Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 47225-AM

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT IN THE AMOUNT OF SDR 17.0 MILLION

(US$25.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF ARMENIA

FOR A

SECOND EDUCATION QUALITY AND RELEVANCE PROJECT (APL 11)

IN SUPPORT OF THE EDUCATION QUALITY AND RELEVANCE (APL) PROGRAM

April 15,2009

Human Development Sector Unit Europe and Central Asia Region

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

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CURRENCY EQUIVALENTS (Exchange Rate Effective February 28,2009)

Currency Unit = Armenian Dram AMD 306.00 = US$l.OO

SDR 1 = US$1.476090

ANQA APL ATC CEP ECD EMIS ESDP GDP ICTs IDA ISDS TI MoES MoF NaCET os1 SAPPU PCN PDO PID P IRL S PISA PIU MED TEMIS TIMSS UNICEF VET

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS Armenian National Quality Assurance Agency Adaptable Program Lending Assessment and Testing Center Center for Education Projects (Project Implementation Unit) Early Childhood Development Education Management Information System Education Sector Development Project Gross Domestic Product Information and Communication Technologies International Development Association Integrated Safeguard Data Sheet Transparency International Ministry o f Education and Science Ministry o f Finance National Center o f Education Technology Open Society Institute Strategic Analysis, Planning and Personnel Unit Project Concept Note Project Development Objective Project Information Document Progress in International Reading Literacy Study Programme for International Student Assessment Project Implementation Unit Marz Education Department Tertiary Education Management and Information System Trends in International Mathematics and Science Study United Nations Children’s Fund Vocational Education and Training

Vice President: Shigeo Katsu Country Director: Asad Alam

Sector Director: Tamar Manuelyan Atinc Country Manager: Aristomene Varoudakis

Sector Manager: Mamta Murthi Task Team Leader: Juan Manuel Moreno

ARMENIA Second Education Quality and Relevance Project (APL 11)

CONTENTS

Page

I . STRATEGIC CONTEXT AND RATIONALE ......................................................................... 1 A . B . C .

I1 . A . B . C . D . E . F .

I11 . A . B . C . D . E .

IV . A . B . C . D . E . F . G .

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

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

Higher level objectives to which the project contributes ........................................................... 3

PROJECT DESCRIPTION .................................................................................................... 3 Lending instrument ................................................................................................................... $ 4

Program objective and Phases .................................................................................................... 4

Project development objective and key indicators ..................................................................... 5 Project components ................................................................................................................... -6

Alternatives considered and reasons for rejection .................................................................... 10

Institutional and implementation arrangements ....................................................................... 11

Monitoring and evaluation of outcomeshesults ....................................................................... 12

Sustainability ............................................................................................................................ 12

Lessons learned and reflected in the project design ................................................................... 9

IMPLEMENTATION ........................................................................................................... 11

Critical risks and possible controversial aspects ...................................................................... 14

Credit conditions and covenants .............................................................................................. 15

APPRAISAL SUMMARY ..................................................................................................... 15 Economic and financial analyses ............................................................................................. 15

Technical .................................................................................................................................. 15

Fiduciary .................................................................................................................................. 16

Social ........................................................................................................................................ 16

Environment ............................................................................................................................. 16

Safeguard policies .................................................................................................................... 17

Policy Exceptions and Readiness ............................................................................................. 17

Annex 1: Country and Sector o r Program Background .................................................................. 18

Annex 2: M a j o r Related Projects Financed by the Bank and/or other Agencies .......................... 23

Annex 3: Results Framework and Moni tor ing ................................................................................. 24

Annex 4: Detailed Project Description .............................................................................................. 29

Annex 5: Project Costs ........................................................................................................................ 44

Annex 6: Implementation Arrangements ......................................................................................... 45

Annex 7: Financial Management and Disbursement Arrangements ............................................. 50

Annex 8: Procurement Arrangements .............................................................................................. 56

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

Annex 10: Safeguard Policy Issues .................................................................................................... 73

Annex 11 : Project Preparation and Supervision .............................................................................. 74

Annex 12: Documents in the Project F i l e .......................................................................................... 75

Annex 13: Statement of Loans and Credits ...................................................................................... 76

Annex 14: Country at a Glance .......................................................................................................... 77

ARMENIA

Source RECIPIENT International Development Association (IDA) Total:

SECOND EDUCATION QUALITY AND RELEVANCE PROJECT (APL#2)

Local Foreign Total 5.09 1.17 6.26

20.33 4.67 25.00 25.42 5.84 3 1.26

PROJECT APPRAISAL DOCUMENT

:Y innual hmulative

EUROPE AND CENTRAL ASIA

2010 2011 I 2012 2013 2014 2015 ' 2.00 3.00 I 6.00 6.00 5.30 2.70 2.00 5.00 11.00 17.00 22.30 25.00

ECSHD

Date: April 15, 2009 Country Director: Asad Alam Sector ManagedDirector: Tamar Manuelyan Atinc

Team Leader: Juan Manuel Moreno Olmedilla Sectors: Secondary education (55%); Tertiary education (25%); Pre-primary education (20%) Themes: Education for the knowledge economy (P); Education for al l (S) Environmental screening category: Not Required Project ID: PI07772

Lending Instrument: Adaptable Program Loan

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

Recipient: Republic o f Armenia Armenia

Responsible Agency: Ministry o f Education and Science Government House 3 Armenia Tel: 3741 526602 www. edu.am

Expected closing date: November 30, 20 14 Does the project depart from the CAS in content or other significant respects? ReJ PAD I. C. [ ]Yes [XINO

Does the project require any exceptions from Bank policies? ReJ PAD IKC. [ ]Yes [X INO

Have these been approved by Bank management? [ ]Yes [ IN0 I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Re$ PAD ZZZ. E. Does the project meet the Regional criteria for readiness for implementation? Re$ PAD ZV. G. Project development objective Re$ PAD ZZ.C., Technical Annex 3 The proposed Project Development Objectives are: (i) enhance school learning in general education and improve the school readiness of children entering primary education; and (ii) support the integration of Armenian Tertiary Education system into the European Higher Education Area. Project description [one-sentence summary of each component] Re$ PAD ILD., Technical Annex 4 Component 1. Enhancing the Quality of General Education (total estimated cost: US$I9.66 million of which US$15.73 million are IDA financing)

Sub-component 1. Promoting School Readiness and equal opportunities at the start of General Education (US$2.49 million IDAfinancing;). The main objective of this sub-component i s to increase the level of school readiness among Armenian children, with a focus on the poorest and most vulnerable communities.

Sub-component 2. Supporting further improvements in the quality of education through improved teacher in-service training and professional development (US$3.53 million IDA financing). The objective i s to improve quality of teaching through (a) developing a national system for teacher and principal professional development, and (b) creating a school improvement network.

Sub-component 3. Continuing support to the integration of ICT in teaching and learning process (US3.72 million I D A financing;), The objective of this sub-component i s ensure that al l schools in Armenia are equipped with up-to-date technologies, connected interactively through the Internet, and ready to use al l these technologies effectively to deliver the curriculum and to enhance and facilitate student learning.

[ ]Yes [X INO

[ ]Yes [X INO

[XIYes [ ] N o

Sub-component 4. Supporting the implementation of high-school reform (USSS. 99 million IDA financing$. The objective of this sub-component i s to support teachers and schools in the implementation of the 12-year general education system and the high-school reform, including the curriculum and assessment reforms, so that school-leavers will be equipped with knowledge and skills comparable to those of 18 year-old in OECD countries.

Component 2. Supporting tertiary education reforms in the context of Bologna Agenda (total estimated cost: US$7.53 million of which US$6.02 million IDA financing)

Sub-component 2. I : Establishment and Strengthening of the National Quality Assurance System (US$2.47 mill ion I D A financing;). The objective of this sub-component i s to establish and strengthen the capacity of the national Quality Assurance system for tertiary education.

Sub-component 2.2: Developing a Tertiary Education Management Information System (US$O. 39 million I D A financing). The objective of this sub-component i s to support the creation of an integrated Tertiary Education Management Information System (TEMIS) as an effective tool to support policy planning, management, monitoring and evaluation of performance of the sector both at the national and university levels.

Sub-component 2.3: Strengthening the Capacity to Implement a Sustainable Financing System (US$1.93 mill ion IDA financing;). The objective of this sub-component i s to support the government in defining and putting in place a sustainable financing system for tertiary education.

Sub-component 2.4: Reforming Pre-service Teacher Education (US$1.22 million I D A financingj. The

objective of this sub-component i s to support development of initial teacher education in the spirit of Bologna Process through (a) longer-term twinning arrangement between the Armenia State Pedagogical University (and the Consortium of Pedagogical Institutes, including Yerevan State University) and an international higher education institution, and (b) upgrading necessary teaching facilities and equipment in these institutes to support modernization of primary school teacher education.

Component 3: Project Management, Monitoring and Evaluation (total estimated cost: US$4.06 million of which US$3.25 million IDAfinancing. The key objectives of this component wil l be to: (i) provide continued support o f mainstreamed arrangements for the management and administration and monitoring of project activities; and (ii) institutionalize key management functions in the MoES covering policy planning, monitoring and evaluation.

Which safeguard policies are triggered, if any? Re$ PAD I K F., Technical Annex I O The Project has been classified as category C for its low impact on the environment.

Significant, non-standard conditions, if any, for: ReJ PAD III, F. Board presentation:

None

Credit effectiveness Condition: The Recipient has approved the Operational Manual, acceptable to the Association.

Credit Disbursement Condition: The Recipient has hired the Component and Subcomponent Heads, satisfactory to the Association,

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Armenia’s poverty and extreme poverty rates declined in 2006 to 26.5 percent and 4.1 percent of the population, respectively (from 34.6 percent and 6.4 percent, respectively, in 2004). Inequality also decreased, as measured by a reduction in the Gini coefficient (income concentration) from 0.395 in 2004 to 0.369 in 2006. Prudent fiscal and monetary policies were instrumental in maintaining macroeconomic stability and contributing to poverty reduction. Real GDP grew by 13.1 percent per year on average over the period 2003-07, more than twice as much as the PRSP-1 target. Inflation averaged 3.9 percent during the same period, which was very low compared with similar economies in the region. Social expenditures also increased to 4.7 percent of GDP, well above the projected PRSP-1 goal of 3.0 percent. Increased resources to the social sectors have improved the access to and quality of general secondary education, and have led to improvements in overall utilization and geographic access to basic health services. However, the worsening international economic environment and growing domestic imbalances represent significant challenges to this outlook: GDP growth i s in fact projected turn negative in 2009 and stay depressed in 2010. Revenues are expected to shrink and budget levels revised considerably from what was planned in the PRSP-2. It i s important that the Government keeps its medium term agenda as far as the education sector i s concerned in sight even as growth slows down as improvements in the education system will be critical for Armenia’s growth prospects in the medium and long term.

2. Education has been a priority sector for public investment in Armenia since the late 1990s. The Government has aimed to reduce poverty by increasing access and improving quality of general secondary education (grades 1 -9), and boosted public spending on that sub-sector. The focused investment has contributed considerably to the development of general secondary education, but has also resulted in the relative neglect o f other sub-sectors, Le., preschool and tertiary education. The challenge that the proposed Project would address i s to sustain and extend the accomplishments in general secondary education with second-generation quality-oriented reforms while at the same time addressing equity and quality concerns in both preschool and tertiary education. In this regard, Armenia can take advantage of the demographic decline affecting general education to strongly pursue the education quality agenda and to also respond to the increasing demand for preschool and tertiary education (See World Bank, 2008, Public Expenditure Review: Education Sector).

3. The proposed project would build on the achievements o f the Education Quality and Relevance Project (APL I), while at the same time extending the original APL agenda to incorporate both preschool and higher education. The following are some of the key accomplishments o f APL I: (i) the development of the National Curriculum Framework, standards and syllabi and implementation of the new curriculum up to the gth grade; (ii) the creation of the Assessment and Testing Center and the introduction of a transparent examination system and enhanced capacity to assess student performance; (iii) the establishment of the National Center of Education Technology and creation of school learning centers through an effective Computer Revolving scheme; (iv) a massive and significant in-service teacher training effort carried out through an improved National Institute of Education; and (v) consolidation of a successful per capita funding system resulting in substantial efficiency gains, increased student-teacher ratios, and enhanced school autonomy.

Key Development Issues

4. The government has boosted public expenditure on education in the recent years, and is committed to further increase it in the next decade. In the first Poverty Reduction Strategy Paper (PRSP) in 2003, the government planned to boost public education spending to 4.0 percent of GDP by 2015, as an important pillar of i t s poverty reduction strategy. Indeed, between 2003 and 2008, the consolidated budget for education increased by 26 percent per annum at nominal (or 20 percent at real) from AMD 35 billion (US$61 million) to AMD 111 billion (US$362 million). In particular, the government has made a concerted effort to allocate more to general secondary education in order to improve access to and quality of education at this level. The second PRSP, prepared in 2008, aimed to raise education spending further

1

up to 4.5 percent of GDP by 2021.’ However, despite i t s strong commitment to education, the global economic crisis might force the government to slow down the overall spending increase and be more selective as to where to invest more. This could in turn become an opportunity to further improve effectiveness and efficiency in education financing. For instance, instead of raising the salary level for every teacher, the government could introduce differentiated salary scales based on performance. The expected demographic transition (declining numbers of school-age (6-1 7 year-olds) population) over the next five years or so requires the government to adjust staffing. These savings in recurrent spending are crucial to pursue planned capital investments in relation to the High School reform and in the Education and ICT program, to increase non-salary recurrent spending for quality improvement in general secondary education, and also to increase total spending on the other underfunded sub-sectors, i ,e. , preschool and tertiary education.

5. Addressing equity concerns, particularly in preschool and higher education, is important to ensure that the poor participate in the benefits of growth. The enrollment rate and the quality of preschool education in kindergartens have dropped sharply since the funding and management responsibility was transferred from the central government to local governments in 1996. In 2006, the rate was 22 percent, (28.5 percent in urban areas and 10.5 percent in rural areas). There were 1,100 kindergartens functioning in 1996, but only 623 in 2007. Al l this i s seriously affecting the school readiness of Armenian first graders. Most local governments simply will not be able to finance the increase of enrollment rates of preschool age children (4 to 6 years-olds) up to 90 percent by 2015, the goal set by the recently approved preschool strategy. In particular, the economic crisis may force many local communities, especially poor ones, to cut down spending on preschool education. There i s urgent need for viable models of preschool education delivery and allocation of additional funds in order to expand and develop preschool services in al l marzes, to meet the national goal.

6. Tertiary Education has seen a dramatic decline in funding and governance and quality assurance are still weak. Government funding for higher education i s well below the regional average, which partly accounts for the fact that enrollment rates have increased only from 20 to 24 percent since independence. Public financing in tertiary education as a percentage of GDP and as a percentage of total education spending i s only about 0.2 percent and 8-9 percent, respectively, compared with 1.3 percent and 20 percent in the OECD. State universities have increasingly relied on tuition fees as the weight of state funding has declined sharply in the last decade. The high dependence on tuition fees makes higher education financing extremely volatile. Moreover, governance of tertiary education i s weak and in particular fai ls to tackle what appears to be pervasive corruption in the sub-sector. Quality assurance policies and institutions also need systematic support for Armenia to be increasingly aligned with Bologna goals in that area.

7. Tuition fees in public universities amount to 30-40 percent of per capita income, as compared to, for instance, 11 percent in the US or Japan. High tuition fees limit access to higher education among the poor. Poor households cannot afford tuition fees for fee-paying places in state or private universities. Without easy access to other financing sources, merit-based full-scholarships in state universities are almost the only way for these households to enroll their children in higher education, but the number of those scholarships i s extremely limited. Moreover, they are not easily accessed by poor households who cannot afford private tutoring, so their children tend to perform less well in university entrance examinations. In addition, many more families that are affected by the recent economic crisis may not be able to afford the high tuition fees without access to student loans or need-based scholarships.

8. Completing the introduction of 12-year general secondary education system calls for a substantial reform of upper secondary schools, which i s already under way and needs to be carefully monitored and aligned with the also ongoing reform of VET institutions and programs at that same level, The high school consolidation plan will be costly in the short to medium term, but given the sharp decline and subsequent slow growth of the school-age population in the foreseeable future, it i s necessary. It wi l l be crucial, however, to keep in place mitigation measures to help rural children, especially girls, who might not have easy access to the new high schools. The new learning environment also demands more

‘ The Government o f Armenia, 2008, Program for Sustainable Development (revised version o f PRSP-2). 2

investments on the effective use of ICT and ongoinghimely upgrade of technologies and software, which entails further efforts in teacher training, production of web-based teaching and learning materials and creation of e-learning educational environments. Despite their importance and urgency of the high school reforms and the effective use of ICT, these reforms which require substantial capital investment could face a risk of budget shortages under the current economic crisis. It i s s t i l l uncertain how the crisis might pressure on capital spending as a whole, but as it becomes clearer, while the MOES will need to secure the planned investment budget as much as possible, it may also need to adjust the investment scale and schedule to maximize the benefits of the reforms and to minimize any potential negative impacts on students.

9. The government is ready to accelerate the implementation of preschool, general and tertiary education reforms. The Armenian government has recently approved a National Strategy for Preschool Education for 2008-2015, and the Strategic Program for upper secondary education reform. In tertiary education, the Government aims to increase access and improve quality and relevance to help the country build a competitive knowledge economy. Having joined the Bologna Process at a relatively late stage (in 2005), Armenia will need to commit substantial organizational and financial resources in an effort to close the gap with other countries that have had more time to establish the new system. An important step forward has been the creation, in November 2008, of the Armenian National Quality Assurance Agency. The project will therefore focus its support on the implementation of those plans, extending what has been achieved under APL I and providing support in the areas of preschool and tertiary education.

B. Rationale for Bank involvement

10. The proposed project i s fully in line with the goals of the current Country Assistance Strategy (CAS) dated June 30, 2004, as well as those of the Sustainable Development Program (SDP), which was discussed by the Board on December 2, 2008. The CAS aims to support the government in improving quality and efficiency of basic public services and to reduce non-income poverty through education, health and infrastructure reforms. The SDP further prioritizes activities to reduce poverty and ensure universally accessible quality education from pre-school to higher education. The proposed project will support these objectives, which will allow a larger share of the population to benefit from economic growth. Further, the Bank has recently carried out a Public Expenditure Review focused on Tertiary Education, and has followed up with technical assistance in the areas of Quality Assurance and Higher Education financing. This has provided a solid foundation to the expanded agenda for APL 11. Finally, the proposed investment activities are likely to be well aligned with the DPO that i s now under preparation, with some triggers and milestones of the DPO reinforcing key actions of strategic importance for APL 11, particularly with regard to overall financing of education in the budget as well as specific targets for Preschool and Higher Education.

C. Higher level objectives to which the project contributes

11, The project i s deeply embedded in both the existing CAS framework and the country’s new Sustainable Development Program (see above). The Government continues to see this activity as a priority even in the current economic environment and the new Country Partnership Strategy (CPS), now under preparation, will refer to the proposed project as part of the FY09 deliverables. The new CPS i s expected to have two pillars-addressing near-term vulnerability and long-term competitiveness. The project’s support of Armenia’s medium-term and long-term development goal related to modernizing the education system i s consistent with the second of these. Armenia needs to strengthen the knowledge base and skills of i t s human capital. This i s an especially important dimension of the country’s long-term competitiveness strategy. Improving quality of secondary education and increasing access and quality of tertiary education are necessary for growth. Further, ensuring quality, relevance and equal opportunity in secondary and tertiary education requires an increasingly complex strategy with a shift in focus from inputs to processes and outcomes, and from a level-specific to a sector-wide perspective. The project will also serve the cross-cutting theme of governance by enhancing the capacity of the Ministry of Education and Science in the areas of policy formulation, personnel management and planning, in order to improve the use of financial, human and physical resources, and of monitoring and evaluation. It will also help to tackle specific governance and corruption issues in higher education, strengthen the information management system, and enhance communication with the public on educational issues.

3

11. PROJECT DESCRIPTION

A. Lending instrument

12. The lending instrument i s an Adaptable Program Loan (APL), financed by an IDA Credit in the amount of US$25.0 million equivalent, on standard IDA terms. The Government counterpart contribution i s estimated at US$6.26 million (of which US$5.32 million would be tax obligations), integrated within the annual government budget allocation for the education sector.

B. Program objective and Phases

13. The original APL framework was for a 10-year program, divided into three phases (4-3-3 years) at a total cost of US$51 million, including $44 million of IDA financing. The Program objective i s to improve the quality and relevance of the Armenian school system to meet the challenges of the knowledge society. Because of the strong performance under APL I and a clear reform direction for the next five years, it i s proposed to merge APLs I1 and I11 into a 5-year APL 11. As o f January 2009, al l seven triggers leading to the second phase of the APL have been met and, even more importantly, four of the five triggers established for the transition from the second to the third phase have also been fully met. (See Annex 1 for details). Thus, it can clearly be expected that the end-of-project objectives of the original APL wil l be achieved by the end of the 5-year reconfigured APL 11.

14. Quality and Relevance Reforms. Through the implementation of APL I, the government of Armenia has implemented key quality reforms, including the new National Curriculum and Syllabi, the unified university entrance examination and school-based assessment, the Computer Revolving Fund for information and communication technologies in schools, and a very effective in-service teacher training system. At the general secondary education level, Armenia’s national Sth and 1 Oth grade examinations have s t i l l not produced reliable indicators to measure students’ performance. However, the results o f TIMSS 2007 (4th and gth grade student achievement in Math and Science) clearly show that the quality of the education system has improved significantly over the past four years. In fact, Armenia is the only ECA country that obtains significantly better scores in all four categories in comparison to the results of 2003. While the Armenian tradition of Mathematics teaching i s likely to be an important underlying factor, APL 1 can legitimately take some credit for these results, as the effort carried out in curriculum reform and in training master trainers and primary and secondary teachers of Mathematics has been substantial.

1 5. Efficiency Reforms. Financing reforms implemented under APL I in general secondary education have boosted efficiency at the school level and enhanced school autonomy. Largely due to the introduction of the per capita financing scheme accompanied by financial autonomy at the school level, the majority o f general secondary schools have consolidated classes to the extent possible and there i s l i t t le room for further efficiency gains at the school level. Despite the continuous declines in enrollment, ratios for general secondary education started to increase in 2002 (although they are s t i l l quite low) primarily due to the implementation of the school rationalization and teacher redundancy programs. As the number of students, driven by demographic changes, declined by over 20 percent, the number of classes was reduced by 24 percent, teaching staff positions by 35 percent, and non-teaching staf f positions by 34 percent. The most dramatic reduction in teaching and non-teaching staff occurred between 2003 and 2005 when the optimization program was introduced, and it has continued even after 2005. This program has helped to increase student-teacher ratio (STR) from 10.8 in 2003 to 13.9 in 2006 and the average teaching load increased from 18 to 22 hours per week. Reduction of staf f helped the government to increase nominal wages and salaries and the share of non-salary allocations in school budgets, which in turn has allowed discontinuing practices such as the “school maintenance fund” (parent informal payments which were presented as compulsory).

1 6. Building Governance, Management, Planning and Monitoring Capacity. APL I focused on strengthening the existing and creation of new capacities to plan, implement and monitor the education reforms aimed at enhancing the quality of education and i t s provision. Improved governance and financial management through enhancing management capacity of schools and full-scale practice of professional leadership of school principals are among the priorities o f the policy reform under APLII. The role and the capacity of School Boards as key accountability instruments was strengthened under APL I and

4

allowed, among other things, to directly tackle corruption practices in general schools. Moreover, the high schools pilots financed by APL I have already made a difference in terms o f reducing private tutoring at that level and al l the dubious practices associated to that phenomenon.

17. This second phase of the APL will continue to focus on the reforms o f the general secondary education system. In doing so, it will also address key policy issues in both higher education and preschool education that are intimately related to those reforms. Thus, APL I1 entails a shift to a more comprehensive approach to the education sector in Armenia. The recently approved high-school reform will create a more diversified upper secondary education which in turn will also demand a more diversified tertiary education system, both with regard to institutions and specific study programs. The second-generation reforms related to the quality o f education in primary and secondary education will be strengthened if the school readiness o f Armenian children i s improved by the time they start their compulsory education. APL I1 will then be supporting the implementation o f the national program o f preschool education which was approved in 2008, the high-school reform, and strategic reforms in higher education within the context o f the Bologna declaration, signed by Armenia in 2005.

C. Project development objective and key indicators

18. The proposed Project Development Objectives are: (i) enhance school learning in general education and improve the school readiness o f children entering primary education; and (ii) support the integration o f Armenian Tertiary Education system into the European Higher Education Area. More specifically, in the next five years, the education system in Armenia should be able to achieve the following goals which the project can support:

e

e

e

0

e

19

Reverse the current deterioration - in enrollments and in quality - o f preschool education, thus improving the school readiness of Armenian six year-olds so that they can successfully complete primary and secondary education. Complete the implementation o f the 12-year general education system, including the curriculum and assessment reforms. Improve teacher quality through pre-service and in-service training, reforming Pedagogical Universities and Colleges, taking full advantage of the existing network of 52 School Centers, moving towards a school-based professional development system, and ensuring that teachers are ready to use the newly available teaching and learning materials, particularly modern school libraries, computer labs and web-based materials. Continue the reforms leading towards a system of school-based management. School principals will be prepared and empowered to carry out effectively the managerial and pedagogical leadership functions, with all schools in Armenia being able to implement their school development and improvement plans. In tertiary education, continue to improve quality in an increasingly diversified system with increased chances o f access. This i s to be achieved through the design o f a financing reform which sets the right incentives and regulations (competitive and performance-based funding) to allow tertiary institutions become more accountable for their performance and through the consolidation o f a new set o f policies and institutions for quality assurance.

'. To measure the impact of the proposed operation, a series o f outcome indicators have been identified: (i) increased preschool enrollments; (ii) improved school readiness among entering first graders in participating communities; (iii) improvement of learning outcomes o f gth graders as measured by TIMMS 201 1 and o f the 12'h graders by the Armenian unified examination, using the 2007 and 2008 results as the baseline, respectively; (iv) in higher education, enhanced program and institution accreditation and quality assurance as measured by the reports produced by the new Armenian National Quality Assurance Agency (ANQA) and eventually its acquiring the status of candidate member to the European Network o f Quality Assurance Agencies; and (v) standings o f Armenia in the Bologna Scorecard (both in the overall score and the partial scores related to quality assurance, recognition and program structure). These indicators will also be complemented with other indicators which are component-specific (See Annex 3).

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D. Project components

20. APL I1 aims at supporting the Government o f Armenia in two main endeavors: Enhancing the quality o f General Secondary Education and supporting Tertiary Education reforms in the context o f the Bologna Declaration. A summary o f project components costs, activities, and expected outputsh-esults follows:

Component 1. Enhancing the Quality of General Education (total estimated cost: US$19.66 million of which US$lS. 73 million are IDA financing)

Sub-component I. Promoting School Readiness and equal opportunities at the start of General Education (US82.49 million IDA financing). The main objective of this sub-component i s to increase the level o f school readiness among Armenian children, with a focus on the poorest and most vulnerable communities. More specifically, this sub-component will assist the Government in its effort to increase the number of children enrolled in preschool education and to increase the quality o f services provided. Approximately 8,750 children in total, ages 5-6, will benefit from participation in a kindergarten class, either through an enhanced existing preschool or through the establishment o f a KG classroom in the local primary school. As a result, it i s expected that these children will enter Grade 1 with a higher level of school readiness as measured by ED1 (Early Development Index).

140 poor and vulnerable communities will benefit from targeted grants that will allow them to enhance the quality o f preschool education provided in their existing structure ( i f they have one) or to establish a new KG classroom in the local primary school (if they do not have an operating preschool). They will also be expected to contribute to the financial sustainability and management o f these enhanced or new KG classrooms and will be empowered by the project to progressively become more autonomous through capacity building efforts in the areas o f community sensitization and fundraising for the purpose of preschool education.

Sub-component 2. Supporting further improvements in the quality of education through improved teacher in-service training and professional development (US$3.53 million IDA financing). The objective i s to improve quality o f teaching through (a) developing a national system for teacher and principal professional development, and (b) creating a school improvement network. This sub- component will provide teachers with better access to professional development opportunities that they need in order to improve teaching in schools. Teachers will benefit from this sub-component in two ways: On one hand, they will be offered in-service training and other professional development support directly by the government institutions as before. On the other hand, specific professional development grants will be made available to - potentially new - service providers so that they can design and deliver in-service training based on teachers’ needs.

This sub-component will also finance school improvement grants to schools enrolling in the School Improvement Network, training o f school principals to become both pedagogical leaders and managers in a school-based management system, technical assistance to support the reform o f the overall teacher and principal professional development policy (in the context o f the National Strategy for Teacher Education and Professional Development), and trainer and teacher guidebooks and other printed teaching materials.

Sub-component 3. Continuing support to the integration of ICT in teaching and learning process (US3.72 million IDA financing). The objective of this sub-component i s ensure that al l schools in Armenia are equipped with up-to-date technologies, connected interactively through the Internet, and ready to use al l these technologies effectively to deliver the curriculum and to enhance and facilitate student learning. This sub-component should fit into the overall government strategy for IT development in Armenia and will focus on strategic interventions not covered in the ambitious Education and ICT Program financed by the National Budget. Thus, the Computer Revolving Fund, as it has been working for almost five years, will not be needed in the future. Even more, APL I1 will not finance hardware for the school computer labs, and will rather focus on the development o f high- quality and relevant electronic materials and on the training and capacity building o f those who need to be ready to integrate them in the curriculum and in the classrooms of Armenian schools.

6

The first challenge under APL I1 will be to extend this technical infrastructure to schools not covered under APL I, enhance the reliability and speed o f the existing networking, and finance the procurement and roll-out of basic hardware to all schools to support the computerization o f basic administrative tasks, especially those related to data collection for the national education management information system (EMIS). Then, a second challenge wil l be to ensure the effective use o f this technical infrastructure to support improved teaching and learning, building o f f activities under APL I related to teacher training and the development and dissemination of electronic learning materials via CD-ROM and the national education portal. Specific activities to be financed by this sub-component include the following:

0

0

0

Sub-component 4. Supporting the implementation of high-school reform (US$S. 99 million I D A financing). The objective o f this sub-component i s to support teachers and schools in the implementation o f the 12-year general education system and the high school reform, including the curriculum and assessment reforms, so that school leavers will be equipped with the right skills and competencies. . Specific activities to be supported include:

0

0

0

Provide internet connectivity to about 400 most remote schools. Provide schools with hardware for school management purposes. Provide schools with electronic learning materials for a l l key school subjects. Train teachers in subject-specific use o f ICT. Support to the National Education Portal as the host of electronic materials, virtual communities of teachers and learners and dissemination tool for good practice. Technical assistance on the use o f ICTs for school management purposes.

Establishment o f resource centers in 100 high schools (libraries plus computer labs). Training o f 150 high school librarians. Training o f 2750 high school teachers. Training o f 150 principals for the new high schools. Curriculum and syllabi design for each o f the three streams in the new high school, ensuring a better articulation between high school and tertiary education. Capacity building for the staff o f MES and o f Marz Education departments who are directly in charge o f the implementation o f the high school reform Technical assistance to help design o f counseling and guidance services at the new high schools.

Component 2. Supporting tertiary education reforms in the context of Bologna Agenda (total estimated cost: US$7.53 million of which US$6 02 million IDA financing)

Sub-component 2.1 I. Establishment and Strengthening of the National Quality Assurance System (US$2.47 million IDAJinancing). The objective o f this sub-component i s to establish and strengthen the capacity o f the national Quality Assurance system for tertiary education. The government established the Armenian National Quality Assurance Agency (ANQA) in November 2008. MoES also created a Working Group on Quality Assurance, which will assist the consolidation o f ANQA during the initial stage. This sub-component will support the ANQA and the WG on QA to establish the external QA system and universities to develop internal QA units.

Activities:

(i) Establishment o f the External Quality Assurance (EQA) system

Capacity-building o f EQA stakeholders

0

0

0

Coordinate public awareness campaigns related to QA and Bologna process

Develop EQA policy, standards, criteria, procedures and guidelines Plan and implement orientation and briefing sessions for external evaluators Organize a study tour to learn activities o f other EQA agencies Pilot accreditation o f selected universities and expand it to the remaining universities Elaborate and disseminate outcomes and progresses o f QA activities in Armenia and abroad

7

(ii) Development of the Internal Quality Assurance (IQA) system 0

0

0

Capacity-building o f IQA stakeholders (university IQA Units, student representatives) Develop approaches to IQA necessary policy, student assessment unified system, standards, procedures and guidelines and updating requirements for faculty qualifications Provide grants to HEIs to develop IQA units and improve IQA system Specific grant scheme to promote good governance and transparency in HEIs

Sub-component 2.2: Developing a Tertiary Education Management Information System (USSO. 39 million I D A financing;). The objective of this sub-component i s to establish an integrated Tertiary Education Management Information System (TEMIS) as an effective tool to support policy planning, management, monitoring and evaluation of performance o f the sector both at the national and university levels. APL I1 will provide technical assistance to the NaCET and universities to design, develop and implement an integrated TEMIS. TEMIS will (i) collect and store data related to different managerial and academic aspects o f the universities; (ii) provide institutions’ management and various academic and non-academic departments with timely and reliable information; and (iii) provide the MoES with detailed data on each university for policy making, planning, monitoring and evaluation. This sub-component will also provide technical assistance to the MoES and universities to develop information-based planning, monitoring and evaluation capacities. Once TEMIS becomes operational, the MoES will be in a better position to update the Higher Education Strategy 2003 in line with the Bologna Process and Armenia’s achievements to that date. Each university wil l also produce an annual strategic plan and self-assessment reports using TEMIS data.

Sub-component 2.3: Strengthening the Capacity to Implement a Sustainable Financing System (US$]. 93 million IDAJinancing;). The objective o f this sub-component i s to support the government in defining and putting in place a sustainable financing system for tertiary education. The first activity will be to design a student loan scheme to provide all needy students with financial aid to pay their tuition fees and living expenditures. The scheme will be tested on a pilot basis with a small number o f masters’ degree students. Second, it will assist the government in setting up priority areas and viable procedures for the operation o f a future competitive innovation fund (CIF) in support o f quality improvement and innovations in tertiary education institutions. It i s envisaged that once the CIF i s designed under APL 11, the Bank’s next higher education project and/or other donors would provide funding to implement it. Third, it will review the existing resource allocation mechanisms for tertiary education, including current scholarship schemes, and provide evidence and alternatives for the Government to design and implement a more sustainable, equitable and efficient funding system.

Sub-component 2.4: Reforming Pre-service Teacher Education (US1.22 million IDAJinancing;). The objective o f this sub-component i s to support development of initial teacher education in the spirit of Bologna Process through (a) longer-term twinning arrangement between the Armenia State Pedagogical University (and the Consortium o f Pedagogical Institutes, including Yerevan State University) and an international higher education institution, and (b) upgrading necessary teaching facilities and equipment in these institutes to support modernization o f primary school teacher education. This technical assistance delivered by a selected international university will focus on upgrading degrees and curricula, enhancing methods of teaching and studying, strengthening educational research capacities, modernizing management and governance, setting the norms o f ethics, and establishing networks o f field schools for practical parts o f new teacher education. This sub-component will finance technical assistance, training activities o f selected teaching staff o f the Consortium of Pedagogical Institutes and Yerevan State University, teaching and study faci l i t ies in laboratories and libraries, and printing o f teaching and training materials.

8

Component 3: Project Management, Monitoring and Evaluation (total estimated cost: USs4.06 million of which US$3.25 million IDAJinancing.

The CEP as the Project Implementation Unit of the Project will be responsible for implementation and management o f the procurement process, disbursements and financial arrangements, project monitoring, and reporting. The Unit will work with the existing management and monitoring framework designed to coordinate, monitor and build the capacity o f participating institutions. However, some adjustments will be made to the framework to ensure the gradual transfer o f responsibilities from the CEP to the Ministry of Education related to policy, planning, monitoring and evaluation functions (see Annexes 4 and 6 for details).

The key objectives o f this component will be to: (i) provide continued support o f mainstreamed arrangements for the management and monitoring o f project activities; and (ii) institutionalize key management functions in the MoES covering policy planning, monitoring and evaluation.

Specific activities to be supported by the Component are the following: e e

e e

e

e

e

e e

e

e e

Financing a Project Implementation Unit with core staff hired as consultants. Implementation and management o f the procurement process, disbursements, and financial management, project monitoring, and reporting. Acquisition o f minor additionsheplacement o f office furniture and equipment. Financing associated with upgrading the PIU facilities. Financing o f local travel, utilities and publications, translations, small office repair, office supplies, fuel, internet service, bank commission charges, vehicle maintenance and repair. Systematic maintenance o f the Monitoring and Evaluation system with updates on key performance indicators, which will be carried out jointly between the NaCET, the ATC, the entity responsible for policy, planning monitoring and evaluation in the MoES, and the CEP. Impact evaluation o f the Preschool subcomponent and beneficiary assessment o f the high school reform. Participation fees for TIMSS 201 1 will also be covered. Financing o f implementation and management o f impact assessments and special studies planned. Facilitate coordination, communication flows and dissemination o f information with participating institutions. Facilitate working group arrangements and the organization of seminars and workshops. Support the NaCET in the usage and management o f the EMIS. Provide training to staff in the CEP in the areas covering procurement, disbursements, information technology, project management and other areas identified and proposed in the course of project implementation.

The expected outputs of this component will be: The CEP staffed with adequate number and professional staff, Project financed goods, works, and services procured without delays in accordance with World Bank procurement guidelines. The CEP prepares quarterly and annual progress reports and submits them to IDA on a timely basis. Implementation and dissemination o f the results o f the planned assessments and evaluations. Monitoring and Evaluation systems, including impact evaluation o f selected activities, with updates on key performance indicators The entity in the MoES assuming full responsibilityfor carrying out planning, monitoring and evaluation functions.

E. Lessons learned and reflected in the project design

2 1. Lessons learned from in-country experience. Important lessons are being generated in Armenia through the pilot preschool projects implemented under APL I. Indeed, the preliminary assessment of these pilots indicate the following trends: grants have been properly used by communities to refurniswenhance KG classrooms; children have begun to attend preschool services on a daily basis at the

9

beginning o f the school year; and the participation o f communities and parents i s very active and often goes beyond expectations. Moreover, the ongoing pilots o f the high school reform, also financed by APL 1, are beginning to yield some results with regard to transition rates and processes from lower to upper secondary education, fine-tuning of the curriculum reform, and recruitment mechanisms of upper secondary teachers. All these are being carefully taken into account in the scaling up o f the reform that APL I 1 i s setting out to support.

Lessons learned from international experience

22. Preschool education. International evidence worldwide documents the significant impact o f quality preschool education on children’s school readiness (including their cognitive, social, emotional, and physical development) and on their future capacity to become productive citizens. Furthermore, investments in the early years (i.e., up to 5) are deemed to be the most cost-effective investment a government can make in i t s population. Lack of access to preschool has been internationally documented as detrimental to children’s capacity to learn in Grade 1 and beyond, to transition successfully from one grade to another, to complete their education and to eventually become fully contributing and productive members o f society. Hence, APL I1 i s emphasizing school readiness of Armenian children.

23. Student loan schemes. Student loan schemes are in operation in more than seventy countries around the world.* Student loans can bring various benefits, particularly in countries where tuition fees represent a high share of family income, such as Armenia: They relieve pressures on national budgets by facilitating greater cost-sharing and provide better access to tertiary education for financially needy students and financial independence and flexibility for any students in general. Student loan schemes can encourage students to study in selected institutions or programs of national priorities and also perform well by forgiving portions o f principal based on academic performance. Most loan schemes are subsidized by the government which bears repayment default risks and administrative costs.

24. Competitive innovation funds. An innovation fund i s a pool of discretionary funds that are earmarked for one or more uses. With more than 30 innovation funds being experimented in various parts o f the world, including Chile, Uruguay, Vietnam, Ghana, and Indonesia, the generic benefits o f such instruments are clear. International experience suggests that innovation funds are highly effective mechanisms for improving transparency and efJiciency o f the budget allocation for tertiary education, and for boosting educational quality and relevance within tertiary in~titutions.~ They offer four main types o f benefits: First, the competitive nature o f these funds generally makes them more efficient instruments for the allocation o f public funding than more traditional approaches based on budgetary planning. Second, they are effective mechanisms for improving educational quality and relevance. Third, their incentive system fosters changes in professional attitudes and institutional culture. Fourth, innovation funds are very flexible and can quickly respond to changing policy priorities. In Armenia, where public financing o f higher education has declined dramatically over the last decade, the Government’s goal to raise enrollment to 33 percent by 2012 and to improve the quality of education requires that total spending increase beyond current projections. Competitive funding appears as the most potentially effective and politically appealing mechanism to do so. APL I1 will support al l the necessary foundation work for the design o f an innovation competitive fund for tertiary education in Armenia.

F. Alternatives considered and reasons for rejection

25. One alternative was considered and rejected: a second phase of the APL focused on support for general secondary education alone. This option was abandoned because a focus on secondary education alone, without including pre-school and tertiary education, could begin to compromise the results and accomplishments of APL I. The government was a strong champion o f the expansion o f scope to include the two sub-sectors. At the same time i t i s recognized that the progress that can be made under the APL

Shen. Hua & Zierman, Adrian, 2008, Student Loans Repayment and Recovery: International Comparisons, The Institute for the

Saint, W, March 2006. Innovation Fundsfor Higher Education: A Users’ Guide for World Bank Funded Projects, Education

10

2

Study of Labor (IZA) Discussion Paper No. 3588.

Working Paper Series No. 2, The World Bank.

series i s finite and further investments, by the Bank or other donors, would be needed in higher education in particular to capitalize on the reforms supported under APL2

111. IMPLEMENTATION

A. Institutional and implementation arrangements

26. Institutional set-up and Administrative Structure of the Second Education Quality and Relevance Project (APL 11). The Ministry o f Education (MoES) of Armenia will be responsible for the implementation of the Project supported by the services o f a Center for Education Projects (CEP) acting as the Project Implementation Unit. The structure o f the MoES has been evolving; further changes are under consideration by the Government in order to respond to institutional needs for carrying out second- generation reforms aimed at enhancing the quality of secondary education and supporting tertiary education reforms. The Organizational Chart in Annex 6 highlights the evolving structure of the MoES and the new institutional challenges. As depicted in the chart, during APL I1 there will be an increasing number o f institutions participating under the project. Therefore, great efforts will need to be directed at clarifying and further defining the roles and functions o f each participating entity, including coordination mechanisms and information flows, to ensure effective cross-agency collaboration.

27. The process o f mainstreaming management, coordination and monitoring activities into the Government structure will be continued under the APL 11. The success o f this process will require the continuation o f the CEP’s role in institutional capacity building and training on management and accountability mechanisms benefiting directed at beneficiary state institutions. In addition, greater efforts and specific steps will be needed to gradually build the capacity in the MoES in the areas o f policy planning, monitoring and evaluation. To mitigate the risk of having these tasks remain under the management o f the CEP, it will be essential to have the CEP build the capacity o f a designated entity in the MoES that will take on these responsibilities. The CEP will work closely with the entity responsible for policy, planning, monitoring and evaluation, building the capacity of, and gradually transferring these responsibilities to, this entity. The key responsibilities to be transferred include: a) quality reporting; b) internal and external evaluations, studies and assessments; c) monitoring and evaluating the project’s outcomes and results; and d) arranging regular meetings between the Minister and Deputy Ministers with working groups to discuss the status of project activities and issues. The entity in the MoES assuming full responsibility for carrying out policy planning, monitoring and evaluation functions i s an expected outcome under Component 3. The status o f this process will be assessed during supervision missions and will be part o f the integral review of the mid-term review.

28. The CEP will work within the existing organizational structure o f the MoES supporting state management institutions (Technical Departments in the MoES, Marz Education Departments, the State Inspectorate o f Education), as well as key beneJiciary state institutions such as the National Institute of Education (NIE), the National Center for Education Technology (NaCET), and School Centers, which served as key implementing entities under the APL I. Although the Assessment and Testing Center (ATC) created under the APL I will not be a beneficiary institution under the APL 11, it will be a participating entity involved in monitoring and evaluation activities. The CEP will also work with institutional entities related to tertiary education, such as the newly established Armenian National Quality Assurance Agency (ANQA) and higher education institutions. Working groups have been established for the implementation o f the component on tertiary education, which will coordinate with other participating institutions and partners. I t will also coordinate with pre-schools and high schools, the other institutions be targeted under the APL 11. Details on these institutions are provided in Annex 6 .

29. Project Management and Coordination. Since its creation in 1996, CEP has gained significant strengths in project management though the implementation o f the Bank-funded Education Financing and Management Reform Project, the APL I and several other small-scale projects. In the absence o f a centralized management and operational framework in the MoES for administering, coordinating and monitoring donor-financed projects, the establishment o f the CEP was essential to ensure the effective implementation of project activities. The CEP under the current APL I Project has been very effective in filling this institutional gap in the Ministry and, more importantly, has provided support for institutional capacity for managing reforms and project activities. Under APL 11, the CEP will continue its activities

11

related to general administration, coordination, implementation, monitoring and evaluation, as well as facilitating the decision-making process. I t will comprise a core group o f technical, administrative, and support staff which i s described in Annex 6 .

30. Implementation Arrangements. Implementation arrangements under APL I1 will be governed by the guidelines and procedures set out in the Operational Manual (OM). The CEP will develop the OM, drawing from the lessons learned and experiences gained in the implementation of the APL I, and reflecting financial management, procurement and reporting arrangements planned for the APL 11.

3 1. Partnership Arrangements. The APL I1 wil l continue effective working relationships established under APL I with UNICEF. Under APL I, the Bank, UNICEF, the US State Department and the Open Society Institute (OSI) successfully collaborated on the implementation o f a number o f priority reforms covering education curriculum development, educational software development, and teacher professional development. Under APL 11, the training o f preschool teachers and administrative staff would benefit from the ongoing collaboration with UNICEF and Step-by-step. UNICEF will be expected to finance the provision o f adequate training for approximately 280 ECD staff (2 per beneficiary community); Step-by- Step will be expected to deliver the proposed training modules.

32. Financial management capacity. CEP currently implements Education Quality and Relevance (EQRP) project (APLI). Previously, CEP also implemented closed Education Management and Financing Project. There are no major weaknesses at the CEP. For capacity building purposes the following actions have been agreed with and implemented by CEP:

Agreed Actions Update the Financial Management Manual (FMM) to reflect the specific activities o f the Project. Develop detailed control mechanism over fund flows o f the grants and describe it in the grants Operational Manuals.

Responsible Completion Date CEP Prior to negotiation

CEP Prior to negotiation

I I

Implementation Status Implemented. CEP has developed a separate Financial Management Manual (FMM) for APLII to reflect the specific activities o f the Project

Implemented. The detailed control mechanism over fund flows o f the grants has been developed, agreed with the Bank, and wi l l be included into the new grants’ Operational Manuals once the manuals are developed.

B. Monitoring and evaluation of outcomeshesults

33. Building the Ministry of Education’s capacity to monitor progress against learning outcomes i s central to al l Project components and subcomponents. Thus, generating data and analyzing results will not be done only to fulfill an M&E requirement o f the project, but rather as integral parts o f the capacity building included in two main project components. The objective will to move the responsibility for M&E from being largely a CEP function (through hired consultants), to center stage in the Ministry’s reporting requirements vis-a-vis the rest o f the Government, Parliament, and other stakeholders.

34. Under the APL 11, efforts will be directed at gradually building the capacity within the MoES in the areas o f policy planning, monitoring and evaluation. These areas of responsibilities have largely been assumed by the CEP, which has contributed to education reforms over the past 10 years. These key areas o f management need to be mainstreamed and institutionalized in the MoES. There i s an already existing structure in the Ministry such as the Information Analysis and Development Programs Department which appears to be involved in some aspects o f policy planning and monitoring. This entity could be strengthened through capacity building, training and technical assistance to assume a stronger role in management and coordinating functions associated with policy, planning, monitoring and evaluation.

C. Sustainability

35. The sustainability of the proposed Project will be determined by four aspects: f irst, the Government’s ownership o f the project; second, fiscal sustainability and cost effectiveness o f the project

12

activities; third, institutional capacity building of the technical level staff and fiduciary management in the education sector under a strengthened and evolving organizational structure; and fourth, an experienced CEP with staff in project management mainstreamed in the MoES.

36. The second PRSP, prepared in 2008, aimed to raise education spending up to 4.5 percent of GDP by 2021, which was the best guarantee of sustainability for the interventions and reforms supported under APL 11. However, the global economic crisis might slow down that projected increase in education investments, forcing the government be more selective and to look for further efficiency savings. Before the economic crisis started, the government had budgeted US$413 million for education in 2009, and projected to raise it to US$479 million in 2010, US$553 million in 201 1, and US$761 million in 2013.4 Of al l investments supported by the Project, high school reforms require the most the government’s continued financial commitment: The government has planned to invest US$160 million between 2009 and 201 1 (US$7 million or roughly 2 percent of the total education budget in 2009, US$84 million or 17 percent in 2010, and US$69 million or 12 percent in 201 1) for renovation works and US$5 million (around 1 percent of total education budget each year) for equipment in the new high schools. After the initial investment, the government will also need to finance recurrent expenses, which could cost US$l- 17 million a year (assuming 3-10 percent of the initial investments, and cumulative annually). This will be equivalent to less than 1 percent of the total education budget in 2009 or 1-3 percent in 201 1 (not adjusted for inflation). The government i s also committed to investing in the integration of ICTs in education, as reflected in the 2009 State Budget, which includes US$2.3 million for Internet connectivity and maintenance and US$l.6 million for computer equipment for schools (0.9 percent of the total education budget). The government plans to continue investing in ICT-US$3.1 million in 2010 (0.6 percent) and US$3.7 million (0.6 percent) in 201 1.

37. Altogether these two major reforms are expected to require 4 percent of total education budget in 2009, 19-20 percent in 2010 and 14-1 5 percent in 201 1. If the economy were to grow as steadily as projected, al l these investment and future recurrent costs of the reforms would have been affordable. However, the overall government budget i s likely to get tighter in the next few years. Without the government’s uninterrupted commitment, the Project’s investment in the high school reform which focuses on the quality enhancement of education will obviously not achieve i t s full potential. APL I1 will complement the government’s initiatives to integrate ICTs in the teaching and learning process and seeks to extend and capitalize on investments begun under APL I. Therefore, even under the difficult economic situation, it i s paramount that the government continues prioritizing education and particularly the high school reforms and ICT in education, if the ultimate goal of a high quality general education system i s to be achieved,

38. Concerning preschool education, the sustainability of the Project’s investment does not depend on the central government, but rather on local communities’ financial commitment. To assure sustainability, communities and parents’ commitment to contributing to recurrent expenses i s the eligibility criterion. However, some communities might find it difficult to afford the recurrent expenses under the current recession, which may require support from the central government. More importantly, to achieve the preschool enrollment rate target at 90 percent by 2015, it i s estimated that the government will need to invest US$3-6 million per year (0.6-1.2 percent o f the total education budget in 2010) until 2015. To address these issues, the government i s revising the legislative framework for preschool education and creating a viable financing mechanism that assures adequate funding, policy reforms which will be supported under the Development Policy Operation, now under preparation.

Medium Term Expenditure Framework (MTEF) 2009-1 1 and PRSP-2. The dollar figures are estimated based on the exchange rate at AMD 306/US$ at the time o f appraisal. This does not reflect the recent (March 2009) sharp depreciation o f the local currency down to around AMD 365/US$.

13

D. Critical risks and possible controversial aspects

B. Mitigation measures

The downturn in the economy anticipated in 2009 triggered by the

Armenia and how much can and should be spent on Education. The Government, however, has committed to continuing to make education a priority and making high school reform in particular a

global financial crisis will have implications for the budget o f

39. According to the recent Business Environment and Enterprise Performance Survey (BEEPS) report, the corruption in Armenia i s significant with about 30 percent o f businesses indicating that i t i s an impediment to doing business. Adequate mitigation measures are incorporated in the project, and the Bank staff w i l l closely monitor performance during implementation. The country risk i s significant and the residual risk after mitigation i s assessed to be moderate.

Risk Rating

M

A. Risks

Macroeconomic risk

authorities will evaluate its impact. MoES will organize public awareness campaigns to inform

equitable, efficient, and transparent distribution o f resources. A student loan scheme will be introduced to assure students o f access to universities regardless o f their economic background. MoES will provide, through the Project, financial incentives for

stakeholders o f the importance o f financing reforms for more

The high school reform may bl resisted by local stakeholders (parents, principals, teachers, and non-teaching staff)

L Higher education financing reforms may be resisted by high academic performance students (and their families)

Corruption in Higher Education i s a serious issue. Thus, external quality assurance may be resisted by university managers and faculties Corruption in general schools, most notably out-of-pocket payments for private tutoring, remains and could get worse a: the economy deteriorates. Capacity o f local authorities and Marz Education Departments i s low in relation to the planned preschool

The government i s developing a systematic process of self-

so that teacher performance i s evaluated based not only on student’s academic performance, but also on professionalism and conduct.

’he Government will provide local authorities with additional

nrollment level, for the implementation of the preschool education eforms. The Project will provide capacity building training for local ,overnments and other stakeholders. The second phase o f the APL will continue to focus on the capacity building of implementation agencies, beginning with the MoES i tse l f . This proposed project will incorporate lessons learned from the

selection of community proposals will be their willingness and capacity to finance recurring costs, particularly teachers’ salary.

evaluation and professional development o f teachers and principals,

unding, taking into consideration their financial capacities and

preschool pilot project in this regard; One of the criteria for the

Capacity building efforts will take place at the community level to ensure that sensible options can be implemented (e.g., waiving o f fees

education reforms Project complexity may lead tc

M

L

M

M

L

implementation delays Some communities may not be able to contribute to the preschool (financially and otherwise) to the extent required by the project. The most disadvantaged children may remain excluded

priority, as it i s a key to future competitiveness. The high school reform will be preceded by thorough planning on mobility o f students as well as teaching and non-teaching staff. Suitable mitigation measures such as provision o f reliable transportation services and/or boarding facilities and improvement o f facilities o f merged high schools will be adopted to minimize negative impacts on access to upper secondary education. MoES will also organize public awareness campaigns to inform stakeholders of expected benefits and measures to mitigate potential negative outcomes. Before scaling up the pilot, the MoES and local

M

universities, which will be linked to quality improvement (competitive and performance-based funding). Corruption will also be directly addressed within a grant scheme to promote good governance and transparency in higher education institutions.

M

from preschool education, even in those communities that receive a grant

E. Credit conditions and covenants

for certain groups o f children, such as orphans, children of single mothers, disabled children, children o f families getting social assistance from the state). The CEP has previous experience with such schemes implemented in previous WB-financed projects (e.g., purchase o f textbooks in primary school).

40. The CEP will maintain a financial management system acceptable to the Bank. The project financial statements, including Statement o f Expenditures (SOEs) and Designated Account Statements will be audited by independent auditors acceptable to the Bank and on terms o f reference acceptable to the Bank. The annual audited financial statements and audit report will be provided to the Bank within six months o f the end o f each f iscal year. The Recipient shall also prepare and furnish to the Bank not later than forty-five (45) days after the end o f each calendar quarter, interim unaudited financial reports for the project covering the quarter, in form and substance satisfactory to the Bank.

4 1. Credit Effectiveness Conditions. The Recipient has, through the MoES, adopted an Operational Manual, satisfactory to the Association.

42. Credit Disbursement Conditions. The Recipient has hired the Component and Subcomponent Heads, satisfactory to the Association.

IV. APPRAISAL SUMMARY

A. Economic and financial analyses

43. Education has been a priority sector for public investment in Armenia since the late 1990s. In particular, the focused investment in general secondary education as a poverty mitigation measure has contributed considerably to the development o f the sub-sector, but has also resulted in under-funding of other sub-sectors, Le., preschool and tertiary education. The APL I has supported the government in increasing access and improving quality of general secondary education. The proposed APL I1 will continue supporting the government in tackling the present multi-dimensional challenges-to sustain and extend the accomplishments in general secondary education with second-generation quality-oriented reforms and to address equity and quality concerns in both preschool and tertiary education.

44. The economic analysis justifies the proposed investment by analyzing cost-effectiveness of investing in preschool education, ICT network and its integration in teaching and learning, and cost- efficiency and quality improvement o f high school reforms. First, good quality preschool education i s critical and cost-effective for children’s later development. By targeting rural communities where preschool enrollment rates are lower due to lack o f access, the proposed project will contribute to more equitable access to good preschool education. Second, the investment in creating high quality learning environment for the restructured upper secondary network i s cost-effective, cost-efficient and complementary to the government’s investment in infrastructure. The project will also monitor the implementation o f mitigation measures to minimize the negative impacts o f the school network restructure. Third, extending internet connectivity to remote schools will help narrow the digital divide between rural and urban schools. Investments in content development and teacher training will ensure ICTs will be effectively used for better quality education. The financial analysis suggests that the project investment will have a visible, but not overpowering impact on the total public education spending. The sustainability o f investment in preschools will be assured through a prudent analysis o f financial capacity and willingness o f communities. A review o f the school financing formula i s necessary to enable high schools to finance higher unit costs to maintain the equipment and facilities invested through the high school reforms. Finally, since there may be another funding source for internet connectivity in rural areas, it will be necessary to reassess the investment needs after the project becomes effective.

B. Technical

45. The development objective will be achieved through i t s technically sound design, focusing on policy advice, institutional capacity building, and support for broad-based education sector reforms. The

15

APL I1 will help Government consolidate a system-wide reform focusing on completing the introduction of the 12-year general secondary education, professional development and school improvement plans, and setting the stage for a more profound and badly needed tertiary education reform. Technical assistance will be provided to strengthen the capacity o f the MoES to implement these key reforms. Managerial and analytical capacity building will take place at al l levels to ensure that the various parts o f the organization are effectively coordinated. Quality assurance and oversight will also be strengthened.

C. Fiduciary

46. The CEP will be responsible for implementation o f the Financial Management (FM) function o f the project including, flow o f funds, budgeting, accounting, reporting, and auditing. The CEP currently implements Education Quality and Relevance (EQRP) project (APLI).

47. Fiduciary Risk at the Project Level. The FM arrangements o f the CEP have been reviewed periodically as part of EQRP (APLI) project supervisions and have been found satisfactory. Based on the FM assessment, it was established that the CEP has overall acceptable FM arrangements in place: particularly, (i) the well systematized filing system allows keeping al l supporting financial documentation; (ii) FMRs have always been received on time and were acceptable; (iii) the CEP procured and installed adequate accounting software for the project implementation; and (iv) annual audits o f the active project were satisfactory.

48. The overall financial management risk for the project before mitigation measures i s moderate and after mitigation measures, the risk i s low.

49. As the project will be implemented in an environment where corruption i s perceived as an important issue, adequate mitigation measures have been put in place and will be closely monitored to ensure that the residual project risk i s acceptable, including: (a) the Government’s move towards e- procurement and use o f public websites to disseminate tenders and announce results; (b) a formal internal control framework described in the Financial Management Manual; (c) the flow o f funds mechanism agreed with the Recipient will be enforced; (d) the project financial statements will be audited by independent auditors and on terms acceptable to IDA; and (e) regular FM supervision and procurement prior and post reviews will be conducted to monitor and assess the corruption risk.

50. Fiduciary Risk at the Country Level. Based on the CFAA and CPAR assessments o f the fiduciary risk as significant and high, as well as based on the results o f the recent PEFA report no elements o f the country FM systems are planned to be used under project. The use of the country PFM systems for the project implementation will be considered, as the government progresses with the PFM reforms in internal and external audits, internal control framework, accounting standards, and treasury and budgeting systems.

5 1. As the banking arrangements with a local commercial bank (HSBC Bank Armenia) have been found satisfactory under active projects, they will remain in place during EQRP2 project implementation, unless other banks in Armenia or the State Treasury become acceptable for opening designated accounts.

D. Social

52. During the implementation o f APL I, good progress has been made through sizable Government investments in badly needed physical infrastructure, putting educational technology in schools, and preparation o f key reforms focusing on the quality o f education. As a result o f these efforts, the enrollment rate for compulsory education i s high, and the literacy rate i s almost 100 percent, irrespective o f gender and ethnicity. Beyond age 16, however, enrollment rates dropped sharply, and there i s some uncertainty as to how the high school reform i s going to impact rural areas and disadvantaged students in terms o f access and opportunity to learn. Moreover, at the start o f compulsory education, the already mentioned deterioration o f the preschool network i s severely affecting the school readiness o f increasingly more young students throughout Armenia.

E. Environment 53. The Environmental Category of the APL I1 i s “C”. N o safeguard policies are expected to be triggered because o f the nature

There are no significant environmental issues in the proposed APL 11.

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of the activities to be financed under the Project. Support under the project would be limited to the refurbishment associated with: (i) resource centers, including computer labs and modern school libraries in high schools; (ii) the enhancement of kindergarten classrooms or the establishment of new kindergarten classrooms in existing primary schools, financed under school grants; and (iii) minor repair work for CEP. This will consist of cosmetic repairs covering replacement of windows and doors, the plastering of walls, the painting of windows, walls, and doors, and the painting and repairing of flooring. There will be no construction activity supported by the Project. The Project will not finance any lead paint, asbestos material or otherwise dangerous/hazardous material in conducting these repairs; such prohibitions will be specified in the contract bidding documents. As regards high school laboratories, the project will ensure that appropriate facilities for handling, storing, and disposing of chemical reagents associated with the high school laboratories will be in place.

F. Safeguard policies

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

54.

G. Policy Exceptions and Readiness

The Project has been classified as category C for its low impact on the environment,

55 . Policy Exceptions: The project does not require exceptions from current Bank policies

56. arrangements in place provides a sound basis for the implementation o f APL 111

Readiness Criteria: Progress made under the ongoing APL I in addition to the implementation

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

17

Annex 1: Country and Sector o r Program Background ARMENIA: Second Education Quality and Relevance Project (APL 11)

1. Government Education policy and strategy. Education has been a priority sector for public investment in Armenia since the late 1990s, and the government has made a concerted effort to allocate more to general secondary education, in particular to improve access to and quality of education at this level. The education sector in Armenia i s currently prioritized as one of the prerequisites of sustained development of the country as well as preservation and reproduction of human capital. Reform projects at al l levels of education are being implemented to ensure universally accessible quality education and to increase efficiency. The National Strategy for Preschool Education (2008), the High School Reform Plan (2008), and the signing of the Bologna Declaration (2005) are the three policy highlights showing Armenia’s commitment with a profound modernization of i ts education system.

2. Armenia has increased public expenditure on education considerably in recent years with a clear vision, but total spending i s s t i l l relatively low compared to countries at a similar income level. Due to that sustained increase of public expenditures, and according to the PSD approved by Governmental Decree on October 30, 2008, their share in the GDP will steadily grow and will reach 4 percent of the GDP in 2015 and 4.5 in 2021. Thus, in 2021 this indicator will increase by 1.7 percentage point as compared to 2006 and will approach the 2005 average for the ECA and FSU countries. However, in nominal terms, this growth will ensure approximately 7-time increase of annual public expenditures per beneficiary compared to 2006.

Education Sector issues and challenges

3. Overview of the Education system in Armenia. Until recently, the general secondary education system in Armenia consisted of eight years of compulsory basic education (three years of primary and five years of lower secondary) and two years of upper secondary education. Currently, this system i s being extended, in two steps, to nine years of basic education (grades 1-4 for primary and grade 5-9 for lower secondary) and three years of upper secondary education (grades 10-12). ‘Tertiary’ education consists of ‘vocational’ or ‘professional’ education (1 -5years after lower secondary school) and university education (after upper secondary school or vocational school). Compared to other countries at similar income levels, Armenia has high average enrollment rates at al l levels of education, except for the preschool level. In particular, enrollments in higher education have been rapidly growing in recent years. Since 2007, the salary matrix for general secondary education teachers i s no longer uniform across the marzes. Different marzes and schools responded differently to the government’s guidance to increase salaries by up-to 27 percent. While the starting salaries of teachers have reached almost equal to GDP per capita in Armenia, due to the narrow salary differentiation between teachers regardless of their qualifications and/or experience, the upper end of the scale in Armenia i s s t i l l about 30- 40 percent lower than the OECD average in terms of i t s ratio to GDP per capita.

4. Education Financing. The government has boosted public expenditure on education in the recent years, and i s committed to further increase it in the next decade. In the first Poverty Reduction Strategy Paper (PRSP) in 2003, the government planned to boost public education spending to 4.0 percent of GDP by 2015, as an important pillar of i t s poverty reduction strategy. Indeed, between 2003 and 2008, the consolidated budget for education increased by 26 percent per annum at nominal (or 20 percent at real) from AMD 3 5 billion (US$61 million) to AMD 111 billion (US$362 million). In particular, the government has made a concerted effort to allocate more to general secondary education in order to improve access to and quality of education at this level. The second PRSP, prepared in 2008, aimed to raise education spending further up to 4.5 percent of GDP by 202 1 .’ When the government prepared the Program for Sustainable Development in 2008, the GDP growth rates were projected at 13.8 percent for 2009 and 12.6 percent for 2010. Given the high growth projection and a gradual increase in education spending as percentage of GDP from 3.0 percent in 2008 to 3.2 percent in 2009, the education budget was estimated to increase from AMD 11 1 billion (US$362 million at AMD 300/US$) in 2008 to AMD 135

The Government o f Armenia, 2008, Program for Sustainable Development (revised version o f PRSP-2). 5

18

billion (US$450 million) in 2009 in the PRSP-2. The 2009 budget i s slightly lower than the PRSP-2 projection, but it s t i l l substantially increased to AMD 126 billion (US$421 million).

5. Despite i t s strong commitment to education, the global economic crisis might force the government to slow down the overall spending increase and proportionately cut education spending as well. With the anticipated economic slowdown, education spending may be lower than what the government envisaged in the next few years. Then, the government may need to make hard choices over priorities. Possible savings may need to come from, for instance, instead of raising the salary level for every teacher, the government could introduce differentiated salary scales based on performance. The expected demographic transition over the next five years or so may require the government to reduce the number of teachers at the secondary level where the student population i s expected to drop significantly, and better targeting vocational training. These savings in recurrent spending are necessary to pursue planned capital investment. For instance, the government should not postpone the on-going high school reforms that have been and will continue being supported under APLl and APL2 as they will not only improve the quality of high school education, but also create an efficient school network. Without government’s capital investment, the potential benefits of the project’s investment in quality improvement may not be optimal. Also, even though only local communities that are committed to contributing recurrent spending will be selected for the preschool pilot, the economic crisis may force some communities to cut down spending on preschool education, which might risk the sustainability o f preschools, particularly in poorer communities. In addition, since the demand for preschool education will remain high, Le., a wider coverage and longer years, the government should continue increasing investment in preschool because of i t s long-term benefits on children’s performance.

6. Quality Issues. The low enrollment of pre-school age children in ECD/ECE services i s leading to increasing inequity at the very start of primary school and i s affecting the long-term quality of academic performance of the majority of Armenian children. The enrollment rate and the quality of preschool education in kindergartens have dropped sharply since the funding and management responsibility was transferred from the central government to local governments (communities) in 1996. Overall enrollment was 22 percent in 2006, 28.5 percent in urban areas and 10.5 percent in rural areas. From about 1100 kindergartens functioning in 1996 only 623 were functioning in 2007. Besides, around 47 percent of communities in Armenia lack adequate buildings for establishment of preschool institutions. Most local governments simply will not be able to finance the increase of enrollment rates o f preschool age children (4 to 6 years-old) up to 90 percent by 2015, the goal set by the recently approved preschool strategy. There would be need of alternative mechanisms for delivery of preschool education and additional funds for expanding and developing preschool education for a l l marzes, with higher allocation for poor marzes, to meet the national goal.

7. The new National Curriculum Framework, approved by the Government of Armenia in 2004, became the cornerstone for the reviewing of the goals of general secondary education and followed with the changes in education content, methodology and new policy of development. APL I brought about radical changes in general secondary education focusing on the need to provide graduates with the knowledge, abilities and skills relevant to the new market and knowledge economy. Despite these remarkable developments, critical changes remain ahead to sustain al l the important reforms recently introduced in the general secondary school area.

8. The results of TIMSS 2007 were made public on December gth, 2008. The results in 4‘h and gth Grade Mathematics are stunning, while those for Science are just acceptable. The overall score in 8th grade Math i s 499, right in between the intermediate and high international benchmark and, to give a comparative reference, better than the results of Italy, Scotland, Australia or Sweden. Even more importantly, Armenia is the only ECA country that obtains significantly better scores in all four categories in comparison to the results of2003. While the Armenian tradition of Mathematics teaching i s likely to be an important underlying factor, APL I can legitimately take some credit for these results, as the effort carried out under the project in curriculum reform and in training master trainers and primary and secondary teachers of Math has been considerable. The Ministry of Education has just created a TIMSS Unit at the Assessment and Testing Center and has allocated funds in the 2009 national budget to

19

cover Armenia’s participation fees in the next administration of the Test. This i s good evidence of the commitment and ownership with one of the crucial interventions supported by the APL I.

9. Efficiency Issues. Financing reforms in general secondary education have boosted efficiency at the school level and enhanced school autonomy. Largely due to the introduction of the per capita financing scheme accompanied by financial autonomy at the school level, the majority o f general secondary schools have consolidated classes to the extent possible and there i s l i t t le room for further efficiency gains at the school level. However, the government has maintained many small rural schools for equity and socio-political reasons. Hence, government i s yet to run the general secondary education system as a whole more efficiently, while assuring access to good quality education for rural children.

10. Overall, student-teacher ratios have been much lower in Armenia than the OECD and EU19 averages at al l levels, but the low ratios are more serious for tertiary education than general secondary education. Despite the continuous declines in enrollment, ratios for general secondary education started to increase in 2002 (although they are s t i l l quite low) primarily due to the implementation of the school rationalization and teacher redundancy programs. As the number of students, driven by demographic changes, declined by over 20 percent (from 560,637 to 446,140), the number of classes was reduced by 24 percent, teaching staff positions by 35 percent, and non-teaching staf f positions by 34 percent. The most dramatic reduction in teaching and non-teaching staff occurred between 2003 and 2005 when the optimization program was introduced, and it has continued even after 2005. The teacher redundancy package also helped reduce the number of teachers after 2004. Even though the reductions were lower than the government’s original targets, the rationalization program has helped to increase STR from 10.8 in 2003 to 13.9 in 2006 and the average teaching load increased from 18 to 22 hours per week. Reduction of staff helped the government to increase nominal wages and salaries. The staffing ratios for state universities are extremely low. On average, student-teacher and student-non-teaching staff ratios are about 8.0 on average.

11. From an education perspective, the problem of the oversized system i s more severe. In most countries, small and rural schools are often less resourceful, efficient, and lag far behind in terms of delivering high quality education. Most likely, this i s also true in Armenia, where small schools, particularly in rural areas- simply can not attract enough teachers to teach the complex curriculum. Also, characteristically to the region, many teachers, especially new recruits, have low qualifications. Even the increased salary does not seem to be enough to attract the best and the brightest to the teaching profession. In addition to the massive trainings of teachers, classroom based support i s needed for further sustaining the changes in their behavior. According to the evidence from teacher training workshops, teachers receive the idea of mentoring and classroom based support rather positively. Moreover, they have found it helpful in raising students’ engagement and thereby the quality o f their learning. About 75 YO of the total numbers of al l teachers are already trained on new national .curriculum, standards, syllabi, and interactive/ cooperation methods. The challenge i s to convert these quantitative achievements into qualitative change focusing primarily on methodological issues. This also means diversification of professional development methods and making necessary changes in pre-service teacher education.

12. Preschool Education. The funding and management responsibility o f early childhood education was transferred from the State Government to local governments (Le., community councils) in 1996, as part of a broader decentralization effort. This process has created problems both on the supply and on the demand side of preschool education. On the supply side, many communities have been unable to fully maintain the existing preschool structures that were in place during the soviet times. Hundreds were shut down (i.e., from 1,100 functioning kindergartens in 1996 to 623 in 2007), and others continue to exist but simply cannot provide the quality of care that would be appropriate for child development and school readiness purposes (e.g., lack of training of staff, decrepitated buildings, lack of funds for heating and other utilities in the winter time, etc.). On the demand side, families are either not satisfied with the quality of care and early education provided and therefore decide to keep their children at home, or they simply cannot afford the fees charged (usually in the order o f 1,000 to 2,000 drams per month, i.e., US$3 to 6 in rural communities and of 4000 to 10000 drams per month, Le., US$13 to 35 in urban areas) to finance part of the daily expenses (e.g., food served to children, small materials, etc.).

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Triggers from APL I to APL I1

Policy for addressing the needs o f special education students agreed with the Bank and approved by the Government National plan for educational assessment and evaluation agreed with the Bank and approved by the Government Minimum standards for school libraries

Status as of December 1,2008

The Law on the Education for Children with Special Education Needs has been adopted by the National Assembly on May 25,2005

The Assessment Policy for Student has been adopted by the Government o f Armenia, (Decree n. 14, April 14, 2005)

The “School Library Development principles,

Immediate Next Steps

This trigger has been met.

This trigger has been met.

This trigger has been met

Triggers from APL I to APL I1

approved by the Government, assessment o f the current situation in schools with respect to these standards completed, and plan for libraries agreed with the Bank and approved by the Government Textbook Revolving Fund cash flow projection for years 2008-2010 demonstrate its self-sustainability

Comprehensive teacher education and professional development strategy i s approved by the Government

Education Chapter o f PRSP revised to reflect developments during phase 1

New policy and implementation plan for school management and inspection service agreed with the Bank and approved by the Government

Triggers from APL I1 to APL 111 Evaluation of the Phase I curriculum and assessment reform completed and revisions made accordingly

Textbook Revolving Fund cash flow projections for years covered by next phase demonstrate its sustainabilitv Comprehensive teacher education and professional development plan implementation progressing satisfactorily

New policy and implementation plan for cost-efficient reform o f student social and support services agreed with the Bank and approved by the Government Education chapter o f PRSP revised to reflect developments during phase 2 o f the APL

Status as of December 1,2008

management and methodological guidelines for general education institutions of Armenia” was approved by the Ministerial Decree N 698-AIQ, dated September 9, 2008.

For 2008, the cash flow projection i s US$14.7 million, and this will go up to US$16.0 million in 2010.

The Ministry of Education has established a working group with representatives from MoES, pre-service teacher institutions, NIE, CEP and other stakeholders. A draft document has been completed and, after internal discussion, has been formally approved as a Ministerial Decree on January 23rd, 2009. The Education Chapter o f the draft PRSP reflects developments o f phase 1 and was approved in January 2008 The Law on inspection was passed b) the National Assembl). (Adopted by RA National Assembl) on November 15,2005). The nen State Inspectorate was established by the Government degree n. 497-N, March 16,

Status as to January, 2009 Evaluation Report of the Curriculum and assessment reform was completed in September 2008 and i s being used in revising the curriculum for the High School reform and the unified examination system. For 2008, the cash flow projection i s US$14.7 million, and this will go up to U S $ ] 6.0 million in 20 10 Although the Strategy was only recently approved, there i s a clear sense o f direction in the teacher professional development policy and all the envisaged reforms are progressing satisfactorily. No progress made

Chapter revised reflecting developments o f the one-year extension o f APL I.

Immediate Next Steps

This trigger has been met

This trigger has been met

This trigger has been met

This trigger has been met

Immediate Next Steps The trigger has been met

The trigger has been met

The trigger has been met

Start dialogue with the Ministry o f Education

The trigger has been met

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Annex 2: Ma jor Related Projects Financed by the Bank and/or other Agencies ARMENIA: Second Education Quality and Relevance Project (APL 11)

1. and Relevance Project APL 1) of US$l8.0 million. The Government’s contribution was US$6.4 million.

The International Development Association (IDA) provided a Credit in 2003 (Education Quality

Projects Supported by Other International Agencies

2. UNICEF has been providing support for pre-school education in collaboration with the MOES and UNICEF Armenia. The activities included the maintenance o f the current network o f the pre-school institutions and improvement of their service quality and the development and introduction o f new, community based alternative services for vulnerable children. In addition, UNICEF conducted trainings o f 2000 staff members o f pre-school institutions, supported development o f legal, statutoryhormative acts and designed the Manual o f curricula-methodological instructions. Annual project “The Education Reform and the Child’s Development” i s also implemented by UN Children’s Fund. Moreover, with the support o f UN Children’s fund the “Li fe Skills” subject has been taught for almost 7 years now in grades 1 though 7 o f secondary school.

3. Open Societv Institute - in 1998 the Open Society Institute implemented the “Step-by-step” project aimed at the introduction o f child-centered methods. The program helps parents take care o f the educational needs o f their children and prepare them for the school. With the support o f US Embassy in Armenia and OSI-AF-Armenia, “Project Harmony” and “ACCELS”, a school connectivity project has been implemented, as a result o f which more than 300 schools o f the republic have obtained computer classrooms and internet connection. ,

4. World Vision International has implemented the “Inclusive Teaching Development Project” in 26 pre-school institutions o f the Republic o f Armenia. It also created a “Support Center for lntegrated Teaching” and provided technical, methodological and professional assistance.

5. Save the Children, USAID and the Swiss Development and Cooperation Agency have developed compilations o f movies and stories for children and a “Form Master’s Manual” was created for supervising instructors. Within the framework o f Community Self-Support Project, Save the Children i s also implementing an overhaul of kindergartens, heating system rehabilitation activities and installation of local networks throughout the Marzes o f Armenia.

6. TEMPUS Erasmus Mundus External Cooperation Window, Marie Curie and 7Ih Community Framework Programmers invest extensively in exchange programs between Armenia and EU at higher education level.

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Annex 3: Results Framework and Monitoring

ARMENIA: Second Education Quality and Relevance Project (APL 11)

Results Framework

1. The monitoring and evaluation o f outcomes and results under the proposed project wi l l be consistent with and be an integral part o f Armenia’s capacity to monitor the sector. The formal responsibility o f monitoring and evaluating the project’s outcomes and results wi l l fall on the CEP and on the Policy Analysis Unit (together with the EMIS department), all in the Ministry o f Education and Science. Moreover, the Assessment and Testing Center (ATC) wil l be in charge o f national assessments and examinations and also o f the coordination o f Armenia’s participation in TIMSS.

PDO

(i) Enhance school learning in general education and improve the school readiness o f children entering primary education;

(ii) Support the integration o f Armenian Tertiary Education system into the European Higher Education Area

Intermediate Outcomes

Component 1. Improved quality o f teaching in general secondary school classrooms.

New resource centers in 150 new High Schools are being actively used by teachers and students

Project Outcome Indicators

Improved ED1 scores o f students in KG and schools receiving the grants compared to students in the control group

Improved examination and tests scores in project-targeted schools and high schools (TIMSS 201 1 and Unified entrance examination)

Standings o f Armenia in the Bologna Scorecard improving from Orange and Yellow to Green (both in the overall score and the partial scores related to quality assurance, recognition and program structure).

Intermediate Outcome Indicators

nhancing the Quality of General Secoi % of teachers intensively using ICT and other new materials in the classroom

% o f teachers taking part in pedagogical development programs

% o f teachers still using exclusively the presentationirecitation mode o f teaching

% o f schools with school improvement plans approved and under implementation. % o f high school students who visited the resource center (laboratory and library) in the previous month.

YO o f daily lessons which take place at the resource center

Use o f Project Outcome Information

Improved ED1 scores will send a strong signal to the Government to get more involved in the financing o f preschool education.

Assess if the new curriculum, resource centers and teacher training are resulting in improved learning outcomes as measured by national and international tests.

Improved standings will bring international recognition of progress made in higher education policy, particularly in quality assurance

Use o f Intermediate Outcome Monitoring

lary Education. Assess if training o f teachers i s translating into an actual change in teaching style and behavior in the classroom.

Low levels o f laboratory and school library use wi l l signal insufficient teacher training and school principal’s leadership. Low levels o f daily lessons held at the resource center wi l l indicate failed implementation o f the new curriculum and o f in-service training.

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Component 2. Supportin ANOA becomes a candidate member o f t i e ENQA.

MoES, NaCET, universities and colleges use TEMIS for policy planning, management, monitoring and performance evaluation.

The government defines and agrees with a more sustainable, equitable and efficient financing system.

Curriculum for teacher education in line with the Bologna Process

Component Project i s successfully implemented

Increased capacity o f the MoES for policy planning, monitoring and evaluation.

tertiary education reforms in the coni No. o f public and private universities evaluated against the newly developed QA standards, criteria, procedures and guidelines.

Number o f public and private universities’ that have operational internal QA Units in place according to the new QA standards.

The updated Higher Education Strategy using the informationidata collected through TEMIS.

Number o f Universities producing a strategic plan and self-assessment reports using the informationidata collected through TEMIS. Identification o f funding sources for the student loan scheme.

Number o f teacher education curricula comparable to a typical teacher education program within the Bologna Higher Education Area.

No. o f students studying in the revised curriculum. Project Coordination, Monitoring a1

Assessment on World Bank supervision reports

Assessment on World Bank Implementation Completion Reports

The entity in the MoES assuming fill responsibility for carrying out policy planning, monitoring and evaluation finctions

rt of the Bologna Agenda Assess the capacity o f ANOA as a credible agency and identify additional project activities, if any, to help ANQA be able to evaluate universities.

Assess the progress o f universities in establishing internal QA Unit and identify and provide means such as training, provision o f funding to assist them completing the task. Ensure that MoES, NaCET and universitiesicolleges actually use the informatioddata provided through TEMIS.

Ensure the government’s ownership o f new financing mechanisms and specific funding tools.

Assess the progress o f the Consortium universities in designing, approving and implementing reformed teacher education curricula.

Evaluation Continuously assess project implementation progress

Ensure the mainstreaming o f key functions in the Ministry o f Education and Science.

25

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A n n e x 4: Deta i led Project Description

ARMENIA: Second Educat ion Quality and Relevance Project (APL 11)

Component 1. Enhancing the Quality of General Secondary Education (total estimated cost: US$I9.66 million of which US$I5.73 million are IDA financing)

Sub-component I. Promoting school readiness and equal opportunities at the start of General Education (US$2.49 million IDA financing)

1. The lack of access to preschool has been internationally documented as detrimental to the school readiness of children, i.e., their capacity to learn in Grade 1 and beyond, to transition successfully from one grade to another, to complete their education and to eventually become fully contributing and productive members of society. In Armenia, while it i s true that official statistics show relatively low levels o f school repetition and drop out, the number of dropouts has sharply increased in the recent past (Le., at an average annual growth rate of 250%), and there i s evidence of significant school wastage, particularly in relation to absenteeism and because many children are not learning but are automatically promoted to higher grades without any form o f remedial educations6

2. In response to this critical situation, a recently approved preschool strategy aims to increase the enrollment rates o f preschool age children (ages 4 to 6) up to 90 percent by 2015. However, no funds from the central government have been committed to this effort, primarily because communities are deemed responsible for the necessary financial investment since the decentralization policy of governance according to the Law on Local Self-Governance of 1996.

Sub-component Objectives

3. The main objective of this sub-component i s to increase the level of school readiness among Armenian children, with a focus on the poorest and most vulnerable communities. More specifically, this sub-component will assist the Government in i t s effort to increase the number o f children enrolled in preschool education and to increase the quality of services provided.

4. The beneficiaries and expected benefits are as follows:

a) Children age 5-6: Approximately 8,750 children ages 5-6 will benefit from participation in a kindergarten class, either through an enhanced existing preschool or through the establishment of a KG classroom in the local primary school. As a result, it i s expected that these children will enter Grade 1 with a higher level of school readiness as measured by EDL7

b) Parents: The parents of these children will benefit from quality preschool education options for their children, which will in turn give them an opportunity to engage in educational or livelihood opportunities. In addition, parents are expected to become more aware of the benefits of quality preschool edication and, as a result, to become more involved in the schooling of their children as they progress through the educational system.

c) Communities: Approximately 140 poor and disadvantaged communities will benefit from targeted grants that will allow them to enhance the quality of preschool education provided in their existing structure (if they have one) or in pre-school section of existing local primary/basic/secondary school ( i f they don’t have an operating preschool). They will also be

Haiyan Hua et al. (2008): School wastage study focusing on student absenteeism in Armenia The restricted focus o f this sub-component on the age group 5-6 (instead o f 4-6 or younger) i s motivated by three

reasons: (1) special importance i s given to this age group in the Preschool Education Reform Strategy for 2008-201 5 ,which makes it more likely that the central government wi l l consider it as a priority for intervention; (2) international evidence indicates that one year o f quality intervention prior to Grade 1 can have a significant impact on school readiness; and (3) while it i s true that interventions would also be useful for younger children, both from an education point of view but also from the perspective o f the holistic development o f the child and to allow young mothers to pursue educational and employment opportunities, focusing on 5-6 year old i s a necessary first step in ensuring children’s school readiness and in moving the policy dialogue forward with the central Government.

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6

7

expected to contribute to the financial sustainability and management of these enhanced KG classrooms and will be empowered by the project to progressively become more independent from the State through capacity building efforts in the areas of community sensitization and fundraising for the purpose o f preschool education.

d) Marzes: The education departments in the regions wil l also be empowered through the project, particularly in the areas o f project management (i-e., selection o f proposals by communities) and monitoring and evaluation.

Activities

5. The sub-component will reach approximately 140 vulnerable communities (30/40 per year) through grants that can be used for the enhancement o f existing KG classrooms (Le., in existing kindergartens under the governance of communities) or in pre-school section o f the existing primary schools. The grant may be used for renovation work and purchase o f furniture and materials adapted to the needs o f 5-year-old children. In addition, the project will finance the training o f preschool teachers and administrative staff directly involved in the delivery o f preschool education. Staff from the Marz education departments will also be invited to attend this training given that they will be involved in the management and monitoring and evaluation o f these activities. This training will include an initial module and additional in-service modules as needed (in collaboration with UNICEF and Step-by-Step).

6. The specific steps involved in the allocation o f grants for each community are:

Sensitization of eligible communities and call for proposals: done jointly by the Marzes and the CEP. Selection o f the proposals on the basis o f agreed upon criteria, including a) level o f vulnerability; b) commitment o f communities to contribute to recurring expenses (including teachers’ salaries and utilities expenses when relevant), and c) willingness o f communities to develop local schemes to ensure that the most disadvantaged children (Le., children with disabilities and the poorest children) can benefit from the project (e.g., through waiving fees or other means). This selection process will be done jointly by the Marzes and the CEP and should be validated by the “Preschool project board” established by the Minister o f Education. Training o f KG teachers, staff and MED (Marz Education Department) officials: done jointly between the Ministry o f Education, UNICEF, and Step by Step. Refurbishment o f classrooms: managed by communities and parents, who may contribute in- kind contributions such as free labor. Distribution o f pedagogical materials on child-centered practices: done jointly with the Ministry o f Education and UNICEF. Beginning o f activities with children Continuous monitoring o f the implementation and timely support to improve implementation arrangements, on the basis of the output indicators listed in 3) above. Ongoing classroom-based support to teachers on how to use child-centered approaches for teaching and on how to create a child-friendly atmosphere appropriate for the optimal development of 5-year old children (done by Step by Step). Provision of refresher trainings (done jointly between the Ministry of Education, UNICEF, and Step-by-step) and exchange o f best practices / innovative approaches within each Marz (after approximately one year of initial implementation).

Institutional and Implementation Arrangements

7. benefiting from preschool services in September 2010 (for the first batch o f 30-40 communities). Subsequent groups o f 30140 communities will benefit each year thereafter.

8.

Assuming that the project becomes operational in the fall of 2009, children wil l start directly

, The division o f responsibilities will be as follows:

a) Government entities:

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0 At the central level, the Ministry o f Education will be responsible for the overall management and oversight o f this project, as well as for providing relevant pedagogical guidance and reference documents through the Division o f preschool education and Inspectorate through the MoES and the National Institute o f Education. At the Marz level, education departments will be progressively empowered to play a role in the sensitization phase, in the selection o f community proposals, and in the monitoring and evaluation of implementation. At the Community level, community heads and councils o f elders will be progressively empowered.to bear more responsibility in the financing and in the overall management o f quality preschool services.

UNICEF will be expected to finance the provision of adequate training for approximately 300 ECD staff (2 per beneficiary community), both prior to the beginning of service delivery and in-service. Step-by-step will be expected to delivered these training modules.

0

b) Partner agencies: 0

0

9. A Memorandum o f Understanding (MOU) will be signed between the Ministry o f Education, UNICEF, Step-by-step, and the World Bank to agree on the specific details o f this partnership.

10. Technical assistance. Limited technical assistance will be required in the context o f this subcomponent. At the national level, technical assistance will be provided through the CEP for the various sub-activities previously listed and for the process o f capacity building at the level of Marzes and communities. Limited international technical assistance will also be provided in the context o f the impact evaluation described above.

Sub-component 2. Supporting further improvements in the quality of education through improved teacher in-service training and professional development (USs3.53 million IDA financing)

1 1. Support to teachers and thereby improving teaching have been key elements o f the government’s education reform. APL I has been successful in making available knowledge and pedagogical ideas that they need in implementing that reform. A vast majority of teachers have been trained to understand the requirements o f the new national curriculum, related methods o f teaching and assessment of student achievement. Furthermore, a network of 52 School Centers i s now operational, experimenting new educational ideas and providing professional development support to the schools in their neighborhoods. Regardless o f this good progress Armenian teachers are at the early phase o f educational change that will lead to sustainably improved quality o f teaching and learning. The starting point for this project i s an active teaching cadre that i s ready and able to move to forward in order to make permanent impact on quality o f education in Armenia.

12. Al l efforts to improve quality of teaching and learning until now have focused on professional development o f individual teachers or small teams of teachers. Furthermore, most o f that professional development has been in-service training around the topics of curriculum, assessment, using ICT in teaching and, to lesser extent, methods of teaching. This leads to two further needs that this projects aims to meet. First, sustainable development o f quality of education requires schools to be able to operate as professional learning communities. This means, in practical terms, that together with professional development o f teachers, education reforms must help schools to improve as communities o f professional practitioners. Second, sustainable improvement of teaching and learning requires also targeted methodological support to specific subject teachers. It i s a common view among many Armenian education specialists that mathematics and science teaching are among those where improvement o f teaching i s the most urgent.

13. This component supports the shift from in-service training of individual teachers to supporting school improvement as a collective process o f change. This means that whereas there will continue to be a significant need for conventional in-service training for all teachers, this project will help schools to become the locus o f change. This requires developing a systematic process that would include guided and coordinated self-evaluation, development planning and annual implementation o f agreed school improvement action plan by al l schools. In order to make this a sustainable part of how schools operate in

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the future, school leadership needs to be significantly enhanced. That i s why this project also supports developing a permanent system for professional development of school principals.

14. The key reform challenges that this sub-component aims to address are the following: (1) lack o f national system for teacher professional development; (2) lack o f national system for school principals professional training and continuous development; (3) shortcomings in teaching mathematics and science in secondary schools in resonance with the needs o f a knowledge economy; and (4) lack o f capacity to maintain sustainable school improvement.

Sub-component Objectives and Beneficiaries

15. The objective o f this sub-component i s to improve quality of teaching through (a) developing a national system for teacher and principal professional development, and (b) creating a school improvement network. This requires new policies and regulations regarding recruitment and promotion o f teachers and principals, incentives for teachers and principals and amendment to teachers’ and principals’ rights and obligations in relation to continuous professional development. This sub-component will finance grants to schools and providers o f professional development services, training of trainers, principals and teachers, science laboratories and hands-on kits to schools, hand-held technologies for teaching mathematics, technical assistance to design teacher and principals professional development systems, and trainer and teacher guidebooks and other printed teaching materials.

16. This sub-component will target secondary schools, principals and teachers, excluding the newly established high schools that are targeted by sub-component 1.4 o f this project. First o f all, this sub- component will provide teachers with better access to professional development opportunities that they need in order to improve teaching in schools. Teachers will benefit from this sub-component in two ways. On one hand, they will be offered in-service training and other professional development support directly by the government institutions as before. The scope o f this support falls into the set priorities o f the ongoing education reform, such as teaching mathematics and science. On the other hand, specific professional development grants will be made available to service providers so that they can design and deliver in-service training based on teachers’ needs.

17. Another beneficiary group i s school principals who will have opportunities and at the later stage also obligation to contemporary school leadership training and other learning opportunities. This will include al l school principals except those leading the newly established high schools. This sub-component will help school principals to better understand the complexities o f educational change and school improvement and thereby lead their schools towards sustainable improvement. Among the project beneficiaries are also schools that will form the School Improvement Network that will be established through the support by this sub-component. The total number o f schools in this network by the end of the APL I1 i s estimated at 400.

18. This sub-component also brings benefits to the emerging professional development providers in Armenia through more opportunities and resources to enhance and expand their services to schools and teachers. It i s assumed that this sub-component will vitalize the in-service provider sector in Armenia and also raise the quality of services. This requires that adequate accreditation and quality assurance procedure will be established by the NIE. In this way also the NIE will be among those benefiting from this sub-component.

Activities

19. The key activity o f this sub-component consists o f a grant scheme that has two different streams. One o f them i s grants to professional development service providers to teachers, principals and schools. The other i s school improvement grants to schools enrolling into the School Improvement Network in order to help schools to be engaged in self-evaluation, networking with other schools, development planning and continuous improvement certain procedures need to be created using technical assistance. These procedures include manuals for schools, trained coaches and web-based platform for the Network.

20. Expected outputs o f this sub-component are: (1) Teacher Professional Development System that i s based on teachers’ right, obligation and incentives to demand-driven professional development or training; (2) School Leadership Development System that provides basic knowledge and skills and

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continuous leadership training for school principals; (3) National School Improvement Network that will provide a supportive professional environment for professional development through school improvement; and (4) opportunities for diversified provision o f professional development services for teachers and schools.

0 Grants to training service providers (non-state/private organizations, NGOs, state and private universities, colleges, etc.) for professional development purposes.

0 Grants to Schools including School Centres for professional development purposes, networking, development o f new educational materials, teaching and learning guides, introduction and dissemination o f good practice and innovative programs. Training o f trainers and teachers (emphasizing Science, Mathematics, languages); School leadership programme and training for school principals and vice-principals; Technical Assistance for the implementation of the National Strategy for Teacher Education and Professional Development, as well as design and implementation of impact evaluation study; Networking and communication between school centres (website, e-mail addresses, regular conferences, seminars and working sessions at the school, regional and national level),

0

0

0

Institutional and Implementation Arrangements

21. The Ministry o f Education and Science through its Project Implementation Unit (CEP) will remain the main implementation agency. I t will be responsible for the planning, administration and monitoring of the Grant scheme, managing technical assistance and, in collaboration with the NIE and i t s regional Marzes, follow up the implementation o f quality assurance procedures and accreditation o f teacher and principal professional development and training. At the Marz level, the education departments will be gradually empowered to adopt an active role in selecting the best proposals for providing schools with grants for professional development and school improvement, as well as for playing a role in monitoring and evaluation of implementation. At the local level, the school principals and staff will be managing the implementation o f school-based project activities, as well as initiate professional development activities. Schools and teachers will set up teachers-networks at the cluster, regional or central levels.

22. The NIE will be responsible for (1) creating and maintaining the accreditation system as a part o f the national professional development system for teachers, (2) leading content development activities and providing pedagogical guidance in the ongoing curriculum reform, and (3) supporting networking o f schools and establishing the School Improvement Network, especially focusing on the remote regions o f Armenia. The NIE should consolidate and manage the existing human resources selected and developed within the APL I in all over Armenia. This approach will contribute to replacing the traditional ‘office- based’ educational consultant/instructor with one who i s educator, mentor and researcher simultaneously.

23. A Steering Group that would have a twin role as advisor and monitor will be established. This group that should remain rather small will have representatives from MOES, NE, CEP, principals, teachers, parents, private sector and international NGO sector.

Sub-component 3. Continuing support to the integration of ICT in teaching and learning process (US$3.72 million IDA financing).

24. APL I has made an extraordinary contribution in terms of the integration of ICTs in Armenian schools. In addition to ensuring affordable connectivity to approximately half o f the schools in the country, a successful Computer Revolving Fund has created compater labs in 85 percent o f the schools and a first generation o f Armenian electronic materials has been disseminated to schools. More importantly, APL I supported the creation of the National Center of Education Technology (NaCET), the agency that i s now in charge o f managing the overall Education and ICT policies and programs in Armenia. However, according to the results o f a recently carried out small-scale evaluation study o f the relevant APL I component, both the levels o f use and actual curriculum integration o f ICT remain modest and the skills of teachers in terms o f using ICTs for the teaching o f their subject need to be dramatically beefed up.

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25. The Government o f Armenia i s already committed to its Education and ICT program, and that shows very clearly in the National Budget for 2009, where important provisions have been made for further connectivity and hardware for schools. In addition, the Ministries o f Education and o f Economy are working together on a concept note, which would lead to an even more ambitious plan for the intensive use of ICTs in Armenian schools, also in the larger context o f a national policy for the Information Society in Armenia. APL I1 should therefore fit into this major government initiative while at the same time help consolidate the progress made during APL I. The commitment o f the government with the Education and ICT-related investments clearly suggests that the Computer Revolving Fund, as it has been working for almost five years, will not be needed in the future. Even more, APL I1 will no longer finance hardware for the school computer labs, and should rather focus on the development o f high- quality and relevant electronic materials and on the training and capacity building of those who need to be ready to integrate them in the curriculum and in the classrooms of Armenian schools.

26. The first challenge under APL I1 will be to extend this technical infrastructure to schools not covered under APL I, enhance the reliability and speed o f the existing networking, and finance the procurement and roll-out o f basic hardware to al l schools to support the computerization o f basic administrative tasks, especially those related to data collection for the national education management information system (EMIS). Then, an even greater challenge will be to ensure the effective use o f this technical infrastructure to support improved teaching and learning, building o f f activities under APL I related to teacher training and the development and dissemination o f electronic learning materials via CD- ROM and the national education portal

27. Particularly with regard to the connectivity of the school network i s concerned, it i s envisaged that only 400 schools in remote areas will remain with no internet connection by the end o f 2009, i.e., at the time APL I1 i s expected to become effective. While it i s hoped that the private sector will get involved in providing this connectivity, the Bank would be ready to contribute to the financing o f this outstanding challenge in order to ensure that the whole school network in Armenia will be interactively connected through the Internet by no later than 201 1. The first activity under this sub-component, once the project becomes effective at the end o f 2009, will be to develop a detailed and well-costed implementation plan based on information current at that time, taking into account any concrete private sector plans to roll-out more robust Internet infrastructure that might help connect rural and remote schools.

Sub-component Objective

28. The objective i s to ensure that all schools in Armenia are equipped with up-to-date technologies, connected interactively through the Internet, and ready to use al l these technologies effectively to deliver the curriculum and to enhance and facilitate student learning. Specific activities to be financed by this component include the following:

Activities 0

0

0

Support to the National Education Portal as the host of electronic materials, virtual

0

Provide internet connectivity to about 400 most remote schools. Provide schools with hardware for school management purposes. Provide schools with electronic learning materials for al l key school subjects. Train o f teachers in subject-specific use o f ICT.

communities of teachers and learners and dissemination tool for good practice. Technical assistance on the use of ICTs for school management purposes.

Institutional and Implementation Arrangements

29. The National Center o f Education Technology (NaCET) will play the central role as the implementation agency for a l l these processes. Further development o f the capacity of NaCET to lead and support initiatives related to ICT use in education wil l be required, and formal and informal links to similar organizations in other countries, especially in Europe will be important mechanisms to help achieve this, as will targeted technical assistance and the development and utilization of a set of quantitative and qualitative monitoring and evaluation indicators. NaCET will work together with other international donors (OS1 in particular) and with the existing providers of electronic materials. Given

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what appears to be few domestic producers of educational content, and that the small size o f the potential market for educational materials in the Armenian language, simply commissioning firms to supply such content may not alone be sufficient to meet the critical needs o f the education system for useful, relevant content. NaCET will have to take the lead in exploring alternative methods o f generating such content, such as through the development and promotion o f a platform and set o f incentives to enable user- generated open education resources (OER).

Sub-component 4. Supporting the implementation of the high-school reform (USSS, 99 million IDA financing)

30. The Government approved the upper secondary school reform strategy in 2008, which involves the final stage in the introduction o f the 12-year general secondary education system and, more specifically, the creation o f a renewed network of 3-year high schools offering a more diversified curriculum and enhanced learning opportunities to students. The Government has turned back on its initial plans to further consolidate schools as part of the high-school reforms. The decision now i s to go ahead with the creation o f the network o f 150 high schools but keeping the new general “stream” in the schools o f the 700 communities where there i s no other general secondary school available. This was justified on the grounds o f protecting equal access of rural students and also to avoid higher drop-out rates for those whose families could not afford the extra costs - transportation or otherwise - o f getting enrolled in the new high schools. The flip side o f this decision i s of course that there will be students in rural areas who would have had a chance to go to the new high school streams - Math and Science or Humanities - and will now just stay in their local school with, in theory, a more constrained opportunity to learn in comparison to their urban counterparts. To deal with this situation, the Government has created a Mitigation Fund, with AMD 50 million (US$l65,000) already in the 2008 National Budget, transferred directly from the Ministry o f Finance to the Marz Education departments. Thus, Marzes can apply and obtain funds to be spent in either providing transportation services to students (and teachers) or even in cash transfers to students themselves in order to cover transportation costs.

Su b-corn ponent Objective

3 1. The objective o f this sub-component i s to support teachers and schools in the implementation o f the 12-year general education system and the high school reform, so that school-leavers will be equipped with knowledge and skills comparable to those o f 18 year-old in OECD countries.

Benefits and target population

32. The beneficiaries and expected outcomes are as follows: Upper secondary students: Will be provided with new opportunities for more advanced study of Mathematics, Languages and Sciences thanks to the introduction o f new streams in the curriculum. There will be a new learning environment with new technologies and modern laboratories, in the hands o f better trained and more motivated teachers. The envisaged need- based grants will provide equity access to high school services in rural remote areas. Schools and teachers: These groups of beneficiaries will be affected through increased financing, new professional development and learning opportunities, encouraged networking with colleagues and other schools. The increased motivation o f learners will create better conditions for the provision o f high quality learning environment promoting teachers and schools cooperation and research work. Parentdfamilies: Since the quality o f education in the new High Schools i s expected to be higher than it was in regular secondary schools, the demand for private tutoring could fal l and students would focus more on meaningful learning rather than memorizing facts. The successful implementation o f need-based grants to rural students could be a serious support to families and would contribute to keeping a high enrollment rate in upper secondary education in Armenia.

Tertiary education institutions: The enhanced quality o f education in upper secondary level and in-depth study o f subjects by choices would positively affect on early orientation of high school students for making the best possible decision on future specialization. Admission decisions on the part o f universities could therefore be better informed

3 5

Activities

0

0

0

0

0

0

0

Establishment o f resource centers in 100 high schools (libraries plus computer labs). Training o f 150 high school librarians. Training o f 2750 high school teachers. Training o f 150 principals for the new high schools. Curriculum and syllabi design for each stream in the new high school, ensuring a better articulation between high school and tertiary education. Capacity building for the staff of MES and o f Marz Education departments who are directly in charge o f the implementation o f the high school reform Technical assistance to help design a viable system o f counseling and guidance services at the new high schools.

Institutional and Implementation Arrangements

3 3 . 0

0

0

0

0

0

34.

The division o f responsibilities will be as follows: At the central level, the Ministry o f Education and Science (MoES) will be responsible for the oversight o f this subcomponent; Marz Education Departments (MEDs) in collaboration with communities and schools should support MoES in the mapping o f the new high school network, provide on-going monitoring and technical support to new HS, as well as support the “losing” schools to overcome the difficulties resulting.from the decline of student numbers. MEDs would also provide support to data collection and give feedback to the MoES on specific implementation issues related to the high school reform. MEDs would also take the lead in managing needs-based grants or scholarships for high school students from vulnerable and remote areas. New established high schools will be the main implementation agency responsible for: building capacity, organizing educational processes, supporting students from remote areas to be able to access the new high school, transparent selection o f high school teachers and support to them for obtaining advanced training, equipping laboratories and libraries, etc. CEP will support H S s in the procurement of goods and services, as well as providing monitoring and technical assistance for the establishment of libraries, science and computer laboratories, the review o f the curriculum and the training o f teachers and school principals. The CEP will be in charge o f the overall management o f the sub-component activities. NIE and i t s branches will be in charge o f the design and development o f the new high school curriculum, introducing the new formative assessment tools, providing teachers and schools with new teaching and learning materials and providing classroom-based support to teachers so that they can apply new methods and technologies. NIE can also participate in data collection, analyses and evaluation activities. Yerevan State Pedagogical University, Yerevan State University and regional Pedagogical Universities will be in charge o f providing training to high school teachers for their professional development. Local short and middle-term technical assistance will be required while establishing the network

o f new high schools. At the national level, technical assistance wi l i be provided through the CEP, NIE, ATC, NaCET and other institutions for the various sub-activities. MEDs will provide on-going assistance to all schools and teachers in this transition period supporting ‘loosing’ and benefiting schools, as well as teachers who would have to move to the other schools or simply become redundant. MoES will coordinate al l activities at the central level providing on-going monitoring and evaluation and supporting necessary changes in regulatory-normative acts or to adopt new legislative documents.

35. Limited international technical assistance will be provided by the ICs in the context o f establishment o f new libraries, training o f science, math and language teachers, introduction o f formative assessment tools. Specific training will be provided on using new hand-held technologies.

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Component 2. Supporting Tertiary Education Reforms in the Context of the Bologna Agenda (total estimated cost: US$7.53 million of which US$6.02 million are IDA financing)

36. This component consists o f four sub-components, namely (i) the establishment and strengthening of the national Quality Assurance system, (ii) the development of an integrated Tertiary Education Management Information System, (iii) the formulation o f a sustainable funding strategy for tertiary education, including the design and implementation of a student loan scheme, and (iv) the reform o f pre- service teacher training at the higher education level. Direct beneficiaries of this component include the MoES policy makers, administrators and students o f state and private universities through the improved quality of education, more efficient and effective management and administration and information systems, and a more equitable and efficient tertiary education financing strategy.

Sub-component 2.1: Establishment and Strengthening of the National Quality Assurance System (US2.4 7 million IDA financing)

37. Armenia joined the Bologna Process in 2005. By this act, it committed i t se l f to overhauling i ts higher education system to comply with al l the dimensions o f the Bologna framework,8 with a view to becoming a full member o f the European Higher Education Area when it i s formalized in 2010. However, the Armenian Quality Assurance system i s not yet in line with the established European practice. To overcome this situation, the government established the Armenian National Quality Assurance Agency (ANQA) in November 2008. MoES also established a Working Group on Quality Assurance, which will assist the establishment and consolidation o f ANQA during the initial stage. This sub-component will support the establishment and strengthening o f the capacity of the ANQA in advancing QA policies and practices to achieve the threshold standards and targets required by the Bologna Process and higher education institutions to organize and implement internal QA activities. It will also support universities to develop internal QA units. Some o f the most urgent activities such as ANQA’s capacity building and awareness campaigns need to take place immediately after i t s establishment, which need to be financed by the government’s own budget and/or with other donor support before the proposed Project becomes effective.

Activities:

(i) Establishment o f the External Quality Assurance (EQA) system 0 Establish mutual understanding o f quality concept, QA basic principles and Bologna

requirements on QA, with participation o f stakeholders (ANQA, MoES, universities, students, and employers) Coordinate public awareness campaigns related to QA and Bologna process through workshops, public talks and mass media Develop capacities o f EQA stakeholders (ANQA, MoES’s Higher Education and Licensing Departments, university representatives) Develop EQA policy, standards, criteria, procedures and guidelines, including consultation with stakeholders Plan and implement orientation and briefing sessions for external evaluators Organize a study tour for learn activities o f other EQA agencies Pilot accreditation o f selected universities and expand it to the remaining universities Elaborate and disseminate outcomes and progresses o f QA activities in Armenia and abroad

0

0

0

0

0

(ii) Development o f the Internal Quality Assurance (IQA) system 0 Improve capacities of IQA stakeholders (university IQA Units, student representatives)

These include: Quality assurance; Degree structure (Adoption o f a system essentially based on 2 main cycles); Promotion o f mobility; Establishment o f a system o f credits; Recognition of degrees (Adoption of a system o f easily readable and comparable degrees); Higher education institutions and students; Promotion of the European dimension in higher education; Promotion o f the attractiveness of the European higher education area; Lifelong learning.

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0

0

Develop approaches to IQA necessary policy, student assessment unified system, standards, procedures and guidelines and updating requirements for faculty qualifications Provide grants to HEIs to develop IQA units and improve IQA system Specific grant scheme to promote good governance and transparency in HEIs

Institutional and implementation arrangements

3 8 . The government established the Armenian National Quality Assurance Agency (ANQA) in November 2008. The ANQA i s in the midst of appointing relevant staff (about 25 persons) and setting up necessary equipment and facilities. MoES has also established a Working Group on Quality Assurance, which will assist the establishment and consolidation o f ANQA during the initial stage. ANQA, supported by WG, will be responsible for technical issues, while the PIU will assist them on procurement and financial management.

Sub-component 2.2: Developing a Tertiary Education Management Information System (US$0.39 million IDA financing)

3 9 . MoES currently does not have an effective management information system on tertiary education. This sub-component will provide technical assistance to establish an integrated Tertiary Education Management Information System (TEMIS) as an effective tool to support policy planning, management, monitoring and evaluation of performance o f the sector both at the national and university levels. The National Center o f Education Technology (NaCET) has been given the legal rights and responsibility to manage education data o f al l education levels, and will be the institutional home to carry out al l the tasks related to the system development and day-to-day operations o f TEMIS. It i s crucial that the NaCET, supported by the Working Group on TEMIS, will first identify any legislative changes needed to make the data management and analysis more efficient and effective.

40. The NaCET will first assess information needs for tertiary education, and design TEMIS. TEMIS will first be piloted in a few public and private universities to observe and assess the operational feasibility and subsequently extended to all public and private universities. The modules will include: (i) Personnel management module (recruitment, legal and administrative decisions, salaries, pension, qualifications o f lecturers, etc.); (ii) Academic management module (registration, curriculum, courses, research, examinations, classrooms, etc.); (iii) Student management module (student admissions, attendance, social affairs, continuing students and graduates, etc.); (iv) Financial management module (accounting, budgeting, payments, cash flow, cost analysis, etc.); and (v) Infrastructure management module (buildings, laboratories, workshops, equipment, etc.). A committee of users will be formed for each module, with representatives from universities and the NaCET. The role o f these committees will be to propose areas of priority to the software developers and to facilitate the exchange o f information and experiences among universities as the modules were prepared and gradually put in place in a number o f institutions. Those universities not represented on the committees will be invited to contribute comments and requests through email or any other communication means. Throughout the development process, the NaCET will organize intensive training programs to support the participating universities in the introduction and adaptation o f the modules and strengthen their capacity to use the new computerized management system in an effective manner. Efforts will be made to train non-specialized personnel with good communication skills in each university to act as change agents.

41. This sub-component will also provide technical assistance to the MoES and universities to develop information-based planning, monitoring and evaluation capacities. Once TEMIS becomes operational, the MoES will update the Higher Education Strategy. Each university will also produce an annual strategic plan and self-assessment reports using TEMIS data.

Institutional and implementation arrangements

42. MoES has formed a Working Group on TEMIS, consisting o f representatives from MoES Departments, universities and the National Statistic Service. NaCET, supported by the WG, will be responsible for the technical matters, while the PIU will assist them on procurement and financial management,

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Sub-component 2.3: Strengthening the Capacity to Implement a Sustainable Financing System (US$I. 93 million IDA financing)

43. While the government has boosted public spending on general secondary education in the last several years, it has not increased spending on tertiary education. The lack of government funding has been mitigated by growth in tuition fees and the expansion o f private sector tertiary education institutions. In 2006, the government financed only 15 percent o f state universities’ total revenue, down from 47 percent in 1997. Today, public universities depend on tuition fees for 65 percent o f their income, on average. As a result, tuition fees in public universities are extremely high, amounting to 30-40 percent o f per capita income, as compared to, for instance, to 11 percent in the US or Japan. Private institutions enroll close to 25-30 percent o f al l students. The high reliance on private spending has limited access to higher education among the poor, raising an equity concern. I t i s estimated that students from the lowest quintile represent only 6 percent of those receiving a government merit-based scholarship, whereas students from the richest quintile make up 40 percent of al l scholarship beneficiaries. Moreover, the existing budget allocation mechanism based on scholarships to selected specializations and stipends i s not demand-driven or performance-based. The government needs not only to boost total higher education spending, but also to reform the financing mechanism to increase equitable access and set the right incentives and regulations that would allow tertiary institutions and programs to improve their quality and relevance and to become more accountable for their performance.’

44. MoES has established a Working Group on the sustainable higher education financing. This sub- component will support the government and WG in defining and putting in place a sustainable funding strategy for tertiary education. The first activity will be to design a student loan scheme to provide al l needy students with financial aid to pay their tuition fees and living expenditures. The scheme will be tested on a pilot basis with a small group o f students. Second, it will assist the government in setting up priority areas and viable procedures for the operation of a future competitive innovation fund (CIF) in support o f quality improvement and innovations in tertiary education institutions. I t i s envisaged that once the CIF i s designed under APL 11, the Bank’s next higher education project and/or other donors would provide funding to implement it. Third, it will review the existing resource allocation mechanisms for tertiary education and design and implement a more sustainable, equitable and efficient funding system.

(0 45. To ensure equal access to higher education for all socio-economic groups in a financially sustainable way, this sub-component will provide the government with technical assistance in designing and setting up a student loan system. I t will provide a good understanding o f various student loan models, technical knowledge about details in terms o f appropriate subsidy and guarantee schemes, and experience to set up a system that helps students, protects the interests o f the public budget and takes advantage o f the mutual interest between commercial banks and the government.

Activities:

0

0

0

0

0

0

Setting a student loan scheme

Conduct a survey on the demand for student loans among university and college students, and university leaders Conduct a student tracer survey Design a student loan scheme Develop a monitoring and reporting mechanism Training o f the government officials and tertiary education institutions Provision of TA to design the loan scheme and organize a study tour on student loan schemes abroad Pilot the model with a small number of students Evaluate the model after implementing it for one academic year Based on the evaluation o f the pilot model, redesign the student loan scheme for a larger scale expansion

Source: World Bank, 2008, Draft Armenia Public Expenditure Review Education Sector. 9

39

0 Establish a student loan oversight unit in the MOF and/or MOES (if it i s decided to scale it up)

(iq 46. The current funding system in Armenia considers public universities as service providers and the government as a “client” purchasing a certain number o f specialists in each area. The allocation is, however, independent of universities’ performance. The government has expressed i ts determination o f moving towards a resource allocation system that would be based on performance. Indeed, Armenian universities are familiar with the concept o f competitive fund through TEMPUS (Trans-European Mobility Program for University Studies), but the funding through TEMPUS has been quite limited and narrow in the range o f themes eligible for financing.

47. This sub-component will provide technical assistance to the MoES to design a Competitive Innovation Fund (CIF) that will enable universities-both public and private-to develop and implement innovative plans for modernizing their curriculum and pedagogical methods, develop ECTS, build their fund-raising capacity, create linkages with industry, and engage in international cooperation activities. It i s envisaged that once the CIF i s designed under APL 11, the Bank’s next higher education project and/or other donors would provide funding to make it operational.

Activities: 0 Conduct a preliminary study on the models o f CIF 0 Based on the study, define objectives o f introducing a CIF in Armenia 0 Prepare a TOR and recruit international and local consultants to conduct a feasibility study and

design a Competitive Innovation Fund 0 Conduct a feasibility study on a CIF 0 Design aCIF

(iii) Defining a sustainable funding strategy 48. This sub-component will support the MoES in conducting a study aiming at defining a sustainable financing strategy for the development o f the higher education system. The specific objectives of the study will be to: (i) identify ways o f mobilizing additional public resources for tertiary education, (ii) define effective allocation mechanisms for the distribution o f public resources (recurrent and research budgets) based on a funding formula with clear and transparent criteria, and (iii) explore ways to achieve a more efficient utilization of existing resources.

Activities: 0

0

0

Start implementing the strategy

Designing a competitive innovation fund

Prepare a TOR and recruit international and local consultants to design an overall funding strategy and prepare an implementation plan Draft report on an overall funding strategy Organize technical workshops to discuss the draft report Formulate policies and measures to implement the recommendations o f the study. Prepare an implementation plan to operationalize the funding strategy

Institutional and implementation arrangements

49. MoES has formed an inter-ministerial Working Group on the sustainable higher education financing, consisting o f representatives from the MoES, MoF, commercial banks, and universities. The WG will be responsible for technical matters, while the PIU wil l assist them on procurement and financial management. The PIU will hire a group o f consultants to administer the student loan pilot. The WG may need to create a sub-group for establishing a CIF and the development o f a sustainable funding strategy.

Sub-component 2.4: Reforming Pre-service Teacher Education (USV.22 million IDA financing)

50. After signing the Bologna Declaration, Armenia has to make fundamental rhythm change in it higher education reform. This applies also to teacher education. The challenge i s to harmonize teacher education according to the National teacher Education Strategy in a way that there i s now overlapping operations (teachers are trained in different Faculties for similar qualifications) and that al l teacher

40

qualifications correspond to those typically found in the forthcoming European Higher Education Area (EHEA).

5 1 Armenia State Pedagogical University (ASPU) in Yerevan i s the key player in teacher education, and the majority o f graduating teachers come from this university. The ASPU has begun to adjust its degrees, study programs and curricula to the requirements o f the Bologna Declaration. However, the lack o f resources, relevant contacts with international teacher education institutes and illusion that modernization o f teacher education only requires technical revision have hindered visible improvements. Positive progress i s the establishment o f the Inter-institutional Consortium o f pedagogical institutes in Armenia i s about to enhance coordination between the six national pedagogical institutes and, if successfully managed, also assist each consortium member in moving ahead with required reforms.

52. Currently teacher education covers a significant proportion o f al l higher education students in Armenia. The total number o f students in the six pedagogical institutes i s about 30,000, half o f them registered as part-time students. Teacher education i s fragmented into narrow specializations which i s a consequence o f the organizational structure o f these institutions. This complex programmatic and organizational structure makes any changes even more complicated due to a large number o f units and individuals to be involved in the reform. Partly due to this reason the main focus o f this project will be on bringing primary school teacher education closer to the international good practices and common Bologna guidelines.

Sub-component Objectives and Beneficiaries

53. The objective o f this sub-component i s to support development o f initial teacher education in the spirit o f Bologna Process through (1) longer-term twinning arrangement between the Armenia State Pedagogical University, (and the Consortium o f Pedagogical Institutes, together with Yerevan State University) and an international higher education institution, and (2) upgrading necessary teaching facilities and equipment in these institutes to support modernization o f primary school teacher education. This requires technical assistance delivered by a selected international university that focuses on upgrading degrees and curricula, enhancing methods o f teaching and studying, strengthening educational research capacities, modernizing management and governance, setting the norms o f ethics, and establishing networks o f field schools for practical parts o f new teacher education. This sub-component will finance technical assistance, training activities, teaching and study facilities in laboratories and libraries, printing teaching and training materials and relevant software for teaching and studying.

54. The main beneficiaries of this sub-component will be the Armenia State Pedagogical University, Yerevan State University and members of the Inter-institutional Consortium and its staff. Teachers will have opportunities to further pedagogical training and researchers will be able to joint research projects and training with their international colleagues. This sub-component will have a particular focus on providing assistance to primary teacher education sections in these institutes. Therefore, these institutes and their staff will probably benefit the most of this project.

Activities

55. The main activity within this sub-component will be the mentioned long-term twining arrangement. This twinning will be arranged for the duration o f the entire APL-2 which will enable deeper cooperation, exchange and partnership between the institutions. The twinning and technical assistance provided through it will focus on revision o f degrees and study programs, curriculum development, training on teaching and study methods, strengthening research capacities, and advancing practical training as part o f teacher education. By its nature, this twinning arrangement will also offer both teachers and students more opportunities to internationalization and cooperation with their peers.

56. This sub-component also includes targeted internal training and professional development to the Consortium members by the staff (local training), provision o f library materials and low-cost 1abo:atory equipment to the primary teacher education institutions (or their Faculties of Primary Teaching and Methodology), and support to the design and pilot o f the practical training in field schools.

57. Al l activities regarding technical assistance will be channeled through a large contract to an international university or higher education institutions in the field of teacher education. Within this

41

twinning arrangement the ASPU and the contracted international partner sign a Memorandum o f Cooperation that will stipulate the duties, division o f labor and other responsibilities regarding the partnership. Only a limited amount o f local technical assistance will be needed, mostly to those areas dealing with internal dissemination through in-house training and the needs arising from the further development o f the field-school training system.

Institutional and Implementation Arrangements

58. Most activities in this sub-component will be administrated by the hired foreign university or higher education institution. MOES and i ts Centre for Education Projects will sign a contract with the selected international partner. The coordination institution in Armenia will be ASPU that will make available relevant staff for that purpose (with experience with international projects and adequate language skills depending on the selected partner university).

59. At the central level, the MoES will be responsible for the overall management and oversight o f this sub-component, supporting the twinning partners with necessary policy changes and adjustments for the required reforms. The CEP will support Armenia State Pedagogical University, Yerevan State University and other members o f the consortium in the implementation activities providing them with technical assistance in procurement o f goods and services, preparing and submitting o f reports, as well as will provide monitoring and evaluation.

60. The NIE will be responsible for coordinating relevant content related issues, supporting with development o f curriculum, training of trainers, and supporting to new teachers for smooth entrance into teaching career. A steering Group for advisory and follow-up purposes to the twinning will be established. This group should have representatives from al l members of the Consortium, MoES, Academy o f Sciences, NIE, schools, students, NGO sector and Armenian business community.

Component 3. Project Management, Monitoring and Evaluation (total estimated cost: US$4.06 million of which US$3.25 million are IDA financing)

61, The CEP as the Project Implementation Unit o f the Project will be responsible for implementation and management of the procurement process, disbursements and financial arrangements, project monitoring, and reporting. The Unit will work with the existing management and monitoring framework designed to coordinate, monitor and build the capacity o f participating institutions. However, some adjustments will be made to the framework to ensure the gradual transfer o f responsibilities from the CEP to the Ministry o f Education related to policy, planning, monitoring and evaluation functions. This framework consists o f (i) providing technical and management training; (ii) developing the strategies and business plans; (iii) managing working groups responsible for facilitating technical discussions, coordinating activities and carrying out rigorous monitoring and evaluation according to established programs and timetables; and (iv) carrying out a comprehensive public information and consultation campaign focusing on education quality and relevance o f projects. One o f the key roles o f the CEP under the APL I1 will be to facilitate coordination and communication flows with participating institutions and partners. The Unit will provide administrative support to the newly created Armenian National Quality Assurance Agency (ANQA) and will work with the entity in the MoES responsible for policy planning, monitoring and evaluation, with the aim of mainstreaming these key responsibilities in the Ministry.

62. With regard to Monitoring and Evaluation, the CEP will work closely with and build the capacity of the entity in the MoES assigned with this function. The aim i s to gradually transfer the following key responsibilities to this entity: a) quality reporting; b) internal and external evaluations, studies and assessments; c) monitoring and evaluating the project’s outcomes and results; and d) arranging regular meetings between the Minister and Deputy Ministers with working groups to discuss the status o f project activities. The institutional set-up and functioning o f the entity responsible for policy, planning, monitoring and evaluation in the MoES i s reflected as an expected outcome. The status of this process will be assessed during supervision missions and will be part of the mid-term review.

42

Component Objectives, Activities and Outcomes

63. The key objectives o f this component will be to: (i) provide continued support o f mainstreamed arrangements for the management, administration and monitoring o f project activities; and (ii) institutionalize key functions in the MoES covering policy planning, monitoring and evaluation.

Activities 0

0

0

0

0

0

0

0

0

0

0

0

Financing a Project Implementation Unit with core staff hired as consultants. Implementation and management o f the procurement process, disbursements, and financial management, project monitoring, and reporting. Acquisition o f minor additionsheplacement o f office furniture and equipment. Financing associated with upgrading the PTU facilities. Financing of local travel, utilities and publications, translations, office supplies, small off ice repair, fuel, internet service, bank commission charges, vehicle maintenance and repair. Systematic maintenance o f the Monitoring and Evaluation system with updates on key performance indicators, which will be carried out jointly between the NaCET, ATC, the entity responsible for policy planning, monitoring and evaluation in the MoES, and the CEP. Participation fees o f Armenia for TIMSS 201 1. Financing o f implementation and management o f impact assessments and special studies planned. Facilitate coordination, communication flows and dissemination of information with participating institutions. Facilitate working group arrangements and the organization o f seminars and workshops. Support the NaCET in the usage and management o f the EMIS. Provide training to staff in the CEP in the areas covering procurement, disbursements, information technology, project management and other areas identified and proposed in the course o f project implementation.

The expected outcomes o f this component will be:

0

0

0

The CEP staffed with adequate number and professional staff. Project financed goods, works, and services procured without delays in accordance with World Bank procurement guidelines. CEP prepares quarterly and annual progress reports and submits them to IDA on a timely basis. Implementation and dissemination o f the results o f the planned assessments and evaluations. Monitoring and Evaluation systems with updates on key performance indicators. The entity in the MoES assuming full responsibility for carrying out policy planning, monitoring and evaluation functions.

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Annex 5: Project Costs

ARMENIA: Second Education Quality and Relevance Project (APL 11)

Component 1 - General Education Component 2 - Tertiary Education Component 3 -Project Management Total Base Costs:

Physical contingencies Price continnencies

Local Foreign Total (US$ million) (US$ million) (US$ million)

11.70 6.44 18.13 5.1 1 1.77 6.88

3 -90 0.00 3.90 20.71 8.2 1 28.91 1.18 0.38 1.56 0.59 0.19 0.78

Total Project Costs: Total Financing Required:

22.48 8.78 31.26 22.48 8.78 31.26

Goods Grants Consultant services Training Operating costs

Note: Identifiable taxes and duties are US$5.28 million, and the total project cost, net o f taxes, i s US$25.98 million. Therefore, the share of project cost net of taxes i s 81 percent.

Local Foreign Total (US$ million) (US$ million) (US$ million)

6.00 5.16 11.16 8.09 0.00 8.09 4.15 3 -62 7.76 3 -29 0.00 3 -29 0.96 0.00 0.96

44

Total Project Costs: Total Financing Required:

22.48 8.78 31.26 22.48 8.78 31.26

Annex 6: Implementation Arrangements

ARMENIA: Second Education Quality and Relevance Project (APL 11)

1. Institutional set-up and Administrative Structure of the Second Education Quality and Relevance Project (APL 11). The Ministry of Education (MoES) o f Armenia will be responsible for the implementation o f the Project supported by the services o f a Center for Education Projects (CEP) acting as the Project Implementation Unit. The structure o f the MoES has been evolving; some further changes are under consideration by the Government in response to institutional needs for carrying out second- generation reforms aimed at enhancing the quality o f secondary education and supporting tertiary education reforms. The Organizational Chart below outlines the proposed institutional set-up and administrative structure o f the APL 11. As depicted in the chart, during the next phase there will be an increasing number o f interrelated institutions participating under the project. Therefore, great efforts will need to be directed at clarifying and further defining the roles and functions o f each participating entity, including coordination mechanisms and information flows, to ensure effective cross-agency collaboration.

2. Key Institutional Challenges Ahead. To ensure the quality and accountability of participating institutions, the process of mainstreaming management, coordination and monitoring activities into the Government structure will be continued under the APL 11. The success o f this process will require the continuation o f the CEP’s role in institutional capacity building and training on management and accountability mechanisms directed at beneficiary state institutions. In addition, greater efforts and specific steps (described below) will be needed to gradually build MoES capacity in the areas o f policy planning, monitoring and evaluation.

3. Under APL I, with the support o f the CEP, some important organizational development interventions started which need to be further developed under the follow-up operation. One output under the APL I on which to build i s the CEP’s promotion o f quality and accountability among various institutional entities that benefited from both strengthened institutional structures and tested and applied administrative, coordinating and monitoring procedures. CEP supported the MoES in redefining and streamlining the roles, responsibilities and inter-relationships between key institutional entities as well as in building their capacity as implementing agencies. These institutional changes were gradually carried out in line with evolving reforms. The training on management and administrative planning initiated by the CEP has helped fill a critical gap in the Civil Service system. According to the 2008 USAID Report “Organizational and Performance Needs Assessment on the Education System Capacity,” under the current Civil Service system there i s “no management, skills training provided, required or credited to individuals.” Thus, the continuation o f the CEP’s role in institutional capacity building and training on management and accountability mechanisms directed at beneficiary state institutions described in this annex will be critical.

4. Institutionalizing Policy, Planning, Monitoring and Evaluation. Greater efforts and specific steps will need to gradually build the capacity within the MoES in the areas of policy planning, monitoring and evaluation. These areas o f responsibilities have largely been assumed by the CEP, which has contributed to education reforms over the past 10 years. These key areas o f management need to be mainstreamed and institutionalized in the MoES. There i s an already existing structure in the Ministry, the Information Analysis and Development Programs Department, which, according to the description o f i ts functions, i s involved in some aspects o f policy planning and monitoring. This entity could be strengthened through capacity building, training and technical assistance to assume a stronger role in management and coordinating functions associated with policy, planning, monitoring and evaluation,

5. To mitigate the risk o f having the task of policy, planning and monitoring remain under the management o f the CEP, at the start o f project implementation it will be essential to have the CEP build the capacity of a designated entity in the MoES that will take on these responsibilities. As a f i rst step, a review of the current structure in the Ministry will need to be carried out to decide which entity would be responsible for these key areas, followed by the development o f specific roles and functions o f the entity. The CEP will work closely with the entity responsible for these key tasks, building the capacity of, and

45

gradually transferring these responsibilities to, this entity. The entity in the MoES assuming full responsibility for carrying out policy planning, monitoring and evaluation functions i s an expected outcome under Component 3 . The status of this process will be assessed during supervision missions and will be part of the integral review of the mid-term review.

6. The organizational chart highlights the evolving structure of the MoES and the new institutional challenges. The CEP will work within the existing organizational structure o f the MoES supporting state management institutions (Technical Departments in the MoES, Marz Education Departments, the State Inspectorate o f Education), as well as beneficiary state institutions such as the National Institute o f Education (NIE), the National Center for Education Technology (NaCET), and School Centers, which served as key implementing entities under the APL I. It will also work with institutional entities related to tertiary education such as the newly established Armenian National Quality Assurance Agency (ANQA) and higher education institutions. It will coordinate with pre-schools and high schools, the other institutions proposed to be targeted under the APL 11. Working groups have been created for the implementation o f the proposed component on tertiary education, which will coordinate with other participating institutions and partners including: (i) key stakeholders such as parents, teachers, and principals; (ii) NGOs, individual consultants and firms (including private enterprises) who compete for technical assistance and training activities advertised under the project; and (iii) key donors such as UNICEF and the Open Society Institute (OSI), implementing projects in education, including pre-schools and tertiary education.

7 . State Management Institutions. The Minister of Education will assume the overall leadership for the education reform process and project implementation. H e will also ensure that envisaged government counterpart financing for the proposed operation i s provided by the Government on a timely basis and that the Government fulfills its obligations with regard to the financing o f recurrent costs o f the three key beneficiary state institutions: the NaCET, the NIE, and the ANQA, to be included in the annual State Budgets. The Ministry of Finance will be responsible for ensuring the proper flow of funds, the timely provision o f counterpart funding, financial monitoring of project activities, and the replenishment o f the special Account and allocation o f funds for project activities. The Deputy Minister of Education will be responsible for the policy dialogue related to general education (including pre-school and high school) and tertiary education. He will also interface with the technical departments in the Ministry, the Marz Education Departments, the State Inspectorate o f Education (which started functioning again in early 2007), the technical working groups, as well as educational state institutions described below. The Technical Departments in the MoES include the General Education Department, the Education Policy and Planning Department, the Information, Analysis and Development Programs Department and the Higher Education department. These departments would coordinate their relevant areas o f work with the state institutions and technical working groups described below. At the Marz level, the Education Departments will be gradually empowered to adopt an active role in the selection process o f school grants for professional development and school improvement, including the monitoring and evaluation o f implementation.

46

W E 8 8

Y 4

Y 4

8. State Institutions. Under the APL I, the CEP worked closely with beneficiary state institutions such as the ATC, the NaCET, the NIE, the National Employment Service (NES), the Social Insurance State Fund (SISF), and School Centers. The APL I1 will benefit from the new state institutions such as the NaCET and the ATC established and trained under the APL I project. The CEP took the leadership role in developing the legal framework for the establishment o f the ATC, created on April 14, 2004, and the NaCET created on March 1 1, 2004. It was also responsible for initiating, managing and coordinating the process to ensure the institutional and financial sustainability o f these key entities responsible for student assessments and educational technologies respectively. Although the ATC will not be a beneficiary institution under the APL 11, it will be a participating entity involved in monitoring and evaluation activities which are directly related to the Results Framework o f the Project.

9. The Project will also benefit from institutional arrangements already in place in support of teacher training activities. This arrangement consists o f close collaboration between the Marz Education Departments, the NIE as the existing institution, which together with i ts eleven regional offices i s in charge o f leading the development o f a sustainable system o f teacher training, and the network o f 52 School Centers responsible for training teachers under a cluster-type arrangement. This arrangement will be strengthened in support o f the APL 11’s focus on further improvements in teacher training and professional development. It will also include the Armenian State Pedagogical University (ASPU), as a new institutional partner that will be a key player in pre-service teacher training activities. In support o f project activities related to tertiary education, the Armenian National Quality Assurance Agency (ANQA) was established in November 2008 with a mandate to: (i) develop and implement QA criteria and procedures required by the Bologna Process, and (ii) assist higher education institutions in establishing and strengthening the internal QA unit with the respective universities. This center will be supported by the newly established working groups described in the following section. The ANQA will manage the implementation o f activities related to the proposed Sub-Component 2.1 : Establishment and Strengthening of the National Quality Assurance System. At the local level, school principals and staff will manage the implementation o f school-based project activities, as well as initiate professional development activities. Schools and teachers will set-up teachers-network at the cluster, regional and central levels.

10. Project Management and Coordination. The Project will benefit from the existing Project Management Unit known as the Center for Education Projects (CEP), which was established by the MoES in 1996. Since its creation, it has gained significant strengths in project management through the implementation o f the Bank-funded Education Financing and Management Reform Project, the Education Quality and Relevance Project and several other Bank-funded small-scale projects. In the absence o f a centralized management and operational framework in the MoES for administering, coordinating and monitoring donor-financed projects, the establishment o f the CEP with the proper structure, systems and procedures was essential to ensure the effective implementation o f project activities. The CEP has a Steering Committee which i s the governing body o f the CEP responsible for overseeing and supervising the implementation o f projects. The CEP under the current APL I Project has been very effective in filling this institutional gap in the Ministry and, more importantly, has provided support for institutional capacity for managing reforms and project activities.

11. Institutional Structure of the CEP. Under the follow-up operation, the CEP will continue i t s activities related to general administration, coordination, implementation, monitoring and evaluation, as well as facilitating the decision-making process. I t will comprise a core group of technical, administrative, and support staff. The technical staff will comprise 5 componenthb-component heads supported by a group of 12 technical specialists. The component /sub-component heads include: the Higher Education Component Head, the Pre-School Sub-Component Head, the Teacher Training Sub-component Head, the ICT Sub-component Head, and the High School Sub-Component Head. The specialists include: (2) Pre- school specialists, (3) Teacher Training Specialists, (1) ICT Integration Specialist, (1) Network Specialist, (2) High School Specialists, (1) Higher Education Governance Specialist, (1) Higher Education Financing Specialist, and (1) Higher Education Quality Assurance Specialist. The CEP will also work with a number o f working groups. The Quality Group for Teacher Education and Professional Development Strategy which was established under the APL I will remain functional under the APL 11. Three new

48

working groups related to tertiary education were established in December 2008, these include: the Working group on Quality Assurance, the Working Group on Tertiary Education Management Information System (TEMIS), and the Working Group on Sustainable Higher Education Financing. The two EMIS specialists formerly located in the CEP have been relocated to the NaCET, the agency now responsible for managing the EMIS. The CEP will also be supported by a Lawyer, a Chief Accountant, two Accountants, two Procurement specialists, an Office Manager, and Assistant and a Translator. The hiring of the Component and Sub-Component Heads wi l l be a condition of disbursement.

12. Key Responsibilities of the CEP. The CEP as the Project Implementation Unit will be responsible for implementation and management o f the procurement process, disbursements and financial arrangements, project monitoring, and reporting. The Unit will work with the existing management and monitoring framework designed to coordinate, monitor and build the capacity of participating institutions. However, some adjustments will be made to the framework to ensure the gradual transfer o f responsibilities from the CEP to the Ministry o f Education related to policy, planning, monitoring and evaluation functions. This framework consists o f (i) providing technical and management training; (ii) developing the strategies and business plans; (iii) managing working groups responsible for facilitating technical discussions, coordinating activities and carrying out rigorous monitoring and evaluation according to established programs and timetables; and (iv) carrying out a comprehensive public information and consultation campaign focusing on education quality and relevance of projects. One o f the key roles o f the CEP under the APL I1 will be to facilitate coordination and communication flows with participating institutions and partners. The Unit will provide administrative support to the newly created Armenian National Quality Assurance Agency and will work with the institutional entity in the MoES responsible for policy planning, monitoring and evaluation with the aim o f mainstreaming these key responsibilities in the Ministry.

13. With regard to Monitoring and Evaluation, the CEP will work closely with and build the capacity o f the entity in the MoES assigned with this function. The aim i s to gradually transfer the following key responsibilities to this entity: a) quality reporting; b) internal and external evaluations, studies and assessments; c) monitoring and evaluating the project’s outcomes and results; and d) arranging regular meetings between the Minister and Deputy Ministers with working groups to discuss the status o f project activities and issues.

14. Implementation Arrangements. Implementation arrangements under the proposed APL I1 will be governed by the guidelines and procedures set out in the Operational Manual (OM). The CEP will develop the OM, drawing from the lessons learned and experiences gained in the implementation of the APL I, and reflecting financial management, procurement and reporting arrangements planned for the APL 11. The approval by the Ministry of Education of an Operational Manual which is satisfactory to the Association is a condition of EfSectiveness.

1 5. Partnership Arrangements. The proposed APL I1 Project will continue effective working relationships established under the APL I with UNICEF and OSI, i ts key donor partners. Under the APL I, the Bank, UNICEF, the US State Department and OS1 successfully collaborated on the implementation o f a number of priority reforms covering education curriculum development, educational software development, and teacher professional development. Under the APL 11, the proposed training of preschool teachers and administrative staff would benefit from the ongoing collaboration with UNICEF and Step- by-Step. It i s expected that a memorandum o f Understanding (MOU) will be signed between the Ministry o f Education-CEP, UNICEF, Step-by-step, and the World Bank setting out the specific details of this partnership. UNICEF wil l be expected to finance the provision o f adequate training for approximately 300 ECD staff (2 per beneficiary community); Step-by-step will be expected to deliver the proposed training modules. In addition, collaboration with the OS1 wil l support the project’s focus on integration o f ICT in teaching and learning process.

49

Annex 7: Financial Management and Disbursement Arrangements

ARMENIA: Second Education Quality and Relevance Project (APL 11)

1. Country Issues. According to the latest Doing Business Survey 2009, Armenia was the top-rated CIS country and scored well vis-&vis many other developed and developing countries (44th out o f 181). At the same time, in the latest Business Environment and Enterprise Performance Survey (BEEPS) report, about 30 percent o f businesses have indicated that corruption i s a problem in doing business. A Country Procurement Assessment Review (CPAR) done in 2004 also concluded that based on the analysis o f the legislative framework, procurement practices, institutional capacity and the opportunity for corruption, the environment for conducting public procurement in Armenia was one of high risk at that time.

2. The 2005 Country Financial Accountability Assessment (CFAA) report concluded that the overall fiduciary risk" in Armenia i s significant. The key reasons are: (i) inadequate capacity o f core control and supervisory agencies performing the audits within the public sector; (ii) although most o f the basic laws are in place with respect to various entities' (private sector and public enterprises, including state non-commercial organizations) financial reporting, the compliance remains a problem and authorities need to improve the quality o f auditing, monitoring and supervision.

3 . The PEFA assessment report published in October 2008 also demonstrates that several critical Public Financial Management (PFM) elements including internal controls, internal and external audit, and financial reporting are still weak.

4. Based on the above assessments o f the country's present PFM system, no elements of the country FM systems are planned to be used under the project. The use o f the country PFM systems for the project implementation will be considered, as the government progresses with the PFM reforms in internal and external audits, internal control framework, accounting standards, treasury and budgeting systems.

5. However, the fiduciary risk o f the stand-alone FM arrangements for Bank-financed investment projects in Armenia i s considered low. Specific procedures are developed by the project to secure proper financial accountability o f this project and to minimize project FM risks. Additional FM arrangements in the project will include the audit of project financial statements by independent auditor and on the term o f reference acceptable to the Bank.

6 . As the banking arrangements with a local commercial bank (HSBC Bank Armenia) have been found satisfactory under active projects, they will remain in place during EQRP2 project implementation, unless other banks in Armenia or the State Treasury become acceptable for opening designated accounts. The country risk i s significant and the residual risk i s assessed to be moderate.

Country level Weak PFM institutions (additional information are included in country issues in the previous section)

7. Risk Assessment and Mitigation. The overall financial management risk for the project before mitigation measures i s moderate and after mitigation measures, the risk i s low. Although the project will be implemented in an environment o f high perceived corruption, adequate mitigation measures are in place to ensure that the residual risk i s acceptable. The table below summarizes the financial management assessment and risk ratings o f this project:

S The CEP i s to maintain independent M financial management system, use o f private auditors and use o f commercial banks for designated

Residual Risk Risk Mitigating Measures FM Risk

INHERENT RISKS

Risk o f illegal, irregular or unjustified transactions not being detected, measured on a four point scale according to 10

the CFAA Guidelines (low, moderate, significant or high). 50

Risk Mitigating Measures

I

Residual Risk FM Risk Entitv level

M Risk o f political interference in entity’s management

Board composition and structure o f the CEP will provide for independence of the entity.

M

I Proiect level Project i s small sized, with local commercial banks used by the Treasury for flow o f Government Counterpart funds, with some risk o f delays in funds

Implementation arrangements that allow close monitoring of activities under the project (including flow o f funds) by the Bank.

L

M

M

M re uests processing b j the MOF. ? 0 VER4 L L 1.VHERE.j.T RISK

CONTROL RISKS I ’. L No additional mitigation measure

required L Budgeting

Good Budgeting system. Budget i s prepared in much detail which i s necessary for monitoring the project Accounting. The CEP has adequate accounting staffing. The CEP recently procured and installed new accounting software for APLII.

L L No additional mitigation measure required

Internal Controls The CEP has overall adequate internal control system in place. Since current (implemented under APLI) and new grant schemes wi l l be implemented under APLII as well, the CEP should develop and utilize the payment supporting documentation review process (for expenditures made by beneficiaries from grant proceeds) on a sample-basis.

L CEP has developed a separate Financial Management Manual (FMM) for the project to reflect the specific activities o f the Project. The FMM will need to be strictly followed by the staff. The detailed control mechanism over f ind flows of the grants has been developed separately, agreed with the Bank and will be included into the new grants’ Operational Manuals once the manuals are developed. No additional mitigation measure required, while it remains at moderate risk reflecting the scale o f the financial crises affecting the commercial banks involved. No additional mitigation measure required

M

M Funds flow Government and IDA funds will flow through commercial bank designated accounts.

M

Financial Reporting No significant issues have arisen in the audits o f the EQRP (APLI) project regarding financial reporting. Auditing The audit will be carried out by independent auditors acceptable to the Bank.

L

M

L

M

M

No additional mitigation measure required

OVERALL CONTROL RISK L

M

M - N

5 1

L OVERALL FMRISK

H - High S - Substantial lerate L - Low

8. Strengths. The significant strengths that provide a basis for reliance on the project financial management system include: (i) FM arrangements similar to EQRP (APLI) project being implemented by CEP and found to be adequate; (ii) the CEP procured and installed adequate accounting software; and (iii) no significant issues arisen in the audits o f the active project being implemented by CEP.

9 . purposes the following actions have been agreed with and implemented by CEP:

Weaknesses and Action Plan. There are no major weaknesses at the CEP. For capacity building

Actions Agreed

1. Update the Financial Management Manual (FMM) to reflect the specific activities o f the Project.

2. Develop detailed control mechanism over fund flows o f the grants and describe it in the grants Operational Manuals.

Responsible

CEP

CEP

Completion Date

Prior to negotiation

Prior to negotiation

Implementation Status

Implemented. CEP has developed a separate Financial Management Manual (FMM) for APLII to reflect the specific activities o f the Project Implemented. The detailed control mechanism over fund flows of the grants has been developed, agreed with the Bank, and wi l l be included into the new grants’ Operational Manuals once the manuals are developed.

0. Implementing Entity. The residual risk associated with the CEP i s moderate with low probability o f external intervention to modify the structure and staff of the organization. Same structure and arrangements with the implementing entity as it was under EQRP (APLI).

1 1. Budgeting and Planning. The CEP i s capable o f preparing relevant budgets. The annual budget i s prepared in much detail, which i s necessary for monitoring of the project. I t i s classified by categories, components and sub-components, sources of funds. The risk associated with planning and budgeting i s assessed as low.

12. Accounting Staffing, Financial Department in the CEP consists o f a financial manager, a chief accountant, and two accountants. The direct responsibility o f the financial manager includes the nrenrirritinn nf reviilrir rennrts f in r l i i d inv TFRdFMRsI Withdrr iwnl Annlirritinn rind the nrniert’s rinniiril

maget. ine cnier accountant IS responsime for tne general accounting or m e project as well as tne maintenance o f the accounting software in the local currency (AMD). One of the accountants i s responsible for invoice processing and payments, and reviews the progress on current contracts implementation. The other i s responsible for bank transactions processing, bank account reconciliation and statutory reporting. The former was hired recently and has experience in financial management at another P lU implementing WB financed projects and worked previously as an auditor in an audit company. The FM staff o f CEP participated in the regional joint FM and Disbursement workshop organized by WB in June 2007 in Yerevan. The risk associated with staffing i s assessed as low.

13. Information Systems. The CEP utilizes 1 C accounting software, which automatically generates FMRs. However, produced FMRs are incomplete and therefore require a finalization in Excel spreadsheets. For APLII the CEP has procured and installed new, enhanced accounting software as the previous accounting software had several drawbacks, which the current vendor was unable to fix. Particularly, in the old software the accounting for AMD and USD i s maintained in separate databases, which results in double posting and duplicate processing of the accounting data. In addition, the

52

accounting software i s inaccurate in USD reporting o f the local currency transactions and needs to be upgraded or replaced. The CEP will continue conducting accounting of the current project (closing in November 2009) in the old software. The new software will be utilized for APLII. The risk associated with information systems i s assessed as low.

14. Accounting Policies and Procedures. The CEP financial reporting i s based on IFRS. The accounting basis o f the CEP i s accrual. It has been agreed to adopt accrual basis for EQRP2 project as well. The current chart o f accounts will be adapted to EQRP2 project’s requirements, and the Financial Management Manual updated. The risk associated with accounting policies and procedures i s considered as low.

15. Internal Controls and Internal Audit. The CEP has adequate internal control system in place, which was assessed to be capable of providing reliable and timely information and reporting on the projects. The latest update o f the Financial Management Manual (FMM) was done in March 2009 to reflect the specific activities o f the new project. Office manager i s responsible for purchases made based on the requests submitted for office supplies, which are approved by the financial manager and authorized by the director. No petty cash box i s maintained at the CEP. Payments, including salary payments, are made via bank transfers. The CEP has no representation expenses. The fixed assets register i s maintained in the accounting software. Al l fixed assets o f the CEP are allocated to the personnel who are formally responsible for their condition and existence. Under APLI the CEP provides grants to local community institutions (preschools) and to school centers (SC). The guidelines for the provision o f the grants are described in the grants’ Operational Manuals. The grants implementation i s monitored by the CEP through review of regular reports submitted by the beneficiaries and via on-site visits. Since the current and new grant schemes will be implemented under APLII as well, the CEP will utilize the payment supporting documentation review process (for expenditures made by beneficiaries from the grant proceeds) on a sample-basis. The detailed control mechanism has been developed, agreed with the Bank, and will be included into the new grants’ Operational Manuals once the manuals are developed. Considering the small size o f the CEP, no internal audit function i s required neither exists. The risk associated with internal controls i s considered as low.

16. Financial Reporting. Project management-oriented Interim Un-audited Financial Reports (IFRs) - previously known as Financial Monitoring Reports (FMRs) - will be prepared under EQRP2 project. The CEP will produce a full set of IFRs every calendar quarter throughout the l i fe o f the project. The format o f IFRs has been agreed during the assessment which includes: (a) Project Sources and Uses o f Funds, (b) Uses o f Funds by Project Activity, (c) Project Balance Sheet, (d) Designated Account Statements, and (e) SOE Withdrawal Schedule. These financial reports will be submitted to IDA within 45 days o f the end of each quarter. The first quarterly IFRs will be submitted after the end o f the first full quarter following the initial disbursement. Those requirements and IFRs formats are incorporated in the FMM. The risk associated with reporting i s low.

17. External Audit. The audit o f EQRP2 project will be conducted (i) by independent private auditors acceptable to the Bank, on terms o f reference (TOR) acceptable to the Bank, and procured by the CEP, and (ii) according to the International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board o f the International Federation o f Accountants (IFAC). The CEP’s previous auditing arrangements are satisfactory to the Bank, and it has thus been agreed that similar audit arrangements will be adopted for EQRP2 project, to include the project financial statements, SOEs and Designated Account Statement. The sample terms of reference acceptable to the WB and to be used for the project audit was provided to the CEP. The annual audited project financial statements will be provided to the Bank within six months o f the end of each fiscal year and also at the closing o f the project. The contract for the audit awarded during the first year o f project implementation may be extended from year-to-year with the same auditor, subject to satisfactory performance. The cost o f the audit will be financed from the proceeds o f the project. The following table identifies the audit reports that will be required to be submitted by the CEP together with the due date for submission.

53

Audit Report Continuing Entip-financial statements Project financial statements (PFS). The PFS include Project Balance Sheet, Sources and Uses o f Funds, Uses o f Funds by Project Activity, SOE Withdrawal Schedule, Designated Account Statement, and Notes to the financial statements, and Reconciliation Statement.

18. In addition, the Armenian Chamber o f Control, the country’s supreme audit institution, performs ad hoc external auditshspections o f CEP and projects under i t s implementation. The risk associated with external audit i s considered moderate.

Due Date NIA Within six months o f the end o f each fiscal year and also at the closing o f the project

19. Funds Flow and Disbursement Arrangements. The total project estimate o f US$ 3 1.26 million will be financed with IDA Credit US$ 25 million and counterpart funds o f US$ 6.26 million. The Recipient i s the Republic o f Armenia, represented by the Ministry o f Finance (MOF), with the Ministry of Education as the beneficiary.

20. The Country Financing Parameters for the Republic of Armenia, will be applied to determine the level o f IDA financing.

2 1, Terms of the Credit: Funds will be provided on standard IDA Credit terms - 20 years to maturity with 10 years grace, to be disbursed through transaction-based disbursement methods that include: advances deposited into a segregated Designated Account to finance project expenditures as they occur, reimbursements o f project expenditures pre-financed by the Recipient, payments against Special Commitments and direct payments to third parties. A service charge will be levied at the rate o f 0.75 percent per annum on the principal amount withdrawn and outstanding. Commitment charge applicable on the undisbursed amount of the Credit has been waived and is, therefore, set to zero.

22. Designated Account. To facilitate project implementation, a Designated Account for the IDA Credit for a ceiling o f US$1.5 million will be opened in a commercial bank, on terms and conditions acceptable to the Bank. The Designated Account will be documented on a quarterly basis and audited in conjunction with the annual audit of the project financial statements. Details on the minimum application will be provided in the Disbursement Letter. Disbursements will be made against full documentation for contracts for (i) goods costing greater than US$200,000; (ii) consulting firms costing greater than US$lOO,OOO; and (iii) individual consultants costing greater than US$50,000. Expenditures relating to contracts below these limits and for training, grants, student loans, and incremental costs will be based on Statement o f Expenditures. Documentation in support of the SOE will be retained in the CEP for at least two years after the project closing date. This information will be available for review by Bank missions during the project supervision and by the project’s auditors. SOEs will be audited in conjunction with the annual audit o f the project.

23. Government Contribution. Government contributions o f US$5.86 million will be disbursed from budgetary allocations expended through the Treasury Systems to a Project Account, opened for the project to finance eligible project expenditures as they are incurred.

54

Category

( 1 ) Works, goods, consultants’ services, including audit, training, incremental operating costs under the Project, and Grants, including Student Loans, under Parts A. 1 and 2 and Parts B. 1 and 3 of the Project

TOTAL AMOUNT

Amount o f the Credit

Allocated (Expressed in

SDR) 17,000,000

17.000,OOO

Percentage of Expenditures to be Financed

80%

24. The risk associated with funds flow and disbursement i s considered as moderate.

25. Supervision Plan. As part of its project supervision missions, IDA will conduct risk-based financial management supervisions, at appropriate intervals (first supervision will be conducted within a year). During project implementation, the Bank will supervise the project’s financial management arrangements in the following ways: (a) review the project’s quarterly IFRs as well as the project’s annual audited financial statements and auditor’s management letter and remedial actions recommended in the auditor’s Management Letters; and (b) during the Bank’s on-site supervision missions, review the following key areas (i) project accounting and internal control systems; (ii) budgeting and financial planning arrangements; (iii) disbursement management and financial flows, including counterpart funds, as applicable; and (iv) any incidences of corrupt practices involving project resources. As required, a Bank-accredited Financial Management Specialist will assist in the supervision process.

55

Annex 8: Procurement Arrangements

ARMENIA: Second Education Quality and Relevance Project (APL 11)

A. General 1. Procurement for the Armenia Second Education Quality and Relevance Project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 and revised in October 2006 (Procurement Guidelines); and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 and revised in October 2006 (Consultant Guidelines) and the provisions stipulated in the Financing Agreement (FA). 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 have been 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. A General Procurement Notice (GPN) will be published in January 2010 in UNDB on-line and in i t s printed version as well as in dgMarket online. Specific Procurement Notices (SPN) wil l be published for all ICB procurement and Consulting contracts per Guidelines as the corresponding bidding documents and RFPs become available.

B. Assessment of the agency's capacity to implement procurement 2. Country Procurement Assessment Review (CPAR) for the Republic o f Armenia was carried out in 2003 and finalized in 2004. Updated Country Procurement Assessment on the basis o f World BanWDAC-OECD methodology i s planned this year to be submitted to the Government by July 2009. The CPAR emphasized that although there i s a very good framework for public procurement and certain progress has been made, procurement reform needs further streamlining and improvements. Armenia adopted a Public Procurement Law (PPL) in June 2000 compatible with UNCITRAL model. CPAR found that single source procurement i s widely used for reasons o f urgent and unforeseen need and recommended to improve budget planning and execution. CPAR stressed the importance o f fostering the culture of compliance through better transparency and dissemination as well as institutional capacity building including through e-procurement. Current Public Procurement Law in Armenia came into force on January 1, 2005 and number and value o f sole source contracts has been gradually reduced. The CPAR concluded that Armenia should be rated as a high risk country in this respect.

3. Assessment o f the Capacity of the Implementing Agency to conduct procurement actions for the project has been updated in December 2008 by the Procurement Accredited Specialist (PAS) assigned to the project and it i s available in the project fi les. The assessment reviewed the organizational structure for implementing the project and the interaction between the project's staff responsible for procurement and the Ministry's relevant central units, including for administration and finance. The key issues and risks concerning procurement for project implementation have been identified and the corrective measures have been recommended. These included maintaining adequate prior review thresholds particularly for the first contracts for each method to ensure proper use of the procedures. Prior review thresholds will be indicated in the Procurement Plan.

C. Procurement Risk Assessment 4. The overall project risk for procurement i s Moderate after mitigation measures and should be reviewed during the mid term review. The risks associated with procurement and the mitigation measures were identified in the capacity assessment to conduct procurement of Center for Education Project in December 2008, They included risks and measures associated with procurement experience at CEP level and its ability to handle multiple packages as well as coordination of procurement activities with beneficiaries and procurement experience o f beneficiaries itself. Conclusion i s that Residual risk after mitigation measures in al l three types of risks i s M (moderate).

56

D. Procurement implementation and arrangements 5. Procurement activities will be carried out by the Center for Educational Projects (CFEP) located under the Ministry o f Education (MoES) o f Armenia that will ensure overall leadership for the reform process, including project coordination. The CFEP has two full time procurement specialists in place. I t i s considered prudent to hire an additional procurement staff/assistant (1 person) to support procurement activities for MoES once the implementation i s facilitated. The staff received training specifically related to World Bank-funded projects. The existing capacity can, therefore, be considered to be satisfactory. Series o f workshops, initiated by the procurement post reviews under the previous APL I project and a Project Launch workshop scheduled around project effectiveness will be the continuation vehicle for informal training o f staff at the MoES, who will be charged with the coordination o f al l activities, including Technical Specifications for the project. The country NCB standard bidding documents for goods and works are reviewed and found acceptable to the Bank under APL I and will continue to be used under APL I1 with necessary updates to comply with current Guidelines. The acceptable NCB bidding document can be found in the Project Operations Manual (POM) and project f i l e . Domestic preference in accordance with clause 2.55 and Appendix 2 o f the guidelines will apply to goods contracts”.

6. Procurement o f Works: Since the focus o f this Project i s on the quality and relevance o f the general education system, there are no major civil works contract planned to be awarded during the implementation o f this Project. Some minor works such as refurbishment o f existing classrooms so that they can be used as preschool classes or, in the case o f high schools, as libraries, could be envisaged under the project.

7 . Procurement o f Goods: Goods contracts procured under this project may include: (i) information technology-related and other office equipment; (ii) printing and dissemination costs, (iii) vehicles; (iv) office furniture and equipment; and (v) mass media time and space. The procurement will be done using the Bank’s SBD for a l l ICB and National SBD agreed with or satisfactory to the Bank, software, database management system shall follow the Bank’s SBD “Supply and Installation o f Information Systems.” Goods o f small values o f less than $100,000 equivalent can be procured under Shopping procedures. Goods, including training and printing materials and publications will be grouped to the extent possible to encourage competitive bidding.

8. Contracts for Consulting Services will be packaged to combine related skills and services in order to make them attractive for competition and reduce the number o f contracts to be administered taking into consideration the size and limited capacity of the CEP to administer a large number o f contracts. To the extent practical, training activities will be incorporated with consulting services contracts. Consultant services consist of short-and long-term assignments to be contracted to firms and/or individuals (national and/or foreign or jointly) depending on the nature and duration o f the assignments. Selection procedures will generally be managed through competition among qualified shortlisted consultants. The shortlists for consultant services contracts with firms shall comprise six firms with a wide geographical spread, and with no more than two firms from any one eligible country and at least one firm from a developing country, unless qualified firms from developing countries are not identified. The procurement o f consultant services contracts financed under the Credit will be in accordance with the provisions o f the Consultant Guidelines.

9. Shortlists comprising: entirelv National Consultants. Consultants’ services for contracts estimated to be less than US$lOO,OOO or equivalent may have a Short List composed entirely o f national consultants. It i s also expected that consulting offices associated with local universities may be included in the shortlists. University-based consultants will not be given preference over other private consultants.

10. Hiring: of Government-Owned Universities and Research Institutes. Under APL I project the procurement eligibility waiver has been obtained for hiring o f the otherwise ineligible Government- owned Centre for Education Reform (CER) (renamed thereafter as National Institute o f Education (NIE)) which would have unique qualifications and experience in the country for the assignments to be carried out under the Credit. Under APL I1 such waiver i s not needed for NIE due to the fact that no activities are planned to be contracted with NIE. However, a similar waiver has been obtained for the Armenian State Pedagogical University (ASPU) and other regional universities involved in training such as Yerevan State

57

Selection of Consultants:

University, Gavar State University, Goris State University, Gyumri State Pedagogical Institute, and Vanadzor State Pedagogical Institute, which all have unique qualifications and experience in the country for planned higher education component training assignments and due to lack of private sector alternatives. Additionally, participation o f Armenian National Quality Assurance Agency (ANQA), established in November 2008 could be considered for assignment o f pilot evaluation and accreditation o f universities by ANQA at a later stage o f project implementation to strengthen ANQA role and capacity. Respective eligibility waiver, if needed, will have to be obtained prior to undertaking this assignment once the Bank affirms that the Center has the necessary capacity.

1 1. Hirinp of Government Officials, Civil Servants, University Professors and Scientists from Research Institutes. Civil servants may be hired as individual consultants or as members o f a team with financing under the Credit, provided they are on leave o f absence without pay and they have not been working for any o f the Beneficiary Agencies immediately prior to taking leave o f absence. University professors or scientists from research institutes can be contracted individually under Bank financing.

12. Training: Training i s an integral element o f the project’s capacity building objective. The Credit wi l l finance training programs, including training workshops, study tours, and local training. Such training programs, particularly study tours, will be included in larger TA contracts with firms to reduce administrative burden on the CEP. The CEP will be responsible for administration o f a small number o f local workshops (including project launch, mid term and completion workshops). Expenditures related to such training activities shall be described in the Project Operations Manual. Design o f the training courses and study tours will be done by the specialists contracted as short term consultants under relevant QCBS, CQ and/or IC procedures depending on the value o f the assignment as described in this Annex. The CEP i s expected to prepare a training plan and agree on its update with the Bank every year.

13. Operatinv Cost: These expenditures would cover equipment and vehicle maintenance, cost for fuel, office utilities, minor office repair and equipment costs, supplies, literature, field trips, meetings and in local and international travel costs related to Project, student participation fee for TIMSS, communication costs, reasonable banking charges, media advertisement, and other reasonable costs as approved by the Association. Procurement o f operating expenditure items would be financed by the project per annual budget approved by the Bank and would be procured using the implementing agency’s administrative procedures which were reviewed and found acceptable to the Bank. Operating cost will not include salaries of civil servants.

14. Procurement Plan: The CEP at appraisal developed an initial Procurement Plan (PP) for the entire project scope consistent with the implementation plan, which provides information on procurement packages, methods and Bank review method. Since this would cover the entire project completion period it will be tentative. However, a firm procurement plan for first 18 months o f the project should be prepared and this plan will be agreed upon between the Borrower and the Bank project team at negotiations, and will be available at the implementing agency’s project database and on the Bank’s external website. The PP will be updated in agreement with the Bank project team annually or as required to reflect the actual project implementation needs and improvements in the Implementing Agency institutional capacity.

15. Freauencv of Procurement Supervision: In addition to the prior review supervision to be carried out by the Bank team, the capacity assessment of the Implementing Agency recommends post reviews to be carried on at least 20 percent o f the contracts subject to post review. It i s expected that a supervision mission in the field will be conducted every six months during which post reviews will be conducted. As a minimum one post review report which will include physical inspection o f sample contracts including those subject to prior review will be prepared each year. Not less than 10% o f the contracts will be physically inspected.

16. Additional Provisions for National Competitive Biddinp: In order to ensure economy, efficiency, transparency and broad consistency with the provisions of Section I o f the Guidelines, the criteria specified in the procurement capacity assessment shall be followed in procurement under National Competitive Bidding procedures. Such clarifications are required for compliance with the provisions o f the “Guidelines for Procurement under IBRD Loans and IDA Credits” (the Guidelines).

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1 7. Anti Corruption Measures: Procurement capacity assessment included seventeen measures/recommendations on strengthening procurement including on the anti-corruption aspects o f project implementation. These included such measures as review o f Anti-Corruption guidelines, signing o f “Declaration o f Impartiality” letters by evaluation Committee members, etc.

59

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Annex 9: Economic and Financial Analysis

ARMENIA: Second Education Quality and Relevance Project (APL 11)

I. Economic Analysis

I. This economic analysis examines (i) cost-effectiveness of investing in preschool education (sub- component 1. l), (ii) cost-effectiveness of investing in ICT network and its integration in the teaching and learning process (sub-component 1.3), and (iii) cost-efficiency and quality improvement of high school reforms (sub-component 1.4).

Benefits of investing in preschool education (Sub-component 1.1) 2. International evidence indicates” that the lack of access to preschool i s as detrimental to the school readiness of children, Le., their capacity to learn in Grade 1 and beyond, to transition successfully from one grade to another, to complete their education and to eventually become fully contributing and productive members of society. In Armenia, while it i s true that official statistics show a relatively low level o f school repetitions and dropouts, the number of dropouts has sharply increased in the recent past (at an average annual growth rate of 250 percent), and there i s evidence of significant school wastage, particularly in relation to absenteeism and automatic promotion without any form of remedial education.’* Poor and falling access to preschool education i s likely to be a cause of this deterioration.

3. Enrollments in preschool education (2 to 6 year-old) dropped sharply in the late 1990s and have gradually improved since 2000, but with wider regional and socio-economic gaps. The transfer of management responsibility for preschool education from the central to local governments in 1996 was a reason for the widening gaps. Between 1996 and 2000, the net enrollment rate (NER) for preschool dropped from 22.3 to 17.9 percent in urban areas and from 12.8 to 5.0 percent in rural areas.I3 The urban- rural gap widened from 12.9 percent point in 2000 to 19.5 percent point in 2005 with 29.1 percent in urban areas (higher than the 1996 level) and 9.6 percent in rural (lower than the 1996 level). The wide regional and socio-economic gaps are also illustrated in terms of the per enrolled-child spending and the gross enrollment rate (GER) in 2005: the spending gap between AMD 113,000 (US$248) per enrolled- child in Kotayk and AMD 31,000 (US$68) in Aragatzotn; the urban-rural gaps between 38.3 percent in Yerevan, 23.5 percent in other towns and 9.3 percent in villages; the regional gaps between 6.9 percent in Tavush and 38.3 percent in Yerevan; and the household gaps between 18.5 percent among the poorest quintile and 33.7 percent among the richest q~inti1e.I~

4. In response to this critical situation, a recently approved preschool strategy aimed to increase the enrollment rates of preschool age children (ages 4 to 6) up to 90 percent by 2015. Under APL I, the government i s piloting a preschool project that provides grants to 22 communities in Lori and Shirak Marzs to establish a preschool section in existing schools or independent kindergartens. The preliminary assessment has observed: grants spent as intended to refurbish/enhance classrooms and procure furniture, goods and equipment; children attending preschool regularly; preschool teachers better trained; and parents actively participating often beyond the initial expectation. On the other hand, contributions from communities have been less than expected on average, although some do better than others.’’ Under APL 11, 140 poor and disadvantaged communities with no preschool will be provided grants to create a preschool section in the existing local school. In cumulative, approximately 8,750 5 to 6 year-old children in these communities will benefit from the program. The total beneficiaries will account for

For instance, Cunha, F., Heckman, J., Lochner, L. & Masterov, D. (2005) Interpreting the evidence on life cycle

Haiyan Hua et al. (2008): School wastage study focusing on student absenteeism in Armenia.

I1

skill formation (North Holland, Amsterdam).

l 3 National Statistical Service o f Republic o f Armenia, Statistical Yearbook of Armenia, various years. l4 Estimated based on the Integrated Survey o f Living Standards (ISLS) 2005.

Conducted by the Bank team during the preparation mission in September 2008. An independent evaluation o f the pilot project, including the number o f children enrolled and attended, the number o f teachers trained, community and parent’s involvement, and level o f satisfaction among various stakeholders, wil l be conducted at the end o f the current academic year.

68

12

15

about 6 percent o f the total target enrollments or 4 percent of the age group in 2012, most o f whom are unlikely to enroll in preschool without the project. The project’s investment will cover only a small portion o f the preschool enrollment targets, but will play a vital catalytic role to demonstrate the importance of preschool education for the overall educational and human development of children.

5. Based on various lessons from the pilot project, the proposed project i s designed to maximize the benefits of investment. First, it will target rural communities which demonstrate clear demand for preschool education but have no access to preschool service without the project (equity), and commit their community budget and parental contributions to cover recurrent expenses (sustainability). Second, the project will primarily renovate and convert the existing spaces available in most rural schools as the preschool section rather than establishing new kindergartens. This approach will not only minimize the initial investment costs, but also maximizes sustainability of the investment because: (i) operational costs of the preschool section will be much lower than independent kindergartens; (ii) rural schools usually have part-time teachers who could be trained as preschool teachers relatively inexpensively; and (iii) school principals can closely see the benefits of enrolling better-ready children in grade 1 (cost- effectiveness). Third, the project will organize an awareness campaign to induce long-term participation of communities and parents in the provision of preschool education (sustainability). In some pilot communities, parents have already seen the benefits of preschool education offered in the school premises. Hence, the project investment in preschool education could generate stronger demand for early childhood development among parents and may result in mobilization of necessary funds at the community level (demand-driven). Fourth, while in APL I the CEP signed the grant agreement only with schools, in APL I1 both communities and schools will sign the agreement and collectively become responsible for ensuring financial and in-kind contributions.

Quality improvement through the high school reforms (Sub-component 1.4) 6. The high school reform strategy, approved in 2008, aims to create high quality learning environment for al l students in upper secondary education in a cost-efficient manner. Of approximately 1,400 schools, 700 schools will be reorganized into 150 high schools (grades 10-12) and 550 basic schools (grades 1-9) by 201 1. The new high schools will have specialized streams in mathhcience, humanities, and arts with well-equipped laboratories, libraries, advanced teaching and learning materials, and better trained teachers. The remaining 700 schools that are the only general secondary school in a village will ensure access to upper secondary education for rural students. Not only to improve cost efficiency of the school network but also to provide better quality education for a l l upper secondary students in better-equipped high schools, the government may want to further reorganize the school network in the future.

7. The government i s fully committed to finance renovation works and other investment needed for the high school reforms; APLs support the government’s initiative by reinforcing the quality enhancement side of the reforms. In 2008, the government allocated AMD 2 billion (US$6.6 million) to renovate 30 high schools and AMD 456 million (US$1.5 million) to equip them with computers, laboratory equipment, books and teaching materials for libraries, and furniture. APL I added AMD 176 million (US$0.6 million) to the equipment and teacher training. In 2009, the government will invest AMD 2.1 billion (US$6.6 million) to renovate 21 high schools, AMD 392 million (US$l.3 million) for equipment, and AMD 300 million (US$1 million) for textbooks from i t s own budget. APL I will finance teacher training activities in 2009. In 2010 and 201 1, while the government i s expected to renovate 50 schools each year and provide part o f equipment,I6 APL I1 will be complementary to the government’s investment primarily in infrastructure by focusing on the “quality improvement” side of the reform. The project will invest in laboratory equipment, books and teaching materials for libraries, and furniture as well as training of principals, teachers and librarians, curriculum and syllabi development, and revision of the examination and assessment system, totaling in US$5.9 million.

8. The reorganization may potentially result in negative impacts on access, but the government already has financial schemes to assure al l students of access to upper secondary education in their

AMD 25.6 billion (US$84 million) in 2010 and AMD 21.2 billion (US$69 million) in 201 1 for renovation, and 16

AMD 610 million (US$2 million) for equipment each year (Source: MTEF). 69

preferred subject stream, which MOES and marzes must take advantage of. Potential negative impacts of the reorganization include: (i) rural students may be deprived of an easy access to specialized streams which will be available only in high schools in urban areas; and (ii) students whose school has become a basic school may have difficulties in commuting to a high school farther away. These impacts could be mitigated relatively easily because under the existing budgetary scheme, marzes are entitled to request the Ministry of Finance for budget to provide transportation for students and teachers at a l l levels of education, or to grant subsidies to students and teachers to arrange transportation on their own.l7 The MOES will monitor whether marzes will request the additional funds to meet the new transportation needs and actually arrange them.

Cost-effectiveness of investing in ICT network and its integration in the teaching and learning process (Sub-component 1.3) 9. The government i s committed to integrate ICTs in education, which i s clearly reflected in the 2009 State Budget, including AMD 714 million (US$2.3 million) for the Internet connectivity and maintenance and AMD 500 million (US$1.7 million) for computer equipments for al l general education schools currently without computers. Furthermore, the government plans to continue investing in ICT- US$3.1 million in 2010 and US$3.7 million in 2011.’8 APL I1 will complement the government’s initiatives to integrate ICTs in the teaching and learning process and seek to extend and capitalize on investments begun under APL I, by i) extending the Internet connectivity to remote schools, ii) developing high-quality and relevant electronic materials, and iii) providing computer equipments to be exclusively used for EMIS-related school administration.

10. The proposed project reflects findings from international experience in i t s design and maximizes synergy with the government’s ICT strategy. First, the provision of Internet connectivity i s an important component of a long-term vision to accelerate and sustain the growth of the ICT industry in Armenia and, more broadly, “to position Armenia in the knowledge-based global ec~nomy.” ’~ Extending connectivity to the remote schools in Armenia will help the government meet this goal, in addition to fulfilling pledges to provide equal access to information. Second, the positive impact of ICT use in education on student achievement i s more likely to be observed when ICTs are used appropriately to complement a teacher’s adoption of active methodologies.*’ The proposed investments in content development and teacher training wil l ensure that the means (Le., ICTs) will be effectively used for higher quality education. Third, the proposed EMIS-related investments will contribute to the foundation of e-government infrastructure for improved government services within Armenia, and that more accurate and timely data collection will improve the prospects for evidence-based decision-making in the education sector. Fourth, international evidence suggests that school principals’ support for ICTs-who could be strong obstacles to the introduction of ICTs, especially in remote areas-is crucial to promote the effective use of ICTs in school. By providing a computer for the EMIS and administrative purposes and relevant training, the project i s likely to succeed in gaining their support and give them an opportunity to appreciate the effectiveness of ICTs.

11. Financial Analysis

Public education expenditure and impact of the project investment

1 1 . The government has boosted public expenditure on education in the recent years, and is committed to further increase it in the next decade. In the first Poverty Reduction Strategy Paper (PRSP) in 2003, the government planned to boost public education spending to 4.0 percent of GDP by 2015, as an important pillar of i t s poverty reduction strategy. In particular, the government has made a concerted effort to allocate more to general secondary education in order to improve access to and quality of education at this level. The second PRSP, prepared in 2008, aimed to raise education spending further up

~~

” The Government has created a Mitigation Fund, with AMD 50 million (US$l65,000) already in the 2008 National Budget, transferred directly from the Ministry o f Finance to the Marz Education departments.

l 9 One o f the two main goals o f the government’s ZCT Muster Strategy. Medium Term Expenditure Framework (MTEF) 2009-1 1.

Trucano, Michael. 2005. Knowledge Maps: ICTs in Education. Washington, DC: infoDev / World Bank.

18

20

70

to 4.5 percent of GDP by 2021.2’ However, despite its strong commitment to education, the global economic crisis might force the government to slow down the overall spending increase and be more selective as to where to invest more. For instance, instead of raising the salary level for every teacher, the government could introduce differentiated salary scales based on performance. The expected demographic transition (declining numbers of school-age (6- 17 year-olds) population) over the next five years or so may require the government to adjust staffing more flexibly. These savings in recurrent spending would be necessary to pursue planned capital investment such as high school reforms and ICT in teaching and learning, to increase non-salary recurrent spending for quality improvement in general secondary education, and also to increase total spending on the other underfunded sub-sectors, Le., preschool and tertiary education.

12. The project investment will have a visible, but not overpowering impact on the total public education expenditure in Armenia. The investment through APL I1 wil l be US$25 million over five years, or US$5 million on average per year. The government budgeted AMD 127 billion (US$413 million)’* for education in 2009. If the economy were to grow as steadily as projected in the next 6-7 years,23 and if the government continues increasing the total public education expenditure as planned in the PRSP, the total education spending i s expected to grow to AMD 232 billion (US$761 million) in 2013. Assuming that about 20 percent of the total education budget i s spent on capital investment, the APL I1 investment will be around 4-8 percent of the capital spending per year. Given that a large part of the project i s invested in institutional capacity building which i s a short-term need, and one-time investment such as high school and preschool renovations, the project investment i s very unlikely to create government’s dependency on Bank-funding in the long term.

Sustainability o f project impact

The role of central and local governments in financing preschool education

13. Recurrent costs. The APL I experience suggests that a more prudent analysis of financial capacity and willingness of communities and parents in the selection process will be crucial to sustain the benefts of the investment. The communities and parents are expected to contribute to the operation and management of the enhanced kindergartens or new preschool classrooms. Unless communities can commit the payments for teacher salaries, it i s unlikely that the provision of preschool education can be sustained. As long as the responsibility for operational costs l ies with the communities, regardless of their financial capacities, the project needs to target only those that are capable and willing to contribute necessary recurrent expenditure. However, given the economic crisis, this requirement for community contributions may result in discriminating against poorer communities to the extent that equity concern could be undermined. Hence, it i s necessary to take into account the impact of economic crisis on the community’s financial capacity, when selecting beneficiary communities. At the same time, even though the government subsidizes the communities with low tax revenues through the financial equalization mechanism, it will need to analyze the financial capacity of each community after the equalization and may need to further subsidize very poor communities that cannot afford preschools in order to achieve the enrollment rate target of 90 percent by 201 5.

14. Capital investment costs. To achieve the preschool enrollment rate target at 90percent by 2015, the government will need a substantial amount of capital investment. As discussed above, there i s a large gap between the current preschool enrollment level and the government’s enrollment rate target for 90 percent by 2015. Capital investment needs to achieve this goal vary under different scenarios. The average cost to renovate and equip a preschool section within an existing school was about US$lO,OOO under the pilot project. However, a preliminary review of the project suggests that the amount should be higher. Together with inflation, thus, the unit cost could be as high as US$15,000 or even US$20,000. Even with the lowest cost scenario (US$lO,OOO per school), it i s estimated that the government will need

’’ The Government o f Armenia, 2008, Program for Sustainable Development (revised version o f PRSP-2). ** Assuming the exchange rate at AMD 305 = US$l,

As o f mid 2009, the government assumed the real GDP growth o f 9.4 percent in 2008, 8.3 percent in 2009, 7.0 percent in 2010, 6.5 between 201 1 and 2013, and 6.0 percent in 2014. Under the recent international economic crisis, these figures may need to be revised downward.

71

23

to invest US$3-6 million per year until 2015 to meet the target. In addition, initial training of preschool teachers i s estimated to cost about US$400 per teacher. For instance, it will cost US$80,000 to train 200 teachers for 100 preschools (two teachers per school). In addition to the initial training, preschool teachers will also need to be regularly trained like general school teachers. The MOES will need to institutionalize training programs currently offered by UNICEF and Step by Step.

Capital investment and recurrent costs o f high school reforms

15. The government will need to find a way to finance higher unit costs to maintain the equipment and facilities of new high schools. The newly established high schools will be well-equipped with high quality laboratory and other equipment, books and teaching materials. This will require higher unit costs for operation and maintenance, compared to general secondary schools. For instance, the initial investment in three laboratories (physics, chemistry and biology) costs AMD 10.1 million (US$33,000) per school. Assuming that the operation and maintenance of the laboratories cost 10 percent o f the capital investment, each school needs an additional US$3,300 just to keep these laboratories running, or US$0.5 million for 150 high schools in total. However, the current school financing formula does not differentiate per student allocation according to the differences in actual needs. The formula needs to be adjusted to better accommodate these additional costs thus maintaining the benefits o f the investment made under the high school reforms.

Synergy between government and Bank’s investments

Sub-component 1.3: Integration of ICTs in the teaching and learning process

16. The climate for Internet connectivity has changed greatly in Armenia in recent years, and it i s expected that the private sector will continue to lead the expansion of greater access to the Internet at higher speeds and lower costs throughout the country. However, it i s currently unclear whether this will happen quickly enough to provide the necessary technical infrastructure to connect all Armenian schools, which i s seen as an important policy goal o f the government. Therefore, the proposed project includes investment in the Internet connectivity for the remaining unconnected schools at the time o f project appraisal with the following condition: As soon as the project becomes effective, the NaCET, with the support of the CEP, will develop a detailed and well-costed implementation plan based on information current at that time, taking into account any concrete private sector plans to roll-out more robust Internet infrastructure that might help connect rural and remote schools. This will prevent any potential duplication or crowding out o f other private investment.

72

Annex 10: Safeguard Policy Issues

ARMENIA: Second Education Quality and Relevance Project (APL 11)

Not applicable.

73

Annex 11: Project Preparation and Supervision

ARMENIA: Second Education Quality and Relevance Project (APL 11)

Planned Actual PCN review 0711 7/08 0711 7/08 Initial PID to PIC 0713 1/08 0713 1/08 Initial ISDS to PIC 0 8/0 8/0 8 08/04/08 Appraisal 02/02/ 09 02/09/09 Negotiations 03/23/09 03/24/09 BoardIRVP approval 051 1 2/09 Planned date of effectiveness 11/12/09 Planned date of mid-term review 11/12/12 Planned closing date 11/30/14

Key institutions responsible for preparation o f the project:

Bank staff and consultants who worked on the project included: Name Title Unit Juan Manuel Moreno Olmedilla ECSHD Caroline Mascarell Sr. Social Protection Specialist ECSHD Maria Gracheva Sr. Operations Officer ECSHD Carmen F. Laurente Sr. Program Assistant ECSHD Junko Funahashi Sr. Counsel LEGEM Anarkan Akerova Counsel LEGEM Karina Mostipan Sr. Procurement Specialist ECSPS Aleksan Hovhannisyan E T Consultant ECSHD Sophie Naudeau Human Development Specialist HDNCY Sachiko Kataoka E T Consultant ECSHD Jamil Salmi Lead Education Specialist HDNED Arman Vatyan Sr. Financial Management Specialist ECSPS Michael Trucano Sr. Education and ICT Specialist HDNED Pasi J. E. Sahlberg Consultant/ Lead Education Specialist ETF

Sr. Education Spec., Task Team Leader

Bank funds expended to date on project preparation: 1. Bank resources: US$23 1,529 2. Trust funds: US$ 8,273 3. Total: US$239,802

Estimated Approval and Supervision costs: Remaining costs to approval: US$14 1,000 Estimated annual supervision cost: US$ 95,000

74

Annex 12: Documents in the Project Fi le

ARMENIA: Second Education Quality and Relevance Project (APL 11)

Government of Armenia. 2004. National Curriculum Framework. Yerevan

Government o f Armenia. 2003. Poverty Reduction Strategy Paper. Yerevan

Government of Armenia. 2008. Sustainable Development Program (PRSP-2). Yerevan

Government o f Armenia. 2007. Medium-Term Public Expenditure Framework (2009-2011). Yerevan

Government o f Armenia. 2005. Proposal for Millennium Challenge Account (MCA) Assistance. Yerevan

Government o f Armenia. 2008. Strategic Program on Preschool Education Reforms in RA for 2008-

2015. Yerevan.

Government of Armenia. 2008. State Program for Establishment of High School System. Yerevan.

Government o f Armenia. 2003. Higher Education Reform Strategy. Yerevan

OECD. 2008. Improving School Leadership, Volume I : Policy and Practice.

OECD. 2008. Education at a Glance.

OSI. 2007. Towards European Higher Education Area through Bologna Process. Current State,

Development Trends and Problems of the Bologna Process in EHEA and Armenia: Yerevan

Republic o f Armenia. 2004. Law on Higher and Post-Graduate Professional Education. Yerevan

Republic o f Armenia. 2005. Law on Preschool Education. Yerevan

Republic o f Armenia. 2008. Law on RA State Budget for 2009. Yerevan

Transparency International Armenia. 2007. Corruption Perception in Armenia. Yerevan

UNICEF and World Bank. 2006. Rapid evaluation of Supplemental Preschool Models and Financing in

the Republic of Armenia. Draft Paper

UNDP. 2006. National Human development Report on Educational Transformations in Armenia.

Yerevan. UNDP

World Bank. 2008. Programmatic Public Expenditure, Armenia. ECA Region. Washington DC.

World Bank. 2008. Armenia: Choices in development Policy 2008-2012. Volume I. Washington DC.

World Bank. 2008. Armenia: Thematic Analyses 2008-2012. Volume 11. ECA Region. Washington DC.

World Bank. 2008. Armenia: Joint IDA-IMF advisory note on the Poverty Reduction Strategy Paper:

Second Progress report. ECA Region. Washington DC.

World Bank. 2007. Early Childhood development: From Measurement to Action. Washington DC.

World Bank. 2008. Quality Assurance in Higher Education in Republic of Armenia: Analyses and

Recommendations. (Draft paper)

World Bank. 2008. Formulating the Financial Principles and Exploring Alternative Financing Mechanisms for Armenian Tertiary Education. (Draft Paper).

75

Annex 13: Statement o f Loans and Credits

ARMENIA: Second Education Quality and Relevance Project (APL 11)

Original Amount in US$ Millions

Difference between expected and actual

disbursements

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

PI 04467 2007 HLTH SYS MOD (APL2) 0 0 0 2200 000 0 0 0 0 0 0 21 04 179 0 00 PO99630 2007 PO94225 2007 PO99832 2006 PO87011 2006 PO83352 2006 PO57880 2006 PO87641 2005

PO60786 2004 PO63398 2004 PO88499 2004 PO87620 2004 PO74503 2004

PO73974 2004 PO57847 2002

PO55022 2002 PO64879 1999

Judicial Reform Project 2 0 00 SIF 3 0 00 AVIAN FLU - A M 0 00 RUR ENT & AGRlC DEVT 0 00 RENEW ENERGY 0 00 URBAN HEAT 0 00 YEREVAN WATERWW 0 00 SERVS PUB SECT MOD 0 00 MUN WATER & WW 0 00 IRRlG D A M SAFETY 2 0 00 SOC PROT ADMIN 0 00

EDUC QUAL & 0 00 RELEVANCE (AF’L #I) HEALTH SYS MOD (APL #I) 0 00 NAT RES MGMT 0 00 IRRIG DEVT 0 00 IRRIG DAM SAFETY 0 00

22.50 25.00

6.25 20.00

5.00

15.00 20.00

10.15 23.00

6.75 5.15

19.00

19.00 8.30

24.86 26.60

0 0 0 0 0 0

0 0 0 000

0 0 0 0 0 0 000 000 000 000 0 0 0 000 000 000

000 000 0 0 0 000 0 0 0 000 000 000 0 0 0 000

000 0 0 0 000 000 000 0 0 0 000 0 0 0

0.00

0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

16 95 9 77

3 50 6 54 2 43

3 66 12 69

5 37 0 79

2 98 122 4 77

4 06 1 13

2 40 3 65

-4 96 0 00 -6 26 0 00 2 48 0 00

-1 56 0 00 0 27 0 00

-1 43 0 00 12 72 0 00

4.48 0.00 -0.74 0.00

1.60 0 00 0.76 0 76 3.52 -0.77

3 33 2 30 -0 76 0 00 -5 49 -3 94 2 65 2 74

Total: 0.00 278.56 0.00 0.00 0.00 102.95 12.40 I .09

ARMENIA STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions o f US Dollars

Com m itted Disbursed

I F C I F C

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2002 ACBA Leasing 2.00 0.27 0.00 0.00 2.00 0.27 0.00 0.00 2004 Armeconombank 2.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2000 Hotel Armenia 0.00 0.00 3.57 0.00 0.00 0.00 3.57 0.00 2004 Hotel Armenia 0.00 0.00 1.25 0.00 0.00 0.00 1.25 0.00 2006 lnecobank 3.00 1.30 0.00 0.00 3.00 0.00 0.00 0.00

2006 NAREK 5.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total portfolio: 12.20 1.57 4.82 0.00 7.00 0.27 4.82 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic

Total pending commitment: 0.00 0.00 0.00 0.00

Annex 14: Country at a Glance

ARMENIA: Second Education Quality and Relevance Project (APL 11) P O V E R T Y a n d S O C I A L

2 0 0 7 P 0 pulatio n m id-year (mi l l ions) GNlpercapi ta (Atlas me thod U S $ ) GNI (Al ias me thod US% billions)

A v e r a g e a n n u a l g r o w t h , 2 0 0 1 - 0 7

Populat ion (%j -0 4 Labor force (%) -0 3

M o s t r e c e n t e s t i m a t e ( l a t e s t y e a r a v a i l a b l e , 2001 .07 )

Pover ty 1% o fpopula l io n below nal io na lpo vertyl inej 51 Urban populat ion ( % o f totalpopulat ion) 64 Life expectancyat birth (years) 72 Infant mortality (per 1000 l ive births) 21 Child malnutr i t ion (%ofchi ldren under5) 4 Access to an improvedwatersource (Mofpopula l ion) 98 Literacy (%ofpopulat ion age 15t) 99 Gross primary enrollment [ % o f school -age populat ion)

A r m e n i a

3 0 2 640

7 9

98 M ale 96 Female %IO

K E Y E C O N O M I C R A T I O S a n d L O N G - T E R M T R E N D S

1987 1997

GDP (US% billions) 16 Gross capital format ion lGDP 191 Exports o f goods and serviceslGDP 20 3 Gross domest ic SavingslGDP -18 9 Gross national savingslGDP 0 3

Current account balance1GDP -18 7 Interest paym ents/GD P 0 8 To ta l debtIGDP 38 9 To ta l debt servicelexports 5 1 Present value o f debt/GDP Present value o f debtlexports

1 9 8 7 - 9 7 1 9 9 7 - 0 7 2 0 0 6 (average annualgrowthj GDP - 6 9 M 7 133 GDP percapita -5 1 112 13 6 Exports o f goods and services - 2 8 4 165 - 4 3

E u r o p e L L o w e r . C e n t r a l m l d d l e -

~ s i a i n c o m e

445 6,052 2,694

0 0 0 5

64 69 23

95 97 97 98 96

2 0 0 6

6 4 33 6 22 0 192 316

-3 8 0 3

32 5 7 0

23 0 619

3 437 1887

6 485

11 15

42 69 41 25 88 89 111 1P 109

2 0 0 7

9 2 317 190 s 9 29 1

187

2 0 0 7 2 0 0 7 - 1 1

13 7 7 6 140 7 6

9 1 a3

3 e v e l o p m e n t d i a m o n d '

Life expectancy

T

GNI Gross per + - primary capita enro llment

1

Access to improved water source

_1 ~ Armenia Lo wer-middle-inco m e group - --

E c o n o m i c r a t i o s '

Trade

Domest ic jl' Capital savings fo rmation

Indebtedness

"_ A rm enia

Lo wer-m iddle-inco m e gro up

S T R U C T U R E o f t h e E C O N O M Y

( % o f G D P ) Agriculture Industry

Services

Ho useho Id final consum ption expenditure General gov t f ina lconsumpt ion expenditure Imports o f goods and services

M anufacturing

[average annualgrowth) Agriculture lndus try

Services

H O usehold final consum ption expenditure General gov ' t final cansumpt ion expenditure Gross capital format ion Imports o f goods and services

M anufacturing

1987 1997

32 0 33 2 24 4 34 8

107 7 11 2

58 3

1 9 8 7 - 9 7 1997 .07

-1 3 6 2 -159 137 -8 9 6 5 7 3 11 7

-3 9 6 8 -2 0 8 7 - 9 8 I 7 8

-19 8 9 6

2 0 0 6

19 6 43 6 E 8

36 8

69 5 11 3

36 5

2 0 0 6

0 4 18 5 -1 1

19 4

141 19 8

25 0 6 7

2 0 0 7

183 43 6

15 1 38 1

1 3 8 9 2

33 8

2 0 0 7

2 5 11 8 3 0

24 3

154 174 9 6 17 1

G r o w t h o f c a p i t a l a n d G D P (Oh)

4 0 T

G r o w t h o f e x p o r t s a n d I m p o r t s ( % )

I Exports -Imports I -~-,

N o t e 2007 data are preliminary estimates This table was produced f rom the Development Economics LDB database * T h e diamonds showfou rkey ind i ca to rs in thecoun t ry ( i n bo1d)compared with i ts income-groupaverage If data aremiss ing Ihed iamond will

be incomplete

77

A r m e n i a

P R I C E S a n d G O V E R N M E N T F I N A N C E

D o m e s t i c p r i c e s (%change) C o n s u m er prices Implicit G D P def la tor

G o v e r n m e n t f i n a n c e ( % o f G D P includes current grants) Current revenue Current budget ba lance Overal l surplusidefici t

T R A D E

( U S $ millions) T o t a l e x p o r t s ( fob)

G o l d jewelry a n d o t h e r p r e c i o u s s t o n e s M achinery and mechanica l equipment M anufactures

T o t a l i m p o r t s (ci f) F o o d F u e l and energy Capi ta l g o o d s

Export price index (ZOOO=WO) Impor t price index ( Z O O O = W O j T e r m s o f trade ( ? O O O = W O )

B A L A N C E o f P A Y M E N T S

(US$ m i l l i o n s ) Exports o f g o o d s a n d serv ices impor ts o f g o o d s and serv ices R e s o u r c e balance

N e t i n c o m e N e t current transfers

Current account ba lance

Financing i tems (net) Changes in net reserves

M e m o : Reserves including g o l d (US% millions) C o n v e r s i o n rate ( D E C loca l /US%j

19 a 7

1987

19 a 7

E X T E R N A L D E B T a n d R E S O U R C E F L O W S

( U S $ m i l l i o n s ) T o t a l d e b t outs tanding and disbursed

1987

I B R D IDA

T o t a l debt serv ice IB R D IDA

C o m p o s i t i o n o f net resource f lows Of f ic ia l grants Off icial creditors Pr ivate creditors Fore ign direct investment (net in f lows) P o r t f o l i o equity (net in f lows)

Wor ld B a n k program C o m m itm ents Disbursements Principal repayments Net f lows Interest payments N e t transfers

1997

t l 0 177

197 -1 7 -5 8

1997

232 55 32

wo 892 273 208 118

1997

330 953

-622

99 217

-307

354 -47

239 490 6

1997

636 x)

240

24 1 1

34 x)O

0 52

1

407 77

0 77

2 76

2 0 0 6

2 9 4 6

6 0 2 6 -1 5

2 0 0 6

985 301

21 3x)

2,192 34 1 351 501

x)4 a 2 65

2 0 0 6

1407 2 328

-921

99 580

-242

6 t l -372

1072 415 0

2 0 0 6

2,073 6

841

157 1

a

56 66

x)8 343

1

57 64

7 57

7 50

2 0 0 7

3 4 3 9

183 2 4

-2 0

2 0 0 7

1253

349 2 449

647

1 6 13 5 86

2 0 0 7

1700 3 032

792

104 822

1719

-1,4x3 -306

1,365 342 1

2 0 0 7

5 965

1 14

96 93

8 85

7 78

02 03 04 05 0 % 07

GDP deflator -cPl

E x p o r t a n d I m p o r t l e v e l s ( U S $ m i l l . )

3.000 T

2.000

1 000

0

I 01 02 0 3 0 4 05 06 0 7

ia Exports Imports

C u r r e n t a c c o u n t b a l a n c e t o G D P ( O h )

30 7

20

10

0

.10

- 2 0

C o m p o s i t i o n o f 2 0 0 6 d e b t ( U S $ m i l l . )

I 0 2 8 8 A

E 8 4 1

F 576

E 131 C 164 D 57

A - IBRD E . Bilateral B . IDA D .Other multilateral F . Private C - I M F G - Short-terr

N o t e This table was produced f r o m the D e v e l o p m e n t E c o n o m i c s LDB database 9124108

78

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43°E

44°E

44°E

45°E

46°E 47°E

39°N

40°N 40°N

41°N 41°N

43°E

47°E

ARMENIA

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

0 10 20 30 40

0 10 20 30 Miles

50 Kilometers

IBRD 33364

SEPTEMBER 2004

ARMENIASELECTED CITIES AND TOWNS

PROVINCE (MARZ) CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE (MARZ) BOUNDARIES

INTERNATIONAL BOUNDARIES