Document o f The World Bank

Report No. 39740-BD

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROGRAM DOCUMENT

FOR A

PROPOSED THIRD EDUCATION SECTOR DEVELOPMENT SUPPORT CREDIT

IN THE AMOUNT OF SDR 65.6 MILLION (US%lOO MILLION EQUIVALENT)

TO

THE PEOPLE’S REPUBLIC OF BANGLADESH

M a y 22,2007

Human Development Sector Unit South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed

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AAA ADB A D P A T C BANBEIS BBS B Ed BISE BTEB C A M P E CAO CAS CBOs CEA CFAA CIDA C T G C&AG DDO DIA Dfl D DOE DSC DSHE E C EED EFA ESDSC ESR ESRP EU FDI FFE FIMA FMRP FMU FSS FY GBs GDP G O B HIES HSC I A S I B A S IDA

CURRENCY EQUIVALENT Cur rency Unit = Bangladeshi T a k a (Tk.)

U S $ 1 = Tk68.90 (April 2007)

Government Fiscal Year July 1 - June 30

ABBREVIATIONS AND ACRONYMS

Analytic and Advisory Act iv i ty Asian Development Bank Annual Development Program Agreement on Texti le and Clothing Bangladesh Bureau o f Educational and Information Statistics Bangladesh Bureau o f Statistics Bachelor in Education Board o f Intermediate and Secondary Education Bangladesh Technical Education Board Campaign fo r Popular Education Ch ie f Accounts Off icer Country Assistance Strategy Community Based Organizations Country Environmental Analysis Country Financial Accountabil ity Assessment Canadian International Development Agency Care Taker Government Comptroller and Auditor General District Disbursement Officer Directorate of Inspection and Audit Department for International Development Department o f Environment Development Support Credit Directorate o f Secondary and Higher Education European Commission Education Engineering Department Education for All Education Sector Development Support Credit Education Sector Reform Education Sector Reform Program European Un ion Foreign Direct Investment Food for Education Program Financial Management Academy Financial Management Reform Program Financial Management Unit Female Secondary Stipends Fiscal Year Governing Bodies Gross Domestic Product Government o f Bangladesh Household Income and Expenditure Survey Higher Secondary Certificate International Accounting Standard Integrated Budget and Accounting System International Development Association

ii

FOR OFFICIAL USE ONLY IEC IIB IMF

IPSAS ITEC JICA M D G MoE MoEF MoF MoPME MPO M T B F M T R T M&E NACER NAEM NAPE N C B NCTB NCTE NGOs N O R A D NPFP NTRCA N V T B PAC PEDP I

’ PEDPII PEFA PER PFM PFMIP PRGF PRSP PRSC PTA RIBEC ROSC SMCs SOEs SOE ssc TIMSS TTC UNICEF WDR

I-PRSP

Information, Education and Communication Independent Inspection Body International Monetary Fund Interim-Poverty Reduction Strategy Paper International Public Sector Accounting Standards Independent Textbook Evaluation Committee Japan International Cooperation Agency Millennium Development Goals Ministry o f Education Ministry o f Environment and Forest Ministry o f Finance Ministry o f Primary and Mass Education Monthly Pay Order Medium term Budgetary Framework Mobile Training Resource Team Monitoring and Evaluation National Advisory Committee on Education Reforms National Academy o f Education Management National Academy o f Primary Education Nationalized Commercial Bank National Curriculum and Textbook Board National Council for Teacher Education Non-Governmental Organizations Norwegian Agency for Development Cooperation National Poverty Focal Point Non-government Teacher Registration and Certification Authority National Vocational Training Board Public Account Committee Primary Education Development Program I Primary Education Development Program I1 Public Expenditure and Financial Accountability Public Expenditure Review Public Financial Management Public Financial Management Improvement Plan Poverty Reduction Growth Facility Poverty Reduction Strategy Paper Poverty Reduction Support Credit Parents Teachers Association Reform in Budget and Expenditure Control Report on Observance o f Standards and Codes School Management Committees Statement o f Expenditures State Owned Enterprises Secondary School Certificate Trends in International Mathematics and Sciences Teachers’ Training College United Nations International Children’s Fund World Development Report

Country Director: Xian Zhu, SACBD Sector Director: Julian Schweitzer, SASHD

Sector Manager: Michelle hboud, SASHD

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

TABLE OF CONTENTS

Abbreviations and Acronyms ii

Credit and Program Summary V

I.

11.

111.

IV.

V.

Introduction 1

Status o f the Secondary Education Sector 4

The Governments Reform Agenda and Bank and Donor Support 6 The Medium-Term Macro Framework 6 The PRSP 8

9 12

The PRSP and the Medium-Term Strategy for Education Al igning Bank and Donor Strategy w i th PRSP in Education

IDA’S Support to the Medium-Term Reform Agenda System Management Enhancing quality o f secondary school teachers Textbooks and Curriculum

The Proposed Credit Fiduciary Issues Environmental Aspects Monitoring and Evaluation Poverty and Social Impacts Lessons Learned and Benefits and Risks

Annexes

Annex A Annex B Annex C Annex D

Annex E Annex F Annex G Annex H Annex I Annex J Annex K

Letter o f Sector Policy Matr ix o f Reform Actions Data Monitoring and Performance Evaluation Enhancing Community Participation - Strengthening the Roles Management Committees ESDSC I11 - Comparison o f Triggers with Prior Actions Environment Screening Matr ix Economic and Financial Analysis Good Practice Principles on Conditionality Statement o f Loans and Credits Bangladesh at a Glance Bangladesh - IMF Staff Assessment for the World Bank

MAP IBRD No. 33368

13 16 22 25

27 28 31 32 33 34

38 46 53

58 61 63 66 75 76 78 80

o f School

Task Team Subrata S. Dhar, Task Team Leader; Amit Dar, Lead Education Economist; Qaiser M. Khan, Lead HD Specialist: Nazmul Chaudhury, Economist: , Kishor llprety? Sr. Counsel; Vinaya Swaroop, Lead Economist: Sandeep Mahajan, Sr. Economist: Chau-Ching Shen, Senior Finance Oflcer; Burhanuddin Ahmed, Sr. Financial Management Specialist; Irajen Appasamy, Senior Operations W c e ; Syed Rashed AI-Zayed, Research Associate; Hena Mukherjee, Consultant; Mokhlesur Rahman, Consultant; Bertha Mburugu, Program Assistant; and Navna Sultana, Program Assistant.

Peer Reviewers: Eduardo Velez Bustillo, Sector Manager, Education, LAC; Trina S. Haque, Lead Economist, AFTH3.

iv

THE PEOPLE’S REPUBLIC OF BANGLADESH THIRD EDUCATION SECTOR DEVELOPMENT SUPPORT CREDIT

Credit and Program Summary

Borrower: T h e People’s Republic o f Bangladesh

Amount: SDR 65.6 mil l ion (USSlOO mi l l ion equivalent)

Terms: Standard IDA terms; 40-year maturity with 10-year grace period

Description: T h i s proposed credit will assist the Ministry o f Education (MoE) in undertaking the third phase o f a medium-term reform agenda. The credit attempts to address systemic governance issues in order to raise the quality and cost-effectiveness o f service delivery, and improve equity o f access to secondary education. The reform agenda focuses on:

Accountability and systemic improvement. Reforms in these areas include rigorous enforcement o f the criteria governing the establishment o f institutions, and implementation o f institutional mechanisms to link school subventions to objective measures o f school performance. School management committees are being strengthened w i th balanced representation, free f rom political interference, and trained to give them greater responsibility for school management and supervision. Equity. Demand-side interventions to encourage rural girls to attend secondary school are continuing. Means-testing mechanisms have been piloted to better target these subsidies to the poor, both boys and girls. Institutions are set up in underserved areas. Measures are being taken to support under-performing institutions particularly in disadvantaged areas. Administratiodcapacity Bui lding - MoE’s planning and policy-making capacity i s being strengthened with adequate institutional mechanism for oversight o f a number o f implementation measures, and greater implementation responsibility i s being devolved to lower levels. Monitoring, Evaluation and Dissemination. M o E i s placing significantly greater emphasis o n program evaluation and monitoring to guide pol icy and planning. The capacity o f the Bangladesh Bureau o f Educational and Information Statistics (BANBEIS) to provide reliable quality data i s being enhanced, with more effective data coordination among various Government agencies. Public expenditure tracking surveys and impact evaluation o f programs are being undertaken. Information on standardized examination outcomes, school performance, and program effectiveness i s being disseminated widely. Teachers ’ Quality. An autonomous Non-Government Teacher Registration and Certification Authority has been established, which now develops a roster o f pre-qualified and certified individuals eligible to be hired as teachers by the School Management Committees (SMCs) and Governing Bodies (GBs). Within NTRCA an institutional mechanism with due authority and capacity i s being set up to manage secondary education teacher training and regulate training institutions. Teacher training i s being undertaken in phases.

Textbook Production and Curriculum Development. Textbook production has been opened up to competition, which has reduced the

V

opportunity o f rent-seeking and ensured timely distribution o f better quality books to students. N C T B now oversees a transparent process o f textbook evaluation and approval. A strengthened curriculum wing o f N C T B is now fully focused on curriculum update and reforms.

Benefits: Improving governance has repeatedly been identified as the biggest development challenge facing Bangladesh and the greatest impediment to achieving i t s growth potential and thus achieving the Mi l lennium Development Goal (MDG) o f poverty reduction. The proposed credit wil l assist in deepening reforms aimed at raising the quality o f service delivery, and at the same time improving equity o f access to secondary education. By tying performance in provision o f education to incentives, and building greater accountability and community participation, these reforms wil l reduce rent-seeking opportunities, undue political interference, and enhance cost-effectiveness.

These reforms are intended to lead to outcomes such as more equitable access to secondary education w i th more schools being set up in underserved areas, better trained and more effective teachers, reduced teacher absenteeism, higher enrollment and completion rates, reduced secondary cycle completion time and unit cost per student. This wil l ultimately lead to a more skilled labor force attuned to the needs o f the Bangladeshi labor market, and able to compete in global markets.

Risks and Mitigation Macroeconomic Risks: The main economic risk stems particularly Strategy:

Key r isks and mitigation strategies include:

from the weak financial condition o f state-owned enterprises (SOEs), especially those in the energy sector. Sustained large losses of the energy sector SOEs have led to a build-up o f outstanding liabilities at these SOEs and have also exacerbated the financial fragilities o f the nationalized commercial banks (NCBs) that are directed to finance their losses. The Bank has worked closely with GOB on this issue, continually encouraging depoliticization o f price adjustment, and providing on-demand analytical notes to help inform GOB’S decision. Authorities have already responded by implementing power tar i f f increases in March 2007 and fuel price increases in April 2007 to stem losses at the Bangladesh Petroleum Corporation (BPC) and the Bangladesh Power Development Board (BPDB), respectively. Another important source o f economic vulnerability i s the persistently l o w tax mobilization. T o address this, authorities are stepping up implementation o f the tax administration modernization program (being supported by DFID and IDA) along with legislative reforms to correct tax pol icy distortions and strengthening o f customs administration. Political Risks. While key stakeholders in the Government are committed to reforms, the sustainability o f the reform process put in train by the Care Taker Government (CTG) wil l be linked to the commitment o f any future government to the reform process as wel l as the smooth return to democracy. Lessons o f experience show that so far the successive governments have continued to implement ongoing education programs and policies, and this trend continues rather more forcefully w i th the Care-Taker Government and with stakeholder support. I t wil l thus be dif f icult for vested interest groups to subvert these reforms without meeting significant resistance from stakeholders. On the political front, the bilateral development partners are taking the lead in working with domestic civic organizations and with the government to help an early and smooth return to democracy. The

v i

Bank i s vigilant about the emerging political environment and in close contact w i th various actors. Corruption. In the past, there were allegations o f corruption and resources meant for education were sometimes siphoned off. T h i s reform package helps build greater transparency and openness in the system and ensure greater community participation. NTRCA’s screening mechanism has effaced malpractices in teacher recruitment, at least for now. Transparent selection process for textbooks and their competitive production have largely reduced rent-seeking in textbook production. Capacity Constraints. Cognizant o f i ts capacity constraints, M o E has taken several measures, particularly to build technical capacity for planning, formulating policies, financing, setting quality standards, assuring quality delivery, and monitoring and evaluation. The capacity o f DSHE and BANBEIS i s also being enhanced. Local oversight committees have been formed in each o f the districts and upazillas to monitor school performance and ensure public disclosure o f information. School management committees are being strengthened to give them greater responsibility for school management and supervision. Moreover, M o E is fol lowing a comprehensive plan for teacher training, which will hopefully lead to higher quality o f service delivery for education. Fiduciary Risks. A recent Review o f Institutional Arrangements for Public Expenditure, Financial Management and Procurement revealed that Bangladesh’s public expenditure institutions need to be strengthened significantly. GOB has taken several steps to address the weaknesses. Significant progress has been made over the last few years to strengthen financial management and reduce fiduciary r isks (e.g., Financial Management Reform Program), and implementation o f other aspects o f the reform program described in th i s Program Document. As a part o f the review o f Institutional Arrangements for public expenditure, financial management and procurement, Bangladesh’s P F M system was rated against internationally accepted indicators (PEFA). This provides a useful framework to track progress towards improved P F M performance. Financial risks. While there are concerns about the uncertain external environment, the PRSP clearly demonstrates the Government’s commitment to maintaining a high level o f investment in the education sector. Recent dialogues with the C T G confirm the continuity o f the commitment. This commitment has been further strengthened through measures aimed at allocating resources more efficiently and reducing leakages from the system. Furthermore, Bangladesh enjoys considerable support from the donor community, whose commitment to the education sector wil l remain high, given sustained reform efforts.

Estimated Disbursement upon credit effectiveness.

SDR 65.6 mi l l ion ($100 mi l l ion equivalent) disbursed in a single tranche

Sector Code: Education

Project ID P102541 Number:

vii

PROGRAM DOCUMENT FOR A PROPOSED THIRD EDUCATION SECTOR DEVELOPMENT SUPPORT

CREDIT (ESDSC In)

I. Introduction

1. The proposed Education Sector Development Support Credit I11 (ESDSC 111), the third in a series o f three Development Policy Credits, aims to deepen and sustain Bangladesh’s continued reforms in the education sector. The f i rst credit was approved by the Board o n August 29,2004 and the second on February 7,2006. The proposed third credit would help the Government build o n the previous two phases o f i t s reform agenda for the education sector, and move forward to implementing the third set o f reforms in order to deepen and consolidate the gains.

2. Bangladesh has recorded substantial progress in poverty reduction -- about one percentage point per year since 1990 - that too in the face o f extremely weak in i t ia l conditions, continued political imbroglio, fragile institutions and poor governance, frequent large-scale destruction by natural calamities, and the negative global image generated by these. Economic growth has been remarkable. The advent o f democracy in the early 1990s was accompanied by increased pace in economic reforms with greater macroeconomic stability, a trend towards trade openness, and economic deregulation. Growth in GDP per head has increased f rom 1 percent during the 1980s to over 3 percent since the early 1990s: per capita growth has moved to an even higher trajectory o f 4 percent since FY03. Lately, growth has also been remarkably stable, with a growth rate o f 6.7% for 2006: Bangladesh i s among the handful of countries that have sustained positive per-capita growth in each year since the early 1990s.

3. months. The new Caretaker Government (CTG) that came to power on January 11,2007, has moved decisively to address the governance problems and aggressively carry forward the reform agenda. The CTG’s pronounced goal i s to ho ld free, fair and credible national elections. The recent anti-corruption drives and efforts to improve governance fit in wel l with this objective.

Bangladesh’s polit ical scenario has undergone unprecedented change over the past few

4. an effort to remove the alleged influence o f muscle power, black money and corruption on the polit ical process. Legal provisions o n asset disclosure are being enforced. The Election Commission has been reconstituted. The code o f conduct for the candidates i s being revised and an ordinance has been passed to bar convicted persons from contesting elections. The CTG i s in the process o f revising the voter l i s t which gave rise to considerable debate in the past. Other actions to strengthen governance include (a) adoption o f rules relating to the Judicial Services Commission and amendments to the Code o f Criminal Procedure to separate the judiciary f rom the executive, and (b) reconstitution o f the Anti-Corruption Commission, which i s n o w vigorously carrying out i t s activities. Initially, these actions, marked with courage and determination, have earned C T G considerable applause from the citizens and international community. As evident f rom the public mood reflected in the media, the popular support will continue i f the actions are executed with political prudence and with a goal o f speedy transition to democracy. Besides, the challenge before C T G i s t o combine polit ical reform with progress o n a few key strategic economic and sectoral reforms to lay the basis for sustained progress following the transition to an elected government. The current environment provides an opportunity to carry out major policy and institutional reforms unencumbered by resistance f rom vested interests. T h e political unrest and uncertainties o f the past few months leading to the new CTG

T o create an environment for fair elections, the C T G has taken a number o f measures in

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had hurt the Bangladeshi economy. The CTG has therefore requested speedy support f rom i ts development partners, including the Wor ld Bank Group.

5. Gross primary enrollment rates are around 90 percent, and the secondary enrollment rate has more than doubled to 57 per cent (WB calculation f rom the latest data) since independence. Bangladesh has already met the Mi l lennium Development Goal (MDG) o n gender parity in primary and secondary schooling. The chi ld mortality rate has halved, and l i f e expectancy has increased by more than 15 years. The decline in infant and chi ld mortality rates, f rom 140 and 95 respectively in 1972 to about 60 and 30 in 2000, was among the fastest in the developing world.

Amidst many odds, progress on social measures in Bangladesh has been encouraging.

6. population i s s t i l l under the poverty line. The administrative data shows overall literacy rate at 65 per cent. Functional literacy i s estimated to be much less. Completion rates are very low. The nation-wide survival rate to Grade 5 i s 53 per cent. Barely one out o f 5 children entering Grade 6 completes Grade 10. Besides, quality o f education i s a major concern at a l l levels. Chi ld malnutrition rates are among the highest in the developing world, and maternal mortality rates, albeit lower than in India, Pakistan, and Nepal in the region, remain among the highest in the developing wor ld outside o f Sub-Saharan Afnca. M a n y o f these problems are systemic -- attributable to, inter alia, weak governance. Corruption, though perceived to be receding under the Care Taker government, was until recently quite pervasive. Weak Government capacity - that too overly centralized -- l imi ts enforcement o f regulations and delivery o f essential services.

However, the progress so far s t i l l leaves much to be attained. Some 40 per cent o f the

7. Bangladesh’s development vision and strategic agenda for poverty reduction, outlined in the Government’s Poverty Reduction Strategy Paper (PRSP),’ recognize these critical challenges. The PRSP was presented to the Boards o f IDA and IMF in early 2006, and the two Boards agreed that i t provided a cohesive policy fiamework for implementing a pro-poor growth strategy. In supporting the implementation o f the PRSP, and earlier the Interim PRSP, the Bank has provided a series o f three budget support programmatic operations in the form o f Development Support Credits (DSCs). The Bank i s now working with the Government o n the fourth credit which purports to help the Government maintain a good macroeconomic policy framework, widen trade liberalization, strengthen the effectiveness and accountability o f the national Board o f Revenue, restructure National Commercial Banks (NCBs), implement an agreed Public Financial Management Improvement Plan (PFMIP), streamline a transparent procurement process, strengthen the Anti-Corruption Commission, and move toward appropriate and cost-effective power generation, among other things.

8. Education deserved special attention as the scope o f reforms i s too large and deep to be covered under an umbrella operation although the broader reform programs supported under the DSCs are complementary. In view o f this, a separate intervention was envisaged outside the DSCs to cover the education issues intensively.

9. achieve the Mi l lennium Development Goals (MDGs) and Bangladesh’s Education for All (EFA)

Bangladesh needs substantial improvement in providing quality education in order to

Unlocking the Potential: National Strategy for Accelerated Poverty Reduction, Government o f People’s 1

Republic o f Bangladesh, 2005. The Poverty Reduction Strategy Paper (PRSP) lays out an ambitious agenda and government commitment to systemic reforms. To generate broad-based growth and reduce poverty, the PRSP focuses on: (a) employment generation, (b) nutrition, (c) maternal health, (d) quality o f education, (e) sanitation and safe water, ( f ) criminal justice system, and (g) local governance. The PRSP vision appropriately builds on the policy triangle o f growth, human development, and governance.

2

targets. The Government has launched several reform measures to address this issue. At the primary education level, 11 development Partners are working with the Ministry o f Primary and Mass Education (MOPME) to support the Primary Education Development Program II (PEDP 11) - a six-year sector-wide program aimed at strengthening educational access, quality and efficiency. At the secondary level, the Ministry o f Education (MoE) has developed a medium- term reform framework to improve quality o f education, and undertake pol icy measures needed to achieve the target. At the tertiary level, the Government has worked with the national and international experts and prepared a 20-year higher education strategy which deals with, among other things, the issues related to access, quality, governance, and funding. The Bank provided technical assistance to this home-grown strategy. Based on the strategy, an Implementation Committee at the Ministry o f Education i s working out different phases o f interventions.

10. private partnership which combines public financing with private provision o f education. The system has a tremendous potential in the gven environment if properly steered, but at the same time, it was subject to lack o f transparency and elite capture. To improve governance, the Government began implementing a substantive pol icy reform agenda to ensure systemic improvement, quality and relevance o f secondary education. T h i s was supported by the World Bank through two programmatic Education Sector Development Support Credits which focused o n (i) greater transparency in the use and allocation of resources, tying resource allocation to performance and accountability and greater stakeholder participation; (ii) streamlining the teacher recruitment process based on agreed criteria and standards to make i t more transparent and to ensure the selection of best candidates as teachers free f rom a l l kinds o f influences; and (iii) enhancing competition in textbook production and publishing and improving relevance o f the curricula.

In secondary and higher secondary education, Bangladesh has a unique system o f public-

1 1. regards systemic improvement, the Government has linked financing o f institutions to performance, leading to the suspension o f government subsidies to the worst performing institutions. The composition o f school management committees has been reformulated to ensure greater community voices, particularly o f the women members o f the communities, in monitoring institutions’ activities. The intimidating presence o f political figures on a huge number o f committees in the past was detrimental to genuine community participation and to oppositions to politically motivated decisions. N o w this has been curbed through a policy enactment limiting the number o f institutions one can serve on the committees. While implementation o f this policy has stumbled in many cases because o f the problems in the larger political environment, incremental improvements are already visible leading to better management o f the institutions. As regards financial management system, a number o f measures have been taken in order to enhance transparency and accountability in the spending and allocation o f resources. Widespread dissemination o f information about performance o f institutions, comparison o f institutions’ performances, incentives for better performance and support for those lagging behind because o f various social reasons are paying their due dividends.

The Government has successfully implemented the f irst two phases o f the reforms. As

12. Authority (NTRCA) which administers a testing and certification process for those who have the minimum required qualifications and aspire to be secondary school teachers. NTRCA creates a pool o f potential teachers from which SMCs recruit teachers for their respective schools following a rigorous process. N T R C A has already administered two rounds o f tests with the help o f the education boards and other relevant agencies since late 2005. T h i s has already led to better recruitment o f qualified teachers and reduction in rent-seeking and collusion in the hiring o f teachers.

The government has established a Non-Government Teacher Registration and Certification

13. The National Curriculum and Textbook Board (NCTB), long embroiled in undefined work between textbook production and curriculum review and revision, has now been streamlined along

3

i t s two important functions. The process o f textbook selection, production and publication - the oversight function o f the textbook wing -- has been made transparent and competitive which has led to a reduction in collusion and rent seeking in the process o f textbook production. The curriculum wing - unencumbered by i ts previously undefined role in textbook production -now fully focuses on curriculum related issues.

14. The positive impact o f these reform initiatives i s already visible. Pass rates in the Grade 10 standardized examinations rose from 39.91 per cent in 2003 to 59.47 per cent in 2006. Similarly, pass rates for HSC examinations rose from 38.43 per cent to 63.92 per cent during the same period. A total o f 368 o f the worst performing institutions had their subsidies suspended following admonition to some 1300 institutions for improvement within a period o f two years. The suspension o f subvention comes only after careful consideration o f the circumstances. For example, the Government i s loolung into another 208 poorly performing institutions, some o f which are in remote and disadvantaged areas, to see what kind o f support they need to improve their performance. The message i s clear that the Government i s serious about tymg subvention to performance, but at the same time, cautious not to penalize the schools which face real constraint particularly in disadvantaged communities. A three year cycle has been completed for reconstituting all school management committees based on the new rules enshrining more community participation and less political interference. Finally, a circular o f the Care-Taker Government in November 2006 to eliminate political elements from the SMCs and GBs was a clincher. All textbooks for grades 6-12 were published and produced using transparent criteria and in a competitive manner.

15. Given the progress made, the Government has requested the Bank for support in deepening the reform agenda through implementing the third phase o f reforms. T h i s credit will provide balance o f payments support to the Government to leverage reforms aimed at raising the quality and cost-effectiveness o f service delivery, while at the same time, improving equity o f access.

II. Status of the Secondary Education Sector

16. Mass Education and the Ministry o f Education - in keeping with the importance attached to education in Bangladesh. The Ministry o f Education (MoE) manages secondary, vocational and tertiary education. The secondary education system comprises three main types o f schools: (i) government schools which are entirely publicly financed, (ii) non-government schools which receive subvention to support 95 per cent teacher salaries, and (iii) government recognized religious schools (madrashas) which also receive subvention. Outside this system, there are many religious schools known as Qawmi madrashas which receive no support from the Government. The actual number o f Qawmi madrashas and the number o f students in these madrashas are not known. Within the recognized secondary education system, some 98 percent o f the secondary school pupils attend non-government schools and madrashas which comprise 99 percent o f the secondary schools/madrashas in Bangladesh (BANBEIS, 2005). Logically, the Government needs to streamline non-government provision o f services in secondary education, take steps to improve quality o f the services and put in place a system o f accountability o f the private providers, more so as they receive public funding for the services. Th is unique public-private partnership has brought about some significant achievements, but has also faced critical challenges.

Education programs are organized under two ministries - the Ministry o f Primary and

4

Some key achievements : Expansion of Secondary Education. Community initiatives, expansion o f the primary education base and the possibility o f public funding, buttressed by local and political patronage, contributed to a rapid growth in the number o f non-government schools a l l over Bangladesh over the past three decades. This catalyzed a remarkable growth in secondary school enrollment -- three times since 1980 to over nine mi l l ion (BANBEIS, 2005). Genderparity. During this period female enrollment has increased seven-fold to over five mill ion, leading to gender parity in secondary education (girls n o w constitute more than 52 percent o f secondary enrollments), mainly owing to the female stipend programs undertaken by the Government to incentivize girls’ education. The Female Secondary Stipends (FSS) program provides stipends and tuit ion waivers to female students throughout the country except in four major metropolitan areas - conditional upon maintaining regular attendance, passing grades, and remaining unmarried while in secondary school.

17. Challenges: Access is still an issue: With 57 percent secondary school enrollment, the country s t i l l has to go a long way in ensuring access for a l l children to secondary education. The situation will be exacerbated by increased primary school completion as a result o f robust on- going intervention at the primary level. Poor quality of education: While access to secondary education has increased considerably, lack o f systemic preparation to deal with the rapid expansion has caused quality to suffer. Absence o f qualified teachers in non-government schools, inadequate community supervision, often subdued by various interferences, late distribution o f books, -- scarce and of poor quality -- are some o f the impediments to dispensing quality educational services. However, it i s also important to recognize that the pace o f progress at the secondary level will largely depend o n progress at the primary level and success in raising quality and completion rates at the elementary level. Encouraging development yet poor outcomes: Though pass rates at the standardized examinations at grade 10 and grade 12 have increased significantly in last five years, overall internal efficiency o f the sector s t i l l remains a concern. At SSC level (grade lo), the pass rate increased f rom 40 percent in 2003 to 59 percent in 2006. Similarly, the pass rate at the HSC level (Grade 12) also increased substantially f rom 38 percent to 64 percent during this period. However, completion rate at the secondary level i s s t i l l as l o w as 20 percent (BANBEIS, 2005). The drop out rate increases sharply after grade 8 - about 32 and 48 percent at grades 9 and 10 respectively compared to 12 percent at grade 8. This i s attributable to the fact that while lower secondary school exams are school- based exams, upper secondary school exams are standardized at the national level - hence making it diff icult t o mask deficiencies in the quality o f schooling. Thepoor were left out. The poor segments o f the population are systematically lagging behind in terms o f enrolment at the secondary level as they cannot afford the (direct and indirect) expenses o f secondary schooling. According to the latest Wor ld Bank study, while GERs for grades 6-10 have risen to 57 percent overall, they are at 41 percent for the poor (coming from the bottom 60 percent o f the households).

18. these problems, particularly the built-in biases against better outcomes and equitable access. Many o f the systemic hindrances are being removed. More effective governance, accountability and community oversight at the school level are being institutionalized. The system i s n o w being

The Government, through i t s reform initiatives in secondary education, i s combating

,

5

put in place to monitor performance, which i s now tied to public funding both f rom the Government and from the more empowered communities. Actions are under way in three broad areas: system management; streamlining a transparent teacher recruitment process; and improving textbooks and curriculum. These are discussed at length in Section IV.

III. The Government's Reform Agenda and Bank and Donor Support

The Medium- Term Macro Framework

19. Economic growth remains strong. The economy grew by 6.7 percent in FY06, the highest rate in over two decades and the third consecutive year o f at least 6 percent growth (Table 1). Despite several months o f polit ical turmoil, forecast suggests 6.7 percent growth in FY07. Growth has been broad-based, cutting across al l major economic sectors and benefiting f rom robust demand in both domestic and export markets. The manufacturing sector grew at an impressive 10.4 percent in FY06, i t s strongest performance in over a decade. Garment exports, which account for about 75 percent o f manufacturing exports, grew by 23 percent (in nominal dollar terms) in FY06. T h i s was despite enhanced competition f rom other low-cost producers due after the dismantling o f the Agreement o n Textiles and Clothing (ATC) on January 1,2005. Construction, fueled by strong manufacturing growth as wel l as large amounts o f remittance inflows, grew by an estimated 8.4 percent, maintaining i t s 8 plus percent growth record since FY94. Remittances through formal channels were recorded at nearly US$5 billion, which i s about 8 percent of GDP and ha l f of merchandize exports, compared with US$1.9 b i l l ion in FYO1.

Table 1: Summary Macroeconomic Indicators

Indicators FY02 N O 3 FY04 FY05 N O 6 N O 7 FY08 N O 9 Output and Prices

Actual Projections

Annual percentage changes Real GDP Growth 4.4 5.3 6.3 6.0 6.7 6.7 7.0 7.0 CPI 2.8 4.4 5.8 6.5 7.2 7.2 6.5 5.0

Exports (bi l l ion US$) 6.0 6.5 7.0 8.6 10.4 12.5 15.0 17.1 Annual % change 4.6 9.5 15.8 23.2 21.6 19.9 19.9 14.1

Imports (bi l l ion US$) (7.7) (8.7) (9.8) (11.9) (13.3) (16.0) (19.3) (21.8) Annual % change (2.5) (13.1) (13) (20.6) (12.1) (20.0) (21.2) (12.7)

External Outlook

Current account balance ("! of GDP) 0.5 0.1 -0.5 -0.9 0.6 0.5 0.2 -0.1 Gross off icial reserves (bi l l ion US$) 1.5 2.5 2.7 2.9 3.5 5.0 5.7 6.9 In months o f GNFS imports 1.8 2.9 2.8 2.5 2.7 3.0 2.7 3.2

Public Finance Percent of GDP Total Revenue 10.1 10.3 10.2 10.5 10.6 10.4 10.6 11.0 Total Expenditures 14.8 13.7 13.3 13.8 13.8 13.8 15.8 14.3 Overall balance (excluding grants) -4.6 -3.4 -3.1 -3.3 -3.2 -3.5 -5.2 -3.2 Domestic financing" 2.5 1.2 1.8 1.7 2.1 2.3 3.7 1.7 Public debt 53.0 51.1 48.7 47.5 46.8 44.3 43.9 42.2

Money and Credit N e t Domestic assets

End ofyear; percentage change 11.6 12.2 13.5 17.1 19.6 13.4 14.2 16.0

Private sector 13.6 12.6 17.5 17.0 18.3 15.1 14.5 14.2 Broad monev (M2) 16.1 15.6 13.8 16.7 19.3 17.5 15.0 17.7

Source: IMF and GOB. GNFS = Goods and nonfactor services. 1/ Includes estimated privatization receipts of 0.2 percent of GDP in FY07

6

20. Macroeconomic stability has been largely maintained. The fiscal, monetary, and external indicators have remained within the thresholds o f the macroeconomic framework agreed with the IMF under the PRGF program, although there have been some temporary deviations and revenue mobilization has persistently fallen short o f i ts targets. T h i s i s quite impressive, in light o f the pressures emanating f rom sustained high global o i l prices and rising food costs. Recognizing this, the I M F ’ s Executive Board approved the fifth and penultimate review o f the PRGF in October 2006.

2 1. sector. This, together with the floating exchange regime that was adopted in M a y 2003, has allowed Bangladesh Bank to stabilize foreign exchange markets and build-up international reserves to more comfortable levels. In a significant turnaround, the current account balance moved from a US$5 18 mi l l ion deficit in FY05 to a US$572 mi l l ion (0.9 percent o f GDP) surplus in FY06. In addition to strong growth o f exports (22 percent) and remittances (25 percent), this was also enabled by a slowdown in import growth (10 percent), as authorities further tightened monetary management and refrained from intervening in currency markets to prevent depreciation o f the taka. The exchange rate has currently stabilized at just under Tk.70/US$, after depreciating against the U S dollar from Tk 63.7/$ o n June 30,2005, to Tk 72.0/$ in November, 2006. Despite a sharp decline in the capital and financial account balance because o f repayments o f trade credits (mostly o i l import related), the balance-of-payments account recorded a surplus in FY06. This, in turn, allowed the foreign exchange reserves to build up to US$3.4 b i l l ion by end- FY06. More recently, as o f early March, 2007, the reserve position had reached an all-time record level of US$4 b i l l ion (more than 3 months o f imports cover).

22. FY06. T h i s was the fourth straight year in which the deficit to GDP ratio was kept under 4 percent. Slower than programmed implementation o f the Annual Development Program (ADP), in common with previous budgets, caused the budget deficit t o GDP ratio to undershoot the programmed 4.0 percent. Tax revenues increased by just 13 percent, wel l short o f the 19 percent target. As a ratio o f GDP, tax revenues remained unchanged at 8.1 percent - one o f the lowest collection rates in the world. A redeeming factor was the sharp increases in domestic VAT and income tax collections, both benefiting f rom the good performance o f the recently set up large taxpayers unit (LTUs). But these gains were erased by a decline in customs revenues, as authorities were unable to improve efficiency in customs administration. . A plethora o f tax exemptions that are in place prevented even more robust responses o f the income tax and VAT. Domestic financing o f the deficit was kept at 2 percent o f GDP, allowing public debt to GDP ratio to fall for the fourth straight year, from 53 percent in FY03 to 47 percent. However, the budget deficit masks the overall fiscal situation because there are several state-owned enterprises (SOEs) with deteriorating financial situation.

Robust performances o f exports and remittances have further strengthened the external

Fiscal discipline was maintained with the budget deficit kept at 3.3 percent o f GDP in

23. The main source o f r i s k to medium- to long-term fiscal sustainability i s the financial losses o f SOEs, especially those in the energy sector, although recent measures by GOB have sought to contain these. The losses o f the energy sector SOEs for FY06 are estimated at about Tk 45 bi l l ion (US$670 million), or 1.1 percent o f GDP. These losses stood at Tk 27 b i l l ion (0.7 percent o f GDP) in FY05, and just Tk 6 billion in FY04. The increase in losses was mainly due to underpricing o f energy products in domestic markets. The Bangladesh Petroleum Corporation (BPC) alone accounted for more than 80 percent o f the losses because o f inadequate pass-through o f the higher global energy prices to domestic consumers, although this was corrected by the fuel price adjustment recently announced by the CTG. Furthermore, failure to adjust electricity tariffs between September 2003 and March 2007 caused losses at the Power Development Board to soar f rom Tk 1.2 b i l l ion in FY04 to an estimated Tk 9.9 b i l l ion (0.2 percent o f GDP) in FY06. The

7

March 2007 increase o f 5 percent on urban electricity retail supply and 10 percent on bulk supply i s expected to lower annual BPDB losses by about Tk 3.5 bil l ion. Furthermore, recent efforts to recover accounts receivables o f power utilities and to significantly reduce BPDB’s payment arrears to Independent Power Producers (IPPs) through budgetary transfers have also strengthened the power sector’s financial situation. Biman, the national airlines, and Bangladesh Chemical Industries Corporation (BCIC), the public sector chemicals corporation, were the other main loss-makers. To tackle the growing problem in Biman, the Government i s considering divestiture through a strategic partner or other appropriate means. I t has also sought technical assistance f rom the Bank and other development partners to support this move.

24. sluggishness o f revenue mobilization are putting a strain o n the fiscal situation, thereby constraining the GOB’S ability to finance i t s strategic developmental priorities such as health, education, and infrastructure.

The need to tackle the large SOE losses and outstanding liabilities and continued

25. agenda, supported by the DSC N operation. Reforms are aimed at: (a) strengthening core governance functions, with emphasis on reforms in public procurement, budget formulation and budget execution, tax administration, and public administration; and (b) improving the investment climate, by maintaining macroeconomic stability, deepening domestic deregulation and trade liberalization, and strengthening performance o f the banking and energy sectors and o f SOEs.’

T o address these issues, the Government i s implementing an ambitious macro reform

26. strong economic growth while partially taming inflationary pressures. Looking ahead, authorities would be wel l served by further containing inflation with continued monetary discipline, and measures to ease food supply chains, addressing the emerging fiscal stresses by adjusting energy prices to eliminate SOE losses and deepening the reform efforts to strengthen revenue mobilization. The CTG has acknowledged these issues and i s taking a number o f corrective pol icy actions

In sum, Bangladesh’s macroeconomic management has been relatively sound, enabling

The PRSP

27. Reduction Strategy Paper (PRSP), titled “Unlocking the Potential: National Strategy for Accelerated Poverty Reduction.” The PRSP i s a completely homegrown document fully owned by the Government and prepared through a comprehensive participatory process which included consultations at the regional levels with representations f rom the whole spectrum o f Bangladesh society.

The Government has la id out i t s medium-term development framework in i t s Poverty

28. The main national level development goals set by the PRSP are: (i) employment generation; (ii) nutrition; (ii) maternal health; (iv) quality education (at primary, secondary, and tertiary levels); (v) sanitation and safe water; (vi) criminal justice; and (vii) local governance. In setting these goals, it acknowledges Bangladesh’s encouraging development record but cautions against complacency and slippages in areas where progress has been good. Espousing a broad definition o f poverty, including human deprivations in income, food security, quality o f life, and vulnerability, the PRSP seeks to address it through a strategically prioritized pol icy framework that has pro-poor growth, human development, and governance as i t s main pillars. I t aims to

For more information on the reforms supported by the DSC, please refer to Report No. 39595-BD (Bangladesh Development Support Credit IV) which wil l be discussed at the Board on M a y 29,2007.

8

unlock the full potential o f the country through a sensible mix o f public action, private initiatives, and community mobilization.

29. PRSP with particular focus on the core governance issues and the human development measures.

The new Care-Taker Government has expressed full commitment to implementing the

The PRSP and the Medium-Term Strategy for Education

30. M o E have developed and started implementing their medium-term strategies for primary and secondary education respectively. The focus o f the strategies i s on enhancing the quality o f education, ensuring equitable access and best utilization o f their scarce resources. The strategies provide pol icy directions, specify targets, and recommend actions required to attain these targets.

Education figures importantly in the PRSP. In keeping with the PRSP, both M o P M E and

3 1. On the primary education side, MoPME, supported by 1 1 development partners including IDA (with ADB as the lead development partner), began implementing the Primary Education Development Program - PEDP I1 in 2004. T h i s program represents MoPME’s vision for primary education till 2009 and provides a pol icy framework and implementation plan for the development o f primary education. PEDP I I ’ s focus i s on implementing strategies to improve the quality o f primary education as wel l as enhancing access for the disadvantaged and excluded. The specific objectives o f the program are to: (a) improve the quality o f teaching and learning, and enhance student achievement; (b) enhance access to schooling for the disadvantaged and provide incentives to teachers to perform better; (c) strengthen planning and management o f primary education; and (d) establish a nation-wide monitoring and evaluation system. Whi le PEDP 11 i s s t i l l not fully comprehensive, the Government has begun workmg closely with communities and NGOs to assist the setting up o f community schools in particularly disadvantaged areas to provide access to educational opportunities for those hard to reach, through a number o f initiatives including the IDNSDC-supported Reaching out o f School Children (ROSC) project.

32. At the tertiary level, academics f rom public and private universities and representatives f rom various sections o f Bangladesh c i v i l society prepared, o n behalf o f the Government, a 20- year strategy for higher education in 2006, in keeping with i t s PRSP goals and focusing particularly o n quality, governance, financing, research and science and ICT education. The Government i s in the process of implementing this strategy in a phased manner.

33. recommend areas for reform in the sector. The committee’s recommendations were aimed at establishing a cost-effective, high quality and equitable education system through governance reforms. T o flesh out these recommendations, M o E commissioned in-depth studies in selected areas. Based o n this information, as wel l as relevant work undertaken jo in t ly with development partners, M o E drafted i t s medium-term framework and finalized after extensive country-wide consultation with various stakeholders and actors. Over the past years, this framework has been updated regularly, in keeping with the emerging realities and opportunities in the secondary education sub-sector, particularly in view o f the emphasis la id out in the PRSP which has been strongly endorsed by successive governments.

In secondary education, the MoE convened a 5 1 -member expert committee in 200213 to

34. Recognizing that a major bottleneck to improving delivery o f secondary education has been poor governance, the framework lays emphasis on reforms aimed at tackling this issue. I t focuses on improving accountability and oversight, and ensuring greater transparency in the management o f the sector along with the use and allocation o f resources tied to better outcomes.

9

Some o f the main elements o f this strategy are highlighted in Box l3 and discussed in the following sections.

Total secondary education budget -base case scenario Resource Requirements (based on simulations) Actual Budget for Secondary Education

35. The critical constraint t o improving the system i s not one o f resources. Earlier simulations, done in 2003, o n the costs o f implementing reforms to enhance quality and governance o f the system (while increasing enrollments), showed that by 2008/9, the system required a total investment o f about $616 mil l ion (Table 2). The actual budgets over the past years show a positive trend o f increased allocation for secondary education already surpassing in 2006 the needed allocation in 2008/9 (last r o w o f Table 2). Therefore, financial sustainability i s not l ikely to be an issue. However, it i s important that strategies and reforms are in place to enhance cost-effective resource utilization.

200314 200415 200516 200617 200718 200819

529 543 565 584 . 607 631 520 539 558 577 596 616 524 597 642

Table 2: Secondary Education Expenditure Forecasts (2003-2009) and Actual Budgets in US% millions

’ The Medium Term Priorities for The Development of Secondary and Higher Education in Bangladesh. Ministry of Education, Government o f Bangladesh (2003).

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Box 1: MoE’s Reform Agenda - 2003-08 Some of the key elements of MoE’s proposed reform agenda are summarized here. They include reforms that have already been undertaken in the in the three phases, and reforms that are still under way.

System Management

Reform actions completed: Establishment/equity - Finalizing criteria governing the establishment and registration o f institutions, Contracting out evaluation o f potential new

Financing - Rigorous enforcement of amended MPO criteria; AdministrafiordCapacity Building, Devolution and Participation -Setting up districthpazilla committees; amending composition o f SMCs/GBs to ensure greater community participation; SMC/GBs elected using revised rules; ridding SMCs/GBs of all political influences Financial Management - Improving financial management at the ministry level through improved controls and increased attention to

reconciliation and follow up on audit queries and PAC recommendations Environment Guidelines: Environment Guidelines for school construction under the overall Environment Management Framework prepared

institutions to private providers; establishing new schools in underserved areas, piloting means-based stipend schemes

Reforms Underway: Establishment/equrty - Actions to raise enrollment by 50% in underserved areas; undertaking school mapping exercise and expenditure tracking

Financing - Designing and Implementing grants-based financing for secondary level institutions; establishment of National Vocational Training survey, outcomes to be used by policymakers to improve policies/programs;

Board (NVTB) and training fund to finance well performing training institutions; financing of public vocational institutions linked to performance in examinations; AdministratiodCapacity Building, Devolution and Participation - Upgrading o f planning capacity at all levels. Monitoring and Evaluation - Instituting expenditure tracking surveys and stipend evaluations; systematizing school mapping exercise undertaken by BANBEIS; systematizing self-reporting of data from schools; continuing dissemination of information on school quality, piloting student assessments at grades 8 and 12; and third party program monitoring and evaluation.. . Monitoring and Evaluation - Rolling out student assessment system throughout the country for grades 8 and 12. AdministratiodCapacity Building, Devolution and Participation - Finalizing action plan for devolution of functions to districtdupazillas; 100% of SMCs elected using revised rules;

Teacher Effectiveness

Reform actions completed: Employment - Enactment and establishment o f autonomous non-government Teacher Registration and Certification Authority; Making NTRCA fully functional; approval of pension scheme for teachers, second certification examinations for potential teachers completed, new potential teachers tested by NTRCA; ensuring that all new teachers have been tested by Teacher Registration and Certification Authority, Instituting incentive scheme for teachers; streamlining teacher recruitment process making i t immune from rent-seeking and nepotism Teacher Training - Ensuring a common set o f standards for teachers in public and private institutions, Finalizing five year plan for teacher training for in-service teachers as well as new teachers;

Reforms Underway: Teacher training: Establishing a National Council for Teacher Education to coordinate in-service teacher training

Employment: Providing right incentives for potential teachers in under-served and remote areas Teacher Training - Certifying all eligible teacher training institutions based on agreed criteria and training and certifying 60% untrained teachers

Curriculum and Textbook Reforms

Reform actions completed: NCTB- Developing action plan for NCTB restructuring and instituting functional separation of its two wings; Textbook approval andprivatization - Instituting transparent criteria for manuscript evaluation; opening up textbook production for grades 6-8 to

Curriculum wing - Curriculum wing of NCTB exclusively focusing on curriculum issues;

Actions Underway: NCTB -Revision of curriculum to make it more relevant; Textbooks - Continuing competitive production of textbooks

now within the system.

competition. 100% o f textbook production for grades 6-10 produced competitively.

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Aligning Bank and Donor Strategy with PRSP in Education

Bank Lending and Non-Lending Program

36. in the PRSP, the Bank’s Country Assistance Strategy, and complementarities with other donors. Putting governance at center stage, the Wor ld Bank Group’s most recent Country Assistance Strategy (CAS)4 aligns itself with the Poverty Reduction Strategy. In particular, the CAS, which i s for the FY06-09 period, emphasizes empowering thepoor as one o f the two pillars. The Bank Group vows to continue to build o n Bangladesh’s impressive social gains by helping the Government meet the M D G s related to human development in order to realize i t s aspiration to reduce poverty substantially within a generation. The CAS states that notwithstanding the impressive gains in education, especially in access, improving quality remains a critical challenge - and should be the focus o f the Bank’s assistance to Bangladesh. I t also proposes to assist in improving the quality and efficiency o f service provision to the poor by strengthening sector governance, and enhancing voice and participation.

The Bank’s assistance in education has strictly followed Government priorities as la id out

37. operations - Primary Education Development Program 11, Post Literacy and Continuing Education I, Reaching Out o f School Children Project, Female Secondary School Assistance Project 11, and the series o f Education Sector Development Support Credits.

In keeping with the CAS objectives, currently the Bank i s supporting GOB in f ive

38. The Bank’s lending program has been based o n extensive analytical work, mostly done by the Bank itself. A comprehensive education sector review conducted in 2000 provided sound understanding o f issues facing the education sector and strateges to enhance education q ~ a l i t y . ~ Policy notes were prepared in areas such as improving secondary education quality, teacher effectiveness, textbook and curriculum policy, vocational education and training reform, and links between secondary and higher education. Furthermore, the Bank has also provided technical assistance to the sector t o conduct rigorous impact evaluations o f its programs - especially stipend programs at the secondary levels and third party evaluation o f a number o f reform measures. Another technical assistance helped the Government prepare i ts higher education strategy. Recent analysis o f the technical and vocational education and training system, supported by the Bank, i s l ikely to be the basis for the Bank’s future support in this area. The Wor ld Bank also undertook a Public Expenditure Review and a Poverty Assessment in 2002, which highlighted constraints to improving access to and quality o f education and identified pol icy priorities for various sub-sectors.6 These analytical studies informed the issues highlighted in Section I1 above and has been used by M o E for the development o f i t s Medium Term Framework.

39. Analytical work has also been done to develop sound environmental policies and guidelines that are also applicable to the education sector. A Country Environmental Analysis (CEA) was jo int ly produced by the Ministry o f Environment and Forest (MoEF) and Wor ld Bank in 2005. The CEA focuses o n improving the health o f the poor, ensuring the sustainability o f the

Country Assistance Strategy for the People S Republic of Bangladesh - FY06-09, Report No. 35 193, The

Bangladesh Education Sector Review: Volumes I-III. World Bank (2000). Bangladesh Public Expenditure Review. World Bank (2002) and Poverty in Bangladesh: Building on Progress.

World Bank (2002). The World Bank i s also currently in the process of undertaking a new poverty assessment and Public Expenditure Review which will inform ftrther policy dialogue and reforms in the education sector.

World Bank, 2006.

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natural resources o n which they depend, and strengthening institutions for environmental management. The CEA also examines the actions necessary to strengthen environmental management, and identifies building the capacity o f the Department o f Environment (DOE) as essential t o better control o f the rapidly escalating urban and industrial environmental challenges. Higher pr ior i ty needs to be given to implementation o f the DoE’s Strategic Plan, which focuses both on improving governance through increased transparency in environmental decision-making, and on providing resources to expand DoE’s capacity once i t s quality has improved.

Collaboration with Other Donors

40. The Bank has continued to work in close partnership with other development partners in support o f the education sector in Bangladesh. On the primary side, many development partners’ are working collaboratively with GOB in implementing PEDP 11.

41. implementation o f the Government’s reform program. IDA’s technical and programmatic credit support t o the reform program i s reinforced through the support provided by ADB and CIDA who are implementing investment operations focused o n teacher development and training, and curriculum development. In addition the EU provided support for teacher training and NORAD for the secondary stipend program. These operations implement critical interventions proposed under the medium-term reform agenda o f the government and synergze with the reforms supported by IDA under the series o f programmatic education sector credits.

In secondary education, assistance from other development partners buttresses smooth

42. IDA ’s program o f support has also been informed by analytical work on secondary and vocational education conducted by other donor agencies (e.g. JICA, EU, DFID and ADB). For example, the public expenditure tracking both in primary and secondary education supported by DflD, has been an important source o f information both for the Government and IDA to point to the systemic governance issues in relation to the use o f resources.

IV. IDA ’s Support to the Medium-Term Reform Agenda

43. policy reforms to enhance governance and improve the quality and relevance o f secondary education. Three key pil lars o f IDA’S support to the Government’s reform program are in the areas o f system management, teacher effectiveness, and curriculum and textbooks. The reforms initiated under this program are consonant with the reforms o f the broader DSC series which focuses on actions that improve overall governance, stimulate economic growth and reduce poverty.

The key objective o f IDA’s support has been to assist MoE in implemen?ing substantive

44. positive impact on improving governance and accountability (see Table 3 and Table 4).

A number o f pol icy reform measures supported by ESDSC I and ESDSC I1 have had a

45. A critical underlying reason for the positive impact i s the Government’s commitment to the reform program and their successful implementation o f the program. As seen in Annex E - almost al l the pr ior actions for the proposed operation are similar to the triggers proposed at the time ESDSC I1 went to Board in 2006. This i s even more impressive given the challenging political environment in late 2006/early 2007. Thus, for example, a means tested stipend program

’ The development partners supporting GOB in PEDP I1 include - ADB (lead development partner), AUSAID, CIDA, DfID, EU, IDA, JICA, the Netherlands, NORAD, SIDA, and UNICEF.

13

has been evaluated and the framework for a national approach i s being designed, school eligibil i ty t o receive subventions i s being conducted in a transparent manner, teacher recruitment i s being undertaken in a transparent manner, and textbooks are being produced competitively. Delays in achievement o f two triggers have been due to sound technical reasons and progress on achieving these i s wel l underway.

Area Reform Actions Initial Impact Improving System Mi

Transparency in financing o f subventions

Enhanced equity in access

Transparency in establishmenthegistra t i on o f institutions

Improved accountability through monitoring o f expenditures and outcomes

o Strengthening

zgement. .. o M o E links subventions for

schools (MPO system) to Performance in standardized examinations.

o Identi fy ‘overserved’ and ‘underserved’ upazilas and provide n o subventions to new schools being established in ‘overserved’ upazilas

o Contract out task of evaluating the el igibi l i ty o f new non- government schools/colleges t o receive government recognition and subventions

o Establish district and upazila oversight committees;

o Pilot a public expenditure tracking survey in secondary schools;

composition o f SMCs/GBs with increasing participation f r o m parentdwomen;

o Enhance monitoring o f teacher attendance and stipend recipients

o Disseminate the results o f standardized examinations widely and publicly

o Reformulate the role and

3 Establish budget monitoring

14

o Subventions o f 368 o f worse performing institutions suspended in 2005 and 2006.

o 2608 schools which showed a significant improvement in performance in SSC (grade 10) examinations, as compared to previous year, received financial incentive awards.

o Pass rates in SSC exam rose to 59% in 2006 f r o m a baseline o f 40% in 2003. Pass rates in H S C examinations rose t o 64% in 2006 f rom a baseline o f 38% in 2003.

o No subventions provided to any new schools being established in 1 15 ‘overserved’ upazilas

o Secondary-level institutions established in 25 underserved upazilas with GOB support.

o Means-tested stipend program pi loted in 404 schools.

o 27% o f public resources targeted to the poor as against a baseline o f 24% in 2003.

o Al l nine education boards have hued competit ively selected private contractors to evaluate school registration.

Inspection Bodies in 2007 showed that the contracting process i s transparent, and there have been considerable reduction o f malpractices in according subventions.

o Teacher absenteeism down to 11% in 2005 f r o m a baseline o f 17%. Recent anecdotal evidence suggests further declines.

o 20% reduction in ineligible girls receiving stipends since 2003

o Significant decline in cheating in standardized examinations;

o SMCs/GBs elected using new procedures. Impact on performance wil l be judged over time as their capacity is strengthened. Some 126,000 S M C P T A members trained on their roles and responsibilities;

SMCs/GBs removed and malpractices in teacher recruitment by SMCs stopped

3 Individuals chair n o more than four SMCs/GBs down from, in some cases, 50 in 2003

3 M+E system has been improved and begun to produce data and information for pol icy and analysis

o A third party evaluation o f the Independent

3 All polit ical influences on constitution o f

3 Improved transparency and accountability.

Area financial management to ensure efficient spending o f resources

o Two teacher registration certification examinations held successfully by NTRCA.

o Al l new teachers being recruited come from the NTRCA certified pool o f potential teachers.

o 20.9 percent teachers have received one or other form o f in-service training by 2007 against the baseline o f 10% in 2003

Reform Actions Initial Impact committee; o Reconciliation o f accounts in al l DDO's continued

accounts; o Improve reconciliation o f

o Settle audit objections settled

o Backlog o f audit objections being reduced. o Audit objections worth 81% in value for 2003-05

Enhancing Teacher Effectiveness.. . o Transparency in I o Cabinet approval and

teacher recruitment and enhanced teacher training

establishment o f NTRCA o Training in-service teachers

following a five year action plan

o Separation in functions o f textbook and

o Reorganization o f NCTB o Clear separation o f roles and responsibilities o f the including separation o f two wings. curriculum and textbook wings

curriculum wing o f NCTB

o Competition in textbook production at secondary level

o Development o f transparent o Competitive process followed for production and publication o f al l textbooks at secondary and al l higher secondary (grades 11-12) level.

o Quality o f textbook paper assessed to have

criteria for textbook manuscript approval

competition in production o f improved; textbooks o Textbooks delivered to students on time.

o A system in place that ensures

46. particularly in relation to tying subvention to performance and recruiting teachers in a transparent manner, was n o easy task. I t needed giving voice to the recipients o f the secondary education

In an environment o f pervasive polit ical interference, carrying out governance reforms,

Indicators

% o f schools establishedregistered following MPO criteria % o f public resources targeted to the poor for enhanced equity access Gender parity in secondary education

15

Baseline Data Achievement

30% in 2003

24% in 2002

50% girls in 2003

(target for 2008 in parenthesis) 60% in 2006 (80% by 2008) 27% in 2005 (33% by 2008) 52% girls in 2005

'YO o f gross enrolment

YO o f pass rate in SSC Exam

% of pass rate in HSC Exam

% o f teacher absenteeism

% o f in-service teacher training

% o f textbook produced on competitive basis

% o f transparent selection & employment o f certified teachers

(50% by 2008) 57% in 2005 (52% by 2008) 59.47% in 2006 (55% by 2008) 64% in 2006 (50% by 2008)

(10% by 2008) 20.9% in March 2007 (25% by 2008) 100% in 2006 (100% by 2008) 100% in 2006 (100% by 2007)

40% in 2003

40% in 2003

38% in 2003

17% in 2003 11% in 2005

10% in 2003

0% in 2003

0% in 2004

services, mobil izing the communities, making the actors in secondary education understand what reforms translated into and sending a strong signal down the system that the Government meant serious business. For a l l these, M o E launched a comprehensive communication campaign, in a cascading manner, f i o m the pol icy level down to the service recipient communities. Interestingly, while in other cases, the vested interest groups’ resistant t o reforms were more vocal, the discourse o n education reforms under ESDSC faced very l i t t le popular resistance, thanks to the moral ground for reforms prepared by the in i t ia l communication campaign.

47. The task was s t i l l very daunting. Significant challenges are there to improving transparency, accountability, school quality and access to the poor. More transparent processes o f school recognition and registration for subvention have been introduced. The reconstitution o f SMCs was decreed by law in order ensure meaningful participation o f the real recipients o f services, particularly o f women, for effective monitoring o f the schools. However, in many cases, the effort was thwarted by polit ical interferences which needed to be corrected. The monitoring and evaluation system needed to be further strengthened in order to in form the policymakers and facilitate their work in policy formulation and planning for the country. I t i s also important that programs are developed and opportunities are created to attract the poor to secondary education. Whi le an appropriate teacher training pol icy has been developed, institutional mechanism need to be in place to implement i t with the a im to improve the quality o f teachers and teaching. Finally, the quality o f curriculum needs to be improved, supported by right kmd o f books, if students are to learn ski l ls that will benefit them in the labor market or in higher education.

48. far. This justifies supporting and deepening the reform agenda in addressing the remaining challenges. The proposed ESDSC 111 aims to support the third phase o f the government’s medium-term reform agenda and deepen the reforms further in the three key areas o f system management, teacher effectiveness and textbooks.

The impact o f the reform measures supported by ESDSC series has been very positive so

49. The reforms supported by the program are described below, focusing o n actions taken in the third year o f the program, the expected impact o f these reforms and proposed further actions in the program.

System Management

50. allocation o f resources to schools and colleges, increase the accountability o f non-government institutions to funding authorities and local stakeholders, and develop a more devolved and efficient system o f management o f the education system, with greater stakeholder involvement.

The objectives in this area o f reforms are to establish greater transparency in the use and

Improved enforcement of criteria in recognitionh-egistration of schools for subvention

5 1. M o E has a fairly comprehensive set o f criteria which need to be met for a school to be registered and to receive government subsidies. However, these criteria were rarely enforced due to lack o f government oversight capacity and political interference and rent-seeking. Given i ts l o w capacity to effectively monitor secondary school establishment and registration, M o E took the approach to competitively select independent inspection bodies ( I IBs) t o evaluate the readiness o f schools/colleges for establishment or recognition, based o n set criteria. The f i rs t set o f competitively selected service providers were hired in November 2005 for a l l the education boards in the country - seven regional education boards, the madrasah board and the vocational/technical education board. Reports f rom these service providers are now the basis for

16

school establishment and registration. The Government agreed with IDA that independent evaluation of the process o f selection and performance o f the service providers would be a trigger for ESDSC 111.

52. conducted early in 2007.

Actions taken under ESDSC 111: A third party evaluation o n the services o f I I B s was

53. process i s working. Last year, with the country in an election mode and the politicians susceptible to dishing out favors to both eligible and ineligible areas, i t was n o easy task for I I B s to evaluate the schools for recognition objectively withstanding the political influence. However, a third party evaluation o f the I I B s ’ work suggests greater transparency in the contracting process and considerable reduction o f malpractices in the establishment and recognition o f schools. Going forward, MoE has decided to make use o f the lessons learned in the process and regularly review the effectiveness of implementation and design.

Impact and next steps: The evaluation has shown that, despite some problems, this

Greater transparency in financing schools

54. in the form o f teacher salaries. The Government n o w finances 95 percent o f the salaries o f teaching staff in non-government schools. T h i s payment scheme i s known as the Month ly Pay Order (MPO). In practice, till recently, once schools attained eligibil i ty to receive the MPO, be it in a genuine manner or through political influence or paying bribes, subsidies flowed regardless o f performance.

In the past, once a school was recognized, i t received monthly government subventions -

55. schools to their performance. T h i s i s being rigorously implemented. The MPO system has been revised to clearly link subventions for teachers’ salaries to outcomes on standardized examinations in grades 10 and 12. Poorly performing schools (with less than 10 percent students passing standardized examinations in grades 10 and 12) are being given a two-year period in which to improve their performance, fail ing which the subventions will be suspended. Initially, the bar was as high as 40 per cent pass rates. Experience from past two years suggests that this measure penalizes not only the delinquents and truants, but also the resource starved underserved areas and the disadvantaged communities with f i rst generation learners, where provision o f secondary education i s a big challenge, particularly in absence o f good teachers and without much support at home. Stopping MPOs for these schools would seriously disrupt the secondary education system. Given this, the Government i s implementing this order gradually and cautiously. Also, the Government agreed with IDA in early 2006 that preparation of a comprehensive action plan to assist the poorly performing schools would be considered a pr ior action for ESDSC 111.

Given this situation, a funding formula has been developed which l inks financing o f

56. Actions taken under ESDSCIU; (i) A total o f 368 worst performing schools (those from which less than 10 percent of the students graduated) which have shown n o improvement in performance have had their MPOs suspended in 2005 and 2006.’ Another 208 schools are being investigated to gauge whether they have valid reason for poor performance, e.g., being in disadvantaged remote areas, underserved communities etc. I f not, the MPOs o f these schools wil l

While the delinquent schools were punished, the students were not. The government ensured that students 8

in the institutions whose MPO had been suspended did not lose educational opportunities. In most cases, these students have moved t o neighboring better performing secondary schools which have been able to accommodate them. Evidence shows that there has not been a decline in enrollment owing t o this reform.

17

also be suspended. (ii) Since 2005, the Government has also introduced financial incentives for best performing and most improving secondary institutions. An incentive i s also given to institutions for improved results in SSC exams. So far, 2608 institutions have been given these awards. Institutions are uti l izing this award to remunerate teachers for improved performance, and improve the quality o f classroom teachindlearning materials. The schools not doing wel l for want o f quality teaching are now supported by 40 mobile teaching resource teams. Consolidating a l l these actions, the Government has prepared a comprehensive action plan to assist the poorly performing schools in a l l aspects o f their poor performance with a special attention to the schools in the disadvantaged and under-served areas.

Impact and Next Steps:

57. T h i s measure certainly sent a strong message down the system which alerted the non- performing schools about the fact that performance matters in getting subvention. A trend i s emergmg as a result o f these actions as evident in the strong improvement in the results in the SSC and HSC standardized examinations (see Table 3). These results prove that tying subvention to performance, providing right kind o f incentives and support and close monitoring o f the situation y ie ld the desired results.

58. Begnning 2008, the Government intends to gradually move from the present blanket subvention to a grants based financing system. Under this reform, financing will not be based on the existing MF'O subvention system, but o n a formula based on the number o f students and performance measures, as agreed with IDA. This reform will be politically challengmg to implement, more so with teachers currently receiving salaries based on a national pay scale. In view of this, the Government will pilot and evaluate the impact o f this intervention in newly approved schools that presently do not receive subventions. The Government has already taken some concrete steps in this regard. They have prepared a draft policy which i s now being reviewed by MoE, and identified the new schools. Once the policy i s endorsed in M a y 2007, they will notify the new schools and the relevant agencies that that their financing will not be based on the existing subvention system, but o n a formula based on the number o f students and performance measures.

Enhanced equity in access

59. The Ministry o f Education was cognizant about the potential problem that strict enforcement o f the criteria might dampen private initiatives to establish schools in disadvantaged communities which could lead to greater inequity in access for the poor. In order to resolve this problem, M o E embarked o n a periodic school mapping exercise in al l upazillas o f six divisions o f Bangladesh to identify the under-served and the over-served areas, stop recognition o f new schools in over-served areas and make more resources available for establishing schools in underserved upazilas. According to the last mapping exercise, M o E has identified 115 over- served upazilas and subventions are not being provided to any new schools established in these over-served upazillas - hence, relatively more resources are f lowing to disadvantaged and underserved upazilas. A new mapping exercise i s n o w underway. Secondary schools have been set up in 25 o f the most economically disadvantaged and underserved upazilas, which did not have secondary schools, with support f rom the government.

60. pilot means tested program has been implemented since 2006 in 404 schools under the Female Secondary School Assistance Program which was also a trigger for ESDSC 111. The poor secondary school age students are identified by school management committees and village level officials o n the basis o f agreed objective criteria, and given a stipend to attend secondary school.

Actions taken under ESDSC 111: T o enhance access o f the poor to secondary education, a

18

Since the country has already achieved gender parity in secondary school enrollment, this pi lot program covers both boys and girls to offset the impending social imbalance which might ensue from the incentives given only to the girls so far under the country-wide girls’ stipend programs. An internal monitoring mechanism has been put in place to ensure strict adherence to the poverty criteria and outcomes o f the pi lot exercise. This pi lot i s currently being evaluated.

61. resources are n o w targeted towards the poor (27 percent in 2005 as compared to 24 percent in 2003). A baseline survey has been undertaken to investigate the in i t ia l impact o f the pro-poor targeting pilot. The preliminary findings are encouraging: (a) among poor households, there i s n o gender differential in attendance rates for 10-18 year o ld children in program school communities while the female-male gap in attendance rates i s pronounced in control school communities; (b) new enrolments among both boys and girls are higher in program schools compared to non- program schools; and (c) test scores are higher among program students than non-program students. The critical follow-up survey has also been completed in January 2007 and the data i s currently being cleaned, entered and analyzed.

Impact and Next Steps: As a result of these interventions, a greater proportion o f public

62. comprehensive national framework and a set o f criteria to target poor children keeping in view the forthcoming projects and programs which wil l have a clear focus o n targeting the poor. A draft framework has already been developed. T h i s will be further informed by the findings o f the follow-up survey, and it i s expected that the framework will be implemented by 2008. Given that the quality o f schooling in underserved areas i s particularly weak, M o E will further develop a strategy to raise performance levels of the schools in those areas.

Based o n the preliminary results o f the ongoing pilot, M o E has started working toward a

Improved accountability through tighter monitoring of outcomes and expenditures

63. There i s a general weakness o f the Bangladesh education system with regard to reliable data wel l recognized by al l involved in the education sector. Reliable data helps the Government take informed decision as to what to prioritize and how to phase actions in a country-wide planning in the face o f resource constraints. Despite some improvements, there was s t i l l a lack o f coordination between BANBEIS and DSHE with regard to data collection and confusion about the respective roles. The result was, in some cases, duplication in data collection, and in others, absence o f data.

64. improvement in the quality o f data and their use, increase in the emphasis o n monitoring, evaluation and the dissemination o f information. A key component o f MoE’s reform agenda i s to ensure that there i s a significant reduction in the misallocation o f resources. T o better understand the situation, M o E undertook a pi lot expenditure tracking survey under the Financial Management Reform Program Project. The survey was undertaken in 28 upazilas and assessed whether inputs were present on the ground (e.g. whether teachers o n the payroll were present in schools), and compared expenditures at the school level with national level data. The survey found that while there were n o major discrepancies o n expenditures, there were some instances o f malpractices in the system - e.g. schools had to make ‘speed’ payments to get resources, teachers were absent, and there were s t i l l a significant number o f girls who did not meet eligibil i ty criteria were receiving stipends. M o E has responded by significantly enhancing system monitoring by district and upazila level officials and involving the school management committees (this i s described in more details below) in monitoring activities at the school level.

However, important reforms have been initiated which have led to a significant

65. the monitoring and evaluation capacity o f M o E and BANBEIS in keeping with the trigger in this

Actions taken under ESDSC I..: Significant steps have been taken by M o E to improve

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regards. (i) A uniform data coding system has now been developed by BANBEIS which allows data o n pupil-level examination scores to be l inked with data o n school characteristics. This alleviates a recurrent problem at the pol icy makers’ level- as i t was not possible to integrate several data sources which used different coding systems. (ii) To ensure country-wide availability o f data and information on a real-time basis, an education database and web based software has been installed in al l district education offices by MoE.

66. Simultaneously, M o E has also taken several initiatives to enhance i t s evaluation capacity and use data f rom evaluations for policymaking. These include: (i) Annual student assessments (based on internationally recognized assessments such as TIMSS) piloted in Grades 8 and 12; (ii) third-party impact evaluation o f the gir ls’ secondary stipend program and o f the means-tested stipend program, and incorporating the lessons f rom these evaluations into program design; and (iii) third party evaluation o f several measures and institutional mechanisms, e.g., public expenditure tracking, transparency in the functions and processes o f NTRCA and Independent Inspection Bodies (IIBs).

67. Impact and Next Steps. The main dividend from better quality data and evaluations o f programs are better policies if properly used. Benchmarking the performance o f Bangladeshi students against international assessment standards wil l serve two functions for policymakers - first, i t will allow them to observe whether the reforms in place are leading to better test scores over time, and second, whether Bangladesh i s closing the performance gap with better performing countries. This will also help them understand the reasons underlying the gap. As regards other evaluations, the Government i s now better informed which helps them fine-tune the policies and the processes.

68. To further improve the quality o f data, B A N B E I S has been resourced to undertake a comprehensive census o f post-primary educational institutions in August 2007. Thls will be repeated at five year intervals. A strategy has also been developed to undertake a sample survey o f institutions on an annual basis in between the censuses. The methodology and questionnaires have been developed and fine tuned with support f rom IDA. In preparation for the upcoming census, BANBEIS i s now holding s ix workshops in six divisions on the use and importance o f education data. In October 2007, BANBEIS will also conduct global positioning survey (GPS) of the education institutions.

Greater participation of communities in school management and devolution of authority

69. participation in the secondary educational system. School Managing Committees’ (SMCs) and Governing Bodies (GBs) were supposed to play a critical role in hiring teachers, and monitoring school performance, attendance o f teachers and students, upkeep o f physical infrastructure, and performance in examinations. However, these bodies were sometimes influenced by politicians - to dole out teaching jobs to unqualified relatives and those who were allegiant t o them. T h i s polit ical interference led to an apparent lack o f interest o f genuine community members and guardians to actively participate in SMCs/GBs in the past.

In principle, there should be a strong institutional mechanism for community

70. In order to ensure meaningful community participation with appropriate empowerment, reforms were introduced to streamline the composition o f these bodies and strengthen their ro le with greater emphasis placed on the monitoring role (Box 2). District and upazilla advisory

SMC’s are required in all recognized non-government secondary schools (grades 6-10) and GB’s in higher secondary schools/intermediate colleges - grades 1 1-12.

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committees were also established with the authority to monitor school performance and ensure public disclosure o f information (e.g. SSC pass rates, teacher absenteeism, class sizes, etc.) related to school quality.

71. 2006 to al l SMCs/GBs and relevant offices that al l “political persons” have to be dropped from the committees with immediate effect for the institutions to continue to receive subvention. Instead, as an interim arrangement until new elections to these committees, the relevant government officials, (e.g., the deputy commissioner, Upazilla Nirbahi Officer, Upazil la Education Officer, as appropriate) will chair the committees. This i s certainly a bo ld step by the Care-Taker Government to withstand the elite capture and polit ical capture o f these committees which set the stage for meaningful community participation; (ii) Over the past two years, about 126,000 SMC/GB/Parents Teachers Association (PTA) members f rom 6,666 institutions have already been trained to better understand their roles and responsibilities.

Actions taken under ESDSC I..: (i) The Government has issued a circular in November

Box 2: School Management Committees (SMCs) and Governing Bodies (GBs) - Composition and Responsibilities

According to the revised regulations governing the formation o f SMCs, they w i l l be elected for a three year term. The committee consists of:

a chairman - the deputy commissioner, an upazilla nirbahi officer, or a local distinguished person - no individual can chair more than four SMCs;

0 a member-secretary - the headmasterheadmistress o f the school; 0 n ine members - two teachers to be elected by teachers o f the school, seven other members

including four guardians to be elected from among the student guardians, and at least one person interested in education to be nominated by the Department o f Secondary and Higher Education (DSHE). At least one o f these members has to be a woman

Among their functions, SMCs w i l l have the authority to: 0

0

monitor school performance, teacher and student attendance. raise funds and create endowments for the school; appoint, suspend, dismiss and remove teachers and ensure regular payment o f teachers’ salaries; approve annual budgets including the development budget and examine the monthly financial statements.

The composition and responsibilities o f GBs are fairly similar to that o f the SMCs.

72. Impact and Next Step: The reformed SMCs, fkeed from polit ical interference, are expected to play a crucial role in management and monitoring o f schools if they are truly empowered. T h i s i s not an easy task in the given stratified rural society and the given client- patron relationship. However, as described in the PRSP, the rural Bangladesh has experienced a “personality revolution’’ with the emergence o f assertive people who have long remained marginalized. Prolonged NGO interventions in rural communities are believed to have acted as a catalyst in this regard. This i s expected to offset the long-known nature o f “elite capture.” As a next step, the Government will launch a third party evaluation o f the impact o f SMC reforms to examine whether these reforms have led to greater accountability o f the schools to the community.

73. Impact and Next Steps. The impact o f these reforms wil l take time to materialize. However, some positive benefits are visible - as demonstrated through declines in teacher absenteeism, and in the number o f ineligible girls receiving stipends.

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74. The elimination o f vested interest groups from SMCs, combined with knowledge regarding their roles and responsibilities, i s expected to make these bodies undertake their monitoring roles even more effectively in the future. Over the next three years, the Government plans to impart training to members in al l SMCs, GBs and PTAs.

75. Environmentally acceptable construction: In order to ensure sustainable and environmentally acceptable construction o f school buildings, it i s important that the proper environmental guidelines are followed.

76. school construction in keeping with the agreed overall Environment Management Framework. The Ministry ensures strict adherence to the guidelines in construction o f schools buildings for the schools to continue to receive support f rom the Government.

Actions taken under ESDSC III: M o E has prepared the environmental guidelines for

77. maintain a healthy and learners-friendly institutional atmosphere which provides multi-faceted benefits to generations. However, M o E needs to review the guidelines o n a regular basis to include new knowledge and keep them updated. In addition, M o E needs to put in place a monitoring mechanism to ensure full compliance, not only in construction, but also in maintenance o f the schools.

Impact and next step: Environmentally sustainable construction helps the country

Enhancing quality of secondary school teachers

78. The objective o f this reform i s to develop a transparent and high-quality system o f teacher recruitment and teacher training guided by agreed criteria and standards. Whi le i t i s diff icult to improve the quality o f a l l teachers in the short-term, it i s possible to begin tackling the problem o f teacher absenteeism, stop poorly qualified teachers from entering the system, and establish a more effective system o f pre and in-service training.

Transparency in teacher recruitment

79. appointment procedures were clearly la id out in government rules and regulations, the hiring system, however, was open to abuse and rent-seeking. A combination o f the lack o f application o f standardized hiring criteria, inadequate community/parental participation in SMCs/GBs, and capture o f these bodies by the local elites and those who are polit ically influential contributed to frequent violation o f hiring practices. Poorer, better-qualified applicants were rejected in favor o f the candidates who could contribute to the school’s finances, pay bribes or would qualify as the protCgC o f someone very influential.

Teachers in non-government schools are recruited directly by SMC’s/GBs. Whi le the

80. improving the quality o f the f l ow o f teachers entering the system. In 2005, the Government set up a Non-government Teacher Registration and Certification Authority (NTRCA), as a pr ior action under the previous ESDSC I, with the responsibility t o screen potential teachers for qualification. Whi le SMCs and GBs, on behalf o f the communities, s t i l l recruit the teachers, it i s mandatory for them to choose f rom the pool o f potential teachers certified by NTRCA in order to qualify for government subventions. NTRCA held two rounds o f examinations in 2005 and 2006 and the third round i s expected to be held in July 2007.

To combat these odds, the Government has embarked o n a major reform aimed at rapidly

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8 1. individuals eligible to be hired as teachers in non-government secondary and higher secondary institutions. One o f the triggers for ESDSC I11 was to conduct a third party evaluation o f the NTRCA processes. This evaluation has recently been completed, and the Government has put in place a system to cross check if the NTRCA certification i s being strictly adhered to.

Actions taken under ESDSC 111: The NTRCA i s now screening and certifying a pool of

Box 3: Non-government Teacher Registration and Certification Authority (NTRCA)

The Non-government Teacher Registration and Certification Authority was established in March, 2005 by a legislation passed by Parliament. The basic responsibility o f the institution i s to administer tests for potential candidates, meeting basic criteria, for teaching positions in secondary schools. NTRCA fm started with support fiom the Board of Intermediate and Secondary Education and the National Academy for Education Management. Now the NTRCA i s in the process of having its own set-up while the collaboration with BISE and NAEM Still continues. The SMCdGBs can now recruit teachers only when they are certified by NTRCA. Otherwise they don't qualify for the government subvention, known as monthly pay order (MF'O). At present, annual national demand for teachers is around 10,000 and NTRCA i s certifying more than double to meet the demand. From 2008, in addition to NTRCA certification, the potential teachers would need a B.Ed. degree for entry to a teaching position.

' I n 2005, the first NTRCA teacher certification examination was held and a total of 58,620 candidates participated of which 33,788 participants passed (57.64%). Specifically, 25,25 1 candidates participated for secondary level institutions of which 12,553 (49.71Y0) passed and for higher secondary level institutions a total o f 33,369 candidates participated o f which 21,235 (63.64Y0) passed.

In the first NTRCA examination, 37 subjects were selected at the secondary and higher secondary level. 23 subjects were from secondary level and 14 fkom higher secondary level.

1

82. The Government has put in place a mechanism to verify the certification and registration o f all candidates. Since the beginning o f the certification process, all teachers recruited by institutions have been certified by NTRCA.

Impact and Next Steps. The evaluation shows that the process i s working effectively.

83. functioning with staff seconded from the Board o f Intermediate and Secondary Education, the Government i s now in the process hiring NTRCA's own full-time staff. Additionally, the Government plans to undertake an evaluation o f the course content o f the certification examination, after the third round o f exams scheduled for July 2007. Changes introduced on the basis o f this evaluation are expected to enhance the quality o f the certification process.

The key next step i s to complete the staffing o f the NTRCA. Whi le the authority started

In 2006, the second NTRCA teacher certification examination was held and a total of 99,807 candidates participated of which 44,343 applicants were for secondary level institutions and 55,464 applicants for higher secondary level institutions. A total of 115 subjects were included in the 2006 examination. Th is represents a sharp rise (21 1%) in the number o f subjects from 2005 examination. Another 50 subjects need to be included in the next examination to cover all the subjects of various educational institutions.

Of these, a total of 22,381(22.42%) candidates passed the 2006 NTRCA examinations of which 11,152 (25.15%) were for secondary level institutions and 22,381 (22.42%) for higher secondary level institutions. Among the certified potential teachers at secondary level 3,597 (32%) are female and their pass rate was 24.71% while in higher secondary level 3,947 (18%) were female and their pass rate was 19.93%.

To be addressed soon ... NTRCA i s now in the process of recruiting the approved staff of its own, linking its database of the certified pool of teachers with those o f BANBEIS and DSHE for MPO subvention and other purposes, sharing o f information with SMCs/GBs. Presently, each certified candidate i s given an exclusive registration number for the purpose o f identification both by the SMCs/GBs and the relevant government agencies.

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Improved Teacher Quality

84. developed a comprehensive reform package for its teacher training system, which was approved by the Cabinet in 2005, and i s n o w being implemented.” Whi le NTRCA i s responsible for certifying the pool o f incoming teachers, a five-year teacher training action plan i s being implemented in order to ensure that teachers within the system are provided training to continually upgrade their skills, and new head teachers undergo compulsory init ial training o n appointment. T h i s i s being done in compliance with the trigger for ESDSC 111. In addition, the Government approved pension for non-government school teachers and an increase in their salary as an incentive to retain teachers into the system, and to upgrade their skil ls.

Teacher Training/Standards. Realizing the importance o f well-trained teachers, M o E

85. Actions taken under ESDSC III: The Government i s pursuing in-service teacher training through various short-term interventions rather vigorously. Over the past two years, 17540 head teachers, 3712 assistant head teachers and 27,206 subject teachers have been trained. 655 trainer teachers have also been trained. In order to provide training support to teachers, particularly in the remote and disadvantaged areas, the Government formed, o n a pi lot basis, 40 Mobi le Teaching Resource Teams (MTRT), each consisting o f four experienced trainer teachers (in Maths, Bangla, English and Science). They have offered on-the-spot training to teachers in 752 schools on the application o f appropriate pedagogical techniques.

86. (NAEM) to perform this added responsibility o f coordinating teacher training across the sub- sector which was put as a trigger for ESDSC III. However, complications arose f rom the fact that some o f these activities also needed to engage the National University and the Open University and institutional mechanism to link NAEM to these two institutions proved to be difficult.

Initially, the idea was to restructure the National Academy for Education Management

87. service training, and these reforms are expected to lead to an improved quality o f the stock o f teachers present in the system.

Impact and Next Steps: Close to 21 percent o f teachers have n o w received some in-

88. Education (NCTE), as an arm o f the NTRCA, which would be given the overarching responsibility o f looking after a l l arrangements for teacher education in the country. T h i s i s expected to be done by 2008. M o E has also decided that beginning in 2008, a l l new teachers entering the system will need a minimum one year B.Ed. level training in government or in approved private teacher training colleges (TIC’S) before being accredited. In addition, an in- service teacher training program will be developed and provided to untrained teachers in non- government schools through a two-stage B.Ed. program. The f i rst stage wil l focus on practical aspects o f classroom teaching. In the second stage, these teachers will complete the remaining B.Ed. module either through distance learning or face-to-face mode through the accredited Teacher Training Colleges (TTCs). Finally, a system o f selective specialist in-service teacher training programs wil l also be developed for teachers in English, Mathematics and the Sciences and will be provided through distance education. While these reforms were expected to be implemented in 2006/7, they have been delayed owing to the fact that init ially i t was envisaged that the National Academy o f Education Management (NAEM) would be responsible for overseeing teacher education at the secondary level. However, based on analysis which

The Government i s in the process o f establishing a National Council for Teacher

lo T h e Asian Development Bank will be supporting MoE’s investments in the area of teacher training through the recently approved Teacher Quality Improvement Project.

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demonstrated that undertaking such a function was not t o NAEM’s comparative advantage, a high-level pol icy decision was taken to establish NCTE.

Textbooks and Curriculum

89. While the National Curriculum and Textbook Board (NCTB) falls under the authority o f MoE, i t i s in fact responsible for curriculum development and textbook production at both the primary and secondary levels. The main objective o f reforms in this area i s t o ensure that N C T B stays away f rom textbook production and publishing and focuses on oversight o f textbook production and curriculum development.

Separation of curriculum development and textbook production

90. In the past, N C T B was responsible for developing curriculum and publishing and distributing standard textbooks. I ts two professional wings - the curriculum and textbook units, respectively - correspond to these two purposes. As the curriculum and textbook wings operate in different fields, they require specialist staff with completely different skills. In Bangladesh, the demarcation between the two wings was blurred and there was a substantial degree o f overlap - with the curricula wing staff often performing the duties o f the textbook wing.

9 1. The rationale for this reform i s that the textbook production and curriculum development units, which require two separate sets o f professional skills, would receive more attention if there i s a clear separation o f functions. In the past, there was an imbalance o f power and control between the two wings affecting particularly the curriculum related activities. Based o n this reality, the Government has now restructured NCTB to demarcate the functions o f the curriculum and textbook units which was agreed as a trigger for ESDSC III. Implementation o f this reform has led to complete functional separation o f textbook and curriculum units. The curriculum unit remains exclusively focused o n preparing, testing, revising, and disseminating curricula and o n other curriculum related activities. The wing i s disengaged f rom textbook production. The textbook wing i s responsible for oversight o f textbook production and distribution through a transparent and open competitive process.

92. textbook wing and focused on the secondary education curriculum. Based on i ts revised curriculum, the f i rs t SSC exams wil l be held in 2009.

Actions taken under ESDSC 111: The curriculum wing i s now fully separated from the

93. reforms in order to see if the functional separation i s leading to an improvement in performance o f NCTB and o f the curriculum wing.

Impact and Next Steps. The Government will also evaluate the effectiveness o f these

Transparency in manuscript approval and competition in textbook production

94. transparent. Criteria and ratings in the selection process were not made public, nor were they made available to the author submitting a manuscript. Textbook publishing for the secondary sector was also not open to competition - publishing and printing were undertaken by f i r m s chosen by N C T B without recourse to a competitive process. The lack o f competition led to rent- seeking, and was responsible for poor textbook quality, high production costs, and unavailability o f textbooks to schools on time.

The manner in which NCTB evaluated textbook manuscripts in the past was not

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2 1 member Independent Textbook Evaluation Committee (ITEC) which developed a set o f transparent selection criteria for evaluating textbook manuscripts. These criteria are now being followed, and based on

Box 4: Textbook Approval Process

Authors are given three months to submit the manuscripts. Submitted manuscripts are then reviewed by independent experts. To maintain transparency and fairness in selecting manuscripts, names of authors are coded and not revealed to ITEC.

the criteria, a-team o f subject specialists outside NCTB evaluate manuscripts which are then approved by ITEC and NCTB (Box 4). The

96. competition. However, owing to a reversal o f a policy decision in late 2005 to continue with the multi-track system for grades 9-10 for one more year, 13 NCTB textbooks had to be used for these grades pending final decision on the curriculum issue. Still, policy for competitive production o f all secondary education books remains the same. The Government will soon take the curriculum related decision and competitive production o f those 13 books wil l resume before the academic year 2008

Actions taken under ESDSC III: All textbooks for grades 6-12 have been opened up to

Once approved with necessary revisions suggested, printers/publishers publish the books. NCTB reviews the published books for congruence with ITEC recommendations. If complied, they are allowed to be marketed ahead of the beeinnine of the academic vear. If

97. and improvements in the quality and costs o f textbooks produced. There has also been a significant improvement in getting the books to the students on time over the past three years since the beginning o f these reforms. In 2005 and 2006, books were delivered to students on time prior to the beginning o f the academic year. The quality o f the paper i s also reported to be superior as compared to that o f previous textbooks. The schools choose the textbooks they want from the market creating a pressure on the printers/publishers to place their books in the bookshops in quality and on time. However, the Government i s considering an independent evaluation o f all aspects o f competitive production o f textbooks at the secondary education level, particularly the quality o f the textbooks, to inform i t s own policy formulation in kture.

Impact and Next Steps: These reforms have led to a significant reduction in rent-seeking

whole process o f textbook publication and printing has now been made

98. Based on the discussion above, Box 5 provides, at a glance, the prior actions and other actions that were added on the basis o f discussion with MoE over the past year keeping in view the evolving necessities in education reforms for disbursement o f the third credit. Annex E compares the prior actions for ESDSC I11 with the potential triggers that were agreed at the time o f ESDSC 11. As can be seen in this Annex, almost all the proposed triggers have become prior actions for ESDSC 111.

Y Y

not, NCTB notifies the relevant printer/publisher to withdraw the book.

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Box 5: ESDSC III: Summary of Prior Actions

System Management

Independent evaluation o f the performance o f service providers assessing school eligibility for subvention has been completed and recommendations being implemented. A means-tested stipend scheme has been piloted. An independent evaluation o f the pilot i s being completed. Based on recommendations, a draft fiarnework for a national approach has been developed. Capacity o f MoE/BANBEIS enhanced to update data annually, and carry out third-party surveys. Student assessment for students in grades 8 and 12 based on internationally recognized assessments (such as TIMSS) piloted. Action plan approved to assist the ill-performing schools in the poorer or disadvantaged areas. Implementation o f MoE financial management improvement plan continues with an effective financial management unit in place. Environmental guidelines prepared for new school construction.

Teacher Effectiveness

Third-party evaluation o f NTRCA registration and certification process completed and recommendations are under implementation. New teacher training plan for new and head teachers as wel l as subject specialists in English, Mathematics and the Sciences developed and teachers are now being trained based on a five-year action plan.

Curriculum and Textbooks

All aspects o f NCTB restructuring completed and total functional separation o f the textbook and curriculum units completed. The process o f competition for textbook publishing and printing for the entire secondary education system has been completed. N o w al l textbooks in grades 6-12 are published following a competitive and transparent process.

K The Proposed Credit

99. education re fo rm program - main l y focusing on supporting governance related reforms in secondary education as l a id out in MoE’s medium-term framework, and described in detail in Section I V above. The proposed credit would complement the D S C series o f operations that are aimed at strengthening core governance functions, with emphasis on procurement, publ ic f inancial management, tax administration, publ ic administration, and checks and balances on publ ic entities. The amount o f the credit wou ld b e US$lOO million equivalent, and the borrower would b e the People’s Republic o f Bangladesh.

The proposed Credi t wil l support the third phase o f implementation o f the government’s

100. Wh i le the proposed credit i s the last in the current series o f education sector programmatic support credits (ESDSC I-111), the Government i s keen t o have continued support t o push forward education sector reforms. Hence, discussions for potential follow-on support under a n e w series o f programmatic support credits are also underway.

10 1. economic framework for increasing growth and poverty reduction based o n agreement with the Bank and the IMF. The economy grew by 6.7 percent in FY06, the highest rate in over two decades and the third consecutive year o f at least 6 percent growth. Despite several months o f pol i t ical turmoil, forecasts suggest 6.7 percent g rowth in FY07 as wel l . Growth has been broad-

The Government has put in place a prudent and sustainable medium-term macro-

27

based, cutting across a l l major economic sectors and benefiting f rom robust demand in both domestic and export markets. The fiscal, monetary, and external indicators have remained within the thresholds o f the macroeconomic framework agreed with the IMF under the PRGF program. T h i s credit i s subject to the satisfactory implementation o f the macro-framework.

102. The pr ior actions are consistent with the medium-term pol icy framework articulated by MoE. The pol icy matrix i s attached as Annex B. The set o f actions supported by the prior credits are outlined in the matrix along with the set o f pr ior actions that Government i s undertaking as part o f the proposed third credit. The matrix also describes the continued actions contemplated for the period beyond the current series o f sector support programs. The monitorable indicators associated with this pol icy framework are presented in the final column.

103. Borrower, Credit Amount, Terms and Tranching: The borrower i s the People’s Republic o f Bangladesh. A single tranche Credit o f SDR 65.6 m i l l i on (US$lOO mi l l ion equivalent) would be made available upon credit effectiveness. The closing date o f the Credit i s December 3 1 , 2007. The completion o f the pr ior actions should be considered sufficient ground for the release o f the Credit.

104. Disbursement: Proceeds o f the Credit will be disbursed in one single tranche, to a specific deposit account of the Ministry o f Finance established at Bangladesh Bank for this purpose; the deposit account i s part o f the country’s official foreign exchange reserves. An amount equivalent to the Credit proceeds will then be credited to an account o f the Government to finance budgeted expenditures. The Government will be required to provide a confirmation to the bank that the proceeds o f the Credit has been received in the designated deposit account and that an equivalent amount in local currency has also been credited to an account o f the government available to finance budgeted expenditures. Transactions and balances o f the Government account wil l be fully incorporated into the Government’s accounting records and financial statements. Disbursement will not be l inked to any specific purchases and no procurement requirements wil l be needed. I f any portion o f the Credit proceeds i s used for ineligible purposes as defined by the Development Credit Agreement, the International development Association (IDA) will require the Borrower either to return that amount to the deposit account or refund the amount directly to IDA. The Bank assessed that the above stated measures would provide adequate fiduciary arrangement for the operation.

Fiduciary Issues

105. Financial Management. Over the last several years, GOB has been addressing key weaknesses in financial management identified in the Country Financial Accountability Assessment (CFAA), through a series o f reform programs supported by DFID, Wor ld Bank and a few other development partners. The government, in collaboration with the development partners took measures to sustain the progress achieved and looked ahead to identify the gaps and address those on a priority basis. A joint Wor ld Bank, DFID and GOB review o f Institutional Arrangements for Public Expenditure, Financial Management and Procurement that was carried out under Public Expenditure and Financial Accountability (PEFA) Pegormanee Measurement Framework identified that although a number o f reforms have been undertaken and the overall trajectory o f change has been positive, the pace o f progress was slow and a number o f challenges sti l l persist. The challenges that need to be addressed are: (a) allowing greater f lexibil i ty to ministries in management o f budget implementation; (b) improving the internal control environment; (c) strengthening the accounting and reporting mechanisms to obtain timely, regular, adequate and reliable information; (d) improving the quality o f audit and i ts impact; (e) developing relevant knowledge, aptitude, competence and skills o f c iv i l servants; (f) enhancing

28

financial management capacity and accountability o f l ine ministries by meaningful integration o f CAOs with the assigned ministry and ( g) enhancing implementation capacity o f PFM institutions.

106. GOB recognized the importance o f improving the quality o f public financial management for achieving the development goals set forth in the PRSP. Accordingly, GOB undertook strengthening the planning processes to avoid over programming, including through better project preparation and approval process and introduced a Medium-Term Budgetary Framework (MTBF) o n a pi lot basis in 14 ministries (including MOE) with plans to include more ministries in FY08.

107. addition to earlier steps o f eliminating a major conflict of interest by separating the external audit and internal accounting functions, GOB i s working on instituting an Audit Ac t to make the C&AG a truly independent body, by earmarking for i t non-discretionary budgetary allocations and providing it with more autonomy on administrative decisions. Furthermore, with assistance from the Bank, GOB has started setting up a technical support unit for the Public Accounts Committee (PAC) in the Legislature and developing a system o f information that would increase the transparency o f i ts decision making processes.

GOB initiated certain steps to enhance oversight o n public financial accountability. In

108. One o f the benchmarks for access to development pol icy lending during the current CAS period (2006-09) i s to achieve satisfactory progress o n the annual benchmarks to be established under the agreed Public Expenditure and Financial Accountability (PEFA) framework. The Bank has been workmg with the government to develop a detailed action plan that will help improve the ratings o n the Public Financial Management (PFM) indicators over the medium term. The government has recently developed and initiated implementation o f an agreed Public Financial Management Improvement Plan (PFMIP), satisfactory to IDA, with measures and timetable to address gaps including those identified in PFM indicators ratings. Efforts are also underway to tailor and apply the PFM measurement framework at the sector level to specifically suit the needs o f MOE. To identify the sector specific public financial management issues, a financial management assessment o f the education sector was conducted at the beginning o f ESDSC program, and it identified the following pertinent issues: (a) inadequate control environment leading to misuse, wastage of public funds and corruption; (b) unreliable accounts due to backlog in reconciliation affecting budget monitoring; (c) insufficient capacity in MOE to produce comprehensive financial information to evaluate performance and take informed decision; (d) absence o f internal audit function to review the internal control system and management; (e) poor response to audit objections at pr ior P A C stage and persistent delays in implementation of PAC recommendations; (0 lack o f professional financial management capacity in various academic and administrative units; and (8) misuse o f autonomy and lack o f accountability in public universities and education boards. Expenditure tracking studies suggested that the public financial resources reached schools as intended, but there was evidence o f mismanagement in the authorization o f spending.

109. MOE has been keen to address the above issues and had agreed with IDA o n a medium term Financial Management Improvement Plan (FMIP) comprising actions to: (a) strengthen the Financial Management Unit (FMU); (b) improve reconciliation o f accounts; (c) introduce internal audit; (d) respond better to resolution o f audit findings; and (e) strengthen follow-up o n recommendations o f the Public Accounts Committee. Significant progress has been made in implementation o f these agreed actions though targeted result was not fully achieved. MoE’s activities in general faced disruptions due to severe polit ical violence and uncertainties over the last quarter o f the previous year.

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110. In keeping with the ESDSC I11 trigger o f a fully functional Financial Management Unit (FMU), the Unit has facilitated improved monitoring o f project expenditure data, introduction o f MTBF including compilation o f integrated budget, and tracking o f poverty related expenditure. The status o f reconciliation o f the records o f the Drawing and Disbursement Officers (DDOs) with the respective Accounts Offices i s regularly monitored , although targeted full reconciliation i s yet be achieved. MOE has initiated the process to take punitive action against the defaulting DDOs and strengthened the enforcement mechanism to achieve the targeted result. On the settlement o f audit objections, MOE worked hard in establishing base l ine data to track audit objections for three financial years FY2002-2005 across a l l the spending un i ts o f the Ministry. Out o f a total number o f 3 134 objections involv ing BDT 344.9 million, settlement reached at the end o f April 2007 recorded 8 1% in value. MOE identified that some organizational strengthening o f MOE i s required to monitor and enforce better response o f i t s units to audit findings. Accordingly, a new wing has been created led by a Joint Secretary who, with his team, i s n o w able to devote full attention to fo l low up actions on a more regular basis. The audit wing with a fully functional Audit Cel l has been vigorously fo l lowing up audit issues by holding tripartite meetings across the country, between the auditee units and auditors in attendance o f the Joint Secretary or the Deputy Secretary o f the audit wing. The Ministry in a high level meeting presided by i ts Secretary recently took a target with a time bound action plan to resolve 80% percent o f audit objections in value by April 30,2007. As evident, they have already achieved their target. The resolution o f audit objections and implementation progress o f PAC recommendations i s being tracked through a data base. A high level committee chaired by the Secretary, MOE i s monitoring the progress and issuing directives to the defaulting directorates under MOE. Private Auditors were engaged in auditing educational institutions across the country in seven packages. MOE i s examining the reports received. MOE agreed to share the TOR with IDA for future engagement o f private auditors for internal audit o f its organization and operations.

11 1. and the government’s demonstrated commitment to reforms provide an adequate PFM environment to support the present Development Policy Operation.

The existing level o f PFM performance together with the positive trajectory o f changes

112. that financial management in the Bangladesh Bank was weak. To enhance the safeguards framework, the Bangladesh Bank has started strengthening i t s financial management with IMF support and the IDA-financed Central Bank Strengthening Project. A timetable has been set for the adoption by the Bangladesh Bank o f International Accounting Standards (IAS) as i t s accounting framework. Starting f rom FY03, Bangladesh Bank had i ts financial statements audited by audit f irms having international affiliation, in full compliance with International Standards on Auditing. Bangladesh Bank’s FY05 financial statements were audited jo in t ly by two f i r m s that are associates o f internally reputed f i rms. The auditors expressed unqualified opinion and indicated that the financial statements were prepared in accordance with I A S and the audit report did not indicate any weakness in foreign exchange management.

Fiducialy Risk. The IMF Safeguard Assessment conducted in September 2002 concluded

113. The various diagnostics conducted by the Bank and other donors also acknowledge that fiduciary risk in public spending in Bangladesh i s high. GOB has taken several steps to address the weaknesses. As outlined the section o n financial management, significant progress has been made over the last few years to strengthen financial management and reduce fiduciary r isks. The GOB has continued i t s PFM reform plans, as evidenced by the ongoing DFID funded Financial Management Reform Program (FMRF’), which started in 2003, and implementation o f other aspects o f the reform program described in this Program Document. As a part o f the review o f Institutional Arrangements for public expenditure, financial management and procurement,

30

Bangladesh’s PFM system was rated against internationally accepted indicators (PEFA). T h i s provides a useful framework to track progress towards improved P F M performance against annual bench marks that are in the process of being established.

114. misused, which poses a particular risk to operations such as ESDSC 111. The Government, however, has a good record o f allocating public spending to key development sectors, including social spending and infrastructure. To further mitigate the risk, auditing arrangements and financial management within government ministries (including MoE) has been strengthened with DFID’s assistance. External oversight by the Comptroller and Auditor Generalk office i s also in place. Further, tracking studies o f major spending o n education also i s evidently curbing leakages. These measures should mitigate budgetary risks, but their effectiveness will depend crucially on the swift resolution o f serious financial irregularities, identified by the C&AG, and on readiness by the Finance Ministry to impose financial sanctions on errant agencies and programs. The PFMIP of M o E addresses some o f these concerns.

Budgetary Risk. Fungibility o f funds implies that budgetary resources may be diverted or

1 15. last several years with steady progress in improving the transparency and competitiveness in public procurement - an area typically r i f e with corruption. Initially, the Government put in place a uni form procurement policy in October 2003 for al l public sector entities across the country, with provisions o f substantially reduced layers in procurement approval process. In addition, a procurement tracking system through MIS was established. The new regulations increased awareness among the contracting/ business community and contributed significantly towards harmonizing donors’ and Government procurement procedures. The Bank and other key development partners accepted the regulations for al l local procurement. Then, despite strong resistance f rom powerful vested interests, the Parliament adopted a new l a w o n public procurement in July 2006, with many provisions that are in l ine with wel l accepted international practices. GOB is now finalizing the rules to implement the law, and, in the interim, is using the rules and regulations based o n the Executive ordinance that was the precursor for the law. The law has introduced new standard bidding documents, which significantly reduces the layers in the procurement approval processes. The Government has also put into place a unique procurement tracking and monitoring system that links an e-procurement with a management information system, which i s being piloted in a few agencies. However, there are s t i l l a number o f cross- cutting governance, institutional, and implementation issues including inadequate enforcement o f regulations, delays in award, and allegations o f fraud and corruption. The problem o f political interference has been effectively effaced by the care taker government, at least for the time being.

Procurement. The landscape o f procurement has been reshaped during the course o f the

Environmental Aspects

116. impacts i s provided as Annex F. Overall, the program i s environmentally benign, and wil l not have significant effects on the environment, natural resources, or forests. In particular, the policies supported under the program do not lead to higher levels o f physical investment, but support more equitable access through reductions in the establishment o f new schools in overserved upazilas, balanced by the establishment o f institutions in underserved upazilas. M o E has met the trigger for the third credit o n preparing and strengthening the environmental guidelines for school construction under an overall environment management framework.

A matrix screening the policies supported under the program for potential environmental

117. the provision o f safe drinking water at schools, and the provision and maintenance o f adequate sanitation. To address these issues, IDA has been working with M o E (as part o f the Second

At the secondary education level, a principal environmental concern i s the need to ensure

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Female Secondary School Assistance Project currently being implemented) to put in place arrangements to guard against the arsenic contamination o f drinking water. The agreed guidelines are also being used to design and maintain separate toilets for girls and boys. Since 2003, over 1,400 tubewells and latrines have been constructed in schools. Wells are also tested for arsenic every six months and contamination rates are in the vicinity o f 15 percent. In areas where the wells have been found to be contaminated, M o E has attempted to develop alternative means to provide arsenic-free water to children.

Monitoring and Evaluation

118. Improving the quality o f economic and social policies based o n objective assessment o f the outcomes o f any intervention demands timely and reliable information. The PRSP outlines a monitoring framework, which includes monitoring indicators, data sources, and institutional arrangements for monitoring and providing feedback to policymakers. Sources include existing data as wel l as planned annual surveys for tracking intermediate indicators related to access, usage, and quality o f public services. This i s more pertinent in education sector and i s pronounced with considerable emphasis in MoE’s third phase o f reform initiatives. In order to adequately evaluate the quality and impact o f educational services, mechanisms have been put in place for t imely and reliable data at various levels: household (and intra-household level to examine issues such as gender); school level data (e.g., quality o f infrastructure, teacher characteristics, measures o f governance, pupil learning); resource flows in the education sector (e.g., expenditure tracking data at the school-level). Apart from the c o u n t q w d e data acquisition systems l ike HIES, BBS’s data collection, MoE has i t s own mechanism to collect data through BANBEIS and DSHE. Some o f these data are obtained through an annual self-reporting system with a mechanism in place through the district education offices and through sample survey to systematically cross-check the veracity of the data. Some o f these data are collected through specialized surveys conducted by government agencies (e.g. BANBEIS) and independent third- parties (e.g., study on teacher absenteeism). Then a periodic census in education sector by BANBEIS, roughly every f ive years, brings out the fuller picture.

119. what steps are being taken to improve the quality and reliability o f data collected by the Bangladesh Bureau o f Educational and Information Statistics (BANBEIS).

Annex C discusses how the ESDSC program as a whole i s monitored and evaluated, and

120. household surveys such as Household Income and Expenditure Survey (HIES) every f ive years. HIES provides an important basis for updated poverty monitoring and analysis. Besides systematic welfare measures (e.g., consumption-based poverty headcount), theses household surveys play a critical role in providing another source o f independent data o n critical educational outcomes (e.g., primary school completion rate).

Household Data. The Bureau o f Statistics (BBS) carries out nationally representative

12 1. A National Poverty Focal Point (NF’FP) has been created in the General Economics Div is ion (GED) o f the Planning Commission to monitor poverty and track progress in implementing the national strategy for economic growth and poverty reduction. The NPFP i s expected to grow and function as an institutionally effective and technically competent Poverty Monitor ing Unit with strong inter-ministerial linkages and interactions with various stakeholders outside the Government.

Successful monitoring depends critically on institutional arrangements and their capacity.

122. school level data on enrollment, age and gender distribution, certain measure o f school efficiency

School-level Administrative data. BANBEIS collects/compiles critical post-primary-

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(e.g., drop-out rate), teacher characteristics, school infrastructure, and school type (government, private nonreligious, religious). BANBEIS, established in 1977, i s the primary technical arm o f the MoE which has been maintaining several post-primary education and GIS mapping database systems. While the basic structure o f BANBEIS i s sound, the system i s now being further strengthened to increase the frequency at which it collects certain critical data, cross-check the veracity o f the self-reported school data, and establish linkages with other essential data systems. As described earlier, MoE i s currently working towards addressing these issues with a time- bound action plan and adequate resource allocation for this important work.

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123. independent third-party surveys on important measures o f system quality ranging from teacher absenteeism to public expenditure tracking. One important change in the mindset observed i s the fact that such independent studies are now taken seriously. For example, Education Watch reports by CAMPE are now much more seriously considered in policy discussions.

Third-party Surveys. MoE i s in the process o f incorporating findings from various

secondary (1 1 percent) education are high to justify government investment in the sub-sector. In particular, secondary education for females i s the best investment from both the individual's and

by the private and social rate o f return o f about 19 percent and 2 1 percent respectively (see Annex G). Simulations also show that a

improving system governance

society's point o f view as shown

package o f reforms aimed at

124. include: (a) pass rates in standardized examinations; (b) teacher absenteeism rates; (c) gross and net enrollment rates (including enrollment rates o f the poor); (d) dropout rates; (e) completion rates; and (f) proportion o f public resources being accessed by the poor. As it will be important to monitor whether Bangladesh will be able to maintain i t s impressive progress towards gender parity, these results are being disaggregated by gender. Furthermore, regular evaluations o f policies and programs will also be carried out to inform M o E o f how to better redesign i t s interventions to help achieve education targets.

Based on these data, the key indicators that are being monitored during the medium-term

Poverty and Social Impacts

126. education spending accessed by the poor decreases by grade as the poor are more likely to drop out at higher grades. Steps being taken in this direction have been highlighted in Section IV. Earlier, an attempt was made to simulate the impact o f these reforms on the distribution o f public resources over the years. According to the results o f that simulation, (see Figure l), the distribution o f public expenditures was expected to become more pro-poor as a result o f the

One o f MoE's goals i s to make access to education more equitable. The public secondary

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measures taken by the Government. The proportion o f public resources being accessed by the poor in secondary education was anticipated to rise f rom 24 percent in 2002 to about 33 percent in 2008. Recent analysis shows that by 2005, the proportion went up to 27 percent. Analysis i s underway to understand further developments over the past year. I f the trend continues, the reform measures wil l make more resources available to the poor at the secondary level.

Lessons Learned and Benefits and Risks

Lessons Learned

127. during the implementation o f previous ESDSC’s, and the DSC’s. Some o f the key lessons incorporated into ESDSC I11 are as follows:

The third Education Sector Development Support Credit builds upon the lessons learned

For these reforms to succeed, continuedpolitical commitment o f the Government to these reforms, i ts ownership o f the results and public receptivity o f the reform initiatives are critical. Although a Caretaker Government i s now in charge, ownership o f the education reforms i s n o w even more pronounced than before. Continued backing o f the process by the highest levels o f government, and tough measures when needed (e.g., in the case o f reconstituting the SMCs/GBs) have ensured that special interest groups have not been able to derail key reform measures. I t i s important that the programmatic approach remains flexible enough to accommodate lessons learned f rom ongoing activities and changes in ground realities - while maintaining overall coherence and direction o f the reform. Finding a home for coordination o f teacher education i s a case in point. Whi le the goal remains the same, to train the in-service teachers and enhance the quality o f teacher training provided by various agencies, the Government revisited the planned institutional mechanism to ensure i ts targeted achievement. Well-designed education reforms enjoy considerable popular support. One significant aspect o f these reform initiatives in the education sector i s that i t never faced any insuperable resistance although there were a number o f measures that hurt the vested interests, particularly the powerful polit ical circles. Besides, extensive consultations with government officials and other stakeholders at the central, district, and upazilla levels engendered a wide buy-in for these reforms from key stakeholders. The success o f these reforms depends considerably o n technical capacity, and effective use o f data generated f rom monitoring and evaluation o f specific programs and the system in general, for planning purposes. To this end, institutional development i s the key. Understandably, it takes time for these institutional development measures to show positive outcomes, but the implementation o f these measures in themselves constitute a strong signal about the seriousness of the Government to ensure the desired impact. For example, revamping the capacity o f BANBEIS as an independent data source was partially unsuccessful in the past because o f the perceived severance f rom the “power” element. T h i s has been corrected by a circular f rom MoE, signed by the Secretary himself, making cooperation with BANBEIS binding for al l institutions and government agencies. Development pol icy lending strongly needs complementarity with investment projects to fo l low up on actual implementation o f pol icy based actions. In the present case, putting this education development support credit in sync with Female Secondary School Assistance Project supported by the Bank and some interventions supported by ADB were found considerably helpful, particularly in institutional development and sustainability .

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0 Triggers also need to emanate f rom comprehensive analytical work t o ensure well-designed reforms. MoE has continued to commission in-depth studies in selected areas. Reforms have been informed by these analyses, and relevant work undertaken by development partners. The more checks and balances are institutionalized, the better i s the chance to curb corruption. If the decision malung authorities and authority to evaluate those about whom decisions are to be made are in the same hands, the r i s k o f corruption i s higher. The experience suggests that distribution o f these authorities at different points and making them impersonal and less discretionary payoffs.

0

Benefits and Risks

128. Improving governance has repeatedly been identified as the biggest development challenge facing Bangladesh and the greatest impediment to achieving i t s growth potential and thus achieving the poverty reduction MDG. The proposed credit will assist in deepening reforms aimed at raising the quality o f service delivery, and at the same time improving equity o f access to secondary education. By tying performance in provision of education to incentives, and building greater accountability and community participation, these reforms will reduce rent- seeking opportunities and undue polit ical interference and enhance cost-effectiveness.

129. secondary education with more schools being set up in underserved areas, better trained and more effective teachers, reduced teacher absenteeism, higher enrollment and completion rates, and reduced time to complete the secondary cycle. T h i s wil l ultimately lead to a more skilled labor force attuned to the needs o f the Bangladeshi labor market as wel l as raising i ts competitiveness in global markets.

I t i s intended that these reforms will lead to outcomes such as more equitable access to

130. There are potentially some social costs associated with the project - e.g. the government’s decision to stop subvention payments to under-performing schools unless they improve their performance, will lead to unqualified teachers being potentially la id o f f by private schools. However, these are far outweighed by the long-term benefits o f good quality secondary education being provided in schools with well-qualified teachers.

13 1. The program does entail significant risks, and many o f these remain the same as was the case with ESDSC I and 11. The key r isks and the risk mitigation strategy are outlined in Table 5 below.

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Table5: Ke: Risks Macroeconomic The main economic risk stems from the weak financial condition o f state-owned enterprises (SOEs), especially those in the energy sector. Sustained large losses o f the energy sector SOEs have led to a build-up o f outstanding liabilities at these SOEs and have also exacerbated the financial fragilities o f the nationalized commercial banks (NCBs) that are directed to finance their losses. Another important source o f economic vulnerability i s the persistently low tax mobilization. Political: Sustaining the political commitment to reform. While key stakeholders in the Government are committed to reforms, the sustainability o f the reform process put in train by the CTG w i l l be linked to the commitment o f any future government to the reform process as well as the smooth return to democracy.

Corruption. In the past, there have been allegations o f corruption and resources meant for education have sometimes been captured.

Capacity. Given relatively low government capacity, implementation o f reforms in a

spending in Bangladesh i s high.

tisks and Risk Mitigation Strategies

The Bank has worked closely with GOB on this issue, continually encouraging depoliticization o f price adjustment, and providing on- demand analytical notes to help inform GOB’S decision. Authorities have already responded by implementing power tariff increases in March 2007 and fuel price increases in April 2007 to stem losses at the Bangladesh Petroleum Corporation (BPC) and the Bangladesh Power Development Board (BPDB), respectively. To address the risk from low tax mobilization, authorities would need to step up implementation o f the tax administration modernization program (being supported by DFID and IDA) along with legislative reforms to correct major tax policy distortions and strengthening o f customs administration.

Risk Mitigation Strategy

Lessons o f experience show that so far, successive governments have continued to implement ongoing education programs and policies, and t h i s trend continues rather more forcefully wi th the Care-Taker Government and with stakeholder support. I t w i l l thus be difficult for vested interest groups to subvert these reforms without meeting significant resistance from stakeholders.

The public discourse for education reforms in the changed political environment continues to gain momentum. This has to be sustained over the longer term for reforms to continue.

The bilateral development partners are taking the lead in working with domestic civic organizations and with the government to help an early and smooth return to democracy. The Bank i s vigilant about the emerging political environment and in close contact wi th various actors. A key objective o f this reform package i s to build greater transparency and openness in the system and ensure greater community participation. Through conducting and disseminating results o f expenditure tracking surveys, stakeholders are made aware o f how resources meant for the system are being utilized. These reforms are l ikely to make it much more difficult to engage in corrupt practices. NTRCA’s screening mechanism has effaced malpractices in teacher recruitment, at least for now. Transparent selection process for textbooks and competitive production o f textbooks have largely reduced rent-seeking in textbook production M o E i s cognizant o f i t s capacity constraints. Several measures are being taken to alleviate t h i s problem. Particular emphasis has been given to building technical planning capacity and focusing the ministry ’s role on formulating policies, financing, setting quality standards, assuring quality delivery, and monitoring and evaluation. The capacity o f DSHE and BANBEIS i s also being enhanced. Towards strengthening local level capacity, oversight committees have been formed in each o f the districts and upazillas to monitor school performance and ensure public disclosure o f information. The strategy also rel ies on strengthening school management committees to give them greater responsibility regarding the supervision o f schools. MoE i s following a comprehensive plan for teacher training. Th is w i l l hopefully lead to higher quality o f services. GOB has taken several steps to address the weaknesses. Significant progress has been made over the last few years to strengthen financial management and reduce fiduciary risks. The GOB has continued i t s PFM reform plans, as evidenced by the ongoing DFID funded Financial

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Risks

Budgetary Risk: Fungibility o f funds implies that budgetary resources may be diverted or misused, which poses a particular r isk t o operations, such as ESDSC 111.

Financing. Owing t o the uncertain external environment, the government's abi l i ty to maintain i ts commitment t o the sub-sector m a y be an issue.

Risk Mitigation Strategy Management Reform Promam (FMRP), which started in 2003, and implementation o f other aspects o f the re fo rm program described in this Program Document. A s a part o f the review o f Institutional Arrangements for publ ic expenditure, financial management and procurement, Bangladesh's P F M system was rated against internationally accepted indicators (PEFA). Th is provides a useful framework t o track progress towards improved P F M performance against annual bench marks that are in the process o f being established.

The Government, however, has a good record o f allocating public spending to k e y development sectors, including social spending and infrastructure. To further mitigate the risk, auditing arrangements and financial management within government ministries (including MoE) has been strengthened with DFID's assistance. External oversight by the Comptroller and Audi tor General's off ice i s also in place. Further, tracking studies o f major spending on education also i s evidently curbing leakages. These measures should mitigate budgetary risks, but their effectiveness will depend crucially o n the swift resolution o f serious financial irregularities, identif ied by the C&AG, and o n readiness by the Finance Min is t ry to impose financial sanctions o n errant agencies and programs. The FMIP o f M o E addresses some o f these concerns.

Whi le there are concerns about the uncertain external environment, the PRSP clearly demonstrates the Government's commitment to maintaining a high level o f investment in the education sector. The recent dialogues with the Care-Taker Government c o n f i i the continuity o f the commitment. Th is commitment has been further strengthened through measures wh ich are aimed at allocating resources more efficiently and reducing leakages f r o m the system.

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Annex A

Subject: Education Scctar Development Support Credit.

Please find nlwckcd the Letts of Seetor Policy with a request for the third Education Sector r)evelopment Suppm C&t &om Ih: Ayub Quadri, Adviser, Ministry of Education.

A s you how, Bangladtsh has made significant proms in access to education and substantive systemic reforms in the eka t ion sector oyer the p s i years with support from fDA. The new Care-Takcr Government km furlher hlmercd the reform initiatives with some coumgeous steps which were considered politicdilly very challenging in the past. The new Government 3s fully cornnutred to deliwmg the public p o d to those who need it most As you wili notice in the tetter o f Sector Policy, a number o f measures have been taken to channel ~ s o m m m t for educatmn to the poor children. panicularmrfy those who are disadvantaged for various ~~asans. We med to consolidate t b a e ~ & R S and enhance ~CCCSS to education further. At the same time, we alsa need lo focus more on tqmvmp education quality at all Iegcls. The Government is working toward achieving these objectives wth fait commitment.

Dt. Quadri’s letter hiflights the key reform areas m secondary and higher secbnda?. editcation: (i) improving syssrem mamgernent, (ii) enhmcing tcacher etfleclismess and fiii) curriculum mod textbock reforms. I would l ike to reiterate some of &e crucial reforms being undertaken.

-ut the ma of sysarn managemeat, we are putting emphasis on msparency m die estabilshment and fmmcing of schools, access to education for %e most disads.antaged. str@gthening of nionltorrltg md cvaluarion rnech&xns and grater cornunity vigilance. We are also yadually moving toward a gmfs-bascd f i c i n g system where resoumzs would folfuw &e students, not the teachers.

Improving teacher effectiveness requirts hsulspmcy in the teacher remitment process, ~ ? t m g a p o l ofquabfied patentid teacha and having a system m place to continually upgrade thc skills of the in- .mic7& tmcbers. To t h i s end, m autonomous Non-government Teacher Regstration and Cerrificatiori Authority (EiTRCA) has been established, which has designed and $tarfed unplementmg standsdrmd and transparmr criteria for crrtifying reachtm based on competitive exanunatians. n e ~ O V e n t R l c n t IS also putting in piace an i ~ i ~ ~ ~ ~ i ~ j o n ~ l mechanism to coordinate activities for impr0i;ement of die qualiry o f ~ b - s e ~ c e teach&-$, and setting standards and monitoring !nechan;sm to oversee the quality of teacher training coIleges, both pubhc and pnvate.

h the area of textbook md curriculum reform, the prodluclion o f tzxtbooh for scconds~ education has now hcm made fully conqeritive. Tranqmnt critcna are followd in cvaluatuig manuscripts by learns ofpmfccssional exyms. Schools are free u1 choose die books from the mwka t h ~ y want ‘io use in iheir rcp2ctive schools. This competition has resulted in significant improvemmnz in the quality ofbooks. 7”ne books also reach the children on h e . %hilt: the achievements we quite significant. wt: still have a long way to go in mmring accss to quality secon,?ary education for all chiMren of Bangladesh.

Contrf ..E

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: 2 :

Mr. Paul Wotfowitz President The Wmld Bank 1818 H Street,.rn? Washrigton LX 20433 7"J.S.h.

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. . . . . . .

Ayub Quudri Adviser

Minimy d Education 3liaisti-y of Prirnar?. 6;: Mass Fducatron

h.finis*j?, ufCu11unl Affairs People's Kepttkrlis uf Baagldrsh

Subject: Kducalicm Sector Deveiopmenl Support Credit: Letter of Sector Folic?

Dear Mr. U'olfctwitr,

I t is known m you &ai recently Bangladesh has gone through some political unrest. The stand-off hetwwn the two m a p political alliances fojlowing the cnd of &e tern o f the previow eleccled Chvernrncnt and their irreconcilable disagreement on &e choice o f key public of ic ia ls md the institutional arrangement for the election to Bangladosh's 9' Parliament led the counuy to what was perccived to be m insxabiiity. liowcva. this was finally averted by the dwlarallon of an emergency on fanumy 1 I. 2007 and e change in the Care-Taker G o v m m t . Tbe ne% Care-Taker Govenuneni i s w,mmnitted tu transferring power i o an eIcc~ed Government ar the earIiosr, once the conditions for a five. Farr and credibit elemon we in place. The Government fitts @en a number o f courageous steps along that direction which have drawn considerable applause both from inside the country and from the inkmation& community.

Amidst many odds, Bangladesh has maintained a strong wonornic perfomaxe over the past few ymrs. The Government has taken significant actions to stabilirx: the mcroeconomic envimnmem and improve governance. Economk p w t b in FY06 reached a historic hi& o f 6.7 percent, reflecring strong growth in industry and agriculture. Dom~tic demand and investment have remained buoyant. Exports and reniittances have gown strongly, cantrhuting to a s q l u s in tlie current aCwunf in FYOB. By mid- March 1007, these mllchedf $4 billion. Amording to the latest Houschnld Income and Expenditure Survey tHfES). the proportion of people h h g in p v ~ t y fell &Om &I pltrc%riS Z(tot, 10 40 percent in ZOOS, u ttk (he proportion ofthose in hardcore poverty failing from 34 percenf to 25 percent. Rural poverty felt front 53 percent to 34 percent and urban poverty from 37 percent to 29 percent.

The country prepared a Poverty Reduction Strategy Paper (FRSP) thmugh a process ofextensive comuttahw with various stakeholders ond human resource development is a i the core of Bangladesh's devulopmsnt effons. We believe that access to quality education i s critical to pvenq' reduction md cwonornx dcvclopmenr. The nation's connnitment to ducaiion has been clearly stated in the constitution and 11s developmcnt plans. Education expenditures are currently about 2.3 percent of GDP aid 16.8 percent o f 'lotit1 govanirnent budpa. This allocation has progressively increased siricc 2003 and education 6ontinucs to receive fhc highest budgetmy allocations among all seciufs. We undmtand rhar

ustained cowmiirnent is imperanve 111 order to achieve the Millcnniurn Development Goals (NDGs) i e Covenunent's o w goal of human re~ource development.

Also. oier the last f eu years, the Govement has undertaken a number o f inponmr smcturdl significant improvements in the education sector. Some of the results are ons demonstrate the Government's committnenr to acrelmte growth and

refoncs in order to hn aiscody visible. These rcducr povcrc) ihpough susraind improvemen? in education.

The Bank has supported the impicmentarion of' the first two phases o f hese refcrms tkrough two credits uch worth I;SSIO# milirrin disbursed in late 2oo.J and earl? 2006. Givm the postrivt: ~chie~czitns. some of which are highjighted below, ihc Governmen: i s sceking supyon for a tfnird credit {if t'S5100 million to dcepcn the rcf6ms. 'This wil l lead to a,enificnmnt progress towards achieving iniprowd se:tor governance and ensuring high quaiiiy and quitable education.

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&?ctnr &dig?~iiird

T h e management o f the educazion system falls under two mtnisrrics. The Mmisrry d P n m q an3 Mass Education (MOPME) i s responsible for p n m q educnrion and the Mmsuy o f Z1d~ca:iqm (VnF) looks after secondary. vocauonal mnd trnmav education. Overall, ;here are more rhan 16 million srudanis at the pnmaq level, and oyer eight mmllton at the sccondnry ievel. E iml in ie~s at 111e r c ~ n a p level are sr1f1 reiati\aiy sinall - about 12 percent of the total higher secondary pdua tss - but ha!c t i x potential of wpid growth wiih the expansion ofprmte prowion of tertiary rducmon.

Bangladesh has: made significant progress, esprciaily in increasing access and achieving gender equity, both ai thc pnrr;UT and secundq levels. Grosc pnmary cnrollimnt rate rose h m 90 pcrcertt in rhe late ? W a s to 9’.6 perm: ZD. 10C5, while 8‘; iht secondary b e l i t rose from a scmy 2C1 percent in early 1990s to 47 perccnr in 2005. ??le achievement is beiter understood pafi~culsul~ when it 15 juxti~posed agamst the bnseline of tlic car!y 1990s and when compared to countries tn South A m mil other cuuiitr~cs at sm la r levels ofpr-cnpita income. 0 t h spectacular achievements are gender poni? 111 access both at p r t i a y and secondary levels rind provision of secund chwce education As you know. Bangladesh 1s sbou-eased all mer the world for these trchiesemmfs and JE nmdefs are being rqltcazed In different countria.

However, challenges in the education sector are strll formidable. While the n~onicnrum in tncreasing access at all Icvels. particularly among the disadvantaged comnmunirfss. has to bc $ustame& the counQ needs to put major emphasis aiso on %he quality o f educaricrn in order EO enfiance lea-ntnp outcomes, ‘reacher atsenweism. now found to be 1 1 per cent. i s not very high compared to other Snulh .4sian countries, taut certainly here is room for further irnprovenmt. Sonre pockets o f the coumy. inhabited by disadsantagcd people. are still underserved and the situation looks far worse frurn h e poinr of view of quality of education provided to the children m those ares. The relevance o f curriculum needs to be updated Low completion rate is 8lso mo&er concern. On]?, 20 percent o f the studenrs entering Grade 6 complete secondary education, One has 10 lake into cognizance. the socio-bconomic factors that contribute to this grim scenuno. Accountabihty and rncentive mechanrsn?s. checks aad bataxices for students, teacbers and s&~m~sm~oss, rhe information support for policy fonnulatian ei id capacity for planning at differmr lev& destrve considerable mprovement.

GOB Commitment

The Govcmnent is stron& cormnitred to addressing these issues through r e f o m across the education system. At the primary level, the Ministry o f Primary m d Mass education i s irnplerncnung the second Primary Education Development Propmi (PEDP II) - a sut-yeaear sub-seetor wide progum \thlch aims to strengthen educational access, quality and elrjciency. ’Ihe progam i s substiintiafly supported hq a group o f deselopmunr partners. both bilatsre! md muftilateral. .4iso, to ensure second chance education for those who are left our at the primary level, the Government 1s unplamenting a Reacliing Out-of- School Children I’roject with suppor~ froin IDA ad SDC

In ordm to address issues ax the secondary and higher secondary levefs, the Minisay of Education has been iniplcnienhag a comprehensive medtutn-%mi reform framework fwusing on quality enhmcernent, policy measurcs and systemic iniprovemeiit The fmmewxk w a ~ dw eloped through ex~msive consullaiions and workshops with stakeholders at tlic central, district, and upwh lewis In shoh rile m m ohpmve of reforms IS w addrrss systmn~c y.wernance issues in order to raise the quality and cost-rffecuveness o f service deliwry, and mniprove equity o f access tn secondary educatian. In dxs cfcon, IDA bas alread? supported iht Government wtii two Eitucanon Sector Development Credils in €3’04 and T.1‘06 ‘ n e Govameni 1s now seeking assismce froin IDA to further deepen these refon%.

Socunduty Ediicti:ian Reforms

T h e G o w x n ~ ~ m r IS uncicnaking reforms in three key areas o fsccundq educuncm. tal Systcmic uzipprovcmcnt 20 ensure better perfonnmce o f institutions. greater eK~cic%cy, cormnunlty pXilCIpQtlLY3 and trmgarency ix rcwurce aliocitron: (0) rttiicfier CffeClIVCiiCSS through development of 8 transpsent

41

aad high quality teacher recruitnlmt and trsintiig system; and ( c ) currtculitn? and textbook tmiprosemmt ihrovgh effccnve sepft'zrion o f Amctions and open coqeti t ion in textbook prcrducraon. "[Tiese are disttsszd below

(a) Imprvvenreim iii Sjyrcnric Mnnagmrmr

The ot?jccii\m we to 1nc~eassc the aCC0U:ltablIily of 1

more det.olved and efficienr n a

Scliortt Hqisrrariuii and Fmancmg

uae and ifl location of resources. focal s:akeholdcrs, and develop 3 1 peatcr slakeholder i ~ v o l t emertt

ccognizing capacity Constzamts IR efYecttvcly monitoring secondan. scitooi eslablrstrrnenr and n. MoE i s implmmnng an approach where competitively selected indepmdcnt s e n w e are Lxiirusicd with the responsibility of evaluating the readiness of schoc~ls~colleges for

Schools are now Anmcmf in mucli inore trtuisparent way, MoE has mhrc&? criteria shich fink Monthly Pay Order (MPO] subvenoons to pcrfonnance (in grade 10 and grade I 2 exunmtions) Earlier. 1300 poorly ~ W ~ O R I U R ~ xtsiitutions u ere served notice that their subventions would bc stopped w&tn a year unhs thsy improved their performance. Many o f them improved ttiev periommice. Sorne 368 WorSf performing insrirutions were barred from receiving subvention suppon in 3005 and 2006 Tnwe a~fioiis sen1 a strong message down the system and alerrsd the whole s~ondwy education systcin. tbe outcome o f which was visible m the progressive improvement in the results of the terminal trxamtnatmns - a rise from 40% in 2003 io 59% in 2004 in SSC and born 38% in 2003 to 64% m 2004 in HSC. 'IO sustain this improvement, 2608 schools which showed siylificanl improvement in perFcirmmce ~n SSC' exa.mmations were given mcentivt swards. In taking this action. MoE has been careful not to panelm the schools in the disadvantaged weas sewing less pnvileges comunitics. Rtlther, a number o f r n e m m s have been taken to idenufy the corntrams of the schools in the daadvanmged weas and help them perfonn better.

csrablishment or recognition.

MPOs are also not being issued to new institutions until they can demonstrate that they nieet pdonnance and geographical cntnia. A series of further actions have been undertaken. For example, (1, standardized examinations are instituted at @e eight to measure learning achievements across instirutlons; ( i i ) grade six exminations are being undertaken to asses the quafit')' of incoming sWlents tnto the secondary cycle; (iii) the composinon and functions o f school magmer i t conunittees have been reformulated to ensure more community involvement in monitoring institutional a c h i e s ; {iv) results a f grade 8-10 and 12 standardize< cxmma:ions, a d the names of schools not meeting pcrfomaiice criteria we now published and disseminated natronai1 y to ensure that stakeboldcrs have complete !nfonnatioza dmtir school perfommice vis-a-v~s other bstitutions atid (11) the fmancial management system timughout the sub-sector is bchiy stremfmed to ensure greater transparancy and accounrabiky.

%%le these systemc chsngcs have been institutionahzed, MoE is p lm iqg to sliifi graduhlly to a gmrs-based financing system where resources going to institutions will be linked more closely to [he student on a per-capita basis, rather than to teachers as is the pracfice now. hi that case, rhe schools u7ttl not direc:?\ receive 53kries for reachers but will be provided I,piants - that cm be used to pay teachers 8s sel l as for other quality-enhmcing purposes. Grater grants a41 also be tied to better perfornmce giving il srrong incerttivz 10 thc schools to stay focused OR performmutce. This will also enharice flcxrbilny of the schuo'ls to clioose the proper mix between salaries and traching4carning inpiirs. Cenainly. his wouid be one ofthe toughest refrms to imnplement tis n would mean deiiniiing teachers' salaries from the national pay scale. Howe\w, t i e Government is conlnrittcd to implerrmung it in order IO ensure grcawr accounabi!try to the smke rexipieats and a strong incentive to enhance quaiin. m and access rn lircandiwy educaao.n As a fir51 step. MoE intends to pilot it with new schools which are nor recetvitsg subvcntlan now and are aqirant o: getting support from &e Government. The schools hove hem fdenrifird A draft pol-rcy bzs 'seen prepared and tlie Minisny i s now also working on the implemairstion and inonitonng mechmisms for the pilor

42 P ' I

Ar.ccss oJ&e Poor $5 Secondary Educution

MoE realizes that the tightermg o f cnteria in school financing and regicrralion nccds fo h e balanced with np2ropriatr mmsures to ensure g~ eater access, particu?ar!y, for relz~rvcly poomr areas which might be c)diewise adverse)? affected. Actions arc: under way in this regad BAYREIS has uridenaken a school mapping exercise, 'f'tiis hns helped bloE tdenhfy 1 15 'owrsened" upiltilas wfiert' :IO n w schools and colleges will be subsidized by the Govemmcni for two yews. In 00 'underssmed' mpuilas 2111s $den2fied, hlo': IS providing support to set up ywernmen! scliools aiid 1s oEcnng incentives to pnrate providers to set upiexpand schools. 25 new schools have already been esublished. Thrs smaiion wifl be reassessed on a remix basis.

.4 dwtmi.wixlrun and MunttoriBg utid Kijuluntrnn

MoE 1s moving tonturds 9 devol\,ed sqstem o f govmrtnce W&WI ik currml ~ d m i ~ t s t r a ~ t v t stnlcturc. In thts system, the central Cotwnxnent will be responsible for formulating policies. financtag, scrtmg quufity standards, and inonrtorrng and enluatron e x , while lower levels of poi eminent wil l be responsible for admistenng the system and ensuring accountability a1 the local 1cr.d. MoE has empowred ofl.ici& at the drstrict and upaila iwe ls to take greater respunsibilie in monitoring school ptrfommce and ensure public disciosure of informauon (e.& SSC pass rates, zeacher absenreeisni, cfass sues. etc.1 related to school quality. As a result of these iiiewures, some sipinicinnt pos already visible. For example, teacher absenteeism was: down to 11 percent in 2005 Erom die haselme o f 17 prceni in 2003 The Govenunent o%ci& at &e field clam that the sinlation has further rmprowd over h e past two years

Fwrctional devolution wilt also invofve restructuring of the Directorate o f Secondary and Nigher Education (DSllE) and associated org~nmnons. I h c Government wit1 undertake an mpruzationaf analysis to recommend institutional changes that need to be imptcmentcd. hlsE's planning und's capaciv i s bemg strengthened. Concuncndy, the capacity o f BAWSEIS, the agency responsible for educat~on statistics and monitoring. i s also being enhanced. T h i s will emwc a grata connectton between appropriate information and policy and planning, as opposed 10 episodic actions o f &lie past niasdy influenced by political considerations. In this effort, MoE 'IS insotutlng periodic sun'eys to tfdck outcomes and pubb m p m d i t u n s and undertaking rigorous evaluation methods of i ts progams and poltcres to improve thsk design and effectiveness. Furthermore, to ensure appropriate financial con!rofs, MQE staned implcrnen?ing a Financial Refom Management Program. 'Ihis i s intended to i n c m accountabiltry and trruxiparency in the use of resources.

Si&dialders' invokwrmr

I t IS imperative that Schoof Management Commiitees (SMCs) and College Governing Bodies :C;Bs? be empowered. They are the key m i n e s at the com%unity level who Inanage schools and monitor school perfonnance, Iht Regulations on Managing Conmttets have been amended fo eastire that only the Depury Comnussioners (TtCs), Upmh Nirbahi Officers (WOs), or rexired gov-rnment o4f7cials nnminakxi by them, can chair SMWGBs, and thaf any particular individual (other t?ian DCs and 18Ckl cannot chau more than four comtttces. 31s has significantly bzough? down the undue pdlKlC31 influence on ananagcmcn! of school affairs md recruitment of racbers. In &e pat. thew wcre mstllnces o f a polrticafly lnfluenriul individual chamng 50 such committees To create morc space for memingiul CQITEIIU~I~~ panicnpariun. MoE issued an order a? Scwcrnher 2006 to reconstitute the SMCs whrch are sill poiiucally mfiuenced. .4s an interim mmg~rnent unul elechons to these cominitrees, relevant Government offici& have been given the rcsponsibitit) IO chair those SMCs. Simultimeousfy% tnintng 1s being provided to the members of the SMCs on their roles and responsibiirries. 50111:: 126.000 mrsnbers fro:n SMCs a:id Parents l'eacliers Assucttlauons from 6,666 institutions have so far been trained. Also, incrcascd women pmicipatton m managem-Ynt bodies has been insrrtutio

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fbj EnAanciixg Teacher Quality

Ilnder these r e h m initiatives, t$e Government has developed a transparent a d I ~ g h - 4 system of teacher retrcitrnent and is workmp toward hen.% teacher imformmce evaluation on ihc o f agreed crttcria and xanduds and a comprehensive tn-service rmcichcr mirtmg system, W e rcaiir i t 3s diffcult to linpn~ve the quaiity o f ail the teachers who a e already in tiic sysiem w i t h a stta:~ panod

IlouLever, 11 is possible to bcgm lackling the problem of ieachcr abserileeisn~. prm exit pouri? d leachers from anwnng !he sysrern. establish a more effective system ofpre-scn ice training lcld

gradually m p v e the quality oitiir reachers already in ;he system.

Teach- ..id ct.er!!iarrttn

MaE has estabhshed an auionomoils National Teacher Regisrration and Cert&catiun A l i d ~ n t ? {NTRCA) ihr~.mgh an enactment endorsed by [be F;ational Partianlent. NTRC.4 fias dcs-tgned a set o f s!id;lrdimd and transparent criteria for the recruitment o f teachers. The main function of 5131s authority i s to screen. and cer,ify a pool of qualified teachers. This IS helhg done on the basis of academic qualrficauons and a smndardmd examination conducted on a regular basis The lisr of‘ ?re-qualified teachers are published and made available la all concerned. School Manageinwit Comminecs (S,tlCs)’Coveming Bodies (GBs) retarn the authority and flexibiliry to remitit reachers. but only fiom this pre-quaitfied pod. This authority has become fully functional and lias adimnistered the first IWO ceriificauon examinations in 2005 md 2005. EXTRC.4 hs?s ceaufied Some 56,169 candidatm so far

The imperative to recwit teachers from the cettifi8d pool h a already prowd to be a strong distnceittive a p i n s r undue influence on SMCdGBs and a m s t elite capture of these bodies.

Tcarlzcr R~7nuncrraiiiin

Pro\won o f good secondary education largely depends on attracting good qunliv teachers Since some 98 percent of the secundq schools we nou-govexnmnt schools, the Govcment needs to look Into rmwerabon and incentive smcture for non-government school tcacliers. Parlianient passed legislatatlon granting pensions to non-govemmt secondary school teachers. Besides, a picture is also emsrging from the expenditure mcking s w e y s as IO how equitably &e schools art utiliang its awn resources to a m c t goad leachers apart from the MPOs received from the Government. 711h wdl inform MaE’s policy decisions in near furure. As a next step, MoE will develop a time-hound action plan to ~ddrcas :smes sunnunding the: provision of incentives to teacliers, also in congruence with grants-based financing mechanism t ~ i the new schools, which will be irnpiemented within the next fca years

T i u c h ~ Trurnrrig und Stondurds

To improve the ijualrty o f the teachers who are already in the system, MoE is %*orking on tJte b m s of a compreheilstse action plan. Over the past two years. roughly 49.000 secondair sciiuols Leachers, now in s m i c e , have been trained making the training m d a s o r y for all head reachers. In addition, 40 mobile teaching resource teams (M’IXT), each consisting offour expet? trainer teachers. are providing trdining sen’ices to the teachers in the remote areas ‘The Government is now woriiiiig on an rnstimtional home to he gvm thc responsibility for developing teacher mining policies as wcll 8s conrdifiatmg, regu!ating and c:rta&ting all terlchm trainmg institutions - both ptibiic itnd privarc Recenlly, a d c c i s m has bezn tlrkca at MuE to create a National Comcil for Teacher Educarron (SCI’t:, uh!ch \vi11 work in close collaboration with N’iRC.4 to ensure that wachers w d m tile system are pro~tdsd uarnirig to continually u p p d e their skills. NCIX will also look after a set o f teaching standards - incfudmg a cox framework of s!andsrds spectfyng the mmimum level competencies for 811 teacliers

{c] Strt.ngtiw:in,y Curriculum and Textbooks

’Ibe m3in OhJeCiiVe o f these initiatives k TO improve transparency in Ifre selection and appro1 a1 of‘ textbooks, competitive production of better qttalig. lextbooks in a cosr-offecn~e and rrn?e& manner. m d :a cnilnncc en~phasis on currituiuin dcvdopmen:.

44

f l i e NaiioiiaI Cun~duftr and Textbook Board T?jCrB), wiiich f i l fs uiidsr die authority of MoE, is responsible for crirriculum developimit and textbook production for bo& &e priiiwy a d socotsdimry levels, MoE ail& MoPhlE have worked together and festrtlctured NCrB to separate functions o f tlie textbook and curriculum units. The cuniculuiii wing now exclusively focuses on identifying subjecis and syllabi; prreparink testing, revising and disseminating curriculum docurxtenis; providing training 111 ;be appjicaiion of cwriculuitr; liaising with National Academy for Mucation Manayeinenl (NAEM) aiid National Awdaiiy of‘l’rirnary Education (NAPE) on the treatment o f curriculum tn teacher training; and liaising with expo& in exilnsiilations and assessment on the coverage of curriculunr. The textbook W13g is rcsyurisible for aves~ght of i e x h o k development, production and distribution. Ttiese functions are now opened tu competition for all textbooks from Grade 6 to 12. Elowever, some books pmdiiced competitively foi Grades 9 and 10 la 2005 had tu be witliddrawn with the postponenienl of intrt,duction of a Vtu-track system. TIie policy remains the same and the competitive producth o f thme books wil l be resuined this year afier a decision is &ken on the unt-iracWinulti-mck curricula.

NCTB designed transparent criteria turder which individiral textbook tnatluscrjpts are evaluated. The evaluation i s done by a 21 -member Independeat Textbook Evaluation Coinmittee (ITEC) camprising specialists hied on the basis of subject expertise. NCTB‘s main focus i s to regulate this process a i d stsure Uint it occim hnspmnt ly . Those tneasures have reduced rent-secking sipiAcantly. Aho, over the last three years, die country experienced remarkable inipmvcnieiit in textbook quality and tlrirfly distribution o f books to lfie cliildreu.

The Govmnmt o f Baiglarlesh has continued to pursue co~nprehensivc refoms iu educrrtion to eiisure access and quality ducation for aI1 children. T h i s is one a m where there i s a tremendous support from at1 strata of people. The reform p r v w will continue to remain suelainable bemusc: (a) the progam has &.ea developcd through extensive consultations with key stakeholders; (b) this coincides with the Govcmmmt’s larger medium-temt nlarrocconomic frcunework for refonns, jointly agrced with the IMF and the World Bank; (c> Gscd projections are wnsisttnt wilh Bangi&h’s re fom needs. with increased mvenue mbilization and bolter prioritized expenditures which are the central eiomczib o f the budget strategy over the indium tern; (d) Banglade& is expected to continue its long stiutdiny traditioil of ampbasizing uivefitnrent in tbe social sectofs, patticularly in educetion; (e} a numbw of iaajor step have been atready undertaken to institu~mdh and rnlmahze the reform process; and (0 these refonns are an integral component oftlie PRSP.

The Government of Bangladesh, through lhc Economic Relations Division, i s reqtiestirig the IDA to continue to support its medium-twm education reform program. The first two ondits each o f $ i lm million were providcd in 2004 and 2006. As can be seen fiom the discussiun above, the msuIFS o f implementing these reforms have been positive. Refonns an taking root and a third credit would help the Govemnient deepen the refom agenda. Given this, a total oFslO0 million is requested for the third credit. Negotiations for t h i s credit are expected 10 take place in May 2007.

1 have noied with particular satisfaction fhe cooperation between Inceniationaf Dcvelopti~eiit /\sscxiation and the Govcminent of BangJgldesish in the field v f education, and I hope that this cooperation will be furilier strrrt@hened tkuougli IDA’S continued suppoit for Uang$ndesh’s cducalioti refnrm program.

Smcercly,

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45

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Annex C: Data Monitoring and Performance Evaluation

A. Monitoring and Evaluating the ESDSC Reform Program

1. The program encompasses a wide range o f institutional and technical reforms. A standard impact evaluation framework (which at the minimum requires pre-intervention data, a wel l defined control and treatment group, and post-intervention data) cannot be used to assess the causal impact o f this heterogeneous reform program on governance, accountability, and school quality. T h i s i s different f rom evaluating the impact o f a project or a specific component o f a reform program. The reform program does indeed call for more systematic support for rigorous impact evaluations o f various key interventions in the education sector. The reform program also calls for strengthening and harmonizing data-systems to ensure that policymakers have access to timely and credible education data.

2. defined indicators which can be monitored - both quantitatively as wel l as qualitatively. The plan for evaluating impacts relies on analyzing household and administrative data, as wel l as using third party surveys/rigorous impact evaluations with technical support to GOB provided by the Bank. In order to ensure that this happens, the key data sources that are going to be utilized include:

All key reform actions in the series o f the ESDSC programmatic loans are tied to well-

Household Data. The key data source will be the Household Income and Expenditure Survey (HIES) that i s conducted by the Bangladesh Bureau o f Statistics (BBS) on a regular basis. These household surveys play a critical ro le in providing another source o f independent data on critical educational outcomes (e.g., primary school completion rate).

School-level Administrative Data. The Bangladesh Bureau of Educational Statistics (BANBEIS) collects/compiles critical post primary -school level data o n enrollment, age and gender distribution, certain measure o f school efficiency (e.g., drop-out rate), teacher characteristics, school infrastructure, and school type (government, private, secular, religious). These data are going to be collected o n a national level every three years and o n a sample basis annually.

Third-party Surveys. Additional evaluative information i s being collected using independent third party surveys. These include expenditure reviews, surveys to monitoring teacher absenteeism, stipend audits, impact evaluation o f the girls’ stipend program and the p i lo t means tested stipend program, surveys to cross-check and scrutinize the selection process o f the NTRCA, a study to look into the qualitative aspects o f the N T R C A administered tests, surveys to better understand the madrasha education profi le in the country, and surveys to examine whether the textbook competition process i s working effectively. Some o f the surveys are already completed and others are to be done at appropriate times.

Baseline data on most indicators has been collected f rom the HIES and BANBEIS databases. Evaluation o f the effectiveness o f the overall reforms program will be undertaken based o n the results o f the above mentioned surveys. The Table below l is ts the main indicators that wil l be measured, the key measurement instrumentddata collection techniques, and the baseline and target indicators.

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Key Reforms

r e g h a t i o n and establishment o f institutions

Measurement Baseline (if applicable),Target Instruments Values for Indicators and

Achievements

Proportion o f public resources targeted to the poor

Improved accountability through monitoring o f expenditures and outcomes - enrollment rates by gender; gross enrollment rates, pass rates in standardized examinations, dropout rates, unit costs per completer

Enhanced community Participation in SMCs/GBs

management - functional f i a n c i a l management unit, backlogs on audit reconciliations addressed

employment o f teachers

I

Independent third-party surveys to examine criteria fol lowed by independently hired providers

HIES, B A N B E I S school- level data

B A N B E I S school-level data, H I E S

Third party qualitative surveys to study role o f community in school management

Third party qualitative surveys, administrative MOE data

Third party surveys to scrutinize NTRCA processes, B A N B E I S school-level data

Target value - By 2008, at least 75% o f sampled schools establishedregistered fol lowing proper criteria. Achievements by 2006: 60% schools registered fo l lowing proper criteria Baseline: 24% in 2002 Target: 33% in 2008 Achievements: 27% in 2005

Enrollment Rates bv Gender at vr imaw and secondaw levels: Baseline:50% in 2003 Target: 50% in 2008 Achievement by 2005: 52% Gross enrollment rates: Baseline: 40% in 2003 Target: 52% in 2008 Achievement by 2005: 57% Pass rates in SSC examination: Baseline: 40% in 2004 Target: 55% in 2008 Achievement by 2006: 59.47% Drovout rates in secondaw cvcle: Baseline: 30% in 2003 Target: 20% in 2008 Unit costs/comvleter: Baseline: $150 in 2003 Target: $120 in 2008 Target: By 2008, a l l SMCs/GBs elected using new criteria. Qualitative surveys show an increased level o f community participation in the management o f institutions. Achievements by 2007: Al l SMCs/GBs reconstituted ridding them o f pol i t ical influences. 126,000 S M C P T A members trained about their roles and responsibilities Target: 50% o f audit objections addressed satisfactorily by 2008. Financial management unit work ing effectively. Achievements by 2007: Audit objections worth 80% in value o f the past three years resolved.

Target: NTRCA certif ication processes found to be transparent. Achievements by 2007: In 2006 and 2007, a l l new teachers hired in schools are certif ied by NTRCA.

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Key Reforms

Improved teacher quality - teacher absenteeism rates, proportion o f secondary school teachers trained

Textbooks and Curriculum. NCTB restructuring completed

Enhanced competit ion in textbook production and publishing - competitive process in production o f textbooks, timeliness o f book distribution, cost o f books.

Effective curr iculum revision

Measurement Instruments

Third party surveys t o examine teacher absenteeism, B A N B E I S school-level data

MOE administrative data

Third party surveys to evaluate competitive process.

Third party studies to evaluate curriculum revisions in 2009 when the f i r s t round o f exams will be held fol lowing the new curriculum.

Baseline (if applicable),Target Values for Indicators and

Achievements Teacher absenteeism : Baseline: 17% in 2003 Target: 10% in 2008 Achievement by 2005: reduced to 11%. Anecdotal evidence suggests further decline in teacher absenteeism Proportion of in-service teachers trained: Baseline: 10% in 2003 Target: 25% in 2008 Achievement by 2007: 20.9%

Target: Functional separation o f the textbook and curriculum units completed. Target met Provortion of books vroduced comvetitivelv: Baseline: 0% in 2003 Target: 100% in 2008. Achievement by 2006: 100% Timeliness in book distribution: Target: Al l books distributed before beginning o f academic year by 2008. Achievement by 2007: Books are a l l distributed before the beginning o f the academic year. costs: Target: Average market costs o f books drops by 20% by 2008. Target: Studies show that curriculum revisions have improved curriculum quality evident in better student outcomes in 2009 exams.

4. program, improving the quality o f this data i s critical. The section below highlights some o f the reforms that are being proposed in order to enhance the effectiveness o f B A N B E I S data.

Since BANBEIS data i s a key input to measuring the impact o f the ESDSC reform

B. Improving the Quality of BANBEIS Data

5. BANBEIS, established in 1977, i s the primary technical arm o f the MOE which has been maintaining several post-primary education and GIS mapping database systems. The strength o f any data system has to be measured by the adequacy o f the timing in which it supplies the data, the quality o f the data, and how this data can be linked with other pertinent information to facilitate comprehensive analysis to guide dynamic policymaking.

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(1) Timing of Data Collection and Quality of Data

6. Currently the most systematic and credible data o n secondary schools i s collected (approximately) every five years v ia a school census. Enumerators are sent t o survey al l secondary schools (and other higher learning institutions in the nation. The spacing between the census is, however, too long to allow for dynamic policymaking which requires update o n data on a much shorter interval. As modifications in existing programs are made and new interventions are piloted, lack o f adequate data o n the impact o f these changes constraint the information set o f policymakers and deny the proper basis to judge impact.

7. (approximately every year, or every other year). BANBEIS sends out a data form which i s f i l led by headmasters (supposed to be cross-checked by Un ion Education Officers) and sent back to B A N B E I S for entry and processing. T h i s type o f self-reported schooling data forms the bed-rock o f most Education Management Information Systems (EMIS) o f this world (in both developing and developed countries). Most self-reported E M I S systems in the developing wor ld suffer from the same problems: some schools don't send back forms, information i s not provided for some variables, incorrect information i s provided for some variables (e.g., enrollment, etc.). These problems are rarely flagged (far less corrected), given that there i s n o systematic demand to analyze the data. Even if aggregate tables are prepared at the national or sub-national level, the data reporting i s usually at a macro/meso level - which masks micro deficiencies in data.

BANBEIS also maintains a database o n schools f rom self-reported data o n a shorter cycle

8. The next post-primary school census i s scheduled for 2008. BANBEIS and the WB are currently engaged in discussion regarding the structure o f the planned census and financing issues. Given that the census i s too far apart, there i s a need for more reliable data o n an annual cycle. The quality o f the self-reported data could be improved by hosting workshops with BANBEIS, headmasters, Union and District Education Officers, and MOE to: a) help train the headmasters to fill out the forms properly; b) signal t o headmasters that these self-reported forms are taken seriously and data reporting should be consistent. Enumerators could also be set to a sub-set o f schools every year to do a sample survey. A limited, but essential set o f information could be credible collected in this manner - which could meet most policy needs. BANBEIS actually does a sample survey once in a whi le in between census rounds, however, so far this has not been systematic, and it i s not clear how B A N B E I S uses this information to cross-check self- reported data. BANBEIS, MOE, and the Wor ld Bank have discussed these issues and workshops are being held to address these concerns.

(2) Strengthening the data hosting and data-consistency-checking capabilities

9. While BANBEIS has done a great j o b in hosting various data sources and linking it with GIS maps, additional technical capacity and funds could help to strengthen i t s hostindarchiving capacities. BANBEIS, MOE, and WB are currently discussing ways to finance the provision o f better training, better hardwarehoftware, and additional staff with key responsibility to properly host the data. T h i s could be combined with specific training in data consistency checking, if necessary funding of additional staff with key responsibility over data consistency checks.

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(3) Linking BANBEIS and Education Board Database

10. Whi le BANBEIS i s responsible for enrollment, student demographic, teacher, and school infiastructure data, various Education Boards are responsible for student-level test score data, and within the secondary school sector context, the crucial Secondary School Completion (SSC) at the student-level. Currently B A N B E I S only reports the average SSC pass-rate at the school- level. For student-level test scores we have to rely upon the Education Boards. The problem in the past was that the education boards used their own school codes (even schools are spelled different); and unlike BANBEIS, even their regional codes were not consistent with BBS. Essentially we had two critical data sets which could not be matched. If we could match the two data sets, GOB could do detailed analysis o f how student, teacher, and school characteristics are related to student-level test outcomes, to in form more detailed pol icy discussion at a national- level. BANBEIS has recently worked with the education Boards and have installed a uni form coding system for al l agencies.

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Annex D: Enhancing Community Participation - Strengthening the Roles o f School Management Committees

Background

1. educational system. School managing committees (SMCs) and governing bodies (GBs) are required in al l recognized non-government secondary schools and intermediate colleges, respectively. Their roles have been institutionalized through the 1977 Board o f Intermediate and Secondary Education (BISE) regulations governing the formation o f SMC's. The membership o f the SMCs consists o f a chairman, a member-secretary and nine other members:

Bangladesh has an institutionalized mechanism for community participation in i t s

0

0

Nine members, including:

A chairman - the district commissioner, an upazilla officer, or an individual nominated by the BISE; A member-secretary - the headmasterheadmistress o f the school; and

9 two teachers elected by the teachers f rom among themselves; 9 four guardiandparents to be elected among the guardiandparents o f the students f rom

among themselves; 9 one founder elected by founders" f rom among themselves; 9 one donor elected by donors'* f rom among themselves; and 9 one local community member interested in education nominated by the district

education office;

2. BISE and can be dissolved o n the recommendation o f MOE o n grounds o f inefficiency, financial irregularity or mismanagement.

The management committee has a term o f three years and serves at the pleasure o f the

According to the 1977 regulations, key functions o f the SMC's include: 0

0

appointing, suspending and dismissing teachers; monitoring school performance and teacher and student attendance; raising and managing funds and creating endowments for the school; and approving annual budgets including the development budget for the school;

3. committees .

All non-government schools in Bangladesh have functioning school management

Issues

4. The structure o f the management committee and i t s functions are geared towards ensuring that communities are closely involved in the operations o f the schools and can support the headmasters in managing the school effectively.

5. capture'. Exploit ing the loophole in the selection o f the chairmanship o f SMCs - which allows

However these bodies were not functioning effectively. A key problem was that o f 'elite

l1 A founder i s an individual who contributed at least Tk. 15,000 towards the establishment o f the school or who donated land upon which the school was built.

A donor i s an individual who donates at least Tk. 10,000 towards the operation o f the school at any time after the school has been established. 12

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BISE to nominate the chairperson - politicians and Members o f Parliament have frequently exerted pressure in order to get chosen for these positions. Members o f Parliament and politicians routinely chaired 30-40 SMCs (and in some instances over 100 SMCs) and often use this position for political gaidfavor.

6. A critical factor underlying the ‘elite capture’ i s the fact that SMC’s have the power to hire teachers. While criteria for hiring o f teachers are set, they were rarely followed and the process was open to abuse and rent-seeking. SMC chairpersons were in the position to ask for ‘donations’ f rom those wishing to teach at the school. These ‘donations’ were often o f the order o f 1-2 lakh Taka (roughly $1500-$3000). Poorer, better-qualified applicants were overlooked in favor o f candidates who could pay these donations. SMC chairpersons also exerted pressure to appoint their relatives or individuals in powerful positions within the community as school teachers.

7. guardians to participate in SMCs and they were generally reluctant to play an active role. T h i s undermined the accountability o f the school towards the community.

The political interference led to an apparent lack o f interest o f community members and

Reforms Undertaken

8. freedom students have to attend the educational institution of their choice. Hence students, and their parents, do have a voice as they can choose among schools on the basis o f quality. However, this does not ensure community participation in the operation o f the school.

One o f the positive aspects o f the Bangladeshi system at the secondary level i s the

9. Information on standardized examination outcomes, school performance, and o n program effectiveness i s disseminated widely down to the upazilla level. T h i s ensures that students, parents and communities have the abil ity to make decisions about how a school i s performing relative to others on the basis o f objective information.

A key step that the government i s taking in this regard i s the provision o f information.

10. as they are the key entity at the local level to monitor schools, especially o n aspects related to the attendance o f teachers and students, upkeep o f physical infrastructure, and performance in examinations, MOE engaged in dialogue with stakeholders - including parents and community members - to design reforms which will enhance community participation at the school level and ensure that the problems stated above could be successfully resolved.

Recognizing that i t i s imperative to empower School Management Committees (SMCs)

1 1. As a result o f this, the following sets o f reforms are being implemented: First, the Regulations o n Managing Committees o f the Registered Non-Government Secondary Schools have been amended to ensure that only the district commissioners, upazilla nirbahi officers, or retired government officials nominated by them, can chair SMCs and that any particular individual (other than district commissioners or upazilla nirbahi officers) cannot chair any more than four committees. T h i s will ensure that politicians or local elite cannot control a vast number o f SMC’s. M o E i s engaged in capacity building o f SMC’s to ensure that they perform these critical functions effectively. Second, the functions o f SMC’s have been modified so that they can play a more active role in monitoring what i s happening in the school - especially in terms o f student and teacher attendance. Furthermore, given the extensive dissemination o f results o n standardized examinations, SMCs play an active role in disseminating this information to the community

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and holding regular meetings with the head teachers and teachers o n how to ensure that school performance improves. Finally, the rules governing the hiring o f teachers have been amended. T o ensure that standardized and transparent criteria are adhered to in the recruitment o f teachers, an autonomous Non-government Teachers’ Registration and certification Authority has been established. This authority now screens and certifies a pool o f qualified teachers based o n standardized tests. All schools will have to recruit new teachers f rom the pool selected by the authority (teachers currently in the system are ‘grandfathered’ but have to become certified - see below). Whi le SMCs s t i l l retain the authority and flexibil i ty t o recruit teachers, these teachers will have to be selected f i o m the pre-qualified pool. T h i s process reduces rent seeking opportunities for the elite, thus reducing their incentives for chairing SMCs, which i s anticipated, in tum, to lead to greater involvement o f the community in the functioning o f schools. Changes are already visible. I t i s anticipated that these changes will further enhance the power o f consumers to monitor and discipline providers and strengthen the role o f parents in school management committees.

12. In the medium-term, a critical reform that i s being envisaged i s the move towards a grants-based financing system, where resources will be l inked more closely to the student. A draft policy has been prepared in this regard, which i s being reviewed by MoE. Under this system, schools will not directly receive salaries for teachers but will be given tuition grants - that can be used to pay teachers as wel l as be used for other quality-enhancing purposes. The grants will be l inked to the number o f students and to school criteria reflecting performance as wel l as physical conditions o f the school, teacher qualifications, and teacher and student attendance. N o t only will this enhance the flexibil i ty that schools have to choose the proper mix between salaries and inputs, but it will give the community (and students and parents) a greater choice in the selection and operation o f good quality schools.

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Annex G: Economic and Financial Analysis

I. Economic Analysis

1. Improving governance has repeatedly been identified as the biggest development challenge facing Bangladesh and the greatest impediment to achieving i t s growth potential and thus achieving the poverty reduction MDG. The proposed credit will assist in leveraging reforms aimed at raising the quality o f service delivery, while at the same time, improving equity o f access. T h i s will be done through putting in place and implement policies that will address governance and quality issues through reform in key areas - system management (e.g. reform o f the MPO system, enforcing regulations regarding registration o f new schools and colleges), teacher recruitment and training (e.g. Teacher Recruitment Authority, consolidation o f training under an apex organization), textbook reform (e.g. transparent criteria for selection o f textbooks, clearly demarcating textbook and curriculum functions). Reforms are intended to strengthen the implementation o f government programs and activities carried out in collaboration with other development partners. It i s intended that these reforms will lead to outcomes such as higher enrollment rates, raised completion rates, decrease in t ime to complete the secondary cycle, and a reduction in the unit cost per student completing the cycle. By altering the incentives for the financing and provision o f education, and building greater accountability in the system, these reforms will reduce rent seeking opportunities, enhance cost-effectiveness and quality o f the education system.

(a) Rate of Return Analysis

2. in Bangladesh i s high. The standard rate o f return analysis was applied to the 1995/96 Household Expenditure Survey data to estimate the private returns to schooling in Bangladesh. Findings showed that each additional year o f schooling yields about a 10 % return on the earnings forgone by the household (Table 1).

In terms o f quantifiable benefits, i t i s clear that the rate o f return to secondary education

Source: World Bank (2000), Bangladesh Education Sector Review, Dhaka

3. (9.2 percent). The rate o f return for individuals in the rural area was 9.5 percent, whereas the rate for those in urban areas was 10 percent. The earnings o f a primary school completer i s on average 52.6 percent higher (annual rate o f return o f 10.5 percent) than those who have n o schooling and those who have some primary schooling but did not complete it. The additional annual rate o f return after completing junior secondary and secondary education i s 7.4 percent and 10.8 percent respectively.

The estimated private rate o f return i s much higher for women (1 6.5 percent) than men

4. The private returns based o n estimated Mincerian regressions, take into account only the forgone earnings (indirect costs) as the cost o f education. Estimates o f social rates o f return take

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into account the individual and government cost o f educational investment associated with moving an individual f rom one education category to the next.

5. The social rates o f return under three different cases are shown in Table 2.13 The assumptions made in the f i rs t case are that the only benefits considered are the monetary benefits measured in terms o f increased earnings. I t i s assumed that an average student requires 3.8 years to complete a 3-year cycle o f junior secondary level and 2.6 years to complete a 2-year secondary cycle. The estimates suggest that the social rate o f retum for lower secondary education i s 8.3 percent and for secondary it i s 8.6 percent.

Private Rates of Return Social Rates (Case A) Social Rates (Case B)

6. benefits. Theoretically, the social rate o f return should include non-monetary benefits or other external benefits - benefits not captured by the individual student or if education i s treated as a family investment, by the individual student and hisher family. Furthermore, improvements in the governance o f the system will lead to quality improvements which will also result in benefits. Non-monetary benefits that can be considered whi le estimating social rates o f return are (a) gains due to improvements in family and health indicators and (b) reductions o f wastage in terms o f dropouts and repetitions, thereby increasing the internal efficiency o f the education system.

However, these estimates are obtained by ignoring non-monetary gains and external

Junior Secondary Secondary Male Female Total Male Female Total 7.3 11.8 7.4 10.7 19.1 10.8 8.4 9.3 8.3 8.6 16.2 8.7 10.2 12.3 10.5 10.6 20.9 11.0

7. efficient and high quality system that the government i s attempting to introduce.

These are captured by Case B - it i s anticipated this case mimics the returns to the more

8. In order to quantify these non-monetary benefits for junior secondary and secondary education, i t i s assumed that improvements in family, health and other social indicators account for an increase in the net monetary earnings o f 25 percent (junior secondary) and 20 percent (secondary) for females and 15 percent (junior secondary) and 10 percent (secondary) for males. I t i s also assumed that an average student requires 3.6 years to complete a 3-year cycle o f junior secondary level and 2.4 years to complete a 2-year secondary cycle (this i s discussed in more detail below).

9. secondary (1 1 percent) education are high to justify government investment in the sub-sector. In particular, secondary education for females i s the best investment f rom both the individual and society’s point o f v iew as shown by the private and social rate o f re tu rn o f about 19 percent and 21 percent respectively.

The results confirm that social rates o f return for both junior secondary (10.5 percent) and

l3 These rates have been computed for lower secondary - grades VI-VIII, and secondary - grades IX-X. They have not been computed for higher secondary (grades XI-XII).

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(b) Outcomes under Reform: Using the SIMSIP Simulatod4

10. Outcomes associated with improved governance and quality have also been simulated using the SIMSIP education simulator. T h i s simulator simulates educational outcomes and costs over a period o f 15 years beginning with the implementation o f policy changes. I t essentially performs two tasks. First, it computes the number o f children enrolled in various schooling cycles over time, together with statistics o n the efficiency o f the education system. Second, i t estimates the budget necessary for the education system to operate. The forecasts for the educational outcomes (number o f students in the system and efficiency parameters) are obtained using a detailed cohort analysis. The cohort analysis tracks the pupils entering the system through time as they progress f rom grade to grade. I t uses information on repetition, promotion, and dropout rates per grade or per cycle to compute efficiency statistics (the age of the pupils at entry in each cycle i s incorporated in the analysis). Once the cohort analysis i s completed, the simulator computes the cost of reaching education targets.

1 1. Three sets o f assumptions must be entered by the user in the simulator: country demographics, the structure o f the education system (age at entry in the various schooling cycles, number o f students and teachers, coverage and extent o f teacher training, proportion o f system that i s in the public sector), and costs (supply-side costs, including teacher wages and teacher-student ratios; demand- side costs related to the provision of stipends to part o f the student body; investment costs related to the training o f new teachers and the construction o f new classrooms; and administrative costs related to staffing both at the central level and at lower levels o f government). Simulations are provided for education outcomes or targets and for the cost o f reaching these outcomes.

Whi le the simulator i s relatively sophisticated, i t s data requirements are relatively few.

Alternative Scenarios

12. associated with reforms for Bangladesh in the secondary education systems. Whi le i t i s not possible to use SIMSIP to simulate costs and outcomes associated with al l reforms,” SIMSIP allows proxying for changes in many pol icy variables that the government i s intending to implement in the secondary education sector and estimating related costs and outcomes. T h i s section presents the outcomes associated with alternative scenarios o f reform. The model differentiates between secondary education (grades 6- 10) and higher secondary education (grades

The SIMSIF’ model i s used to simulate the outcomes (and costs) of pol icy changes

11-12).

13. The model has been used to simulate and proxy for five scenarios:

operates as at present; Scenario I- T h i s i s the baseline scenario. No policy changes are implemented. The system

subventions). These changes are proxied in SIMSIP through increasing subvention costs and lowering the student teacher ratio;

Scenario II - The government supports more secondary schools (through increased

l4 For more information on SIMSIP, please see SiMSIP: Simulations for Social Indicators and Poverty by Q. Wodon, M. I. Ajwad, B. Ryan, and J. P. Tre ; September 2001.

For example, using this model i t i s difficult to simulate outcome and cost implications of textbook and curriculum reforms. However NCTB i s self-financing, and so reforms are assumed to be cost-neutral.

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the system o f registration o f schools and colleges i s enforced by MOE, the MPO system i s tightened, and over time greater devolution i s introduced into the system with greater proportion o f the financing also coming from communities. In SIMSIP, these are proxied for through changes in extent o f funding going to private schools (e.g. better enforcement o f regulations wil l imply that the government fbnds fewer though better quality schools; similarly greater community participation in financing will reduce the government burden); and changes in administrative costs (devolution o f authority to lower levels may lead to an increase in administrative costs);

Scenario 111- Management related changes are implemented in the system. T h i s implies that

Scenario I V - Teacher recruitment and training related changes are implemented. The government hires more qualified teachers, invests more in teacher training and in ensuring that teachers are meeting training standards. In SIMSIP, these are proxied for through increases in proportion o f teachers trained, increases in teacher salaries, and a reduction in pupil teacher ratio.

Scenario V- This i s a combination scenarios 11-IV, i.e. the government undertakes infrastructural changes but simultaneously puts in place and implements policies aimed at improving the management o f the secondary and vocational system, and ensuring high standards are maintained in teacher recruitment and training. Furthermore changes aimed at improving the content, timeliness and quality o f textbooks and curriculum are also implemented (these are assumed to be cost-neutral as NCTB is self-financed).

Reform Implications: S IMSIP Simulations

Gross Enrollments

14. Currently, gross enrollment rates at the secondary level are close to 50 percent and at the higher secondary level are about 17 percent. Table 3 presents increases in enrollments under different scenarios.I6 Over a 15 year period, enrollment rates rise most rapidly under Scenario V in both secondary and higher secondary education.

Table 3: Percent Increase in Gross Enrollment

Completion Percentage

15. completion rates at the secondary and higher secondary level are around 40 percent for the SSC and 35 percent for the HSC respectively. As modeled, there i s n o increase in completion rates in the baseline scenario. Clearly the maximum increase in completion rates, both in the short-run as well as in the long-term occurs under scenario V - when al l reform measures are implemented.

Table 4 presents increases in completion rates in the alternative scenarios. Current

l6 While Scenario I maintains status quo - gross enrollments rise over time owing to country demographics.

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Years to Complete

16. Table 5 presents the average decrease in years to complete the two levels o f schooling. On average, the years to complete the five year secondary education cycle in 2001/2 was about 6.5 years, while the average years to complete higher secondary education was close to 3.5 years. Scenario V shows the steepest decline in years to complete secondary and higher secondary education.

17. scenario V seems to be the most effective alternative. Whi le this i s not surprising, as this scenario simulates the implementation o f a range o f policies intended to enhance system governance and improve the quality o f the system, a critical question that any government faces i s that o f the cost and the cost-effectiveness o f implementing reforms. This i s discussed in the section below.

In terms o f key outcomes for the secondary and higher secondary educational system,

II. Financial Analysis

(a) Financing of Secondary Education

18. T h i s analysis examines the current and projected budget for the secondary education sector. As it i s diff icult to get an accurate breakdown o f budget data between secondary and higher secondary education, the analysis in this section presents budgets for the entire secondary education sector - grades 6-12. The results under two cases are presented here: a base-case scenario and a high growth scenario (Tables 6 and 7).

19. rates, based on projections f rom the medium-term macroeconomic framework, jo int ly agreed with the IMF and the Wor ld Bank. GDP growth rate i s assumed to be constant at 4.0 percent f rom 2003-09. T h i s implies that Government maintains sound macroeconomic management and

T h e base-case utilizes conservative assumptions regarding GDP projections and growth

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proceeds with implementing the reform agenda. Total government budget as a percentage o f absolute GDP i s taken from IMF estimates and i s projected to increase at a nominal rate from 14.5 percent in 2001-02 to 15.5 percent in 2007-09. T h e proportion o f education sector budget to Government o f Bangladesh i s projected to remain constant at the 2001-02 level o f 15.3 percent over the period 2003-09. And the proportion o f education budget going to the secondary sector i s maintained at 200 1-02 level o f 43.1 percent. Finally, we assume that recurrent and developmental spending, as a proportion o f secondary education budget, remain constant at 75 percent and 25 percent respectively.

Proportion o f Government Budget to education (%) Total Government budget for education (US$ billions) Proportion o f education budget to secondary education ("?) Total secondary education budget (US% billions) ... o f which recurrent (US$ billions) . . .of which development (US$ billions)

15 15.3 15.3 15.3 15.3 15.3 15.3

1.02 1.17 1.23 1.26 1.31 1.35 1.41

43.1 43.1 43.1 43.1 43.1 43.1 43.1

0.440 0.506 0.529 0.543 0.565 0.584 0.607

0.326 0.375 0.392 0.403 0.419 0.433 0.450

0.114 0.131 0.137 0.140 0.146 0.151 0.157

4.0

61.75

15.5

9.57

15.3

1.47

43. I

.63 1

.467

.164

20. 41 percent over the period 2003-08, from $6.78 bil l ion in 2001-02 to $9.57 bil l ion in 2008-09. Education and universal primary education more specifically i s a priority for the GOB. As a result o f the increase in overall government budget, the allocation for education i s projected to increase by approximately 45 percent over the period 2003-08, from $1.02 bil l ion in 2001-02 to $1.47 bil l ion in 2007-08. Th is i s s t i l l fairly small - around 2.3% o f GDP. Out o f the total allocation to education, the share o f the secondary budget could increase in real terms over the period 2003-08, from $0.440 bi l l ion to $0.631 bil l ion in 2008-09.

The results o f the base-case show that total government budget could increase by about

2 1. growth scenario from IMF projections. GDP growth rate i s assumed to increase from 3.8 percent in 2001-02 to 6.5 percent in 2008-09. Total government budget as a percentage o f absolute GDP i s taken from IMF estimates and i s projected to increase from 14.5 percent in 2001-02 to 16.3 percent in 2008-09. The proportion o f education sector budget to Government o f Bangladesh i s projected to increase nominally from 15 percent in 2001-02 to 16 percent in 2008-09. And, the proportion o f education budget going to secondary education i s projected to increase from 43.1 percent in 2001-02 to 47.0 percent by 2007-08 (a half percentage point increase annually). We continue to assume that recurrent and developmental expenditures, as a proportion o f secondary education budget, remain constant at 75 percent and 25 percent respectively.

In the case o f high-growth, GDP projections and growth rates based on high economic

71

22. The results (Table 7) show that total government budget as a percentage o f GDP could increase by about 70 percent over the period 2003-08, from $6.78 bil l ion in 2001-02 to $1 1.58 bil l ion in 2007-08. As a result o f increase the increase in overall government budget, the allocation for education i s projected to increase by over 80 percent over the period 2003-09, from $1.02 bil l ion in 200 1-02 to $1.85 bil l ion in 2008-09. In this case, the share o f educational expenditures to GDP will r ise to about 2.6 percent by 2008/09 which i s s t i l l relatively low by international standards. Out o f the total allocation to education, the share o f secondary education, in absolute terms could increase by about 90 percent over the period 2003-09, from $0.440 bil l ion in 2001-02 to $0.870 bil l ion in 2008-09. The recurrent expenditure will increase correspondingly from $0.326 mil l ion to $0.635 mill ion and the development expenditures from $0.1 14 mil l ion to $0.235 million.

... of which recurrent (US$ billions) . . .of which development (US$ billions)

0.326 0.354 0.407 0.456 0.510 0.556 0.595 .635

0.114 0.124 0.142 0.159 0.178 0.194 0.208 .235

(b) Sustainability of Secondary Education Expenditures

23. simulator, this section attempts to simulate and assess the costs associated with implementing reforms aimed at enhancing the quality and governance o f the system, and assess whether these costs are sustainable.

Implementing reforms entails costs. Based on the cost analysis using the SIMSIP

24. to increase i t s expenditure on education (Table 8). Even to maintain status quo -with no improvements in completion rates or in average years to complete the level, the government would have to spend about $32 mill ion a year more than presently by 2008 and $1 32 mill ion more per year by 2018. When the government begins to implement reforms - especially under scenarios 111-V, the cost rises substantially. For example, implementing better practices in teaching and recruitment o f teachers (Scenario IV) would cost an addition $86 mill iodannum in real terms by 2008 (and $344 mill ion per annum by 2018). Interesting, re foms improving

In all five scenarios simulated through the SIMSIP simulator, the government would have

72

system management (Scenario III) are cheaper - whi le they y ie ld fairly similar outcomes to Scenario IV. The main reason behind this i s probably that improved system management involves factors such as building more capacity at the upazilla and district level which could result in higher costs, while at the same time better enforcement o f MPO regulations will ensure that the government funds fewer schools thus reducing costs. Scenario V, in which a l l reforms are implemented would need increased investments to the tune o f approximately $96 mil l iodyear by 2008 and $384 mi l l ion a year more by 201 8. Hence, under this scenario the government would almost double i t s current investments in secondary and higher secondary education in real terms by 2018.

25. are roughly $80 and $1 8 1 in secondary and higher secondary education respectively. Table 9 examines this issue by looking at the unit costkompleter.

I s this increased investment in reforms cost-effective? Current unit costs per completer

Table 8: Increase in Real Annual Public Costs

26. The answer to the question i s yes - reforms have a significantly positive impact o n reduction in unit costs per completer (by about 20 percent at the secondary level and 70 percent at the higher secondary level by 2018). I t i s important to recognize that most savings are realized when all reforms are implemented simultaneously (scenario V).

27. If the government aims to undertake reforms as described in Scenario V, Chart 1 shows the distribution o f costs between recurrent costs, demand-side costs, and investment costs. Recurring costs (dotted line in chart below) are the sum o f the expenditures o n teacher wage bill and the administrative costs associated with running schools. The wage bill for the teaching staff i s the largest fraction o f recurrent costs. Demand-side costs (solid l ine in chart) are costs associated with providing stipends. Supply-side investment costs (solid l ine in chart) are composed o f three main components - the cost o f paying teacher subventions, the cost of training new teachers and the cost o f training existing teachers. In the Bangladeshi context (as i s true worldwide), recurrent costs will be the major portion o f total costs. In this scenario, investment costs are expected to start rising slowly in the short-run, but will increase fairly sharply over time as greater investments in teacher training and subventions k i ck in -by 2018 investment costs will

73

be close to 20 percent o f total costs. Finally, demand-side costs are expected to remain fairly

1 BO

160

140

120 - - - .- 5 100 - Ln 3

Bo

60

40

20

0

Chart 1: Cost Brrakdown for Sornarlo V

E50

BOO

750

700

650

500

450

400

350 2003 201

-Demand -In". - - - P - - - Rae. - - - r - - - T ~ t s l

constant over time.

74

Annex H: Good Practice Principles on Conditionality

Principle 1 : Reinforce Ownership The proposed ESDSC I11 operation supports the education sector reforms which emerged as a deeper and broader program initially based on the MTBF that GOB has been implementing since 2002. The reform program, prepared after extensive consultations across the country, also conforms to the PRSP goals o f enhancing human development and governance, particularly in the education sector. Ownership and active participation o f al l stakeholders responsible for delivery o f secondary education services and recipients o f these services have rendered th is reform package the unique status o f unequivocal support from al l spectrums o f Bangladesh society. The design and implementation o f the reform program have been championed by successive governments, more so by the new Care Taker Government. The government’s track record in ownership and commitment i s demonstrated in well-thought-out sequencing and execution o f reform actions over the years which enjoyed widespread popular support.

Principle 2: Agree up front with the government and otherfinancialpartners on a coordinated accountability framework The Bank’s support to the key reforms in secondary education is summarized in the policy matrix attached as Annex B to this program document. I t constitutes a focused subset o f critical actions from the government’s larger reform program. These were agreed upon with the Government from the very beginning o f the ESDSC series o f support. The program i s consistent with the medium-term matrix o f reforms laid out in the FY06-09 CAS that was jointly prepared with the major development partners in Bangladesh. Besides, coordination wi th other development partners at the education local consultative group forum i s a regular feature. The Asian Development Bank i s also providing support including technical assistance and investment project support complementing these policy reforms.

Principle 3: Customize the accountability framework and modalities of Bank support to country circumstances The ESDSC series i s designed as a programmatic series wi th three annual tranches based on an agreed performance accountability framework (Annex B) derived from the broader education reform agenda o f the Government. Early consensus on the reforms gave the Government predictability in aid flows to support the program. Sensitive policy reforms - such as rigorous enforcement o f amended MPO criteria tied to performance, gradual shifting toward grants based financing, fiduciary and governance reforms -- are al l customized to meet the specific needs o f the country situation. Establishment and operationalization o f Non-government Teacher Registration and Certification Authority, restructuring o f National Curriculum and Textbook Board and competitive production o f textbooks are al l very challenging reforms but they have been successfully implemented with popular support. Indeed, there i s a broad consensus across Bangladesh on these as core elements o f a successful education reform program.

Principle 4: Choose only actions critical for achieving results as conditions for disbursement The Bank agreed with the Government on 10 prior actions from the larger policy matrix as the benchmarks for ESDSC III. They cover three core areas o f education reforms: (i) systemic improvement, (ii) enhancement o f teacher quality and (iii) curriculum and textbooks. Prior actions focus on critical steps in, among other things, implementation, evaluation o f measures undertaken, testing innovations, and enhancing capacity at different levels.

Principle 5: Conduct transparent progress reviews conducive to predictable and performance-based financial support The Bank agreed with the Government on the indicative triggers for ESDSC I11 and the cycle o f performance reviews for the program during implementation o f reforms under ESDSC 11. The Bank and the Ministry o f Education, wi th support from i t s relevant agencies jointly monitored the progress over the year. The process was buttressed by a number o f independent evaluations o f various reform measures. The Ministry o f Education took the coordinating role to collate progress updates from various agencies and share them with al l concerned agencies.

75

Annex I: Statement of Loans and Credits

BANGLADESH Difference between expected and actual

disbursements Original Amount in US$ Millions

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

PI00330 2007

PO98273 2006

PO89382 2006 PO74841 2005 PO86661 2004 PO83890 2004

PO86791 2004 PO81969 2004

PO74966 2004

PO78707 2004

PO53578 2003 PO71435 2003

PO62916 2003 PO81849 2003

PO74731 2002

PO75016 2002

PO71794 2002

PO44876 2002 PO74040 2002 PO69933 2001

PO57833 2001

PO50752 2001 PO44810 2001 PO41887 1999

BD Railway Reform Programmatic DevPolicy

Local Governance Support Project

Investment Promotion Financing Facility

HNP Sector Program iBD - Water Supply Program Project

Economic Management TA Program (EMTAP) Reaching Out o f School Children Project

Enterprise Growth & Bank Modernization

Primary Education Development Program I1 Power Sector Development TA

Social Investment Program Project Rural Transport Improvement Project

Central Bank Strengthening Project

BD: Telecommunications Technical Assist.

Financial Services for the Poorat

Public Procurement Reform Project

Rural Elect. Renewable Energy Dev.

Female Secondary School Assis. I1 Renewable Energy Development HN/AIDS Prevention

Air Quality Management Project

Post-Literacy & Continuing Education

Legal & Judicial Capacity Building Municipal Services

0.00 40.00

0.00 111.50

0.00 50.00

0.00 300.00 0.00 0.00

0.00 0.00

0.00 0.00

0.00 250.00 0.00 150.00

0.00 7.10

0.00 18.24

0.00 190.00

0.00 37.00 0.00 9.12

0.00 5.00 0.00 4.50

0.00 190.98

0.00 120.90

0.00 0.00 0.00 40.00 0.00 4.71

0.00 53.30 0.00 30.60

0.00 138.60

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 40.29 0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00 0.00 0.00 8.20

0.00 0.00 0.00 0.00

0.00

0.00 0.00

0.00 0.00 0.00

0.00 0.00

0.00

0.00 0.00 0.00

0.00 0.00

0.00 0.00 0.00

31.06

0.00 21.98

0.00

0.00 0.04 0.68

112.33

47.35 361.48

39.57 19.64

43.19 140.99

99.36

13.86

5.63 126.17

36.37

7.82

1.78

0.34

91.16

25.1 1

1.97 2.09

2.65

29.37

15.03 36.88

-0.08 -1.25

-56.05 0.77

8.74

3.65

50.42 2.92

9.77

3.60 54.76

32.50 5.10

1.07

-0.35

46.91

38.32

6.2 1 19.67 2.15

21.26

10.57

0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00

0.00

1.93

0.00

0.00

0.00 1.89

0.00 -0.48

0.00 -5.35 0.00

-0.33

-0.54

-1.74 0.00

34.08 22.36

Total: 0.00 1,751.55 0.00 8.20 53.76 1,300.43 294.74 17.74

76

Statement of IFC’s Held and Disbursed Portfolio

In Millions of U S Dollars

Committed Disbursed

FY Approval Company

IFC IFC

Loan Equity Quasi Partic. Loan Equity Quasi Partic

2001 1997 1991

2004 2006 1998 1998 1998 2000 2003 2000

BRAC Bank

DBH

Dynamic Textile

GTFP Dhaka Bank

GTFP Eastern Bnk GrameenPhone Ltd

GrameenPhone Ltd

IPDC Khulna

LafargdSurma LafargdSunna

RAK Ceramics

United Leasing

Total portfolio:

0.00

1.91

0.00 5.00 2.59 24.00 59.00 3.13 10.40 35.00

0.00 7.20 2.57

1.63 0.65 0.00 0.00 0.00

0.00 0.00

0.00

0.00 10.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00

1.48 0.00 0.00 0.00 0.00 0.00

11.99 0.00

15.00 0.00 0.00

0.00

1.91 0.00

5.00

2.59 24.00 0.00 3.13

10.40 35.00 0.00

7.20 2.57

1.60 0.00

0.65 0.00 0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 1.48 0.00

0.00 0.00 0.00

0.00 11.99 0.00

15.00 0.00 0.00

150.80 12.28 0.00 28.47 91.80 12.25 0.00 28.47

FY Approval Company

Approvals Pending Commitment

Loan Equity Quasi Partic.

2000 USPCL

1998 Khulna

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total pending commitment: 0.00 0.00 0.00 0.00

77

Annex J: Bangladesh At a Glance

South LOW- Asia income

POVERTY and SOCIAL Bangladesh Development diamond'

2006 Population, mid-year /*?/ GNI per capita (Affssmkd lK$J GNI (r l f larmfhti LL!V;sCwknrl Average annual growth. 2000-06

Population (27 Labor force i?$ Most recent estimate [latest gear available. 2000-06) Poverty ,&!::'&pt-pdahra~h.djmw(v~t Urban population ,Wt-#ft-w.dmw/ Life evpectancy at birth [u~a-~' Infant mortality /&r l~&~MtAc! Child malnutrition fi't-#&iw~.&~f/ Access to an improved water source fi;'&pt-pda&J Literacy fi:'d@?k& Gross primary enroilment fi:'d3&kdq~pt-pda&t

Male Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1986

GDP ( t i S Y m T ! 21.2 Gross capital fnrrnationlGDP 16.7 Ewports of goods and seruiceslGDP 5.4 Gross domestic sauingsfGDP 8.0 Grnss national sauingslGOP 16.9 Current account balancefGDP -5.1 Interest payrnentslGOP 0.7 Total debtfGDP Total debt seruicefewports Present value of debtlGDP Present value of dobtfsnpnrts

1986-96 1996-06 ( M F M - W M ) GDP 4.2 5.4 GDP per capita 1.8 3.4 Evports of goods and services 11.7 9.6

STRUCTURE of the ECONOMY

r:: 'Ormq, Agriculture Industry

Scruicrs

Household final consumption evpenditure General gov't final consumption expenditure Imports of goods and serwices

Manufacturing

l ~ q i = ~ d ~ m W l y Agriculture Industry

Services

HDusehold final consumption ewpenditure General gov't final consumption ewpenditure Gross capital formation Impmts of gDods and services

Mrnulacturing

1986

31.8 21.5 14.0 46.5 a5 0

4 3 12.2

1986-96

2.3 6.5 6.7

3.2 4.0 6.7 7.5

3.8

144.4 480 69.9

1.9 2.2

50 25 63 56 48 74 41

109 107

111

1996 40.7 20.0

11.1 12.4

20.0

-3.2 0.5

2005

6.0 *.O

15.6

1996

25.7 24.9 15.4 49.5

03.2 4.4

10.7

1996-06

3.6 7.0 6.3 5.5

3.6 0.3 B.6 5.8

1,+70 604

1,005

1.7 2.1

29 63 66 45 04 60 110 116 105

2005 60.0 24.5 16.6 20.0

-0.9 0.4

25.8

22.0 86.5

2,353 560

1,364

1.9 2.3

31 58 00 39 75 62

104 110 89

2006 62.0 25.0 17.8 20.3 26.6

0.9

2006 2006-10

6.7 4.8

15.7

2005

20.1 27.2 16.5 52.6

76.4 5.5

23.0

2005

2.2 0.3 6.2 6.4

5.1 7.0

10.7 19.1

6.3 4.5

12.5

2006

18.5 20.1 17.2 52.4

76.1 5.6

24.4

Life evpectancy

T

GNI Gross PQr p r i m a r y capita nrollment

Access to improved water snurce

- A@&s4 ~ L r n m - W

Economic ratios'

Trade

Domestic Capital sa u i n g s formation

Indebtedness

~~

Growth of capital and GDP [%)

- . . . . . . . 01 02 E l 04 OS 06

-GCF -GOP

I Growth of erports and imports [ X )

8.6 20 10.4 i o 6.5

6.0 -10 7.9 -20

Note 2006 data are preliminary estimates. Group data are for 2005. ' The diamonds show four key indicators in the country [in bold] compared with its income-group ruerage. If data are missing. the diamond will

be incomplete.

78

PRICES and GOVERNMENT FINANCE

Beme5tk p k e s

Consumer prices Implicit GDP deflator

mPJ-at&mrasce fi:'#'~33? .&#+&-c wrm-wm%l Current revenue Current budget balance Overall surplusfdeficit

fi:k&-?-&wi

TRADE

Total eHports [fob] Raw jute Leather and leather products Manufactures

Total imports [cif) Food Fuel and energy Capital goods

Ewport price inden /."fa7n.-.$Wl Import price inder ~VW=.$W] Terms of trade piT€?=AWi

BALANCE of PAYMENTS

prndkmy Ekiports of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

Mm-- Reserves including gold Conwersion rate f22FC

1986

8.0

9.5 4.1

-3.1

1986

819 124

61 486

2.364 356 342

1,003

46 48 96

1986

1,043 2,587 -1,544

-126 586

-1.084

1.212 -128

29.9

EXTERNAL DEBT and RESOURCE FLOWS 1986

8,062 IEIRD 61 IDA 2,450

pm Total debt outstanding and disbursed

Total debt service 448

IDA 28 IBRD r 5 Cornposition of net resource flows

Official grants 553 Official creditors 843 Private creditors 55 Foreign direct investment [net inflows) 2 PortFolio equity [net inflows] 0

World Bank program Commitments Disbursements Principal repayments Net flows Inter& payments Net transFers

383 337

330 25

305

a

1996

6.7 4.2

9.0 2.2

-4.5

1996

3.884 91

241 3.2105 6.947

570 274

1,918

85 79 ioa

1996

4.437 7,604 -3,167

55 1.821

-1,291

274 1.017

1,878 40.9

1996

15.341 46

5,713

672 8

92

596

-39 14

-117

548

168 279

54 225

45 180

2005

6.5 5.1

10.5 2.1

-3.8

2005

8,573 96

221 7,819

ii.870 1,607 1.602 1,794

119 134 89

2005

9,750 13.917 -4,167

-680 4.230

-557

624 -E?

2,929 61.8

2004

20,129 0

8.895

671 8

2118

822 557 -16

449 4

707 615

467 68

399

148

2006

7.0 5.2

10.7 2.2

-3.3

2006

10,422 117

269 9,506 13.301

1,801 1,795 2,010

122 141 87

2006

11,711 15,707 -3.989

-786 5.347

572

-207 -365

3,188 67.2

2005

18,935 0

a.6aa 791

0 223

671 339

-9

1 a02

5ua 547 153 394 70

325

1 Export and import levels [US$ mill.]

I Current amount balance to GDP [%I

I 7

Composition of 2005 debt (US$ mill.]

c: 368

A - IBRU B -IDA D . Other multilateral F - Priratc C . IMF G - Short-tcrm

E - Bilstcrd

Rsvelopment Economics 5f15f07

79

Annex K: Bangladesh - IMF Staff Assessment for the World Bank, M a y 7,2007

1. Macroeconomic performance has been broadly in line with the objectives of the PRGF-supported program. Over the last several years, economic activity has remained strong and macroeconomic stability sustained, while poverty has been significantly reduced. The external sector has been particularly robust with strong growth in exports and remittances allowing for a considerable increase in international reserves. Recently, inflation has increased and wil l likely require policy adjustments. With respect to fiscal policy, while overall discipline has been maintained, revenue collection has consistently fallen short o f targets under the PRGF-supported program. This, together with under-execution o f development spending, continues to hamper the implementation o f the budget. Structural reforms have progressed in several key areas, albeit often with significant delays.

Recent Economic Developments

2. Growth remains strong spurred by export demand and rising private domestic investment, but inflation has recently increased. GDP growth i s expected to continue at around 6.7 percent in FY07, despite some supply-related disruptions, with lower agricultural growth more than offset by strong manufacturing and service activities. Average inflation picked up to 6.9 percent in March reflecting increases in both food and nonfood prices. Following fuel price hikes, average inflation i s projected to reach 7.2 percent in FY07 before moderating during the course o f FY08.

3. The exchange rate has been relatively stable and international reserves have increased throughout the period of political upheaval. Reserves have reached beyond $4 billion (approaching three months o f imports) on the back o f continued strong remittances and exports, which are growing at 25 and 21 percent, respectively. As credit to government soared in the first half o f the fiscal year, broad money growth reached a record high of 22 percent in December and several end-December performance criteria were missed. While Bangladesh Bank (BB) has moved to bring its net domestic assets in line with the PRGF- supported program, broad money and private credit are s t i l l growing at 20 and 17 percent, respectively.

4. early in the fiscal year sending domestic financing of f track. Revenue shortfalls and delays in external disbursements firther aggravated the situation requiring expenditure cuts later in the year to bring the overall deficit back in line with the budget framework. Revenue, as a percent o f GDP, is expected to decline by 0.2 percentage points in FY07, rather than improve by 0.4 percentage points as targeted under the PRGF-supported program.

The execution of the FY07 budget has been problematic. Spending accelerated

8C

Outlook and Risks

5. Buoyant garment exports and remittance flows, as well as the possibility o f higher aid and private flows, should help sustain investment. Inflation could be contained at around 6% percent in FY08 with some adjustment in policies and aided by an expected leveling o f f o f international food and commodity prices. This scenario, however, depends crucially on the government’s ability to improve governance-especially in the power sector, make progress on substantial infrastructure deficiencies in the ports and transportation system, improve labor skills, and address other constraints faced by investors. The current account may slip into deficit if investment and import growth strengthen, but international reserves would increase with higher aid flows and foreign investment. To meet the large social and infrastructure spending needs, revenue performance will need to be substantially improved. Political stability, including progress toward credible elections with continued broad support for the transitional government, will be an important factor in sustaining investor and donor confidence.

Growth i s expected to remain around 6%-7 percent over the medium term.

Macroeconomic Policies

6. require an overhaul o f existing legislation to simplify the system and broaden the tax base. Numerous amendments to legislation over the years have created tax laws that are complicated and hard to administer. Systemic reform i s necessary to achieve the full benefits o f ongoing tax administration reforms and to support further trade liberalization.

Addressing the perennial revenue challenge in a sustainable way will likely

7. are planning for an increase in revenue to 10.6 percent o f GDP based on specific measures and better governance, while expenditure priorities will focus on higher social safety net spending and a more realistic 0.6 percent o f GDP increase in the annual development program. The overall budget deficit i s targeted to increase to 5.2 percent o f GDP once the government assumes the stock o f nonperforming loans o f the state-owned petroleum company (BPC) with domestic banks accumulated over several years amounting to 1.6 percent o f GDP. The underlying deficit (i.e., the overall deficit excluding the impact o f assuming SOE debt) would remain around 3 % percent o f GDP. Price increases for fuel, electricity, and fertilizer already implemented have substantially reduced SOE losses, but further adjustments wil l be needed (see 710).

The FY08 budget aims at realistic revenue and spending targets. The authorities

8. A further tightening of monetary policy i s likely to be needed in the face of strong foreign inflows and rising inflation. In recent months, ample liquidity (arising from strong exports and remittances) has emerged as the main challenge for monetary policy. Although monetary and credit aggregates have retreated from their peaks in December, they are s t i l l growing well above the authorities’ targets. The recent jump in inflation, coupled

81

with the April hike in fuel prices, reinforces the need for some monetary tightening, including to firmly anchor inflationary expectations.

9. T o support the objectives o f monetary policy, there i s scope to moderate the pace of reserve accumulation. A modest real appreciation o f the exchange rate i s currently taking place through higher inflation. Given the continued strong export performance and growth in remittances, BB i s close to reaching a comfortable reserve position and could moderate its reserve accumulation to allow for more movement in the nominal exchange rate.

Structural Reforms

10. Petroleum pricing policy has contributed to large quasi-fiscal losses of the state- owned enterprises, particularly in the petroleum, power, and fertilizer companies. The petroleum price adjustments o f April 2 (1 6-2 1 percent) have brought retail prices closer to full cost-recovery levels (about 88 percent), but in the absence o f fbrther price adjustment (and at current international prices) losses would continue at about !4 percent o f GDP annually. To avoid the re-accumulation o f losses in BPC, it i s imperative to introduce an automatic mechanism o f price adjustment and improve operational efficiency. Further adjustments in electricity tariffs and fertilizer prices, and financial restructuring o f the state- owned electricity companies, will be needed. Adjustment o f natural gas prices, which i s also overdue, would reduce distortions and contribute to government revenue.

1 1. but further efforts are needed to preserve bank soundness and enhance financial intermediation. The regulatory framework has been strengthened, off-site and on-site supervision has been enhanced, and steps are being taken to restructure, corporatize, and privatize the large NCBs. However, the observed improvements in published aggregate indicators o f bank soundness conceal wide divergences in individual banks’ performance and mask the underlying weaknesses in the banking system because o f underestimation o f the capital shortfall and loan classification rules that are less stringent than international standards. Accordingly, the proposed amendment to the Banking Companies Act i s a welcome step to further strengthen loan classification guidelines and gradually raise banks’ minimum capital requirements. Corporatization o f the NCBs will need to be accompanied by appointment o f qualified directors that can guide and implement restructuring programs at these banks.

Bangladesh Bank has advanced reforms aimed at deepening financial markets,

Status of IMF Relations

12. an initial commitment of SDR 347 million (65 percent o f quota). This was later augmented by SDR 53 mil l ion (10 percent o f quota) in accordance with the IMF’s Trade Integration Mechanism (TIM). A total o f SDR 3 17 mil l ion has been drawn as o f March 3 1,2007. Several performance criteria were missed for the final review on account o f

Bangladesh’s three-year PRGF arrangement was approved in June 2003, with

82

accelerated spending by the outgoing government and weak revenue collection and revenue administration reform efforts. Notwithstanding some recent improvements that are moving things in the right direction, not all program targets have been brought back in line as o f end- March 2007, which will likely preclude completion o f the review. The PRGF arrangement wi l l expire on June 19, 2007.

13. The most recent Article I V consultation was discussed by the Executive Board o f the IMF in June 2005. The next Art ic le IV consultation i s scheduled to be discussed by the Board in June 2007. The transitional government has emphasized i ts commitment to advance reforms during i ts tenure and i s keen for early negotiation o f a follow-on PRGF. Staff wi l l decide on next steps after taking into account the views expressed at the IMF Board discussion.

83

Table 1. Bangladesh: Key Economic Indicators, FY03-09 11

Projection FY03 FY04 FY05 FY06 FY07 FY08 FYO9

National income and prices (percent change) Real GDP GDP deflator CPI inflation (annual average) 2/

Central government operations (percent of GDP) Total revenue

Tax Nontax

Total expenditure Current expenditure

Of which: Interest payments Of which: Subsidies

Annual Development Program Other expenditures 3/

Overall balance (excluding grants) 4/ Primary balance 4/ Financing (net)

Domestic 41 51 External

Total central government debt (percent of GDP)

Money and credit (end of fiscal year; percent change) Net domestic assets Credit to private sector Broad money (M2)

Balance of payments (in billions of US. dollars) 6/ Exports, f.0.b.

Imports, f.0.b.

Current account

(Annual percent change)

(Annual percent change)

(Percent of GDP)

Gross official reserves (in billions of U.S. dollars) In months of imports of goods and nonfactor services

Memorandum item: Nominal GDP (in billions of taka)

5.3 4.5 4.4

10.3

2.0

13.7 8.1 1.9 2.3 5.4 0.1

-3.4 -1.5 3.4 1.2 2.1

51.1

8.3

12.2 12.6 15.6

6.5 9.5

-8.7 13.1 0.1 0.1

2.5 2.9

3,006

6.3 4.2 5.8

10.2 8.2 1.9

13.3 7.8 1.6 2.4 5.0 0.5

-3.1 -1.4 3.1

1.3 I .a

48.7

13.5 17.5 13.8

7.0 7.2

13.0 -0.5 -0.9

2.7 2.8

-9.8

3,330

6.0 5.1 6.5

10.5

2.0 8.5

13.8 8.4 1.7 2.8 5.0 0.4

-3.3 -1.7 3.3 1.7 1.6

47.5

17.1 17.0 16.7

8.6 23.2

-1 1.9 20.6 -0.9 -1.5

2.9 2.5

3,707

6.7 5.2 7.2

10.7

2.1

13.9

8.5

8.4 1 .a 2.6 4.7 0.8

-3.2 -1.4 3.2 2.1 1.2

46.9

19.6

19.3 18.3

10.4 21.6

-1 3.3 12.1 0.6 0.9

3.5 2.7

4,162

6.7 6.3 7.2

10.4

2.1

13.9 9.0 1.9 3.0 4.2 0.7

-3.5 -1.5 3.5 1.9 1.1

44.4

8.3

13.4 15.1 17.5

12.5 19.9

-16.0 20.0 0.5 0.8

5.0 3.2

4,720

6.7 6.7 6.5

10.7 8.5 2.1

15.8 8.7 2.0 2.8 4.8 2.3

-5.2 -3.2 5.2 3.7 1.5

44.0

14.2 14.5 15.0

15.0 19.9

-19.3 21.2 0.2 0.3

5.7 3.0

5,374

7.0 5.0 5.0

11.1 9.0 2.1

14.3

2.0

4.8 0.8

-3.3 -1.3 3.3 1.7 1.6

42.4

8.7

2.8

16.0 14.2 17.7

17.1 14.1

-21.8 12.7 -0.1 -0.2

6.9 3.2

6,037

Sources: Data provided by the Bangladesh authorities; and Fund staff estimates and projections.

1/ Fiscal year begins July 1. 2/ CPI uses FY96 weights. 3/ Consists of other capital, net lending, food account balances, check float and discrepancy. 4/ Includes assumption of BPC liabilities of 1.6 percent of GDP in FY08 51 Includes estimated privatization receipts of 0.5 percent of GDP in FY07. 6/ Balance of payments is presented on the basis of BPM5.

84

R A J S H A H IR A J S H A H I

D H A K AD H A K A

S Y L H E TS Y L H E T

K H U L N AK H U L N A

B A R I S A LB A R I S A L

C H I T TC H I T T A G O N GA G O N G

PPANCHAGARANCHAGAR

THAKURGAONTHAKURGAONNILPHAMARINILPHAMARI

LALMONIRHA

LALMONIRHATT

DINAJPURDINAJPUR

RANGPURRANGPURKURIGRAMKURIGRAM

GAIBANDHAGAIBANDHA

JOYPURHAJOYPURHATT

NAOGAONNAOGAON

NOWNOWABGANJABGANJ

RAJSHAHIRAJSHAHI

NANATORETORE

BOGRABOGRA

JAMALPURJAMALPUR

SERPURSERPUR

NETROKONANETROKONA

MYMENSINGHMYMENSINGH

TTANGAILANGAILSERAJGANJSERAJGANJ

PPABNAABNA

KUSHTIAKUSHTIA

MEHERPURMEHERPUR

CHUADANGACHUADANGA

JHENAIDAHJHENAIDAH MAGURAMAGURA

RAJBARIRAJBARI

FFARIDPURARIDPUR

MANIKGANJMANIKGANJ

DHAKADHAKA

GAZIPURGAZIPUR

KISHORGANJKISHORGANJHABIGANJHABIGANJ

SUNAMGANJSUNAMGANJ

SYLHETSYLHET

MOULMOULVI BAZARVI BAZAR

BRAHMANBRAHMANBARIABARIA

NARSINGDINARSINGDI

NARANARAYNGANJYNGANJ

MUNSHIGANJMUNSHIGANJ

SARIASARIATPURTPUR CHANDPURCHANDPUR

COMILLACOMILLA

MADARIPURMADARIPURGOPGOPALGANJALGANJ

NARAILNARAILJESSOREJESSORE

SASATKHIRATKHIRA

KHULNAKHULNA

BAGERHABAGERHATT

PEROJPURPEROJPUR

BARISALBARISAL

JHALUKAJHALUKATHITHI

PPAATUAKHALITUAKHALIBHOLABHOLA

BARGUNABARGUNA

LUXMIPURLUXMIPUR

NOAKHALINOAKHALI FENIFENI

KHA

GRA

CH

HA

RI

KHA

GRA

CH

HA

RI

RANGAMARANGAMATITI

CHITTCHITTAGONGAGONG

BANDARBANBANDARBAN

COXCOX’’SSBAZARBAZAR

RangpurRangpur

GaibandhaGaibandha

DinajpurDinajpur

BograBogra

SerajganjSerajganjNatoreNatore

JoypurhatJoypurhat

NaogaonNaogaon

NowabganjNowabganj

JamalpurJamalpurSerpurSerpur

NetrokonaNetrokona

SunamganjSunamganj

PabnaPabna

KushtiaKushtia

RajbariRajbariMeherpurMeherpur

ChuadangaChuadanga

JhenaidahJhenaidahMaguraMagura

NarailNarail

SatkhiraSatkhira

BagerhatBagerhat

PerojpurPerojpur

JhalukathiJhalukathi

GopalganjGopalganj

MadaripurMadaripurSariatpurSariatpur

FaridpurFaridpur

JessoreJessore

NoakhaliNoakhali

KhagrachhariKhagrachhari

PatuakhaliPatuakhali

BholaBhola

BargunaBarguna

ComillaComilla

Moulvi BazarMoulvi Bazar

MymensinghMymensingh

TTangailangail

ManikanjManikanj

RangamatiRangamati

BandarbanBandarban

Cox's BazarCox's Bazar

ThakurgaonThakurgaon

NilphamariNilphamari LalmonirhatLalmonirhat

KurigramKurigram

PanchagarPanchagar

FeniFeni

GazipurGazipurNarsingdiNarsingdi

NaraynganjNaraynganj

MunshiganjMunshiganj

ChandpurChandpur

LuxmipurLuxmipur

BrahmanbariaBrahmanbaria

HabiganjHabiganj

KishorganjKishorganj

RajshahiRajshahi

KhulnaKhulna

SylhetSylhet

BarisalBarisal

ChittagongChittagong

DHAKADHAKA

JJaammuunnaa

GGaannggeess

GGaannggeess

MMeegg

hhnnaa

KarKarnalinaliReserReservoirvoir

GG aa nn gg ee ss DD ee ll tt aa

SS uu nn dd aa rr bb aa nn ss

R A J S H A H I

D H A K A

S Y L H E T

K H U L N A

B A R I S A L

C H I T T A G O N G

PANCHAGAR

THAKURGAONNILPHAMARI

LALMONIRHAT

DINAJPUR

RANGPURKURIGRAM

GAIBANDHA

JOYPURHAT

NAOGAON

NOWABGANJ

RAJSHAHI

NATORE

BOGRA

JAMALPUR

SERPUR

NETROKONA

MYMENSINGH

TANGAILSERAJGANJ

PABNA

KUSHTIA

MEHERPUR

CHUADANGA

JHENAIDAH MAGURA

RAJBARI

FARIDPUR

MANIKGANJ

DHAKA

GAZIPUR

KISHORGANJHABIGANJ

SUNAMGANJ

SYLHET

MOULVI BAZAR

BRAHMANBARIA

NARSINGDI

NARAYNGANJ

MUNSHIGANJ

SARIATPUR CHANDPUR

COMILLA

MADARIPURGOPALGANJ

NARAILJESSORE

SATKHIRA

KHULNA

BAGERHAT

PEROJPUR

BARISAL

JHALUKATHI

PATUAKHALIBHOLA

BARGUNA

LUXMIPUR

NOAKHALI FENI

KHA

GRA

CH

HA

RI

RANGAMATI

CHITTAGONG

BANDARBAN

COX’SBAZAR

Rangpur

Gaibandha

Dinajpur

Bogra

SerajganjNatore

Joypurhat

Naogaon

Nowabganj

JamalpurSerpur

Netrokona

Sunamganj

Pabna

Kushtia

RajbariMeherpur

Chuadanga

JhenaidahMagura

Narail

Satkhira

Bagerhat

Perojpur

Jhalukathi

Gopalganj

MadaripurSariatpur

Faridpur

Jessore

Noakhali

Khagrachhari

Patuakhali

Bhola

Barguna

Comilla

Moulvi Bazar

Mymensingh

Tangail

Manikanj

Rangamati

Bandarban

Cox's Bazar

Thakurgaon

Nilphamari Lalmonirhat

Kurigram

Panchagar

Feni

GazipurNarsingdi

Naraynganj

Munshiganj

Chandpur

Luxmipur

Brahmanbaria

Habiganj

Kishorganj

Rajshahi

Khulna

Sylhet

Barisal

Chittagong

DHAKA

I N D I A

I N D I A

I N D I A

MYANMAR

BHUTAN

Jamuna

Ganges

Ganges

Meg

hna

KarnaliReservoir

B a y o f B e n g a l

M o u t h s o f t h e G a n g e s

To Dispur

To Dispur

To Dispur

To Silchar

To Goalpara

To Patna

To Katihar

To Katihar

To Gangtok

To Sittwe

To Calcutta

To Calcutta

G a n g e s D e l t a

S u n d a r b a n sMt. Mowdok

(957 m)

26°N

25°N

24°N

23°N

22°N

21°N

25°N

24°N

23°N

22°N

21°N

88°E 89°E 90°E 91°E

89°E 90°E 91°E 92°E

92°E

BANGLADESH

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0 10 20 30 40

0 10 20 30 40 50 Miles

50 Kilometers

IBRD 33368

SEPTEMBER 2004

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DIVISION CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

DISTRICT BOUNDARIES

DIVISION BOUNDARIES

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