Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 82624-LA

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

IN THE AMOUNT OF SDR 9.1 MILLION (US$14 MILLION EQUIVALENT)

AND A

A PROPOSED CREDIT

IN THE AMOUNT OF SDR 9.1 MILLION (US$14 MILLION EQUIVALENT)

TO THE

LAO PEOPLE’S DEMOCRATIC REPUBLIC

FOR THE

EARLY CHILDHOOD EDUCATION PROJECT

March 3, 2014

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 31, 2013)

Currency Unit = LAK LAK 8,000 = US$1

US$1.54 = SDR 1

FISCAL YEAR October 1 – September 30

ABBREVIATIONS AND ACRONYMS

CBC Community Based Contracting GDP Gross Domestic Product CBCOM CBC Operational Manual GPE Global Partnership for Education CCDG Community Child Development Group ICB International Competitive Bidding CQS Selection Based on Consultant Qualifications IDA International Development Association DA Designated Account LCS Least Cost Selection DESB District Education and Sports Bureau MAF Ministry of Agriculture and Forestry DNFE Department of Non-Formal Education MoES Ministry of Education and Sports DOF Department of Finance MPI Ministry of Planning and Investment DOI Department of Inspection MOF Ministry of Finance DOP Department of Personnel MOH Ministry of Health DP Department of Planning MTSPIP Medium Term Strategy for Performance

Improvement Plan DPC Department of Planning and Cooperation NCB National Competitive Bidding DPPE Department of Pre-Primary and Primary Education NSEDP National Socio-Economic Development Plan DTTE Department of Teacher Training Education NSMP National School Meals Program ECE Early Childhood Education OA Operating Account ECOP Environmental Code of Practice OM Operational Manual ECDM Education Construction Design Management PAF Performance Assessment Framework ECU ESDP Coordination Unit PDO Program Development Objective EDPII Second Education Development Project PESS Provincial Education and Sports Service EMIS Education Management Information System RIES Research Institute for Educational Science EQS Education Quality Standards SOE Statement of Expenditures ESDP Education Sector Development Plan TA Technical Assistant ESITC Educational Statistics and Information Technology Center QCBS Quality and Cost Based Selection ESMP Environmental and Social Management Plan VEDC Village Education Development Committee ESQAC Education Standard and Quality Assurance Center VHV Village Health Volunteer FAM Financial and Administration Manual

Regional Vice President: Axel van Trotsenburg Country Director: Ulrich Zachau

Sector Director: Xiaoqing Yu Sector Manager: Luis Benveniste

Task Team Leader: Omporn Regel/Boun Oum Inthaxoum

iii

LAO PEOPLE’S DEMOCRATIC REPUBLIC EARLY CHILDHOOD EDUCATION PROJECT

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT .................................................................................................1

A. Country Context ............................................................................................................ 1

B. Sectoral and Institutional Context ................................................................................. 2

C. Higher Level Objectives to which the Project Contributes .......................................... 4

II. PROJECT DEVELOPMENT OBJECTIVES ................................................................4

A. PDO............................................................................................................................... 4

Project Beneficiaries ........................................................................................................... 4

PDO Level Results Indicators ............................................................................................. 5

III. PROJECT DESCRIPTION ..............................................................................................5

A. Project Components ...................................................................................................... 5

B. Project Financing ........................................................................................................ 10

Lending Instrument ............................................................................................................. 9

Project Cost and Financing ............................................................................................... 10

C. Lessons Learned and Reflected in the Project Design ................................................ 10

IV. IMPLEMENTATION .....................................................................................................11

A. Institutional and Implementation Arrangements ........................................................ 11

B. Results Monitoring and Evaluation ............................................................................ 12

C. Sustainability............................................................................................................... 12

V. KEY RISKS AND MITIGATION MEASURES ..........................................................13

A. Risk Ratings Summary Table ..................................................................................... 13

B. Overall Risk Rating Explanation ................................................................................ 13

VI. APPRAISAL SUMMARY ..............................................................................................13

A. Economic and Financial Analysis .............................................................................. 13

B. Technical ..................................................................................................................... 14

C. Financial Management ................................................................................................ 15

D. Procurement ................................................................................................................ 15

E. Social (including Safeguards) ..................................................................................... 16

iv

F. Environment (including Safeguards) .......................................................................... 16

Annex 1: Results Framework and Monitoring .........................................................................18

Annex 2: Detailed Project Description .......................................................................................21

Annex 3: Implementation Arrangements ..................................................................................34

Annex 4: Operational Risk Assessment Framework (ORAF) .................................................50

Annex 5: Implementation Support Plan ....................................................................................56

Annex 6: Economic Analysis .......................................................................................................60

v

PAD DATA SHEET

Lao People's Democratic Republic

Early Childhood Education Project (P145544) PROJECT APPRAISAL DOCUMENT

.

EAST ASIA AND PACIFIC

EASHE

Report No.: PAD595 .

Basic Information

Project ID EA Category Team Leader

P145544 B - Partial Assessment Omporn Regel/Boun Oum Inthaxoum

Lending Instrument Fragile and/or Capacity Constraints [ ]

Investment Project Financing Financial Intermediaries [ ]

Series of Projects [ ]

Project Implementation Start Date Project Implementation End Date

2-Apr-2014 31-Jul-2019

Expected Effectiveness Date Expected Closing Date

31-Jul-2014 31-Jul-2019

Joint IFC

No

Sector Manager Sector Director Country Director Regional Vice President

Luis Benveniste Xiaoqing Yu Ulrich Zachau Axel van Trotsenburg .

Borrower: Government of Lao People's Democratic Republic

Responsible Agency: Ministry of Education and Sports

Contact: ESDP Coordination Unit Title:

Telephone No.: (856-21) 243-672 Email: edpiimoe@laopdr.com .

Project Financing Data(in USD Million)

[ ] Loan [ ] Grant [ ] Guarantee

[ X ] Credit [ X ] IDA Grant [ ] Other

Total Project Cost: 28.00 Total Bank Financing: 28.00

Financing Gap: 0.00 .

vi

Financing Source Amount

BORROWER/RECIPIENT 0.00

International Development Association (IDA)

14.00

IDA Grant 14.00

Total 28.00 .

Expected Disbursements (in USD Million)

Fiscal Year

2015 2016 2017 2018 2019 2020 0000 0000 0000

Annual 1.00 4.00 8.00 9.00 5.50 0.50 0.00 0.00 0.00

Cumulative

1.00 5.00 13.00 22.00 27.50 28.00 0.00 0.00 0.00

.

Proposed Development Objective(s)

The objective of the project is to increase coverage and improve the quality of early childhood education services for 3 to 5-year-olds in target districts .

Components

Component Name Cost (USD Millions)

Component 1: Increasing Coverage of Early Childhood Education in Target Districts

6.00

Component 2: Improving Quality of Early Childhood Education Services

13.30

Component 3: Project Management, Capacity Development, and Monitoring and Evaluation

8.70

.

Institutional Data

Sector Board

Education .

Sectors / Climate Change

Sector (Maximum 5 and total % must equal 100)

Major Sector Sector % Adaptation Co-benefits %

Mitigation Co-benefits %

Education Pre-primary education 90

Education Primary education 10

Total 100

I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project.

vii

.

Themes

Theme (Maximum 5 and total % must equal 100)

Major theme Theme %

Human development Education for all 100

Total 100 .

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects?

Yes [ ] No [ X ]

.

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]

Does the project meet the Regional criteria for readiness for implementation?

Yes [ X ]

No [ ]

.

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X .

Legal Covenants

Name Recurrent Due Date Frequency

Recruit six financial management consultants 01-Sep-2014

Description of Covenant

Within one (1) month of Effectiveness, appoint/recruit six (6) financial management staff/national consultants, as appropriate, under terms of reference satisfactory to the Association.

Name Recurrent Due Date Frequency

Appoint an auditor 01-Feb-2015

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Description of Covenant

Within six (6) months of Effectiveness, appoint an auditor with terms of reference satisfactory to the Association. .

Name Recurrent Due Date Frequency

Project Steering Committee approves the Annual Plan and associated budget

Yes N/A Yearly

Description of Covenant The Recipient shall ensure that the Project Steering Committee approves the Annual Plan and associated budget by March 31 in each year of implementation of the Project .

Team Composition

Bank Staff

Name Title Specialization Unit

Omporn Regel Senior Operations Officer

Team Leader EASHE

Boun Oum Inthaxoum

Operations Officer Team Leader EASHE

Carmenchu D. Austriaco

Finance Analyst Finance Analyst CTRLN

Pedro Cerdan-Infantes

Education Economist Education Economist EASHE

Phetdara Chanthala Health Specialist Health Specialist EASHH

Amer Hasan Education Economist Education Economist EASHE

Satoshi Ishihara Senior Social Development Specialist

Senior Social Development Specialist

EASTS

Roch Levesque Senior Counsel Senior Counsel LEGAM

Boualamphanh Phouthavisouk

Team Assistant Team Assistant EACLF

Chau-Ching Shen Senior Finance Officer Senior Finance Officer CTRLN

Sirirat Sirijaratwong Procurement Specialist Procurement Specialist EASR2

Souphanthachak Sisaleumsak

Procurement Specialist

Procurement Specialist EASR2

Siriphone Vanitsaveth

Financial Management Specialist

Financial Management Specialist

EASFM

Maya Gabriela Q. Villaluz

Senior Operations Officer

Senior Operations Officer EASPS

Non Bank Staff

Name Title Office Phone City

ix

Sandra Beemer Education Consultant Washington D.C.

Natasha Graham Disability Consultant Washington D.C.

HyoJung Jang Education Consultant Vientiane

Achariya Kohtbantau

Education Consultant Bangkok

Garvan O'Keefee Civil Engineer Vientiane

Wei Aun Yap Health Consultant Vientiane

Mary Young ECD Specialist Washington D.C. .

Locations

Country First Administrative Division

Location Planned Actual Comments

1

I. STRATEGIC CONTEXT

A. Country Context

1. Lao People’s Democratic Republic (Lao PDR) has sustained robust economic growth over the past decade. The economy has expanded on average by 7.1 percent per year between 2001 and 2010 and the growth rate is projected to increase to 7.5–8.0 percent per year between 2011 and 2015. The booming natural resource sector has been a major driver of this growth, followed by services, manufacturing, and agriculture/forestry. Per capita income has grown six times over since 1990, reaching US$1,260 in 2012, removing Lao PDR from low income country status to a lower-middle income country. At this rate, the country is on track to achieve its long-term goal of graduating from Least Developed Country status by 2020. Moreover, Lao PDR’s accession to the World Trade Organization in early 2013 signifies that the country has become more active in the global economy since its transition from a command economy in the 1980s to a more market-oriented economy. Against the backdrop of this impressive economic growth, Lao PDR also has achieved significant poverty reduction. In 1992, almost half of the population lived below the poverty line, but by 2008, the share had declined to almost one quarter. Between 2003 and 2008, the poverty rate impressively declined by 6 percentage points, from 33 percent to 27 percent, and it was projected to decline even further to around 23 percent in 2012.1 2. Despite these remarkable achievements, significant economic disparities persist across the country’s diverse ethnic groups and geographical areas. Lao PDR has 49 officially recognized ethnic groups, with the following four linguistic groups being the largest: (a) the Lao-Tai; (b) Mong-Khmer; (c) Hmong-Mien; and (d) Sino-Tibetan. However, within these major groups, the Lao-Tai have registered much lower poverty rates than the other three non-Lao-Tai groups: in 2012, 25 percent of Lao-Tai were considered poor compared to 42 percent or more for the other three groups. This stands in contrast with the fact that the three non-Lao-Tai groups make up 65 percent of the total population. Although government support has been aimed at ethnic groups and regions, the lack of access to infrastructure and markets in these rural and remote regions remains as a barrier to growth and poverty reduction. In this regard, the pattern of poverty also has a significant geographical dimension. In rural areas, where nearly three-fourths of the country’s 6 million people live, the poverty rate of 32 percent is almost twofold that in urban areas (17 percent). Exceptions to the rural poverty classification are districts along the border with Thailand and the plains along the Mekong valley in the central region, which have experienced rapid growth and poverty reduction. However, the mountainous areas in the North and South of the country and districts defined by the government as priority districts2 remain poor due in large part to the limited access to roads and markets from the widely dispersed villages.

1 The estimate is calculated by extrapolating past poverty trends (using the correlation between GDP growth and poverty reduction rate). Actual poverty data for 2012/13 (from Lao Expenditure and Consumption Survey 5) is expected to be available by April, 2014. 2 Priority districts were defined in the National Growth and Poverty Eradication Strategy (Government of Lao PDR, 2003), based on a set of household, village and district level indicators. The 47 districts are considered priority districts for poverty reduction, out of a total of 143. Just above a third of the population lives in these priority districts.

2

B. Sectoral and Institutional Context

3. Education, including early childhood, is a clear priority for the Government of Lao PDR. The 7th National Social and Economic Development Plan (NSEDP) 2011-2016 identifies education as a key priority to meet the Millennium Development Goals (MDGs) by 2015 and graduate from least developed country status by 2020. The Government’s increased commitment to education is in part reflected in the increased budget allocation for the education sector, which increased from 12 percent of the total state budget in 2011/12 to 18 percent in 2012/13. Within the basic education sub-sector, expanding coverage of early childhood education (ECE) is an important goal and strategy of the Government. Recognizing the critical importance of ECE for healthy development of all children, which will have long-term implications in the human development of the country, the Government has set forth a clear medium-term goal in the Education Sector Development Plan (ESDP) 2011-2015: creating affordable and expanded access to early childhood education, especially in poorer and educationally disadvantaged areas.3 4. Coverage of ECE services and resources devoted to ECE are still insufficient. Despite the significant investments made in education, the Government’s expenditure for ECE was only 3 percent of the total education budget in 2012/13. The coverage of ECE services remains largely limited. The proportion of 3 to 5-year-olds enrolled in ECE programs has increased from 23 percent to 33 percent between 2011 and 2013. Yet, it is still low compared with other countries with similar income levels. The enrollment rate of 5-year-olds reached 52 percent in 2012/13 (from 32 percent in 2008/09), and it is expected to reach over 60 percent by 2015.4 However, the Government ECE programs cover mainly 5-year-olds in the “pre-primary classroom” attached to a primary school, leaving 3 and 4-year-olds with limited access. 5. Coverage of ECE services varies significantly across geographic, socio-economic, and ethnic dimensions. Coverage is larger for the better-off segment of the population in the urban centers and for the Lao-Tai ethnic group. The urban-rural gap is also wide: while 57.4 percent of 3 and 4-year-olds attended kindergartens in Vientiane Capital in 2011/12, only 14.5 percent did in Saravan province (southern Lao PDR). Disparity in enrollment is also large among ethnic groups. Of the total ECE enrollment, 90 percent are children of the Lao-Tai ethnic group and 10 percent are of other ethnic groups. Less than 8 percent of children from the lowest income quintile, from rural areas without roads or from non-Lao-Tai communities, have access to ECE services. This lack of access undermines prospects for early learning/school readiness which is, in turn, compounded by poor nutrition, due to food insecurity and malnutrition in the upland and highland areas in rural regions. Chronic malnutrition results in high stunting rates (44 percent), wasting (5.9 percent) and underweight (26.6 percent) and impacts children’s educational outcomes. Although gender parity for 3 to 5-year-olds in ECE is on-track to be achieved by 2015, achievement of gender parity becomes more off-track as the level of education increases. 6. The differences in coverage of ECE services translate into disparities in child development outcomes. The latest Lao Social Indicator Survey 2011/12 shows that only 6 percent of 3 to 5-year-olds from the poorest quintile (often living in rural and remote, non-Lao-Tai areas) are on track in literacy and numeracy, while over half of their peers from the richest

3 ESDP 2011–2015 4 Mid-term Review of ESDP 2011–2015

3

quintile are on track in both. Moreover, most children in rural areas have never been seen by a doctor and many may have disabilities and impairments or are at risk of developing them due to untreated/undetected health conditions.5 In turn, these untreated health conditions prevent them from learning. Improvement of early detection strategies are critical in addressing the needs of children with disabilities in order to help them learn and stay in school. 7. Toward the goal of expanding access to ECE for all children, the Government has laid out specific steps as part of its Education for All National Plan of Action 2003-2015 in order to: (i) promote coordination between the Government, community and private sector; (ii) mobilize communities in favor of pre-primary education, and promote the development of community pre-primary education; and (iii) promote access to pre-primary education for 5-year-olds by establishing a pre-primary class or community-based school readiness program to prepare them for Grade 1, particularly targeting ethnic groups, girls and children from the poorest families. Moreover, the Government’s commitment to equitable and healthy development of all children is reflected in the draft National Policy on Holistic Early Child Development (2010), which is guided under the supervision and coordination of the National Committee on Mother and Child.6 8. The project seeks to support the expansion of quality ECE services, with the objective of improving the overall development and school readiness of children in disadvantaged communities. Research conducted in both developed and developing countries shows that ECE is one of the most cost-effective and equitable interventions in human development. By investing early, ECE interventions have been shown to decrease dropout and repetition rates,7 increase graduation rates in post-secondary education and improve labor force productivity and wages.8 Programs that combine education, parenting education and nutrition interventions have shown the largest positive impacts particularly for children from low income families. By intervening in the early years of children’s learning and development, the project seeks to strengthen the foundations for healthy physical, cognitive, emotional and social development of children. 9. This project will build on the achievements of the International Development Association (IDA)-funded Second Education Development Project (EDPII), the GPE (Global Partnership for Education, formerly EFA-FTI) Program,9 and the Community Nutrition Project. It will support similar goals, take note of lessons learned, and build directly on other successful components of these projects. Some of the successes and lessons learned from the EDPII project and the GPE Program include: (i) the community-based contracting (CBC) for school construction has been institutionalized and successfully implemented, leading to quality construction, which continues to improve and is more cost-efficient; (ii) the pre-primary teacher training scholarships and in-service teacher training courses, which have been provided under the GPE Program for ethnic

5 Many out of school children experience some forms of disability including learning, speech, physical, cognitive, sensory disabilities or emotional difficulties. In addition, there are many children who are in school, but are expected to drop out because of a disability or a health condition that prevents them from staying in school. 6 This inter-ministerial body is composed of ministers of relevant ministries (including Ministry of Education and Sports, Ministry of Health, and Ministry of Justice, and Ministry of Labor and Social Welfare) and their respective officials from central, provincial and district level and relevant stakeholders. 7 Barnett and Nores 2010, 2012 8 Gertler et al, 2012, Berlinski and Galiani, 2007 9 Formerly known as the Education For All – Fast Track Initiative (EFA-FTI) Program. For consistency and ease of reference, the new name, ‘GPE Program,’ will be used throughout the document.

4

girls from disadvantaged areas, showed success in ensuring that they return to their areas and teach; and (iii) the National School Meals Program (NSMP) has been successfully implemented and is mature enough to be expanded.

C. Higher Level Objectives to which the Project Contributes

10. The project forms a core part of the World Bank Group's 2012-2016 Country Partnership Strategy for Lao PDR (66692-LA, approved by the Board on January 25, 2012), which is closely aligned with the 7th National Socio-Economic Development Plan. The project will support efforts to achieve the Strategic Objective 3 of the Country Partnership Strategy on "Inclusive Development” and the Government’s ESDP. It will contribute to Lao PDR’s efforts to achieve the Millennium Development Goals for basic education, gender, health, and poverty reduction and make services available to the disadvantaged. In particular, the project’s provision of scholarships for ethnic girls to become teachers will contribute to closing gender gaps in post-primary education levels. 11. Investing in early childhood education is consistent with the World Bank’s twin goals of reducing poverty and boosting shared prosperity. ECE is expected to contribute to reducing poverty in project target areas by improving educational attainment of beneficiaries, as higher educational attainment is associated with higher income both in urban and rural areas.10 The project is also expected to improve educational equity, since ECE has been shown to have larger effects on the most disadvantaged populations (i.e., those that have larger development deficits). The project is thus expected to reduce the large disparities observed in educational attainment of children across income groups and ethno-linguistic groups and across gender, contributing to shared prosperity. The project is also aligned with the World Bank Education Sector Strategy 2020, focusing on the goal of “Learning for All,” and particularly on investing early.

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

12. The objective of the project is to increase the coverage and improve the quality of early childhood education services for 3 to 5-year-olds in target districts.11

Project Beneficiaries 13. The project’s main beneficiaries are children 3 to 5-years-old in target districts, with careful attention to disabilities and gender parity. Other beneficiaries include parents, primary caregivers for children, and community members through the community awareness campaign. The project will also support teachers, principals, Village Education Development Committees (VEDCs), Village Health Volunteers (VHVs), health center workers in target districts and

10 StEP report, Lao Development Report, World Bank, forthcoming. 11 There are 22 districts that have been identified as priority districts (and are referred to as “target districts” for the purposes of this project) on the basis of their educational needs as indicated by their having a female primary net enrollment ratio and a survival rate up to Grade 5 that are below the national mean level from the latest available educational statistics.

5

concerned Ministry of Education and Sports (MoES) and relevant Ministry of Health (MOH) staff through training and capacity building activities.

PDO Level Results Indicators 14. The PDO level results indicators are:

• Net enrollment rate of 3 and 4-year-olds in target districts (disaggregated by gender)

• Net enrollment rate of 5-year-olds in target districts (disaggregated by gender) • ECE Quality Standards designed and endorsed • Number of classroom observation reports submitted by ECE officers to the

principals 15. These data will be derived from administrative data collected through the Education Management Information System (EMIS) and the project M&E activities. The relevant indicators will also be tracked, and data will be reported, disaggregated by gender.

III. PROJECT DESCRIPTION

A. Project Components 16. The project will support the following three components. Component 1 will focus on increasing coverage through: (i) the provision of Construction Grants and Training to participating villages for the construction of pre-primary classrooms using CBC; and (ii) establishment of Community Child Development Groups (CCDGs) for 3 and 4 year olds. Component 2 will focus on improving the quality of ECE services through: (i) a supporting services package, technical assistance and training; and (ii) teacher and education officer training. Component 3 will focus on strengthening project management, capacity development, and monitoring and evaluation at all levels of early childhood education. Component 1: Increasing Coverage of Early Childhood Education in Target Districts (Grant US$6.0 million) Sub-component 1.1: Community-Based Contracting for Pre-Primary Classroom Construction 17. This sub-component will transfer grants-in-aid for CBC to communities in target districts to construct up to 250 pre-primary classrooms in selected 200 existing primary schools. Construction will include age-appropriate water and sanitation facilities and adhere to accessibility standards for physically disabled children. Sub-component 1.2: Community Child Development Groups for 3 and 4-year-olds 18. Under this sub-component, the project will pilot CCDGs for 3 and 4-year-olds in 48 locations where there are primary schools with pre-primary classrooms. The CCDG concept will be piloted to provide a separate learning environment for 3 and 4-year-old children to determine

6

if this will have a positive impact on the cognitive development of 3, 4 and 5-year-old children.12 The CCDGs are part of a planned impact evaluation that will compare the impact and cost-effectiveness of two approaches to providing services for 3 to 5-year-olds: CCDGs (48 locations) and multi-age teaching (47 locations) for 3 to 5-year-olds. (See sub-component 2.2 for multi-age teaching.) 19. The project will finance the establishment of CCDGs and specifically: (i) the provision of CCDG grants and the grant monitoring and support mechanism; (ii) the provision of training for VEDCs and caregivers; and (iii) the development and production of CCDG materials and tool kits. The CCDG grants will be provided to VEDCs to support the development of the CCDG and early childhood learning activities. The CCDG grants will comprise three parts: (i) a one-time amount to create a clean and safe environment suitable for 3 and 4-year-olds attending CCDG; (ii) a yearly lump sum for VEDCs to purchase basic materials (e.g., mats, water basin, hand towels, toys, notebooks, pencils, crayons, and other learning materials); and (iii) subsistence for caregivers. A manual on grant utilization will be developed and the project will provide training for VEDCs to enable them to manage the grants effectively. Component 2: Improving Quality of Early Childhood Education Services (Grant US$8.0 million; Credit US$5.3 million) Sub-component 2.1: Supporting Services Package (Grant US$8.0 million and Credit US$3.2 million) 20. This sub-component will provide a package of services to target communities to improve the quality of ECE as well as to increase the demand for ECE services by delivering: (i) community awareness campaign sessions to engage parents in parental education at the village level; (ii) childhood disability screening, and (iii) the NSMP. Under this sub-component, the project will build on the existing effective partnership between the education and health sectors under the School Health Task Force.13

21. Community Awareness Campaign. The objective of the community awareness campaign is to increase the knowledge and understanding of the parents of children aged 0-5 years as well as other community members in all target villages about: (i) the importance of ECE and the first 1,000 days of a child’s life since conception; (ii) appropriate parenting skills for age groups 0 to 5 on early stimulation; (iii) nutrition; (iv) health; (v) hygiene; and (vi) childhood disability awareness. In addition, the community awareness campaign will inform the community about the available ECE services in the village.

12 Current pre-primary classrooms are only for 5-year-old children. However, the 5-year-old children bring their 3 and 4-year-old siblings to pre-primary school with them. The CCDG will provide an alternative to multi-age pre-primary classrooms. 13 The School Health Task Force is a bi-sectoral collaborative structure between the Ministry of Education and Sports and the Ministry of Health to implement the National School Health Policy. (The National School Health Policy has been developed to serve as a reference for implementation of school health strategy of health program task forces from central to local levels; for school directors from preschool to secondary education; and also for line ministries, international organizations that wish to support school health program activities.)

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22. The project will finance the development and production of (i) training modules and facilitation guides, which will be used to train VEDCs and VHVs and (ii) tool kits for campaign sessions for each village under the project. The School Health Task Force, in collaboration with the Inclusive Education Center, will be responsible for the development of materials. The project will also finance technical assistants for material development and training. 23. Childhood Disability Screening. The project will introduce medical, disability and nutrition screening. It will provide an opportunity for children in rural areas—most of whom have never been seen by a doctor—to participate in a screening carried out by medical professionals, and receive or be referred for treatment, under the guidance of MOH. The project will also build general disability awareness and support inclusive education policy implementation. 24. This activity will be implemented in three steps: (i) a disability awareness campaign will be conducted as part of a larger community awareness campaign; (ii) a “Child Functioning and Disability” questionnaire will be administered at the community level in the form of an interview with parents of children aged 3-5 years to identify potentially disabled and or impaired children; and (iii) a medical, disability, and nutrition screening of identified children will be provided, with a provision of treatment and/or a referral for follow-up with a specialized service provider. The project will be implemented by a joint team composed of members of an existing School Health Task Force and the Inclusive Education Center. 25. There project will finance: (i) one international and two local medical Technical Assistants (TAs) to assist in carrying out medical screening; (ii) development of disability awareness training materials; (iii) development of operational and training manuals; and (iv) provision of training on disability awareness and the use of “Child Functioning and Disability” questionnaire for MoES staff at the central level, and support training of provincial, district, and VEDCs and VHVs. 26. National School Meals Program (NSMP) The project will provide school lunches to CCDGs, pre-primary and primary school children to encourage attendance of girls and boys in remote rural communities and to provide children with nutritious meals which allow them to better concentrate on their studies. The project will continue the successful NSMP already supported by the ongoing GPE Program. Under the NSMP, communities procure and prepare locally sourced fresh foods using grant money transferred to them from the project funds. This program is an integral part of the education sector strategy to increase school retention and the Government is committed to gradually taking over the program in the long term.

27. This activity will finance training and technical assistance to the NSMP Section of the MoES, district officials and schools. Anchored on the principle that good nutrition is crucial to good health, which improves resistance to diseases and promotes good mental and physical development, the program will not only provide lunch to address short-term hunger, but it will also promote linkages with other school interventions, such as access to safe water, personal hygiene, and other basic health and nutrition services. To ensure sustainability, the program will continue to promote: (i) integrated local food production (school gardens); (ii) food security and nutrition; and (iii) capacity building in areas such as nutrition.

8

Sub-component 2.2: Teacher and Education Officer Training 28. The project target districts have a shortage of qualified pre-primary school teachers. In addition, the existing pre-primary classes, that are designed to cater only to 5-year-old children, are experiencing increased demand due to the 5-year-olds bringing their 3 and 4-year-old siblings to school and the teachers are not equipped to manage these multi-age classes. To assist the government in managing this situation, the project will support pre-service training of pre-primary school teachers, the development of a multi-age training module, and in-service training on multi-age techniques for teachers and school administrators. 29. The project will finance: (i) approximately 200 pre-service teacher training scholarships for ethnic girls through a two pronged approach consisting of three-year scholarships or, if the girls have completed 9 years of education, an intensive 30 week training program; (ii) the development of a multi-aged teaching module and the technical assistance necessary to develop the module; (iii) multi-age in-service teacher training for approximately 500 pre-primary teacher in the target areas; (iv) multi-age in-service training for approximately 500 principals and vice-principals in target areas; (v) training of trainers (provincial and district ECE officers) in multi-age modules so that they can train the school principals and vice principals as well as provide technical support at the school level when needed; (vi) training of VEDCs; and (vii) the provision of approximately 300 pre-primary school tool kits to be used by the teachers in the newly established pre-primary classrooms.

Component 3: Project Management, Capacity Development, and Monitoring and Evaluation (Credit US$8.7 million) 30. This component will support project management, capacity development, and monitoring and evaluation of early childhood education. The component’s main activities will include: (i) capacity development and support for financial management, procurement, environmental and social safeguards and internal audit; and (ii) support for Monitoring and Evaluation (M&E) activities (including a possible child development monitoring system and class observation tools, and stakeholder trainings). Sub-component 3.1: Project Management and Capacity Management (Credit US$7.3million) 31. This sub-component will finance the incremental costs associated with project management. It includes activities designed to ensure efficient program management and early identification of corrective measures to solve any implementation problems. As the implementing agency (the “ESDP Coordination Unit” – ECU) takes on broader coordination responsibilities for the national program, it would need additional resources for logistics, physical space and transportation. A series of workshops such as a launch workshop and annual review workshop are included in this component, together with financing for the required financial audits to support the Department of Finance (DOF). Given the importance of financial management in the education sector and the project, funding will be provided to continue the implementation support of the Medium Term Strategy for Performance Improvement Plan of Financial Management initiated under EDPII. The project will provide funding to build financial management capacity of financial management staff in MoES at all levels. In addition to

9

financial management capacity, the project will support the managing procurement activities and adherence to environmental and social safeguards. 32. This sub-component will also focus on capacity development to improve the overall management of the pre-primary education sub-sector. There will be staff development at the Department of Planning (DP), DPPE, DTTE, Research Institute for Educational Science (RIES), DOF, Department of Inspection (DOI), Education Standard and Quality Assurance Center (ESQAC) and Department of Personnel (DOP). A strategic staff development plan covering general training, technical skills and leadership development will be developed, reflecting the specific needs of each department and the overall strategic needs of the sub-sector. The project will finance: (i) workshops and annual conferences; (ii) overseas study tours, participation at regional and international ECE conferences and ECE-related training; (iii) action research on selected ECE topics to strengthen existing government research capacity and ability to disseminate findings; and (iv) short-term and graduate courses, including English language training. Sub-component 3.2: Monitoring and Evaluation (M&E) 33. The monitoring and evaluation scheme under the project will include a Result Framework and Monitoring. Monitoring the project’s implementation progress and the results outcomes will be led by the DPPE’s M&E unit and includes data collection and data organization, drawing information from various centers and line departments (i.e., the Education Statistics and Information Technology Center, DOI, etc.). 34. The reporting of project progress would be integrated into the ESDP Performance Assessment Framework (PAF) operational cycle, including annual Joint Sector Reviews with Development Partners. The PAF, as a means to measure ESDP progress, is the agreed whole sector monitoring mechanism and is the foundation of the results framework. The DOI would be responsible for collecting all the information from different sources in a timely manner according to the PAF operational cycle. The project will finance technical assistants and workshops (no goods) for M&E at central, provincial and district levels. It will also fund expenses related to conducting semester and annual sub-sector reviews and planning. 35. As part of these M&E activities, the project will pilot the inclusion of child development indicators in the EMIS and the development and use of a classroom observation tool for ECE officers. To this end, the project will finance expenditures related to data collection, technical assistance, workshops and training. Annex 2 provides additional information regarding this pilot activity. B. Project Financing

Lending Instrument

36. The lending instrument will be Investment Project Financing and will be financed by an IDA Grant in the amount of SDR 9.1 million (US$14 million equivalent) and an IDA Credit in the amount of SDR 9.1 million (US$14 million equivalent). The total project cost will finance works, goods, services, sub-grants, training, workshops, incremental operating costs and

10

scholarships. It is expected to be implemented over a 5 year period. During negotiations, the borrower indicated that IDA grant will be utilized before IDA credit as indicated in the FA). Project Cost and Financing

Project Components Project cost

(US$M) IDA Financing

(US$M) % Financing

1. Increasing Coverage of Early Childhood Education in Target Districts (financed by IDA Grant) 2. Improving Quality of Early Childhood Education in Target Districts (financed by IDA Grant US$8.0 million and Credit US$5.3 million) 3. Project Management, Capacity Development and Monitoring and Evaluation (financed by IDA Credit)

6.00

13.30

8.70

6.00

13.30

8.70

100

100

100

Total Project Costs

Total Financing Required

28.00

28.00

28.00

28.00

100

100

C. Lessons Learned and Reflected in the Project Design

37. The project design draws on lessons learned from prior projects in the sector and experience with early childhood education in other countries. Lessons learned incorporated into the design include:

• Children who have positive early learning and development experiences can make a better transition into primary school. Children are more likely to be enrolled in primary school at the right age, less likely to repeat grades and dropout of school, and thus more likely to complete primary school on time. Provision of early learning, especially for the most vulnerable and disadvantaged children, is essential to expand right age enrollment of primary education in Lao PDR.

• Experience from previous ECE-type activities in Lao PDR have shown the need to overcome demand-side constraints, revise ECE material content and promote health and meal services if an ECE program is to be successful. Therefore, the project will: (i) address the demand-side constraints (e.g., by promoting awareness campaigns aimed at increasing parents’ knowledge about and understanding of the benefits of ECE); (ii) review the content and relevance of the ECE instructional materials for the 3 to 5-year-olds target population; and (iii) provide health and disability screening and school meals to ensure that children are ready for learning and schooling.

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• Incorporation of lessons from international experience on how to make early

childhood education work for disadvantaged children. These include the following elements: (i) having sufficient caregivers/teachers that have been trained to provide effective support to disadvantaged children, particularly those from ethnic groups; (ii) using an adequate child development materials/curricula which focus on effective classroom practices; (iii) capacity building of the VEDCs, the districts and the provinces to carry out awareness campaigns and other Supporting Services; (iv) maximizing involvement of parents in child learning and development; (v) strengthening the institutional capacities of key departments responsible for early childhood education (such as DPPE and DTTE), to help MoES achieve its objectives in the sub-sector; and (vi) assessing outcomes in terms of child development through the use of an appropriate child development measurement instrument.

• Clarify the lines of responsibilities in MoES in decision making process to improve service delivery. The Operational Risk Assessment Framework (ORAF) includes various elements for improving transparency and accountability through strengthened procurement arrangements and financial management, enhanced public disclosure, involvement of civil society, a complaints mechanism, and internal audit and inspection in the education sector. With this in place, as well as the previously adopted Financial Management Manuals, and Operational Manuals for previous projects in the sector, the MoES has clearer lines of who will make decisions for the project.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

38. The MoES is the project executing agency and has final responsibility for project implementation according to agreed administrative arrangements, financial management and procurement practices and applicable safeguards policies (see Annex 3 for more details). Under the authority of the MoES, the ECU will coordinate program activities. The ECU will be guided by a Project Steering Committee and a Project Advisory Council and supported by a Project Working Group. The MoES will implement program activities as part of the day-to-day work of the MoES line departments, referred to as the Coordinating Departments (CDs). The CDs will be composed of DOF, DPPE, DTTE, etc. The CDs will have counterpart officials nominated at the provincial and district levels, depending on the sub-component. 39. All CDs will liaise with the Project Coordinator, through a focal point based in the ECU. At the same time, their work will be monitored through their location in the functional hierarchy of the MoES. The Financial Management and Procurement functions in the ECU will be strengthened with staff and consultants with the requisite qualifications. Accountability for managing the flow of funds and for financial reporting will continue to reside with the DOF. Each Department will continue to monitor performance of its staff, coordinate staff work programs between the ECE project and other projects, provide technical and quality oversight of its staff and provide opportunities for staff professional development. This implementation arrangement incorporates the accountability mechanisms of project management that would

12

encourage timely execution of the project, and, it builds on existing capacity of the MoES in the individual functional responsibilities of the MoES line departments.

B. Results Monitoring and Evaluation

40. The M&E scheme includes a Result Framework and Monitoring agreed during project preparation. This Framework will include specific outcome indicators for the PDO and each of the project components. Associated with each of these outcome indicators will be agreed baseline figures for 2012/2013, target values for each year of project implementation and a description of data collection and reports to support the M&E of the project. Monitoring the project’s effectiveness and the results outcome will also come largely through data from Educational Statistics and Information Technology Center (ESITC) together with information from DOI collected through its M&E network (various other centers and line departments) at all levels. The DPPE’s M&E unit will lead this effort at the project level. The reporting of project progress will be integrated into the ESDP Performance Assessment Framework (PAF) operational cycle, including annual Joint Sector Reviews with development partners. The PAF, as a means to measure ESDP progress, is the agreed whole sector monitoring mechanism and is the foundation of the results framework. The DOI will be responsible for collecting all the information from different sources in a timely manner according to the PAF operational cycle.

C. Sustainability

41. The project is based directly on the policy directions laid out by the ESDP and followed by intensive consultations with the government and development partners, and as such has strong local ownership. Large parts of the project are also based on current, successful programs in the education sector. The planned impact evaluation will provide information about the cost-effectiveness of different alternatives for providing ECE services, contributing to the sustainable expansion of services in the future. In addition, the project makes extensive use of government systems. Following the ongoing GPE Program, the use of government personnel, monitoring and evaluation systems and procurement and financial systems is unprecedented in Lao PDR. 42. In terms of fiscal sustainability, the recent increases in the education budget provide enough resources to absorb the operational cost of the investments under the project. The main operational costs associated with the project investments are the personnel and operational costs associated with the new pre-primary classrooms and CCDG, and the operational cost of the NSMP. Their annual cost amounts to less than .05 percent of the total education budget and 1.5 percent of total spending on ECE, according to the financial analysis of the project. The Government’s commitment to maintaining these investments will be crucial. Recent increases in teacher salaries have left little space in the budget to absorb new costs. The Government’s continuing efforts to increase expenditure in ECE will thus be crucial to the sustainability of the project in the long-term.

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V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table

Risk Category Rating

Stakeholder Risk Low

Implementing Agency Risk

- Capacity Substantial

- Governance Moderate

Project Risk

- Design Moderate

- Social and Environmental Low

- Program and Donor Low

- Delivery Monitoring and Sustainability Substantial

Overall Implementation Risk Moderate

B. Overall Risk Rating Explanation

43. Based on the ORAF, the overall implementation risk is moderate, primarily because of the capacity risks identified for the project. Although the project has identified capacity constraints as an implementation risk, many of the CDs responsible for project implementation are familiar with the Investment Project Financing modality and they have had previous experience in implementing similar activities under other Bank and donor projects, including the ongoing GPE Program.

VI. APPRAISAL SUMMARY

A. Economic and Financial Analysis

44. ECE interventions are among the most cost-effective interventions in the social sectors. The economic returns of investing in ECE and later in life have been quantified most rigorously in the U.S. context. These estimated returns range between 7 and 14 percent a year14, and they are substantially higher than the returns to programs that are administered later in life (e.g., vocational training and compensatory programs). In mid-low income countries, evidence is accumulating on the effects of ECE interventions on both cognitive and non-cognitive outcomes of children. Long-term economic benefits of ECE interventions have been documented in a randomized trial in Jamaica, in which nutrition supplementation and parenting education improved children’s cognitive development, their educational attainment and earnings in a 20-year follow-up. Existing evidence strongly suggests that the impact of ECE interventions is

14 Heckman, Moon, Pinto, and Yavitz (2008)

14

larger in children from more disadvantaged backgrounds. In settings marked by high inequalities and high rates of poverty and malnutrition, returns to early childhood interventions have been estimated at between 6:1 to 18:1 from increased productivity and earnings alone.15 In a country like Lao PDR, where high dropout and repetition rates in primary school and high levels of inequality in child development persist, the potential benefits of investing in ECE are therefore likely to outweigh the costs significantly.

45. The main economic return to the project investments will come from the returns to the increased educational attainment of beneficiaries. By improving a child’s school readiness, the project is expected to increase educational attainment in the long run, leading to better skills, more productivity and higher salaries for the beneficiaries. However, the benefits from the package of services provided is expected to go beyond cognitive development of children (existing evidence of the impact of each component separately is discussed in Annex 6 Economic Analysis). By intervening early through maternal health and parental education, the project seeks to improve children’s physical development and health. In addition, the parental education on early stimulation and the introduction of CCDGs for 3 and 4-year-olds seeks to improve both cognitive and non-cognitive skills of children (e.g., communication skills, social skills, and emotional development). The provision of school meals has been shown to contribute to a reduction in dropout and increased attendance, and in conjunction with parental education and early stimulation, it is expected to improve students’ attentiveness and learning in the classroom. These factors (e.g., better health, cognitive and non-cognitive skills) bring economic benefits that are additional to the standard returns to education, but they are hard to quantify.

46. A cost-benefit analysis of the project shows that even under conservative assumptions, the expected benefits of the project outweigh its costs. The cost-benefit analysis uses educational attainment as the most easily measured impact of the project, assuming a range of potential outcomes from very optimistic (e.g., 2 additional years) to the least (e.g., one-half additional year of schooling). The most current estimates on the returns to education are used to translate these increases in attainment into increases in future income. These benefits are then compared to the stream of costs generated from project interventions: mainly, infrastructure construction, teacher salaries and per student block grants. The analysis shows that under the most optimistic scenario (where take-up in the project areas is 90 percent of 3 to 5-year-olds and they get 2 additional years of schooling), the project will report almost US$7 in benefits for each dollar invested. Under the most pessimistic scenario (i.e., 50 percent take-up rate and one year of additional schooling), the project will still bring about US$2 for each dollar invested. This is because the returns to education accrue over the whole professional life of the beneficiaries. Since these estimates are likely to be lower-bound estimates—and, as additional benefits accruing from returns to skills, health outcomes and externalities from a more educated population are not considered—these estimations attest to the soundness of the investment in this project in economic terms.

B. Technical

47. The project draws on the lessons learned from successful previous education projects in Lao PDR and other countries. The project components are embedded within the ESDP 2011-2015. The project was prepared through a lengthy consultative process with the MoES and 15 Engle, P.L, et al, 2011

15

development partners. The school safety, social, and environmental aspects of the CBC for school construction have been reviewed by World Bank experts and a gender review has been conducted by Plan International as part of the Mid-term Review of the ESDP 2011-2015. The NSMP has benefited from the nutritional analysis and detailed monitoring and evaluation of the ongoing NSMP activities under the GPE Program.

C. Financial Management

48. The financial management arrangements will be deemed acceptable and meet the requirements of OP/BP 10.00 when the proposed mitigation measures have been implemented. See detailed arrangements and action plan for implementation in Annex 3. 49. The overall financial management risk is assessed to be substantial, given the nature of the project activities that involve extensive community-level support and participation. The project is benefiting 22 target districts throughout the country. The main risks include: (i) low capacity at the community level, which could increase the risk of funds not used for intended purposes; (ii) capacity of implementing agency staff to ensure acceptable financial management arrangements; (iii) inability to liquidate advances in a timely manner and to monitor and provide timely information on commitments; and (iv) delays in the transfer and shortage of funds. These risks will be mitigated by: (i) operational manuals for CBC, CCDG and NSMP, including associated community guide; (ii) reviewing and modifying the Finance and Administration Manual (FAM) to reflect the requirements and nature of the project, including updating and simplifying of financial procedures; (iii) increasing the number of skilled staff at the central level and strengthening financial management skills of provincial and district level finance staff; (iv) improving the system for and production of six-month expenditure projection per semester; (v) training of MoES finance staff at all levels, district engineers and beneficiary communities; and (vi) continuing the implementation of the Medium Term Strategy and Performance Improvement Plan (MTSPIP).

D. Procurement

50. Procurement of goods and works under the project and financed in whole or in part by IDA funds will be carried out in accordance with the IDA’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated January 2011. The procurement of consultant services financed in whole or in part by IDA funds will be carried out in accordance with the IDA’s "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated January 2011, and the provisions stipulated in the legal agreement and the approved procurement plan. The ECU has prepared a detailed procurement plan for the first 18 months, which has provided the basis for the selected procurement procedures. This plan has been discussed and agreed with the IDA. The plan will be updated with the IDA’s prior concurrence, annually or as required, to reflect changes in implementation needs and improvements in institutional capacity. The procurement risks of the project will be managed and mitigated through an action plan that has been incorporated into the project design and the project financing agreement. The details about procurement are provided in Annex 3.

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E. Social (including Safeguards)

51. The project’s focus on children in disadvantaged districts, those from poor families and those with disabilities, is expected to contribute to social inclusion and greater equality of opportunity. Given this focus on disadvantaged children and the project’s coverage of areas resided by ethnic groups, the World Bank’s safeguard policy OP 4.10 on Indigenous Peoples (IPs) is triggered. 52. The Ethnic Group Development Plan (EGDP) developed for the ongoing GPE Program has been updated for and will be used by the project. This plan was prepared in consultation with potential project beneficiaries/communities through a participatory social assessment and in partnership with the agencies responsible for various facets of ethnic group issues. In order to get a broad community/ethnic support, the consultation has taken place in the provinces where more ethnic groups/people are present in three main regions of Lao PDR: north, central and south. It was based on free, prior and informed consultations in accordance with OP 4.10. The social assessment is part of the process by which the MoES informs the ethnic communities and local authorities at village, district and provincial levels about the project and the construction of pre-primary education classrooms. The consultation and assessment ensures social engagement and inclusiveness and that ethnic groups issues are incorporated into the project planning, design, implementation and monitoring. It also ensures that the project benefits are mutually distributed in a culturally appropriate manner as well as to avoid negative impacts. A social assessment has been carried out in these areas. The findings of the social assessment have been documented in the EGDP. 53. Gender equality is a key goal of the project. By targeting the 22 most educationally disadvantaged districts, the project will direct resources more strategically towards better educational outcomes for girls through boosting enrollment in and completion of pre-primary education. The components identified in the project support this gender-informed approach in five key areas: (i) the construction of pre-primary classrooms, which is an essential strategy to promote greater access for 5-year-old girls; (ii) the establishment of pilot CCDGs, which will increase access for 3 to 4-year-old girls; (iii) the provision of scholarships for ethnic girls, which will enable more females from these groups to enter the teaching profession; (iv) the provision of the NSMP, which has been shown to increase enrollment of girls; and (v) the promotion of inclusive education, which is core to the Education Quality Standard approach that has had impressive results over the years in getting more girls into school.

F. Environment (including Safeguards)

54. The project is not expected to have any major environmental impacts and is therefore classified as a Category “B” project. The locations of a new school building will be within the existing school compound. The exact location of the new buildings will be determined using the Environmental Screening checklist described in the Environmental Code of Practice (ECOP). The ECOP provides guidelines on how to determine the most appropriate site considering the health, safety and security of the school children and the structural integrity and environmental soundness of the school building and its premises. The ECOP is also integrated in the Community Based Contracting Operational Manual (CBCOM) to ensure that the environmental safeguards are integrated in the planning, construction and operation of the new pre-primary

17

school building. Any impacts that occur are likely to be short-term, and will not contribute to the increase of impacts or accumulation thereof in the school compound in natural ecosystems within and adjacent to it. The final building site will not be located near any sensitive or degraded ecosystems neither will it be located next to a major road, bridge or infrastructure that may expose the children to risky situations or hazardous conditions. Any risk will be mitigated by the adoption of appropriate Environmental, Health and Safety (EHS) management measures included in the ECOP, which includes proper spatial planning and design, and construction industry best practice protocols. 55. The ECOP in the CBCOM also includes an Environmental and Social Management Plan (ESMP) which contains the mitigation measures, monitoring and institutional arrangements of the environment, health and safety aspects for the construction of each school building. OP/BP 4.11 Physical Cultural Resources has not been triggered for the project. However, the ECOP and EGDP include appropriate measures to avoid or mitigate adverse impacts on physical cultural resources, including “Chance Find” procedures in the ECOP. The MoES has successfully used an Operations Manual with a Safeguards section for EDPII. MoES will have to undertake capacity building activities to ensure the rigorous implementation of the CBCOM and an enhanced institutional arrangement with the VEDC for community-based monitoring and the Ministry of Public Works for technical guidance. Approved projects with environmental and/or social impacts are supervised and monitored by district engineers, and the Provincial Program Managers to whom they report. Findings and any recommendations are recorded in quarterly reports which are sent to the Program Director, through the Provincial Education Service, and shared with World Bank supervision missions. 56. The ECOP and CBCOM were presented in public consultations before finalization and submission to the Bank. The ECOP and the EGDP report were widely disseminated and publicly disclosed by the MoES in English and Lao languages on December 19, 2013.

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Annex 1: Results Framework and Monitoring

LAO PDR: EARLY CHILDHOOD EDUCATION PROJECT

.

Project Development Objectives .

PDO Statement:

The objective of this project is to increase coverage and improve the quality of early childhood education services for 3 to 5-year-olds in target districts.

Project Development Objective Indicators

Cumulative Target Values Data Source/

Responsibility for

Indicator Name

Unit of Measure

Baseline (2013/14)

YR1 YR2 YR3 YR4 End Target

Frequency

Methodology Data Collection

Net enrollment rate of 3 and 4-year-olds in target districts (disaggregated by gender)

Percentage

11.4 F: 11.8

13.9 F: 14.2

16.3 F: 16.6

18.8 F: 19

21 F: 21.4

23.7 F: 23.8

Yearly EMIS EMIS

Net enrollment rate of 5-year-olds in target districts (disaggregated by gender)

Percentage

42.6 F: 43.3

49

F: 49.6

55.5 F: 55.9

62 F: 62.3

68 F: 68.6

74.9 F:75.0

Yearly EMIS EMIS

19

ECE Education Quality Standards designed and endorsed

Yes/No No Designed Endorsed

by MoES

Yes/No ESQAC ESQAC

Number of classroom observation reports submitted by the ECE officers to the principals

Number 0 19 38 57 76 95 Yearly DPPE DPPE M&E Network

.\

Intermediate Results Indicators

Cumulative Target Values Data Source/

Responsibility for

Indicator Name Core Unit of Measure

Baseline YR1 YR2 YR3 YR4 End

Target Frequency

Methodology Data Collection

Number of beneficiaries (number) of which female (%) (Bank Core indicator)16

Number 0 F: 0%

6,140 F: 50%

12,280 F: 50%

18,420 F: 50%

24,560 F: 50%

30,700 F: 50%

Yearly

DPPE M&E Network/ECU

DPPE M&E Network/ECU

Number of VEDC members trained in Community Awareness Campaign

Number 0 1400 2800 3500 3,600 Yearly DPPE M&E network/ECU

Number of VHVs trained in Community Awareness Campaign

Number 0 200 420 520 520 Yearly DPPE M&E network/ECU

16 The project beneficiaries include students, teachers and VEDCs.

20

Number of additional pre-primary classrooms constructed

Number 0 83 83 84 250 Yearly DPPE M&E network/ECU /EMIS

Number of pre-primary teachers receiving pre-service training

Number 0 200 200 Yearly DPPE M&E network/ECU

Number of pre-primary teachers receiving in-service training

Number 0 50 450 500 Yearly DPPE M&E network/ECU

Number of caregivers trained

Number 0 96 96 Yearly DPPE M&E network/ECU

Number of children aged 3 to 5 years received medical screening

Number 0 340 680 1020 1360 1700 Yearly DPPE M&E network/ECU

Number of school gardens established

Number 0 50 150 250 300 306 Yearly NSMP NSMP

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Annex 2: Detailed Project Description LAO PDR: EARLY CHILDHOOD EDUCATION PROJECT

57. The PDO is to increase coverage and improve the quality of early childhood education services for 3 to 5-year-olds in target districts. Component 1: Increasing Coverage of Early Childhood Education in Target Districts (Grant US$6.0 million) 58. This component aims to increase coverage of early childhood education services by: (i) transferring grants-in-aid for CBC to communities in target districts to construct pre-primary classrooms; and (ii) piloting CCDGs for 3 and 4-year-olds within target districts. Sub-Component 1.1: Community-Based Contracting (CBC) for Pre-Primary Education Classroom Construction 59. The project will provide construction grants to construct up to 250 pre-primary classrooms in selected 200 existing primary schools, with water and sanitation facilities designed for 3 to 5-year-olds, and accessibility standards for physically disabled children. The CBC will follow the successful model used in EDPII and the GPE Program, which is detailed in the CBCOM. The project will train VEDCs and transfer grants-in-aid for CBC to communities in the target districts to construct pre-primary classrooms. All constructions will be permanent structures, with a minimum expected lifespan of fifteen years, meeting the requirements of the MoES School Construction Guidelines, which are described in detail in the latest revised CBCOM. The updated CBCOM incorporates environmental safeguards aspects and lessons learned in the EDPII and the GPE Program. 60. Each pre-primary classroom construction will include school furniture suitable for pre-primary classrooms, a teacher’s desk and chair and some playground materials. Sanitation facilities will be provided for 3 to 5-year-olds. Water supply will be provided for the latrines and for hand washing in schools where there is no existing water supply. 61. The pre-primary classrooms will be constructed in established primary schools teaching all five primary grades but lacking pre-primary classrooms. The availability of teachers for the new pre-primary classrooms has been checked at Provincial and District levels by the Provincial Education and Sport Service (PESS) and District Education and Sports Bureau (DESB) and will be coordinated with the teacher training department to identify schools where local people are being trained as pre-primary teachers. 62. The PESS and DESB in the target districts are experienced in training, managing and supervising CBC constructions from EDPII and the GPE Program. Where these units have qualified MoES engineers available, the project will work with and train these engineers to support the VEDCs to monitor and supervise the constructions. In districts and

22

provinces without permanent qualified engineers, the project will deploy experienced consultant engineers from previous or ongoing projects to support the PESS and DESB. 63. The VEDCs in all target communities will be trained by the DESB in school development planning, school construction, maintenance and management using CBC, following the procedures established in the Operational Manual and the supervision and monitoring of the implementation of the CBCOM and M&E. The VEDCs will help mobilize the parents to send their children to and stay in school, and monitor the attendance of teachers. They are responsible for procurement of local materials and labor for pre-primary classroom construction and for monitoring the construction with assistance from the district engineer. EDPII and the GPE Program have shown that with technical support from the DESB and PESS, consistent and good quality construction is achieved by the VEDCs using CBC, and that it promotes strong local ownership in the school. Sub-component 1.2: Community Child Development Groups (CCDGs) for 3 and 4- year-olds (Grant US$1.0 million) 64. Under this sub-component, the project will pilot CCDGs for 3 and 4-year-olds in 48 locations where there are primary schools with pre-primary classrooms. The CCDG concept will be piloted to provide a separate learning environment for 3 and 4-year-old children to determine if this will have a positive impact on the cognitive development of 3, 4 and 5-year-old children. The CCDG is part of a planned impact evaluation that will compare the impact and cost-effectiveness of two approaches to providing services for 3 to 5-year-olds: CCDG and multi-age teaching for 3 to 5-year-olds. (See sub-component 2.2 for multi-age teaching.) The establishment of CCDGs will include: (i) provision of CCDG Grants and the grant monitoring and support mechanism; (ii) provision of training for caregivers; and (iii) development of CCDG materials and production of CCDG tool kits. 65. CCDG Grants. Following the successful community grant schemes under EDPII and the GPE Program, CCDG grant will be provided to the VEDCs to support early childhood learning activities under CCDGs. The Grant comprises three parts. Firstly, each CCDG will receive a one-time lump sum of approximately US$2,500 to start construction of a basic shelter on the village primary school grounds. This shelter will have a concrete floor and zinc roofing to provide a clean and safe environment for young children. The community will contribute to building the wall of the shelter, using local materials to ensure long-term sustainability. Secondly, a yearly lump-sum will be provided to VEDCs for the purchase of basic materials (e.g., mats, toys, notebooks, pencils, crayons, water basin, hand towels, and other learning materials) and to support CCDG caregivers. The grant amount will be approximately US$600 per community per year. Thirdly, the grant will include monthly subsistence for caregivers. The amount will be approximately US$70 per caregiver per month for nine months a year when CCDGs are in session. 66. A manual on grant utilization will be developed collaboratively by the DPPE, DOF, DNFE and the ECU. The project will provide training for VEDCs to enable them to

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manage the grants effectively and the project will also finance the monitoring of CCDG grant usage and management to minimize potential fiduciary risks. 67. Training of CCDG Caregivers. CCDGs will be carried out by trained caregivers. The ECE provincial and district trainer teams will provide training to up to 96 caregivers from 48 CCDGs (2 from each CCDG) using the CCDG teaching manual and learning materials that will be developed prior to the project effectiveness. The length of the training is estimated at 16 days, which can be divided in phases. Based on the CCDG teaching and learning materials that are being developed, the number of training days could be added as appropriate. Caregivers will be retrained annually for the first three years of the project implementation. 68. Development and provision of CCDG materials and tool kits. RIES will develop age-appropriate learning materials and teaching guide for CCDG based on the existing curriculum of kindergartens 1, 2 and 3. RIES will select the contents that are appropriate for 3 and 4-year-olds and develop materials for each age group separately. The main focus of CCDG teaching and learning materials will be on promoting holistic child development. All ready-to-use teaching and learning materials will be included in CCDG tool kits, which will be made available during the caregiver training and provided to the communities where CCDGs will be established. 69. Monitoring and support mechanisms for CCDGs will be incorporated into Sub-Component 3.2: Monitoring and Evaluation. Component 2: Improving Quality of Early Childhood Education Services (Grant US$8.0 million and Credit US$5.3 million) 70. Given that quality is critical to the success of early childhood education, the objective of this component is to improve the quality of ECE services through a holistic approach. This component consists of two sub-components: (i) supporting services package, which is composed of the community awareness campaign, childhood disability screening, and the NSMP; and (ii) teacher and education officer training, which includes training and development of training materials for teachers, school principals, ECE officers and VEDCs, as well as the development of teaching and learning materials for multi-age teaching for 3 to 5-year-olds. Sub-component 2.1: Supporting Services Package 71. This sub-component will provide a package of services to target communities to improve the quality of ECE as well as to increase the demand for ECE services by delivering: (i) community awareness campaign sessions to engage parents in parental education at the village level; (ii) childhood disability screening, and (iii) the NSMP. Under

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this sub-component, the project will build on the existing effective partnership between the education and health sectors under the School Health Task Force.17 72. Community Awareness Campaign. Research shows that family and community engagement in children’s early years can greatly contribute to ensuring quality early development experience for young children. To ensure the quality of and maximize the benefits of early childhood education, parents, who are the primary caregivers for their children in the earliest years, need to be sensitized to the importance and benefits of ECE and their critical role in children’s development. Since home is where children spend the most time, it is essential that caregivers (e.g., parents, older siblings, grandparents, etc.) in households be informed about their important role in creating an environment that supports healthy and holistic development of children. Moreover, given the strong evidence that ECE interventions focusing on health, nutrition, and early stimulation (rather than on health and nutrition alone) yield the greatest benefits in terms of children’s health and overall development, the community awareness campaign in the form of parenting education will focus on health, nutrition, early stimulation, hygiene, and disability. 73. The objective of the community awareness campaign is to increase the knowledge and understanding of the parents of children aged 0-5 years as well as other community members in all target villages about: (i) the importance of ECE and the first 1,000 days of a child’s life since conception (including maternal health); (ii) beneficial parenting skills and practices for age groups 0 to 5 on early stimulation18; (iii) nutrition; (iv) health; (v) hygiene; and (vi) childhood disability. Since the main target group is parents and caregivers, the community awareness campaign sessions will focus on practical parenting education based on the key topics mentioned above, taking into account of local needs. In addition, the community awareness campaign will also inform the community about the available ECE services in the village. 74. The campaign will be provided in all target villages under the project and implementation will be phased based on criteria outlined under the planned impact evaluation. The activities under the community awareness campaign will be implemented at the village level by the trained VEDC and VHV. The campaign will be provided in a series of multiple sessions offered monthly, focusing on the 5 major topics mentioned above. Using picture-based visual materials that are self-explanatory, each session will be participatory and interactive in nature, engaging attendees and encouraging them to

17 The School Health Task Force is a bi-sectoral collaborative structure between the Ministry of Education and Sports and the Ministry of Health to implement the National School Health Policy. (The National School Health Policy has been developed to serve as a reference for implementation of school health strategy of health program task forces from central to local levels; for school directors from preschool to secondary education; and also for line ministries, international organizations that wish to support school health program activities.) 18 Defined as providing young children with constant opportunities to interact with caring people and to learn about their environment from the earliest age. In practice, stimulation is about parents and other family members and care givers being responsive to the emotional and physical needs of children from birth onward, playing and talking with them (even before children can respond verbally), and exposing them to words, numbers, and simple concepts while engaging in daily routines.

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participate in hands-on activities to practice translating their knowledge into action. The most appropriate location for the sessions would be the village primary school. Alternatively, the village center or other locations that are deemed appropriate (e.g., a location where the monthly village meeting is convened) could be used. The villages have the flexibility to determine and choose where to conduct the community awareness sessions as they see fit. 75. VEDC and VHV Training on Community Awareness Campaign. The project will finance (i) the adaptation and development of training materials and facilitation guides for VEDCs and VHVs, as well as materials (e.g., facilitator’s tool kit) for awareness campaign sessions at the village level; (ii) technical assistance of two TAs (1 local and 1 international) for material development and training; and (iii) the training at the central, provincial, district, and village levels. 76. The project will provide training to the VEDCs (of which at least one member will be a female) and the VHVs. Building on the existing collaboration between the MoES and MOH under the School Health Task Force, cascade training will be offered. The two TAs will support the training of the central team, which is composed of the central level School Health Task Force and Inclusive Education Center as master trainers, who will then train provincial and district level School Health Task Force and Inclusive Education Center staff together. The provincial and district level officials will split into teams who will then train the VEDCs and VHVs at the village level. Since the VEDC members only hold two-year terms and VHVs are on a voluntary basis, the provision of refresher training is critical to train new facilitators. 77. Childhood Disability Screening. Very little is known about the situation of children with disabilities in Lao PDR. The current census reports a disability prevalence rate of 4 percent, which is significantly lower than an international average (most recent World Report on Disability estimates 15 percent disability prevalence in developing countries). The low prevalence of 4 percent points out that most children with mild and moderate disabilities go undetected and that only the most severe cases make up that percentage from the census. 78. Many children develop disabilities due to relatively simple but untreated health conditions which then prevent them from going to school and learning. Development and improvement of early detection strategies are essential in addressing the needs of children with disabilities, and in preventing more children from developing disabilities because of untreated health conditions.

79. Some attempts have been made by several departments at the MoES to include children with disabilities in education either by supporting development of inclusive teacher training modules, conducting basic school-based health screening and via other isolated projects. The most recent Australian AID’s situation analysis report on the Disability Inclusive Education in Lao PDR reported that although there is some information

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on children with disability and education, it is largely limited to ad hoc reviews and project reports. Teachers also reported that they are lacking skills and basic knowledge about childhood disability, making it very challenging to include children with disabilities in the classroom or refer them to appropriate services. 80. Early childhood is a crucial phase of growth and development. For all children, early childhood provides an important window of opportunity to prepare the foundation for life-long learning and participation, while preventing potential delays in development and disabilities. For children who experience disability, it is a vital time to ensure access to interventions which can help them reach their full potential. 81. The project will introduce childhood disability screening, which will be carried out as part of a disability awareness campaign in 200 locations where the project will be implemented, and capacity development and training activities carried out at all levels on understanding childhood disability and inclusive education program development. 82. It will provide an opportunity for children in rural areas—most of whom have never been seen by a doctor and may have disabilities and or impairments due to untreated health conditions—to participate in a childhood disability screening carried out by medical professionals, and receive or be referred for treatment. As disabilities and untreated health conditions may prevent children from accessing education and participating in learning, this sub-component seeks to address the unmet needs of children before they develop into more serious disabilities and health conditions, and prevent them from accessing and benefitting from education. It will also build general disability awareness, and support inclusive education policy implementation. 83. The project will use existing mechanisms and build on the existing collaborations between the education and health sectors. It will be implemented by a joint team composed of members of an existing School Health Task Force and an Inclusive Education unit. It will build capacity at all levels (both at the School Health Task Force and Inclusive Education center) by providing training on better understanding disability and impairment categories, and implementation of inclusive education policy. In addition, the project will utilize existing VEDC, VHVs, and health center workers to carry out activities associated with the health and disability screening. 84. This sub-component will be implemented in three steps:

• Step 1: The first step will consist of conducting a disability awareness campaign, which will be part of a larger community awareness campaign. The objective of this campaign is to: (i) increase general knowledge about and understanding of different types of childhood disabilities, their causes, and preventive measures; (ii) provide information on the importance of childhood disability screening and early intervention;

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and (iii) provide information about locally available support services (e.g., hospitals, clinics, and any other support services, networks and referral programs).

• Step 2: The second step will include administering the “Child Functioning and Disability” questionnaire,19 which will be done at the community level in the form of an interview with parents of children aged 3-5 years old with an objective to identify potentially disabled and or impaired children. The questionnaire, consisting of 14 questions, was designed to identify potentially disabled children and refer them for follow-up medical screening. It measures potential problems associated with hearing, seeing, walking, learning, emotional development, and allows for detecting potential problems that require additional medical attention and follow-up treatment. Early detection and treatment of high risk precursors and impairments will prevent and/or mitigate a significant percentage of disabilities which prevent or limit the child’s involvement and achievement in school.

• Step 3: The third step will involve a medical disability and nutrition screening of identified children, with a provision of treatment (e.g., assistive devices, medicine, etc.) and or a referral for follow-up treatment to a specialized service providers. This medical screening will include: (i) pediatric/medical assessment of a child; (ii) vision screening; (iii) hearing screening; and (iv) cognitive assessment.

85. As a result of this medical disability and nutrition screening, some children are able to receive treatment on the spot (e.g., eyeglasses, medicine to treat infections, etc.), and some children will be referred for additional follow-up treatment (i.e., provision of assistive devices, follow up treatment for infections, etc.) 86. The project will finance the technical assistance of a disability expert, and two local medical TAs to assist in carrying out medical screening and training provincial medical staff. All the relevant disability awareness training materials will be developed with assistance from a TA/disability expert. For the duration of the implementation of this sub-component, the disability TA will be shared between the Inclusive Education Center and School Health Task Force and support all activities related to this activity. The disability TA and two local medical TAs will work closely with the central team, which will be composed of members from the School Health Task Force, Inclusive Education Center with close collaboration with MOH (to carry out medical screening). In addition, as part of this project the TA will develop an operational and training manuals and conduct training on disability awareness and the use of “Child Functioning and Disability” questionnaire for MoES staff at the central level, and support training at the provincial and district levels, and training of VEDC and VHV. The TA will also provide support to the central team during implementation of the project.

19 Developed and validated by UNICEF (MICS) and Washington Group of Disability Statistics

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87. The cascade training approach will be used in the implementation of this sub-component. The TA will train the central team; the central team will train staff at provincial and district levels; and the district and provincial level staff (with close monitoring by and assistance from the central team) will train VEDCs and VHVs. VEDCs and VHVs will conduct disability awareness training in 200 of the project locations. Close collaboration and support will be provided by members of the central team and TA. Medical TAs will conduct training using the same approach to district and provincial medical staff. 88. Childhood disability screening will include nutrition screening and will be carried out by medical professionals with close support from the MOH, and the two local medical TAs. Necessary referrals will be coordinated with help from VHVs. To implement this part of the Project, the central team will work closely with MOH. MOH will help facilitate this medical health screening by: (i) assessing the availability of medical doctors in locations where the screening will take place; (ii) identifying locally available service providers (e.g., clinics, provincial hospitals with capacity to address and treat referred children, if necessary; (iii) scheduling medical screening in different locations; (iv) preparing a record keeping system/data entry with children’s forms and referral information; (v) setting up a referral system working closely with VEDC, local health centers and other existing service providers; (vi) conducting a follow-up visits to check how many of the referred children actually received a follow-up treatment; (vii) prepare a final report for the MoES including reasons why some of the referrals for follow-up treatments did not take place; (viii) making recommendations for scale-up; and (ix) assessing availability of services and the quality of services provided. 89. National School Meals Program (NSMP). The project will provide school lunches to CCDGs, pre-primary and primary school children to encourage school attendance of girls and boys in remote rural communities and enable the children to better concentrate on their studies. The project will continue the successful NSMP under the ongoing GPE Program. Under the NSMP, the communities procure and prepare locally sourced fresh foods using grant money transferred to them from the project. This program is an integral part of the education sector strategy to increase school retention and the Government is committed to gradually taking over the program in the long term. 90. Training and technical assistance will be provided to different levels from the NSMP Section of the MoES to the schools. It will continue to be anchored on the principle that good nutrition leads to good health, which improves resistance to diseases and promotes good mental and physical development. The program will not only provide lunch to address short-term hunger, but it will also promote linkages with other school interventions, such as access to safe water, personal hygiene, and other basic health and nutrition services. To ensure sustainability of the NSMP and its impact, the program will continue to promote: (i) integrated local food production (school gardens); (ii) food security and nutrition; and (iii) capacity building in areas such as nutrition.

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Sub-component 2.2: Teacher and Education Officer Training 91. The project target districts have a shortage of qualified pre-primary school teachers. In addition, the existing pre-primary classes, that are designed to cater only to 5-year-old children, are experiencing increased demand due to the 5-year-olds bringing their 3 and 4-year-old siblings to school and the teachers are not equipped to manage these multi-aged classes. To assist the Government in managing this situation, the project will support teacher training and education officer training in two ways: (i) pre-service training of pre-primary school teachers to ensure that the project areas have an adequate number of qualified pre-primary teacher; and (ii) development and introduction of a multi-age training module into the in-service training for teachers and education officers at the central, provincial and district levels. 92. Pre-service Teacher Training. The project will build on the successful experience of the GPE Program and will continue to provide scholarships to train ethnic girls as pre-primary school teachers through a two-pronged approach consisting of: (i) a three-year scholarship program for girls who have completed lower secondary school (or 9 years of education); and (ii) an intensive 30 week pre-primary training program for girls who have completed upper secondary school (12 years of education). The project will support approximately 200 scholarships for ethnic girls from the project target areas where the project will construct pre-primary classrooms. The DTTE will provide the pre-service training. 93. Multi-Age Teaching Module. The project will support the development of the new multi-age teaching module. Pre-primary school teachers currently are not trained to manage students of different age groups in one classroom. To assist the government, the project will support the development of a multi-age training module that will be incorporated into the pre-service and in-service teacher training curriculum. RIES, along with the DPPE and DTTE, will be responsible for developing the multi-age teaching module with technical assistance supported by the project. The central level master trainers will be responsible for training the provincial and district level ECE officers who will deliver the in-service training on the new multi-age teaching module using the MoES established cascade training system. The provincial and district level ECE officers will receive this training twice during the project implementation period. 94. In-Service Teacher Training.20 The project will support in-service teacher training on multi-age teaching to equip the current pool of pre-primary school teachers with the necessary skills to effectively teach and manage multi-age classrooms of 3, 4 and 5-year-olds. The introduction of multi-age teaching for pre-primary classes will require a 10-day in-service training program for approximately 500 teachers in the 22 target districts. The training materials for this in-service training will be the same as those used for pre-service training. 20 Detailed implementation of multi-age teaching will be part of the CCDG manual.

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95. School Principal Training. The project will provide 7 days of principal and vice-principal training for approximately 500 principals in the 22 project districts twice during the project implementation period on the multi-age teaching module. The central level ECE master trainers will train the provincial and district level ECE officers so that they can train the principals. The ECE master trainers will be responsible for developing the training modules and related materials for principal training. 96. ECE Master Trainers. Currently there is a team of 10 ECE master trainers at the central level. These master trainers are responsible for training the provincial and district trainers. As part of the project, an additional 10 master trainers will be recruited and all 20 master trainers will be responsible for providing the training for the trainers at the provincial and district levels on the new multi-age teaching module. 97. Training of ECE Provincial and District Trainers. The ECE officers at the provincial and district levels are responsible for collecting village level statistics on pre-primary school children, monitoring ECE teachers, and providing materials and textbooks to ECE teachers. However, the capacity of the ECE officers to carry out their responsibilities is limited. The project will provide training to these officers to strengthen their capacity. To build their capacity, the project will support 10 days of training of provincial and district ECE trainers for four provincial level staff and four district level staff in the 22 project districts on the new multi-aged teaching module. The ECE master trainers, with project supported technical assistance, will develop the training materials for the ECE officers. The ECE training of trainers will be repeated at least twice during the life of the project for provincial and district ECE officers to continue their professional development. The ECE provincial and district trainers will be responsible for training the school principals, in-service teachers and VEDCs in the multi-age teaching module. The project will also provide funding for technical monitoring activities which will include classroom observations of the multi-age teaching classroom and for the purchase of motorbikes for the ECE officers. 98. VEDC Training. The project will pilot the multi-age teaching module in selected 47 pre-primary classrooms in complete primary schools during the planned impact evaluation. VEDCs in the areas where the pilot will take place will be trained on the concept of multi-age teaching by the ECE provincial and district trainers. 99. Pre-Primary Tool Kits. The project will provide approximately 300 teaching tool kits21 to the newly constructed pre-primary classrooms. These standard teaching tool kits are issued by the DPPE and contain the required materials to establish a pre-primary class.

21 The tool kits include items such as: (i) curriculum guidelines; (ii) attendance checklist; (iii) student practice books; (iv) student hygiene material; (v) reading books; and (vi) schools supplies, such as scissors, pencil sharpeners, tape, glue, etc.

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Component 3: Project Management, Capacity Development and Monitoring and Evaluation (US$8.7 million) 100. This component will support project management, capacity development, and monitoring and evaluation of early childhood education. The component’s main activities will include: (i) capacity development and support for financial management, procurement, and internal audit; (ii) capacity development and support for local institutions to undertake evidence-based research on holistic child development and strengthen the capacity of MoES staff through fellowships, short-term training and study tours; and (iii) provision of training for central, provincial, and district education officials as well as VEDC members to develop and implement a unified early childhood education monitoring system, conduct semester and annual sub-sector reviews. The M&E activities will develop the foundations for a child development monitoring system, including (i) the development of a simplified child monitoring tool that teachers can administer; (ii) training for central, provincial, and district education officials as well as VEDC members and teachers on the implementation of the tool and the consolidation of information at the school level to facilitate reporting through the M&E network; and (iii) the Education Management Information System (EMIS). In addition, the project will support the development and testing of a classroom observation tool, which the district ECE officers will use to monitor classroom activities during their visits to schools. Sub-component 3.1: Project Management and Capacity Management 101. This sub-component will finance the incremental costs associated with project management. It includes activities designed to ensure efficient program management and early identification of corrective measures to solve any implementation problems. As the ECU takes on broader coordination responsibilities for the national program, it would need additional resources for logistics, physical space and transportation. A series of workshops such as a launch workshop and annual review workshop are included in this component, together with financing for the required financial audits to support the DOF. Given the importance of financial management in the education sector and the project, funding will be provided to continue the implementation support of the Medium Term Strategy for Performance Improvement Plan of Financial Management initiative under EDPII. The project will provide funding to build financial management capacity of financial management staff in MoES at all levels. The ECU will ensure that the Bank procurement and safeguards procedures are followed. 102. This sub-component will also focus on capacity development to improve the overall management of the pre-primary education sub-sector. It will focus on staff development at the DP, DPPE, DTTE, RIES, DOF, DOI, ESQAC, DOP, thereby improving their capacity to offer practical guidance and support to provinces, districts and schools. A strategic staff development plan covering general training, technical skills and leadership development will be developed, reflecting the specific needs of each department and the overall strategic needs of the sub-sector.

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103. Specific activities under this sub-component include:

(a) workshops and an annual conference on selected ECE topics, overseas study tours and internships, short courses, post-graduate fellowships for MoES staff, participation at regional and international ECE conferences, English language training, training in areas to strengthening ECE performance; and

(b) action research on selected ECE topics to strengthen existing research capacity at the Education and Sport Research Center, improving the MoES’ own capacity to monitor and support research activities as well as to disseminate research findings.

Sub-component 3.2: Monitoring and Evaluation (M&E) 104. The monitoring and evaluation scheme under the project will include a Result Framework and Monitoring. The framework provides a clear statement of the Project Development Objective, and with specific impact indicators and outcome indicators for the project components. Monitoring the project’s implementation progress and the results outcomes will be led by the DPPE M&E unit. The unit will monitor all related activities including data collection and data organization, drawing information from the ESITC and DOI through its M&E network (various other centers and line departments) at all levels. 105. The reporting of project progress would be integrated into the ESDP Performance Assessment Framework (PAF) operational cycle, including annual Joint Sector Reviews with development partners. The PAF, as a means to measure ESDP progress, is the agreed whole sector monitoring mechanism and is the foundation of the results framework. The DOI would be responsible for collecting all the information from different sources in a timely manner according to the PAF operational cycle. The project will finance technical assistants for M&E and M&E workshops at central, provincial and district levels. It will also fund expenses related to conducting semester and annual sub-sector reviews and planning. 106. As part of these M&E activities, the project will pilot the inclusion of child development indicators in the EMIS. This pilot will include: (i) the development of a child development monitoring tool to be used by teachers and caregivers to monitor children, which is based on existing materials already developed for kindergartens and pre-primary classes; (ii) capacity building for teachers, principals and district officials on child development data; and (iii) the inclusion of child development indicators in the EMIS in the 100 pilot locations (all part of the impact evaluation). In addition, a tool for monitoring classroom activity will be developed and piloted in the same locations. This piloting will include: (i) the development and testing of a tool based on existing tools but adapted to the Lao context; and (ii) capacity building for ECE officers to use the tool. This activity will be part of an independent impact evaluation to be carried out in parallel to the project. The project will finance one round of data collection on different dimensions (cognitive and

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non-cognitive) of child development in target districts. The project will also provide training for provincial and district level ECE officers on classroom observation techniques using the child development monitoring tool, to be developed by the project, that will be used to monitor the PDO level indicator related to classroom observation.

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Annex 3: Implementation Arrangements LAO PDR: EARLY CHILDHOOD EDUCATION PROJECT

I. Project Institutional and Implementation Arrangements 107. This annex presents the organizational structure within the MoES, and clarifies the responsibilities of the main groups that support the implementation of the project. It also lays out the implementation arrangements for the technical sub-components. 108. Organizations responsible for implementation. The project is expected to be implemented over a 5-year period between 2014 and 2019 and the overall responsibility for implementation of the project rests with the MoES. Under the authority of the MoES, the ECU will coordinate all implementation activities for the project, guided by a Project Steering Committee and a Project Advisory Council, and supported by a Project Working Group (PWG). The MoES is the executing agency of the project and has final responsibility for the successful implementation of the project according to administrative, financial, engineering practices, and social and environmental standards. 109. Project Steering Committee. The Project Steering Committee will consist of:

a) The Vice Minister of the MoES as chair;

b) The Director-General of the DPPE as secretary;

c) The Directors-General of each of the responsible departments as members; and

d) The Project Director as a member. 110. The purpose of the Project Steering Committee is to resolve problems and provide solutions during project implementation that cannot be handled by the ECU and the Coordinating Departments (CDs). The Vice Minister shall call a meeting of the Project Steering Committee on a quarterly basis or as needed. The functions of the Project Steering Committee are to:

a) Provide policy and strategy guidance as needed;

b) Approve the annual plans, budgets, and reports prior to submission to the World Bank for approval;

c) Review implementation progress and results; and

d) Support the line Departments in their interface with other concerned Government agencies (MOF, Ministry of Planning and Investment (MPI), Ministry of Foreign Affairs (MOFA), MOH, Ministry of Agriculture and Forestry (MAF), Lao Women’s Union, MoES’ departments, and Provincial Authority’s representatives) to assist in facilitating project implementation.

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111. Project Advisory Council. A Project Advisory Council, chaired by the Minister of Education and Sports, will consist of senior representatives of MoES departments, MPI, MOF, MOFA, MOH, MAF, Lao Women’s Union, and participating provinces. The Council will meet twice a year to review project progress, and at any time to address policy or cross-sectoral issues outside the purview or authority of the Steering Committee. 112. ESDP Coordination Unit (ECU). The ECU will provide overall coordination for the project and liaise with the World Bank. The ECU will consist of:

a) An ECU Project Director, with the rank of Deputy Director General;

b) A Project Manager, with the rank of Head of Division; and

c) 2 Deputy Project Managers with the rank of Deputy Head of Division and 15 Government Administrative Staff to assist the Project Director and Project Manager in day to day operations.

113. The ECU and the CDs will be accountable for the successful performance of the project and will report to the Vice Minister in charge of the project. The main functions of the ECU are to:

a) Ensure that all the CDs carry out their work on time and according to the Operation Plan;

b) Liaise between the CDs, Project Steering Committee, the World Bank, Focal Group 1 & 3 and the Education Sector Working Group and keep them apprised of all important project matters;

c) Liaise with the World Bank and relevant Government authorities on project issues as needed (e.g., MOF, MPI, etc.);

d) Provide full support and assistance to the CDs in resolving implementation problems and ensure all involved understand World Bank and project procedures;

e) Coordinate the preparation of annual work programs by each CD, aggregate them into an annual work program for the project, and secure its approval by the Project Steering Committee and the World Bank;

f) Coordinate the preparation of an associated budget for the work program, including monitoring its execution;

g) Monitor the implementation of the work program, the commitments and disbursements of the Grant proceeds by each CD;

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h) Supervise compliance with agreed covenants and the fulfillment of the objectives and performance indicators;

i) Prepare annual progress reports and transmit them to the decision-making bodies and the World Bank in a timely manner;

j) Coordinate with the CDs and DOF in the preparation of the annual audit of accounts;

k) Coordinate project activities and results with other development partners through the ESWG;

l) Assist and provide training to the CDs on all project management matters; and

m) Assist and coordinate all aspect of the project to make sure that the project will achieve its PDO, complete on time, and stay within the allocated budget.

114. Project Working Group. The PWG is an internal coordination mechanism and facilitates team work. The Project Working Group is comprised of the Project Director (chair), Project Manager, and concerned CDs. The Project Working Group meeting is an informal gathering of peers to maintain cohesion as the ECE team. At the meetings, Department Heads can share any problems, concerns, and areas on implementation with each other as colleagues in open discussion. The PWG will meet on a monthly basis and summary minutes of the meetings will be recorded, circulated, and filed for reference. However, the PWG does not have the authority to make decisions regarding the project but instead has the following main functions:

a) Ensure coordination of project implementation across the various project activities by sharing information among heads of each CD and reporting on progress to the Chair;

b) Contribute to problem solving across the project sub-components in technical, administrative, financial and human resource areas related to project implementation and management;

c) Agree on standardized formats for progress reports and other relevant project documentation; and

d) Ensure liaison and coordination with provincial and district authorities.

115. The Coordinating Departments (CDs): A Team Concept. Using the matrix approach, the MoES will nominate officials from each relevant CD of the MoES (e.g., DP, DPPE, DTTE, RIES, DOF, DOI, ESQAC and DOP and other concerned MoES agencies) as indicated in the organizational chart in this annex to work on the project. The CDs will execute project activities on the ground, with counterpart members nominated in central, provincial, and district levels, depending on the component. For example, officials

37

responsible for the CBC sub-component will be located at all three administrative levels, province, district, and village levels. 116. The MoES will assign focal points from each relevant CD. These focal points will coordinate with the ECU regularly and will take lead responsibility for technical oversight of their area of project responsibility. They will liaise with the Project Director and with staff from their CD to ensure project coherence. Each CD will ensure that sufficient staff, time and other resources are available to meet project implementation timetables. 117. Provincial Project Directors will be appointed as relevant to head the provincial implementation teams. Officials working on the project located at the central, provincial, and district levels are parts of the larger CD team for their respective sub-components. Counterparts for the CDs will be nominated at these levels and their responsibilities for sub-component activities clearly identified. This arrangement is intended to integrate sub-component implementation activities across administrative levels, while maintaining the cohesion of the CDs for planning and monitoring. 118. Under the guidance of the CDs for each of these components, project officials in PESS offices will provide leadership, support and oversight during implementation. Nominated project officials in the DESB will manage community-level committees who implement all project activities. 119. On matters regarding the project, all focal points will liaise with their departments and report to the Project Director on progress against the project work plan. Each CD will continue to monitor performance of its staff, coordinate staff work programs between the project and other donor projects, ensure technical and quality oversight of its staff, and provide staff development. However, for staff assigned to the project, the CDs instruct those staff to coordinate with the ECU. Coordination of day-to-day project operations lies solely with the Project Director and Project Manager. Broader project responsibility and oversight lies with the MoES through the PWG. 120. The CDs are responsible for the planning and implementation of their respective project subcomponents. They will:

a) Prepare annual work plans and budgets of the sub-components under their responsibility;

b) Ensure timely execution of their work plans towards the achievement of component objectives;

c) Prepare quarterly progress reports submitted to the ECU through their respective departments;

d) Coordinate the associated inputs and activities within the related component;

38

e) Provide support to the PESS and DESB offices in their specific sub-component activities;

f) Prepare terms of reference for consultants and studies; and

g) Coordinate with other CDs as needed through the ECU.

121. Initially, central level CDs will take responsibility for mobilizing, training, and assisting PESS and DESB counterparts to undertake all planning for implementation. After this time they will provide support to and oversee the work of the PESS and DESB offices, providing ongoing training and support, funding, setting of targets, monitoring and evaluation, and continuous improvement of management arrangements. 122. Annual Review Process. The ESDP Performance Assessment Framework is the overarching sector review mechanism for both MoES and development partners. In accordance with the objectives of the Vientiane Declaration, it is slated to become the single mechanism for review in the medium term. Consistent with this agreement, the project will be evaluated annually by a Joint Sector Review Mission, comprised of Government staff and development partners.

39

Early Childhood Education Project Management Structure

40

Financial Management, Disbursements and Procurement 123. Financial Management. The financial management arrangements will be deemed acceptable and meet the requirements of OP/BP 10.00 when the proposed mitigation measures have been implemented. See detailed action plan and timeline for implementation. 124. The overall financial management risk is assessed to be substantial, given the nature of project activities that involve community-level support and participation. The project is benefiting 22 target districts throughout the country. The main risks include: (i) low capacity at the community level which could increase the risk of funds not used for intended purposes; (ii) low capacity of implementing agency staff to ensure acceptable financial management arrangements; (iii) inability to liquidate advance in a timely manner and to monitor and provide timely information on commitments; and (iv) delay in the transfer and shortages of funds. These risks will be mitigated by: (i) providing operations manuals for CBC, CCDG and NSMP, including associated community guide; (ii) reviewing and modifying the Finance and Administration Manual (FAM) to reflect the requirements and nature of the project, including updating and simplifying of financial procedures; (iii) increasing the number of skilled staff at the central level and strengthening financial management skills of provincial and district level finance staff; (iv) improving the system for and production of six monthly financial or expenditure projection; (v) training of MoES finance staff at all levels, district engineers and beneficiary communities; and (vi) continuing the implementation of the Medium Term Strategy and Performance Improvement Plan (MTSPIP). 125. Staffing. The DOF at MoES comprises 6 divisions: (i) administration; (ii) accounting; (iii) budget; (iv) inspection; (v) management and monitoring of construction; and (vi) management of asset (including procurement). Currently, the accounting and inspection divisions provide finance and accounting support to the ECU. At provincial levels, the projects are being supported by the finance staff of the PESS. 126. Given prior experience, it is agreed that the same staffing structure at both central and provincial levels will be used for the ECE project, with additional support to implement environmental and social safeguards. It has been determined that current staffing levels are adequate considering that the ECU’s workload may be reduced with the closing of the EDP II and GPE projects and that refresher trainings can be provided if needed. Furthermore, central and provincial staffing levels will be monitored to ensure that they remain adequate, while a pilot will be undertaken to allow provincial level staff to enter accounting data and thus reducing central staff workload. However, the Integrated Fiduciary Supervision Assessment (IFSA) review of the CBC showed that district engineers needed additional training on the correct procedures for reporting of CBC expenditure, which will be completed prior to effectiveness. 127. Budgeting. The ECU will be responsible for the overall preparation and consolidation of the annual budget. Each CD will be responsible for activities planning and budgeting under their implementation. Annual budgets based on annual work plan shall be prepared by component and sub-components, completed and approved by the MoES and the Bank before the next fiscal year plan of each year. The budget will also be divided into quarters and reviewed against actual expenditure made on a quarterly basis with significant variances between the budget and actual

41

expenditures explained in the Interim Unaudited Financial Report. To ensure sufficient funds, six-month forecasts of expenditure shall be prepared, reviewed and updated on a quarterly basis. Any subsequent revisions for increase or decrease in the overall annual budget are subject to review and approval. 128. Daily Subsistence Allowances and Overseas Travel. The project shall follow the rates provided in the Ministry of Finance Ministerial Decision on Public Administrative Budget that are applicable at the time of project implementation, or as otherwise indicated/advised by the Ministry of Finance. Any modifications should be clearly stated and agreed with relevant parties and documented in the FAM which will be revised from time to time subject to the acceptance by the Bank. 129. Accounting Policies and Procedures. The current FAM reflects the design of the ECE project and to ensure that it provides reasonable assurance to effectively mitigate identified risks. Revisions will address aspects of accounting policies and manuals, budgeting and expenditure forecast, per diem rates/travel allowances, flow of funds/disbursement channels and financial management procedures/roles and responsibilities, amongst others. 130. The basis of accounting is cash basis and the computerized accounting software “ACCPAC” is used at central level. The project accounting will use a double entry system and follow the cash basis of accounting, with systems designed to monitor advances, commitments and fixed assets. Although the current version of “ACCPAC” produces Interim Financial Report (IFRs), it needs to be configured to record project transactions by source of funds, component, sub-component, expenditure category and location (PESS and central department). Furthermore, the ECU will explore the possibility to configure “ACCPAC” to record and produce advance reports by coordinating departments. 131. Sub-grants. Manuals for CBC and NSMP have been prepared and accepted. While they have been accepted, it is recommended that they be further simplified taking into consideration the limited bookkeeping capacity at village level. Detailed recommendations for improvement under the financial management sections of the construction grants and NSMP have been provided to the ECU and DOF. The CCDG grant activity requires the development of a manual, which was made available prior to negotiations, along with revised drafts of the CBC and NSMP manuals. 132. Internal Controls. The existing systems of internal controls in the current FAM need to be reviewed and updated. This will include reviewing and clarifying the system of providing supporting documents by the ECU and Inspection and Accounting Divisions of DOF. The main weaknesses with the internal controls are the commitment controls and liquidation of advance. Measures to strengthen the controls in these areas will be clearly defined in the FAM. Moreover, accounting software capacity may need to be reviewed whether it can be used to record and produce advance and commitment reports. If not possible to upgrade, the project will define a robust system for recording, monitoring and reporting of advances and commitments manually and to also ensure up-to-date information. Sanctions or disciplinary measures for failure to liquidate advances within a reasonable timeframe will be proposed and agreed to by all CDs involved, DOF and the ECU, and documented in detail in the FAM. Proposed measures

42

discussed at the negotiations included the halting of advances should CDs, provincial or district education offices not clear their advances within 3 months. An internal audit unit will be established as per the Mid-Term Strategy for Performance Improvement Plan on financial management. 133. Fund Flows. One Designated Account (DA) denominated in US Dollars (US$) will be opened to receive IDA funds, both credit and grant. An Operating Account (OA) will be opened at a commercial bank and managed by the MoES/DOF to facilitate day-to-day administrative expenditure and minor advance for travel and training on emergency cases. The OA will be maintained in Lao Kip (LAK) with a ceiling of LAK 200,000,000 or equivalent US$25,000. Funds flow to each participating provinces will be via transfer to a provincial bank account maintained in LAK, opened at a commercial bank and managed by the PESS. The provincial bank account will be used to receive and replenish eligible operating expenditure for the PESS and as a pass through account for sub-grants funds. For sub-grant activities, funds will be transferred directly from the DA to the Provincial Account, as a pass-through account, and then to the community bank accounts (See the Project Fund Flow Chrt below). This procedure has worked well in the past but requires due diligence by all parties involved to ensure timely transfer of funds. The procedures and controls on funds flow to each type of account are specified in the FAM. .

Project Fund Flow Chart

Central Level

Provincial Level

Community Level

Designated Account

(DA)USD 2.0 million

The World Bank

Community Accountfor sub-grants

LAK

Operating Account(OA)

USD 25,000

Provincial Account/pass through account

LAK

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134. Financial Reporting. DOF and the ECU have been responsible for preparation and consolidation of unaudited Interim Financial Report (IFR) information for previous Bank-supported projects and this will continue under the ECE project. The IFR shall include at minimum financial statements, project progress including variance analysis. The IFR will be prepared and submitted to the Bank no later than 45 days after each quarter. DOF will also be responsible for the preparation of annual financial statement for audit by external auditors. The reporting period will follow the Government’s fiscal year being October 1 to September 30. The provincial level will report monthly or when expenditures reach 80 percent of the operating advances provided (whichever comes first). The report shall summarize total receipts and payments and projected funds needed for the next two months. 135. Sub-Grants. Reporting on the use of sub-grant funds follows the reporting mechanism of each sub-grant activities as stipulated or to be stipulated in each operation manual. 136. Audit Arrangements. IDA-financed projects implemented by MoES have been audited by private external auditors. Therefore, under the ECE project, a private independent external auditor with a TOR acceptable to the Bank shall be appointed no later than 6 months after project effectiveness. A sample of 20 percent of the sub-grants provided will be selected for audit annually, using a risk based approach (including the results of the quality and timeliness of financial reporting from the community level). Audit reports and management letters are to be submitted to the Bank no later than 6 months after the fiscal year ends. The audit report and audited financial statements are required to be publicly disclosed following the Bank Policy on Access to Information.

137. Implementation Support and Supervision Plan. Financial management implementation support will be semi-annual and include field visits. The financial management missions will include reviews of the continued adequacy of financial management arrangements, transaction review and an integrated fiduciary review (procurement and financial management) of sub-grant expenditure and other goods and services contracts. 138. Disbursement Arrangements. A DA will be opened for the project denominated in US$. The account will be maintained at the Bank of Lao and managed by the National Treasury, Ministry of Finance. The DA ceiling is estimated to be US$2.0 million, US$1.0 million each for IDA Grant and IDA Credit. 139. Disbursement methods allowed are advance, direct payment, and reimbursement. The supporting documentation required for eligible expenditures paid from the DA are the Summary Sheets with Records and Statement of Expenditures (SOE) (with a customized SOE for reporting of grants by province). The frequency for documenting expenditures paid from the DA will be monthly. Reimbursements will also be documented by Summary Sheets with Records and SOEs. Direct payments will be documented by records. The minimum application size for reimbursements and direct payment will be US$200,000. All documentation for expenditure submitted for disbursements will be retained by the ECU and PESS and be made available to the external auditors for their annual and interim audits, and to IDA and its representatives if requested.

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140. The project will have a Disbursement Deadline of four months after the Closing Date. All expenditures that incur before the Closing Date will be eligible for reimbursement. Disbursement from grant account shall be made against the following expenditure categories:

Expenditure Category Allocation (Grant)

US$

Allocation (Credit)

US$

% Financing (exclusive of

taxes)

(1) Goods, works, non-consulting services, consultants’ services, Training and Incremental Operating Costs for the Project

3,150,000 13,400,000 100

(2) Construction grants 3,100,000 100 (3) CCDG grants 400,000 100 (4) NSMP grants 6,900,000 100 (5) Unallocated 450,000 600,000

Total 14,000,000 14,000,000

Incremental Operating Costs means reasonable cost of goods and non-consulting services required forto the day-to-day implementation of the Project, incurred by the Recipient (which expenditures would not have been incurred absent the Project), including consumable materials and supplies, communications services (postage, telephone and internet), media and printing services, translation and interpretation services, office space rental and utilities, leasing and/or routine repair and maintenance of vehicles, equipment, facilities and office premises, fuel costs, bank and insurance charges required for the Project, administrative support staff, and Project staff travel, lodging and per diems, but excluding salaries (including bonuses, fees and honoraria or equivalent payments) of officials of the Recipient’s civil service. Financial Management and Disbursement Action Plan

Action Responsible party

Timing Condition/dated covenant

Recruit six financial management consultants to support DOF in monitoring of commitments, follow up on advances and providing hands on training and support to provincial finance staff

ECU Within one month after project effectiveness

Dated covenant

Appoint an auditor with TOR acceptable to the Association. A sample of at least 20 percent of the sub-grants approved and implemented during the year should be

ECU, DOF Within six months after project effectiveness

Dated covenant

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Action Responsible party

Timing Condition/dated covenant

audited 141. Procurement. Procurement of goods and works under the project and financed in whole or in part by IDA funds will be carried out in accordance with the IDA’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated January 2011. Procurement of consultant services financed in whole or in part by IDA funds will be carried out in accordance with the IDA’s "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated January 2011, and the provisions stipulated in the legal agreement and the approved procurement plan. 142. Assessment of the ECU’s capacity to implement procurement as MoES’ unit in charge of day-to-day project management. An assessment of the ECU procurement capacity was carried out by IDA’s procurement staff in accordance with relevant instructions. The ECU has been carrying out procurement under the recently closed EDPII project and the ongoing GPE Program. The assessment confirmed that ECU has satisfactorily carried out procurement under EDP II and the GPE Program; and there were no major procurement issues. 143. Keeping in mind the broader fiduciary risks present in Lao PDR, including a weak country procurement environment, the overall project procurement risk is currently Substantial. However, the risk will be managed and mitigated through the action plan that is being incorporated in the project design as listed below. In addition, procurement staff experience and the incorporation of the capacity strengthening measures lower the residual procurement risk to Moderate. 144. Action Plan to Improve Procurement Capacity. A qualified individual consultant experienced in World Bank procurement procedures would be engaged by the ECU as a “Procurement Consultant - PC” before any other procurement is started. A qualified government staff member will be assigned by MoES to serve as the focal point for coordination, consultation and follow-up of procurement activities with the ECU, CDs, provincial departments, districts and villages, with the support of the PC. The PC’s TOR will include procurement capacity building of MoES staff. It is expected that the assigned MoES staff member will take over the responsibility of procurement after the training to be provided by the consultant. Furthermore, the ECU will organize an intensive procurement training workshop for the project implementing staff with assistance from the Bank’s procurement staff in Vientiane office within one month after project effectiveness, and periodically during the life of the project. Also, the CBCOM will be updated and finalized with the assistance from the PC within three months after project effectiveness to cover the community participation procurement and contracting procedures, subject to the Bank’s concurrence. Lastly, procurement training will be provided to all villagers who will conduct CBC procurement in line with the CBCOM. The ECU will be responsible for planning and delivering this training with the assistance from the PC. 145. Procurement Plan. The ECU has prepared a detailed procurement plan for the first 18 months, which has provided the basis for the selected procurement procedures. This plan has to be discussed and agreed with IDA as detailed below. The plan will be updated with IDA’s prior

46

concurrence, annually or as required, to reflect changes in implementation needs and improvements in institutional capacity.

Date of Bank's approval of the Procurement Plan: January 28, 2014 Goods and Works and non-consulting services

Prior Review Threshold: Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the Guidelines for Procurement:

S/N Procurement Method Prior Review Threshold

US$

Comments

1. ICB (Goods) All 2. NCB (Goods)* The first contract 3. Shopping (Goods) - - 4. Community Participation in

Procurement - -

5. Direct Contracting All (*) NCB procedures will follow the procedures specified in the Financing Agreement. Proposed Procedures for CDD Components (as per paragraph. 3.17 of the Guidelines):

Refer to the relevant CDD project implementation document approved by the Bank Reference to (if any) Project Operational/Procurement Manual: CBCOM, CCDG Manual,

and NSMP Manual. Summary of the Procurement Packages planned during the first 18 months after project effectiveness

1 2 3 4 5 6 7 Ref. No.

Description Estimated Cost US$

Packages Domestic Preference

(yes/no)

Review by Bank (Prior / Post)

Comments

1 Summary of the NCB (Goods) packages

892,000 4 No Post First contract for Prior Review

2 Summary of the of the Shopping (Goods) packages

389,601 8 No Post

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

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Selection Method Prior Review Threshold Comments

1. QCBS/QBS US$ 100,000

2. CQS, LCS US$ 100,000

2. Single Source (Firms/Individual) All

3. Individual SSS above US$10,000 and fiduciary positions

Consultancy Assignments with Selection Methods and Time Schedule

1 2 3 4 5 6

Ref. No.

Description of

Assignment

Estimated

Cost

US$

Packages

Review by Bank

(Prior / Post)

Comments

1.

Summary of number of contracts that will be let under QCBS

0 0 -

2.

Summary of number of contracts that will be let under LCS

192,000 2 Prior >US$100,000 contract

3.

Summary of number of contracts that will be let under Individual Consultant

2.1 mil. 47 Post

146. Small local consultants contract may include only the fees and not the payment of logistics for attending training as a facilitator or monitor, in such cases the contract shall include that the logistics for said training will be paid by the project. 147. Frequency of Procurement Supervision. Field procurement supervision will be conducted as part of the regular implementation support missions, which will be conducted at least twice a year. The Association will periodically undertake the ex-post review by a procurement specialist. 148. Environmental and Social (including Safeguards). There are no major environmental and social safeguards issues anticipated in the project, and no land acquisition, loss of lands and/or resettlement concerns are expected. For selected school sites, only 1 small school building will be built, with 1-2 classrooms of not more than 72 square meters floor area per classroom within existing school parameters. The project’s focus on children in disadvantaged districts, those from poor families and those with disabilities is expected to contribute to social inclusion and greater equality of opportunity. Given this focus on disadvantaged children and the project’s coverage of areas resided by ethnic groups, the World Bank’s safeguard policy OP 4.10 on Indigenous Peoples (IPs) is triggered.

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149. Environmental Safeguards Instruments. The Environment Code of Practice (ECOP) is to establish in-house best environmental management practices and specifications relating to project development, construction and management. The project design and construction activities will be guided by the ECOP to ensure that the environmental safeguards are integrated in the planning, construction and operation of the new pre-primary school building. Any impacts that occur are likely to be short-term, and will not result in potential harmful effects on natural ecosystems within and adjacent to the construction site. The ECOP includes an Environmental Screening Checklist and an ESMP. 150. Environmental Code of Practice (ECOP). The ECOP provides for each sub-project an EMP template that will be completed and implemented based on detailed information of site-specific environmental and social impacts, mitigation measures, monitoring and institutional arrangements. The ESMP will also cover key areas of the project and associated activities that will be managed and monitored to ensure minimal impact on the environment during the execution of the project, and includes “Chance Find” procedures. The Environmental Screening Checklist will be used to determine the best location for the new classroom within the school grounds to ensure the young children’s security, safety and ease in going to and from the school. Other considerations are the structural integrity and environmental friendliness of the classroom and other ancillary facilities. The Technical Specifications for Contracts will make reference to the adherence to the ECOP and its strict implementation. 151. Public Consultation and Community Participation. A series of public consultations were conducted among the MoES project staff and partner agencies at the central, provincial and district levels, and the project beneficiaries and their families at the village level in the local language. In the process of finalizing the CBCOM, ECOP, and the EGDP, several meetings, workshops and focus group discussions were held to ensure that lessons learned from similar projects and the experiences and preferences of the various agencies and stakeholders were taken into account. 152. The MoES and the DESBs, with the assistance of the VEDCs, will be responsible for securing the cooperation and participation of the communities whose children will be attending pre-primary classes. Their participation will entail the selection of the location of the new classrooms, contribute to the labor force during construction and monitor the progress and completion of the construction according to the CBCOM. 153. Social safeguards instrument: The EGDP that was developed for the ongoing GPE Program has been updated for and will be used by the project. This plan was prepared in consultation with potential project beneficiaries/communities through a participatory Social Assessment and in partnership with the agencies responsible for various facets of ethnic group issues. In order to get a broad community/ethnic support, consultations have taken place in provinces where more ethnic groups are present in three main regions of Lao PDR: north, central and south. It was based on free, prior and informed consultations in accordance with OP 4.10. The social assessment is part of the process by which the MoES informs the ethnic communities and local authorities at village, district and provincial levels about the project and the construction of pre-primary classrooms. The consultation and assessment ensures that social engagement, inclusiveness and ethnic groups issues are incorporated into project planning,

49

design, implementation and monitoring. It also ensures that the project’s benefits are equally distributed in a culturally appropriate manner as well as to avoid negative impacts. A social assessment was carried out in these areas and its findings documented in the EGDP. 154. Gender equality is a key goal of the project. By targeting the 22 most educationally disadvantaged districts, the project will direct resources more strategically towards better educational outcomes for girls through boosting enrollment in and completion of pre-primary education. The components identified in the project support this gender-informed approach in five key areas: (i) the construction of pre-primary classrooms, which is an essential strategy to promote greater access for 5-year-old girls; (ii) the establishment of pilot CCDGs, which will increase access for 3 to 4-year-old girls; (iii) the provision of scholarships for ethnic girls, which will enable more females from these groups to enter the teaching profession; (iv) the provision of the NSMP, which is a demand side intervention that has been shown to increase enrollment of girls; and (v) the promotion of inclusive education, which is core to the EQS approach that has had impressive results over the years in getting more girls into school. 155. Disclosure. Environmental and social safeguards documents have been disclosed and include project information, impacts, and proposed mitigation measures. Local disclosure of information targets directly affected communities. The ECOP and CBCOM were presented in public consultations before finalization and submission to the Bank. The ECOP and the EGDP report were widely disseminated and publicly disclosed in country by the MoES in English and Lao languages on December 19, 2013. The ECOP was disclosed on the World Bank Infoshop on October 1, 2013 and the EGDP was disclosed on the World Bank Infoshop on December 19, 2013. 156. Institutional and Implementation Arrangements and Capacity Building. The MoES will have to undertake capacity building activities to ensure the rigorous implementation of the CBCOM and an enhanced institutional arrangement with the VEDC for community-based monitoring and the Ministry of Public Works for technical guidance. Approved projects with environmental and/or social impacts are supervised and monitored by district engineers, and the Provincial Program Managers to whom they report. Findings and any recommendations are recorded in quarterly reports which are sent to the Program Manager, through the PESS’s, and shared with World Bank supervision missions. 157. It is the responsibility of the M o E S to prepare and carry out a n d a p p l y the necessary safeguards instruments, and to ensure compliance with national regulations before starting the construction. Sound environmental practices have to be incorporated into the sub-project design and implementation, and social issues addressed to avoid potential above acceptable levels/standards. 158. Training activities will be conducted with the MoES, DESBs and VEDCs to ensure the strengthening of their capacity to comply with the requirements set forth in the two safeguard instruments.

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Annex 4: Operational Risk Assessment Framework (ORAF)

Lao PDR: Early Childhood Education Project (P145544)

.

Project Stakeholder Risks

Stakeholder Risk Rating Low

Risk Description: Risk Management:

The principal stakeholders are Government at central, province and district levels, civil society organizations, parents, teachers and children aged 3-5. Government ownership and commitment for the Bank-supported EDP II and the GPE Program is strong. As the recent update of the Education Sector Development Plan (2011–15) includes a key focus on ECE, the preparation of the ECE project is a high priority of MoES. The recipient and Bank interests, objectives, and motivation for undertaking this operation are well aligned. In previous education projects in the country, teachers, parents, NGOs, and development partners have expressed strong support for the

The project will include measures of outreach to parents and teachers during preparation including consultations on proposed interventions. During implementation, a strong communications strategy through the VEDCs on the importance of ECE will increase the flow of information to the stakeholders.

Resp: Client Status: In Progress

Stage: Both Recurrent:

Due Date: N/A

Frequency: Continuous

Resp: Client Status: In Progress

Stage: Both Recurrent:

Due Date: N/A

Frequency: Continuous

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interventions under this project. This project will build on activities and lessons learned from the current GPE Program under implementation in MoES. The risk of limited stakeholder involvement in the project is low particularly since ECE is a strong focus of the Government and the stakeholders already have experience with implementing pre-primary and caregiver activities in the current GPE Program.

Implementing Agency (IA) Risks (including Fiduciary Risks)

Capacity Rating Substantial

Risk Description: Risk Management:

MoES has successfully implemented a number of Bank-financed projects in the education sector, including the recently closed EDP II and the ongoing GPE Program. Ministry officials are familiar with the proposed interventions, as some were already implemented previously. They are also familiar with Bank procedures and have received training on financial management, procurement, and sector issues. Based on past experience, a risk may be that MoES and its technical teams may have insufficient in-house capacity to carry out the expected large volume of procurement and financial management activities. In

Capacity building will be continued to address the fiduciary risk issues. Training for procurement and financial management staff will be provided on an ongoing basis to help ensure necessary controls are in place and that sound procurement and financial management practices are being implemented. In addition, International and national individual technical consultant for these areas will be engaged by the project. Enhanced training in financial management and procurement at community level. The CBCOM manual and other manuals will be revised and simplified for use at the community level. The Financial Management MTSPIP for the Ministry has been developed. Support to the implementation of the MTSPIP will continue under this project. As part of this assignment, training manuals, procedure manuals and recommendations to improve financial management performance for the MoES at all levels will be produced. Series of workshops will also be conducted by the TA. The project will be audited annually, and the Bank will also closely supervise the project during implementation. Further a detailed Operational Manual will be developed to guide project implementation. This manual will provide MoES staff with a comprehensive set of written policies and procedures for, among other things, routine tasks, administrative activities, records management, and documentation.

Resp: Both Status: In Progress

Stage: Both Recurrent:

Due Date: N/A

Frequency: Continuous

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particular, there is a risk that financial documentation and reporting are weak at the local (community) levels. Hence, increased in support to the community may overstretch their capacity to record and report properly.

Governance Rating Moderate

Risk Description: Risk Management:

There is strong ownership by the Government to the concept of the project, MoES has driven the initiation of the project concept and its evolving design, and the project’s goals are fully aligned with the current sector strategy. Fiduciary performance, especially in the area of financial management, during the EDP II and ongoing GPE Program has been a challenge. Procurement capacity has been satisfactory, with capacity built and experience progressively gained in both procurement and financial management.

Centralized fiduciary and core project implementation services remain within the existing project management arrangements. Regular Bank implementation support missions, including procurement ex-post and financial management transaction reviews will be carried out every six months. Daily support to address on time issues will be provided from the Bank team in Vientiane through the life of the project.

Resp: Both Status: In Progress

Stage: Both Recurrent:

Due Date: N/A

Frequency: Continuous

Project Risks

Design Rating Moderate

Risk Description: Risk Management:

The MoES is thoroughly familiar with this type of financing through previous IDA projects. Moreover, almost all of the interventions being considered for this operation have

The implementing agency and the project team will work together to provide additional implementation support in the early stage of implementation period with so as to avoid implementation delays of those activities. In addition, the fiduciary training provided to MoES will anticipate these issues and possible solutions to them before they arise.

53

been piloted in previous IDA projects in the sector, and this project builds on the foundation established by previously deployed interventions. Some interventions being considered, however, are new for the MoES, and there is a risk that some interventions will not be implemented on-time. Previous experience from IDA and GPE projects has shown that some activities have experienced delays (e.g., countrywide large scale of civil works, new interventions including the NSMP and the Mobile Teacher Program). Moreover, the complexity of the project with multiple implementing departments within MoES continues to represent a risk to the overall quality of delivery.

Resp: Both Status: In Progress

Stage: Both Recurrent:

Due Date: N/A

Frequency: Continuous

Social and Environmental Rating Low

Risk Description: Risk Management:

With regards to construction, there are likely to be some concerns relating to inconveniences or nuisances to surrounding areas during building. There is a risk that the most disadvantaged children, particularly those with disabilities and/or those from poor families, may not be reached or are not allowed to access

These potential impacts on the environment are deemed to be minor, site-specific, and reversible in nature, and for which mitigation measures can be readily designed. Based on the past experience with the EDP II and GPE projects, and to ensure compliance with Bank Safeguards policies, an Environmental Codes of Practice (ECOP) was developed, which will be implemented by the project team. The project will incorporate proven strategies based on successful experiences from other education projects for disadvantaged communities in Lao PDR to find and encourage the enrolment of these groups. In addition, the EGDP that was developed for the ongoing GPE Program has been updated for and will be used by the project. This plan was prepared in consultation with potential project beneficiaries/communities through a participatory Social Assessment and in partnership with the agencies responsible for various facets of ethnic group issues. In order to get a broad community/ethnic support, consultations have taken place in provinces where more ethnic

54

to either formal or non-formal education interventions.

groups are present in three main regions of Lao PDR: north, central and south. The EGDP was based on free, prior and informed consultations in accordance with OP 4.10. Additionally, stakeholder consultations about the project will occur frequently during preparation to raise awareness about the project’s interventions.

Resp: Client Status: In Progress

Stage: Both Recurrent:

Due Date: N/A

Frequency: Continuous

Program and Donor Rating Low

Risk Description: Risk Management:

The Local Education Group has been informed and closely consulted and are unlikely to object to the project. Donor collaboration continues to be good. The project interventions are firmly in line with the donor-endorsed Education Sector Development Plan.

The team will continue to promote effective donor coordination through active dialogue with other donors as an ongoing agenda for the monthly donors meeting. The project will keep donors updated about the project through joint missions, frequent consultation, and meetings.

Resp: Bank Status: In Progress

Stage: Both Recurrent:

Due Date: N/A

Frequency: Continuous

Delivery Monitoring and Sustainability

Rating Substantial

Risk Description: Risk Management:

Previous experience from IDA projects in the sector have shown that contract management for MoES may present a risk for timely implementation and delivery of interventions. Though the government has mainstreamed many of key project activities in EDPII and GPE Program which have shown positive impacts on education outcomes, mainstreaming key activities of the ECE project into the Education Budget may be a challenge: the

Intensive supervision missions, frequent review of the implementation plans, and diligent following up with MoES on the state of its communication and enforcement of penalties with contractors will help the implementing agency improve its contract management. Additionally, the supervision missions will support the project with additional procurement oversight. To further ensure the sustainability of the project and results, the project will provide intensive master trainers to ensure that skills and knowledge can be transferred at all levels even after project closing. The Task Team will continue to work in partnership with concerned departments to improve the quality of the M&E framework through participation in the MoES-led results monitoring consultations and exercises. Additionally, component 3 of the project will help MoES strengthen its monitoring framework for the project. While there is a risk of mainstreaming key activities into the education budget, the risk is low because the MoES has identified the project activities as being key activities for achieving the Education Sector Plan and as such it is expected that these activities will be sustained.

55

education budget share has increased vis-à-vis the total national budget since 2011.

Resp: Both Status: In Progress

Stage: Both Recurrent:

Due Date:N/A

Frequency: Continuous

Overall Risk

Overall Preparation Risk:

Moderate Overall Implementation Risk:

Moderate

Risk Description: Risk Description:

The overall preparation risk is Moderate because of the governance risks. This is despite the fact that the proposed Grant is a follow-on project and there has been strong support in all segments of society and from development partners.

The Implementation Risk Rating is Moderate primarily because of the capacity risks.

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Annex 5: Implementation Support Plan

LAO PDR: EARLY CHILDHOOD EDUCATION PROJECT

Strategy and Approach for Implementation Support

159. Implementation support is a core element of the proposed partnership between the Government of Lao PDR and the World Bank under the ECE project. The Implementation Support Plan has been designed to improve: (i) monitoring and evaluating results on the ground; (ii) facilitating the timely implementation of the risk mitigation measures identified in the project’s ORAF (Annex 4); and (iii) providing implementation support on the capacity risks related to sectoral and technical aspects of the project, as well as those related to fiduciary concerns. Intensive supervision missions, frequent review of the implementation plans, and diligent follow-up with the MoES on the state of its communication and enforcement of penalties with contractors will help the implementing agency improve its contract management. Additionally, supervision missions will provide the project with external procurement oversight. The Implementation Support Plan is founded on semi-annual intensive supervision missions and continuous sectoral and technical oversight. The plan covers the following dimensions:

(a) Project Supervision Missions: Implementation support from the Bank will be provided through supervision missions conducted every six months. These missions will be conducted in collaboration with the MoES. At least one of these missions each year will include field visits. The MoES will prepare a detailed six-month implementation report to be shared with the Bank one month prior to the supervision mission.

(b) The occasion of supervision missions will provide the Bank with extensive information regarding project implementation submitted prior to the mission, and will lead to the identification of key implementation issues and bottlenecks as well as the necessary corrective measures agreed between the MoES and the Bank.

(c) Continuous Sectoral and Technical Oversight: Knowledgeable Bank staff and technical

consultants will provide advice and exchange views to ensure:

(i) Component 1 – Increasing coverage of ECE services in disadvantaged districts. Expertise is available within the Bank on the key themes in this component, including CBC for construction, Community Grant schemes, ECE services, disability and inclusion. (ii) Component 2 – Improving quality of ECE services by providing the supporting services package, training (for teachers, caregivers, VEDCs, other concerned service delivery agents), and developing training and pedagogical materials.

(iii) Component 3 – Support for the ECE sub-sector management, project management, and monitoring and evaluation systems at all levels. This will

57

include support to the MoES as well as national and international technical advisors to strengthen implementing capacity. The Task Team will continue to work in partnership with concerned departments and development partners to improve the quality of monitoring framework through participation in the MoES-led results monitoring consultations and exercises.

(d) Fiduciary Oversight: Bank fiduciary specialists will continue their capacity building activities to address the fiduciary risk issues. Training for procurement, financial management, and auditing staff will be provided on an ongoing basis to help ensure necessary controls are in place and that sound procurement and financial management practices are being implemented. The Bank financial management and procurement team will work together with the ECU to provide implementation support in the early stage of implementation period so as to avoid implementation delays of those activities. In addition, the fiduciary training provided by the IDA to the MoES will anticipate these issues and possible solutions to them before they arise. (e) External Audit. An independent external auditor will be engaged to conduct the audit of the entire project. The audit will be carried out with greater emphasis on internal controls, according to a TOR acceptable to the Bank. An annual audit report will be required to be submitted to the Bank within six months after the end of calendar year. Auditors’ reports would be shared with MoES, MOF and the Bank, and would be posted on the project website, with specific review and agreement on corrective actions undertaken during the project supervision missions each year. (f) Procurement Aspect: The team will provide training to all agencies conducting procurement on Bank procurement procedures. (g) Local Technical and Fiduciary Support. A local education specialist in the Bank’s Country Office will serve as Chief Technical Advisor to provide technical support for the annual planning and implementation of the projects, and liaise with other education partners in the field. In consultations with the Task Team Leader, this specialist would also work with local Bank financial management and procurement staff to ensure that the project receives timely fiduciary support. (h) Donor Coordination: The team will continue to promote effective donor coordination through active dialogue with other donors as an ongoing agenda for the quarterly Education Sector Working Group. The project will keep donors informed about the project through frequent consultations and meetings.

160. Composition of the Bank Implementation Support Team. The Bank’s team consists of an education specialist/Task Team Leader, local specialist, operations officer, social development specialist, environmental specialist, engineer/architect, financial management specialist and procurement specialist.

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I. The Main Focus of Implementation Support

Time Focus Skills Needed Resource Estimate (US$)

First twelve months

Project Management; Details of Implementation Arrangement; Monitoring of ECE sub-sector; Education policy research regarding project activities

Expertise on early childhood and primary education monitoring system; Operational expertise; Policy research expertise

75,000

Procedures and normative framework for planning and finance and implementation of ECE activities

National ECE and basic education policy and implementation specialist

Financial Management training and supervision: Financial Management section of Project Implementation Manual

Financial Management specialist

Procurement training and supervision: Procurement section of Project Implementation Manual and preparation of bid documents

Procurement Specialist; Engineering consultant

Environmental Safeguards training and supervision; ESMP, ECOP, checklist, and EGDP implementation

Environmental and social safeguards Specialists

Monitoring and evaluation training and supervision: M&E framework for the project developed

M&E specialist

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12-36 months

Project Implementation Support; Mid-Term Review of project; Continued support on ECE and policy research

Expertise about ECE and basic education policies and reform; Operational expertise; Policy research expertise

300,000

Procurement: Periodic reviews as required by Bank policy

Procurement specialist

Financial Management: Annual Financial Statement review and auditing report review

Financial Management specialist

II. Skills Mix Required Skills Needed Number of Staff

Weeks Number of Trips (per year)

Education specialist and Task Team Leader 7 2 Education specialist 4 2 Operations Officer 3 1 Engineer 4 3 FM specialist 5 2 Procurement specialist 5 2 Social Development specialist 2 2 Environmental Specialist 2 2

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Annex 6: Economic Analysis

LAO PDR: EARLY CHILDHOOD EDUCATION PROJECT 161. ECE interventions have been shown to be not only one of the most cost-effective interventions in education, but also one of the most equitable ones, since the largest impacts of ECE are on disadvantaged populations.22 By addressing inequalities early on, ECE can improve school readiness and many aspects of child development (cognitive, physical and behavioral). By improving school readiness, ECE programs improve educational attainment and learning in primary school. Evidence in the United States has shown long-term impacts in terms of higher education attainment, higher productivity and salaries, lower crime and lower teenage pregnancy.23 Considering all the benefits, the returns to ECE interventions in the United States have been calculated at between 7 and 15 times the investment.24 162. Evidence of impacts in developing countries on long-term impacts is scarcer, but a growing body of evidence has shown that ECE programs in developing countries can have large impacts on child development, school readiness and performance, both in attainment and learning outcomes, in primary school.25 They also show positive impacts on non-cognitive skills like self-confidence.26 In terms of long-term outcomes, recent evidence from Jamaica shows very large and significant impacts of early stimulation on labor market outcomes 20 years later.27 However, these positive impacts should not be taken for granted. Parental awareness about the importance of ECE, the quality and type of services, and the characteristics of the targeted beneficiaries are important for outcomes. In a recent evaluation of a program in Cambodia28, for example, the low take-up for community play groups and home-based programs reduced the impact of the program significantly. The low quality of caregivers may also adversely affect outcomes.29 The higher differential impacts of ECE for more disadvantaged groups (those that start with a larger deficit) have been well documented in Indonesia.30 The expected benefits of ECE interventions will thus depend on the context, the quality of the programs and the target populations. 163. The objective of this economic analysis is to present the economic justification for the project interventions. In particular, the analysis aims to answer three main questions:

• Why is focus on ECE in Lao PDR? o What is the rationale for public investment in ECE?

• How will the project components contribute to the PDO?

22 Investing in Young Children, Nadeau, Kataoka, Valerio, Neuman and Elder (2011) 23 The Case for Investing in Disadvantaged Young Children, Heckman, 2013 24 Heckman 2008, Heckman, Stxrud and Urzua, 2006 25 See for example Hasan et al (2012) in Indonesia, Berlinski, Galiani and Gertler (2009) in Uruguay, Rao et al (2012) in Cambodia, Yilman and Yahizan (2010) in Turkey 26 Berlinski, Galiani and Gertler (2009) 27 Gertler et al (2013) 28 Filmer (2013) 29 Rao et al (2012) 30 Hasan et al (2012)

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o How were target districts and villages selected?

• Do the benefits of the interventions exceed their cost?

• Can the Government absorb the recurrent costs associated with the program?

164. It is important to note that while a cost-benefit including an expected Net Present Value is included in this annex, there are important caveats with this analysis. ECE is relatively new in Lao PDR, especially in targeted communities and for the target group (3 to 5-year-olds). There is therefore very little information about the potential impact of these programs in Lao PDR. In fact, the project is designed to include an impact evaluation of different approaches to provide services for 3 to 5-year-olds during the initial two years of the program, to inform further expansion. In the absence of Lao specific data, the analysis uses ranges of impacts from other countries to provide a range of Net Present Value, all showing very high benefit to cost ratios. However, the Net Present Value is only part of the economic justification of the project. The next two sections explore why invest in ECE in Lao PDR and the logic for the components in light of existing evidence.

1. WHY FOCUS ON EARLY CHILDHOOD EDUCATION?

165. Lao PDR has some of the worst education indicators in the region. Literacy in Lao language is still far from universal, especially for some groups. Ethno-linguistic groups are particularly affected by illiteracy, but they are not the only ones. Even among young people (15 to 24-year-olds), 31 percent of females are illiterate (23 percent of males). Wealth and location (urban/rural) are clearly correlated with literacy rates: 71 percent of the population in the bottom wealth quintile is illiterate and 40 percent in rural areas (compared to 9 percent in urban).

Figure 1: Illiteracy rates by ethnic group, gender, wealth index and geographic area, 2011-2012

18

55

23

31

71

51

28

16

4

9

40

35

24

45

0 50 100

0 50 100

Lao-Tai

Non-Lao-Tai

Male

Female

Poorest

Second

Middle

Fourth

Richest

Urban

Rural

North

Central

South

Ethn

o-lin

guist

icho

useh

old

head

Gend

erW

ealth

inde

x qu

intil

eRe

siden

ceRe

gion

Percentage of 15-24 year olds

Literate

Illiterate

% in G1whoattendedECD

Source: Lao Social Indicators Survey (LSIS), 2011-12

166. An important reason for this high level of illiteracy is the low survival rates to grade five. About one third of students drop out before finishing grade 5, which means that Lao PDR is unlikely to meet the MDG goals of universal access to primary education and reduction of

62

gender disparities in primary education if these dropout rates continue.31 The survival rate to grade 5 is particularly low for the poor while it has decreased, which are mainly driven by high dropout (and repetition) in grade 1. At the primary level most children enroll at some point (some late), but a high percentage of them do not progress to second grade in a normal fashion.

Figure 2: Survival to grade 5

0 50 100

Lao-Tai

Mon-Khmer

Hmong-Mien

Male

Female

Poorest

Second

Middle

Fourth

Richest

Urban

Rural

North

Central

South

Ethn

o-lin

guist

icgr

oup

ofho

useh

old

head

Gend

erW

ealth

inde

xqu

intil

eRe

siden

ceRe

gion

G1-G2 progression

G1-G5 survival Source: LSIS 2011-12

167. Even children who stay in school have difficulties reading and understanding texts at grade 3, according to the Early Grade Reading Assessment (EGRA) results. By grade 2, large shares of students still score 0 in EGRA sub-tests: 40 percent cannot recognize the sounds in words, 40 percent cannot read a single familiar word, 30 percent cannot read at least one word correct in the first line in a simple story and the average student has no understanding of the story they just read (60 percent cannot answer a single question correctly). Only in grade 4 are these percentages significantly reduced.

Figure 3: Share of students scoring 0 in different Early Grade Reading Assessment sub-tests

40%

23%

12%

57%

30%

14% 12%6%

2%0%

10%

20%

30%

40%

50%

60%

70%

80%

G3 G4 G5 G3 G4 G5 G3 G4 G5

Phonemic Awareness Reading Comprehension ListeningComprehension

Perc

enta

ge o

f stu

dent

s sco

ring

0

Share of students who score 0

Share of students who score 0

9%

3% 1%

38%

17%

5%

32%

13%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

G3 G4 G5 G3 G4 G5 G3 G4 G5

Letter Name Familiar Word Oral Reading Fluency

Perc

enta

ge o

f stu

dent

s sco

ring

0

Share of students who score 0

Share of students whoscore 0

Source: World Bank, EGRA report

31 Background report to the Roundtable Implementation Meeting on MDG, Ministry of Planning and Investment (2011).

63

168. Differences in child development at the start of primary school are a key factor in learning outcomes. Perhaps the clearest example of the differences in school readiness is language ability. Children coming into primary school with a deficit in Lao language may catch up in reading and oral fluency, but fall far behind in comprehension, even if they progress from grade to grade. Since the language of instruction for all subjects is Lao, it is unlikely that they are absorbing the rest of the curriculum either.

Figure 4: Share of students scoring 0 in EGRA subtests, by ability in Lao language

G3 G4 G5 G3 G4 G5 G3 G4 G5

PhonemicAwareness

Oral ReadingFluency

ReadingComprehension

Only few basic words

G3 G4 G5 G3 G4 G5 G3 G4 G5

PhonemicAwareness

Oral ReadingFluency

ReadingComprehension

Basic Lao

0102030405060708090

100

G3 G4 G5 G3 G4 G5 G3 G4 G5

PhonemicAwareness

Oral ReadingFluency

ReadingComprehension

Shar

e sc

orin

g 0

Fluent Lao

Source: World Bank, EGRA report

169. Available measures of child development for 3 to 5-year-olds show big differences in child development across wealth quintiles, between urban and rural areas and between ethnic groups. While comprehensive child development measures are not yet available in Lao PDR, the LSIS included a simple questionnaire for parents on their child’s development.32 It asks about basic tasks (identifying numbers/letters, picking up objects, following instructions, etc.) with yes/no answers, which limits its ability to measure progress across age. The questions are also not designed to measure competencies that are relevant to a particular age (i.e., both 3 and 5-year-olds are asked if they can read). However, they do show some interesting trends, especially on literacy and numeracy, when comparing different groups. According to this measure, only 8 percent of children in rural areas are on track in literacy-numeracy development, compared to 40 percent in urban areas. Moreover, about half of the richest children are on track compared to 6 percent of the poorest. Children from the Lao-Tai ethnic group are much more likely to be on track in literacy-numeracy development than non-Lao-Tai children.

32 These include 5 domains of development: i) physical, ii) social, iii) emotional, iv) language, and iv) cognitive. However the scope of the questions is very limited. For example, a child is on track for physical development “If the child can pick up a small object such as a stick or a rock from the ground with two fingers, and/or the mother or caretaker does not indicate that the child is sometimes too sick to play”.

64

Figure 5: Literacy-numeracy skills for children under 5, LSIS 2011-2012

0 10 20 30 40 50 60

Lao-Tai

Mon-Khmer

Hmong-Mien

Chinese-Tibetan

Poorest

Second

Middle

Fourth

Richest

Attending preschool

Not attending preschool

Urban

Rural

36-47 months

48-59 months

Male

Female

Ethn

o-lin

guist

icgr

oup

ofho

useh

old

head

Wea

lth in

dex

quin

tile

Pre-

scho

olRe

siden

ceAg

eGe

nder

Literacy-numeracy

170. Children attending any form of pre-primary education are much more likely to develop literacy and numeracy skills by age 5, but pre-primary education coverage is very low for disadvantaged groups. ECE services are currently available mainly for the richest segments of the population and mainly in urban areas. The most disadvantaged groups have significantly lower access to ECE services. Only 10 percent of the poorest children attend any form of organized ECE before they enter primary education, compared to 67 percent of the richest. About 50 percent of children in urban areas attend primary school, compared to 20 percent in rural areas.

35

14

23

25

10

15

27

44

67

51

20

21

32

15

0 20 40 60 80 100

Lao-Tai

Non Lao-Tai

Male

Female

Poorest

Second

Middle

Fourth

Richest

Urban

Rural

North

Central

South

Ethn

o-lin

guist

icho

useh

old

hea

dGe

nder

Wea

lth in

dex

quin

tile

Resid

ence

Regi

on

Attended pre-school Did not attend pre-school

171. It is important to intervene early to address these inequalities, so expanding ECE services for 3 to 5-year-olds is crucial, especially in disadvantaged areas to address high dropout and low learning outcomes/achievement in primary school.

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Rationale for Public Investment 172. There is strong consensus that public investment in early childhood services is desirable and justified on efficiency and equity grounds. All the standard arguments for public investment in education apply to ECE. Coordination failures, incomplete information about the returns to education and undeveloped financial markets will prevent the private sector to provide these services, especially in poor communities. Several studies have found that male students in the last year of primary school severely undervalued the benefits of moving up to and completing secondary school, and such misperceptions consequently resulted in high dropout rates.33 The numerous externalities of education investments (in terms of productivity, health externalities, social capital) provide further justification for public investments in education. 173. There is also strong rationale for services to younger children, especially in poor countries. The existence of large differences in child development has been documented in many poor and developing countries, and these differences if left unaddressed, intensify in primary school. As ECE has been shown to have the potential to correct some of these differences if properly targeted and implemented, early investments have one of the largest documented returns in the education sector. Evidence from the United States demonstrates that the rate of return to each dollar of education investment decreases with age.34 Rationale for World Bank Involvement 174. The value added from the World Bank participation comes from its long engagement in the education sector, in particular, its involvement in the implementation of pre-primary education component under the ongoing GPE Program. The World Bank’s Education Strategy is focusing on the goal of “learning for all,” and particularly on investing early. Its global knowledge and experience will provide solid support to this project. 175. In addition to the experience in Lao PDR, the World Bank brings knowledge about similar programs in other countries, including many in the region. Lessons learned from World Bank projects in Indonesia, Cambodia or Vietnam, in addition to in other regions, will inform the implementation of this project.

2. HOW WILL THE PROJECT COMPONENTS CONTRIBUTE TO THE PDO?

176. The higher level of objective of this project is to improve school readiness in order to reduce dropout in primary school, increase educational attainment and improve learning outcomes, leading to better skills, more productivity and higher salaries in the long run. This is done through two components, focused on expanding services to 3 to 5-year-olds and ensuring the quality and holistic nature of those services. The project design is based on existing evidence that expanding access to younger children, providing good quality and holistic services that are targeted to disadvantaged groups is likely to maximize the impact of the ECE programs.

33 World Bank (2006). World Development Report 2007: Development and the Next Generation. Washington, DC: The World Bank. 34 Heckman, J. J. & Lochner, L. (1999). Rethinking Education and Training Policy: Understanding the Sources of Skill Formation in a Modern Economy. Mimeo.

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Figure 6: Project logic and components

177. The most immediate impact of ECE programs is on a wide range of child development measures. These impacts have been widely documented in developed countries and the evidence in developing countries is growing rapidly. Evidence of large, positive impacts has been found in countries as varied as Argentina, Bangladesh, Kenya or Mozambique. In the region, recent evaluations of programs in Indonesia and Cambodia show positive effects especially on disadvantaged populations. The estimated effects of the programs vary, and Table 1 presents a selected set of estimates.

Table 1: Summary of effects of ECE on child development measures

Program Study Impact

Philippines Armecin et al 2006 0.28-0.43 US pre-kindergarten Magnuson et al 2004 0.1-0.13 UK preschools Samos et al 2007 0.069-0.071 Argentina National Preschool Program

Berlinski, Galiani and Gertler 2006 0.23 per year

Colombia Young 1995 100 % increase

enrollment by grade 3 Bangladesh Rural Preschools Aboud 2006 0.13-0.17 Madrasa Resource Center Study, Kenya, Uganda and Tanzania

Malmberg, Mwaura and Sylva 2011 0.40

Indonesia Hasan et al 2013 Mozambique Cambodia

Source: Adapted from Economic Analysis of School Readiness Promotion Project in Vietnam, papers cited in the table and Investing in Young Children (2011)

67

178. The package of supporting services, including the community awareness campaign which includes parental education, the school meals and childhood disability screening is designed to further contribute to reducing primary school dropout and improving learning. Community awareness campaign on the importance of early childhood stimulation is crucial since parents do not always appreciate the benefits of these types of services, especially in poor rural areas.35 Parenting education has been shown to have impacts on different settings, though low take-up and the high cost of individual home visitations are sometimes obstacles to the sustainability of these programs. For reasons of sustainability, the project takes a community approach to parenting education, based on the evidence of positive impacts of parenting education programs delivered in groups support and cost considerations.36 The inclusion of nutrition messaging in the parenting education sessions for parents of young children is expected to contribute to reducing malnutrition, though it being a low intensity intervention, the impact on malnutrition might be small.37 However, combined with school meals program in targeted disadvantaged schools, this package is designed to provide incentives for attendance to ECE services and improve the conditions of children attending these centers. 179. The childhood disability screening is an innovative approach to identify both easily treatable conditions that may prevent children from attending school or learning properly, and more severe disabilities and follow-up on their treatment. A similar program carried out in Cambodia identified a prevalence rate of 15.6 percent for children with impairment. This included all children who on examination on that day had a health condition either acute or chronic (e.g. from conjunctivitis or ear wax to gross motor disabilities or cerebral palsy or mental retardation). Many of these children have conditions that have been previously undiagnosed, and caused them to be absent from school. Many of these health conditions, if diagnosed on time, are easily treatable. The main disabilities of children aged 2 to 5 relate to cognitive problems linked to speech and language difficulties. Problems with vision are relatively rare, and, although a substantial number of children have hearing difficulties, many of these problems are readily treatable on the spot. Of the children screened, 10.1 percent were estimated to have mild disabilities. Overall, 3.2 percent had a moderate or severe disability. These findings confirm many similar observations in developed countries. They call for disability screening and referrals, school health programs, innovation in curricula, along with new teaching methods and the development of teaching materials that will allow these children to access curricula to learn as efficiently as possible.

3. COST-BENEFIT ANALYSIS

180. The economic benefits from the provision of ECE services are expected to come mainly from increased educational attainment and skills of beneficiaries, who will be able to get better jobs and higher pay upon graduation. Depending on the year and sample used, the increase in wages associated with one year of education has been estimated at between 3 and 4 percent on average (Figure 7). These estimates are based on employees with wages, so they present an incomplete view of the returns to education in Lao PDR. They compare workers employed for

35 Investing in Young Children, Note 3.3, World Bank 36 No Small Matter, chapter 4, World Bank 37 Food for Thought, Save the Children, 2013

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wages with more education and less education. However, workers with less education are much less likely to be employed for wages. So a comparison of educated workers with less educated workers, regardless of type of contract, is likely to show higher returns. If education increases the likelihood that a worker is employed in more productive sectors and more formal jobs, the numbers included in Figure 7 would underestimate the returns to education.

Figure 7: Returns to education from different sources

0

1

2

3

4

5

6

7

8

LECS IV 2008-09 LFS 2010 STEP 2011

Annu

aliz

ed R

etur

ns to

Edu

catio

n

Male

Female

All

Source: Skills for Quality Jobs and Development in Lao, PDR 2013

181. A better measure of the returns to ECE project is to look at skills beyond educational attainment. Skills have returns on top of the education level, as shown in the STEP report.38 Both cognitive and non-cognitive skills have returns in the labor market that are independent of education. Technical skills, which build on cognitive skills, have large positive returns in the labor market even controlling for education, adding about 20 percent to the wage. Personality traits, like openness or grit (only for males) also have positive returns in the labor market. And this is only for waged workers. Since these skills are likely to have returns even in subsistence agriculture and casual workers, the actual returns to these skills is likely to be larger. However, since there is not enough evidence to quantify the link between ECE and these skills, only the increase in educational attainment and the returns to education are used for calculations. It is important to note, however, that these calculations are a lower bound estimate of the actual returns. Costs 182. The cost of the program includes both the investment from the project and the operational cost of the structures and groups provided by the project. Pre-primary classrooms will be built by the project, but they will need to be staffed by a civil servant teacher and provided with funds to operate (at the current per student spending in pre-primary school). The CCDG will be provided with a 600 USD grant per year for operating costs, plus the cost of the stipend for caregivers. The supporting services package come at a cost of US$21,150 per location. The costs are outlined in Table 2.

38 : Skills for Quality Jobs and Development in Lao, PDR 2013

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Table 2: Project Cost

Pre-primary classrooms US$ • Building 10,000 per classroom

• Operational cost 14 per student per year

• Teacher 2000 per teacher per year

CCDG • Block grant to VEDC 600 per year

• Stipend 120 per year

Supporting Services • VEDC training

• Childhood Disability Screening

• NSMP

21,150

per location for 4 years

183. Comparing these costs to the stream of benefits from the additional income received by beneficiaries (discounted at 5 percent per year) provides the cost-benefit analysis. Given the uncertainty in the project benefits in terms of additional years of schooling, this analysis provide some scenarios (from very optimistic to very pessimistic) and compare the benefits to the costs. The calculations are presented in Table 3. The analysis show that under the most optimistic scenario (where take-up in the project areas is 90 percent of 3 to 5-year-olds and they get 2 additional years of schooling) the benefits greatly outweigh the costs: for each dollar invested, the project will report 23 dollars in benefits. Under the most pessimistic scenario (50 percent take-up rate and ½ year additional schooling), the project will still bring about more benefits than costs. This is because the returns to education accrue over the whole professional life of the beneficiaries. As explained in the previous section, these estimates are likely to be lower bound estimates, as additional benefits accruing from returns to skills and externalities from a more educated population are not considered. These estimations attest to the soundness of the investment in this project.

Table 3: Cost-benefit estimates

Number of Beneficiaries

Additional years of education

Additional income for all beneficiaries

Return per US$ invested

Very optimistic, full capacity, high impact (2 additional years)

31,500

2 541,008,892

20.8

Moderate, 80% take up, low impact (1 additional year)

31,500

1 216,403,557

8.3

Less optimistic, 60% take up and low impact (1 additional year)

17,500

1 162,302,667

6.2

Financial Sustainability 184. The financial sustainability of new projects is an important concern in Lao PDR considering that recent budget trends have left very little space for non-wage recurrent costs to be absorbed by the Government budget. Between 2010 and 2012 capital spending has remained

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relatively constant in real terms, while salary spending has increased by 150 percent. As a result, by 2012, only 8 percent of the budget was for non-wage recurrent spending. With these constraints in mind, the project seeks to ensure the financial sustainability of the interventions in two ways. First, to ensure sustainability of expanding access to early childhood education services in the long run, the project tests low cost approaches to providing these services, and incorporates an evaluation of their impact that will include cost-effectiveness of different approaches. However, sustainability is also important in the short run. In order to ensure that the investments are sustainable, this analysis calculate the operational costs associated with the investments in this project to ensure that they can be absorbed by the government budget.

Figure 8: Education budget in real terms, 2003-2012*

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Education Spending (Real, 2012 Kip)

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Note: *Break-down of recurrent budget by salary / non-salary not available for 2008-2010 period

185. The operational costs associated with the investments can be absorbed by the Government budget, so the project is sustainable in the short run. The main recurrent costs associated with the project are in the form of teacher salaries and per student block grants that will be associated with the new classrooms, the start-up grant and stipends associated with CCDGs and the operational cost of the NSMP. Despite the concerning budget trends, with an exceedingly low non-wage recurrent expenditure, the associated operational costs for the investments from the project (coming mainly from the need for teachers and school block grant in pre-primary classrooms and the block grants to CCDG, and the operational cost of the NSMP) come to about US$2.3 million a year, representing only 0.9 percent of the Government’s total education budget in 2012, or 1.7 percent of its recurrent budget.

Table 4: Yearly recurrent costs associated with project activities

Cost

Number of beneficiaries

Total per year

Pre-primary classrooms US$

School Block grant 14 per student per year 23,280 5,820

Teacher 2000 per teacher per year 200 (new) 400,000

CCDG

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Block grant to VEDC 600 per center per year 50 centers 35,000

Support to caregivers 630 per caregiver per year 100 caregivers 63,000

VEDC Training

Supporting Services 1,000 per location per year 400 communities 400,000

School Meals Program

Operational cost 40 Per Student per year

23,280

1,315,200

Source: Project costing and Government Budget 186. The increase in operational expenditures on ECE associated with project investments will represent a significant increase in the spending on ECE of about 10 percent (excluding the NSMP, which covers students beyond ECE). So while the overall resource envelope is large enough to absorb the cost, the stated Government commitment to ECE is an important factor in this sustainability analysis, ensuring that resources will be directed to maintaining project investments in particular and ECE in general.