Public Disclosure Authorized - World Bank · 2016. 7. 14. · GDSS Government Day Secondary Schools PTR Pupil Teacher Ratio ... Annex 15: Map No. 33440 ... National Product (GNP)

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 53051-MW

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 33 MILLION

(US$ 50 MILLION EQUIVALENT)

TO THE

REPUBLIC OF MALAWI

FOR A

PROJECT TO IMPROVE EDUCATION QUALITY IN MALAWI (PIEQM)

May 21, 2010

Education Sector Unit Southern Africa 2 Department Africa Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 29, 2010)

Currency Unit = Malawian Kwacha Malawian Kwacha 1.52 = US$1

US$1 = SDR 0.6568

MALAWIAN FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

BP Bank Policy MDG Millennium Development Goals

CAS Country Assistance Strategy MGDS Malawian Growth and Development Strategy

CDSS Community Day Secondary School MOU Memorandum of Understanding

CF Catalytic Fund MoEST Ministry of Education, Science and Technology

CPD Continuous Professional Development MSCE Malawi School Certificate Education

CSS Conventional Secondary Schools MTEF Medium-term Expenditure Framework

CSR Country Status Report NCB National Competitive Bidding

DEM District Education Manager NCIC National Construction Industry Council

DEP Development Education Plans NESP National Education Sector Plan

DPs Development Partners

NGLFC National Local Government Finance Committee

DPP Democratic Progressive Party ODL Open Distance Learning

DSS Direct Support to Schools OP Operation Policy

DTED Department of Teacher and Education Development

PAD Project Appraisal Document

ECD Early Childhood Development PCAR Primary Curriculum and Assessment Reform

EFA Education for All PCR Primary Completion Rates

EIMU Education Infrastructure Management Unit

PEA Primary Education Advisors

EMAS Education Methods Advisory Services PFM Public Financial Management

ii

EMIS Education Information Management System

PIEQM Project to Improve Education Quality in Malawi

ESIP Education Sector Implementation Plan PIU Project Implementation Unit

ESMF Environmental and Social Management Framework

PoW Programs of Work

FM Financial Management PqTR Pupil per Qualified Teacher Ratio

FTI Fast Track Initiative PSLCE Primary Schooling Leaving Certificate Exam

FPE Free Primary Education PTA Parent Teacher Association

GDSS Government Day Secondary Schools PTR Pupil Teacher Ratio

GER Gross Enrolment Rate ROR Rates of Return

HIPC Heavily Indebted Poor Countries RPF Resettlement Policy Framework

HRMIS Human Resources Management Information System

SACMEQ Southern African Consortium of Monitoring Education Quality

IDA International Development Association

SADC Southern African Development Community

ICB International Competitive Bidding SIL Specific Investment Loan

IEC Internal Efficiency Coefficient SIP School Improvement Planning

IFMIS Integrated Financial Management Information System

SMC School Management Committee

IFRs Interim Financial Reports SWG Sector Working Group

IPTE Inter Primary Teacher Education Program

SWAp Sector Wide Approach

JCE Junior Certificate Education TDC Teacher Development Centers

JFA Joint Financing Agreement TTC Teachers Training College

LGFC Local Government Finance Committee

TWG Technical Working Group

Vice President: Obiageli Katryn Ezekwesili Acting Country Director: Olivier P. Godron

Country Manager Sandra Bloemenkamp Sector Manager: Christopher J. Thomas

Task Team Leader: Carlos A. Rojas

iii

MALAWI


CONTENTS

Page

I. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1

A. Country and sector issues.................................................................................................... 1

B. Rationale for Bank involvement ......................................................................................... 7

C. Higher level objectives to which the operation contributes ................................................ 8

II. PROJECT DESCRIPTION ................................................................................................. 9

A. Lending instrument ............................................................................................................. 9

B. Project development objective and key indicators ............................................................ 10

C. Project Component ............................................................................................................ 12

D. Lessons learned and reflected in the operation design ...................................................... 14

E. Alternatives considered and reasons for rejection ............................................................ 16

III. IMPLEMENTATION .................................................................................................... 16

A. Partnership arrangements .................................................................................................. 16

B. Institutional and implementation arrangements ................................................................ 16

C. Monitoring and evaluation of outcomes/results ................................................................ 18

D. Sustainability..................................................................................................................... 18

E. Critical risks and possible controversial aspects ............................................................... 19

F. Loan/credit conditions and covenants ............................................................................... 20

IV. APPRAISAL SUMMARY ............................................................................................. 21

A. Economic and financial analyses ...................................................................................... 21

B. Technical ........................................................................................................................... 22

C. Fiduciary ........................................................................................................................... 23

D. Social................................................................................................................................. 24

E. Environment ...................................................................................................................... 25

F. Safeguard policies ............................................................................................................. 25

G. Policy Exceptions and Readiness...................................................................................... 26

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

iv

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 41

Annex 3: Results Framework and Monitoring ........................................................................ 42

Annex 4: Detailed Project Description ...................................................................................... 48

Annex 5: Project Costs ............................................................................................................... 63

Annex 6: Implementation Arrangements ................................................................................. 65

Annex 7: Financial Management and Disbursement Arrangements ..................................... 78

Annex 8: Procurement Arrangements ...................................................................................... 97

Annex 9: Economic and Financial Analysis ........................................................................... 104

Annex 10: Safeguard Policy Issues .......................................................................................... 111

Annex 11: Project Preparation and Supervision ................................................................... 114

Annex 12: Documents in the Operation File .......................................................................... 115

Annex 13: Statement of Loans and Credits ............................................................................ 120

Annex 14: Country at a Glance ............................................................................................... 122

Annex 15: Map No. 33440 ........................................................................................................ 125

v

LIST OF FIGURES AND TABLES Figure 1: Access Probability for Each Level of Education by Group ............................................ 4 Figure 2: Mean for the Reading and Mathematics Test Scores of Learners in All SACMEQ Countries (SACMEQ II) ................................................................................................................. 5 Figure 3: PIEQM Results Framework .......................................................................................... 10 Figure 4: Trends in Malawi’s National Inflation Rates, 2007-2009 ............................................. 31 Figure 5: Evolution of Primary Enrollment (in 000s) ................................................................... 33 Figure 6: Evolution of Primary GER (%) ..................................................................................... 33 Figure 7: Access Rate by School Grade ....................................................................................... 34 Figure 8: PqTR and PTR in Rural and Urban ............................................................................... 34 Figure 9: Share in Enrollment by School Type ............................................................................ 36 Figure 10: Recurrent Expenditure by Spending Nature ................................................................ 40 Figure 11: Recurrent Expenditure by Level of Schooling ............................................................ 40 Figure 12: Probalistic Schooling Profile ....................................................................................... 51 Figure 13: Access Rates to the Different Grades according to Wealth Index .............................. 52 201. Figure 14: Sector Working Groups (Main Technical Working Groups) .............................. 66 Figure 15: Organization of MoEST and Related Institutions ....................................................... 67 Figure 16: EIMU Organizational Structure .................................................................................. 72 Figure 17: EIMU Organogram (Under Discussion) ..................................................................... 73 Figure 18: Flow of Education Related Public Resources from Public Expenditure Tracking Survey (2010)................................................................................................................................ 76

Table 1: Malawi Population and Education Indicators ................................................................... 7 Table 2: Potential Risks and Mitigation Measures ....................................................................... 19 Table 3: Malawi Key Macroeconomic Indicators, 2005-2011 ..................................................... 27

vi

Table 4: Performance and Disbursement of Externally Funded Primary Projects/Programs US$ '000 ................................................................................................................................................ 41 Table 5: Package for Disadvantaged Youth.................................................................................. 53 185. Table 6: Risks Associated with Implementing the SIP and their Management .................... 59 Table 7: Costing of NESP (2010-2014) US$ millions.................................................................. 63 Table 8: Costing of Basic Education (2010-2014) US$ millions ................................................. 64 Table 9: PIEQM Cost by Subcomponent US$ millions ............................................................... 64 Table 10: Pooled Partner Funding for Basic Education (2010-2015)** US$ millions ................ 64 Table 11: Management Institutions .............................................................................................. 74 Table 12: Teacher Management Institutions ................................................................................. 77 Table 13: Detailed FM Risk Assessment ...................................................................................... 82 Table 14: Results from a Mincerian Estimation of Regressing the Logarithm of Workers’ Annual Income on Education .................................................................................................................. 106 Table 15: Sector of Employment according to Education Level (%) ......................................... 107 Table 16: Private and Social Rates of Return to Education (%) ................................................. 108 Table 17: Correlates of Mother’s Education on Various Adult Behaviours: Share for the Different Cycles .......................................................................................................................... 109 Table 18: Correlation between Parental Education and Child Access to Standard 1 ................. 110

vii

MALAWI


PROJECT APPRAISAL DOCUMENT

AFRICA

AFTED

Date: May 21, 2010 Team Leader: Carlos A. Rojas Acting Country Director: Olivier P. Godron Sector Manager/Acting Director: Christopher J. Thomas/Tawid Nawaz

Sectors: Primary Education (75%); Secondary education (25%) Themes: Education for all (100%)

Project ID: P114847 Environmental category: B- Partial Assessment

Lending Instrument: Specific Investment Loan Joint IFC: Joint Level:

Project Financing Data

[ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m): 50.00 Proposed terms: Standard IDA terms with a maturity of 40-years

Financing Plan (US$m) Source Local Foreign Total

International Development Association (IDA)

32.50 17.50 50.00

Fast Track Initiative Catalytic Fund (FTI CF)

58.50 31.50 90.00

Department for International Development (DfID)

58.50 31.50 90.00

German Development Corporation (GDC) 16.25 8.75 25.00 United Nations Children’s Fund (UNICEF) 0.65 0.35 1.00 Total: 142.34 76.66 256.00 Borrower: Republic of Malawi Responsible Agency: Ministry of Education, Science, and Technology PO Bag 328 Capital Hill Malawi Tel: (265-1) 789-422 Fax: (265-1) 788-064

viii

Estimated disbursements (Bank FY/US$m)

FY 2011 2012 2013 2014 2015 Annual 6.0 9.0 15.0 15.0 5.0 Cumulative 6.0 15.0 30.0 45.0 50.0 Project implementation period: Start June 17, 2010 End: December 31, 2014 Expected effectiveness date: September 9, 2010 Expected closing date: June 30, 2015 Does the project depart from the CAS in content or other significant respects? Ref. PAD I.C.

[ ]Yes [X] No

Does the project require any exceptions from Bank policies? Ref. PAD IV.G. Have these been approved by Bank management?

[ ]Yes [X] No [ ]Yes [ ] No

Is approval for any policy exception sought from the Board? [ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? Ref. PAD III.E.

[X]Yes [ ] No

Does the project meet the Regional criteria for readiness for implementation? Ref. PAD IV.G.

[X]Yes [ ] No

Project development objective Ref. PAD II.C., Technical Annex 3: To increase access and equity and enhance quality of the teaching and learning environment in basic education. Project description Ref. PAD II.D., Technical Annex 4: PIEQM is comprised of three main components: (i) improving access to and equity of education through a mix of demand- and supply-side interventions; (ii) enhancing the teaching and learning environment by providing the necessary learning materials and increasing the corps of teachers through open distance learning; and (iii) improving institutional and management capacity through supporting reform in teacher management and devolving school planning and development to the local level, while improving capacity at all levels of Government of Malawi. Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10: The program has triggered (i) OP 4.01 Environmental Assessment and (ii) (OP4.12) Involuntary Resettlement. The project is classified as Environmental Assessment category B partial assessment. Significant, non-standard conditions, if any, for: Ref. PAD III.F. Board presentation: None Loan/credit effectiveness: (i) Appoint head of procurement unit with qualification and experience acceptable to the Bank; and

ix

(ii) Adoption of Sub-financing Manuals for implementation of school grants and secondary school tuition stipends in a form satisfactory to the Association Covenants applicable to project implementation: (i) Maintain a procurement unit with adequate number of staff whose qualifications and experience acceptable to the Association; (ii) Submit to the Association annual procurement audit no later than 6 months after the end of each Fiscal Year; (iii) Maintain adequate financial management system and records; prepare financial statements of operations, resources and expenditures of the operation; (iv) Submit to the Association audited financial statements not later than 6 months after the end of each Fiscal Year; (v) The Implementing Agency shall furnish Interim Financial Reports (IFRs) not later than 45 days after the end of each calendar quarter; and (vi) Appoint external auditors within 4 months of effectiveness of the Credit.

1

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Malawi is landlocked country bordered on the northwest by Zambia, on the north and northeast by Tanzania, and to the south, southeast and southwest by Mozambique. With a land area of 118,484 square kilometers and a population of slightly more than 13.5 million, Malawi is one of Southern Africa’s most densely populated countries and has a young and growing population that is expected to reach 20 million by 2025. Religious affiliations include traditional African religions (3 percent), Christianity (79.9 percent), and Islam (12.8 percent). 2. Malawi is one of the world’s poorest countries, and is currently ranked 164 out of 174 countries on the United Nations Human Development Index. With an estimated Gross National Product (GNP) per capita of US$160, approximately 65 percent of the population lives below the national poverty line. Malawi’s real Gross Domestic Project (GDP) growth has been highly variable. The agricultural sector accounts for 90 percent of foreign exchange earnings, 40 percent of GDP, and 80 percent of the workforce, but is highly susceptible to drought.1 In addition to its challenging economy, Malawi faces extreme challenges in the development of human resources. It has among the world’s highest proportions of citizens who are HIV-positive, with an adult prevalence of 14.2 percent, as well as very high rates of infant and child mortality.2 The latest data from 2006 show that 53 percent of Malawian children aged 6-59 months experience stunting, a severe form of malnutrition. In Africa, only Burundi and Madagascar match Malawi’s high level of stunting in a region where the average is 40 percent. 3. Over the last few years Malawi has experienced strong economic performance due to increased fiscal discipline. Lack of fiscal discipline had plagued the Republic of Malawi since 1994, leading to an economic crisis with domestic debt at 24 percent of GDP. In 2004, Malawi began to enforce stricter fiscal discipline. As a result, the country made progress in terms of economic growth and more effective poverty reduction strategies. Government repaid domestic debt and maintained modest overall deficits that averaged 2 percent between 2004 and 2008. In addition to a good macroeconomic environment, good weather and a fertilizer subsidy program have contributed to robust growth and moderate inflation. After reaching 9.8 percent in 2008, real GDP growth was estimated at 7.6 percent in 2009. Interest rates are beginning to fall, the share of credit extended to the private sector has risen, and the public sector no longer crowds out investment. In addition, the successful deployment of fertilizer subsidies in 2006, coupled with consistent rainfall across most of the country, resulted in a bumper harvest in maize, the most important staple crop. This has reduced food security challenges, and together with an improved central budget discipline, led to a reduction in inflation to 8.6 percent in 2007—the lowest in more than two decades.3

1 Maize is the staple food of the population and is grown by most small landholders. The main cash crops by small landholders also include tobacco, groundnuts, rice, and cotton. Large commercial estates specialize in Virginia tobacco, tea, sugar, coffee, rubber, and nuts. 2 Infant and under-five mortality rates are 110 and 175 per 1,000 live births. 3 The significant loosening of fiscal policies in the run-up to the May 2009 presidential and parliamentary, coupled with foreign exchange shortages, threatened to weaken the macroeconomic framework. However, following the election, the Government of Malawi has committed again to maintaining fiscal discipline, as evidenced by government's target of domestic debt repayment of 1.5 percent of GDP in the 2009/10 fiscal year.

2

4. After having improved fiscal discipline, the government has now made social development a focal area, with a particular emphasis on education. The Malawi Growth and Development Strategy (MGDS) (2006-2011), which sets out the government’s priorities in these areas, highlights the development of human capital through education as a central pillar of the poverty strategy.

5. In October 2009, Malawi was welcomed by the Education for All – Fast Track Initiative into the FTI Partnership following the successful appraisal and endorsement of the National Education Sector Plan (NESP) by the Local Education Group. The NESP and Education Sector Implementation Plan (ESIP), which has been approved at the highest levels of the Government of Malawi, translate the government’s prioritization of education into objectives, strategies, and financing for education. The NESP was drafted by the Ministry of Education Science and Technology (MoEST) in collaboration with Development Partners (DPs), civil society, and other relevant stakeholders. The NESP outlines the strategy for Malawi to achieve equitable access to education, improve quality, and improve governance and management. In addition to the NESP, a four-year ESIP 2009-2013 provides a detailed outline of the activities to be conducted, the indicators to be monitored, and the cost associated with the implementation of the NESP. Education sector issues 6. Between November 2007 and February 2009, the World Bank, with financial support from the Education for All - Fast Track Initiative’s Education Program Development Fund (EPDF), prepared and delivered a comprehensive Country Status Report (CSR) in close collaboration with a multi-ministerial national team and local institutions. The CSR identifies and meticulously analyzes the education system at all levels. The following paragraphs, in which we discuss primary and secondary education in Malawi in more detail, draw heavily on empirical findings and key issues identified in the CSR.

7. The school cycle in Malawi has a duration of 12 years. Schooling in Malawi is divided into two cycles: beginning with the 8-year primary cycle, from standard 1 to standard 8. Basic education is still mainly provided by public institutions, which enrol 99 percent of pupils in primary4 and 77 percent in secondary. At the end of the primary cycle, students take the Primary Schooling Leaving Certificate Exam (PSLCE), which determines their eligibility to pass to the secondary level.5 The secondary cycle covers 4 years, from Form 1 to Form 4. Secondary schools in Malawi can be categorized into five groups: (i) Community Day Secondary Schools (CDSSs), which account for 47 percent of enrolled students, and are low-cost secondary schools; (ii) Conventional Secondary Schools (CSSs), which account for 20 percent of students and are comprised of government National Schools, District Boarding Secondary Schools, and Government Day Secondary Schools (GDSS); (iii) Grant-Aided Schools, which enroll 6 percent of students, are partially funded by the state and also receive funding from other sources; (iv)

4Although faith-based organizations are nominally owners of 70 percent of primary school, since the government pays most of the costs they are categorized as public schools. 5 Secondary schools in Malawi are selective therefore not all students who pass the PSCLE are selected for secondary school.

3

Open Schools, which enroll 3 percent of students, provide “second chance” education for older students; and finally (v) private schools, which enroll 23 percent of students. Based on the results of the PSLCE at the end of the primary cycle, students are assigned to the different school types. Most selective are national boarding schools, followed by government day schools, and finally CDSSs, which are generally in rural areas, and have limited infrastructure. 8. Malawi set an ambitious goal to improve access to education in 1994, when it adopted a country-wide fee-free primary education. Before 1994, education reforms focused mainly on tertiary education. During this period education reforms also aimed to reduce economic and gender disparities in access and completion. In 1994, in addition to free primary education, reforms included (i) elimination of the requirements for school uniforms, (ii) school feeding programs, (iii) use of vernacular language as the medium of instruction in standards 1–4, and (iv) expansion of the teaching workforce through inclusion of less qualified teachers. 9. Reforms aimed at improving access saw tremendous success, with a 67 percent increase in pupils from 1994 to 1995 (1.8 million pupils to 3 million pupils). However, this vast expansion of the education system led to significant challenges with which Malawi is still grappling. Malawi’s education system continues to face serious challenges, including inadequate infrastructure, inequitable access and quality of education, and abysmal pupil-teacher ratios (PTRs), leading to poor completion rates and learning achievement. Primary Education 10. Access to standard 1 in primary education is almost universal, but the dropout rate is very high, leading to only a 35 percent primary completion rate. The retention rate within the primary cycle improved from 24 percent in 2004 to 35 percent in 2008, but remains largely insufficient. Income and urban-rural equity also remain major challenges in primary education, as evidenced through regional and income disparity in access and completion (see Figure 1). There is a 34 percent urban-rural difference in access probability to standard 8. Income disparity in completion is starkest among the top and bottom income quintiles, where there exists a vast 44 percent disparity in completion of primary education. As for gender equity Malawi is well placed to meet Goal 3 of the Millennium Development Goals (MDGs), promoting gender equality and empowering women, given its achievement in near equal enrolment in primary education. Yet although the gender parity indexes have increased since 2000, meaning that there has been improved enrolments for girls at all educational levels, gender disparity varies from one level to another: the parity index starts at 1.04 in the first four standards (standards 1-4) and decreases down to 0.96 in the last four standards (standards 5-8) of primary education.

4

Figure 1: Access Probability for Each Level of Education by Group

Malawi Country Status Report, 2009 11. It has been estimated that 65 percent of public resources are lost due to repetition and dropouts before primary cycle completion. Although Malawi’s intake into primary education is one of the highest in Africa, less than 35 percent of children complete primary education, leaving more than 600,000 primary-age children out of the system. Related to dropouts are repetition rates, which average of 20 percent over the primary cycle. Accounting for both repetition and dropouts, the Internal Efficiency Coefficient6 (IEC) for primary education is at 35 percent, implying that Malawi requires 23 years to produce one graduate instead of 8 years under perfect efficiency. 12. Malawi is also characterized by a severe lack of pedagogical resources and infrastructure in primary education, as evidenced by a PTR of 80:1, high pupil to classroom ratio (100:1)7, and a pupil to desk ratio of (9:1). The 2005 Primary Curriculum Assessment Reform (PCAR) included training of all primary teachers and development and distribution of teaching & learning. PCAR led to an improvement in student to textbook ratios, teaching practices, and in the number of qualified teachers, as indicated by the decrease in the Pupil per Qualified Teacher Ratio (PqTR) from 118:1 in 1999 to 91.5:1 in 2009. However, the PTR is nearly twice the Southern African Development Community (SADC) average and Education for All Fast Track Initiative (EFA FTI) reference benchmark of 40:1.8 Rural primary schools, which are attended by a majority of school children, are particularly disadvantaged, with a PTR of 99:1 compared to urban schools, which have a PTR of 47:1. PTRs are also skewed within schools with extremely high ratios in standard 1 and 2 (121:1 for std1 and 97:1 for std 2), making progress in early literacy and numeracy very difficult for many children.

6 The IEC is defined as the ratio between the cumulated student years invested in a system with no student flow problems and the actual cumulative student years invested given the current pattern of dropout and grade repetition. An education system with no dropout and no repetition would have a coefficient of 100. 7 Sixteen percent of pupils are enrolled in a school that does not provide the eighth grade of the primary cycle, and these students are likely to drop out before completion. 8 High levels of teacher attrition are a major contributor to these high PTRs. In 2007, 4,529 primary school teachers (working in government-funded primary schools) left their schools, corresponding to an attrition rate of 3.2 percent. Among those, 14.3 percent retired, 37.2 percent passed away, and 7 percent suffered from prolonged illnesses. The two latter reasons are likely to be related to the HIV/AIDS pandemic.

5

Figure 2: Mean for the Reading and Mathematics Test Scores of Learners in All SACMEQ Countries (SACMEQ II)

Source: SACMEQ II report, 2005 Note: SACMEQ scores are scaled so that the average of all students is 500 and the standard deviation is 100. 13. The consequences of the poor learning environment in primary education are manifested in the poor testing results. In 2004, only 9 percent of primary school students were found to have reached a minimum level of mastery in reading in English. In Mathematics, a mere 2 percent of pupils possessed skills beyond basic numeracy. Compared to the other 15 countries that participate in the Southern African Consortium of Monitoring Education Quality (SACMEQ), 9 Malawi fares poorly, as it finished last in assessments in English reading and placed next to last in mathematics (Figure 2). Secondary 14. Unlike primary school, secondary school is selective, with access rates as low as 16.3 percent. Access to secondary education showed a 0.7 percent annual growth rate between 2001 and 2004, which has accelerated to 5.3 percent annually since 2004. However, the Gross Enrolment Rate (GER) for secondary education is only 17 percent, with access to secondary education lower for girls than for boys. Gender disparity varies from one level to another; the parity index starts at 0.85 in the first two forms and decreases down to 0.67 in the last two last forms of secondary education. In lower secondary (Form 1–Form 2), the gender parity index for Malawi is above the African average (0.8), yet for upper secondary Malawi stands behind the SADC average of 0.8. 15. Equity remains a major concern for secondary schools. The PTR in secondary school is also better than that of primary schools, as well as much better than the African average (20:1 compared to 28:1). Teacher deployment across secondary schools is more consistent than in

9 SACMEQ includes South Africa, Botswana, Kenya, Lesotho, Malawi, Mozambique, Mauritius, Namibia, Uganda, Seychelles, Swaziland, Tanzania, Zambia, Zanzibar, and Zimbabwe.

428.9440.1448.8478.2482.4492.3500516.7521.1521.2529.6536.4545.9546.5582

0 200 400 600

Malawi

Namibia

Uganda

SACMEQ

Botswana

Swaziland

Tanzania

Seychelles

Mean scores in English reading

430.9432.9435.2447.2478.1486.1500506.3512.9516.5522.4530554.3563.3584.6

0 200 400 600

Namibia

Zambia

Zanzibar

SACMEQ

Botswana

Tanzania

Seychelles

Mauritius

Mean scores in Mathematics

6

primary schools, as indicated by the value of the statistical coefficient of determination (R2) of 72 percent.10 This is a sharp improvement from 2000, when only 41 percent of the variation in teacher deployment was explained by school size. Yet teacher qualifications, as well as equitable distribution of qualified teachers, still remain major challenges. Overall, CDSSs, which are low-cost secondary schools generally located in rural areas, are systemically less well endowed,11 have limited infrastructure, are underfunded, lack appropriate teaching and learning materials, and require more qualified teachers. Approximately half of secondary students attend CDSSs, where 81 percent of the teaching force is unqualified, while in CSS only 27 percent of the teaching force is unqualified. This is largely because the supply of trained teachers has been unable to keep pace with the demand, leading a number of primary teachers to teach secondary schools, despite not being qualified to teach at that level. 16. Although internal efficiency at the secondary level is slightly better than primary school, the low achievement at the end of secondary school continues to raise concerns regarding the skills acquired in the schooling system.12 Pass rates in the Junior Certificate of Education (JCE), taken at the end of two years of secondary education, and the Malawi School Certificate of Education (MSCE), taken at the end of secondary school, are only 62 percent and 51 percent, respectively. These poorer outcomes are associated mainly with CDSSs. The CDSSs have lower MSCE pass rates, with only 33 percent of students who sit the exam passing it, compared to 50 percent in CSSs. Management Capacity 17. The improvement of management capacity for basic education is crucial to ensure effective use of resources to improve access, equity, and the learning environment. The highly centralized management system in Malawi has hindered effective teacher management, project implementation, and adequate flow of funds. The 2008 Public Expenditure Tracking Survey (PETS) found discrepancies in the actual number of teachers reported by the MoEST compared to the teacher rosters maintained by each school. There also exist large disparities among education divisions and schools in Malawi. For example, while some schools have 100:1 pupil-teacher ratios, others have six teachers for every hundred students. Through efforts to decentralize decision making to the local level, the MoEST has begun strengthening capacity at the school, zone, and district level. However, at all levels there is still a need for capacity building and policy reforms in order to ensure activities outlined in the sector plan lead to the NESP’s objectives of increased access, equity and quality of learning.

10 The value of the indicator ranges between 0 and 100 percent (or 0 and 1) . The 100 percent value corresponds to a functional relationship where all the observations are located on the mean relationship (regression line), meaning that all schools are being treated equally (perfect equity) and the number of teachers depends only on the number of students enrolled at school level. On the other hand, a 0 value indicates an absence of relationship between the number of teachers and the number of students they are teaching. 11 CSSs receive 86 percent of government funding, CDSSs receive only 13 percent. Although this could be explained by the fact that CSSs have more current expenditures to cover than CDSSs (e.g. boarding facilities, utilities), this allocation of government funds tends to reinforce iniquities between types of schools. 12 The Internal Efficiency Coefficient for secondary education was 66 percent in 2007, implying it takes six student-years to produce a graduate instead of the four years theoretically needed. This is higher than in 1999/00, when 5.2 years were required to produce a graduate.

7

18. Table 1 provides key population and education indicators for Malawi. Table 1: Malawi Population and Education Indicators

Domain/Indicator Total

Gross enrolment ratios (%), 2007 Primary 101.2% Secondary 16.3% Higher 52 per 100,000 inhabitant Primary education enrolments and student flow, 2007 Total enrolments 3,306,926 Percent in privately financed and managed schools 1.28% of above Access rate to Grade 1 (%) 100% Primary education completion rate (%) 35% Repetition rate over primary cycle 20% Dropout rate over the primary cycle 5% Gender parity index (St. 1- St. 4) 1.04 Gender parity index (St. 4 - St. 8) 0.96 Primary student learning outcomes Pass rate in national primary school leaving exam 75% SACMEQ II means score for reading (mathematics) 428.9 (432.9) Percent of students reaching minimum level of reading mastery, SACMEQ II

8.6%

Govt. primary school service delivery indicators Years in cycle 8 standards Pupil-teacher ratio (overall) 80:1 Pupil-textbook ratio (standard 2, standard 8) Chichewa 2.1:1, 1.5:1 English 1.9 :1, 1.4:1 Mathematics 1.6:1, 1.4:1

Source: 2009 Malawi Country Status Report, 2005 Malawi Poverty and Vulnerability Report B. Rationale for Bank involvement FTI Involvement 19. Under the EFA FTI, the donor community has substantially increased resources in education for countries that propose technically sound and fiscally sustainable education sector plans to achieve the MDG of universal primary completion by 2015. Despite improvements in the education sector, the MoEST in Malawi is still made up of a series of isolated projects. Both the Government of Malawi and development partners recognize that this piecemeal approach to planning is highly inefficient, and that effective changes will require a comprehensive approach. In this context, the preparation and appraisal of the NESP and ESIP by the Local Education Group consisting of the Government of Malawi DPs, nongovernmental organizations (NGOs), and other relevant stakeholders have led to harmonization among the key stakeholders in identifying and prioritizing key issues in the education sector to support the development of a sound education plan. That in turn has encouraged the Government of Malawi to take a systematic approach to addressing the needs of the education sector. Since the existing aid flow is not sufficient to create the momentum necessary to accomplish the goal of quality universal

8

basic education, given the extensive needs in the education sector and the weak but improving macro economic situation, the Government of Malawi, in addition to working within the FTI framework, is applying to the Fast Track Initiative Catalytic Fund (FTI CF). Bank Involvement 20. The Malawi Country Assistance Strategy (CAS) (2007-2010) outlines a program of country assistance in support of the overall Malawian Growth and Development Strategy (MGDS), which underscores the importance of education for economic growth and social protection. The CAS specifically proposes that the World Bank stays strongly involved in supporting education programs as a mechanism to address poverty and inequality. Currently the World Bank is supporting the education sector through: (i) a US$32 million Education Sector Support Project (2005-2010), (ii) a Country Status Report delivered in May 2009, and (iii) US$50 million Malawi Action Social Fund (2009-2014) for which $20 million provides dedicated support for community construction of teacher housing. Apart from direct support to the education sector, the World Bank also provides general budget support to Malawi. This funding contributes to education through government allocations to the sector. In Fiscal Year 2008/09, the contribution was US$30 million. 21. The NESP is fully consistent with the Malawi CAS goals of strengthening Malawi’s foundation for supporting economic growth through human capital accumulation. Additionally, the NESP aims to improve good governance through sustaining improvements in budget execution, increase accountability by strengthening monitoring systems within the MoEST, and improve capacity of communities to engage in decision-making in education at the local level. 22. Within the framework of a Sector Wide Approach (SWAp), through a Memorandum of Understanding (MOU) and Joint Financing Arrangement (JFA), partners will support the education sector in a more coordinated and harmonized fashion. The Bank’s involvement in the SWAp improves the efficiency of its support to the NESP, and reduces transaction costs for the government, in line with the Paris Declaration on Aid Effectiveness. The Bank’s global experience in management of SWAps, its experience with education reforms in low-income countries, and its expertise in fiduciary management will support the needed technical and fiduciary expertise essential for an effective SWAp. Finally, analysis of financing requirements for activities on primary and secondary education shows that the Bank financing continues to be required in order to achieve the objectives of the proposed program, as these resources will contribute to fill a substantial funding gap. C. Higher level objectives to which the operation contributes 23. The Project to Improve Education Quality in Malawi (PIEQM) is contributing to the attainment of two MDGs: i) Goal 2: achieving universal primary education; and ii) Goal 3: promoting gender equality and empowering women. PIEQM will also support the government’s MGDS, which underscores the role of education in economic growth. In addition, it is consistent with the CAS, contributing to the government’s objective to improve access to and quality of education.

9

II. PROJECT DESCRIPTION

A. Lending instrument 24. Pooled Funding Mechanism. Within the principles of a “thematic” SWAp, using a pooled funding mechanism, the proposed Operation is a Specific Investment Loan (SIL) only covering activities aimed at improving basic education. Proposed resources from International Development Association (IDA) (US$50 million) will be pooled with resources from the FTI CF (US$90 million) and contributions from other DPs. A JFA describing the structure and institutional mechanisms for pooling funds has already been signed between the Government of Malawi and the U.K. Department for International Development (DfID), the Embassy of the German Federal Republic, the United Nations Children’s Fund (UNICEF) and the Association. 25. The Project Appraisal Document (PAD) will be the main reference document for PIEQM as a whole, which will be co-financed by the proposed Credit, the CF, and pooled partners. The request to the CF and the allocation of the Credit resources is based not only on the estimated financing gap but on a detailed analysis of the MoEST’s capacity to execute the activities described in the NESP. In order to support the MoEST in meeting the NESP goals, PIEQM will finance selected high-impact interventions that address critical demand-side, supply-side, and capacity constraints in the education sector. Upon effectiveness, PIEQM will immediately begin supporting those interventions for which a concrete action plan is available. During the first year of implementation technical support will also be provided to finalize those interventions that require detailed strategic plans and costing.

26. Over the next few years Malawi is expected to make dramatic progress towards achieving universal primary completion by 2015. The Government of Malawi has recently committed itself to a reform agenda largely based on the findings of the CSR and high-level dialogue with stakeholders. These reforms include (i) increasing accountability through providing grants to schools for the implementation of school improvement plans; (ii) hiring teacher assistants in rural schools to help address the high PTR; (iii) reducing the barriers of entry into teaching for rural teachers; (iii) restricting repetition to a maximum level of 8 percent by 2013; and (iv) promotion of double shifting and multi-grade teaching. Progress is already discernable as the current primary completion rate of 35 percent represents a rise from 24 percent in 2004. In addition, long-term (NESP), medium-term (ESIP) and immediate Programs of Work (PoW) plans are available, articulating the government’s reform agenda. DPs have committed to support the NESP through a SWAp, agreeing that all future support should be provided through the above plans. Subsequently, the PIEQM has been strategically designed to support the NESP goals through key interventions that improve access and equity, quality, and governance. As a result of these strategies, and an application for FTI CF, the total financial envelope supporting the NESP constitutes a proportionate response to the scale of issues faced in Malawi.

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B. Project development objective and key indicators Project Development Objective 27. The project development objective is to increase access and equity and enhance quality of the teaching and learning environment in basic education. The objective will be met through a set of evidence-based, innovative, and pragmatic interventions that build on lessons learned from past interventions and rigorous local and global knowledge. PIEQM will be monitored closely through a set of key performance indicators (see Annex 3). PIEQM Results Framework and Justification Figure 3: PIEQM Results Framework

28. PIEQM represents a pragmatic approach to ensuring the provision of quality education and increasing participation of marginalized children in basic education in order to meet Malawi’s goal of universal primary completion. Unlike more developed countries (where drop-out is highest during the transition from primary to secondary education), Malawi faces severely low retention rates in the early years of the primary cycle and minimal levels of achievement in basic numeracy and reading. This finding is starkest for the lowest 3 income quintiles: By the end of primary school less than a quarter of these students remain in school. Rigorous analysis within the CSR suggests that inadequate school infrastructure, financial constraints, and exorbitant teacher-pupil ratios are key factors for these low levels of student retention and learning. Therefore, PIEQM supports the NESP by structuring itself into the three key areas of access and equity, quality, and governance. The access dimension of the PIEQM contains demand-side interventions that address critical equity issues, as well as more conventional supply-side interventions in terms of classroom construction and procurement of teaching and learning materials. To improve quality inputs, PIEQM supports innovative government interventions to increase teacher supply and performance. Lastly, PIEQM ensures the necessary capacity, governance and management systems by supporting a set of key reforms identified through continuous dialogue between key stakeholders.

To increase access and equity and enhance

quality of the teaching and learning environment

Improved availability of adequate Basic

Education Facilities

Decreased Cost of Education to Disadvantaged

Students

Improved Availability of

Learning Materials

Enhanced Quality and Quantity of Teachers

Improved Management

Capacity at All Levels

Construct and Upgrade Basic

Education Facilities

Provide Direct Support to

Disadvantaged Children

Provide Textbooks

and Learning Materials

Train Teachers through Distance Learning

Support Teacher Management

Reform

Support School Improvement

Planning

Strengthen Planning

and Budgetary

Management

11

29. Component 1: Improve Access and Equity. Malawi experiences a 100:1 pupil:classroom ratio, with 32 percent of primary schools not offering all standards. Evidence suggests that adequate infrastructure resources significantly decrease dropouts through effects on pupil-teacher ratios, increased accessibility of schools, and improved classroom environment (Duflo 2002, Woods and Mvalo 2007). Yet, even when there is sufficient school infrastructure, disadvantaged children face various barriers to educational opportunities. Through evaluations of over five pilot initiatives in Malawi, it was found that relatively small in-kind transfers (e.g., school uniforms, school meals) have significant and positive effects on school retention (Baird, McIntosh, and Özler 2009, Fiszbein and Shady 2009).13 This component will therefore support increasing the participation of children in basic education through (i) construction/rehabilitation of basic education facilities and (ii) direct support to disadvantaged children.

30. Component 2: Improve Teaching and Learning Environment. Malawi experiences very high overall PTRs of 80:1. Average PTRs in rural areas are even more extreme, and can be as high as 150:1. Several recent studies have found that promoting entry into the teaching workforce for teachers from rural areas is a potentially effective solution for decreasing rural-urban disparities in the learning environment, as well as a way to increase the number female teachers, without leading to a decline in the quality of learning (Das and Hammer 2005). Therefore, this component will support (i) the provision of relevant textbooks and teaching and learning materials; and (ii) the development and implementation of an innovative Open Distance Learning (ODL) program that will recruit and train 12,000 rural teachers. 31. Component 3: Improve Management Capacity at All Levels. Lack of pedagogical resources may not explain the entire quality deficit. Contrary to the findings in richer countries, evidence from developing countries suggests that providing only supply-side inputs and student level demand-side inputs without changing either teacher performance or education delivery will not lead to improvements in student performance (Duflo et al. 2009).14 Through many rigorous impact evaluations in developing countries, two reforms have emerged as key to improving education outcomes significantly: (i) effective teacher management systems that enhance teacher capacity and incentivize teacher effort and (ii) devolution of education decision making to the school level (Duflo and Kremer 2009). 15 To support the MoEST in the development and implementation of these reforms PIEQM will finance (i) improvement of the teacher management system; (ii) the provision of school grants to finance school improvement plans; and (iii) capacity building at all levels of government to help the MoEST to design and implement these reforms.

13 In Malawi alone Concern/DfID, Oxfam, UNICEF, USAID, World Bank, and WFP have piloted cash and in-kind transfer programs. 14 In another study, Hanushek (2006) finds that only 9 percent of 170 studies of teacher training found a positive and statistically significant relationship between teacher education and student outcomes. Trained teachers often revert quickly to old habits and training activities have little effect on their motivation and ability to use new innovations or best practices. Special features of effective programs include training closely linked to a weekly curriculum, immediate feedback that participating teachers received from instructors, and appropriate incentives. See also Glewwe and Kremer 2006; Krueger and Whitmore 2001; Angrist and Lavy 1999; and Piketty 2004. 15 See also Muralidharan and Sundararaman 2009; Gertler, Patrinos, and Rubio-Codina 2008; and Jimenez and Sawada 2003.

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C. Project Component 32. In support of key interventions to improve access and quality of basic education in Malawi, particularly for marginalized children, PIEQM follows a two-phased approach. Initially PIEQM will only support interventions that are clearly defined and have a concrete strategy and action plans. These include civil works, distribution of textbooks and learning materials, direct transfers to disadvantaged youth, and school grants. In addition, during the first year of implementation, technical support will be provided to finalize the design of specific interventions for which detailed strategic plans and costing are required. These include the development of a strategy for a comprehensive teacher management system and central and district capacity building. In these, as in all interventions, there will be close collaboration between pooled and non-pooled partners, as well as with private sector institutions and NGOs to ensure complementary support to these key strategic policy and programmatic interventions. The costs under each component are estimates only, as allocations of budgets will be defined by yearly work plans. This ensures the necessary flexibility to allow for effective coordination between government agencies, DPs, and Department Directors that are in charge of implementing the NESP. Component I: Improve Access and Equity (US$96 million) 33. The objective of this component is to promote the NESP goal of universal primary completion through a mix of demand- and supply-side interventions. Through this component PIEQM will finance the expansion of physical facilities as a key supply-side intervention. Demand-side programs include targeted secondary school bursary packages to decrease the gap in equitable access. Subcomponent 1.1: Construct and Upgrade Education Facilities (US$ 70 million) 34. This subcomponent will finance (i) updating the 2001 school mapping exercise; and (ii) construction, rehabilitation and upgrading of a wide range of education facilities for pupils and teachers, including Teacher Training Centers (TTCs), particularly in areas where inadequate physical infrastructure hinders school attendance by marginalized children All construction activities will be implemented by the MoEST’s Education Infrastructure Management Unit (EIMU). Subcomponent 1.2: Provide Direct Support to Disadvantaged Children (US$26 million) 35. To increase participation in basic education by marginalized students PIEQM will finance (i) secondary school bursary packages (i.e., tuition, textbooks, exam fees) and stipends; (iii) development and implementation of communication strategy; and (iii) a rigorous evaluation to identify incentive packages that are cost-effective and lead to improvement in school participation and outcomes. 36. The transfers to primary schools will be in the form of top-up grants to schools identified as being vulnerable according to malnutrition, poverty and education outcome indicators. For primary schools, a school-based education support committee, comprised of the head teacher, School Management Committee (SMC), and a community child protection worker supported by a social welfare assistant, shall complete the registration exercise. For secondary schools, the

13

education support will build upon the ongoing MoEST bursary program. The implementation shall be managed and monitored by a committee comprised of the Division Education Manager,16 the Division Desk Officer, Division Auditor, District Education Manager, District Social Welfare Officer, and a representative from the school bursary committee. Secondary tuition fees will be provided directly to these schools as a per capita grant for each student. Component II: Improve Teaching and Learning Environment (US$59 million) 37. The primary objective of this component is to improve the quality of the teaching and learning environment by financing the (i) provision of pedagogic aids for pupils and teachers; and (ii) the implementation of an Open Distance Learning (ODL) program, which provides a high-impact, time-bound solution to address the PqTR of 91.5:1. Subcomponent 2.1: Provide Textbook and Learning Materials (US$48 million) 38. This subcomponent will support the (i) printing and distribution of textbooks and learning materials; and (ii) provision of pedagogic aids including textbooks, libraries, computers, and audio/visual aids for basic education.

Subcomponent 2.2: Train Teachers through Open Distance Learning (US$11 million) 39. PIEQM aims to improve the number of qualified teachers in basic education by supporting the implementation of an ODL program with three annual intakes of 4,000 students a year. This subcomponent will finance the (i) printing and distribution of ODL materials; (ii) supervision of ODL students through procurement of vehicles; (iii) upgrading teacher development centers (TDCs) and a teacher training college (TTC) so that ODL can be delivered more effectively through them; and (iv) evaluating the effectiveness of ODL to improve education quality in underserved communities. 40. District Education Managers (DEMs) will oversee the placement of ODL students. Domasi College of Education, a secondary teacher training institution that has experience in developing ODL courses, will organize and supervise the introductory training of ODL students. The Department of Teacher Education and Development (DTED) in the MoEST will oversee the overall implementation of the ODL program. This includes coordinating the work of the district-based supervisors who will support learners in the schools to which they are attached. Component III: Improve Management Capacity at All Levels (US$90 million) 41. The objective of this component is to support key reforms in the education sector that will ensure planned interventions translate to improved access, equity, and quality. Through this component, issues of teacher management, accountability, planning, quality assurance, and monitoring across the system will be addressed within the context of the ongoing decentralization process in Malawi, which is redefining the roles of the MoEST in education delivery at the central, district, and school levels. Subcomponent 3.1: Support Teacher Management Reform (US$9 million)

16 Secondary Education is managed at the Division Level. Malawi has 6 Education divisions. Primary Education is managed at the District Level. Malawi has 34 Education Districts.

14

42. To address system-wide constraints in teacher management, this subcomponent will finance ((i) implementation of a program of activities to support the implementation of continuous professional development and teacher management; and (ii) development of an integrated Human Resources Management Information System (HRMIS). Subcomponent 3.2: Support School Improvement Planning (US$69 million) 43. This subcomponent will build on the previous school grant program initiated by the World Bank and institutionalized by MoEST with support from the DfID. The subcomponent will improve education service delivery by increasing the flow of resources to the school level by financing (i) development of school improvement plans; and (ii) provision of school grants to deliver the plans. 44. The DEM will be responsible for oversight of the grants. The SMC will be responsible, with the head teacher, for submitting School Improvement Plans to District Assemblies for inclusion in the Development Education Plans (DEPs), as well as overseeing the management of these resources. At the national level, the Ministry of Finance and the National Local Government Finance Committee (NGLFC) provide financial management and oversight of locally disbursed funds. Subcomponent 3.3: Strengthen Planning and Budgetary Management (US$12 million) 45. Within the context of the decentralization process, this subcomponent will finance activities to strengthen the capacity of the district and central levels to provide planning, financial, and technical oversight based on a Capacity Development Strategy (CDS) for education which was developed using FTI Guidelines in this area. 17 Capacity building activities will include (i) upgrading certification and implementing divisional refresher workshops for staff in financial management and procurement at all levels; (ii) monitoring and evaluation of the SWAp; and (iii) improving education planning capacity building at the central and district levels based on the strategies prepared by Japan International Cooperation Agency (JICA) and the United States Agency for International Development (USAID). D. Lessons learned and reflected in the operation design 46. PIEQM is a pragmatic and coherent project. The planning and preparation process was iterative, and was built upon lessons learned from past experiences as well as learning that occurred during the planning process itself. These key lessons include: (i) the need for a collaborative process in preparing rigorous analytical data that identifies bottlenecks in the system and needed key reforms; (ii) importance of high-level discussion on the reform agenda; (iii) the importance of using the preparation and endorsement of the education sector plan to consider donors' collective policy reform agenda; (iv) the need for the government, with key stakeholders, to prepare a realistic working plan in the short term, rather than waiting for the production of a perfect education sector plan to engage stakeholders in education reforms; and (v) recognition of the effectiveness of government structures, rather than stand-alone project implementation units, to ensure donor harmonization. Regarding this last point, the government

17 Guidelines for Capacity Development in the Education Sector within the Education For All - Fast Track Initiative Framework, February 2008

15

and key stakeholders can continue to engage in high-level dialogue in order to improve the plan over the long term. 47. School Improvement Plans: Earlier studies have found that decentralization of power to schools not only improves transparency in education but also leads to positive impacts on student performance. Evidence to date in Malawi from the Direct Support to School (DSS) Program suggests that DSS significantly reduced pupil-teacher ratios in standards 1 to 3 (by 38 percent in phase 1). Because the project was successful in showing that schools were able to plan and manage funds for effective learning at the school level, the MoEST made further commitments to reforms aimed at decentralization of power to the school level. Yet, several shortcomings of the DSS were identified, including high transaction costs, insufficient funding to address school challenges, inefficient funding modalities, weak capacity of SMCs to effectively implement programmes, and schools with little decision-making power over resource allocation. The Enhanced Direct Support to School (EDSS) program, supported by DfID, successfully addressed this shortcoming by allowing schools more flexibility and ownership of the funding modality and ensured coherence between national and school-level priorities through budget conditionality. These lessons learned will be consolidated and extended into the new school improvement planning program. 48. Student transfers: As described on page 11, prior studies have found that improvements in school enrollment and attendance are possible with small amounts of transfers to promote sustainability and coverage. One recent study in Malawi found that as little as $5 per household per month (compared to integer values up to $16 used in some programs) had significant effects on pupil attendance. The cash transfers to girls in secondary school not only increased school participation but resulted in delayed age at sexual debut, first pregnancy, and marriage (Baird et. al., 2009). This has special significance in Malawi where 9 percent of girls 15-24 are HIV positive. 49. Lessons Learned from Health/HIV pooled fund: From the World Bank’s experience in the Health and HIV pool in Malawi, it is evident that there is significant need for comprehensive fiduciary support in sector-wide operations due to weak procurement capacities in the government coupled with unrealistic sector-wide procurement planning that is not fully institutionalized within the government budget implementation process. To support the MoEST the World Bank will rely heavily upon a procurement and financial management specialist based in the Malawi country office who will be supported by other senior procurement staff also based in the region. During the first year the fiduciary support to MoEST will focus on capacity building. In cases where outside technical assistance (TA) is needed in respect to financial management, the education SWAp will ensure systems are in place so that knowledge from TA are transferred to local staff, as was done in the Health Sector.

16

E. Alternatives considered and reasons for rejection 50. Stand alone Specific Investment Loan (SIL). A traditional stand-alone SIL was considered and rejected. It was agreed that within the spirit of a comprehensive sector plan under a SWAp, the Association resources should be part of the basket funding (pooled) mechanism where resources from the FTI CF will also be deposited. This allows for a more comprehensive approach, which was encouraged and endorsed by both government of Malawi and DPs. Accordingly, the approach is based on the government’s overall policy framework and reflects existing operational implementation capacity. It also allows for a broad view of the entire system and its financing, with an emphasis on strengthening government capacity.

III. IMPLEMENTATION

A. Partnership arrangements 51. The World Bank’s overall program in Malawi is closely aligned with those of other major partners in support of the MGDS, and is designed to further the Paris Agenda on Aid Effectiveness and Harmonization. PIEQM is fully consistent with the Development Assistance Strategy, which has been prepared by the Ministry of Finance to align donor support to the MGDS. In several sectors, the Bank and DPs have already established pooled funding mechanisms to support the government-led sector programs upon which the education sector will build. 52. There are currently 9 DPs providing support to the education sector.18 In October 2009 an MOU was signed by the government and all education DPs that outlines the collaboration among partners and between the DPs and the government. For a subset of the partners that intend to pool funds, a JFA was also signed that lays out the institutional and financial mechanisms for the pooled fund.19 It is expected that within the framework of a SWAp and through the JFA, partners will support the education sector in a more coordinated and harmonized fashion. B. Institutional and implementation arrangements 53. It has been agreed that PIEQM will be implemented by the MoEST, and will take advantage of the experience accumulated during the implementation of on-going operations. In performing these functions, the MoEST will maintain close collaborative relationships with relevant institutions including universities, the Teacher Service Commission (TSC), Malawi Institute of Education (MIE) and the Malawi National Examinations Board (MANEB). Strengthening the institutions supporting the implementation of PIEQM, as well as the larger SWAp, will be an essential aspect of this Operation. The institutional arrangements for the SWAp are based on the Government of Malawi’s guidelines for Institutionalizing Sector Working Groups (Ministry of Finance 2009). These guidelines were set up in 2008 to enhance effective utilization of resources in line with the Paris Declaration and Accra Agenda for Action by enabling DPs to align their assistance with priorities articulated in sector plans.

18 DPs include AfDB, CIDA, DfID, GDC, JICA, USAID, UNICEF, WFP, and WB. Currently GTZ and AfDB are the lead donors. 19 As of the preparation of the PAD, pooled partners are DfID, GDC, UNICEF and WB.

17

Oversight and Coordination of the SWAp: 54. SWAp Secretariat. The work of the Sector Working Group (SWG) will be facilitated by the SWAp Secretariat. The secretariat will be based in the Department of Planning and will assist the latter in driving forward the SWAp process. As a result of an assessment of the key risks to effective implementation of a SWAp, 4 long-term technical advisers have been retained to support MoEST and DPs in the development of the education SWAp. The four will provide support in the following areas over a period of two years: institutional development, procurement, planning and monitoring, and financial management. The advisers will be integrated into the MoEST and will, together with their MoEST counterparts, form a SWAp Secretariat. The SWAp Secretariat will have overall responsibility for the day-to-day oversight, coordination, and monitoring and evaluation of Operation activities, in close cooperation with various stakeholders. PIEQM, as a sub thematic area of the larger SWAp focusing on basic education, will be overseen by the larger SWAp Secretariat. 55. Education Sector Working Group. The SWG will be chaired by the Secretary of Education Science and Technology (SEST) and vice-chaired by the lead donor of the DPs. Participation in the SWG includes department directors, DPs, NGOs and the private sector. The SWG will: (i) provide overall strategic guidance for the SWAp implementation; (ii) oversee the equitable distribution of the budget to districts and communities; (iii) ensure that agreed performance targets and timelines for activities under the different components are met; (iv) ensure effective project implementation; and (v) proactively address critical issues that could hinder implementation. The SWG is expected to meet once every calendar quarter. 56. Technical Working Groups (TWG). The TWGs are directly derived from the structure of the Education Sector Plan. The TWGs include Department Directors, DPs, and other stakeholders. The TWG is to assist the MoEST in developing Annual Work Plans (AWP) and in monitoring their implementation. The TWG is expected to meet at least once every month. 57. District Level. At the district level, the DEM will prepare district education plans, administer posting of teachers, monitor in-service teacher education programs, and oversee the day-to-day operations of educational institutions. The DEMs will also be responsible for timely oversight of the SIP subcomponent using Primary Education Advisors (PEAs) based at the zonal level and internal auditors for day to day oversight. The MoEST will retain responsibility for policy formulation and enforcement, inspectorate, and the establishment of new schools. 58. Local Government Finance Committee (LGFC). The LGFC is the legal entity responsible for financing at the local level. Funding for the DEPs will be sent directly from the Ministry of Finance to the LGFC. The LGFC includes the District Commissioner as Chair, the Director of Finance and Planning, as well the sector representatives. At the national level, the Ministry of Finance and the NGLFC provide financial management oversight of funds.

59. Community Level. The community level has two key institutions, the SMC and the Parent Teacher Association (PTA), both of which are linked and supported by the District Line Ministry Team. The SMC will be responsible, with the head teacher, for submitting School Improvement

18

Plans to District Assemblies for inclusion in the DEPs, as well as overseeing the management of resources provided through school grants to deliver the plans. The PTA will be responsible for mobilizing the community, auditing and electing the SMC, and providing SMCs with relevant information related to upkeep and management of schools. 60. A procurement unit will also be maintained within MoEST with appropriate staff to be responsible for all procurement under the project. C. Monitoring and evaluation of outcomes/results 61. To provide continuous feedback on PIEQM’s progress towards the achievement of the NESP targets, a range of indicators, outlined in Annex 3, will be monitored. Through its capacity building component (3.2), the Operation will support existing data collection systems at the school, district and central level. In general, inputs, outputs and outcomes will be mainly captured, analyzed and disseminated by the Education Management Information System (EMIS) team. As appropriate, department and units will be supported to carry out data collection efforts as needed. In addition, secondary data including household surveys such as the Demographic and Health Survey (DHS) and the Malawi Integrated Household Survey (IHS)20 will be analyzed to identify key indicators not collected in the EMIS. Lastly, design and implementation protocols will be prepared to implement rigorous impact evaluations (IEs) in key areas to test programmatic and policy alternatives. 62. The MoEST and DPs will conduct an annual Joint Sector Review (JSR) focusing on agreed indicators. The JSR will serve as a consultative meeting to discuss overall progress for the previous financial year based on the annual performance report to be prepared by the MoEST. The production of the EMIS data will be built into the annual JSR cycle to ensure relevant data is available. In addition, joint monitoring meetings will be held between MoEST, Ministry of Finance, Ministry of Development Planning and Cooperation, and DPs following submission by MoEST of a quarterly report showing financial, procurement and activity progress in the previous quarter. D. Sustainability 63. The Government of Malawi has made the education sector a priority and thus is committed to addressing the key issues faced by the system as stated in their NESP. The Plan represents the education vision of the government for the next decade and the likelihood of its sustainability is strongly enhanced by their commitment and ownership. 64. As discussed in Annex 9, improved education outcomes are shown to increase earnings at the micro level and boost economic growth at the macro level. Since education is recognized in the MGDS as a right and a driver for economic growth, it is also expected that external funds will continue to be made available to support the education sector. Through the JFA, the Government of Malawi has committed to increasing or at least maintaining the real level of its

20 Malawi has had two Integrated Household Surveys The first in 1998, the second in 2004. As this PAD is being prepared the third survey, IHS3, is in the process of collecting data.

19

own budget provision for education, even if donor contributions or other sources of funds for education increase. 65. Reforms and interventions outlined in the NESP provide an opportunity to improve the low IEC at the primary level, where 65 percent of public resources are wasted in paying for repeated grades or schooling for students who dropout before cycle completion. The introduction of policies to incrementally reduce repetition rates and improve quality enhancements such as school construction, provision of learning materials and teacher training coupled with equitable deployment of teachers are expected to lead to improvements in the IEC. 66. To support institutional sustainability, PIEQM will strengthen capacity at all levels to monitor the effectiveness of interventions, and adjust the interventions accordingly. The school improvement planning component is a key intervention to improve planning and good governance at the school level and capacity at the school level to strengthen the quality of teaching and learning in schools and the accountability of teachers and school management to the community. A multi-level approach where planning, monitoring and evaluation functions at the central level are strengthened, and capacity for implementation support at the district and school levels is improved, will ensure that policies and reforms are effective and sustainable.

E. Critical risks and possible controversial aspects

67. The table below summarizes the potential risks identified and the mitigation measures that have been considered.

Table 2: Potential Risks and Mitigation Measures

Risk Rating Mitigation Measure(s) Rating after Mitigation Measure

Limited implementation capacity at the MoEST at the central and provincial levels.

High MoEST is working with the Office of the President and cabinet to identify and allocate appropriately qualified staff to key positions. DPs to support MoEST to revise mechanism to recruit skilled staff within market salaries. During first year of implementation the DPs will also identify training needs particularly for key areas such as procurement and financial management.

Substantial

Implementation of PIEQM might be slow in the initial stages because of unfamiliarity with this funding modality in the Malawi education sector.

Substantial Stakeholders, led by the Government of Malawi, will work together in the preparation and approval of the annual programs of works and annual procurement plans. There will also be several periodic reviews of implementation progress including the annual joint sector review.

Moderate

Rapid expansion of school construction could threaten quality of construction.

Substantial A school construction unit designed to reflect the experiences learned from programs has been established in the MoEST. This unit will provide technical and fiduciary support to schools and communities to ensure appropriate standards are met.

Moderate

Expanding and increasing Substantial Management of the direct support to schools (DSS) will Moderate

20

the amount of resources provided to schools under the DSS program could increase the risk of late disbursement of funds and weak fund management at decentralized and school levels.

be strengthened by: (a) providing training for central and district staff in charge of implementing the Operation, (b) enhancing and revising manuals for management of funds at school level, (c) increasing transparency in the allocation of funds to schools/communities by ensuring the information on the amounts allocated are accessible to all and, (d) establishing oversight by primary education advisors (based in the zones) and internal auditors.

The FM risk is significant for PIEQM. This is mainly due to capacity gaps in the local government and educational institutions where most of PIEQM funds would be used.

Substantial To build sustainable FM capacity in the education sector a financial management improvement plan provides enhanced mechanisms for the use of the country system for budgeting, accounting & financial reporting, flow of funds, internal auditing, and public oversight. The external auditing would be subcontracted by the national audit office based on agreed terms of reference. PIEQM would also include a sub-component to build sustainable FM capacity in the education sector, which would overtime mitigate some FM risks (see Annex 7 for more details).

Substantial

The overall country procurement risk is substantial due to relatively weak mechanisms in place.

Substantial MoEST will employ senior technical assistance to build procurement systems, and the seniority and reporting relationship for head of procurement will be upgraded. MoEST will in addition identify suitable and larger offices for the procurement unit to be able to accommodate the records and filing system as well as additional staff. Continued training in national and international procurement rules and procedures will be provided to all procurement staff (donor funded and in particular Bank procedures).

Moderate

Overall Risk Rating Substantial

F. Loan/credit conditions and covenants Conditional of Negotiation: None Conditions for Board Presentation: None Conditions of Effectiveness (i) Appoint head of procurement unit with qualification and experience acceptable to the Association (ii) Adoption of Sub-financing Manuals for implementation of school grants and secondary school tuition stipends in a form satisfactory to the Association

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Covenants (i) Maintain a procurement unit with adequate number of staff whose qualifications and experience acceptable to the Bank; (ii) Submit to the Association annual procurement audit no later than 6 months after the end of each fiscal year; (iii) Maintain adequate financial management system and records; prepare financial statements of operations, resources and expenditures of the operation; (iv) Submit to the Association audited financial statements not later than 6 months after the end of each fiscal year; (v) The Implementing Agency shall furnish Interim Financial Reports (IFRs) not later than 45 days after the end of each calendar quarter; 21 and (vi) Appoint external auditors within 4 months of effectiveness of the Credit.

IV. APPRAISAL SUMMARY

A. Economic and financial analyses

68. A focus on education is in the heart of MGDS 2006-2011. In the MGDS 2006-2011, the Government of Malawi recognizes the role of an educated population as a necessary enabling environment for sustainable development. In primary education emphasis is on equipping students with basic knowledge and skills to enable them to function as competent and productive citizens; at secondary education the focus is on providing academic basis for gainful employment in the informal, private and public sectors; and at tertiary education the goal is to produce high quality professionals with relevant knowledge.

69. The underlying rational for public invest in education is the high social economic and non-economic rates of return to education, in addition to the credit market imperfections that preclude the poor from reaping the private returns to education. From a public economics rationale, the significant positive externalities from education justify government’s investment in the sector. The macro empirical evidence on the positive impact of education on economic growth through the channel of reducing poverty and income inequality is robust. An alternative channel by which education can boost economic growth is by reducing income inequality. The strong micro link between education and earnings gives credence to the notion that education can play a role in reducing poverty, decreasing inequality and ultimately boosting economic growth.

70. Private and Social Rates of Return (ROR) to education in Malawi are high. While private ROR describes the average extra income gained by an individual through acquiring additional education in relation to the cost of this education for that individual (including the foregone earnings due to the years of study), social ROR capture the gain to society at large and

21 The first IFR shall be furnished to the Association within 45 days after the end of first calendar quarter after Credit Effectiveness date and shall cover the period from the first expenditure under the operation.

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are calculated by relating the additional expected income to the total cost involved in the education, both private and public. Both the social and private ROR to education in Malawi are high. These high ROR may reflect the scare supply of educated labour and the fact that education is still a rare privilege in Malawi for which the labor market is prepared to pay a high premium, compared to its costs.

71. Furthermore, the robust evidence for the existence of considerable private and social noneconomic returns to education, such as improved health and education continuity within the households, are main arguments for public investment in the sector. The benefits from education go beyond individual economic benefits. In the Malawi Poverty and Vulnerability Analysis (2007) shows that the incidence of stunting decreases with the mother’s (or guardian’s) level of education, but only after a minimum of eight years of schooling. These findings are also true for the other anthropometric indices; underweight and wasting. Furthermore the report shows that higher levels of education were found to be associated with more knowledge of HIV/AIDs and higher levels of condom usage. B. Technical 72. The components of this Project are based on the reform priorities of the government articulated in the NESP. The specific design of each component has considered experiences and lessons learned from ongoing sector projects in the country as well as within and outside the region. 73. Due to the implementation limitations related to constraint in financial and human resource capacity faced by MoEST, PIEQM proposes a pragmatic approach to supporting the most critical issues faced by the MoEST while strengthening its institutional capacity. It has been agreed with the MoEST and DPs that during the first year of project implementation, significant efforts will be devoted to providing training and capacity building at the central and district levels. Training on financial management and hands-on training on procurement procedures will be conducted on a regular basis. Similarly, efforts will be made to support the MoEST to provide the requisite staff and resources available for key departments or units within MoEST such as infrastructure, teacher training, planning and decentralization, among others. To plan the sustainability of these already ongoing efforts PIEQM intends to support the government in designing policies and related strategies to attract and retain qualified staff within the education system. 74. Civil works, which is a critical factor for improving access and equity, takes into consideration both ongoing programs and sector plans. The management of this major area is based on the experience accumulated under the several operations financed by the government and DPs, and also considers the Malawi management structure for civil works. The procurement of goods and services and their costs and alternatives have been reviewed with an eye towards cost-efficient purchases. The DDS component has been designed and will be strengthened, incorporating lessons learned and evidence from ongoing project in Malawi and the more than 15 years of experience with similar programs in Latin America and neighboring African countries. In addition, several interventions will take place to improve the teaching environment by financing the acquisition of learning materials aiming for a child to text-book ratio of 1:1.

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75. The MoEST also recognizes that the current number of pre-service teacher training graduates will be inadequate to cover the proposed expansion and improvements to the education system and therefore supports a distance learning program. PIEQM will support the implementation of this initiative through the printing and distribution of materials, supervision of students, and evaluation to ensure its effectiveness. At policy levels aiming for long term impact PIEQM will support the assessment of ongoing teacher management policies and will support changes to ensure greater efficiency in teacher management. C. Fiduciary 76. Financial Management Assessment: A financial management assessment of MoEST was carried out in accordance with the World Bank-Financed Investment Operations Financial Management Practices Manual dated November 3, 2005. The ongoing education project in Malawi is up to date with the audit reports and interim financial reports. Details of the assessment are provided in Annex 7. 77. MoEST is the main implementing agency responsible for the coordination of the implementation activities of the implementing line ministry, education divisions (which are an extension of the Ministry), district assemblies and educational institutions. The PIEQM will use the Malawi country public financial management (PFM) system, assessed to have met the requirements of Bank’s OP/BP 10.02. There is however, the need to build capacity in MoEST, the education divisions, district assemblies and at implementing educational institutions. 78. Although significant improvements have been made in the overall PFM environment in Malawi in recent years, these have yet to impact substantially MoEST, local governments, and the educational institution level that will use the PIEQM funds. The program will therefore be implemented in a substantial risk environment. 79. The key risk concerns are the intended use of funds (for example, program non-related payments and lack of timely accounting for eligible expenditures by the cost centers) under MoEST and the district assemblies and at the educational institutions level. The key mitigation measures include following rules and procedures; use of the Integrated Financial Management Information System (IFMIS), to be suitably customized for the sector plan; inclusion of specific measures to control soft expenditures; an annual technical audit to supplement the financial statements audit; and management of community-based activities through a rigorous community-driven development (CDD) approach. 80. Currently, MoEST is using the single treasury system for all its receipts and payments. Its accounts and IFRs are prepared by the centrally managed IFMIS. The PIEQM therefore intends to integrate the FM functions within the government PFM system. 81. The residual FM risk rating for the PIEQM is “Substantial.” Table 13 shows the key financial management risks and the proposed mitigating measures against these risks, which the government may face in achieving the development objectives of the operation.

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82. It is concluded that the financial management arrangements for the proposed program meet the minimum financial management requirements as defined in the Bank’s OP BP 10.02.

83. Procurement Assessment: Procurement for the proposed project will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised October 2006; and “Guidelines: Selection of Employment of Consultants by World Bank Borrowers” dated May 2004, revised October 2006. Guidelines on Preventing and Combating Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 2006 and the provisions stipulated in the Financing Agreement.

84. Public procurement in Malawi is governed by the Public Procurement Act of August 2003. The Act requires procurement regulations to provide, inter alia, threshold for use of various procurement methods, bidding and bid evaluation procedures and contract management. The law further establishes the Office of Director of Public Procurement with oversight for public procurement. The office became operational in 2005 with the appointment of the director and other substantive officers. Procurement regulations and desk instructions have been distributed to all procuring entities. The Office of Director of Public Procurement has also established a dedicated website for sharing of information, placing of adverts and notification of awards to the general public.

85. Malawi undertook self assessment of its procurement systems using OECD-DAC Assessment Methodology in 2007. The overall results showed that (i) existence a sound and adequate legal and regulatory framework guiding public procurement, (ii) mechanisms in place to support management capacity in procurement are relatively weak, and (iii) framework facilitating efficient procurement operations and market practices have been established, while the compliance and performance in these areas is still low. The overall country procurement risk is substantial.

86. The MoEST has an established procurement Unit in line with the Act. However it has inadequate staff capacity and its procurement practices do not fully comply with the Law. The overall capacity to carry out procurement is moderate and the risk is substantial.

D. Social

87. This operation includes key strategies that represent an important contribution towards achieving MDG2. The overall social impact of PIEQM will be positive. Malawi has designed several strategies addressing the significant obstacles of high urban/rural disparities in access and completion, as well as extreme poverty. In order to reach the most marginalized pupils, the program of inclusive education strategies includes increasing the number of teachers in underserved communities, social protection measures include secondary school bursary packages to girls in primary schools, and the implementation of a Complementary Basic Education (CBE) program for out-of-school children.

88. In addition, the construction and/or rehabilitation of school facilities in rural as well as in socially deprived urban settings will have an overall positive impact in the communities. The project will contribute to the goal of achieving gender equity in access and retention by improving the conditions of girls’ hostels and developing appropriate water and sanitation

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facilities, known to be particularly important for retaining girls in school. The selection of appropriate construction materials and construction techniques allows for a greater percentage of construction costs to be retained locally.

89. To mitigate any possible social impact caused by the civil works activities, The MoEST has updated (and redisclosed) both its Environmental and Social Management Framework (ESMF) and the Resettlement Policy Framework (RPF).

90. Although no resettlements are anticipated as a result of the implementation this operation, the Ministry of Education has updated its RPF prepared for the on-going education project. The RPF includes (i) description of the resettlement screening process; (ii) description of typical socio–economic impacts; (iii) eligibility criteria for compensation and methods of delivery; (iv) methods of valuation of the affected properties; (v) preparation of the resettlement action plan; (vi) provisions for preparation of checklists on resettlement and training in resettlement exercises; (vii) outline for budget estimates for resettlements and compensations; (viii) resettlement monitoring systems and (ix) the resettlement screening form.

E. Environment

91. PIEQM is classified as Category B as per World Bank Operational Policy 4.01 (Environmental Assessment). PIEQM will finance construction and rehabilitation of educational facilities in Malawi.

92. The on-going Education project financed by the Association has been closely following the recommendations established in the environmental assessment conducted as part of the documentation required during project preparation. Since the implementation of the NESP includes the construction/rehabilitation of educational facilities, MoEST has updated the ESMF.

93. Specifically, the ESMF (i) identifies potential adverse environmental and social impacts of the various sub-projects; (ii) establishes the screening procedure to be used for identifying potential environmental and social impacts of sub-projects and for assigning the appropriate impact category; (iii) describes appropriate mitigation measures to be incorporated into the sub-project design; (iv) assigns roles and responsibilities for the various spheres of government (district, municipal and national) in the country for ensuring compliance with environmental guidelines; and (v) proposes a capacity building program for ensuring capacity for implementation of environmental and social management plans and other mitigation measures for the sub-projects under NESP.

F. Safeguard policies 94. The NESP triggers two safeguard policies, namely, Environmental Assessment (OP/BP 4.01) and Involuntary Resettlement (OP/BP 4.12). The ESMF and RPF have been prepared for addressing these policies requirements.

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Safeguard Policies Triggered by the Operation Yes No Environmental Assessment (OP/BP 4.01) [ X] [ ] Natural Habitats (OP/BP 4.04) [ ] [ X] Pest Management (OP 4.09) [ ] [ X] Physical Cultural Resources (OP/BP 4.11) [ ] [ X] Involuntary Resettlement (OP/BP 4.12) [ X] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [ X] Forests (OP/BP 4.36) [ ] [ X] Safety of Dams (OP/BP 4.37) [ ] [ X] Projects in Disputed Areas (OP/BP 7.60)* [ ] [ X] Projects on International Waterways (OP/BP 7.50) [ ] [ X]

G. Policy Exceptions and Readiness 95. This Project is consistent with Bank Policy. PIEQM’s implementation, fiduciary, safeguards, and monitoring and evaluation (M&E) arrangements are in place satisfactory to the Association. A draft procurement plan has been reviewed, with comments incorporated from the Bank.

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Annex 1: Country and Sector or Program Background A. Country Overview

96. The Republic of Malawi is a landlocked country in southeast Africa with a young and rapidly growing population. Based on the recent census (2008), the total population in Malawi is 13,066,320 increasing by 32 percent, from 9.9 million in 1998. This population growth represents an intercensal annual growth rate of 2.8 percent per annum between 1998 and 2008 compared to a lower 2 percent during the intercensal period 1987-1998. The spatial distribution of the population shows 45 percent of the country’s population living in the Southern region, 42 percent in the centre and 13 percent in the North. Approximately 52 percent of the Malawian population is under the age of 18 years of whom approximately 51 percent are females and 49 percent males.

97. Malawi has recently registered high rates of economic growth, following a history of volatile and low growth. GDP growth in the last three years has been high, averaging 8.3 percent: 6.7 percent in 2006, 8.6 percent in 2007, and 9.7 percent in 2008. Growth for 2009 is projected at 6.9 percent (See Table 3 for a summary of key macroeconomic indicators). This performance has been anchored by strong growth in agriculture (particularly smallholder agriculture), construction, finance and insurance, and in information and telecommunications. It has also been helped by improved macroeconomic management, good weather, and a supportive donor environment. Prior to the recent feat of relatively sustained high growth, macroeconomic management was generally weak. Together with the country’s over-dependence on rain-fed agriculture, and highly concentrated exports, growth had generally been low and volatile. Between 1999 and 2004, average growth per annum was only 2 percent.

Table 3: Malawi Key Macroeconomic Indicators, 2005-2011 2005 2006 2007§ 2008 2009* 2010* 2011*

GDP Growth (%) 2.1 6.7 8.6 9.7 6.9 6.0 5.1

Inflation (%) average 15.5 13.9 7.9 8.7 8.9 8.0 7.8

Growth in M2 (%) 16.2 16.5 36.9 33.1 10.9 11.8 10.8 Exchange rate (average US/MK) 118.4 136.3 140.0 140.6 155.0 160.5 171.4 Current account balance including transfers (% of GDP)

-11.7 -7.1 -1.7 -6.3 -3.5 -4.4 -5.5

Fiscal balance, excluding grants (% of GDP)

-13.4 -14.2 -17.2 -16.0 -14.2 -11.8 -10.4

Fiscal balance, including grants (% of GDP)

-1.5 -1.3 -3.1 -5.1 -2.4 -2.6 -

External Debt, Public Sector (% of GDP) 108.3 14.4 14.4 16.3 17.7 20.0 22.7

NPV of public sector debt (% of average exports) 235.3 40.9 30.3 36.6 48.6 57.2 72.2

Domestic Debt, Central Government (% of GDP) 16.5 12.6 11.8 19.0 14.5 11.8 9.5

Gross reserves in months of import cover 1.3 1.2 3.3 1.6 2.1 2.4 2.3

Average interest rate (91days T-Bill Rate) 24.4 20.0 13.9 10.9 - - -

Notes: (§) These figures are preliminary estimates (*) Projection Source: Malawi authorities, IMF, and World Bank staff estimates

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98. While there exists a longstanding positive relationship between export performance and economic growth in Malawi, this has not translated into sustainable development due to a high export concentration. Malawi’s exports have been heavily concentrated in agriculture, with tobacco, tea and sugar alone accounting for over 70 percent of total export earnings. This dependence on rain-fed agricultural exports has left the economy vulnerable to weather vagaries and volatilities in world commodity prices. There is thus need for an export diversification drive in order to reduce inherent risks associated with agriculture, thereby consolidating the recent back-to-back economic growth into sustainable development. In this context, Malawi needs to build on recent progress where non-traditional exports to the region grew by 14.6 percent during the period 2000-2006. 22 The newly opened uranium mine, which started commercial production in September, is the only significant non-agriculture source of export, and is expected to account for 25 percent of Malawi’s export earnings per year. 99. While progress has been registered in some social indicators, the overall picture remains poor. In 2005, the poverty headcount was 52.4 percent, marginally down from 54.2 percent in 1998. However, both the 2007 and 2008 welfare monitoring survey reported a poverty headcount of 40 percent, indicating that poverty may have declined in the last few years, in line with the high growth rates registered.23 In education, there have been improvements in school attendance levels. During the last decade, the proportion of men who had never attended school dropped from 21 percent to 12 percent, while that of women dropped from 47 percent to 23 percent. On the other hand, in health, life expectancy has declined from 46 years in 1987 to 37 years in 2005, largely due to the HIV/AIDS epidemic. Childhood immunization has also decreased from 82 percent in 1992 to 64 percent in 2004. Maternal mortality rates have increased from 620 in 1992 to 960 in 2004, although they are now on a decreasing trend. Child malnutrition has remained virtually unchanged since 1992, and almost half of the children under five years of age in Malawi are stunted, with 22 percent severely stunted. On a positive note, trends in under-five mortality and infant mortality have improved steadily over the past two decades. Similarly, Malawi appears to be making progress in containing the spread of HIV/AIDS, as adult prevalence rates dropped from 14.4 percent in 2004 to 12 percent in 2007. 100. Given Malawi’s high level of poverty and vulnerability to shocks, food security remains a critical issue. The functioning of domestic input and output markets in the agriculture sector continue to dominate the policy agenda. With the majority of the population living below the poverty line, ensuring food security has always been a major development objective. In this regard, policies governing domestic agriculture markets for inputs and produce have been central to the development discourse, and politically sensitive. In the fertilizer market, the focus of government has been the implementation of a price subsidy program which is designed to play food security and social protection roles by enhancing productivity in maize which is the key staple, and tobacco, which is the main cash crop. Although the subsidy program is intended for poorer farmers, targeting has been a major challenge, and program costs have been escalating. Regarding the output market, policies have mainly centered on the operations of the state

22 The recently finalized Country Economic Memorandum prepared by Bank staff in collaboration with DfID, AfDB, and the Millennium Challenge Corporation offers useful recommendations on how Malawi can seize opportunities for growth through trade, particularly with the region. 23 Comprehensive data on poverty are collected through the Integrated Household Survey (IHS).

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marketing board, namely, the Agricultural Development and Marketing Corporation (ADMARC), which continues to play a predominant role in the maize markets. In particular, attention in recent years has been focused on how to improve the parastatal’s efficiency and provide a more stable and enhanced role for the private sector.

Macroeconomic performance 101. The country’s macroeconomic program remains broadly on track but faces risks from uncertainties in exchange rate policy and effects of the financial and economic crisis. Malawi is currently implementing a one-year arrangement under the Exogenous Shocks Facility (ESF) that was approved by the IMF board in December 2008, following a successful sixth and final review of a three-year Poverty Reduction and Growth Facility (PRGF), IMF's lending instrument to developing countries, now replaced by the extended credit facility in July 2008. However, the first review of the operation, which was expected in June 2009, was pushed forward to October to allow the new government to articulate its position on some of the macroeconomic objectives and strategies under the ESF, including its exchange rate objectives and the policy strategy for reaching these goals.

102. The foreign exchange market situation remains fragile, with critically low levels of international reserves. Overvaluation of the Malawi Kwacha against major currencies has resulted in a depletion of foreign reserves and significantly eroded the competitiveness of Malawi’s exports. The nominal exchange rate has remained stable vis-à-vis the US dollar since 2006, but significantly gained value against other currencies. As a result, the IMF has recently reclassified the exchange rate regime as a de facto conventional peg, and estimates that the Malawi Kwacha may be over-valued by 10-28 percent. Partly as a result of this policy, Malawi’s medium-term objective of building up reserves to 2.5-3 months of imports has been heavily compromised. As at end July -the peak of the tobacco marketing season, official reserves were at 0.9 months of prospective imports. Reflecting foreign exchange shortages and challenges with maintaining the current exchange rate framework, the premium between the parallel and official exchange rates has been widening and is currently at least 20 percent above the official rate, and there are also signs of a buildup of unpaid import invoices. Further, there has been deterioration in the competitiveness of Malawi’s exports, particularly in the non-traditional sector that is geared mostly to sub-regional markets. Under the current ESF with the IMF, authorities committed to study options for adopting a more appropriate foreign exchange management framework that would introduce increased flexibility and ensure alignment with underlying fundamentals.

103. Fiscal consolidation has resulted in significant declines in public debt, although the fertilizer subsidy program has recently contributed to a rise in domestic debt. Malawi reached the Heavily Indebted Poor Countries (HIPC) completion point in August 2006 and subsequently qualified for the Multilateral Debt Relief Initiative (MDRI). This resulted in a decline of the debt-to-exports ratio from 235.3 percent in 2005 to 40.9 percent in 2006. Further, reducing domestic debt has been a cornerstone of the fiscal strategy embodied in the government’s budgets in recent years. From 16.4 percent of GDP in 2004, domestic debt had declined to 11.8 percent of GDP by end 2007. This achievement has been possible due to two major factors. First, the government has used a good portion of increased foreign flows (from debt relief and budget support), and increased tax revenues, to reduce the stock of domestic debt.

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Second, the authorities have adhered to strict fiscal discipline in the execution of the budget. However, increased expenditures on the fertilizer subsidy program in recent times have led an increase in domestic debt, which shot up to 19.0 percent of GDP in 2008. Since its inception in the 2005/06 fiscal year, the subsidy program has increased from 1.2 percent of GDP in the initial year to 4.5 percent in the 2008/09 fiscal year, with government actual spending consistently outstripping what was approved in the budget. This has resulted in further widening the fiscal gap.

104. A prudent monetary policy framework, supported by the strong fiscal environment, has the supported expansion of private sector credit in recent years. Government’s commitment to fiscal discipline through, among others, reduction in the levels of domestic borrowing, has helped the central bank to reduce nominal interest rates, from 35.0 percent in May 2004 to 15.0 percent at the end of July 2009. Correspondingly, commercial bank lending rates have declined from 36 percent in May 2004 to 19.6 percent as at end-July 2009. With corresponding declines in inflation rates, real interest rates have been declining, thereby contributing to an increase in commercial bank lending to the private sector. As a result, credit to the private sector has been increasing. At MK83.8 billion in July 2009, credit to the private sector represented about 13 percent of nominal GDP, comparing to 4 percent of nominal GDP in May 2004.

105. The global financial and economic crisis has hit several sectors of the Malawi economy, though the extent of the impact remains unclear. As with other developing countries, the major channels through which the crisis was expected to affect Malawi include reduction in foreign aid, reduced demand and prices for exports, subdued capital inflows, and a reduction in private remittances. Earlier understanding suggested that the country’s financial sector may have been sheltered from first round effects of the turmoil due to its relatively closed capital account, insignificant foreign portfolio investment, and limited integration with the world financial system. Coupled with no clear indication on the magnitude of the impact through the other expected channels, there was limited pro-active policy response to the crisis by the Government of Malawi. However, new evidence seems to suggest that both the first and second round effects of the crisis may have hit Malawi, though the exact magnitude of the impact still remains unclear due to constraints in data availability and challenges in attributing the outcomes as due to domestic policies or the global crisis.

106. Inflation has been moderate, and has remained within single digits since 2007. The headline inflation rate reached single digits in January 2007, reaching a ten-year low of 7.1 percent in September 2007. Although inflation has remained below ten percent until now, it started rising towards the second half of 2008 due to the lagged impact of global fuel price increases experienced in the first half of the year (See Figure 4). In June 2008, local fuel pump prices were adjusted upwards by 25 percent. Coupled with food seasonal factors, this exerted significant pressure on inflation during the last half of 2008 through to the first quarter of 2009. Subsequently, inflation rose from an average of 8.1 percent in the first half of 2008 to an average of 9.4 percent for the last half of the year, pushing the average annual inflation for 2008 to 8.7 percent from 8.0 percent in 2007. The global slump in fuel prices later in 2008 and the corresponding downward adjustment in local pump prices in February 2009 helped to ease this pressure. As of July 2009, headline inflation rate was at 8.0 percent-down from a two-year high

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of 10.1 percent reached in January 2009, while food and non-food inflation rates were 6.9 percent and 9.6 percent, respectively.

Figure 4: Trends in Malawi’s National Inflation Rates, 2007-2009

Source: National Statistical Office

Macroeconomic Outlook

107. Projected economic growth for 2009 and 2010 continues to be high but is subject to significant risks. The most recent projections from the IMF and government are that growth will be 6.9 percent in 2009 and 6.0 percent in 2010. While these projections are lower than growth rates in 2007 and 2008, they are still high based on two assumptions. First, there is an expectation of higher tobacco supply response to last year’s record prices. Second, the new uranium mine that has just opened is expected to contribute 10 percent to GDP. However, these growth projections are subject to several downside risks. First, the full impact on output of the terms of trade shocks that hit the economy in 2008 and part of 2009 has not yet been fully assessed. While last year’s shock emanated from high fertilizer and oil prices-which subsided towards the end of the year, this year’s shock is largely due to lower export prices on key agricultural commodities, namely tobacco and cotton. Twenty-seven weeks into the 2009 tobacco auction season (mid-September), prices were down by 24 percent, and the total amount fetched (US$394.2 million) was 15 percent lower than the corresponding point last year, despite selling a slightly larger quantity this year. Secondly, continued foreign exchange shortages present special challenges of several sectors of the economy which rely on imported material for their critical inputs.

108. Inflation is expected remain moderate over the near term while the international reserve position remains precarious. There has been a significant decline in world fuel prices and fertilizer prices have also been coming down. Coupled with a hamper maize harvest in the

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2008/09 growing season, the inflation rate is expected to remain within single digits at the end of 2009. As a result, the IMF and government are projecting inflation to be around 9.7 percent in 2009 and 6.7 percent in 2010.

Debt Sustainability

109. With prudent external borrowing, sound public debt management, and effective use of borrowed resources, Malawi’s future risk of external debt distress is expected to be moderate. As mentioned earlier, Malawi reached completion point of the HIPC initiative in August 2006. As a result of HIPC and the MDRI, external debt declined from an average (in NPV terms) of 253.3 percent of exports in 2005 to 40.9 percent in 2006. As a share of GDP, external debt stock decreased from 143 percent in 2005 to 14.3 percent in 2006. Preliminary estimates show that as of 2007, external debt (in NPV terms) as a share of exports had risen to 41.6 percent, while debt stock as a percentage of GDP had increased to 14.5 percent. While the sensitivity analysis shows that Malawi's NPV of debt-to-exports profile is going to remain below the HIPC threshold under a number of shocks, it is only so in the event that the authorities maintain sound macroeconomic and external borrowing policies over the medium and long term and accelerate the implementation of structural reforms.

110. A focus on education is in the heart of MGDS 2006-2011. The MGDS 2006-2011 highlights the development of human capital through education as a central pillar to poverty reduction. The Government of Malawi recognizes the role of an educated population as a necessary enabling environment for sustainable development. The NESP (2008-2019) translates the goals of the MGDS into objectives, strategies and financing for education. Drafted as a collaboration between DPs, the Ministry of Education, and international consultants, the NESP outlines the strategy for Malawi to achieve equitable access to education, improving quality and the sector’s governance and management.

The Primary Education Cycle24

111. Malawi succeeded in significantly boosting primary enrolment by abolishing primary school fees in 1994. The duration of the primary cycle in Malawi is 8 years, from standard 1 to standard 8, with the official age being 6 years old to enter standard 1. At the end of the cycle students take the PSLCE that determines their eligibility to pass onto secondary level. In 1994, Malawi introduced the free primary education (FPE) policy which had an exceptionally high impact on enrolment, leading to an increase of 51 percent in the year following fee abolition. As of 2007 total enrolment and the GER marked 3,306,926 and 101 percent respectively (Figure 5 & 6).25 Historically, the provision of primary education was undertaken by the government.26 In 2004 a national policy authorized education provision by private institutions; however private schools still play a small role, catering to only 1 percent of the total primary level enrolled students in 2007.

24 All data is obtained from the CSR 2009 unless cited otherwise. 25 Refer to World Bank report (2008) for data prior to 2000.

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Issues of Access to Primary Education

Figure 5: Evolution of Primary Enrollment (in 000s)

Figure 6: Evolution of Primary GER (%)

112. Access to the early grades of the primary cycle is fairly high but Malawi has not yet reached universal access. While the GER of 101 percent shows the capacity of enrolment in the primary cycle, however it includes the enrolled students that are out of the official age27, and it is also influenced by repetition rates. Figure 7 shows the schooling profile for 2007 where each point represents the access rate28 to the corresponding grade. The data displays a high level of intake of 142 percent. This level of intake for standard 1 should not be mistaken for universal access as it is partially due to the multi cohort phenomenon where out of official age children are enrolled. The access probability to standard 1 for a given generation is 96 percent, which means that there is still 4 percent of a generation with no access to schooling. Additionally, the portion of individuals that accessed standard 1 in 2006 is only 60 percent of the official age group, age 6, compared to 96 percent for people of age 11. The latter highlights a phenomenon of late enrolment. Possible explanations for later enrolment is unawareness of the age of official age of school or parental perception of the child’s ability to walk to school, this is underscored by findings in the IHS 2004 which shows that, respectively, 69 percent and 24 percent of the children age 6-7 years and 8-9 years who had not attended school declared ‘being still too young to attend school’ as the main reason.

27 In Malawi there is difficulty in verifying the age of the child as birth certificates are not common. 28 Access rate is computed by dividing the number of non-repeaters of the respective standard by the population of the official age to attend

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Figure 7: Access Rate by School Grade

Figure 8: PqTR and PTR in Rural and Urban

Issues of Primary Cycle Completion and Equity

113. Despite the high access rates at the start of the cycle, Malawi remains far from the goal of universal primary education as suggested by Primary Completion Rates of only 35 percent. The low level of PCR indicates that there are still 65 percent of cohort that do not reach the end of the primary cycle. In light of the relatively higher intake, this low completion rate is mainly a consequence of poor retention. Dropouts are a major concern amounting to 51 percent wastage of public resources. Related to dropouts are repetition rates which mark an average of 20 percent over the cycle and contribute to 29 percent resource wastage. Accounting for both repetition and dropouts, the IEC 29 for primary education is as low as 35 percent implying that 65 percent of public resources are lost due to repetitions or dropouts before the cycle completion. Put another way, the primary education system requires 23 years to produce one gradate instead of 8 years under perfect efficiency.

114. Malawi has a pronounced level of income disparity with regards to the probability of accessing a complete primary cycle. The significant upsurge in enrolment in Malawi post introducing FPE demonstrates that the fees were likely to have represented a major barrier to enrolment. The income disparity with respect to probability of access to standard 1 between the top and the bottom quintile is only 4 percentage point (pp). Yet, there is a difference of 44 pp in the probability of completing primary education between the top and bottom quintile (Figure 1). In a survey of students that were attending primary education in 2003 and not the proceeding year, 16 percent of the respondents noted “no money for fees/uniform” as the reason for dropping out of school while 48 percent noted “found work”. In another survey investigating the reasons for children to have never attended schools, 7.7 percent attributed the reason to “no money for fees/uniform”. This suggests that despite some relaxation of financial constraints on primary schooling with the introduction of FPE, poverty related factors are still an important constraint stopping the poorest household from sending their children to school. Notably this income disparity can also be related to the fact that the poor tend to live in areas of poorer school

29 The IEC is defined as the ratio between the cumulated student years invested in a system with no student flow problems and the actually cumulative student years invested given the current pattern of dropout and grade repetition. And education system with no dropout and no repetition would have a coefficient of 100.

Access Rates by School Grade

100% 97%

88%

76%

66%

52%46%

35%

17% 18%12%14%

0%

20%

40%

60%

80%

100%

120%

std1

std2

std3

std4

std5

std6

std7

std8

Form

1

Form

2

Form

3

Form

4

35

quality, implying lower returns to education, consequently a plausible higher opportunity cost to working.

115. There exists a significant level of location disparity as rural areas and regions of the south and the center tend to have lower PCR, higher incidents of incomplete schools, and lower quality indicators. The regional disparity is evident from the urban-rural difference in access probabilities to standard 8 of 34 pp (Figure 1). This regional disparity is also confirmed across the three administrative regions, north, centre and south where the access probability to the final primary standard marks 54 percent for the northern region compared to lower levels of 34 percent for the center and for the south. Possible reasons for this geographic disparity can be that rural areas, and particularly the south, have higher incidence of poverty which can lead to more dropouts. Alternatively, it can be a school supply issue given that 14 percent of the pupils in the central and south that were attending standard 1 in 2006 were attending a school that was not providing standard 8, compared to 9 percent in the north. Finally, the deployment of primary teachers is significantly uneven with teachers being concentrated in urban areas and scarce in rural areas. In urban government funded primary schools the PTR is 47 compared to 99 in the rural areas (Figure 8). These figures translate to 47 and 93 for PqTR.

116. Malawi has an impressive record of gender equity in access rates to primary education, but gender parity has not yet been attained for PCR. Gender parity indices (computed by dividing GER for girls by GER for boys) significantly improvement for girls marking 1.02 for the primary cycle compared to 0.94 in 2000 and 0.87 in 1991. These figures vary across the two half’s of the primary cycle marking 1.04 for first half of the cycle (standards 1 to 4) but slightly declining to 0.96 in the second half (standard 5 to 8) indicating higher incidence of girls dropout. This is also demonstrated by a difference in the probability to access completing primary education of 14 percentage points between boys and girls, in favour of boys (Figure 1).

Issues of Quality in Primary Education

117. The current number of teachers falls short of the required, resulting in a high PTR of 80:1. The PTR has been increasing reaching a high of 80:1 in 2007 from 59:1 in 2001. In addition to the increase in the primary school age population of 3.7 percent a year, this drop in PTR is also attributed to the decline in the number of teachers hired between 1997-2004 where the MoEST focused on training teachers currently in the system through an accelerated teacher training system (Malawi Integrated In-Service Teacher Education Program – MIITEP), rather than hiring new teachers.

118. With respect to teachers’ level of education, a portion of 55 percent of the government funded primary teachers have the Malawi School Certificate of Education (MSCE), a degree obtained at the end of secondary education cycle, while 47 percent have a Junior Certificate of Education (JCE), a degree which is obtained at the end of the first two years of secondary school. The current supply capacity of public TTCs (which supply 95 percent of teachers) is 3,900 up from 2,800 in 2008, mainly due to the expansion of the colleges. This will rise to about 4,500 in 2010 with the inauguration of the Machinga Teachers’ College at Liwonde (WB funded). The

36

expansion and construction of TTCs will allow the number of teachers entering into the system to roughly match the current attrition rate of 3.2 percent.30

119. Furthermore, the high pupil classroom ratio and high pupil desk ratio are additional major challenges to the quality of primary education. The pupil classroom ratio and the pupil desk ratio suggest the need for investment in infrastructure as noted by a high level of 100:1 in 2005 for the former indicator, and 9:1 for the latter.

120. The consequence of the poor education quality is reflected on the considerably weak student-learning outcomes. In 2004, only 9 percent of students were found to reach a minimum level of mastery in reading in English, which is a decline from earlier levels of 19 percent in 1999 (SACMEQ I & II). In mathematics, 98 percent of the students did not possess skill beyond basic numeracy and none of them had skills beyond competent numeracy. Finally, of the 94 percent of government schools students that sat the PSLCE exams, only 75 percent passed. The Secondary Education Cycle

Figure 9: Share in Enrollment by School Type

121. Secondary education in Malawi is fragmented across various types of schools. The secondary school cycle takes the duration of four years, from Form 1 to Form 4 with the official age of 14 for the first grade. Secondary schools in Malawi can be categorized into five groups: (i) CDSS, which account for 47 percent of enrolled students in 2007, are low cost secondary schools. Prior to 2004 CDSS were known as distance education centres (DEC) under the supervision of the Malawi College of Distance Education (MCDE), (ii) CSS - 20 percent of students - comprise of: four government national schools, district boarding secondary schools and GDSS, (iii) grant aided schools - 6 percent of students - are partially funded by the state (teachers are paid by the government) and also receive funding from other sources, (iv) open schools – 3 percent of students - are “second chance” education for older students, and finally (v) private schools - 23 percent of students. Based on the results of the PSLCE at the end of the primary cycle, students are assigned to the different school types. Those with the best results gain access to government national boarding schools, then government day schools, then CDSS.

30 A survey investigating the reason for attrition among government funded primary teacher points out that 14.3 percent went on retirement while 37.2 percent had passed away and 7 percent suffered from prolonged illness. The latter two reasons are likely to be related to the HIV/AIDS pandemic.

71.79%

65.11%

66.69%

58.04%

46.34%

45.88%

47.71%

47.15%

12.76%

14.60%

17.76%

15.15%

20.01%

22.52%

21.99%

20.32%

9.60%

13.12%

10.33%

20.61%

23.50%

21.69%

23.82%

23.18%

0% 20% 40% 60% 80% 100%

2000

2001

2002

2003

2004

2005

2006

2007

CDSS

CSS/Gov

Grant

Open

Private

37

At the end of the first two years, students take the JCE, followed by the MSCE at the end of Form 4. The performance in the latter examination determines student selection to university. Issues of Access to Secondary Education

122. Access rates and GER to secondary education are as low as and 16.3 percent and 17 percent, respectively, which can be attributed to the financial burden of secondary education, low primary leaving examination pass rates, poor quality of CDSSs and the long distances to schools. In 2007 total secondary enrolment amounted to 210,325 students translating to a GER of 16.3 percent over the whole secondary cycle. Figure 7 shows an access rate to Form 1 that is as low as 17 percent, which when compared to the PCR of 35 percent implies some student flow regulation. This is confirmed by a transition rate between primary and secondary education of 46 percent. These low rates can be partially attributed to demand side concerns. Secondary education can be expensive. School fees in the top government national boarding schools such as Lilongwe Girls Secondary School and Dedza Boys Secondary School are in the range of MK 3000-4000 per term, and can reach MK 8000 for most other public boarding schools. Noting that there are three terms per academic year, these fees constitute a significantly high financial burden, accounting for approximately 30-50 percent of GDP per Capita. In addition, the low intake in secondary schooling can also be attributed to (i) low pass rates achieved in the PSLE; (ii) as well as the low quality of some secondary schools, particularly CDSS, which decreases the perceived returns to schooling; and (iii) the distance to secondary schools. Issues of Secondary Cycle Completion

123. As a consequence to the low access rates, completion rates are also low amounting to 14 percent. Figure 1 shows a secondary completion rate of 14 percent as noted by the access rate to Form 4. GER is higher over the first two years of the cycle marking 18.3 percent and decreasing to 14.1 percent in the second half. Notably, dropout rates are high in secondary schooling averaging to 8.3 percent. Inefficiency resulting from dropouts is significant contributing to 29 percent wastage of public resources in 2007. Linked to dropouts is repetition rate, which marked an average of 6 percent for the secondary cycle and resulted to lower public resource wastage of 6 percent. Accounting for both dropouts and repetitions, secondary education IEC is 66 percent implying that 34 percent of public resources were wasted due to repetition and dropouts. Notably it takes 6 years to produce a secondary school graduate compared to 4 years under a fully efficient system. Issues of Inequity in Secondary Education

124. The evidence suggests significant income disparity in secondary school access and completion rates. 9 percent of children from families that belong to the lowest wealth quintile have access to Form 1 of secondary education compared to an access probability of 59 percent for children from the richest quintile thus marking a difference of 50 percentage points (Figure 1). By the end of the cycle, the poorest household have a 2 percent probability of completion compared to 31 percent for the top quintile. A decomposition of household expenditure on

38

education shows that 58 percent are spent on tuition, 10 percent on uniform and 8 percent on books.31

125. Geographic disparity persists in Malawian secondary education where regions of the south and centre tend to have lower access probability and lower quality indicators. Urban areas have access probabilities of 56 percent to lower secondary versus 20 percent for rural areas. Compared to the Southern and Central regions, more children from the North have access to lower secondary education equalling 40 percent compared to 20 percent and 25 percent for the centre and south respectively. While there is little differences between rural and urban areas with respect to the PTR (18:1 in urban areas against 21:1 in rural zones - Figure 8), a stronger variation emerges when accounting for teacher qualification. In 2007, the PqTR stood at 33:1 in urban regions versus 58:1 in rural ones. Furthermore this weak quality shows on student outcome as noted from that JCE and MSCE performances which have higher pass rates of 73 percent and 50 percent respectively for the urban areas, compared to 59 percent and 42 percent respectively for rural.

126. Malawi has some way to go before reaching gender parity in secondary education. Gender parity indexes for the secondary cycle have slightly increased since 2000, marking 0.77 in 2007 up from 0.67 in 2000. In 2007 lower secondary education marked an index of 0.85 compared to 0.67 for upper secondary. This confirms that less girls than boys enrol in secondary school, additionally more girls drop out and do not reach the upper classes. Possible reasons can be: early female marriages, the likely long distance to schools that exposes girls to road harassments, and the limited hostel capacity for female accommodation which is a common feature in Malawi boarding schools. Issues of Quality in Secondary Education

127. School quality in Malawi is highly inequitable depending on the type of school. Nationwide CDSSs are less well resourced than secondary schools, although they enrol nearly half of secondary students. They generally are underfunded, have unqualified teachers, poorer learning environments, and lack appropriate teaching and learning materials and equipment. This translates into the poorer outcomes associated with CDSS.

128. CDSS have a significantly low portion of qualified teachers.32 The PqTR is considerably high in CDSS, at 107:1. This is largely because the supply of trained teachers has been unable to keep pace with the requirement. As a result a number of primary teachers who are unqualified for secondary teaching have been moved to teach secondary schools, particularly the CDSS. With respect to teachers’ level of education and qualification, only 19 percent of CDSS teachers have a diploma/degree in education and 78 percent of teachers are only MSCE holders. With respect to CSS, they are much better resourced with a PqTR of 29:1. Furthermore 73 percent of the teachers have a diploma/degree in education.

129. Teacher attrition rates in government-funded schools are as high as 4.3 percent. The total number of public school teachers was 8,026 in 2007. A total of 349 teachers left in 2007 resulting to a teacher attrition rate of 4.3 percent in government secondary schools. While 17.5 31This decomposition does not distinguish between spending on primary or secondary education. 32 Secondary teachers are considered qualified if they have an MSCE and either a diploma or degree in education. Graduates with degrees in other subjects can do a University Certificate of Education to reach qualified teacher status.

39

percent of the leavers resigned, a portion of 29 percent of attritions was caused by death and 5.4 percent due to prolonged illnesses. HIV/AIDs is likely to be partly responsible for the latter two situations.

130. The learning outcomes of the different school types reflect the poor quality of CDSSs. Pass rates in MSCE 44 percent. The best results are scored for CSS (54 percent) and private schools (50 percent) while the poorest outcomes are for the CDSS (33 percent). These inequitable results can be attributed to the inequitable school qualities. Additionally it is also due to a sampling bias with regards to the process of student allocation to school types given that PSLCE results are used to rank students, with the best going to CSSs. The Education Sector Management and Capacity

131. The highly centralized management system in Malawi hinders effective teacher management and adequate flow of funds. In primary education there is a fairly incoherent distribution of teachers. For instance in 1000-student schools, the number of teacher varies from less than 10 to more than 50 resulting to a class size that ranges from 20 to 100. The poor management is further reflected in teacher deployment which his highly skewed towards urban areas (PTR of 46:1) compared to 86:1 in rural area. The situation at the secondary level is relatively better whereby the degree of randomness in teacher allocation was observed to be 28 percent, meaning that at secondary level, 72 percent of teachers are allocated in public schools based on the number of students enrolled in schools as opposed to unexplained factors.

132. Furthermore there is a lack of connection between available resources and results in the different schools which reflects a serious pedagogical management problem. In primary education, schools with the same expenditure per student show PSLE results that vary from less than 10 to 100 percent, which is also the case in secondary education. This observation raises question regarding the way resources are transformed into learning achievement at the school level.

133. However, both at the central and district level there is weak capacity to implement and monitor education programs. This problem is exacerbated by the frequent shifts of leadership, although mid-level staff has been relatively stable. Through decentralization efforts, the Government of Malawi has begun strengthening local management capacity, which includes financial and decision making at the school level including district, head teachers and PTAs. The NESP has also provided a set of potential indicators for the M&E framework, although increased work will need to be implemented to further address the needs of the actual monitoring and implementation of these and other reforms in order to ensure that evidence-based decision making continues. The Education Sector Expenditure

134. Sectoral aggregate Expenditure: The PER 2007 shows that government expenditure on education has increased during the past decade reaching 5.3 percent of GDP in 2004 in comparison to 3.8 percent in 1993/94. Expenditure per capital and per student grew by 74 percent and 31 percent respectively in real terms. Of total expenditure in 2003/2004, a portion of 58 percent and 15 percent was spent on primary and secondary education, respective. Donors

40

accounted for 28 percent of the total education expenditure in 2003/04 and for the 98 percent of total development spending. Notably, as of now, two third of the donor spending on education is off-budget. However this funding modality will change due to the current education SWAp.

135. Sectoral recurrent expenditure: The total education public recurrent expenditure amounted to MK 22.3 billion in the 2007/08. This represents 19.4 percent of total government recurrent expenditures and 4.8 percent of GDP, compared to 16 percent and 3.7 percent respectively in 2001/02.

136. Inter-sectoral budget allocations: In 2007, primary education received the largest share of the recurrent education expenditures (44 percent).33 The share for higher education (27 percent) is larger than that for secondary education (22 percent). 70 percent of recurrent expenditure goes to teacher and non-teachers emolument and 24 percent to Other Recurrent Transactions (ORT) (Figures 10 & 11).

Figure 10: Recurrent Expenditure by Spending Nature

Figure 11: Recurrent Expenditure by Level of Schooling

137. Per pupil spending: In 2007/08, the recurrent expenditure per student in primary education stood at around MK3,000 which is equivalent to only 8.3 percent of GDP per capita. At the secondary level, the public unit cost is estimated to be MK 30,300 (83 percent GDP per capita versus 30 percent for the SSA average) and it is 4 times higher (in terms of GDP per capita) than it was in 2000. However this average unit cost for secondary level hides the disparities that exist between the CSS and the CDSS, to the detriment of the latter.

138. Household financing: The total household spending on education is estimated to be 1.43 percent of the GDP (MK 4.4 billion in 2004), a value relatively low compared to the 2 percent of GDP average in SSA. Primary education is mostly funded by public resources (92 percent of the total cost), in line with the implementation of FPE and the MDG. This compares to 70 percent for secondary education. The cost-sharing structure between public and private funding is the same in higher education as in primary education with 92 percent of the financing coming from public resources.

33 The allocation to primary is 51 percent if resources sent to the District for primary education are factored into the total.

41

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies Table 4: Performance and Disbursement of Externally Funded Primary Projects/Programs US$ '000

Multilateral / Bilateral Funded Programme Commit

ment Disbursement

DPs Project Description Start End US$

('000) 2006 2007 2008

AfDB

Education IV- Infrastructure development, education material provision, human resource capacity development, and project management

2003 2009 21,750 4,975 2,864 1,104 Education V - Infrastructure development, education material provision, human resource capacity development, and project management

2007 2012 21,750 80 170 649

CIDA

Grant Support to the Education Sector Phase II. 2005 2010 18,200 3,185 2,548 2,002 Initial Teacher Primary Education (IPTE) funding channeled through GTZ.

2007 2009 4,368 0 1,274 2,275 IQBE funds for PCAR and child friendly schools funds channeled through UNICEF. For intervention 2 and 3 get details from GTZ and UNICEF 2007 2010 6,825 1,365 1,365 3,822

DfID

Education Sector Support Programme - education infrastructure (primary school classrooms, teachers houses, TDC construction) curriculum reform (development and provision of textbooks and teachers orientation) teachers capacity development (support in the TDC through VSO volunteers) school grants 2001 2009 102,388 4,851 7,020 11,309

GDC

Improving Basic Education Phase II (GTZ) 2005 2007 7,150 2,244 2,544 83 Improving Basic Education Phase III (GTZ) 2008 2010 7,436 5,877 2,929 School Feeding Project (GTZ) 2005 2009 5,863 1,140 1,004 1,514 Primary Education Phase III (KfW) 2004 2009 8,180 Education Basket Phase I (KfW) 2 years 15,730

JICA

Project for Supporting District Education Plan Institutionalization Programme (DEPIP) 2006 2010 1,035 166 254 226 Strengthening of Mathematics and Science in Secondary Education (SMASSE Phase2)

2008 2012 1,939 - - 338

UNICEF Child Friendly Schools, Life Skills Education/Guidance & Counseling , School WASH, Early Childhood Development (ECD) 2006 2008 5,000 7,000 10,000

USAID

Malawi Teacher Training Activity 2005 2008 6,000 2,000 2,000 2,000 Primary School Support Program 2006 2008 7,000 3,000 2,000 EMIS Support 2004 2008 3,300 1,000 600 350 Tikwere/IRI 2007 2010 5,300 1,000 2,500 Centrally funded activities (Teachers for Africa, Ambassador Girls' Scholarship Program)

2005/06

World Bank

Education Sector Support Project (ESSUP) - Teacher Capacity Development (construction of TTCs/refurbishment of Universities), School Health, School Grants, Secondary School Refurbishment

2005 2010 35,000 5,000 4,800 4,000

WFP

School Feeding Project. Development Project 10106 (2002-2007) and 10581 (2008-2011) 2008 2011 40,271 8,700 12,090 12,100 Technical support to the Government of Malawi's Universal School Meals Programme 2008 2009 109 52

TPM/Dutch 2002 2008 42,042 7,150 8,223 5,667

Performance Status - Indicated whether the operation’s performance is satisfactory or unsatisfactory in terms of its development objectives (DO) and its implementation progress (IP). Project rating provided by DPs.

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Annex 3: Results Framework and Monitoring

Results Framework

PDO Project Outcome Indicators Use of Project Outcome

Information Increase access and equity and enhance the quality of the teaching and learning environment in basic education

Access 1. Gross enrollment rate 2. Net enrollment rate Equity 3. Primary completion rate (rural/urban) 4. Direct project beneficiaries (number) - female (%) (core)34 Quality of Learning Environment and Teaching Environment 5. Pupil classroom ratio 6. Pupil teacher ratio

Monitor progress of components to achieving project’s objectives

Intermediate

Outcomes Intermediate Outcome Indicators

Use of Intermediate Outcome Monitoring

Component 1. Improve Access and Equity

1.1 Construct and Upgrade Education Facilities

Improved availability of adequate basic education facilities

7. Boarding facilities built and/or rehabilitated (number) 8. Decline in shortfall of classrooms at primary level (%)

Inform whether construction is improving is improving learning environment

1.2 Provide Direct Support to Disadvantaged Children

Decreased cost of education to disadvantaged students

9. Children receiving grant (number) 10. Children receiving grants still in school (%)

Monitor if equity is being addressed through project objectives

Component 2. Improve Teaching and Learning Environment

2.1 Provide Textbook and Learning Materials

Improved availability of learning materials

11. Textbooks distributed (number) (core Africa) 12. Pupil : textbook ratio

Assess delivery of textbooks

2.2 Train Teachers through Open Distance Learning

Enhanced quality and quantity of teachers

13. Decline in shortfall of qualified teachers at primary level (%)

Inform whether teacher training efforts are improving PTRs

Component 3. Improve Management Capacity at All Levels 3.1 Support Teacher Management Reform

14. Assessment of teacher management system complete (yes/no)

Measure weather assessment of teachers is improving teacher management

34 Core IDA indicator. This indicator includes almost all primary school students as all primary schools will receive school grants.

43

3.2 Support School Improvement Planning 3.3 Strengthen Planning and Budgetary Management

Increased financial resources to school level Improved management capacity at school level Improved management at all levels

15. Satisfactory implementation of teacher management action plan for recruitment, education, deployment, remuneration, supervision, and promotion of teachers (yes/no)35 16. Human resource management information system in place (yes/no) 17. Primary schools receiving school grants (%)36 18. Schools with strategic and annual work plans and budgets in place (number) 19. Reliable annual abstract disseminated by March (yes/no) 20. Learning assessment system in place (Yes/No) 21. Managers trained in strategic planning, budgeting, and reporting (number)

Evaluate performance of school grants in increasing community involvement in school planning Gauge capacity training programs ability to support the delivery of reliable information for policy making Inform on capacity to implement education sector plans

* All components are in-line with the NESP and ESIP Arrangements for results monitoring 139. The MoEST is seeking to improve the delivery of educational quality by strengthening its monitoring and evaluation of interventions in the education sector. Accordingly, the government established a National Monitoring and Evaluation Master Plan in 2004, setting out a range of activities including development of a national strategy, clearly defining monitoring outcomes, impact assessments, and advocacy to raise awareness of the importance of monitoring and evaluation. A capacity needs assessment of M&E in the MoEST was undertaken in 2008, identifying critical capacity gaps and activities. The assessment report highlights good progress within the MoEST in establishing a functional M&E system such as the establishment of a dedicated M&E Unit in 2005, with a number of staff already trained in the M&E field. The Unit’s location within the MoEST’s planning department alongside the units responsible for policy-making and planning, budgeting and EMIS, will help foster working relationships between these core functional areas. With the support of USAID, the MoEST has also made 35 Once strategy is developed than criteria for satisfactory engagement will be defined 36 In the first year of the program, PIEQM will support the existing nationwide school grants program. The enhanced program will be introduced nationwide incrementally over a 4-year period in which schools will receive training to prepare school improvement plans.

44

significant progress in the development of the EMIS, and as a result the MoEST is now able to produce timely education statistics. 140. Data Collection. The EMIS is the main instrument for monitoring outcomes and outputs. The EMIS produces a range of key statistics for the sector, including information on the key indicators identified in the MGDS and NESP. Mechanisms are in place to ensure the quality of performance information collected, with DEMs reviewing performance data collection forms before they are sent to Ministry headquarters for entry into the EMIS. 141. In cases where data is required that is not collected from EMIS, performance reports will be prepared by the responsible line ministries and other data sources included the IHS and DHS. The information collected by EMIS and line departments will feed into the Joint Sector Review. As indicated in the MOU, MoEST and the DPs will conduct an annual Joint Sector Review focusing on agreed indicators summarized in the annual report. The recently completed CSR provides a baseline for the majority of the indicators that has been agreed upon by the DPs, stakeholders and MoEST. While quarterly reports will report mainly on ongoing activities, the annual report will provide details on both programmatic outputs and effectiveness of intervention in meeting NESP objectives. To support the latter the MoEST will undertake rigorous impact evaluations to identify cost-effective models of delivery of ODL delivery and direct support to disadvantaged children. 142. To date, however, most of the M&E work in the MoEST is project-based, linked to specific activities that DPs are funding rather than as a core day-to-day function of the Ministry that supports policy, planning and resourcing decisions. The MGDS, as well as the NESP, provide the needed key indicators, but the MoEST will need to identify who will collect the required performance information, the timeline for doing so, and the appropriate baseline measure. Further effort is also required to ensure that MoEST staff knows how to use the EMIS and interpret the performance information it generates. In order to address these issues, the next phase of the development of the EMIS will consolidate the progress made to date by supporting the decentralization of key data collection and processing to the district level, and enhancing the quality and accuracy of data collected. The EMIS has already been decentralized in all 34 Districts. PIEQM will support these efforts and coordinate as necessary, through subcomponent 3.3, in order to ensure better planning, targeting, and feedback to relevant stakeholders and promote timely decision-making. 143. Impact Evaluation. IEs that provide timely input for improving education intervention will provide valuable information to the MoEST, which is currently introducing several new and innovative interventions. Evaluation design and implementation protocols are currently being prepared to identify (i) the most cost-effective school bursary packages, and (ii) the impact of the ODL teachers on education quality in underserved populations. Others will be identified as needed. Malawi benefits from having several high-quality university and research institutions conducting research in education and health within the country. Through employing a learning-by-doing approach, the MoEST will collaborate with these international and local research institutes to build capacity in the MoEST to identify key programmatic question, design and implement IE protocols, and analyze and disseminate the findings.

45

Arrangements for results monitoring

Target Values Data Collection and Reporting Project Outcome

Indicators Baseline YR1 YR2 YR3 YR4 Frequency and

Reports Data

Collection Instruments

Responsibility for Data Collection

1. Gross enrollment rate in primary education

119% 117% 116% 115% 114% Annual EMIS MoEST (Planning)

2. Net enrollment rate in primary education

79% 80% 81% 82% 83% Annual EMIS MoEST (Planning)

3. Primary completion rate Rural Urban

28% 60%

28% 60%

29% 61%

30% 61%

32% 62%

Annual EMIS MoEST (Planning)

4. Direct project beneficiaries (number) (core IDA)

0 1,500,000 2,566,500 3,634,263 3,703,315 Annual Progress Report MoEST (SWAp

Secretariat)

Female (%) (core IDA)

0 46% 46% 47% 48% Annual Progress Report MoEST (SWAp

Secretariat) 5. Pupil:classroom ratio 100:1 99:1 99:1 98:1 97:1 Annual EMIS MoEST (Planning) 6. Pupil : qualified teacher ratio

91.5:1 91:1 90:1 89:1 87:1 Annual EMIS MoEST (Planning)

7. Boarding facilities built and/or rehabilitated (core Africa) (number) (cumulative)

0 2 5 8 11 Biannual Progress Report MoEST (EIMU)

8. Decline in shortfall of classrooms at primary level (%) (core IDA)

Will be provided by HDNED Annual Progress Report MoEST (EMIS)

8a/ Classrooms built or rehabilitated under PIEQM (core IDA) (number) (cumulative)

0 200 1,000 2,000 3,000 Annual Progress Report MoEST (EMIS)

8b/ Total number of classrooms needed (core IDA)

Will be provided by HDNED

9. Children receiving transfer (core Africa) (number) (cumulative)

0 30,000 210,000 215,000 315,000 Biannual Progress Report MoEST (Primary), MoLGRD, DEMS

10. Children receiving grants still in school (percentage)

0 90% 92% 92% 94% Annual Progress Report MoEST (Primary),

DEMS

11. Textbooks purchased and distributed (number)

0 2,400,000 4,800,000 7,200,000 9,800,000 Annual Progress Report MoEST (EMAS)

46

(cumulative) (core Africa) 12. Student/textbook ratio English Math St.3 St.7

2.6:1/ 2:1 1.7:1/ 1.5:1

2.6:1/ 2:1 1.7:1/ 1.5:1

2.6:1/ 2:1 1.7:1/ 1.5:1

1.5:1/ 1.5:1 1.5:1/ 1:1

1.5:1/ 1.5:1 1.5:1/ 1:1

Annual EMIS MoEST (Planning)

13. Decline in shortfall of qualified teachers at primary level (%)


13a/ Additional teachers qualified due to PIEQM (cumulative)

0 4,000 8,000 12,000 12,000 Annual Progress Report MoEST (DTED)

13b/ Total shortfall of qualified teachers


14. Assessment of teacher management system complete (yes/no)

No No Yes Yes Yes Once Report MoEST (SWAp)

15. Satisfactory implementation of teacher management action plan for recruitment, education, deployment, remuneration, supervision, and promotion of teachers (yes/no)37

No No No Yes Yes Once Report MoEST (SWAp)

16. Human resource management information system in place (yes/no)

No No No Yes Yes Annual Progress Report MoEST(HRMD)

17. Primary schools receiving school grants (%)

0 30% 70% 100% 100% Biannual Progress Report MoEST (DEM,

Primary), MoLGRD

18. Primary schools with strategic and annual work plans and budgets in place (%)

0 30% 70% 100% 100% Annual Progress Report MoEST (DEM,

Primary), MoLGRD

19. Reliable annual abstract disseminated by March (yes/no)

No No Yes Yes Yes Annual EMIS MoEST (EMAS)

20. Learning assessment system in place (score) (core IDA)

No, 0 Malawi does not have an assessment system in place38

37 Once strategy is developed than criteria for satisfactory engagement will be defined 38 USAID and UNICEF are currently jointly working with the MoEST to support the development and implementation of a national early grade reading and math assessment system.

47

21. Managers trained in strategic planning, budgeting, and reporting (number) (cumulative)

0 20 50 60 100 Annual Progress Report MoEST (Planning)

48

Annex 4: Detailed Project Description

144. In 1994, Malawi took its first steps towards ensuring Education For All by introducing a set of key education reforms, most importantly through the introduction of fee-free primary education (FPE). In addition to FPE, the 1994 reforms included (i) elimination of the requirements for school uniforms, (ii) school feeding programs, and (iii) use of vernacular language as the medium of instruction in standards 1–4. 145. These reforms led to a 67 percent increase in enrolment from the previous year. However, despite improvements in access and equity as a result of FPE, a number of key challenges remain, including continued and persistent inequity in access to basic education, low learning achievement, weak central management, and low internal efficiency.

146. Malawi is expected to make dramatic progress towards achieving quality education for all thanks to the following work conducted thus far:

Government has committed itself to a reform agenda largely based on the findings of the CSR and through high-level dialogue. Reforms include (i) increasing accountability through providing grants to schools for the implementation of school improvement plans; (ii) hiring teacher assistants in rural schools to help address the high PTR; (iii) reducing the barriers of entry for teachers based in the rural area; (iv) promotion of double-shifting39 and multi-grade teaching; and (iv) polices to decrease repetition.

Long-term (NESP), medium-term (ESIP) and immediate PoW plans are available, articulating the government’s response to the reform agenda.

All DPs commitments to support the NESP through a SWAp (so that all future

activities should be outlined within the above plans and ideally on budget) are evidenced in the January 14, 2010 signing of the MOU by all education partners.

Four DPs have gone a further step in coordination by committing to a thematic sector

budget strategy (focusing on basic education) through a JFA (and at least one additional DP, ADB, has expressed its intent to join the mechanism in 2013).

As a result of the above efforts and an application for EFA FTI CF, the total financial

envelope is much greater and constitutes a proportionate response to the scale of issues faced in Malawi.

147. PIEQM is comprised of three main components: (i) improving access to and equity of education through a mix of demand- and supply-side interventions; (ii) enhancing the teaching and learning environment by providing the necessary learning materials and increasing the corps of teachers through open and distance learning; and (iii) improving institutional and management

39 In 2008/9 Republic of Malawi has approved double shifting and provided allowances for teachers to double shift.

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capacity through supporting reform in teacher management and devolving school planning and development to the local level, while improving capacity at all levels of government. Development Objective: To increase access and equity and enhance quality of the teaching and learning environment in basic education Component 1: Improve Access and Equity 148. The objective of this component is to promote the NESP goal of universal primary completion through a mix of demand- and supply-side interventions. In Malawi there are between 570,000 and 720,000 school-age children who are not enrolled in primary school (standards 1–8). Access to standard 1 in primary education is almost universal, but the dropout rate is still very high, leading to only a 35 percent primary completion rate.

NESP 2008-2018 Strategies:

Accelerate classroom construction through the provision of the community grants.

Promote gender equity, including support promotion and retention of girls in school.

ESIP 2009-2013 Main Programs and Activities:

Accelerate construction of classrooms, teachers’ house, girls’ hostels, and new TTCs.

Rehabilitate and upgrade infrastructure in older education institutions.

Improve retention of girls in standards 6-8 and transition of girls into secondary education.

**NESP strategies come from ESIP p. 49-70 and ESIP main programs and activities come from ESIP p. 26.

Subcomponent 1.1: Construct and Upgrade Education Facilities 149. Context: Malawi has a poor learning infrastructure characterized by a very high pupil to classroom ratio (100:1) combined with an inadequate number of schools that are unevenly distributed. Furthermore, sixteen percent of pupils are enrolled in a school that does not provide all eight grades of the primary cycle. These factors contribute to high rates of dropout, grade repetition, and associated high internal inefficiency factors in the education system. It is estimated that 26,000 additional classrooms are required in the primary sector alone to meet NESP targets of a pupil to classroom ratio of 60:1.

150. Strategic Intervention: This subcomponent will finance (i) updating the 2001 school mapping exercise; and (ii) construction, rehabilitation and upgrading of a wide range of education facilities for pupils and teachers, including Teacher Training Colleges, particularly in areas where inadequate physical infrastructure hinders school attendance by marginalized children. 40 All construction activities will be implemented by the MoEST’s Education Infrastructure Management Unit (EIMU).

40 From the ongoing WB Education Sector Support Project (ESSUP) selected TTCs and secondary schools have already been identified for construction/rehabilitation works that could be executed during the first years of implementation.

50

151. School Mapping: The school mapping baseline study was conducted in 2001. Since then new schools have been built and others extended. PIEQM will finance a school mapping exercise that will use Geographical Information System (GIS) and Global Positioning System (GPS) methods to record and position education infrastructure (i.e., classrooms, teachers’ houses, administration buildings) on a map. In addition to the focus of the original school mapping exercise, which was to identify areas for building additional classrooms, this new exercise will also focus on identifying areas where inadequate physical infrastructure hinders school attendance by marginalized children. 152. Classroom/School Construction: The ESIP that indicates approximately 2,000 classrooms should be built per year over the 2010-2013 period, yet a recent assessment suggests that capacity is estimated at approximately 700-1,000 per year. Therefore, PIEQM is expected to finance 3,000 classrooms over the 4-year lifespan of PIEQM. Schools for rehabilitation/construction will be prioritized based on distance to school, classroom: student ratio, and quality of current infrastructure. The technical specifications for the construction of classroom constructions follow international standards. In addition, the existing school and classroom designs have evolved over a number of years to promote a positive learning environment and now include features such as reading corners, painted tiles, children’s chalk boards and hooks to display work. Classroom space use will be maximized to accommodate all grades, inclusive of double shifting or multi-grade schooling, where appropriate. The design of school facilities and the construction process also present opportunities for value to be added, and the EIMU has developed and incorporated many of these approaches as standard in its work. For example, appropriate provision of water and sanitation facilities is known to be important for the retention of girls, and selection of appropriate construction materials and construction techniques allows for a greater percentage of construction costs to be retained locally. Other innovations include specifically incorporating HIV/AIDS awareness programs, basic health and safety provision and artisan training into contracts. 153. Maintenance Strategy: SMC are responsible for basic maintenance at the school level. They are expected to cover the cost of minor repairs through school grants. DEMs are responsible maintenance of all major works (i.e., replacement of roofs), while the EIMU is the unit responsibility for major emergencies, as well as overseeing the quality of all maintenance activities. During the first year of PIEQM implementation, the maintenance strategy will be reviewed. 154. Implementation Arrangements: The EIMU, housed in the Ministry of Education, will be responsible for implementation of this component. Previous construction implementation units managed by DfID and AfDB41 will now be managed by the EIMU, with DfID and AfDB covering the recurrent costs of core staff EIMU for three years (from September 2009). The EIMU is a response to prior arrangements, where implementation was through numerous Project Implementation Units (PIUs). This approach was reconsidered in the context of a desire for MoEST and donors to work more closely together, the Paris Declaration on Aid Effectiveness,

41 DfID has undertaken the majority of school construction works including (classrooms and sanitation facilities) in the primary education sector for the MoEST since 2003 with a capacity to build up to 1,000 classrooms per year. AfDB has undertaking the majority of works for the secondary schools.

51

the ongoing development of the SWAp, and a need to promote better collaboration. This has widened the range of approaches available for the Government of Malawi and donors to support required improvements in educational infrastructure. The main activities to be supported by the EIMU are predominantly in the primary sector and focus on (i) the continuation of well-tested conventional approaches to construction, which were successfully used by previous PIUs; and (ii) increased emphasis on decentralised and community-based approaches to construction, water and sanitation, and maintenance.

Subcomponent: 1.2: Provide Direct Support to Disadvantaged Children 155. Context: Malawi has been fortunate to benefit from several high-profile and rigorously evaluated pilot studies of cash and in-kind transfer programs,42 as well as an ongoing MoEST program, that have found such transfers to be effective in raising school enrolment and attendance. The results suggest that although primary schools are tuition free, economic barriers begin to play an increasingly important role in student completion for secondary. In addition, pilot studies that test various threshold amounts and conditionalities for cash transfers suggest that for young women in particular, relatively small cash transfer programs decrease early marriage and early pregnancy by 40 percent and 30 percent, respectively43 , in addition to decreasing the likelihood of contracting STDs. Figure 12: Probalistic Schooling Profile

Source: Calculation from MICS 2006 data, CSR 2009

42 Ongoing and recently completed cash and in-transfer programs have been piloted in Malawi by Concern/DfID, Oxfam, UNICEF, USAID, World Bank, WFP, as well as from the following programs administered by the MoEST: (1) Scholarships for Orphans and Vulnerable Children funded by the National AIDS Council and administered by District Authorities, (2) the National Scholarship Program, and (3) the Orphans and Vulnerable Children program. 43 According to the 2004 Integrated Household Survey (IHS) for girls, pregnancy/marriage accounts for 24 percent of dropouts in standard 5, reaching 63 percent in Standard 8.

72%

11%

15%21%

25%

37%

48%

60%

80%

96%93%

88%

0%

20%

40%

60%

80%

100%

S1 S2 S3 S4 S5 S6 S7 S8 F1 F2 F3 F4

52

Figure 13: Access Rates to the Different Grades according to Wealth Index

Sources: Calculation from MICS 2006, CSR 2009

156. Strategic Intervention: To increase participation in basic education by marginalized students PIEQM will finance (i) secondary school bursary packages (i.e., tuition, textbooks, exam fees) and stipends; 44 (ii) development and implementation of communication strategy to inform parents and communities of the bursary packages and in-kind transfers; and (iii) a rigorous evaluation to identify incentive packages that are cost-effective and lead to improvement in school participation and outcomes. 157. Secondary School Package: In secondary school, bursary packages will be provided for approximately 1000 schools with an average of 15 students per school per year. As in primary school, recipients will be chosen in the first year of lower secondary school (Form 1) and continue to receive the package throughout secondary school. For secondary applicants the PSCLE scores will also be taken into consideration. The scholarship size amount has been adopted following existing Bank and USAID standards for interventions in Malawi. Stipends for needy students of approximately US$5 per month will also be piloted and rigorously evaluated for scale-up. The stipends are to be used to cover basic education costs such as costs of transportation to school, uniforms, toiletries, and learning material for secondary school student 158. Evaluation: PIEQM will finance rigorously-designed impact evaluations that test programmatic alternatives to provide financial support to disadvantaged. The evaluations will identify: (i) the most effective package for maximal coverage and impact (school bursaries only versus school bursaries and in-kind/cash transfer) and (ii) modalities for the identification of the students to ensure equitable and optimal coverage (proxy-means test versus community identification). 44 The World Bank Zomba Cash Transfer Program (ZCTP) provided, using a randomized design, various amounts of money (USD5 to USD15 per month) as an incentive for young girls to attend/stay in school. They found that increasing beyond USD5 did not improve the schooling outcomes.

2%5%8%9%

94%

23%

31%39%

53%59%

67%

98%

0%

20%

40%

60%

80%

100%

Access toprimary

Primarycompletion

Acces to low ersecondary

completion oflow er

secondary

acces rates toupper

secondary

completion ofupper

secondary

1st quintile

2nd quintile

3rd quintile

4th quintile

5th quintile

53

Table 5: Package for Disadvantaged Youth

159. Implementation Arrangements:

Secondary School Implementation Arrangements. The secondary bursary program will build upon and scale up the existing MoEST bursary program. Each school has a school bursary committee composed of the head teacher, deputy head teacher, form teachers, and community members. In liaison with the district social welfare officer, the school bursary committee is responsible for identifying and certifying needy students. After candidates are identified, the school bursary committee will complete application forms which will be forwarded for consideration to the division education manager through the DEM. The division education manager in coordination with the division desk officer, division auditor, and DEM, will be responsible for monitoring the program. Secondary tuition fees will be provided directly to these schools as a per capita grant for each student. The stipends will be paid directly to the child at school.

Component II: Improve Teaching and Learning Environment 160. The primary objective of this component is to improve the quality of the teaching and learning environment by financing the (i) provision of pedagogic aides for pupils and teachers; and (ii) the implementation of an ODL program, which provides a high-impact, time-bound solution to address the PqTR of 91.5:1.


Provision of teaching and learning materials to primary schools.

Complete the PCAR.

Expansion of teacher student intake through ODL (4,000 students).


Increase provision of teaching and learning materials.

Recruit additional teachers and/or teaching assistants each year.

Increase the output of trained teachers.

Sub-component 2.1: Provide Textbook and Learning Materials

Secondary School Bursary Package Secondary Bursary Package = MK 10,300 ($70 equivalent) Textbook Fee Tuition Fee General Development Fund Development Fund ID card MK 500 MSCE Exam fee MK 800

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161. Context: The MoEST, in collaboration with the Malawi Institute of Education (MIE), embarked on the development of a national primary school curriculum in 2001. The reform was necessitated to enable the primary curriculum to address political changes and various emerging social issues such as population expansion, environmental degradation, and HIV/AIDS. The conceptual framework upon which the curriculum is based is articulated in Malawi’s national primary curriculum & assessment framework. The emphasis is on developing the knowledge base, skills and values of all pupils so that they can more effectively participate in the social, economic and political development of the country. 162. The resulting PCAR was a country-led initiative that successfully brought together government (led by MoEST), higher learning institutions (led by MIE), DPs, and other stakeholders to implement a curriculum that consists of (i) ensuring consistency within and across subjects with a focus on the improvement of assessment and examination systems; (ii) orientation of all primary teachers to the new curriculum; and (iii) provision and replacement of textbooks and materials for each grade level. The implementation of PCAR began with standard 1 in January 2007 followed by standards 2, 5 & 6 in 2008, standards 3 & 7 2009 and standards 4 & 8 in 2010 (scheduled). 163. Strategic Intervention: This subcomponent will support the (i) printing and distribution of textbooks and learning materials; 45 and (iii) provision of pedagogic aids including textbooks, libraries, computers, and audio/visual aids for basic education. 164. The allocation of textbooks in primary schools is set by the guidelines on Teaching and Learning Materials, which outlines the MoEST’s intention to allocate one textbook per learner for each subject taught. Textbooks are distributed free of charge to all public schools. The MoEST has designed a comprehensive strategy to replace school textbooks every 3 years from standards 1-8. The replacement policy was implemented to avoid stagnation of the content and loss of relevance. It is also a means of ensuring teacher and educator involvement in building and sustaining a vibrant living curriculum.

165. Implementation Arrangements: The process of delivering textbooks to schools is chain-like in structure. Procurement requirements are first calculated and compiled by the MoEST headquarters. A distribution plan is formulated for each school. Procurement of textbooks and learning materials will be conducted following standard procurement procedures. Currently the MoEST, with support from IDA, is undertaking a supply chain management system assessment to identify bottlenecks and propose recommendations to enhance the distribution system across the country. Subcomponent 2.2: Train Teachers through Open Distance Learning 166. Context: Malawi has for many years suffered a chronic shortage of teachers, resulting in an extremely high pupil: teacher ratio (PTR) which currently stands at 80:1, one of the highest in the world. In 1994, 22,000 temporary teachers were recruited to address the 40 percent

45 USAID is currently assisting MoEST and MIE for Standard 1-4 textbooks revision; the revision should be complete before the end of this Operation.

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expansion in primary enrolment that was a result of the introduction of FPE. In 1997 an abbreviated training program, The Malawi Integrated In-Service Teacher Education Programme (MITEP), was implemented to accelerate teacher training to meet the needs of 18,000 (out of the 22,000) that were unqualified. 46 Through 1997-2004, MITEP certified most of the untrained teachers, but this resulted in an on-going persistent shortage of teachers as during that period there was limited recruitment of additional teachers.

167. Due to concern regarding the quality of the MITEP emergency training program, the MoEST implemented the IPTE program in 2006, an improved mode of training teachers with a longer period of residential-based training at the TTC. To increase the number of teachers, the capacity of existing colleges has been expanded as well as a new college constructed under the World Banks ESSUP and a number of smaller colleges started by non-government organizations. Nevertheless, despite these increases in the numbers of teachers receiving training, the PTR remains at 80:1. Furthermore, this figure masks differences between rural and urban areas, where PTRs can range from 150:1 to 35:1, respectively. 168. Strategic Intervention: To provide an immediate solution to this critical issue of teacher shortages in the education sector, the MoEST has developed an innovative ODL program providing training for student teachers in the schools where they are needed. The ODL program will (i) reduce high PTR ratios through three yearly intakes of 4,000 student teachers; and (ii) reduce disparities in PTR between urban and rural areas through local recruitment of the ODL student teachers to schools that have an acute teacher shortage. 169. The subcomponent will support implementation of ODL through financing the (i) printing and distribution of ODL material; (ii) supervision of ODL students through procurement of vehicles; (iii) upgrading TDCs and TTC so that ODL can be delivered more effectively through them; and (iv) evaluation of the usefulness of ODL as a tool for increasing the number of teachers and subsequently improving the quality of education provided to underserved populations. 170. ODL Material: ODL materials in the 10 learning areas have been developed. The curriculum for ODL is the same as IPTE in terms of content and learning where the IPTE manuals have been adapted for the ODL students. 171. Supervision of ODL students: The training sessions will take place before deployment and during school holidays. Each student teacher will be attached to a TDC and a TTC. The 315 TDC centres are located at the zonal level and cover 15 to 20 schools per zone. College tutors based in TTCs will provide a short induction course; field supervisors based in TDCs will provide in-service training and supervision of ODL teachers. PIEQM will finance upgrades to TDC and TTCs including relevant materials, computers, and internet access. PIEQM will also finance the purchase of vehicles and motorcycles for the supervision of ODL students by TTC and TDC-based field supervisors.

46 MITEP was a two year programme that included a four month college-based training of the practicing teachers followed by extensive practicum time in schools under the supervision and support of Heads and Primary Education Advisers and finally by examinations at college.

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172. Long-Term ODL programs: Because ODL programs recruit local teachers at slightly lower academic qualifications and use distance education for training, they provide a unique opportunity to identify best practices in (i) identifying avenues to support underserved populations; and (ii) critical areas that can feed into the larger teacher management and education program. PIEQM will therefore finance a rigorous evaluation of the Malawi ODL program. In addition it will support a review of regional (Namibia, South Africa, Zimbabwe) and global distance learning initiatives such as Teacher Education for Sub-Saharan Africa (TESSA), an initiative of the Open University of the UK. From these reviews, PIEQM will derive best practices and lessons learned to transform distance learning programs from time-bound initiatives to a potential avenue for programs that aim to upgrade overall teacher skills and qualifications. 173. Implementation Arrangements: ODL student teachers are recruited from rural underserved communities. Entry qualification for ODL students are slightly lower as they need a pass in the English examination of the Malawi school certificate of education rather than the credit required of those undertaking the more conventional course. After a short induction course, ODL teachers will be recruited into schools and learn on the job. They will work in rural schools with poor teacher pupil ratios. DEMs will oversee the placement of ODL students. Domasi College of Education, a secondary teacher training institution, which has experience in developing ODL courses will organize and supervise the induction of ODL students. DTED in the MoEST will oversee the overall implementation of the ODL program. This includes (i) coordinating the work of the district-based supervisors who will support student learners in the schools to which they are attached and (ii) coordinating the contribution of teacher training colleges to the face-to-face components of the ODL course. Component III: Improve Management Capacity at All Levels 174. The objective of this component is to support key reforms in the education sector that ensure planned interventions translate to improved access, equity and quality. For the past three years, the Government of Malawi has been engaged in capacity building assessments at all levels to identify functions necessary for effective delivery of education. PIEQM will assist in the development of key reforms in teacher management and decentralization, while supporting increased capacity to implement these reforms through building critical and relevant capacity at all levels of government.


Provide grants to enable school-based improvement planning and management.

Improve community participation in school management

Monitor performance to strengthen internal efficiency.

Expand governance and management training for local level, e.g. district education officials, PTA and SMCs.


57

Institutionalize Direct Support to Schools (DSS) (grants paid into schools’ own bank account).

Increase the participation of local communities and SMCs in primary school management.

Strengthen ‘Whole School Development’ (planning, management, regulations, discipline, etc.)

Enhance maintenance and rehabilitation of schools through increased community involvement.

Subcomponent 3.1: Support Teacher Management Reform 175. Context: Teacher absenteeism in Malawi averages 20 percent, and teachers face few consequences for absences or weak performance. Teacher management in Malawi has suffered from the lack of a comprehensive strategy to address recruitment, deployment, remuneration, in-service supervision, and professional development. To date, support from DPs has been mainly in areas of teacher education and development,47 rather than management. Within the MoEST there are more than 5 units that support teacher education, without a clear mandate outlining their respective responsibilities. This has lead to an ineffectual and piecemeal approach. The introduction of ODL and new TTCs48 will quickly increase the number of teachers into the workforce, underscoring the importance of developing a coherent and pragmatic system. 176. In recognition of the need for improved teacher management, the MoEST has embarked on the following reforms: (i) establishments of new posts;49 (ii) introduction of the decentralization plan, where PEAs, who are responsible for the day to day support of teachers, will be employed and managed directly by districts rather than the central ministry; and (iii) introduction of an inspectorates that will be responsible for in-service inspection of teachers, leaving PEAs to focus on advisory services. 177. Through its recently launched teacher development program, USAID will cover the bulk of implementation of national training activities for teacher development and supervision, emphasizing early grade literacy and numeracy skills. The USAID program includes costs associated with teacher education and supervision implementation, implementation of an adapted early grade reading/maths assessment (EGRA and EGMA) and strengthening teacher management systems.

47 To date, Continuous Professional Development (CPD) at the national level has consisted of training of teachers in PCAR that will be complete in 2010. At the local level there have been some CPD initiatives supported by Volunteer Service Overseers (VSO). Ideally, CPD should incorporate responses to national needs (PCAR) and localized needs both across zones and at particular schools. 48 Currently Malawi has five public primary TTCs, 2 small colleges supported by Development Aid People to People (DAPP) and three small faith-based colleges. The World Bank through ESSUP has built 1 TTC (Liwonde) which is expected to be operational by 2010. Three new TTCs are being planned with support by Arab Bank for Economic Development in Africa (BADEA), and a further TTC is planned with DfID support (outside of the pool) which are expected to be operational by 2015. 49 The most recent establishment of P8 posts of Primary School Headships has enhanced the primary teacher career path.

58

178. As USAID is responsible for implementation, this allows PIEQM to strategically support teacher education and management reform at a systemic level to ensure long-term, high-impact support. Since it is critically important to develop a teacher management system that will ensure that teachers are motivated by the career of teaching, that they are deployed appropriately, and that they both attend classes and teach well.

179. Strategic Intervention: To address system-wide constraints in teacher management and development, this subcomponent will finance (i) implementation of program of activities to support the implementation of continuous professional development and teacher management; 50 (ii) the implementation of activities proposed in the action plan; and (iii) development of an integrated Human Resources Management Information System (HRMIS).

180. The design and implementation of an effective and relevant HRMIS that is accessible both from the central and district levels is critical to the success and sustainability of improvements in teacher management. The HRMIS will support the link between career progression and teacher performance and professional development, provide updated information on the number of teachers needed in order to meet national PTR goals, and support the appropriate deployment of teachers both between and within schools. This operation will therefore support the following areas required for the development of an HRMIS: (i) software design to manage the system; (ii) computer hardware (computers, printers, scanners, servers); (iii) capacity building within the Ministry through training; and (iv) training in the utilization of the system at the central and district levels. 181. Implementation Arrangement: The needs assessment will be overseen by SWAp Secretariat in close collaboration with DTED and Education Management Advisory Services. Subcomponent 3.2: Support School Improvement Planning 182. Context: In 2005, MoEST initiated mechanisms for channelling funds directly to schools as part of the implementation of the Bank’s ESSUP. The focus for DSS programme was on school-level procurement of basic teaching and learning materials (TLM). In 2008/9, the TLM component funded by the Bank was supplemented by additional funding from DfID to allow schools to allocate resources to minor maintenance needs identified through a simplified process of school improvement planning. Evaluations of these programmes showed that the DSS programme has been successful in generating increased accountability, community participation, and local ownership. However, shortcomings cited include high transaction costs, insufficient funding to address school challenges, inefficient funding modalities, weak capacity of SMCs to effectively implement programmes, and schools with little decision-making power over resource allocation. 183. To identify potential options to address these issues, MoEST, through support from DfID, piloted an enhanced model of DSS. The pilot built on the learning from the nationwide programmes, while allowing schools more flexibility and ownership of the funding modality and ensuring coherence between national and school-level priorities through budget conditionality.

50 At present promotions are based on interviews rather than assessment of performance.

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Enhanced DSS grants were conditional on the DEM’s approval of a school improvement plan and budget that are in line with a focus on improving the quality of teaching and learning in standards 1 to 8. Evidence to date suggests that the enhanced DSS significantly shifted in-school deployment reducing pupil to teacher ratios in standards 1 to 3 (through financing the engagement of auxiliary teachers) and strengthened planning, budgeting, management and accountability at the school/community level. 184. Strategic Intervention: PIEQM will (i) finance training to all public school personnel and SMCs/PTAs in planning, financial management and accountability to produce annual school improvement plans and budget; and (ii) school grants conditional on an approved school improvement plans and attendant budget by the DEM, scaled-up to all public primary schools.

185. Table 6: Risks Associated with Implementing the SIP and their Management

RISKS MITIGATING FACTORS

Weak capacity of districts to implement programme effectively

Budget allocation for district offices to support implementation & monitoring

Learning to date from previous DSS programmes and pilots

Incremental introduction of nationwide programme

Fungibility & fiduciary risk within the system

Ensure district audits of all primary schools at least once in three years

Institutionalise district quality auditing reporting within MoEST reporting mechanisms

Fiduciary risk associated with corrupt practices at community, school and district levels

All schools to open bank accounts to limit district-level fiduciary risk

Effective expenditure tracking systems tested during pilot

Schools and communities trained in basic financial issues and accountability

All schools to publicly display financial information on monthly basis

Delays in grant disbursement to schools and districts

Delivery of grants to be part of the yearly joint annual review with funders

Commercial banks do not respond to need to expand provision in rural areas

High level advocacy to support expansion in commercial banking provision

Bank charges consume large proportion of school grants

Seek agreement with Bank CEOs

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Communities turn away from supporting schools due to “external” funding support

Capacity building programmes to ensure community participation in “whole-school development”

Public information and advocacy campaigns to explain the school improvement planning programme and the role of the community within the programme

186. Implementation Arrangements: In the first year of the program, PIEQM will support the existing nationwide school grants program. In subsequent years, PIEQM will support SIPs through schools grants that seek to further empower schools and communities to implement their own school improvement activities that are in line with national strategy, while broadening the focus of DSS from teaching and learning materials and minor maintenance.

187. The enhanced program will be introduced nationwide incrementally over a 4-year period beginning in the 2010/11 financial year. By 2013, all schools offering basic education will receive enhanced school grants. School communities will be allowed to recruit sufficiently qualified auxiliary teachers from the local community, pay hardship allowances, and provide incentives to existing qualified teachers to double-shift

188. Training will take place three times a year. The first training will focus on SIP development and implementation. The goal is to have each school be able to develop a SIP and basic budget for SIP activities. School Improvement Plans, in addition to providing details on the use of school grants for basic inputs, are also expected to include plans for (i) encouraging pupils’ attendance, especially that of girls and other vulnerable groups; (ii) monitoring attendance and punctuality of teachers; and (iii) monitoring quality of learning at schools. The second training will focus on SIP monitoring and basic grant management, specifically on how to develop a budget and conduct basic financial management (record-keeping). The goal is to have each school be able to fill out a school grant application, implement the school grant (e.g., monitoring of SIP activities) and conduct basic financial management. The last training will focus on reviewing the SIP development and monitoring process and basic financial management. The goal is to review key training messages to reinforce capacity that has already been built and to have schools review SIPs, see what has been accomplished and revise them accordingly for the next school year.

189. At the national level the Ministry of Finance and the NGLFC provide financial management and oversight of funds at the local level. At the district level, the DEM will prepare DEPs and be responsible for oversight of this subcomponent using PEAS and internal auditors. Funding for the DEP will be sent directly from the Ministry of Finance to the LGFC. The LGFC is the legal entity responsible for financing at the local level. The LGFC includes the district commissioner as chair, the director of finance and planning, as well the sector representatives The SMC will be responsible, with the head teacher, for submitting school improvement plans to district assemblies for inclusion in the DEPs, as well as overseeing the management of these resources.

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Subcomponent 3.3: Strengthen Planning and Budgetary Management 190. Context: Education planning at the central and district level and financial management will be strengthened in the context of the Malawi decentralization policy (1998), which assigns responsibility for the delivery of basic education to district assemblies, while the MoEST is to provide an oversight function to ensure equitable access to quality education throughout Malawi. To date relatively little has been decentralized due to the lack of a comprehensive capacity program at the district level. This subcomponent will complement efforts by JICA, USAID, and the Bank MASAF project to build financial and planning capacity at the district level.51 191. Strategic Intervention: This subcomponent will support (i) upgrading certification and implement divisional refresher workshops for staff in financial management and procurement at all levels, in accordance with action plans developed under the financial management and procurement assessments; (ii) monitoring and evaluation of the SWAp, including baseline data collection for key indicators as identified in the MGDS and NESP; training in EMIS interpretation at the central and district levels; and equipment needed for decentralization of EMIS to the remaining 24 districts; (iii) improved coordination and subsequent future collaboration and potential support for ministries supporting basic education; 52 (iv) and identification of the improvement of education planning capacity building at the central and district levels based on the strategies prepared by JICA and USAID that will be finalized in mid-2010.

192. Within the context of the decentralization process, this subcomponent will finance activities to strengthen the capacity of the district and central levels to provide planning, financial, and technical oversight based on a Capacity Development Strategy for education which was developed using FTI guidelines in this area. 53 Capacity building activities will include (i) upgrading certification and implementing divisional refresher workshops for staff in financial management and procurement at all levels; (ii) monitoring and evaluation of the SWAp; and (iii) improving education planning capacity building at the central and district levels based on the strategies prepared by JICA and USAID.

193. Implementation Arrangements: Secretariat for SWAp and a SWAp management group, chaired by the permanent secretary have been constituted. Members of the secretariat include the institutional and development, financial management, procurement, and monitoring and evaluation advisors. The secretariat oversees the development and later implementation of the capacity building strategy. The training in fiduciary responsibilities will be overseen by the

51 MASAF is supporting the roll-out of an Integrated Financial Management and Information System (IFMIS), a computerized government accounting system allowing accountability to strengthen public management at all levels of government. JICA and USAID are supporting capacity development at the district and sub-district levels in the areas of planning, budgeting, monitoring and evaluation along with information management. 52 For example, Early Childhood Development is overseen by the Ministry of Children, Women and Development (MoCWD), yet there are several Ministries involved in implementation, including the MoEST, which underscores the importance in effective planning and coordination for successful implementation 53 Guidelines for Capacity Development in the Education Sector within the Education For All - Fast Track Initiative Framework, February 2008

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procurement and financial management sub-committee chaired by the director of finance in the Ministry of Education and supported by the financial management advisor.

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Annex 5: Project Costs

194. Table 7 presents the total financing needed for the NESP. Table 8 presents financing needed for basic education. Estimates of the costing for the implementation of PIEQM and pooled partner resources for PIEQM are represented in Table 9 and 10, respectively. 195. Over the last 6 years the Government of Malawi has significantly increased its resources to the education sector. The education budget in 2007/8 represented 19.4 percent of total government recurrent expenditures, an increase over the 2001/02 figure of 16 percent. As a result of key reforms in the education sector noted in this document, the commitment of the government to the sector, and the development of pragmatic sector plans, the DPs have also increased their financial commitment to the education sector. The request to the FTI CF will complement these efforts. The FTI CF request is based not only on the estimated financing gap but on (i) prioritization of critical interventions outlined in the sector plans that will help attain the EFA goals; (ii) detailed analysis of the capacity to execute these interventions; and (ii) identification of interventions that are ready to be implemented as demonstrated by clear action plans, costing stratagems, and well-defined institutional and implementation arrangements.

196. The IDA contribution to PIEQM is estimated at US$50 million over 4 years. The Government of Malawi and DPs have had ongoing high-level discussions to identify avenues to ensure the sustainability of the interventions and to avoid displacement of contributions to non-salary recurrent expenditures. Subsequently the Government of Malawi in the JFA commits to “increasing or at least maintaining the real level of its own budget provision for Education, even if donor contributions or other sources of funds increase.” (Joint Financing Agreement, Para: 8.01). The level of funding for the education sector from domestic revenues is expected to increase from year to year, at a rate equal to, or faster than, the rate of inflation. Government of Malawi currently allocates 19% of discretionary expenditure to education (including that part of DP funding that is already ‘on-budget’). In high level dialogue with the DPs, the government have further committed to taking steps to reach the following goals (i) a minimum of 20 percent of total budget to be spent on education and (2) at least 64 percent of recurrent public expenditure on education to be devoted to primary education.

Table 7: Costing of NESP (2010-2014) US$ millions54

2010/11 2011/12 2012/13 2013/14

Recurrent Expenditure 240 258 277 285 Capital 100 110 112 116 Total Cost 340 368 389 401 Government of Malawi Contribution 161 167 175 181 Pooling DPs (+ FTI)55 51 67 80 51

54 Costing is slightly adjusted from the LEG Appraisal Report submitted in October 2009 due to updating and verification of costs over the last few months. 55 Pooling DP contribution includes CF FTI support from 2010-2013, leading to a slight drop in pooled support in 2013/14. The decrease in commitment from 2010/11-2011/12 from the non-pooled partners is a result of the completion in 2010/ 2011 of the funding cycle for several non-pooled partners. These partners anticipate renewing their commitment but cannot yet confirm allocations.

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Non-Pooled Partners 50 34 30 27

Financing Gap 78 100 104 142 Table 8: Costing of Basic Education (2010-2014) US$ millions

2010/11 2011/12 2012/13 2013/14

Recurrent Expenditure 171 195 209 211

Capital 42 49 50 35

Total Cost 213 244 259 246 Government of Malawi Contribution 110 119 131 135

Pooling DPs (+ FTI) 51 67 80 51

Non-Pooled Partners 31 20 18 16

Financing Gap 21 38 30 44

Table 9: PIEQM Cost by Subcomponent US$ millions Subcomponent Local Foreign Total

1.1 Construct and Upgrade Education Facilities 53 18 70

1.1 Provide Direct Support to Disadvantaged Children 15 11 26

2.1 Provide Textbook and Learning Materials 15 33 48

2.2 Train Teachers through Open Distance Learning 1 10 11

3.1 Support Teacher Management Reform 1 8 9

3.2 Support School Improvement Planning 63 6 69

3.3 Strengthen Planning and Budgetary Management 1 11 12

Sub-Total 149 96 245

Price /Physical Contingencies 11 Total 256

Table 10: Pooled Partner Funding for Basic Education (2010-2015)** US$ millions Financiers Total (US$ million) IDA 50

FTI 90

UK (DfID) 90

GDC 25

UNICEF 1

Total Pooled Partner Funding 256**IDA will close in June 30, 2015. In the 2014/15 fiscal year IDA will release US$5 million in 2014/2015. Therefore the costing for 2010-2014 (Tables 7& 8) account for only US$251 million out of the US$256 million that will be disbursed.

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Annex 6: Implementation Arrangements

197. The Malawi operation will be implemented using a pooled funding mechanism. Over the four-year implementation period, the MoEST will assume overall responsibility for coordination and implementation of PIEQM.

198. At the central level, the ministry has established an SWG that will be chaired by the Secretary for Education, Science & Technology (SEST). Participation in the SWG includes senior representatives from government, DPs, NGOs and the private sector. The SWG will be responsible for (i) providing overall strategic guidance for the SWAp implementation; (ii) approving program of programs of work (PoW) and ensuring alignment of PoWs to budget allocations; (iii) monitoring that agreed performance targets and timelines for activities under the different components are met; (iv) ensuring adherence to agreed-upon audit and procurement guidelines; and (v) coordination of a capacity building activities. 199. The Department of Planning will be responsible for oversight of the SWAp Secretariat, allowing for strengthened working relationships between line departments. Technical Assistance will be provided to the MoEST through line departments and through four advisors housed in the SWAp Secretariat. The secretariat includes advisors in the following areas: institutional development, procurement, planning and monitoring, and financial management. 200. TWGs are the technical arms of the SWG, and report to the chair of the SWG. The TWGs are derived directly from the structure of the National Education Sector Plan. The TWG is to assist the MoEST in developing annual work plans and in monitoring their implementation. Through regular meetings the TWG will facilitate the development of efficient information sharing mechanisms of all institutions and organizations and programs within the sub-sector, and will monitor progress and evaluate the sub-sector PoW semi-annually. The ultimate goal for all the TWG is to translate the sector plan into a one-year program of action and to review and monitor progress towards annual work plans.

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201. Figure 14: Sector Working Groups (Main Technical Working Groups)

202. At the district level, the DEM prepares district education plans (DEP) and is responsible for the posting of teachers, monitoring in-service teacher education programs, and overseeing the day-to-day operation of education institutions including (i) integrating governmental and non-governmental organizations interventions focused on education quality improvement into the education plans as appropriate; (ii) working closely with planning and budgeting for school grants as per the school grant guidelines; (iii) documenting and disseminating good practices in education quality improvement; and (iv) monitoring the progress of PIEQM at cluster and school levels. The DEM office will annually organize a three-day workshop for DEP updating. This annual DEP workshop will conduct a survey of recent educational achievements, update the DEP based on progress made in implementing the previous plan, and disseminate the latest education-related data developments. 203. At the community level, SMCs and PTAs will prepare SIPs and provide them to DEMs for inclusion in the DEPs. The SMC is composed of community members served by the primary school. Its overall role is to enable each primary school to develop and implement a budgeted school improvement plan that will serve as a road map to activities that improve student achievement and hold schools accountable for student learning.

Sector Working Group

Chair:

Secretary of Education

TWG – 1

Basic Education

TWG -5

Financial Management

and Procurement

TWG – 6

Teacher Education

TWG-4

Infrastructure

TWG-3

Tertiary Education

TWG – 2

Secondary Education

SWAp Secretariat

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Figure 15: Organization of MoEST and Related Institutions

204. With regards to implementation PIEQM we will work closely with pooled and non-pooled partners engaged in the following activities:

205. PIEQM, through its various components, will enhance the capacity of these key institutions to support the implementation of intervention focused on improving access and equity, quality, and efficiency. Below are descriptions of these responsibilities and the main agencies involved in these activities:

Minster

Deputy Ministers

Directorate of Basic

Education

Directorate of Secondary

& Higher Education

Directorate of Education Methods & Advisory Services

Directorate of Teacher

Education and Development

Directorate of Education

Planning

Directorate of Vocational

Training

Education Division

Offices (6 Division)

District Education Managers

Zones – Teacher

Development Centers

Institutes of Higher

Education

Secondary Schools

AfDB Secondary Teacher Education, Higher education , CDSS School Construction

CIDA Teacher Training for Basic Education (IPTE), Procurement Advisor at Central Level

DfID SWAp Technical Assistance, EIMU Technical Assistance, Construction of Teacher Training College, Framework for Accountability and Governance

GTZ Teacher Training for Basic Education (IPTE/CPD), School Health and Nutrition, Complementary Basic Education

JICA District Capacity Building, School Construction (CDSSs) UNICEF ECD, Child Friendly Schools, Rehabilitation/Construction of school

blocks, In-service Teacher Training

USAID Development of a Capacity Developing Strategy, Curriculum Development, Decentralization, School improvement Plans/School Grants , Teacher Training through Audio (Tikwere), Continuous Professional Development

WFP School Meals, Take Home Rations

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206. School Grants. The incremental introduction of the SIPs and grants will build from the existing nationwide DSS (originally funded by WB, now DfID). This existing method uses bank accounts at the district office. Using this approach, procurements are usually done by district office staff in accordance with school improvement plans prepared by schools. The risks of this approach are limited to potential misuse of funds at the district level. However, this approach has relatively high transaction costs and limits ownership by the school, so may not be as effective as the next approach.

207. The next stage in the incremental approach may use bank accounts at the school level. Each payment from a school bank account typically requires the signatures of both the head teacher and chair of the SMC. Due to current weak development in Malawi’s banking sector, bank accounts are generally only available in the town where the district office is located. This means that transaction costs may still be somewhat high as many payments require a visit to the town. However, in Enhanced DSS pilots this has given opportunity to maintain good control by requiring for each payment an authorisation from the DEM office. The risk of this approach is misuse of funds at the school level. However, such misuse is mitigated by (i) district authorisation of payments, (ii) using of cheque signatures from both school and SMC, (iii) publication of monies received and expenditures on school notice boards, (iv) oversight by PEA, and (v) oversight by district level internal auditors. 208. The final stage in the refined approach would use school bank accounts located closer to the school. This approach would have lower transaction costs. This stage could also forgo the requirement for each payment to have an authorisation from the DEM office, presuming that the other three controls, (ii), (iii) and (iv) above, have grown in strength and effectiveness. 209. The following chart shows the flow of funds, including bank accounts and payment points, for stages both with and without school bank accounts.

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Direct Support to Disadvantaged Children 210. Eligibility Criteria. The eligibility selection criteria for identifying and screening vulnerable children has been adapted from the national guidelines for supporting orphans and vulnerable children (OVC), developed by Ministry of Gender, Children, and Development (Guidelines for Education Support to OVC, June 2008, Sections 7- 9). The assessment of beneficiaries will be at two levels; the individual child and the household where the child is coming from. The following shall be the specific requirements for assessment at each level to determine the eligible beneficiaries. Specific to the child

Child coming from a child-headed household (regardless of sex) Performance of the child in school i.e., the child is doing well or s/he has potential

(this will not be at the entry point) Double or single orphans living with elderly grandparents (Note: a child shall be

called double orphan if the child has lost both parents to death) Child/orphan living with chronically ill parent/guardian Has no able parent/guardian (disability inclusive) Neglected child with special needs (including those with no fixed place of abode)

MG 1 bank account

A Payments on behalf of schools

Payments by schools

Normal monthly funding from

District Assembly bank account

B Funding as required

School bank accounts

Funding flows from bank account to bank account

Key:

DSS payments from bank account to pay suppliers

Alternative routes:

A: Existing route, using District bank account B: Route using school bank accounts

Bank account

DSS funding flows:

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Child living with a very poor parent Child receiving another scholarship

Specific to the family Low household income Lack of potential economic activities for the family. Elderly and frail guardian Chronically ill parents/guardians without reliable means of economic support Child headed household without any assistance Single very poor guardian especially those not in productive economic engagements Disabled parents who cannot fend for themselves Parent is a civil servant. Children of teachers are not eligible for this program.

211. Implementation Steps for Student Transfer Programs (e.g., in-kind transfer and bursary package)

Step 1: Identify, register and select students Step 2: Assess the social and economic situation of identified students (rank and then

choose neediest) Step 3: Provide educational support Step 1: Identify, register and select students Step 4: Provide guidance and counseling to all students receiving assistance Monitor progress of assisted students Reporting

212. Implementation of Student Transfer Programs and School Grants. As described above (paragraph 206) funds for school grants and in-kind transfers will first flow to the districts. Districts will then transfer money to schools. The district councils will account for these funds alongside the other SWAp funds to MoEST. Activities to be funded by the school grants will be outlined in the annual school improvement plans. School improvement plans and budgets are prepared through a process that includes all school and community stakeholders, i.e. teachers, head teacher, learners, SMC, traditional leaders, parents, village development committee members and other community members who have interest in the school. The district desk officer (and zonal PEA) will review the SIP and budget for accuracy. Schools are to list all activities to be funded for the school grants. For schools receiving in-kind transfers they make a list of all the items to be purchased (materials for uniforms, shoes, stationery, etc.). It is expected that all necessary goods will be purchased at one time following the appropriate procurement procedures. Manuals for school grants have already been prepared but will need to be updated in light of the increase in funds and lessons learned from past programs. The two manuals – one for school grants, the other for in-kind transfers – will include details of the institutional and implementation arrangements. The manuals will include details on (i) the allocation formula for funding per school; (ii) requirements for disbursement at school level (i.e. school accounts, training, committees in place, etc); (iii) the frequency of releasing funds; (vii) the list of eligible expenditures; (iv) community, zonal and district monitoring and accountability arrangements; and (vi) the template sent by schools to districts accounting for expenditures. In addition, in-kind transfer manuals will include (i) selection criteria for schools to receive the intervention

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based on poverty and education outcome indicators; (ii) the mechanism for targeting beneficiaries, and (iii) the allocation formula for the number of beneficiaries per school. 213. Secondary school bursaries and stipends will be provided to schools from the Division office. All Secondary Schools must have bank accounts to receive these funds. Once beneficiaries are identified, checks will be sent the other recurrent transactions (ORT) or bursary account. Bursary packages will be paid directly to school for payment of school fees and other identified items (i.e., school exam, textbooks, school id, etc). Students will receive a receipt from the school notifying them of fees paid. Stipends will be paid to the student through the school. Receipt of bursary and stipends by students will be provided by the school to the division office. Manuals for the secondary school bursary program are in existence due to the on-going program and will be updated before effectiveness. The stipends are a new element to the program and will be piloted and rigorously evaluated by this operation for potential scale-up. Manuals for the two transfer programs at the secondary level will include details on (i) requirements at school level (i.e. school accounts, training, committees in place, etc); (ii) community, zonal and district monitoring and accountability arrangements; (iii) the frequency of releasing funds, (iii) the template sent by schools to divisions accounting for expenditures; (iv) the mechanism for targeting beneficiaries that will include the process for identifying students matriculating from primary school and; and (v) the allocation formula for the number of beneficiaries per zone.

214. Infrastructure - The Education Infrastructure Management Unit (EIMU) is a unit in the MoEST reporting to the directorate of planning and integrating the functions of existing PIUs. The EIMU will develop, coordinate and manage the implementation of MoEST’s educational infrastructure programme. Funding and delivery mechanisms will remain flexible in order to enable a wide range of avenues for GoM and donor support. To do so effectively, the EIMU will have a number of duties and responsibilities delegated to it, including most of the procurement requirements, financial management, management of support services, and some aspects of staff recruitment. Oversight and policy direction is provided by a steering committee, while a technical working group will allow discussion and coordination of operational aspects.

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Figure 16: EIMU Organizational Structure

Ministry of Education, Science and Technology

Directorate of Planning

Steering Committee (Basic Education, Secondary

Education, Development Partners, Civil Society)

Educational Infrastructure Management Unit

(amalgamation of functions of existing PIUs)

Development and Management of Implementation of MoEST Workplan

Technical Working Group

EIMU Coordinator reports to Steering

Committee

EIMU Operations Manager supports

Technical Working Group

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Figure 17: EIMU Organogram (Under Discussion)

Unit Coordinator

Operations Manager

Programme Manager Primary

Programme Manager Secondary and Tertiary

Programme Manager Maintenance and

Community

Administration and Finance Manager

Accountant

Accounts Assistant

Administration/Office Assistant (x 2)

Transport Manager

School Water and Sanitation Programme

Officer

Maintenance and Community Programme

Officer

Programme Assistants

Programme Assistants

Quantity Surveyor

Clerk of Works (x 4)

Quantity Surveying Assistant

Quantity Surveyor

Clerk of Works (x 2)

Quantity Surveying Assistant

Architect (supports all programmes)

Procurement Officer (supports all programmes)

Engineer (supports all programmes). Position dependent on workload

Architect (supports all programmes).

Position dependent on

Proposed initial staffing

Potential additional initial staffing

Potential additional future staffing (dependent on workload)

Accounts Assistant

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215. Textbooks and Curriculum Development. Building on lessons learned in PCAR, the relevant and roll out and maintenance of textbooks and learning material will be under the supervision of a secretariat that is comprised of members from Malawi Institute of Education (MIE), Educational Methods Advisory Services (EMAS), and Director of Planning, as outlined below. PIEQM will continue to provide support for the strengthening of these institutions initiated under PCAR.

Table 11: Management Institutions DEPT/ INSTITN

ROLES / FUNCTIONS

PLANNING

Chair the Policy Advisory Committee Coordinate educational development plans Coordinate education management information systems Coordinate budgets & costs / Coordinate provision of primary support in line with NESP

EMAS Provide policy guidance for the conceptualisation & renewal of the curriculum Monitor and evaluate the curriculum and use data to improve and keep on track Ensure quality assurance of materials and curriculum delivery Inspect the curriculum in action in primary schools for quality control coordinate advocacy

BASIC EDUCATION

Coordinate provision of teaching & learning materials & resources Coordinate record keeping Coordinate parent & community support Coordinate linkages with implementation of EFA

SPECIAL NEEDS EDUCATION

Coordinate provision of teaching & learning materials for learners with special needs e.g. Braille Ensure Special Needs Education (SNE) policy is maintained at all schools Coordinate parent & community support for special needs education Coordinate linkages with implementation of EFA goals

DTED Provide policy guidance for pre- service/CPD and in-service training Coordinate pre- service/CPD and in-service training programmes Coordinate all modes of IPTE Develop and coordinate a primary education career path

PROCUREMENT &SUPPLIES UNIT

Procure goods, services and works Distribute goods, services and works

MIE Materials development, production Curriculum conceptualisation, development and renewal Curriculum development for IPTE and CPD Coordinate training for PCAR including CPD Support DTED to coordinate implementation of CPD Research and development – base line studies Coordinate revision of instructional materials for next editions

MANEB Develop & administer PSLCE Research, monitor & evaluate outcomes Contribute to the guidelines for good assessment practices in schools Coordinate advocacy on continuous assessment for outcomes-based education Research, monitor and evaluate learning outcomes

Primary TTCs Ensure curriculum is fully aligned

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Train teachers to deliver the primary curriculum DCE/Chanco/ Mzuzu

Ensure all qualification courses and programmes for primary education are aligned Ensure trainee trainers are competent to train teachers to fully deliver the outcomes-based primary curriculum

216. Resource Flows in the Ministry of Education. Figure 18 below shows the flow of resources from the Ministry of Finance to the MoEST headquarters down to the secondary and primary schools. The solid lines represent flows of funds while the dotted ones represent flow of material resources. The distribution system in the education sector is partially decentralized in that resources meant for primary schools are distributed through the district assemblies and DEM while others, like salaries, are paid directly from the accountant general’s department. Many agencies under the MoEST are cost centers.

56 These include: Teaching Service Commission, ministry headquarters, supplies unit, staff development institute, teacher training and technical colleges, the physical facilities unit and all conventional secondary schools. The funding they receive is meant to finance other recurrent transactions (ORT). The funding to MoEST Headquarters consists of ORT and funds for teaching and learning materials. 217. The supplies unit, which is responsible for distributing teaching and learning materials to all primary schools, gets funding for ORT and personal emoluments (PE) directly from Treasury. The supplies unit is responsible for distribution of materials to primary schools, CDSS and grant aided secondary schools. The procurement of teaching and learning materials is done by the internal procurement committee (IPC) in the MoEST headquarters, which is also responsible for paying the suppliers.

56 Cost centres are agencies that get their funding directly from the Ministry of Finance

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Figure 18: Flow of Education Related Public Resources from Public Expenditure Tracking Survey (2010)

UpgradedCDSSs -ORT, PE

Grant Aided Secondary Schools -Grants and Salaries (From Ed. Division) -Teaching and Learning materials from Supplies Unit

Teaching Service Commission- ORT, Teaching and learning materials

Teacher Training and Technical Colleges

Ministry of Finance – Accountant General

Dept of Teacher Development -ORT, In-service training

Physical Facilities UnitORT, Infrastructure Devt – Responsible for infrastructure development in all Min of Education Institutions

Education Divisions -ORT -Funding for CDSS -Grants (for grant aided SS Schools) -Salaries

Conventional Secondary Schools and upgraded CDSS -ORT, PE, Teaching and Learning materials

Ministry of Education – Hqs -ORT -Funds for Teaching and Learning

District Assemblies -allocation for Education sector

Supplies Unit Distribution of Teaching and Learning

MCDE -ORT Distance learning materials

District Education Manager -ORT Primary Schools

-Teaching and learning materials from Supplies Unit -Funding for operations from DA through DEM

218. Teacher Management – The two year pre-service training for primary IPTE teachers is managed through the teacher training colleges. The Department of Teacher and Education Development (DTED) will be the responsible unit for the implementation of the ODL program. The primary in-service training is served by a national network of 315 Teacher Development Centers (TDCs). Each TDC serves a cluster of about 15 primary schools in the zone. The primary purpose of the TDC is to serve the needs of teachers within the zone but facilities are also available for pupils and community members. Each TDC is staffed by a primary education adviser (PEA). PEAs are part of the district advisory and support system and are in charge of the continuous professional development and monitoring of teachers in their zones. PEAs currently fall under the jurisdiction of the Education Methods Advisory Services (EMAS) section of MoEST, although DEMs are responsible for their day-to-day management. Under the decentralization plans, PEAs will be employed and managed directly by districts. TDCs, however, are the responsibility of DTED. Since issues related to teacher pre-service education and continuing professional development are scattered among DTED, basic education, EMAS directorates, PIEQM will support the coordination and demarcation of responsibilities among the various organizations. The recent functional review has separated advisory services from

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inspection such that it should be possible to reallocate the role of the PEAs under DTED while EMAS focuses on inspection and curriculum development, with technical support from MIE.

Table 12: Teacher Management Institutions Department of Teacher Education and Development

Recruit teacher trainees for training, plan for training, development of IPTE curriculum and support materials, training mentors (Primary and secondary), training of school managers, monitoring of teacher development activities

Department of Education Methods and Advisory Services

Assessment of teachers’ and school performance, ensuring quality assurance of education programs, inspection of public and private schools, oversight of curriculum development

Directorate of Basic and Secondary Education

Deployment of teachers to Divisions and districts, processing of disciplinary cases in liaison with human resource department, establishment of staffing needs, selection of candidates for training in various programs

Zones and Clusters Identification of professional needs, conducting CPD

District Assemblies Posting of teachers, facilitation of CPD, establishment of ODL centers, maintenance of ODL centers

Teacher Service Commission Advertisement for promotion, conducting interviews, appointments of staff on probation as well as on acting and permanent basis, confirmation, dismissals, and termination of service

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Annex 7: Financial Management and Disbursement Arrangements

Executive Summary 219. A financial management assessment of the Ministry of Education, Science and Technology (MoEST) was carried out in accordance with the World Bank-Financed Investment Operations Financial Management Practices Manual dated November 3, 2005. The objective of the assessment was to determine whether MoEST has acceptable financial management arrangements, which will ensure that:

Proceeds of the loan or grant are used for the purposes intended, in an efficient and economical way;

The proceeds are properly accounted for;

The periodic financial reports are accurate, reliable, and timely;

Arrangements exist for an independent audit of the sources and uses of the loan proceeds;

and

The assets of the PIEQM are safeguarded. 220. The Bank’s policy on Financial Management (FM), OP/BP 10.02, requires the borrower and the operation implementing agencies to maintain financial management systems, including budgeting, accounting, financial reporting, internal controls, funds flow arrangements, and auditing adequate to ensure that they can provide the Bank with accurate and timely information regarding the Education PIEQM resources and expenditures. The FM systems are expected to be in place at the commencement of the PIEQM implementation. 221. MoEST is the main implementing agency responsible for the coordination of activities of the implementing line ministry, education divisions (which are an extension of the ministry), district assemblies and educational institutions. The PIEQM will use the Malawi country public financial management system, assessed to have met the requirements of Bank’s OP/BP 10.02. There is however, the need to enhance capacity in MoEST, the education divisions, district assemblies and at implementing educational institutions. 222. Although significant improvements have been made in the overall public financial management (PFM) environment in Malawi in recent years, these have yet to impact substantially MoEST, local governments, and the educational institution level that will use the PIEQM funds. The program will therefore be implemented in a substantial risk environment. 223. The key risk concerns the intended use of funds (for example, project unrelated payments and lack of timely accounting for eligible expenditures by the cost centers) under MoEST and the district assemblies and at the educational institutions level. The key mitigation measures include following rules and procedures; use of the IFMIS, to be suitably customized for the sector plan; inclusion of specific measures to control soft expenditures; an annual technical audit

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to supplement the financial statements audit; and management of community-based activities through a rigorous community-driven development approach. 224. Currently, MoEST is using the single treasury system for all its receipts and payments. Its accounts and interim financial reports (IFRs) are prepared by the centrally managed IFMIS. The PIEQM therefore intends to integrate the FM functions within the government PFM system. 225. The FM functions of the education sector suffer from twin problems: lack of adequate FM staff and weak capacity of the existing staff, particularly in the districts and educational institutions. About 60 percent of the approved FM positions are vacant (405 against an approved set-up of 900 staff). The existing FM staff would require significant capacity-development support. MoEST prepared a “quick” capacity-need analysis in the education sector. This assessment has revealed some gaps in FM staffing but indicates that the Education Sector requires not 500 staff but around 200 staff to be deployed to Education Institutions, Districts and MoEST. While the FM capacity in local assemblies and educational institutions requires enhancement, it is noted that there has been a lot of capacity building in FM at District Level during the past two years. With the help of the development partners who will finance an FM capacity-building program as part of TA support to a SWAp Secretariat, the FM capacity in the education sector will significantly improve. 226. The overall residual FM risk rating for the PIEQM is “Substantial”. Table 13 below shows the key financial management risks which the government may face in achieving the development objectives of the operation and the corresponding mitigation measures against the risks. Summary Project Description Component I: Improve Access and Equity 227. The objective of this component is to promote the NESP goal of universal primary completion through a mix of demand- and supply-side interventions. Through this component PIEQM will finance the expansion of physical facilities as a key supply-side intervention. Demand-side programs include targeted secondary school bursary packages and in-kind transfer programs meant to decrease the gap in equitable access to basic education. Component II: Improve Teaching and Learning Environment 228. The primary objective of this component is to improve the quality of the teaching and learning environment by (i) providing teaching and learning material and (ii) providing immediate support to the implementation of the ODL Program, an innovative short-term reform by the Government of Malawi to address the PqTR of 91.5:1. Component III: Improve Management Capacity at All Levels 229. The objective of this component is to support key reforms in the education sector that will ensure interventions translate to improved access, equity, and quality. Through this component

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issues of teacher management, accountability, planning, quality assurance and monitoring across the system will be addressed within the context of the ongoing decentralization process in Malawi, which is redefining the roles of the MoEST in education delivery at the central, district, and school levels. Country Issues 230. A series of Public Expenditure and Financial Accountability (PEFA) assessments have been conducted with the support of the European Union in 2005, 2006, and 2008. Recently in August, 2009, the Bank conducted a Use of Country Financial Management Systems assessment. The latter assessments found that a number of improvements have been made since the 2006 assessment in areas such as the legislative framework for public financial management, transparency of inter-governmental fiscal relations, recording and management of cash balances, timely preparation of annual consolidated financial statements, and legislative scrutiny of the annual budget law. The assessment reported that regardless of progress being made, weaknesses remain in internal auditing and external auditing, particularly timely submission of audit reports to Parliament and follow-up, and public access to key fiscal information. 231. The Malawi Country Assistance Strategy (2007-2010) states that public services delivery in Malawi suffers from a shortage of skilled personnel, and limited institutional capacity and accountability at all levels of government. The government faces some human resource constraints in a number of key sectors, including FM professionals. Weak institutional capacity in the civil service at both national and local levels of government seriously undermines government capacity to manage resources effectively, implement reform, and translate increased expenditure into improvements in the quality of public service delivery. 232. Despite strengthening fiscal discipline, budget control, and accountability in public finances, FM capacity remains an issue. Weak capacity constrains the alignment and management of international development assistance (which finances about 40 percent of the government budget). This is compounded by perverse incentives to seek non-salary remuneration through training and other non-service delivery activities. While Malawi has embarked on many reforms in PFM, the linkages between planning, budgeting, public expenditure control, monitoring, and the policy development and review processes are still weak and needs significant development. 233. The Government of Malawi prepared a medium-term expenditure framework (MTEF), which is not based on fiscal policy priorities, but is merely a mechanical extrapolation of current budget numbers. This is particularly important as the MTEF needs to adequately reflect the objectives and priorities of the Malawi Growth and Development Strategy (MGDS). However, the government deserves credit for implementing an IFMIS with the assistance of the World Bank and setting-up of a single treasury system. The government effectively made use of the “Key Lessons” from the Tanzania government system. All central ministries are now using the IFMIS system and this will be soon piloted in six districts. IFMIS records funding, commitments, and payments for all central ministries; this ensures that the expenditures are within the budget limit. IFMIS is facilitating timely preparation of consolidated government financial statements. Some expenditure financed by development partners are not immediately

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captured by IFMIS. These are integrated through a sub-system for preparing the consolidated financial statements of the government. Currently there are plans to prepare separate financial statements for the individual ministries or sectors to be audited by the Supreme Audit Institution. 234. Apart from five district assemblies, the other 23 district assemblies and town assemblies are outside the IFMIS; moreover, they use a different chart of accounts from the central government. Monthly funding data are available for each assembly, but no proper expenditure and revenue accounts are produced, and end-year accounts are available with major delays. In this context, the consolidation of local government budget execution data with those of central government to produce general government reports is crucial for improving the transparency and accountability of government operations. The reliability of consolidation of the financial statements of the government cannot be fully expected until the IFMIS covers the entire general government. Government has announced plans to roll out IFMIS to the rest of the district assemblies. This exercise will be funded to a large extent by the Bank through the MASAF Project. The government also needs to build independent technical system audit capacity to ensure that the data produced by the IFMIS is reliable. The assessment covered some district assemblies and secondary schools. While the district assemblies showed relative FM strength in that they have staff including directors of finance and equipment, the schools generally lack computer equipment. 235. A new Auditor General has been appointed. He has taken steps to clear the audit backlog and is on course to bring the audit reports to current soon. Audit reports for fiscal years 2005, 2006 and 2007 have just been issued. The government has completed a review of the Human Resources Management Information System (HRMIS) and a payroll audit. Implementation of recommendations from these exercises is in progress and is expected to help improve management of the payroll. The government is also planning to have a more organized and coordinated approach for improving PFM. A dedicated unit, Public Finance and Economic Management (PFEM) unit has been set-up within the Ministry of Finance, and is already working to coordinate implementation of PFM reforms. The Ministry of Finance has come up with a revised action plan based on the findings of 2008 PFM performance report. This constitutes an important step toward meeting the PFM reforms and capacity development challenges—but it is only a first step: the true test will be implementation of the action plan over the next few years. Risk Assessment and Mitigation 236. FM risk is assessed in order to ensure that appropriate risk mitigating measures are incorporated into design of the operation, to enable the development partners to make decisions on the appropriate level of assessment and supervision intensity, and to enable FM resources to be allocated in a manner consistent with assessed risks. The following is the detailed risk assessment:

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Table 13: Detailed FM Risk Assessment Risk Risk Rating Risk Mitigation measures

incorporated into Grant design Risk after Mitigation

Condition of Effectiveness, Board or Negotiation (Yes/ No)

Inherent Risk Country Level Malawi has made good progress in PFM capacity development, particularly rolling out of IFMIS at the ministry-level. However, IMFIS is yet to be rolled out to the remaining 23 District Assemblies that also use significant public funds. Decentralization and devolution of central government power is still in a preliminary stage. The accountability in local government level is still evolving. The overall capacity of the local government institutions is still being developed. Governance and accountability is also a serious concern in Malawi and the cost of corruption remains high by international standards.

High PFM weaknesses are being addressed through a PFM Capacity Development Action Plan. IFMIS is being piloted in five districts. The government has launched a plan for combating corruption at all levels and developing national integrity. The government preaches a zero-tolerance policy for misuse of public funds; however, it is felt that such a policy should be strictly applied. Otherwise, the overall fiduciary risks would remain substantial at the national level.

Substantial No

Entity Level The MoEST FM assessment shows some weaknesses, including shortage of staff exhibited at the national level. At the cost centers level, there are a number of issues including fraudulent payments which indicate control weaknesses.

Substantial The PIEQM TA support includes implementation of a Financial Management Improvement Plan. The Internal Audit Unit will prepare a risk-based internal audit plan within the first year of the program to conduct internal audit of all high and substantial -risk areas in the MoEST and the cost centers. Internal audit committee of the MoEST will function effectively to take

Substantial No

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The capacity of the districts and divisional educational offices and educational institutions indicate some weaknesses in that approximately 60 percent of the approved FM positions are vacant. The capacity of the existing staff also needs improvement. This poses some risk for intended use of funds.

mitigation measures on the findings by the internal and external auditors. A quick FM staff needs assessment in the education sector was conducted and 27 staff members were recruited in areas that showed weak capacity. A more detailed needs assessment will be done during the implementation of the PIEQM A capacity development strategy would help design a training plan and identify courses for professional and career development of the finance staff in the education sector in association with the Staff Development Institute and other training facilities available.

Program Level The PIEQM is to be implemented in part in a decentralized fashion. This would create significant problems in collecting financial data to prepare financial reports and also annual financial statements. Since the funds would be used in about 300 cost centers it would be challenging to conduct internal and external audit and ensure that the funds would be used for intended purpose.

Substantial MoEST will retain control over the whole PIEQM and which will be monitored to ensure compliance with set procedures. With support of the SWAp Secretariat, capacity development and training will be provided to FM staff on an on-going basis as part of an overall national capacity development strategy. The major risk may come from the procurement of goods and services. Major procurement contracts would be reviewed by the financiers based on agreed threshold.

Moderate No

Overall Inherent Risk Substantial Substantial Control Risk Budgeting Budget is quite detailed. However, the links to MTEF are rather weak and need improving. This would lead to

Moderate Budgets will be prepared annually and revised where necessary. The treasury instructions and circulars require all government

Moderate No

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less focus on controlling and monitoring activities that drive progress towards the MGDS

ministries to submit monthly expenditure returns which are used as a tool for monitoring budget execution. Financial budgets will be linked to physical outputs through an operating plan. The IFRs will be used to monitor variance analysis with budget in accordance with funding requirements. The government is working towards completely linking the budget to MGDS. This activity has been included in the CABS as a prior condition.

Staffing The FM staff at district level and education institution level manage the current work load. However, the vacancy rate is still high and is being addressed The capacity of the existing staff is also weak and need development.

High Qualified finance staff, has been appointed to manage the FM function at the central level. Also a realistic FM staff needs assessment in the education sector would be conducted and staff where there is weak capacity would be recruited. This will be in addition to the “quick” needs assessment which resulted in the recruitment of 27 FM staff. FM staff would be trained in financial management on an on-going basis starting May 2010.

Substantial No

Accounting Policy and Procedures MoEST is using the IFMIS managed by the Treasury department. However, IFMIS is not rolled out in the districts and education divisions posing substantial risks for timely preparation of IFRs for monitoring the implementation and also delay in the preparation of program

Substantial A consistent set of accounting policies would be applied per the IFMIS desk instructions Districts and educational institutions would be closely supervised to ensure satisfactory books of accounts are maintained A sub-system would be used for PIEQM for integrating all

Substantial No

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financial statements. the expenditures made by different cost centers and preparing the IFRs and also annual financial statement. The FM staff of the districts, educational divisions, and concerned educational institutions would be trained in FM.

Expenditure Controls Inability to use funds efficiently and economically for purposes intended at various levels of implementation. Inability to properly account for advances and other expenditures.

Substantial The PIEQM will require stringent accounting and reporting rules. Independent external auditors shall be engaged to conduct annual audits. Internal audit will review the activities of the PIEQM and verify expenditures incurred.

Moderate No

Internal Audit Audit plan is not prepared by assessing risk adequately.

Substantial Staff within the Central Internal Audit Unit (CIAU) will be trained on more enhanced internal audit techniques. The unit’s work plan will cover a program review of internal controls based on identified risks. IA staff would be trained in international internal audit standards issued by the US Institute of Internal Audit, Inc. will be used. A risk-based internal audit plan for the operation would also be agreed with the JFA partners.

Substantial No

Reporting and Monitoring Significant funds would be used by the districts and the educational institutions. Since IFMIS is not rolled out at the district level, it may be difficult to prepare timely IFRs.

Substantial The FM of MoEST agreed IFR format and its contents with the districts and concerned educational institutions and ensure timely submissions of the same by all concerned bodies. This was agreed with the development partners at negotiations. Incentives to provide

Moderate No

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information on time will include refusal to advance additional funds if reports to retire funds have not been received.

Funds Flow Allocation and release of funds from Government of Malawi may not be in timely manner.

Substantial The funds from JFA, FTI and other financiers will flow directly to a US dollar designated account maintained at Reserve Bank of Malawi (RBM). The funds would then be transferred to the Malawi government account via the holding account also at RBM. Parallel funds from government will be subject to quarterly monitoring by the DPs through review of IFRs.

Moderate No

External Audit and Public Oversight Overall accountability environment in Malawi is still evolving. Although Malawi has an independent auditor general, the capacity of his office is limited. The risks are that the audit would not cover a substantial part of the program and the depth of the audit would not be sufficient

Substantial With the approval of the auditor general, the MoEST would appoint a private, competent and independent external auditor who would audit the annual accounts based on agreed terms of reference with the development partners. The auditor would also review the quarterly IFRs during the implementation of the PIEQM. Any major findings by the external auditor would be tracked and followed-up by the development partners until the issues are resolved. In addition to external audit, technical and performance audit would be conducted to review the quality of the work and performance of the PIEQM based on agreed terms of reference with the development partners.

Substantial No

Overall Control Risk Substantial

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Substantial Overall Project Risk Rating Substantial

Strengths 237. The main strengths include a detailed budgeting system in the education sector, adequate FM and Internal Audit staff in MoEST, an experienced Finance Director in the Ministry (who has experience in implementing a Health Sector Program), and support of the senior management. Weaknesses 238. The major weaknesses include uneven FM capacity in 300 cost centers, which will use the PIEQM funds; IFMIS is yet to be fully rolled out to the districts and educational institutions; internal audit is not risk-based and findings are not resolved in a timely manner; and inadequate capacity of the National Audit Office (NAO). 239. Action Plan. The following action plan has been discussed and agreed with MoEST. The action plan includes two types of actions. The Actions as stated in a and b are required for managing the FM risks; the additional three actions (c-e) are required for strengthening the capacity of the education sector for a SWAp in due course.

Actions Target date By Whom A. FOR MANAGING THE SWAP FM RISK

a. Prepare a Financial Management Manual, which will include all rules and regulations, including financial regulations for implementing the NESP. This could be built on the existing FM Manual of the government and also include NESP specific requirements.

31 January 2011 MOEST DOF

b. Prepare a risk-based internal audit plan in accordance to JFA requirement and agree the same with the development partners.

Within three months after effectiveness

Central Internal Audit unit

B. FOR STRENGTHENING THE FM CAPACITY

OF THE EDUCATION SECTOR

c. Design training plan and also courses for professional and career development of the finance staff in the Education Sector in association with the Staff Development Institute and other training facilities available in Malawi.

By December 31, 2010 MOEST DOF

d. Prepare Annual Financial Statements of MoEST for the fiscal year ended June 30 2011 and have them audited by the Auditor General and submitted to the

By December31, 2011 Accountant General’s Department

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Public Accounts Committee of the Parliament.

e. Agree External Audit Terms of Reference.

Agreed at the conclusion of negotiations

MOEST/AG/DPs

Implementing Entity 240. The Ministry of Education, Science and Technology will coordinate implementation of the PIEQM through the SWAp Secretariat. The implementing ministries/departments are: MoEST, the six education divisions, the district assemblies and individual educational; institutions. The overall responsibility for the PIEQM will lie with the secretary for education, science and technology. In performing these functions, the MoEST will maintain close collaborative relationships with institutions including universities, the Teacher Service Commission (TSC), and the Malawi National Examinations Board (MANEB). The MoEST will be responsible for assigned activities including procurement (such as school construction and refurbishment, textbooks, vehicles, and IT equipment) on behalf of the districts and communities. 241. Oversight and coordination arrangements of the PIEQM are as follows: 242. Education Sector Working Group (SWG). The SWG will be chaired by the principal secretary and vice-chaired by the lead donor of the DPs. Participation in the SWG includes senior representatives from government, DPs, NGOs and the private sector. 243. Technical Working Groups (TWG). The TWGs are directly derived from the structure of the education sector plan. The goal of each TWG shall be to oversee the development of realistic and relevant policies and timely annual work plans. 244. SWAp Secretariat. The work of the SWG will be facilitated by the SWAp Secretariat. As a result of an assessment of the key risks to effective implementation of a PIEQM, 4 long-term technical advisers have been retained to support MoEST and DPs in the development of an education SWAP. The four will provide support in the following areas over a period of two years: institutional change management, procurement, planning and monitoring, financial management. The advisers will be based and managed in MoEST and will, together with MoEST counterparts, form a SWAp Secretariat. The secretariat will be based in the Department of Planning and will assist the latter in driving forward the SWAp process. The institutional change management adviser will act as coordinator of the SWAp Secretariat, reporting directly to the Department of Planning. The SWAp Secretariat will have overall responsibility for the day-to-day oversight, coordination, monitoring and evaluation of project activities, in close cooperation with various stakeholders. Donor Harmonization, MOU and JFA 245. The development partners and the government are bound by the MOU and the JFA. The MOU and JFA were signed by UNICEF, GDC, DIFD and IDA. IDA will also represent FTI.

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This FM Assessment has been done in collaboration with the above and incorporates views and comments of the DPs and the Malawi government. 246. Planning and Budgeting. The Ministry of Education, Science and Technology prepared a National Education Sector Plan (NESP) having significant resource gaps. . The budgeting system of MoEST is quite comprehensive. The Ministry of Finance provides an indicative resource envelop for the education sector, which involves some 300 cost centers. Based on the estimates submitted by these cost centers, MoEST prepares the consolidated budget, which is finally discussed and agreed with the Ministry of Finance; this is followed by integration in the national budget and approval by the Parliament. Currently, there is no realistic MTEF for MoEST. The operation will follow government principles for budgeting as issued by Ministry of Finance. Since MoEST is also a pilot for Performance-Based Budgeting, it will explore the use of such principles for the PIEQM implementation. 247. Staffing. The MoEST has appointed a chief accounting officer and a deputy chief accounting officer, for the ministry to manage the FM function. The sector has two main challenges: develop the capacity of the existing staff in public financial management and also recruit and train new staff. Currently, a training policy for finance and accounting staff is being developed. In the absence of adequate training and a career development plan, the FM staff in MoEST is demoralized. A major capacity development program would be required for upgrading the FM capacity of the MoEST, districts, and educational institutions. It is expected that a training plan for such staff will be developed on the basis of training-needs assessment as part of the financial management improvement plan in the education sector and the development of a capacity development strategy. MoEST and other concerned bodies need to consider appointing required staff in those cost centers that have inadequate FM staff. With this additional FM capacity, MoEST will be well-positioned for proper financial management for all its resources. 248. Accounting Policies, Procedures and Information Systems. The financial management system will be anchored on a harmonized financial management system using IFMIS. The receipts and expenditures will be accounted for on a modified accrual basis. All accounting and supporting documentation will be retained by the finance directorate of MoEST, district offices, or the concerned cost centers in a system that would allow authorized users easy access. Documentation at the district level will be maintained there, and documentation for some of the local implementing activities such as local training, scholarships, and school improvement grants will be retained at the school level. Per treasury instructions, MoEST is required to submit monthly expenditure returns, which are used as a tool for monitoring budget execution. The report would outline expenditures to be incurred in each month, against budget, variance from budget, commitments made, and cash balances in their holding accounts at the Reserve Bank of Malawi at the end of such months. 249. Financial Reporting. The MoEST FM will prepare quarterly IFRs, which would be used for ensuring funds are being used for intended purposes. The financial reports would include among others: (i) sources and uses of funds by program component, (ii) executive summary describing the progress of the operation and highlighting the issues therein and also variances between planned and actual sources and uses of funds. These reports will provide information in

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terms of financial activity, and shall include a statement showing for the period and cumulatively cash receipts by source and expenditures by main expenditure classification, beginning and ending cash balances and a designated account activity statement. The reporting line items in the IFRs will follow the chart of accounts. The chart of accounts used by the government has been revised to reflect activities of the PIEQM. The IFR format and its contents was discussed with the development partners and agreed at negotiations. The consolidated IFRs will be submitted to the government and development partners within 45 days from the end of each quarter. The districts/schools will submit their IFRs for consolidation into the main IFRs to the MOEST within 20 days from the end of each quarter. Further to the IFRs, the MOEST will prepare for each fiscal year financial statements which will be audited. 250. Internal Control. The funds will be used by about 300 cost centers, having varying forms of control environment and high risks. A 2008 internal audit report commented negatively on the internal control systems, especially at the districts and schools. It cited low capacity at the school level and lack of financial management training for FM staff working in the Division Education offices, district assemblies, and educational institutions. The CIDA and DfID report on the education sector fiduciary environment noted some fiduciary risks arising from weak controls in the sector and low levels of FM staff capacity. To address these weaknesses the activities under the PIEQM would include capacity-building initiatives and a strengthened internal audit function, together with measures to increase the use of payments by check and timely review of audit management letters issued on project financial statements. Retirement of funds advanced to district/division levels and below will be a condition for further advances. In addition to the above, the following specific actions would be taken:

Financial Management Manual. In addition to the IFMIS desk instructions, a separate FM manual, to be prepared by the SWAp Secretariat of MoEST, would set out the processes and procedures to be followed. While the IFMIS desk instructions and the PFM Act are adequate, this will be done to enhance the FM system. The contents of the manual would be agreed and a manual acceptable to the development partners is expected during the SWAp implementation. The manual will include arrangements for accounting, reporting, record keeping, budgeting, division of responsibilities, etc.

School and Community Activities. Disbursements will be made to communities/schools in accordance with community contracting agreements, similar to those used in the current DSS project. Manuals for school grants, in-kind transfers, secondary school bursary packages, and stipends will be prepared for the use of funds before effectiveness. These measures would provide for release of funds to match requirements and strong accountability mechanisms, including community oversight.

Contract Management. A significant amount of the PIEQM funds would be used for civil works projects and this would require additional effort to control. When contracts are implemented at a national or local level there will be a requirement for a contract register to be maintained that will record details of each contract and payments made against the contract.

Payments. A detailed procedure would be prepared for invoice processing. This will be included in the FM manual. As far as practicable, the system would be integrated in the evolving government system. All payments above MK 100,000 will be made by checks.

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Although cofinancing may not be required, it should be noted that release of counterpart funds for parallel activities could be an issue despite significant reforms in the area of treasury management to improve the situation.

Safeguard over Assets. MoEST has procedures to safeguard and protect assets from fraud and waste through recording such assets in a fixed asset register. It is expected that assets bought by the PIEQM funds will be covered by such a policy. A periodic count of inventory will be encouraged to happen regularly. Government assets are not normally insured in Malawi.

251. Internal Audit. MoEST has a separate internal audit unit with some professional staff. The department head of internal audit is functionally responsible to the Secretary for Education, Science and Technology but administratively reports to the Director of the Central Internal Audit Unit (CIAU) in the Ministry of Finance. The work program of internal audit has been extended to oversight of donor-funded projects. A risk-based internal audit plan would be prepared and agreed with the development partners annually. The audit reports would be shared with the development partners before each supervision mission. The Bank has provided financial assistance to strengthen the internal audit function in the government through the FIMTAP Project, including the MoEST internal audit unit, leading to a basic understanding of internal auditing, development of internal audit methodology, and training of new recruits. Part of the PIEQM funding will allow for piloting of risk-based internal audit at the MoEST divisional offices and also at the district level for strengthening of internal control. 252. Funds Flow and Disbursements Arrangements. The schematic diagram (below) reflects the flow of funds for the operation. Report-based disbursements depending on the approved work plan will be used right from the beginning and funds for six months would be provided as an advance. After the initial advance, funds to the pooled account would be made available twice a year based on the approved work plan and the pledge made by the relevant development partner. The funding will be reflected in the interim financial reports (IFR). Other methods available include special commitment, reimbursement and direct payment. Although funding will be made half yearly, Consolidated IFRs will be submitted by MoEST to the development partners within 45 days from the end of each quarter so that the progress of the program is followed up more closely.57 The financial reports would include: (i) sources and uses of funds by program component, (ii) use of funds by cost category; (iii) summary statements of expenditure (a) expenditures under contracts subject to prior review and (b) expenditure other than those under contract subject to prior review and (iv) executive summary describing the progress of the operation and highlighting the issues therein. Funds from the development partners will go straight into a pooled US dollar denominated account. From the pooled account, all the funds will be transferred into a Malawi Kwacha holding account as and when needed from which disbursements would be made to various stakeholders’ accounts. Transfers will be made from the pooled account into a Kwacha account out of which disbursements to schools and other supported activities will be made. Beneficiaries from PIEQM will have to submit quarterly IFRs as a measure of accountability on the usage of funds. There is one disbursement letter as part of the Financing Agreement with the borrower. The Disbursement Letter sets out and summarizes all the disbursement arrangements and procedures under the operation.

57 The cost centers would submit the quarterly IFRs within 20 days from the end of each quarter.

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253. Funds flow to the support for disadvantaged students in primary school will flow to the districts. Divisions will provide bursary packages and stipends for secondary students. At secondary school level, the students will receive stipends from the divisions. The divisions will account for these funds alongside the other PIEQM funds to MoEST. The identification and selection of disadvantaged students will follow the criteria referred to under implementation arrangements in paragraph 160.

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FUNDS FLOW DIAGRAM

Malawi Govt. No. 1 Account in Malawi Kwacha at RBM

MoEST Education Institutions

Districts

Providers of Goods, Works, Services, Training, and Operating Costs

Pooled Account in US Dollars at RBM

Development Partner Contributions (including FTI)

Holding Account in Malawi Kwacha at RBM



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254. The following table specifies the categories of eligible expenditures that may be financed out of the proceeds of the PIEQM, the allocations of the amounts of the financing to each category, and the percentage of expenditures to be financed for eligible expenditures in each category:

Category Amount of the Financing Allocated (expressed in US$

Percentage of Expenditures to be Financed

(inclusive of Taxes)

(1) Goods, works, consultants’ services, non-consulting services (including said items listed above as may be financed by direct support grants or school grants), training, and operating costs for the Project

Such percentage as the Association shall determine and communicate to the recipient in its annual confirmation for the relevant agreed annual work plan

TOTAL AMOUNT 50,000,000 100%

255. External Audit. The National Audit Office (NAO) has the mandate to undertake the audit of the PIEQM. However, MOEST, with the approval of the auditor general will contract a private independent auditor to audit the PIEQM’s financial statements. The audit will be performed in accordance with International Standards on Auditing (ISA) and based on terms of reference acceptable to the development partners. The audited financial statements and audit reports will be submitted to the government and development partners together with the management letter which will outline any internal control weaknesses and will include management responses to the management letter issues within six months after the end of each fiscal year. The financial statements will be for the whole program, on which auditors will issue a single opinion covering the accounts and the management of designated accounts. The auditor will also review the IFRs and provide comments on their quality. The MoEST internal audit committee will be responsible for ensuring that remedial measures are taken against all audit findings. MoEST will be responsible for engaging auditors with the permission of the auditor general of Malawi, and the Secretary for Education, Science and Technology will be responsible for managing the audit contract and making the payment to the selected auditor for the cost of the annual audits of the grants. In addition to the financial audit, a technical and performance audit will be undertaken annually based on terms of reference agreed with the financiers. This will include a procurement audit. Emphasis will be placed on assessment of proper use and accountability of funds, procurement, physical implementation of the operation activities, and social and environmental monitoring. In addition, the technical audit would focus on the extensive civil works financed by the grants and include quantitative and qualitative checks. The audit would be conducted by an independent firm having expertise in similar work. 256. The Ministry of Education science and Technology was also responsible for the Education Sector Support Project (ESSUP) which is closing on 15 September 2010. In terms of financial management, the project showed improvement in that the 2009 Audit Report got an unqualified audit opinion after the 2008 audit report which was qualified. All the issues in the 2008

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management letter have been addressed. The only outstanding issue is the agreed ineligible expenditures of US$ 19,178.42 arising out of failure to provide supporting documents due to weak filing system. A letter declaring ineligible expenditures was sent to the Government of Malawi on May 13, 2010. The resources are expected to be refunded to IDA within 30 days of notice. The ESSUP filing system has since improved as evidenced in the 2009 external audit report. 257. Governance and Accountability. Corruption is an issue in Malawi. This does pose risks for the proposed operation for intended use of funds. On 5th February 2009, the government launched its anti corruption strategy involving the public sector and private sector. If well implemented, the strategy will have positive effects on corruption levels in Malawi. To combat corruption, the development partners would continue to engage in policy and institutional reform, but with an increased operational focus on improving sector and core governance. To combat corruption MoEST and the development partners will take the following actions: Strengthen the capacity of internal audit by recruiting adequate professional staff in the

education sector, provide training to the staff in internal audit standards issued by the Institute of Internal Audit Inc., and prepare a risk-based internal audit plan. The audit team would conduct an audit of all high-risk areas of the sector plan and make the reports available to the development partners annually.

The development partners would strengthen supervision efforts, including through a systematic annual review of the high-risk areas of the PIEQM implementation plan.

Enhance disclosure of information that would facilitate oversight of implementation by third parties, civil society, and beneficiaries. All development grants to the educational institutions should be made public and placed in the notice board of the school.

Review of annual audited financial statements of all educational cost centers, including the management letter, by the members of the school committee.

It has been suggested that government form an integrity committee in MoEST as part of improving national integrity and roll it out in all districts and educational institutions in the country. Efforts could be made to include national integrity issues in the educational curriculum. The expertise of countries such as Malaysia and Singapore could be used. Progress on this will be followed up by the development partners.

Rigorously pursue the remedies open to the development partners when corruption is found. 258. PFM Capacity Development. The capacity of MoEST would be strengthened as part of PFM improvement plan to be implemented by the Ministry of Finance. Areas of action would include strengthening of MoEST external and internal auditing functions, accounting and financial management information systems, statutory financial reporting and transparency, fiscal decentralization framework implementation, and procurement. In addition to this, part of the PIEQM funds will address capacity development needs to upgrade the FM capacity of MoEST, districts, education divisions, and educational institutions (see paragraph 223). MoEST’s Finance Department will be the focal point for these interventions. Capacity-building activities would be undertaken with selected districts and education institutes staff in areas such as accounting, record keeping, and financial monitoring. Efforts will be closely integrated with ongoing

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initiatives for implementation of greater fiduciary oversight and capacity building financed by the World Bank and other development partners.

259. FM Supervision. The PIEQM would be implemented in a “Substantial” risk environment. FM supervision will be undertaken twice in a year. During supervision, the supervising team will review the FM systems, evaluate quality of budgets, the PIEQM’s interim financial reports, compliance with the IFMIS desk instructions, and follow-up on audits. Based on the findings the mission, project risks would be reviewed and supervision plans would be revised accordingly. 260. Conclusion. The assessed overall residual FM risk for the operation is "Substantial". The Government of Malawi is committed to improving the fiduciary environment in Malawi. The government successfully implemented the IFMIS, which is being piloted at the district level. Once IFMIS is rolled out, this will significantly improve the capacity of MoEST to provide reliable financial information for the development partners and also for the sector. The FM arrangements meet the Bank’s FM requirements under OP/BP 10.02

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Annex 8: Procurement Arrangements

General 261. The proposed operation will be financed by FTI CF, IDA and other donors in a pooled manner. A Memorandum of Understanding (MoU) has prepared and signed by government and development partners supporting the Sector. In the event of conflict between the provisions of the MoU and this section relating to procurement financed by the Bank, the provisions of this Annex will prevail

262. Procurement under the Operation would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers' dated May 2004 revised October 2006, and the provisions stipulated in the Financial Agreement. National Competitive Bidding (NCB) will be in accordance with the Malawi Public Procurement Act which has been reviewed and found satisfactory to the Bank. Foreign bidders would not be precluded for participation in the National Competitive Bidding. Registration/classification of bidders may be used for establishing bidder qualification or preparing a list for use under price comparison procedure, but not as criteria for bidding. Provisions of Article 164 (i) and (j), Article 80.3 and Article 80.4 (ii) of the National Procurement Regulations will not apply to the operation for procurement under NCB and Shopping. The various procurement actions under different expenditure categories are described in general below. For each contract to be financed under the FA, the various procurement or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame will be agreed between the Borrower and the Bank in the Procurement Plan (PP). The PP will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Procurement Arrangements and Procedures

Procurement Plan 263. A procurement plan outlines the best procurement procedures to use for a given program or project. It also helps plan and monitor implementation of investment activities. The procurement plan for implementation of PIEQM shall define: (a) the particular contracts for the goods, works, and/or services required to carry out activities; (b) estimated cost of each individual contract; (c) proposed methods for procurement contracts as agreed under this Annex; (d) expected bid opening date and (e) related review procedures as agreed in this Annex. The procurement plan shall be prepared and shared with Pool Partners by June 30 of each year. The Ministry shall update the procurement plan annually, or as needed throughout the duration of the implementation of PIEQM, and implement it in the manner in which it has been approved by the pooled partners.

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Methods of Procurement 264. International Competitive Bidding (ICB). All procurement above the thresholds specified for NCB shall be conducted using ICB as set forth in Section II of the Guidelines for Procurement under IBRD Loans and IDA Credits (the Guidelines) of May 2004, revised October 2006. For ICB, the Ministry may apply national preference in accordance with the Guidelines. Use of Bank standard bidding documents shall be mandatory.

265. Limited International Competitive Bidding: Limited International Bidding (LIB) is essentially ICB by direct invitation without open advertisement. Under the proposed Project, the Borrower may use LIB on agreement with the Bank under circumstances where (a) there is only a limited number of suppliers, or (b) other exceptional reasons may justify departure from full ICB procedures. Under LIB, borrower shall seek bids from a list of potential suppliers broad enough to assure competitive prices, such list to include all suppliers when there are only a limited number. Domestic preferences will not applicable in the evaluation of bids under LIB

266. National Competitive Bidding (NCB). NCB procedures will apply to contracts for works and goods estimated to cost less than the equivalent of US$3,000,000 and US$500,000 for works and goods respectively. NCB will be carried out in accordance with the Malawi Procurement Act No. 8 of 2003. The following additional provisions shall apply under NCB procedures: (i) an explicit statement to bidders of the evaluation criteria shall be included in the bidding documents; (ii) award shall be to the lowest evaluated responsive and qualified bidder; (iii) “bracketing” or rejection of bids outside a range or “bracket” of bid values shall not be permitted; (iv) foreign bidders would not be precluded for participation in National Competitive Bidding (v) registration and classification of bidders may be used for establishing bidder qualification or preparing a list for use under price comparison procedure but not as criteria for bidding and (vi) artificial division of lots into small quantities or slicing of packages and set aside for small and medium enterprises will not be used.

267. For procurement of routine items like stationery and office supplies, a supplier would be selected following National Competitive Bidding (NCB) for supply of the routine items over a certain period. The procurement documents should stipulate the estimated quantity requirement for each item over a certain period of time, the delivery time, the terms and conditions of contract, the payment schedule. The evaluation and selection of supplier should be for each item separately based on minimum lowest unit rate and agreement of the supplier to abide by the provisions and conditions of the procurement documents. An agreement will be signed with the supplier confirming validity of the unit rate for the given period. The purchaser will issue a purchase order each time it requires a specific quantity.

268. Shopping. Shopping is a procurement method based on comparing price quotations obtained from several suppliers. A minimum of three suppliers shall be considered to assure competitive prices, and is an appropriate method for procuring non-routine readily available off-the-shelf goods or standard specification commodities or non-consulting services. Requests for quotations shall indicate the description and quantity of the goods or specifications of non-

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consulting services, deadline for submission of quotations, as well as desired delivery (or completion) time and place. Quotations should be submitted in sealed envelopes within the deadline and be opened by the Borrower at the same time. The evaluation of quotations shall follow the same principles as NCB. The terms of the accepted offer shall be incorporated in a purchase order or brief contract. 269. Direct contracting for goods or works. Direct contracting is contracting without competition (single source) and may be an appropriate method under the following circumstances: (i) An existing contract for goods or works, awarded in accordance with procedures acceptable

to the Bank, may be extended for additional goods or works of a similar nature. The Bank shall be satisfied in such cases that no advantage could be obtained by further competition and that the prices on the extended contract are reasonable. Provisions for such an extension, if considered likely in advance, shall be included in the original contract.

(ii) Standardization of equipment or spare parts, to be compatible with existing equipment, may justify additional purchases from the original supplier. For such purchases to be justified, the original equipment shall be suitable, the number of new items shall generally be less than the existing number, the price shall be reasonable, and the advantages of another make or source of equipment shall have been considered and rejected on grounds acceptable to the Bank.

(iii) The required equipment is proprietary and obtainable only from one source. (iv) A contractor responsible for a process design requires the purchase of critical items from a

particular supplier as a condition of a performance guarantee. (v) In exceptional cases, such as in response to natural disaster. 270. Procurement of non-consulting services. Non- consulting services are services that are not of intellectual or advisory in nature. Non-consulting services under this project will include cleaning services, freight and clearing services, airing of IEC messages and internet service. The procurement of non-consulting services shall be as per provisions specified above for the procurement of goods and works.

271. Selection of Consultants. Consulting services under the operation will include engineering and architectural services. Except as detailed below, consulting services will be selected through competition among qualified short-listed firms based on Quality and Cost-Based Selection (QCBS). Consultants for financial audits and other repetitive services estimated to cost less than US$50,000 equivalent per contract may be selected through Least Cost Selection (LCS) method. Consulting services by firms estimated to cost less than US$200,000 equivalent may be selected on the basis of Selection Based on Consultant Selection (CQS). As appropriate, other selection methods such as Fixed-Budget Selection (FBS), Quality Based Selection (QBS) may be used for selection of consulting firms. Individual consultants shall be selected on the basis of Individual Consultant Selection method (IC) as per Section V of the Consultant Guidelines.

272. Single Source of consultants. Single-source selection may be appropriate only if it presents a clear advantage over competition: (i) for tasks that represent a natural continuation of previous work carried out by the firm, (ii) in emergency cases, such as in response to disasters and for consulting services required during the period of time immediately following the emergency, (iii)

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for very small assignments, or (iv) when only one firm is qualified or has experience of exceptional worth for the assignment.

273. Training. Ministry will formulate an annual training plan and budget which will be submitted to the Bank for its prior review and approval. The annual training plan will, inter alia, identify: (i) the training envisaged; (ii) the justification for the training, how it will lead to effective performance and implementation of the operation and or sector (iii) the personnel to be trained; (iv) the selection methods of institutions or individuals conducting such training; (v) the institutions which will conduct training, if already selected; (vi) the duration of proposed training; and (vii) the cost estimate of the training. Report by the trainee upon completion of training would be mandatory

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

275. Operating Costs. Operating costs will be procured using the Government of Malawi administrative procedures which were reviewed and found acceptable to the Bank. Operating cost will not include salaries or top up salaries of civil servants.

Prior Review 276. Pooled partners and the Government of Malawi have agreed that the Bank will review and provide required procurement clearances for PIEQM contracts subject to prior review. Alternatively, an independent consultant may be hired to do the prior review clearances on behalf of the Bank. For the purposes of the initial procurement plan and initial assessed capacity of the MOEST, contracts that require prior review include: (i) all contracts estimated to cost the equivalent of US$3 million or more for works and US$500,000 or more for goods; (ii) consulting service contracts provided by a firm estimated to cost the equivalent of US$200,000 or more; (iii) each contract for the employment of individual consultants estimated to cost the equivalent of US$100,000 or more; (iv) as well as cases of direct contracting or single-source selection of contractors, firms or individual consultants exceeding US$1,000 per contract. The foregoing parameters will in effect limit prior review only to contracts meeting the threshold for International Competitive Bidding (ICB) and international consultants. The number of contracts subject to such prior review will be determined by the procurement plan. The Bank’s response time for prior review, including comments and/or clearances, shall not exceed 10 working days. Prior review thresholds are summarized as per below:

277. Prior Review Threshold : Procurement decisions subject to prior review by the Bank as stated in Appendix 1 to the Guidelines for Procurement:

Procurement Method Prior Review Threshold

Comment

1. ICB and LIB (Goods) US$500,000 All contracts 2. NCB (Goods) More than US$50,000

and less than US$500,000

First contract

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3. ICB (Works) Above US$3,000,000 All contracts 4. NCB (Works) More than US$50,000

and less than US$3,000,000

First contract

5. ICB (Non-Consultant Services) As per goods First contract 6 Shopping (Goods or Works) Below US$50,000 None 7 Direct contracting All contracts above

US$1,000 All contract

278. Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants:

Selection Method Prior Review Threshold

Comment

1. Competitive Methods QCBS, QBS,CQS,FBS,LCS,(Firms)

US$200,000 All contracts

2. Single Source (Firms) US$1,000 All contracts 3 Individual Consultants US$100,000 All contracts

Audits 279. At the end each year of implementation, an independent procurement audit will be carried out at by a procurement auditing firm to be competitively appointed by the ministry. This audit will focus on post-procurement reviews (PPRs) of contracts that were not subject to prior review; the purpose of the audit is to determine whether procurement for these contracts met the requirements of the agreed procurement plan. The audit will also review the ministry’s procurement capacity. Because the audit permits a further re-assessment of the level of risk, should the capacity-building efforts described below be successful, the audit could result in a lowering of the risk rating and an associated increase or the prior-review thresholds. The ministry shall share the auditor's findings, recommendations, and action plan with the pooled partners within 30 days of its receipt of same, and report quarterly or more frequently, as necessary, to the pooled partners on implementation of the actions proposed by the audit report. 280. The following provision shall be included in bidding documents relating to and contracts awarded on the basis of National Competitive Bidding and financed out of the proceeds of the Financing, namely, that: (a) pursuant to paragraph 1.14 (e) of the Procurement Guidelines, bidders, suppliers, and contractors are required to permit the Association to inspect their accounts and records and other documents relating to the bid submission and contract performance and to have them audited by auditors appointed by the Association; and (b) pursuant to paragraph 1.14 (a) (v) (bb) of the Procurement Guidelines, acts intended to materially impede the exercise of the Association’s said inspection and audit rights are considered to be an obstructive practice for the purposes of paragraph 1.14 of the Procurement Guidelines.

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Misprocurement 281. If it is determined that any goods, works or services have not been procured by MoEST in accordance with the agreed Procurement Plan and procedures, misprocurement will be declared. Bank policy requires canceling that portion of the Grant allocated to the goods, works, and services that were misprocured. Should cases of misprocurement occur under activities financed under the pooled financing, either during prior reviews or post reviews, each pooled partner will take actions established in its own guidelines, and any pooled partner may decide, after consultation with the Government of Malawi and other pooled partner to cancel from its respective financing an amount equivalent to the contract amount multiplied by its proportional contribution to pooled fund. Capacity of Ministry of Education, Science and Technology 282. An assessment of the ministry was undertaken by the Bank in October 2008. The ministry has the organizational requirements to undertake procurement in accordance with the Malawi Public Procurement Law. The ministry has a specialized procurement unit staffed with five people including the chief procurement officer who is head of the unit, one principal procurement officer, one senior procurement officer, one procurement officer and one procurement specialist. The SPU also has a procurement technical adviser financed by CIDA. The current institutional setting puts the SPU at a level that is not commensurate with the functions and responsibilities. Indeed, the chief procurement officer reports to a senior deputy secretary, who in turn reports to the DOFA. This reflects the less than desirable consideration that the unit is given within the administration. The assessment recommends that the position of head of procurement be upgraded to the level of the deputy director reporting directly to director of finance and administration and indirectly to the principal secretary for the procurement function is to be given the necessary attention and standing and for advice to be provided timely and to appropriate decision makers .

283. The ministry has also established an EIMU comprising three quantity surveyors, one architect, two civil engineers, one maintenance engineer and two clerks of works and headed by an experienced quantity surveyor. The EIMU will provide the technical and supervision input into the construction program and work closely with the SPU as a clearing house for all procurement activities

284. Assessment of the district assemblies was undertaken by the Bank under the Agricultural Development Support Project and MASAF III LDF Mechanism in 2008. The assessment showed that the capacity and underlying systems were weak but the organization of procurement functions has improved. The education sector is fully devolved to the districts and has high level representation. Each district has an internal procurement committee comprising sector heads which is responsible for award of contracts. Though it is desirable to have a procurement officer at each district, considering the level of procurement under the operation at district level, the capacity in place would be adequate

285. The ministry has three warehouses in Liwonde, Lilongwe and Mzuzu for distribution and storage of text and note books. Supplier’s delivery goods to these warehouses. Anecdotal evidence suggests that about 15 percent of the materials are lost during the delivery from

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warehouses to schools and it takes long (in some cases one year) for materials to reach intended beneficiaries. The school material supply chain management will be assessed more during appraisal and corrective measures will be agreed with government.

286. The project will be built on the experience of the previous Bank-supported education projects in Malawi. The MoEST’s implementation capacity with regard to previous Bank-assisted education projects has been weak. Decision making was fluid and prolonged delays were experienced with regard to key contracting decisions. The ministry will therefore require technical assistance and training to enhance capacity.

287. Planning for procurement within the ministry is weak. Procurement is undertaken on adhoc basis, with little monitoring. Excessive delays are experienced both prior to award and to complete contract delivery

288. The overall capacity of the ministry to undertake procurement is AVERAGE and the risk SUBSTANTIAL.

Capacity Building 289. Pooled partners and the Government of Malawi agree on a series of actions and measures to support procurement-related capacity building, including:

(i) Enhancing the procurement capacity of the MoEST, including, inter alia: (i)

strengthening procurement planning ; (ii) upgrading the headship of Specialized Procurement Unit and its reporting lines as recommended by the assessment; (iii) strengthening internal controls and record management; (iv) introducing a monitoring system to measure performance in procurement matters; and (v) recruiting technical assistance in procurement and (vi) providing adequate office space for the procurement function.

(ii) To make its supervisory role more efficient and responsive to the needs of the MoEST

(iii) The capacity building measures introduced through implementation of the PIEQM

(including Procurement planning and "on-the-job training" through prior and post reviews) will be made an integral part of the country's own capacity building activities.

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Annex 9: Economic and Financial Analysis

290. A focus on education is in the heart of MGDS 2006-2011. In the MGDS 2006-2011, the Government of Malawi recognizes the role of an educated population as a necessary enabling environment for sustainable development. In primary education emphasis is on equipping students with basic knowledge and skills to enable them to function as competent and productive citizens; at secondary education the focus is on providing academic basis for gainful employment in the informal, private and public sectors; and at tertiary education the goal is to produce high quality professionals with relevant knowledge. The MGDS further identifies specific expected medium term outcomes related to these goals, namely: reducing absenteeism and dropouts, increasing enrolment, improving learning outcomes, and increasing access and achievement by girls, vulnerable children, and children with special learning needs.

291. The underlying rational for public invest in education is the high social economic and non-economic rates of return to education, in addition to the credit market imperfections that preclude the poor from reaping the private returns to education. Returns to education can be private returns which are benefits that accrue to the individual himself after taking into account the private costs, or social returns which occur when private benefits externalize to benefit the society as a whole, net of the social costs. Moreover, these returns can be economic or non-economic. On the micro level economic returns to education take the form of productivity enhancements leading to higher earnings, and higher growth rates on the macro horizon. Non-economic returns are manifested in the form of healthier lifestyle, more informed decision-making and personal development, and can extend to social cohesion, civic engagement and democratic participation. From a pubic economics rational, the significant positive externalities from education justify government investment in the sector. However, even if the magnitude of the economic private returns surpass the economic social returns, the presence of noneconomic externalities to education coupled with credit market constraints that result in individuals under investing in education, present an economic rationale for some significant degree of public investment.58

292. The Theory of Human Capital (THC), supported by the empirical evidence, suggests substantial economic private returns to education. The THC is currently widely accepted as the micro-based premise for interpreting the education-earnings relationship. The theory argues that education enhances individual worker productivity which translates to higher earnings. There is ample robust empirical micro-evidence supporting the THC (Card 1999). More selective research focusing on the causality debate between the impact of schooling versus ability on earnings concludes that the effect of ability does not exceed 10 percent of the estimated schooling return (Card 2001).

58 A rigorous cost-benefit analysis of this program is not feasible. While it can be straightforward to obtain estimates for private economic returns to education, credible estimates of the social economic returns, which are necessary for public investment analysis, are elusive. It is also very difficult to quantify positive non-monetary externalities from education. Furthermore, the expected outcomes from education projects are long term and are difficult to attribute to a specific intervention. Nevertheless, based on the international evidence and the micro empirical evidence for Malawi, the potential benefits of this program can be expected at both the individual and the social level.

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293. In the case of rural developing countries economic private returns to education can materialize in the form of agricultural productivity enhancement, especially under conditions of technological and institutional innovation. The data for the Mincerian earnings function which measures the education-earnings relationship is usually based on employment in the formal wage sector which can be irrelevant to regions like Africa where the majority of the working population is engaged in the agricultural informal sector. This raises the question as to whether education can increase productivity in agriculture. A growing number of studies find empirical evidence in developing countries of increasing returns to primary education but only as countries proceed from traditional to modern agriculture (Jolliffe 1998). This can explain the particularly low rates of return to education for farmers in sub-Saharan Africa where agricultural technology is primitive (Pritchett 1997). This concern is particularly relevant to a country such as Malawi where 85 percent of the population is based in rural areas and agriculture being the single most important sector of the economy, employing 80 percent of the workforce. Based on the international evidence the association between education and agricultural productivity is likely to be weak in Malawi given that the sector is highly dependent on traditional agricultural practices that are likely to undermine the productivity returns to education.

294. The macro empirical evidence on the positive impact of education on productivity and ultimately economic growth is less assertive in comparison to the micro evidence. In recent years there have been attempts to verify and measure the existence of positive externalities from education in the macroeconomic context of new theories of endogenous growth that suggest that increasing individual productivity, by boosting human capital, would contribute to economic growth. Though the macro empirical literature is inconclusive on this relationship (Islam 1995, Caselli et al 1996, Temple 1999), some evidence on the positive impact of education on growth was found when the assumption of the linearity relationship between education and growth was dropped (Krueger & Lindahn 2001) and when the impact of education on growth was considered with a time lag.

295. However, the macro empirical evidence on the positive impact of education on economic growth through the channel of reducing poverty and income inequality is more robust. An alternative channel by which education can boost economic growth is by reducing income inequality. The strong micro link between education and earnings gives credence to the notion that education can play a role in reducing poverty, decreasing inequality and ultimately boosting economic growth. (Persson & Tabellini 1994, Alesina & Rodrik 1994, Knight and Sabot 1990).

296. Studies on Malawi confirm the private returns to education as demonstrated by a positive correlation between the level of education of the household head and both income and expenditure, while a negative correlation with poverty. Unfortunately there are no studies that relate educational attainment with agricultural productivity in Malawi, however we show evidence for a positive correlation between education and income and expenditure. The first column of Table 14 displays the results from a Mincerian estimation of regressing the logarithm of workers’ annual income on education. The results confirm a positive and significant correlation between the household level of education and income. The figures imply that having attained a lower primary education increases annual income by 7.8 percent compared to someone with no schooling. This impact of education increases to reach 154 percent for individuals with upper secondary education in comparison to those with no education and further rises to 405 percent for higher education. This very high premium for higher educational levels indicates a

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high labour market demand for a qualified workforce and reflects the exceptionally low enrolment rates for higher levels of education. Table 14: Results from a Mincerian Estimation of Regressing the Logarithm of Workers’ Annual Income on Education

Mincer

Earning

Equation

Correlates of Household Log Per Capita Expenditure

Correlates of Ultra-Poor Status of Households

Highest Education Level Achieved:

Lower Primary

(St 1-4)

0.078*** Some Primary 0.052** -0.314***

Upper Primary

(St 5-8)

0.385*** Completed primary

0.128*** -0.507***

Lower Secondary (Form 1-2)

0.810*** Post Primary 0.403*** -0.979***

Upper Secondary (from 2-4)

1.528***

TVET (Technical College)

2.427***

Higher Education 4.057*** Source: for column 1: CSR 2009, and for column 2: Malawi Poverty and Vulnerability Analysis (2007).

Refer to report for full set of controls, *** 1 percent significance level. “No education” is the reference group.

297. It is common in developing countries to use consumption expressed in monetary terms instead of income as a measure of wellbeing given that many people earn their income in the unrecorded informal sector, consequently income may not reflect true welfare. Column 2 of Table 14 shows the results from regressing household log per capita expenditure on education. The coefficient estimates confirm the earlier findings of a positive impact of education on well-being. For example, having some primary education is associated with a 5 percent increase in per capita consumption, increasing to 12 percent for household heads who have competed primary education, and to 40 percent if more than primary education has been acquired. The third column of Table 16 shows the results pertaining to the association between education and ultra poverty, the latter defined as those households whose total per capita expenditure levels are below the specified food poverty line. The results assert that better-educated household heads are less likely to belong to the ultra-poor. The higher the level of education attained by the household head the lower is the probability for the person to be poor.

298. Education can serve to reallocate some of the working population towards economically more productive sectors that stimulate higher earrings and growth. Table 15 shows the distribution of workforce across sectors in relation to their educational achievement. The figures indicate two patterns; firstly there is a higher chance that a person participates in the formal labor market if he or she is more highly educated; and secondly, they are likely to move to non-agricultural activities. For instance 83 percent of workers with upper secondary education

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are employed in the formal, public or private, non-agricultural sector compared to only 47 percent of the upper primary level workers. In this setup education can induce participation in higher value added and more productive economic activities which in turn should positively impact earnings and growth.

Table 15: Sector of Employment according to Education Level (%)

Non formal agricultural

Non formal

non agri.

Formal Public Sector

Formal Private Sector

Total

No school 69.3 0.7 6.9 23.2 100 Lower Primary (LP) 65.0 0.5 6.8 27.7 100 Upper Primary (UP) 52.2 0.4 9.1 38.4 100 Lower Secondary (LS) 33.5 0.2 19.4 46.9 100 Upper Secondary (US) 16.6 0.8 32.9 49.7 100 TEVET (Technical colleges) 2.2 0.4 65.7 31.7

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University (HE) 0.5 0.6 41.9 57.1 100 Source: CSR 2009

299. Notably, besides increasing the quantity of one’s education as previously discussed, improving the quality of education also plays a significant role. In addition to the commonly measured quantity of education impact on earnings, as captured by the years of schooling or educational levels attained, the quality of education plays a significant role on earnings. This is proven on the micro level (Glewwe 1996 & 2002, Bedi & Edwards 2002). On the macro level, education was found to have a positive impact on growth when it was measured in terms of quality as opposed to quantity (Hanushek & Kimko 2000). Common ways to improve the quality of education has to do with the curriculum development, improving teacher qualifications, having adequate PTR and acceptable classroom conditions (Hanushek & Luque 2003). The evidence for Malawi indicates that lower PTR, higher teacher qualifications, the availability of textbooks are all positively and significantly correlated to higher test scores which reflect the better educational quality (CSR 2009).

300. Private and Social Rates of Return (ROR)59 to education in Malawi are high. While private ROR describes the average extra income gained by an individual through acquiring additional education in relation to the cost of this education for that individual (including the foregone earnings due to the years of study), social ROR capture the gain to society at large and are calculated by relating the additional expected income to the total cost involved in the education, both private and public. Table 16 displays the private and social ROR to education in Malawi. The data confirms increasing private ROR for higher educational levels that range from 5 percent for lower primary to 44 percent for upper secondary and 171 percent for higher education. Both the social and private ROR to education in Malawi are high. This can be explained by the country’s low GDP per capita, which is in line with the classic pattern of diminishing ROR to higher levels of development (Psacharopoulos & Patrinos 2002). These high

59 ROR computation use Mincerian earning coefficients of Column 1 of Table 1. Refer to CSR 2009 for full computation technique.

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ROR reflect the scare supply of educated labor and the fact that education is still a rare privilege in Malawi for which the labor market is prepared to pay a high premium, compared to its costs.

Table 16: Private and Social Rates of Return to Education (%)

Malawi High Income Middle Income

Low Income

Priv Soc Priv. Soc Priv. Soc Priv. Soc Lower Primary

5 3 25.6 13.4 27.4 18.8 25.8 21.3

Upper Primary

15 12

Lower Secondary

22 11 12.2 10.3 18.0 12.9 19.9 15.7

Upper Secondary

44 25

Technical Coll.

54 35

Higher Education

171 23 12.4 9.5 19.3 11.3 126.0 11.2

Source: CSR 2009 Psacharopoulos & Patrinos 200260

301. Despite the lower levels of social ROR in comparison to the private ROR, the presence of market imperfections present an economic rationale for public investment in education. A comparison of social and private ROR shows lower values for the former. This is expected given that the social ROR are typically computed using the total costs of education, private plus public, whilst are not able to include the economic benefits that accrue to society at large (which are not detected by the individual earning function). Consequently the social economic returns are likely to be underestimated. Theoretically, the presence of greater private returns to education suggests that the activity could be left to individual investment; however credit market failure that lead low and middle-income individuals to under invest in primary education presents a public economics rationale for government intervention.

302. Furthermore, the robust evidence for the existence of considerable private and social noneconomic returns to education, such as improved health and education continuity within the households, are main arguments for public investment in the sector, particularly for primary education. The benefits from education go beyond individual economic benefits. Education leads to more informed decisions regarding ones’ own and household health and hygiene and with respect fertility control (Gupta & Mahy 2003, Glewwe 1999). Furthermore, there are positive externalities of parents schooling on their children’s education (Glewwe & Jacoby 1994, Tansel 1997). Notably health benefits are sometimes cited among the non-economic arguments for public investment in education, nevertheless they can also be considered under the economic debate given that a significant segment of human capital development is

60 Due to some sampling and methodological concerns that have to do with data compilations, the estimates from Psacharopoulos & Patrinos (2002) should be considered as indications of patterns of private ROR versus social ROR, and ROR levels versus country development levels as opposed to precise estimates.

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related to investment in health care which results in a more productive labor force (Strauss & Thomas 1998).

303. In the case of Malawi the health outcomes with respect to mother’s education confirm the exceptionally high efficiency of the primary cycle. Table 17 compares the contribution of each level of schooling to some social outcomes. On average the primary cycle represents almost half (48 percent) of the total social impact while secondary together with higher education account for 26 percent. One extra year of schooling is found to be associated with an average of 6 percentage point (pp) increased impact on social behaviours (6.0 pp (48/8) for primary cycle, 6.5pp (26/4) for secondary 6.4pp (25/4) for higher education). The last three rows of the table show each cycle’s contribution relative to its costs. Costs represent units of GDP per capita and are obtained by multiplying the unit cost of each cycle by its duration. Results in the last row of the table indicate the very high efficiency of the primary cycle compared to secondary and tertiary education. All costs being equal, the efficiency of the primary cycle in enhancing human development is 18 times higher than that of the secondary cycle and 243 times higher than that of tertiary education. Table 17: Correlates of Mother’s Education on Various Adult Behaviours: Share for the

Different Cycles

Primary (vs.

Non-educated)

Second 1 (vs.

Primary Cycle)

Second 2

(vs. Second

1)

Higher Ed (vs.

Second 2)

Total

High contribution of primary

cycle

Enhancing adult women literacy 96.9 3.1 0.0 0.0 100

Reducing stillbirth 78.1 9.8 6.7 5.4 100

Encouraging use of iron tablets 71.4 10.6 8.2 9.8 100

Knowledge about HIV/AIDS 67.5 11.4 9.2 11.9 100

Assistance at delivery 65.3 17.9 13.5 3.4 100 Medium

contribution of primary

cycle

Antenatal care 49.0 12.6 12.7 25.7 100

Use of tetanus toxins 48.5 15.4 14.5 21.6 100 Anti-malaria treatments 39.7 12.8 14.2 33.3 100

Moderated contribution of primary

cycle

Use of Vitamin A for under five kids 24.3 17.1 19.1 39.5 100

Total number of live birth 21.6 14.3 17.8 46.3 100

Woman’s age at first birth 17.0 14.6 18.7 49.8 100

Birth interval 0.0 16.2 23.2 60.6 100

Average social impact 48.3 13.0 13.1 25.6 100

Unit cost (as percentage of GDP per capita) 8.3 83.3 2,146.7 -

Total spending (unit of GDP per capita) 0.66 3.33 85.87 -

Efficiency (= impact/spending) 0.727 0.039 0.003 -

Source: CSR 2009.

304. In another citation, the Malawi Poverty and Vulnerability Analysis (2007) shows that the incidence of stunting decreases with the mother’s (or guardian’s) level of education, but only after a minimum of eight years of schooling. These findings are also true for the other anthropometric indices; underweight and wasting. Furthermore the report shows that higher

110

levels of education were found to be associated with more knowledge of HIV/AIDs and higher levels of condom usage (for secondary level education or more).

305. Finally and in line with the international evidence, in Malawi both parents’ education is positively associated with a higher probability of their children attending school. In addition to the positive externalities of parent schooling on their children’s health there are also positive externalities of parents’ schooling on their children’s education. Table 18 displays the results from a Probit regression model of the correlates between parental education and the probability of child access to standard 1. The results highlight that maternal and paternal education has an increasing positive and significant effect. For instance, children whose mothers have no education have an access rate that is 3.7 percent less than for those whose mother has a primary education level. While this access rate increases to 1.6 percent for children whose mother has post primary education compared to having a mother with only primary education.

Table 18: Correlation between Parental Education and Child Access to Standard 1 Mothers Level of Education No education -0.037*** Post primary 0.016*** Non formal education 0.006 Fathers Level of Education No education -0.018*** Post primary 0.016*** Non formal education -0.125 Source: CSR 2009. Refer to report for full set of controls

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Annex 10: Safeguard Policy Issues

Environment 306. Minor adverse environmental impacts are envisaged as a result of civil works to be undertaken during the construction and rehabilitation of educational facilities under NESP. It is envisaged that all impacts will be of low magnitude, temporal and reversible. PIEQM triggers OP 4.01 for Environmental Assessment and 4.12 for Involuntary Resettlements due to identified potential environmental and social adverse impacts.

307. Because the exact locations and potential negative localized impacts of the future sub-projects under the NESP could not be identified and assessed prior to the appraisal of PIEQM, the Government of Malawi has updated the ESMF prepared for the ongoing education project funded by the Association.

308. The updated ESMF is designed to provide practical guidance and reference material for the planning, review, approval, and implementation of sub-projects under the NESP. It outlines the institutional roles and responsibilities for different spheres of government for overall environmental management of sub-project through: (i) identification of environmental and social impacts due to project activities; (ii) screening of potential impacts to determine environmental assessment category; and (iii) preparation and implementation of mitigation measures. The ESMF also provides a sample training program for ensuring capacity for environmental management during project implementation.

309. PIEQM is classified as Environmental Assessment category B – partial assessment.

310. The ESMF and RPF were disclosed in-country on September 21, 2009. They were disclosed in the InfoShop on March 2, 2010.

Social

OP 4.12 Involuntary Resettlement

311. PIEQM covers provision of development of education facilities new facilities such as new schools, teacher training colleges and technical colleges in addition to rehabilitation of existing facilities in order to improve equitable access to and quality of education. In addition PIEQM will provide funding for institutional strengthening in educational institutions at national, divisional and local levels across the country.

312. Malawi is a small country with one of the highest population densities in Southern Africa. The country has an estimated population of 14 million people against land size of about 9.4 million hectares. The average population density is 139 persons per square kilometre. And the southern half of the country has an average population density of about 350 persons per square kilometre. About 85 percent of the population live in rural areas and depend on small holder farming while only 15 percent of the population live in towns where as much as 75 percent of the urban population live in poor peri – urban and informal settlements. Agriculture is the main stay of Malawi’s economy, accounting about 40 percent of gross domestic product and about 85 percent of export revenue.

112

313. Specific locations of new education facilities (new schools and colleges) are not known at the moment. However, basic land requirement for new education facilities ranges from 3.5 ha for a primary school to 60.0 ha for a teachers training college. Availability of such size of land would need formal land acquisition and this entails land tenure and access changes within the community’s settings. Land acquisitions would displace some people and some negative socio – economic impacts of such changes would be loss of land, loss of residential properties, loss of access to assets, loss of grazing land among others. These impacts would be serious if left unattended.

314. A RPF has been prepared by a consultant based on previous experiences with construction of new secondary schools and TTC under the World Bank funded Educational Sector Support Project 1 (ESSUP 1) implemented by the MoEST. Refinement with sector specific focus has been provided by The Ministry of Lands, Housing and Urban Development. Consultations with potentially affected persons will be carried out in the course of the resettlement screening process.

315. A RPF is a living document that will be subject to period review to address specific concerns raised by stakeholders and emerging policy requirements. It complements the national level guidelines on resettlement and compensation stipulated in the Malawi National land Policy, Land Acquisition Act and Town and Country Planning Act.

316. The RPF includes (i) resettlement screening process (ii) description of typical socio –economic impacts (iii) eligibility criteria for compensation and methods of delivery (iv) methods of valuation of the affected properties (v) preparation of resettlement action plan (vi) provisions for preparation of checklists on resettlement and training in resettlement exercises (vii) outline for budget estimates for resettlements and compensations (viii) resettlement monitoring systems and (ix) resettlement screening form.

317. The Resettlement Screening Process: The screening process has been prepared in light of the requirements of (OP 4.12) Involuntary Resettlement Policy, and will complement the Malawi National Land Policy and Land Acquisition Act (57:04) which require resettlement and compensation plan for developments projects which may necessitate land acquisition and displacement of some people. However, these instruments do not contain guidelines for resettlement screening for some sub projects where details and specific locations are not known early on. Thus the resettlement screening process will bridge the gap.

318. The screening process consists of four steps (i) screening of the subprojects and sites (ii) assignment of resettlement categories and preparation of resettlement action plan (iii) review and approval of resettlement action plan; and (iv) payment of compensations. The screening process will be carried out using a screening form attached as an annex. The district executive committee under the supervision of the district commissioner will carry out the resettlement screening.

319. Monitoring, evaluation and reporting on resettlement issues will be part of a project implement processes and local authority reporting system. Local leaders will keep records of all activities done in their area which will be submitted to district assembly for consolidation. The district monitoring officer and local chiefs will be responsible for monitoring at a local level and transmission of the same to district commissioner on monthly basis. Compliance to resettlement screening will be generated from annual reports, evaluation reports and feedback meetings and implementation support missions.

113

320. Resettlement Training. The RPF outlines provisions for resettlement training for members of District Executive Committee (DEC), Area Executive Committee (AEC) and selected staff from the Planning Division of Ministry of Education, Department of Lands and Valuations, Department of Forestry (to understand the implications of resettlement exercises). Appropriate training would cover areas such as: policy and legal framework on resettlement and compensation, screening, census of affected persons, use of screening forms, gender issues, methods of valuation of assets, eligibility criteria, administration and delivery of compensation among others. The final program would be determined closer to time of training. Training will be provided by experienced Land Management Specialists.

321. Information education and communication materials (facts sheets, brochures, flyers, posters, newspaper articles and messages in electronic media) will be prepared to guide subprojects implementers and to improve the understanding of resettlement issues within PIEQM.

114

Annex 11: Project Preparation and Supervision

Planned Actual PCN review July 27, 2009 September 10, 2009 Initial PID to PIC July 27, 2009 August 27, 2009 Initial ISDS to PIC July 27, 2009 August 25, 2009 Appraisal August 28, 2009 March 1, 2010 Negotiations November 15, 2009 April 29-30, 2010 Board/RVP approval December 20, 2009 June 17, 2010 Planned date of effectiveness September 10, 2010 Planned date of mid-term review November 2012 Planned closing date June 30, 2015 June 30, 2015 Key institutions responsible for preparation of PIEQM: Ministry of Education, Science, and Technology in close cooperation with DPs. Bank staff and consultants who worked on the operation included: Name Title Unit Carlos Rojas Simon Chirwa Thandiwe Gxaba Suzanne Morris Steve Mhone Muna Meky Ana Ruth Menezes Francis Mkandawire Marjorie Mpundu Maggie Mshanga Cheikh Sagna Ryoko Tomita Wilcox Maria Helena Anderson Donald Hamilton Hastings Mumba

Senior Education Specialist Procurement Specialist Senior Environmental Specialist Senior Finance Officer Procurement Specialist Human Development Specialist Education Specialist Financial Management Specialist Counsel Team Assistant ETC, Social Scientist Specialist Consultant Consultant Consultant Consultant

AFTED AFTPC AFTEN CTRFC AFTPC AFTED AFTED AFTM LEGAF AFMMW AFTCS AFTED

Bank funds expended to date on project preparation:

1. Bank resources: US$ 140,000 2. Trust funds: US$ 150,000 3. Total: US$ 290,000

Estimated Approval and Supervision costs:

Remaining costs to approval: US$ 70,000 Estimated annual supervision cost: US$ 160,000

115

Annex 12: Documents in the Operation File

Poverty Reduction and Development Plans 1. Ministry of Development Planning and Cooperation 2006. Malawi Growth and Development

Strategy 2006-22, 2006.

2. Ministry of Finance 2007. Malawi Development Assistance Strategy 2006-2011

Education Sector Plans and Reviews

3. Ministry of Education, Science & technology, 2009. Education Sector Implementation Plan 2009-2013, ESIP.

4. Ministry of Education, Science & Technology, 2009. Annual Work Plan and Budget 2009-2010.

5. Ministry of Education, Science & Technology, 2009. Annual Procurement Plan 2009-2010

6. Ministry of Education, Science & Technology, 2009. Education Country Stratus Report 2008-2009.

7. Ministry of Education, Science & Technology / SACMEQ, 2005. Malawi SACMEQ II Study

8. Ministry of Education, Science and Technology, 2009. Joint Financing Arrangement

9. Ministry of Education, Science and Technology, 2009. Memorandum of Understanding

10. Ministry of Finance, 2006. Malawi Public Expenditure Review.

11. Ministry of Finance, (2009). Guidelines for Institutionalizing Sector Working Groups to Strengthen the Implementation of the Malawi Growth and Development Strategy.

Education Cost and Finance Simulation Models

12. Ministry of Finance, 2009. Medium Term Expenditure Framework and the 2009-10 Budget.

Sector Analyses and Consultant Reports

13. Kadzamira E. and Chibwana M. Gender and Primary Schooling in Malawi, Partnership for Strategic Resource Planning for Girls’ Education in Africa. FAWE and IDS, 2004.

14. Ministry of Economic Planning and Development. 2008 Public Expenditure Tracking Survey, Education and Health, 2009.

15. Ministry of Economic Planning and Development. Malawi Millennium Development Goals Report 2008.

16. UNICEF, 2008. Gender Audit of the Education Sector.

116

Social Support Policy

17. Achtell, Ernest and Davey, James. Concern World Wide Malawi- Food & Cash Transfer

(FACT) Project- Tracing of Project evolution, planning and implementation, 2005.

18. Alesina, Alberto and Rodrik, Dani. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May 1994.

19. Angrist, Joshua and Lavy, Victor. "New Evidence on Classroom Computers and Pupil Learning," NBER Working Papers 7424, National Bureau of Economic Research, Inc. 1999.

20. Baird, Sarah McIntosh, Craig., and Özler, Berk. “Designing Cost-Effective Cash Transfer Programs to Boost Schooling in Sub-Saharan Africa,” World Bank Policy Research Working Paper, no. WPS 5090, the World Bank, 2009.

21. Baird, Sarah., Chirwa, Ephraim,. McIntosh, Craig., and Özler, Berk, “The Short-Term Impacts of a Schooling Conditional Cash Transfer Program on the Sexual Behavior of Young Women,” Health Economics, forthcoming. (Published Online: Nov 27 2009 8:44AM. DOI: 10.1002/hec.1569), 2009.

22. Bedi, A.S. and J.H.Y. Edwards. 'The Impact of School Quality on Earnings and Educational Returns: Evidence from a Low-Income Country', Journal of Development Economics 68(1): pp.157-185, 2002.

23. Brewin, Michael. Associate Consultant, ACG Ltd Concern. World Wide Malawi. Base line

Survey Report for Dowa Emergency Cash Transfer (DECT), 2006.

24. Card, David. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September, 2001.

25. Card, David. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier, 1999.

26. Caselli, Francesco., Esquivel, Gerardo., and Lefort, Fernando. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September, 1996.

27. Das, Jishnu and Hammer, Jeffrey. "Money for nothing: the dire straits of medical practice in Delhi, India," Policy Research Working Paper Series 3669, The World Bank, 2005.

28. Devereux, Stephen., Mvula, Peter., and Solomon, Colette. Evaluation of Concern World Wide’s Food & Cash Transfer Project in three districts in Malawi, June 2006.

117

29. Duflo, Esther. "The Medium Run Effects of Educational Expansion: Evidence from a Large School Construction Program in Indonesia," NBER Working Papers 8710, National Bureau of Economic Research, Inc. 2002.

30. Duflo, Esther., Dupas, Pascaline., and Kremer, Michael. Additional Resources versus Organizational Changes in Education: Experimental Evidence from Kenya, 2009.

31. Gertler, Paul., Patrinos, Harry., and Rubio-Codina, Marta. "Empowering parents to improve

education : evidence from rural Mexico," Policy Research Working Paper Series 3935, The World Bank, 2008.

32. Glewwe, Paul. "Schools and Skills in Developing Countries: Education Policies and Socioeconomic Outcomes," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 436-482, June 2002.

33. Glewwe, Paul. "The relevance of standard estimates of rates of return to schooling for education policy: A critical assessment," Journal of Development Economics, Elsevier, vol. 51(2), pages 267-290, December 1996.

34. Glewwe, Paul. "Why Does Mother's Schooling Raise Child Health in Developing Countries? Evidence from Morocco." Journal of Human Resources 34(1):124-159, 1999.

35. Glewwe, Paul and Kremer, Michael. "Schools, Teachers, and Education Outcomes in Developing Countries," Handbook of the Economics of Education, Elsevier, 2006.

36. Gupta, N and and Mahy, M. “Adolescent childbearing in sub-Saharan Africa: can increased schooling alone raise ages at first birth? Demogr, Res, 2003.

37. Hanushek, Eric A. and Kimko Dennis D. "Schooling, Labor-Force Quality, and the Growth of Nations," American Economic Review, American Economic Association, vol. 90(5), pages 1184-1208, December 2000.

38. Hanushek, Eric A. & Luque, Javier A. "Efficiency and equity in schools around the world," Economics of Education Review, Elsevier, vol. 22(5), pages 481-502, October 2003.

39. Islam, Nazrul. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of

Economics, MIT Press, vol. 110(4), pages 1127-70, November 1995.

40. Jimenez, Emmanuel and Sawada, Yasuyuki. "Does Community Management Help Keep Kids in Schools? Evidence Using Panel Data from El Salvador's EDUCO Program," CIRJE F-Series CIRJE-F-236, CIRJE, Faculty of Economics, University of Tokyo, 2003.

41. Jolliffe, Dean. "Skills, Schooling, and Household Income in Ghana," World Bank Economic Review, Oxford University Press, vol. 12(1), pages 81-104, January 1998.

42. Keatinge, Jo and Amoaten, Susan. Concern World Wide Malawi- Malawi Case Study – Main streaming HIV within a Humanitarian response, 2006.

118

43. Knight, John, B. and Sabot, Richard. H. “Education Productivity and Inequality, The East African Natural Experiment, A World Bank Research Publication, 1990.

44. Krueger, Alan and Lindahl, Mikael. "Education for Growth: Why and For Whom?" Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section, 2000.

45. Krueger, Alan B. and Whitmore, Diane M. "The Effect of Attending a Small Class in the Early Grades on College-Test Taking and Middle School Test Results: Evidence from Project STAR," Economic Journal, Royal Economic Society, vol. 111(468), January 2001.

46. Muralidharan, Karthik and Sundararaman, Venkatesh. "Teacher Performance Pay: Experimental Evidence from India," NBER Working Papers 15323, National Bureau of Economic Research, Inc., 2009.

47. Mutharira, Bingu W., the President of Malawi His Excellency. National Social Support Policy, “a Right for All”, August 2009.

48. OIBM and Malswitch. Technical Evaluation for Concern World Wide Malawi & DfID of the Dowa Emergency Cash Transfer (DEXT).

49. Persson, Torsten and Tabellini, Guido. "Is Inequality Harmful for Growth?" American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June 1994.

50. Piketty, Thomas., Postel-Vinay, Gilles., and Rosenthal, Jean Laurent. "Wealth Concentration in a Developing Economy: Paris and France, 1807-1994," CEPR Discussion Papers 4631, C.E.P.R. Discussion Papers, 2004.

51. Pritchett, Lant. "Divergence, Big Time, "Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, summer 1997.

52. Psacharopoulos, George and Patrinos, Harry Anthony. "Returns to investment in education: a further update," Policy Research Working Paper Series 2881, The World Bank, 2002.

53. Shawa, Abbie M., (Minister for MDPC) Ministry of Development, Planning & Cooperation MDPC. National Social Protection Policy Program, August 2009.

54. Temple, Jonathan. "A positive effect of human capital on growth," Economics Letters, Elsevier, vol. 65(1), pages 131-134, October 1999.

55. Woods, Eric and Mvalo, William. Construction Impact Report 080207, 2007.

OTHER PAPERS and Data Sources

56. Ministry of Education, Science and Technology, 2008. Education Statistics.

57. Ministry of Education, Science & Technology / GTZ, 2008. Capacity Gap Analysis, Primary Education Sub-sector.

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58. Ministry of Education, Science & Technology / GTZ, 2009. Capacity Gap Analysis, Secondary Education Sub-sector.

59. Republic of Malawi, 2009. Ministry of Education Science and Technology. Financial Management Assessment and Arrangements for the Proposed Education Sector Project.

60. UNICEF and UNDP, 2008. Malawi Capacity Needs Assessment of Monitoring and Evaluation in the Ministry of Education, Science and Technology. Report prepared by ATOS consulting.

61. World Bank and Development Partners, 2009. Financial Management Assessment.

62. World Bank, 2009. Procurement Capacity Assessment.

63. World Bank, 2009. Environmental and Social Management Framework.

64. World Bank 2008, Resettlement Policy Framework.

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Annex 13: Statement of Loans and Credits

Original Amount in US$ Millions

Difference between expected

and actual disbursements

Project ID

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

P107303 2009 MW - PRSC 2 0.00 30.00 0.00 0.00 0.00 30.86 0.00 0.00

P110446 2008 MW-3rd Social Action Fund APL II (FY08)

0.00 50.00 0.00 0.00 0.00 47.19 6.17 0.00

P105256 2008 MW-Ag Sector Development SIL (FY08)

0.00 32.00 0.00 0.00 0.00 31.58 0.00 0.00

P096336 2007 MW-Sec Natl Water Dev Project SIL (FY07)

0.00 50.00 0.00 0.00 0.00 42.08 1.23 0.00

P103773 2007 MW-Bus. Env. Strengthening SIL (FY07)

0.00 15.00 0.00 0.00 0.00 10.49 1.07 0.00

P057761 2006 MW-Infrastr Srvcs SIM 0.00 40.00 0.00 0.00 0.00 34.02 9.50 4.26

P084148 2006 MW-Irrig, Rural Lvlihds & Agr SIL (FY06)

0.00 40.00 0.00 0.00 0.00 23.71 11.50 1.75

P070823 2005 MW-Edu Sec Supt SIL 1 (FY05)

0.00 32.20 0.00 0.00 0.00 9.43 -10.16 0.00

P075247 2004 MW-Com Based Rural Land Dev (FY04)

0.00 27.00 0.00 0.00 0.00 0.79 0.24 0.00

P078408 2003 MW-Fin Mgmt, Transpar & Account (FY03)

0.00 23.70 0.00 0.00 0.00 3.92 1.02 0.00

P070235 2001 Regional Trade Fac. Proj. - Malawi

0.00 15.00 0.00 0.00 0.00 6.73 4.14 0.00

Total: 0.00 354.90

0.00 0.00 0.00 240.80 24.71

6.01

121

MALAWI STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval

Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2000 NICO 0.00 0.52 0.00 0.00 0.00 0.52 0.00 0.00

Total portfolio: 0.00 0.52 0.00 0.00 0.00 0.52 0.00 0.00

Approvals Pending Commitment

FY Approval

Company Loan Equity Quasi Partic.

Total pending commitment:

0.00 0.00 0.00 0.00

122

Annex 14: Country at a Glance

Sub-P OVER T Y and SOC IA L Saharan Lo w-

M alawi A frica inco me2007Population, mid-year (millions) 13.9 800 1,296GNI per capita (Atlas method, US$) 250 952 578GNI (Atlas method, US$ billions) 3.5 762 749

A verage annual gro wth, 2001-07

Population (%) 2.6 2.5 2.2Labor force (%) 2.3 2.6 2.7

M o st recent est imate ( latest year available, 2001-07)

Poverty (% of population below national poverty line) .. .. ..Urban population (% of to tal population) 18 36 32Life expectancy at birth (years) 48 51 57Infant mortality (per 1,000 live births) 76 94 85Child malnutrition (% of children under 5) 18 27 29Access to an improved water source (% of population) 76 58 68Literacy (% of population age 15+) .. 59 61Gross primary enro llment (% of school-age population) 119 94 94 M ale 117 99 100 Female 121 88 89

KEY EC ON OM IC R A T IOS and LON G-T ER M T R EN D S

1987 1997 2006 2007

GDP (US$ billions) 1.2 2.7 3.2 3.6

Gross capital formation/GDP 17.3 11.6 23.7 28.5Exports of goods and services/GDP 25.5 21.4 17.0 14.9Gross domestic savings/GDP 14.9 -0.6 11.2 17.6Gross national savings/GDP .. -2.9 15.5 21.9

Current account balance/GDP -5.1 -14.5 -19.4 -15.0Interest payments/GDP 2.4 1.0 0.6 ..Total debt/GDP 115.5 83.6 26.9 ..Total debt service/exports 38.0 14.2 11.5 ..Present value of debt/GDP .. .. 5.5 ..Present value of debt/exports .. .. 22.3 ..

1987-97 1997-07 2006 2007 2007-11(average annual growth)GDP 3.3 2.1 7.9 7.4 4.7GDP per capita 1.0 -0.6 5.2 4.7 4.4Exports of goods and services 3.5 -7.9 -11.8 -1.1 -5.3

ST R UC T UR E o f the EC ON OM Y

M alawi

Low-income group

D evelo pment diamo nd*

Life expectancy

Access to improved water source

GNIpercapita

Grossprimary

enro llment

M alawi

Low-income group

Eco no mic rat io s*

Trade

Indebtedness

Domesticsavings

Capital formation

123

1987 1997 2006 2007(% of GDP)Agriculture 49.0 32.6 34.2 34.3Industry 24.9 18.1 19.7 20.4 M anufacturing 16.8 13.5 13.6 14.1Services 26.1 49.3 46.1 45.3

Household final consumption expenditure 66.0 83.1 77.0 70.8General gov't final consumption expenditure 19.1 17.5 11.8 11.6Imports of goods and services 27.8 33.6 29.4 25.8

1987-97 1997-07 2006 2007(average annual growth)Agriculture 4.9 1.2 11.9 5.9Industry 3.1 2.0 1.0 8.5 M anufacturing 2.2 0.0 5.8 9.1Services 2.5 1.9 7.9 4.0

Household final consumption expenditure 7.6 -0.6 -5.0 -11.6General gov't final consumption expenditure -2.6 3.5 11.7 5.1Gross capital formation -5.7 17.1 12.0 31.8Imports of goods and services 2.7 1.7 -13.1 -4.2

Note: 2007 data are preliminary estimates.

This table was produced from the Development Economics LDB database.

* The diamonds show four key indicators in the country (in bo ld) compared with its income-group average. If data are missing, the diamond will be incomplete.

-20

0

20

40

60

80

02 03 04 05 06 07

GCF GDP

Gro wth o f capital and GD P (%)

-40

-20

0

20

40

02 03 04 05 06 07

Exports Imports

Gro wth o f expo rts and impo rts (%)

Malawi

P R IC ES and GOVER N M EN T F IN A N C E1987 1997 2006 2007

D o mestic prices(% change)Consumer prices 25.2 15.2 10.1 7.5Implicit GDP deflator 16.7 20.8 18.0 7.6

Go vernment f inance(% of GDP, includes current grants)Current revenue 22.3 14.4 17.4 13.1Current budget balance -2.1 -4.1 3.8 -5.1Overall surplus/deficit -10.8 -8.6 -3.7 -14.0

T R A D E1987 1997 2006 2007

(US$ millions)Total exports (fob) 278 530 467 464 Tobacco 173 346 245 233 Tea 28 42 43 50 M anufactures 39 72 114 122Total imports (cif) 291 783 1,094 1,079 Food 2 168 234 231 Fuel and energy 40 75 104 103 Capital goods 82 260 363 358

Export price index (2000=100) 102 123 102 102Import price index (2000=100) 64 99 96 95Terms of trade (2000=100) 159 125 106 108

0

500

1,000

1,500

01 02 03 04 05 06 07

Exports Imports

Expo rt and impo rt levels (US$ mill.)

0

20

40

60

80

02 03 04 05 06 07

GDP def lator CPI

Inf lat io n (%)

124

B A LA N C E o f P A YM EN T S1987 1997 2006 2007

(US$ millions)Exports o f goods and services 301 569 594 647Imports o f goods and services 324 895 1,344 1,333Resource balance -23 -326 -750 -686

Net income -57 -41 -38 -22Net current transfers .. -19 173 177

Current account balance -60 -386 -615 -531

Financing items (net) 86 333 649 572Changes in net reserves -26 53 -34 -40

M emo :Reserves including gold (US$ millions) 58 146 142 227Conversion rate (DEC, local/US$) 2.2 16.4 136.0 140.0

EXT ER N A L D EB T and R ESOUR C E F LOWS1987 1997 2006 2007

(US$ millions)Total debt outstanding and disbursed 1,367 2,226 850 .. IBRD 104 34 0 0 IDA 509 1,375 157 178

Total debt service 116 85 90 .. IBRD 14 8 0 0 IDA 5 18 37 1

Composition of net resource flows Official grants 138 118 2,664 .. Official creditors 83 131 34 .. Private creditors -11 -1 -2 .. Foreign direct investment (net inflows) 0 15 30 .. Portfo lio equity (net inflows) 4 0 0 ..

World Bank program Commitments 78 16 0 27 Disbursements 55 107 46 14 Principal repayments 8 15 26 0 Net flows 47 92 20 14 Interest payments 12 12 11 1 Net transfers 35 80 10 12

Note: This table was produced from the Development Economics LDB database. 9/24/08

-25

-20

-15

-10

-5

0

01 02 03 04 05 06 07

C urrent acco unt balance to GD P (%)

G: 64

D: 265

C: 19

B: 157F: 8

E: 337

A - IBRDB - IDA C - IM F

D - Other mult ilateralE - BilateralF - PrivateG - Short-term

C o mpo sit io n o f 2006 debt (US$ mill.)

125

Annex 15: Map No. 33440