Report and Recommendation of the President to the Board of Directors

Transcription

1 Report and Recommendation of the President to the Board of Directors Sri Lanka Project Number: September 2013 Proposed Loan and Administration of Technical Assistance Grant India: Supporting Human Capital Development in Meghalaya

2 CURRENCY EQUIVALENTS (as of 9 August 2013) Currency unit Indian rupee/s (Re/Rs) Re1.00 = $ $1.00 = Rs60.50 ABBREVIATIONS ADB Asian Development Bank DOE Department of Education DOF Department of Finance DPCU district project coordination unit GAP gender action plan GOM Government of Meghalaya ICT information and communication technology IPP indigenous peoples plan JFPR Japan Fund for Poverty Reduction LIBOR London interbank offered rate M&E monitoring and evaluation MSEPC Meghalaya State Employment Promotion Council MSSDS Meghalaya State Skill Development Society NGO nongovernment organization NSDC National Skill Development Corporation PAM project administration manual PIU project implementation unit PMU project management unit PPP public private partnership PSC project steering committee PWD Public Works Department QCBS quality- and cost-based selection RMSA Rashtriya Madhyamik Shiksha Abhiyan (India s National Secondary Education Mission) SCF Skills Challenge Fund SHS secondary and higher secondary SMC school management committee TA technical assistance TTC teacher training center TVET technical and vocational education and training NOTES (i) The fiscal year (FY) of the Government of India begins on 1 April and ends on 31 March. FY before a calendar year denotes the year in which the fiscal year starts, e.g., FY2014 begins on 1 April 2014 and ends on 31 March (ii) In this report, $ refers to US dollars.

3 Vice-President X. Zhao, Operations 1 Director General J. Miranda, South Asia Department (SARD) Director S. Ra, Human and Social Development Division, SARD Team leaders Team members Peer reviewer S. Chakravarti, Social Sector Economist, SARD B. Panth, Lead Education Specialist, SARD V. Annamraju, Senior Portfolio Implementation Specialist, India Resident Mission, SARD E. Bagtas, Operations Assistant, SARD R.V. Peri, Principal Private Sector Development Specialist, SARD R. Sabur, Senior Safeguards Specialist, SARD A.A. Syed, Counsel, Office of the General Counsel S. Jagganathan, Senior Education Specialist, Regional and Sustainable Development Department In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

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5 PROJECT AT A GLANCE CONTENTS Page I. THE PROPOSAL 1 II. THE PROJECT 1 A. Rationale 1 B. Impact and Outcome 3 C. Outputs 3 D. Investment and Financing Plans 5 E. Implementation Arrangements 5 III. TECHNICAL ASSISTANCE 7 IV. DUE DILIGENCE 7 A. Technical 7 B. Economic and Financial 7 C. Governance 8 D. Poverty and Social 8 E. Safeguards 8 F. Risks and Mitigating Measures 9 V. ASSURANCES AND CONDITIONS 10 VI. RECOMMENDATION 10 APPENDIXES 1. Design and Monitoring Framework List of Linked Documents 14

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7 PROJECT AT A GLANCE 1. Project Name: Supporting Human Capital Development in Meghalaya 2. Project Number: Country: India 4. Department/Division: South Asia Department/Human and Social Development Division 5. Sector Classification: Sectors Primary Subsectors Education Technical education and vocational skills training Upper secondary education 6. Thematic Classification: Themes Primary Subthemes Social development Human development Private sector development Public sector goods and services essential for private sector development Capacity Development Institutional Development 6a. Climate Change Impact No Climate Change Indicator available. 7. Targeting Classification: General Intervention Geographic dimensions of inclusive growth 9. Project Risk Categorization: Complex Targeted Intervention Millennium development goals Income poverty at household level 6b. Gender Mainstreaming Effective gender mainstreaming (EGM) 8. Location Impact: Rural High Urban High 10. Safeguards Categorization: Environment B Involuntary resettlement C Indigenous peoples B 11. ADB Financing: Sovereign/Nonsovereign Modality Source Amount ($ Million) Sovereign Project loan Ordinary capital resources Total Co-financing: Financier Category Amount ($ Million) Administration Type Japan Fund for Poverty Official-Grant 2.0 Full Reduction Total Counterpart Financing: Source Amount ($ Million) Government 25.0 Total Aid Effectiveness: Parallel project implementation unit No Program-based approach No

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9 I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on (i) a proposed loan to India for Supporting Human Capital Development in Meghalaya, and (ii) proposed administration of technical assistance (TA) to be provided by the Japan Fund for Poverty Reduction (JFPR) for Capacity Building for Supporting Human Capital Development in Meghalaya Meghalaya is one of India s special category states. 2 It is flanked by Bangladesh in the south and Assam, India, on the other three sides. The project will enhance the employability of Meghalaya s youth (16 35 years old) by improving the quality, access, and delivery of its secondary and higher secondary (SHS) education, and technical and vocational skills development programs. 3 II. THE PROJECT A. Rationale 3. Meghalaya is a predominantly tribal state with rich mineral reserves, more than 70% forest cover, and abundant rainfall. 4 Owing to its remote location, hilly terrain, and poor infrastructure, Meghalaya finds it difficult to attract private investment. Despite these constraints, its economy has grown at 8% over The tertiary sector grew by 9.1% while the secondary sector grew by 9.9%. 5 While the Government of Meghalaya (GOM) has been focusing on upgrading infrastructure development and incentivizing private investment, it is constrained by the state s weak human capital profile. 4. Owing to the poor quality of Meghalaya s secondary (grades 9 and 10) and higher secondary (grades 11 and 12) schools, and outdated technical and vocational education training (TVET) system, Meghalaya s youth find it difficult to make the transition from primary to secondary or tertiary sector jobs, and to compete for formal employment, especially outside the state. 6 The gross enrollment ratio is only 29.9% at the SHS level as compared with the all India average of 45.5%. Of the 961 recognized SHS schools in Meghalaya, only 33 (3%) are directly under the government (central and state) and cater to 6% of the students. A total of 337 (35%) are private-unaided schools in which 23% of the students study. The remaining 591 (62%) are government-aided private schools where 71% of the students, mainly from poor tribal families, study. Since government-aided private schools are not eligible for infrastructure support from GOM and only receive limited grant funding, their infrastructure is far below the standards prescribed by India s National Secondary Education Mission (RMSA). 7 Of the SHS schools in 1 The design and monitoring framework is in appendix 1. 2 Special category states are designated as such since they suffer from various constraints resulting from their special history, poor connectivity, difficult terrain, weak economic base, and poor infrastructure. 3 The Asian Development Bank (ADB) provided project preparatory technical assistance. ADB Technical Assistance to India for Preparing the Supporting Human Capital Development in Meghalaya Project. Manila. 4 The tribes listed in the Constitution Scheduled Tribe (ST) Order, 1950, account for 86% of Meghalaya s population. Khasis, Garos, and Jaintias are the three largest tribes of the state. 5 The tertiary sector includes hospitality, transport and communication, trade, banking, insurance, and public administration. The secondary sector includes construction, manufacturing, and mining and quarrying. 6 In FY2010, 62.3% of the labor force was engaged in agriculture, 25.6% in services, and 12.2% in the secondary sector. In terms of labor force, 55% was self-employed, 30% was casual labor, and 15% was in the formal sector. 7 The RMSA was launched in 2009 to provide universal access to secondary education by 2017 and achieve universal retention by Under the RMSA, all government secondary schools will be provided basic facilities including classrooms, laboratories, libraries, and toilets.

10 2 Meghalaya, 60% do not have science laboratories, and 72% do not have separate toilets for girls. Nearly 5,700 serving SHS teachers do not have the required training. For every five secondary schools, there is only one higher secondary school in Meghalaya. 5. Owing to the poor learning environment and limited capacity at the SHS level, many students drop out before completing their education. This puts a heavy burden on Meghalaya s under-resourced TVET programs. The annual TVET training capacity is 7,000 against the state target of 21,000. As in other states, Meghalaya s TVET programs are mainly funded and directed by central line ministries such as those for labor and employment, human resource development, rural development, tourism, and industries and commerce. These programs are implemented according to ministries priorities, and lack the flexibility to respond to Meghalaya s evolving needs. The linkage of these TVET programs with private sector needs or the demand side is weak, which adversely affects their quality and placement rate Meghalaya s decadal population growth rate of 27.8% over was the highest of all Indian states. 9 More than half (56%) of Meghalaya s population is under 25 years against 49% for India. Human capital development is an urgent priority for GOM. The Twelfth Five-Year Plan of Meghalaya, , notes that education and skills development will be the cornerstone of development as these enhance people s productivity and employability, and empower them to participate gainfully in market activity. 10 The plan aims at universalizing secondary education as part of the RMSA mandate. However, since only 3% of Meghalaya s schools are under the RMSA, GOM needs additional support to improve the infrastructure and learning environment in government-aided private schools where the majority of poor students study. 7. The National Skills Policy, 2009, mandates decentralization of skills development to states, and facilitation of public private partnerships (PPPs) in TVET reform. Accordingly, the Meghalaya State Employment Promotion Council (MSEPC) was established in August The Meghalaya State Skill Development Society (MSSDS) was formed in December 2011 to deliver on the mandate laid down by MSEPC. It has been given the authority to receive funds from the government (central and state), financial institutions, and development partners. 12 GOM now needs to draw on external funding, best practice, and capacity development support to operationalize the MSSDS effectively. 8. In view of GOM s priorities, the project will enhance the employability of Meghalaya s youth by improving the quality, delivery, and access of its SHS education and TVET programs. It will catalyze PPPs in skills training, strengthen public training institutes, build awareness among the tribal youth, increase participation of women, and strengthen monitoring and evaluation (M&E) to increase results orientation. The project will reinforce GOM s efforts in creating a facilitating environment for inclusive growth and combating poverty. It is in line with the country partnership strategy, for India, which aims at supporting India s efforts 8 Sector Assessment (Summary): Secondary Education and Skill Development (accessible from the list of linked documents in Appendix 2). 9 According to Census 2011, the decadal population growth for the whole of India during was 17%. 10 Government of Meghalaya, Planning Department Twelfth Five-Year Plan of Meghalaya, Meghalaya. 11 The MSEPC is headed by the chief minister. The executive council is headed by the chief secretary. 12 The 2011 skills-gap analysis conducted by the National Skill Development Corporation (NSDC) estimates additional demand for 249,000 skilled workers in sectors such as horticulture, construction, hospitality, automotive, information technology (IT) and IT-enabled services, health care, and food processing within Meghalaya over It identifies retail, hospitality, health care, private security, and airlines (flight attendants, ground staff) as areas with strong employment potential outside Meghalaya provided the youth have the right skills.

11 3 toward inclusive growth, and the country operations business plan, for India, which recognizes education as a new sector in Asian Development Bank (ADB) operations in India. 13 The project is fully aligned with Strategy This will be the first ADB project in India to focus on reform of SHS education and skills development. It has several innovative features. The Skills Challenge Fund (SCF) modality will enable the MSSDS to draw in private training agencies for providing training options to meet the needs of different segments: rural and urban youth, girls and boys, dropouts (at various levels) and school graduates, and those seeking employment within and outside Meghalaya. Districtlevel skills-gap analysis and M&E studies, that are sensitive to gender equality and social inclusion, will be conducted to ensure that training is linked to demand, and leads to the desired results, i.e., placement for wage employment or enhanced remuneration for self-employment. Partnerships with the sector skills councils established by the National Skill Development Corporation (NSDC) will market Meghalaya as a source of trained labor while building its skills ecosystem. The project will revitalize public training institutions by training their trainers, improving course material, and upgrading training equipment. This approach can be replicated for strengthening the TVET programs in other states as well. 10. The project will reinforce and build on GOM s efforts to improve road connectivity and power supply, attract industries, and enhance livelihoods through the flagship Integrated Basin Development and Livelihood Program. These initiatives are gradually stimulating economic activities and demand for skilled jobs within the state. The project is therefore, very timely, and ensures convergence with GOM s initiatives. Given its strong pro-poor and gender focus, the project will support GOM in creating a virtuous cycle of inclusive growth in the state. B. Impact and Outcome 11. The impact of the project will be enhanced employability of Meghalaya s youth. Its outcome will be improved quality, delivery, and access to SHS education and technical and vocational skills training in Meghalaya. C. Outputs 12. The outcome will be achieved through the following four outputs: 13. Output 1: Improved teaching and learning in government-aided secondary and higher secondary schools. The project will enhance the physical and learning environment of selected schools, support school management and leadership in improving delivery of SHS education, provide information and communication technology (ICT) equipment and materials for more effective teaching and learning, and support training of SHS teachers. This output will be achieved through the following four activities: (i) Upgrading the infrastructure of 117 or about 20% of the government-aided private SHS schools to RMSA standards to improve the overall learning and teaching environment, improve access for the physically challenged, and meet seismic and other safety standards. 15 Additional rooms and facilities (including laboratories, libraries, separate toilets for girls and boys, clean drinking water, 13 ADB Country Partnership Strategy: India, Manila; ADB Country Operations Business Plan: India, , Manila. 14 ADB Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, Manila. 15 Meghalaya has 11 districts and 39 blocks. The project will upgrade three schools per block on average.

12 4 (ii) (iii) (iv) better furniture, display boards, and computers) will be provided. Rooms will be built to accommodate grades 11 and 12 where required to increase retention and enrollment at the higher secondary level. In return for the infrastructure development support, the school management committees (SMCs) of the recipient schools will sign an agreement with GOM committing to monitor and enhance teacher and student attendance, upgrade teachers qualifications and training, lower the dropout rates, monitor teaching and learning, and provide data regularly in the prescribed formats. 16 Promoting interactive learning and teaching, including in remote locations, by providing tablets with built-in solar panels and pre-loaded teaching modules on SHS courses, soft skills, training in select trades, and career counseling to these 117 schools. Training by qualified public and private sector training providers for about 3,500 under-qualified and untrained teachers who are employed in the 591 government-aided SHS schools. School principals and key administrators will also receive training. The training will be mandatory for all untrained teachers of the 117 selected schools. Enhancing Meghalaya s capacity to train teachers by upgrading the six teacher training centers (TTCs) and providing these with modern teaching facilities. The project will also support training for the instructors in the TTCs. 14. Output 2: Increased capacity and responsiveness of technical and vocational education and training. The project will help the MSSDS catalyze market-responsive skills training programs in line with the priorities laid down by the MSEPC through two broad activities: (i) Strengthening skills training in Meghalaya to coordinate and target priority skills training in the state. The SCF will provide grants to incentivize skills training through private and public training providers in priority sectors identified through skills-gap analysis, industry consultations, and demand assessment. The capacity of MSSDS to appraise and award funds to qualified training providers, enhance quality assurance by establishing a monitoring system, and link up with sector skills councils and other NSDC-led PPP initiatives will be strengthened. 17 (ii) Incentivizing selected, Meghalaya-based public (e.g., industrial training institutes and community polytechnics) and private nonprofit training providers to promote placement-linked training and self-employment by upgrading their training equipment, training their instructors, and improving their curriculum and delivery methods. The providers will enter into an agreement with the MSSDS committing to reforming their training methods and partnering with the private sector as required. The proposals submitted by the providers will be selected through a competitive process by the project appraisal committee of the MSSDS. 15. Output 3: Increased awareness and participation. Since many of Meghalaya s schoolchildren are first-generation learners, the project will support this output by establishing an effective student counseling and guidance mechanism to persuade SHS students (boys and girls) to complete schooling, acquire soft skills critical for employment, and inform them about the available vocational training options and the corresponding opportunities. Nongovernment 16 Criteria for Selecting Government-Aided Schools for Upgrading and Memorandum of Understanding with School Management Committees (accessible from the list of linked documents in Appendix 2). 17 Skills Challenge Fund: Guidelines and Application Process (accessible from the list of linked documents in Appendix 2).

13 5 organizations (NGOs) will be engaged to develop campaign materials and mobilize communities to enhance awareness about the usefulness of education and skills training. 16. Output 4: Improved project management and monitoring and evaluation. This will be achieved by (i) providing technical support to implement project activities and build capacity; and (ii) hiring a research institute or consulting firm to undertake skills-gap analysis and tracer studies to track the results of skills training and learning reforms. D. Investment and Financing Plans 17. The project is estimated to cost $125 million equivalent (Table 1). Table 1: Project Investment Plan ($ million) Item Amount a A. Base Cost b 1. Improved teaching and learning in government-aided SHS schools Increased capacity and responsiveness of TVET Increased awareness and participation Enhanced project management and M&E 18.3 Subtotal (A) 95.9 B. Contingencies c 21.3 C. Financing Charges During Implementation d 7.8 Total (A+B+C) ADB = Asian Development Bank, M&E = monitoring and evaluation, SHS = secondary and higher secondary, TVET = technical and vocational education and training. a Includes taxes, duties, freight, and insurance of $4.5 million to be financed from ADB loan resources. b In mid-2012 prices. c Physical contingencies computed at 10% for civil works and 3% for equipment. Price contingencies are computed in accordance with ADB Financial Management and Analysis of Projects. Manila. d Includes interest and commitment charges. Interest during construction has been computed at the 5-year forward London interbank offered rate plus a spread of 0.4% and a maturity premium of 0.2%. Commitment charges for an ADB loan are 0.15% per year to be charged on the undisbursed loan amount. Source: Asian Development Bank. 18. The Government of India has requested a loan of $100 million from ADB s ordinary capital resources to help finance the project. The loan will have a 25-year term, including a grace period of 5 years, using the annuity method with a 10% discount factor, an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per year, and such other terms and conditions set forth in the draft loan and project agreements. Based on this, the average loan maturity is years and the maturity premium payable to ADB is 0.20% per annum. The financing plan is in Table 2. Since Meghalaya is a special category state, it will receive 90% of the loan as a grant from the Government of India. Table 2: Financing Plan Source Amount ($ million) Share of Total (%) Asian Development Bank Government Total Sources: Asian Development Bank and Government of Meghalaya. E. Implementation Arrangements 19. GOM, through the Department of Finance (DOF), will be the executing agency. The Department of Education (DOE), MSSDS, and Department of Labor will be the three

14 6 implementing agencies. The chief secretary, GOM will be chair of the project steering committee (PSC), which will include the additional chief secretary, finance; principal secretary, planning; principal secretary, education; principal secretary, community and rural development; chief executive officer, MSSDS; principal secretary, labor; and secretary, Public Works Department (PWD). The PSC will meet quarterly to monitor progress, approve the project s annual budget, and provide overall guidance. The project management unit (PMU) will be headed by the additional chief secretary, finance. It will include all PSC members (except the chief secretary) plus the chief engineer, PWD, and director, institutional finance. The commissioner and secretary, finance, will be the deputy project director. The PMU will be responsible for day-today coordination, management of project activities, and preparation of progress reports. The project director will be the focal point for issues related to social and environment safeguards. Two project implementation units (PIU) have been established. The first (PIU1) will focus on SHS education, while the second (PIU2) will focus on skills development and TVET reform. GOM has designated staff members to the PIUs for undertaking functions such as education, rural development, procurement, accounts, finance, and planning. Eleven district project coordination units (one for each district) headed by district magistrates will ensure effective project implementation. Detailed implementation arrangements are in the project administration manual (PAM). 18 Table 3: Implementation Arrangements Aspects Arrangements Implementation period 1 January September 2018 Estimated completion date September 2018 Management (i) Oversight body PSC headed by the chief secretary, Government of Meghalaya (ii) Executing agency Department of Finance, Government of Meghalaya (iii) Key implementing agencies Department of Education; Meghalaya State Skills Development Society; and Department of Labor, Government of Meghalaya (iv) Implementation unit In Shillong, capital of Meghalaya PIU1 Secondary and Higher Secondary Education; 8 staff designated PIU2 Meghalaya State Skill Development Society; 6 staff designated Procurement International competitive bidding 2 contracts $16.1 million National competitive bidding 8 contracts $29.8 million Consulting services QCBS (90:10) (skills training) 10 contracts $20.0 million QCBS and SSS (teacher $3.8 million training) Advance contracting Disbursement 3 contracts amounting to $3.4 million (through QCBS) and 2 contracts of $200,000 each through SSS a QCBS (90:10 basis) 3 contracts $9.03 million QBS 1 contract $1.81 million Individual consultants 4 contracts $0.19 million The contract for the project management consultant is expected to be issued before loan effectivity. The loan proceeds will be disbursed in accordance with ADB's Loan Disbursement Handbook (2012, as amended from time to time) and detailed arrangements agreed upon between the government and ADB. ADB = Asian Development Bank, PIU = project implementation unit, PSC = project steering committee, QBS = quality-based selection, QCBS = quality- and cost-based selection, SSS = single-source selection. a The justification for SSS is provided in the Project Administration Manual, section VI. Source: Asian Development Bank. 20. Procurement arrangements. All procurement to be financed under the project will be carried out in accordance with ADB s Procurement Guidelines (2013, as amended from time to time). ADB has approved advance procurement action. The Government of India and GOM 18 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

15 7 have been advised that approval of advance procurement does not commit ADB to finance the project. The consultants will be engaged in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time). III. TECHNICAL ASSISTANCE 21. The TA is estimated to cost $2 million which will be financed on a grant basis by the JFPR, and administered by ADB. TA will be provided to build capacity of GOM staff deputed to the PMU and PIUs. Manuals will be prepared and the required training provided to ensure that GOM officials are able to implement the project, track the performance of skills providers, and monitor compliance. Quality course materials will be prepared for training both male and female teachers and skills trainers. Social development (gender) and social safeguards (indigenous people) consultants will sensitize staff of GOM, public and private TVET agencies, and SMCs about the needs and concerns of women and tribal people, and help in the implementation of the gender action plan (GAP) and indigenous peoples plan (IPP). The TA project profile provides further details. 19 IV. DUE DILIGENCE 22. Detailed due diligence has been undertaken for this project. A. Technical 23. Condition assessment has been undertaken for 21 state-aided private schools and two TTCs to be upgraded under the project. 20 The schools and TTCs were selected from across all districts of Meghalaya. The design and cost estimates for civil works, equipment, furniture, and other facilities have been discussed with the PWD, GOM. The detailed project reports and bill of quantities are being prepared by PWD. B. Economic and Financial 24. The economic benefits for this project are expected to derive from (i) improved quality and increased capacity of SHS education in 117 selected government-aided private schools; (ii) a reduced number of students failing or dropping out as a result of a poor learning environment; (iii) improved learning outcomes resulting from teacher training, use of ICT-based modules, and career counseling; and (iv) enhanced capacity and quality of skills training by increasing the involvement of private sector providers with a focus on outcomes. The project yields a net present value of $60.7 million. The economic internal rate of return associated with this net present value is 18.6%, assuming a discount rate of 12%. 25. The overall effort to enhance human capital development in Meghalaya, as elaborated in the project design, will cost $125 million. Of this amount, $100 million (or 80%) will be funded through the ADB loan while GOM will provide $25 million (or 20%). The Planning Commission has agreed to allocate $25 million as part of the State Plan for this project over the 12th plan period ( ). Consequently, the project will not put any net additional fiscal burden on GOM. The contributions to be made by GOM to the SCF and the school maintenance fund will ensure sustainability of the benefits beyond the life of the project. 19 Technical Assistance: Capacity Building for Supporting Human Capital Development in Meghalaya (accessible from the list of linked documents in Appendix 2). 20 Sample Condition Assessment of a School (accessible from the list of linked documents in Appendix 2).

16 8 C. Governance 26. A financial capacity assessment and procurement capacity assessments were undertaken of the DOF, DOE, and MSSDS. 21 The financial capacity assessment concluded that the DOF and DOE have well established financial management procedures. However, since the MSSDS is a relatively new entity, its financial management systems and procedures need to be strengthened significantly. GOM s strong commitment to and ownership of needed reforms in financial management provide a good basis for the required improvements. Capacity building assistance will be provided to strengthen the internal controls and operating procedures of the MSSDS. The procurement assessment highlighted the need to assist the DOE and PWD in undertaking civil works, and the MSSDS in engaging skills training providers. The required capacity building inputs will be provided under the loan and through the JFPR TA. By setting up management information systems for the DOE and MSSDS, the project will strengthen governance and financial management systems within the DOE and MSSDS. ADB s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government of India and GOM. The specific policy requirements and supplementary measures are described in the project administration manual. D. Poverty and Social 27. Endemic poverty and low levels of some social indicators are major problems facing Meghalaya. According to the census of households below the poverty line carried out in 2002, 48.9% of households state-wide were below the poverty line. The education and health profile of women in Meghalaya remains relatively poor. 22 A detailed ground-level social assessment was undertaken during project design, which has guided preparation of the GAP and IPP. The social assessment reaffirms strong support for the project since it will improve the quality, delivery, and access of SHS, and TVET programs, especially in underserved districts and blocks. The GAP focuses on building awareness and mobilizing communities around education and skilled employment for tribal youth (boys, girls); building the capacity of teachers and skill providers on gender equality concepts and practices; developing gender-sensitive infrastructure in schools; and assisting trained youth, especially women, to avail of employment opportunities. E. Safeguards 28. The project is categorized B for environment since it will only involve upgrading of the buildings of existing schools and TTCs. Where there is space within existing school premises, additional rooms will be built for grades 11 and 12. The upgrading will improve the overall environmental management of the buildings in terms of appropriate drainage, handling and disposal of sanitary and solid waste, introduction of water harvesting, and seismic strengthening. School buildings located in or near an environmentally sensitive area will not be included under the project. An environmental assessment and review framework has been prepared to guide the future environmental assessment work of upgrading 117 schools and six TTCs. Since there will be no land acquisition or resettlement, the project is categorized C for involuntary resettlement. 21 Procurement Capacity Assessment Report; Financial Capacity Assessment (accessible from the list of linked documents in Appendix 2). 22 In , Meghalaya s maternal mortality rate was 238 per 100,000 live births against the national average of 212 per 100,000 live births. The infant mortality rate of females per 1,000 live births was 59 in Meghalaya against 52 for India as a whole in 2009.

17 9 29. The project is classified B for indigenous peoples. The various scheduled tribes together constitute 86% of Meghalaya s population. To understand the views and aspirations of the scheduled tribes about the activities proposed under the project, a series of meaningful consultations were held with durbars and nokmas (councils of tribal elders), women s groups, SMCs, teachers, students, parents, NGOs, skills providers, and government officials during the design phase. The project was explained to the stakeholders, and their feedback used to strengthen the design. These consultations confirm strong support for both, the education and skills development components of the project. It is appreciated that the project will not have any negative effect but instead, have a positive effect by improving youth employability. While the entire project has been designed to reach out to all tribal groups, a separate IPP has been prepared to ensure that the different tribal groups benefit equitably and in a culturally appropriate manner from the positive effects of the project. 30. The project director, who is the focal point for all safeguard issues, will be assisted by a social safeguards specialist, social development specialist (gender), and environment specialists who will be hired under the loan. They will oversee implementation of the IPP, GAP, and the environmental assessment and review framework. The specialists will also ensure that grievances, if any, are redressed in a timely and effective manner, and that the PMU, PIUs, and DPCUs comply with ADB s information disclosure and consultation requirements. F. Risks and Mitigating Measures 31. Major risks and mitigating measures are summarized in Table 4 and described in detail in the risk assessment and risk management plan. 23 Risks Limited capacity of GOM Given the poor law and order and bad roads, especially in remote areas, it may be difficult to attract good contractors to implement the project MSSDS has limited financial management capacity Limited capacity in procurement. Staff assigned to PMU and PIUs not familiar with ADB s procedures. Table 4: Summary of Risks and Mitigating Measures Mitigating Measures (i) Capacity development support will be provided to the PMU, PIUs, and DPCUs through the JFPR TA. (ii) GOM staff from relevant departments will be invited for orientation seminars (procurement, consultant recruitment, ADB procedures, safeguards) organized by the India Resident Mission. (iii) Support will be provided by the resident mission s project implementation office in Guwahati, Assam, as required. (i) Since the DPCUs are headed by the district magistrates and comprise the block development officers, the required support will be provided by GOM. The recent reconstitution of seven districts into 11 districts will make it easier for local authorities to maintain order in a smaller geographical area; (ii) Detailed procurement risk assessment was undertaken. Meghalaya-based and other relevant contractors will be invited to the resident mission s business development seminars. (iii) GOM is focusing on improving its road network. (i) A detailed action plan, laying out the mitigation measures for addressing the various risks has been prepared. The required assurances and covenants will be included to ensure prudent financial management. (ii) Short-term consultants will be engaged to design the internal control systems and manuals for MSSDS. Long-term consultants will be engaged under the loan to train the MSSDS staff in financial management and accounting. Consulting inputs will be provided to strengthen the procurement and disbursement functions within the PMU and PIUs. ADB = Asian Development Bank, DPCU = district project coordination unit, GOM = Government of Meghalaya, JFPR = Japan Fund for Poverty Reduction, MSSDS = Meghalaya State Skill Development Society, PIU = project implementation unit, PMU = project management unit, TA = technical assistance. Source: Asian Development Bank. 23 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

18 10 V. ASSURANCES AND CONDITIONS 32. The Government of India and GOM have assured ADB that implementation of the project shall conform to all applicable ADB policies including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the project administration manual and loan documents. 33. The Government of India and the GOM have agreed with ADB on certain covenants for the project, which are set forth in the loan agreement and project agreement. 34. Prior to disbursement of financing for output 2, (i) ADB and the Government of India must have approved (a) the criteria for the selection of the training providers for the SCF, and (b) the form of an agreement for the SCF; and (ii) the MSSDS shall have entered into an agreement for the SCF with at least one of the selected training providers. VI. RECOMMENDATION 35. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve (i) the loan of $100,000,000 to India for Supporting Human Capital Development in Meghalaya, from ADB s ordinary capital resources, with interest to be determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility; for a term of 25 years, including a grace period of 5 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan and project agreements presented to the Board; and (ii) the administration by ADB of technical assistance not exceeding the equivalent of $2,000,000 to the Government of India for Capacity Building for Supporting Human Capital Development in Meghalaya to be provided by the Japan Fund for Poverty Reduction on a grant basis. 4 September 2013 Takehiko Nakao President

19 Appendix 1 11 DESIGN AND MONITORING FRAMEWORK Design Summary Impact Enhanced employability of Meghalaya s youth Performance Targets and Indicators with Baselines 1 Target year: Fiscal year (FY) (i) Decline in the unemployment rate of Meghalaya to 8% from 11% in (as per the National Sample Survey, 66th round) (ii) Average pass rate at the secondary level in governmentaided private schools to increase by 5% from the pass rate of 67.1% in class 10 and 69.5% in class 12 Data Sources and Reporting Mechanisms (i) National Sample Survey reports, independent evaluations, and M&E reports to be prepared under the project (ii) Annual reports of the MSSDS and DOE, GOM Assumptions and Risks Assumption No adverse economic shocks in Meghalaya or in the rest of India, which affect the demand for skilled labor Risk Private investment may not pick up within Meghalaya at the required pace despite efforts by GOM. Outcome Improved quality, delivery, and access to SHS education and technical and vocational skills training in Meghalaya (Baseline: FY ; Target year: FY ) (i) 5% reduction in dropout rate per annum for both girls and boys at SHS levels in 117 governmentaided private schools covered under the project (baseline 11% average drop-out at the SHS level) (ii) 60% of skilled male and female trainees for wage employment find jobs within 1 year (i) Project tracer studies and M&E surveys for both indicators (ii) Reports of DOE and the Meghalaya Board of School Education for indicator (i) (iii) Reports of MSSDS and DOL for indicator (ii) Assumption The state government remains committed to human capital development, and continues to provide adequate funding for it. Risk The physical infrastructure (roads, power supply, and telecommunications connectivity) does not improve at the required space despite the efforts of GOM. Outputs 1. Improved teaching and learning in government-aided SHS schools (Baseline: FY ; Target year: FY ) (i) 117 SHS government-aided schools upgraded to meet the infrastructure, training, and gender and social equity standards of RMSA (ii) Enrollment capacity increased by 3,200 students in grades 11 and 12 in 40 schools (iii) Six state-run TTCs upgraded (i) Annual reports prepared by DOE and periodic reports prepared by PIU1 for all indicators (ii) Reports of review missions to supplement and validate information on all indicators Assumption The SMCs of the 117 schools will abide by the agreements signed with DOE. Risk It may be difficult to get quality contractors to undertake building upgrading work in remote districts of Meghalaya. 1 Primary surveys and tracer studies will be conducted under the project to strengthen the baseline figures.

20 12 Appendix 1 Design Summary Performance Targets and Indicators with Baselines 1 to national standards to increase capacity to train primary and SHS school teachers Data Sources and Reporting Mechanisms Assumptions and Risks (iv) In-service training of 3,500 SHS teachers covering all 591 government-aided private schools (50% women) 2. Increased capacity and responsiveness of technical and vocational education and training (v) ICT-enabled teaching and learning pilot tested in 117 schools (Baseline: FY ; Target year: FY ) (i) SCF operational (ii) Training of 12,000 youth per annum or 60,000 over project period (40% women trainees and 95% tribal trainees) conducted (iii) Training equipment and curriculum in selected Meghalaya s public and private nonprofit training organizations upgraded (i) Reports of MSSDS for indicator (i) (ii) Reports prepared by MSSDS and project tracer studies for indicator (ii) (iii) Reports prepared by MSSD and DOL for indicator (iii) Assumption Measures to strengthen the financial management capacity of MSSDD will be taken in a time-bound manner as agreed by GOM. Risk Movement in key personnel may lead to some delays in rolling out of the activities 3. Increased awareness and participation 4. Improved project management and monitoring and evaluation At least 20,000 participants (50% women) in awareness building and mobilization campaigns that address social, economic, and gender barriers to completing secondary education and accessing TVET programs. (i) Project implemented on time and within budget (ii) Monitoring and evaluation system, with gender targets for education and skills development, in place by mid Reports prepared by NGOs (i) Reports of the two PIUs and PMU for both indicators (ii) Reports of review missions to supplement and validate information on all indicators Assumption The number of youth interested in continuing SHS and skills training will increase. Assumption The key staff who receive training remain within the relevant PIU until project completion. Activities with Milestones 1. Loan inception (February 2014 following loan effectiveness) 1.1 Conduct inception workshops. 1.2 Discuss project administration memorandum with the steering committee and focal points of different departments. 1.3 Hire design and supervision consultants. 2. Output 1: Improved teaching and learning in governmentaided secondary and high secondary schools Inputs ADB: $100 million Government: $25 million Japan Fund for Poverty Reduction: $2,000,000* * The government will also provide counterpart support in the form of

21 Appendix 1 13 Activities with Milestones 2.1 Finalize 117 schools to be upgraded and finalize agreements with these schools (by September 2014). 2.2 Advertise school upgrading contracts (starting in third quarter 2013). 2.3 Issue contracts and initiate civil works (within 1 month of loan effectivity). 2.4 Issue tenders to upgrade 6 TTCs (by second quarter 2014). 2.5 Monitor performance of schools and TTCs (ongoing). 2.6 Conducting teacher training (from January 2015). Inputs basic office accommodation, remuneration and per diem of counterpart staff, and other in-kind contributions. 3. Output 2: Increased capacity and responsiveness of technical and vocational education and training 3.1 Establish SCF and finalize initial proposals (March 2014). 3.2 Invite and appraise proposals for skills development (by July 2014). 3.3 Award contracts for skills training, and conduct close monitoring and evaluation (ongoing until end of project). 4. Output 3: Increased awareness and participation 4.1 Design awareness building and mobilization strategy and design the required material translated into key tribal languages (by end of 2014). 4.2 Undertake multi-pronged awareness building, mobilization, and career counseling in different districts (from second half of 2014 to end of project). 4.3 Provide feedback to strengthen project implementation and enhance participation of target beneficiaries (ongoing). 5. Output 4: Improved project management and monitoring and evaluation 5.1 Recruit required consulting firms, including that under JFPR (within 1 month of loan effectivity). 5.2 Assist staff of PIUs and DPCUs in implementing the loan and undertaking M&E (ongoing). 5.3 Monitor, report, and evaluate performance through sexdisaggregated surveys, and tracer studies (ongoing). 5.4 Finalize and implement communications strategy (fourth quarter 2014). 5.5 Undertake skills-gap analysis to guide future work of SCF; continue with M&E and prepare reports (2014 to end of project). ADB = Asian Development Bank, DOE = Department of Education, DPCU = district project coordination unit, FY = fiscal year, GOM = Government of Meghalaya, ICT = information and communication technology, JFPR = Japan Fund for Poverty Reduction, M&E = monitoring and evaluation, MSSDS = Meghalaya State Skill Development Society, NGO = nongovernment organization, PIU = project implementation unit, PMU = project management unit, RMSA = Rashtriya Madhyamik Shiksha Abhiyan or National Secondary Education Mission, SCF = Skill Challenge Fund, SEMIS = Secondary Education Management Information Service, SHS = secondary and higher secondary, SMC = school management committee, TTC = teacher training center. Source: Asian Development Bank.

22 14 Appendix 2 LIST OF LINKED DOCUMENTS 1. Loan Agreement 2. Project Agreement 3. Sector Assessment (Summary): Secondary Education and Skills Development 4. Project Administration Manual 5. Contribution to the ADB Results Framework 6. Development Coordination 7. Economic and Financial Analysis 8. Country Economic Indicators 9. Summary Poverty Reduction and Social Strategy 10. Gender Action Plan 11. Initial Environmental Examination 12. Environmental Assessment and Review Framework 13. Indigenous Peoples Plan 14. Risk Assessment and Risk Management Plan Supplementary Documents 15. Criteria for Selecting Government-Aided Schools for Upgrading and Memorandum of Understanding with School Management Committees 16. Skills Challenge Fund: Guidelines and Application Process 17. Technical Assistance: Capacity Building for Supporting Human Capital Development in Meghalaya 18. Consultation and Participation Plan 19. Communication Strategy 20. Procurement Capacity Assessment Report 21. Financial Capacity Assessment 22. Sample Condition Assessment of a School