Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 405 14-HN

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR$9.8 MILLION (US$l5.37 MILLION EQUIVALENT)

TO THE

REPUBLIC OF HONDURAS

FOR AN

EDUCATION QUALITY, GOVERNANCE AND INSTITUTIONAL STRENGTHENING PROJECT

December 18,2007

Human Development Sector Central America Country Management Unit Latin America and Caribbean Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective October 3 1, 2007)

Currency Unit = Lempiras (L) 19.479 Lempiras = US$1

0.63720US$ = SDR 1

ADEL

AECO AM CAFTA CAS CEB CCPREB CNB DU DMAF DMTP EC ECU EDUCO

EFA EFA-FTI EFA-PF EMU ENCOVI ENEE FEREMA

GDP GNI GoH HIPC HRM HONDUTEL

IBE IDA IDB TNE IMF INICE

JICA L A C LLECE

FISCAL YEAR January 1 - December31

ABBREVIATIONS AND ACRONYMS Asociaciones de Desarrollo Educativo Local (Local Education Development Associations) Asociaciones Educativas Comunitarias (Parent School Associations) Administration Manager Tratado de Libre Comercio de CentroamBrica (Central America Free Trade Agreement) Country Assistance Strategy Centros de Educacibn Bhsica (Basic Education Centers) Centro de Educacibn Prebasica Comunitaria (Community Based Preschool Services) Curriculum Nacional Bhsico (National Curricula) Departmental Units Deputy Minister for Social Groups and Administrative Affairs Deputy Minister for Technical and Pedagogical Affairs Education Centers EFA Coordination Unit Educacibn con Participaci6n de la Comunidad (Community Managed Education Program in Rural Areas) Education For All Education For All - Fast Track Initiative Education For All - Pooled Fund Educational Modernization Unit Encuesta de Condiciones de Vida (Quality o f L i f e Survey) Empresa Nacional de Energia E16ctrica (National Electric Company) Fundacibn para la Educacibn Ricardo Ernesto Maduro Andreu (Ricardo Ernesto Maduro Andreu Education Foundation) Gross Domestic Product Gross National Income Government o f Honduras Heavily Indebted Poor Countries Human Resources Management Empresa Hondureila de Telecomunicaciones (Honduran Telecommunications Company) Intercultural Bilingual Education International Development Association Inter-American Development Bank Instituto Nacional de Estadisticas (National Statistics Institute) International Monetary Fund Instituto Nacional de Investigacibn y Capacitacibn Educativa (National Institute for Research and Education Training) Japan International Cooperation Agency Latin America and the Caribbean Laboratorio Latinoamericano de Evaluacibn de la Calidad de la Educacibn, OREALCRJNESCO (Latin American Laboratory for the Assessment o f Quality

L S M S MDRI MERECE

MIDEH

MoE PASCE

PEC PER POA PRAF

PRAEHMO

PREP1 PRGF PROHECO PROMETAM

PRONADE

PRONEEAAH

PRS PRS TAC PSD QED sc SDP SGR SEMED

SIAFI

SIDA

SIEE S IARHD SEW

SINECE

SWAP TOR UECEX UI UM UMCE

UNAH

FOR OFFICIAL USE ONLY Education, OREALCNNESCO) Living Standard Measurement Study Multilateral Debt Relief Initiative Mesa Redonda de Cooperantes Externos en Educacidn (Internacional Donors’ Education Round Table) M e j orando e l Impact0 del Desempeiio Estudiantil de Honduras (Improving Student Education Achievement in Honduras) Ministry o f Education Programa de Ajuste Social y Calidad Educativa (Quality o f Education and Social Adjustment Program) Proyecto Educativo de Centro (School Based Education Project) Proyecto Educativo de Red (School Network Education Project) Plan Operativo Anual (Annual Operational Plan) Programa de Asignacion Familiar (Supply-side School Grant Program for Poor Families) Programa de Apoyo a la Enseiianza Media (National Education Program for Secondary Education) Proyecto de Educacidn Pre-BBsica Interactiva (Interactive Preschool Education Project) Poverty Reduction and Growth Facility Proyecto de Educacih Comunitaria (Honduras Community Based Education Program) Proyecto de Mejoramiento de la Enseiianza Tecnica en e l k e a de Matematica (Mathematics Education Improvement Program) Programa Nacional de Autogestidn para e l Desarrollo Educativo (Sel f Managed Education Development National Program) Programa Nacional de Educacidn para las Etnias Autdctonas y Afroantillanas de Honduras (National Education Program for Etnic Groups in Honduras) Poverty Reduction Strategy Poverty Reduction Strategy Technical Assistance Credit Pedagogical Services Director Quality Education Director Steering Committee Secretaria de la Presidencia (Secretary o f the Presidency) Sistema de Gerencia por Resultados (Results Based Management) Sistema de Educacidn Media a Distancia (National Distance Secondary Education Program) Sistema de Administracidn Financiera Integrada (Integrated Financial Management System) Agencia Sueca para el Desarrollo Internacional (Swedish Internacional Development Authority) Sistema Integrado de Estadisticas Educativas (Integrated Education Statistics System) Sistema de Recursos Humanos Docentes (Human Resources Information System) Sistema de Informacion de la Estrategia de Reduccidn de la Pobreza (Information System for Poverty Reduction Strategy) Sistema Nacional de Evaluacidn de la Calidad Educativa (National Assessment System for Quality o f Education) Sector-Wide Approach Terms o f Reference Unidades Ejecutoras de Creditos Externos (Executing Agencies for External Credits) Unidad de Infotecnologia (Information Technology Unit) Unidad de Modernizacidn (Modernization Unit) Unidad Externa de Medicidn de la Calidad de la Educacidn (External Evaluation Unit o f the Quality o f Education) Universidad Nacional Aut6noma de Honduras (National Autonomous University o f Honduras)

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.

UNESCO UNICEF UPEG USAID WB World Bank

United Nations Educational, Scientific and Cultural Organization United Nations International Children’s Emergency Fund Unidad de Planeaci6n y Evaluaci6n de la Gesti6n (Evaluation and Planning Unit) U S Agency for International Development

Vice President: Pamela Cox Country Director: Jane Armitage Country Manager: Evangeline Javier

Sector Manager: Eduardo Velez-Bustillo Sector Leader: Laura Rawlings

Task Team Leader: Mario Cristian Aedo Inostroza

REPUBLIC 0 F HONDURAS EDUCATION QUALITY. GOVERNANCE AND INSTITUTIONAL STRENGTHENING

CONTENTS

Page

STRATEGIC CONTEXT AND RATIONALE .......................................................................... 1 Country and sector issues .................................................................................................... 1

Rationale for Bank involvement .......................................................................................... 6

Higher level objectives to which the project contributes .................................................... 7

A . B . C .

PROJECT DESCRIPTION .......................................................................................................... 8 Lending instrument .............................................................................................................. 8 Project development objective and key indicators .............................................................. 8

. . D . E . F . G . H .

Project components .............................................................................................................. 8

Alternatives considered and reasons for rejection ............................................................. 17

Lessons learned and reflected in the project design .......................................................... 15

IMPLEMENTATION ................................................................................................................. 18

Partnership arrangements (if applicable) ........................................................................... 18

Institutional and implementation arrangements ................................................................ 18

Monitoring and evaluation o f outcomesh-esults ................................................................ 19

I . J . K . L . Sustainability ..................................................................................................................... 20

Critical risks and possible controversial aspects ........................................................... 20

Credit conditions and covenants ........................................................................................ 22

M . N .

APPRAISAL SUMMARY .......................................................................................................... 23

0 . Economic and financial analyses ....................................................................................... 23

P . Technical ........................................................................................................................... 23

Q . Fiduciary ............................................................................................................................ 23

R . Social ................................................................................................................................. 25

S . Environment ...................................................................................................................... 25

T . Safeguard policies .............................................................................................................. 26

U . Policy Exceptions and Readiness ...................................................................................... 26

. .

Annex 1: Country and Sector or Program Background .......................................................... 27

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .................. 34

Annex 3: Results Framework and Monitoring ......................................................................... 36

Annex 4: Detailed Project Description ...................................................................................... 44

Annex 5: Project Costs ................................................................................................................ 57

Annex 6: Implementation Arrangements .................................................................................. 59

Annex 7: Financial Management and Disbursement Arrangements ..................................... 62

Annex 8: Procurement Arrangements ....................................................................................... 69

Annex 9: Economic and Financial Analysis .............................................................................. 76

Annex 10: Safeguard Policy Issues ............................................................................................. 90

Annex 11: Project Preparation and Supervision .................................................................... 104

Annex 12: Documents in the Project File ................................................................................ 105

Annex 13: Statement o f Loans and Credits ............................................................................. 107

Annex 14: Country at a Glance ................................................................................................ 108

Annex 15: Map IBRD 33418 ..................................................................................................... 110

HONDURAS EDUCATION QUALITY, GOVERNANCE AND INSTITUTIONAL STRENGTHENING

PROJECT

Source Local Foreign

PROJECT APPRAISAL DOCUMENT

Total

Human Development Sector Management Unit Latin America and the Caribbean Regional Office

Borrower International Bank for Reconstruction and

Date: December 18,2007 Team Leader: Mario Cristian Aedo Inostroza

Acting Country Director: Makhtar Diop Sectors: Education (1 00%) Sector ManagerAIirector: Eduardo VeledE. Javier Themes: Education for the Knowledge (P) Project ID: P101218 Environmental screening category: C

1.03 0.00 1.03 14.5 1 0.84 15.37

I Lending Instrument: Specific Investment Loan

[Loan [ X I Credit [ ] Grant [ ] Guarantee [ ] Other:

Development

Total: Financing Gap

For Loans/Credits/Others: Total Bank financing (US$m.): 15.37 Proposed terms: FSL - IDA lending on hardened terms for 10 years o f grace period and a

0.00 15.55 0.84 16.40

maturitv o f 20 vears. with txinciDaireDavable at 10 Dercent Der annum for 1 1120.

Borrower: Government o f Honduras

Responsible Agency: Secretaria de Educaci6n de Honduras - Ministry o f Education o f Honduras 1 a Avenida entre 2a y 3a calle Comayaguela M.D.C., Honduras Phone: (504) 238-4325 y (504) 238-4260 E-mail: info@se.gob.hn

I

Project implementation period: Start May 2008 End: June 2013 Expected effectiveness date: May 1,2008 Expected closing date: June 30,2013

Does the project depart from the CAS in content or other significant respects? Ref: PAD A.3 Does the project require any exceptions from Bank policies? Ref: PAD D. 7

I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Ref: PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 The objective o f the Project i s to support the Government o f Honduras to increase the coverage, quality, accountability and governance o f i t s basic education system. Specifically, the Project’s Development Objectives are to: (i) expand pre-school coverage in disadvantaged communities; (ii) improve completion rates in PROHECO schools; (iii) improve teacher accountability; and (iv) improve accountability o f schools to citizens. Project description [one-sentence summary of each component] Ref: PAD B.3.a, Technical Component 1. Enhancing and Scaling-Up Interventions that Address the Education Needs of the Poor (US$ 7 million equivalent, 43 percent of total Project cost). This component would support pre and primary school level interventions focused on the poorest segments o f the population.

[ ]Yes [XINO

[ ]Yes [XINO

[ ]Yes [XINO

[XIYes [ ] N o

[XIYes [ ] N o

Have these been approved by Bank management? [ ]Yes [ IN0

Component 2. Community Participation in School Management for Better Performance (US$ 3.6 million equivalent, 22 percent of total Project cost). This component would foster community participation within an Integrated School Management System with the objective o f improving the quality o f education.

Component 3. Governance and Institutional Strengthening the MoE (US$ 5.1 million equivalent, 31 percent o f total Project cost). This component would support efforts to strengthen the MoE, including improving governance and management capacity.

Component 4. Project Administration (US$ 0.7 million equivalent, 4 percent o f total Project cost). This component would finance technical personal and operating costs.

Which safeguard policies are triggered, if any? Ref: PAD D. 6, Technical Annex 10

The Indigenous Safeguard i s triggered under the proposed Project.

Significant, non-standard conditions, if any, for:

Re$ PAD C.7 Board presentation: None Loadcredit effectiveness:

1. The ECU has been adequately staffed, including the appointment o f a coordinator and staff in adequate numbers (a procurement specialist, a financial management specialist, a monitoring specialist and procurement and financial management assistants), all with qualifications and experience in a manner satisfactory to the Association.

2. The Operational Manual has been finalized in a manner satisfactory to the Association, and adopted by the Recipient through the Ministry o f Education

Covenants applicable to project implementation:

In a manner satisfactory to the Association, the Recipient shall, by no later than:

1. September 30, 2008, determine the entitlements for each PROHECO teacher regarding their pension payments (both employee and employer contributions) made since January 1 , 1999.

2. December 31, 2008, hire a private firm regulated by Honduras’s National Banking and Insurance Commission, to manage a pension fund for the PROHECO teachers.

3. March 1, 2009, deposit in the aforementioned pension fund the amount o f Lp 49,258,272 detailing the specific entitlements o f each PROHECO teacher employed since January 1 , 1999 to the date on which the deposit i s made.

4. Throughout Proiect implementation, maintain and operate the pension fund referred to in item

STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Honduras i s a lower middle-income country, with a per capita income o f US$1,190 (Atlas methodology) and a population o f 7.2 mi l l ion inhabitants in 2005. It stands out as one o f the most open economies in Central America, with exports o f goods and services accounting for around 40 percent o f GDP. Furthermore, it has a fairly diversified export base, with the three main traditional export commodities (coffee, bananas and shrimp) currently accounting for less than 20 percent o f exports. In spite o f having a very open economy, Honduras also stands out historically as the slowest-growing country in the region (per capita growth was 1.7 over 2002- 2006). This largely explains the slow progress made in poverty reduction, as Honduras i s one the poorest countries in Lat in America.

2. About hal f o f Hondurans are poor, while almost one quarter is extremely poor. According to the 2004 LSMS data, 51 percent o f Hondurans have a consumption level below the full poverty line and a total o f 24 percent o f the population have consumption levels below the extreme poverty line. Poverty i s far more concentrated in rural areas where nearly 72 percent l ive in poverty, compared to 28 percent in the urban areas. The urban-rural contrast is even wider for the poverty gap index and the poverty severity index. The poverty gap in rural areas is nearly four times that in urban areas, and poverty severity is almost five times as large. Extreme poverty shows an ever stronger urban-rural contrast. Almost 40 percent o f rural residents l ive in extreme poverty, while less than 7 percent o f urban residents are extremely poor.

3. Organization o f the Education sector. The educational system o f Honduras i s organized into four levels: (i) a non-compulsory pre-primary cycle o f 2 to 3 years; (ii) a basic cycle o f 9 years; (iii) a medium cycle o f 3 years which culminates in a baccalaureate or in technical/vocational training; and (iv) a tertiary cycle lasting f rom 2 to 8 years. The educational system operates under a highly centralized administrative structure, with the Ministry o f Education (MoE) as the unit responsible for formulating and enforcing policy. The M o E i s responsible for a diverse range o f tasks: nation-wide planning, evaluation, teacher training and development, curriculum development, textbook development, teaching resources, management o f information systems, education financing, efficient resource use, supervision o f building design and maintenance, degree accreditation and conferment, certification at al l levels o f the system, enforcement o f the legislation pertaining to education and coordination o f the structures o f the educational units in the public and private sectors. The M o E comprises several structures that are organized as follows: the main Central Unit, 18 departmental structures that are responsible for policy implementation, and school districts in charge o f pedagogical and educational supervision o f the schools and teachers.

4. By 2006 in Honduras there were approximately 120,000 students in preschool education and 1.2 mi l l ion students in grades 1 to 6 o f basic education level. An important organizational aspect o f the Honduran education sector in the pre-basic education as wel l as in the f i rs t 6 grades of basic education i s the degree o f participation o f the PROHECO schools. Honduras’ community-based education program, PROHECO (Proyecto Hondureiio de Educacidn Cornunitaria) was launched in March 1999 with the objective o f enhancing access to education and fostering community participation in school-related decision making. Studies carried out by

1

the Ministry o f Education in 1997 showed that more than 14 percent o f school-aged children were not enrolled in schools, 85 percent o f these in rural areas. Building on the experiences in El Salvador (EDUCO) and Guatemala (PRONADE), the Honduran Government decided to use a school-based management model to address these deficiencies and establish new pre-school and primary schools in remote rural villages. By the end o f 2006, PROHECO was present in al l departments with more than 2,100 schools, with over 11 1,000 students (8 percent o f the total enrollment at the preschool and basic levels) and employed approximately 4,200 teachers.

5. Access and Equity. Honduras has made progress in expanding primary school coverage over time; however, substantial challenges remain in continuing to expand coverage, especially for disadvantaged groups and at the pre-primary and secondary levels. Net enrollment for preschool i s 20 percent' with lower coverage among poorer children and those in the rural areas who would benefit the most f i om early childhood development programs (the ratio between the richest and the poorest quintiles i s 2.9 and between urban and rural is 1.5). Net enrollment for primary education (grades 1 to 6) i s 82 percent2 and the differences by household income and geographical location are not very large (the ratio between the richest and the poorest quintiles i s 1.2 and between urban and rural is 1.05). Secondary net enrollment (grades 7 to 12) is 36 p e r ~ e n t , ~ with significant differences between income and geographical location (the ratio between the richest and poorest quintile i s 12.1 and between urban and rural i s 2.6).

6. System Efficiency. Repetition rates in primary education have remained constant since 1997 and they are particularly high in the early grades at 15 percent in first grade and 1 1 percent in second grade (2003). The drop out rate in primary education i s 7 percent. Graduation rate f rom primary education among those aged 12 is jus t 45 percent. The transition rate f rom the primary to secondary i s extremely l o w with only 34 percent o f grade 6 graduates entering grade 7. In secondary education (grades 7-13) the repetition rate is 17 percent with a drop out rate o f 17 percent; only 44 percent o f the students who enter lower secondary education complete this cycle. In upper secondary education, the repetition rate i s 8 percent and the drop out rate is 13 percent; 57 percent o f the students do not complete this cycle.

7. Student Performance. Standardized test scores in Spanish and Mathematics, at third and sixth grade, have shown no improvement since 1997. The average percent o f correct answers in the standardized Unidad Externa de Medicidn de la Calidad de la Educacidn U M C E test o f 2004 did not reach 50 percent in Spanish or Mathematics in either grade. Only 20 percent o f the students reached the sufficiency level (more than 60 percent o f correct answers in the test). Additionally, there i s a significant gap in terms o f performance between rural and urban areas. Urban scores were five percentage points higher than those from the rural areas. In terms o f international assessments, even taking into account Honduras' l o w per capita income, Honduran students performed lower than almost al l other Latin American Countries in the 1997 Latin- American Laboratory Assessment (LLECE).4

' 2004 Living Standard Measurement Survey (LSMS) data. 2004 L S M S data. 2004 L S M S data. Hondurans third graders were the worst performers in language and math among the eleven countries considered in

the assessment, Honduran fourth graders were the worst performer in language and second from bottom in math.

2

8. Rural Education faces additional challenges: an urban-biased curriculum; lack o f special training on multi-grade techniques even though the majority o f teachers must handle more than one grade in the same classroom; lack o f educational materials to support learning for both teachers and students; poor infrastructure; and preschool staffed mostly by volunteers with l o w preparation and training. Additionally, the majority o f students who finish primary education cannot continue into lower secondary education because o f lack o f lower secondary schools or Centros de Educacidn Bdsica (CEB).

9. Human Resources Management. Teachers, as well as health sector workers, are legislated under a separate employment regime (Estatutos) and have negotiated significant pay raises compared to the rest o f the c iv i l servants. The fiscal balance o f the combined public sector experienced a significant deterioration during 2000-03, attributable in part to an increase in the public sector wage bill. This led the Government to pass a public wage framework law in December 2003 that helped to stem, at least temporarily, the growth o f the public wage bill. The information available on public sector wages and employment, though limited, suggests that the growth in real wage rates o f health sector workers and other non-teacher c iv i l servants leveled o f f between 2002 and 2006. For teachers, however, the real wage rate increased by an estimated 18 percent during the same period, reflecting the latter’s comparative strength in terms o f union organization and influence that has translated into negotiated salary increases without any performance requirement.

10. In August 2006, after several protracted teacher strikes, the Government negotiated a new agreement with the teachers’ union. The agreement includes: (i) salary increases linked to a performance based system for teachers (Programa de Ajuste Social y Calidad Educativa - PASCE), combined with rationalization o f human resources policies (including a Teacher Census and Audit o f Posts, improvements in the Sistema Integrado de Administracidn de Recursos Humanos Docentes (SIARHD) and early retirement schemes for teachers); (ii) implementation o f a national system o f assessment o f the quality o f education through standardized performance testing; and (iii) independent social audits by parents o f teacher school attendance. Preliminary estimates o f the fiscal impact o f the compensation measures included in this agreement indicate that teacher salaries will double in nominal terms during 2007-2009, increasing the public wage bill between 1 .O and 1.5 percent o f GDP over the medium term.5 The raising o f the wage bill seriously weakens Honduras’ fiscal position, leaves l i t t l e room for non- salary expenses and threatens to further weaken the capacity o f the Ministry o f Education (MoE) to maintain quality standards in education.

11. After lengthy negotiations with the Teachers’ Unions the regulation o f PASCE was approved (March, 2007), but the agreement failed to link the PASCE payment to quality o f education outcomes (performance). The included verification variables for PASCE payment (teacher compliance with the school calendar, punctuality and class planning) hardly qualify as indicators o f school quality. In the Estatuto del Docente HondureAo, the specific labor code for teachers, absenteeism could lead to a written warning by the school principal, a salary deduction after some writ ten warnings and to the loss o f the teaching post if the behavior i s not corrected.

Honduras was the only LLECE country that did not participate in the follow up Segundo Estudio Regional Comparativo y Explicativo o f education quality carried out during 2006. The central government wage bill was at 9.8 percent o f GDP in 2005.

3

However, these warnings and sanctions are generally not applied to teachers. By June 2007, the GoH had disbursed two payments to 47,430 teachers out o f 55,412 teachers. However, a high percentage o f the non paid teachers are expected to be paid, making the PASCE an almost universal “incentive”. The future challenge for the GoH i s to incorporate quality indicators into the system, which requires changing the Regulation o f PASCE with the obvious opposition o f the Teacher’s Union.

12. In terms o f the Teachers’ Census and Audit o f Posts, an inter-institutional agreement to conduct the Teachers Census and Audit o f Posts was signed among the Secretary o f the Presidency, Secretary o f Finance, Secretary o f Education and Tribunal Superior de Cuentas.6 A pilot study to test the instruments and the robustness o f the sample for the work was carried out in May, 2007. Carrying out o f the census and audit began in July 2007, but is facing implementation delays and strong opposition from the teachers’ unions.

13. According to the GoH’s timeline, the Census and Audit are expected to be completed by December 2007. The Institutional and Governance Component o f the proposed Project i s designed on the assumption that the results from the Census would be available before the component i s launched (condition o f disbursement) and depend critically upon their completion.

14. Accountability. In the last three years the number o f school days in regular schools has been about 72, compared to 200 mandatory school days. Teachers’ strikes, especially intensive after Congress revoked, in mid-2006, parts o f the Public Wages L a w o f 20037, have been the main culprit for the shortened school calendar which disrupts education and affects quality. The gap between teacher pay and performance i s the highest in the Central American region and teachers are not held accountable for this lack o f results. There is no information on compliance with the official school calendar, teacher absenteeism, and school performance (administrative and educational), that communities and parents associations could use to hold schools and teachers accountable for their weak performance.

15. By comparison, the number o f teaching days in PROHECO schools in the year 2006 exceeded 175 days. As opposed to regular teachers, PROHECO teachers do not get paid if they are absent from work. Furthermore, their short run contracts (12 months) are not renewed if they don’t perform to the satisfaction o f the parents associations.

16. Behind much o f this dismal picture is the MoE’s limited institutional capacity characterized by fragmented structures o f authority and responsibility, onerous bureaucratic procedures, absence o f strategic planning and the lack o f integrated management information systems for decision making. In addition, efforts to de-concentrate the Ministry - particularly to the Departments - have not been successful as the efforts have centered on activities, not on managerial, planning or budgeting responsibilities.

Institutional Weakness.

The funding for the Census of Teachers and Audit of Post has been arranged by the GoH and the activity i s jointly funded by the GoH, the World Bank (through the PRS TAC), Education for Al l (EFA) funds and the Swedish International Development Agency (SIDA).

The Public Wages Law o f 2003 suspended temporarily several previously negotiated fringe benefits and bonuses for public employees, including teachers’ salaries.

4

17. It i s noteworthy that while past IDA credits have supported institutional strengthening, implementation has been shrouded by a weak commitment on the part o f the leadership(s) within the MoE. Past diagnostic work and the development o f models have often been ignored at the implementation stage and across administrations. This i s further aggravated by the high turnover o f senior and mid-level staff within the MoE, causing lack o f institutional memory and undermining ownership o f concerted efforts to strengthen the ministry.

18. Education for All. Since 2002, the principle planning instrument that the Government and donors have used in the education sector i s the Education for All Plan (EFA). This plan defines the priorities, goals and actions for the sector and it focuses donors’ financial contributions and national efforts for their achievement. The past and current administrations have followed the plan integrally, although implementation delays have been significant, mostly due to the MoE’s weak implementation capacity.

19. The Technical Planning Unit o f the M o E (UPEG) prepared an Education Sector Plan which was approved by the Mesa Sectorial de Educacidn’ in mid 2007. The Education Sectorial Plan includes a diagnosis, policy measures, reform proposals, and programmatic budgeting and expected results for the sector for the years 2005-2015.

20. Parallel to the Mesa Sectorial de Educacidn, since 1998 the donors have formed the Mesa Redonda de Cooperantes Externos en Educacidn (MERECE), composed o f members o f al l the international agencies working in the education sector. The group i s positioned as a reference platform for the education sector, not only in terms o f agencies‘ priorities but also in terms o f planning coordination for aid and project effectiveness. MERECE participates in revising and following up on reforms, providing technical support to the Government and monitoring the achievements o f the education sector. MERECE i s also responsible for reviewing and approving EFA’s annual implementation plan.

21.

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In summary, Honduras’ education sector has many issues, as outlined below:

L o w quality throughout the education system; L o w coverage at the preschool and secondary levels and inequitable access at a l l levels, particularly in rural areas and among the poor; Insufficient critical learning inputs in schools located in poor rural and urban marginal schools; Inefficiency (as measured by l o w transition and graduation rates) at a l l levels; An increasing wage bill which not only threatens the country’s fiscal sustainability but severely limits the capacity for making the necessary improvements in education quality; L o w administrative and management capacity in the MoE; Absence o f strategic planning and concentration o f functions, resulting in a top down approach to planning; Limited accountability at al l levels; Lack o f information about performance at al l levels;

~

The Mesas Sectoriales have been in operation in Honduras since 1999 as a group o f tri-partite committees, composed o f Civ i l Society, Government and Donor representatives to review reforms and sectoral programs.

5

0 Weak Human Resources management policies, especially in reference to performance incentives, monitoring and evaluation systems, training and recruitment; and Weak demand and limited social monitoring o f sector outcomes.

22. These conclusions are consistent with the findings o f the sector governance assessment that was carried out, as part o f Project preparation, with local stakeholders (MoE, teachers and teacher union representatives, parent association members, c iv i l society organization members, donors) through a series o f workshops during May 2007 (see Annex 10).

B. Rationale for Bank involvement

23. The rationale for a follow-up education operation in Honduras arises from the many unmet needs and governance challenges faced by the education sector, including ensuring the sustainability o f what has already been achieved through past interventions. At the same time, the team recognizes that previous IDA-financed projects have had limited success beyond expanding education access to rural students due mainly to weak governance in the sector. In particular, three areas are seen as critical in this regard: (i) lack o f information to design policy reform, monitor impact on education outcomes and improve governance; (ii) weak capacity o f the Ministry o f Education (MoE) to implement improvements in Human Resources management policy; and (iii) weak accountability and social monitoring at a l l levels.

24. The Project would support the GoH efforts to increase coverage at the preschool level for children o f age 5. The rationale for this intervention is that a year o f preschool i s expected to increase school attainment and that higher school attainment will lead to higher standards o f living for these children when they grow up. There are two reasons why to expect increased attainment. Making preschool available to poorer populations will prepare the kids for primary school, given them skills which may not be given in their home environment. The M E C O V I 2004 data show a nation-wide first grade repetition rate o f 28.7 percent overall, and o f 32.4 percent in rural areas. So the f i rs t expectation is that preschool will prepare children for f i rs t grade so that they perform better, repeat less, and hence attain more years o f schooling for the total number o f years that they stay in scho01.~ A second reason relates to evidence (for instance Edwards, Fuller, and Parandekar, 1998 and Carneiro and Heckman, 2003) that earlier enrollment leads to higher attainment. In 2004, only 60 per cent o f 7 year-olds and 35 per cent o f 6 year- olds were in primary school. I t i s expected that by drawing students into the school system at an earlier age, a year o f preschool will induce them to enroll in f i rs t grade by age 6. A large proportion o f children leave school when they are old enough to legally work. Since this age i s fixed, enrolling a year earlier will mean one more year o f schooling. Heckman (2007) indicates that investing in disadvantaged young children is good economic and public policy because o f early investment promotes efficiency, reduces inequality and presents a high economic return. lo

25. The proposed Project targets three building blocks which are deemed essential to improve sector performance: (i) advancing and scaling-up selective interventions that address the needs o f

Early in the 198Os, the Consortium for Longitudinal Studies found that, on average, arithmetic and reading achievement scores o f children who went to preschool were higher than those o f children who had not participated in preschool programs. lo Currie y Blau (2005) shows that early enrichment for disadvantaged children increase the probabil ity o f later economic success.

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the poor; (ii) continuing to promote greater community participation in school management; and (iii) improving governance in the education sector with special attention to strengthening the MoE and i t s information systems, as well as strengthening civil society’s capacity to demand accountability from the public sector.

26. At the pre-primary and primary levels, Honduras i s already receiving support from donors and multi-laterals to implement several interventions. (i) Education For All Fast Track Initiative - EFA-FTI (Canada, Germany, Sweden and Spain); (ii) Mejorando e l Impact0 del Desempefio Estudiantil de Honduras - MIDEH (US AID); (iii) Ampliando Horizontes Project (UNESCO); EDUCATODOS (USAID); (iv) Improvements in Teaching Technique in Math Project-PROMETAM (JICA); and (v) Community-based Education Project (World Bank).” The proposed interventions would be carried out in coordination with and would support some o f these programs.

These programs include:

27. At the secondary level, Honduras i s also receiving support from the USAID, IDB and the European Union to address access and transition issues, quality o f education, and relevance o f curriculum to meet labor market demands. The key programs under implementation include: (i) Middle Level Education Support Program in Honduras - PRAEHMO (European Union); (ii) EDUCATODOS, TELEBASICA and SEMED (US AID); (iii) Lower secondary and labor education programs (IDB); and (iv) transforming the national education structure - third cycle o f education and middle level education (IDB). For this reason the proposed Project would not address the issue o f the transition between the second and the third cycles o f basic education (formerly known as lower secondary education), as identified in the CAS.

C. Higher level objectives to which the project contributes

28. The proposed Project contributes to achieving the higher level objectives o f (i): Honduras’ Poverty Reduction Strategy (PRS); (ii) Honduras’ Education for All for 2003-201 5; and (iii) Strategic Sectorial Education Plan 2005-201 5.

29. (i) improving the quality and efficiency o f education at all levels; (ii) supporting decentralization and community participation in education management; (iii) improving teachers’ performance and supporting programs to improve their qualifications; and (iv) promoting PROHECO and Intercultural and Bilingual Education.

The PRS emphasizes the following pertinent goals for the education sector:

30. The Honduras’ EFA-FTI proposal builds upon the strategic orientation o f the PRS and defines four strategies to fulfill the Millennium Development Goals and those o f Education for All: (i) improving the efficiency o f primary education cohort flows; (ii) improving the quality o f preschool; (iii) supporting the quality and efficiency o f teachers; and (iv) improving the education demand and participation o f disadvantaged communities.

3 1. order to achieve social equity.

Finally, the Plan de Nacidn 2007-2030 highlights improving the quality o f education in

l1 HNiCommunity-Based Education Project, Loan P007397, closes on December 3 1,2007.

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PROJECT D E S C R I P T I O N

D. Lending instrument

32. A Specific Investment Loan (SIL) was requested by the Government o f Honduras to provide financing to targeted interventions in the education sector while seeking to improve the Ministry o f Education’s fiduciary, monitoring and evaluation capacity.

E. Project development objective and key indicators

33. The objective o f the Project i s to support the Government o f Honduras to increase the coverage, quality, accountability and governance o f its basic education system. Specifically, the Project’s Development Objectives are to: (i) expand pre-school coverage in disadvantaged communities; (ii) improve completion rates in PROHECO schools; (iii) improve teacher accountability; and (iv) improve accountability o f schools to citizens.

34. Outcome indicators:

The success o f the Project will be measured by the following Project Development

Preschool Coverage 0 Increased preschool enrollment in targeted areas.

Improve Completion rates in PROHECO schools 0 Increased 6th grade Gross Completion Rates in PROHECO schools.

Improve Teacher Accountability 0

0

Improved compliance with the official school calendar in targeted regions. Reduction in teacher absenteeism in targeted regions.

Improve accountability o f schools to citizens 0

0

Increased proportion o f schools who involve parents in social audits o f the schools using the 60 words per minute fluency test in second grade. Development o f a balance score card for the national, departmental and school level and its adoption by departments and schools (national and in targeted regions).

F. Project components

35. (i) Enhancing and Scaling up Interventions that Address the Needs o f the Poor; (ii) Community Participation in School Management; (iii) Governance and Institutional Strengthening o f the MoE; and (iv) Project Administration.

The proposed Project would be structured around the following components:

Component 1. Enhancing and Scaling-Up Interventions that Address the Education Needs of the Poor (US$ 7 million equivalent, 43 percent of total Project cost)

36. This component would support pre and primary school level interventions focused on the poorest segments o f the population where the PROHECO (Proyecto de Educacicin Cornunitaria)

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schools are concentrated. mechanism o f targeting extremely poor population in Honduras (Red Solidaria).

The beneficiaries wi l l be chosen through the existing national

1.1 Coverage expansion for preschool education in rural areas (US$4.1 million equivalent, 25 percent o f total Project cost).

37. The proposed Project would support the MoE’s goal o f providing one year o f quality preschool education to five year old children in Honduras. The subcomponent aims to expand the coverage and improve the quality o f pre basic education using alternative cost-effective models through the opening o f 800 new Communitary Pre-Basic Education Centers (CCEPREB). The MoE i s taking the lead in presenting this modality as a national strategy to increase coverage in pre basic education. The Project would continue supporting the Pre Basic Education Program (PREPI) “Juego y Aprendo”package for preschool that the Government i s currently using to expand coverage. The Project would support the creation o f CCPREBs in PROHECO schools f i rs t in those areas targeted by the Red Solidaria social assistance strategy.

38. The subcomponent would finance the opening12 o f 800 new CCEPREBs including 300 IBE preschools and their pedagogical and fungible materials, the training o f 1,200 volunteers including at least 300 IBE volunteers, and the supervision o f service delivery in the newly opened 800 CCEPREBs.

1.2 Quality improvement in multi-grade PROHECO schools through teacher training and provision of materials (US$3.0 million equivalent, 18 percent o f total Project cost).

39. Using the successful experience o f several multi-grade models in LAC, the proposed Project would finance teacher training, including the design, production and adaptation o f appropiate methodologies and didactic materials to implement multi-grade pedagogical strategies in PROHECO and PROHECO-IBE schools. This responds to supervision and evaluation findings o f the on-going education operation, which identified the need for more adequate materials and training in these schools.

40. The subcomponent supports the MoE by financing the adaptation, reproduction and distribution o f pedagogical materials for multi-grade setting in PROHECO schools and a teacher toolkit for the usage o f pedagogical materials, including materials for PROHECO-IBE schools. The target i s to reach all PROHECO schools with the educational material and to train their teachers in multi-grade methodologies and in the usage o f the pedagogical material.

41. Additionally, the proposed Project would seek ways o f coordinating this subcomponent with the above-mentioned preschool component to maximize the pedagogical benefits o f the interventions.

’’ Preschools would use existing local facilities, such as PROHECO schools, churches and community spaces. No new construction i s expected.

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Component 2. Community Participation in School Management for Better Performance (US3.6 million equivalent, 22 percent of total Project cost)

42. The general objective o f this component i s to foster community participation within an Integrated School Management System that would contribute to improving the quality o f education. In order to achieve this general objective, the Project would support the following three subcomponents:

Subcomponent 2.1. Consolidation and Institutionalization of the School Management System (US$1.7 million equivalent, 10 percent o f total Project cost)

43. The objective o f this subcomponent i s to develop an integrated School Development System, through consolidating norms o f self-management and through strengthening the modalities for school management for traditional schools, PROHECO, PROHECO-IBE and Educational Networks.

44. The subcomponent would review the existing modalities o f school management (AECO- PROHECO, ADEL, School Networks, Parents Association, etc.) to define: consolidated policies and norms for community participation; social management; school planning; school systems for information, monitoring and evaluation; and financial administration processes. In each o f these school management elements a general normative would be developed, to link all the existing school management modalities in Honduras, including culturally appropriate specifications for IBE schools as part o f education networks.

45. PROHECO i s a viable school management modality for Honduras. This i s particularly true in rural communities with difficult access, where parents are required to organize in order to manage their school, including selecting, hiring and managing teaching staff. To this end, the subcomponent would strengthen the processes, procedures, criteria and norms for teaching staff managed by the AECO, the association responsible for school management.

46. The subcomponent would finance the following activities to support the institutional strengthening o f PROHECO: (i) provide Technical Assistance to support the institutionalization o f the PROHECO program, within the regular structures o f the Ministry o f Education; (ii) workshops to discuss the PROHECO program with medium and lower level personnel o f the MoE at both central and departmental levels; (iii) Technical Assistance to assess alternatives for improving labor income and benefits (including pension funds) for PROHECO teachers; and (iv) funding for activities aimed at strengthening the financial management and recording capabilities at the AECO’ level.

47. Additionally, the subcomponent would analyze and strengthen the management modality for traditional schools, empowering the existing entities, namely, the parents associations, the teaching staff committees, the student government and the directors’ managing and leadership roles.

48. The Educational Networks model in Honduras - where a number o f rural schools merge in a central location that offers the basic education 3rd Cycle (7th to 9th grades) for all students belonging to the network - would be strengthened to serve as a reference organization model.

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Activities would include training to strengthen social management processes (including indigenous federations), establishing partnerships with other institutions that support education, and strengthening the legal, administrative, technical and pedagogical instruments o f the Network.

Subcomponent 2.2. School Planning and Resources for Quality Education (US$1.4 million equivalent, 9 percent of total Project cost)

49. This subcomponent’s objective is to strengthen school planning capacity and resource allocation for quality education. This subcomponent would contribute to consolidating an integrated school planning system, based on the School’s Educational Project (PEC). l3 During the past five years Honduras developed multiple processes and tools for education planning at the school level. The subcomponent would contribute to review, structure, and develop a single instrument that supports school planning and management. It would provide support for educational school planning processes and for the development o f tools to monitor the PECs’ outcomes and provide feedback. Similarly, it would strengthen the educational planning through promoting the cooperative networks among schools through the Network’s Educational Project (PER).

50. The subcomponent includes the development o f training programs for PROHECO and PROHECO-IBE teachers. These activities would be coordinated with the multi-grade training activities contemplated under subcomponent 1.2.

5 1. Additionally, the subcomponent would also strengthen a single normative and standardized procedure to support the administration o f the financial transfers received by the school, including defining and/or developing allocation formulas, transference mechanisms, information systems and settlement strategies, and accountability mechanisms.

Subcomponent 2.3. School Management and Education Performance Monitor ing and Evaluation (USS0.5 million equivalent, 3 percent o f total cost)

52. Honduras’ Ministry o f Education is developing an integrated monitoring and evaluation system. The system includes three types o f evaluation geared towards strengthening: (i) student learning assessment, (ii) teacher performance assessment, and (iii) school assessment, including IBE schools. This subcomponent would support the development o f an institutional evaluation o f schools, which includes defining performance indicators, efficiency indicators (access, attendance, promotion, and cycle finalizing), and other school management indicators. Similarly, it would support the development o f strategies, procedures and instruments to empower the communities to monitor learning outcomes, teachers’ performance and to provide feedback to M o E and i t s decentralized units. To ensure the efficiency and reliability o f educational statistics, the subcomponent would strengthen the educational data collecting and feedback system used by the M o E at the local level.

53. The subcomponent would also support the development o f a capacity building program for communities and Parent Associations, including IBE organizations, to foster dialogue and

l3 The PEC i s a key component o f the PROHECO and AECO models.

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accountability in the education sector. The content o f the modules would include among others: (i) key areas o f municipal and school management; (ii) key weaknesses in the education sector and tools to improve transparency and accountability in the sector; (iii) information about corruption in the education sector; and (iv) social monitoring tools and indicators at the municipal and school level.

Component 3. Governance and Institutional Strengthening the MoE (US$S.l million equivalent, 31 percent of total Project cost)

54. This component would support efforts to strengthen the MoE, including improving governance and management capacity. l4 This component i s consistent with some important elements o f the Plan de Sostenibilidad del Proceso de Mejora de la Administracidn de Recursos Humanos Docentes del Sector Educativo de Honduras that the Government i s implementing since last year, where the Census o f Teachers and Audit o f Post corresponds to its starting point. This sustainability plan calls for the strengthening o f the MoE’s technological platform; the improvement o f system personnel management, management records and evaluation systems; the de-concentration o f Human Resources Management and education statistics management to the Departmental level; the development o f an integrated system o f educational statistics and the development o f strategic planning capabilities within the Ministry.

55. The component would support the design and development o f an information platform to generate and disseminate information about performance o f the education sector at al l levels. It would also upgrade and strengthen the education statistics system o f the M o E by supporting the decentralization o f information production, gathering and usage. PROHECO schools would be integrated into this platform.

The component i s organized across the following three areas o f intervention:

3.1 Information for improved performance and greater accountability (US$4.4 mil l ion equivalent, 27 percent o f total Project cost).

56. One o f the key deterrents to effective educational performance, management and accountability quite simply i s the limited and relatively unarticulated information in the sector. In some cases, information systems or data bases are partial and out o f date (SIARHD, SIEE). In other cases, the lack o f integration among databases hinders the ability to assure accurate payroll and personnel information for accountability and finance (SIAFI-SIARHD). In s t i l l other cases, the absence o f validated instruments o f institutional (school) and teacher performance affects the ability to plan and monitor improvements (SINECE). This subcomponent would finance five basic activities:

(i) Building capacity within the Unidad de Infotecnologia (UI), at central and departmental levels, to create a Web-based technological platform to allow the M o E for improved

~~

l4 These activities are consistent with the focus o f President Zelaya on issues o f publ ic sector transparency and performance management.

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decision-making and monitoring o f performance. l 5 At present, the UI has limited capacity to serve as the infoi-mation orienting, generating and archiving instrument for the various data bases in the MoE. In addition, both the capacity o f the departmental level and the articulation between central and departmental levels i s extremely weak. The proposed Project would finance the provision o f hardware, software, technical assistance and training to improve the quality o f information at al l levels. (ii) Generating information about performance of the education sector at all levels (national, departmental, district and schools), accessible for the general public and used in decision making at al l levels. Performance evaluation i s essential, not only for monitoring and evaluation purposes o f the MoE, but for improving the capacity o f c iv i l society and communities to carry out effective social auditing for the sector. Currently, information on performance i s limited, although ongoing efforts o f various donors aim at improving outcome measurements. In particular, the proposed Project aims to improve the capacity to evaluate teacher performance (evaluation) and school performance through the financing o f technical assistance, institutional support and training for the Sistema Nacional de Evaluacidn de la Calidad Educativa (SINECE) at the central level and the expansion to the departmental level o f these capacities. (iii)Upgrading and strengthening the education statistics unit of the M o E to implement a system o f reliable and consistent educational statistics for al l levels (national, departmental, district and schools). The system should generate information at the school level including, among others, information on school closures (strikes, weather, teacher training, and extra holidays) and student absenteeism. In addition, the consolidation o f this information at the departmental level and central level in a timely fashion requires substantial support. The proposed Project would finance technical assistance for data collection, automation and analysis for the institutionalization o f an effective statistical data base available for M o E planning and monitoring, c iv i l society capacity to evaluate, and for communities and schools to better manage resources. (iv) Expanding and strengthening the SIARHD at central and sub-national levels16 to provide reliable information on teachers at al l levels (national, departmental, districts and schools), including information on teacher absenteeism and tardiness at the school level. Currently, data o n personnel exists in several different data bases (SIAFI for payroll, SIARHD for the personnel system), and among these databases information is inconsistent, unreliable, and often incompatible. Further, significant information relevant to human resource management i s entirely absent or exists in haphazard form at either the central or departmental levels. Compounding the information gaps and inconsistencies i s the weakness in the ski l l level o f those responsible for managing both information and people. Similarly, at the sub national level, information i s unreliable, manually maintained, and weakly integrated with the national SIARHD. The proposed Project would finance, at the central and departmental levels, three areas: (a) integrated software with appropriate sub modules related to key functional areas o f SIARHD, including the basic personnel f i le (and history)

This subcomponent also includes necessary actions to keep the current operational capability o f the Unidad de Infotecnologia and to improve i ts interconnectivity, such us renewal o f equipment and licenses, training o f operators, and providing the departments with equipment, connectivity and trained staff. l6 This component also include updating SIARHD, as other modules for the system need to be developed, such as promotion and professional development system, improvements in the management o f teacher credentials and scanned certificates, interconnecting the system to the 18 departments, providing maintenance to the system, integrating SIARHD to SIAFI.

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for individual teachers, recruitment and selection, career development (including training), evaluation, attendance and discipline, and human resource planning, including the addition o f ethnic and native language variables to the system; (b) computer hardware (computers, printers, servers, connectivity); and (c) training at the central and departmental level. (v) Strengthening the capacity for educational planning and the use of information for decision-making at the central and departmental levels. While information availability is essential, there i s a need to strengthen the capacity to utilize information for educational planning, an activity that the proposed Project would support through technical assistance and training for UPEG and the departmental level.

57. In the education statistics and SIARHD interventions there i s a need to transfer substantial responsibilities to the Departmental and district levels as major providers o f information, and this focus would be supported by the proposed Project. Moreover, much information originates and serves for decision-making at the school level and is supported in the Project (Subcomponent 3.1 and Component 2). The distribution and strengthening o f roles and responsibilities among levels are to be supported according to determination o f functional distribution.

58. The technological platform and information systems will link with other national information systems such as the Sistema de Administracidn Financiera Integrada (SIAFI), the Sistema de Informacidn de la Estrategia de Reduccidn de la Pobreza (SIERP), and the Sistema de Gerenciapor Resultados (SGR).

3.2 National System o f Assessment o f Learning Outcomes (US$0.3 million equivalent, 2 percent o f total Project cost).

59. At present, Honduras has the capability and systems in place to begin assessing summative learning (end o f the year) based on the recently introduced National Curriculum for basic education. EFA has budgeted funds to carry out these measurements for a national representative sample o f schools (representative at the departmental level, both at the rural and urban levels), for years 2007 and 2008, and plan to continue funding these national evaluations in later years. The proposed Project would complement these efforts by promoting the participation o f Honduras in international standardized assessments o f students learning and by strengthening the institutional capabilities o f the Ministry o f Education to use the information for monitoring o f learning outcomes and decision making, and to increase overall transparency through the dissemination o f the results.

3.3 Human Resource Management and Evaluation (US$0.4 million equivalent, 2 percent of total Project cost).

60. Improvements to the SIARHD will provide the information required for decision-making on human resources. Additionally, improvements in Human Resources Management (HRM) systems and processes are essential for improved teacher utilization. The project would support the design, modification and implementation o f critical human resource management processes and procedures for a more effective personnel system for teachers, At present, many o f the key human resource management functions reside either partially or wholly at the central leve l while, in practice, many o f these management systems should concentrate at the departmental level

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where most teacher-related activities occur. In addition, some HRM functions appropriately need to reside at the school level. Finally, the need to assure the nonnative, evaluative and oversight roles o f the central level require management support at this level as well.

61. The Project would address management improvement needs at the central and provincial levels and would support the definition o f appropriate levels o f decision-making and actions among them. The activities to be supported include: (i) definition o f allocation o f HRM functions and reengineering within and among the central, departmental and school levels, including development o f operating manuals for each o f the key subsystems, and implementation o f the newly structured subsystems and corresponding procedures; (ii) analysis o f legal parameters, limits and opportunities for modifying current practices and procedures in HRM; and (iii) training for administrative personnel in the HRM system at the central and departmental levels, including IBE technical teams.

62. The teacher evaluation role at the M o E is under the responsibility o f the Sisterna Nacional de Evaluacidn de la Calidad Educativa (SINECE). l7 However, this unit requires technical assistance to do a reengineering o f its processes and requires help for human capacity formation. The teacher evaluation should also form part o f the performance information available for social monitoring.

Component 4. Project Administration (USSO. 7 million equivalent, 4 percent of total Project cost)

63. The proposed Project would be implemented directly by the MoE, including the EFA office, and this component would finance technical personal (local consultants) and operating costs. The proposed administration arrangements include, as key steps, a common framework with EFA-PF for monitoring implementation, a joint operational manual and joint technical and administrative units with EFA-Pooled Fund (see Annex 6). Studies would be undertaken in order to contribute to the gradual development o f the fiduciary and technical bases to sustain a process o f institutional strengthening o f the MoE.

G. Lessons learned and reflected in the project design

64. The Bank has significant knowledge and experience in the areas o f increasing coverage at the preschool and primary levels, teacher training to improve the quality o f primary rural education in a multi-grade setting, and institutional strengthening o f the MoE.

65. proposed Project design:

The following are relevant lessons learned which have been taken into account in the

Simplicity in design and selectivity in interventions. Evaluations o f IDA credits for the education sector in Honduras in the last decade have shown moderately unsatisfactory progress in achieving project goals. Two key areas singled out in

l7 SlNECE should also evaluate the study programs and the educational institutions. N o evaluation i s currently undertaken by this unit.

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those reports are questions related to the sustainability o f multiple interventions and failure to improve institutional weaknesses. The proposed Project was designed so that a very narrow group o f interventions would be supported, al l o f which would ensure sustainability o f past interventions and/or promote greater efficiency. Additionally, much attention has been paid to avoid adding recurrent costs. At the institutional level, a concrete set o f interventions i s being proposed, al l o f which to provide the M o E with the tools it needs to better manage the sector.

Institutional strengthening begins with Project management. A consistent observation in project design and implementation has been that often the implementation through self-contained implementing units does little to strengthen the long term institutional capacity o f ministries and reduces the sense o f project ownership. The proposed Project was designed so that i t s implementation would be carried out by the existing M o E structure, with limited support in fiduciary areas.

Community participation to foster accountability. The greatest success o f the PROHECO model has been introducing the community as an important “manager” o f local schools. While there is little accountability and transparency within the MoE, PROHECO schools have demonstrated that community involvement leads to greater school accountability. The proposed Project would seek ways o f bringing that accountability to other areas o f the education sector.

e Community participation to improve culturally appropriateness in school setting. As the Honduras Community Education Project (Credit 3497) has demonstrated, another benefit o f involving communities in the local management o f school i s ensuring culturally appropriate interventions at that level. This is particularly important in a country with nine different indigenous and Afro-descendent groups, with a variety o f cultural traditions and practices. The proposed Project would continue to rely on community participation to improve culturally appropriateness at the school level.

e Greater coordination among donor and multi-lateral communities. Despite significant progress to better coordinate with donors under the EFA-FTI, there i s st i l l a need to foster a sense o f teamwork among the Government, donors, and multi-laterals. Accordingly, the proposed Project has been discussed at length with al l groups since i t s identification, and much o f its design i s based o n those exchanges. EFA-FTI goals remain the back-bone o f what i s being proposed and there i s a general commitment among al l involved to continue implementing complementing interventions as part o f a single-effort to reach EFA goals.

The need to link action with outcomes (or performance), and the capacity to disseminate positive results in a clear and unambiguous way i s critical. This will be considered through the focus o f the Project in measuring learning outcomes

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and in the communication strategy considered to reduce stakeholders’ resistance to the Project.

Proper Human Resources Management (HRM) can result in expenditure savings. Limited information, weak institutional capacity, highly centralized management, and the lack o f transparency al l result in inefficiencies, duplication and misallocation o f human resources. The proposed Project takes specific aim at rectifying these weaknesses. In particular, the proposed Project would strengthen de-concentrated levels o f the M o E to execute key HRM functions, and would clarify normative and evaluative central level functions.

H. Alternatives considered and reasons f o r rejection

0 The Project team considered putting resources into the EFA-FTI existing pool o f funds but decided that a gradual approach would be more appropriate given the need to strengthen fiduciary systems in the MoE. This decision will be reassessed at the midterm review o f the Project.

0 Although not pooling funds, the proposed Project i s fully aligned within the EFA- FTI sectoral framework and supporting the same goals. Project components fal l beneath three o f the four areas considered in the EFA FTI Plan, namely: (i) Teacher Training, (ii) Institutional Strengthening, and (iii) Coverage Expansion and Quality o f Education, Project goals during its term (2008-2012) are completely aligned with EFA goals over the same time period.

0 Project coordination and administration will be under the responsibility o f a strengthened EFA Coordination Unit (ECU). The proposed administration arrangements include, as key steps, a common framework with EFA-PF for monitoring implementation and a harmonized operational manual. The M o E will prepare a single POA which will include activities to be financed under the Project, dully identified.

0 The Project’s implementation arrangements allow technical capacity building in the l ine units, empowering and leaving the planning and monitoring responsibilities inserted in the EFA plan. The Project strengthens the fiduciary capacity o f the M o E regarding the EFA Plan as well through the provision o f technical assistance to improve i t s implementation.

0 The Project team decided against addressing the issue o f the transition between the second and the third cycles o f basic education (formerly know as lower secondary education), as identified in the CAS, in view o f the various donor- financed activities already underway. Honduras i s the beneficiary o f several interventions addressing access and transition issues, quality o f education, and relevance o f curriculum to meet labor market demands.

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0 Different implementation arrangements and risks were discussed and evaluated during project preparation and it was decided that the proposed Project should be implemented by the existing M o E structure, rather than a project implementation unit. This approach i s consistent with the need to strengthen the permanent institutional capacity o f the MoE. However, given the need to minimize implementation risks and ensure fiduciary compliance, the M o E has agreed to re- structure the EFA unit. This re-structured unit will be in charge o f the administrative implementation arrangements for both EFA-Pooled Fund and the proposed Project. The unit will be staffed by M o E and EFA current staff and the proposed Project would finance a Coordinator for the Unit, a Procurement Specialist, a Financial Management Specialist, a Monitoring Specialist and a procurement and financial management assistance.

IMPLEMENTATION

I. Partnership arrangements (if applicable)

66. Project activities would be carried out ensuring complementarity with EFA in coordination with EFA donors and MERECE.

The Project would be implemented by the Ministry o f Education.

J. Institutional and implementation arrangements

67. The Ministry o f Education (MoE) has chosen to work through existing units to: promote an efficient use o f a l l existing (and expected) funds from international donors in a complementary manner; ensure a common strategic vision; guarantee frequent sharing o f information in a transparent way; and discuss issues that are o f interest for a l l donors involved. Therefore, rather than setting up a separate new institutional structure (project implementation unit), the proposed Project i s designed to strengthen and streamline the functions o f existing institutional structures at central and de-concentrated levels. The proposed arrangements are the result o f various consultant assessments which included expert interviews, field visits, and workshops in Honduras with al l relevant potential participants. The arrangements were decided with the M o E team and discussed and agreed with EFA - Pooled Fund donors. They include, as key steps, a common framework for monitoring implementation and a harmonized operations manual with EFA-Pooled Fund.

68. The proposed Project would be implemented by a steering committee, the Ministry’s own l ine departments, and the EFA Coordination Unit. The steering committee and the Ministry’s offices would be responsible for the technical aspects o f implementation while the EFA Coordination Unit would take care o f the administrative and fiduciary aspects o f it.

69. A Steering Committee (SC) would be in charge o f overall project coordination o f EFA and the proposed Project. This Committee, comprising the three deputy ministers o f education, their technical advisers and the heads o f line departments, would be chaired by the Minister who can delegate this function to one o f the deputy ministers. O n the technical side, implementation arrangements also include Ministry o f Education departments/offices at both central and de-

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concentrated levels with specific duties in the implementation o f EFA-PF and IDA-financed Project.

70. The administrative implementation arrangements for both EFA-PF and the IDA-financed Project would be performed by the strengthened EFA Coordination Unit (ECU), reporting directly to the Minister o f Education.

71. The unit would be staff by M o E and EFA current staff and the proposed Project would finance a Coordinator for the unit, a Procurement Specialist, a Financial Management Specialist, a Monitoring Specialist and a procurement and financial management assistance. These long- term consultants would be competitively selected.

K. Moni tor ing and evaluation o f outcomes/results

72. The proposed Project would strengthen and utilize monitoring and impact evaluation to substantiate outcomes and results. In addition, the institutional arrangements include a common framework for monitoring the results o f EFA and IDA-financed interventions. To the extent possible, the results monitoring and evaluation arrangements o f the proposed Project will be integrated into the existing data collection and utilization efforts. Honduras currently has one o f the weakest data collection systems in Central America, and efforts will be devoted within the framework o f the proposed Project to strengthen country capacity for data collection and utilization. Continued support for the existing systems, and fostering demand for their products from c iv i l society -notably parents’ groups-and the donor community will contribute to their development and sustainability.

73. Most data for Project monitoring and evaluation will be drawn from the M o E administrative data and from data bases generated by the proposed Project. As needed, for specific impact evaluations o f Project activities, data would be collected through specially designed surveys.

74. There are two designs for impact evaluations o f Project interventions. For Subcomponent 1.2 “Multi-grade training o f PROHECO teachers” the evaluation question is What is the impact of this training on primary school performance -- mainly student learning, repetition rates and dropout rates -- versus no training? The proposed design i s a randomization within PROHECO schools o f the phasing in o f the teacher training by geographical location. Teachers in areas where the training will be provided later would serve as the control group for the treatment group o f teachers trained in the methodologies for multi-grade teaching. For Subcomponent 2.3 “School Management and Education Performance Monitoring and Evaluation” the evaluation question i s What is the impact of the capacity building program delivered to Parent Associations and communities over a program which just provides information to parents and communities but no capacity building?” The proposed design is to use the phasing in o f the capacity building program by geographical location. Communities and Parent Associations in areas where the training will be provided later would serve as the control group for the treatment group o f communities and Parent Associations trained.

’* In other words, i s information sufficient for built capacity or are complementary actions in the form o f capacity building necessary to achieve an impact?

19

L. Sustainability

75. The proposed Project rests on four key pillars to guarantee its sustainability: (i) strategically, it directly supports key sector issues; (ii) socially, project preparation has benefited f rom consultation in both the legislative and executive branches o f Government, and stakeholders at the central, departmental, community and school level; (iii) it does not introduce new programs into the Honduran education sector, but strengthens and optimizes existing PROHECO schools and school management modalities; and (iv) financially, the bulk o f interventions are investments with the exception o f the preschool expansion, whose sustainability has been discussed and agreed with the Central Government.

M. Critical r i s k s and possible controversial aspects

Risk Achievement of Project Development Objectives

Limited capacity o f the MoE and high turnober o> political andor

technical leadership.

Absence o f strategic planning.

Teachers’ str ikes which disrupt education.

Achievement Component

Risk Mitigation Measures

The institutional and implementation arrangements build directly on strengthening institutional capacity for the MoE. The Project incorporates substantial training for M o E personnel as part o f TA. Under Components 1 and 2 o f the Project, an emphasis on strengthening strategic planning sk i l l s !?om the development o f the PEC at the communityhchool level through Departmental and Central level strategic planning exercises aim to build strategic planning capacity. Several efforts are incorporated in Project design and implementation, including: - Agreements reached in 2006 with Teachers Unions (PASCE). -Engagement o f the Teachers Union in a productive dialogue throughout project preparation and implementation. - Evaluation o f interventions and dissemination o f results to foster wider support among stakeholders. -Inclusion o f a Project-financed set o f activities to provide continuous communications through a social communications activity.

Risk Rating with Mitigation

High

Medium

High

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Results Budgetary restrictions

preparation and -implementation.

the donor and multilateral Maintain a close dialogue with

minimizing commitment to prioritize the needs o f the poor.

Impact o f budgetary restrictions on sustainability o f the

intervention.

Low

Insufficient commitment o f the M o E in improvingiexpanding education services for the poor

population. Insufficient commitment and legitimation o f the efforts by

M o E personnel.

Stakeholder resistance o f some project interventions.

MoE due to constant turnover o f high and mid-level personnel.

I Lack o f coordination among donors and multilaterals

Close collaboration wi th the Ministr ies o f Education and Finance to ensure precedence o f poorest beneficiaries; close coordination with PRSC I1 team to ensure complementarity o f policies and interventions; evaluation o f interventions and dissemination o f information to foster wider support among stakeholders. Project financing highly selective and simple interventions to minimize increased recurrent costs and consolidate past interventions; close collaboration wi th donors to monitor impact o f interventions. Maintain close dialogue with education authorities at the central and departmental levels, and with EFA donors. Create ownership and participation o f staff from the M o E (central and departmental level) during the process o f project preparation; minimize use o f external consultants during project implementation; creation o f an implementation structure that directly involves l ine personnel during Project implementation. Develop a communications strategy throughout project preparation and implementation. Encourage MoE to carry out participatory workshops with main stakeholders as early as the pre-appraisal stage regarding the possible content o f the Project and i t s main expected impact. Strengthening o f Information Technology and the Web-based information system w i l l provide greater transparency for dialogue and consensus buildinn. Maintain close dialogue with education authorities at the central and departmental levels. Engage Ministry staff in project

High

High

Medium

Medium

Medium

High

21

supporting the education sector. community throughout preparation and implementation to ensure greater coordination o f assistance strategies. Start building the basis for eventual move towards SWAP.

Fiduciary Financial Management: Limited During implementation the

capacity o f the M o E staff and Bank’s team would closely monitor compliance and i t w i l l

consultants. provide technical assistance and training to line staff to increase capacity.

Procurement: Limited knowledge During implementation the o f Bank procurement procedures Bank’s team would closely

within the M o E and strong monitor compliance and it w i l l reliance on PIU consultants. provide technical assistance to

increase capacity.

strong reliance on PIU

Overall Risk

N. Credit conditions and covenants

High

High

High

Conditions of Effectiveness

(i) The ECU has been adequately staffed, including the appointment o f a coordinator and staff in adequate numbers (a procurement specialist, a financial management specialist, a monitoring specialist and procurement and financial management assistants), all with qualifications and experience in a manner satisfactory to the Association.

(ii) The Operational Manual has been finalized in a manner satisfactory to the Association, and adopted by the Recipient through the Ministry o f Education.

Disbursement Conditions

N o withdrawal shall be made with respect o f payments for:

(i) Expenditures covered by Component 3.1 o f the Project, unless the SIARHD has been updated on the basis o f a teachers’ census and post audit results, and the accuracy o f the updated SIARHD has been tested by way o f random audits, in a manner satisfactory to the Association;

(ii) Expenditures covered by Component 2 o f the Project, unless the amount o f Lp 35,915,610 has been deposited in an account satisfactory to the Association, for the benefit o f PROHECO teachers entitled to pension payments since January 1 , 1999, all in a manner satisfactory to the Association.

Dated Covenants

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In a manner satisfactory to the Association, the Recipient shall, by no later than:

1. September 30, 2008, determine the entitlements for each PROHECO teacher regarding their pension payments (both employee and employer contributions) made since January 1, 1999.

2. December 3 1, 2008, hire a private firm regulated by Honduras’s National Banking and Insurance Commission, to manage a pension fund for the PROHECO teachers.

3. March 1. 2009, deposit in the aforementioned pension f ind the amount o f Lp 49,258,272 detailing the specific entitlements o f each PROHECO teacher employed since January 1, 1999 to the date on which the deposit i s made.lg

4. Throughout Proiect implementation, maintain and operate the pension fund referred to in item 3 above.

APPRAISAL SUMMARY

0. Economic and financial analyses

76. The evaluation comprehended the components: (i) enhancing and scaling-up interventions that address the education needs o f the poor, and (ii) governance and institutional strengthening o f the Ministry o f education. The component “Community Participation in School Management for Better Performance ” was not evaluated as it comprises activities whose economic benefits are difficult to assess in economic terms. The overall conclusion o f the analysis i s that the proposed Project i s both financially and economically sound, conclusion which remained robust through different sensitivity analysis (see Annex 9 for details).

P. Technical

77. The sector analysis provided key information on: (i) preschool coverage; (ii) efficiency indicators for primary and PROHECO schools; (iii) education needs and pertinent strategies for Indigenous Populations; (iv) governance; and (v) institutional weaknesses o f the MoE. Project preparation has benefited from a series o f consultations and on-going studies supported by the Bank, the GoH, other donors, and local and international specialists. These include, among others: Stakeholders Workshops, Public Expenditure Review, Targeting o f the Red Solidaria, the Plan de Sostenibilidad del Proceso de Mejora de la Administracidn de Recursos Humanos Docentes del Sector Educativo de Honduras, Descentralization and Deconcentration o f the Educational Sector, and School-Based Management (see Annex 12 for a sample o f studies prepared and consulted).

Q. Fiduciary

78. Project coordination and administration will fal l under the Ministry o f Education (MoE). MoE, through the re-structured EFA Coordination Unit (ECU), which will report directly to the

l9 This amount includes Lp 35,9 15,610 which represents PROHECO teachers’ contributions made under the Honduras Community-based Education Project (Credit 3497-H0), listed as a disbursement condition.

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Minister o f Education, will be responsible for fiduciary tasks for al l the components o f the proposed project and will manage the Designated Account. This re-structured unit will absorb the existing staff from the EFA unit and will use some o f i t s existing administrative procedures and systems. Consultants to be hired and financed by the proposed Project will be under the ECU. This arrangement envisages a cross-training o f the fiduciary staff o f both EFA-PF and IDA-financed consultants and the DMAF staff, as wel l as to contribute to the gradual plan of strengthening fiduciary country systems in Honduras.

Procurement

79. An assessment o f the procurement capacity o f the EFA-PF staff was carried out by the Association in March 2007, as requested by the Government. The assessment indicates that the EFA group has no capacity to manage an IDA project. After consultations with relevant potential participants, consultant assessments and discussions with the MoE, it has been agreed on the creation o f a unit with fiduciary responsibilities under the Deputy Ministry o f Social Groups and Administrative Affairs (details in Annex 8).

Financial Management

80. following conclusions:

O n the basis o f the assessments performed, the financial management team presents the

. The preliminary FM capacity assessment (FMA) has identified project-specific actions in order to strengthen the FM capacity o f M o E and enable it to carry out the financial activities o f the proposed project effectively. . Once M o E has carried out the proposed action plan presented in this assessment, they would have in place adequate FM arrangements that meet the Association’s minimum fiduciary requirements to manage the specific financial activities o f the proposed project.

I t i s important to note that the project is expected to use country systems (SIAFI and UECEX) for accounting and reporting purposes, as these systems would provide adequate information for monitoring specific project expenditures. N o additional system i s needed. In addition to the use o f country systems (SIAFI), the proposed project will also use the single treasury account to make project payments.

8 1. In summary, the proposed project has been designed as follows: Project coordination and administration will fa l l under the Ministry o f Education (MoE). MoE, through the strengthened EFA Coordination Unit (ECU) which will report directly to the Minister o f Education, will be responsible for FM tasks for all the components o f the proposed project and will manage the Designated Account. E C U will absorb the existing staff from the EFA unit and will use some o f its existing administrative procedures and systems. It i s important to mention that the Ministry o f Education, mainly through the EFA Unit, has prior experienced in managing administrative and financial aspects o f externally-financed projects.

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R. Social

82. The Indigenous and Afro-descendant population data in Honduras varies depending on the data source. According to the 2001 census, 7.2 percent o f the population i s Indigenous or Afro-descendant, speaking 7 languages. However, according to the Indigenous federations the estimate i s 12.7 percent. The presence o f autochthonous peoples in the project area triggers the application o f the Operational Policy 4.10. An Indigenous Peoples Plan (IPP) has been submitted and disclosed by the Ministry o f Education (Annex IO). I t reflects the stakeholder assessment o f current education needs o f the poorest and isolated communities, most o f which are Indigenous and Afro-descendant peoples. The IPP aims at responding to the needs o f the ethnic groups in a culturally-adequate manner.

83. A social assessment o f a sample o f non-Indigenous and Indigenous school communities was carried out by an independent group o f consultants, in schools inside and outside o f school networks, in three main regions o f Honduras: (a) Western Region, (b) Northern region, Bay Islands and Moskitia; and (c) Central and Southern Regions. The objective o f the social assessment was to implement free and informed consultations with potential stakeholders and beneficiaries o f the proposed project at the central, department, district, municipal and community levels, on the main issues related to the components. The main recommendations o f the assessment are: (i) improve or create the info-technology school network at the central, department and school level and train those collecting data; (ii) install solar panels in schools without electricity; and train school staff and parents in monitoring results agreements with the community; (iii) provide training and mechanisms for systematic parents, students and stakeholder participation tied to the school projects, and social control o f teachers and students performance; (iv) ensure a match o f IBE teachers and bilingual students; (v) strengthen and stimulate teachers’ encounters and forums on academic/developmental topics, with clear products; (vi) include volunteer teachers in the activities related to the networks; (vii) publicize best practices o f teachers, PEC and PER experiences; (viii) strengthen schools with libraries and reference materials for self-training o f teachers and students, including IBE materials; (ix) promote perfecting (reading-writing) o f indigenous languages for indigenous as well as non- indigenous teachers; (x) train parents, including ‘escuelas de padres’ in the elaboration o f PECs and PERs; (xi) ensure j ob stability o f district supervisors to allow for supervision o f alternative education centers; and (xii) continue to expand education through alternative centers, prior to turning them into conventional centers.

84. Other assessments include: (a) a census/mapping o f IBE schools, students and teachers; and (b) four workshops carried out by the Association with key stakeholders on the subject o f governance in the education sector. Results o f all the assessments have been taken into account in designing the proposed Project.

S. Environment

85. The project will not finance any construction activities. For the purposes o f Operational Directive 4.01 the operation has an environmental category o f C, which does not require an environmental assessment.

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T. Safeguard policies

86. The only safeguard triggered by the Project i s the Indigenous Peoples, as at least 7.2 percent o f Honduras' population i s indigenous or o f Afro descent. Annex 10 includes the Indigenous Peoples Plan outlining key issues and recommendations. As the Project will not finance any constructions, the Environmental Assessment i s not required.

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPBP 4.01) [ I [XI Natural Habitats (OP/BP 4.04) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.1 1) Involuntary Resettlement (OPBP 4.12) Indigenous Peoples (OP/BP 4.10) Forests (OP/BP 4.36) Safety o f Dams (OPBP 4.37) Projects in Disputed Areas (OP/BP 7.60)* Projects on International Waterways (OPBP 7.50)

U. Policy Exceptions and Readiness

87. N o policy exceptions are contemplated under the proposed Project. The Government has shown a high level o f commitment to the proposed Project during preparation and many o f the components build on activities already initiated under the KN-PRSTAC. The definition and costing o f the activities financed by the proposed Project have been completed in a manner satisfactory to the Bank. The Ministry o f Education i s finalizing the Operational Manual and will present it as a condition for effectiveness.

* By supporting the proposed project, the Bank does not intend to prejudice the final determination o f the parties' claims on the disputed areas.

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Annex 1: Country and Sector o r Program Background

Honduras: Education Quality, Governance and Institutional Strengthening

A. Country Context

1. Honduras is a lower middle-income country, with a per capita income o f US$1,190 (Atlas methodology) and a population o f 7.2 mi l l ion inhabitants in 2005. I t stands out as one o f the most open economies in Central America, with exports o f goods and services accounting for around 40 percent o f GDP. Furthermore, it has a fairly diversified export base, with the three main traditional export commodities (coffee, bananas and shrimp) currently accounting for less than 20 percent o f exports. In spite o f having a very open economy, Honduras also stands out historically as the slowest-growing country in the region. This largely explains the slow progress made in poverty reduction, as Honduras i s one the poorest countries in Latin America.

2. The 2004 Living Standards Measurement Survey shows that 51 percent o f the total Honduran population lives in poverty and 24 percent in extreme poverty. These indicators have hardly changed since 1997 in spite o f significant increases in anti-poverty spending over the last five years. Honduras also has among the worst social indicators in Lat in America and the Caribbean region, lagging behind in the areas o f chi ld malnutrition and education quality.

3. Macroeconomic developments between 2004 and 2006 have been generally favorable: real GDP growth averaged around 4.8 percent in that period, or 2 percentage points higher than in 2001-02. The inflation rate has remained in single digits and gradually declining, in spite o f sporadic surges induced by variable international o i l prices. The external sector deficit also has been declining and the country’s gross international reserves have increased rapidly, maintaining a ratio o f almost 4.5 months’ worth o f imports, in spite o f a significantly higher o i l import bill. These improvements are attributable to a sharp increase in wage remittance inflows, as well as to an improved export performance. Meanwhile, the real exchange rate has remained fairly stable over the last two years. These positive developments carried over to the overall fiscal balances, which had improved from a deficit o f -5.1 percent o f GDP in 2003 to -1.6 percent in 2005. However, the deficit worsened again in 2006 and is projected to deteriorate further in the coming years in the absence o f timely corrective actions.

4. Although it continues to be a source o f vulnerability, the financial sector has been undergoing a gradual recovery since 2002. The portfolio share o f non-performing loans has been steadily decreasing during 2004-06, while the capital-asset ratio, provisions against non- performing loans and the return on equity have been steadily increasing. Adding to these positive financial developments i s the decline in the country’s external public debt, which fel l from around 70 percent o f GDP at the beginning o f the decade to 50 o f GDP in 2005 and an estimated 29 percent at the end o f 2006. These declines reflect the HIPC and beyond-HIPC debt re l ie f that became available after Honduras reached the HIPC completion point in April 2005, as well as subsequent assistance provided by the IMF and World Bank under the Multilateral Debt Relief Initiative (MDRI). As a consequence o f these debt relief initiatives, Honduras’s current public debt and debt service ratios are well below the thresholds that signal potential debt distress.

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Table Al . l Honduras: Key Macroeconomic Indicators; 2000-07 2000 2001 2002 2003 2004 2005 2006 2007p

Annual arowth rates f%l Real GDP 5.7 2.6 2.7 3.5 4.7 4.1 5.5 4.8 Inflation (eop) 10.1 8.8 8.1 6.8 9.2 7.7 5.3 6.0 Real Effective Exchange Rate (eop) (+ = apprec.) 4.5 3.8 -0.7 -3 -1.4 -1.2 _ _ --

Shares of GDP PA), except when stated otherwise Fixed Capital Formation 26.1 23.6 22.2 24.0 28.1 23.4 23.2 22.3 Gross National Savings 22.2 18.9 19.1 20.0 22.1 22.1 22.1 19.8

Public Sector Revenues and Grants Public Sector Expenditures o/w wages and salaries

28.8 28.9 26.9 21.4 28.4 28.2 27.5 26.0 29.5 32 30.6 32.5 31.4 29.9 29.6 30.7 11.4 12.8 13.5 13.2 12.9 12.3 12.7 13.8

Overall Public Sector Balance -0.3 -3.2 -3.6 -5.1 -2.9 -1.6 -2.1 -3.9

Export o f goods and services (% change) 11.5 -2.7 3.5 -- 15.8 11.4 7.8 3.9 Imports o f goods and services (“A change 9.3 4.4 I 8.2 21.1 13.9 20.1 14.4 BOP CA Balance before grants (“A o f GDP) -8.8 -10.4 -7.3 -7.4 -8.9 -3.1 -3.6 -4.6 BOP CA Balance after grants (% o f GDP) -3.8 -4.1 -3.1 -4.0 -5.9 -0.4 -1.2 -2.5 Gross International Reserves (months o f imports) 4.4 4.9 4.7 3.7 4.5 4.5 4.4 4.4

Source: Central Bank o f Honduras and IMF. Figures for 2007 are projections.

5. Honduras has benefited from a benign external environment in recent years, but its medium-term macroeconomic outlook i s clouded by several significant challenges. With respect to the external environment, Honduras concluded al l the actions required to fully implement the CAFTA-DR agreement, resulting in the agreement’s entry into force as o f April 1, 2006. Meanwhile, Honduras i s currently benefiting from lower debt service payments to the Inter- American Development Bank (IDB), which also agreed in December 2006 to participate in the MDRI initiative. The additional reductions o f the external debt and the entry into force o f the CAFTA-DR agreement should raise Honduras’s attractiveness to private investors and, thereby, help create opportunities for achieving faster growth. On the other hand, the moderation o f construction activity in the USA has dampened the growth o f wage remittances and the terms at which Honduras can borrow abroad are likely to become more expensive as i t s per-capita income grows beyond the threshold levels for concessional lending.20

6. Most importantly, there are several significant fiscal challenges that the authorities must tackle successfully to avoid macroeconomic destabilization and maintain a sustainable growth environment. These challenges include:

Declining tari f f revenues as the CAFTA-DR agreement comes into effect. Although such declines are likely to be temporary, they threaten to undermine fiscal stability in the short to medium term. Rising; operating losses o f the public enterprises. The operating losses o f the electric utility, ENEE, in particular, are estimated at around 2.2 percent o f GDP in 2006, and on a rising trend. Meanwhile, the operating surplus o f the state-owned telecom company, HONDUTEL’s has been declining rapidly in the wake o f greater competition after the sector was liberalized in December 2005.

0

*’ For example, with a GNI per capita o f US$l,l90 in 2005, Honduras already exceeds the IDA lending threshold (the operational cut-off i s US$1,025 in FY 2007) by a substantial margin.

28

Rising public wages. The government had succeeded in containing wage pressures with the enactment o f public sector pay framework legislation in December 2003. Parts o f that legislation were revoked by Congress in mid-2006, however, and in August 2006, the government negotiated a new agreement with the teachers union that i s projected to double teacher salaries in nominal terms during the next three years, raising the overall public wage bill between 1.0 and 1.5 percent o f GDP over the medium term. Popular pressures to increase subsidies in transport, fuel and electricity, as well as to freeze gasoline and energy prices, in the wake o f international o i l price hikes.

0

7. The developments listed above already have begun to exert significant fiscal pressures. Although Honduras was able to achieve the quantitative macroeconomic targets agreed with the IMF under i t s PRGF-supported program, it was not able to meet al l the structural targets. This meant that the final two program reviews planned for 2006 could not be completed and the PRGF arrangement was allowed to expire in February 2007. The authorities are currently engaged in discussions with the IMF o n a new program.

8. In terms o f Central Government Expenditures one o f the concerns i s the evolution o f the Public Sector Wage Bill. The evolution o f the public sector wage bill i s dominated by the education sector, as teachers represent close to two-thirds o f total central government employment. The real wage rate for teachers increased by an estimated 18 percent between 2002 and 2006, reflecting the latter’s comparative strength in terms o f union organization and influence, without improvements in services.

9. The agreement on salaries reached with the teachers union in August 2006 (known as PASCE) i s poised to boost teacher wages further as it commits the government to a 7.2 bi l l ion Lempira increase in teacher compensation over the next 4 years. This very large increase i s roughly o f the same order o f magnitude as the country’s entire education salary budget for one year. Nevertheless, PASCE i s unclear in several important areas. It i s not clear what happens to the compensatory component o f the agreement after the fourth year. Though it was intended to be a one-time payment made in four equal yearly installments to teachers on the payroll as of August 2006, the door i s l e f t open for the payments to continue beyond 20 10.

10. These outcomes appear reflected in the inefficiency o f public expenditures in Honduras. Recent research at the World Bank (based on cross-country data from 1996-2002) suggests that the efficiency o f public social spending generally is lower in Honduras than elsewhere in the region - out o f 20-22 countries ordered in descending order o f efficiency, Honduras ranks close to the bottom in terms o f education spending efficiency.21 Other research at the Inter-American Development Bank, which extended this analysis to measure the efficiency o f public spending in terms o f overall development performance indicators, also found that Honduras ranks significantly below the regional average and median efficiency scores. These findings suggest that there i s significant room for improving the efficiency o f public spending in education in Honduras.

Honduras ranked 17th out o f 20 using the input-oriented measure o f public spending efficiency in education and 21

18’ out o f 20 using the output-oriented measure.

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Table 2: Ranking of Efficiency Scores for Public Spending in Education ~~~~~~~ Efficieiie-y Scores in Edricatiati

hput-orient ed Output -oriented Uruguay 0.97 Uruguay 0.97 DominicanRep. 0.80 Argentina 0.75 Guatemala 0.70 Barbados 0.72 El Salvador 0.66 Pgnama 0.70 Chile 0.63 Chile 0 .87 Peru 0.62 Mexico 0.67 Trin. & Tob. 0.62 Trin. & Tob. 0.67 Argentina 0.61 Peru 0 .66 B r a d 0.60 B rad 0.66 Mexico 0.57 Jamaica 0.63

Sample median

Colombia 0.52 DominicanRep. 0.61 Panama 0.52 Guyana 0.61 Nicaragua 0.52 Bolivia 0.60 Guyana 0.51 Colombia 0.58 E o h i a 0.50 Costa Rim 0.56 Honduras 0.50 ET Salvador 0 .55 CostaRica 0.49 Honduras 0 .53

E arb ado s 0.36 Guatemala 0.47 Ecuador n a Ecuador n a Venezuela na Haiti n a H aiti n a Venezuela n a

Paraguay 0.52 Paraguay 0.61

Jamaica 0.44 Nicaragua 0.47

Source: World Bank, Honduras Public Expenditure Review 2007.

B. Sector Context 11. Honduras has registered steady improvements in key education indicators since the end o f the last decade: between 1998 and 2006, the average years o f study in the population aged 10 or more increased from 6.1 to 6.4 years, the illiteracy rate decreased from 15.2 to 14.1 percent, preschool attendance increased by almost 44 percent and the primary attendance o f 9-year olds rose by 2.9 percentage points. Gross primary education coverage rose slightly in the period 1999-2004 to 113 percent, while net coverage (ages 7-12) rose to 90.6 percent.22 Gross secondary coverage also has grown in that period, from an estimated 35 percent to 65.5 in 2004, while coverage in higher education grew from 14.4 percent o f the population aged 20-24 in 1999 to an estimated 18.7 percent in 2004.23

World Bank, edstats. Unesco (2006).

22

23

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Table 3: Education Outcomes in Central and Latin America; 2004 Honduras CostaRca ElSalvador Guatemala NicaragLla Average LAC

Adult Literacy rate, 2000-2004 (age IS+), 96 80,O 94.9 85.0" 69.1 78.7 90.2 Primary completion rate, 2004, % 79.4 923 85.7 70.2 73.5 96.0

Net Secondary enrollment, 2004, % 36.1 40.8" 48.1 34,O 40.7 6S.S

Source, Unesco and World Bank edstats. "Year 1990." Year1995.nCen~alGov.Expenditureineduca~on.'4Year 1995.

Net Primq enrollment, 2004, % 90.6 88.3n 92.3 93 0 87.9 95.3

Public edu. Spending % GDP, 2004 7.3" 4.9 2.8 1 ,7'4 3.1 4.3

12. While these education improvements are certainly welcome, it does not appear that Honduras' high spending effort has resulted in superior education outcomes compared to i t s neighbors. Key shortcomings remain in terms o f completion rates, secondary coverage and education quality. Grades 1-2 s t i l l have high repetition rates that set children back, and about 30 percent s t i l l fa i l to graduate from 6' grade (the percentage o f children completing the gfh grade has remained stable at 70 percent since 1994). Inequities in enrollment and completion rates are persistent across urban-rural areas and socioeconomic strata.

13. Figure 1 shows that the enrollment in lower secondary education in Honduras i s lower than countries with equivalent per capita income. Behind this l o w enrollment there is a l o w transition to seventh grade. Figure 2 provides a graphical illustration o f the survival rate to grade 11, using a survivor function plot, which projects the expected probability o f survival o f the current 7-year old cohort to each grade. It shows that students drop out continuously throughout the educational cycle (primary and secondary cycles), but there is a particularly l o w transition from grade 6 to 7.

Figure 1 : The Secondary Education Gap Figure 2. Survivor Function Plot by Years of Education

~~~ ~ ~ _-_

f X I x x -

1 B

)*arrtrf&dwaB**

*le aiwarul tPli"&t S W

14. With respect to education quality, it i s noteworthy that standardized test scores in Spanish and Mathematics, at third and sixth grade, have shown no improvement since 1997. The average percent o f correct answers in the standardized U M C E test o f 2004 are below 50 percent in Spanish or Mathematics (considered l o w levels o f achievement in the scale used by UMCE). Only 20 percent o f the students reached the sufficiency level (attain more than 60 percent o f correct answers in the test). Additionally, there i s a significant gap in terms o f performance between rural and urban areas. Urban scores in the 2004 U M C E test were five percentage points higher than rural scores. In terms o f international assessments, even after allowing for

31

Honduras' l o w per capita income, Honduran students performed below almost al l other Latin American countries in the 1997 Latin-American Laboratory Assessment (LLECE). This poor performance i s consistent with the country's high repetition and drop-out rates and i s l ikely to be reflecting the limited time devoted to learning activities (school closures, teacher absenteeism and tardiness, shortened class days, etc.), insufficient performance and accountability by teachers, absence o f clear educational standards and testing, absence o f objective criteria for transition between grades, text availability, lack o f adequate teacher training for textbooks and knowledge o f subjects that characterize Honduras' public education system.

Figure 3: Education Quality in Honduras: National Student Assessment Results (2004)

Honduras 3* md 6" Bades

15. Several trends currently underway will produce an increased demand for education. Honduran income per capita i s growing and young parents have at least twice as much education as did their own parents. Increased demand for education will manifest itself in several ways that have distinct impacts on the structure o f the educational system. Most importantly, these include the age o f initial enrollment and the duration in school. The major forces at play in reconfiguring education demand in Honduras will therefore be: (i) higher initial (net, or age- appropriate) enrollment rates at earlier ages, (ii) greater educational attainment, and (iii) elimination o f the over-age (gross) enrollment bubble.

16. Forecast enrollment growth i s inverse U-shaped, highest in the middle, significantly lower in grades 1-3 and lowest o f a l l for grades 11 and 12. Thus, while significant growth can be expected at al l levels o f schooling, the biggest change will be due to higher transition rates from primary to secondary schooling. The weighted average forecast by sector i s 40 percent growth at the primary and 44 percent growth at the secondary level for the decade after 2006.

17. If the public sector maintains i t s share o f the projected expansion in student enrollment, without changes in wages or in average studenuteacher ratios, projected increase in teacher demand will have an enormous fiscal impact. Expenditures on teaching will have to increase from about 3.4 percent of GDP in 2006 to 4.3 percent in 2017 just to keep pace with increased demand under the existing structure. The PASCE agreement put further upward pressure on the

32

public wage and i t will be more expensive to accommodate this expected increase in demand. The Government should consider alternatives to address teacher remunerations to ensure that they are sustainable, something unlikely in the current scenario. Public school teachers are not underpaid in a labor market sense; they are just paid less than what they are legally entitled to.

33

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

Honduras: Education Quality, Governance and Institutional Strengthening

Sector Issue

Ban k-financed Improve the quality o f preschool and lower basic education (grade 1-6 ) in targeted rural areas in Honduras, including the improvement o f the quality o f intercultural and bilingual education in indigenous communities. Assist the Government in improving i t s institutional capacity in the areas o f participatory planning and monitoring, public expenditure management, accountability, public administration and public service delivery thereby facilitating the implementation o f the country's Poverty Reduction Strategy. Increase participation in the holistic development processes o f their communities and their nation. This will be achieved by strengthening the communities, local capacity to build sustainable organizations, development projects, and cultural identity. Support the Government's efforts to (i) support reforms aimed at increasing competitiveness and maximizing the potential for new investment and employment creation, (ii) increase the impact and efficiency o f resources devoted to human development and social protection, and (iii) increase the sustainability o f poverty reduction initiatives through policy and institutional reforms

Project

Community Based Education Project (4 1.5 M)

PRSTAC (L. 10.5 M)

Nuestras Rakes Program ($15.0 M)

PRSC ($58.80 M, tranch 1)

Latest Supervision (ISR) Ratings (Bank-financed Projects only)

Implementation Progress (IP)

MS

M S

U

S - Latest PRSC ratings-(Closed in 2004)

Development Objective (DO)

MS

MS

U

S- Latest PRSC ratings-(Closed in 2004)

34

Other Agencies Improve the school management model and to increase coverage o f the third cycle o f Basic education in rural areas

Multidonors Bring the benefits o f education to “every citizen in every society” focusing in the coverage and quality o f primary education USA Support the decentralization process at departmental and municipal levels to improve the implementation o f programs, regionalized disbursements, and financial management systems. JAPAN Support the MoE in a) training teachers in math, and b) production o f didactic materials for mathematics to increase the technical, scientific, methodological, and didactic level.

UNICEF Develop methodologies that conform “Children-friendly Municipalities”, as an effective answer to the challenges o f educational quality and equity, especially for rural, indigenous and afro-descendant girls in multi- grade setting schools. Germany -GTZ Support the MoE in a) Technical Advising, b) Promotion o f basic education (FEBU), c) Education for all (EFA), d) Project for promoting teacher training (PROFID), e) Technical Assistance to the social cabinet, and f) Technical Assistance to UNAT on implementing the poverty reduction strategy

National Education Reform Program- IDB- 1069/SF/HO ($23.0 M)

Education For All (FTI) ($213.0 M)

Investing in people: A healthier country with more education ( $33 .O M)

Improve Technical teaching methodologies in mathematics (PROMETAM) ($5.9 M)

Child friendly schools ($1.2 M)

Education and social development program ($1.0 M annually Technical Assistance)

35

Annex 3: Results Framework and Monitoring

Honduras: Education Quality, Governance and Institutional Strengthening

PDO

The Project’s Development Objectives are to:

Expand pre-school coverage in disadvantaged communities

Improve completion rates in PROHECO schools

Improve teacher accountability

Improve accountability o f schools to parents

Intermediate Outcomes

Component 1: Enhancing and Scaling-Up Interventions that Address the Needs o f the Poor

Table A3.1 Results Framework Generation and Use o f Project Project Outcame Indicators

Increased preschool enrollment in targeted areas

Increased 6th grade Gross Completion Rates in PROHECO schools

Improved compliance with the official school calendar in targeted regions Reduction in teacher absenteeism in targeted regions

Increased proportion o f schools who involve parents in social audits o f the schools using the 60 words per minute fluency test in second grade

Development o f a balance score card for the national, departmental and school level and its adoption by departments and schools

Intermediate Outcome and Output Indicators

Number o f new CCEPREBs opened per year

Number o f CCEPREB volunteers trained per year

Nunber o f CCEPREBs equipped with fungible materials per year

Number o f PROHECO schools receiving the packages o f didactic materials Number o f PROHECO teachers trained in active-participatory methodologies and in the usage o f multi-grade didactic materials Package o f didactic materials adapted to the National Curriculum for the first two cycles o f basic education in the areas o f Math, Spanish, Social Sciences and Natural Sciences

Outcome Information

Assess effectiveness o f the preschool expansion on coverage. Make necessary adjustments. Check for differences in results

Assess effectiveness o f the training o f PROHECO teachers on a more efficient usage o f instructional time and on student learning. Check for differences in results. Take remedial actions as necessary

Assess effectiveness o f interventions in terms o f increase the time students are exposed to any educational experience. Adjust as necessary

Assess effectiveness o f intervention in terms o f involvement o f parents in social audits. Check for differences in results and make necessary adjustments

Assess transparency and access to information. Take remedial actions as necessary.

Use o f Intermediate Outcome Monitoring

Assess progress o f the expansion o f the preschool coverage. Adjust as necessary Assess progress o f training units. Make changes as necessary

Assess progress o f the sustainability o f the expansion o f coverage. Adjust as needed Assess progress o f material support to PROHECO teachers. Take remedial actions as necessary Assess progress o f technical support and training to PROHECO teachers. Make necessary adjustments

Assess progress in contributing towards defining a national strategy for addressing the needs o f multi- grade schools. Adjust if necessary

36

I Component 2: Community Participation in School Management for Better Performance

Institutional Strengthening o f the M o E

Teacher manual/ toolkit for the usage o f the package o f didactic materials designed

Operational Manual on community school management revised and distributed to al l AECOs Secondary Level Educational Networks established in rural areas School Educational Project (PEC) templates consolidated into a single official template applicable to al l schools AECO members trained in preparation o f PECs and the Network’s Educational Project (PER) Managerial information systems developed and implemented in targeted schools and networks Participatory school management monitoring and evaluation system to monitor school, teacher and student performance developed and implemented in targeted schools and networks Promoters and coordinators o f PROHECO program trained in financial management and recording .. - capabilities at thc AECOs level Availability o f information in a web- based technological platform for monitoring performance. Data to include: compliance with school calendar; teacher absenteeism; student attendance; enrollment, promotion, repetition, and completion rates; and sample data on student performance SINECE personnel trained in using information from learning assessment to monitor performance, to feedback into policy making and to disseminate results HRM system strengthens and SIARHD decentralized to departments

Arrangements for results monitoring

Assess progress in contributing towards defining a national strategy for addressing the needs o f multi- grade schools. Take remedial actions as necessary

units o f MoE. Adjust as necessary Assess effectiveness o f technical

Assess work o f technical units. Make necessary adjustment Assess progress o f technical support to communities. Make changes as necessary

Assess technical units and support. Make adjustments

Assess progress o f technical units. Make necessary changes

Assess outreach effectiveness. Take remedial actions as necessary

Assess progress o f technical support and training o f

To monitor the improvement o f information available for local communities to conduct social audits to schools. Make necessary adjustment

Assess progress o f technical units. Make necessary adjustments

Provide validation o f SIARHD, SIAFI/payroll, statistics, and human resource management procedures for management information system and planning functions at central and departmental levels

To the extent possible, the results monitoring and evaluation arrangements o f the proposed Project will be integrated into the existing data collection and utilization efforts. Honduras currently has one o f the weakest data collection systems in Central America, and efforts will be devoted within the framework o f the proposed Project to strengthen country capacity for data collection and utilization. Continued support for the existing systems, and fostering demand for

37

their products from civil society -notably parents’ groups-and the donor community will contribute to their development and sustainability .

Most data for Project monitoring and evaluation will be drawn from the MoE administrative data and from data bases generated by the proposed Project. As needed, for specific impact evaluations o f Project activities (see below), data would be collected through specially designed surveys.

Impact Evaluation

There are two designs for impact evaluations o f Project interventions. In addition, qualitative studies would be carried out to complement the quantitative work.

Subcomponent 1.2: Multi-grade training o f PROHECO teachers

The hypothesis i s that those teachers trained will improve the management o f the instructional time and will have a positive impact on student learning. The evaluation question i s the following: What i s the impact o f this training on primary school performance -- mainly student learning, repetition rates and dropout rates -- versus no training?24 The proposed design i s a randomization within PROHECO schools o f the phasing in o f the teacher training by geographical location (1,038 PROHECO teachers are expected to be trained per year). Teachers in areas where the training will be provided later would serve as the control group for the treatment group o f teachers trained in the methodologies for multi-grade teaching. Results between the control and treatment groups would be compared a year after training i s completed, while at the same time baseline information would be used to control for the validity o f the control group and changes in other variables between base l ine and follow-up.

Subcomponent 2.3: School Management and Education Performance Monitoring and Evaluation

The hypotheses i s that capacity building to parents and communities to use the information provided would have a positive impact relative to just providing information. The evaluation question i s the following: What i s the impact o f the capacity building program delivered to Parent Associations and communities over a program which just provides information to parents and communities but no capacity building?25 The proposed design i s to use the phasing in o f the capacity building program by geographical location. Communities and Parent Associations in areas where the training will be provided later would serve as the control group for the treatment group o f communities and Parent Associations trained. Results between the control and treatment groups would be compared a year after treatment i s completed. Baseline information would be used to control for the validity o f the control group and changes in other variables between base l ine and follow-up.

24 To evaluate the impact o f the training and as a way o f incorporating parents on auditing results o f the training a simple student fluency test - which measures the number o f words which a student reads per minute - wi l l be used. 25 In other words, i s information sufficient, or are complementary actions in the form o f capacity building necessary for impact?

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Annex 4: Detailed Project Description

Honduras: Education Quality, Governance and Institutional Strengthening

The proposed Project contributes to achieving the higher level objectives o f (i) Honduras’ Poverty Reduction Strategy (PRSP); (ii) Honduras’ Education for All for 2003-2015; and (iii) the Plan de Nacidn 2007 - 2030. The PRSP emphasizes the following pertinent goals for the education sector: (i) improving the quality and efficiency o f education at al l levels; (ii) supporting decentralization and community participation in education management; (iii) guaranteeing teachers’ performance and supporting programs to improve their qualifications; and (iv) promoting PROHECO and Intercultural and Bilingual Education. The Honduras’ EFA-FTI proposal builds upon the strategic orientation of the PRSP and defines four strategies to fulfill the Millennium Development Goals and those of Education for All: (i) improving the efficiency o f primary education cohort flows; (ii) improving the quality and coverage o f preschool; (iii) supporting the quality and efficiency o f teachers; and (iv) improving the education demand and participation o f disadvantaged communities. Finally, the Plan de Nacidn 2007-2030 highlights improving the quality o f education in order to achieve social equity.

The proposed Project i s estimated to cost $16.4 mil l ion equivalent and would be structured around four components: (i) Enhancing and Scaling up Interventions that Address the Needs o f the Poor; (ii) Community Participation in School Management for Better Performance; (iii) Governance and Institutional Strengthening o f the MoE; and (iv) Project Administration.

Component 1. Enhancing and Scaling-Up Interventions that Address the education Needs of the Poor (US$7 million equivalent, 43 percent o f total Project cost)

This component seeks to improve preschool coverage and the quality o f basic education focusing on the poorest segments o f the population. The beneficiaries would be chosen following the national mechanism o f targeting extremely poor population in Honduras (Red Solidaria).

This component i s organized into two subcomponents: (i) coverage expansion for the preschool level in rural areas, and (ii) quality improvement in PROHECO multi-grade schools through teacher training and provision o f materials.

Both subcomponents would be focused on the rural and extremely poor areas targeted by Red Solidaria.26 Additionally, they would support the M o E in establishing a wel l structured and

26 Honduras has developed a targeting mechanism that uses the LSMS (2004) and the Census (2001) to estimate the percentage o f population living in extreme poverty. This i s the result o f a collaborative effort involving ENCOVI (Program for the Improvement of Living Standards Measurement Surveys), SDP (Secretary o f the Presidency), INE (National Statistics Institute), and PRAF (Conditional Familiar Cash Transfer Program). The data sources used in the elaboration o f the targeting mechanism were the 2001 Census, and the 2004 Living Standards Measurement Survey. The map uses the aggregate consumption estimate and the poverty l ine built by INE. The GoH i s actually using this methodology to target different existing programs in the country and will be used for future interventions. The two subcomponents will

44

high-quality scheme for networking the preschool and PROHECO schools. In both school levels, the proposed Project aims at supporting the G o H in providing materials, training, and supervision to improve the quality o f education.

For the past four years the M o E has used alternative programs to increase coverage at both levels @re basic and basic education). The proposed Project would help the M o E to continue the expansion and implementation o f these programs in order to consolidate them, in a highly harmonized and aligned strategy o f al l actors through EFA (i.e. donors and c iv i l society represented by funding coming from NGOs and private sector). The M o E has agreed to lead these strategies in order to provide a long-term working framework for the expansion and quality improvement o f these services.

Subcomponent 1.1. Coverage expansion for preschool education in rural areas (US4.1 million equivalent, 25 percent o f total Project cost). This subcomponent would support the MoE’s goal o f providing one year o f quality pre basic education to five year old children in rural areas o f Honduras. The subcomponent aims to expand the coverage and improve the quality o f pre basic education using alternative and cost-effective models. The subcomponent would finance the opening o f 800 new Communitarian Preschool Education Centers (CCPREB) and maintaining their operational capacity through the provision o f pedagogical and fungible materials, the training o f volunteers, and the supervision o f service delivery. As requested by the MoE, the proposed Project would finance the revision and purchase o f the Pre Basic Education Program (PREPI) “Juego y Aprendo”, which consists o f pedagogical inputs, methodology, and training for the preschool volunteers. This package has been used by the Government to expand coverage in rural areas with financial support o f EFA-FTI, USAID, and the Government o f China- Taiwan.27 An evaluation o f the preschools using the PREPI package has shown positive results.28 Currently there are 4,569 centers operating with the PREPI educational material. The model requires that the community provides the funding o f the economic incentive for the volunteer (approximately L s 1,000 per month or roughly US$50), infrastructure and basic material^.^'

This subcomponent would complement efforts carried out with EFA financing, which will fund opening 1,133 additional centers in 2007 and 1,000 in 2008. The M o E has agreed to absorb 100 percent o f the labor force expenses o f the centers and to guarantee the adequate supervision o f the services delivered in the existing centers. The M o E i s taking the lead in presenting this modality as a national strategy to increase coverage in pre basic education. The proposed Project would support the expansion o f the community schools in PROHECO schools first and also in those communities targeted by the Red Solidaria.

be aligned with this initiative to strengthen the expansion and consolidation o f the social safety net in the country for the education sector.

27 This pedagogical material i s adapted to the National Curriculum o f Pre Basic Education (DCN-PB).

28 Rapalo et a1 (2007).

29 Usually this i s funded by the communities themselves, NGOs or the private sector, among others.

45

The main activities to be supported through this subcomponent include: (i) technical evaluation, adjustment, and validation o f the pedagogical materials; (ii) identifying the coverage expansion o f the CCEPREBs through a census (i.e., where to locate the preschools); (iii) organizing 800 CCEPREBs with local communities; (iv) equipping (purchasing and distributing) 800 CCPREBs with pedagogical materials; (v) training 1,200 CCEPREBs volunteers, in the usage o f the educational materials (assuming a 50 per cent annual turnover); (vi) financing 800 volunteers for the CCEPREBs; (vii) equipping 800 CCPREBs with fungible materials; (viii) supervising the implementation, and (ix) conducting an impact evaluation assessment o f the intervention.

Subcomponent 1.2. Quality improvement in multi-grade PROHECO schools through teacher training and provision o f materials (US$3.0 million equivalent, 18 percent o f total Project cost), This subcomponent seeks to increase the quality o f education in multi-grade PROHECO schools using pedagogical techniques internationally proven to increase the quality o f the services delivered in multi-grade settings. Using the successful experience o f multi-grade models in LAC, the subcomponent would finance the reproduction and purchase o f appropriate methodologies and didactic materials to implement multi-grade pedagogical strategies in PROHECO and PROHECO-IBE schools.

Since 2005 the MoE started to steadily use these methodologies through the “Escuela Amiga” Program with the financial and technical support o f UNICEF. A pilot o f 80 schools in 9 departments was implemented centering the intervention in the training o f rural teachers on active-participative methodologies. Given the successful results o f the pilot, the MoE plans to expand this initiative to the 8,000 rural schools for the period o f 2007-201 1, with the support of UNICEF. UNICEF wi l l finance the training o f multi-grade rural teachers in active-participative methodologies.

In order to support the MoE on continuing this initiative, the activities financed by this subcomponent are geared towards: (i) adaptation and validation o f the pedagogical materials with a intercultural scope, (ii) designing a teacher toolkit for the usage o f the pedagogical materials, (iii) reproduction and distribution o f the didactic materials and the teacher toolkit to PROHECO and PROHECO-IBE schools, (iv) training o f 4,200 PROHECO teachers in multi- grade methodologies and in the usage o f the pedagogical materials, and (v) carrying out an impact evaluation o f the intervention.

Component 2. Community Participation in School Management (US$3.6 million equivalent, 22 percent o f total Project cost)

The objective o f the component i s to foster community participation within an Integrated School Management System that would contribute to improving the quality o f education. In order to achieve this objective, the proposed Project would support the following three subcomponents:

Subcomponent 2.1. Consolidation and Institutionalization of the School Management System (US$1.7 million equivalent, 10 percent o f total Project cost)

46

The objective o f this subcomponent is to develop an integrated School Development System, through consolidating norms o f self-management and strengthening the modalities for school management for traditional schools, PROHECO schools and Educational Networks.

The subcomponent would finance a review o f the existing modalities o f school management (AECO - PROHECO, ADEL, School Networks, Parents Association, etc.) to define: consolidated policies and norms for community participation; social management; school planning; school systems for information, monitoring and evaluation, and financial administration processes. In each o f these school management elements a general normative would be developed, to link al l the existing school management modalities in Honduras.

In the case o f PROHECO schools, where parents are required to organize in order to manage their school, the subcomponent would seek to strengthen the processes, procedures, criteria and norms for teaching staff managed by the AECO. Additionally, the subcomponent would seek to strengthen the management modality for traditional schools, empowering the existing entities, namely, the parents associations, the teaching staff committees, the student government and the director’s managing and leadership roles.

The subcomponent would finance the following activities to support the institutional strengthening o f PROHECO:

1. Provide Technical Assistance to support the institutionalization o f the PROHECO program, within the regular structures o f the Ministry o f Education. The PROHECO program has been absorbed by the Ministry o f Education, but it i s not fully integrated to its current pedagogical and administrative activities. Some resistance to the Program exists among medium and lower level personnel o f the MoE, due to the lack o f information o n the goals and scope o f the program. The subcomponent would:

a. finance a Consultant to review and improve the “Plan de Institucionalizacidn de PROHECOY o f the MoE;

b. finance workshops to discuss the PROHECO program with medium and lower level personnel o f the M o E o f both central and departmental levels; and

c. finance the design o f a Web based brochure with the goals, scope and educational results that are achieved by the PROHECO schools.

2. Provide Technical Assistance to assess alternatives for improving labor income and benefits (including pension funds) for PROHECO teachers. This i s needed as PROHECO teachers currently receive a considerably lower salary than regular teachers, have less j ob stability3’ and do not receive social security benefits (health, pension and disability coverage).

3. Provide funding for activities aimed at strengthening the financial management and recording capabilities at the AECO’ level. This strengthening is needed to address the findings o f a

30 A PROHECO teacher receives approximately U S $ 230 as total earnings per month, as opposed to US$ 320 as a base wage for a regular teacher. PROHECO teachers only have short term contracts (12 months) as opposed to regular teachers who have indefinite contracts.

47

recent audit o f the AECOs3’ which identified as an issue the lack o f proper financial documentation at the AECO level, which greatly limited the scope o f their audit.

Finally, the Educational Networks model in Honduras - where a number o f rural schools merge in a central location that offers the basic education 3rd Cycle (7th to 9th grades) for all students belonging to the network - would be strengthened as a reference organization model and as an organization among schools model. The subcomponent would finance training to strengthen social management processes (including indigenous federations), establishing partnerships with other institutions that support education, and strengthening the legal, administrative, technical and pedagogical instruments o f the Network.

Subcomponent 2.2. School Planning and Resources for Quality Education (US$1.4 million equivalent, 9 percent of total Project cost)

The objective o f this subcomponent i s to strengthen school planning capacity and resource allocation for quality education.

The subcomponent would contribute to consolidate an integral school planning system, based on the Center’s Educational Project (PEC).32 During the past five years Honduras developed multiple processes and tools for the Education Planning at the school level. The subcomponent would finance the review, consolidation and development o f a single instrument that supports the management modalities planning. It would support the educational school planning processes and the development o f tools to monitor the PEC’s outcomes and provide feedback. Similarly, i t would strengthen the educational planning through cooperative networks among schools through the Network’s Educational Project (PER).

The subcomponent would finance the development o f training programs for PROHECO and PROHECO-IBE teachers. These activities wi l l be coordinated with the multi-grade training activities contemplated in subcomponent 3.2.

The subcomponent would seek to strengthen the educational resources allocation (supplies, texts, equipment, furniture, etc.) strategies, to make sure that schools receive the inputs and resources that support their quality education processes in an efficient and timely manner. I t would also finance the development o f an efficient distribution system, building upon community participation and strategic partnerships with local organization and with the Educational Department units’ support. The subcomponent would seek to strengthen a single normative and standardized procedure to support the administration o f the financial transfers that the school management modalities receive, including allocation formulas, transference mechanisms, information systems and settlement strategies, and accountability.

31 Coca Luque and Asociados (2007). 32 The PEC i s a key component o f the PROHECO and ADEL models.

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Subcomponent 2.3. School Management and Education Performance Monitoring and Evaluation (US$0.5 million equivalent, 3 percent o f total Project cost)

This subcomponent objective i s to support the development and implement a participatory monitoring and evaluation system for the school management.

The Ministry o f Education i s developing an integrated quality education monitoring and evaluation system. The system addresses three types o f evaluation geared towards strengthening: (i) students’ learning assessment, (ii) teachers’ performance, and (iii) assessment o f schools. This subcomponent would support the development o f an institutional evaluation o f schools, which includes performance indicators, efficiency indicators (access, attendance, promotion, and cycle finalizing), and other school management indicators. Similarly, it would finance the development o f strategies, procedures and instruments to empower the communities to monitor learning outcomes, teachers’ performance and to provide feedback to M o E and its decentralized units. To ensure efficiency and reliability o f educational statistics, the subcomponent would support strengthening the data collecting and feedback system for educational statistics used by the M o E at the local level.

A program for capacity building for better performance delivered communities and Parent Associations, including IBE organizations, would be designed to foster dialogue and accountability in the education sector. The content o f the modules will include among others: (i) key areas o f municipal and school management; (ii) key weaknesses in the education sector and tools for addressing the lack o f transparency, accountability and information o f the sector; (iii) how corruption operates and where in the education sector; (iv) social monitoring tools and impact indicators; and (v) designing social monitoring tools at the municipal and school level.

Component 3: Governance and Institutional Strengthening o f the Ministry o f Education (US$5.1 million equivalent, 3 1 percent of total Project cost)

This component would support efforts to strengthen the MoE, including improving governance and generating management capacity and information about the performance o f its education system in a deconcentrated educational system. Earlier analyses identify these key areas as critical to the improved performance o f the educational system.33 The subcomponents and activities are consistent with the focus o f President Zelaya on issues o f public sector transparency and performance management. Some o f the subcomponents included here constitute important elements o f the Plan de Sostenibilidad del Proceso de Mejora de la Administracidn de Recursos Humanos Docentes del Sector Educativo de Honduras that the government i s implementing since last year, where the Census o f Teachers and Audit o f Post corresponds to i t s starting point.

The component would support the development o f an information platform to generate and disseminate information about performance o f the education sector at al l levels; and would also finance the upgrade and strengthening o f the education statistics system o f the M o E supporting the decentralization o f information production, gathering and usage. PROHECO schools will be integrated to this platform.

33 Moore, Richard (2003).

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The component is organized across the following three areas o f intervention:

Subcomponent 3.1. Information for improved performance and greater accountability (US$4.4 million equivalent, 27 percent o f total Project cost)

One o f the key deterrents to effective educational Performance, management and accountability quite simply i s the absence and the limited articulation o f information in the sector and the MoE. This hinders the capacity o f stakeholders, c iv i l society, and interested parties (e.g., research organizations, NGOs) to provide informed input for the sector. Earlier efforts by the M o E have attempted, with some success, to improve information systems, especially with the creation of the Unidad de Infotecnologia (UI). However, these efforts and the UI remain unarticulated across the Ministry.34

In some cases, information systems or databases are partial and out o f date (Sistema Integrado de Administracidn de Recursos Humanos Docentes - SIARHD, Sistema Integrado de Estadisticas Educativas - SIEE). While basic information (individual histories) exists, in most cases the information is both inaccurate and incomplete. In addition, requisite human resources modules do not exist (e.g., personnel development, evaluations, etc.). In addition, statistical information has not been updated for several years, and no system for maintaining the statistical base exists.

In other cases, the lack o f integration among data bases hinders the ability to assure accurate payroll and personnel information for accountability and finance (Sistema Integrado de Administracibn Financiera -SIAFI, administered through the SEFIN, and SIARHD). The result is that the Ministry o f Education is unable to link human resources to payroll consistent with the SEFIN.

In s t i l l other cases, the absence o f validated instruments o f institutional (school) and teacher performance affects the ability to plan and monitor improvements (SINECE). W h i l e initial efforts to develop instruments are evident, these have received little support and no validation. Further, there i s l i t t le organizational link or feedback between efforts in SINECE and educational planning.

Finally, the institutional framework for information systems lacks both capacity and legitimacy. The Unidad de Infotecnologia does not have legal standing and personnel under contract are subject to high turnover. Users and providers o f al l information systems require substantial training at the central level, and at the departmental level the current situation o f users and providers i s dire.

In fact, the Unidad de Infotecnologia sti l l does have legal status within the MoE, and this is one o f the init ial 34

activities for the proposed Project.

50

This subcomponent would finance five basic activities:

(i) Building capacity within the Unidad de Infotecnologia PI), at the central and departmental levels and creating a Web-based technological platform to allow for improved M o E decision-making and monitoring o f performance. At present, the UI has l imited capacity to serve as the information orienting, generating and archiving instrument for the various data bases in the MoE. In addition, both the capacity o f the departmental level and the articulation between central and departmental levels are extremely weak. Personnel at the departmental level are either poorly trained or non- existent. Finally, the appropriate role o f the UI as an instrument and organizer o f information remains unclear, and the UI often acts independently o f end users within the ministry. In fact, observations within the M o E often point to the usurpation o f appropriate roles o f line units by the UI. The Project proposes assistance through the provision o f hardware, software, technical assistance and training to improve the quality o f information, organizational structure for information at al l levels and the refining o f processes o f articulation. This subcomponent also includes necessary actions to keep the current operational capability o f the UI and to improve its interconnectivity, such as renewal o f equipment and licenses, training o f operators, and providing the departments with equipment, connectivity and trained staff.

(ii) Generating information about performance of the education sector at all levels (national, departmental, district and schools), accessible for the general public and used in decision making at al l levels. Performance evaluation i s essential, not only for monitoring and evaluation purposes o f the MoE, but for improving the capacity o f c iv i l society and communities to carry out effective social auditing for the sector. Currently, information on performance is limited, although ongoing efforts o f various donors aim at improving outcome measurements. The case o f MIDEH and support f rom USAID i s a clear example o f these efforts that require close collaboration in the proposed Project. In particular, the proposed Project aims to improve the capacity to evaluate teacher and school performance through the provision o f technical assistance and institutional support at the central level and the expansion to the departmental level o f these capacities. In addition, much information can and should be generated, transmitted (to departments) and utilized at the school level. Component 2 o f the proposed Project addresses this school level management and community participation function o f information. Here it i s relevant to consider addressing the need for instruments for the transmission and consolidation o f information.

(iii)Upgrading and strengthening the education statistics unit of the MoE to implement a system o f reliable and consistent educational statistics for al l levels (national, departmental, district and schools). This information base is relevant for a variety o f users, including al l levels within the MoE, but also for interested stakeholders (NGOs, academics, the donor community, etc.). The system should generate information at the school level, including among other, information on school closures (strikes, weather, teacher training, and extra holidays) and student absenteeism. In addition, the consolidation o f this information at the district, departmental level and central level in a timely fashion requires substantial support. At present, much o f this information i s recorded, transmitted and consolidated manually. The proposed Project would provide technical assistance for data collection, automation and analysis for the institutionalization o f an effective statistical data base available for M o E planning and

51

monitoring, c iv i l society capacity to evaluate, and for communities and schools to better manage resources. In addition, organizational processes for consolidating the statistical information are proposed.

(iv)Expanding and strengthening the SIARHD at central and sub-national levels3’ to

(VI

In the

provide reliable information on teachers at al l levels (national, departmental, districts and schools), including information on teacher absenteeism and tardiness at the school level. Currently, data on personnel exists in several different databases (SIAFI for payroll, SIARHD for the personnel system), and among these data bases information i s inconsistent, unreliable, and often incompatible. Furthermore, significant information relevant to human resource management i s entirely absent or exists in haphazard form at either the central or departmental levels. Significant modules for human resource administration at a l l levels do not exist within the information system, and need to be developed. Compounding the information gaps and inconsistencies i s the weakness in the skill level o f those responsible for managing both information and people. Similarly, at the sub national level, information is inconsistent, manually maintained, and weakly integrated with a national SIARHD. This i s critical in an effort to deconcentrate the M o E because most human resource management activities should be strengthened and transferred to the departmental level. While some progress in strengthening human resource administration at the sub national has resulted from earlier project interventions, much remains to be done. Currently, the M o E has developed an assessment o f the processes o f Human Resource Management for the departmental leve l that will serve as the basis for the development o f software for SIARHD. These include processes (and eventual software modules) related to recruitment, selection, inscription, movement, individual payment adjustments, payroll, adjustments to numbers o f posts, sanctions and discipline, retirement, and training career development. The proposed Project would support, at the central and departmental levels, three areas: (a) integrated software with appropriate sub modules related to key functional areas o f SIARHD, including the basic personnel f i l e (and history) for individual teachers, recruitment and selection, career development (including training), evaluation, attendance and discipline, and human resource planning, including the addition o f ethnic and native language variables to the system; (b) computer hardware (computers, printers, servers, connectivity); and (c) training at the central and departmental level. Strengthening the capacity for educational planning and the use of information for decision-making at the central and departmental levels. While information provides a key, there is a need to strengthen the capacity to utilize information for educational planning, an activity that the proposed Project would support through technical assistance and training for UPEG and planning at the central and departmental levels. In particular, the proposed Project would support the building o f a planning model that i s “bottom-up” as opposed to any current efforts (weak as they are) that rely on a “top-down” approach.

education statistics and SIARHD interventions there i s a need to transfer substantial activities to the Departmental and district levels as major users and providers o f information, and

This component also include updating SIARHD, as other modules for the system need to be developed, such as promotion and professional development system, improvements in the management o f teacher credentials and scanned certificates, interconnecting the system to the 18 departments, providing maintenance to the system, integrating SIARHD to SIAFI.

35

52

this focus would be supported by the proposed Project. Moreover, much information originates and serves for decision-making at the school level and i s supported in the Project (Subcomponent 3.1 and Component 2). The distribution and strengthening o f roles and responsibilities among levels are to be supported according to determination o f functional distribution. An initial perspective on levels, responsibilities i s presented below:

Information School District Department Process

Registry and Generation P S,R S,R

Capture P S S,R

Centra l

S,R

R

Processing

Validation

P S P P

R P P

Information Flows by Level

Reports Generation

Analysis

Feedback for Improvement o f Information Processes

R R P P

P,R S,R P,R P

R R S,R P

53

S C H O O L S D I S T R I C T S D E P A R T M E N T S Generate Consolidate Consolidate Process Transmit Process

Utilize Analyze Validate Receive Reports Receive Reports

Analyze Analyze Provide Feedback

CENTRAL Consolidate

Process

Reports

Analyze Provide Feedback

HR Process

Establish Norms

Recruitment, Selection

Induction

(Director)

X (most actions as legal)

Movement

X (Subgerencia x (RH) RH and INICE

roles)

X (Transmission and supervision)

X (For actions requiring higher

X than school sanctions,

Trdmites, bureaucratic

actions

Creation o f Posts

Evaluation

Needs Assessment

Discipline

discipline)

INICE Needs Recommendations, Assessment Deptal. Planning Training

Career Development

(Related to Training i and Promotion

responsibility) X (Departmental

RH to UPEG X (Resource needs for school) Deptal.)

Payment

X (UPEG via Subgerencia de

RHD) Planning

Schools I District I Department I Central

X (exclusive)

X

I I X I INICE partially)

X

X l x Recommend 1 X 1 X(HRP1anning)

Adjustments registered (Days

absent, etc.)

X X

Adjustments (Although with

ful ler deconcentration o f budget function,

greater

As noted above, the technological platform and information systems will link with other national information systems such as the Sistema de Administracidn Financiera Integrada (SIAFI), the Sistema de Informacidn de la Estrategia de Reduccidn de la Pobreza (SIERP), and the Sistema de Gerenciapor Resultados (SGR).

Subcomponent 3.2. Nat ional System o f Assessment of Learning Outcomes (US$0.3 million equivalent, 2 percent o f total Project cost). At present, Honduras has the capability and systems in place to begin assessing swnmative learning (end o f the year) based on the recently introduced National Curriculum for basic education. EFA donors have budgeted funds to carry out these measurements for a national representative sample o f schools (representative at the departmental level, both at the rural and urban levels), for years 2007 and 2008, and plan to

54

continue funding these national evaluations in later years. The proposed Project would complement these efforts by promoting the participation o f Honduras in international standardized assessments o f students learning and by strengthening the institutional capabilities o f the Ministry o f Education to use the information for monitoring o f learning outcomes and decision making, and to increase overall transparency through the dissemination o f the results.

Subcomponent 3.3. Human Resource Management and Evaluation (US0.4 million equivalent, 2 percent o f total Project cost). Improvements to the SIARHD will provide the information required for decision-making on the utilization o f human resources. However, an improvement in Human Resources Management (HRM) systems and processes i s the other key element for improved teacher utilization and distribution. The proposed Project would support the design, modification and implementation o f critical human resource management processes and procedures for a more effective personnel system for teachers. At present, many o f the key human resource management functions reside either partially or wholly at the central level, while in practice many o f these management systems should concentrate at the departmental level, where most teacher-related activities occur. In addition, some HRM functions appropriately need to reside at the school level. Both o f these thrusts are in keeping with the overall effort to deconcentrate the MoE, and have been the emphasis in recent M o E efforts to assess current and recommended processes for the departmental level. Finally, the need to assure the normative, evaluative and oversight roles o f the central level require management support at this level as well. The premise upon which these efforts are based i s that operational (and some strategic) activities should occur at subnational levels while most normative functions should remain and be strengthened at the central level.

The proposed Project would address management improvement needs at the central and provincial levels and would support the determination o f appropriate levels o f decision-making and actions among them. The activities to be supported include: (i) determination o f the distribution o f HRM functions and reengineering within and among the central, departmental and school levels; (ii) development o f operating manuals for each o f the key subsystems, and implementation o f the newly structured subsystems and corresponding procedures; (iii) analysis o f legal parameters, limits and opportunities for modifying current practices and procedures in HRM; and (iv) training for administrative personnel in the HRM system at the central and departmental levels, including IBE technical teams.

The teacher evaluation role at the MoE i s the responsibility o f the Subgerencia de Recursos Humanos Docentes and in conjunction with the Sistema Nacional de Evaluacidn de la Calidad Educativa (SINECE).36 Teacher evaluation performs several functions, including the building o f an overall performance management system linked to incentives. However, this unit requires technical assistance to do a reengineering o f i t s processes and requires help for human capacity formation. The teacher evaluation should also form part o f the performance information available for social monitoring.

36 SINECE should also evaluate the study programs and the educational institutions. No evaluation i s currently undertaken by this unit.

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Component 4. Project Administration (US$0.7 million equivalent, 4 percent of total Project cost)

The proposed Project would be implemented directly by the MoE and this component includes the cost o f the technical personal (local consultants) and operating costs. The proposed administration arrangements include, as key steps, a common framework with EFA-PF for monitoring implementation, a harmonized operation manual and joint technical and administrative un i t s with EFA-Pooled Fund (see Annex 6). The proposed arrangements are the result o f various consultant assessments which included expert interviews, f ield visits, and workshops in Honduras with al l relevant potential participants. Studies will be undertaken in order to contribute to the gradual development o f the fiduciary and technical bases to sustain a process o f institutional strengthening o f the MoE.

56

Annex 5: Project Costs

konduras Honduras Education Project Components by Financiers (US% Miliion)

Honduras: Education Quality, Governance and Institutional Strengthening

Table 1 ionduras ionduras Education Project Summary of Project Cost Estimates US$ Million) (US$ Million)

Foreign Local Total

A. 1.0 Enhancing and Scaling-Up Interventions that Address the Needs of the Poor 1 . I . Support for the preschool level in rural areas 1.2. Teacher training and materials for education in a multi-grade setting

Subtotal 1 .O Enhancing and Scaling-Up Interventions that Address the Needs of the Poor B. 2.0 Community Participation in School Management for Better Performance

2.1 Consolidation and Institutionalization of the School Management System 2.2 School Planning and Resources for Quality Education 2.3 School Management and Education Performance Monitoring and Evaluation

Subtotal 2.0 Community Participation in School Management for Better Performance C. 3.0 Governance and Institutional Strengthening the MoE

3.1 Information for improved performance and greater accountability 3.2 National System of Assessment of Learning Outcomes 3.3 Human Resource Management and Evaluation

Subtotal 3.0 Governance and Institutional Strengthening the MoE D. Project Administration rotal BASELINE COSTS

Physical Contingencies Price Contingencies

rotal PROJECT COSTS

0.12 3.91 4.03 0.16 2.74 2.90 0.28 6.65 6.93 ---

0.04 1.59 1.63 0.15 1.23 1.38

- 0.50 0.50 0.19 3.32 3.51 ---

0.33 3.99 4.32 0.01 0.26 0.27 0.01 0.42 0.43 0.35 4.66 5.01

- 0.68 0.68 0.83 15.30 16.13 0.01 0.12 0.12

--- ---

0.01 0.13 0.14 0.84 15.55 16.40 ---

International Gobierno de Development

Honduras Agency Total Amount % Amount % Amount % ------

A. 1.0 Enhancing and Scaling-Up Interventions that Address the Needs of the Poor 1.1. Support for the preschool level in rural areas 1.2. Teacher training and materials for education in a multi-grade setting

Subtotal 1.0 Enhancing and Scaling-Up Interventions that Address the Needs of the Poor 8. 2.0 Community Participation In School Management for Better Performance

2.1 Consolidation and Institutionalization of the School Management System 2.2 School Planning and Resources for Quality Education 2.3 School Management and Education Performance Monitoring and Evaluation

Subtotal 2.0 Community Participation in School Management for Better Performance C. 3.0 Governance and Institutional Strengthening the MoE

3.1 Information for improved performance and greater accountability 3.2 National System of Assessment of Learning Outcomes 3.3 Human Resource Management and Evaluation

Subtotal 3.0 Governance and Institutional strengthening the MoE - 0.68 100.00 0.68 4.20 0. Project Administration Total PROJECT COSTS 1.03 6.30 15.37 93.70 16.40 100.00

------

0.24 5.40 4.15 94.60 4.39 26.80 - 0.27 100.00 0.27 1.60

0.00 0.60 0.43 99.40 0.43 2.60 0.24 4.70 4.85 95.30 5.09 31.10 ------

0.70 17.20 3.37 82.80 4.06 24.80 0.03 0.90 2.94 99.10 2.97 18.10 0.73 10.30 6.30 89.70 7.03 42.90 ------

0.04 2.40 1.63 97.60 1.67 10.20 0.02 1.60 1.39 98.40 1.42 8.60

- 0.51 100.00 0.51 3.10 0.06 1.70 3.53 98.30 3.59 21.90 ------

57

Table 3

Honduras Honduras Education Project Expenditure Accounts by Years -- Totals Including Contingencies (US$ Million)

I. Investment Costs A. Bienes

Textbooks Didactic materials Comunication Equipment Computer equipment Scaners Printing of documents Motos

Subtotal Bienes B. Consulting Services C. Non-consulting Services E. Training

Total Investment Costs II. Recurrent Costs

A. incentives to volunteers 8. Materials C. Materiales didacticos E. Maintenance F. Expenses during field visits (viaticoslmobilization)

Total Recurrent Costs Total PROJECT COSTS

Totals Including Contingencies 07/08 08/09 09/10 10/11 11/12 Total _.__-----

0.01 - 0.01 - 0.37 0.37 0.10 0.10 0.95

0.09 0.11 0.11 - 0.32 0.02 0.02 0.19 0.16 - 0.38

- 0.06 0.06 - 0.12 - 0.34 0.26 0.23 ~ 0.83 ------ - 0 1 8

0.12 0.85 1.18 0.55 0.10 2.80

- 0.33 0.54 0.23 0.24 1.34 0 7 3 1.95 1.14 0.47 0.29

------ 0.96 4.33 4.37 2.46 1.37 13.48 0.11 1.20 1.51 1.20 0.74

4,761

- 0.10 0.20 0.30 0.60 - 0.07 0.08 0.08 0.08 0.31

- 0.10 0.20 0.30 0.40 - 0.01 0.01 0.01 0.01

- 0.22 0.25 0.25 0.25 0.96 - 0.40 0.64 0.84 1.04 2.921

0.96 4.73 5.01 3.29 2.40 16.40

------ ------

Table 4

Honduras Honduras Education Project Project Components by Year .. Totals Including Contingencies (US$ Million)

A. 1.0 Enhancing and Scaling-Up Interventions that Address the Needs of the Poor 1.1. Support for the preschool level in rural areas 1.2. Teacher training and materiais for education in a multi-grade setting

Subtotal 1.0 Enhancing and Scaling-Up Interventions that Address the Needs of the Poor B. 2.0 Community Participation in School Management for Better Performance

2.1 Consolidation and Institutionalization of the Schooi Management System 2.2 School Planning and Resources for Quality Education 2.3 School Management and Education Performance Monitoring and Evaluation

Subtotal 2.0 Community Participation in School Management for Better Performance C. 3.0 Governance and Institutional Strengthening the MoE

3.1 Information for improved performance and greater accountabiiity 3.2 National System of Assessment of Learning Outcomes 3.3 Human Resource Management and Evaluation

Subtotal 3.0 Governance and Institutional Strengthening the MoE

Totals Including Contingencies 07108 08/09 09/10 10111 11112 Total -----

008 068 095 115 120 406 016 100 089 042 050 297 025 168 183 157 170 703

022 049 063 027 004 167

------

. 002 072 041 026 142 ----- -,-I ~ 0.20 0.10 0.20

0.22 0.72 1.46 0.89 0.30

- 4,391 0.27 0.37 1.91 1.29 0.62 0.20

~ 0.11 0.16 ------

0.40 2.19 1.57 0.68 0.25 5.09 0.431 0.04 0.16 0.12 0.07 0.06

- .

0.09 0.15 0.15 0.15 0.15 0.68 ----- D. Project Administration Total PROJECT COSTS 0.96 4.73 5.01 3.29 2.40

58

Annex 6: Implementation Arrangements

Honduras: Education Quality, Governance and Institutional Strengthening

1. Introduction

The present Annex describes both the institutional foundations and the implementation arrangements for the proposed Project. The Ministry o f Education (MoE) has chosen to work through existing units to promote an efficient use o f a l l existing (and expected) funds from international donors in a complementary manner, ensure a common strategic vision, guarantee frequent sharing o f information in a transparent way, and discuss issues that are of interest for al l donors involved.

Therefore, rather than set up a separate new institutional structure (project implementatiodco-ordination unit), the proposed Project i s designed to strengthen and streamline the functions o f existing institutional structures at central and de-concentrated levels. The proposed arrangements are the result o f various consultant assessments which included expert interviews, field visits, and workshops in Honduras with al l relevant potential participants. The Team held meetings with the Ministry o f Education and EFA - Pooled Fund donors to validate the proposed implementation arrangements. They include, as key steps, a common framework for monitoring implementation and a harmonized operations manual with EFA-Pooled Fund.

2. Overview o f Institutional and Implementation Project Arrangements

The M o E would implement this credit within a 5 year timeframe, starting April 2008. The key responsibilities o f M o E related to the proposed Project include policies formulation, planning, implementation, coordination with non public stakeholders, monitoring, evaluation, as well as management o f external funding.

The proposed Project would be implemented technically by a steering committee, the Ministry’s own line departments, and a re-structured EFA Coordination Unit. The steering committee and the Ministry’s offices would be responsible for the technical aspects o f implementation while the re-structured EFA Coordination Unit would take care o f the administrative aspects o f it.

a) Technical Implementation Arrangements A Steering Committee (SC) would be in charge o f overall project coordination o f EFA and IDA funds. This Committee, comprising the Minister o f Education, the three deputy Vice Ministers o f education,37 their technical advisers, the Chair o f UPEG and the heads o f l ine departments, would be chaired by the Minister who can delegate this function to one o f the deputy minister^.^' The SC will be responsible for: (i) compiling annual implementation and

37 Deputy Vice Minister for Technical and Pedagogical Affairs, Deputy Vice Minister o f Educational Services and Deputy Vice Minister for Social Groups and Administrative Affairs. 38 The Chair o f the Committee wil l be assisted by an Executive Secretary. The Executive Secretary specifically would: (i) verify that the proposed activities by in l ine departments adjust to EFA-PF and IDA project eligibil i ty conditions; (ii) assure that implementation o f EFA-PF and IDA financed Project

59

procurement plans; (ii) leading and coordinating the dialogue on specific policies necessary for project implementation; and (iii) monitoring the implementation o f annual plans (including Project components and subcomponents), and the fulfillment o f targets.

O n the technical side, implementation arrangements also include Ministry o f Education departments/offices at both central and de-concentrated levels with specific duties in the implementation o f EFA-PF and the proposed Project. Each head o f department/office with implementation responsibilities would report to hidher corresponding Deputy Vice Minister, who in turn would inform to the ESC. L ine departments with Project implementation responsibilities, and the corresponding components and subcomponents are shown in the following box:

Component

1.Enhancing and Scaling-Up Interventions that Address the Needs of the Poor a. Coverage Expansion and Quality Improvement for Pre-

Basic Education

b. Quality Improvement in Multi-Grade Setting Schools Through Teacher Training and Provision o f Materials

2. Community Participation in School Management for Better Performance a. Consolidation and Institutionalization o f School

Management System

b.

c.

School Planning and Resources for Education Quality

Monitoring and Evaluation o f School Management and Education Performance

Information for Improved Performance and Greater Accountability

National System o f Assessment of Learning Outcomes

3. Governance and Institutional Strengthening of MoE a.

b.

c. Human Resource Management and Evaluation

4. Project Coordination

Lead Implementing Departments*

DMPT-PSD, with collaboration o f DU, EC. AM and ECU

DMPT-PSD, with collaboration of QED, EC, AM and ECU

DMAF-UM, with collaboration of DU, AM and ECU

DMAF-UM, with collaboration o f DU, AM and ECU

DMAF-UPEG, with collaboration o f UI, QED, DU, AM and ECU

DMAF-UI, with collaboration o f UPEG, QED, DU, AM and ECU

DMPT-QED, with collaboration o f UI, AM, and ECU

DMPT-QED, with collaboration o f UI, AM, and ECU DMAF (AM and ECU)

* AM: Administration Manager; DU: Departmental Units; DMAF: Deputy Vice Minister for Social Groups and Administrative Affairs; DMTP: Deputy Vice Minister for Technical and Pedagogical Affairs; EC: Educational Centers; ECU: EFA Coordination Unit; PSD: Pedagogical Services Director; QED: Quality Education Director; UI: Unidad de Infotecnologia; UM: Unidad de hlodernizacidn; UPEG: Unidad de Planeacidn y Evaluacidn de Gestzdn.

b) Administrative Implementation Arrangements The administrative implementation arrangements for both EFA-PF and the IDA-financed Project will be performed by the re-structured EFA Coordination Unit (ECU) reporting directly to the Minister o f Education. The Deputy Vice Minister for Social Groups and

i s in line with the projected calendar; (iii) identify the gap between program and execution o f technical, social, fmancial, and administrative activities included in the annual implementation plan; (iv) follow- up baseline and monitoring indicators of EFA-FP and IDA Project components; and (v) synthesize the evaluation o f outcomesiresuits.

60

Administrative Affairs (DMAF) will play a key role in administrative and financial management matters and procurement with both national and external funding. The Deputy Minister would be responsible for fiduciary matters, including signing bidding documents, withdrawal requests and contracts; and would represent the Minister o f Education on al l administrative matters related to EFA-PF and the proposed Project.

The E C U will be staffed by M o E and EFA staff and the proposed Project will finance a Coordinator for the unit, a Procurement Specialist, a Financial Management Specialist, a Monitoring Specialist and a procurement and financial management assistance. These long- term consultants would be competitively selected.

The technical and fiduciary management team for the proposed Project would have the following key functions: (i) to support E C U in the annual implementation plan and annual procurement plan compilation, in particular eligible activities; (ii) ensure compliance with the financial and procurement rules and manage related required donor and Bank documentation; (iii) guarantee transparency and compliance in the utilization o f donor and Bank resources; (iv) draft and implement a training program on IDA fiduciary norms and procedures to M o E staff, EFA-PF staff and others’ donors teams (if needed), and (v) draft and implement a technical training program targeting l ine departments to respond to their needs. The key functions o f each specialist would be detailed in the Operations Manual. The Association would review and approve the Terms o f Reference for the four consultants listed above as well as the CVs o f selected candidates.

I t i s worth noting that the E C U Coordinator would be the liaison between this Unit and M o E l i n e units to ensure that the proposed activities are eligible, their implementation schedules feasible, and the TORS have the appropriate clearance from the Steering Committee. The E C U Coordinator would also be responsible for submitting no objections to EFA-PF and to the Association.

O n a strict need basis, with assistance from short-term local consultants funded by EFA-PF, the E C U Coordinator would identify and propose the necessary technical assistance so that relevant l ine departments/offices may draft and cost TOR and/or technical specifications related to complex a ~ t i v i t i e s . ~ ~ All consultants to be added to the above structure would require the Association’s no objection to the TOR and CV.

39 This type o f short-term technical assistance may be required for: (i) reviewing the quality o f ToWspecifications and their costing, (ii) if necessary, providing specific assistance in case TOR must be revised during the bidding process or to write up detailed responses/clarification statements to the request o f proposals that indicate concerns about what i s required to be sent to the interested bidders, and (iii) providing support for the monitoring o f goods, services and consulting services financed by the proposed project.

61

Annex 7: Financial Management and Disbursement Arrangements

Honduras: Education Quality, Governance and Institutional Strengthening

Summary Conclusion of Financial Management Assessment.

In summary, the proposed project has been designed as follows: Project coordination and administration will fal l under the Ministry o f Education (MoE). MoE, through the strengthened EFA Coordination Unit (ECU) reporting directly to the Ministry of Education, will be responsible for FM tasks for all the components o f the proposed project and will manage the Designated Account. E C U will absorb the existing staff from the EFA unit and will use some o f i t s existing administrative procedures and systems. It is important to mention that the Ministry o f Education, mainly through the EFA Unit, has prior experienced in managing administrative and financial aspects o f externally-financed projects.

O n the basis o f the assessments performed, the financial management team presents the following conclusions:

(9

(ii)

(iii)

The FM capacity assessment (FMA) has identified project-specific actions in order to strengthen the FM capacity o f M o E and enable it to carry out the financial activities o f the proposed project effectively.

Once M o E has carried out the proposed action plan presented in this assessment, they would have in place adequate FM arrangements that meet the Bank’s minimum fiduciary requirements to manage the specific financial activities o f the proposed Project.

It i s important to note that the project i s expected to use country systems (SIAFI and UECEX) for accounting and reporting purposes, as these systems would provide adequate information for monitoring specific project expenditures. N o additional system i s expected to be needed. In addition to the use o f country systems (SIAFI), the proposed project wil l also use the single treasury account to make project payments.

Organizational Arrangements and Staffing Overall project coordination and administration wil l fa l l under the Ministry o f Education (MoE). The M o E has chosen to work with existing units to promote an efficient use o f al l existing (and expected) funds from international donors in a complementary manner. Therefore, MoE, through the strengthened EFA Coordination Unit (ECU) which will report to the Ministry o f Education, will be directly in charge o f financial management (FM) tasks. These will basically include: (i) budget formulation and monitoring; (ii) cash flow management (including processing payments and submitting credit withdrawal applications to the Bank); (iii) maintenance o f accounting records, (iv) preparation o f in-year and year-end financial reports, (v) administration o f underlying information systems, and (vi) arranging for execution o f external audit.

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The EFA Coordinating Unit (ECU) will oversee the administrative aspects of both EFA-PF and the IDA financed Project. This unit would coordinate with the technical units o f the Ministry responsible for implementing the technical aspects of the proposed project. The unit will absorb the existing staff currently involved in the administrative aspects o f EFA, with a view to include additional personnel to take care o f the additional workload created by the proposed project. The EFA unit i s currently responsible for monitoring the administrative and financial aspects o f EFA financed by multiple donors. As such, the unit already has a basic administrative structure and FM systems in place (which could be used at least at the beginning of the Project). Five national long-term consultants will be hired to complement the existing EFA-PF staff and oversee the administrative aspects o f the IDA proposed Project. These long term consultants wil l be competitively selected and hired to guarantee fiduciary compliance for the proposed project. Their terms o f reference and CVs would be subject to the Bank’s no objection. They comprise: (i) Coordinator for ECU, (ii) a Financial Management Specialist, (iii) a Procurement Specialist, (iv) a Monitoring Specialist, and (v) an Assistant in procurement and financial management.

Budget Planning Between April and May o f each year, M o E will prepare i t s tentative investment program for the next year (including the investment program for the proposed project) and submit it to the Ministry o f Finance (SEFIN) for review and approval. The program should be consistent with the budget policy provided by the Ministry of Finance, and be incorporated into the national budget for i t s submittal to Congress in September.

On the basis o f the approved budget, M o E will adjust as needed i t s project annual work (POA) and procurement plans, which will be reviewed by the Association. The M O E will prepare a single POA which will also include activities to be financed under the proposed Project, dully identified.

Accounting and Financial Reporting

Accounting Policies and Procedures. The main FM regulatory framework for the project will consist of: (i) Honduras’ laws governing budget management; (ii) MoE’s operating manuals; and (iii) the Unit’s operating norms.

Project-specific FM arrangements that are not contemplated in the documents cited above will be documented in a concise FM section o f the project’s operational manual. Among others, specific reference will be made to: (i) the internal controls appropriate for the Project; (ii) the formats o f Project’s financial reports and (iii) auditing arrangements.

Information Systems. The proposed project will utilize country systems for accounting and financial reporting. The financial activities o f the Project (especially

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budget and budget execution) will be recorded in SIAFI. In addition, to meet the reporting requirements o f the proposed Project, the Association’s team has investigated the used o f UECEX, which i s a module o f SIAFI specifically designed for the accounting and reporting o f externally-financed projects. The Association’s team will continue to work with M o E and SEFIN to ensure the proper implementation and operation o f UECEX for the proposed project.

Treasuy System. It i s important to note that with the use o f country systems (SIAFI) comes the use o f the single treasury account. As expenditures/commitments arise, they will be recorded in SIAFI; and funds will be converted into local currency by the National Treasury in the Ministry o f Finance (SEFIN) and channeled through the single treasury account to make payments to suppliers, contractors or consultants.

Financial Reports. On a semester basis, M o E will prepare and submit to the Association an unaudited interim financial report (IFR) containing at least: (i) a statement o f sources and uses o f funds and cash balances (with expenditures classified by subcomponent); (ii) a statement o f budget execution per subcomponent (with expenditures classified by the major budgetary accounts). The interim reports will be submitted not later than 45 days after the end o f each semester. In this case, the IFRs are not expected to be utilized for disbursement purposes (at least at the beginning). If at a later date, the IFRs are used for disbursement purposes, the following annexes would be required: (i) a Designated Account activity statement (including a copy o f the bank statement); (ii) a summary statement o f Designated Account expenditures for contracts subject to prior review, and (iii) a summary statement o f Designated Account expenditures for contracts not subject to prior review.

O n an annual basis, M o E will prepare project financial statements including cumulative figures, for the year and as o f the end o f that year, o f the financial statements cited in the previous paragraph. The financial statements will also include explanatory notes in accordance with the Cash Basis International Public Sector Accounting Standard (IPSAS), and MoE’s assertion that credit funds were used in accordance with the intended purposes as specified in the Development Credit Agreement. These financial statements, once audited, will be submitted to the Association not later than six months after the end o f the Government’s fiscal year (which equals the calendar year).

The supporting documentation o f the semester and annual financial statements will be maintained in the Unit’s premises, and made easily accessible to Association supervision missions and to external auditors.

Flow o f Funds IDA Disbursement Method. Credit proceeds will be withdrawn by M o E using the advance method supported by documentation showing that the credit proceeds previously withdrawn have been used to finance eligible expenditures. Supporting documentation will be in the form o f Statement o f Expenditures (SOEs), at least

64

initially, with the exception o f payments related to contracts above the SOE threshold, which will be reimbursed against full supporting documentation. The SOE threshold for the project will fol low the prior review threshold, which have been set at $150,000 for goods and non-consultants services, $100,000 for consultant services-firms and $35,000 for consultant services-individuals. Once the system for producing IFRs has been tested and found satisfactory to the Association, the supporting documentation may be changed to interim unaudited financial reports (IFRs).

Other Procedures. By appraisal, no need has been identified for the use o f special commitment procedures. Should the need arise during implementation; the Association will evaluate it and if granted, agree to their use v ia an amendment to the Disbursement Letter. The project may use reimbursement or direct payments.

IDA Designated Account. MoE will open a segregated Designated Account in Banco Central ofHonduras in U S dollars, to be used exclusively for deposits and withdrawals o f credit proceeds for eligible expenditures. After the conditions o f effectiveness have been met, and the designated account has been opened, M o E will submit its f i rs t disbursement request to the Association, together with the expenditure and financing needs forecast for the next six months. For subsequent withdrawals, M o E will submit the disbursement request, along with the supporting documentation (SOEs or IFRs). At any time, the undocumented advance to the designated account cannot exceed the authorized ceiling established in the Disbursement Letter.

Disbursement D e a d h e Date. Four months after the closing date specified in the Development Credit Agreement.

Retroactive Financing The Bank would finance up to a maximum o f U S $ 300,000 equivalent in the aggregate incurred for: (i) payments made on or after June 1, 2007, but in no case more than one year f rom the date o f the Financing Agreement, for eligible expenditures under components 1 and 4 o f the proposed project; and (ii) payments made on or after SIARHD has been updated on the basis o f a teachers’ census and post audit results, and the accuracy o f the updated SIARHD bas been tested by way o f random audits (all in a manner satisfactory to the Association), but in no case more than one year from the date o f the Financing Agreement, for eligible expenditures under part 3 o f the proposed project.

Audit Arrangements Internal Audit. In the course o f i t s regular internal audit activities vis-a-vis the institutional budget, internal auditors for M o E may include project activities in their annual work plans. If such audits occur, M o E will provide the Association with copies o f internal audit reports covering project activities and financial transactions.

External Audit. The annual project financial statements prepared by M o E will be audited following International Standards on Auditing (ISA), by an independent firm (or the Controller General o f Accounts, subject to prior agreement with the Bank) and

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in accordance with terms o f reference (TORS), both acceptable to the Bank. The audit opinion covering project financial statements will contain a reference to the eligibility o f expenditures.

In addition, memoranda on internal controls (“management letters”) will be produced on a semi-annual basis.

The audit work described above can be financed with credit proceeds. MoE will arrange for the f i rs t external audit within three months after Credit Effectiveness. Each audit engagement i s expected to cover at least two years.

Disbursement Schedule

Expenditure Category

(1) Goods, Consultant Services, Non-Consultant Services and Training under Part 1 o f the Project (2) Goods, Consultant Services, Non-Consultant Services and Training under Part 2 o f the Project (3) Goods, Consultant Services, Non-Consultant Services and Training under Part 3.1 o f the Project (4) Goods, Consultant Services, Non-Consultant Services and Training under Part 3 o f the Project other than Part 3.1 ( 5 ) Goods, Consultant Services, Non-Consultant Services, Training and operating costs under Part 4 o f the Project

Total

Credit Amount in SDR$

(US$ million) 4,000,000

(US$6.3 million) 2,250,000

(US$3.5 million) 2,650,000

(US$4.1 million)

450,000

(US$0.7 million)

450,000

(US$0.7 million)

9,800,000

US$15.4 million)”

‘YO of Expenditures to be Financed

100%

100%

100%

100%

100%

Notes: 1. N o withdrawals shall be made in respect o f payments made for expenditures covered by Category 2 in the table above, unless the amount o f Lp 35,915,610 has been deposited in an account, satisfactory to the Association, for the benefit o f PROHECO teachers entitled to pension payments since January 1, 1999, all in a manner satisfactory to the Association. 2. No withdrawals shall be made in respect o f payments made for expenditures covered by Category 3 in the table above unless the SIARHD has been updated on the basis o f the teachers’ census and post audit result, and the accuracy o f the SIARHD has been tested by way o f random audits, in a manner satisfactory to the Association. * The column for de Credit Amount in US$ does not add to U$15.4 million due to rounding o f numbers.

Country Issues As stated in Governance Strategy Note (2006), significant improvements have been made in strengthening public financial management systems in Honduras, with the

66

launch o f a comprehensive reform program to support implementation o f the 2004 Finance Law, the implementation o f SIAFI at the central level o f government and the National Payment System. However, corruption remains a serious concern, which impedes growth and development. Therefore, as an effort to support improvements in governance in Honduras, accelerate growth and make sustained progress in poverty reduction, the Bank has produced a Governance Strategy Note which provides a framework for the Bank’s involvement in Honduras. This note recommends specific actions to strengthen transparency accountability and the demand for good governance across the portfolio through among others: extensive disclosure o f project procurement information, strengthened partnerships with c iv i l society and beneficiaries in project design and monitoring, regular risk assessments and enhanced supervision where needed and continuity o f project staffing. This assessment has taken into account the conclusions o f the Governance Strategy Note.

Risk Risk Risk Mitigating Measures Incorporated Rating into Project Design

Risk Assessment Summary The FM risk for this project has been assessed at Substantial and once there i s evidence that the mitigating measures have been implemented and are working as intended, the level o f FM risk for this project will be re-assessed and revised accordingly. The following table presents the risk assessment, as wel l as the risk mitigating measures incorporated into the design o f the project and the financial management implementation arrangements.

Condition of Negotiations/Board or Effectiveness NIN)?

Inherent Risk Country Level

Entity Level Project Level

In part because o f the poor rating o f Honduras in Transparency International’s Corruption indices, and despite recent measurable improvements in the country’s public fmancial management systems, inherent r isk is st i l l considered to be substantial.

The FM aspects o f the project wil l be concentrated in a unit (institutionalized within the Ministry) responsible for overseeing the fiduciary aspects o f externally-funded projects, staffed with personnel possessing adequate qualifications.

The Credit Agreement wil l include a covenant that MoE will be required to maintain adequate implementation arrangements at a l l times.

The Unit will include 5long term consultants, including a Financial Management Specialist dedicated to ensure fiduciary compliance o f the project.

Negotiations: Y

Effectiveness: Y

Control risk

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Budgeting,

Action Responsible Entity 1. Finalize the draft format o f unaudited financial reports (IFRs). 2. Finalize draft audit TORS and short l is t . 3. Finalize the draft F M section o f the project operational manual. 4. Finalize the proposal in relation to the chart o f account and incorporation o f the project into SIAFI's

MoE

MoE MoE

MoE

Accounting, Internal Control

Completion Date4' November 1,2007

November 1,2007 November 1,2007

After negotiations

Funds Flow

with ECU. 6. Provide training in FM, Procurement and disbursement to MoE. 7. Contract external auditors, based on short l i s t satisfactory to the Bank.

Financial Reporting, Auditing

World Bank May 1,2008

MoE 3 months after effectiveness

FM Risk

M

S

M

S

Project budget and accounting wi l l be registered in the national system (SIAFI).

The project wi l l prepare an operational manual. The Project wi l l use the single treasury account to make payment to suppliers, contractors and consultants.

To prevent delays in payments, the proposed unit wi l l be directly under the Deputy Ministry for Social Groups and Administrative Affairs. The project wi l l utilize country systems (SIAFI and UECEX) for accounting and financial reporting.

MoE wi l l furnish separate audit reports to the Bank.

Negotiations: Y

Financial Management Action Plan

structure and the utilization o f UECEX. 5. Contract Financial Management Specialist to work I MoE I May 1,2008

IDA FM Supervision Plan. An IDA FM Specialist may perform a supervision mission prior to effectiveness to verify the implementation o f the unit and the FM system. After effectiveness, the FM Specialist must review the annual audit reports, should review the financial sections o f the semester IFRs, and should perform at least one supervision missions per year.

40 This column solely presents the estimated completion date, not an indication o f legal conditions.

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Annex 8: Procurement Arrangements

Honduras: Education Quality, Governance and Institutional Strengthening

A. General

1. Procurement for the proposed Project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated M a y 2004, revised in 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004, revised in 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Association in the Procurement Plan. The Procurement Plan will be updated every six months or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement of Works: There will be no works procured under this Project.

3. Procurement of Goods: Goods procured under this project would include: Security and Information systems, communication equipment, Licenses, servers, computers, printers, software, scanners, educational materials and textbooks, training material, and motorcycles. The procurement will be done using the Bank's SBD for al l I C B and National SBD agreed with or satisfactory to the Association. Contracts for goods estimated to cost less than US$50,000 per contract, may be procured using the Shopping (NationaUInternational) procedures based on a model request for quotations satisfactory to the Association.

It is expected that the proposed Project will finance a direct contracting with FEREMA o f an educational package (Mddulo Juego y Aprendo) for the expansion o f the preschool level in rural areas. FEREMA i s the designer and only provider o f this type o f package which complies with the new National curriculum for preschool and has been used by the Ministry o f Education (MoE) to expand coverage.

4. Procurement o f non-consulting services: This type o f services will include printing, distribution, internet connection, security services, promotion and distribution o f web services. The documents to be used for services are the standard non-consulting services and/or price quotation solicitation.

5. Selection of Consultants: Consultant services procured under the proposed Project are expected to include several packages o f information systems such as development o f MIS, design o f interconnection among different systems, develop o f interneuweb services, system development for departmental connections, develop o f information control systems for teachers, re-design o f budget, the administrative staff for the project, payrolls and auditing modules, development o f monitoring systems, registry systems, education system, evaluation and consolidation o f school management systems, re-

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design o f SIARHD (Human Resource System), brochures designs, formats designs, development o f indicators, impact evaluation, project audit, legal analysis o f subsystems, institutionalization plan, and supervision o f activities where applicable. The methods to be used are those described in Table F (Thresholds for Procurement Methods and Prior Review)

Short lists o f consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

6. Operatingmecurrent Costs: Cost such as expenditures for mobilization, bonuses for teachers, per-diems, expenditures for f ield visits, security services, visits to centers and supervision, and assistance with logistics, will be financed by the proposed Project in accordance with an annual plan agreed with the Association.

7. Others: the proposed Project will finance international scholarships (pasantias).

The procurement procedures and SBDs to be used for each procurement method, as wel l as model contracts for works and goods procured, are to be presented in the Operational Manual.

8. Selection of Training Providers: Training providers can be individual trainers/consultants, NGOs, public training institutions, universities and training f i rms. They will go through pre-qualification process ensuring a minimum level o f quality. A technical evaluation committee will review the quality o f the proposal based on predefined criteria (eligibility criteria, curriculum, prior training experience and performance, training facilities, and training needs). The contracting will be done using a standard contract agreed with or satisfactory to the Association.

In the case o f training to be provided to PROHECO teachers on multi-grade methods, it is expected that the proposed Project will finance a direct contract with the foundation “EscueZa Nueva Back to the PeopZe” o f Bogota, Colombia, to provide this training. They will advise the M o E on the adaptation on teacher guides and students workbooks to the National Curriculum. The Foundation i s the leading expert in multi-grade teachings methods and has been working with the M o E and UNICEF in training rural teachers in Honduras.

B. Assessment o f the agency’s capacity to implement procurement

9. An assessment o f the capacity o f the unit initially proposed by the Government to manage the fiduciary activities o f the proposed Project was carried out by the Association in March 2007. The assessment indicated that this unit, currently implementing the Education for All (EFA-PF) initiative with pooled funds from various donors in which the Bank i s not participating, did not have the capability to manage the IDA-financed project. There have been major delays on the implementation o f the EFA program and therefore, disbursements are not taking place. The review o f a random N C B process for

70

procurement o f computer and office equipment unveiled the following issues: (i) bidders are allowed to inspect each others’ bid after the bid opening ceremony; (ii) use o f specific brand names in l i eu o f clear specifications for the desktops; (iii) bidders are required to register with the “OJicina Normativa de Compras y Contrataciones del Estado” in order to submit a bid; and (iv) besides providing a performance security in the amount o f 15 percent o f the contract price, suppliers are required to furnish a “quality security” in an amount equivalent to 5 percent o f the contract price aimed at ensuring quality o f the delivered goods. Also, bidders were allowed 14 calendar days for preparation and submission o f the bid. EFA’s team did not report having implemented any activity which required IDA or Bank prior review.

As a result o f the above, an IDA mission visited Honduras on June 2007 and after interviews with relevant potential participants, consultant assessments results and discussions with the MoE, it was agreed on the strengthening o f the existing EFA unit, particularly with additional support for fiduciary responsibilities to manage projects and programs financed with external funds. The EFA-ECU will be reporting directly to the Minister o f Education and will be in charge o f issuing bidding documents, withdrawal requests and signing o f contracts. It will represent the EFA-PF and IDA financed project in al l the administrative matters with respect to the selection o f contractors, suppliers and consultants.

10. Staffing: The unit comprises the current EFA pool fund program and the following staff which will be financed by the proposed Project: (i) a Coordinator for the Unit, (ii) a financial management specialist, (iii) a Procurement Specialist, (iv) a Monitoring Specialist for EFA-PF and IDA Project, and (v) a procurement/financial assistant.

11. Procurement Risk. In consideration o f the issues mentioned above, the overall project procurement risk i s high. The risk should diminish with the implementation o f the recommended measures and an action plan that emphasizes the probity aspects o f procurement and the capacity o f the staff to be hired to implement the Project. The rating could be revisited at least six months into full project implementation. In order to mitigate the high risk o f implementation, the following action plan i s proposed. The recommendations are not conditions o f effectiveness.

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12. Action Plan.

Action Timeframe

1 Project Launch workshop on Bank-financed After negotiations procurement to address project implementation as well as procurement arrangements, Bank procurement guidelines and procedures and client connection

2 Submission o f the Operational Manual. Manual By negotiations should be adjusted and submitted to the Bank for review, and no objection should be issued. This Manual should include a procurement chapter

3 Contract an experienced procurement person for the After negotiations

4 project

Agree on bidding documents to be used on N C B for procurement o f goods, works and non-consulting

After Negotiations or before the first activity for each

services category during the approval o f the Specific Procurement

5 Training on procurement After negotiations

13. Prior review thresholds and supervision plan. Considering the risk assessment rating, the proposed prior review thresholds for the project are equivalent to more than US$150,000, for goods and N o n Consulting Services, more than US$lOO,OOO for consulting services with f i rms, and more than US$35,000 for individual consultants. All ICBs and single-source o f consultants as well as direct contracting for shall be prior reviewed by the Association regardless o f the amount involved.

The size o f the sample for post-review will be 1 in 5 as average. This figure may be adjusted during project implementation depending on the performance o f the agency and the results o f the reviews. The procurement team is available for discussion o f this assessment and the proposed supervision plan.

C. Procurement Plan

14. A Procurement Plan has been prepared for the project and will form the basis for procurement. The Plan will be updated every six months to reflect changes in procurement process. The procedures used for each type o f procurement would be consistent with those described in the Credit Agreement, in the P A D as well as with stipulations o f the Operational Manual. The revisionshpdates in the Procurement plan would be agreed with the Association prior to its implementation.

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D. Frequency o f Procurement Supervision

Equipment Computer Equipment (Redes Educativas)

School material Packages (Funjible) (1000) Educational Methods Package: (Pre-School Juego y Aprendo) Intemect Connection Software Licenses Motorcycles Printing and distribution o f material for PROHECO

15. In addition to the prior review supervision to be carried out from the Association’s offices, the capacity assessment o f the Implementing Agency has recommended two post- review missions for the f i rs t two years o f project implementation.

E. Details of the Procurement Arrangements Involving International Competition

1. Goods, and Non Consulting Services

(a) List o f contract packages to be procured following I C B and direct contracting:

309,000 ICB No N o Prior

360,000 ICB No N o Prior Distributed in 5 years

412,140 Direct No No Prior Distributed in 5 years

240,000 ICB NO NO Prior 184,810 ICB N o No Prior 530,000 ICB N o No Prior

Contract Estimated Procurement Domestic Review Expected Comments (Description) I E; Method 1 p-Q I Preference I by Bank 1 Bid- 1

(yesho) (Prior / Opening I Post) I Date I

Communication I 225,000 I ICB I No I NO I Prior I

(b) I C B contracts estimated to cost above US$150,000 for goods and non-consulting services per contract and al l direct contracting will be subject to prior review by the Association.

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2. Consult ing Services

(a) L i s t o f consulting assignments with short-list o f potential international f i r m s and direct contracting.

Review by Bank (Prior I Post)

Description o f Assignment

Expected Proposals

Submission Date

Communication Campaign S I A R H D Redesign Update Institutional WEB Products Impact Evaluation Impact Evaluation Training to PROHECO Teachers, adaptation o f students and teachers rmides

Estimated cost US$

300,000

606,000

181,800

3 03,000

202,000

500,000

Selection Method

QCBS

QCBS

QCBS

QCBS

QCBS

Direct

Prior I I

Prior I I

Comments

Escuela Nueva Back to the

Bogota, Colombia

People” o f

(b) Consultancy services by f i r m s estimated to cost above 100,000 per contract, single source selection o f consultants ( f i rms) and individual consultants for assignments estimated to cost above 35,000 will be subject to prior review by the Association.

(c) Short l is ts composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

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I

reshold for Procurer Expenditure

Category Goods

Consultant Services Firms

Individuals

ent Methods and P Control Value

(Threshold) >150 <150 <50 Regardless o f value

>loo 4 0 0 Regardless o f Value

>3 5

<3 5 Regardless o f Value

o r Review (in US$ thoue Procurement Method

ICB NCB Shopping Single Source

QCBS, LCS,CQS,QBS Idem Single Source

Comparison o f 3 CVS

Chapter V o f Guidelines Single Source

nds) Prior Review

Al l First Two First two

All TOR(by TTL) All

A l l (TOR’CV, Evaluation and Contract) TOR (by TTL) All (TTL)

Note: QCBS = Quality-and Cost-Based Selection LCS = Least-Cost Selection CQS = Consultant’s Qualification (Firms) QBS = Quality-Based Selection

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Annex 9: Economic and Financial Analysis

Honduras: Education Quality, Governance and Institutional Strengthening

1. Methodology

The proposed Project consists o f three components:

1) Enhancing and scaling-up interventions that address the education needs o f the poor by:

1.1 Increasing coverage at the preschool level; and 1.2 Teacher training for multi-grade classroom techniques in PROHECO

Continue promoting community participation in school management for better

2.1 Consolidation and institutionalization o f the school management system; 2.2 School planning and resources for quality education; and 2.3 School management and education performance monitoring and evaluation. Governance and institutional strengthening o f the Ministry o f Education with

3.1 3.2 3.3

schools, and 2)

performance with emphasis on:

3) emphasis on:

Information for improved performance and greater accountability; National system o f assessment o f learning outcomes; and Human resources management and evaluation.

O f the total U S D $16 millions total Project costs (including $1 mi l l ion o f local counterpart), USD $6.9 millions will go to f i rs t component, USD $3 millions to the second component, and USD $5.5 to the third.41 This i s not a typical investment. The intervention is more in the nature o f system-wide fine-tuning. The components are related only in that they all intend to improve efficiency. The analysis will be a counterfactual exercise. “What if’ scenarios will be simulated under various assumptions o f quantitative impact and these impacts will then be translated into pecuniary terms to provide the financial and economic basis o f the project. The second component will not be evaluated as it comprises activities whose economics benefits are difficult to assess in economic terms.

This analysis will draw on three sources o f information to forecast i t s economic and financial impact:

0

0

0

The 2004 LSMS (MECOVI) household survey; evidence o f quantitative impact from similar projects; and impact evaluations previously done in Honduras.

The M E C O V I survey contains a wealth o f information that will be used both to assess the current baseline and to simulate and calibrate reasonable goals for intervention impact. This database includes information that can be used to establish benchmarks ranging from very

41 The remainder $0.6 mill ions are for the Project management unit.

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good estimates o f preschool coverage and o f primary grade-repetition and dropout rates to an order-of-magnitude “feel” for the severity o f teacher absenteeism. The other sources include documents such as the recently completed Honduran public school audit, a recent evaluation o f the “Juego y Aprendo” preschool project, and the (2001) Project Appraisal Document, provide some impact assessments o f similar past interventions, as wel l as component-specific accounts o f the various problems facing the sector.

The overall conclusion o f the analysis i s that the proposed Project is both financially and economically sound.

2. Background, Operational Context and Rationale for the Project

Notwithstanding sustained improvements over the past half-century, Honduras remains close to the bottom in terms o f educational attainment, as other countries in L A C have also pulled ahead. Educational attainment continues to grow, but it has grown faster in most o f the rest o f the region, leaving Honduras in third place (from bottom to top) in Lat in America, behind Hait i and Guatemala.

Average educational attainment o f Hondurans over the age o f 24 grew from 1.69 years of formal schooling completed in 1965 to 4.08 years in the year 2000. While this growth i s significant, it places Honduras at a level attained by most o f Lat in America 30 years earlier (Figure A9.1). Mean attainment for the rest o f the region grew to more than 6 years o f schooling. Adult educational attainment in Honduras in the year 2000 remained slightly below the level Argentina had attained in 1950.

L o w adult attainment comes primarily from l o w participation and completion rates at the primary level, while coverage i s the major problem at the middle and high school levels. The 1980’s saw dramatic expansion o f the primary school system, so that universal access -in the sense o f having a free public school nearby -was attained in the mid 1990’s. I t is now safe to say that if young adults have less than 6 years o f schooling, it i s either because their parents did not send them to school or because they dropped out. At the post-primary level supply- side access (the existence o f a nearby school) and affordability (pecuniary cost in excess o f family income) are s t i l l at least as important in keeping children out o f school as the family’s own (demand side) cost-benefit calculation.

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Table A9.1. A H a l f Century o f Schooling Evolution in Honduras: Inequality and Attainment

I Total I 37.9 I 2,751,527 I 5.6 I 4.49 I 20.16 I 0.802 I 16.73 I 59.03 I 7.161 11.4 I 5.68 1 Source: Edwards (2006).

Table A9.1, from Edwards’ (2006) recent study o f teacher demand, shows that most o f the gains in average adult educational attainment have come from increased primary school enrollment. The 1939 birth cohort included roughly 40 per cent with no schooling at all. Only 8 per cent went on beyond the primary level. The 198 1 birth cohort, which would have been eligible for enrollment in 1988, includes less than 10 per cent with no formal education and more than 25 per cent with post-primary schooling. Mean schooling rose from 3 to nearly 7 years with most o f the gains coming from increased primary school enrollment. The result was a drop in educational inequality as measured a 50 per cent decline in the coefficient o f variation (column 4) o f attainment.

Evidence on younger cohorts indicates that these inequality-reducing changes are on-going. Over the past decade sector interventions, together with the impact o f income growth on demand have drawn a growing proportion o f young children into the educational system.

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Figure A9.1: Changes in School System Enrollment Rates.

100

90

80

70

60

50

40

30

20

10

0 3 4 5 6 7 8 9 10 11 12 13 14 15

Age

Honduras 1996 to 2006 Changes School System Enrollment Rates, by Age

(Sourse: IN€ Household Surveys, Sept. 1996 and 2006)

Figure A9.2: Children Never Enrolled

HONDURAS 1996 to 2006 Children Never Enrolled, by Age

(Sourse: /NE Household Surveys, Sept. 1996 and 2006)

(II -2006

3 4 5 6 7 8 9 10 11 12 13 14 15

Age

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Figures A9.1 and A9.2 summarize these developments by drawing on household survey data for 1996 and 2006. Figure A9.1 shows the percentage o f children enrolled, by age, at the time o f each survey. Figure A9.2 shows the percentage that was enrolled at some point in their l ife, by age. The second figure shows nearly universal primary school access. The most notable change over the decade -represented as a l e f t and downward shift in the curves - i s dramatically higher coverage at an earlier age. Very little has changed for the children over the age o f 9. Since the dropout pattern changed little over age 9 for the decade, earlier enrollment i s consistent with up to one full year o f school attainment. In 1996 only 20 per cent o f 6-year olds had been to school. Ten years later, this had r isen to about 80 per cent.

The GoH intends to continue and consolidate this process, deepening it with further coverage gains among the lower age groups already, and broadening it by extending coverage down to even younger children. Recent policy chan es to this end include reducing the de facto primary school enrollment age from 7 to 6' and establishing the new goal o f universal preschool coverage for al l 5-year old^.^^

Investments contemplated in the project evaluated here will address efficiency issues by increasing years o f schooling per dollar spent. O n the output side it is hoped that a year o f preschool at age 5 will encourage children to start school at age 6 and also leave them better prepared for the f i rs t grade where high repetition rates have historically been a major problem. There is also evidence that younger enrollment will lead to more years o f attainment for children who drop out o f school when they reach the legal work age (Edwards, et al., 1996). Finally, school-monitoring efforts accomplished through greater local involvement in governance can contribute to lower teacher absenteeism and through that to more education per dollar spent on salaries.

O n the input side, this project contemplates lowering costs per student-year by improving central administration, including improvements in personnel records that will make it possible to better distribute teaching loads, verify teacher qualifications, and purge the system o f ghost teachers.

3. Evaluation

As stated above, the evaluation comprises the following components: (i) enhancing and scaling-up interventions that address the education needs o f the poor, and (ii) governance and institutional strengthening o f the Ministry o f Education.

3.1 Enhancing and Scaling-up Interventions that Address Education Needs o f the Poor

42 The Honduran constitution stipulates the age o f initial enrollment at 6 %, but the actual policy has been to target children o f age 7. 43 This w i l l be a more dramatic change than data in Figures A9.2 and A9.3 would seem to imply. These show approximately 70 percent o f 5-year olds with some schooling. However, this mainly reflects attendance in a part time pre-K program held in primary schools when regular students are out for summer vacation. The new programs w i l l last for a full academic year.

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This i s a 3-pronged intervention that seeks to increase preschool coverage for the 5-year olds and develop and formalize the methodology for multi-grade school teaching. The project contemplates costs o f USD $6.9 million.

According to the Project Concept Note (World Bank, 2007b) the impacts o f this intervention that will be observable in the short run should be to:

1) improve the quality o f formal primary schooling and decrease grade repetition rates by:

a. better preparing f i rs t grade children for school; b. increasing the efficiency o f class-time use in multi-grade schools; and c. providing a consistent and objective set o f criteria for teachers to

determine learning and hence grade passage.

a. directly by enticing enrollment at an earlier age, thus achieving higher school attainment for any given dropout age; and

b. indirectly by increasing the rate o f return to schooling and thereby the incentive to stay enrolled.

2) increase total years o f school attainment:

Since the exact impact o f these interventions i s unknown, the method used here will be to estimate how much o f an improvement in grade attainment and education quality would be needed to make the proposed intervention financially and economically viable and then judge whether improvements o f such magnitude are reasonable project targets.

The nationally representative 2004 M E C O V I household survey provides data on 4,004 fully employed adult males currently working in urban areas. Approximately 47 per cent o f these are migrants. Ordinary Least Squares estimates shown in Table A9.2 indicate typically higher earnings for migrants ceteris paribus. This i s consistent with results that have long been reported in the literature on migration44 and i s generally attributed to the fact that those who choose to migrate f iom their place o f birth are not a random sample o f the adult population there, but are perhaps more strongly motivated to improve the quality o f their life. This may extend to more effort in the workplace, and i s captured as a 22 per cent higher wage for the same characteristics. Thus, if migrants earn less as a group than the general urban population, it is because they attain less schooling or are younger and have thus had less labor market experience.

44 See for instance Todaro (1969) and Yap (1976).

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Table A.9.2: Rate o f Return to Education. Fully Employed Adult Males by Area of Schooling

Constant I 1.34 10.059085 I 22.68 0

-5‘4. =O. 32 7 Data: MECOVI 2004.

The rate o f return to education for urban males i s 13.3 per cent. Job market experience causes hourly wages to rise, albeit at a decreasing rate o f increase as the years pass. Note that interactions between migrant status and experience are statistically insignificant. Wages r ise with experience because o f on-the-job learning. Insignificant interaction terms mean that migrants are equally capable o f learning on the job.

For the purposes o f this Annex, the estimate o f interest is the impact o f being a migrant on the rate o f return to schooling. This i s captured for the coefficient “Schooled in rural area”, an interaction te rm between years o f schooling and migrant status. This is our proxy for the difference in school quality between rural and urban areas. It shows a 1.1 per cent lower rate o f return per year o f schooling for males born in rural areas, with the underlying coefficient statistically significant at the 10 per cent level.

This seems l ike a small number, but the return to schooling differential compounds with years o f schooling. For instance, consider two male urban workers that are both primary school graduates and are identical in every respect except that one o f them went to school in a rural area. The worker with rural schooling would be earning 12.3 per cent lower wages. This will be our estimate o f the average quality differential between an urban and rural primary school education in Honduras. Our estimate o f the value o f extending school attainment by one year in rural areas without quality improvements i s a 12.2 per cent increase in wages4’ Thus the Honduran urban labor market i s treating primary school graduates from rural areas as though they had only 5 years o f schooling.

45 This i s computed by subtracting the migrant differential f rom the basic rate o f return to schooling: 13.3-1.1=12.2.

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Lifetime Earnings

The truth be told, nobody knows to the dollar what the impact o f these investments will be. The method o f analysis developed here does not pretend to know it either. Instead it relies on the luxury afforded by the fact that the educational situation in Honduras i s quite bad and adopts the approach o f showing that reasonable guesses at project impact are several orders of magnitude greater than what is needed to justify it economically.

First, the log-wage estimates from Table A9.2 are used to generate a predicted wage for the primary school graduate o f 8.47 (2004) Lempiras per hour for the urban born male and of 9.87 Lempiras for the migrants.46 The average Honduran in our sub-sample worked an average o f 53 hours per week. This translates into 22,442 Lempiras and 26,153 Lempiras annually for urban and rural-born workers, respectively. If the quality o f rural schools were raised to the level o f urban ones, the migrants’ yearly income would rise by 1,835 Lempiras to 27,988 Lempiras.

In present discounted value (8 per cent) terms, the lifetime earnings o f an average urban-born male who enrolls in school today at age 7, attains 6 years o f schooling, enters the labor force at age 16, and retires at age 65 will be 285,279 Lempiras, or about U S D $15,313. For the urban male schooled in a rural area, the present value o f lifetime earnings i s 332,446 Lempiras (USD $17,845). If the migrants had been given an urban-quality education instead, the value o f their lifetime earnings would r ise by an additional 23,403 Lempiras, or by about USD $1,256.47

There were about 310,000 children enrolled in the first grade in 2004, o f which roughly 199,000 (65 per cent) were in rural areas.48

Probit estimates presented in Table A9.3 predict the probability o f primary school completion as a function o f age, area o f residence, and sex. Out-of-sample predictions were generated for the younger population. They forecast that 71.8 per cent o f the population that was enrolled in f i rs t grade in 2004 will complete primary school by the time they are 25.49 This next generation o f primary school graduates will be made up o f 91.6 per cent o f the children currently enrolled in urban areas and 60.4 per cent o f children enrolled in rural f i rs t grades.

These estimates w i l l further assume that males have completed primary school by age 12 and entered the labor force with zero years o f labor market experience at age 16 and that employment lasts 50 weeks per year.

46

The year-end exchange rate for 2004 was HNL18.63AJSD. Fuente: Informe del INE de digitaciones Censo de centros educativos 2004. Note that since parameters are based on the previous generation, the effect o f recent improvements

in system efficiency are not included, and hence this estimate under-estimates the proportion that w i l l attain at least 6 years o f schooling and so i s biased towards rejecfing the economic viability o f the project.

47

48

49

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Table A9.3 : Probit estimates for the probability o f Completing Primary School, population over 25 years o f age.

PROHECO school quality improvements

The Project evaluated here contemplates interventions targeting PROHECO schools that will accelerate gains in school attainment and improve schooling quality at a cost o f USD $2.9 million. Project parameters and estimated benchmarks for the multi-grade classroom interventions are shown in Table A9.4. One Project subcomponent seeks to improve the quality o f PROHECO multi-grade schools, where teachers enter the classroom lacking formal training in multi-grade techniques. The benefit o f bringing the quality o f a rural primary education up to the quality o f an urban one i s USD $1,256 per student. We can now develop a first benchmark for the project: it will be economically justified if it manages to bring rural school quality up to the urban level for only 2,309 (1.1 per cent) o f the rural student^.^' O f course the number o f needed beneficiaries per year will fa l l with the expected duration o f the intervention impact. For instance if the project’s impact lasts for 10 years, i t would break even with only 293 beneficiaries per year.

However this part o f the intervention targets only children in PROHECO multi-grade schools. The 2004 data indicate there were 27,182 f i rs t grade students enrolled in PROHECO multi-grade schools. Completion estimates indicate that 30 per cent, or 8,077 o f these students will finish primary school. A second benchmark i s obtained by dividing the investment among only those students that are expected to complete primary school. This calculation implies that the multi-grade classroom quality improvements must translate into adult, discounted lifetime earnings gains o f $359.04 per student in order to break-even. This amounts to 29 per cent o f the $1,256 benefit that would be conferred o n each rural student by raising the average quality o f rural fully to the urban school level. In other words, if the project investments can manage to close the urban rural gap only for those first grade students currently enrolled in these PROHECO schools who will complete primary school and then close it by only 29 per cent, the project will be justified even without any other impacts from this component over time or any impact from the preschool subcomponent. Reasonable modifications to these assumptions further weaken the impact that will be needed to justify the intervention. For instance if the quality improvements last for 10 years, then the

50 This i s because 6,780,000/1,25~ 5,397.

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level o f benchmark falls from a 29 per cent reduction in the ruralhrban education quality gap to a 3.6 per cent r e d ~ c t i o n . ~ ~

Total Project Investment Per-student benefit o f bringing rural primary educi to urban primary education quality On-Year Impact Benchmarks Number o f f i rst grade students enrolled in rural (2004) Number o f Beneficiaries that w i l l justify full invest rural quality improvement

Number o f f r s t grade students enrolled in PRC -as % o f al l rural 1 St graders

Table A9.4: Investments that improve the quality o f rural education (USD$2004)

$2,900,000 $1,256

198,926

2,309

1.2% 27,182

Item I Quantity Parameters

Benefit per student necessary to justify project -as YO o f $1,256 Number o f first grade students enrolled in PRC schools who are expected to complete primary scho Benefit per student necessary to justify project -as YO o f $1.256

$106.69 8.5% 8,077

$359.04 28.6%

Pre-school intervention

We can now perform a similar exercise with the second subcomponent o f the pro-poor intervention. I t seeks to extend preschool coverage for 5-year old children creating 800 preschools. The cost o f this subcomponent i s o f $4 millions. The rationale for this intervention i s that i t should increase school attainment and that higher school attainment will lead to higher standards o f living for these children when they grow up. There are two reasons why it i s expected that a year o f preschool will increase attainment. The M E C O V I 2004 data show a nation-wide f i rs t grade repetition rate o f 28.7 per cent overall, and o f 32.4 per cent in rural areas. So the first expectation is that preschool will prepare children for f i rs t grade so that they perform better, repeat less, and hence attain more years o f schooling for the total number o f years that they stay in school. A second reason relates to evidence (for instance Edwards, Fuller, and Parandekar, 1998) that earlier enrollment leads to higher attainment. In 2004, only 60 per cent o f 7 year-olds and 35 per cent o f 6 year-olds were in primary school. It i s expected that by drawing students into the school system at an earlier age, a year o f preschool will induce them to enroll in f i rs t grade by age 6. A large proportion o f children leave school when they are old enough to legally work. Since this age i s fixed, enrolling a year earlier will mean one more year o f schooling.

Rate o f return estimates f rom Table A9.2 were used to simulate the effect o f increasing school attainment on lifetime earnings in Table A9.5. Urban lifetime earnings range from

~~ ~~

5 1 I t does not fall by a factor o f 10 because o f discounting (at 8 per cent). Subsequent beneficiaries w i l l enter the labor market that much later and their earnings gains are worth less in present value terms.

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about 113,000 Lempiras with one year o f schooling to nearly 400,000 Lempiras with nine. Rural earnings range from about 81,000 to 280,000. The national figure in column 3 i s an average o f columns 1 and 2, weighted by the proportion o f f i rst grade students in each area. Columns 4 to 6 show the average change in l i fet ime earnings that can be expected from each year o f schooling.

Table A9.5: Discounted Per-Student Lifetime Earnings by Schooling and Area o f Residence (2004 Lempiras)

Note that this analysis i s confined to a partial equilibrium analysis. Suffice it to note that the widening wage gap demonstrates that the inducement to migrate accelerates with increased educational attainment. Right now, 64 per cent o f first-graders are in rural areas, but these people will not stay put. The more educational interventions targeted at the rural areas succeed in raising attainment the faster the rural population will be depleted. The expected rate o f urbanization - wel l beyond the scope o f this Annex - should be considered as a major demographic force shaping the allocation o f educational investments.

Without any interventions that affect school attainment today’s average first grader will attain between 7 and 8 years o f education by age 25. If the intervention raises attainment by one year, then average lifetime earnings can be expected to rise by somewhere between 40,000 and 46,000 (2004) Lempiras for every male. Taking the average o f these two figures, the impact o f increasing attainment by one year for al l 20,000 children expected to be enrolled in preschool and also expected to be enrolled in first grade in 2004 would be in the order o f about USD $ 43 million. This i s about 10 times the amount that i s going to be invested in this subcomponent. In order to break even on the U S D $4 mi l l ion investment the attainment-enhancing increases in preschool coverage, then we would need only 93 students to be affected by the intervention.

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In summary, the amount o f the investment i s small in relation to i t s possible economic impact.

3.2. Governance and Institutional Strengthening of the Ministry of Education

A recent report finds that “weak personnel management i s a problem that pervades Honduras’ public sector and affects policy implementation at all levels” (World Bank, 2001~). This component i s a multifaceted plan to strengthen the institutional capabilities o f the Ministry. I t attempts to: improve system personnel management and management records by developing an “Integrated Administration System o f Educational Human Resources” (SIARHD); develop an “Integrated System o f Educational Statistics” (SIEE); develop strategic planning capabilities within the Ministry; formulate a strategy for enhancing Departments and linking them through up and downward SIEE information flows; and help the Ministry o f Education to implement a sustainable National System o f Assessment o f Learning Outcomes.

The seemingly diverse parts o f this component will operate jointly as a system-wide fine tuning. They are united by the common goal o f lowering per-student cost. The recent Honduras Public Expenditure Review highlights the Education sector, concluding that “The picture that emerges ?om the ... analysis is a weak personnel system without a minimum capacity to plan and deploy staff according to actual needs, without suficient monetary and non-monetary incentives supported by a robust performance management system” (World Bank, 2001~). A recent study o f teacher pay in Honduras (Edwards, 2006) found that nearly 40 per cent o f secondary teachers hold 3 or more teaching jobs.

Salary negotiations o f August, 2006 resulted in the PASCE agreement between the Government o f Honduras and the country’s main teachers unions.52 All 48,141 teachers on record were to receive scheduled raises along with a lump sum payment o f 50,000 Lempiras paid in four equal installments. This payment has taken on the name o f the entire agreement, and i s commonly referred to as “ e l PASCE”.

Already strapped for resources to meet i t s recurrent public sector wage bill (World Bank, 2001c, Garcia, 2005, Edwards, 2006 and 2007) the MoE has attempted to link the lump sum payments to improvements in education quality, by trying to verify that teachers are actually showing up at work and doing a good job. In practice, this has been implemented mainly through a one time “social audit” o f all teaching positions to make sure that personnel drawing salaries are actually based in the schools where they appear and then also that they actually show up for work on a regular basis, that they are punctual and that they have developed lesson plans. This was a monumental effort, with teams o f 4 people fanning out across the countryside to visit all o f the public schools in Honduras. Yet, as o f May 30,2007 about 47,000 o f the teachers covered by PASCE had been paid. Payment was delayed pending verification for the majority o f the remaining teachers and only denied for about 335 o f them.53 The Social Audit served as a healing effort. It also highlights how poor i s the

52 For a full description o f the agreement see Edwards (2006 and 2007). 53 Conversation with Roberto Zelaya, May 30, 2007.

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current system o f personnel management: at present the only sure way to determine who is teaching i s to visit al l o f the schools.

For many years, similar problems have existed with data for monitoring system effectiveness. MoE-generated statistics on promotion and repetition have always suffered from inaccuracy (Edwards, 1995) as the number o f schools that choose to send in data fluctuates from year to year. A more fundamental problem i s that even if educational statistics on promotion and repetition were accurately reported, their significance would be far from clear. Evidence uncovered in earlier work strongly suggests that grade repetition and promotion are only weakly related to learning outcomes (Edwards, Fuller, & Parandekar, 1997). Also, recent testing work done by U S A I D compared primary school test results to grade repetition and passage decisions for a sample o f students and found that a significant proportion o f those that were forced to repeat did well on tests and that about as many who were promoted did poorly. This problem appears to be recognized by personnel in the field and teachers have responded very favorably to the development o f minimum operational standards for learning and an objective system for testing learning outcomes.54

The Project Concept Note suggests that: “Performance indicators for the institutional components of the project would include revision and actualization of the SIEE, potentially with a new model for data collection; revision and actualization of the SIARHD data base; the transfer and strengthening of the capacity of Departments (Direccciones Departamentales) of key management and information functions; better integration among various unitddirecciones at the central level; improved training for technical personnel at the central and departmental level; and strengthening of the UI through improved hardware, sofiware and training”.

Clearly these changes that will take up U S D $5.5 millions are not ends in themselves, but a means to improving allocative efficiency. The economic and financial justifications are one and the same. They will come mainly from lowering the average cost o f providing a year o f schooling by facilitating the systematic management o f teaching personnel. In addition, the SIEE data base and strengthening o f Departmental capabilities may also allow for improvements in education quality, though these secondary effects are not considered here.

A summary o f the analysis i s presented in Table A9.6. I t i s estimated that the public sector educational wage bill in 2006 stood at approximately U S D $318 million. Mean monthly public school teacher salaries in 2006 were 124,530 Lempiras per annum, or about USD $6,590.63.j5 In this perspective, the investment represents about 1.7 per cent o f the annual wage bill, or enough money to pay 835 teachers an average salary for one year.

August (2006) conversation with Ned Van Steenwyck, USAID Tegucigalpa. 54

55 This i s based on a monthly salary o f 8,895 Lempiras, 14 salaries per year (see Edwards, 2006), and a year-end exchange rate o f 18.895 Lempiras per USD.

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TABLE A9.6: Analysis o f Institutional Strengthening Investment (2006 USD $)

Annual Wage Bill Average Annual Teacher Pay (14 months)

$ 3 18,000,000

$6,590.63

Institutional Strengthening Investment -as % of Wage Bill -equivalent to this many teacher salaries

Savings per year needed for project to break even (PV = 0 at 8% with 10-year impact) -as % of Wage Bill -equivalent to this many teacher salaries

Seen entirely as a financial improvement -without any extra-organizational effects l ike quality improvements -and at a discount rate o f 8 per cent the U S D $5.5 mi l l ion component would break even (IRR=O) if it can generate $0.8 mi l l ion in savings annually for 10 years. These would presumably come from improvements in personnel management accuracy that make it possible to assign teachers where they are needed, consolidate schools, verify entitlement to “colaterales”,56 and eliminate “ghost” teachers. This very reasonable benchmark in the context o f the entire educational wage bill and the opportunities that exist for improvements in personnel management (World Bank, 2007~). It represents an annual savings o f only 0.3 per cent for 10 years and could be attained, for instance, by obviating the need for 124 teaching posts out o f the current 48,000 teacher^.^'

$ 5,500,000 1.7%

835

$ 8 19,662 0.3%

124

These are the salary bonuses paid out mainly for seniority, hardship postings, and specialized education or training. 57 Simulation exercises indicates that if the discount rate increases to 12 percent and if the number o f year impact i s restricted to 5, the Project would break even if it can generate $1,5 mil l ion in savings annually for 5 years. This represents an annual savings o f 0.5 percent for 5 years and could be attained, by obviating the need for 232 teachers.

56

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Annex 10: Safeguard Policy Issues

Honduras: Education Quality, Governance and Institutional Strengthening

Social Safeguards

The proposed Project wi l l target the poorest strata o f the population with a focus on interventions that would improve the quality o f preschools and multi-grade schools, and the promotion o f sector governance and accountability.

According to the 2001 census, 7.2 percent o f the population are indigenous or Afro- descendants, speaking 7 languages. The presence o f autochthonous peoples in the project area triggers the application o f the Operational Policy 4.10. Based on the results o f social assessments, and in consultation with the Indigenous and Afro-Honduran Federations, an Indigenous Peoples Plan (IPP) has been elaborated by the GOH to ensure the poor and isolated communities o f the country, many o f which are indigenous and Afro-descendant peoples, benefit from the project in a culturally-adequate manner.

1. Social Assessment

A social assessment o f a sample o f non-indigenous and indigenous school communities was carried out by an independent group o f local consultants in schools inside and outside school networks, in three main regions o f Honduras: (a) Western Region (Copan, Lempira and Intibuca), (b) Northern region, Bay Islands and Moskitia; and (c) Central and Southern Regions (Olancho, Comayagua and La Paz). The objective o f the social assessment was to carry out free and informed consultations with potential stakeholders and beneficiaries o f the proposed project at the central, department, district, municipal and community levels, on the main issues related to the proposed interventions. Some o f the topics o f consultation were:

(i) Data collection issues on teachers’ performance and students’ academic achievement, and information flow from the local to the central level and vice- versa; present capacity o f systems users to input data; Capacity and preparedness o f the school communities to partake in strategic planning and decision-making on administrative as well as on pedagogical issues; and Perceptions o f the quality o f education under different modalities, at preschools (formal and CEPENF) and multi-grade schools (traditional and PROHECO); opinions about the quality o f instruction, teacher training, incentives and opportunities to grow. Special attention was paid to current teaching methods and materials used in non-IBE as well as IBE multi-grade schools.

(ii)

(iii)

The recurrent themes brought up by participants during the social assessment were: (i) quality and availability o f information systems; (ii) community participation in the schools; (iii) school and education quality; and (iv) local language schools. The following are the key points raised by participants during the consultations.

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Information Systems (a) There i s a lack o f a national information technology network for the school networks. (b) Equipment exists at the central and department levels but its condition i s inadequate

(c) The weakest point in the data collection system i s at the school and district levels. (lack o f back-up hardware, insufficient RAM).

Community participation . Although there are several community organizations (AECOs, parents associations, municipal commissions, NGOs, foundations, churches), they do not always know how to participate in the school l i f e and/or what they are accountable for. With very few exceptions, participation o f the school community in school planning does not exist. AECOs are the most active parents associations, but only in the administrative realm, not in academic issues.

.

School Quality Inadequate infiastructure, poor equipment and limited texts and materials affect the implementation o f ‘active participatory’ teaching models, particularly in multi-grade settings. The creation o f new PROHECO and CCEPREB schools has been very successful in terms o f expansion o f coverage, but not necessarily in terms o f education quality. Preschool materials are sometimes under-utilized due to poor training o f volunteer teachers.

.

. Local Language Schools .

9

. Teacher training in IBE and Spanish as second language are generally viewed as very useful. Student absenteeism has decreased in part thanks to the nutrition programs and the teaching o f IBE. IBE training for teachers and IBE education for students i s highly regarded in al l IBE schools, particularly in first and second grades. Linguistic mismatches between the languages o f the teacher and o f the students are viewed as detrimental to both parties.

The main recommendations put forth by participants are: . . . .

Improve or create the info-technology school network at the central, department and school levels and train those collecting data. Install solar panels in schools without electricity. Train school staff and parents in monitoring results agreements. Provide training and mechanisms for systematic parents, students and stakeholder participation tied to the Proyecto Educativo de Centro (PEC) and Proyecto Educativo de Red (PER), and social control o f teachers and students performance. Ensure a match o f IBE teachers and bilingual students. .

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Strengthen and stimulate teachers’ encounters and forums on academic/developmental topics, with clear products. Include volunteer teachers in the activities related to the networks. Disseminate best practices o f teachers, PEC and PER experiences. Provide school libraries with more books and reference materials for self-training o f teachers and students, including IBE materials. Promote reading-writing o f indigenous languages for indigenous as wel l as non- indigenous teachers. Train parents in the elaboration o f PECs and PERs. Ensure j ob stability o f district supervisors to allow for supervision o f alternative education centers. Continue to expand education through alternative centers (i.e. PROHECO), prior to

turning them into conventional centers.

Other Assessments

Besides the aforementioned social assessment, other assessments include:

(a) A census/mapping of IBE schools, students and teachers was carried out prior to the distribution o f bilingual and intercultural texts produced under the 3497-HO project. The census was carried out by independent consultants together with the Departmental Coordination and the Ethnic Federations. I t aimed to providing a realistic picture o f the present supply o f trained teachers and resources, as well as an inventory data o f existing demand o f IBE.

(b) The World Bank carried out four consultation workshops on governance in the education sector in Tegucigalpa, L a Paz and Olancho. Some o f the topics included in the consultations were: reporting systems; accountability and transparency in planning and budgeting; administration of human resources; monitoring and evaluation; procurement; teachers’ performance; and information systems. The objective o f the workshops was to understand the structural limitations o f the sector and its needs. The subject o f the consultations i s consistent with the Country Assistance Strategy (CAS) recently formulated by the GOH, the Transparency Law (financed by the Institutional Development Fund), and the Policy and Human Resources Development for Aid Coordination which will support the strengthening o f public information systems (SIAFI). Participants in the consultations included representatives from the Ministry o f Education, the Education Committee in Congress, Education and Transparency Tables o f the G- 16, and c iv i l society.

Some o f the problems identified during the governance workshops were: (i) absence o f accountability and commitment o f public employees, teachers, unions and donors; (ii) lack of information which results in absenteeism o f teachers; (iii) absence o f coherent education legislation capable o f transcending al l forms o f government, and resisting partisan interference and corruption; (iv) poor administration o f human resources such as: inadequate teacher preparation, absence o f teacher supervision and evaluation, and lack of accountability; (v) inadequate administration o f educational materials, including negligence to distribute existing stock; (vi) lack o f empowerment o f c iv i l society (particularly parents’

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associations) and weak mechanisms to exercise social control, which results in distrust among stakeholders o f public and private education sector; and (vii) l o w level o f interest o f academic sector and media to denounce problems.

Some recommendations include: (i) disseminate information on the mechanisms o f the Poverty Reduction Strategy (ERP) and Transparency Law to enable the c iv i l society to exercise social controls in the education sector; (ii) empower the parents’ councils with tools to participate beyond the school community in the social control o f the ERP; (iii) create a common Governance Agenda for the education sector which clarifies the roles and responsibilities o f all the actors o f the sector; (iv) enforce massive dissemination o f the right to education, the value o f education and educators, the roles and responsibilities o f the sector actors, as part o f the proposed Governance Agenda to be created; and (v) Create a sub- committee o f the Education and Transparency Committee to follow-up with the proposed Governance Agenda and proposed mechanisms for accountability in the sector.

(c) “A Participatory Evaluation of PROHECO’ was carried out by ESA Consultants in 2004. It evaluated the program from 1999-2004. Some o f the results were: (a) enrollment in PROHECO schools quadrupled between 1999 and 2004; by 2004 it had provided access to education to more than 45,000 children in rural areas who would otherwise not have been able to attend a school; (b) PROHECO students perform slightly better than those o f traditional schools (UMCE, 2003); (c) training o f AECOs and promoters i s key to successful school administration; and (d) l o w educational level o f AECO members i s not a problem but ownership i s directly proportional to their educational level. The evaluation recommended the institutionalization o f PROHECO to ensure sustainability, and promoting a dynamic multi-grade teaching methodology in PROHECO schools.

(d) A Mid-term Evaluation of the Community-based Education project was carried out in February 2005.

(e) A Comparative Analysis of School-based Management in Central America, which included an evaluation o f PROHECO was performed by Emanuela Di Gropello (2006). Her results indicate that the PROHECO model i s a promising mean to promote more civic engagement in education and to cost-effectively get better or similar educational results than traditional programs. In particular, community and schools appear to have been empowered and teacher effort strengthened, resulting in a better use o f the existing l imited capacity. The model had an impact on enrollment; and there i s evidence that academic achievement i s at least as high in PROHECO schools as in traditional schools.

3. Legal framework for Intercultural Bilingual Education

(a) Constitution o f the Republic o f Honduras, Art. 172, 173 and 346 support the protection and promotion o f the use o f the languages that are part o f cultural heritage.

(b) The Law for the Protection o f the National Cultural Heritage under Decree 8 1-84 (1 994) states that the cultural traditions constitute national patrimony. The law promotes the organization and development o f projects geared towards the defense o f the cultural heritage,

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and the sanction o f those that undermine indigenous culture. In 1997 the law was reformed by Decree 220, to describe what is included as cultural heritage: languages, historical traditions, knowledge, traditional skills, values, religious practices and sacred sites.

(c) International Labor Organization (ILO) Agreement 169 on the Rights o f Indigenous Peoples, ratified by Honduras in April 1994, Part VI, Art. 26: calls for the adoption o f measures to guarantee education at al l levels (preschool, primary, secondary, tertiary), at least equal to the rest o f the country. Art 27 states that education delivered to indigenous peoples should be previously consulted with them in order to tailor it to their needs and social, economic and cultural requirements, and it should include their knowledge, skills, history and value system; moreover, indigenous leaders should be trained to participate in the formulation o f educational programs where the responsibility o f managing those programs may be transferred gradually; governments should recognize the right o f peoples to create their own institutions, making funds available for their maintenance. Art. 28 states that, whenever possible, children should be taught to read and write in their own language or the language most commonly spoken in the ethnic group. If that is not possible, the indigenous authorities should contact competent authorities to achieve this goal; efforts should be made to ensure indigenous peoples have the opportunity to become fluent in Spanish; at the same time, measures should be taken to preserve the indigenous languages o f those interested, as well as promote the development and use o f said languages.

(d) Code o f the Child and Adolescent, Chapter 5, Art. 50, paragraph C which states the importance o f the promotion o f culture for children and youths through the media.

4. The National Education Program for the Autochthonous Ethnic Groups of Honduras (PRONEEAAH)

PRONEEAAH was created by Executive Agreement No. 0719-EP in 1994 to recognize the pluri-cultural and pluri-linguistic diversity o f the Honduran society. Although Intercultural Bilingual Education was made official by Legislative Decree 93 in 1997, a linguistic policy for IBE has not yet been defined. The IBE program seeks to recover and develop indigenous languages and their cultures. It seeks to train students to master the official language (Spanish), while maintaining literacy in their native language as a way o f preserving their identity.

PRONEEAAH i s the technical pedagogical unit working closely with al l the other departments o f the Ministry. The agreed structure o f PRONEEAAH includes: a General Coordinator, a Pedagogical Coordinator, a Teacher Training and Materials Development Coordinator, and an Administrator. The Technical Unit includes 9 representatives o f a l l linguistic groups, nominated by the Indigenous and Afro-Honduran Federations. The Unit exists since 1998 but only in 2001 it was able to develop as a program, with financing o f World Bank project 3497-HO (approximately US$7 million), Education for All (since 2004), and national funds. PRONEEAAH is not formally established and it i s temporarily funded by external funds.

94

5. Ethnographic profile o f Honduras

According to population projections based on the 2001 census, the total population of Honduras i s 7.36 millions in 2006 considering a population growth o f 2.3 percent per year. Table No. 1 below shows 2001 census which estimates that the Indigenous and Afro- Honduran peoples represent 7.2 percent o f the population, compared to PRONEEAAH estimates at 12.7 percent o f the total population.

Table A1O.l: Honduras Ethnic population by Group

6. The Intercultural Bilingual Program to-date

Intercultural Bilingual Education seeks to recognize the bilingual background and cultural identity o f the students. Bilingualism i s factored in as an asset, not a liability. I t i s conceived as a bridge between the native language (other than Spanish) and Spanish. I t s goal i s to ensure good command o f Spanish while the native cultural identity i s preserved. IBE i s emphasized for bilingual peoples, while intercultural education i s emphasized for the Lenca group, which lost i t s original language a century ago.

58 The groups are represented by Federations, recognized as legal entities by Gobernacion. The Lencas are represented by 4 federations: Organizacion Nacional Indigena Lenca de Honduras (ONILH), Consejo Popular Indigena de Honduras (COPINH), Movimiento Indigena Lenca de Honduras (MILH), and (FONDIL). The Miskitos are represented by the Moskitia Asla Tawanka I.L.C. (MASTA), which i s subdivided into 7 sub-federations. The Garifuna by the Organizaci6n Fraternal Negra de Honduras (OFRANEH). The English-speaking Bay Islanders by the Native Islanders Professionals and Laborers Association (NABIPLA). The Tolupan by the Federacion de Tribus Xicaques de Yoro ( FETRIXY) representing 30 tribes in Montaila de la Flor and Yoro. The Pech by Federacion de Tribus Pech de Honduras (FETRIPH). The Chorti by the Concejo Nacional Indigena Chorti de Honduras (CONICHH). The Tawahka by the Federacion Indigena Tawahka de Honduras (FITH). Despite multiple federations within a group, only one representation o f each group integrates de Technical Unit o f PRONEEAAH.

95

The inclusion o f native languages and cultures in the classroom started in the 1950s, on initiative o f NGOs and churches throughout the country. Adult literacy training was done in the 1990s in Pech, To1 and Tawahka with materials provided by the Summer Institute o f Linguistics. In the Moskitia, the Miskito Moskitia Pawisa (MOPAWI) provided preschool and primary school teacher training in Miskito in 1992. In the Bay Islands, teachers made the transition from Bay English towards standard English in the classroom.

The f i rs t official teacher training in IBE was launched by the Universidad Nacional Autdnoma de Honduras (UNAH) in 1993.

7. Contributions o f the Community-based Education Project 3497-HO to Intercultural Bilingual Education through the Indigenous and Afro-descendant Peoples Plan

IDA credit 3497-HO has been the backbone o f the IBE Program in Honduras from 2001 to- date. In 2005 the success o f the program attracted other donors. Some o f the achievements under IDA financing are:

(a) Strengthening o f the institutional structure o f the IBE Program. Accreditation o f 42 PRONEEAAH staff in IBE administration at the central, departmental, and district levels.

(b) Secondary education to 780 teachers (the goal was 700) who only had completed gth grade, through an accelerated program. Then, it financed education and accreditation as Primary School Teachers with IBE Orientation in 6 Normales San Pedro Sula (Garifuna), Puerto Lempira (Miskito), Intibuca (Lenca), Roatan (Bay English), Montaiia de la Flor and Yoro (Tol). Some 800 more Teachers are expected to finish accreditation in 2007.

(c) Training o f IBE Technical Staff, 6 Directors o f Normales, 90 program tutors, and 500 teachers on IBE in teaching techniques o f IBE, Spanish as a Second Language (SSL), and in the use o f teachers’ guides and texts.

(d) Desk review for mapping o f IBE school facilities, teachers, students (2004). (e) Adaptation o f the National Curriculum to the local needs o f linguistic groups, for

preschool and primary school levels, with assistance o f international and national experts. Design o f textbooks and teachers’ guides, including validation in the classroom.

(f) Creation o f 264 PROHECO-IBE schools (goal was 200), and training o f their corresponding AECOs in financial management (including Bay Islands and Moskitia).

(g) Creation o f 3,740 ADELs (goal was 2,800) with support o f parents associations. (h) Support to 252 School Education Projects (PEC). (i) 172 preschool CEPREB-IBE centers were created, with the respective volunteer

teachers hired and trained. (i) Preschool materials designed, printed and distributed. Reading-writing textbooks in

SSL, and bilingual in Garifuna, Pech, Tawahka, Miskito, Bay English, Chorti and Tolupan, Teachers’ guides for S S L and bilingual texts. Also, other didactic materials distributed to 500 IBE schools in 15 departments.

96

(k) Primary school materials designed, printed and distributed. Reading-writing textbooks in SSL and bilingual in seven languages, for first, second and third grades, as well as Teachers’ guides for SSL and bilingual texts. Also, textbooks o f Lenca literature.

(1) Assessment o f IBE programs: PEBIT Program (Tawahka), Garifuna Program, CEBIMH (Moskitia), and Montaila de la Flor Program (Tolupan). Lessons learned taken into account for present IBE program.

Language Grammar Dictionaries Reading-Writing Texts Other Texts

Garifuna Grammar Garifima- Afansehani aban; Grades 0, Math, Calculus 1 Spanish 1,2,3; Oral tradition.

Dances-Songs; WaAeAe; Short Stories

Mismito Grammar Miskito- Yabal Raya;Grades 0, 1,2, Yabal Raya

for grade 2 Spanish 3; Baikanka; Text

Miskitu for Grades 0, 1,2, 3.

1,2,3 To1 In process Tol-Spanish Aprendamos Tol; Grades 0, Preschool text

Pech In process In process Kakorska; Grade 0, 1,2,3. History o f the

Bay Grammar; English- Texts for grades 0, 1,2, 3. History o f the Pech

English work- Spanish Negros de Habla book Inglesa

Tawahka In process Texts for grades 0, 1,2, 3. Oral Tradition of the Tawahka

Chorti Grammar Texts for grades 0, 1, 2, 3. Math for pre- school in Chorti

Lenca Oral Tradition o f the Lenca

* Texts include: (language, Math, Social Sciences, Natural Sciences)

SSL: Text o f Spanish as L2 Grades 0, 1,2,

3

Grades 0, 1,2, 3

Grades 0, 1,2, 3

Grades 0, 1,2, 3

Grades 0, 1,2, 3

Grades 0, 1,2, 3

Grades 0, 1,2, 3

8. Intercultural Bilingual Education Strategy

The main elements o f the PRONEEAAH strategy5’ for IBE are:

(a) PRONEEAAH aspires to become a General Intercultural Bilingual Education Directorate (DIGEBI) o f the Ministry o f Education, in order to ensure the institutional permanence and financing o f the IBE program.

(b) Institutional Strengthening o f the Technical Team at the Central and the Departmental levels through specialized tertiary education, to obtain degrees in Bilingual Education or Education Administration. Framework agreements o f PRONEEAAH with universities in Honduras and overseas are needed for the specialized training o f human resources.

59 The strategy below has not been officially adopted by the Ministry o f Education.

97

(c) Specialized teacher training particularly for official IBE preschool and primary school teachers. Also, teacher training for preschool volunteers in Indigenous and Afro- Honduran communities.

(d) Promotion o f IBE, i t s goals, objectives, mechanisms and instruments at the central, departmental, district and local levels, particularly in the isolated regions to ensure bilingual communities are included.

(e) Seeking an official definition o f a linguistic policy for bilingual education (texts and materials, teacher training, studentlteachers evaluation).

(0 Continue the production o f bilingual and S S L textbooks for 4th, 5’ and 6th grades.

(8) Certify 350 more IBE teachers o f the 9 ethnic groups.

(h) Design a Secondary Education Model for bilingual students.

(i) Design assessment tools to evaluate IBE students and teachers’ performance.

(i) Ex-post evaluations o f IBE and o f the teachers’ training program are needed.

9. The Indigenous Peoples Plan (IPP)

The Government o f Honduras has submitted to the Bank an Indigenous Peoples Plan which includes a strategy to ensure that Indigenous and Afro-Honduran peoples have access to project benefits, and that benefits are targeted to them in a culturally-adequate manner. The IPP will be disseminated in Spanish on the web page o f the Ministry o f Education. The IPP includes:

Activities affecting the entire project:

Assistance to the Government o f Honduras in defining a linguistic policy for intercultural bilingual education by means o f a study (including consultations in-and outside the MOE, and at international level). Specifications for IBE in key publications (i.e. AECO, PEC & PER and Manuals) issued for administration and management o f school networks. Social Auditing and Accountability through participation o f c iv i l society. Training o f Indigenous Federations for the social auditing and accountability o f IBE schools in school networks. Evaluation. A sample o f EBI schools will be included in the preschool and multi- grade impact evaluations o f the Project.

98

Component 1: Enhancing and Scaling-up Interventions that Address the Needs o f the Poor (Preschool and multi-grade schools)

1.1 Support for the preschool level in rural areas by increasing student coverage.

2

3 4

Training o f at least 300 volunteer preschool teachers in IBE pedagogy and use o f IBE materials. Production o f materials (posters) to accompany existing IBE preschool texts. Procurement and distribution o f fungible preschool materials (Valijas didbeticas) and teacher support materials, to complement existing IBE preschool texts (which exist in 7 languages), and teachers’ guides.

1.2 Teacher training and materials for education in a multi-grade setting.

0

0

0

Elaboration o f teacher’s guides for teaching IBE multi-grade schools using “Escuela Nueva” methodology. Design, validation and printing. Training o f trainers. Procurement and distribution o f didactic materials for multi-grade IBE schools. Training o f multi-grade IBE school teachers in the use o f multi-grade “Escuela Nueva” methodology in the classroom.

Component 2: Community participation in School Management for Better Performance.

2.1 Creating a system o f key performance indicators at the school level (AECOs, parents’ councils).

0 Strengthening the participation o f AECOs, student governments and teachers councils in IBE and indigenous multi-grade schools in school networks.

0 Training o f 15 IBE promoters for the organizational and administrative accompaniment o f IBE and Indigenous schools.

2.2 Fostering local participation in strategic planning and school management through the School Education Projects (PEC).

0 Training o f 500 school principals, 500 parents councils, the PRONEEAAH Technical Team, 16 Department Coordinators and IBE Promoters on the techniques for elaboration and monitoring o f PEC and PER in school networks.

Component 3: Governance and Institutional Strengthening of the MOE

3.1. Information for improved performance and greater accountability.

Add the ‘ethnicity’ and “native language” variables to the SIARHD information system, to be able to know automatically which vulnerable groups are being served, the teachers’ level o f instruction and training opportunities offered to them, the language o f instruction and

99

students' achievement in standard tests (Math and Spanish, 3'd and 6' grades) compared to mainstream students.

3.2 National System o f Assessment o f Learning Outcomes.

Ensure a sample o f IBE schools is included. Sensitivity training o f testers, IBE teachers and IBE students on National Standardized Testing.

3.3. Human Resource Management and Evaluation.

Training o f IBE Technical Teams at central and departmental levels, schools and community levels on management and monitoring o f data systems. The training should include (i) a sensitivity module to teach awareness o f importance o f data des-aggregation; and (ii) a technical module to ensure data collection and monitoring is done properly.

100

m 0 ob2 0 N 3 8

SI 3 3 11

3 3

3 XI

3,

0 0

0 0

8 00

zn 3 N

I

3

E a,

B E 3

0 0

d 8

0 9 a73 Y

3 3

3 3-

2

3 3

3 3,

2 i

3

10. Mechanisms and benchmarks for monitoring the IPP

Proper implementation o f the IPP according to the schedule above will be monitored by PRONEEAAH and the social safeguards specialist included in the Association's task team, in supervision missions. Some o f the mechanisms included to make sure monitoring o f project results on the Indigenous and Afrodescendants beneficiaries are: (a) The students ethnicity and native language variables included in the information systems under Component 1 will enable data des-aggregation for periodic monitoring o f the IPP; (b) Training o f the technical teams at the department, community and school levels will allow proper management o f the monitoring system under Component lb, and more importantly; and (c) The monitoring o f the IPP has been designed within the framework o f the Project.

11. Accessible procedures to address grievances As in the previous project, the following procedures will be used to address grievances and demands by Indigenous and Afro-descendant beneficiaries: (a) The community presents the problem to the respective local ethnic authority who in turn addresses the problem with the representative o f the ethnic group at PRONEEAAH6'; and (b) The later offers a solution, or acts as facilitator between the community and the Secretariat o f Education to solve the problem. For issues that require a legal process, the customary settlement mechanism i s to submit grievances to the "Fiscalia de Etnias" (Ethnic Court).

6o PRONEEAAH has representatives at District offices.

103

Annex 11: Project Preparation and Supervision

Honduras: Education Quality, Governance and Institutional Strengthening

Planned Actual PCN review 01/16/2007 0 1 / 1 6/2007 Initial PID to PIC 0 1/24/2007 Initial I S D S to PIC 0 1/24/2007 Appraisal 10/01/2007 10/01/2007 Negotiations 11/27/2007 Board/RVP approval 0 1/17/2008 Planned date o f effectiveness 03/30/2008 Planned date o f mid-tern review 06/16/20 10 Planned closing date 06/30/20 13

Key institutions responsible for preparation o f the project: Ministry o f Education

Bank staff and consultants who worked on the project included:

Name Title Unit Mario Cristian Aedo Sr. Education Economist (Task Manager) LCSHE Andrea Guedes Sr. Operations Officer LCSHE Pilar Gonzalez Sr. Counsel LEGLA Fabienne Mroczka Financial Management Analyst LCSFM Mary Lou Veizaga Procurement Analyst LCSPT Henry Forero Sr. Information Officer ISGEG Aracelly Woodall Sr. Program Assistant/Costing Specialist LCSHE Natalia Moncada Program Assistant LCSHH Ximena B. Traa-Valarezo Consultant LCSUW Richard J. Moore Consultant LCSHE Benjamin Santa Maria Consultant LCSHE John Edwards Consultant LCSHE Peer Reviewers Emanuela Di Gropello Sr. Human Development EASHD Joel Reyes Sr. Institutional Dev. Spec LCSHE Albert0 Leyton Country Representative LCCSV

Bank funds expended to date on project preparation: 1. Bank resources: $292,734.73 2. Trust funds: N / A -0- 3. Total: $292,734.73

Estimated Approval and Supervision costs: $104,000.00 1. Remaining costs to approval: $1 5,000.00 Estimated annual supervision cost: $89,000.00

104

Annex 12: Documents in the Project File

Honduras: Education Quality, Governance and Institutional Strengthening

Carneiro, P. & Heckman, J. (2003) “Inequality in America: What Role for Human Capital Policy?”, M I T Press, Cambridge, MA.

Coca Luque y Asociados (2007) “Auditoria Especial sobre las Cotizaciones de Maestros PROHECO ingresados a1 Instituto Nacional de Prevision del Magisterio y Banco Central de Honduras: period0 aiio 1999 a enero de 2007”.

Currie, J. & Blau, D. (2005) “Preschool, day care, and after school care: who’s minding the kids?”, North Holland, Amsterdam.

Di Gropello, Emanuela (2006) “A Comparative Analysis o f School-based Management in Central America”, World Bank.

Edwards, John H. Y. (1995), “The Status o f Primary Education in Honduras”, mimeo, USAID, Tegucigalpa and Academy for Educational Development/Washington, D.C., December.

Edwards, John H. Y. (2006) “Honduras: Education demand and teacher salaries 2006-2017”, World Bank, mimeo.

Edwards, John H. Y. (2007) “The link between PASCE and School Quality”, World Bank, mimeo.

Edwards, John H. Y., Bruce Fuller, and Suhas Parandekar (1997) “Primary Education in Honduras: What remains to be done?” LASHD Paper Series # 7, World Bank.

Garcia, Norbert0 E. (2005) ”Los regimenes especiales de contratacidn en e l gobierno central de Honduras ”, Programa de Comercio, Inversion y Competitividad, FIDE/AID.

Heckman, J. (2007) “Investing in Disadvantaged Young Children i s Good Economics and Good Public Policy”, Testimony before the Economic Committee, June.

Moore, R. (2003) “Informe Final de Consultoria, Contrato Honduras: Ministerio de Educacion, BID-1 OOO-SF/HO”, July.

Rapalo Castellanos, Renan and Aguilar, Claudia Regina (2007) “Estudio de implementacion e impacto del programa Juego y Aprendo (Resultados Preliminares), FEREMA, mimeo, Tegucigalpa.

Todaro, M. P. (1969), “A Model o f Labor Migration and Urban Unemployment in Less Developed Countries” American Economic Review 59, 138-148.

Unesco (2006), Informe sobre la Educacion Superior en America Latina y e l Caribe 2000-2005.

105

World Bank (200 1 a) “Honduras: Public expenditure management for poverty reduction and fiscal sustainability”, Poverty Reduction and Economic Sector Management Unit, Latin America and the Caribbean Region, Report #22070.

World Bank (200 1 b) “Project appraisal document, HN/Community-based education project”, Human and Social Development Group, Central America Country Management Unit, Latin America and the Caribbean Region, Report #2 1 85 1.

World Bank (2007a) “Calidad de l a educaci6n y fortalecimiento institucional: Misibn de preparacibn, 18 de junio a1 22 de junio de 2007”, mimeo, June.

World Bank (2007b) “Honduras: Education quality and institutional strengthening project: Project Concept Note”, mimeo, May 2007.

World Bank (2007~) “Honduras: Public Expenditure Review”, mimeo, April 2007

Yap, L. (1 976) “Rural-urban migration and urban under-employment in Brazil”, Journal of Development Economics, 3, 3,227-243.

106

Annex 13: Statement o f Loans and Credits

Honduras: Education Quality, Governance and Institutional Strengthening

Difference between expected and actual

disbursements Original Amount in US$ Millions

ProjectID F Y Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

P103881 2007 HN Water and Sanitation 30.00 30.00

PO88319

PO86775

PO82242 PO81516

PO901 13

PO833 11

PO83851 PO83244

PO70038

PO64914

PO55991

PO40177

PO81172

PO53575

PO07397

2006

2006

2006 2006

2006

2005 2004

2004

2004

2004

2004

2003

2003 2002

2001

HN (CRL) Barrio-Ciudad Project HN (CRLl) Rural Infrastructure Project

HN Nutrition and Social Protection

HN JUDICIAL BRANCH MODERNIZATION HN GEF Rural Electrification HN First Prog Fin Sec Dev Pol Credit

HNPRS TAC

HN Nuestras Raices Program

HN Trade Facilitatio & Productivity Enha

HN FORESTS & RURAL PRODUCTIVITY HN LAND ADMINISTRATION PROGRAM HN Financial Sector Technical Assistance HN Regional Dev in the Copan Valley

PROJECT

PROJECT

HN- HEALTH SYSTEM REFORM

HN COMMUNITY-BASED EDUCATION

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

15.00

47.00 20.00

15.00

25.00

8.00

15.00

28.06

20.00

25.00

9.90 12.00

27.10

41.50

0.00

0.00 0.00 0.00

2.35

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

6.00

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

13.75

45.23 18.44

14.36

2.35 11.91

7.88

13.46

23.54

13.52

6.54

7.45 4.32

12.02

4.48

2.00

-2.80

4.10 0.22

0.48

26.96

4.78

8.50

13.68

6.27

0.38

6.02 0.19

5.76

5.21

0.00

0.00

0.00 0.00

0.00 0.00 0.00

8.3 1

0.00

0.00

0.00

0.00 0.00

0.00

Total: 0.00 211.56 2.35 6.00 0.00 229.25 81.75 8.3 1

REPUBLIC OF HONDURAS STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions o f U S Dollars

Committed Disbursed

IFC IFC

F Y Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic

1999 Granjas Marinas 2.25 0.00 0.00 0.00 2.25 0.00 0.00 0.00

International.. . 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0.00

Total portfolio: 9.25 0.00 0.00 0.00 9.25 0.00 0.00 0.00

107

Annex 14: Country at a Glance

Honduras: Education Quality, Governance and Institutional Strengthening POVERTY and SOCIAL

Honduras 2006 Population mid-year (millions) GNI per capita (Atlas method, US$) GNI (Atlas method US$ billions)

Average annual growth. 2000-06

Population 1%) Labor force 1%) Most recent estimate (latest year available, 2000.06)

Poverty 1% of population below nahonal poverty line) Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Child mainutntion (% of children under 51 Access to an improved water source (% of population) Literacy (% ofpopulation age 15+) Gross primary enrollment (% of school-age population)

Male Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1986

GDP (US$ billions) 3 8 Gross capital formationlGDP 13 9 Exports of goods and SeNiceslGDP 26 8 Gross domestic savingslGDP 12 I Gross national savingslGDP 7 8

Current account balance/GDP -6 6 Interest payments/GDP 3 0 Total debt/GDP 78 1 Total debt servicelexporls 28 5 Present value of debt/GDP Present value of debtlexports

1986.96 1996-06 (average annual growth) GDP 3 5 3 3 GDP per capita 0 5 0 8 Exports of goods and services 1 5 3 6

7 4 1,200

8 8

2 3 4 5

51 47 69 31 17 87 80

113 113 113

1996

4 0 31 1 46 9 26 0 26 5

- 4 8 4 1

117 0 27 7

2005

4 1 1 8 8 3

Latin America 8, Carib.

558 4,767 2,650

1 3 2 1

78 73 26

91 90

118 120 116

2005

8 3 30 1 41 7 9 4

28 9

-1 4 1 0

63 2 7 2

31 9 50 3

2006

6 0 3 9 4 8

Lower- mtddle- income

2.276 2,037 4,635

0 9 1 4

47 71 31 13 81 89

113 117 114

2006

9 2 32 9 40 8 7 3

31 2

-1 9

2006-10

5 1 2 9 5 0

"I . __ - -. I

Life expectancy

GNI Gross per i------c primary capita enrollment

Access to improved water source

-Honduras ... - . Lower-middle-income group

Trade

Indebtedness

-Honduras

STRUCTURE of the ECONOMY

(% of GDP) Agriculture Industry

Services

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

Manufacturing

(average annual growth) Agriculture Industry

Services

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services

Manufacturing

1986 1996

20.6 22.3 23.5 30.8 14.3 18.1 55.9 46.9

73.6 64.4 14.3 9.5 28.3 52.0

1986-96 1996-06

3.7 2.5 4.0 3.9 3.5 4.3 3.1 4.3

2.8 4.5 -2.2 7.4 11.7 2.2 3.7 6.2

2005 2006

13.9 13.8 31.3 31.1 20.1 19.7 54.7 55.1

78.9 78.8 13.7 14.0 62.4 86.5

2005 2006

-0.3 8.1 5.9 5.2 5.1 4.9 5.9 8.8

7.4 8.0 9.3 7.7

-3.0 12.4 9.9 13.5

Growth of exports and imports (Oh) 20 T I

Note 2006 data are preliminary estimates This table was produced from the Development Economics LDB database. * T h e diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will

be incomplete

108

Honduras

PRICES and GOVERNMENT FINANCE

Domerfic prices (% change) Consumer prices Implicit GDP deflator

Government finance (% of GDP, includes curent grants) Current revenue Current budget balance Overall surpluddeficit

TRADE

(US$ millions) Total exports (fob)

Bananas Coffee Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export price index (2000=100) import price index (2000=100) Terms of trade (2000=100)

BALANCE of PAYMENTS

(US$ millions) Exports 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

Memo: Reserves including goid (US$ millions) Conversion rate (DEC, localAJS$)

EXTERNAL DEBT and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

IBRD IDA

Total debt service IBRD IDA

Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment (net inflows) Portfolio equity (net inflows)

World Bank program Commitments Disbursements Principal repayments Net flows interest payments Net transfers

1986

4.4 3.9

15.5 -2.3 -7.4

1986

894 257 322

962 151 97

172

105 84

126

1986

1,012 1,076

-64

-211

-253

283 -30

118 2.0

1986

2,975 465

81

299 56 I

146 99 14 30

0

37 33 22 11 36

-25

1996

29.5 22.9

16.7 1.4

-3.0

1996

1,418 280 279

1,840 281 246 440

99 95

105

1996

1,915 2,128 -212

-258

-1 94

292 -98

257 11.8

1996

4,719 350 424

616 89

5

97 -5 69 91 0

91 52 61 -9 33

-42

2005

8.8 10.4

18.9 0.7

-4.4

2005

1,717 253 335 70

4,539 748 904

1,020

2005

3,501 5,245

-1,744

-348 1,979

-113

486 -372

2,339 19.0

2005

5,242 0

1,353

381 73 18

931 157 57

464 0

189 151 78 73 13 60

2006

5.6 5.1

19.4 0.6

-3.3

2006

1,930 251 404

71 5,418

914 1,087 1,232

2006

3,803 6,206 .2.403

-294 2,518

-179

566 -387

2,642 19.0

2006

0 349

0 14

14 30 8

23 7

16

Inflation (%)

l5 T I 1 I

'I 01 02 03 04 05

-GDP deflator -.o.I.CPI

Export and import levels (US$ mill.)

6,000 7

4,000

2,000

0

O6 I 00 01 02 03 04 05

Exports #J Imports

I 1 Current account balance to GDP (%)

G: 414

F 5

I E 891

I D: 1,848

A - IBRD E - Bilateral B - IDA D - Other multilateral F . Pnvate C - IMF G -Short-term

Note: This table was produced from the Development Economics LDB database.

109

9/28/07

MAPSECTION ,

Montañas d

el P

atuca

Montañas de Comayagua M

ontañas d

e Coón

Sie

rra La

Esp

eranza

M o s q u i t o C o a s t

CerroCerroLas MinasLas Minas(2,870 m)(2,870 m)

Patuca

Paula

ya

Aguan

Jalán

Ulúa

Sulaco

Coco

Sico

Guy

aam

bre

C O R T E S C O R T E S C O L Ó NC O L Ó N

G R A C I A SG R A C I A SA D I O SA D I O S

O L A N C H O O L A N C H O

Y O R OY O R O

AT L Á N T I D AAT L Á N T I D A

S A N TAS A N TAB Á R B A R A B Á R B A R A

C O P Á NC O P Á N

O C O T E -O C O T E -P E Q U EP E Q U E

L E M P I R A L E M P I R A

I NT I

B UC

Á

L A PA ZL A PA Z

COM

AYAG

UA

EL PARAÍSOEL PARAÍSO

VALLEVALLE

C H O L U T E C A

F RA

NC

I SC

O

MO

RA

ZA

N

DanlíDanlí

Las ManosLas Manos

El El TriunfTriunfo

San MarcosSan Marcosde Colónde ColónSan LorenzoSan Lorenzo

SabanaSabanaGrandeGrande

CedrosCedrosGuaimacaGuaimaca

SalamáSalamá CatacamasCatacamas

Dulce NombreDulce Nombrede Culmíde Culmí

El CarbónEl Carbón

San EstebanSan Esteban

AuasbilaAuasbila

SirsirtaraSirsirtara

BalfateBalfate

SonagueraSonaguera

OlanchitoOlanchitoLa VegaLa Vega

CorocitoCorocito

El ProgresoEl ProgresoMorazánMorazán

HigueritoHiguerito

JaitiqueJaitiqueSan LuisSan Luis

QuimistanQuimistan

NuevoNuevoArcadiaArcadia

CopánCopán

MapulacaMapulaca

CamascaCamasca

MarcalaMarcala

YuscaránYuscarán

NacaomeNacaome

CholutecaCholuteca

JuticalpaJuticalpa

YoroYoro

San PedroSan PedroSulaSula

SantaSantaBárbaraBárbara

Santa RosaSanta Rosade Copánde Copán

GraciasGracias

LaLaEsperanzaEsperanza La PazLa Paz

ComayaguaComayagua

TEGUCIGALPATEGUCIGALPA

C O R T E S C O L Ó N

G R A C I A SA D I O S

O L A N C H O

Y O R O

AT L Á N T I D A

S A N TAB Á R B A R A

C O P Á N

O C O T E -P E Q U E

L E M P I R A

I NT I

B UC

Á

L A PA Z

COM

AYAG

UA

EL PARAÍSO

VALLE

C H O L U T E C A

F RA

NC

I SC

O

MO

RA

ZA

N

I S L A S D E L A B A H I A

Danlí

Las Manos

El Triunfo

San Marcosde ColónSan Lorenzo

SabanaGrande

CedrosGuaimaca

Salamá

Tela

Catacamas

Dulce Nombrede Culmí

Barra Patuca

El Carbón

San Esteban

Auasbila

Sirsirtara

Iriona

Balfate

Sonaguera

OlanchitoLa Vega

Corocito

El ProgresoMorazán

Higuerito

JaitiqueSan Luis

Puerto Cortés

Quimistan

NuevoArcadia

Copán

Mapulaca

Camasca

Marcala

Yuscarán

Nacaome

Choluteca

Juticalpa

PuertoLempira

Trujillo

Roatán

La Ceiba

Yoro

San PedroSula

SantaBárbara

Santa Rosade Copán

NuevaOcotepeque

Gracias

LaEsperanza La Paz

Comayagua

TEGUCIGALPA

BELIZE

GUATEMALA

EL SALVADORNICARAGUA

Patuca

Paula

ya

Aguan

Jalán

Ulúa

Sulaco

Coco

Sico

Guy

aam

bre

Humuya

Guayape

Caribbean Sea

PACIFIC OCEAN

Lago de Yojoa

Lago de Izabal

Gulf ofHonduras

Golfo de Fonseca

To Estelí

To Puerto

Cabezas

To Managua

To San Salvador

To San Miguel

To San Salvador

To Chiquimula

Montañas d

el P

atuca

Montañas de Comayagua M

ontañas d

e Coón

Sie

rra La

Esp

eranza

M o s q u i t o C o a s t

CerroLas Minas(2,870 m)

89°W 88°W 87°W 86°W 85°W

89°W 88°W 87°W 86°W 85°W

13°N

14°N

15°N

16°N

17°N

13°N

14°N

15°N

16°N

17°N

HONDURAS

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 20

0 60 Miles4020

100 Kilometers806040

IBRD 33418R

JULY 2006

HONDURAS SELECTED CITIES AND TOWNS

DEPARTMENT CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

DEPARTMENT BOUNDARIES

INTERNATIONAL BOUNDARIES