Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 38260-LC

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 2.4 MILLION (US$3.5 MILLION EQUIVALENT)

TO

ST. LUCIA

FOR THE

OECS S K I L L S FOR INCLUSIVE GROWTH PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE

OECS S K I L L S FOR INCLUSIVE GROWTH PROGRAM

April 5, 2007

Human Development Sector Caribbean Country Management Unit Latin American 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 Effect ive March 3 1,2007)

Currency Unit = Eastern Caribbean Dollar EC$2.67 = US$1

US$1.51326 = SDRl

APL BEP CANTA

CAS

CDB CEE CIDA

CHA

CKLN

CTO CSME CARICOM cxc

CVQ cwc DFID

ECCB ECCU EC% EU FM GDP IDA

IDB

IEG

F I S C A L YEAR Apri l 1 to March 3 1

ABBREVIATIONS AND ACRONYMS Adaptable Program Loan IFR Interim Financial Reports Basic Education Project IRR Internal Rate o f Return Caribbean Association o f National L A C Latin America and the Caribbean Training Agencies Country Assistance Strategy LCSHD Human Development Sector in the Latin

American and Caribbean Region Caribbean Development Bank MOF Ministry o f Finance and Physical Development Common Entrance Exam MIS Management Information System Canadian International Development MOE Ministry o f Education and Culture Agency Caribbean Hotel Association MOEA Ministry o f Economic Affairs, Economic

Planning, National Development and Public Service

Caribbean Knowledge and Learning N T I National Training Institution Network Caribbean Tourism Organization NELP National Education and Literacy Program Caribbean Single Market Economy NSDC National Ski l ls Development Centre Caribbean Community OAS Organization o f American States Caribbean Examinations Council OECD Organization o f Economic Cooperation and

Caribbean Vocational Qualification OECS Organization o f Eastem Caribbean States Cricket World Cup OEDP OECS Education Development Project Department for International OERU OECS Education Reform Unit Development Eastern Caribbean Central Bank PCU Project Coordination Unit Eastern Caribbean Currency Union CSEC Caribbean Secondary Education Certificate Eastern Caribbean Dollars S I L Specific Investment Loan European Union SKN Saint Kitts and Nevis Financial Management SLHTA St. Lucia Hotel and Tourism Association Gross Domestic Product SVG St. Vincent and the Grenadines International Development Association TVET Technical and Vocational Education and

Training Inter-American Development Bank UNESCO United Nations Educational, Scientific and

Cultural Organization Independent Evaluation Group o f the US$ United States Dollars World Bank

Development

Vice President: Pamela Cox Country Director: Caroline Anstey

Sector Leader: Chingboon Lee Sector Directorhlanager Evangeline Javier / Eduardo Velez Bustillo

Task Team Leader: Andreas Blom Team Members: Angela Demas, Christel Vermeersch, Cornelia Tesliuc, Theresa

Beltramo, Daniela Marotta, and Que Bui.

FOR OFFICIAL USE ONLY

ST . LUCIA OECS (LC) Skills for Inclusive Growth

CONTENTS

Page

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

Rationale for Bank involvement ...................................................................................................... 3

Higher level objectives to which the project contributes ................................................................. 4

1 . 2 . 3 .

B . PROJECT DESCRIPTION .............................................................................................................. 4 Lending instrument .......................................................................................................................... 4

Program objectives and operation ................................................................................................... 4

Project development objective and key indicators .......................................................................... 5

Project components ......................................................................................................................... 6 Lessons learned and reflected in the project design ...................................................................... 12

Alternatives considered and reasons for rejection ......................................................................... 14

. . 1 . 2 . 3 . 4 . 5 . 6 .

C . IMPLEMENTATION ..................................................................................................................... 15 1 . Partnership arrangements (if applicable) ....................................................................................... 15

2 . Institutional and implementation arrangements ............................................................................ 15

3 . Monitor ing and evaluation o f outcomes/results ............................................................................ 17

4 . Sustainability ................................................................................................................................. 17

5 . Crit ical risks and possible controversial aspects ........................................................................... 18

6 . Loadcredi t conditions and covenants ........................................................................................... 18

D . APPRAISAL SUMMARY .............................................................................................................. 19 1 . Economic and financial analyses ................................................................................................... 19

2 . Technical ....................................................................................................................................... 19

3 . Fiduciary ........................................................................................................................................ 20

4 . Social ............................................................................................................................................. 20

5 . Environment .................................................................................................................................. 20

6 . Safeguard policies ......................................................................................................................... 20

7 . Policy Exceptions and Readiness .................................................................................................. 20

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 .

Annex 1: Country and Sector or Program Background ....................................................................... 21

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ............................... 26

Annex 3: Results Framework and Monitoring ...................................................................................... 31

Annex 4: Detailed Project Description ................................................................................................... 37

Annex 5: Project Costs ............................................................................................................................. 48

Annex 6: Implementation Arrangements ............................................................................................... 52

Annex 7: Financial Management and Disbursement Arrangements ................................................... 56

Annex 8: Procurement Arrangements .................................................................................................... 64

Annex 9: Economic and Financial Analysis ........................................................................................... 68

Annex 10: Safeguard Policy Issues ......................................................................................................... 78

Annex 11: Project Preparation and Supervision ................................................................................... 79

Annex 12: Documents in the Project F i l e ............................................................................................... 81

Annex 13: Summary of Studies o f Sk i l l Enhancement in the OECS ................................................... 84

Annex 14 Statement of Loans and Credits ............................................................................................. 88

Annex 15: Country at a Glance ............................................................................................................... 89

Annex 16: Maps (IBRD 33487) ............................................................................................................... 91

OECS SKILLS FOR INCLUSIVE GROWTH

APL

APL 1 Credit APL 2 Credit

PROJECT APPRAISAL DOCUMENT

Estimated Implementation Indicative Financing Plan Period (Bank FY) Borrower

US$ m US$m US$m IDA % Others Total Commitment Date Closing Date

3.5 67 1.82 5.32 September 2007 March 2012 St. Lucia

3.0 67 1.47 4.47 September 2008 March 2013 Grenada

L A T I N AMERICA AND CARIBBEAN

LCSHE-DPT

Source Local Foreign

Date: April 5, 2007 Country Director: Caroline D. Anstey Sector ManagedDirector: Eduardo Velez Bustillo / Evangeline Javier

Team Leader: Andreas Blom Sectors: Vocational training (60%); Other social services (30%); General public administration sector (1 0%) Themes: Other financial and private sector development (P); Social safety nets (P); Vulnerability assessment and monitoring (P); Improving labor markets (P); Education for the knowledge economy (P) Environmental screening category: C Project ID: PO97141

Lending Instrument: Adaptable Program Credit

Total BORRO WEWRECIPIENT INTERNATIONAL DEVELOPMENT

Project Financing Data [I Loan [XI Credit [ 3 Grant [ ] Guarantee [ ] Other:

0.87 0.00 0.87 2.75 0.75 3.50

For Loans/Credits/Others: 3.50 Total Bank financing (US$m.): 3.50 Proposed terms: Standard IDA credit with Service Charge payable by the Recipient on the Withdrawn Credit Balance equal to three-fourths o f one percent (3/4 o f 1 %) per annum. The maximum commitment charge rate payable by the Recipient on the unwithdrawn financing balance shall be one-half o f one Dercent (1/2 o f 1%) Der annum.

AS SOCIATION Private Sector Total:

0.95 0.00 0.95 4.57 0.75 5.32

Borrower: Government o f St. Lucia Ministry o f Finance and Physical Development Financial Center, Bridge Street, Castries, Saint Lucia, West Indies Tel: 758-468-5502 Fax: 758-452-6700

FY 4nnual Cumulative

Responsible Agency: Ministry o f Education and Culture Francis Compton Building Waterfront, Castries Saint Lucia, West Indies Tel: 758-468-5203 Fax : 758-452- 5655

2007/08 2008/09 2009/10 2010/11 0.98 0.88 0.87 0.77 0.98 1.86 2.73 3.50

Estimated disbursements (Bank FY/USSm)

Project implementation period: Start: September 1,2007 End: August 3 1,201 1 Expected effectiveness date: September 1,2007 Exuected closing. date: March 15.2012

[ ]Yes [XINO Does the project depart from the CAS in content or other significant respects? Ref: PAD A.3 Does the project require any exceptions f rom Bank policies? Ref: PAD D. 7 Have these been approved by Bank management?

[ ]Yes [XINO [ ]Yes IN0

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

[ ]Yes [XINO

[XIYes [ ] N o

[XIYes [ ] N o

Project development objective Ref: PAD B.2, Technical Annex 3 The objective o f the first phase (operation) o f the APL i s to assist the Government o f St. Lucia to increase the employability o f youth through private-sector driven training. This objective will be pursued through three means: (i) establishment o f a competitive training scheme that finances private sector-driven training and traineeships, (ii) development o f an improved policy framework for delivering training by enhancing OECS collaboration in training and introducing occupational standards to increase quality and value o f training, and (iii) strengthening institutional capacity to better implement, monitor, and plan training. Project description [one-sentence summary of each component] Ref: PAD B.3.a, Technical Annex 4 Component 1, Sk i l ls training for unemployed youth, will finance the operation and expansion o f a training scheme to train approximately 1,850 unemployed persons from ages 17-30 who will subsequently be placed in an internship with private f i r m s to gain on-the-job experience.

Component 2, Improving the policy framework for training, will finance activities to improve the policy framework for delivering training by enhancing OECS collaboration for training to reap benefits o f economies o f scale, introducing occupational standards to increase the quality and value o f training and transferability o f skil ls.

Component 3, Project management and institutional strengthening, will finance activities and term staff to implement the project, monitor and evaluate the project’s impact, and strengthen the capacities o f participating institutions to better implement, monitor and plan.

Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 No safeguard policies are triggered.

Significant, non-standard conditions, if any, for: Re$ PAD C. 7 Board presentation: Board presentation i s scheduled for May 8, 2007. N o significant, non-standard conditions are involved.

Loadcredit effectiveness: 0 Signed and ratified subsidiary agreement between the responsible agency, Ministry o f

Education and Culture, and the National Ski l ls Development Centre.

Covenants applicable to project implementation: 0 The Borrower shall, no later than 90 days after the Effective Date, provide evidence that

it has entered into an agreement with: (a) one o f the national training institutes in the Caribbean region to license standards that have been endorsed by CARICOM; or (b) an international training institute to license prevailing international occupational standards. The Borrower shall, through i t s Steering Committee, review the Unit Cost o f Training jointly with the Association once every year, and adjust, as necessary, in a manner satisfactorv to the Association.

0

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

1. Economic growth is steadily improving in the countries of the Organization of Eastern Caribbean States (OECS), yet the economy continues to face obstacles to competitiveness. The OECS economies experienced a downturn o f growth in 2001 (overall -1.5 percent growth), followed by a steady increase from 0.7 percent in 2002 to 4.5 percent in 2005. The economy, driven by tourism and related construction, has undergone a dynamic shift over the last decade marking a transition from mono crop- based agriculture to a service-oriented economy. The percentage o f people employed in agriculture, hunting and forestry declined from the 1996 level o f 24 percent to 14 percent in 2004, while direct employment in tourism rose from 21 percent in 1996 to 24 percent in 2004. An example i s construction related to tourism where in 2006 construction o f hotels in St. Lucia added 1,100 rooms (25 percent increase), partly motivated by the 2007 World Cup Cricket being hosted in the Caribbean. The growth in tourism and related service sector i s expected to continue in the medium term.

2. Despite the OECS being considered as upper middle-income countries, an estimated third of the population in the OECS is poor. Although reliable and updated poverty figures are not available for all countries, estimates suggest that poverty in the OECS ranges from a low o f 12 percent o f the population in Antigua and Barbuda to an average o f 25 percent in St. Lucia and to a high o f 38 percent in St. Vincent and the Grenadines. Wh i le poverty i s predominantly in the rural areas, migration to urban communities in search o f employment i s also contributing to the number o f poor people in towns and cities. It i s expected that the current high economic growth can reduce poverty if it i s maintained and includes the poor.

3. To maintain high economic growth and reduce poverw, the OECS countries must undertake crucial reforms to improve competitiveness, including improving provision of a skilled labor force in areas relevant to the economy. According to the World Bank report, OECS New Agenda for Growth, the OECS must address three crucial elements to maintain high economic growth in the medium term: (i) formulation o f a long-term vision that positions the OECS Economic Union in the global economy; (ii) reorientation o f the basic development model toward greater openness, competition and a more level playing field in the sub-regional economy; and (iii) the creation o f new capacity in the labor force and the private sector to take advantage o f emerging opportunities in the global market place. In Grenada, f i r m s cited shortage o f skilled labor as the number one constraint to increasing competitiveness. Therefore, enhancing the employability o f youth would help increase competitiveneSs o f the economy, especially in the expanding sectors. For example, the expansion in hotel rooms in St. Lucia i s expected to increase demand to around 2,500 employees in 2007. Expanding the pool o f qualified labor would improve the quality o f services in the industry, stimulate demand for labor, and assist in lowering wage-pressure.

4. The recent economic expansion provides St. Lucia and the OECS with an opportunity to broaden the gains of growth to youth. Across the globe, youth unemployment i s two to three times larger than adult unemployment, and St. Lucia i s no exception. Youth unemployment was 39 percent in 2005 compared to 13 percent for the whole workforce. Youth unemployment imposes a high risk to society via forgone earnings and increased risks o f deviant behavior. The Caribbean Youth Development Report estimates that bringing youth unemployment down to the level o f the whole workforce would increase GDP by 1.3 percent.' Youth unemployment i s caused by: (i) low labor market relevance o f schooling, (ii) little assistance and knowledge about the transition from school to the world o f work, (iii) fewer low- skilled positions in the economy due to a slowdown in traditional industry, and (iv) the existence o f a high reservation wage due to out-migration and opportunities in the informal economy. The World Bank's Caribbean Social Protection report recommends that social assistance in the OECS could be refocused to

' World Bank, 2003.

1

providing “a hand-up rather than a handout.” This would provide incentives for market-responsive training programs and in parallel improve targeted conditional cash transfers, job search and other social protection programs. Given the projected high level o f annual growth in the near to medium-term, the government has a window of opportunity to increase youth employment through assistance in successfully transitioning from school to work through training that responds to the demands of the market and through job-search activities.

5. Better preparation of young people through more relevant education and training would increase employment outcomes for youth. Education i s a key factor for a successful career in the OECS. For example, in St. Lucia, a worker with secondary education has, on average, a 73 percent higher wage than one with only primary education while a worker with post secondary education earns a wage 146 percent higher than a primary education holder. The OECS governments have taken strong actions to reap these returns by advancing universal secondary education. However, schooling seems insufficiently focused on labor market ski l ls and overly oriented toward an academic career. For example, teaching does not impart l i f e ski l ls (reliability, communication, team skil ls, etc.) demanded by the service sectors. Since only 11 percent o f secondary school age graduates enroll in tertiary education in the OECS, there i s a need to better link the education system with labor demand. Improving curricula and teaching in secondary and tertiary education to better reflect labor market demands i s the f i rst best option, but it wi l l take time and probably wil l not eliminate a l l difficulties associated with transitioning from school to work. Consequently, there i s a need for specific training o f young people to actively assist them in gaining a f i rst job experience. This would reduce the share o f youth engaging in deviant behavior and not fulfilling their human capital potential for contribution to society.

6. Providing training through quality programs closely tied to employer needs would increase impact and incentives for training. The Governments in the OECS invest a modest amount in public training, mostly through small public training programs. For example, in St. Lucia, the National Ski l ls Development Centre (NSDC) helps youth gain employment through the provision of vocational training, l i fe ski l ls and traineeships. However, demand outnumbers supply by 150 percent. While formal impact evaluations are lacking, traineeships seem a successful means for youth to gain a foothold in the labor market. Ha l f o f the trainees report finding employment at the end o f such programs. However, employers criticize public training as being of low relevance. Training youth according to recognized competency- based standards valued by employers and the government would provide youth with an added incentive for participating in training. The challenge i s to design an efficiently operating training program that yields social gain by training unemployed youth and, at the same time, provides the private sector with well-prepared and motivated trainees.

7. Public-private partnership in education would increase the impact of investments in education and leverage private resources. The OECS countries invest a substantial proportion of public resources in education almost exclusively via direct institutional funding. For example, St. Lucia invests on average 6.8 percent of Gross Domestic Product (GDP) in the education sector compared to 4.8 percent for OECD countries and 4.1 percent for Latin America and the Caribbean (LAC) as a whole. Improving the relevance of education and training through closer linkages with employers would enhance outcomes of the investment. Further, a public-private partnership could showcase needed examples o f how public funds can leverage private resources. Lastly, a well-designed and efficient program to increase employability o f youth could also lead to lower need for government spending on social protection.

8. I n the medium term, the OECS countries would reap substantial benefits by jointly administering a similar trainingprogram. There are at least five reasons why the OECS would gain from collaboration in training: (i) meeting a common need for increasing youth employment; (ii) creating a market o f training providers operating under a joint set o f standards to yield economies of scale and drive down the cost o f training; (iii) reducing preparation time costs by developing common project designs; (iv) lowering

2

administration costs and increasing professionalism by collaboration; and (v) building a common labor pool and labor market to take advantage o f the Caribbean Single Market Economy (CSME). As demonstrated by the OECS Telecommunications Reform Project, which leveraged sub-regional economies o f scale within telecommunications, it i s essential to have political buy-in for regional initiatives. Further, other sub-regional projects show that in order for such programs to be successful, they must operate efficiently, and be able to tailor programs to local demand.

Government Strategy

9. Government oflcials in the OECS see the region’s current high economic growth as a window of opportunity to address the urgent need o f providing relevant skills for unemployed youth to enter the labor market, as well as an opportunity to help transition the labor force into higher-end services. The OECS Development Charter emphasizes the need to enhance the sk i l ls o f i t s citizens as well as generate sufficient quality job opportunities to reduce crime and violence among youth and absorb greater numbers o f the labor force.

10. The Government of St. Lucia prioritizes skills training and outreach to unemployed youth as outlined in three recent government strategies: (i) The 2005-2008 Macroeconomic Prospects and Medium-term Economic Strategy highlighted the need to reduce unemployment and poverty rates, particularly pointing out the need to “improve the employability o f youth and other marginalized sections o f the population through traininghetraining and enterprise development initiatives,” as one o f the seven medium term goals; (ii) The Ministry o f Education Development Plan for 2006-2010 places continued emphasis on raising the level o f achievement o f all learners, reforming the management o f education, and improving the relevance o f the secondary curriculum and introduction o f alternative modes o f certification, For example, St. Lucia i s one o f two OECS member countries to have established a national Technical and Vocational Education and Training (WET) entity, and (iii) The 2005 Tourism Sector Strategy and Action Plan emphasizes the goal o f building the human resource base to meet the existing and developing needs o f the sector and, in particular, to develop occupational standards for tourism industry jobs.

2. Rationale for Bank involvement

1 1, During the OECS CAS consultations which tookplace in March 2005, Governments of the OECS unanimously supported skills enhancement as a key initiative for the region’s governments to tackle in order to increase competitiveness and give more young people a chance in the new competitive economy. The proposed project falls under Pillar One, Supporting Growth and Competitiveness, o f the OECS Country Assistance Strategy (CAS) for 2006-2009. The CAS highlighted “growing unemployment, specifically among young people” as one o f the core challenges that must be addressed, offering support for both “stimulating growth and competitiveness” as well as “reducing vulnerabilities, particularly targeting at-risk youth” in the two pillars o f the CAS.

12. The design of this project is based on the findings of in-depth sector studies. Analysis in the Caribbean Social Protection Strategy (2005) and the forthcoming OECS Ski l ls Enhancement report strongly informed project design.* Further, key findings from the World Development Report 2006 on Youth have been taken into account. The project will also complement the on-going OECS Secondary Education Adaptable Program Loan (APL) and the Caribbean Knowledge Learning Network project (CKLN) by better linking education to labor market demands and by offering assistance to unemployed youth who face difficulty in gaining a foot-hold in the labor market. Finally, the project will draw upon

Annex 13 present the summaries of four background studies undertaken for the forthcoming report on Skill Enhancement in the Eastern Caribbean.

3

lessons learned Bank-wide, and create synergies with similar Bank programs in Argentina, Chile, Colombia, the Dominican Republic, and Honduras.

13. The proposedproject would use loanJitnds to leverage more effective investment by Government, the private sector and other donors. This would be accomplished in three ways: (i) implementing and evaluating a new modality for demand-driven training through existing institutions; (ii) investing in institutional strengthening and policy action-planning, and (iii) working . closely with other OECS governments as well as with other donors and regional bodies during preparation and implementation.

3. Higher level objectives to which the project contributes

14. The OECS Skills for Inclusive Growth Project contributes to two CAS objectives. They are: (i) improving competitiveness by equipping OECS youth with the skills, knowledge and attitudes sought by employers. These ski l ls are necessary in order to participate in the opportunities presented by a globalizing and growing economy, and (ii) reducing vulnerabilities by targeting sk i l ls development to unemployed youth.

15. By fostering an innovative public-private partnership, the project would contribute to a closer relationship between education and training institutions and the private sector to improve the match between supply and demand for skills. Over the medium term this would increase wages and the productivity and employability o f the St. Lucian labor force.

B. PROJECT DESCRIPTION

1. Lending instrument

16. The proposed lending instrument is the Adaptable Program Loan (APL). In the proposed “horizontal” APL, support for multiple operations (phases) i s provided for several countries under a common program framework. The term horizontal implies that the instrument wi l l apply sequentially across interested and eligible OECS countries to allow governments to join the program when they are ready and meet the eligibility criteria. The implementation period o f the operations likely wil l overlap. As discussed in the section for alternatives, the “horizontal” APL i s preferable compared to several stand- alone specific investment loans (SIL). The horizontal APL allows for: (i) creating a common framework for competitive and private-sector driven training in the OECS conducive to increasing regional collaboration within this area, (ii) establishing a common framework for Bank financing of training across the OECS, and (iii) simplifying the approval process for subsequent operations.

2. Program objectives and operations

17. The proposed APL wil l support the development of private sector-driven training programs in the OECS3 The advancement toward this objective wi l l be measured by the number o f trainees enrolling and successfully completing a private sector-driven training program.

18. Program eligibility criteria. A country wi l l become eligible to join the program when they meet three criteria for participation.

Completion o f a detailed project proposal to improve ski l ls training incorporating the following key principals: (a) Training i s demand-driven and offered in partnership with the private sector; (b) Training i s financed through a competitive scheme;

A private sector driven training program i s understood to be a program where a private sector firm has to actively participate in the application for training, selection o f training provider and/or pay part o f the training cost prior to the initiation o f the training.

4

(c) Training addresses issues o f employability and career mobility o f the workforce; (d) Training i s short and focused; and (e) Training combines technical and behavioral skills.

The government commits to participate in the following key regional activities: (a) Acceptance o f approved regional standards; (b) Recognition o f OECS training providers accredited under the project, and

Availability o f counterpart funding for the project.

0

0

19. All OECS territories (Anguilla, Antigua and Barbuda, British Virgin Islands, Commonwealth o f Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines) could potentially participate in the program, even though they may not require or be eligible for IBRDADA financing. Participation could be financed entirely by the country, or partly financed by the World Bank and/or another donor. I t i s expected that World Bank financing will be limited to a subset o f countries. The Country Assistance Strategy (CAS) lays out the framework for IBRD/IDA financing for the program. In the low and base case scenarios, four OECS countries have available IDA funding for the program (Commonwealth o f Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines).

20. The program will be rolled out on an on-demand basis. St. Lucia will be the f i rs t to jo in the program given that it has met the criteria for participation. Based on discussions with the government o f Grenada and other potentially eligible OECS countries, it i s highly likely that at least one additional country will participate in the program. However, given the demand-driven nature o f the APL, it cannot be guaranteed that subsequent operations would be realized.

2 1. Bank procedures for approval of subsequent operations of the APL. This Project Appraisal Document (PAD) for the first operation describes the program objectives and the subsequent operation. The subsequent operation wil l be consistent with the above-described program objective, comply with the established participation criteria, and provide financing for another training project in the OECS. The P A D for the later operation will refer to this PAD, and will include: (i) a section documenting compliance with the program objective and criteria as approved by the Board for this first operation, and (ii) a review o f implementation and early lessons learned from the preceding operation o f this APL. Following the approved APL procedures, the PAD for the subsequent operation will be circulated to the Board for information after approval in principle by Management (exercised by Regional Vice Presidents), and management approval will become effective 10 working days thereafter. The project would be scheduled for Board discussion if requested by at least three Executive Directors during the 10-day review time period, Should demand for Bank financing exceed the approved envelope of US$ 6.5 million, the operation and subsequent operations would require Board approval.

3. Project development objective and key indicators

22. the employability o f youth through private-sector driven training.4

23.

The objective o f the f i rst operation o f the APL i s to assist the Government o f St. Lucia to increase

The key indicator for this project outcome is:

By employability, we mean improve the knowledge, skil ls and behavior of beneficiaries to help youth transition to the labor market. The employable skills that employers seek in entry-level positions include basic literacy and numeracy skills (e.g., math, reading, communication, and writing) and higher-order sk i l l s (e.g., decision-making, problem-solving, learning). The behaviors and traits that employers seek (also known as l i f e skills) are those associated with dependability, positive attitude, self-confidence, motivation, adaptability, and punctuality, to name a few. As such, they are lifelong skills that will serve them at the different stages of their employment trajectories.

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0 Percent o f enrolled youth employed fifteen months after the start o f the training program (target value 70 percent for the average o f the project and 75 percent for year 4 o f the project).

24. This objective has three intermediate outcomes with associated lines o f action: (i) to increase levels o f training among unemployed youth through the establishment o f a competitive training scheme that finances private sector-driven training, (ii) to develop an improved policy framework for delivering training by enhancing OECS collaboration in training and introducing occupational standards to increase quality and value o f training, and (iii) to strengthen institutional capacity to better implement, monitor and plan training. The main intermediate outcome/output indicators o f success for each o f these lines o f action are:

0 Number o f trainees enrolling and successfully completing the training program and traineeship (accumulated target value for the project 1,850).

Number o f Caribbean Vocational Qualification (CVQ) certificates awarded (accumulated target value for the project 1,265).

Percentage o f indicators reported on a yearly basis (yearly target value 100 per~ent).~

0

0

The remaining indicators are reported in Annex 3.

4. Project components

25.

Component 1 - Skil ls training for unemployed youth - US$3.56 mill ion (67 percent o f project cost)

Component 2 - Improving the policy framework for training - US$0.84 mil l ion (16 percent o f project

Component 3 - Project management and institutional strengthening - US$0.92 mil l ion (17 percent o f

The components are closely linked. Component 1 wil l finance training o f the targeted youth population. Component 2 will support policies and introduce competency-based standards to improve the quality o f training and assistance to youth under Component 1, while Component 3 finances and strengthens project management.

26. While it i s important and advantageous for the countries participating in the APL to undertake activities at the regional level, the extent to which this can be done will depend on the pace o f integration o f the countries into the program. Under component 1, regional activities would be two-fold: (i) training providers throughout the OECS will be eligible to compete for the training o f St. Lucian youth; and (ii) representation from other OECS countries in the project management. Under Component 2, regional activities are expected to include the development and printing o f informational material, training o f assessors, collaboration o f regional experts in workshops on standards, establishment o f an OECS register o f qualifications, and implementation o f a common labor market needs assessment. Finally, regional activities under Component 3 include impact evaluation o f training interventions and procurement o f information management systems.

The project consists o f three interlinked components:

cost)

project cost)

Regional activities wi l l be Jinanced under all three components.

An essential capacity o f an institution i s i t s capacity to perform, use and learn ftom evaluations, Brown (1999). Hence, this indicator i s one available indicator to measure a key aspect of institutional capacity. Further, it measures the performance o f the project administration.

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Component 1- Skills Training for Unemployed Youth - US$3.56 million

27. This component wil l finance the operation and expansion of a training scheme for disadvantaged, unemployed youth. This scheme will subsidize training o f approximately 1,850 unemployed youth and their placement in traineeships with private f i r m s to gain on-the-job experience. The National Ski l ls Development Centre (NSDC) affiliated with the Ministry o f Education will implement the training scheme. On average, the scheme will invest a unit cost o f US$1,35 1 per trainee. The Training Scheme i s competitive and involves to a large extent the private sector in training provision, selection o f training providers and on-the-job training. In the f i rst round o f the project, the Training Scheme i s expected only to fund training within the hospitality sector in order to gain experience before expanding to other sectors. This sector has the most employment vacancies and requires only modest training equipment to commence training. During the project, training will be expanded to other priority economic sectors, expected to be Agriculture, Information and Communication Technologies, and Construction. The component consists o f two subcomponents:

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Subcomponent 1.1 Ski l ls Training - US$3.40 mil l ion

Subcomponent 1.2 Increasing public awareness - US$O. 16 mill ion

Subcomponent 1.1 Skills Training - US$3.40 million

28. This sub-component wil l finance the training of unemployed youth through a competitive training scheme. The training will, in partnership with the private sector, equip youth with technical and l i f e ski l ls that the labor market demands. This increases the probability that the trainees will gain employment at the end o f the program. The training scheme wil l be financed by the credit with co-financing from the government and the private sector, The operation o f this training scheme will be the main activity under this component.

29. On a regular basis, the training scheme wil l organize andfinance training of disadvantaged, unemployed youth. Each “round” o f training entails the following steps: (i) outreach to unemployed youth (trainees), f irms and training providers to inform these target beneficiaries o f the training scheme; (ii) call for training proposals; (iii) matching eligible trainees, f i r m s and providers; (iv) provision o f pre-service training (classroodtechnical training), which will last about four months; (v) completion o f a traineeship lasting approximately four months; (vi) certification o f trainees’ skills; and (vii) monitoring and evaluation. After the end o f the traineeship, it i s at the discretion o f the employer and the trainee whether they will enter into a job contract.

30. Private, non-governmental, and public training providers wil l be invited to participate in the project. There will be a focus on inviting training providers from across the OECS. The employer chooses which provider corresponds best to the needs o f the firm. Training providers will meet quality standards for provision o f competency-based training designed under Component 2.

3 1. The eligibility criteria for participation of youth, training provider, and employers are presented in Table 1.

Eligibility Criteria Verification

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Currently those unemployed between the ages o f 17-30

Verification relies on self-selection to a large extent, but there will be:

verification o f regular pension contributions to The National Insurance Corporation database; communication with community officers in case o f doubt; and

Maximum of 6 months work experience in sector of training N o previous training in sector

0 signed statement certifying that the trainee i s unemployed. 0 Relying on self-selection to a large extent, but it will be verified with sector associations 0 verification through training records o f major training providers

32. Matching the right trainee, to employer and training provider is critical for maximizing the probability of success at the end of the program. This requires a trilateral match in that: (i) the capabilities and attitudes o f trainees must fit with the employer’s firm culture and labor needs; (ii) training has to be synchronized with the employer’s needs; and (iii) trainees have the ability to learn enough during pre- service training to successfully complete the traineeship. Since each match i s unique, the three partners in the process (i.e. trainee, employer, training provider) have to play an equally important role.

33. Each potential trainee wi l l attend a counseling session. The counseling session wi l l : (i) evaluate candidates’ eligibility for the program; (ii) identify strengths and weaknesses in trainee aptitude, and (iii) recommend possible training areas and occupations best suited to the trainee. Further, the counseling session will identify basic skill gaps, and the candidate could be guided and encouraged to enroll in second chance education programs, such as the National Education and Literacy Program.

34. Training providers and employers submit training proposals to the NSDC based on employer S training needs and the training provider’s capacity to deliver. The employer/firm chooses i ts training provider. Proposals can be submitted in three ways: (i) direct match between the employer and the (pre- qualified) training provider submitted by the training provider, and (ii) a training broker can submit on behalf o f several f i r m s and a training provider. This i s particularly important for small and medium establishments that do not possess the capacity to plan and administer training. Sector associations, such as the St. Lucia Hotel and Tourism Association, have expressed willingness to act as training brokers, and (iii) f i r m s can on their own submit a request for training o f a certain number o f trainees.

Occupations for which standards have been adopted in the Caribbean Vocational Qualification Framework

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0 CARICOM database o f occupational standards.

35. I n case the demand for finds exceeds the amount allocated for training, the technical evaluation committee wil l use the following pre-dejned and published selection criteria to select the winning proposals: the amount that the firms/employers are willing to pay in excess o f their mandatory contribution, and prior performance o f training providers and employers. These selection criteria reflect the project priorities, and could be updated regularly based on outcomes.

36. NSDC and training providers select and allocate the matching number of trainees f rom the database with the winning proposals. The NSDC works alongside the training provider to ensure that each trainee matches the requirements o f the chosen training program. The training provider will be rewarded based on i t s trainees’ completion rate. The provider therefore will have an incentive to match the trainee’s capacity and attitude with the requirements. Although, this may lead to “cream-skimming” among the unemployed, i.e. the best-prepared among the unemployed will receive a traineeship, this mechanism will: (i) maximize the success o f getting a young person hired and permanently out of unemployment, which will create a reputation of program success; (ii) align the incentives o f the employer, the provider and the NSDC; and (iii) best contribute to firm’s competitiveness by providing the most suitable candidates among the unemployed youth.

37. The training wil l impart both life skills and technical skills. The NSDC will provide a short mandatory training program, called Productivity Enhancement Training (PET), with the aim of teaching l i f e skills to the trainee. This will last approximately one to two weeks. Thereafter, the training provider will offer an estimated four months of group training with the aim of imparting technical occupational skills. The technical occupational skills training could include language training if this competence i s demanded by the firm.

38. The project wi l l be co-financed by benejciaries. To ensure the commitment o f firms and to build sustainability, firms will be required to co-finance a minimum of 10 percent of the cost o f the classroom part o f the training (five percent for small and medium establishments). They will also cover the expense o f the trainee’s stipend during the traineeship. Whi le the project i s under implementation, it will be investigated whether the trainees should contribute back to the scheme if they gain employment as a result of the training. This would form a sustainable source of financing for the scheme.

39. The trainees wil l receive a modest stipend. The goal of the stipend i s to provide minimum income support for the trainee to undertake the training. It can contribute to payment for transportation, child care and other necessary costs of participation. The stipend would be a uniform amount given to all trainees in order to facilitate administration. For the first year, the stipend will amount to EC$300 per month (US$112) of training. The training scheme will finance the stipend during the pre-service training and the firm will pay the stipend during the traineeship.

40. Unit cost for the training scheme. A unit cost o f EC$2,450 (US$907) that covers four months o f technical skills training per trainee i s calculated based on the actual costs of training provided by the NSDC, and by the three other largest training providers in St. Lucia. I t i s composed of a training fee based on 16 trainees per course, the cost of materials and equipment, and a stipend payable to trainees for transportation. The unit cost will be reviewed annually to ensure that it remains in sync with average market rates for training. Details on the calculation of the unit cost are in Annex 4.

4 1. Training providers wil l be paid based on outcomes. Training providers will receive the unit cost per trainee, minus the amount o f the stipend regardless o f the occupation for which the training i s provided. Training providers will be paid 40 percent of this figure upon commencement of training; 30 percent upon completion o f the technical classroom training; and the remaining 30 percent for only those trainees who successfully complete the traineeship and obtain certification. This payment schedule provides a strong incentive for providers to offer quality training ensuring that trainees learn and become certified.

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42. During the project, the Training Scheme wil l be expanded to other high-priority sectors with hiring needs. In the f i rst round o f the project, the training scheme i s expected to fund only training within the hospitality sector. Informed by the results o f the f i rs t round and a consultant study, the training program will be expanded to other sectors. To the extent possible, the training model for other sectors will build upon the relevant rules and procedures o f the training scheme for the hospitality sector. However, it i s expected that the need for technical training and training equipment for other sectors wil l exceed those for the hospitality sector. The length o f training and traineeship may therefore have to be adjusted along with the unit cost per trainee. Further, it would be necessary to make prior agreements with public (or private) training providers regarding access to specialized training equipment that only one or very few providers have in St. Lucia or the OECS.

Subcomponent 1.2 Increasing public awareness - US$0.16 million

43. The project’s impact depends critically upon its ability to attract unemployed youth, firms and training providers. During project preparation, there has been extensive consultation and involvement o f these three groups in the process. This sub-component wil l finance activities to increase public awareness o f the project and encourage stakeholders to participate in the oversight o f the project. Printing o f informational materials, television and radio-spots, informational workshops, and job-fairs would be financed. Regional collaboration will reduce the development and production costs o f this material.

Component 2- Improving the policy framework for training- US$0.84 million

44. This component wil l finance activities to improve the policy framework for delivering training. This wil l be done by enhancing OECS collaboration for training to reap benefits o f economies o f scale, introducing occupational standards to increase quality and value o f training, and developing policy action plans. Activities to be financed include consultancies, employer’s surveys, minor equipment, and travel. Given the substantial fixed costs involved with policy development, the project will seek cost-sharing with other OECS countries. The component consists o f two subcomponents:

2.1 Introduce occupational standards, certification and quality assurance - US$0.48 mil l ion

2.2 Development o f policy action plans - US$0.36 mill ion

Subcomponent 2.1 Introduce occupational standards, certification and quality assurance - US$0.48 million

45. This subcomponent wil l finance the strengthening of the training system in St. Lucia. The sub- component will support the necessary steps to introduce and use occupational standards.6 The use o f these standards wil l be linked to the financing o f training through the Training Scheme and other training providers including technical trainers at the secondary education level are expected to teach to the standards. The Ministry o f Education will acquire the occupational standards that were adopted at the regional level through CARICOM. St. Lucia will therefore not be doing any standards development. This regional collaboration entails considerable advantages for the trainees, given i t s recognition across the Caribbean, and cost-savings for the state. The necessary steps for introducing the standards are validating, training and orientation, assessing and certifying, and registering.

Occupational standards describe the competences required to perform the job of a specified occupation. Ofien several levels of standards exist per occupation. When a trainee has demonstrated these competences to a certified assessor in a real-life job-setting, the trainee receives a qualification certificate. A qualification framework-for example the Caribbean Vocational Qualification framework-classifies and registers qualifications. The qualification framework integrates the offerings of schools and training institutions with informal learning into a common framework allowing individuals to follow different learning paths. In the case o f the CVQ fiamework, it also integrates education offerings across the Caribbean countries and therefore facilitates labor mobility within the region.

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46. Validating competency standards using Industry Groups. The first step in rolling out occupational standards i s the validation o f these standards by f i r m s through Industry Groups. The occupational standards wil l be acquired through an agreement with regional training institutions.

47. Training and orientation in standards and qualijications. Government staff, training providers, and instructors wil l participate in workshops to train personnel in the implementation o f the standards- based approach including the standards themselves and certification. Stakeholder workshops will also be conducted using technical assistance from institutions experienced in the CVQ standards.

48. The project wil l finance technical assistance and training o f assessors to build capacity to assess and certify competences. The assessment will be carried out by the training providers with the oversight o f the Ministry o f Education. In order to ensure the assessment process meets the required standards, technical assistance will be provided for both co- assessment with the local assessors trained by the project and for random re-assessment o f trainees.

49. The certijicates wil l be registered at a qualijication databank. This register wil l be common to al l OECS countries participating in the project. The Certificates will be a standardized format approved by the National TVET Council.

50. Quality Assurance of Providers. To ensure an adequate level o f quality, training providers wil l be submitted to a quality assurance review. In the f i rst two years o f the project, trainers will have to meet certain minimum standards to become pre-qualified for training under the project. This pre-qualification process will, in year three o f the project, be replaced by a formal registration o f training providers by the Ministry o f Education. The national TVET advisory committee in the MOE will guide the establishment o f this accreditation process. Technical assistance will be contracted to assist in setting up these quality assurance procedures, and could possibly be carried out on a regional level, either at the OECS or at the CARICOM level.

Assessment and certification of trainees.

Sub-component 2.2 Development o f policy action plans - US$0.36 million

5 1. This sub-component wil l finance the development of policy action plans on assistance to at-risk youth and job-training in order to inform the government on future policymaking. The plans wil l focus on the two major policy areas related to the project: assistance to at-risk youth and job-training. In both areas, there are several uncoordinated programs financed by government, N G O and donors. This has, in certain cases, led to sub-optimal outcomes where low quality and less relevant training i s provided and at- risk youth falls through the cracks between programs. The objective o f the plans i s to review all programs in operation within each policy area, including the proposed training program. Based on this review, recommendation will be proposed to increase coherence, coordination and sustainability within each area. In particular, the development o f two plans i s proposed: (i) Action Plan to include all vulnerable youth into the economy, and (ii) Action Plan to improve the relevance and sustainability o f job-training, which will include a Labor Market Needs Assessment and a study o f career mobility within the labor market. This policy action plan will examine the sustainability o f financing o f job-training, including the training funded by this project. The recommendations will feed into governmental strategies and facilitate donor- coordination. The policy plans wil l be undertaken in a collaborative manner between stakeholders in order to build consensus. Further, it will build on on-going country analysis combined with international examples. To develop the plans and forge consensus, this subcomponent will support consultancies to undertake studies, focus groups and workshops.

Component 3- Project management and institutional strengthening - US$0.92 million

52. This component willfinance activities to improve project management, including monitoring and evaluation, and strengthen NSDC and Ministry o f Education’s institutional capacity through two sub- components:

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3.1 Project Management and Institutional Strengthening - US$0.52 mil l ion

a) Introducing occupational standards and certification b) Developing o f policy action plans

3.2 Monitoring and Evaluation - US$0.40 mill ion

0.48 0 0 0.48 0.36 0 0 0.36

Sub-component 3.1 Project Management and Institutional Strengthening - US%0.52 million

53. This subcomponent wi l l finance necessary project management expenditures. A project manager wil l be contracted by NSDC to implement the project. Operational costs associated with project implementation will be supported. Further, the WET unit o f the MOE will be strengthened by one additional term staff to carry out the project activities under component 2.

54. The subcomponent wi l l also invest in institutional strengthening of the NSDC and MOE. It will assess and strengthen the capacity o f the implementing agency, NSDC, to manage and facilitate training. NSDC will upgrade i t s management information system and strengthen the institution’s capacity in financial management. NSDC will also expand and train i t s staff o f counselors to guide young clients.

Sub-component 3.2 Monitoring and Evaluation - US%0.40 million

55. This subcomponent wi l l support monitoring and evaluation. This i s a separate sub-component to emphasize the importance o f monitoring and evaluation. The funds wil l primarily support collection o f information on graduates and limited analysis o f the data. Further, a tracer study wil l be undertaken to identify the impact o f the investment and provide feedback for program improvements. The monitoring and evaluation framework will be standardized across the participating OECS countries.

3) Project management and

5. Lessons learned and reflected in the project design

56. Training programs must be driven by labor market demand. Internatiohal experience has proven time and again that vocational training opportunities are most successful in adequately preparing beneficiaries for the labor market when they have close links to the labor market in their design and implementation. The proposed training scheme follows the model o f similar youth training programs in

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LAC by requiring that prior to any training, providers must establish a link to employers’ labor needs. Further, a work traineeship must be guaranteed by an employer. This will ensure that the youth trainee will have an opportunity to gain relevant employer-driven skills as well as combine the classroom training with on-the-job experience. While traineeships are not and should not be a guarantee for a future job, they have proven to be a good proxy for identifying firms and sectors with future potential for employment opportunities.

57. The best way to ensure that courses are efectively demand driven is by sharing some of the costs with the private sector. A recent report on impact evaluations of job training programs financed by IDB revealed that the most common mechanism for ensuring support from the private sector, a simple “letter of intent” from an employer offering to host interns who are provided free o f charge by the program, has repeatedly been shown to be insufficient. Instead, programs perform better when the private sector share some costs. For example, in Mexico, under the on-the-job training modality (by which training i s provided by the firms and not by the training institutions) firms cover the direct costs of training, while the program covers the stipends to participants. In Peru, firms pay a minimum wage to participants during the internship phase. Under the proposed project the firms will contribute five to10 percent of the cost o f training to the Training Scheme and will cover the stipends to participants during the internship phase.

58. Training programs need to be an integral part of active labor market policies. The proposed OECS training scheme builds explicitly on the existing Government-funded training programs throughout the OECS. Experience, particularly from Europe, has shown that labor market insertion can be successfully improved, including for disadvantaged population groups, if intermediary services that efficiently link labor market demand with supply are provided. A key part o f this project i s to ensure that both trainees and employers are well-linked and to provide a bridge linking the two groups.

59. I n countries where a national training institution (NTJ exists, it is important to pay attention to the political economy of such institutions and avoid operating around them. The positive experience in the Dominican Republic as well as the negative experience in countries where the NTI were not considered as a key actor in the program (e.g. Panama), suggest that NTI i s an important actor that could help or hurt the execution of the project and the achievement of the desired outcome$. Under the project NSDC will serve as the implementing agency for the Training Scheme and will strengthen i t s capacity as it relates to managing competitive funds, integrating life-skills in a vocational training curriculum, developing internship programs with employers, and focusing more explicitly on disadvantaged youth.

60. Working with the private sector requires flexibility and quick responses from the suppliers of training. In order to encourage the private sector to accept trainees, the program needs to be flexible and respond quickly to the opportunities offered by the market. The project therefore will introduce various modalities for submitting training proposals to NSDC, including direct match between the employer and the training provider, a training broker acting on behalf o f several firms, or direct requests from firms.

6 1. Training cannot substitute for schooling. It i s known that a short-term training program cannot make up for the opportunities lost by youth who have either dropped out of school, been held back, or who have had a poor education. Studies have shown that for many youth, a combination of training and reentry to the education sector through “second chance” education programs have proved to be a successful combination in the long run. Firms polled in a recent World Bank report on Latin America and the Caribbean overwhelmingly chose to train skilled (secondary education or above) workers. Although higher levels o f education are associated with higher incidence of training, the critical threshold seems to be completion o f secondary education. This most likely reflects the idea that investment in training requires a sufficient prior skill base in order to pay-off privately. Overall firms rarely invest into basic skills o f a worker, but rather train in specific job-related skills. Thus, to achieve full benefits from a skills training program for unemployed youth, it i s important to have broader access to secondary education and expand access to “second chance” education programs. For reasons explained below, this project only

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assists modestly in expanding “second chance education” programs. However, in other projects, the World Bank i s assisting four governments o f the OECS providing universal access to secondary education, see Annex 2 Major Related Projects.

62. Life skills training is essential to succeed in the workplace and in life in general. As shown by an emerging strand o f studies, l i f e skills--such as communication skills, learning-to-learn, networking, conflict resolution skills, team work, information on r isky behaviors (including reproductive health, HIV/AIDS, etc.)--are increasingly important in a knowledge-based economy. These ski l ls enable disadvantaged youth to increase their employability. This project includes a l i f e sk i l ls module and counseling o f youth to strengthen a young person’s l i f e ski l ls. At the same time the project will strengthen the mentoring o f trainees during the internship phase.

63. Keep project design simple. There i s broad recognition that the Bank’s technical expertise in project design has made a significant contribution to the sub-region’s development. However, project implementation in the OECS has not always gone smoothly and a number o f areas were cited as contributing to the often lackluster implementation o f Bank projects in the OECS. A key area i s complex project design, which has led to delays in effectiveness and implementation. Therefore, this project design i s kept relatively simple. As explained below, the scope o f the operation was limited to private sector- driven ski l ls training. This strategic focus implied that the project does not include programs that are included in some o f the other training projects in Latin America and the Caribbean, such as expansion o f second chance education programs, further education and training o f employed workers and strengthening o f technical education.

6. Alternatives considered and reasons for rejection

64. Scope of operation. During design o f the project, there was extensive debate on whether to include components on wider social protection issues and/or on wider training for both unemployed youth and the employed workforce, Despite the importance o f reducing vulnerabilities and increasing the efficacy o f social safety nets in the OECS, the decision was taken to concentrate the project on the objective o f increasing employability o f unemployed youth through private-sector driven training. Nevertheless, the project includes forward-looking action plans in Component 2 to lay the foundation for future policies and actions to support the OECS countries in strengthening the social protection systems to address major sources o f risk and poverty.

65. Supply-side vs demand side training. The team also discussed the possibility o f funding a supply- side project or increasing direct institutional financing to training institutions. However, analytical work on training clearly indicates that the most effective training i s demand driven training which involves public-private partnerships and critically links training provision to fulfilling identified private sector needs. Further, to encourage sustainability and build local training capacity, it has been decided to set up the training scheme in a market structure where multiple providers can submit bids under the training guidelines and both public and private institutions can participate in the training.

66. National vs regional project. There were several choices considered for implementation including the choice to have a regional OECS-wide project or a national project. At present, training i s very much a national undertaking, which implies that the countries do not reap many benefits o f economies o f scale. In order to have world class training that will provide the needed skills, it i s crucial to build a regional market for training. This will professionalize training in the region, improve quality o f training, provide volume, drive down costs, and save scarce fiscal resources. Balancing between the gains from a regional approach to training and the constraints o f national government in pooling resources, it was decided that the project would chose a middle path between a 100 percent regional approach including all territories and a series of national projects designed for each country. The program proposes similar national training projects with the same set o f operating principles and procedures, including mutual recognition o f

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training providers and certifications, while separating each country’s finances. Therefore, the program i s flexible in responding to each country in terms o f timing and economic priorities, while fostering regional collaboration where the gains are largest.

67. Choice of Bank instrument. The project i s a “horizontal APL” where several countries can access funding under the same framework established for the f i rst operation. Two alternatives to this instrument were discussed. The first alternative i s a “vertical APL” that provides financing for multiple operations (and loans) over time to each country. This could allow for either a design o f a long term investment plan stretching six to 10 years or a “customized” lending instrument with smaller loans in order to reduce commitment charges. However, this was decided against due to the lack o f such a customized instrument and the government’s desire for swift project preparation. The second alternative was a series o f single country specific investment loans (SIL). The S I L was rejected since the chosen instrument, the horizontal APL, allows for: (i) creating a common framework for competitive and private-sector driven training in the OECS conducive to increasing regional collaboration within this area, (ii) establishing a common framework for Bank financing o f training across the OECS, and (iii) simplifying the approval process for subsequent operations.

C. IMPLEMENTATION

1. Partnership arrangements (if applicable)

68. The government and the Bank teams have actively engaged all main stakeholders during the preparation of the project. Besides the partnership with the implementing agencies, there are at least five formal or informal partnership arrangements for the implementation o f the project:

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0

0

Labor unions 0

Regional organizations (OECS Secretariat, CANTA, and CARICOM) Private sector (St. Lucia Hotel and Tourism Association, Chamber o f Commerce, Caribbean Tourism Organization, and Caribbean Hotel Association) Government agencies (Ministry o f Tourism and Ministry o f Labor)

Other donors: European Union (EU), Caribbean Development Bank (CDB), and the Organization o f American States (OAS).

2. Institutional and implementation arrangements

69. The Ministry of Education (MOE) through the National Skills Development Centre (NSDC) wil l be the agency responsible for execution of the project. MOE will enter into a subsidiary agreement with the NSDC for the implementation o f Component 1 (Skills Training for the Unemployed Youth), sub- component 2.2 (Developing Action Plans), and component 3 (Project Management and Institutional Strengthening). The Ministry o f Education wil l be responsible for the implementation o f Sub-component 2.1 (Introducing Occupational Standards, and certification) through the Unit for Technical and Vocational Education and Training (TVET). Further, both NSDC and M O E wil l liaise with the Human Resource department o f the MOEA for establishing o f an accreditation process o f training .providers.

70. The National Skills Development Centre (NSDC) was established in 2001 as a public company charged with training of youth. It i s ascribed to the Ministry o f Education with an independent board whose chair i s the Permanent Secretary o f the Ministry o f Education. The Board also includes representatives from the private sector. The capacity o f NSDC to implement the project will be further strengthened by hiring a project manager, contracting behavioral counselors, and investing in management information systems.

7 1. NSDC’s role is managing, financing and facilitating training under the project. It will not be a provider o f training. As a result, there will be no conflict o f interest between financing and being a

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potential training provider. NSDC will develop further i t s capacity to administer and facilitate training. For example, it will facilitate training by offering i t s physical infrastructure to potential training providers. In recent years, the government o f St. Lucia has invested funds into the physical infrastructure at NSDC, such as, construction o f classrooms and kitchens. To capitalize on those investments, NSDC will provide use of i t s premises to all potential training providers at a pre-defined, standard fee. Also NSDC can continue to offer other types o f ski l ls training with other sources o f funding.

72. To oversee and guide project implementation a Steering Committee wil l be established under the auspices of the MOE. I t will be chaired by the Permanent Secretary o f M O E or another appointee designated by the Minister o f Education. The deputy chair i s the Permanent Secretary o f the Ministry o f Economic Affairs, Economic Planning, National Development, and Public Service (MOEA), or another appointee designated by the Minister o f EA. Further, the organizations participating in the implementation o f the project will participate: NSDC, the WET unit o f MOE, the PCU, and the department o f Economic affairs o f MOEA. Further, the Minister o f Education can appoint additional members to the steering committee. The committee will meet on a quarterly basis. In the start o f the project, the project steering committee could meet more frequently. NSDC convenes these meetings at the request o f the chair, co-chair or at i t s own request. The committee will be charged with the following responsibilities:

0

Monitoring and supervising the implementation o f the project

Ensuring that the general operations o f the training scheme are executed within the agreed guidelines.

Reviewing and approving the training proposals based upon a report submitted by technical evaluation committees.

73. Technical evaluation committees wil l be constituted. These committees will be in charge o f evaluating training proposals. The committees will submit to the project steering committee a report containing recommendations as to which training proposals should be funded from the Training Scheme. There will be one committee for each economic sector. The committee will be composed o f independent technical experts from the sector with experience in training, which could include trainers and HR personal from the private sector and representatives from the WET unit and NSDC.

74. The Project Coordinating Unit (PCU), established as a part of the MOEA wil l be responsible for all fiduciary responsibilities. These responsibilities include procurement, financial management, project reporting on procurement and financial management, and disbursement o f funds. Further, MOEA will participate in the project steering committee, review budget matters, and manage counterpart funding for the project. 75. A series of other organizations wil l support project implementation as part of their regular mandate. The Ministry o f Social Transformation through i t s community officers wil l assist in the Community Outreach and Public Sensitization Activities. Lastly, the labor market partners (Business Sector Associations, such as the St. Lucia Hotel and Tourism Association, SLHTA, for the hospitality sector, and the labor unions wil l assist in project implementation through outreach to the unemployed and to the f i r m s through job fairs, employer open day activities, brokering o f training and detection o f labor market needs.

0

Regional implementation

76. There are multiple gains f i o m regional collaboration within the program. The OECS i s composed o f nine relatively small territories. In the current situation, training i s entirely a national undertaking, which implies that the countries do not reap many benefits o f scale. In order to have world- class training that will provide the needed ski l ls to i t s economy, i t i s crucial to build a regional market for training. This will professionalize training in the region, improve quality o f training, provide volume,

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drive down costs, bring employment and save a significant amount o f resources for the region’s governments. Project success therefore depends upon the willingness o f the participating OECS countries to collaborate on the program.

77. Regional activities wil l to the extent that it is practical be jointly undertaken by the OECS countries participating in the program. Among other aspects, this depends upon the pace o f integration o f new countries into the program. If only the project in St. Lucia has been approved, it can on i t s own undertake the specified regional activities. Following the practice in previous Bank financed projects in the OECS, a specified amount o f funds will be reserved for regional activities in the credit. The regional activities will be financed by each country’s project, and procurement will be assigned to one o f the countries’ PCUs on a case-by-case basis.

3. Monitoring and evaluation of outcomedresults

78. A full monitoring and evaluation system has been established. For outcomes, the project draws on the existence o f a quarterly survey and report on unemployment in St Lucia by the statistical office. This information i s deemed to be reliable. For immediate project outcomes, The responsibility for collecting data resides with the NSDC with assistance from the WET Unit in Ministry o f Education for the indicators for sub-component 2.1. NSDC will keep track o f the indicators through a database o f all the new applicants and trainees. Data collection for the employers and training providers i s also NSDC’s responsibility.

79. To evaluate the impact of the training, a tracer study wil l track the impact of training in terms of employment and salary of the trainees. Delivery to the Bank o f this tracer study by mid term evaluation i s one o f the disbursement milestone that, if complied with, wil l increase the finance percentage o f the Bank. Baseline data on applicants will be collected by NSDC at the time o f application. The impact o f training on beneficiaries will be compared to those o f a comparison group. The control group wil l be extracted from the data collected by NSDC about applicants and trainees. The control group will constitute applicants that are not selected to participate in the training under the project. I t i s noted that full comparability between the treatment and non-treatment group could be difficult, given the non- randomized selection o f trainees. Hence, the difference in employment outcome between the treatment group and the comparison group to be identified by the tracer study cannot necessarily be fully ascribed to the impact o f the training program. There are four reasons, why it was decided not to include funding for a rigorous impact study on the project: (i) a rigorous impact study would require a randomized treatment o f applicants, which i s likely to result in sub-optimal matches o f trainees and employers, (ii) the number o f trainees i s relatively small in this project, which reduces the statistical certainty o f the findings, (iii) the costs o f undertaking the impact study could amount to a relatively large share o f the project finance, five percent, and (iv) a large number o f training programs have been or are scheduled to be evaluated by the IDB, IEG o f the World Bank, and other World Bank departments.

4. Sustainability

80. Project sustainability will be given a high priority during project implementation. The principal risks are lack o f continued finance and lack o f political commitment to a continuation o f the proposed private sector driven model. The best risk mitigating measure for both risks i s to demonstrate the positive outcomes o f the training scheme. This requires timely implementation o f the project, a monitoring and evaluation system, and dissemination o f the results to the general public. Further, the project requires f i r m s to co-finance training, which i s a sustainable source o f finance. To further build financial sustainability, three sources can be tapped: (i) increased co-finance from trainees and f irms, (ii) government budget, and (iii) introduction o f training levy. The policy action plan will review these options in the St. Lucian context and recommend a suitable combination to achieve financial sustainability. In addition, in the medium run other donors could contribute to the training scheme. Other donors, such as the EU, have collaborated in the project design. The use o f occupational standards and

17

concurrent improvements in quality o f training are likely to be sustainable given the relatively modest cost o f updating and maintaining the use o f these standards.

Mitigation

Simple project design with limited procurement 0 Private sector participation on the board of NSDC

0 Hiring o f term staff to assist in implementation 0 Design o f Performance-based funding 0 Target motivated and job-seeking youth

0 Monitoring and evaluation

5. Critical risks and possible controversial aspects

Residual Risk

S

Potential Risks

contribute back to the scheme Open the competition to both St. Lucian and regional

Strong outreach activities Facilitate through training brokers, such as f i r m s and employer associations

0 Involvement o f a wide group o f stakeholders in the

OECS training providers

design and implementation phases to build broad support from civil society for the project

training

out if any

0 Target group i s unlikely to receive private sector

0 Monitoring and Evaluation to evaluate the crowding

Slow implementation and ineffective management

M

M

N

M

Remedial education and longer courses are required for employers to hire the target group The training scheme i s not sustainable due to lack o f political commitment to the private sector driven model or lack o f finance Lack o f quality training providers

0 Financing and training of accountant staff. 0 Transitory financial arrangements until NSDC has

demonstrated full capacity to financially manage the flow of funds for stipends Finance an information campaign

0 Involve Officers from Ministry o f Youth and other entities in touch with the target group

Employers and training providers do not pair UD

M

N

M

Change of political priorities

L i t t le additional impact on the ski l ls pool (the scheme substitutes public financing for private funding) Fiduciary Risk - Financial Management Arrangements

Low uptake of the training by target group

Overall

Risk

H

H

H

S

S

M

S

M

M

S

S

S

(H = High; S = Substantial; M = moderate; N = Lowmegligible)

6. Loanlcredit conditions and covenants

Credit effectiveness conditions:

18

Signed subsidiary agreement between the Ministry o f Education and the National Ski l ls Development Centre.

D. APPRAISAL SUMMARY

1. Economic and financial analyses

8 1. The youth training is expected to affect youth employment on two dimensions: the probability of employment and wages for employed youth. The economic analysis presented in Annex 9 computes the combinations o f employment probability and wage increases that wil l lead to positive returns for the project and evaluates the St. Lucia project from the economic return point o f view. The assumptions underlying the economic analysis are summarized in Table A-9.1 in Annex 9.

82. Rate of return of the project. Various scenarios o f employment and wage impact were used to compute, under the assumptions made, the Ne t Present Value and Rate o f Return o f Project investments. An increase in average wage income o f 20 percent i s needed to ensure a positive rate o f return with discount rates o f 5, 7.5 and 10 percent. Combinations o f changes in the employment rate and changes in wages that wil l lead to at least 20 percent increase in average wage rates are indicated in green in Table A-9.3 in the Annex 9.

83. Summary of impacts of other j ob training programs. The general conclusion presented in the reviewed studies i s that youth training programs in developed countries had the poorest track record, when compared with training programs for the long-term unemployed and those displaced through mass layoffs. Social rates o f return were typically negative, both in the short-and the long run. However, results from youth training programs appeared to be different in the case o f the “Jovenes” programs in Latin America (Argentina, Chile, Peru and Uruguay). O f the five new evaluations o f youth training programs in Latin America between 1999 and 2004, all showed positive employment impacts and two o f the three computing earning effects demonstrated positive impacts on that indicator. The lessons learned from these projects are also summarized in the main text and included in the project design.

84. Assessment. With interventions that were similar to the planned intervention in St. Lucia, two out o f the five projects (Peru, Chile) achieved results which, if attained in St. Lucia, would yield positive rates to the St Lucia project. If the St Lucia project impact were similar to those in the Argentina project, the rate o f return to investment would be positive only for adult females, but not for the other groups o f beneficiaries. Were the results o f the St Lucia project similar to those in the Dominican Republic and Brazil project, the rate o f return would be respectively borderline negative and negative. Importantly, the economic analysis does not take into account the positive externalities o f the project, such as higher propensity to engage in further education, improved services to the poor, reduction in future social protection spending, improved health, and reduced crime and violence.

2. Technical

85. The project is deemed technically sound and innovative. The main lessons learned from technical and vocational education and training in the Latin America and Caribbean region and OECD countries have been taken into account when designing the project. The project designed was influenced by recent experiences and evaluation o f a private sector driven training system in the United Kingdom and in Latin America. In addition, the design incorporates training experiences from Jamaica and other Caribbean countries. The ‘second component i s aligned with the training policies agreed and implemented at the wider Caribbean level in the sense that occupational standards and accreditation activities under the project wil l be consistent with the standards adopted by CARICOM and promoted by the Caribbean Association o f National Training Agencies (CANTA).

19

3. Fiduciary

86. Fiduciary responsibility wi l l be assumed by the centralized Project Coordinating Unit in the Ministry of Economic Affairs, Economic Planning, National Development, and Public Service. This unit has over five years o f experience with World Bank fiduciary guidelines and i s managing three World Bank projects. In addition, it has participated in several Bank training sessions and workshops. The PCU i s in the process o f being strengthened with additional personnel who will increase i t s capacity in order for it to timely handle the workload o f an additional project.

4. Social

87. Focus groups with unemployed youth have shown strong interest in receiving training and in particular in occupations that are of high relevance to the labor market. The target group also supported a mandatory traineeship.

88. Social indicators for the OECS countries are strong and almost all of the major Millennium Development Goals have been met. Primary education net enrollment ratios, for example, are high, between 84 and 100, and infant mortality rates are low, ranging from 14 to 22 per 1,000. Dramatic progress in access to improved water source and sanitation has also taken place over the last ten years. L i f e expectancy, which ranges from 7 1 to 77 years, is^ comparable to most OECD countries.

5. Environment

89. The category has en environmental C rating. I t i s expected to be neutral on the environment or marginally positive through a higher understanding for the importance o f the environment through an increased level o f education and training o f the workforce in the OECS countries.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [I [XI

Natural Habitats (OPBP 4.04) 11 [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.11) [I [XI Involuntary Resettlement (OPBP 4.12) [I [XI Indigenous Peoples (OPBP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [ I [XI Projects in Disputed Areas (OPBP 7.60)' [I [XI Projects on International Waterways (OPBP 7.50) [I [XI

7. Policy Exceptions and Readiness N o exceptions are sought, and the project i s ready for implementation.

* By supporting the proposedproject, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

20

Annex 1: Country and Sector o r Program Background

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

90. Average per capita income in the OECS region classijes the region as upper middle-income. The average GDP per capita i s US$5,600. It ranges from about US$3,500 in Dominica and St. Vincent and the Grenadines to over US$lO,OOO in Antigua and Barbuda. St Lucia, with per capita income o f $ 4,400 in 2004 and $ 4,800 in 2005, i s j us t below the average for the region. Notwithstanding their status as upper middle-income countries and a lack o f reliable time-series data, poverty in the OECS appears to be increasing and the gap between the rich and the poor could be widening. Income inequality in the sub- region i s also high, with Gini coefficients ranging from about 0.4 to 0.5 (see table1 below). Wh i le poverty i s increasing predominantly in rural areas, migration to urban communities in search o f employment i s also contributing to a r ise in the number o f poor people in towns and cities. On average, although data sources are weak and not easily comparable, it i s estimated that across OECS, one-third o f the population i s below the national poverty lines.

Table 2 Poverty rates in the OECS

Source: World Bank and IMF * The national monthly Poverty Line i s estimated at $156.37.

Economic Growth, Competitiveness and Skills

91. The OECS is at an economic crossroads. In spite o f having made significant strides in development, persistent unemployment and poverty have combined to create an imperative for redefining the OECS strategy for growth and economic de~elopment.~ The ski l ls gap, outlined below, i s a key factor contributing to difficulties in job creation and i s especially pertinent in the OECS as the economies transition out o f more traditional agricultural production o f bananas and sugar. Weak job creation leads to both increasing informal sector employment and to out-migration o f ski l ls that are not being effectively absorbed in the economy. Without an adequate skill base and skill accumulation, new technologies are not adopted in f i r m s and innovation and competitiveness suffers.

92. The OECS economies, driven by tourism and related construction, have undergone a dynamic shvt over the last decade marking a transition from mono-crop based agriculture to service oriented economies. In St Lucia, in particular, this transition has led to a decline in the share o f the agriculture sector in Gross Domestic Product (GDP) from 14.5 percent in 1990 to 3.3 percent in 2005 and an increase

’ This includes the achievement o f the second millennium development goal: Universal Basic Education.

21

of the tourism sector from a 9.6 percent of GDP in 1990 to 13.6 percent in 2005. Consequently, the share of workforce employed in the agriculture sector declined from 21.9 percent in 1995 to 12 percent in 2005, while the proportion o f people employed in the hotel and restaurant sub-sector increased from 9.9 percent in 1995 to 12.2 percent in 2005. Like many other middle income countries, as the global economy relocates production of traditional agriculture products to countries with more available farm land and lower wage costs, there i s strong pressure in St Lucia and in the whole OECS to upgrade the ski l ls o f low- qualified workers in the domestic market to f i l l vacancies in the higher end services sector and fuel economic growth.

93. Economic activity in the medium term has strengthened. The OECS economies experienced a downturn o f growth in 2001 (overall -1.5 percent growth), followed by slow growth in 2002 (0.7 percent), and a steady increase in real GDP growth from 2003 (3.1 percent) to 2005 (4.5 percent). Growth i s expected to accelerate further ahead o f the 2007 Cricket World Cup (CWC) and expected to remain in the 5-6 percent range for 2006.8 In St Lucia, the tourism and construction industries produced some revival o f economic activity in the late 1990s, allowing annual average growth o f 3.3%, but poor conditions in the banana industry and for global tourism resulted in contractions o f 0.4% in 2000 and 3.7% in 200 1. The economy stabilized in 2002, growing by 0.8% and the recovery strengthened from 2004, with growth o f 2.9 in the year rising to 5.8% in 2005.

94. The OECS are highly linked to global business cycles due to their extremely open economies, dominated by the tourism industry. As a result o f growth in the tourism and construction sectors, the countries recently have rebounded from a deep economic downturn in 2000/2001, a direct ripple effect from the US-led economic slowdown. These small, middle-income island economies face significant vulnerabilities to exogenous shocks-as a result o f high debt levels, abrupt changes in the terms o f trade such as the loss o f preferential trade agreements, and natural disasters-that disproportionately subject poor households to transient poverty and high volatility o f consumption.

95. Tourism is a critical sector for the OECS. While tourism and associated downstream activities such as construction, drive the OECS economies, accounting for 28.8 percent o f GDP and 54.2 percent o f export earnings- secondary school graduates have limited hands-on ski l ls and are thus ill prepared by formal education to find a job in the tourism sector. Until recently, the OECS tourism product comprised predominantly beach resorts offering the traditional sun, sea and sand tourism. In St Lucia, tourism i s a great part o f the economy and the main source o f foreign exchange. In St Lucia, in 2005, there was an all- time high o f 317,939 stopover arrivals, more than any other country member o f the OECS, and 6.5% more than 2004. Due to increased competition for the more traditional tourism, the OECS i s in the process o f trying to deepen the impact o f tourism through both increasing the quality o f inputs -- high quality labor, physical infrastructure and security -- alongside increasing the value-added o f tourism which i s increased through adding a wide variety o f tourism services, restaurants, entertainment, tours, and increasing the backward and forward linkages o f tourism in both the domestic and regional economies.

96. Yet unemployment rates, especially among youth, have remained high across the region. Youth unemployment imposes a high risk to society via forgone earnings and increased risks o f deviant behavior. Youth Unemployment relative to Adult Unemployment i s disproportionately high with youth taking an overall 47.6 percent share o f total unemployment in OECS countries. High Youth unemployment in the OECS (32 percent) versus adult unemployment (1 1 percent) highlights an important trend that youth are disproportionately excluded from the world o f work. The Caribbean Youth Report estimates that bringing youth unemployment to the level o f the whole workforce would increase GDP by 1.3 percent. Youth unemployment i s caused by: (i) low labor market relevance o f schooling; (ii) li t t le assistance and knowledge about the transition from schooling to the world o f work; (iii) fewer low-skilled positions in the economy due to a slowdown in traditional industries and agriculture, and (iv) the

IMF Briefing Paper for the 2006 ECCU Regional Surveillance Discussions, June 2006.

22

existence of a high reservation wage due to out migration and opportunities in the informal economy. The failure o f the formal education system to provide multiple pathways to learners and to engage non- traditional students, as well as retain secondary students, has led to a growing population o f disenfranchised, excluded youth who emerge from secondary school with limited ski l ls appropriate for the world o f work. While the OECS i s not in the crisis state o f neighboring Jamaicag and Trinidad and Tobago with regards to youth violence, nevertheless governments in the region have voiced growing concern o f increasing incidence o f youth crime and violence in the OECS. The Government o f St Lucia has sent in the past a clear message that ski l ls training and unemployed youth are priority policy goals to enhance youth employment and make economic growth more inclusive. The Caribbean Social Protection report recommends that social assistance in the OECS could be refocused to providing “a hand-up rather than a handout.” This would provide incentives for market-responsive training programs and in parallel improve targeted conditional cash transfers, job search and other social protection programs. The present high level o f annual economic growth in the OECS provides a window o f opportunity to provide a “hand- up”. This could be done by increasing youth employment through ski l ls training and work attachments and to successfully transition youth from school to work through training and job-search activities.

97. Skills are important for achieving and maintaining competitiveness. A recent report from the World Bank, “Doing Business 2007: Organization o f Eastern Caribbean States” shows that the OECS countries perform well on the ease o f starting a business, thanks to their simple business regulation and relatively flexible employment regulations. St Lucia ranks f i rst among the OECS countries in the “ease o f doing business” regional ranking, and 27th in the global ranking. Since better performance in the indicators measured by Doing Business i s generally associated with greater economic growth and lower unemployment, this report shows once again that there i s an great potential for St Lucia in terms o f future growth. Yet, in order to achieve growth, it i s necessary to provide employers with workers with the necessary skills, The ski l ls o f the labor force are crucial for a country’s competitiveness. A more skilled labor force raises productivity and hence incomes, as well as entrepreneurship. In addition, a strong ski l ls base has the dynamic effect o f facilitating improvements in other growth-contributing areas, notably technology adoption, quality o f government and corporate governance. Numerous economic studies have revealed a significant correlation between investment in the human capital and a country’s future growth and labor productivity. In particular, a recent study has revealed a clear association between investment in the human capital of low-qualified workers and a country’s future growth and labor productivity.” Further, the skill base i s particularly important for economies in transition. Recent economic studies on the competitiveness o f American cities and regions suggest that human competencies may be even more important when facing adverse economic conditions and transitions into new economic sectors, which i s the case o f the OECS countries. Further, research shows that ski l ls training increases the likelihood o f future skills training.

98. Building a skill base is particularly important for competitiveness in the OECS, because of the economy’s projected reliance on services and niche manufacturing in the future. Service industries are generally more labor and skills-intensive than traditional manufacturing and agriculture. Moreover, moving up the value chain in services will entail increasing numbers and levels o f ski l ls in the labor force.” In a survey o f 24 export f i r m s undertaken for the OECS Export Development Unit, the education level o f labor was ranked as the biggest problem.12 In a survey o f 28 percent o f the hotel stock in St. Lucia, hoteliers unilaterally complained o f workers low productivity, Further, hoteliers assessed sk i l l s as

According to the Caribbean Media Corporation, Jamaica was ranked the murder capital o f the world, after 2005 saw more than 1600 people killed, an average o f at least five people murdered a day. lo Coulombe, S., J.-F. Tremblay and S. Marchand, (2004), “Literacy Scores, Human Capital and Growth Across 14 OECD Countries,” Statistics Canada, Ottawa.

For further information and analyzes see Towards a New Agenda for Growth- OECS, World Bank, April 7,2005. ’* Madsen, Bent (2004). “End o f Project Evaluation o f the OECSEDU Export Capability Enhancement Program,” GFA Management. Hamburg, Germany.

9

23

missing links at all levels- from room attendants to management- and generally concluded four key areas for skills enhancement should focus on (i) soft skills; (ii) the ability to learn; (iii) entrepreneurship ski l ls or self initiative, and (iv) professional skills, in particular management and chefs’ skills.

99. Further, the project i s well timed such that it dovetails with the existing regional efforts on accreditation and regional harmonization o f training standards currently being reviewed by CARICOM. Begun in 1990, the CARICOM Strategy for Technical and Vocational Training has led to the creation o f the Caribbean Association o f National Training Agencies (CANTA) in 2004 and has created an agreement for a shared qualification framework, mutual recognition o f qualifications, and the standards on which they are based. The agreement lays the foundation for a Caribbean Vocational Qualification or CVQ. St. Lucia is, at present, the only OECS country which i s an Associate member o f CANTA, but the momentum i s there for the other OECS countries to join.

100. Regional collaboration is important within skills training. Without a change to the type o f ski l ls youth are gaining prior to entering the labor force, the advent o f the Caribbean Single Market Economy (CSME), which entails free movement o f certain categories o f labor, could further exasperate the returns to skilled labor and increase youth unemployment. However, regional initiatives for closer economic integration have had limited success. With the exception o f the regional monetary authority, regional entities are less effective as national authorities occasionally have resisted transferring decision-making responsibilities.

Sector Background for the Education and Training Sector

101. The OECS have broad access to education and invests substantially in education. All the OECS countries have achieved universal primary enrollment and completion with the exception o f St. Vincent and the Grenadines, which i s expected to attain this within 2007. Further, enrollment rates in secondary education have been rising rapidly. However, completion rates are lagging. Further, the quality o f education remains a major issue. The OECS education sectors are well-funded but less well managed as outputs are not consistent with the considerable public resources dedicated to them. The OECS countries invest a substantial proportion o f public resources in education almost exclusively via direct institutional funding. For example, St. Lucia invests on average 6.8 percent o f GDP compared to 4.8 percent for OECD countries and 4.1 percent for LAC. Improving the relevance o f education and training through closer linkages with employers would increase the outcomes o f this high investment.

102. The lack of skilled labor is further compounded by the limited accredited technical training currently available in the OECS. While some second chance education programs exist in St Lucia for high school-age students- such as CARE and the National Skill Development Centre - demand far outstrips supply and most public sector offerings are concentrated in community colleges which are reputed as producing graduates with less than adequate relevance and effectiveness for employers’ needs. Some transition toward orienting vocational training programs to international standards and accreditation has begun in the OECS, TVET has traditionally been offered as a second class alternative for students who do not succeed academically. Traditionally, TVET education programs have been used as a substitute for secondary education (senior primary institutions are a good example).

103. Better preparation of young people through more relevant education and training would increase employment outcomes for youth. Education i s a key factor for a successful career in the OECS. For example, in St. Lucia, a worker with secondary education has on average a 73 percent higher wage than one with only primary education, while a worker with post secondary education earns a wage 146 percent higher than a primary education holder. The OECS governments have taken strong actions to reap these returns by advancing universal secondary education. However, research in the OECS points out that schooling i s too focused on academic careers and insufficiently focused on ski l ls demanded o f labor market entrants with secondary school level completed. Given the very low estimated tertiary enrollment rates- St. Lucia (14 percent), combined with the relatively high unemployment o f youth, 39 percent in St Lucia, there i s an imperative to provide more options for youth to gain ski l ls relevant to the labor market.

24

Further, there i s a need to better link the education system with labor demand in secondary school. At present, teaching does not impart life sk i l ls (reliability, communication, teams ski l ls etc) demanded by the services sectors and there i s very limited, career counseling advisors to secondary students on how to gain post high school employment. Finally, tertiary education enrollment rates in the OECS in general, and in St Lucia in particular, are lagging below the LAC average o f 24 percent (St. Lucia 14 percent) and a world average of 25.7 percent. Improving curricula and teaching in secondary and tertiary education to better reflect labor market demands i s the f i rst best option, but it wi l l take time, and wi l l probably never eliminate difficulties in transitioning from school to work. At present, there i s a need for specific training of young people to actively assist this group gaining a f i rst job experience and to reduce the share o f youth losing human capital and engaging in deviant behavior.

104. The Caribbean Education Strategy Report outlines the Caribbean region’s education strategy. I t was designed to provide the framework for educational reform throughout the Caribbean and was endorsed by a l l the OECS Governments in 2000 and emphasizes the importance o f producing graduates relevant to the evolving labor force needs. The report cites the level o f competitiveness in the labor force as a “burning issue” and asserts that “besides the cognitive skills, today’s worker must possess appropriate attitudes to the world o f work, and sound communication skills”. Whi le there i s wide agreement that ski l ls must be adjusted to fit the demands of the key economic sectors- led by tourism- a mismatch between the supply and demand of labor st i l l exists. To best align the ski l ls demanded and supplied in modern OECS societies, it wi l l be important to build consensus around the ski l ls needed for the world o f work among Government, Caribbean CXC officials and pan-regional education and industry standards, the private sector, youth, and civil society.

105. m i l e formal impact evaluations are lacking, traineeships seem a successful means for youth to gain a foothold in the labor market. Hal f o f the trainees at the NSDC report finding employment at the end o f such programs. However, employers criticize public training as being o f low relevance. Further, training youth according to standards valued by employers and the government would provide youth with an added incentive for training. The challenge i s to design an efficiently operating training program that yields social gains by training unemployed youth and, at the same time, provides the private sector with well-prepared and motivated trainees.

25

Annex 2: M a j o r Related Projects Financed by the Bank and/or other Agencies

Sector Issue Addressed

(listed in Section B.2)

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

Project

1 Status, Amount, Project Objectives Bank-financed operatio Access to basic services

education to make it more equitable

I

I

Prevent the spread o f

, in the OECS St. Lucia Poverty Reduction Fund Project (P054939). This project closed on 06/30/2004. Total amount: US$1.5 mil l ion and SDRl.2 million. Objective: Develop the institutional and operational framework for a social fund model, and pilot i t s ability to increase access to, and provide quality o f basic social and economic infrastructure, and services, among St. Lucia's vulnerable poor. Grenada - OECS Education Development Program (P077759). This project i s currently active, expected to close on 09/30/2007. Total amount: US$8.0 million. The new objectives are to: (i) increase equitable access to secondary education, including replacing and rehabilitating secondary schools damaged by the passage o f Hurricane Ivan on September 7,2004; (ii) improve the quality and efficiency o f Secondary Education, and (iii) strengthen the institutional capacity o f the education sector. St. Vincent and the Grenadines - OECS Education Development Program in (P086664). This project i s currently active, expected to close on 12/30/2008. Total amount: US$6.2 million. The program objective i s to build human capital in the OECS which, in turn, w i l l contribute to the diversification o f their economy and more sustainable growth. This w i l l be achieved by: (a) increasing equitable access to Secondary Education; (b) improving quality and efficiency o f Secondary Education; and (c) strengthening the institutional capacity o f the Borrower's educational sector. St. Lucia - OECS Education Development Program (P077712). This project i s currently active, expected to close on 09/30/2008. Total amount: US$12.0 million. The objective i s to build human capital in the OECS which, in turn, w i l l contribute to the diversification o f their economy and more sustainable growth. This objective w i l l be achieved by: (i) increasing access to secondary education; (ii) improving the quality o f the teaching and learning process, wi th more direct interventions at the school level and a focus on student-centered learning, and (iii) strengthening management o f the sector and governance o f schools. St. Kitts and Nevis - OECS Education Development Program (P075978). This project i s currently active, expected to close on 39/30/2008. Total amount: US$5.0 million. Objectives: Same as St. Lucia's. Grenada - 2"d Phase APL HIV/AIDS (P076715). The project i s

Latest Supervision (ISR) or OED Ratings

(Bank-financed proi

Implemen -tation

Program 0

~

S

MS

S

MS

S

U

:ts) Develop

ment Objective (DO)

S

MS

S

MS

MS

Mu

26

HIV/AIDS, improve access to care for HIV/AIDS

Expand and improve tertiary education via use o f I C T and improved collaboration

Reforms in the telecommunications sector and supply o f informatics-related ski l ls

currently active, expected to close 06/30/2009 (revised closing date). Total amount: US$6.0 million. The objectives are: 1) curbing the spread o f HIV/AIDS epidemic; 2) reducing the morbidity and mortality attributed to HIV/AIDS; 3) improving the quality o f l i f e for persons living with HIV/AIDS (PLWAs); and 4) developing a sustainable organizational and institutional framework for managing the HIV/AIDS epidemic over the longer term. St. Vincent and the Grenadines HIV/AIDS Prevention and Control Project (P076799). The project i s currently active, expected to close on 06/30/2009. Total amount: US$7.0 million. The Project w i l l support the national program that aims to prevent and to control the spread o f the epidemic, and to mitigate the socio- economic impact o f the disease on the population. St. Lucia HIV/AIDS Prevention and Control Project (P076795). The project i s currently active, expected to close 06/30/2009. Total amount: US$6.4 million. The Project w i l l support the national program that aims to prevent and to control the spread o f the epidemic, and to mitigate the socio-economic impact o f the disease on the population. St. Kitts and Nevis HIV/AIDS Prevention and Control Proiect (P076798). The project i s currently active, expected to close" 06/30/2008. Total amount: US$4.0 million. Project aims to support selected activities o f St. Kitts and Nevis' Strategic Plan for the National Response to HIV/AIDS, under the four component: advocacy and behavior change; prevention in high risk groups and general population; access to treatment, care and support for persons l iving with HIV/AIDS; surveillance, epidemiology and research. Caribbean Learning and Knowledge Network (together wi th the EU). The overall objective i s to contribute to upgrading and diversifying ski l ls and knowledge o f the Caribbean people, through greater regional connectivity and collaboration. The project purpose i s to develop Regional capacity to uti l ise affordable I C T to enhance the competitiveness o f i t s labour force. The project activities w i l l allow extension o f the C K L N to a total 50 institutions by project conclusion. The main activities are: (i) A series o f consultant inputs and workshops in support o f tertiary education institutions in the development o f strategic planning, financial and human resource management capacity, (ii ) Support for consultations regarding financing models for tertiary education, (iii) provision o f bandwidth access at affordable prices, (iv) Workshops to strengthen technical IT and human capacities in the institutions, (v) Implementation o f region-wide mechanisms and systems to facilitate the movement o f knowledge and courses, and (vi) Strengthening o f the C K L N Foundation to administer the Region-wide elements o f the project. The Organization o f Eastern Caribbean States (OECS) Telecommunications Reform Project (P035730). Project closed on 12/3 1/2004. Revised amount: US$5.5 million; Original amount: US$6.0 million. Project aimed to introduce pro-competition reforms in the telecommunications sector and increase the supply o f informatics-related sk i l l s in the five OECS borrowing countries-- Grenada, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines, and Commonwealth o f Dominica. An independent regional regulatory authority was to be established and new sector legislation was to be passed in each country in the course o f project :rating at time o f closing).

27

resilience, preparedness, and ability to respond to the effects o f natural disasters

The OECS countries' institutional capacity to develop and implement security plans for industry's energy needs, airport and seaport facilities

OECS Telecommunications & I C T Development Project (P088448). The project i s currently active, expected to close 12/3 1/2009. Total amount: US$2.71 million. Improve the access, quality and use o f telecommunications and I C T services to achieve socio-economic development in the OECS. St. Vincent and the Grenadines Emergency Recovery and Disaster Management Project (P069923). Project closed on 06/30/2006. Total amount: US$5.91 million. The program aimed at strengthening St. Vincent's ability to manage efficiently and effectively emergency situations, in order to reduce the likelihood o f loss o f l i fe and assets. It also aimed at enhancing the capacity o f disaster management agencies and mitigates the adverse effects o f disasters that regularly strike the island, in particular, floods, landslides, sea surges, and hurricanes. To this end, the project aimed to support the strengthening o f physical infi-astructure to better weather natural disasters and enhancing institutional capacity in order to improve responsiveness once disasters have struck. (rating at time o f closing) Grenada Hurricane Ivan Emergency Project (P092692). The project i s currently active, expected to-close-on 06/30/2008. Total amount: US$lO.O million. The project aims at supporting the recovery efforts o f the Government o f Grenada through the financing o f critical imports and rehabilitation activities in key social sectors. Due to the catastrophic losses in the education and health sectors, and their core importance to Grenadian society, the focus o f this project i s to rehabilitate infrastructure in these areas. St. Lucia Disaster Management Project I1 (P086469). The project i s currently active, expected to close on 12/31/2009. Total amount: US$7.50 million. The project aims at further reducing the country's vulnerability to adverse natural events (hurricane, floods, etc.) through investment in risk management activities. As such, the objectives o f the project are to further strengthen (a) infi-astructure against the impact o f adverse natural events (hurricanes, flooding, etc.) through the implementation o f physical mitigation measures; (b) the response capacity in case o f adverse natural event (hurricane, flooding, etc.) through capacity building, equipment purchase and investment in emergency infrastructure; and (c) the institutional capacity o f the various ministries and agencies dealing with disaster management through the provision o f adequate facilities, critical equipment, technical assistance and training. St. Kitts and Nevis Emergency Recovery Project Country (P077684). Formally closed: 12/3 1/2005. Total amount: US$4.40 million. The project aimed to help safeguard and maintain the productive capacity o f the country's tourism sector, notably by securing the industry's energy needs in the aftermath o f the September 1 Ith events; aimed to enhance security at key airport and seaport facilities in line with international standards, with the aim o f preventing hrther acts o f terrorism and safeguarding the sub- region's image as a safe destination; and aimed to strengthen the country's institutional capacity to develop and implement security plans, procedures and measures as mandated by the international :ivil aviation and maritime transport regulatory agencies (rating at time o f closing). St. Vincent and the Grenadines Emergency Recovery Project (p076822). Formally closed: 12/3 1/2005. Total amount: US$3.20 million. Same as above (rating at time o f closing).

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Bank-financed operatioi

Other donor-financed p STEP (OAYCIDA)

EU

in LAC on lifelong learning and training Dominican Republic Youth Development Project (P096605). Total amount: US$25.0 million. Project i s not yet effective. The project’s development objective i s to support the Government of the Dominican Republic (GoDR) in improving the employability o f poor at-risk youth by building their work experience and l i fe skills, and expanding second chance education programs to complete their formal education. Honduras Nutrition and Social Protection Project (F‘082242). The project i s currently active, expected to close on 06/30/2010. Total amount: US$20.0 million. The project development objective i s to improve Honduras’ social safety net for children and youth. This would be achieved by (i) improving nutritional and basic health status of young children through and expanding the successful AIN-C program, and (ii) increasing employability of disadvantaged youth through piloting a First Employment program. The coordinated implementation of these interventions constitutes the first step towards consolidating the government’s institutional and technical capacity to formulate, coordinate, and monitor a comprehensive social safety net. This objective supports government’s strategy o f fostering human capital investment among poor families in the poorest municipalities of the country to reduce poverty. )jects in the OECS The Organization o f the American States (OAS) Small Tourism Enterprise Program (STEP), begun in 1998. The program targets the OECS and eight other countries in the Caribbean. The program has two key objectives: 1) enhancing the competitiveness of tourism enterprises to meet international standards, and 2) Training and capacity building programs tailored to the requirements of small tourism enterprises. The first component of the program was designed to help small hotels in the Caribbean gain access to technology and provide internet-based training. The second component of the project focused on the need for skil ls training to improve service quality in the region. The STEP project secured a licensed agreement with the American Hotel and Lodging Association- Educational Institute(AHLA-EI) and with AHLA consent modified the AHLA certified l ine staff “Skills for Success’’ training module to be appropriate for the small hotel sector in the Caribbean. The project’s central goal- to increase the competitiveness o f small hotels in the region in the global tourism market-has been met and the program has worked with over 7000 small hotel employees. Over 1000 hotel employees from establishments across the Caribbean have been certified and 327 Caribbean trainers certified to continue the delivery of the AHLA certified ‘Skil ls for Success’ adapted training module. The education projects which the Delegation implementedis currently implementing in St. Lucia are: National Skills Development Centre (NSDC), the School Feeding Programme, and the Multi-Annual Training Programme.

1) NSDC: NSDC i s a relatively new organization established to promote sk i l l s training for displaced farmers, farm workers and other un- and under-employed. The on-going programme o f support to NSDC provides financing, La., for the expansion of coverage

S S

29

(new plant at rural site), the running o f training courses at the main centre and the development o f job attachment schemes.

2) School Feeding Programme: The overall aim o f the project was to develop the human resource base o f St. Lucia by improving the quality o f access to education and to develop a sustainable school- feeding programme. In particular, it aimed at achieving this by: i) improving school attendance, particularly at rural schools through the provision o f f iee lunchtime meals; ii) developing school-based small-scale farms. The project consists o f the following activities: Phase 1: - The provision o f meals to 10,700 targeted students for one year - The development o f school gardens - The development o f school poultry uni ts Phase 2: The provision o f drip irrigation systems, water tanks, fishponds, plant nurseries and storage cupboards

3) Multi-Annual Training Programme: The primary aim o f the project was to produce highly skilled cadres in specialised areas. Scholarships were provided to candidates selected on the basis o f aptitude and a commitment to serve the St. Lucian government. Training took place, at regional universities (University o f West Indies) as well as overseas universities (primarily situated in the UK) .

30

Annex 3: Results Framework and Monitoring

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

Results Framework

To increase the employability o f youth through private sector driven training

Intermediate Outcomes

1) Percentage o f enrolled youth employed fifteen months after the start o f the training

I iate /Output Indicators

Component 1 : Ski l ls training for unemployed youth

Sub-component 1.1 : Training Scheme

To increase levels o f training among unemployed youth through the establishment o f a competitive training scheme that finances private sector- driven training and traineeships

1) Number o f unemployed youth enrolled in training

2) Percentage o f enrolled youth that become certified one year after the start o f the training

3) Percentage o f trainees in other sectors than tourism

Component 2: Improving the policy framework for training

Sub-component 2.1 :

To develop an improved policy framework for delivering training by enhancing OECS collaboration in training and introducing occupational standards to increase quality and value o f training:

I

1) Number o f CVQ certifications awarded

utcome Information

These Project Development Outcome Indicators will be used to monitor the overall progress towards project goals.

Employment levels among youth enrolling in the training will be compared to employment levels among o f a control group.

us te te Outcome /Ou itoring

Indicator 1 will be used to measure the scope o f the intervention.

Indicator 2 wil l be used to monitor the efficiency the various training providers at training and certifying trainees.

Indicator 1 and 2 will, when combined, give the reported intermediate outcome indicator referred to in the main text.

Indicator 3 will be used to measure the successful expansion o f the training scheme to sectors outside o f tourism.

These intermediate indicators need to be monitored to assess progress to Intermediate Outcome Indicator # 2.

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I I I Quality assurance for the certification system

Operationalization o f a certification system

Sub-component 2.2: To improve policy framework for delivering training by development o f Policy Action Plans

2) Number o f accredited training providers

3) National Qualifications register in operation

1) Action plan for the inclusion o f vulnerable groups in the economy

2) Action plan to improve the relevance and sustainability o f training

~ ~~~

Component 3 : Project Management and institutional strengthening

To strengthen institutional capacity to better implement, monitor and plan training through the strengthening o f the project implementing agencies

1) Percentage o f above indicators and o f additional implementation indicators reported on a yearly basis by NSDC13

This indicator will monitor the timely reporting o f the project implementing agencies

Arrangements for results monitoring

106. The responsibility for collecting data resides with the NSDC with assistance f rom the TVET Unit in Ministry of Education for the indicators for sub-component 2. I. NSDC will keep track o f the indicators through a database o f al l the new applicants and trainees. This database will be improved within the first year o f the project, and wil l thereafter be constantly updated to make sure that tracking information for applicants and trainees i s available. Data collection for the employers and training providers i s also NSDC’s responsibility. In addition, from the database on employers it will be possible to match the employers in the course database with other databases. Lastly, the quality o f training providers wil l be recorded in the database by the outcome of the pre-qualification and the outcome of previous training.

107. To evaluate the impact of the training, a tracer study wi l l track the impact of training in terms of employment and salary on the trainees. Delivery to the Bank o f this tracer study by mid term evaluation i s one o f the disbursement milestone that if complied with will increase the finance percentage of the Bank. Baseline data on applicants will be collected by NSDC at the time o f application. This baseline data contains background information regarding prior schooling, employment history, previous risk behavior (self-reported) and social background. Since this information i s needed for selection o f applicants and implementation of the training scheme, there i s no additional cost to collecting baseline data o f applicants, apart from re-designing forms. The impact o f training on beneficiaries will be compared to those o f a

,

l3 The additional implementation indicators to be reported by NSDC are: (i) The number o f f m s involved in training proposals, and (ii) The number o f trainers involved in training proposals. These wil l be used to monitor fm interest in the training fund, trainer interest in the training hnd, and market demand for training supported by the training fund.

32

comparison group. The control group wil l be extracted from the data collected by NSDC about applicants and trainees through a questionnaire. The control group wil l constitute applicants that are not selected to participate to the training under the project. NSDC will s i g n up sufficient number o f unemployed youth during the first year of the project to make a subgroup o f at least 125 not yet in receipt o f training by year three o f the project. This group will constitute the comparison group. It i s noted that full comparability between the treatment and non-treatment group could be difficult, given the non-randomized selection o f trainees. Hence, the difference in employment outcome between the treatment group and the comparison group to be identified by the tracer study cannot necessarily be fully ascribed to the impact o f the training program. There are four reasons, why it was decided not to include funding for a rigorous impact study on the project: (i) a rigorous impact study would require a randomized treatment o f applicants, which i s likely to result in sub-optimal matches o f trainees and employers, (ii) the number o f trainees i s relatively small in this project, which reduces the statistical certainty o f the findings, and (iii) the costs o f undertaking the impact study could amount to a relatively large share o f the project finance, five percent, and (iv) a large number o f training programs have been or scheduled to be evaluated by either the IDB, IEG o f the World Bank and LCSHD.

108. Project management in NSDC necessitates a number of diyerent data collection instruments and databases, notably on applicants, trainees, training providers and involved employers. The development o f databases for project specific purposes will be financed from project funds. These data bases will be used to monitor the implementation o f the project. In addition, the data bases on applicants wil l be used to sample graduates and comparable non-trainees for tracking. This will be the basis o f the tracer study.

109. Further, the project draws on the existence of a quarterly survey and report on unemployment in St Lucia by the statistical of$ce. This information i s deemed to be reliable. Due to high fluctuations in unemployment rates over the seasons, it will be necessary to base all comparisons on seasonally adjusted on year-average data. There i s currently sufficient capacity to collect unemployment information at the national level.

33

Arrangements for results monitoring

Baseline Tar2et Values Data Collection and Reporting Outcome Indicators 2010 2012

Data Collection Responsibility for (results expected over period the 2006 (end of (end of Frequency and Reports

entire period of the APL) operation 1) operation 2) Instruments Data Collection

Number oftrainees enrolling and successfully completing a private Implementing sector-driven training program in 0 1,265 2,200 Annual Administrative data agencies participating countries * (accumulated (NSDC for St. Lucia) over the duration of the program)

. . .. * A prIvate sector dnven trammg program IS understood to be a program where the a prIvate sector finn has to actively participate m the applIcatIOn for trammg, selectIOn of training provider and/or pay part of the training cost prior to the initiation ofthe training.

Target Values Data Collection and Reporting Project Outcome Indicators Baseline YRI YR2 YR3 YR4 Frequency and Reports Data Collection Responsibility for

Instruments Data Collection

I) Percentage of youth NA 65 68 71 75 Yearly Follow-up/tracking NSDC employed fifteen months of trainees and after the start of the training comparable group of

non-trainees Intermediate Outcome/Output

Indicators

I) Number of unemployed 0 250 450 600 550 Yearly Project NSDC youth enrolled in training administration

documents 2) Percentage of enrolled 0 65 67 69 71

youth that become certified one year after the start of the training

3) Percentage of enrolled 0 5 10 20 30 youth in training in other sectors than hospitality

I) Number ofCVQ 0 0 460 415 390 certifications awarded

34

2) Number of pre-qualified or 0 15 22 28 35 accredited training providers

3) National Qualifications No No Yes Yes Yes register in operation

I) Action plan for the inclusion No Yes One time delivery of NA NSDC of vulnerable groups in the report economy

2) Action plan to improve the No Yes On-time delivery of NA NSDC relevance and sustainability reports of training

a) Study for Yes Career Mobility

b) Labor market Yes needs assessment

c) Future Yes financing of training

I) Percentage of above 100 100 100 100 100 On time delivery of NA NSDC indicators and of additional report implementation indicators reported on a yearly basis by NSDC14

14 The additional implementation indicators to be reported by NSDC are: (i) the number offrrms involved in training proposals, and (ii) the number of trainers involved in training proposals. These will be used to monitor firm interest in the training fund, trainer interest in the training fund, and market demand for training supported by the training fund.

35

Key IDA 14 Sector Outcomes

The reporting on these indicators is a requirement for IDA projects.

Assessment: There is existing capacity to monitor under-five mortality rates, primary education completion rates, and access to water source.

Given its emphasis, the project will collaborate with the Statistics Institute in the following manner: Quarterly unemployment information will be extracted from existing data collection efforts by the Statistics Institute. The Statistics Institute will be involved in the design of data systems for the project.

While these actions will ensure collaboration with the Statistics Institute, it is not expected that they will directly enable the production of data on access to all-season roads.

Indicator Dominica Grenada st. Lucia St. Vincent and the Grenadines

Under-five mortality rate (2004) 14 21 14 22 Primary education completion rate 107.4 90.2 101.6 92.9 (2004) Percentage of popUlation with 97 95 98 n.a. sustained access to water source (2003) Percentage of rural population n.a. n.a. n.a. n.a. with access to an all-season road Note: Source: World Development IndIcators.

36

Annex 4: Detailed Project Description

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

110.

Component 1 - Skills training for unemployed youth - US$3.56 mi l l ion (67 percent o f project

Component 2 - Improving the policy framework for training - US$0.84 m i l l i on (16 percent o f

Component 3 - Project management and institutional strengthening - US$0.92 mi l l ion (17

11 1. The components are closely linked. Component 1 wil l finance training. Component 2 wil l support policies and introduce competency-based standards to improve the quality o f training and assistance to youth under Component 1, while Component 3 finances and strengthens project management.

112. Regional activities w i l l be financed under all three components .While it i s important and advantageous for the countries participating in the A P L to undertake activities at the regional level, the extent to which this can be done will depend on the pace o f integration o f the countries into the program. Under component 1, regional activities would be two-fold: (i) training providers throughout the OECS will be eligible to compete for the training o f St. Lucian youth; and (ii) representation f rom other OECS countries in the project management, which could be in either the project’s technical evaluation committee or the projects’ steering committee. Under Component 2, regional activities are expected to include the development and printing o f informational material, training o f assessors, collaboration o f regional experts in workshops on standards, establishment o f an OECS register o f qualifications, and implementation o f a common labor market needs assessment. Finally, regional activities under Component 3 include impact evaluation o f training interventions and procurement o f information management systems.

The project wil l consist o f three interlinked components:

costs)

project costs)

percent o f project costs)

Component 1 - Skills training for Unemployed Youth - US$3.56 million

113. This component wi l l Jinance the operation and expansion of a training scheme for disadvantaged, enemployed youth. This scheme wil l subsidize training o f around 1,850 unemployed youth and their placement in traineeships with private f i r m s to gain on-the-job experience. The National Skills Development Centre (NSDC) affiliated to the Ministry o f Education will implement the training scheme. On average, the scheme will invest a unit cost o f US$1,351 per trainee. The Training Scheme i s competitive and involves to a large extent the private sector in training provision, selection o f training providers and on-the-job training. In the first round o f the project, the Training Scheme i s expected only to fund training within the hospitality sector in order to gain experience before expanding to other sectors. This sector has the most employment vacancies and requires only modest training equipment to commence training. During the project, training wil l be expanded to other economic sectors, expected to be Agriculture, Information and Communication Technologies, and Construction. The component consists o f two subcomponents:

0

0 Subcomponent 1.2 Increasing public awareness - US$0.16 m i l l i on (4 percent o f

Subcomponent 1.1 Skills Training - US$3.40 mi l l ion (96 percent o f component)

component)

37

Subcomponent 1.1 Skills Training - US%3.40 million

1 14. This sub-component wil l finance the training of unemployed youth through a competitive training scheme. The training will, in partnership with the private sector, equip youth with technical and l i f e skills that are demanded in the labor market. This increases the probability that the trainees will gain employment at the end o f the program. The training scheme will be financed with credit with co-financing from the government and the private sector. The operation o f this training scheme i s the main activity under this component. The description o f this subcomponent i s organized into the following sections:

a. Principles for the operation o f the training b. Overview o f the Training Scheme Workings c. Eligibility criteria d. Matching and Selection criteria e. Financing o f training

a. Principles for the operation of the training scheme

1 15. 0

0

0

0

0

0

Six principles acquiredfrom lessons learnt guided the design of the training scheme: Training i s demand driven and offered in partnership with the private sector. Training addresses issues of employability and career mobility of the workforce. Training i s short and focused. Training includes a traineeship in companies. Training combines technical and behavioral skills, and The scheme seeks efficiency, excellence and value in implementation through regional collaboration and recognition o f skills.

b. Overview of the Training Scheme Workings

116. The training scheme wil l on a regular basis organize and finance training of young unemployed individuals. Each “round” o f training entails the following overall steps: (i) outreach to, and signing-up of, young unemployed (trainees), firms and training providers; (ii) a call for course proposals (iii) matching eligible trainees, firms and providers; (iv) pre-service training, (v) traineeship, (vi) certification o f skills, and (vii) evaluation. (See Figure 1)

117. The training wil l impart both life skills and technical skills. The NSDC will provide a short mandatory training program, called Productivity Enhancement Training (PET), with the aim of teaching l i f e skills to the trainee. This will last approximately one to two weeks. Thereafter, the training provider will offer an estimated four months of group training with the aim o f imparting technical occupational skills. The technical occupational skills training could include language training if this competence i s demanded by the firm. This i s followed by an estimated four months traineeship in a firm. During the traineeship, the trainer will supervise the trainee. Further, each firm i s required to designate a mentor who will guide the trainee. At the end of the traineeship, a certification o f the trainee’s competences will take place.

38

Figure 1: Overview of the workings o f the training scheme

Eligibility Criteria

Trainee

Employer - Pre-service training - Traineeship + Certification (Outreach) (4 months) (4 months)

Training Provider (Outreach and pre-qualification)

Verification

c. Eligibirity criteria

between-the ages of 17-30 0 verification o f regular pension contributions to The National

Insurance Corporation database; 0 communication with community officers in case of doubt;

ccredited by a well-known foreign training accreditation

39

Belong to an eligible economic sector

Occupations Occupations for which standards have been adopted in the Caribbean Vocational Qualification Framework

d. Matching mechanism between employers, trainees and training providers

118. Matching the right trainee to employer and training provider i s critical to maximize the probability o f success at the end o f the program. This requires a trilateral match in that: (i) the capabilities and attitudes o f the individual must meet the employer’s culture and labor needs; (ii) training has to be synchronized with the employer’s needs; and (iii) trainees have the abilities to learn enough during the pre-service training to successfully complete the training. Since each match i s unique, the three partners in the process (Le. trainee, employer, training provider) have to play an equally important role. The following mechanism will allow for such a match:

keeping records on the training and each trainee. members in the sector association are automatically eligible; non-members o f the sector association must submit documentation that they belong to an eligible sector.

CARICOM database o f occupational standards.

Enrolling and selecting interested vouth into the training program 0 Young persons who have applied or are interested may attend an orientation session,

which i s a group session that outlines the program including the structure o f the training, expectations from participants, etc. NSDC will schedule an appointment with signed-up youth to attend a behavioral counseling session with an NSDC officer. The purpose o f the Career Counseling session i s three fold: (i) evaluate their eligibility for the program; (ii) identify strengthens and weaknesses in trainee aptitude, and (iii) recommend possible training areas and occupations best suited to the trainee. Further, the counseling session will identify basic skill gaps, and the candidate could be guided and encouraged to enroll in second chance education programs, such as the National Education and Literacy Program. Eligible youth are entered into the NSDC database for potential trainees.

0

0

Generation o f uroposals bv emulovers and eligible training providers Eligible employers review their training needs and capacities NSDC provides a l i s t o f pre-qualified training providers to f i r m s Proposals are submitted. This can be done in three ways:

0

0

0

o By direct match. Eligible training providers contact employers directly. Providers propose training and agree with employers to training a certain number o f trainees. With a training broker. A sector business association, such as the St. Lucia Hotel and Tourism Association (SLHTA), or another institution coordinates a training proposal for several (smaller) employers.

o Firms alone. Firms can submit a request for training o f a certain number o f trainees. NSDC will seek to incorporate those requests with other proposals or act as a broker.

The training proposals are submitted to NSDC. These proposals are binding to the training providers/employers. This means that, if they are approved for funding, training providers and employers are bound to execute the training. Potential sanctions include exclusion from participation in future calls for proposals.

o

0

40

Selection o f winning proposals The MOF sets the annual budget availability for the project. A technical evaluation committee for each sector will review the training proposals and ensure that the proposals meet the eligibility criteria. This body will consist o f well- respected and independent individuals who have no conflict of interest with the training proposals. In particular, the members cannot be linked to any submitted training proposal. The committee, as a minimum, will consist of: a training expert from NSDC, a pedagogy specialist, and a recognized sector specialist. The technical evaluation committee submits i t s recommendations for approval to the Steering committee that will make the final selection. In case the demand for funds exceeds the amount allocated for training, the technical evaluation committee will use these additional pre-defined and published selection criteria to select the winning proposals:

The amount that the firms/employers are willing to pay in excess o f their mandatory 10 percent contribution. Preferential treatment for small establishments (less than 50 employees). Prior performance o f training providers

o

o o o Prior performance o f employer

These selection criteria reflect the project priorities. They are established by the project committee and will be updated regularly based on trainees’ performance and outcome of previous selection. NSDC verifies the number o f trainees required from the winning proposals. NSDC and training providers select and allocate the matching number of trainees from the database with the winning proposals. The NSDC works alongside the training provider to ensure that each trainee matches the requirements of the chosen training. The training provider will be rewarded based on its trainee’s completion rate. The provider will therefore have an incentive to match the trainee’s capacities and attitudes with the requirements. Although, this may lead to “cream-skimming” among the unemployed, i.e. the best-prepared among the unemployed will receive a traineeship, this mechanism will: (i) maximize the success o f getting a young person hired and permanently out of unemployment, which will create a reputation of program success, (ii) align the incentives of employer, provider and NSDC, and (iii) best contribute to firm’s competitiveness by providing the best suitable candidate among the unemployed youth.

As mentioned, this mechanism involves to a large extent f i r m s and training providers.

41

S K . t t ‘F, i

J

R

42

largest training providers. The unit cost i s composed of the training facilitator’s fee based on 16 trainees per course, materials and equipment, and a stipend payable to trainees for transportation. The unit cost will be reviewed annually to ensure that it remains in sync with average market rates for training. Calculation o f the unit cost i s detailed in the table below.

Pre-service Training Estimates EC$ unit Description

Facilitators 3500 Month for one course 3500 x 4 months = 14000 trainee - stipend 300 Month materials & equipment 2500 Month EC$10,000 per course / 4 months

Unit cost per trainee (pre-service) Facilitators 875 (14000/16 students) trainee - stipend 1200

trainee/ EC$lO,OOO per course at 16 trainees per materials & equipment 156.25 month course divided by 4 months total 223 1.25

An additional amount was added to cover the stipend during the l i fe skills training (PET) which precedes the technical skills training and would last about two weeks.

Payment of training; providers

122. Training providers wil l be paid based on outcomes. Training providers will receive the unit cost per trainee, minus the amount o f the stipend regardless o f the occupation for which the training i s provided. Training providers will be paid 40 percent of this figure upon commencement o f training; and 3 0 percent upon completion o f the technical classroom training. The remaining 30 percent will be disbursed only for those trainees who successfully complete the full training including the apprenticeship and obtain certification. This payment schedule provides a strong incentive for training providers to offer quality training that ensures their trainees learn and become certified.

123. During the project, the Training Scheme wil l be expanded to other high-priority sectors with hiring needs. In the first round o f the project, the training scheme i s expected to fund only training within the hospitality sector. Informed by the results o f the first round and a consultant study, the training program will be expanded to other sectors. To the extent possible, the training model for other sectors will build upon the relevant rules and procedures for the training scheme for the hospitality sector. However, it i s expected that the need for technical training and training equipment for other sectors will exceed those for the hospitality sector. The length o f training and traineeship may therefore have to be adjusted along with the unit cost per trainee. Further, it would be necessary to make prior agreements with public (or private) training providers regarding access to specialized training equipment that only one or very few providers have in St. Lucia or the OECS.

Subcomponent 1.2 Increasing public awareness - US$0.16 million

124. The project’s impact depends critically upon its ability to attract unemployed youth, f i r m s and training providers. During project preparation, there has been extensive consultation and involvement o f these three groups by means o f focus group, representative membership o f the government’s preparation team, and ad-hoc meetings. This sub-component will finance activities

43

44

Component 2- Improving the policy framework for training- US$0.84 million (16 percent o f project)

125. This component wil l finance activities to improve the policy j-amework for delivering training. This wil l be done by enhancing OECS collaboration for training to reap benefits o f economies o f scale, introducing occupational standards to increase quality and value o f training, and developing policy action plans. Activities to be financed include consultancies, employer’s surveys, minor equipment, and travel. Given the substantial f ixed costs involved with policy development, the project will seek cost-sharing with other OECS countries. The component consists o f two subcomponents:

2.1 Introduce occupational standards, certification and quality assurance - US$0.48 mi l l ion (57 percent o f component)

2.2 Development o f policy action plans - US$0.36 mi l l ion (43 percent o f component)

Subcomponent 2.1 Introduce occupational standards, certification, and quality assurance - US$0.48 million

126. This subcomponent willfinance the strengthening of the training system in St. Lucia. The sub-component will support the necessary steps to introduce and use occupational standard^.'^ The use o f these standards will be l inked to the financing o f training through the Training Scheme, and other training providers including technical training at the secondary education level are expected to teach to the standards. The Ministry o f Education will acquire the occupational standards that were adopted at the regional level through CARICOM. St. Lucia wil l therefore not be doing any standards development. This regional collaboration entails considerable advantages for the trainees given i t s recognition across the Caribbean, and cost-savings for the state. The necessary steps are validating, training, assessing and certifying, and registering.

127. Acquiring the standards. St. Luc ia i s part o f the Caribbean Association o f National Training Agencies (CANTA). C A R I C O M has agreed to over 100 regional occupational standards, o f which the majority has been formulated by HEART Trust/NTA-NCTVET, Jamaica. Therefore, St. Lucia wil l not be doing any standards development at the national level. Regional standards wil l be used as a starting point for adaptation o f standards in the hospitality, construction and I C T industries. The project will finance acquisition o f the NCTVET-Jamaica and/or other endorsed C A R I C O M standards developed by one o f the region’s national training institutes. If required standards are not available at regional level, they can be licensed from a recognized international training institution.

128. Validating Competency Standards Using Industry Groups. The f i rst step in rol l ing out occupational standards i s the validation o f the competency standards by the f i r m s through Industry Groups. Participants for the hospitality and construction groups are already on-stream. Group meetings will be convened to discuss, adapt and validate the standards. It i s expected the project will have a body o f standards approved by the time o f project launch. The National TVET

l5 Occupational standards describe the competences required to perform the job o f a specified occupation. Often several levels o f standards exist per occupation. When a trainee has demonstrated these competences to a certified assessor in a real-life job-setting, the trainee receives a qualification certificate. A qualification framework-for example the Caribbean Vocational Qualification framework-classifies and registers qualifications. Thereby, the qualification framework integrates the offerings o f schools and training institutions with informal learning into a common framework allowing individuals to follow different learning paths. In the case o f the CVQ framework, it also integrates education offering across the Caribbean countries and therefore facilitates labor mobility within the region.

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Council will formally validate the standards. Formal validation and national recognition of the standards will occur through the approval o f the standards in the National TVET Council, and wil l take place during the f i r s t six months o f the project. Priority will be given to housekeeping, food and beverage services, and guest relations within the hospitality industry.

129. Training and Orientation in the Standards and Qualijkations. The project will include workshops for Competency-based training for system personnel including administrators and instructors. Government staff and training providers, and instructors wil l participate in a Competency-Based Training Workshop to train personnel in the implementation o f the standards- based approach including the standards themselves and certification. Other workshops wil l be organized for stakeholders to orient them to the project. These wil l show employers and targeted community members what the project i s about and how the project will lead to qualifications for trainees and improved sk i l ls for firms. The Industry Associations and Labour Union will participate in the promotion activities (workgroups and information materials, radio time etc.).

130. Assessment of trainees. The project will finance technical assistance and training o f training assessors to introduce competency-based assessment and certification in St. Lucia. The assessment wil l in itself be carried out by the training providers with the oversight o f the Ministry o f Education. A cadre o f 20-30 assessors will be needed in the f i r s t years o f the project. Technical assistance will be contracted to conduct assessor training and train the assessors’ trainers. Further, in order to ensure the assessment process meets the required standards and quality, technical assistance will be provided for co-assessment with local assessors trained by the project and to conduct re-assessment o f selected learners to verify that the standards are upheld.

13 1. CertiJication of Learners. The training provider will issue Certificates to the trainees on behalf o f the National TVET Council. The Certificates wil l be a standardized format approved by the National TVET Council and wil l allude to the approved standards used in the training, the name o f the qualification including the skill area and Level o f the training. Each unit competency certification will be recorded and tracked by the training provider in the form o f a transcript o f units achieved. When the learner has demonstrated competency o n a l l required units, these transcripts wil l be forwarded to the National TVET Council and project administration along with a notification that the learner has met al l the requirements for C V Q qualification. The certification and accreditation will be registered at a OECS qualification’s databank that will be common for a l l OECS countries participating in the project. These records are subject t o audit by the Quality Assurance function.

132. Quality Assurance of Providers. T o ensure an adequate level o f quality, training providers wil l be submitted to a quality assurance review. In the f i rst two years o f the project, trainers wil l have to meet certain minimum standards to become pre-qualified for training under the project. This pre-qualification process will in year three be replaced by a formal registration o f training providers by the Ministry o f Education. The national TVET advisory committee in the MOE will guide the establishment o f this accreditation process. The project can therefore support activities for the TVET advisory committee necessary for the establishment o f this accreditation process. Technical assistance wil l be contracted to assist in setting up these quality assurance procedures, and could possibly be carried out on a regional level, either at the OECS or at the C A R I C O M level.

Sub-component 2.2 Development o f policy action plans - US$0.36 million

133. This sub-component wil l jnance the development of policy action plans on assistance to at-risk youth and job-training in order to inform the government on future policymaking. The plans will focus on the two major policy areas related to the project: assistance to at-risk youth and job-training. In both areas, there are several uncoordinated programs financed by

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government, NGO and donors. This has, in certain cases, led to sub-optimal outcomes, where low quality and less relevant training i s provided and at-risk youth falls through the cracks between programs. The objective o f the plans i s to review all programs in operation within each policy area, including the proposed training program. Based on this review, recommendation will be proposed to increase coherence, coordination and sustainability within each area. In particular, the development o f two plans i s proposed: (i) Action Plan to include al l vulnerable youth into the economy, and (ii) Action Plan to improve the relevance and sustainability of job-training, which will include a Labor Market Needs Assessment and a study o f career mobility within the labor market. This policy action plan will examine the sustainability of financing o f job training, including the training funded by this project. The recommendations will feed into governmental strategies and facilitate donor-coordination. The policy plans will be undertaken in a collaborative manner between stakeholders in order to build consensus. Further, it will build on on-going country analysis combined with international examples. To develop the plans and forge consensus, this subcomponent will support consultancies to undertake studies, focus groups, and workshops.

Component 3 - Project management and institutional strengthening - US$0.92 million (17 percent o f project)

134. This component will finance activities to improve project management, including monitoring and evaluation, and strengthen the implementing agencies’ institutional capacity through two sub-components:

3.1 Project Management and Institutional Strengthening - US$0.52 million (57 percent of component)

3.2 Monitoring and Evaluation - US$0.40 million (43 percent o f component)

Sub-component 3.1 Project Management and Institutional Strengthening - US$0.52 million

13 5, This subcomponent w i l l finance necessary project management expenditures. A project manager will be contracted by NSDC to implement the project. Operational costs associated with project implementation will be supported. Further, the TVET unit o f the MOE will be strengthened by one additional term staff to carry out the project activities under Component 2. Lastly, there will be support for the financing o f staff with responsibility for fiduciary matter within the PCU as agreed with the Bank.

136. The subcomponent w i l l also invest in institutional strengthening of NSDC and MOE. The subcomponent will assess and strengthen the capacity of the implementing agency, NSDC, to manage and facilitate training. Further, NSDC will upgrade its management information system and strengthen the institution’s capacity in financial management. NSDC will also expand and train its staff o f counselors to guide young clients.

Sub-component 3.2 Monitoring and Evaluation - US$0.40 million

137. This subcomponent wi l l support monitoring and evaluation. This i s a separate sub- component to emphasize the importance of monitoring and evaluation. The funds will primarily support collection o f information o f graduates and limited analysis. Further, a tracer study will be undertaken to identify the impact o f the investment and provide feedback for improvements. This monitoring and evaluation will be comparable across the participating OECS countries.

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Annex 5: Project Costs

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

A. Project Cost by Componenthbcomponent and Financier (US%)

Component I Subcomponent Private Sector Government IDA Total Amount % Amount % Amount % Amount %

A. Skills Tralning for Unemployed Youth I. Increase Public Awareness - - - - 154,039 100% 154,039 29% 2. Skills Training 948,070 28% 675,916 20% 1,776,679 52% 3,400,665 64% Subtotal Skllls Tralnlng for Unemployed Youth 948,070 27% 675.916 19% 1,930,717 54% 3,554,703 67%

8. Strengthening the Policy Framework for Trainlng 1. lntro of Standards, Accredit., Quality Assurance, Certification - 0% 482,876 100% 482,876 91% 2. Development of Policy Action Plans (PAP) - 0% 360,485 100% 360,485 68% Subtotal Strengthenlng the Policy Framework for Trning - 0% 843,361 100% 843,361 16%

1. Proiect Management & Institutional Strenathenina 197.622 38% 323.509 62% 521.131 98% C. Project Management and Institutional Strengthening

2. Monitoring and Evaluation - 0% 401,538 100% 401,538 75% Subtotal Project Mngmnt and Institutional strengthening 197,622 21% 725,047 79% 922,669 17%

Total PROJECT COSTS 948,070 18% 873,539 16% 3,499,125 66% 5,320,734 100%

B. Financier by Implementation Year (US%)

Financier 2007/08 2008/09 2009/10 2010111 Total Private Sector 128,118 230,612 307,482 281,859 948,070 Government 191,179 240,538 222,900 218,923 873,539

980,671 876,160 870,241 772,054 3,499,125

Total 1,299,967 1,347,309 1,400,623 1,272,835 5,320,734

C. Project Cost Summary by Component in EC$ and US$

Components (EC$) (US$) A. Skills Training for Unemployed Youth

1 , Increase Public Awareness 2. Skills Training

Subtotal Skills Training for Unemployed Youth B. Strengthening the Policy Framework for Training

1. lntro of Standards, Accreditation & Quality Assurance, Certification 2. Development of Policy Action Plans (PAP)

Subtotal Strengthening the Policy Framework for Training C. Project Management and Institutional Strengthening

1. Project Management & Institutional Strengthening 2. Monitoring and Evaluation

Subtotal Project Management and Institutional Strengthening

Physical Contingencies Price Contingencies

Total PROJECT COSTS

392,740 146,000 9,010,635 3,349,679 9,403,375 3,495,679

1,228,526 456,701 935,205 347,660

2,163,732 804,361

1,323,485 492,002 1,013,630 376,814 2,337,115 868,816

13,904,222 5, l 68,856 35,663 13,258

372,888 138,620 14,312,774 5,320,734

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Annex 6: Implementation Arrangements ST. LUCIA: OECS (LC) Skills for Inclusive Growth

138. The Ministry of Education (MOE) through the National Skills Development Centre ("DC) wil l be the agency responsible for execution of the project. M O E will enter into a subsidiary agreement with the NSDC for the implementation o f Component l(Training o f the unemployed youth), sub-component 2.2 (Developing action plans), and Component 3 (Managing the project and strengthening institutions). The Ministry o f Education will be responsible for the implementation o f Sub-component 2.1 (Introducing Occupational Standards, certification and quality assurance) through the Unit for Technical and Vocational Education and Training (TVET). Further, both NSDC and M O E will liaise with the Human Resource department o f the MOEA for accreditation o f training providers.

139. The National Skills Development Centre (NSDC) was established in 2001 as a public company charged with training of youth. I t i s ascribed to the Ministry o f Education with an independent board whose chair i s the Permanent Secretary o f the Ministry o f Education. The Board also includes representatives from the private sector. The capacity o f NSDC to implement the project will be further strengthened by hiring a project manager, contracting behavioral counselors, and investing in management information systems.

140. NSDC's role is managing, Jinancing and facilitating training under the project. It will not be a provider o f training. As a result, there wil l be no conflict o f interest between financing and being a potential training provider. NSDC will develop further i t s capacity to administer and facilitate training. For example, it will facilitate training by offering i t s physical infrastructure to potential training providers. In recent years, the government o f St Lucia has invested funds into the physical infrastructure at NSDC, such as construction o f classrooms and kitchens. To capitalize on those investments, NSDC will provide use o f i t s premises to all potential training providers at a pre-defined, standard fee. Also NSDC can continue to offer other types o f ski l ls training with other sources o f funding.

141. Avoid conflict of interest. Since the project involves competition between the providers for funding from the scheme, there may be a conflict o f interest between NSDC's role as an administrator o f the Scheme, and i t s role as a potential training provider. The following institutional provisions will avoid conflicts o f interest:

NSDC will not be a provider o f training under the Training Scheme. However, NSDC can continue to offer training under other sources o f funding. An independent evaluation committee, composed o f al l stakeholders, will be in charge o f evaluating the proposals and deciding which proposals will be funded from the Training Scheme. The stakeholders are Ministry o f Education, Bank o f Saint-Lucia, Ministry o f Youth and Sports, SLHTA, representatives from the construction and IT sectors when the Training Scheme expands to those sectors.

142. Steering Committee wil l be established under the auspices of the MOE. It will be chaired by the Permanent Secretary o f M O E or another appointee designated by the Minister o f Education. The Deputy chair i s the Permanent Secretary o f the Ministry o f Economic Affairs, Economic Planning, National Development, and Public Service (MOEA) or another appointee designated by the Minister o f MOEA. Further, the organizations participating in the implementation o f the project will participate: NSDC, the TVET unit o f MOE, the PCU, and the department o f Economic affairs o f MOEA. Further, the Minister o f MOE can appoint additional members to the steering committee. The committee could include a member from another OECS country to foster regional collaboration. The committee wil l meet on a quarterly basis. In the start o f the project, the project steering committee could meet more frequently. NSDC convenes these

0

0

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meetings at the request of the chair, co-chair or at its own request. The committee will be charged with the following responsibilities:

Monitoring and supervising the implementation of the project

Ensuring that the general operations of the training scheme are executed within the agreed guidelines.

Reviewing and approving the training proposals based upon a report submitted by the technical evaluation committee.

143. Technical evaluation committees wil l be constituted. These committees will be in charge of evaluating training proposals submitted by training providers and employers. Based upon an objective set o f criteria, the committees will submit to the project steering committee a report containing recommendations as to which training proposals should be funded by the Training Scheme. There will be one committee for each economic sector and it should contain at a minimum, a sector specialist, pedagogy specialist, and a traininghuman resource specialist. The committee will be composed o f independent technical experts from the sector with experience in training, which could include trainers, human resource specialists from the private sector and representatives from the TVET unit and NSDC. Further, the technical committees could include a member from another OECS country to foster regional collaboration.

Figure 1: Institutional setup of the training scheme within NSDC

I NSDCBoard I T

. . . ............ NSDC General Manager

\ I

144. Other units in MOE. For implementation of the sub-component 2.1, the TVET unit in MOE will draw upon the expertise available in the Communication Units to design and implement a communication campaign regarding the introduction o f occupational standards. Further, the TVET unit will involve the Exams Unit o f MOE to issue formal CVQ certificate to trainees awarded a CVQ.

145. Implementation arrangements for the policy action plans in sub-component 2.2. The project’s steering committee will be responsible for the development of the policy action plans with the assistance o f the NSDC, Ministry o f Education and the project manager. The funds will pay for consultant services to develop the plan. The labor needs assessment i s planned for the

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first year o f the project and wil l be in collaboration with the OECS Secretariat. This could possibly be undertaken together with other OECS countries. The other activities o f this subcomponent are scheduled for year two and three, since the action plans will build upon the results o f the f i rst years o f operation o f the training scheme.

146. The Project Coordinating Unit (PCU), established as a part of the MOEA wil l be responsible for allJiduciary responsibilities. These responsibilities include procurement, financial management, project reporting on procurement and financial management, and disbursement of funds. Further, MOEA will participate in the project steering committee, review budget matters, and manage counterpart funding for the project.

147. A series of other organizations wi l l assist project implementation. The staff o f these institutions will not be financed by the project, since it i s part o f their regular mandate:

0 Organization o f Eastern Caribbean States Secretariat: 9 Build consensus around and understanding o f the OECS Skil ls Enhancement

Project . 9 Contribute to the drafting o f the terms o f reference and contribute to the

undertaking o f the Labor Market Needs Assessments as needed for participating OECS countries.

9 Assistance and guidance on the implementation o f the project

0 Ministry o f Social Transformation - responsible for 9 Community Outreach and Public Sensitization Activities 9 Conduct Social Assessments

e Business Sector Associations (St. Lucia Hotel and Tourism Association, SLHTA, for the hospitality sector):

9 Coordinate job fairs 9 Coordinate employer open day activities 9 Facilitate the entry o f small employers into the training program by brokering

training 9 Promote the program and use o f occupational standards to f i r m s in the

OECS. 9 Provide insight on labor market needs

0 Labor Union - responsible for 9 Coordinate job fairs 9 Coordinate employer open day activities

Regional implementation

148. There are multiple gains f rom regional collaboration within the project. The OECS i s composed o f nine relatively small territories. In the current situation, training i s entirely a national undertaking, which implies that the countries do not reap many benefits o f scale. In order to have world class training that wil l provide the needed ski l ls to i t s economy, it i s crucial to build a regional market for training. This will professionalize training in the region, improve quality o f training, provide volume, drive down costs, bring employment and save a significant amount o f resources for the region’s governments. Project success therefore depends upon the willingness o f the participating OECS countries to collaborate on the project.

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149. Regional activities, to the extent that it is practica,l wi l l be jointly undertaken by the OECS countries participating in the project. Among other aspects, this depends upon the pace o f integration o f new countries into the program. If only the project in St. Lucia has been approved, it can on i t s own undertake the specified regional activities. Following the practice in previous Bank-financed projects in the OECS, a specified amount o f funds will be reserved for regional activities in the credit. The regional activities will be financed by each country’s project, and procurement wil l be assigned to one o f the countries’ PCUs on a case-by-case basis.

150. Participating territories wi l l each have a Steering Committee. These committees however will commit to implement part o f the project on a regional basis. Only activities o f importance to the creation o f a regional market for training, and activities that have a potential opportunity for cost-savings and other efficiencies will be undertaken on a regional level.

15 1. Depending on the pace o f integration o f other countries into the program, it will be examined whether the regional activities could be carried out by a contracted service person for training that delivers services to the national implementing agencies according to Figure 2.

Grenada

Figure 2: Regional collaboration on Training Scheme

Other OECS countries

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Annex 7: Financial Management and Disbursement Arrangements

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

152. An assessment o f the financial management arrangements o f the Project Coordination Unit (PCU), currently located in the Ministry o f Economic Affairs and Economic Planning, National Development and Public Services was undertaken in January 2007. These arrangements include systems o f budgeting, accounting, financial reporting, auditing, and internal controls. The PCU i s currently responsible for the implementation o f four World Bank-funded projects, including the Emergency Recovery Project, Emergency Disaster Management Project, the HIV/AIDS Prevention and Control project and the Water Supply Infrastructure project.

153. In the past few years the PCU has accumulated significant experience with the implementation o f the WB-financed projects. I t has already established a well-functioning financial management system, and following the completion o f the action plan proposed in this assessment, it will have in place adequate financial management arrangements, meeting the World Bank fiduciary requirements.

154. At the same time, an effort was made to incorporate the use o f the existing country system to the project implementation. I t was decided that at present, the project audit will be conducted by the Auditor General o f Saint Lucia.

Financial Management Implementation Arrangements

155. Annex 6 details the project’s implementation arrangements. The PCU which will be responsible for the project’s financial management i s currently located in the Ministry o f Economic Affairs and Economic Planning, National Development and Public Services, and will act in coordination with the NSDC, assigned overall responsibility for project implementation.

156. The use o f the existing PCU i s designed around the recognition o f i t s experience in managing the fiduciary aspects o f various World Bank-financed projects. The proposed arrangements allow for effective utilization o f existing resources, ensure consistency o f fiduciary implementation across projects, and achieve economies o f scale in fiduciary implementation.

The loan disbursement aspects o f the proposed project will also be managed centrally by the PCU, as detailed in the flow o f funds section below.

Risk assessment

157, St. Lucia i s a middle-income country. Existing public financial management systems support certain overall level o f accountability and internal controls in the country.’6 The recent implementation o f the new government accounting system (Smartstream) has simplified treasury and accounting functions and made them more efficient in terms o f transactions recording, commitment and expenditure control, and reporting. This, however, does not necessarily have a direct impact on the control environment o f the donor-financed project. l7

158. The currently existing approach to the implementation o f the donor-financed projects in Saint-Lucia involves simultaneous participation o f the dedicated project coordination unit (PCU)

The last CFAA assessment for the country was conducted in 2003. Although al l expenditures (recurrent and capital) must be recorded in the government accounting system,

the practice i s variable when dealing with externally funded capital projects. Most projects use bank accounts separate from the Consolidated Fund and have their own dedicated accounting systems.

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and of the existing government agencies. Therefore, technical and fiduciary aspects o f the project management are divided between the sector ministries and the P C U located in the Ministry o f Economic Affairs and Economic Planning, National Development and Public Services. These arrangements create a particular, semi-"sheltered" fiduciary environment for the implementation o f the Wor ld Bank-financed projects, at the same time implanting i t s technical functions in the existing country systems.

159. Whi le the projects implemented by the P C U utilize elements o f the existing country systems, (the head o f the PCU i s a c iv i l servant, the audit i s performed by the Director o f Audit), the integration i s far f rom ' being complete, with the P C U maintaining a separate accounting system and each project using individual bank accounts.

160. Table 7.1 summarizes results o f the financial management assessment and determined risk ratings:

Table 7.1: Financial Management Assessment and Risk Ratings

-Risk- Assessment

INHERENT RISKS

~

Risk Mitigating Measures Residua Risk

Country level Saint-Lucia i s a middle income country. There are existing country public financial management systems in place, supporting certain level o f accountability and internal controls. Entitv level

M

The implementing PCU has previous experience o f working with the external donor-financed projects. I t s performance has been satisfactory. After the recent change o f government i t was reassigned to a different ministry, however, i t s structure and personnel remained intact. Project level

OVERALL INHERENTRISK CONTROL RISKS

M

Budget The PCU has adequate systems in place and previous experience o f working with the WE3- financed projects. The GOSL has a good track record o f providing the counterpart funds for the project implementation. Accounting The PCU has adequate systems in place and previous experience o f working with the WE3 - financed

M M

M I I M

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projects. The PCU i s staffed with the experienced accountant and accounting assistant. Internal Controls The PCU has adequate systems in place and previous experience of working with the WB- financed projects. Comprehensive operations manual has been developed for the projects implemented by the PCU. This Op. manual will be adapted for the needs o f the current project. Funds flow The project implementation arrangements includes payments of individual monthly stipends to the program participants and periodical payments to the training providers, thus somewhat

S complicating the flow of funds. Financial Reporting Additional training in the World Bank FM

and disbursement rules and procedures wil be provided to the PCU accounting staff. The project will co-finance hiring o f an additional accountant.

The PCU has adequate systems in place and previous experience of working with the WB-financed projects. Financial reports for the other projects, implemented by the PCU, usually are timely submitted and o f a good quality. There i s a variation in quality of reports prepared by the junior accounting staff. Since the project disbursement i s report-based, good quality of the prepared reports has a particular imDortance. Auditing Director of audit has previous experience of working with the World Bank-financed projects. Audit reports prepared by the Director of Audit are o f the adequate quality and timely submitted.

OVERALL CONTROL RISK

RESIDUAL RISK RATING

Risk Assessment

M

Risk Mitigating Measures

While the NSDC i s strengthening i ts inancial management capacity, the PCU ill be responsible for calculation and ayment of the monthly stipends to the rogram participant i S

I

M

residua Risk

M

M

M

M

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Staffing

161. The PCU i s adequately staffed with the accountant, assistant accountants and team assistants. The PCU accountant has extensive experience working with the World Bank-financed projects (since 1995). Her performance while working with the projects implemented by the PCU was satisfactory. With the hiring o f additional staff, she moved to the supervisory role, also acting as the PCU deputy coordinator.

Budgeting and Counterpart funds

162. The project will have a significant share o f counterpart funding o f US$0.875 million. This contribution i s expected to be received over four fiscal years. Project annual budgeting wil l be based on the cost tables, and will be updated according to the latest information as the implementation will roll-out. The annual budgets will be prepared by the PCU and submitted to the project TTL and GOSL for approval. The approved annual budget wil l then be entered into the accounting system and used for periodic comparison with actual results as part o f the interim reporting. The annual allocation o f the GOSL share o f project funding will be based on the approved budget. Future counterpart funds’ availability was confirmed during the meeting with the government.

Accounting System and Records

163. The project wil l use the existing accounting software (QuickBooks) to maintain the project accounts. The software will allow for the tracking o f inflows by funding source, and outflows by: (i) project component; (ii) funding source; (iii) disbursement category. Based on this information relevant financial reports can be prepared. The Chart o f Accounts i s being drafted, and wil l be finalized by the project effectiveness. Wh i le preparing accounting and financial information transactions will be recorded as incurred, and all primary supporting documentation wil l be maintained to facilitate ex post reviews and the external annual audits. Such documents should be maintained for a minimum period o f five years. The detailed accounting policies and procedures are set forth in the updated project Operational Manual.

Internal Controls and Safeguard of Assets

164. The project will adapt the Financial Management manual currently utilized by the PCU. The Financial Management Manual reflects the structure o f the PCU, administrative arrangements, internal control procedures, including procedures for authorization o f expenditures, maintenance o f records, safeguard o f assets (including cash), segregation o f duties to avoid conflict o f interest, regular reconciliation o f bank account statements, bank signing mandate (to include at least two signatories), regular reporting to ensure close monitoring o f project activities, as well as the flow o f funds to support project activities. The project-specific information, i.e. the Chart o f Accounts, the formats o f the reports, etc. will be added as part of the Annexes to the Manual.

165. Assets acquired by the project will be in the custody o f the respective institutional departments, which will also keep copies o f the supporting documentation. The PCU will maintain supporting records and balances. At least one annual physical inspection will be undertaken by the implementing agency and PCU staff, preferably with the participation o f the external auditors.

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Interim and Annual Reporting

166. The PCU will be responsible for producing the Interim Financial Reports (IFRs) on a quarterly basis to be submitted to the Bank. The IFRs will provide required monitoring information and will be used for disbursement purposes. The IFRs will include a narrative outlining the major project achievements for the quarter, the project’s sources and uses of funds, a detailed analysis o f expenditures, the relevant output indicators for component 1 upon which the performance-based disbursements are based, and necessary procurement tables. IFRs should be submitted to the Bank no later than 45 days after the end o f each reporting period.

167. The annual financial statements will include the project’s sources and uses o f funds, a detailed analysis of expenditures, a schedule o f withdrawal applications presented during the year, a reconciliation of the Designated Account, the notes to the financial information and management representation letter. These reports will be prepared by the PCU and made available to the auditors after the end o f each fiscal year.

External Audit Arrangements

168. Project financial statements will be audited annually. As in most OECS countries, the Director o f Audit i s responsible for auditing and reporting of the public accounts o f the country, including projects funded by international organizations. The Auditor General’s Office has performed adequately in the past in terms of the quality o f the audit reports provided and the timely delivery o f annual audited financial statements for World Bank projects. Therefore, annual project financial statements will be audited in accordance with International Standards on Auditing issued by the International Organization o f Supreme Audit Institutions (INTOSAI) and the World Bank’s guidelines on auditing as stated in the guidelines: Financial Management Practices in World Bank-financed Investment Operations (November 2005), by the Office o f the Auditor General. The auditors’ terms of reference (TORs) will be prepared by the project and cleared by the World Bank before the engagement of the auditor. The TORs will include the audit o f financial transactions, the review of the internal% control structure and mechanisms and the review o f the project’s compliance with the terms o f the loadcredit agreement(s). The annual audit reports will be prepared in a format in accordance with ISA and World Bank guidelines, and they will include an opinion on the project financial statements, including Designated Account Reconciliation, review of the internal controls, review o f the project’s compliance with the terms o f the loadcredit agreement(s) and a management letter. The project’s annual audit report will be required to be submitted to the World Bank for review no later than four months following the end o f the fiscal year (April-March).

In addition, the NSDC financial statements will be audited on an annual basis by the Auditor General of Saint Lucia and presented to the World Bank no later than six months after the end of the fiscal year (March 3 l).*’

Disbursement Arrangements and Flow of Funds

169. The World Bank share o f financing will be channeled through a Designated Account denominated in US Dollars, which will be opened by the PCU in a commercial bank. The PCU will operate a local currency account, to finance project expenditures in local currency, where funds from the U S Dollars Designated Account will be periodically transferred (funds sufficient

*’ Such audit i s already required to be performed, based on the existing St. Lucian legislation.

60

to cover no more than 30 days worth of expenditures). These accounts will be operated in accordance with the procedures and guidelines set forth in the Bank’s Disbursement Guidelines.

170. A separate EC$ denominated, interest bearing account will be opened to receive the GOSL part of project financing as well as Employers share o f payments under the Component 1 (Training unemployed youth). Funds received from the Employers will be used to finance the training provided under the project arrangements.

171. Disbursement of the credit proceeds would be transferred to the US Dollar denominated Designated Account managed by the PCU. Advances to the Designated Account would be made based on the forecast of the project eligible expenditures for a period o f at least six months based on Interim Financial Reports (IFRs). Supporting documentation for expenditures made from the Designated Account would also be based on IFRs. The IFRs will be submitted to IDA on a quarterly basis and no later than 45 days after the end o f each quarter.

172. As eligible expenditures are incurred, the PCU will withdraw the amount to be financed by IDA from the Designated Account (US$ or EC$) in accordance with the below financing percentages. From a separate EC$ denominated project account’, it will withdraw a governments’ share o f financing and employers’ contribution.

173. Reimbursement method o f disbursement will also be available. The supporting documentation would also be IFRs and the pre-finance expenditures should clearly be identified in the reports if combined with supporting advances made to the Designated Account in same IFRs. The minimum application size for reimbursement should be US$50,000.

174. Direct method of disbursement will also be available. The minimum amount for the direct disbursement will be US$lO,OOO.

175. Payments to the Training Providers and Stipend Payments. The sequence and organization o f the training process i s described in details in Annex 4. According to the proposed arrangements the NSDC i s responsible for the selection and “matching” o f the eligible trainees with the training providers. Once this i s done, the NSDC will pass the detailed instructions to the PCU, which will make payments to the training providers from the project account.

176. Selection and “matching” process will take place approximately twice a year. Payments to each training provider will be done in three installments: 40 percent advance upon the initiation o f the training program, 30 percent upon completion of the four-month training program, and final 30 percent payment, upon the successful graduation of the trainees. In each individual case, the employer’s contribution to the training will constitute five to 10 percent from the total price of the program. The exact percentage will depend on the size and sector of the sponsoring employer. These contributions should be transferred by the employers to a project EC$ account maintained by the PCU before the beginning o f the training program, and, immediately afterwards, paid to the training providers as part of the f i rst 40 percent installment.

177. Once the training program i s completed, achieved results, (number o f successful graduates), will be verified by the NSDC and, on a sample basis by the technical audit. Once the results’ validation i s completed, the NSDC will issue instructions to the PCU, authorizing second and third payments. Once the results’ validation i s completed, the NSDC will issue instructions to the PCU, authorizing second and third payments.

178. Stipend payments will be transferred to the eligible trainees on a monthly basis.lg Such payments will normally cover four-month training period and additional four months of the

l 9 The trainees wil l be required to open the bank account for that purpose.

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following internship. The stipends should never be paid for more than nine months. It i s envisioned that eventually stipend payments, (distributions to the students), wi l l be handled by the NSDC. However, assessment conducted during the project preparation indicated that at the moment the NSDC does not have the required capacity in place. Specific actions have been proposed to strengthen i t s capacity. Once the NSDC implements these actions, an additional review wi l l be conducted and a decision wil l be made regarding the funds o f flow for payment o f stipends. In the meantime, the PCU wil l be responsible for the calculations and distributions of the stipends to the program participants, based on the eligibility information presented by the NSDC.

Category

(1) Goods, works, consultants’ services and Operating Costs for the Project (except as covered by Category (2) below)

Amount of the

(expressed in SDR)

Percentage of Expenditures Credit Allocated to be Financed

1,582,000 100%

(2) Skills Training

a. f irst allocation

b. second allocation

TOTAL AMOUNT

Performance-based disbursements.

180. Disbursements for payment o f ski l ls training wi l l be performance-based, The credit proceeds wil l cover a minimum o f 67.5 percent o f the unit costs incurred in the l i fe-ski l ls and technical ski l ls part o f the training scheme and a maximum of 77.5 percent. The difference o f 10 percent margin within these two parameters wi l l depend upon the performance o f the project by September 15,2009. If the following three project milestones described below are reached by that date, the finance percentage wi l l increase by 10 percent from 67.5 percent to 77.5 percent.

283,800 67.5%

534,200 77.5%

2,400,000

Enroll and train at least 700 unemploved vouth. This milestone measures the project’s ability to provide access to training to the targeted number of unemployed youth. Certifv at the Level 1 of the Caribbean Vocational Oualification framework at least 67 percent o f the above 700 trainees. This milestone indicates the project’s ability to successfully train the enrolled trainees.

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Tracer study of emplovment status and salary o f trainees 15 months after enrolling in training. This tracer study should cover at least 75 percent o f the trainees enrolled in the f i rst round o f training scheme. Further, the tracer study should cover a comparison group o f at least half the size o f the group o f trainees.

18 1. NSDC with the assistance o f the WET unit in the M O E will be responsible for providing the information required to meet the milestones. External auditors wil l verify the reported numbers for accessibility and employability on a sample basis. By September 15, 2009 at the latest, the government will submit to the Bank the necessary document that the milestones have been made. If data are not available or reliable, withdrawal conditions have not been met.

182. Counterpart funding from the Government o f St. Lucia will finance 15 to 25 percent o f the unit cost for life-skills and the technical ski l ls training (first part o f the training scheme) and the private sector contribution will be 5 to ten percent of the unit cost for the first part o f the training scheme depending on the size o f the firm. The unit cost for the second part o f the training scheme which covers the payment o f a stipend to trainees during the apprenticeship i s fully funded by the private sector.

Supervision arrangements

183. As part o f i t s project supervision missions, IDA will conduct risk-based financial management supervisions, at appropriate intervals. These will pay particular attention to: (i) project accounting and internal control systems; (ii) budgeting and financial planning arrangements; (iii) review o f the Interim Financial Reports; (iv) review o f audit reports, including financial statements and remedial actions recommended in the auditor’s Management Letters; (v) disbursement management and financial flows, including counterpart funds, as applicable; and (vi) any incidences o f corrupt practices involving project resources.

Financial Management Action Plan

* This i s the estimated completion date. A delay would not affect effectiveness or implementation, since the PCU could manage disbursements o f stipends to trainees until NSDC has the required capacity.

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Annex 8: Procurement Arrangements ST. LUCIA: OECS (LC) Skills for Inclusive Growth

A. General

184. The procurement for this project i s expected to be relatively simple. More than half o f expenditures will be transfer to training providers and stipends to trainees. N o construction i s foreseen and procurement i s mostly consultancies, minor equipment, and operational costs.

185. 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 May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, 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 Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

186. Procurement o f Works: Although not expected, works procured under this project could include: minor construction o f training facilities. Should need be the procurement would be done using the Bank's Standard Bidding Documents (SBD) for all ICB and National SBD agreed with or satisfactory to the Bank for N C B and Shopping.

187. Procurement o f Goods: Goods procured under this project would include: training equipment. The procurement will be done using the Bank's SBD for all ICB and National SBD agreed with or satisfactory to the Bank for N C B and Shopping.

188. Selection of Consultants: Consultants will be contracted for the design o f the expansion o f the training fund, introduction o f occupational standards and certification, development o f policy action plans, and enhancing the monitoring and evaluation system.

189. Selection of Training Providers: Training providers can be individual trainers/consultants, NGOs, public training institutions (other than NSDC), and training f i rms. They will go through a pre-qualification process ensuring a minimum level o f quality. Private sector f i r m s will competitively choose the training providers from the l i s t o f pre-qualified providers. The firm(s) and the training providers will jointly submit a training proposal for funding. A technical evaluation committee w i l l review the quality o f the proposal based on pre- defined criteria (eligibility criteria, curriculum, prior training experience and performance, training facilities, and training needs) set out in the Operational Manual. Once selected, training providers will be paid 40 percent o f their portion o f the fixed per trainee unit cost (i.e. minus the stipend) upon proof o f initiation o f training, 30 percent upon completion o f the pre-service training, and the remaining 40 percent upon certification o f the trainee. The certification will be subject to an independent verification on a sample basis. I n summary, the selection of the training providers will be based on identified training needs and the providers' qualifications and capacity to deliver, in accordance with chapter V of the Consultant GuideZines(in the case of individuals) and the Consultant Qualifications method (in the case of firms, NGOs o r other training institutions). The contracting will be done using a standard contract agreed with or satisfactory to the Bank.

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190. Short l is ts o f consultant f i r m s for services estimated to cost less than US$lOO,OOO 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.

191, Operating Costs. Operational costs such as expenditures for project administration, Le., Project Manager’s compensation, office rental and utilities/communications, wil l be financed by the Credit during the Project in accordance with an annual plan agreed with the Bank.

192. The project wil l finance under component 2, improving the policy framework for training, introduce the regionally approved occupational standards in St. Lucia. These standards are agreed to at the CAFUCOM level and have been developed by other national training institutes in the region. In order to use these standards, St. Lucia must enter into a memorandum o f understanding with one o f the national training institutes in the region to license the standards. Further, this agreement could include learning material, technical assistance, and training o f assessor trainers, co-assessors and information material regarding the standards and their application. The procurement plan will specify the expected amount o f this memorandum. The acquiring o f standards would involve a legally binding agreement that could or could not be part o f a broader Memorandum o f Understanding.

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

Memorandum of Understanding.

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

194. Procurement activities wil l be carried out by the Project Coordination Unit (PCU) in the Ministry o f Economic Affairs, Economic Planning, National Development and Public Service. The agency i s staffed by a Project Coordinator, a Deputy Project Coordinator, as wel l as fiduciary and administrative staff. The procurement function i s headed by the Deputy Project Coordinator, who has overall responsibility for procurement actions and supervises the procurement staff comprising the Project Officer - Contract Management, and the Project Officer - Contract Management Assistant.

195. An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the project i s not deemed necessary due to the fact that the P C U staff have many years o f experience in Bank procurement procedures and guidelines. The P C U has managed the fiduciary aspects o f various Bank financed projects through i t s involvement with the Disaster Management I, Emergency Recovery, Disaster Management 11, H IV /A IDS Prevention and Control and Water Supply Infrastructure projects.

196. The P C U has performed i t s procurement function in Bank projects satisfactorily, and there has been litt le or no staff turnover since the Unit’s involvement with the first Disaster Management Project. In addition, existing procurement staff has actively participated in numerous capacity building activities offered by Bank staff, including the fiduciary workshop held at the Bank’s headquarters in July 2006.

197. Even though the overall project risk for procurement i s low, it i s important that good coordination and communication exist between the P C U and the implementing agencies (NSDC and Ministry o f Education).

198. The overall project risk for procurement i s LOW.

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C. Procurement Plan

1 Ref. No.

SLU-SP- ICD-0 1

SLU-SP- ICP-0 1

SLU-SP- DM&E-01

199. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on March 13, 2007, and i s available at the office o f the PCU in the Ministry o f Economic Affairs, Economic Planning, National Development and Public Service. I t wil l also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2 3 4 5 6 7 Description of Estimated Selection Review Expected Comments

Assignment cost Method by Bank Proposals (Prior / Submission Post) Date

Conduct 110,000 QCBS Prior Apr 2009 diagnostic and write report Development 110,000 QCBS Prior Oct 2008 o f policy action plans Design o f 132,000 QCBS Prior Jul2007

Framework M&E

D. Frequency of Procurement Supervision

200. In addition to the prior review supervision to be carried out from Bank offices, the Bank team has recommended one supervision mission per year to visit the field to carry out post review o f procurement actions.

E. Details o f the Procurement Arrangements Involving International Competition

1. Goods, Works, and Non Consulting Services

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

Not envisaged

(b) All ICB contracts and all direct contracts will be subject to prior review by the Bank.

2. Consulting Services

(a) List o f consulting assignments with short-list o f international f i r m s .

(b) Consultancy services estimated to cost above US$lOO,OOO equivalent per contract (f irms) and US$50,000 equivalent (individuals) and all single source selection o f consultants ( f i r m s and individuals) regardless o f contract value will be subject to prior review by the Bank. The Procurement Plan specifies procurement methods and prior review thresholds, as outlined in the table below.

66

(c) Short l is ts composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$lOO,OOO 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.

Contract Value (Threshold)

Thresholds for Procurement Methods and Prior Review (in US$ thousands)

Procurement Method Contracts Subject to Prior Review

Expenditure Category

>1,500 150-1,500

1. Works ICB All N C B >500 All

2. Goods

4 50 Regardless o f value

>150 25-1 50

3. Consulting Services

4 0 0 None 3 Quotations (Shopping) None Direct Contracting All

ICB All N C B None

3.A Firms

<2 5 Regardless o f value

3.B Individuals

Shopping None Direct Contracting All

Note:

<loo CQS QCBS,QBS,FBS,LCS, TOR only (by TTL)

Regardless o f value >50

<5 0 Regardless o f value

CQS Single Source All Comparison o f 3 CVs in accordance with Chapter V o f Guidelines

Single Source All (by TTL)

All (by TTL)

< < TOR only (by TTL)

I I

>loo I QCBS,QBS,FBS,LCS, I All

QCBS = Quality- and Cost-Based Selection QBS = Quality-Based Selection FBS = Fixed Budget Selection LCS = Least-Cost Selection CQS = Selection Based on Consultants’ Qualifications

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Annex 9: Economic and Financial Analysis

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

The youth training program through the training scheme i s expected to affect youth employment outcomes on two dimensions: the probability o f employment and wages for employed youth. The following economic analysis computes the combinations o f employment probability and wage increases that will lead to positive returns for the project. The analysis then compares the necessary employment probability and wage increases to those that were attained in similar projects in Latin America. Finally, the analysis compares the results from those projects to the results that are required to attain a positive return to investment in St. Lucia, and evaluates the St. Lucia project from the economic return point o f view.

Section A9-1: Assumptions in the economic analysis

Table A-9.1: Assumptions in the economic analysis (all amounts in XCD29

General assumptions monthly wage of non-trained school leaver with program requisites probability o f employment at 12 months from registration, if not participating probability o f employment at 6 months ftom registration, if not participating years of benefit to the program average wage

benefits monthly value o f trainees work to employer

costs monthly stipend to trainees months o f classroom training months o f traineeship private out-of-pocket cost of training government cost o f training: stipend during training government cost o f training: payment to training providers employer cost o f stipend during the traineeship displacement effect private opportunity cost of training

-

AssumDtion

830

40%

25% 10

332

300

5073 300 1.5

200 450

2000 1800

0 622.5

Svm boVFormula

W

E

e n

=w*E

I

c=c l+c2+c3+c4+c5 st

m l m2 c l

c2=ml *st c3

c4=m2 * s t c5

=m*w*e

Table A-9.1 summarizes the assumptions that are made in the economic analysis. A number o f assumptions merit further explanation.

Probability of employment if not participating in the training.

The following two questions are essential to the economic analysis:

2o The rate o f exchange on 09/22/2006 was 2.67 XCDAUSD.

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-

- Ceteris paribus, what i s the probability that a young person, who i s unemployed today, will be employed within six months from now? Ceteris paribus, what i s the probability that a young person, who i s unemployed today, will be unemployed twelve months from now?

The first question i s important because it determines the opportunity costs of participating in the training program. The second question i s important because it provides the benchmark for comparing employment outcomes for youth that do not participate in the training scheme.

Employment at month.. .

7 13 19 25 31 37

Transition probabilities from unemployment to employment are traditionally not available from household surveys, because those surveys typically collect static cross-sectional data that do not provide employment statistics over time. Instead, we use a 2006 survey o f secondary school graduates from St Vincent, which did provide historic employment information, to estimate transition probabilities between employment and unemployment. (Vermeersch 2006)

Conditional 1

32% 43% 51 % 55% 66% 65%

Table A9-2: Probability of transition to employment, by time of unemployment

13 -- __

33% 46% 62% 68%

19 I 25 31 I I --

-- --

29% 43% 58%

n being u 7

21% 37% 44% 62% 64%

--

Table A9-2 reports the probability that a young person will be employed at particular points in time, given that this person was unemployed 1 month after graduation, 7 months after graduation, etc. The top number in each column gives the probability that the person will be employed, if unemployed six months earlier. The probability of employment after 6 months ranges from 3 1 to 56 percent, with an average o f 35 percent. The second number from the top in each column reports the probability that the person will be observed to be employed, if unemployed twelve months earlier. The probability of employment after 12 months ranges from 37 to 64 percent (47 percent on average).

Given these numbers for St. Vincent, the economic analysis will assume that the probability o f employment during the training (first 6 months after registration of unemployed persons for the training program) i s 25 percent. The 35 percent figure was adjusted downwards to reflect (1) lower levels of education among St Lucia training candidates than among St Vincent respondents; (2) the fact that average employment level during the f i rst 6 months i s lower than the final employment at 6 months.

We will also assume that the probability of employment 12 months after observation o f unemployment i s 40 percent, lower than the 47 percent in St Vincent respondent, because St Lucia training candidates have lower education levels than St Vincent respondents.

Further analysis o f the St Lucia household survey data2' reveals that probabilities of employment change according to age. Graph A9-1 plots the cross-sectional probability of employment by age,

Wor ld Bank calculations, using the 2005 St. Lucia household survey (LSMS). 21

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where the probability o f employment for each person i s defined as the number o f months that the person worked for pay in the past 12 months. If we assumed that the training only increases wages when the trainee finds a job shortly after completion o f the training (Le. the training has no influence on wages if there i s a large time gap between training and employment), then the economic analysis does not need to take into account the interaction between higher wages and higher probability o f employment as trainees get older.

Graph A9-1: Probability of employment amongst low-educatedpopulation, St. Lucid2

20 40 60 Age

80

Probability of working in a given month Fitted values

Monthly wage and employment probability change in absence of training.

The wage income data in the 2005 St Lucia household survey could not be used to estimate the average wage o f young persons. Instead, we use the St Vincent data to estimate the average wage. Vincentian secondary school graduates earned an average o f 830 ECD per month during the first 3 years after graduation. Wages among the target group in St. Lucia were assumed to be 830 ECD because: (1) Vincentian graduates had a higher level o f education than St. Lucians in the target group.; (2) Per capita GNI in St Vincent was US$2,820 in 2004, while it was U S $ 3,750 in St. Lucia.

22 The probability o f employment i s calculated as the number o f months that each person worked for pay in the last 12 months. The graph plots this probability, averaged by age group. The sample excludes any persons that have more than 4 secondary school exam leaving qualifications, as well as persons with tertiary education qualifications. The calculations include persons who are unemployed and not looking for work.

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Section A9-2: Rate o f re turn o f the project

We now use the proposed assumptions and various scenarios o f employment and wage impacts to compute the N e t Present Value and Rate o f Return of Project investments.

Assume that x i s the percentage point change in the probability of employment at 12 months from registration if a young person i s assigned to the training program. Assume that y i s the percentage increase in wage for young people who have employment 12 months after training, compared to young people who have employment without training. The ensuing percentage increase in wage mass for the target group which can be attributed to the training program i s reported in Table A- 9.3. This percentage increase in wage mass i s also the percentage increase in the average wage o f the target group, when taking into account both unemployed persons (who have wage 0) and employed persons.

Table A9-3: Increases in wage mass as a result of changes in wages and employmentprobabili@

Formula: B = [(l+y)*x]/E + y

mass for constant

The percentage increase in wage mass, together with the status quo level of wages, can then be used to compute the present value o f training (Table A-9.4), the net present value of training (Table A-9.5), and the Rate o f Return to investmene3 (Table A-9.6).

~~ ~

23 Rate o f Return or Return on Investment (ROI) i s the ratio o f money gained or lost on an investment to the amount o f money invested. (Wikipedia)

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Table A9-4: Present value of training under several discount rate and wage mass increase scenarios

Formula: P V = w*(l+B)*(l/d)*(l-l/(l+d)"n)

B = Increase in wage mass

I% 5%

10% 15% 20% 25% 30% 35%

40%

d=discount rate 5% 7.50% 10% 608 573 545

1838 1667 1524 3376 3035 2748 4915 4402 3972 6453 5769 5196 799 1 7137 6420 9529 8504 7644

11067 9871 8868

12605 11239 10092

Table A9-5: Net present value of training under several discount rate and wage increase scenarios

Formula: NPV = PV - C

B = Increase in wage mass

I% 5%

10% 15%

20% 25% 30% 35% 40%

d=discount rate 5 yo 7.5% 10%

-4465 -4499 -3234 -3405 - 1696 -203 8 -158 -67 1

1380 697 2918 2064 4457 343 I 5995 4799 7533 6166

-4528 -3549 -2325 -1101

123 1347 257 1 3795 5019

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Table A9-6: Rate of return of training under several discount rate and wage increase scenarios

B = Increase in wage

mass

Formula: RR = NPVK

1% 5%

10% 15%

20% 25% 30% 35% 40%

~~~

d=discount rate 5% 7.5% 10%

-88.02% -88.69% -89.26% -63.76% -67.13% -69.96%

-33.44% -40.17% -45.83% -3.11% -13.22% -21.70%

87.86% 67.65% 50.69% 1 18.18% 94.60% 74.82% 148.50% 121.56% 98.95%

As appears from Table A-9.6, an increase in average wage income o f 20 percent i s needed to ensure a positive rate o f return with discount rates o f 5, 7.5 and 10 percent.

Combinations o f changes in the employment rate and changes in wages that will lead to at least 20 percent increase in average wage rates, are indicated in green in Table A-9.3,

Section A9-3: Summary of impacts of other job training programs

Two review paper by Dar and Tzannatos (1999) and Betcherman, Olivas and Dar (2004) survey the results o f impact evaluations o f active labor market policies, including training programs for the unemployed, and youth training programs.

Training for the general population of unemployed For general training for the unemployed, Dar and Tzannatos (1999) showed that the interventions with the most positive returns were smaller-scale, on-the-job-training programs that directly met labor market needs and were well targeted, especially for women and other disadvantaged groups among the long-term unemployed. Martin and Grubb (2001) find that most programs that demonstrated gains for participants did so through improved employment opportunities rather than through higher hourly wages. Betcherman, Olivas and Dar (2004) mention that 28 our o f 39 studies of training for the unemployed showed a positive impact on future employment, while only 15 out of 29 studies showed positive impact on earnings. Outcomes in developing countries seem to be less encouraging than in developed countries

Youth training programs Dar and Tzannatos (1999) concluded that youth training programs in developed countries had the poorest track record, when compared with training programs for the long-term unemployed and those displaced through mass layoffs. Social rates of return were typically negative, both in the short-and the long run. Between 1999 and 2004, results from new impact evaluations in developed countries maintained this general conclusion Betcherman, Olivas and Dar (2004). However, results from youth training programs appeared to be different in the case o f the “Jovenes” programs in Latin America. Of the 5 new evaluations o f youth training programs in

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Latin America between 1999 and 2004, all showed positive employment impacts and two o f the three computing earning effects demonstrated positive impacts on that indicator. The Jovenes programs in Argentina, Chile, Peru and Uruguay have the following common features24: they are targeted at disadvantaged youth, combine training and work experience with other services including psychological development, conventional assessment, etc. Implementation involves important roles for civi l society and the private sector, and flexible, competitive and decentralized service delivery. Questions on the programs include long-term impacts, costs and potential coverage o f these kinds o f programs. (Betcherman, Olivas and Dar (2004)). Among the studies o f “Jovenes” programs, the Dominican Republic study i s the only one that uses experimental assignment to training to construct the control group. This i s clearly a weakness and therefore the results o f the studies must be interpreted with caution.

Section A 9 4 Assessment

With interventions that were similar to the planned intervention in St. Lucia, two out o f the five projects (Peru, Chile) achieved results which, if attained in St. Lucia, would yield positive rates to the St Lucia project. If the St Lucia project impact were similar to those in the Argentina project, the rate o f return to investment would be positive only for adult females, but not for the other groups o f beneficiaries. The Brazil project yielded only small impacts overall. Were the results o f the St Lucia project similar to those in the Brazil project, the rate o f return would be negative. Were the results o f the St Lucia project similar to those in the Dominican Republic project, the rate o f return would be borderline negative. The results from Uruguay cannot be interpreted because the original paper was not available at the time o f writing. It i s important to note that the economic analysis does not take into account the positive externalities o f the project that are associated with reduced crime and violence. At this point, there i s insufficient evidence to estimate the potential impact o f this type o f project on youth r isky behavior, though an evaluation i s currently under way in the Dominican Republic.

Section A9-5: Assessment

The following returns and costs are omitted from the analysis: - - -

-

Positive spillovers on firm productivity Reduced social costs related to reduced r isky behavior and crime Crowding-out effects: trainees that are “subsidized” by the training program may crowd out other trainees which are not subsidized Economic returns to the introduction o f occupational standards in the St Lucian economy and sub-regionally.

24 Note that those features are also common to the St. Lucia project.

74

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References

Aedo, Cristian and Sergio Nuiiez (2001), “The Impact o f Training Policies in Latin America and the Caribbean: The Case of “Programa Joven,” unpublished manuscript, ILADEWGeorgetown University.

Bravo, David and Dante Contreras (2000), “The impact o f financial incentives to training providers: The case o f Chile Joven,”unpublished manuscript. Betcherman, Gordon, Karina Olivas, and Amit Dar (2004), “Impacts o f Active Labor Market Programs: New Evidence from Evaluations with particular Attention To Developing and Transition Countries,” The World Bank, Social Protection Discussion Paper Series, No. 0402.

Card, David, Pablo Ibarrarh, Ferdinand0 Regalia, David Rosas and Yuri Soares (2006), “Labor Market Impacts of a Youth Training Program in the Dominican Republic: Evidence from a Randomized Evaluation”, unpublished manuscript.

Dar, Amit and P. Zafiris Tzannatos (1999), “Actie Labor Market Programs: A Review of the Evidence from Evalautions,” Social Protetion Discussion Paper No. 990 1 , The World Bank, Washington D.C.

Friedlander, D., Greenberg, D. H., and Robins, P. K. (1997). Evaluating government training programs for the economically disadvantaged. Journal of Economic Literature, 35, 1832-1 848.

Nopo, Hugo, Miguel Robles and Jaime Saavedra (2002), “Una medici6n del impact0 del Programa de Capacitacibn Laboral Juvenil PROJoven,” Working Paper dt36, Grupo de Analisis para e l Desarrollo (GRADE), InterAmerican Development Bank, Washington D.C.

Santiago Consultores Asociados (1 999), “Evaluaci6n Ex-Post Chile Joven 11,” CINTERFOR.

Vermeersch, Christel(2006), “The Transition From Secondary School to Work: An Empirical Investigation,” Background Paper, The World Bank LCSHD.

77

Annex 10: Safeguard Policy Issues

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

1. No safeguards are triggered for this project.

78

Annex 11: Project Preparation and Supervision ST. LUCIA: OECS (LC) Skills for Inclusive Growth

Planned Actual PCN review 06/21/2006 06/12/2006 Init ial PID to PIC 07/13/2006 Init ial ISDS to PIC 0711 212006 Appraisal 12/12//2006 Negotiations 0312712007 04/02/2007 BoardlRVP approval 05/08/2007 Planned date o f effectiveness 0910 112007 Planned date o f mid-term review 0911 512009 Planned closing date 0311 5/20 12

Key institutions responsible for preparation o f the project:

National Skills Development Centre under the Ministry o f Education Ministry o f Education Ministry o f Economic Affairs, Economic Planning, National Development, and Public Service Ministry o f Finance and Physical Development

Bank staff and consultants who worked on the project included:

Name Andreas Blom Theresa Beltramo Angela Demas Daniela Marotta Christel Vermeersch Cornelia Tesliuc Chingboon Lee David Warren Gillette Hall Svetlana Klimenko Judith Morroy Xiomara A. Morel Rolande Simone Pryce Thomas McArdle Henning Salling Olesen

Que Bui Lourdes Noel

Title Education Economist Junior Professional Associate Operations Officer Young Professional Economist Social Protection Specialist Sector Leader Sr. Social Protection Specialist Social Protection Specialist Financial Management Specialist Procurement Analyst Sr. Finance Officer Lawyer Consultant (Sr. Director) Consultant (Professor in Lifelong Learning) Sr. Program Assistant Sr. Program Assistant

Unit LCSHE LCC3C LCSHE LCSHE LCSHE LCSHS LCC3C LCSHS SDV LCSFM LCSPT L O A G l LEGLA (HEART-NTA, Jamaica) (University o f Roskilde)

LCSHD LCSHD

Peer Reviewers: 0

0

0

0

0

Pablo Ibarraran, Inter-American Development Bank Caroline Mager, Center for Excellence in Leadership, UK Amit Dar, Lead Education Economist, SASHD Errol Graham, Sr. Economist, LCC3C Alan Carroll, Operations Adviser, LCSQE

79

Robert Schware, Lead Informatics Specialist, CITPO Andrea Vermehren, Sr. Social Protection Specialist, SASHD

Bank funds expended to date on project preparation: 1. Bank resources: US$199,804.53 2. Trust funds: US$6,300.00 3. Total: US$206,104.50

Estimated Approval and Supervision costs: US$600,000 Estimated annual supervision cost: US$85,000

80

Annex 12: Documents in the Project File

ST. LUCIA: OECS (LC) Skills for Inclusive Growth

Aedo, Cristian and Sergio Nuiiez (200 l), “The Impact o f Training Policies in Latin America and the Caribbean: The Case o f “Programa Joven,” unpublished manuscript, ILADES/Georgetown University.

Bravo, David and Dante Contreras (2000), “The impact o f financial incentives to training providers: The case o f Chile Joven,”unpublished manuscript.

Betcherman, Gordon, Karina Olivas, and Amit Dar (2004), “Impacts o f Active Labor Market Programs: New Evidence from Evaluations with particular Attention To Developing and Transition Countries,” The World Bank, Social Protection Discussion Paper Series, No. 0402.

Brown, Deryck, “Evaluating Institutional Sustainability in Development Programmes: Beyond Dollars and Cents”, Journal o f International Development: Vol. 10, No.1, 55-69, 1998

Card, David, Pablo Ibarraran, Ferdinand0 Regalia, David Rosas and Yuri Soares (2006), “Labor Market Impacts o f a Youth Training Program in the Dominican Republic: Evidence from a Randomized Evaluation”, unpublished manuscript.

Caribbean Community Secretariat, “Regional Strategy, technical and vocational education and training”, Georgetown, Guyana, 1990

Caribbean Ne t News, “Jamaica i s Murder Capital o f the World,” Press Release January, 9, 2006.

CDB, Caribbean Forum for Development, “Productivity Enhancement and Ski l ls Development for the New Economic Climate in the Caribbean,” November, 2005.

Dar, Amit and P. Zafiris Tzannatos (1999), “Actie Labor Market Programs: A Review o f the Evidence from Evalautions,” Social Protetion Discussion Paper No. 990 1 , The World Bank, Washington D.C.

De Ferranti, D., G. Perry, LGill, J. Guasch, W. Maloney, C. Sanchez-Paramo, N. Schady (2003). Closing the Gap in Education and Technology, World Bank. Washington D.C.

DFID and World Bank, “Lifelong Learning and Training Policies in Latin America: Main Findings and Policy Leads from the Case Studies,” Chapter in Knowledge and Ski l ls in New Economy, World Bank. Washington D.C.

Donovan, M.S., Bransford, J.D. and Pellegrino, J.W. How People Learn: Bridging Research and Practice, Committee on Learning Research and Educational Practice Commission on Behavioral and Social Sciences and Education, National Research Council Washington, DC: National Academy Press, 2000

European Commission (2005): Towards a European Qualification Framework for Lifelong Learning. Commission Staff Working Document (2005)957.

Friedlander, D., Greenberg, D. H., and Robins, P. K. (1997). Evaluating government training programs for the economically disadvantaged. Journal of Economic Literature, 35, 1832-1 848.

Government o f Grenada, Education Statistical Digest, 2003

81

Government o f St. Lucia, Education Statistical Digest, 2005 ’

Hull Kristensen, P. & F. Borum (eds) (1990): Techonological innovation and organizational change. Danish patterns of knowledge, networks and culture. Cph. New Social Science Monographs.

James, V. Williams, C. and Hamilton, R. “Private and social rates o f return for participation in HEART Trust/NTA training programmes in Jamaica”. Unpublished paper, HEART Trust/NTA, 2006

Karmel, T. and Nguyen, N. “Australia’s tertiary education sector”, National Centre for Vocational Education Research, 2003

Larsen, Lene (1999): The Production School. An Alternative Means for Modern Youth? In Weber, Kirsten (ed.): Lifelong Learning and Experience. Papers and Perspectives of the 1st International Summer School in Lifelong Learning, Roskilde University.

Lewis, A. “Economic development with unlimited supplies o f labour.” Manchester School 22, May 1954.

Lutz, Burkart (1 976): Bildungssystem und Beschaftigungsstruktu in Deutschland und Frankreich, in. H.- G. Mendius u.a. Betrieb, Arbeitsmarkt, QualiJikation, Frankfurt

McArdle, T. “Investment in Training: A Cross-country Comparative Study on “Best Practices”, Jamaica Case Study: Investment Projects Test a System in the Midst o f Reform”, International Labor Office & Cinterfor, 2005 (not yet published)

McArdle, Tom (2004). “Firm and Worker Training in the Caribbean,” World Bank Background Paper. Washington D.C. and Kingston, Jamaica.

Madsen, Bent (2004). “End o f Project Evaluation o f the OECSEDU Export Capability Enhancement Program,” GFA Management. Hamburg, Germany.

Michael White and Associates, “Labour Market Survey Final Report”, Caribbean Knowledge and Learning Network, Bridgetown, 2006.

fiopo, Hugo, Miguel Robles and Jaime Saavedra (2002), “Una medici6n del impacto del Programa de Capacitaci6n Laboral Juvenil PROJoven,” Working Paper dt36, Grupo de Analisis para e l Desarrollo (GRADE), InterAmerican Development Bank, Washington D.C.

Salling Olesen, Henning (1994): Adult Education and the Labour Market. ESREA and Slovenian Adult Education Center, Ljubljana

Salling Olesen, Henning (2002): Literacy2 1 : Cultural Techniques, Self Regulation, and Collective Experience. In: A.Melo et a1 (eds)(200 1): Wider beneJits of Adult Learning. Understanding and monitoring the ‘Consequences of Adult Learning. Cadernas Cieca I, Edicaes Universitkias Lus6fonas, Lissabon 200 1

Salling Olesen, Henning (2004): Lifelong Learning in Colombia and Denmark, in World Bank: Study of Lifelong Learning in Colombia

Salling Olesen, Henning (2005): “Work related learning, identities and culture “ in E. Kurantowicz et a1 (eds): Old and New Worlds of Learning, Wroclaw, 2005: Wydawnictwo Naukowe. Also on www.ruc.dk/inst lO/hso

82

Salling Olesen, Henning (2006): Work Identification - Inhibition or Resource for Learning? In: Tarja Tikkanen (ed): Older Workers ’ Learning, CEDEFOP 2006

Salling Olesen, Henning (2006). “Caribbean Ski l ls Enhancement Project- Coherence in Education, Training, and Informal Learning,” Background paper prepared for the World Bank

Santiago Consultores Asociados (1 999), “Evaluacih Ex-Post Chile Joven 11,” CINTERFOR.

Sir Arthur Lewis Community College, Prospectus, 2004-05

Sternberg, R. et a1 (2000): Practical intelligence in Everyday Life, Cambridge University Press

Vermeersch, Christel(2006), “The Transition From Secondary School to Work: An Empirical ’ Investigation,” Background Paper, The World Bank LCSHD.

World Bank: A Time to Choose. Caribbean Development in the 21st Century, Washington D.C. World Bank 2005.

World Bank(2005): Towards a new Agenda for Growth, OECS

World Bank (2003), “Caribbean Youth Development: Issues and Policy Directions”, Washington, D.C.,

World Bank, “Grenada: A Diagnostic Review of the Investment Climate,” World Bank/IFC FIAS Paper. Washington, D.C., (2004).

83

Annex 13: Summary of Studies of Skill Enhancement in the OECS

1. Job Training in the OECS: an Overview and Analysis of Programmes and Activities

This report analysed the job training in the OECS and shed light on improving the level o f ski l ls within the workforce to increase productivity and competitiveness. The main findings are:

The OECS countries are behind other CARICOM countries in improving ski l ls training and the framework in which i t operates. In 1990 the CARICOM countries agreed to establish national organisations to coordinate TVET. In the OECS, only St. Lucia has established a national W E T entity and this only recently. These training institutions developed a (mostly) common framework referred to as N V Q s , albeit s t i l l evolving. This has led to the Caribbean Association of National Training Agencies (CANTA) process of region-wide acceptance of occupation standards. The OECS countries are in general trying to adopt this system in some form, but progress i s slow and reforms have not achieved any critical mass, and the training provisions remain highly fragmented and disconnected from the labour market.

Steps to participating in the emerging framework would include:

Adopting, and perhaps adapting existing standards from one o f the CANTA standards developing bodies in Barbados, Jamaica or Trinidad & Tobago, usually through an industry advisory structure set up through the national TVET entity. Determining how learners wi l l be assessed under the CANTA approach, and specifically whether the competence wi l l be determined using local assessors operating within a quality assurance system provided through an existing CANTA member or by arranging with the CANTA member to provide assessment. Reorienting instructors and administrators (and possibly assessors) to provide training according to the standards adopted, and putting in place some form o f learning management system to enable monitoring and to assist learners to navigate the new system.

With the Caribbean Single Market now a reality and free movement o f labour an improved mechanism for recognizing sk i l l s i s an imperative. I t can be argued that replicating a national certification structure in each territory i s not necessary, as the countries could seek accreditation and certification services through the existing national training entities, or one of the agencies could evolve into a regional agency.

The training capacity o f the OECS countries i s inadequate and needs to be increased and diversified, but the larger issue i s the framework(s) in which training operates. The training capacity can be increased, but it needs to be increased within an improved framework. The improved framework needs to include stronger linkages to the labour market (including labour market information) and needs of employers, needs to accommodate different kinds of training (in institutions, on-the-job) and provide more flexible pathways for individuals to acquire recognised qualifications.

The biggest challenge to training quality i s to improve the teaching and learning o f soft skills. The teachinglinstruction does not stress performance by the learner that incorporates a l l the elements of competency-the knowledge, the skill, and the attitudinal dimension. The youth programmes focus on the ski l ls and the tertiary programmes focus on the knowledge, but neither teaches soft ski l ls effectively. It takes deliberate use o f standards-based learning materials to deliver and assess these soft ski l ls within the context of training for employment.

Issues o f the quality and relevance of training vary by the kind of training provision. The community colleges suffer relevance problems because they are not connected properly to the labour market and needs of employers. They could benefit from incorporating the CARICOM standards into their programmes (although the amount o f standards at higher levels of training i s a larger regional issue), increasing work experience and promoting internship components with tight integration to the

.

84

institutional programme, and by generally pursuing closer working relationships with the employers including industry attachments for staff, guest lecturers, cooperative training, industry advisory groups, etc..

The programmes aimed at youth and disadvantaged groups have different problems more related to quality. The absence o f a framework and leadership for the sector tends to lead to a somewhat low standard in these programmes. The National Skills Development Centre i s an exception and model here o f a programme aimed mostly at the disadvantaged that functions at a good standard. The lingering tendency to provide TVET as an alternative to upper secondary education should be addressed. Many o f these programmes are trying to adopt the NVQ/CVQ framework, but there are serious obstacles to doing so.

There i s also need to diversify training offerings. There are areas in which no training appears to be available, but where there i s likely demand, and some training offered in community colleges i s too general to prepare people for the more specialised jobs in the market. There are no programmes aimed at the kind o f tourism that i s emerging that provides jobs in relatively large amounts, especially in restaurant services and housekeeping (which may not involve lengthy training programmes). Training in food preparation and front office jobs i s difficult to find. There i s very little training offered relating to maintenance o f tourism properties; this i s usually a multi-skilled programme that could be done in conjunction with tourism properties. There are no multi-functional hospitality worker programmes that would provide a good worker profile for the small properties and villas. There i s no training to service the boating and yachting in the region.

2. The Transition from Secondary School to Work: an empirical investigation from St. Vincent

This study analysed what are the typical paths o f transition between secondary school and the labour market, the ski l ls mix among recent graduates from secondary school and the correlation between the education o f graduates and their training (in particular their outcomes on the CSEC exam) and labour market outcomes. The following conclusions can be drawn:

1. There i s l i t t le interaction between graduates and employers on ski l ls despite an evident lack o f knowledge on valued sk i l ls among graduates. At the same time graduates seem to over estimate their own IT ski l ls.

2. Levels o f on-the-job training are relatively low: 19 percent o f graduated received on-the-job/job- related training at least once, but the average was only 13 percent among graduates who went straight to the labour market.

3. There i s l i t t le correlation between levels o f achievement on the CSEC exam and labour market outcomes. For graduates who transitioned directly from secondary school to the labour market, only their CSEC mathematics scores are associated with higher earnings, and there i s no correlation between CSEC scores and employment. This points to a potential issue with the CSEC exams/ and or the secondary education system: if there i s little correlation between secondary school leaving performance and labor market outcomes, then it is likely that employers either do not see the CSEC results as reflecting graduates’ abilities, or that the ski l ls acquired in secondary are not rewardedvalued in the labour market.

85

3. Skills Enhancement in the Tourism Industry ‘

The main findings o f the paper can be organized into four key lessons:

Skills enhancement in the tourism sector would not only benefit the tourism industry but have positive economic effects throughout society.

There i s a high correlation between ski l ls base and technology adoption. Increasing ski l ls training will allow the least skilled workers in society to retrain and continue to acquire skills, thus easing pressure at the bottom o f the pyramid o f labor market entrants, and hence reduce long-term unemployment. There are preliminary reports that ski l ls training for youth has the positive externality o f motivating participants to go back to school for further education.

2. There i s a clear mismatch between supply and demand o f ski l ls in the tourism sector which hinders growth and competitiveness in the sector. The existing ski l ls training i s inadequate to meet the standards o f an internationally competitive tourism industry. St. Lucia and the wider Caribbean would benefit from harmonized internationally accredited TVET standards for the tourism industry.

Hoteliers, interviewed for this paper, unilaterally felt that the school curriculum- both secondary and tertiary- in St. Lucia was ill suited to meet the demands o f the island’s leading economic sector, tourism. The general consensus on the most needed ski l ls for the tourism sector included: i). soft skills26, (ii). the ability to learn, (iii). entrepreneurship ski l ls and se l f initiative, and (iv). professional skills, particularly skilled managers and chefs. Firms in the OECS rank ski l ls as a number one constraint to increasing competitiveness. Given the region’s plans for greater integration and the large percentage o f tourists (74 percent) coming from Europe, Canada, and the United States, instituting internationally accredited regional TVET standards for the tourism sector would increase the competitiveness o f the tourism sector. In the absence o f adequate international ski l ls training, top hotels poach employees from the next level o f hotels and so on down the chain.

3. A wide societal endorsement o f tourism as the economy’s leading sector o f growth i s needed to maximize the potential in the sector.

While employers and educators rank hospitality and tourism ski l ls as among the top five skill sets needed for the future, students do not. This phenomenon warrants further exploration to assess whether there are negative assumptions associated with employment in the tourism sector by youth or if simply there i s not enough awareness o f the possibility o f careers in tourism. In a recent CDB sponsored conference on Ski l ls and Employment, labor union representatives from the OECS and wider Caribbean pledged to partner with employers in providing training for workers in the soft skills desired by employers.

0

4. Formal impact evaluations and assessments o f al l the publicly offered training programs, as well as Secondary School and Senior Primary School outcomes in the labor market should be underfaken to understand the efficacy o f training programs and the outcomes o f education.

26 Soft Skills as it applies to the Eastern Caribbean include: 1). The three 3s ‘Reading, Writing, and Arithmetic; 2). Cooperative Skills; 3). Communication; 4). Work ethic; 5). Entrepreneurship; 6). Commitment. (Olesen, Henning, 2006).

86

4. Caribbean Skills Enhancement Study: Coherence in Education, Training, and Informal Learning

In order to bridge the gap between education and work l i f e it will be necessary to develop a much more clear economic and social strategy for each country - which i s sufficiently clear to explain to every individual and each entreprise in which way their choices may contribute to the shared vision. This can be underpinned by planning for key sectors o f business, and key sectors in developing human services corresponding with the present development o f the countries, all combined with plans for qualified labour supply It seems very important to implement self- devolving pilot projects which can bring experience, inspire and involve developments o f organisations. The following recommendations are seen as practical steps that can be taken immediately at the same time as they can contribute to the long term strategies.

Pilot project, St Lucia: Training of staff for tourism/hospitality. Establishing a training and education programme for unemployed young and mature workers in areas required by hotel and tourism staff. The programme should comprise personal development, general education as well as specific ski l ls for jobs that can be anticipated, and should include one or two practical trainee period(s) in (a) local enterprise(s) o f good standing.

Pilot project: Basic vocational education for early school leavers. The programme should provide an attractive social environment, with space for personal development, creative work with music, theatre, etc, and also offer a basic education for paid work. The programme should help young people to explore their interests and resources at the same time as introducing basic work experiences by the format o f the programme and by offering training in specific vocational ski l ls. The programme should comprise career guidance and on an individual basis create attachments in local work life, followed by a reflection and digestion o f work experiences in the programme. At the end o f the programme each student should develop a personal action plan for learning and employment, and the programme should assist in initial steps to put i t into practice. Models for this type o f programmes can be found in Danish production schools and Day Folk High Schools (Salling Olesen 2004)

Vocational secondary education combining school and workplace learning. Establishing o f alternative secondary school programmes in collaboration with business, in which students are trained partly in workplaces and guaranteed employment in a period after the end o f education.The programmes should be open to regular secondary school students as well as recent early school leavers (under the age o f 20) who want to take up education again. The programme should give students 1-2 CXC credits at the same time as a recognized competence in a relevant job category in the business (e.g. kitchen assistance, room attendance).

Competence dissemination in specialized key areas of work. In areas o f specialized competence, where enterprises import specialized labour from the wider Caribbean region, or from outside the region, a competence dissemination should be arranged, either by legal condition, or by agreement between business and education and training agencies. Examples are chief cooks, executive managers and other specialized competences that can not possibly be established as systematic training in small societies.

87

Annex 14 Statement of Loans and Credits St. Lucia: OECS (LC) Ski l ls for Inclusive Growth

Difference between expected and actual

disbursements Original Amount in US$ Millions

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

PO76795 2005 LC HIV/AIDS PREVENTION & 3.20 1.60 0.00 0.00 0.00 5.73 1.30 0.00 CONTROL

PO94416 2005 LC Water Supply Infrastr. Improvement 3.85 3.85 0.00 0.00 0.00 6.34 1.89 0.00 PO86469 2004 LC Disaster Management Project I1 3.70 3.77 0.00 0.00 0.00 4.91 0.58 0.00 PO70244 2002 LC Water Sector Reform Tech Ass is t 1.30 1.30 0.00 0.00 0.00 1.06 0.77 0.00 PO77712 2002 6 0 LC Education (APLO1) 6.00 6.00 0.00 0.00 0.00 8.56 . 6.54 0.00

Total: 18.05 16.52 0.00 0.00 0.00 26.60 11.08 0.00

ST. LUCIA STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions o f U S Dollars

FY Approval Company

Committed Disbursed

IFC IFC

Loan Equity Quasi Partic. Loan Equity Quasi Partic.

Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FY Approval Company

Approvals Pending Commitment

Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

88

2000

53 355 -59

3

-96 -14 1

37

30 33

235 31 -

34 4 7 :

55 0

200s

zDti 449 -63

4

-136 -16 4

26 5

23 1

-4 2

30 33

398 26

48 5 6 9

iff a

2000 21106

T e ~ h n o I ~ g y and Xnfrartrwcturt3 2000 2000

5 2

329 d l f

8.6 20.1

EnVkQnment

Agncultuml land (% of land area) 33 33 Yorest area (W, of land area, 2000 anU 2005) 279 2 7 9 N ~ t i ~ n a ~ l y protested areas Ph of land area)

CD2 omiss~ons per capita (mt) 2 2 2 4

GOP per unit of eneigy use (2000 PPP +$ per kg of oil equivalent)

Energy use pet mpits (kg ofoil ~ q ~ I ~ a ~ a ~ ~ )

6 10 1 t 1 1 0 I

12 27 '1 3 9 z

Development Eco t Data Group lDECDGi

G R O SG R O SI S L E TI S L E T

D A U P H I ND A U P H I N

C A S T R I E SC A S T R I E S

D E N N E RD E N N E R YY

P R A S L I NP R A S L I N

S O U F R I E R ES O U F R I E R E

C H O I S E U LC H O I S E U L

L A B O R I EL A B O R I E

M I C O U DM I C O U D

V I E U XV I E U XF O RF O R TT

ANSEANSELA RALA RAYEYE

CANARIESCANARIES

Mt. GimieMt. Gimie(950 m)(950 m)

Mt. TMt. Tabacabac(678 m)(678 m)

Mt. GrandMt. GrandMagazinMagazin(616 m)(616 m)

SansSansSoucisSoucis

DauphinDauphin

GrandGrandAnseAnse

La CroixLa CroixMaingotMaingot

Anse La RayeAnse La Raye

LondonderrLondonderryy

LaborieLaborie

DesurisseauDesurisseau

MonMonReposRepos

PraslinPraslin

DennerDenneryy

CASTRIESCASTRIES

G R O SI S L E T

D A U P H I N

C A S T R I E S

D E N N E R Y

P R A S L I N

S O U F R I E R E

C H O I S E U L

L A B O R I E

M I C O U D

V I E U XF O R T

ANSELA RAYE

CANARIES

SansSoucis

Dauphin

GrandAnse

La CroixMaingot

Anse La Raye

Canaries

Soufrière

Choiseul

Vieux Fort

Londonderry

Laborie

Desurisseau

Micoud

MonRepos

Praslin

Dennery

Gros Islet

CASTRIES

CuldeSac

Dennery

Canelles

CaribbeanSea

Saint Lucia Channel

Saint Vincent Passage

Rodney Bay

Choc Bay

Fond d'or Bay

Praslin Bay

Grande Culde Sac Bay

Marigot Bay

Soufrière Bay

Anse de Piton

LaborieBay

Vieux FortBay

Grand Anse Bay

Cap Point

Cape Marquis

Pigeon Island

Pointe Seraphine

Grand Caille Point

Gros Piton Point

Vierge Point

Trou Gras Point

Cape MouleChique

Maria I.

Mt. Gimie(950 m)

Mt. Tabac(678 m)

Mt. GrandMagazin(616 m)

61°00'W

61°00'W

14°00'N

13°50'N

14°00'N

13°50'N

60°50'W

60°50'W

SAINTLUCIA

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 1 2

0 1 2 3 Miles

3 Kilometers

IBRD 33487

DECEMBER 2004

SAINT LUCIASELECTED CITIES AND TOWNS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

QUARTER BOUNDARIES

INTERNATIONAL BOUNDARIES