Document of

The World Bank

FOR OFFICIAL USE ONLY

,dyf.SEa_b

Repot No. P-3970-1-

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR fECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO USt5.8 MILLION

TO THE

DOMINICAN REPUBLIC

FOR A

VOCATIONAL TRAINING PROJECT

May 1, 1985

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CURRENCY EQUIVALENTS

Dominican Peso - DR$US$1.OU - DR$3.0

(Estimated average of floating unified exchange rateintroduced in January 1985)

FISCAL YEAR

January 1 - December 31

SCHOOL YEA.S-

October 1 - July 30

ABBREVIATIONS

IDB Inter-American Development-BankIMF International Monetary FundINFOTEP National Institute for Vocational TrainingRCLC Rural Community Learning CenterUSAID United States Agency for International DevelopmentUNDP United Nations Development Programme

MEASURES

1 meter = 3.28 feet1 sq. meter (m2 ) = 10.8 sq. feet1 kilometer (Kma 0.62 miles

1 sq. kilometer (Km ) 0.39 sq. milesI hectare (ha) = 2.47 acreas

DOMINICAN REPUBLIC FOR OMCLIL USE ONLY

VOCATIONAL TRAINING PROJECT

LOAN AND PROJECT SUMMARY

.

Borrower: The Dominican Republic

Beneficiary: Instituto Nacional de Formacion Tecnico Profesional (INFOTEP)

Amount: US$5.8 million equivalent

Terms: Repayable over 17 years, including four years of grace, at thestandard variable interest rate.

RelendingTerms: The Bank loan would be made available to INFOTEP as a grant,

under a subsidiary financing agreement between the Borrowerand INFOTEP.

ProjectDescription: The purposes of the project are to:

(1) Strengthen INFOTEP's role and capabilities to coordinate,regulate and monitor developments in vocationaltraining. The proposed project would provide technicalassistance (47 staffmonths of consultants services andeight staffmonths of fellowships) to (i) enhance INFOTEPplanning services and management, (ii) develop a trainingstandard and certification system, (iii) improve coursescontent, and (iv) organize the technical supervision ofall vocational training courses;

(2) Assist the vocational training system, directly andindirectly, through INFOTEP, to respond effectively bothin quality and quantity, to anticipated skillrequirements. The proposed project would (i) expand thecapacity to upgrade and train about 990 instructorsthrough the organization of about 57 courses; (ii)establish a trainee follow up and placement system; (iii)increase the pre-service training for about 850additional unskilled workers; (iv) increase thein-service training for about 5,500 additional skilledworkers and supervisors; (v) establist. a pilot productiontraining center to provide training for about 900 lowincome workers engaged in the informal sector of theeconomy; and (vi) enhance INFOTEP training advisoryservices to assist about 560 enterprises in the trainingof about 1,800 supervisors and managers. Therefore, theproject would provide for construction or expansion and

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

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equipment of three vocational training centers, forcomplementary training equipment for othercollaborating training institutions, for the establlshment ofa mobile training program through the acquisition cf about 14mobile sets of training equipment and about eight lightvehicles, and for technical assistance (59 staffmonths ofconsultants services and 156 staffmonths of fellowships).

Risks: No significant risks are associated with the technicalimplementation of the project.

LOCAL FOREIGN TOTAL- -1S$ million

Project Cost:

A. Technical Assistance Program to Strengthen 0.1 0.4 0.5INFOTEP's Planning, Technical andAdministrative Capacity

B. Program to Expand the Coverageand Quality of Training:

Santo Domingo Training Center 1.3 2.3 3.6Completion - Santiago Training Center 0.1 0.1 0.2Mobile Vocational Training Program 0.3 1.5 1.8Pilot Production Training Center 0.0 1/ 0.0 2, 0.0 3/Training and Advisory Services4/ 0.3 - 0.3

C. Project Administration 0.1 0.3 0.4

Total Base Cost 2.2 4.6 6.8Physical Contingencies 0.2 0.5 0.7Price Contingencies 0.5 0.4 0.9

Subtotal 0.7 0.9 1.6

Total Project Cost 2.9 5.5 8.4

Financing Plan: LOCAL FOREIGN TOTAL z

INFOTEP 2.3 - 2.3 28IBRD 0.6 5.2 5.8 69UNDP 0.0 0.2 0.2 2Spain 0.0 0.1 0.1 I

Total 2.9 5.5 8.4 100

1/ This figure is 0.017.2/ This figure is 0.012.3/ This figure is 0.029.7i/ These include instructors' training, follow-up and placement services,

service training of supervisors, and advisory services to enterprises.

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Estimated Disbursements: -US$ million* Bank FY FY86 FY87 FY88 FY89 FY90

Annual 0.5 2.4 2.4 0.3 0.2Cumulative 0.5 2.9 5.3 5.6 5.8

Rate of Return: Not applicable.

* Staff Appraisal Report: No. 5470-a-DO, dated April 30, 1985

J

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRDTO THE EXECUTIVE DIRECTORS ON

A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$5.8 MILLIONTO THE DOMINICAN REPUBLIC FOR AVOCATIONAL TRAINING PROJECT

1. I submit the following report and recommendation on a proposed loanto the Dominican Republic for the equivalent of US$5.8 million to helpfinance a Vocational Training Project. The loan would have a term of 17years, including four years of grace, at the standard variable interestrate. Under separate arrangements, the Government of Spain and UNDP wouldsupport the project through technical assistance grants in the amounts ofUS$81,000 and US$176,000 respectively.

PART I - THE ECONOMY

2. The most recent economic report, Report No. 4735-DO, entitledDominican Republic: Economic Prospects and Policies to Renew Growth, wasdistributed to the Executive Directors on February 13, 1984. Countryeconomic data are presented in Annex I.

3. The Dominican Republic occupies the eastern two-thirds ofHispaniola, the island situated between Cuba and Puerto Rico in the longmountainous archipelago that stretches 1,500 miles from the Gulf of Mexicointo the Atlantic (Map IBRD 18817). The country is endowed with a variety ofresources, including minerals, fertile soils suitable for sun-nourished cropslike sugar, and long beaches attractive to a growing number of tourists. Its5.7 million people have an average per capita income, in 1983, of aboutUS$1,330, placing it among the lower-tier countries in Latin America butstill middle income. The illiteracy rate, at 30 percent, is among thehighest in Latin America. Though 80 percent of the relevant age group isenrolled in primary education, only 45 percent of the first graders completethe primary curriculum.

Past Development Policies and Performance (1966-82)

4. After a three-decade dictatorship and a brief but costly civil warin 1965, the transition to fully participatory constitutional rule took place

X slowly under the dozen-year presidency of Joaquin Balaguer. During much ofthis period, the Dominican Republic followed essentially conservativemacroeconomic policies. Monetary and fiscal policies were tied closely tochanges in the external environment, and trade policies sought to exploiteasy opportunities for import substitution. Favorable terms of trade and arelatively high investment rate produced high rates of growth. From 1968 to1974, real GDP increased by 11 percent annually, export prices and volume5rew by 15 and 9 percent, respectively. Real production in manufacturinggrew annually by 14 percent, construction by 18 percent, and the incipientbut dynamic mining sector by 38 percent.

5. Several new economic and political forces gradually began toundermine the foundation of this growth, and rates declined first to a yearlyaverage of 4 percent during 1975-81, and then to under 2 percent during1982-84. External factors were important. Export prices became asubstantially more volatile, adding more complexity to short-termmacroeconomic management after 1974. Export prices reached a peak in 1975,declined by 30 percent in the 1979 period, reached a new peak in 1981 andthen plummeted again by 40 percent in 1982. The oil price shocks of 1974 and1979 increased the fuel bill tenfold, raising it to US$500 million by 1981,nearly 40 percent of the import bill. In 1977 petroleum absorbed only 60percent of sugar earnings, but by 1982 had risen to 133 percent. In the1980s, export volumes also declined under the weight of the recession in theindustrialized countries; by 1982 export volumes had declined one-fifth fromtheir 1978 level. Similarly, rising interest rates on top of an increasingdebt took their toll; service payments on public debt rose from US$87 millionin 1978 to US$246 in 1979. These external factors--worsened terms of trade,low export volumes, and high interest rates--caused GNP to be 8.8 percentlower in the 1979-81 period than it would have been in the absence of theseabrupt changes in the external environment.

6. But focusing solely on external changes would ignore the fragilityof the economic development strategy built upon import substitution, growingsubsidies, and price distortions. The trade and foreign exchange regimeaccorded high rates of effective protection to several domestic industrieswhile penalizing potential new sources of exports. Moreover, during the late1970s, the foreign exchange rate became increasingly overvalued. Althoughpegged to the US dollar at par value, the conservative policies r cessary toretain parity had been gradually abandoned in the late 1970s. By 1982 thepremium on the dollar in the nation's long-established, free-floatingparallel market fluctuated around 45 percent, but was slowly moving upwards.Another element of long-term fragility was tax policy and administration.The tax burden declined from about 18 percent of GDP in 1970 to under 10percent in 1982. Simultaneously, public enterprise which had contributedpositively to public savings, reaching historic highs in the mid-1970s,became a drain on the treasury by 1982. At the same time, Governmentexpenditures rose at an accelerated rate after 1978. Thus, while at thebeginning of the decade, public savings amounted to 8 percent of GDP, by theend of the decade they had dwindled to zero and by 1982 they were negative.

7. This poor performance was in part caused by the hostile externalenvironment, since the performance of the state-owned sugar company and Iexport taxes heavily influenced the savings rate of the public sector. Butother internal factors were nonetheless more important. As Dominican societygradually became more open and political participation broadened during the1970s, new social groups made demands on the public sector and the governingpolitical parties responded with favorable tax treatment, subsidies, andemployment opportunities. After 1979 this tendency was translated into evenmore costly defensive actions to cushion urban labor and middle classconstituencies from the need to adjust to externally imposed declines in realincome. Examples of these phenomena abound. The Government granted anincreasing number of tax exonerations to importing firms, and revenues fromimport duties fell from 6.7 percent of GDP in 1971 to 2.2 percent in 1982;

this practice created even greater distortions in the trade regime.Similarly, the new policies led to freezes on key prices (food, electricity,and petroleum). Thus, while the three principal state enterprises hadcontributed a high of 2.6 percent of GDP to national savings in 1975, by 1982they were absorbing public subsidies worth 1.6 percent. Likewise, after1978, employment in the public sector increased at rates nearly double thoseof the early 1970s.

8. The high growth period of 1968-74 also masked inattention toreforms in public sector institutions necessary to incorporate the poor intothe growth process, especially the rural poor. Even in the period of rapid

* growth, the rural poor had received only a small portion of new incomegenerated. More than 40 percent of Dominicans live in absolute poverty, andilliteracy and infant mortality rates are unacceptably high. Open anddisguised unemployment festered. The emergent anti-export bias took its tollmost heavily on the agricultural sector where most of the poor live, andthis, together with the pro-urban bias in new subsidies and employment, ledto accelerated rural-urban migration. Health investments mainly benefitedthe cities. Education resources were directed more toward urban rather thanrural beneficiaries, and toward increasing opportunities in the high payingprofessions rather than increasing the skills and productivity of the urbanand rural poor.

The Evolution of Public Policies Since 1982

9. The new Government that took office in August 1982 concluded athree-year Extended Fund Facility (EFF) with the IMF in January 1983. Aspart of the program, the Government raised taxes by one percent of GDP andreduced the deficits of the large, inefficient state enterprise sector. Itimproved the incentives for exporters and the efficient import substitutionby progressive transfers of imports and exports into the free-floatingparallel market. Finally, by year-end 1983, it had also reached an agreementin principle with its commercial creditors to reschedule US$660 million ofoutstanding loans.

10. However, the new Government underestimated both the gravity andcomplexity of the crisis. As growth slowed in mid-1983, the Governmentadopted an expansionary fiscal policy in the third quarter of 1983. Thisonly aggravated macroeconomic problems. Additional income was quicklytranslated into more imports and capital flight; the floating rate jumpedfrom 165 percent of the official rate to more than 300 percent in the lastquarter and uncertainty spread. By year-end the Government had failed toreduce the overall public sector deficit or the external imbalance, and didnot meet many of the targets of the EFF.

11. Resolving the situation required greater fiscal cutbacks, taxes,exchange rate adjustments, and credit restriction during 1984; this made theconditions for the second year of the EFF more stringent, and eventuallypolitically unacceptable. By the end of 1984, the economic situation wasgrave: the overall public sector deficit was 7.5 percent of GDP, the CentralBank no longer had sufficient funds to service its external debt and make oilpayments, as traditional exporters were withholding revenues because theCentral Bank gave them an exchange rate worth only half their free market

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dollar value. External arrears on the foreign obligations of the CentralBank grew to an estimated US$505 million. Debt service in 1985, includingarrears, was projected to exceed all current account receipts.

.

12. Nonetheless, the situation changed abruptly in January 1985 whenthe Government took several difficult measures to resolve the financialcrisis and reach a new Standby Arrangement with the IMF. The Government'sproposed program implies actions on the foreign exchange rate, pricing ofpublic enterprises, public finances, monetary policy and external debt. Themultiple exchange rate has been unified at the floating parallel market rate,tantamount to a 58 percent devaluation relative to the average effectiveexchange rate prevailing in 1984. With the increase in costs thatdevaluation implies, public enterprises in electricity, petroleumdistribution, food distribution, and manufacturing are compelled to raisetheir prices. Under the terms of the program, these increases will more thancompensate for the devaluation because most enterprises ran large deficitseven while receiving price subsidies through the dual exchange rate regime.The new program also entails a package of tax increases, expenditure cuts,and curtailments of subsidies worth more than one and one-half percent ofGDP. Interest rates are to be made more flexible, and the program is alsodesigned to assuage the acute foreign debt crisis caused mainly by short-termborrowing during the last two years. Therefore, new net disbursements ofloans in 1985 with maturities of less than 12 years will be limited toUS$64.2 million, and the Government will limit its borrowing to sourcesoffering terms longer than 12 years. In addition, as part of the program,the Government will reduce its external arrears during 1985 and restructureits foreign debt. The Standby Arrangement was approved by the IMF Board onApril 15, 1985. In the meantime, the Dominicans have taken preliminary stepstoward renegotiating the Paris Club obligations aad restructuring thecommercial bank debt.

13. If fully implemented, these measures constitute a major stepto position the economy for realizing its growth potential. With itseconomically sound stabilization program now in place, we believe the countryis creditworthy for Bank lending.

PART II - BANK GROUP OPERATIONS IN THE DOMINICAN REPUBLIC

14. Bank lending in the Dominican Republic has consistently sought topromote a more diversified econiomic base, a more viable macroeconomic policyenvironment, and iustitutional reforms that would promote more broadly shareddevelopment.

15. The Bank Group began its operations in the Dominican Republic in V1969 with a loan supporting the development of extended lateritic nickeldeposits. Since then, three IDA credits and 15 Bank loans (one of which--aUS$7.1 million loan for a municipal technical assistance project-wascancelled) have been made. The IFC has made four investments: an industrialcredit facility (cancelled), a cement plant, a cotton production andginning project, and a leasing institution. As of March 31, 1985, the totalof IDA credits and Bank loans outstanding was US$275.3 million of whichUS$99.5 million were undisbursed. Annex II includes a summary of Bank Group

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operations and IFC investments; notes on the execution of ongoing projectshave been distributed separately to the Executive Directors.

16. Bank Group loans and credits have financed one nickel miningoperation; two education projects; two tourism projects; one livestockproject; two irrigation projects; three road construction and maintenanceprojects; one population and family health project; one urban developmentproject; one sugar rehabilitation project; one coffee and cocoarehabilitation project; one reconstruction project for urgent imports and apower and ports engineering project.

17. The country's institutional weaknesses have hampered projectimplementation and disbursement performance. Most projects have been plaguedwith managerial weaknesses, delays in getting congressional ratification,unavailability of required counterpart funds, changes in leadership andpolicies. These problems have afflIcted the irrigation, sugar rehabilitationand urban development projects. In the last few years the difficult fiscalsituation has caused a slowdown in the implementation of all publicinvestment projects.

18. Many public and private aid agencies are active in the DominicanRepublic. Among the most important are the Inter-American Development Bank(IDB), the United States Agency for International Development (USAID), andthe United Nations system. The IDB retains a diverse program with emphasison agriculture, public health, transport, energy and education but alsoincluding important investments in the industrial and mining sectors, andurban development. To date, the IDB has approved 56 lending operations formore than US$960 million equivalent (of which about US$465 million have beendisbursed to date) and in addition has delivered important technicalassistance services. In the future IDB plans to maintain a strong programwith loans to the energy, agricultural and industrial sectors, and tohigh-priority social projects in the fields of education and ruraldevelopment.

19. USAID emphasizes food aid programs complemented by food productionprograms. Other USAID assistance is directed to small/medium industrialdevelopment, energy conservation, vocational education and skills training,primary education and housing. The United Nations system provides a varietyof technical assistance and pre-investment support, and sponsors an importantmineral reconnaissance program. In addition, other donors (Federal Republicof Germany, France, Sweden, Venezuela) support assistance programs inselected sectors; much of their benefits flowing to the urban, energy andpower sectors.

Bank Strategy

20. The economy of the Dominican Republic is overly dependent on a fewstagnant export crops. The price of sugar-crop which traditionally hadaccounted for 30-40 percent of the country's export-continues to fluctuatearound historic lows and the prospects for improvement in the near future aredecidedly bleak. Unemployment will continue to be high, and absolute povertyfar more pervasive than the country's per capita income would indicate. The

Bank's strategy is to help the Government focus on long-term objectivesand/or reforms that will position the country to take better advantage ofavailable growth opportunities through export diversification and improve theemployment opportunities of the poor by increasing their productivity.

21. The near-term lending strategy of the Bank is built on a smallnumber of well-targeted investment projects, since the Dominican Governmentwill continue to experience severe shortages of local funds to match projectlending. Besides the proposed project, the Bank contemplates projects tohelp improve infrastructure, necessary to improve the country's new emphasison diversified exports and efficient import substitution. These include aproject in road reconstruction and maintenance, a power project and a projectfor the construction of a coal terminal.

22. Past economic work has identified essential sectoral reforms whichthe Bank could support with policy-based lending. In agriculture,impediments to exports inherent in tax and investment policies of theGovernment must be removed to ensure maximum growth and diversification ofthe country's exports. Also, food pricing policy should be revised to permitautomatic adjustments in response to changes in costs and market conditions.In industry, the system of incentives to importers and exporters must bereformed to enhance manufactured exports and promote efficientlabor-intensive import substitution. In energy, the Government will have torevise its prices regularly in line with changing cost and market conditionsas well as undertake substantial institutional and administrative reforms inthe power generation sector. In health policy, expanded rural health caredelivery together with population programs could help mitigate the effects ofshort-term adjustment on the poor while curbing the high population growthrate.

23. The proposed project is consistent with this strategy: it is afinancially modest, strongly focused project which does not requireGovernment counterpart funds and contributes directly to better integrationof the poor in the economic process by increasing their productivity.In the long run, it will contribute to Government efforts to increase anddiversify the country's production capacity by increasing skilled manpower.

PART III - THE VOCATIONAL TRAINING SYSTEM

General

24. The slowdown in growth plaguing the economy in recent years hasmade the chronic unemployment problem acute. Open unemployment is estimatedat about 22 percent of the 2 million labor force and disguised unemploymentmay be twice that. The situation is especially severe in urban areas whereprevious pro-urban policies had attracted new workers. Nearly 60 percent ofworkers now live in cities. Moreover, the Government's adjustment programwill reduce the subsidies and employment opportunities in the public sectorand throw a greater share of the adjustment to harsh external realities uponthe shoulders of the urban poor.

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25. One element of the open and disguised unemployment problem is themismatch between the existing supply of skills of the labor force and thedemand. The demand for skilled workers in industry, agroindustry,construction and services (tourism in particular) is projected to grow morerapidly than the demand for unskilled labor. Given the preponderanc2 ofsupply in the low skill segment of the market and the scarcity in the higherskill end, any resumption of economic growth is likely to be characterized bya widening wage gap between skilled and unskilled workers. Thus, not onlywill the short supply of skilled workers dampen growth, the structure of thelabor market will contribute to a worsening of income distribution whengrowth resumes. Vocational training can mitigate both phenomena.

Characteristics of the Vocational Training System and its InstitutionalFramework

26. The Ministry of Education provides, through a variety of means(secondary education, special courses and technical schools), education withsome vocational content to about 10,000 students. However, this training ismerely of a pre-vocational nature since most of the graduates either advanceto higher education or enter the job market in areas different from thosethey were trained for.

27. Vocational training proper is provided by a variety of private andpublic institutions (Ministry of Agriculture, Armed Forces, Social SecurityInstitute, INFOTEP). Most institutions provide pre-service training, i.e.,before entrance into the job market, to trainees who, in most cases, havedropped out of the formal education system (at elementary or secondary level)and in some cases, are adults without skills. Current enrollment in theseprograms amounts to about 5,000 students who graduate as technicians ormostly as certified skilled workers or craftsmen. Of this total, privateinstitutions absorb about 1,200 students and INFOTEP about 1,000. The ArmedForces with 11 centers, the Ministry of Agriculture with four centers and theprivate institutions provide for some regional coverage. The programs of theArmed Forces, Social Security Institute and INFOTEP are mainly orientedtoward metal mechanics, construction and electricity, while the agriculturalsector is served by the limited vocational training capacity of the Ministryof Agriculture.

28. In-service training, which has existed only since 1983, is providedby INFOTEP to about 4,000 trainees. These in-service training programs,although also covering the above-mentioned areas of specialization, emphasizetraining in the services and agricultural sectors. These are provided byINFOTEP's own instructors or by other training institutions supported,technically and financially, by INFOTEP, and include training of supervisorsand production engineers in private enterprises.

The Vocational Training System's Performance and Issues

29. The country's present capacity to retrain employed workers andupgrade their skills represents less than one-fifth of the expected demand,with these shortfalls being very critical to the services, agricultural and

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metal mechanics sectors. The same projections indicate that, by 1987, thedemand for new skilled manpower (i.e., entering the job market) will exceedthe current training capacity of the country by about 100 percent. Clearlythere is a need to expand the vocational training capacity, particularly inthe area of in-service training.

30. In addition, the pre-service training, as now conceived and run,has problems with the relevance and quality of its programs. Because of lackof analyses and forecast of changes in the labor market, the content andcomposition of the vocational training programs offered by the institutionsbear no relationship to market demands. This results in enterprisespreferring to hire unskilled manpower and providing ad hoc on-the-jobtraining, and in high unemployment among the graduates of the pre-servicetraining programs. lhis problem is compounded by lack of coordination amongthe institutions, resultiag in duplications and gaps in programs and locationof facilities; by poorly qualified instructors who lack relevant industrialexperience; and by the poor quality of the equipment and materials used intraining.

Strategy for Improving the System

31. In order to structure the vocational trainiag activities, increasetheir output and improve the adequacy of the training, the Government createdINFOTEP in 1980.1/ INFOTEP's mandate consists of (i) regulating,coordinating and monitoring all vocational training activities in thecountry; (ii) supporting the activities of existing training institutions;and (iii) complementing existing training activities where and when needed.This initiative received the support of the business community and tradeunions who are represented on INFOTEP's Board and finance, through payrolllevies, its operations. Besides enterprises and unions, the Ministries ofLabour, Education and Armed Forces are represented on the Board. The Boardis assisted, in technical matters, by a National Advisory Committee composedof representatives of enterprises and trade unions and of Government agenciesas the subject matter requires.

32. Since its inception, INFOTEP has received technical assistance frommultilateral as well as bilateral sources. This has allowed INFOTEP toestablish itself as an institution, to produce a preliminary medium-termdevelopment plan for vocational training, and start implementing vocationaltraining programs, mainly at the in-service level. However, it still doesnot have the technical capability and expertise to analyze the labor marketand forecast changes adequately; nor does it have the capacity to implement aplan reuulting from such analyses. Also, it does not have the capabilitiesand facilities to complement the shortfall of existing training capacitiesadequately and to monitor the impact of the training programs.

33. Coordination and Decentralization of the Training Activities.INFOTEP intends to improve its capacities to analyze and forecast labormarket requirements, and to monitor the impact of training provided. Thesewould enable INFOTEP to assist other institutions in planning and

1/ The promulgation of Law 116 of January 1980 establishing INFOTEP was inpart the result of the Second Education Project (Loan 1142-DO) of 1975(para 36).

coordinating their training activities both through direct advice andselective support of programs of Institutions, and through coordinatingmechanisms such as INFOTEP's Board and sectoral technical advisorycommittees, which will comprise representatives of training Institutions,

* employers' organizations and trade unions. The guidelines for theestablishment of sectoral technical advisory committees at the regional levelwould be submitted to the Bank for comments by not later than June 30, 1986

* and thereafter INFOTEP would promptly establish such committee- (Section 2.06of the draft Project Agreement). The use of common trade standdrds, to beestablished by INFOTEP, would allow employers and training institutions toidentify timely the need for additional training of employed workers and, at

* the same time, improve the targeting of programs by institutions. Creationof job placement services would enhance the integration of graduates into thelabor market and into jobs corresponding to their skills.

34. Quality of Training. In order for INFOTEP to contribute to raisingthe quality of training, it plans to build up a capability to train its owninstructors, and those from other institutions and private enterprises,whether new or experienced. Occupational analyses of all important trades byINFOTEP should provide a basis for all training institutions to adjust andupgrade course contents. Supervision of all training activities, based onpre-established aorms and regulations, would become a continuous function ofINFOTEP and will require training of qualified supervisors. Finally, throughexpanded but selective support of other institutions' programs (material,equipment, instructional programs and technical assistance) INFOTEP will beable to influence the relevance and quality of the courses; an action plan tothat effect would be prepared by INFOTEP and submitted to the Bank forcomment by March 31, 1986 and promptly thereafter implemented (Section 2.07of the draft Project Agreement).

35. Adequacy of Training. INFOTEP aims at contributing to theexpansion of the training capacity, mainly in the area of in-service trainingwhere the shortfall of the existing capacity is the greatest. It will expandits own training capacity, as well as encouraging other training institutionsto expand in-service courses with adequate support of INFOTEP, end willassist private enterprises in setting up and running internal courses. Inaddition, the creation of a mobile training program by INFOTEP will not onlyincrease the training capacity but also increase flexibility in meeting thetraining needs of a wider range of geographic locations.

Bank Participation in the E2ication Sector

36. The Bank Group has financed two education projects in the DominicanRepublic: a First Education Project, supported by an IDA credit of US$4million, was signed in February 1971 (Credit 235-DO), and a Second EducationProject supported by a loan of US$8 million, was signed in July 1975 (Loan1142-DO). Another Education Project, focusing on rural primary education wasappraised, but was dropped by the Government from its investment program aspart of its financial adjustment measures.

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37. Tho first project aimed at preparing and implementing a reform ofthe education system by improving the quality and content of secondaryeducation and training of primary teachers, and by preparing a comprehensivelong-term plan for educational development. At completion2/ (April 1977),the project had provided a modern, well-equipped and geographically balancedphysical setting for secondary schools and primary teachers' trainingcolleges. The reform of secondary schools suffered from implementationdelays, and thus, had only a partial impact. The educational planning wasnot finalized and the reform of secondary education (structure andcurriculum) was only partly completed and implemented, indicating the needfor detailed pre-established job descriptions and timetables allowingeffective supervision and evaluation of consultants' work in future projects.

38. The second project was designed to address the most importantissues of rural basic education and vocational training, includingagriculture. The project aimed at the rationalization of the physicaldistribution of rural primary education and provided, to that effect, forconstruction or expansion and equipment of rural community learning centers(RCLC), as well as of agricultural and other vocational training centers, andincluded a technical assistance component for upgrading programs for teachersin the RCLCs. At completion>/ (December 1983) the rationalization of therural primary education had been achieved by-the creation of the RCLCs,complemented by the primary teachers' upgrading programs; four agriculturaland three other vocational training centers were established; and, also,INFOTEP was created, which prepared a preliminary medium-term developmentplan, a first step toward a sustained improvement of the vocational trainingsystem (para 31).

PART IV - THE PROJECT

Background

39. The Government of the Dominican Republic has requested the Bank'sassistance in financing a five-year project aimed at improving the country'svocational training system, through increasing INFOTEP's capacity tocoordinate, regulate, monitor and decentralize vocational trainingactivities, and to improve the quality of and expand the vocational trainingsystem.

40. The proposed project would help the Government's developmentefforts oriented to more intensive use of the country's natural resources (inagriculture, tourism and resource-based manufacturing). It would contributeto increasing labor productivity and reducing unemployment. Anotherimportant feature of the government policy that this project would support isproducing incentives for regional development in order to slow workermigration to the major cities and promote a more equitable distribution ofdevelopment benefits.

2/ Project Performance Audit Report (No. 2021), April 11, 1978, and ProjectCompletion Report of the same date.

3/ Project Completion Report of August 15, 1984.

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41. The Bank's support of the proposed project is justified because:(i) it would contribute to an overall improvement and more rationalutilization of the Dominican Republic's vocational training system; (ii) itwould aid the Government's efforts to improve worker productivity andregional distribution of employment; (iii) it would contribute to enhancingexports and to attracting foreign investment; (iv) it is feasible in terms offinancial and administrative capacities of the borrower and the implementingagency; and (v) it would complement the Bank's previous involvement ininstitution building in the area of education and vocational training.

42. A subsector study4/ mission visited the Dominican Republic inFebruary 1984, followed by a preparation/pre-appraisal mission in June 1984.The project was appraised during October 1984. Negotiations were held inWashington, D.C. on April 15 and 16, 1985. The Borrower and the Beneficiarywere represented by a delegation led by Dr. Pedro Franco Badia, Secretary ofLabour. A Staff Appraisal Report (No. 5470-a-DO, dated April 30, 19B5) isdistributed separately. Annex III contains a supplementary project datasheet.

Project Objectives

43. As noted above, the project has two major Dbjectives: (a) toenable INFOTEP to coordinate, regulate and monitor developments in thevocational training system; and (b) to expand INFOTEP's capacity to provide,directly and indirectly, appropriate training in response to anticipatedskilled worker requirements.

Project Components

44. With regard to achieving the first objective, the proposed projectwould provide technical assistance (47 staffmonths of consultants servicesand eight staffmonths of fellowships) to INFOTEP to (i) enhance INFOTEPplanning services and management; (ii) develop a training standard andcertification systems (iii) increase improve courses content; and (iv)organize the technical supervision of all vocational training courses.

45. Concerning the second objective, the proposed project would (i)expand the capacity to upgrade and train about 990 instructors through theorganization of about 57 courses; (ii) establish a trainee followup andplacement system; (iii) increase the pre-service training for about 850additional unskilled workers; (iv) increase the in-service training to about5,500 additional skilled workers and supervisors; (v) establish a pilotproduction training center to provide training for about 900 low incomeworkers engaged in the informal sector of the economy; and (vi) enhanceINFOTEP training advisory services to assist about 560 enterprises in thetraining of about 1,800 supervisors and managers. Therefore, the projectwould provide for construction or expansion and equipment of three vocationaltraining centers, for complementary training equipment for othercollaborating training institutions, for the establishment of a mobiletraining program through the acquisition of 14 mobile sets of trainingequipment and about eight light vehicles, and for technical assistance (59staffmonths of consultants services and 156 staffmonths of fellowships).

4/ Vocational Training Subsector Memorandum, Report 5148-DO.

- 12 -

46. Planning of Vocational Training System. The proposed project wouldinclude expert services and fellowships to provide assistance and training tomanagerial and technical personnel of INFOTEP, and developing theappropriate mechanisms for planning and orienting the vocational trainingactivities of the system components. To these ends, 55 staff-months oftechnical assistance, of which 24 staff-months will be financed by UNDP, havebeen included in the project.

47. Training Standard and Certification Services. With support ofconsultant services (three staffmonths) and a fellowship financed by theproject, INFOTEP would develop a trade testing system based on trainingstandards for recognized, skilled occupations. This would allow themonitoring of training quality and relevance by targeting courses to providetraining in required skills; it would also motivate workers to attend theprescribed courses in order to obtain a certification of the level of skillsacquired.

48. Occupational Analyses and Course Content. To increase therelevance of training to labor market requirements and to standardizetraining programs, the project would include: occupational studies in 35occupations, preparation of 320 training modules, and experimentation withmodern training methods. Occupational analysis would be the basis for thepreparation of syllabi for different training modules, allowing workers toattend successive courses according to their specific training needs. Tothese ends the project includes consultant services (three staffmonths) and afellowship.

49. Supervision of Training Courses. Supervision of all coursesprovided by the different institutions would be organized as a permanentINFOTEP function, and executed by qualified personnel to ensure that programsare implemented following pre-established standards and methodologies. Theavailability and quality of equipment, tools, training facilities andtraining materials would be assessed, as well as trainers' skills andperformance. The -project includes consultant services and fellowship to thisend.

50. Instructor Training Program. The project would finance 57 trainingcourses for instructors of INFOTEP and collaborating institutions. INFOTEPspecialists, assisted by experts financed by the project, would train about400 new full-time and part-time instructors and about 590 experiencedinstructors.

51. Trainee Follow-up and Placement. Selective follow-up of graduateswould be organized to obtain feedback on the impact of the training onworkers' employment, income and performance. Placement services and trainingagency-employer committees would facilitate the employment of new graduates,and help detect changes in needs and spot program deficiencies. To thateffect the project provides for consultant services and fellowships.Specific follow-up studies, financed by the project, of the graduates of theproposed pilot production center for the informal sector occupation will becarried out to provide a basis for deciding about future expansion; suchstudies would be prepared by INFOTEP in consultation with the Bank and the

- 13 -

results would be presented to the Bank for comment and discussions byDecember 31, 1987 and promptly thereafter implemented (Section 2.07 (a) (ii)and (b) of the draft Project Agreement).

52. Expansion of Training Opportunities. The proposed project, whenfully operational in 1989, would expand the country's yearly trainingcapacity to supply pre-service training for about 850 additional trainees,and in-service training for about 7,300 additional active workers andsupervisors representing about 25 percent of the target group; of this total,5,000 trainees would be reached through the mobile training program, 1800through the training services in firms and 500 in training centers. Inaddition, a pilot production training center would be established in a suburbof Santo Domingo offering training opportunities to about 900 low-incomeworkers engaged in informal sector trades, which would allow then to earnsome income from the sale of items produced during training.. Pre-servicetraining would mainly be expanded in agriculture and netal-mechanics.In-service training would be expanded about equally in industry, agricultureand service sectors, and to a lesser extent in the construction sector. Inaddition, the in-service training capacity would be further increasedsubstantially by private firms using the trainers/supervisors trained byINFOTEP, and by shifts, promoted iy INPOTEP, in other institutions' programs,towards in-service training. Furthermore, expansion of training capacitieswould take place through creation or expansion-of vocational training centersand mobile training programs.

53. The project would provide financing of construction, furniture andequipment for INPOTEP's training center in Santo Domingo, and completion ofthe Santiago Center, owned by the Ministry of Education but to be used inpart by INFOTEP under a formal agreement between the two parties. Theproject would also provide equipment and furniture for the pilotproduction-training center, and finance the replacement of obsolete equipmentand provision of additional equipment for one small existing training centerin Santo Domingo (Herrera), and otber selected training institutions.

54. The proposed project would also enable INFOTEP to operate trainingprograms in small towns and rural commuities where fixed centers would notbe economically viable. Financing would be provided for fourteen mobile setsof equipment to provide for or complement existing local physical facilitiesof the commuuities or collaborating training institutions. To that effectINFOTEP will enter into agreements with enterprises or public agencies (such

iL as the Ministry of Housing, Agriculture or Education) who will share theresponsibility of the courses with INFOTEP and organize the recruitment ofparticipants. The mobile sets would be specialized in industrial sewing,maintenance and metal mechanics, house construction, agricultural mechanics,and food production and preservation. This approach, which has proven to besuccessful in other countries of the region under Bank financed projects, ischaracterized by its low cost, high return and flexibility.

55. INFOTEP's Advisory Services for Enterprises Requiring SystematicOn-the-Job Training Programs. INFOTEP would enhance its capacity to assistenterprises in diagnosing training needs and in implementing on-the-jobtraining programs. Courses would be offered to improve skills in

- 14 -

organization, planning, administration, industrial relations, accidentprevention, etc. Supervisors and technicians would be trained as trainers inspecific subjects, where upgrading of skills of workers is needed. By 1988about 560 enterprises would benefit from such assistance, permitting about1800 supervisors and managers to be trained per year. To that effect, theproject would provide (i) technical assistance for developing trainingprograms in small and medium enterprises; (ii) provision for fellowships forINFOTEP technical staff; (iii) audio visual aids and learning materials; and(iv) printing equipment to produce the instructional materials for theprograms.

Project Costs and Financing

56. Costs. The total cost of the project (net of taxes) is estimatedat DR$25.1 million or about US$8.4 million equivalent, of which US$5.5million equivalent is foreign exchange (66 percent). Cost estimates forcivil works are based on tenders received. Equipment and furniture costs arebased on inventories of requirements. Costs of technical assistance areassessed on the base of terms of reference and a program of consultantdeployment. Physical contingencies amount to 10 percent and pricecontingencies for local and foreign costs combined amount to 12 percent,based on estimated inflation rates for local costs of 26.6 percent in 1985,13 percent in 1986, 10 percent in 1987, 8 percent in 1988 and 7 percent ineach of 1989 and 1990, and for foreign costs of 5 percent in 1985, 7.5percent in 1986, 8 percent for each of the years 1987 through 1990.

57. Financing. The proposed Bank loan of US$5.8 million would finance69 percent of the total project cost or 94 percent of foreign exchange costand 20 percent of local costs. This level of financing is recommended on thefollowing grounds: the reserves accumulated by INFOTEP to finance in part theproposed project have lost 55 percent of their purchasing power sinceappraisal as a consequence of the change in the exchange rate system andconcomittant inflation; because of its ongoing adjustment program, theGovernment cannot provide the funds to fill the financing gap. INFOTEP wouldcontribute, mainly from accumulated revenues, US$2.3 million equivalent,representing 28 percent of the total project cost; the annual contributionduring project implementation will be reflected in INFOTEP's budget. Underseparate arrangements, the UNDP and the Government of Spain would financetechnical assistance for about US$0.3 million, which represents some 3percent of the total project cost and 6 percent of foreign exchange costs.The Government would pass on the proceeds of the loan as a grant to INFOTEPby a financing agreement, acceptable to the Bank (Section 3.01 (b) of thedraft Loan Agreement). Execution of the financing agreement would be acondition of effectiveness (Section 6.01 of the draft Loan Agreement).

Project Implementation

58. Implementation of the project would be the responsibility ofINFOTEP. A project director has been appointed from the staff of INFOTEP,while the Director General of INFOTEP would have overall projectresponsibility. The appointed project director has qualificationssatisfactory to the Bank, according to agreed terms of reference. INFOTEP

- 15 -

would maintain a project director with qualifications satisfactory to theBank during project implementation (Section 3.01 (b) of the draft ProjectAgreement). The project director would be assisted by INFOTEP's planning,technical and administrative directorates and the construction department.The project is expected to be implemented over five years, and to becompleted by June 30, 1990.

59. Executing Agency. INFOTEP is a semi-autonomous organization,established by law in 1980 as the main vocational training entity in thecountry (para 31). The headquarters are located in Santo Domingo and it hasfacilities with regional responsibilities in Santo Domingo, Herrera, Santiagoand Azua. It is administered by a Tripartite Board, chaired by the Secretaryof Labor, and composed of representatives of the Government, employersorganizations and trade unions. The Board is mainly responsible forpolicymaking, resource allocation, and review and monitoring of key issuesconcerning budgetting, staffing, long-term planning and organizationalsetting. A General Directorate executes policy, supervises training programsand coordinates operations. The institution is organized in five operationalunits: Finance; Collection; Administration and Personnel; Methods andOperations; and Planning and Studies. The Institute is financed through apayroll levy on public and private enterprises and their employees(contributions of 1 percent and 0.5 percent, respectively), representingUS$2.1 million equivalent in 1985 and expected to increase in constant 1985terms to US$2.5 million equivalent by 1989. A specific action plan toincrease INFOTEP income by 20 percent in real terms by December 31, 1989 byimproving the efficiency of collecting the payroll levy would be prepared bythe Government and submitted to the Bank for comment by December 31, 1986,and promptly thereafter implemented (Section 4.01 of the draft LoanAgreement). From 1980 to 1985 INFOTEP's income exceeded operatingexpenditures, resulting in accumulated reserves which would be used tofinance part of the project. In early 1985, INFOTEP's total staff amountedto 284 persons, which is expected to increase to 324 by 1989, when theproject would be fully operational. INFOTEP's recurrent budget is forecastto increase in constant terms from US$1.83 million equivalent in 1985 toUS$2.47 million equivalent by 1989, when it will be fully operational. Inthe intermediary years INFOTEP is expected to generate surpluses on itsincome which will complement the revenues accumulated through 1985, tofinance the project.

60. Procurement. Procurement for civil works is being carried out onthe basis of international competitive bidding (ICB) in accordance with Bankguidelines. Tenders for the first phase of the civil works, includingconstruction of workshops, sanitary facilities, guardhouse and storerooms ofthe Santo Domingo Regional Center, were received in December 1984. The sameprocedure is being followed on the second phase of the construction program,which includes classrooms and offices for the Santo Domingo Regional Center,and completion of the Santiago Center, owned by the Ministry of Education.Contracts for equipment, furniture and other materials would be grouped toform attractive packages, as far as possible, and when exceeding US$50,000would be awarded on the basis of ICB, in accordance with Bank guidelines.Contracts below US$50,000 would be awarded on the basis of competitivebidding advertised locally in accordance with government procurement

- 16 -

practices acceptable to the Bank; such purchases would, in aggregate, notexceed US$350,000. In addition, miscellaneous items that cannot be groupedin packages exceeding US$20,000 would be procured through local purchasing onthe basis of three price quotations; such local purchasing would not inaggregate exceed US$300,000. Prior Bank review would be required forcontracts exceeding US$100,000. Other contracts would be subject to randomreview by the Bank after contract award. Contracts for technical assistancewould be made in accordance with the Bank's guidelines. In the case of ICB,domestic manufacturers would be allowed a preferential margin in bidevaluation equal to the prevailing tariff or 15 percent of the CIF bid price,whichever is lower. Annex IV provides the details of procurement modalities.

61. Disbursement. Because of the advanced stage of preparation andimplementation of parts of the project (civil works, equipment procurementand technical assistance), a disbursement profile, which is substantiallydifferent from that of the average education project in the region, has beenadopted, which projects fast disbursement of the loan amount. The ClosingDate would be December 31, 1990. The proposed loan is expected to bedisbursed over a period of about five years to cover: (a) 30 percent oftotal expenditures for the second phase of the building program whichincludes part of the Santo Domingo Center (classrooms and regional office)and the completion of the Santiago Center; (b) 100 percent of foreignexpenditures, and 80 percent of local expenditures (excluding taxes) forfurniture, equipment and vehicles, including installation costs whereapplicable; (c) 100 percent of foreign expenditures for consultant servicesand fellowships. Disbursements against civil works, fellowships andcontracts for furniture and equipment with a value of up to US$20,000 each,would be made on the basis of :tatements of expenditure. Relating documentswould be retained by INFOTEP and would be made available for Bank review.All other expenditures would be fully documented. A Special Account, inU.S. dollars, would be financed out of the proceeds of the loan, through aninitial deposit and subsequent replenishment (Section 2.02(b) of the draftLoan Agreement). The initial deposit would amount to US$0.5 millionequivalent.

Accounting and Auditing Procedures

62. INFOTEP would maintain separate accounts for the project inaccordance with acceptable accounting practices. A summary of projectaccounts, reflecting cumulative expenditures incurred by the end of eachsemester, would accompany progress reports sent to the Bank for information.All INFOTEP accounts, financial statements and statements of expendituresrelevant to the project would be audited annually by independent auditorswith qualifications acceptable to the Bank. The annual auditor's report andthe certified copies of all relevant financial statements would be remittedto the Bank not later than 120 days after closing of each fiscal year(Section 4.01 of the draft Project Agreement). INFOTEP's current accountingpractices and its auditing arrangements are acceptable to the Bank.Similarly, the Government would be required to have the Special Accountaudited annually by independent auditors with qualifications acceptable tothe Bank (Section 4.02 of the draft Loan Agreement).

- L7 -

Project Justification and Benefits

63. Building on an initiative started under a previous Bank financedoperation, the project would further the development of the vocationaltraining system through institutional development of INFOTEP, increases incoverage and quality of the vocational training provided, therebycontributing to the government's development efforts.

64. Institutional Development. The project would equip INFOTEP withthe capacity to carry out integrated planning for the vocational trainingsystem, to assist enterprises and institutions to upgrade training programs,and to optimize the use of the country's physical and human trainingresources.

65. Improvement in Coverage. The project would double the country'scapacity to supply in-service training in Santo Domingo and in the regions.Coverage would be further increased by: (i) the multiplier effect of firminstructors/supervisors trained by INFOTEP; and (ii) changes in theorientation of courses offered by collaborating institutions. Sectoralcoverage would also be enlarged.

66. Improvement in Quality. Quality of training would improve becauseof the availability of: (i) instructors with upgraded qualifications; (ii)program content reflecting labor market requirements; (iii) adequate trainingequipment, tools and materials; (iv) periodic technical and pedagogicalsupervision of the courses; and (v) periodic follown-i- of gLaduates'on-the-job performance.

Risks and Proposed Measures

67. No significant risks are associated with the technicalimplementation of the project. Achieving the project's objectives, aimed atimproving the whole vocational training system, is, however, subject to twopotential risks. The first is concerned with INFOTEP's ability to fulfillits primary role of coordinating and monitoring all training activities inthe country; the second refers to the readiness of INFOTEP to provideadequate financial resources to support the training activities ofcollaborating institutions.

68. INFOTEP's Ability to Coordinate and Monitor the System. As a newlyorganized institution, there is always the risk that INFOTEP may prove to beineffective in its role of coordinating the activities of the entire system,and may become instead another palliative institution competing with publicand private institutions already providing training. This risk would bereduced if, as is recommended in the proposed project, INFOTEP were given themeans to offer good quality services, and thereby earn prestige as well asthe confidence of its clients. A technical assistance program, which formsan integral part of the project and built upon technical assistancepreviously provided by INFOTEP, aims to assist INFOTEP's technical staff incoping with this task.

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69. INFOTEP's Allocation of Resources to Support CollaboratingInstitutions. INFOTEP has been expanding its training activities rapidly, tosome extent at the expense of collaborative efforts with other trainingagencies, thus limiting its influence on improving the quality and providingdirection for the rest of the system. The required resources would beobtained by earmarking an increasing portion of INPOTEP's resources for thesepurposes by mitigating INFOTEP's tendency to increase its administrativeexpenditures (including salaries). Therefore, assurances have been obtained afrom INFOTEP that it would maintain separate entries in its annual operatingbudget for contribution to other training agencies through several means,such as training materials and equipment, instructional program and technicalassistance. A plan identifying measures to be taken to increase the share ofthese activities in INFOTEP's annual budget to 30 percent by December 31,1989 would be submitted to the Bank for comment by June 30, 1986, andimplemented promptly thereafter (Section 4.02 of the draft ProjectAgreement).

PART V - LEGAL INSTRUMENTS AND AUTHORITY

70. The draft Loan Agreement between the Dominican Republic and theBank, the Project Agreement between the Bank and INFOTEP, and the Report ofthe Committee provided for in Article III, Section 4 (ii) of the Articles ofAgreement are being distributed separately. Execution of the financingagreement between the Government and INFOTEP, acceptable to the Bank, wouldbe a condition of effectiveness.

71. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank.

PART VI - RECOMMENDATION

72. I recommend that the Executive Directors approve the proposed loan.

)

A. W. ClausenPresident

AttachmentsMay 1, 1985

- 19 - ANNEX IT AB L SA Page 1 of 5

DOMINICAN xRI . - -CI4 ImLA MUST AUSDOMINICAN RUP. (HOST RECEN ES,0TKNDATE3 4k9)tN T (M0S T 2Hw sn"SXI

neatk igL mEIIT NIDDLT INT'A HIOOINCOI19taL im&t m TICLb T AMC CARA Gi WOrE

AIX TlDa Nl SQ. -)TOTAL U6.7 4U.7 4U.7

* AGRICULTURAL 13.3 25.1 27.6

Wri CAPITA (US) 250.0 420.0 1330.0 2106.6 2345.3

UI;T CuIt_ u IE M CAPITA(KIIoGRAMS OP OIL EQUIVALENT) 106.0 236.0 34.0 995.5 1122.6

lMUIATIO UM VlTAL atATImCBPOPULATION*Hl-DYEAR (THOUSANDS) 3047.0 4006.0 5744.0URAN POPULATION (2 OF TOTAL) 30.2 40.3 52.9 66.5 4b.6

POPULATION PROJECTIONSPOPULATION IN YEAR 2000 (NILL) 6.4

* STATIONARY POPULATlON (MILL) 14.9POPULATION INIENTUI 1.9

POPULATION DENSITYPER SQ. Km. 62.5 62.2 114.0 35.7 52.9PEM SQ. D. AOl. LAND 166.3 159.9 202.7 92.4 156.9

POPULATION AGE STRUCTURE (2)0-14 Tlts 47.3 49.0 43.9 39.9 31.0

15-64 Yrs 49.3 46.3 53.1 56.0 01.1bS AND ABOVE 2.9 2.7 2.7 4.1 7.1

POPULATION CROMN RATE (Z)TOTAL 3.6 2.7 3.0 2.4 1.6URAN 6.0 5.S 5.3 3.b 3.7

CRUDE BIKRT RATE (IER THOUS) 48.6 43.7 33.5 31.3 23.4CRUDE DEATH RATE (PER THOUS) 17.0 12.1 7.6 6.1 H.NcROSS RPRODUCTION RATE 3.6 3.2 2.2 2.0 1.0

FAMILY PLNNINGACCEPTORS, ANNUAL (TbOUS) .. 17.Z B8.9 IcUSERS (t OF HARRIED WMER) 42.0 40.3

DOD AM ITRITICIINDEX OF FOOD PROD. PER CAPITA(1909-71-l00) 96.0 100.0 104.0 114.3 114.5

PER CAPITA SUPPLY oFCALORIES (2 OF REQUIREMENTS) 96.0 100.0 106.0 110.6 126.6PROTEINS (CMS PER DAY) 47.0 49.0 52.0 67.3 59.7

OF WHICH ANlIAL AND PULSE 25.0 27.0 21.0 /c 34.1 34.5

CHILD (AMES I-4) DRATN RATE 20.0 10.1 5.0 5.7 5.2

HEALTHLIFE EXPECT. AT BIRTH (YEARS) 50.9 5b.6 62.4 64.7 67.4INFANT HORT. RATE (PER THOUS) 119.5 90.0 64.5 60.b 54.2

ACCESS TO SALFE WATER (irOr)TOrAL 3.2 /I 37.0 55.0 /d 65.4URBAN 22.9 7f 72.0 o.0 7;i 76.1RURAL 1.4 W 14.0 27.07 4*6.2

ACCESS TO EICRETA DISPOSAL(: UF POPULATION)

TOTAL 58.0 42.0 /d 52.9URBIA . 6. 3.0 74.0 7d7 67.0RURAL .. 54.0 16.0 77 24.5

POPULATION PER PHYSICIAN 8220.0 1e 2070.0 2320.0 If 1917.7 1065.HPUP. PER NURSING PERSON ,, 1920.0 2150.0 3 I15.3 764.4POP. PER HOSPITAL BED

TUTAL 400.0 340.0 370.0 /d 367.2 326.3URBAN .. 270.0 .. 411.5 201.5ROURAL 2610_0 2634.3

ADMItSSIONS PER HoSPITAL BED .. 33.0 th .. 27.3 20.0

HOIISIIIC

AVERAGE SIZE OF HOUSENOLDTOrAL 5.0 5.2URBN 4.6 5.0

- RURAL 5.1 5.3 .. .. .

AVERAGE PO. OF PERSONS/ROOITOTAL 2.0 1.5URBAN 1.6 1.2RURAL 2.2 1.8 .. .. ..

ACCESS TO ELECT. (Z OF SDWELLINGS)TOTAL 20.0 3b.8URBAN 57.7 76.3 .. .. .RURAL 3.0 10.7

ANKN?X I-20 .LL A Page 2 of 5

MR t ell acci n Ueu"aAnissLk ~ ~ ^ i,ioLs z.:zwcL u

R b ~~NEIZCA5 ZCAR EUROPEt§l,tl 197t1! *1SXU LA?. XCIr 6 CA ausnU--AUIED EUOLGNT sTIOS

PIZNA TOTAL 55.0 13.0 10.0 105-. 101.1 4NlW 99.0 15.0 *- 10.3 105.5FELY 9h5.0 1.0 *. 104.5 7h.7

*SCONDARas TOTAL 7.0 20.0 41.0 43.2 53.1NILE 7.0 20.0 *- 52.3 8.9 -rEWE 7.0 20.0 .. 55.5 50.5

VOCATIONAL CE a IECOIDARE) 43.5 5.2 6.2 33.6 21.5

PUPIL-TEACHI RATIOPIEDLRY 55.0 55.0 s3.0 30.1 25.1SECONDARY 15.0 27.0 16.5 20.5

AULT LTERACY RATEn (2) 64.5 67.2 48.0 79.5 75.5

PARSENURI CARS/I0USND OP 3.5 I.E 15.4 56.0 54.7into RECCIVERVUOUANo P0OP 33.5 50.3 40.5 2253. 165.9TV Ec2Z121/TUOSAND POP 3.2 25.0 70.9 107.2 123.6NEWEPAIIU ('DAILT ESEEAL

IuTUhsT) cIUCULA!IOITIAs POPULATON 26.9 36-3 61.7 6 3.5 96.2

CSII JUlltAL ATTENDANCEICAPIT 1-7 L-2 1.4 Rdt 2.8 2-9

TOTAL LAWIL 1OCE (TRUS) 054.0 1060.0 1601.0FEmALE tPRCENT) 10.5 1L.1 12.6 23.2 34.5AGZXCULTUIZ (PERCEIT) 66.5 61.2 49.0 31.5 40.7

INDUSTET CIECNT) 12.2 14.0 15.0 23.9 23.3

PARTICIPATIOU RATE (IIRCZUT)TOTAL 2A.0 26.5 27.9 32.2 *2.9KALZ 59.4 46.5 58.3 49.3 54.7EnAL 5.0 5.9 7.1 15.2 31.0

ECOOC DiUPw CT UTIO 1.8 2.0 1.7 1.4 0.9

PERCNT or nIvATE INComzczivzD Er

XEST S OF . .. EMOLDS ..IICEE 202 Orf L .. .. V5UO....4.0LOWIEIT 202 0Ct IUEOLS .. .. 5.3LOWES 40Z or &OUSERIUS .. .. 14.5 j

ZZZln USID C OLDS ozn cISTDIATE ABSOLUTE POVETY INCOMELEL (US* HZ CW11A)

IIU.UI .. .. 451.0 2U.2RUAL .. .. 263.0 154.0

ISTDIATED RELATIVE POVERT INCMELET. CUS6 PR CAPITA)

015 .. .. 265.0 /f 522.5RIUL .. .. 1U.67f 372.5

EsTITED POP. BIM ISOLUTEPoVEny INC= LEVE ) C

1U9AL 4. . .07 ..

NOT AVAILAPLE

Wr~~~~~~~~~~~~ O t rz SUT AMLICARLE ~ ~ ~ ~ ~ ~ 9 TE

/a e group amrae. for ach Indicator are population-welghted aritimetic me_n. Coverag of contrias emont tbeLndieator. depeds on availabiity of data and ia uot aniform.

Unless otbezulee noted. Data for 1960' refer to an year betwee 1959 end 1961; 'Dta for 1970' between 1969 and1971; ed data for 'Hot Reant Etetite' between 1960 ed l982.

/c 1977; Id 1975; / 1962; If 1978; ,L 1976; /b 1972; LI Perent of housing unit. hith piped water;P 1±979.

Jan. 1984

mfis . 5gW5a5ii -m3a.....Om SSlSSn a-s swLs 35uus is - .33 -- 355s" a-nat-ass At -Wasmu -W .a= --

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v- -To-omususa-flaid. L-. a. -i- a .in ez, t.nua. upjZ 34 -au. zs a0- ms5r - Tme& %--M Is a,sn

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-22- -m IPag. 4 of 5

DOMINICAN REPWILIC - ECONDIC DATA

ON per capita, 1063' USSI. 3 30 a/

Area: 48.5 ke2

Population: 5.6 mililon (old-1983)

GROSS NATIONAL PRODUCT IN 1984 b/ ANNUAL RATE OF GOITH (S In constunt Drien)

USS Mililon S 1908-75 1970-75 1075-84

GDP at Market Price 5,4142.9 100.0 6.1 9.2 3.6Gros Domtic Investment 1,124.0 20.5 13.4 17.6 5.5Grmss Natlonal Savings 888.2 16.2 4.7 16.0 -0.2Current Account Balance -226.3 -4.1 - -Export of Goods, NFS 1,390.9 25.4 3.5 11.1 1.0Import of Goods, NFS 1,554.5 28.4 4.37 12.5 -1.4

OUTPUT AND PRODUCTIVITY IN 1984(constant 1970 prices)

Value AddedUSS illion S

Agriculture, Livestock,Forestry and Flshing 549.5 17.1

Mining 135.1 4.2Industry 844.4 26.3Servlces 1,682.5 52.4

Total 3,211.5 100.0

GOVERNtENT FINANCE

Gaitral Govern_nt Central GovernmntRlS IMillonc/ S%ot GDP DR$ Million S ot GDP

1984 1975 1984 1984 1975 1984

Currant Receipts 1,261.4 21.6 11.5 1,103.9 18.2 10.1Current Expenditures 1,129.9 8.3 10.3 1,296.9 8.0 11.8Currant Surplus(C) or Deficit I-) 131.5 13.1 0.1 -199.3 10.2 -1.8Capital Expenditures 353.4 11.6 3.2 260.6 9.1 2.4External Assistance (not) - - -- 139.7 0.3 1.3

MONEY, CREDIT AND PRICES

1970 1979 1960 1981 1982 1983 1904(ORS mIIIIon outstanding end of period)

Money and Quasi-Money 283.7 1,653.1 1,803.0 2,064.3 2,353.0 2,252.2 2,386.7lank Credit to Public Sector 213.1 552.8 652.8 995.6 1,379.2 1,694.6 1,824.0Bank Credit to Private Sector 174.9 893.1 1.044.5 1,019.9 1,113.5 1,258.6 1,412.9

WFercanteoes or Index Numbers)

Money and guas I-oney as 5 of GOP 19.1 29.9 27.1 27.3 29.4 25.8 21.8Consumer Price Index (Base 1976-77. 100) 57.0 116.9 136.3 146.8 158.0 168.9 208.4Consumer Prlce Index In

Annual Percantage Changes 3.8 9.2 16.6 7.7 7.6 6.9 23.4Bank Credit to Public Sector as of S of GOP 14.3 10.0 9.8 13.2 17.2 19.4 16.6Bank Credit to Private Sector as of % of GOP 11.8 16.2 15.7 13.5 15.9 14.4 12.9

a/ IBROl World Atlas.b/ Al I figures for 1984 are based on an exchange rate of DR52 to USSI, reprasenting the averaga of the sultiplo exchange rate syste.

Stnce the IBRD World Atlas, for 1983, uses the offtical aexchnge rat of ORSI to RSS1, the figures are not comparable.c/ Estimated.

- 23 - A=IPalmS of 5

DuliloUll M_L 19106 - 4 CAPITAL PLO

UALAN- rF or PADNI7 NELIUESIU aE)T eram 1971-54

77197 1P IL7 1V jn ttill 111 IM IN 1151 NI WAL9 911111ii

_ne (re) 290.3 35. Inpw of bde.s Ws No.$ 9117.9 61.0 1,114.9 1.271l.3 1,512.6 1.141.0 1.229.8 1,390.9 Cotfta (npromaad) 94.2 9.5

_ I1 of Owd,. nFS 1.0 .0 1i0P. t1 1911 I.e1. 1.16 la I.54.5 ee. (r 62.6 7.1Aour. f.o (detlelt * -2 -114.1 -191.2 . 0 -349.4 41 -0. -392.0 -33.0 -163.6 Tobm fleas) 42.? 4.9

Perrloil 17.3 1M.ONot Pat_r lnce -123.8 -123.4 -135.7 -17,. -210.2 -M.1 -24.1 -27.1 -30.0 o 161.9 11.5met IrmeafU% ej w 169.6 111.5 163. 2 215.0 267.3 OIieor 146.7 16.7Cirrent AGeout Sialen -241.9 -4J. -311.9 -331.3 411.5 .405.9 -441.9 -61.1 -236.3 Tatal 477.7 100.0

EKVIUL ODUT OECL_R 30. 1914 III S MIll IIonOlr.et foreign Invet.t 60.0 45.6 9.0 -13.4 62.7 79.7 -1.4 22.0 6.5Net ILT horrlong 93.3 104.3 97.7 210.1 21z.7 153.6 192.8 24.1 16.0 Pabile DA* incladlng g_rent.n private 2,354.3

Dlbeursete 4llj51. 1150.53 1192.73 1M1.71 t3l2.21 1320.2M 4355.) (246.7) 430.J3 ln-Qurated PriWte D 200.m/?la?llo (3.03 t46.21 (65.01 4151.0) 4121.51 I166.61 t163.03 (224.61 1239.01 Total Outstanding mnd Dleburud 2.954.0/

Other It_ e. n .l. 45.4 15.5 79.5 46.5 236.6 21.7 *60.1 22.3 -13.1 MST SIRVICE RATIO FCR 3964Chane In Not Ramer

I. * lerase1 43.2 -71.2 55.1 57.5 1171. 150.9 310.6 352.7 154.7 PRblie 0It. includin g ureutaadcl 32.3lbn-uareetaed PCIvote bt 2.9

0re.s Reaervee 16S.0 224.0 1m. 339.1 402.5 55.5" 156.3 195.1 266.0 Total Owtste.lng and Dlabwraddl 35.2Not Roe"re. -11.0 10.2 -54.9 -122.4 -240.2 -39.1 -616.1 -406.9 -5)5.90t

Peol sad Related MaterlIlsIepoe?I 170.0 176.7 199.0 314.9 445.8 497.4 44695 461.1 369 InIDI LEu 1 INr0 tOc_ar 31. 1943 USlS MllioonLupo-te -. -- - - .- - - - _

bItetaedIg md Olsalid 172.0-ladisborsd 104.6

Owtatanding Including mdIlhread 276.6

a/ Est lmatInclude arers an tLTD. bwt dom not ncluet rta lltItle of COntral Omsk.melun- and lOng-4te only.Doe not Include ehort-te_e deb? or Cntrel lnau labilltlee.

/ Asouf ODc_eber 31. 1944.

S

- 24 - Annex IIPage 1 of 2

STATUS OF B1 GBDPlP OPERATIONS IN THE DOMINICAN REM LIC

A. STATEMENT OF BANK LOANS AND IDA CREDIT (as March 31, 1985)

Loan orCredit US$ millionNumber Year Borrower Purpose Amount (Less cancellation)

Bank IDA Undis.

Seven loans and three credits fully disbursed 113.8 22.1a/ -

1655-DO 1979 Dominican Republic Irrigation II 27.0 16.61699-DO 1979 Central Bank Tourism II 25.0 10.11760-DO 1979 State Sugar Council Sugar Rehab. 35.0 31.3

1784-DO 1980 Dominican Republic Highways II 35.0 0.52023-DO 1981 Dominican Republic Coffee and

Cocoa Rehab. 24.0 17.12104-DO 1982 Dominican Republic Sites and

Services 25.4 22.22292-DO 1983 Dominican Republic Sto. Domingo - -

Municipalitybf2369-DO 1983 Dominican Republic Itabo

Engineering 3.8 1.7

Total 289.0 22.1of which has been repaid 35.3 0.5

Total now outstanding 253.7 21.6

Amount soldof which has been repaid -

Total now held by Bank and IDA 253.7 21.6a/

Total Undisbursed 99.5

a! With exchange adjustment.b/ Cancelled July 13, 1984.

-25- Annex IIPage 2 of 2

B. *STATEMENT OF IFC INVESTNENTS (as of March 31, 1985)

Fiscal Type of Amount in US$ MillionYear Borrower Business Loan Equity Total

1971 Cementos Nacionales, S.A. ConstructionMaterial 6.0 1.7 7.7

1978 Financiera Empresarial, S.A IndustrialCredit 3.0 - 3.0 a/

1983 Prodtuctora Nacional deAlgodon. Cotton

Cultivation 4.0 1.0 5.0

1984 Compania Dominicana de Noney andLeasing, S.A. Capital

Market 3.0 0.2 3.2

Total Gross Commitments 16.0 2.9 18.9Less Repayments andCancellations 7.4 - 7.4

Total Commitments now heldby IFC 8.6 2.9 11.5

Totv' Undisbursed includingParticipants Portion 4.9 0.3 5.2

a/ Cancelled

- 26 - ANNEX IIIPage 1 of 2

DOMINICAN REPUBLIC: VOCATIONAL TRAINING PROJECT

Supplementary Project Data Sheet

I. Timetable of Key Events:

(a) Project Preparation:

Subsector Study Mission Departure February 1984Project Prepared by INFOTEP/Bank June 1984Appraisal Mission Departure October 1984Confirmation of Government'sRequest Received February 1985

(b) Negotiations Completed: April 16, 1985

(c) Loan Effectiveness Planned: October 1985

II. Special Conditions

1. Condition of Loan Effectiveness: Execution of a financingagreement, acceptable to the Bank, by which the loan proceeds aremade available as a grant by the Borrower to the Beneficiary (para57).

2. Project Conditions:

(a) Guidelines for the establishment of sectoral technicaladvisory committees at the regional level would be submittedto the Bank for comment not later than June 30, 1986and promptly thereafter such committees would beestablished (para 33);

(b) An action plan for upgrading the quality and extending the useof the collaborating institutions would be submitted to theBank for comment by March 31, 1986 and promptly thereafterimplemented (para 34);

(c) The result of the studies concerning training in the informalsector included in the project, would be presented to the Bankfor comments and discussion by December 31, 1987 and promptlythereafter implemented (para 51);

- 27 -

ANNEX IIIPage 2 of 2

(C) An action plan plan to increase by about 20 percent INFOTEP'sincome between 1985 and 1989 by improving the efficiency incollecting the payroll levy would be submitted to the Bank forcomment by December 31, 1986 and promptly thereafterimplemented (para 59); and

(e) INFOTEP would maintain separate entries in its annualv operating budget for contributions to other vocational

training agencies, and would earmark a portion of its annualoperating budget for these activities, which portion wouldrise to 30 percent by December 31, 1989, according to a planidentifying seasures to be taken to that effect, which theGovernment will prepare and submit to the Bank for coments byJune 30, 1986 and promptly thereafter implement (para 69).

1I

- 28 -

ANNEX IV

DOMINICAN REPUBLICVOCATIONAL TRAINING PROJECT

METHODS OF PROCUREMENT BY PROJECT CATEGORY

(US$ thousands)

Project Category ICB LCB OTHER N.A. TOTAL COSTS

Civil Works 2,383 2,383

Equipment 3,255 433 371 4,059

Furniture 116 116

Experts 678 678

Fellowships 710 710

Local Personnel 163 163

Studies 119 119

Program Administration 143 143

8,371

IBRO 18817

'I A,IDni.ic Ocaga

n srr - ,, , , -~~ew PUETOK *t ,*f* r) .4lncim

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