PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB5958 Project Name. Nepal: Enhanced Vocational Education and Training Region

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1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB5958 Project Name Nepal: Enhanced Vocational Education and Training Region SOUTH ASIA Sector Vocational training (75%);Public administration- Education (20%);Other industry (5%) Project ID P Borrower(s) GOVERNMENT OF NEPAL Implementing Agency TBD Environment Category [ ] A [] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared August 25, 2010 Estimated Date of January 17, 2011 Appraisal Authorization Estimated Date of Board April 20, 2011 Approval I. KEY DEVELOPMENT ISSUES AND RATIONALE FOR BANK INVOLVEMENT 1. Nepal is one of the poorest countries in South Asia. It has lagged behind in economic growth compared to its neighbors. Between 2001 and 2006, Nepal grew at an average rate of 2.7 percent, less than third of India s and quarter of China s growth rate over the same time period. About a quarter of the population is estimated to be below the national poverty line. The Government recognizes that to make inroads into eradicating poverty and improve social outcomes would require sustained, broad-based, inclusive and faster economic growth. The macroeconomic challenges facing the country have been compounded by the recent economic downturn and inflation putting pressure on the education budgets and increase household poverty levels. Furthermore, Nepal, a linguistically, ethnically and geographically diverse country, has been beset by political conflict for two decades. 2. Despite this, Nepal s progress in improving its social and human development has been commendable. Primary Net Enrollment Rate (NER) stands at about 90 percent and the country has achieved gender parity at the primary level by adopting policies aimed at ensuring equity in access, not only by gender, but across ethnic and caste boundaries as well. Secondary NERs are considerably lower at about half that of primary, though this too has been increasing rapidly in recent years. On key health indicators, Nepal has begun to demonstrate significant gains. Infant mortality rates have declined from 108 in 1990, to 64 in 2000, to about 41 in 2010, while under-five mortality rates have declined from 161 (1990) to 92 (2000) to 50 (2010). Nepal has also done very well in reducing maternal mortality rates from 850 (1990) to 415 (2000) to 229 (2010) deaths per 100,000 live births. Nepal has seen tremendous success in increasing immunization coverage. Nearly 86% of children under a year old are immunized against measles. These are truly significant improvements in the country, particularly at a time when the country was in the middle of a civil conflict. 3. Nepal has a vibrant workforce with more women participants than any other country in the region, and comparable to more developed east-asian economies. The Labor Force Participation Rate for population aged 15 years and above, according to the Nepal Labor Force Survey (NLFS, 2008), was 85.2%. Educational attainment of the workforce is low with 48% of the workforce reporting never having attended a school. The share of the workforce with primary and higher level education (grade 5 and above) is 38%, where as that with secondary and higher (grade 8 and above) is 25%. The NLFS 2008

2 reports that for the age group years, only about a tenth of the individuals report having some kind of training. Amongst the men who received training, nearly two-fifths have taken courses in computer science, about a tenth in driving and vehicle operations, about 6 percent as electricians, about 4 percent in dress making and tailoring, and about 3.4 percent in agriculture and animal husbandry areas. Nearly twofifths of women report being trained in dressmaking and tailoring, about a quarter in computer science and applications, and 6 percent in nursing and other medical auxiliary professions, and about 5 percent each in hairdressing and beauty works, and in handicrafts. The survey also reports a strong desire for further training and that nearly three-fifths of those who had already received training, sought further training opportunities. 4. However, slow economic growth and continued political impasse impedes the country s ability to increase the number of well paying and sustainable jobs, and this compels young Nepalis to consider migrating overseas in search of better opportunities. Information on the numbers and skill profiles of migrant labor abroad is sketchy but India absorbs the largest number of Nepali migrant labor due to proximity and an open border, strong religious and cultural ties, and similarities in language and culture. Other preferred migrant destinations are in the Middle East, East-Asia, South-east Asia, and in the OECD countries. The estimates of the number of migrants varies from about a third to nearly half the male population of Nepal Most of the migrant worker going abroad are unskilled, and are engaged in low paying jobs. 5. The government s objectives of economic growth that is broad-based and inclusive, poverty alleviation and improving the competitiveness of Nepal s economy in global markets are integrally linked to its Technical Education and Vocational Training (TEVT) goals, policies and programs. The government s objectives in the field of skills and training have been set out in several TEVT policy documents, and a new draft National TEVT Policy ( ) has been prepared 1. The aims are to reform, strengthen, and expand access to the technical vocational education and training system in the country to help Nepal maintain a competitive edge in the region, and generate employment for poverty alleviation. The policy takes a long term view for the development of the education and training sector in Nepal. Additionally, it also stresses on the need to increase the responsiveness of the training system to cater to the needs of the labor market and commits to achieving this through a multi-pronged strategy that includes, but is not limited to: (i) improving the quality, relevance and efficiency of available training programs, (ii) encouraging public private partnerships in the sector, and (iii) enhancing the flexibility of training in terms of the duration, timetable and curriculum are some of the reforms proposed by the Government. 6. Government of Nepal (GON) has actively sought donor support for the TEVT sub-sector. Several development partners have already been in playing a role in the sub-sector such as the Asian Development Bank (ADB), the Swiss Development Corporation (SDC), UNDP, USAID, DFID, GTZ etc. The ADB s Skills for Employment (USD 25 million) is the largest TEVT project in the country. Additionally, China, India and Korea, are also assisting in the expansion of the technical education subsector through direct support to some training institutions. Several international and national nongovernment organizations (NGOs) have also been directly responsible for provision of training. The development partners through the School Sector Reform Program SWAp (Sector Wide Assistance project), also support soft-skills training at the secondary school level through Annex Schools of the Department of School Education. Finally, IDA provided assistance to the TEVT sector through Western Region Campus Project ( ), Institute of Engineering Development Project ( ) and Engineering Education Project ( ). At present, IDA supports the Adolescent Girls Employment 1 The National Planning Commission, however, has reiterated that they do not see this policy as a final document, and that they wish to make this national policy as live a document as possible to ensure that course corrections can be made constantly.

3 Initiative (AGEI) Project which works through the Employment Fund to provide market relevant training and guaranteed employment to young girls who wish to participate in the labor force. 7. This proposed project comes in response to a direct request made by the Government of Nepal in March 2010 for the Bank s support in developing the country s skills development agenda. The proposed project is fully consistent with the Three-Year Interim Plan (TYIP) which includes specific national level development goals to improve quality of all levels of education and also proposes actions to improve the effectiveness of technical education and vocational training. The World Bank s Interim Strategy Note (ISN ) 2 recognizes skills shortages and mismatches in the country and its impact on implementation of a pro-poor growth strategy, particularly at a time when Nepal is trying to emerge from a protracted conflict which has severely impacted on people s lives and livelihoods, and which has impacted on the economic growth of the country at a time when all the other countries in the region were growing at substantial rates. 8. The proposed project will respond to the key constraints identified for the sub-sector: a. The performance of public institutions remains poor due to the weak incentive structures. b. There is very little evidence on the effectiveness of the training programs in place. Programs are of poor quality typically and are not aligned with the needs of the labor market. c. Investments in the sub-sector continue to be small and due to the inefficiencies in transforming inputs into outputs are also ineffective. d. Quality assurance mechanisms do not exist and the absence or irrelevance of existing occupational, skills, and product standards, further reduces the effectiveness of investments in the TEVT sector. Quality recognition mechanisms also do not exist and therefore existing skills learnt informally or via formal or informal apprenticeships remain devalued. e. There is need for articulation across vocational/technical education and training, and the general education stream to develop a more streamlined education and skills sector. f. Absence of useful and timely information to all actors in the TEVT system (e.g., government, employers, and potential beneficiaries) makes it difficult to address skill imbalances within the economy. 9. Investment in the sub-sector needs to be twinned with improvement in governance so that there is alignment of inputs and outcomes, greater accountability and quality assurances built into the system. Public institutions need to focus on employability of their trainees and performance incentives for these institutions should reflect that. Training institutions and industry should work in tandem to reduce skills gap and mismatches. Quality assurance mechanisms will require public goods such as qualifications frameworks to be created and coordination across institutions and organizations of the government, industry and private sector, and quality assurance bodies. II. PROJECT OBJECTIVES 10. The proposed Project Development Objectives are to: (i) expand the supply of skilled and employable labor through policy reforms and strengthening of technical and vocational education, and (ii) improve access to TVET for labor force participants and potential entrants. 2 Interim Strategy Note for the People s Republic of Nepal FY10-11, Report No NP, The World Bank, 2010.

4 11. The key performance indicators (KPIs) will include inter alia and will be revised and fine-tuned during the preparations: a. Employment rate and average earnings of TEVT graduates within six months of graduation b. Number of formally certified TEVT graduates c. Increase in the enrolment of youth in TEVT courses from disadvantaged groups and lagging regions. d. Comprehensive action plan supporting the TEVT policy developed and implemented. III. PRELIMINARY DESCRIPTION 12. Since the development of a high quality TVET subsector is a long-term agenda, involving both developing the necessary institutional structures to create an effective policy and regulatory environment over the long term, and simultaneously strengthening the system s capacity to meet the demand for skilled workers in the shorter term. 13. Component 1 will support development of the necessary institutional structures to create an effective policy and regulatory environment for the long term. These will include inter alia a high level multi-party Committee on Education and Skills which will also include private sector and civil society stake-holders as members, draft National Strategy for TEVT ( ), a white paper for the restructuring of CTEVT, establishment of a Qualifications Authority for Education and Skills, adoption of a National Qualifications Framework, a draft plan for establishment and operation of an Employment Fund and development of a framework for the delivery of vocational educational and training services by the private sector. 14. Component 2 will focus on improving the quality and relevance of training imparted at the technical education and Diploma levels. These are typically longer term programs Eligible public and private institutions will be competitively selected on the basis of well-defined criteria for support under this component. Disbursements under this component will be made on the basis of measurable and verifiable performance of the selected institutions. 15. Component 3 will support two types of short-term training programs to increase employability of Nepalese youth in domestic and overseas markets and to fill the short-term gap for skills. This component will comprise of: (a) a voucher for jobs scheme supporting short-term training of beneficiaries in select trades through unit cost payment to providers and stipends to beneficiaries; and (b) a pilot for the development of a system to recognize and certify prior learning to increase the market value of valuable but informally learnt skills on the part of the majority of Nepal s workers. 16. Component 4 will focus on (a) establishing a sound structure for project management and implementation, including monitoring and evaluation, and providing it will appropriate technical assistance, staffing and logistical support; and (b) build capacity for policy development, planning and delivery of improved quality vocational training. In addition, this component will also support the Government in improving its ability to develop labor demand trends by sector so that at the policy level training resources can be increasingly channeled to support these growth areas.

5 IV. SAFEGUARD POLICIES THAT MAY APPLY 17. The project triggers OP/BP 4.01 Environmental Assessment and OP/BP 4.10 Indigenous Peoples. The EA Category is C and hence an EA will not be needed. If during project preparation it is determined that OP/BP 4.01 could be triggered because of possible rehabilitation of buildings and/or other facilities, then the Safeguards Framework will include guidelines for how to go about this (the standard formulations used across the various rehabilitation projects in the Nepal portfolio). A comprehensive assessment of disadvantaged groups will be carried out and completed prior to Appraisal. V. TENTATIVE FINANCING Source: ($m.) BORROWER/RECIPIENT 9.00 International Development Association (IDA) Total VI. CONTACT POINTS Contacts: Venkatesh Sundararaman/Saurav Dev Bhatta Titles: Senior Economist/Senior Education Specialist Tel: Extensions 6158/6124 Fax: vsundararaman@worldbank.org/sbhatta@worldbank.org