT component. The service is currently scheduled for completion in August 2003. 26 Including environmental studies, natural sciences, biology, physics, chemistry and geography.

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3. Education Management

a. Capacity Building for Education Management (ADB/Government)

61. A program of capacity building will be provided for staff of MOECS; provincial, city, and district administrations; and kindergarten and school principals to build competencies for planning and implementing educational services, as well as improving monitoring and evaluation. Particular emphasis will be placed on imparting best practices in educational management from international experience, with stress on financial management. The capacity building program will also stress the acquisition of ICT, language, and general management and presentation skills, as well as optimal monitoring and evaluation skills for assessing progress in meeting sector targets including the Millennium Development Goals as well as specific interventions, including the SEDP. Postgraduate programs in education management in selected institutions will be strengthened. In addition, local training institutions will be contracted to develop and provide training programs for trainees under the SEDP. To ensure the relevance of training programs, staff of target institutions will be involved in defining their goals, scope, and content. International and local expert services will be involved in developing and delivering training, which will promote the integration of international experience in the programs. Staff of provincial and district education administrations will be provided with essential ICT hardware and software, plus various office equipment to enhance their effectiveness in education management. ADB will coordinate with JICA in policy and planning support in this regard.27

b. Project Implementation Support (ADB/Government/NDF) 62. A project management unit (PMU) will be established under MOECS to support effective and efficient management of the ADB and NDF-financed elements of the SEDP. The PMU will be established on the basis of the ESDP project implementation unit to capitalize on its experience in implementing this related intervention. An international project specialist will support the PMU in planning and procurement activities, monitoring and evaluation, and organizing training to upgrade the skills and knowledge of PMU staff. The resource base of the PMU will be modernized for SEDP implementation. The PMU will also coordinate with the JICA Mongolia country office in the implementation of Japanese-financed SEDP components. C. Technical Justification

63. The SEDP’s technical approach to educational infrastructure development will improve quality, coverage, and sustainability of services. The ESDP and other interventions have shown that a comprehensive approach to rehabilitation is needed to significantly extend a facility’s lifespan and to significantly improve the learning and residential environment. The approach will ensure that the three essential elements for effective building development: heating, moisture limitation, and maintenance are catered for as a whole. Good heating systems and insulation will allow schools to operate throughout winter and reduce heating costs. Prevention of moisture will improve heating, protect from structural damage, and protect electrical systems. Routine effective maintenance will prevent costly structural problems from arising, thereby extending the lifespan of buildings. In addition, the development of new facilities under the SEDP will reflect best practices from other cold climates and will make use of new building standards to achieve optimal levels of performance and efficiency of the new facilities. Special consideration will be

27 This includes a long-term Japanese adviser in MOECS who will provide, inter alia, policy advice for education

management to complement the ADB support.

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given to new heating technologies and techniques, including improved building design, insulation, and utilization of passive solar heating methods. D. Cost Estimates

64. The total project cost is $68.5 million equivalent, including taxes and duties. The cost estimates are summarized in Table 1 and detailed in Appendix 7.

Table 1: Summary of Project Cost Estimates ($ million)

Component Foreign

Exchange Local

Currency Total Cost

% of Base Cost

A. Base Cost 1. Urban School Development 35.0 10.0 45.0 69.2 Rural School and/or Kindergarten Development and/or Capacity Building

3.4 10.1 13.5 20.8

2. Quality Improvement 2.6 2.8 5.4 8.3 3. Education Management 0.6 0.5 1.1 1.7 Subtotal (A) 41.6 23.4 65.0 100.0 B. Contingencies 1. Physical 0.7 1.3 2.0 2. Price Escalation 0.2 0.6 0.8 Subtotal (B) 0.9 1.9 2.8 C. Interest Charge 0.7 0.0 0.7 Total 43.2 25.3 68.5 Note: Physical contingencies are 10% of the total base cost and price escalation is estimated on the basis of 2.4%

for foreign exchange and 5% for local currency (Asian Development Bank and Nordic Development Fund loans only)

Source: ADB Staff calculations. E. Financing Plan

65. ADB will provide a loan of SDR 10.806 million ($14 million equivalent) from its Special Funds resources and the Government will provide $3.5 million equivalent for financing (i) rural school rehabilitation, (ii) construction of new kindergartens and schools, (iii) capacity building for educational facilities’ management, (iv) teacher training, (v) learning materials’ provision, (vi) ICT integration, (vii) capacity building for decentralized management, and (viii) project implementation support. The Borrower will be Mongolia and the loan will have a maturity of 32 years including a grace period of 8 years, with an interest rate of 1% per annum during the grace period and 1.5% thereafter. The loan will include financing of the interest charge. In parallel with the ADB loan, the Government of Japan will provide $45 million equivalent28 on a grant basis for urban school development in the three major urban centers, policy and planning support, assistance in formulating approaches to integrate ICT into education processes, and a program to improve school construction standards. NDF will also provide a loan of $4.8 million equivalent for rural school and kindergarten rehabilitation, science education modernization, vocational education integration, and project implementation support. The loan will be provided 28 Comprising the amounts committed by the Japanese government for school rehabilitation work in Ulaanbaatar

(totaling about $20 million equivalent) and the amount requested by the Government for the urban centers in Darhan-Uul and Orkhon in the amount of $25 million equivalent. All due diligence was completed for the urban school rehabilitation in Darhan-Uul and Orkhon provinces for implementation during 2002 to 2004.

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at NDF’s standard lending terms, which include 40-year maturity, including a 10-year grace period, no interest, 0.75% service charge, 0.5% commitment fee, and denomination in euro. The financing plan is summarized in Table 2.

Table 2: Financing Plan

($ million) Source Foreign

Exchange Local

Currency Total Cost

%

Asian Development Bank 5.6 8.4 14.0 20.4 Government of Japan 35.0 10.0 45.0 65.7 Nordic Development Fund 2.2 2.6 4.8 7.0 Government 0.0 4.7 4.7 6.9 Total 45.0 23.5 68.5 100.0 Source: ADB Staff calculations. F. Implementation Arrangements

66. MOECS will be the Executing Agency, with primary responsibility for overall planning and coordination of SEDP activities and for implementing ADB and NDF-financed SEDP activities. MOECS is the Executing Agency for the urban school development activities to be financed by the Government of Japan. The Deputy Minister, MOECS will be the project director, with responsibility for providing the policy and strategic direction for ADB and NDF-financed activities. ADB and NDF-financed activities will be undertaken in coordination with local administrations, provincial and district local councils (hurals), together with specialized educational institutions for teacher training and educational research. School boards will be consulted in planning the range of activities in SEDP-supported schools. A multisectoral steering committee, chaired by the Deputy Minister, MOECS, and comprised of representatives from MOECS, the Ministry of Finance and Economy, the Cabinet Secretariat, the Education Research Institute and ADB’s Mongolia Resident Mission, has been established to provide policy guidance and to oversee implementation of the ADB and NDF-financed activities. Building upon the experience and expertise of the ESDP project implementation unit, a PMU has been established to support MOECS to effectively and efficiently achieve SEDP objectives. The PMU is headed by a project manager who will be responsible for day-to-day implementation of ADB and NDF-financed SEDP activities. ADB and the PMU will coordinate with the JICA Mongolia office during implementation to ensure coordination between the respective SEDP components. 67. Within MOECS, CCU will be the key entity responsible for the implementation of ADB and NDF-financed school development activities. CCU was recently established by MOECS, to address needs for improved capacity for construction, rehabilitation, and maintenance of educational facilities. CCU is financed by levying fees for its services to MOECS or other clients, including local administrations. A detailed description of CCU and of the internal processes for construction and rehabilitation is given in Appendix 8. 68. The SEDP will be implemented over 5 years. This will allow adequate time to complete construction and rehabilitation works given Mongolia’s very short construction season. A midterm review will be undertaken by the Government and ADB, in conjunction with NDF and JICA, during the second year of implementation to assess progress and achievements, identify any difficulties being encountered, and recommend remedial action if required.

20

a. Procurement 69. All procurement under the ADB loan will be accordance with ADB's Guidelines for Procurement. Appendix 9 summarizes the procurement packaging for the SEDP. ICT equipment or materials valued at more than $300,000 equivalent will be procured through international competitive bidding. Procurement of equipment, and learning materials will be awarded through international shopping for contract packages of less than $300,000 equivalent or less. Small contracts of less than $100,000 equivalent each for off-the-shelf items may be filled by direct purchase. Local competitive bidding will be undertaken for civil works contracts less than $1,000,000 equivalent each in accordance with procedures acceptable to ADB. The PMU will be responsible for overall procurement activities. Procurement under the Government of Japan and NDF-financed components will be in accordance with the respective agencies’ own procedures. b. Consulting Services 70. ADB will finance 21 person-months of international consulting services and 459 person-months of domestic consulting services. The international and domestic consultants will support MOECS, and other education sector entities covered by the SEDP in all aspects of civil works, policy and strategic advice, training and staff development, as well as TA for quality improvement. International consultants under the ADB loan will be selected and engaged in accordance with ADB's Guidelines on the Use of Consultants. Advance action will be taken to select ADB-financed consultants to facilitate the start-up arrangements for the SEDP. Domestic consultants will be selected and engaged by the PMU under arrangements acceptable to ADB.29 NDF will finance 19 person-months of international consulting services and 284 person-months of domestic consulting services, in accordance with its own procedures on the recruitment of consultants. The summary terms of reference are in Appendix 10. The Government of Japan will also finance long- and short-term consulting services in accordance with its own procedures on the use of consultants.

c. Disbursement Arrangements and Imprest Fund 71. All disbursements under the ADB loan for the SEDP will be carried out in accordance with Government procedures and ADB’s Loan Disbursement Handbook. Disbursements for the Government of Japan and NDF-financed components will be done in accordance with the respective agencies’ own procedures. To expedite disbursement of ADB loan proceeds, the SEDP will use an imprest account. The imprest account will be established in accordance with ADB’s Loan Disbursement Handbook. The account will be opened by the PMU in a commercial bank acceptable to ADB. The initial amount to be deposited in the imprest account will not exceed 6 months of projected expenditures and is estimated at $250,000 equivalent. 72. Statement of expenditure procedures will be used to reimburse eligible expenditures under ADB-financed SEDP activities, and to liquidate advances provided to the imprest accounts in accordance with procedures satisfactory to ADB and consistent with ADB’s Loan Disbursement Handbook. Each individual payment reimbursed or liquidated under the procedures will not exceed $50,000 equivalent for each item of expenditure.

29 According to the specific packages of consulting services, domestic consultants will be recruited both under

separate contracts and subcontracted by international consultants.

21

d. Reports, Accounts, and Audit

73. The PMU will prepare quarterly reports (in the format of ADB’s project performance report) on project implementation focusing on the ADB and NDF-financed components, but also incorporating the principal outputs under the Government of Japan-financed components. JICA will prepare its own reports for assessing progress of the Government of Japan-financed components. The PMU will provide reports to ADB and NDF and copied to JICA within 30 days after the end of the applicable period. Brief monthly reports will also be provided. Within 3 months after the physical completion of the Project, MOECS will submit a project completion report to ADB, JICA, and NDF. 74. MOECS will maintain separate records and accounts for all expenditures to be financed by the proceeds of the ADB loan, will be maintained by MOECS in accordance with sound accounting principles. They will specify the expenditures for all activities and identify all expenditures to be financed by the loan proceeds. Project accounts, including financial statements, statements of expenditures, and imprest account records, will be audited annually by auditors acceptable to ADB. The auditors’ report, and copies of the certified accounts and related financial statements, including the auditors’ opinions on the use of loan proceeds, compliance with loan covenants, and the use of the imprest account under ADB’s statement of expenditures procedures, will be submitted to ADB in English not later than 6 months after the end of the fiscal year to which they relate. Records and accounts, as well as audit procedures, will be established for the Government of Japan and NDF-financed SEDP components, in line with the respective agencies’ requirements.

e. Monitoring and Evaluation 75. Monitoring and evaluation will be undertaken in the framework of MOECS’s existing education management information system, as well as through specific measures to gauge SEDP benefits within the context of the education sector as a whole using a system of monitorable indicators, based on a review of baseline statistics. Consulting services will be provided for this purpose and surveys commissioned to independently supervise and evaluate SEDP activities. Monitoring and evaluation specialists will be recruited to support MOECS in developing monitoring and evaluation systems and to assess overall SEDP impact on a systematic basis. The specialists will report directly to the steering committee. G. The Executing Agency

76. MOECS, the Executing Agency for the SEDP, has successfully implemented the ESDP30 and has attracted a wide range of assistance agencies to the education sector. It has also successfully supported the implementation of three ADB TAs, leading to the development of a comprehensive policy and planning framework for the education sector. MOECS has also been instrumental in undertaking educational reforms that place Mongolia at the forefront of Asian transition countries in terms of educational performance, and provide a comprehensive and solid policy framework for SEDP implementation. 77. A weakness of MOECS, which was highlighted during ESDP implementation, however, was its lack of capacity for supervising civil works. This problem has, however, been addressed through the creation of a self-financing CCU under MOECS. As a new unit, the SEDP will 30 The implementation performance rating is highly satisfactory with original activities completed ahead of schedule.

22

provide support for CCU’s development. With regard to textbook provision, MOECS’s policies and operating procedures are not yet fully compatible with utilizing private sector capacities in educational publishing, although it has initiated programs with assistance agencies, including the Soros Foundation, to modify structures and arrangements. Capacity for policy development and planning of ICT integration also requires development. SEDP will address this by providing staff training and building partnerships with specialized ICT research and training institutions. H. Environmental and Social Measures

1. Environment

78. No adverse environmental effects are expected from the SEDP. A comprehensive environmental assessment was undertaken under the CIDA Mongolia School Rehabilitation and Construction Study. Its findings are presented in Supplementary Appendix B. The SEDP will also provide support for the environmental studies program for primary grades 1 to 3, by providing learning materials and teacher training for selected schools to strengthen this program and to make it more relevant to the daily lives of students.

2. Social Analysis

79. The SEDP, including components financed by Government of Japan and NDF, will provide positive educational benefits to children aged 4 to 18, of kindergarten, primary, and secondary school age. There will be no adverse social or educational impacts (Appendix 10 include the initial social assessment), or involuntary resettlement effects. New facilities will be constructed on existing school sites or in sparsely populated areas on land allocated by local administrations,31 and selected in consultation with local communities. The SEDP is, therefore, classified as Resettlement Category C. 80. The SEDP is classified as Category C in terms of impact on indigenous peoples. Although Mongolia comprises over 16 distinct clans and ethnic groups none of these is so distinct from the dominant or mainstream society that is especially vulnerable to being disadvantaged in the process of development. 81. The SEDP will also make provision to address the lower participation of boys in education, particularly at the upper secondary level. Support will be aimed primarily at revising educational programs to make them more suitable to boys’ demands including more links with labor markets and integration of vocational education into standard curricula.

V. PROJECT JUSTIFICATION

A. Financial and Economic Analyses

1. Project Benefits

82. The principal benefit of the SEDP will be to safeguard and restore access for at least 95,000 children of kindergarten and school age through the rehabilitation and construction of educational facilities, including dormitories. About 45% of these children are expected to be from poor families. The SEDP will also enhance the external efficiency of both primary and secondary education programs and their relevance to the emerging social and economic

31 There is no private land ownership in Mongolia; allocation of land is the responsibility of local administrations.

23

context. At least 140,000 children of kindergarten and school age are expected to benefit. Graduates of the SEDP-supported schools and programs will benefit from enhanced skills and knowledge, which will boost their ability to secure viable employment and their future income-earning potential. Modernizing educational methods and improving educational content will allow increased labor mobility between economic sectors. Access of children with disabilities to education will also be facilitated by upgrading school facilities and developing staff competencies for integrating children with disabilities into mainstream programs. 83. The SEDP will have a significant impact on public expenditure by emphasizing far greater efficiency in the development and management of existing educational institutions, particularly for energy and utility costs, which typically account for 40% or more of individual institutions’ recurrent expenditure. By 2007, SEDP investments could decrease annual expenditures by 22%, saving over $3.2 million yearly on selected items (Table 3). By developing new school designs, capable of accommodating more students, operating cost unit per student can be decreased in SEDP schools. Table 3: Expected SEDP Impact on Recurrent Budgetary Requirements (selected items)32

Item Budgeted Resources in 1999

(MNT million)

Percentage Reduction (increase) in

Real Budgetary Allocations by 2007

(%)

Recurrent Annual Expenditure Forecast

in 2007 (MNT million, 1999 prices)

Electricity 2,049 5 1,947 Coal and Heating 10,897 25 8,173 Fuel Transportation 479 15 407 Clean and Waste Water

1,593 20 1,274

Total 15,018 11,801 Source: ADB Staff calculations. 84. The SEDP’s drive to emphasize the importance of preventative maintenance is also expected to have a significant impact on reducing capital expenditures for repairs and construction of facilities in the medium to long term. An additional benefit, noted from the ESDP, is that the health of both staff and students can be expected to improve after school facilities are rehabilitated. Health problems generally arise as a result of sustained exposure to freezing temperatures, which characterize so many schools in Mongolia today. B. Social Dimensions

85. The SEDP has direct implications for children of kindergarten and school age in both urban and rural areas. In urban areas, SEDP activities will be aimed specifically at providing educational services to poorer communities, many of which are located in the suburban tented communities, and where the majority of new migrants to urban areas reside. In addition, SEDP will help to safeguard educational services by supporting strategically located schools serving poorer rural communities. Support to rural boarding schools’ dormitories, which poor children are strongly reliant on for attending school, will be a key element to facilitating poor children’s

32Generally a wide discrepancy exists between actual expenditures by item and provided budgets. As real

expenditures on heating are widely believed to be far in excess of budgetary provisions, the real savings from improved heating can be expected to be far greater than the estimated budgetary reductions.

24

access. In addition, the SEDP will facilitate the access to mainstream education services for children with disabilities and special learning needs. 86. The SEDP will address the wide gender gap in secondary education by improving education programs in line with boys’ needs. Widespread poverty means that boys’ labor is often required by their households for herding to bring in extra income. With the quality and relevance of education perceived as low, the opportunity cost of their full-time participation in education is seen as high, leading to their withdrawal from school. By adapting the content and methods of education provision more to actual labor market needs, the perceived opportunity cost of education will fall, thus encouraging greater enrolment and retention. C. Impact on Poverty

87. The SEDP will have direct and indirect impacts on pupils from poor families, including children with disabilities. It will reduce deprivation poverty by increasing access to education in areas with the lowest enrolment rates, including remote rural areas, as well as among migrant and poorer communities in the principal urban centers of Ulaanbaatar and in Darhan-Uul and Orkhon aimags. Due to the investments in educational facilities under the SEDP it will again be possible to restore full access to educational services by selected schools. 88. Income poverty will also be addressed by SEDP activities for increasing and diversifying educational attainment that will allow school graduates to proceed to higher education and to compete better in labor markets. These opportunities will enhance graduates’ opportunities for income earning, which will directly affect the livelihoods of themselves and their dependents. D. Risks

89. Risks are relatively few for the SEDP, given high societal and governmental commitment to education and the SEDP’s aims. In addition, Mongolia has accumulated substantial project implementation experience from ADB and other agencies. However, the relative lack of specialist personnel and institutional experience of some areas covered by the SEDP poses some risk for SEDP implementation. This includes building design and supervision where MOECS has only recently established a specialist CCU for this purpose. These risks can, however, be mitigated with sufficient emphasis on capacity building under the SEDP, and by cooperating in this field with other agencies by pooling experience and resources. The lack of institutional capacity in education management structures for adoption and integration of appropriate ICT, and promotion of private sector publishing provision also poses some risk to effective implementation. This, too, should be addressed with a program of capacity building together with the development of partnerships with specialist institutions in the private sector. 90. Another risk concerns contractor capacity for civil works on schools, especially in remote rural areas. Some contracts will be relatively large for the communities included in the SEDP, and if contractors face difficulties in mobilizing sufficient personnel, equipment, and materials, delays in works could lead to disruptions in school operations. Given the very short construction season, even short slippages in implementation progress can lead to major delays, if contractors are forced to suspend work during the long winters. This risk can best be offset by effective supervision of works, as well as by setting realistic schedules and outputs in the contracting process. This will be addressed by substantial financing of the requisite specialist personnel to support supervision during the SEDP and to develop longer-term capacities in this area within MOECS and local administrations.

25

91. A harmonized approach to educational infrastructure development and maintenance by all major developing agencies is essential. This will require support for the Government’s policy of rationalizing the education network with the creation of the new strategically located “complex” and “inter-soum” schools at the core. Support for developments outside this policy framework will lead to resources being channeled to unsustainable institutions and a deficient allocation of resources within the sector. Effective aid coordination will, therefore, be essential.

VI. ASSURANCES

A. Specific Assurances

92. In addition to the standard assurances, the Government has given the following assurances, which are incorporated in the legal documents:

(i) Within 12 months of loan effectiveness, MOECS will prepare and submit to ADB for approval a plan to modify the rental system for textbooks for secondary education to be provided under the SEDP, as well as a timetable for the introduction of a fully liberalized market for textbooks and learning materials. MOECS will commence implementation, on a pilot basis, of the modified rental system within 18 months of loan effectiveness.

(ii) Within 12 months of loan effectiveness, the Government will take all necessary

actions to ensure that all children, regardless of legal status (e.g., children of internal migrants lacking the required transfer documentation), can enroll in schools of their choice at SEDP sites.

(iii) Within 18 months of loan effectiveness and in consultation with ADB and other

development agencies, MOECS will prepare a draft ICT policy paper covering primary and secondary education, and future investments in ICT to advance key education priorities.

(iv) The Government will ensure that all schools and sites selected for development

under the SEDP meet the selection criteria, as described in Appendix 6.

(v) The Government will ensure that MOECS consults with provincial and local governments, including local hurals (district councils), as well as school boards, in the planning, rehabilitation, and construction of facilities under the SEDP.

(vi) The Government will ensure that provincial and local governments provide all

necessary counterpart funds on a timely basis. Adequate funds for operation and maintenance of SEDP facilities will be provided through specific line items for operation and maintenance in the annual budget.

B. Condition for Loan Effectiveness

93. The Loan Agreement for the Project will not become effective until all conditions for effectiveness of the loan documentation for the NDF loan, aside from effectiveness of the ADB Loan Agreement, have been satisfied.

26

VII. RECOMMENDATION

94. I am satisfied that the proposed loan would comply with the Articles of Agreement of ADB and recommend that the Board approve the loan in various currencies equivalent to Special Drawing Rights 10,806,000 to Mongolia for the Second Education Development Project, from ADB’s Special Funds resources with an interest charge at the rate of 1% per annum during the grace period and 1.5% per annum thereafter; a term of 32 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft Loan Agreement presented to the Board.

TADAO CHINO

President 10 July 2002

27

PROJECT FRAMEWORK

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

Goals Ensure that by 2015, all children, will be able to complete a full course of primary schooling. (Millennium Development Goal) Achieve net enrolment ratio of 90% in basic education (grades 1 to 9) by 2005 and 55% in preschool education (Government of Mongolia target)

Net enrolment ratio in primary and secondary education Proportion of students starting grade 1 that reach grade 5 Proportion of students starting grade 5 that reach grade 10 Literacy rate of 15-24 year olds

• Government

statistics (National Statistics Office, Ministry of Education, Culture and Science (MOECS)

• Funding agencies’ reports and statistics

• ADB Review Mission reports

• Project completion reports by Government and Asian Development Bank (ADB)

Macroeconomic and political climate remain positive Continued strong commitment of communities, parents, and pupils to education

Purpose Improve access to and quality of preschool and basic education in poorer rural provinces and urban districts, and increase sustainability of educational provision according to the National Education For All strategy

Percentage of basic education dropouts reduced by 0.6% by 2004 Percentage of boys in upper secondary education increases to 45% in 2008 Learning achievements of 8th grade students will be increased by 5% by 2005 Percentage of nonprofessional kindergarten teachers will be reduced by 3.3% by 2005

• Government

statistics and MOECS records and analyses

• ADB review mission reports

• Midterm review report

• Field visits to project institutions, communities and beneficiary groups

• Project completion reports by Government and ADB

• Consultation with funding agencies and nongovernment agencies (NGOs)

• Surveys and studies under the Project

Government is able to maintain real levels of financing for the education sector Government and private sector publishers can establish workable partnerships for learning materials’ provision Sufficient institutional capacity

Outputs School and Kindergarten Development

• Operating capacity

and performance in at least 146 schools improved

• 6 model kindergarten/ primary education facilities established

• Project progress

reports • Mission reviews • Project progress

reports

• Government counterpart

funds are made available on a timely basis

• Adequate contractor

capacity for school

Appendix 1, page 1

28

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

facilities established • Capacity of MOECS

for facility development and management improved

• Capacity of local administrations and schools for maintenance improved, national maintenance program approved

• Mission reviews • Project progress

reports • Mission reviews • Project progress

reports • Mission reviews

capacity for school rehabilitation and construction exists in all project sites

• Government provides

sufficient recurrent financing to permit sustained maintenance of project facilities

Quality Improvement • At least 900,000 textbooks, teachers guides, and learning materials provided

• Concept for Information and Communication Technology (ICT) integration and related teacher training systems developed

• ICT facilities developed in at least 40 schools

• Teacher training systems for rural provinces improved and 5,000 kindergarten and school teachers upgraded

• Science education programs modernized and introduced in at least 120 schools

• Vocational education programs piloted in 20 secondary schools

• Project progress reports

• Mission reviews • Project progress

reports • Mission reviews • Project progress

reports • Mission reviews • Project progress

reports • Mission reviews

• Workable partnership between MOECS and private sector publishers can be developed for provision of learning materials

• Sufficient recurrent

financing can be secured for operation and maintenance of ICT facilities

Education Management

• Competencies and

skills of at least 2,000 education managers and administrators upgraded for more effective planning, implementation, monitoring, and evaluation

• Project progress

reports • Mission reviews

Sufficient recurrent financing can be mobilized to ensure sustained provision of competence-building programs for education sector managers

Appendix 1, page 2

29

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

• Education management systems upgraded

• Monitoring and evaluation systems developed for the Project and wider education system

• Project Management Unit established and supporting efficient and effective project implementation

• Project progress

reports • Mission reviews • Project progress

reports • Mission reviews

Activities School Development • About 146 schools

rehabilitated and furnished

• 6 combined schools/

kindergartens constructed and furnished

• Capacity building of

MOECS/CCU, including facilities’ development plan and maintenance program

Quality Improvement • Learning materials’

provision • ICT integration • Teacher training

systems’ development

• Science education

Start: Year 1, QI Complete: Year V, QIII Responsible: MOECS, provinces, schools Start: Year 1, QIII Complete: Year V, QIII Responsible: MOECS, provinces, schools Start: Year 1, QII Complete: Year II, QIV Responsible: MOECS, provinces, schools Start: Year 1, QI Complete: Year IV, QIV Responsible: MOECS, provinces, schools Start: Year 1, QI Complete: Year IV, QIV Responsible: MOECS, provinces, pedagogical colleges, schools Start: Year 1, QII Complete: Year V, QII Responsible: MOECS, provinces, pedagogical colleges, schools Start: Year 1, QIII

Appendix 1, page 3

30

Design Summary

Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks

modernization • Vocational education

integration Education Management • Competence-building

program for education managers

• PMU establishment

and operation

Complete: Year V, QII Responsible: MOECS, provinces, pedagogical colleges, schools Start: Year 2, QII Complete: Year IV, QII Responsible: MOECS, provinces, pedagogical colleges, schools Start: Year 1, QII Complete: Year V, QIII Responsible: MOECS, provinces, schools Start: Year 1, QI Complete: Year V, QIV Responsible: MOECS

Inputs Vehicles, equipment and furniture Civil works Training Materials Surveys and studies Consulting services Project implementation Contingency Interest charge Total Government Government of Japan Nordic Development Fund Total ADB loan

$3.5 million $53.2 million $1.3 million $2.3 million $0.1 million $1.4 million $1.3 million $2.7 million $0.7 million $68.5 million $3.5 million $45 million $4.8 million $14 million

Appendix 1, page 4

31 Appendix 2

Source: Adapted from Mongolian Universities and Colleges (Handbook). 1998. Ulaanbaatar: Mongolian Universities Consortium. 1998.

EDUCATION SYSTEM STRUCTURE 1999/2000

BA = Bachelor of Arts BS = Bachelor of Science

32 Appendix 3, page 1

Figure A3:Management Structure of the Educational System

Glossary a) Aimag = province, b) Hural = council, c) Soum = district, sub-administrative unit of the aimag

Aimag/ City Governor

Soum/ District Governor

Soum People’s Representative

Khural

Aimag/City Peoples’

Representative Khural

Education Inspection

Board Nonformal

Education Center

Institute of Education

MOECS

Cabinet

Parliament

ECC TEVT Institution

Private Stakeholders

Public Stakeholders

Kindergartens, Primary & Secondary Schools, (Community Learning Centers

Science andTechnology Fund

State Training Fund

Culture and Arts Fund

Cultural Heritage Center

33 Appendix 3, page 2

Figure A3.1: Public Expenditure on Education, including Capital Expenditure (1995 to 2000)

Year As percentage of GDP

(%) Total Expenditure

(MNT, million) Capital Expenditure

and Loans (MNT, million)

1995 7.52 N/A N/A 1996 6.62 34,341.40 1,481.40 1997 5.52 46,125.90 1,599.00 1998 6.82 52,941.40 3,203.00 1999 7.00 64,811.40 3,677.70 2000 7.30 82,109.00 2,990.20

Source: MOECS, 2001

Figure A3.2: Education Budget by Subsector and Selected Items (1996 to 2001)

Subsector

1996

1997

1998

1999

2000

2001

% change (1996 to 2001)

Nursery schools 389 538 457 539 414 589 51 Kindergartens 6,310 8,952 10,325 11,015 13,974 12,409 97 Primary and Secondary

18,565 24,551 28,589 31,467 42,014 47,142 154

Vocational education and training

2,090 2,906 3,231 4,233 4,559 4,769 128

Higher education 3,669 6,464 10,413 11,524 13,422 10,702 191 State Training Fund

402 234 142 438 598 3,873 963

Capital investment

701 531 1,182 1,557 2,033 1,864 166

Source: World Bank. 2002. Public Expenditure Review. Draft. Ulaanbaatar.

34 Appendix 4, page 1

OVERVIEW OF NATIONAL EDUCATION POLICIES AND STRATEGIES A. Mongolia Education and Human Resource Master Plan, 1994

1. With Asian Development Bank (ADB) support,33 the framework Mongolia Education and Human Resource master plan was developed in 1994 to provide a foundation for education sector development. The Master Plan identified six principal areas for action that became the basis for several legislative and policy frameworks:

(i) Enhance basic and general education. (ii) Reform higher education for national development purposes. (iii) Rationalize systems for vocational training. (iv) Provide learning opportunities for out-of-school children and youth. (v) Improve educational management. (vi) Increase efficiency of the Ministry of Science and Education structure and

operations. B. Legal Basis for the Education Sector

2. With the master plan as a foundation, the Mongolian Parliament approved a package of laws in 1995 to govern the education sector. These laws were later amended in 1998. A number of Government resolutions and programs have also been passed which provide important directions for education sector development:

(i) National Program on Pre-School Strengthening, Government Resolution No. 46, 1995.

(ii) Main Directive of the Government of Mongolia for Reform of the Education Sector in 1997-2005, Government Resolution No. 89, 1997.

(iii) National Non-formal Education Development Program, 1997 to 2004. (iv) National Program for Technical Education and Vocational Training (TEVT),

Government Resolution No. 41, 1998. (v) National Policy on Science and Technology, Government Resolution No. 55,

1998. (vi) National Program on Distance Education, June 1999.

C. The Mongolia Action Plan for the 21st Century

3. The Mongolia Action Plan for the 21st Century (MAP 21), which was released in 1998 provides a comprehensive approach for development that is environmental friendly, economically stable, socially wealthy development of all the participants in the development activities based on the principles of sustainable development. 4. MAP 21 had the following objectives for education:

(i) Make education a universally popular necessity for everybody, and establish a formal and nonformal education system including viable teaching.

(ii) Develop and determine training content and standards for every level of education and set up a new monitoring system for education, that consists of highly qualified specialists as well as representatives from the public.

33 TA 2228-MON: Education Development, approved on 9 December 1994, for $400,000.

35 Appendix 4, page 2

(iii) Establish a new system of technical education and vocational training to develop human resources able to provide sustainable development for Mongolia, including a high rate of employment that satisfies the needs and demands of the labor market.

(iv) Promote educational activities about environmental issues and efficiency of resource usage, and ecology at all levels in schools.

D. Action Program of the Government of Mongolia

5. The Government Action Program from 2000 gives strong emphasis to the development of social policy, including education. Stated objectives for social policy include “creating an environment for human development, improving the living standard of citizens, ensuring equal access to social services, and reducing unemployment and poverty. 6. Government priorities for education sector development are to

(i) increase investment and capital repairs of facilities; (ii) expand and/ or construct buildings for crowded schools and maintain rural school

buildings to meet the normal requirements of educational activities; (iii) support and encourage private investment in the education sector; (iv) computerize all secondary schools, including Internet installation; (v) redesign education content to prepare children for future life and work and to

teach them traditional and modern production technologies; enforce educational environment standards; and adopt a quality evaluation system;

(vi) promote the recognition of Mongolian qualifications internationally; (vii) improve title development, publishing, and distribution systems; (viii) expand secondary schools attendance and fully subsidize expenses related to

school dormitories; (ix) expand scope of pre-school education services and introduce new methods for

home teaching of children; and (x) conduct informal and distance education and specialized training; provide

dropouts with necessary training and reduce illiteracy rate.

36 Appendix 5, page 1

EXTERNALLY SUPPORTED EDUCATION PROJECTS

(Preschool, Primary, and Secondary Education)

Funding Agency

Project Title

Duration

Amount ($ million)

Areas covered

Technical Assistance 3351: Second Education Development Project Preparation

1999– 2001

0.55

To support preparation of the Second Education Development Project (SEDP)

Loan 1507/1508: Education Sector Development Program

1997– 2002 15.15 Primary, secondary and higher education sub-sector reform and development

Technical Assistance 3174: Education Sector Strategy Study 2000-2005

1999 0.15 To support strategic development for the education sector

Technical Assistance 2719: Institutional Strengthening in the Education Sector

1997– 2000 0.95 To support Ministry of Education, Culture and Science (MOECS) capacity building

ADB

Technical Assistance 2228: Education Development

1995– 1996 0.4 To prepare the Education Sector Development Program

Support to primary and secondary education in Mongolia

1992– 1998 7.1 Learning materials, teacher training, school management, policy development

Danish International Development Agency

Rural School Development

2000– 2003 0.88 Learning materials, teacher training, rural school renovation, and energy systems

Mongolian Foundation for an Open Society (Soros Foundation)

SCHOOL 2001 Educational Reform Program

1998– 2001 1.7 Learning materials, teacher training, school management, dormitory development

37 Appendix 5, page 2

Funding Agency Project Title Duration Amount

($ million) Areas covered

Internet for Schools

1998– 2001 0.36 Internet provision, teacher training

English Language Program

1999–2001 0.35 Learning materials, teacher training

Step by Step Preschool Program

1998–2003 0.46 Methodology, teacher training, learning materials

Mongolian Foundation for an Open Society (Soros Foundation)

Critical Thinking Program

1998–2001 0.1 Methodology, teacher training, learning materials

Save the Children Fund (UK)/ UNDP

Strengthening of Pre-School Education

1995–2000 1.5 Methodology, teacher training, learning materials, renovation of kindergartens

Community-Based Approaches to Primary Education

1997 UNICEF

Professional Development of Primary School Teachers

1997–2001 0.13 Teacher training, teaching and learning materials

World Bank Local Development Fund of the Poverty Alleviation Program

1996–1999 1.3 School renovation/ various community infrastructure projects

38 Appendix 6

SELECTION CRITERIA FOR PROJECT SCHOOLS 1. Schools to be selected for rehabilitation under the Asian Development Bank (ADB) and Nordic Development Fund (NDF) loans will meet the following criteria. Priority will be given to schools located in rural provinces:34

(i) are confirmed as priority schools by both MOECS and the relevant provincial

administration; (ii) combined primary and secondary schools (Grade 1 to 8 or Grade 1 to 10); (iii) have demonstrated increased enrolments during the previous 3 years (ADB loan

only); (iv) have been identified by MOECS as in need of major rehabilitation, but can still be

repaired in a financially viable manner; (v) have a minimum of 25% of enrolled students coming from poor families at the

time of selection; (vi) are not be in receipt of overlapping support from any other agency; and (vii) will be suitable for conversion to renewable energy systems (NDF loan only).

2. Sites to be selected for construction of new facilities under the ADB loan will meet the following criteria (priority will be given to schools located in rural provinces34):

(i) are confirmed as priority sites by both MOECS and the relevant provincial administration;

(ii) local administrations are able to demonstrate substantial capacity constraints in existing facilities (kindergarten and primary school) during the previous 3 years;

(iii) are located within communities with poverty rates above the national average; (iv) are not in receipt of overlapping support from any other agency.

3. In all cases, MOECS and the local administration will be required to provide an assurance that there will be no resettlement effects arising from works. 4. All sites and facilities will be selected subject to ADB concurrence.

34 Excluding Darhan-Uul and Orkhon provinces, which are primarily urban, as well as Ulaanbaatar city.

Item

A. Rural School Development1. School Rehabilitation and Construction 2,136 7,973 10,109 692 Capacity Building for Facilities Management 88 97 185 1

Subtotal (A) 2,224 8,070 10,294 70

B. Quality Improvement1. Learning Materials' Provision 717 1,134 1,851 132. ICT Integration 800 145 945 63. Teacher Training 80 608 688 5

Subtotal (B) 1,597 1,887 3,484 24

C. Education Management1. Capacity Building for Decentralized Management 205 393 598 42. Project Implementation Support 249 80 329 2

Sub-total (C) 454 473 927 6

Subtotal (A+B+C) 4,274 10,431 14,705 100

Physical Contingencies 427 1,043 1,471 Price Contingencies 103 522 624 Interest Charge 700 700

Total 5,504 11,996 17,500

PROJECT COST ESTIMATES and FINANCING PLAN

Table A7.1: Summary of Cost Estimates by Component and Sub-component($'000)

Total BaseCost(%)Exchange Currency Cost

Foreign Local Total

ICT = Information and Communication Technology

Table A7.2: Financing Plan ($'000)

Item ADB Government Total A. Rural School Development 1. School Rehabilitation and Construction 7,655 2,454 10,109 3. Capacity Building for Facilities Management 178 7 185 Subtotal (A) 7,833 2,461 10,294 B. Quality Improvement 1. Learning Materials' Provision 1580 271 1,851 2. ICT Integration 916 29 945 3. Teacher Training 515 173 688 Subtotal (B) 3,011 473 3,484 C. Education Management 1. Capacity Building for Decentralized Management 489 109 598 2. Project Implementation Support 329 - 329 Subtotal (C) 818 109 927 Subtotal (A+B+C) 11,662 3,044 14,705 Physical Contingencies 1,166 304 1,471 Price Contingencies 472 152 624 Interest Charge 700 700 Total 14,000 3,500 17,500

ADB = Asian Development Bank, ICT = Information and Communication Technology

41 Appendix 8

PROCUREMENT PACKAGING

A. Asian Development Bank (ADB) Components 1. Procurement under the Asian Development Bank (ADB) loan will be carried out in accordance with ADB’s Guidelines for Procurement (Table A8).

Table A8: Summary of Procurement

Description

Number of Contracts

Amount Base Cost

($)

Procurement

Mode A. Civil Works 1. School Rehabilitation 2. Kindergarten/School Construction 3. IT facility renovation

>12 6

>10

6,000,000 2,700,000 60,000

LCB LCB

DP/LCB

B. Equipment, Vehicles, and Furniture 1. Rural School Development

CCU/ Aimag Office Equipment School Furniture

2. Quality Improvement Pedagogical Univ. IT equipment School IT Equipment School IT Furniture

3. Education Management Education and Culture Centers’ Office/ Training Equipment MOECS Training Equipment

PMU Equipment and Vehicle

1 4

1 <2 1

1

1 2

20,000 540,000 50,000 600,000 80,000 70,200 3,660 40,000

DP LCB DP ICB/DP DP DP DP DP

C. Learning Materials 1. CCU Software and Equipment 2. Textbooks/Teacher Guides 3. Supplementary Learning Materials 4. School IT Software 5. Kindergarten Learning Materials 6. Academy of Management Library

1 >5 >3 1 >2 2

14,000 1,350,000 235,000 40,000 150,000 5,000

DP IS/LCB IS/DP DP IS/DP IS/DP

ADB = Asian Development Bank, CCU = Construction Client Unit, DP = Direct Purchase, ICB = International Competitive Bidding, IS = International Shopping, LCB = Local Competitive Bidding B. Government of Japan and Nordic Development Fund (NDF) Financed Components 2. Procurement under the Government of Japan and Nordic Development Fund (NDF) financed components will be undertaken in accordance with the respective agencies own procedures and requirements.

42 Appendix 9, page 1

OUTLINE TERMS OF REFERENCE FOR CONSULTANTS

1. The Asian Development Bank (ADB) will finance 21 person-months of international consulting services and 459 person months of domestic consulting services. The Nordic Development Fund (NDF) will finance 19 person-months of international consulting services and 284 person-months of domestic consulting services. Government of Japan will also provide long- and short- term consulting services in agreement with the Ministry of Education, Culture and Science (MOECS). A. ADB-Financed Consulting Services 2. Architects (international, 10 person-months; domestic, 42 person-months) The architects will work primarily with MOECS- Construction Client Unit (CCU), to advise on all aspects of rehabilitation and construction works under the Second Education Development Project (SEDP) (ADB components) including (i) rehabilitation and construction of kindergarten and school facilities, including provisions to facilitate access of children with disabilities; (ii) development of new building standards; (iii) tendering of civil works’ contracts; (iv) supervision of works and development of supervision procedures; (v) capacity building in the areas of facilities’ development and management with a focus on CCU and local administrations, to include on-the-job training as well as organization of one international scholarship; (vi) preparation of a costed pro-poor short-, medium- and long-term facilities development plan; (vii) support to MOECS and local administrations in developing new maintenance procedures and techniques and technical assistance in the development of the national maintenance program; and (viii) support for monitoring and evaluation (M & E) of civil works’ interventions under the SEDP. The architects will cooperate closely with other SEDP personnel including the Japan International Cooperation Agency (JICA) and NDF-financed architects and the Japan Overseas Cooperation Volunteers team of architects and engineers. 3. Civil Engineers and Supervisors (domestic, 150 person-months) In close cooperation with other SEDP personnel, the civil engineers will work primarily with MOECS-CCU on (i) rehabilitation and construction of facilities, including support for the design estimation work including assessments of individual SEDP schools’ needs; (ii) development procedures and methodologies for supervising contractors in implementing works on selected schools; (iii) work with the PMU to provide independent verification of progress of works and identification of any implementation problems; and (iv) provide training and other support to MOECS-CCU as needed, and advise on the development of training programs for CCU and domestic administrations. 4. Architects and Draughtspersons –- School Drawings (domestic, 140 person-months) In close cooperation with other SEDP personnel, the architects and draughtspersons will support MOECS-CCU in developing detailed drawings for schools to be rehabilitated or constructed under the SEDP. The specialists will work closely with MOECS, domestic administrations, and staff of selected schools, as well as disabled persons’ organizations, to gain their feedback in the optimal design of facilities. The specialists will present the proposed drawings to key stakeholders for discussion prior to their finalization to gain feedback. 5. Maintenance Specialists (domestic, 60 person-months) In close cooperation with other SEDP personnel, the specialists will work primarily with MOECS-CCU and domestic administrations to (i) develop and introduce new approaches and techniques for maintenance of educational facilities; (ii) advise on the development of the national maintenance program, including identification of training requirements, and equipment and materials requirements; (iii)

43 Appendix 9, page 2

conduct awareness raising and training workshops aimed at relevant personnel in domestic administrations and in schools; (iv) conduct regular assessments of maintenance procedures in project schools, and advise on how to improve their effectiveness; and (v) support MOECS in improving planning and budgeting procedures for maintenance of school facilities. 6. Textbook Adviser (international, 3 person-months, domestic, 3 person-months) The textbook advisers will work with MOECS and other key stakeholders, including the Mongolian Foundation for an Open Society, to advise on all aspects of the issues related to the short-, medium- and long-term provision of learning materials for the education sector, including under the SEDP. The specialists will (i) advise on development of new policies to increase participation of the private sector in educational publishing, and for the development of a fully liberalized market for educational materials; (ii) contribute to the development of training programs for writers, illustrators, and other publishing specialists; (iii) provide technical assistance to MOECS on the development of new titles, including advice on educational content and methodologies, as well as on organizing piloting for new titles; (iv) support the development of M & E systems to assess the quality and relevance of learning materials; and (v) advise on expanding the secondary education textbook rental system to further financial sustainability. 7. Teacher Training Advisers (domestic, 6 person-months) The advisers will undertake an assessment of teacher training systems developed under the ESDP, and make recommendations for improving quality of provision as well as upgrading the M&E of programs. The advisers will pay specific attention to the needs of unqualified teachers as well as to preparing teachers to integrate children with disabilities into mainstream education. The advisers will work with MOECS in first undertaking a detailed review of the current systems, and provide specific recommendations for improving the system to MOECS and local administrations, including (i) staff training programs; (ii) requirements for learning materials (iii) modifications to training methodologies (iv) assessment techniques and (v) certification systems. The advisers will also work with MOECS to estimate demand in the medium- to long- term and related resource requirements. 8. ICT Adviser (domestic, 12 person-months) The Information and Communication Technology (ICT) Adviser will serve as coordinator for all ICT consultants and will assist MOECS in forming the ICT policy paper for integrating ICT applications into educational programs. The Adviser will also work with MOECS to identify the potential for ICT applications to support the integration of children with disabilities into mainstream education. The Adviser will undertake a comprehensive critical review of ICT utilization in the education sector and support MOECS in developing strategies and action plans for the phased integration of ICT into education, with emphasis on the needs of rural schools. The action plans will include costed plans and approaches for (i) development of communication/support networks and content delivery mechanisms (chiefly e-mail, e-mail-based networks, and CD-ROMS) (ii) a targeted scheme to recruit rural informatics teachers and to strengthen ICT preservice and in-service training; (iii) additional support mechanisms for domestic education officials in target regions and (iv) information and monitoring mechanisms to track efficiency and effectiveness of ICT applications. The adviser will cooperate closely with JICA personnel in implementing ADB-financed ICT components as well as with Soros Foundation. 9. ICT Specialist (Hardware) (domestic, 2 person-months) The consultant will work with MOECS in assessing hardware needs according to the provisions of the draft policy paper as well as SEDP-specific needs. In this regard, the specialist will support the ICT adviser in undertaking the review of ICT utilization. The specialist will develop a costed medium- to long-term equipment requirements plan for the education sector, which will minimize capital and

44 Appendix 9, page 3

recurrent costs, and will assist in securing procurement of related hardware inputs under the SEDP, including support for drafting of tender documents. The specialist will support the establishment of e-mail networks between schools (ensuring compatibility with systems initiated under the Sakura Project) and the design of automated mechanisms for monitoring ICT utilization. 10. ICT Training Specialist (domestic, 6 person-months) The specialist will contribute to the detailed review of ICT applications in education, with specific focus on the training needs (pre-service and in-service) of personnel for further ICT integration. Based on this review, the specialist will contribute to the ICT policy paper and provide detailed recommendations for strategies and action plans to develop ICT staff training and capacities, and to upgrade competencies of personnel for ICT. In conjunction with MOECS and selected institutions, the specialist will design staff development programs under the SEDP, including defining training content, potential providers and timetables, and criteria for selecting participants. The specialist will work with MOECS to design and implement a capacity building program for the Pedagogical University and other selected ICT training institutions and will support the implementation of new training programs for school staff including methodological support, content development, and development of M&E procedures. The specialist will also advise on the developing in-service training programs (in conjunction with the teacher training advisers) and support their implementation for SEDP schools. 11. ICT Education Content Developers (domestic, 18 person-months) Under the guidance of the ICT Adviser, and in coordination with the ICT training specialists (to ensure compatibility of training and content development), team members will participate in the review of ICT applications and contribute to the ICT policy paper and related strategies and action plans. Based on this framework, the developers will support development and delivery of ICT-based content for education, with emphasis on rural educators. The developers will be responsible for providing content for creative, student-centered teaching in Informatics and English respectively, as well as on other identified subjects, including innovative school management approaches for school directors. The developers will support MOECS to build capacity for ICT content development together with key educational institutions. 12. International Project Management Specialist (international, 2 person-months) The specialist will support the PMU in all aspects related to project management, as required, including (i) development of implementation and financing plans for SEDP activities; (ii) support for procurement of Project inputs; (iii) support for all disbursement-related activities; (iv) development and maintenance of M&E procedures and indicators for SEDP activities. The specialist will undertake a training needs analysis of project management unit (PMU) staff and provide appropriate on-the-job training combined with training seminars, as appropriate, with particular focus on competencies for comprehensive M&E implementation. 13. International Education Management Specialist (international, 2 person-months) The specialist will advise MOECS and domestic administrations on comparative international education management practices, and on the basis of a critical review of the current system, will provide detailed policy recommendations for enhancing the efficiency and effectiveness of the Mongolian system, as well as related strategies and costed action plans for implementing these recommendations, including a medium- and long-term management training program. The specialist will undertake a survey of current management systems and methods, and a capacity building needs analysis of key agencies. The specialist will organize a series of workshops to discuss findings with relevant staff and incorporate feedback into the final strategy paper. The specialist will also work with the Academy of Management (AOM) to strengthen education

45 Appendix 9, page 4

management programs, including upgrading the AOM library, and provide training seminars for staff and participate as a guest lecturer in AOM courses. 14. Management Training Specialists (domestic, 12 person-months) The management training specialists will advise MOECS and other key agencies on the development of a comprehensive management training program for education managers at national and domestic levels, in cooperation with the international education management specialist. The specialists will develop a database of management training programs available in Mongolia, conduct evaluations of their relevance for the needs of the sector, and support MOECS in initiating a capacity building program to enhance the quality of programs. The specialists will also develop a series of training workshops for selected personnel of MOECS and education and culture centers to raise awareness of options for education management. 15. M&E Specialists (international, 4 person-months, domestic, 8 person-months) The specialists will support MOECS in developing M&E systems, procedures, and indicators for tracking education development, including the impact of the SEDP and other interventions, based on the Millennium Development Goals and other national policies including the Education Sector Strategy (ESS) and the Education for All goals. The specialists will develop a series of monitorable indicators (including identification and development of baseline statistics) that are to be assessed by the system, and propose methodologies for assessing their progress, matched to project activities. The specialists will organize annual surveys to verify progress in meeting sector and SEDP targets, and will cooperate with the management specialists to provide on-the-job training for staff of MOECS and education and culture centers in the development and management of M&E systems and for strengthening management training programs to further disseminate M&E competencies. B. NDF-financed Consulting Services 16. Architects (international, 12 person-months; domestic, 30 person-months) The architects will work with MOECS and other SEDP consultants to advise on all aspects of NDF-financed rehabilitation works under the SEDP, including (i) preparation for rehabilitation of the 40 selected kindergarten and primary school facilities including assessment of appropriate renewable energy solutions ; (ii) development of new rehabilitation standards for SEDP facilities including provision for installing renewable energy systems; (iii) support to tendering civil works’ contracts under Nordic competitive bidding; (iv) support for development of supervision procedures and supervision of works; (v) CCU capacity building in the areas of modernizing energy systems, with focus on renewable energy solutions; (vi) provision of technical assistance to local administrations to develop maintenance procedures for renewable energy systems and contribute to related areas in the development of the national maintenance program; and (viii) support for M&E of NDF-financed civil works’ interventions under the SEDP. 17. Civil Engineers and Supervisors (domestic, 100 person-months) In close cooperation with other SEDP personnel, the civil engineers will work primarily with MOECS to (i) support the preparation for rehabilitating and constructing of kindergarten and primary school facilities, including support for the design estimation work including assessments of individual SEDP kindergartens’ and schools’ needs; (ii) support CCU in developing procedures and methodologies for supervising contractors in implementing works on selected schools; (iii) work with the PMU to provide independent verification of progress of works and identification of any implementation problems; and (iv) provide training and other support to MOECS-CCU as needed.

46 Appendix 9, page 5

18. Architects and Draughtspersons –- School Drawings (domestic, 90 person-months) In close cooperation with other SEDP personnel, the Architects and Draughtspersons will support MOECS-CCU in developing detailed drawings for kindergartens and primary schools to be rehabilitated or constructed under NDF-financed SEDP activities. The specialists will work closely with MOECS, local administrations, and staff of selected schools, as well as disabled persons’ organizations, to gain their feedback on the optimal design of facilities. The specialists will present the proposed drawings to key stakeholders for discussion prior to their finalization to gain feedback. 19. Maintenance Specialists (Energy Systems) (domestic, 40 person-months) In close cooperation with other SEDP personnel, the specialists will work primarily with MOECS-CCU and domestic administrations to (i) develop and introduce new approaches and techniques for maintenance of kindergartens and primary schools, particularly in remoter rural areas and with particular attention to maintaining energy systems; (ii) provide training for staff of domestic administrations and SEDP kindergartens and primary schools in preventative maintenance, as well as maintenance of renewable energy systems; (iii) prepare a maintenance manual for use by kindergartens, primary schools, and domestic administrations; (iv) conduct regular assessments of maintenance procedures in SEDP kindergartens and schools and advise on means for improving their effectiveness; and (v) support MOECS in developing plans for further conversion to renewable energy systems in the medium to long term. 20. Science Education Advisers (international, 4 person-months; domestic 12 person- months) The advisers will work with MOECS and other relevant agencies, including research institutions, universities, and local education and culture centers, to review science education programs (including curricula, syllabi, learning materials, staffing, and science education facilities) in primary and secondary education with regard to quality and relevance, including their appropriateness to labor market developments. Based on the review, the advisers will produce a detailed report with recommendations for modernizing and streamlining the science education system for discussion with MOECS and other key stakeholders. The report will include information on investment requirements for an upgraded system, including needs for facilities’ development, learning materials’ revision, staff development and proposals for improved M&E procedures. 21. Vocational Education Advisers (international, 3 person-months; domestic 12 person- months): The advisers will work with MOECS and other relevant agencies to assess the feasibility of integrating vocational education into academic curricula in secondary education. The advisers will review the experience of ‘complex’ schools to assess whether the initiative can be expanded to other schools. Based on the review, the advisers will support MOECS and other agencies to develop an action plan for integrating vocational education including detailed proposals for curriculum revisions, staff development, learning materials development, procurement, and facilities’ requirements for the new subjects. The advisers will consult with the Employment Promotion Office and other agencies involved in labor force development to assess future anticipated needs in the labor markets for consideration in the planning of vocational subjects.

47 Appendix 10, page 1

INITIAL SOCIAL ASSESSMENT A. Project Impact

1. The Second Education Development Project (SEDP) will provide positive educational benefits to primarily children aged from 4 to 18, of kindergarten, primary, and secondary school age. The SEDP will benefit children who are currently attending school as well as opening up educational services for children not currently attending school. By increasing access to education, beneficiaries will gain improved opportunities to proceed to higher education and for more successful employment, leading to higher income expectations. This will have a direct impact on income poverty reduction. 2. The SEDP will not have any adverse environmental or social impact.

B. Involuntary Resettlement

3. The SEDP is classified as Resettlement Category C as the Project’s activities will not cause any resettlement effects. 4. Under the Asian Development Bank (ADB) loan, 6 new combined kindergartens/primary schools will be constructed in 6 sparsely-populated rural provinces close to the constituent communities. The total land requirement for all facilities is estimated to be less than 5 hectares in total. 5. Land, which is all owned by the state, will be allocated by the domestic administration at the soum (district) level in consultation with the communities benefiting from the new facility. The sub-district (bagh) based councils will be the principal mechanism for public consultation. The local media will also be used to make people aware of plans to develop new schools. 6. Aimag administrations will also provide ADB with written assurances that no involuntary resettlement will result from the development of the new facilities. 7. Rehabilitation of the more than 100 schools to be rehabilitated under the Project will be scattered across the country. Rehabilitation will be minor in scope with no involuntary resettlement effects.

C. Impact on Indigenous Peoples

8. The SEDP is classified as Category C. Although Mongolia comprises over 16 distinct clans and ethnic groups (of Mongol and Turkic origin) none of these is, according to the working definition employed by ADB, so “distinct from the dominant or mainstream society that it makes them especially vulnerable to being disadvantaged in the process of development.” 9. This is demonstrated by Table A10.1, which shows the literacy rates of the different ethnic groups in Mongolia

48 Appendix 10, page 2

Table A10.1: Resident Population Aged 7 and Over by Ethnic Group

and Literacy Rate, 2000

Ethnic Group Literate population %) Illiterate population(%) Total population 95.4 4.6 Khalkh 95.7 4.3 Kazakh 93.2 6.8 Dorvod 94.4 5.6 Bayad 94.0 6.0 Buriad 96.3 3.7 Dariganga 94.0 6.0 Zakhchin 95.3 4.7 Uriankhai 94.3 5.7 Darkhad 91.6 8.4 Uuld 95.7 4.3 Torgund 95.1 4.9 Khoton 90.2 9.8 Khotgoid 93.2 6.8 Myangad 94.7 5.3 Tuva 93.6 6.4 Others 93.4 6.6

Source: National Statistical Office, Population and Housing Census, 2000 10. The differences in literacy rates between the different groups are remarkably small. As expected the lower literacy rates can be observed among groups that reside in the remotest areas of the country, where educational services are most difficult to provide. 11. Levels of educational participation do not differ significantly between the various ethnic groups (Table A10.2).

Table 2: Resident Population Aged 7 and Over by Ethnic Group and Educational Level, 2000

Ethnic Group Educated

Population (%) Non-educated population (%)

Population with at least secondary education (%)

Total population 80.0 20.0 58.3 Khalkh 80.3 19.7 59.2 Kazakh 77.0 23.0 47.9 Dorvod 78.9 21.1 56.6 Bayad 78.3 21.7 54.8 Buriad 82.4 17.6 63.8 Dariganga 78.8 21.2 57.1 Zakhchin 78.5 21.5 56.4 Uriankhai 79.5 20.5 55.2 Darkhad 77.5 22.5 46.6 Uuld 80.3 19.7 57.9 Torgund 80.2 19.8 61.9 Khoton 70.8 29.2 43.3 Khotgoid 81.3 18.7 49.8 Myangad 78.4 21.6 56.0 Tuva 79.2 20.8 52.1 Others 79.4 20.6 56.7 Source: National Statistical Office, Population and Housing Census, 2000.

49 Appendix 10, page 3

12. With its nationwide coverage, the SEDP will have a positive educational impact on all clans and ethnic groups. Given the equal levels of educational development between different groups no indigenous peoples’ development plan or for other specific actions in favor of any particular group(s) are needed.