Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: 48349-UZ

PROJECT APPRAISAL DOCUMENT

ON A

Public Disclosure Authorized PROPOSED CREDIT

IN THE AMOUNT OF SDR 18.9 MILLION (US$28 MILLION EQUIVALENT)

TO THE

REPUBLIC OF UZBEKISTAN

FOR THE

BASIC EDUCATION PROJECT Public Disclosure Authorized SECOND PHASE OF AN ADAPTABLE PROGRAM LOAN IN SUPPORT OF THE EDUCATION REFORM PROGRAM

June 3,2009

Human Development Sector Unit (ECSHD) Europe and Central Asia Region Central Asia Country Unit Public Disclosure Authorized

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. CURRENCY EQUIVALENTS

(Exchange Rate Effective April 30,2009

Currency Unit = Uzbekistan Sum (UZS) 1 Sum = US$0.0006899 US$I.OO = 1,449.50 Sum

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank APL Adaptable Program Lending Association International Development Association Avloniy Institute Central Institute for Teacher Training and Retraining named after A. Avloniy BEP 1 First Phase of the Basic Education Project BEP2 Second Phase of the Basic Education Project CAS Country Assistance Strategy COA Chamber of Accounts CPAR Country Procurement Assessment Report CRU Control and Revision Units DSE Department of School Endowment FAD Finance and Accounting Department FMS Financial Management System GDP Gross Domestic Product GoU Government of Uzbekistan GPN General Procurement Notice GNP Gross National Product IBRD International Bank for Reconstruction and Development ICT Information and Communications Technology IDA International Development Association IFRS Interim Unaudited Financial Reports IPSAS International Public Sector Accounting Standards ISA International Standards on Auditing ISN Interim Strategy Note M&E Monitoring and evaluation MoF Ministry of Finance MOPE Ministry of Public Education MTBF Medium Term Budget Framework NPPT National Program for Personnel Training PAD Project Appraisal Document PCF Project Cash Flow PER Public Expenditure Review PFS Project Financial Statements OECD Organization for Economic Cooperation and Development OM Operational Manual RCPTTR Republican Center for Preschool Teacher Training and Retraining SBTT School-Based Teacher Training SEDP School Education Development Program SSE Secondary Specialized Education UNDB United Nations Development Business WIS Welfare Implementation Strategy

Vice President: Shigeo Katsu Country Director: Motoo Konishi Sector Director: Tamar Manuelyan Atinc Sector Manager: Mamta Murthi Task Team Leader: Maureen McLaughlin

i FOR OFFICIAL USE ONLY

UZBEKISTAN BASIC EDUCATION PROJECT .PHASE TWO

CONTENTS Page

I. STRATEGIC CONTEXT AND RATIONALE ...... 4

A . Country and sector issues ...... 4 B. Rationale for Bank involvement ...... 6 C. Higher level objectives to which the project contributes ...... 7 I1. PROJECT DESCRIPTION ...... 7

A . Lending instrument ...... 7 B . Program objectives and phases ...... 8 C . Project development objective and key indicators ...... 9 D. Project components ...... -9 E . Lessons learned and reflected in project design ...... 15 F. Alternatives considered and reasons for rejection...... 15 I11. IMPLEMENTATION ...... 16

A . Partnership arrangements ...... 16 B . Institutional and implementation arrangements ...... 16 C . Monitoring and evaluation...... -17 D. Sustainability...... 17 E. Critical risks and possible controversial aspects ...... 19 F. Loadcredit conditions...... -20 Iv. APPRAISAL SUMMARY ...... -21

A . Economic and financial analyses ...... 21 B. Technical ...... 22 C . Fiduciary ...... 22 D. Social...... 23 E . Environment...... 24 F. Safeguard policies ...... 24 G . Policy exceptions and readiness ...... 24

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization . Annex 1: Country and Sector or Program Background ...... 25

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 29

Annex 3: Results Framework and Monitoring...... 30

Annex 4: Detailed Project Description...... 35

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

Annex 6: ImplementationArrangements ...... 45

Annex 7: Financial Management and Disbursement Arrangements ...... 47

Annex 8: Procurement Arrangements ...... 54

Annex 9: Economic and Financial Analysis ...... 59

Annex 10: Safeguard Policy Issues ...... 65

Annex 1 1: Project Preparation and Supervision ...... 66

Annex 12: Documents in the Project File ...... 67

Annex 13: Country at a Glance ...... 69

MAP IBRD 33508

... 111 UZBEKISTAN

BASIC EDUCATION PROJECT - PHASE TWO

PROJECT APPRAISAL DOCUMENT

EUROPE AND CENTRAL ASIA

ECSHD

Date: June 3, 2009 Team Leader: Maureen A. McLaughlin Country Director: Motoo Konishi Sectors: Primary education (50%); Secondary Sector ManagerlDirector: Tamar Manuelyan education (20%); Pre-primary education (20%); Atincblamta Murthi General public administration sector (1 0%) Themes: Education for all (P); Decentralization (S); Participation and civic engagement (S);Rural services and infrastructure (S) Project ID: P 107845 Environmental screening category: C - Not Required Lending- Instrument: Adaptable Program- Loan Project Financing Data [ ] Loan [XI Credit [ 3 Grant [ 3 Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing: SDR 18.9 million (US$28 million equivalent) Pronosed terms: Standard IDA Terms with 10 vears grace Deriod and 35 vears maturitv

Source Local Foreign Total RECIPIENT 7.70 0.30 8.0 International Development Association (IDA) I 4.10 23.90 28.00 Total: 11.80 24.20 36.00

Recipient: Republic of Uzbekistan

Responsible Agency: Ministry of Public Education (MOPE) Uzbekistan

Does the project depart from the CAS in content or other significant respects? Re$ [ ]Yes [XINO PAD I.C. Does the project require any exceptions from Bank policies? Re$ PAD IKG. [ ]Yes [XINO

1 Have these been approved by Bank management? [ ]Yes [ ]No Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ]No Re$ PAD III.E. Does the project meet the Regional criteria for readiness for implementation? Re$ [XIYes [ ] No PAD IV. G. Project development objective Re$ PAD ILC, Technical Annex 3

The overall objective of the project is to continue supporting the Government of Uzbekistan’s (GoU) efforts to improve the effectiveness of teaching and learning through (1) targeted interventions in selected general secondary education schools and preschools in poor, rural areas; (2) development of institutional capacity to assess student learning; and (3) adoption of predictable and transparent school budgets in selected oblasts.

Project description:

The proposed second phase of the Basic Education Project will have five main components:

Component 1: Providing Learning Materials and Resources for Grades Five through Nine of General Secondary Schools (Total estimated cost US$ 29.9 million of which IDA is US$ 22.8 million). The objective of this component is to improve the quality of teaching and learning in project schools through effective use of learning materials and resources acquired under the project.

Component 2: Strengthening School-Based Training for Teachers and Directors in Preschools and General Secondary Schools (Total estimated cost US$ 1.4 million of which IDA is US$ 1.0 million). The objective ofthis component is to change teaching in project schools and preschools towards a more interactive, student-centered approach to improve learning outcomes.

Component 3: Strengthening School Boards and Providing Competitive Grants to Selected Schools for School Improvement (Total estimated cost US$ 2.7 million of which IDA is US$ 2.7 million). The objective of this component is to increase further the involvement of school boards in project schools and provide competitive funding for school improvement.

Component 4: Improving Education Financing, Budgeting and Management (Total estimated cost US$0.5 million of which IDA is US$0.3 million). The objective ofthis component is to improve education financing, budgeting and school management in selected oblasts.

Component 5: Supporting Project Management and Results Management (Total estimated cost US$ 1.5 million of which IDA is US$ 1.2 million). The objective of this component is to support project management, implement national standardized assessment of student learning, and evaluate project effectiveness.

Which safeguard policies are triggered, if any? Re$ PAD IV.F., Technical Annex 10 No safeguards policies are triggered.

Significant, non-standard conditions, if any, for: Re$ PAD IILI? Board presentation: VIA

2 Condition of effectiveness: The Operational Manual (OM) has been revised and adopted by the MoPE for the purposes ofthe Project and is satisfactory to the Association.

Condition ofdisbursement for grants: The Grants Manual, satisfactory to the Association, has been adopted by the Recipient (through the MoPE).

Covenants applicable to pro-iect implementation: The Recipient, through the MoPE, shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 4.09 ofthe General Conditions.

Without limitation on the provisions of Part A of this Section, the Recipient, through the MoPE, shall prepare and furnish to the Association not later than forty five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association.

The Recipient, through the MoPE, shall have its Financial Statements audited in accordance with the provisions of Section 4.09 (b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the Association not later than six months after the end of such period.

The Recipient, through the MoPE, shall: (a) have the internal control framework, the operational processes and procedures followed under the Project audited for the first 24 months of Project implementation, in accordance with terms of reference and by independent auditors both acceptable to the Association; (b) furnish to the Association as soon as available, but in any case not later than six (6) months after the end of such period: (i)certified copies of the assessment of the internal control framework, the operational processes and procedures referred to in paragraph (a) of this Section for such period, as so audited; and (ii)an opinion on such processes and procedures by said auditors, in scope and detail satisfactory to the Association, as to whether they provide the Recipient adequate accounting, internal control and financial reporting as intended for the Project; and (c) furnish to the Association such other information concerning such internal control framework, operational processes and procedures, and the audit of such internal control framework, operational processes and procedures, and concerning said auditors, as the Association may from time to time reasonably request.

3 I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Uzbekistan is an upper low-income resource rich, doubly landlocked country, strategically located in the heart of Central Asia. Uzbekistan accounts for one-third of the region’s population and its economic and social prospects are crucial for the 27 million Uzbeks and for the neighboring region. Uzbekistan gained independence in 1991, and in 2007 the Atlas Gross National Income (GNI) per capita was estimated at US$730. Uzbekistan has a young and predominantly rural population - 65 percent of the total population lives in rural areas.

2. Uzbekistan has chosen a gradual approach to economic reform to minimize the social costs of transition. This gradualist state-led development approach, in which features of an open-market economy are introduced to the command and control system in a step-by-step manner, contrasts with the majority of transition countries who reformed much more quickly. While this development model has had its benefits, it has also had opportunity costs, as evidenced by a slower reduction in poverty and lower improvement in living standards than in reforming Commonwealth of Independent States (CIS) countries.

3. Governance in Uzbekistan is characterized by low transparency and limited voice and participation of citizens. The 2007 Transparency International Corruption Perception Index rates Uzbekistan as 175 out of 179 countries. Restricted dissemination of basic economic and social information and questions regarding the reliability of data present a serious impediment to accountability, to public participation in policy-making debates, and to effective monitoring and evaluation of programs.

4. The education sector faces similar issues with limited data, little public participation in policy making at the national, oblast and rayon levels, and limited involvement in school decisions at the local level. As a result, information on student learning outcomes has not been available and community and stakeholder participation as a way to encourage public accountability for school policies, resource allocation, and school management has not generally occurred. Recently, however, the GoU has taken positive steps to address these issues through a national standardized assessment of student learning for students in grades 4 and 8, and through school board activation and community participation in school decisions in selected schools.

5. Uzbekistan’s development strategy includes a strong focus on the maintenance of basic public services, including education. Since the mid-l990s, Uzbekistan has devoted a very high percentage of its Gross Domestic Product (GDP) (ranging from 5.6 to 9.6 percent) and of the government budget to education. Education spending for 2007 accounted for 25.1 percent of the total budget, and 7.5 percent of GDP, considerably above the Organization for Economic Cooperation and Development (OECD) average. Until 2004, however, education expenditures concentrated on new programs to upgrade secondary vocational education while funding shortages remained in general education (currently grades 1-9).

6. In 2004, the focus shifted to general education through adoption of the School Education Development Program (SEDP) for 2004-2009 to improve conditions of school buildings and learning resources and equipment in schools. Donor financing has also provided support to the SEDP, including textbooks, ICT, distance education, teacher training, equipment and learning materials. According to the MOPE, SEDP has covered rehabilitation, reconstruction and construction of almost

4 8,500 schools and additional science equipment, ICT, textbooks and furniture have been provided to schools. Teacher salaries have also increased significantly. Most schools continue, however, to need learning materials and resources, student-centered teacher training and other improvements to increase quality and reduce disparities.

7. The government is currently preparing the next medium-term education program and plans to keep the SEDP Fund to continue development of basic education and to increase its focus on preschools. While the Uzbekistan economy is relatively insulated from the direct impact ofthe world- wide economic and financial crisis due to its rather closed nature and the country’s strong macro position, the deepening ofthe crisis does pose serious risks to the economic outlook of2009 and 2010. As a result, fiscal pressures are going to increase and some choices in public expenditures will have to be made, including the possibility that the government may not be able to spend as generously on basic education as the SEDP has in the last several years.

8. Enrollment in general education in Uzbekistan is high. The most recent data available from households and communities for 2004 indicate that enrollment rates are above 96 percent for all communities with small variation by geographic location. Learning outcomes and quality ofeducation are a concern, however. Many factors hinder improvement of learning and quality: overloaded and outdated curricula, insufficient and outdated equipment and learning resources in schools, a lack of teachers’ professional competence to promote active engagement by students in their own learning, no incentives for schools or teachers to change the system or improve its outcomes, limited data for monitoring and evaluation, and limited community and stakeholder participation to encourage accountability. Few schools have been able to create a stimulating atmosphere to encourage students to be masters oftheir learning and teachers to apply new teaching/learning methods, and to cooperate and to share best practice.

9. Schools in rural communities, especially those schools that are remote from the oblast or rayon center, fare worse in most aspects then urban schools. Moreover, the schools in rural communities that are remote from both the rayon and oblast center fare worst, in many instances exhibiting as little as half the share of learning resources that is observed in urban schools. For instance, based again on data from 2004, only 37 percent of remote rural schools have a sufficient number of teaching manuals as compared with 64 percent in urban areas - the latter by no means an acceptable level. While this situation has improved as a result of SEDP investments as well as donor activities that are focused on rural schools, more recent data are not available to analyze the extent of such changes.

10. Basic education expenditures are inequitably distributed among oblasts, rayons and schools. Such inequitable distribution ofresources is reflected in definite disparities in learning conditions and resources between urban and rural schools as mentioned above as well as school attendance. The urbadrural disparities in school and teacher characteristics have a disproportionate effect on the poor, primarily because poverty is more prevalent in rural areas (the last poverty assessment in 2003 suggested a poverty rate of 29.8 percent of poor in rural areas, compared to 22.6 percent in urban areas.)

11. The GoU is working to improve public finance management including introducing a Treasury system, performance-based budgeting, per capita financing in health and education, and a Medium Term Budget Framework (MTBF). In 2007 the GoU took a number of steps by Presidential decree to adopt a new way of financing schools, moving to begin implementation of per capita financing of schools in order to reduce inequities in the distribution ofexpenditures and increase the efficiency and equity of school financing. The GoU began to implement per capita financing in 2008 in Bukhara and Ferghana Oblasts and Tashkent City. Work is underway to extend per capita financing to three additional oblasts in 2009.

5 B. Rationale for Bank involvement

12. The Basic Education Project (BEP) was initially designed as one four-year investment project but later changed into a two-phased Adaptable Program Loan (APL). In late 2005, as the project was about to be discussed by the Bank Board, concerns about governance and corruption in Uzbekistan put the Country Assistance Strategy (CAS), and the project, on hold. Instead, an 18-month Interim Strategy Note (ISN) was developed to allow Uzbekistan to show improvements in the country environment and in basic services for the population before moving to a full CAS. Consistent with the ISN, BEP was divided into two parts, with an 18-month first phase of a two-phased APL’. The approach of the ISN, and the triggers in BEP to move from phase one to phase two, emphasized openness and transparency, including the collection and use of data in developing and evaluating programs as well as broader public participation in basic services in the country.

13. The APL, which is the first education operation to be supported by the World Bank in Uzbekistan, was designed to support Uzbekistan’s education reform program. This program, including SEDP, aims to make significant improvements in the school education system, including improvements in physical conditions of educational facilities, development of educational standards satisfactory to international standards, and creation of equal access and quality of education for children living in rural and urban areas. * The first phase of the APL (BEPI) was designed to build capacity, while the second phase (BEP2) was designed to build upon and extend the capacity to encourage greater education reform.

14. The APL provides support to implement interventions that are part of or complementary to the reforms in the education sector including piloting and supporting several new initiatives: (i)a new mode of engagement with the government, whereby communities are more closely and directly involved in project design and implementation; (ii) a new standardized national assessment of student learning; (iii)a new school-based approach to teacher training; and (iv) a new approach to school financing. At the same time the APL strengthens pro-poor aspects of the education reform program through targeted interventions, including learning materials and resources, to selected general secondary education schools and preschools in poor, rural areas (project schools and preschools).

15. BEPI has helped to make significant progress in capacity building in several key areas. Community involvement in school decision making increased at project schools through the training of school boards and their active involvement in needs assessment and selection of learning materials; per capita financing was designed and implemented in two oblasts and Tashkent City; the pilot of a national standardized student assessment was implemented and analyzed for grade 4; a standardized assessment of student learning was recently carried out for grade 8; and most teacher training materials have been developed and facilitators and experts trained. The learning materials for poor, rural

The first phase took longer to implement than initially planned due to (i)the extent of reforms envisioned to begin during that time; (ii)the time it generally takes in Uzbekistan to get a project up and running, (iii)the fact that this was the first education project financed by the World Bank in Uzbekistan; and (iv) the fact that it was the first project that MOPEwas implementing without a Project Implementation Unit. To accommodate the need for more time, the first phase was extended for an additional 18 months with a closing date of December 2009.

Uzbekistan’s education reform program to improve teaching and learning conditions in general secondary schools and preschools is described in a September 18, 2006 Letter of Development Policy from the Minister of Public Education to the President of the World Bank. See Annex 15 in World Bank, 2006, Project Appraisal Document on a Proposed Credit in the Amount of SDR 10.1 Million (US$ 15 Million Equivalent) to the Republic of Uzbekistan for a Basic Education Project in Support of the First Phase of a US$40 Million Equivalent Adaptable Lending Program. 6 schools (grades one to four) and preschools have not yet been provided to schools, however, as the procurements are still ongoing. Reflecting the slow start up and the slow procurement processes in Uzbekistan, project commitments and disbursements under BEPl are lower than desired, but they are increasing3

16. BEP2 will build on the capacity developed under BEPl by increasing further community participation in school decision making and efforts to improve quality of education through a new program of competitive grants for selected schools to finance sub-projects; improving through school- based teacher training the skills and competencies of teachers to use child centered teaching strategies; expanding the availability of learning materials to grades five to nine in project schools in poor, rural areas; enhancing transparency, predictability, efficiency, and equity in school education financing through expansion of per capita financing to three additional oblasts; assessing learning of students over time through periodic standardized national assessments of student learning in grades 4 and 8; and developing results-based managerial and monitoring and evaluation (M&E) capacity in the MoPE.

17. The World Bank brings its extensive work and experience in supporting other general education and preschool projects elsewhere in the region and in the world, thus providing best practice examples of initiatives at these educational levels as well as experience in project implementation. In particular, the Bank team has extensive experience in other countries in the region and elsewhere who have implemented similar initiatives. In Uzbekistan, the Bank has conducted policy dialogue, sponsored workshops on international experience, and provided technical expertise in school-based teacher training, school-based quality improvement funds, per capita funding and financial management, assessment of student learning, and design of surveys.

18. The Bank has worked very closely with the MoPE on the design and implementation of BEPl and brings that knowledge and experience to BEP2.

C. Higher level objectives to which the project contributes

19. The CAS, endorsed by the Bank’s Board of Directors in June 2008, includes service delivery as one its four pillars for Bank engagement with Uzbekistan. Education, especially support for improved quality and governance, is highlighted under this pillar and BEP2 is included in the Bank program. Another CAS pillar supports improved economic opportunities in rural areas. As BEP2 project schools are in poor, rural areas, the project will also support this pillar.

11, PROJECT DESCRIPTION

A. Lending instrument

20. BEP2 is the second phase of a two-phased APL financed by IDA in the amount of US28 million. The total project cost is estimated at US36 million. The government counterpart contribution will be US$8 million, which will finance taxes and duties, the distribution of learning materials to school, training under two components, study tours to countries involved in implementing similar reforms, and social contributions for local consultants.

21. BEP2 will be implemented over a period of four years to build on, consolidate, and extend the capacity building results of BEP1, which is scheduled to close at the end of December 2009. To ensure continuity of reform the two phases are scheduled to overlap for six months.

As of the end of April 2009, BEPl disbursements were at 9 percent and commitments equaled about $4.5 million, almost one-third of the total loan of $15 million.

7 B. Program objectives and phases

22. The overall objective of the APL and each of the phases is to continue supporting GoU’s efforts to improve the effectiveness of teaching and learning through: (1) targeted interventions in selected general secondary education schools and preschools in poor, rural areas; (2) development of institutional capacity to assess student learning; and (3) adoption of predictable and transparent school budgets in selected oblasts.

23. The Bank confirmed in October 2008 that the two triggers to move from phase one to phase two of BEP have been satisfactorily attained, indicating important steps in openness and transparency.

At least 75 percent of project schools have their school board actively involved in the school needs assessment and selection of learning materials under component one; and A standardized student assessment has been conducted on a pilot basis on a representative sample of students in project and non-project schools

24. The process of actively involving school boards in needs assessment and selection of learning materials included: training school boards on ways to involve parents, teachers and other community members in the process; in-school workshops on needs assessment methodology followed by formation of working groups for data collection; surveys and input from parents and teachers; data analysis; developing each school’s list of its highest priority teaching and learning materials; and submitting the school request forms to MoPE.

25. According to data included in the school request forms submitted to MoPE, all project schools carried out needs assessment activities with active participation of school boards. MoPE also reported that schools used at least two methods-generally interviews and questionnaires-to gather input from parents, teachers and students. Site visits by the Bank education team conformed that the process was very participatory following the suggested steps in the training and that school boards were enthusiastic about the process. Schools had posted detailed information in school entrances or other public places in the building describing school board training, community participation in needs assessment and selection of learning materials, budget estimates and final decisions. Many included photographs documenting their activities.

26. The MoPE, with assistance from an international expert, designed learning assessment instruments for grades 4 and 8 based on tests used in international assessments of learning. The pilot of the first standardized assessment of student learning-mathematics and language for students in grade 4--was conducted in the fall of 2008 by trained facilitators in selected classrooms. A draft report analyzing the results from the assessment of grade 4 was presented to the Bank in March 2009. The draft report indicated that the pilot was carried out in a reasonable way, especially as a first effort. A national standardized assessment for students in grade 8 was carried out in May 2009.

27. Increased community involvement through active participation of school boards and development, testing and implementation of a national assessment of student learning are important steps in education reform. The MoPE has also shown a commitment to reform in several other areas, including development of new materials for teacher training, and faster-than-expected design and implementation of per capita financing for schools. Capacity building parts of the project are generally moving well while the large procurements, on the other hand, are moving more slowly.

28. A full CAS, together with successful achievement of the two triggers to move from the first to the second phase of BEP, provide the basic conditions to move ahead with BEP2. Moreover, several

8 areas, especially teacher training and per capita financing, are at risk of stalling without support from BEP2 soon.

C. Project development objective and key indicators

29. The project development objective of BEP2 is to continue supporting GoU’s efforts to improve the effectiveness of teaching and learning through: (1) targeted interventions in selected general secondary education schools and preschools in poor, rural areas; (2) development of institutional capacity to assess student learning; and (3) adoption of predictable and transparent school budgets in selected oblasts.

30. Progress towards achievement of these objectives will be measured through three project outcome indicators, which are listed below, and a number of intermediate outcome indicators presented in Annex 3 :

0 An increase in learning outcomes in grade 4 that is greater in project schools than in non- project schools as measured by a new standardized assessment of learning achievement available for a sample of students in project and non-project schools. 0 National standardized assessments of student learning carried out in grades 4 and 8 with report analyzing and disseminating the results. Per capita financing implemented in six oblasts with report analyzing and disseminating the results.

D. Project components

3 1. The design of BEP2 is tightly tied to the first phase, building upon the capacity developed and lessons learned in implementation of BEPl to help the MoPE to implement new activities and foster broader education reform. The project combines targeted interventions to poor, rural schools with interventions designed to make systemic change in the Uzbekistan education system.

32. The second phase of the program continues to have five closely related components grouped in two main areas. The first area consists of three interrelated components that are all oriented toward the improvement of learning and teaching conditions in general secondary schools located in poor, rural areas (Components 1,2 and 3). Learning materials, teacher training, school board activation and school improvement grants are targeted to these project schools. The second area consists of two components that are oriented towards improving the efficiency, management and monitoring capacity of the sector (Components 4 and 5). These components develop a system of national assessment of student learning; build capacity for MoPE to monitor and evaluate; and implement and refine per capita financing ofschools.

In the first phase the MoPE selected schools and preschools in poor, rural areas which would benefit directly from the project through school board activation, learning materials and teacher training (Components 1-3): I501 general secondary schools and 598 preschools. MoPE selected rayons based on poverty, number of schools in remote areas, and their classification - according to previous governmental sources - as “waterless and deserted areas” of Uzbekistan. While some of the schools in the selected rayons are also direct beneficiaries of the SEDP, or of projects financed by other donors (notably ADB), this component aims to reach out to the neediest schools and to provide learning materials and equipment that will not be provided from other sources. Project schools selected in BEPl will continue in BEP2, receiving teachingleaming materials, teacher training, and access to school grants. Out of the 1501 general secondary schools in BEPI, 13 have only grades 1-4 and are thus not entitled to get materials for grades 5-9 under Component I.MoPE has replaced these schools with others, so that the number of schools receiving grades 5-9 materials is still ,1501. The total number of project schools increased therefore to 1514, by inclusion of 13 new schools that fit three criteria: (i)located in project rayons; (ii)have only grades 5-9; and (iii)are close to project schools. It was also agreed that the 26 schools will not be included in the final assessment of project impact (13 grade 1-4 schools and 13 new grade 5-9 schools). 9 33. Implementation under BEP2 is expected to proceed more smoothly and more quickly than was the case in BEPl as capacity was developed during the first phase and additional time was spent during preparation ofBEP2 on implementation readiness conditions.

Component 1: Providing Learning Materials and Resources for Grades Five through Nine of General Secondary Schools (Total estimated cost US$ 29.9 million of which IDA is USS22.8 million)

34. The objective of this component is to improve the quality of teaching and learning in project schools through the effective use of learning materials and resources acquired under the project.

35. BEPl financed learning materials and resources for selected preschools and for grades one to four at 1501 selected general secondary schools as well as development of the process and materials for needs assessment, and training for school boards to participate effectively.

36. BEP2 will finance the provision of learning materials, equipment and other resources for grades five to nine in 150 1 general secondary schools, dissemination of information to school boards, teachers, parents and communities on the learning materials through exhibition fairs, and the distribution of materials to schools in a timely fashion after the materials are procured by the MoPE. IDA will finance the learning materials and exhibition fairs while government funds will support the distribution ofmaterials to schools and taxes and duties for the learning materials. The list of learning materials includes, for example, books for pleasure reading and reference books for school libraries, science equipment, musical instruments, and some ICT equipment.

37. The MoPE will hold an exhibition fair in each oblast as soon after BEP2 approval as possible to show school boards, teachers, parents, and communities the available materials before they make their selections. In BEPl school boards indicated that they would have liked to get more information on the learning materials and to see them in order to make more informed choices. The MoPE is developing a detailed plan for carrying out the exhibition fairs.

38. BEP2 will use the same type of demand-driven, process as used in BEPl to select learning materials for each school. School boards, through an open and participatory process, will assess school needs and then request materials most needed at that school, selecting from a list of materials prepared by the MoPE and agreed by the World Bank team. The amount of funds provided to each school will vary by number of classes in grades five to nine, the number of students, and the remoteness of the school. The Bank and MoPE have already agreed on the formula for school budgets under this component and on the budget for each school. The list of learning materials is still under discussion including a limit on the amount of funds that can be used for ICT. Technical specifications must be developed as soon as the list is agreed between MoPE and the Bank.

39, The main implementation agency for this component will be the MOPE’SMain Department for the Development and Organization of the TeachingLearning Process in General Education Schools. The Department of School Endowment will also be involved in the procurement activities.

40. Two intermediate outcome indicators are sought under this component: (i) all schools eventually receive the learning materials and resources that they requested; and (ii)at least 50 percent of teachers at sampled project schools who are observed by on-site assessment visits are using effectively the learning materials and resources acquired under the project.

10 Component 2: Strengthening School-Based Training for Teachers and Directors in Preschools and General Secondary Schools (Total estimated cost US$ 1.4 million of which IDA is US$ 1.0 million)

41. The objective of this component is to change teaching in project schools and preschools towards a more interactive, student-centered approach to improve learning outcomes. The project will improve teacher quality by developing and introducing school-based teacher training (SBTT), as a complement to the existing training strategies. Teacher training programs will promote the use of student-centered active learning strategies, improvement of student assessment methods, cooperation- based work methods, community mobilization and effective use of modern teaching aids.

42. BEPl financed activities to enhance the capacity of the Republican Center for Preschool Teacher Training and Retraining (RCPTTR), the Central Institute for Teacher Training and Retraining named after A. Avloniy (Avloniy Institute), and the oblast and rayon education departments to introduce the SBTT approach and to promote student-centered teaching methods. This was done through training and technical assistance provided by international and local consultants to experts of the Avloniy Institute and the RCPTTR who then trained 165 facilitators (oblast specialists and rayon methodologists). Teaching materials to facilitate the training were developed and provided to all experts and facilitators. The component also financed the provision of teaching equipment for the RCPTTR, the Avloniy Institute, seven oblast Teacher Training Institutes, education departments, rayon Methodological Centers and Teacher’s Rooms at each school. 43. Building on the capacity developed under the first phase, BEP2 will continue to support the introduction of the new SBTT strategy in Uzbekistan, as well as the promotion of student-centered teaching methods. BEP2 will finance technical assistance for the development and adaptation of teaching training strategies; development and production of training modules and materials, and actual training of directors, methodological groups and teachers. Mentorship will also be provided to methodological groups and teachers. Information, communication and education activities will be developed, including production of printed materials.

44. Four training programs will be financed: (i)refresher training of 165 facilitators (oblast specialists and rayon methodologists) initially trained under BEP 1; (ii)training directors of project schools and preschools on the teacher training program and on education management; (iii)training teams of school and preschool teachers on the new teaching methods and on adult training; and (iv) training teachers in project schools and preschools on the new teaching methods. Given the school- based approach to teacher training, mentoring will be provided in each training program. Costs to be covered will include fees for trainers and mentors, travel, as well as accommodation and meals for trainers and trainees. To conduct the trainings, training materials will be printed, as well as certificates to be given to training graduates; teaching supplies will also be provided, including paper for copying handouts for each teacher in project schools and preschools.

45. To promote SBTT as a complementary approach to the existing centralized teacher training schemes, a strategy will be further developed; additional knowledge and experience will be accumulated through a study tour financed using counterpart funds; and information will be disseminated through seminars, including those organized for rectors and staff of the seven Oblast Teacher Training Institutes.

46. The MOPE’SMain Department for the Development and Organization of the Activity of Education Institutions will have responsibility for the overall coordination of component implementation while the two training institutes (Avlonyi Institute and RCPTTR) will be responsible for developing expertise and overseeing the quality of the teacher training programs.

11 47. Three intermediate outcome indicators are sought under this component: (i)a strategy for SBTT is adopted by the MoPE to complement the existing teacher training strategies; (ii) at least 50,000 teachers at schools and preschools are trained; and (iii) at least 60 percent of the trained teachers at sampled schools and preschools observed by the on-site assessment visits have changed their teaching practice to a more interactive, student-centered approach.

Component 3: Strengthening School Boards and Providing Competitive Grants to Selected Schools for School Improvement (Total estimated cost US$ 2.7 million of which IDA is US$2.7 million)

48. The .objective of this component is to increase further the involvement of school boards in project schools and provide competitive funding for school improvement.

49. BEPl supported the establishment and activation of School Boards to support school community mobilization and greater participation of the communities in schools. BEP 1 financed development of training materials and the training needed to get school boards, parents and other members of the school community involved in school needs analysis and selection of learning materials under component 1.

50. Building on the activation of school boards from BEPI, BEP2 will continue to build capacity and move school boards to an even higher level of participation by encouraging them to develop proposals for Competitive Grants to finance Sub-projects aimed at school improvement. This component will support the establishment and implementation of a Competitive Grants program for school boards to design and implement their own plans to improve school quality. The maximum grant will be $5,000.

5 1. The Grants Manual, which the MoPE is currently preparing, will describe the procedures and rules, to implement the Competitive Grants to finance Sub-projects. Adoption by MoPE of a Grants Manual, satisfactory to the Association, is a condition for disbursement of Competitive Grants.

52. These proposals to be developed by school boards are expected to be quality-oriented activities aimed at improving the classroom pedagogical process and the school pedagogical climate to improve learning outcomes-for example, school newspapers, theatre, libraries, and after school programs. In this respect, this component will not finance any civil works even if they are very small. For example, school and/or classroom rehabilitation and/or preventive or corrective maintenance would not qualify for financing through the Competitive Grants. Income generation activities would also not qualify for funding.

53. All project school boards will have the opportunity to compete for a grant but only the best 500 projects will be selected for funding following a carefully designed and transparent review process to mitigate the risk of political interference and the possibility of collusion of school boards with the reviewing committees at the Oblast level. In addition, positive discriminatory criteria will be introduced in the annual allocation of funds to allow a significant number of high-risk project schools, the poorest and lowest performing project schools, to tap the competitive funds with good quality proposals.

54. In addition to financing the provision of Competitive Grants, this component will finance the required training for school boards to carry out procurement of goods and services following the Bank rules and guidelines in the Grants Manual and for Oblast evaluation committee members to use appropriately the approved evaluation guidelines when evaluating proposals and selecting winners. This component will also finance the cost involved in the annual reviewing processes, travel and other

12 expenses related to the on-site monitoring and supervision, training of stakeholders, and development and dissemination of best practices in school improvement activities.

55. The MOPE’SMain Department for the Development and Organization of the Activity of Education Institutions will be responsible for the overall implementation ofthis component.

56. One intermediate outcome indicator is sought under this component: 30 percent of project schools will have successfully implemented school quality proposals by the end of the project.

Component 4: Improving Education Financing, Budgeting and Management (Total estimated cost US$0.5 million of which IDA is US$0.3 million)

57. The objective of this component is to improve education financing, budgeting and school management in selected oblasts.

58. The GoU has historically placed a high priority on education, as reflected in the extremely high government spending at about 7-9 percent of GDP over more than a decade. However, efficiency and equity of school education financing are still areas of concern. The school financing system has strictly been governed by a number of regulations and normatives set by the government, resulting in inefficient and nontransparent spending of public resources. The highly regulated norm-based budgeting with no financial management authority at the school level has discouraged schools from spending efficiently: for instance, any savings in utility expenses would simply result in budget reduction in the following year. In terms of equity, the education budget has been unevenly allocated across regions and schools without clear reasons.

59. The GoU took a number of steps to begin changing the school financing system after BEPl was approved. First, responsibility for budget allocations for basic education schools was transferred from MoPE and its regional departments to the Ministry of Finance (MoF) and its regional departments. Subsequently, basic education schools were declared legal entities and school directors became the primary administrators of budgetary funds and the Director’s fund for top-up of teacher salaries. As a result, school principals and accountants were made responsible for estimating budget and staff needs; executing the estimated budget through the regional Treasury; managing school budget and human resources in accordance with the current legislation; executing various payments, including wages, and accounting school assets; and accounting and reporting in accordance with the established standards.

60. The GoU began implementation of per capita financing in 2008 in Bukhara Oblast, Ferghana Oblast and Tashkent City. BEPl provided international technical assistance to help the MoPE to design the formula for per capita financing as well as the framework for training. The first phase also supported training for school accountants and principals, and financed computers for school-level financial management. A preliminary evaluation by MoF/MoPE of the per capita financing implementation in the Bukhara Oblast shows some positive outcomes. For instance, many schools have consolidated classes and reduced the average teaching load, lowering the average cost of running a class (teacher salaries, utilities, etc.).

61. BEP2 will support the GoU’s expansion of per capita financing to three additional oblasts, Namanghan, Syrdarya and Khorezm. BEP2 will finance training on school budget planning, execution and accounting; establishment of a school financial management and public expenditure monitoring system, including software development and installation of a school financial management and accounting system on a pilot basis in the six oblasts; and monitoring and evaluation activities. 62. The Department of Financing, Accounting and Reporting in the MoPE has the main responsibility for coordination and implementation of this component. The MoF’s Treasury Trainig Center will continue to carry out training of school directors and accountants on the new system.

63. One intermediate outcome indicator is sought under this component: the percent of schools at three additional oblasts participating in per capita finance that are getting more than 10 percent above or below average spending per student will decline from 60 to 30 percent.

Component 5: Supporting Project Management and Results Management (Total estimated cost US$ 1.5 million of which IDA is US$ 1.2 million)

64. The objective of this component is to support project management, implement national standardized assessment of student learning, and evaluate project effectiveness.

65. Building upon the progress made during BEPl this component will support: (i) project management, including procurement, financial management, monitoring and evaluation and support to implement specific project activities; (ii) carrying out of a final standardized national learnin assessment for project and non project schools; (iii)standardized national assessment for 4th and 8if grades; (iv) updating and analysis of the baseline survey collected during BEPl; (v) periodic monitoring and reporting of key educational indicators in a sample of project and comparable non- project schools; (vi) updating of the agreed BEP2 project’s indicators; and (vii) carrying out of an impact evaluation study of the overall BEP2, including on-site assessment of the classroom pedagogical changes towards a more student-centered approach and effective use of new learning materials.

66. The pilot of a standardized learning assessment for grade 4 was carried out in October 2008 and was a successful learning experience for the MoPE. The capacity building to be financed under this component for BEP2 will include training, workshops, as well as learning assessment-related equipment for printing tests and processing and analyzing information. International consultants will train staff in assessments paid by IDA and study tours will be financed through counterpart funds.

67. Based on the preliminary data provided to the Bank on the baseline survey carried out under BEP 1, this component will finance the updating and analysis of this information on or about 20 13. A qualified agency will be selected to carry out this task under terms of reference satisfactory to the Bank. The MoPE’s Main Department for the Development and Organization of the Activity of Education Institutions will oversee the implementation of the follow-up survey.

68. BEP2 will also undertake, through a firm or other independent organization, classroom observations near the end of the project to see how teachers are teaching and whether they have adopted the new more student-centered teaching styles and whether they are using the new learning materials effectively in the classroom.

69. This component will finance an impact evaluation study of the overall BEP2 to be conducted by a qualified consulting firm or individual under terms of reference satisfactory to the Bank.

70. The main agency to coordinate activities for this component will be the MoPE’s Main Department for the Development and Organization of the TeachingLearning Process in General Education Schools.

14 E. Lessons learned and reflected in project design

71. A key lesson learned in BEPl is that implementation in Uzbekistan always takes a long time due the highly hierarchical and controlled environment, including slow and lengthy decision making and procurement processes. The Bank’s Country Office in Uzbekistan is working with the GoU to address many of these issues.

72. In addition, given that BEP includes some significant changes in how the MoPE, local schools and communities operate, including collecting and using data and the participation of communities in decision making, implementing these kinds of changes takes even longer. It takes time to understand and accept what is involved, including exactly what the changes are and why they will be beneficial. Implementation of BEPl has helped to develop capacity and understanding, which BEP2 will build upon and extend.

73. The time to implement, especially the long lag in startup, emphasized the need for as much work up front as possible to meet implementation readiness conditions as well as the need to streamline implementation processes for BEP2 where ever possible based on the experience of BEP 1. Revising and updating the OM for BEP 1 to reflect changes in BEP2, satisfactory to the Association, is a condition for Project effectiveness. The MoPE has already begun work on the feasibility study for BEP2, which is a condition in Uzbekistan for any project to begin implementation, and the Bank team has reviewed the initial estimates to ensure consistency with the costs agreed in negotiations. Having early agreement on key specifics-such as the eligible list of learning materials under component 1 and the Grants Manual under component 3-is also important so that implementation can begin more quickly.

74. Another lesson was the importance of bringing in the international experience of other countries so that the Uzbekistan specialists could see concrete examples of countries who have already reformed in the same areas as covered by the APL. BEP2 includes four study tours to other countries to observe reforms in School-Based Teacher Training, standardized assessment of student learning, school boards and competitive grants and per capita financing. Government counterpart funds will finance the study tours; during negotiations the Bank and MoPE discussed the need for the GoU to ensure the study tours will be financed.

75. A final lesson concerned the learning curve for the MoPE as an implementing agency for a Bank-financed project. BEPl was the first Bank financed education project and the first that the MoPE has enacted without a PIU, so the MoPE was learning both Bank procedures and how to implement without a PIU.

F. Alternatives considered and reasons for rejection

76. The GoU has strongly and consistently expressed its interest in moving ahead to phase two of the APL as soon as possible. Thus, the main decision was one of timing, particularly achievement of the two triggers for movement to phase two-school board activation and student assessment-and sufficient overall progress in project implementation. Although implementation has lagged behind what was initially envisioned in BEP1, the MoPE successfully achieved the two triggers in October 2008 and has shown clear commitment to reform in several key areas, especially increased community involvement through active participation of school boards, development and testing of a national assessment of student learning, development of new materials for teacher training, and faster-than- expected design and implementation of per capita financing for schools.

77. While commitments and disbursements are still lower than desired, reflecting the slow start up and the slow procurement processes in Uzbekistan, they are increasing. Moreover, the level of 15 disbursements underestimates what has happened in capacity building in BEP 1 and activities in several areas, especially teacher training and per capita financing, need the support of BEP2 now to move ahead with implementationof reforms. As waiting until spending is substantially higher would jeopardize progress in these areas, the Bank opted to proceed now.

111. IMPLEMENTATION

A. Partnership arrangements

78. The Bank has an effective working relationship with the Asian Development Bank (ADB), who is the largest donor in education in Uzbekistan, and with UNICEF. The Bank, ADB and UNICEF are supporting similar and complementary education reforms to improve the quality of education in Uzbekistan. ADB has four on-going projects, including one that is similar to BEPl and BEP2. This project, which includes equipment, in-service teacher training, and community participation in rural schools, also focuses support on targeted schools but the ADB-supported schools do not overlap with the schools in BEP. Another ADB project is supporting the development of a book publishing sector and development of school libraries in 1,000 schools, which complements efforts in BEP to provide the opportunity for schools to obtain more reading materials for school libraries as part of the learning materials in component 1. UNICEF, who works closely with ADB and the Bank, has supported child- friendly schools with active learning and teacher training.

79. Under SEDP, the GoU has focused its resources on school rehabilitation and construction, while international donors, including the World Bank, ADB, UNICEF, the Islamic Development Bank and bilateral donors, are providing support to other program components, including materials, equipment and new teacher training methods. Annex 2 provides more detail on donor activity.

B. Institutional and implementation arrangements

80. The project will be implemented directly by the MoPE, building on the capacity and knowledge developed under BEPl regarding Bank procedures and the project. The Deputy Minister, as Project Director, will be responsible for overall leadership, management and oversight of the project with Heads of Departments responsible for implementation of specific components. The MoPE’s Main Department for the Development and Organization of the TeachingLearning Process in General Education Schools will have overall responsibility for implementation and coordination for Components 1 and 5; the MoPE’s Main Department for the Development and Organization of the Activity of Education Institutions will have overall responsibility for implementation and coordination for Components 2 and 3; and the MoPE’s Department of Financing, Accounting and Reporting will have responsibility for implementation and coordination for Component 4. The Department of School Endowment (DSE) and the Finance and Accounting Department (FAD) will work with the teams on procurement and financial management issues.

81. To provide needed help and expertise in implementing the project, BEP2, like BEP1, will finance local consultants with relevant skills and experience. The support from the local consultants will help ensure that the MoPE implements the project in accordance with the procedures set forth in the Financing Agreement, the Project Appraisal Document, the Grants Manual and the OM.

82. Ten local consultants will support project activities, including M&E, and four local consultants will support project implementation: procurement, financial management, project coordination, and translator/administrative assistant. Working closely with DSE and an international procurement consultant hired under the project, the local consultant on procurement will be

16 responsible for preparation of a procurement plan and for ensuring that all tendering processes are consistent with Bank procedures and guidelines. Working closely with FAD, the consultant on financial management will be responsible for tracking all project expenditures, and ensuring consistency with Bank guidelines. The Chief Accountant in FAD will continue to have overall financial management responsibilities for the project and will approve payment-related transactions. The local consultant on coordination will work closely with the Project Director to coordinate the activities of all five project components, ensuring that activities move forward in a sequenced and structured fashion.

83. Under Component 2, BEPl provided teacher training and technical assistance to experts of the Avlonyi Institute and the IUPTTR who then trained 165 facilitators (oblast specialists and rayon methodologists). The facilitators will use their newly developed capabilities to bring training directly to schools and preschools in 35 rayons in seven oblasts. In each of the participating schools and preschools, the project will train directors and teams of three to five teachers, called methodological groups, who will in turn be responsible for going back to their schools or preschools to train their colleagues. Mentoring will be provided in all training programs. Three local consultants will assist MoPE and the two institutes.

84. Under Component 4, the MoF’s Treasury Training Center will continue carrying out training of school principals and accountants using the training modules for per capita financing, budgeting, management and accounting that were developed under BEPl . To facilitate the distribution of relevant information to the wide range of stakeholders, the government will form an inter-ministerial working group, consisting of representatives of MoPE, MoF, and Regional Public Education and Finance Departments. The Department of Financing, Accounting and Reporting of the MoPE will act as the Secretariat for the working group. 85. See Annex 6 for detailed implementation details by component.

C. Monitoring and evaluation

86. The project will benefit from the expertise developed in BEPl for student assessment and the baseline survey but still needs to develop an M&E system. Under BEPl an international consultant was hired by MoPE to help design and implement the new standardized national assessments for grades 4 and 8 and to help prepare reports. This assistance together with MoPE experts resulted in a successful pilot for grade 4 in October 2008 in which the MoPE carried out the assessment. BEP2 includes an international firm to be hired to support further development and implementation of standardized national assessments, as well as a firm to carry out the follow up to the baseline survey and a firm to observe classroom teaching practices.

87. The MoPE will update the agreed BEP2 project’s indicators and include them as an Annex in the project’s progress report to be discussed at least twice a year during the Bank supervision missions.

88. The main agency to coordinate activities for this component will be the Main Department for the Development and Organization of the Teaching/Learning Process in General Education Schools in the MoPE.

D. Sustainability

89. The sustainability of the project depends on three key aspects: (1) GoU’s ownership of the project; (2) fiscal sustainability and cost effectiveness of project; and (3) institutional capacity building of technical and fiduciary staff. 17 90. The APL is a response to the GoU’s request to complement their financing plan of the SEDP. In addition, it supports the GoU’s move to per capita financing of schools. All project activities will be implemented through existing structures of the MOPEand thus, they will become an integral part of the MOPE’Snormal plan of activities and program. Moreover, BEP2 builds on capacity already developed and documented under BEP 1.

91. Involvement of school boards, continuation and expansion of per capita financing, formal adoption of SBTT, and regular assessment of student learning are all expected to continue after the project based on the capacity developed under the project. These will bring about long-term change and sustainability, including more efficient and equitable financing. It is also likely that SBTT will cost less than traditional teacher training as the training will occur at the school level and thus does not include associated with institution-basedtraining such as accommodation, travel and per diem.

92. In terms of maintenance costs and implications for the recurrent budget of the education sector, these are not likely to be substantial. The bulk of project funds are designated to the provision of learning materials and resources and school grants, which are not estimated to result in sizeable maintenance expenditures. The project component on strengthening in-service training for teachers and principals, in turn, is not introducing in-service training per se into the education sector, but rather introducing a new school-based approach to teacher trainig, which is likely to cost less than traditional training. Activation of the school boards does introduce training, and technical assistance into the system that are not present to date. However, these activities do not extend beyond the lifetime of the Project since they are in support of the establishment of the school boards and not their day-to-day running. Finally, the project component on per capita financing is responding to an immediate need to implement a new system of education finance that is expected to make the financing system more efficient and equitable.

18 E. Critical risks and possible controversial aspects

Risk factors Description of risk Rating Mitigation measures Rating of of risk residual risk

M Provisions are included in the M Macroeconomic economic crisis may generate an Financing Agreement to ensure Framework economic slowdown that could adequate and timely allocations negatively impact the education for GoU financed activities. budget and thus put at risk allocations for some of the GoU's financed Project activities. country Low transparency and external S The Bank and other donors are M Governance accountability; cumbersome working with GoU to change governmental procedures. procedures. The Project includes components that support higher accountabilitv and transnarencv.

Sector Reversing education reform M The Project is based on long M Specific Risks term GoU reform programs and (Primary will benefit from study tours education) and local assistance. pecific Risks Political interference in the M Anonymity in the review and M Iesign allocation of Competitive Grants evaluation process of project to schools. proposals will help to ensure fair and objective decisions. :mplementation Limited capacity in MoPE to S Local consultants will assist M Zapacity and implement projects without a MoPE departments; other justahability dedicated project implementation institutions/organizations will unit. participate in Project implementation (MoF, training institutes, school boards). :inancia1 Weak financial management in FM consultant hired to support M danagement MoPE. the chief accountant to establish effective financial management system, including project accounting system using appropriate software. Project will be subject to external audit by independent auditor firm acceptable to the Bank. 'rocurement GoU's cumbersome processes for Implementation arrangements M awarding contracts, including ask for full integration of long and bureaucratic approval procurement into MoPE, with procedures. streamlined approval procedures; staff will be trained to improve understanding of Bank procurement procedures. [V. Overall Riz (including Reputational Risks) Overall Risk I Moderate kisk Rating - H (H h Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

19 F. Loadcredit conditions

93. Credit Effectiveness Condition:

The Operational Manual has been revised and adopted by the MoPE for the purposes of the Project and is satisfactory to the Association.

94. Disbursement Condition for Competitive Grants:

The Grants Manual, satisfactory to the Association, has been adopted by the Recipient (through the MoPE).

95. Covenants for Implementation

The Recipient, through the MoPE, shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 4.09 ofthe General Conditions.

Without limitation on the provisions of Part A of this Section, the Recipient, through the MoPE, shall prepare and furnish to the Association not later than forty five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association.

The Recipient, through the MoPE, shall have its Financial Statements audited in accordance with the provisions of Section 4.09 (b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the Association not later than six months after the end of such period.

The Recipient, through the MoPE, shall: (a) have the internal control framework, the operational processes and procedures followed under the Project audited for the first 24 months of Project implementation, in accordance with terms of reference and by independent auditors both acceptable to the Association; (b) furnish to the Association as soon as available, but in any case not later than six (6) months after the end of such period: (i)certified copies of the assessment of the internal control framework, the operational processes and procedures referred to in paragraph (a) of this Section for such period, as so audited; and (ii)an opinion on such processes and procedures by said auditors, in scope and detail satisfactory to the Association, as to whether they provide the Recipient adequate accounting, internal control and financial reporting as intended for the Project; and (c) furnish to the Association such other information concerning such internal control framework, operational processes and procedures, and the audit of such internal control framework, operational processes and procedures, and concerning said auditors, as the Association may from time to time reasonably request.

20 IV. APPRAISAL SUMMARY

A. Economic and financial analyses

96. Economic Analysis. The main economic analysis underlying the program was developed when the initial project was being designed. In Uzbekistan, where the focus is on basic education that is overwhelmingly publicly provided and with near universal coverage, the primary rationale for using project funds to increase public funding of basic education in Uzbekistan rests on equity grounds. The specific attributes ofbasic education in Uzbekistan are such that the inequities do not lie predominantly in enrollment but rather in quality. The inequities manifest themselves in the school infrastructure as well as availability of learning and teaching inputs, and they are apparent between urban and rural and remote areas. In addition to resources, other reforms are also needed to have the resources used in such a way that real change will occur and learning outcomes will improve. These include: incentives for schools or teachers to change the system or improve its outcomes, data for monitoring and evaluation, and community and stakeholder participation to encourage accountability.

97. Data collected in 2004 from school officials in different communities in Uzbekistan on aspects such as whether schools have sufficient numbers of teachers, rooms, desks, boards, manuals, and heating equipment, and whether those physical materials available are in good condition show that overall shares of schools with sufficient numbers of inputs, or inputs in good condition, leave much to be desired. In addition, schools in urban communities fare better in almost every aspect, followed by schools in rural communities that are close to the rayon and oblast center. Clear disparities are apparent between urban schools and rural remote schools, whether these are remote from the oblast or rayon center or both. Indeed, it is of interest to note that distance from the oblast center in many instances has more ofan impact on school attributes than distance from the rayon center.

98. Basic education expenditures have been relatively low and have been inequitably distributed. A study on school financing has observed that per student spending has been allocated inequitably between oblasts, rayons and school^.^ Such inequitable distribution of resources has been reflected in inequitable learning conditions discussed above and in attendance. Poor school conditions discourage children from attending schools regularly. The household survey in 2004 suggested that attendance is an issue in Uzbekistan, in particular, in rural areas in winter and cotton harvest seasons.6 Moreover, the high reliance on informal private spending on uniforms, textbooks, learning materials and informal contributions to schools has also resulted in inequitable access to good quality education and reduced enrollments and attendance, especially among the poor in rural areas7

99. Thus, the APL is targeted to poor, rural schools to improve quality and reduce disparities, supporting the GoU’s efforts to improve the effectiveness of teaching and learning in basic education and preschools. While the government is committed to increase investment primarily in school infrastructure and teacher wages, BEP2 will continue complementing the government’s strategies by focusing on improvement of effectiveness ofteaching and learning and equity and efficiency gains in resource allocations.

100. Annex 9 presents international evidence where available on the cost effectiveness of the reforms in the project, as well as potential efficiency gains through the implementation of per capita financing based on the preliminary outcomes in Bukhara oblast.

Avanesyan, Vahram, 2006, Per Pupil Funding Formula for Uzbekistan General Education, Draft. For instance, Uzbekistan Regional Panel Survey, 2004. ’ The average education-related expenditure per student in basic education in 2000 was more than the poverty level monthly expenditure on food (World Bank, 2007, Republic of Uzbekistan: Living Standards Assessment Update, p. 89).

21 101. Financial Analysis. Since the mid-l990s, Uzbekistan has devoted a very high percentage of its GDP (ranging from 5.6 to 9.6 percent) and of the government budget to education, higher than other countries in the region and even most OECD countries. In 2007, 7.5 percent of GDP or 25.1 percent of the consolidated expenditure was spent on education. However, until 2004, considerable budget growth was concentrated in the National Program for Personnel Training (NPPTFthe programs for specialized secondary education, thereby under financing the other sub-sectors. A major breakthrough took place in May 2004 when the Government put forward the SEDP shifting the focus to general education. The off-budget School Education Development Fund8was created to finance the SEDP 2004-2009. The total cost of the program was estimated at US$ 1.2 billion in 2005 constant prices, of which US$ 240 million was to be funded by development partners. By 2008, the government invested US$ 741 million (US$ 529 million at 2005 prices) for new construction, rehabilitation and repair of schools and US$ 269 million (US$ 189 million at 2005 prices) for furniture, learning materials and lab equipment, computers and sport equipment. In 2009, the government intends to invest another US$429 million (US213 million at 2005 prices).

102. Even though the Uzbekistan economy is relatively insulated from the direct impact of the financial crisis due to its rather closed nature and the country’s strong macro position, the deepening of the crisis poses serious risks to the economic outlook of 2009 and 2010. As a result fiscal pressures are going to increase and some choices in public expenditures will have to be made. It is possible that the government may not be able to spend on basic education as generously as the SEDP has in the last several years. Therefore, since the wage level of teachers is already relatively high, it is the right time for the government to focus on non-salary recurrent spending such as teaching materials and teacher training.

103. The government is currently preparing the next medium-term education program and plans to keep the SEDP Fund to continue development of basic education and to address preschool. Unlike basic education, spending on preschool education has not increased much except in 2008. Realizing this, the government intends to focus more on development of under-funded preschool education, in addition to the continuing investment in basic education, under the new program. Estimates of expected spending are not known at this time.

B. Technical

104. The project was designed based on the current situation in education in Uzbekistan and reflects the policy priorities of the GoU as well as advice and knowledge of the Bank team on international experiences in undertaking similar reforms. Project preparation incorporated lessons learned from the first phase of the APL as well as building on capacity developed during implementation of the first phase.

C. Fiduciary

105. Financial Management. In January 2009, the Bank carried out a financial management assessment of MoPE, which concluded that the financial management arrangements for BEP2 are adequate in terms of staffing, budgeting and internal controls. At that time, the BEPl accounting system was not capable of supporting the preparation of regular and reliable financial statements. However, following implementation of the action plan agreed during the January assessment, the project accounting system has been modified and can now process all financial transactions under BEP1. The MoPE submitted on May 15, 2009 interim financial reports for the quarter ending March 3 1,2009, which were generated using the accounting system, and were satisfactory to the Bank.

* The government collected US$ 146 million in 2005, US$ 191 million in 2006, US$ 289 million in 2007 (prelim.) and US$ 329 million in 2008 (proj.) through the Education fund (designated taxes).

22 106. Fiduciary Risk at the Project Level: From a financial management perspective, the project is considered a Substantial Risk given the current weaknesses in the fiduciary environment and the involvement of school boards in financial transactions in Sub-projects financed by Competitive Grants (Component 3). However, adequate mitigating measures will be implemented, including making the project accounting system fully operational with built-in controls and updating the OM to include detailed requirements on the management of competitive school grants (FM procedures, accounting, reporting, internal controls and audit requirements), to reduce the residual risk to Moderate. These changes, plus an update of the Chart of Accounts, will be incorporated into the revised OM. 107. The financial management function for the project will continue to be the responsibility of the Chief Accountant, who will be assisted by a suitably qualified and experienced local financial management consultant hired in a competitive and open process. The OM developed for BEPl will be updated to include specific accounting and reporting requirements for BEP2. 108. Fiduciary Risk at the Country Level: The 2004 draft Country Financial Accountability Assessment (CFAA) ranked the country's fiduciary environment as extremely weak and the risk to public funds as high. The findings show that systems of public accountability function poorly and public sector transparency is inadequate at all levels of government. The main problems are: (i) inadequate capacity of public sector accounting; (ii)poor financial reporting and audit arrangements; (iii)weak internal control environment, including underdeveloped internal audit system; and (iv) weak oversight arrangements by the legislature. Most project implementing entities use the cash basis of accounting, which in most cases is sufficient for proper accounting of project resources and expenditures. Fiduciary risk at country level is considered Substantial before mitigation measures. 109. Procurement. In October 2008 and March 2009, the Bank carried out an assessment of the procurement capacity of the MoPE, including the DSE who has responsibility for all MoPE procurements. The assessment concluded that the local consultant for procurement and the international specialist who have been hired under BEP 1 have gained sufficient working knowledge of World Bank procurement procedures and guidelines to carry out activities successfully but MoPE has insufficient DSE staff to provide strong support to BEP procurement activities in a timely manner. 110. From a procurement perspective, the project is considered a Substantial Risk given that Bank procurement activities have not been fully integrated into DSE but with mitigating measures, including integration of procurement into DSE under BEP2 and the improved knowledge of Bank procurement procedures, the residual risk is reduced to Moderate.

11 1. The MoPE will continue to have overall responsibility on procurement functions of the Project as under the BEP 1, with support of a local and international consultant. All procurement under the Project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" published May 2004 and revised in October 2006 (Procurement Guidelines); and "Guidelines: Selection and Employment of Consultants by World Bank Recipients" published May 2004 and revised in October 2006 (Consultant Guidelines) and the provisions stipulated in the Financing Agreement.

D. Social 112. The APL focuses particular attention on disadvantaged schools for investment in provision of teaching materials, training of teachers on student centered approaches, and activation of school boards. The latest Living Standards Assessment showed that rural areas suffer from lower access to quality public services. By targeting project interventions to poor rayons located in rural areas the project will be addressing one of the sources of low quality services in disadvantaged areas. Moreover field visits conducted during supervision of BEPl and preparation of BEP2 show strong support not only at the level of regional and local education authorities but, most importantly, among school

23 boards, school directors, teachers, students and parents who are the direct beneficiaries ofthe project.

1 13. The activation and strengthening of school boards, which was successfully implemented in BEP1, is a concrete and important effort to give voice and to empower stakeholders, which will continue and expand in BEP2. The introduction ofper capita funding, together with school autonomy and strong community participation through school boards, should contribute to a more efficient and effective use school of resources.

E. Environment

114. The Project is Category C as the Sub-projects financed through Competitive Grants under Component 3 will not include any civil works.

F. Safeguard policies

NIA

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPBP/GP 4.0 1) 11 [x 1 Natural Habitats (OPBP 4.04) 11 [x 1 Pest Management (OP 4.09) 11 [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [I [x 1 Involuntary Resettlement (OPBP 4.12) [I [x 1 Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OPBP 4.36) [I [x 1 Safety of Dams (OPBP 4.37) [I [XI Projects in Disputed Areas (OPBP/GP 7.60)' [I [XI Projects on International Waterways (OPBP/GP 7.50) [I [x 1

G. Policy exceptions and readiness

115. Policv Exceptions: The project does not require exceptions from the current Bank Policies.

1 16. Readiness Criteria: Progress made under the ongoing first phase ofthe APL in addition to the implementation arrangements in place provides a sound basis for implementation ofthe second phase ofthe APL.

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

24 Annex 1: Country and Sector or Program Background

UZBEKISTAN: Basic Education Project - Phase Two

Uzbekistan is an upper low-income resource rich, doubly landlocked country, strategically located in the heart of Central Asia. Uzbekistan accounts for one-third of the region’s population and its economic and social prospects are crucial for both the 27 million Uzbeks and for the neighboring region. Uzbekistan gained independence in 1991 and in 2007 the Atlas Gross National Income (GNI) per capita was estimated at US$730. Uzbekistan has a young and predominantly rural population - 65 percent ofthe total population lives in rural areas. Most ofthe poor are rural dwellers.

Uzbek authorities have chosen a gradual approach to economic reform to minimize the social costs of transition. This gradualist state-led development approach, in which features of an open-market economy are introduced to the command and control system in a step-by-step manner, contrasts with the majority of transition countries who reformed much more quickly. While the development model has had its benefits, it has also had opportunity costs, as evidenced by a slower reduction in poverty and lower improvement in living standards than in reforming Commonwealth of Independent States (CIS) countries.

Governance in Uzbekistan is characterized by low transparency and limited voice and participation of citizens. The 2007 Transparency International Corruption Perception Index rates Uzbekistan as 175 out of 179 countries. Restricted dissemination of basic economic and social information and questions regarding the reliability ofdata present a serious impediment to accountability, to public participation in policy-making debates, and to effective monitoring and evaluation ofprograms.

The education sector faces the same issues with limited data, little public participation in policy making at the national, oblast and rayon levels, and limited involvement in school decisions at the local level. As a result, information on student learning outcomes has not been available and community and stakeholder participation as a way to encourage public accountability for school policies, resource allocation, and school management has not generally occurred. Recently, however, the GoU through the first phase ofthe APL has taken positive steps to address these issues through a national standardized assessment ofstudent learning for students in grades 4 and 8, and through school board activation and community participation in school decisions in selected schools.

Uzbekistan’s development strategy includes a strong focus on the maintenance of basic public services. Education spending for 2007 accounted for 25.1 percent ofthe total budget, and 7.5 percent of GDP, considerably above the OECD average. The current situation is, however, a late response to the relative neglect experienced by the education sector during the early 1990s. Real expenditures for education fell early in the transition, and recovered to pre-transition levels starting from 2001. Real teachers’ salaries had progressively eroded. Expenditures for other vital educational activities - including in-service teacher training, educational materials, and other inputs to maintain and update teaching and learning materials -- had been reduced to low levels.

In particular, until recently, education expenditure concentrated on new programs to upgrade secondary vocational education, while acute funding shortages remained in general education (grades 1-1 1). The centerpiece ofthe Government’s education reform was the National Program for Personnel Training (NPPT), launched in 1997. This program fundamentally restructured secondary and higher education with the intention ofproviding the new skills required in the global economy.’ At the same time, it aimed to raise the skill levels of future labor-market entrants by extending the duration of

Shavkat Kurbanov and Edem Seitkhalilov, National Program for Personnel Training: the Basis for the Achievement of Strategic Goals, UNESCO, September, 2000.

25 compulsory education from nine years to twelve years. Nonetheless, questions remain about the efficiency and labor market relevance of the current high public spending on education.

The SEDP, adopted by Presidential decree in May 2004, focuses on general education. It comprises a major program of school rehabilitation and construction, provision of educational materials and equipment (including IT and internet access), and training of teachers and school principals. From 2004 to 2009, SEDP invested $1.3 million in construction and rehabilitation of school buildings, provision of equipment (including IT equipment) and learning materials. The program was financed primarily by direct budget financing and funds of a targeted extra-budgetary School Development Fund accumulating an earmarked sales tax of 1 percent. Donor financing of US$200 million also provided support to the SEDP, including textbooks, ICT, distance education, teacher training, equipment and learning materials, school board and community mobilization, and student assessment.

Although the SEDP has, to date, covered rehabilitation, reconstruction and construction for 8,476 schools, an estimated 1,265 schools still require construction and rehabilitation works. The GOU plans to extend its activities for the remaining schools in need in 20 10 and 2001, estimating that it will cost an additional $200-250 million from the budget and the SEDP Fund to finish the remaining schools. Most schools continue to need learning materials and resources, teacher training and other improvements to increase quality and reduce disparities. The government is currently preparing the next medium-term education program and plans to keep the SEDP Fund to continue development of basic education and to increase its focus on preschools.

Accompanying the major investments under SEDP are significant salary increases for teachers and school principals, some of which are performance-based. The government substantially increased salaries of teachers, by 50 percent in 2007 and by 65 percent in 2008. The average teacher salary in 2008 is estimated at US$ 224 per month. These very significant increases reverse the long-term trend of declining real salaries in the sector and are expected to help restore prestige in the teaching profession and to attract qualified graduates to become teachers.

Learning outcomes and quality of education are a concern, however. Many factors hinder improvement of learning and quality: overloaded and outdated curricula, insufficient and outdated equipment and learning resources in schools, a lack of teachers’ professional competence to promote active engagement by students in their own learning, no incentives for schools or teachers to change the system or improve its outcomes, limited data for monitoring and evaluation, and limited community and stakeholder participation to encourage accountability. Few schools have been able to create a stimulating atmosphere to encourage students to be masters of their learning and teachers to apply new teachindlearning methods, and to cooperate and to share best practice.

Most teachers still employ traditional methods of work, devoting attention mostly to narrow subject knowledge, requiring from students to memorize and repeat notions, concepts and definitions. Critical thinking, problem solving, communication, cooperation and similar competencies do not receive sufficient attention. Moreover, approaches to teacher training have not changed much, and the changes that have taken place have not permeated through the system due in part to lack of local capacity, but also due to approaches to staff development that rely on providing training to teachers working individually with little or no contact with other teachers in their own schools. Seminars for teachers are on an individual basis, and incentives to schools for training teachers’ teams do not exist. After attending professional development events teachers go back to their schools to work on an individual basis, concentrating on the issues related to their specific subjects. This strategy does not encourage improvement of the entire school learning environment. SBTT, being developed and implemented as part of the APL, will help teachers to work together to improve the school learning environment.

26 Clear disparities exist in human and material resource endowment between urban and rural schools. Data were collected from school officials at the time of initial preparation of the APL (2004) on aspects such as whether schools have sufficient numbers of teachers, rooms, desks, boards, manuals, and heating equipment, and whether those physical materials are in good condition. loThe overall number of schools with sufficient numbers of inputs, or inputs in good condition, is quite modest. For both urban and rural communities, only 83 percent of schools have sufficient numbers of teachers, and 79 percent sufficient numbers of boards. Only 72 percent have sufficient number for rooms and 66 percent sufficient number of desks. Finally, there is a great need for teaching manuals and heating equipment, where only 57 and 56 percent respectively of schools where found to have sufficient numbers. In terms of overall quality of schools, only 40 percent of schools are deemed in good or excellent condition, while 18 percent have experienced deterioration in their condition over the last five years.

Beyond this sobering overall picture, schools in urban communities fare better in almost every aspect, followed by schools in rural communities that are close to the rayon and oblast center. Based on the latest analysis and data from 2004, clear disparities are apparent between urban schools and rural remote schools. Schools in rural communities that are remote from both the rayon and oblast center fare worst, in many instances exhibiting as little as half the share that is observed in urban schools, e.g., only 38 percent of schools in these communities have sufficient numbers of rooms or desks, as compared to roughly 80 percent in urban schools. The smallest discrepancy between urban and remote rural schools is observed in the availability of sufficient numbers of teachers. Here, however, it is likely that rural teachers tend to have lower qualifications and less experience than urban teachers.

The urbadrural disparities in school characteristics documented above have poverty implications, since poverty is more prevalent in rural areas (29.8 percent in 2003, compared to 22.6 percent in urban areas, latest available data). Schools that serve poorer children are less likely to have a telephone connection or access to piped water in satisfactory condition, with rural areas faring worse than urban areas. In addition, the schools that serve the wealthiest quintile of the population are less likely to have at least one building in unsatisfactory condition (45.8 percent compared to roughly 60 percent for all other quintiles). Finally, schools serving better-off student populations are closer to the district center.

There are also significant regional disparities in the funding of general secondary education, as discussed and documented in the PAD for the first phase of the APL. Based on data from 2005, the overwhelming share of current expenditures (above 90 percent) are wage expenditures, and total per student expenditures at the oblast level in 2005 varied from a low of nine tenths to 1.3 times the national average, ranging from a high for Navoi oblast of 134 percent of the average to a low in Namangan oblast of 88 percent of the average. Therefore, a general secondary student in Navoi oblast is benefiting, on average, from roughly a third more resources than the average general secondary student in the country, while a student in Namangan oblast is getting less than nine-tenths of the average student’s resources.

The GoU is also making strong efforts to improve public finance management including introducing a Treasury system, performance-based budgeting, per capita financing in health and education, and a MTBF. In 2007 the GoU took a number of steps by Presidential decree to adopt a new way of

10 See Annex 1 and Annex 9 in World Bank, 2006, Project Appraisal Document on a Proposed Credit in the Amount of SDR 10. I Million (US$15 Million Equivalent) to the Republic of Uzbekistanfor a Basic Education Project in Support of the First Phase of a US$40 Million Equivalent Adaptable Lending Program. ” See Avanesyan, Vahram, 2006, “Per Pupil Funding Formulafor Uzbekistan General Education,” Draft.

27 financing schools, moving to begin implementation of per capita financing of schools in order to increase the efficiency and equity of school financing. As a result of the changes the GoU began to implement per capita financing in 2008 in two Oblasts and Tashkent City with technical and financial support from the APL as well as government funds. Work is underway to extend per capita financing to three additional oblasts in 2009 and perhaps nationwide in later years when the results from the first oblasts will be available.

28 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies UZBEKISTAN: BASIC EDUCATION PROJECT - PHASE TWO

2006-2009 15.0 Provision of learning materials to 1501 I Project --Phase 1 schools and 598 preschools, training and I activation of school boards, design, development and training for school-based teacher training, development and pilot of national assessment of student learning, and development and introduction of per capita financing. Asian Development Rural Basic 2008-201 1 30.0 Project similar to BEP providing Bank Education equipment for rural schools, in-service teacher training, and community participation in rural schools of 3 regions. It does not overlap territorially with BEP. I Education Sector 2003-2009 38.5 Improvement of basic education quality Development and management, development of system Program of distance learning centers for teachers. Started before the School Development Education Program but contributes to its objectives. Second Textbook 2005-2009 25.0 Support to reform in educational curricula Project and textbooks. Provision of textbooks to schools, development of book publishing sector, and development of school libraries in 1,000 schools. Introduction of 2006-201 0 30.0 Support use of ICT in teaching priority ICT in Basic subjects (math, sciences, history and languages, and informatics) in grades 5-9 in 890 poor schools. Four components: (i) establishment of school clusters for ICT; (ii) teacher and staff development for ICT; (iii) learning materials development; and (iv) capacity building and management sup p0 rt. Computer 2005-2007 20.0 Provision of computer equipment to 2,155 I Eouinment basic schools in Uzbekistan Government of I Korean Economic 2006-2009 30.0 Provision of computer equipment to 15 18 Korea Development and schools, development of Center for Cooperation Fund multimedia and electronic programs and textbooks Islamic Construction and 2006-2009 10.3 Construction and provision of equipment Development Bank Equipment of for 15 schools with overall capacity of Basic Schools 5355 students

OPEC Saudia Construction and 2008-2001 21 Construction and equipment of 28 schools Arabia Development Equipment of in 8 regions. Fund General Education Schools UNICEF UNICEF Program 2010-2015 NA Child friendly schools, special needs zhildren, expansion of preschool. Work with World Bank and ADB. NOTE: In the past, USAID and British Cour 11had projects Uzbekistan ut the projects are now closed.

29 Annex 3: Results Framework and Monitoring

UZBEKISTAN: Basic Education Project - Phase Two

Results Framework

PDO Continue supporting the GoU’s To monitor improvement in efforts to improve effectiveness grade 4 that is greater in project education attainment and student of teaching and learning through schools than in non-project schools learning and provide feedback to (1) targeted interventions in as measured by a new standardized education authorities, schools, selected general secondary test of learning achievement teachers, employers, parents and education schools and preschools available for a sample of students in students. in poor, rural areas; (2) project and non-project schools. development of institutional capacity to assess student National standardized assessments To implement tailored-made learning; and (3) adoption of of student learning carried out pedagogical interventions in those predictable and transparent periodically in grades 4 and 8 with project school showing the poorest school budgets in selected report analyzing and disseminating learning outcomes. oblasts. the results. To improve school budgeting and use Per capita financing implemented in of resources at the school level. six oblasts with report analyzing and

Intermediate Outcomes

Component 1: Improved quality To ensure that learning materials and of teaching and learning in received the requested learning resources are reaching schools and project schools through effective materials and resources. teachers and students are making use of the learning materials and effective use of them. resources acquired under the Percent of teachers at sampled project. project schools observed by on-site assessment visits who are using effectively the learning materials and resources acquired under the project. Component 2: Changed Strategy for School-Based Teacher To ensure that in-service teacher teaching in project schools and TrainKg adopted. training provided under the project preschools towards a more results in a change of teaching interactive, student-centered Number of teachers at project behavior in the classroom conducive approach to improve learning schools and preschools trained. to improve learning outcomes. outcomes. Percent of the trained teachers at sampled project schools and preschools observed by on-site assessment visits who have changed their teaching practices towards a more interactive, student-centered approach. Component 3: Increased hrther Percent of school boards at project To stimulate community involvement involvement of school boards in schools that have implemented in school improvement activities and project schools and provide school-based quality improvement decision-making. competitive funding for school projects. immovement.

30 PDO Project Outcome Indicators 1 Use of Project Outcome information Component 4: Improved Percent of schools at three To use information to improve the education fmancing, budgeting additional oblasts participating in formula for allocating funds to and school management in per capita finance that are getting schools, to increase predictability, selected oblasts. more than 10 percent above or transparency, efficiency and equity in below average spending per student school budgets, and to determine whether per capita financing should be adopted nationwide. Component 5: Implemented Learning assessment results for To monitor changes in education national assessment of student grades 4 and 8 from national attainment and student learning and learning and evaluated project assessments provide feedback to education effectiveness. authorities, schools, teachers, Report prepared and disseminated employers, parents and students. comparing results in baseline survey of schools and households with results from follow up survey

Impact evaluation prepared and disseminated

31 e .Lr I ..e i E r4 N B m L 5 +P i E:

EL L i u E a 8 zg3

m m

Annex 4: Detailed Project Description UZBEKISTAN: Basic Education Project - Phase Two

Component 1: Providing Learning Materials and Resources for Grades Five through Nine of General Secondary Schools (Total estimated cost US$29.9 million of which IDA is US$22.8 million)

The objective of this component is to improve the quality of teaching and learning in project schools through effective use of learning materials and resources acquired under the project. This is to be done in alignment with the priorities and on-going activities of the SEDP and in coordination with education projects supported by other donors who are also helping to equip schools with teaching and learning resources, materials and aids.

BEPl financed learning materials and resources for:

0 598 selected pre-schools, providing each school the same materials and equipment, based on a list prepared by the MoPE and agreed by the World Bank; and 0 grades one to four at 150 1 selected general secondary schools, through a demand-driven process in which school boards, through an open and participatory process, assessed school needs and then requested materials most needed at that school, selecting from a list of materials prepared by the MoPE and agreed by the World Bank.

BEPl also provided financial and technical support for development of the process and materials for needs assessment and for training for school boards to participate effectively.

Due to slow startup of BEP1, the lengthy approval and procurement processes, and the need to carry out the baseline survey and school board training before school boards could carry out needs assessment, the learning materials and resources have not yet reached preschools or classrooms. Materials for preschools have been contracted but have not yet been received or delivered to preschools. It is expected that preschools will receive all materials before the 2009-2010 school year begins. The procurement process for learning materials for grades one to four is underway but these materials will not reach classrooms before the 20909- 2010 school year begins. During site visits some school boards, parents, teachers, and communities expressed frustration at the long lag between needs assessment and when the materials will actually arrive at the schools.

BEP2 will finance the provision of learning materials, equipment and other resources for grades five to nine in 150 1 general schools using the same type of demand-driven process for needs assessment and selection of materials with attention to steps to help reduce the length of time before materials are in the schools and classrooms. BEP2 will also finance dissemination of information to school boards, teachers, parents and communities on the learning materials through exhibition fairs, and the distribution of materials to schools in a timely fashion after the materials are procured by the MoPE. IDA will finance the learning materials and exhibition fairs while government funds will support the distribution of materials to schools.

Implementation under BEP2 is expected to proceed much more smoothly and more quickly than was the case in BEPl as capacity was developed during the first phase. For example, school request forms and school board training were developed and provided in BEPl so that capacity to carry out the demand-driven process already exists at the local level and implementation should begin much more quickly.

Implementation processes will be streamlined where ever possible based on lessons learned in BEPl . For example, the needs analysis and selection of learning materials by school boards will use a similar process as BEPl but the process will be streamlined significantly to eliminate redundant reviews and reduce the burden and time involved in the process. The school request form will be significantly shorter and will not require 35 t

school boards to submit data that was already collected under BEP1. The review process for the school requests will also be streamlined and will not have three layers of duplicative review as was the case in BEPl . Instead, Rayon education authorities will receive the requests from schools, group the requests from all the school boards into a package and send the package immediately to the oblast for review. The oblast education authorities will review the forms and the MoPE will aggregate all requests for procurement purposes. Rayon education authorities will assist schools with their proposals if needed.

In addition, during preparation of BEP2 extra time was spent on implementation readiness conditions so that implementation can begin as soon as BEP2 is effective. For example, MoPE and Bank have agreed on school formula and budget for each school, which varies the budget by the number of classes for grades five to nine, the number of students, and the remoteness of the school. Also, a preliminary list of learning materials has been developed by MoPE, which includes, for example, books for pleasure reading and reference books for school libraries, science equipment, musical instruments, and some ICT equipment. The list of learning materials is still under discussion including a limit on the amount of funds that can be used for ICT. Technical specifications must be developed as soon as the list is agreed between MoPE and the Bank

The MoPE will hold an exhibition fair in each oblast as soon after BEP2 approval as possible to show school boards, teachers, parents, and communities the available materials before they make their selections. In BEP 1 school boards indicated that they would have liked to get more information on the learning materials and to see them in order to make more informed choices. The MoPE is developing a detailed plan for carrying out the exhibition fairs. The MoPE also agreed to develop a plan to distribute the learning materials to the schools and agreed to include funding in the government budget to support the distribution of learning materials to schools in timely fashion. This funding is included in the cost estimates for the project.

The main implementation agency for this component will be the MOPE’S Main Department for the Development and Organization of the Teachinaearning Process in General Education Schools. The Department of School Endowment will also be involved in the procurement activities.

Two intermediate outcome indicators are sought under this component: (i)all schools eventually receive the learning materials that they requested; and (ii)at least 50 percent of teachers at sampled project schools who are observed by on-site assessment visits are effectively using the learning materials and resources acquired under the project. An independent firm will be hired to conduct classroom observations of teachers to determine the extent to which the items are being used effectively in the classroom.

Component 2: Strengthening School-Based Training for Teachers and Directors in Preschools and General Secondary Schools (Total estimated cost US$ 1.4 million of which IDA is US$ 1.0 million)

The objective of this component is to change teaching in project schools and preschools towards a more student-centered approach to improve learning outcomes. The project will improve teacher quality by promoting school-based teacher training (SBTT), as a complement to the existing training strategies. Teacher training programs will promote the use of student-centered active learning strategies, improvement of student assessment methods, cooperation-based work methods, community mobilization and effective use of modern teaching aids.

BEPl financed activities to enhance the capacity of the RIPTT and the Avloniy Institute, and the oblast and rayon education departments to introduce the SBTT approach and to promote student-centered teaching methods. This was done through training and technical assistance provided by international and local consultants to experts of the Avloniy Institute and the RIPTT who then trained 165 facilitators (oblast specialists and rayon methodologists). Teaching materials to facilitate the training were developed and provided to all experts and facilitators. The component also financed the provision of teaching equipment for the RIPTT, the Avloiy Institute, seven oblast Teacher Training Institutes, education departments, rayon Methodological Centers and Teacher’s Rooms at each school.

36 Building on the capacity developed under the first phase, BEP2 will continue to support the introduction of the new SBTT strategy in Uzbekistan, as well as the promotion of student-centered teaching methods.

The Teacher Training Institutions will use their newly developed capabilities to bring training directly to schools/pre-schools in 3 5 rayons from 7 oblasts. In each of the participating schools/preschools, the project will train teams of three to five teachers, called methodological groups, who will in turn be responsible for going back to their schools/preschools to train their colleagues and introduce student-centered and active teaching approaches, student assessment methods consistent with the new teaching, effective use of teaching aids and materials, and for creating a culture of collaboration and continuous learning within the school/preschool. Methodological groups and teachers will receive coaching and mentoring support from teams of facilitators responsible for their training. This practice will help school and preschool teachers strengthen what they learned and thus build up their skills.

Also, during the second phase, school/preschool directors will participate in a series of three training events where they will become familiar with school-based teacher training, student- centered and active teaching approaches and student assessment methods, so that they can support the work of the methodological groups. They will also receive training to strengthen their skills and competencies on school leadership, school- community collaboration, change management, resource management etc. It is expected that schooVpreschoo1 directors will play a key role in supporting the work of the methodological groups in their schools.

In order to achieve these objectives, the project will finance technical assistance for the development and adaptation of teaching training strategies; development and production of training modules and materials, monitoring and evaluation studies, and actual training of directors, methodological groups and teachers. Mentorship will also be provided to methodological groups and teachers.

Four training programs will be financed: (i)refresher training of 165 facilitators (oblast specialists and rayon methodologists) initially trained under BEPl; (ii)training directors of 1501 project schools and 598 project preschools on the teacher training program and on education management; (iii)training methodological groups (teams of school and preschool teachers) on the new teaching methods and on adult training; and (iv) training teachers in project schools and preschools on the new teaching methods. Costs to be covered will include fees for trainers and mentors, travel, accommodation and meals for trainers and trainees. To conduct the trainings, training materials will be printed, as well as certificates to be given to trainings graduates; teaching supplies will also be provided, including paper for copying handouts for each teacher in project schools and preschools.

For promoting SBTT as a complementary approach to the existing centralized teacher training schemes, a strategy will be further developed, additional knowledge and experience will be accumulated through a study tour financed through counterpart funds and information will be disseminated through seminars, including those organized for rectors and staff of the seven Oblast Teacher Training Institutes. SBTT is based on work showing that a relatively small group of teachers may initiate substantial changes in schools/preschools. A team formed in the schooVpreschoo1 (3-5 teachers)- called the methodological group- will take part in a group of training events to develop skills and competencies that will help them introduce innovations in their schools/preschools and to encourage other teachers to contribute to changing school practices. From the very beginning a representative of administration - schooVpreschoo1 director and/or deputy - will be involved in the process. Cooperation among teachers will encourage growth of the teachers’ professional competencies and the schooVpreschool’s internal development.

Trainings will take place, to the extent possible, in education facilities that were equipped under various other programs, such as: the Asian Development Bank (ADB) financed Information and Communication Technology in Basic Education Project (under which 860 Cluster Leader Schools are to be equipped in 2009), or the ADB financed Distance Education Project (under which 70 schools in 5 rayons will also be equipped in 2009-20 10).

37 Component 2 will finance the following activities:

Refresher training of facilitators. The refresher is needed to update facilitators’ knowledge and make sure that all facilitators have the same level of knowledge. Funds will be needed for experts’ payment, travel and accommodation expenses for facilitators and training supplies. 0 Printing pre-school directors and teacher training materials. Training school and preschool directors in student- centered, interactive teaching methods using the program and materials developed during Phase 1. Training will be conducted by facilitators. Experts will provide coaching. Funds will be needed for facilitators and experts’ payment, travel and accommodation expenses for facilitators, experts and directors, training supplies and printing diplomas for participating directors. Training and coaching methodological groups of school and preschool teachers in student- centered, interactive teaching methods in line with the program and materials developed during the first phase of the Project. Funds will be needed for facilitators’ payment, travel and accommodation expenses for facilitators and methodological groups, training supplies and printing diplomas for participating methodological groups. In-school teacher training. Funds will be needed for printing materials, payment of facilitators who will serve as mentors/coachers, travel and accommodation expenses for facilitators, training supplies and printing diplomas for participating teachers. Introduction of school-based teacher training in Uzbekistan in addition to the already existing teacher training schemes. Funds will be needed for: development of a strategy; a study tour to a country that uses SBTT; seminars for rectors and staffs of oblast teacher training institutes. Communication and awareness building activities to familiarize teachers and the public with school- based teacher training and the new, student- centered, interactive teaching methods.

The MOPE’S Main Department for the Development and Organization of the Activity of Education Institutions will have responsibility for the overall coordination of component implementation while the two training institutes (Avlonyi Institute and the RIPTT) will be responsible for developing expertise and overseeing the quality ofthe teacher training programs.

Three intermediate outcome indicators are sought under this component: (i)a strategy for SBTT is adopted in Uzbekistan to complement the existing teacher training strategies; (ii)at least 50,000 teachers at project preschools and schools are trained; and (iii)at least 60 percent of the trained teachers and directors at sampled schools and preschools observed by the on-site assessment visits have introduced in their teaching practice a more interactive, student-centered approach. As mentioned above in Component 1, an independent firm will be hired to conduct classroom observations of teachers to determine the extent to which the items are being used effectively in the classroom.

Component 3: Strengthening School Boards and Providing Competitive Grants to Selected Schools for School Improvement (Total estimated cost US$2.7 million of which IDA is US$2.7 million)

The objective of this component is to increase further involvement of school boards in project schools and provide competitive funding for school improvement.

BEPl supported the establishment and activation of School Boards to support school community mobilization and greater participation of the communities in schools. BEP 1 financed development of training materials and the training needed to get school boards, parents and other members of the school community involved in school needs analysis and learning materials under component 1. Thus the number of education specialist at all levels of the education system with knowledge, competence and skills to promote activation of School Boards and community participation increased. It is also expected that the facilitators will train

38 School Boards in BEPl on the preparation of competitive school grants that will be provided under the project during phase 2.

Building on the activation of school boards from BEPI, BEP2 will continue to build capacity and move school boards to an even higher level of participation by encouraging them to develop proposals for Competitive Grants to finance Sub-projects aimed at school improvement. This component will support the establishment and implementation of a Competitive Grants program for school boards to design and implement their own plans to improve school quality. The maximum grant will be $5,000.

These proposals are expected to be quality-oriented activities aimed at improving the classroom pedagogical process and the school pedagogical climate to improve learning outcomes-for example, school newspapers, theatre, libraries, and after school programs. In this respect, this component will not finance any civil works even if they are very small. For example, school and/or classroom rehabilitation and/or preventive or corrective maintenance would not be allowed. Income generation activities are also not allowed.

All project school boards will have the opportunity to compete for a grant but only the best 500 projects will be selected for funding following a careful designed and transparent review process to mitigate for the risk of political interference and the possibility of collusion of school boards with the reviewing committees at the Oblast level. In addition, positive discriminatory criteria will be introduced in the annual allocation of funds to allow a significant number of high-risk project schools, the poorest and lowest performing project schools in the 28 project rayons, to tap the competitive funds with good quality proposals. Approved proposals are to receive a maximum of about US$3,000 equivalent each.

In addition to financing the provision of Competitive Grants, this component will finance the required training for (a) school boards to carry out procurement of goods and services following the Bank rules and guidelines in the Grants Manual; and (b) Oblast evaluation committee members for them to appropriately use the approved evaluation guidelines when evaluating proposals and selecting winners. This component will also finance the cost involved in the annual reviewing processes, the traveling and other expenses related to the on-site monitoring and supervision and the dissemination of required information to all the stakeholders participating in this scheme.

Building on the training of the school boards provided during BEP1, the training to be offered to the school boards during 2009 for the preparation of relevant and quality school-improvement proposals will follow a cascade-type system under the framework of a broad school-board mobilization-training scheme. A qualified training agency will develop and test the modules and the MOPE will carry out the training. A ten-day training will be provided to 121 master trainers selected from the seven participating Oblasts, most likely during the second and third quarters of 2009. Immediately after the completion of this first-tier training, the 121 master trainers will in turn train selected members of the school boards in how to prepare relevant school-improvement proposals. This second-tier training to be provided at the rayon level is expected to last two days and be completed by December 2009.

The school-board members to be trained will include one teacher, one parent and one representative of the community selected by all the members of the school board. These three people are likely to take a lead role in the preparation of the proposal with participation of the rest of the members of the school board and the school principal. Accordingly, about 4,500 school board members would benefit of this training. The MOPE’SMain Department for the Development and Organization of the Activity of Education Institutions will be responsible for the overall implementation of this component.

One intermediate outcome indicator is sought under this component: 30percent of project schools will have successfully implemented school quality proposals by the end of the project.

Component 4: Improving Education Financing, Budgeting and Management (Total estimated cost US$ 0.5 million of which IDA is US$ 0.3 million)

39 The objective of this component is to improve education financing, budgeting and school management in selected oblasts.

The GoU has historically placed a high priority on education, as reflected in the extremely high government spending at about 7-9 percent of GDP over more than a decade. However, efficiency and equity of school education financing are still areas of concern. The school financing system has strictly been governed by a number of regulations and normatives set by the government, resulting in inefficient and nontransparent spending of public resources. The highly regulated norm-based budgeting with no financial management authority at the school level has discouraged schools from spending efficiently: for instance, any savings in utility expenses would simply result in budget reduction in the following year. In terms of equity, the education budget has been unevenly allocated across regions and schools without clear reasons.

The GoU took a number of steps to begin changing the school financing system after BEPl was.approved by the Bank Board. First, responsibility for budget allocations for basic education schools was transferred from MoPE and its regional departments to the MOF and its regional departments (Presidential Decree No. 3857, February 26, 2007). Subsequently, basic education schools were declared legal entities and school directors became the primary administrators of budgetary funds and the Director’s fund for top-up of teacher salaries (Presidential Decree No. 609, March 29, 2007). As a result, school principals and accountants were made responsible for estimating budget and staff needs; executing the estimated budget through the regional Treasury; managing school budget and human resources in accordance with the current legislation; executing various payments, including wages, and accounting school assets; and accounting and reporting in accordance with the established standards.

As a result of the changes enacted by the GoU to begin implementation of per capita financing in 2008, activities and coverage of BEPl was expanded. BEPl had been designed lay the ground work for per capita financing through implementation support in three rayons in the Bukhara Oblast with expansion to the remaining Bukhara rayons in BEP2. However, as the government decided to introduce per capita financing in all rayons in Bukhara, BEPl was expanded to include all of Bukhara and MoPE also introduced per capita financing in the Ferghana Oblast and Tashkent City using its own resources (Presidential Resolution No. 744, December 12,2007).

BEPl provided international technical assistance to help the MoPE to design the formula for per capita financing as well as the framework for training. The first phase also supported training for school accountants and principals, and financed computers for school-level financial management. A preliminary evaluation by MoFMoPE of the per capita financing implementation in the Bukhara Oblast shows some positive outcomes. For instance, many schools have consolidated classes and reduced the average teaching load, lowering the average cost of running a class (teacher salaries, utilities, etc.). A comprehensive report is under preparation.

A preliminary evaluation of the per capita implementation in the Bukhara Oblast in 2008 by MPEMOF has shown some positive outcomes. For instance, many schools have consolidated classes and reduced the average number of stafka (teaching load) per teacher, lowering the average cost of running a class (teacher salaries, utilities, etc.). BEP2 will support the GoU’s expansion of per capita financing to three additional regions, Namanghan, Syrdarya and Khorezm, (Presidential Resolution No. 1024, December 29, 2008). BEP2 will finance training on school budget planning, execution and accounting establishment of a school financial management and public expenditure monitoring system, including software development and installation of a school financial management and accounting system; and monitoring and evaluation activities. Specific activities include: (1) establishment of a school financial management and public expenditure monitoring system; (2) software development and installation of a school financial management and accounting system at the school, rayon, oblast and central levels, and training for school accountants in six oblasts; (3) regular monitoring and supervision by a full-time local consultant; (4) quarterly working group meetings; (5) annual evaluation of

40 the per capita formula and implementation by MPEMOF and adjust the formula and implementation plan, as necessary; (6) final evaluation of the per capita implementation at the end of project; (7) dissemination workshop for stakeholders and development partners at the end of project; and (8) study tour on the PCF implementation in a relevant country in Europe (10 persons) financed through counterpart funds. The government has not yet decided whether or when to expand PCF nationwide as this decision will depend on the result of the pilot project in the six regions. Based on the preliminary evaluation by MoPE and MoF that PCF and school-based financial management will be adopted PCF by 2013. In this case, the GoU will use its budget to support the expansions.

The Department of Financing, Accounting and Reporting in the MoPE has the main responsibility for coordination and implementation of this component. The MOF's Treasury Training Center will continue carrying out training of school principals and accountants using the training modules for per capita financing, budgeting, management and accounting that were developed under BEPI, In addition to facilitate the distribution of relevant information to the wide range of stakeholders, the government will form an inter- ministerial working group, consisting of representatives of MoPE, MoF, and Regional Public Education and Finance Departments.

One intermediate outcome indicator is sought under this component: the percent of schools at three additional oblasts participating in per capita finance that are getting more than 10 percent above or below average spending per student will decline from 60 to 30 percent.

Component 5: Supporting Project Management and Results Management (Total estimated cost US$ 1.5 million of which IDA is US$ 1.2 million)

The objective of this component is to support project management, implement national assessment of student learning, and evaluate project effectiveness.

Building upon the progress made during BEPl this component will support: (i)project management, including procurement, financial management, monitoring and evaluation and support to implement specific project activities; (ii)carrying out of a final standardized learning assessment for project and non project schools; (iii)standardized national assessment for grade 4" and gth; (iv) updating and analysis ofthe baseline survey collected during BEP1; (v) periodic monitoring and reporting of key educational indicators in a sample of project and comparable non-project schools; (vi) updating of the agreed BEP2 project's indicators included in the supplemental letter to the IDA financial agreement; and (vii) carrying out of an impact evaluation study of the overall BEP2, including qualitative assessment of the classroom pedagogical changes towards a more student-center approach and effective use of new learning materials.

The pilot of a standardized national assessment for grade 4 was carried out in October 2008 and was a successful learning experience for the MoPE. The capacity building to be financed under this component will include training, workshops, as well as learning assessment-related equipment for printing tests and processing and analyzing information. International consultants will train staff in assessments paid by IDA and study tours will be financed through counterpart funds.

Based on the preliminary report to be provided to the Bank during the second quarter of 2009 on the analysis carried out on the raw data included in the baseline survey carried out under BEP1, this component will finance the updating and analysis of this information on or about 2012. A qualified agency will be selected to carry out this task under terms of reference satisfactory to the Bank.

BEP2 will also undertake, through a firm, classroom observations near the end of the project to assess whether teachers have adopted the new, more student-centered teaching styles and whether they are using the new learning materials effectively in the classroom.

41 BEP2 will annually update the average completion (on-time graduation) rates, drop out rates and school attendance (for primary level grades 1-4, secondary level grades 5-9 and the overall basic education cycle grades 1-9) of a random sample of about 150 project (10 percent of the universe) and 150 comparable non- project schools (the control group). The comparability of schools will be based on socio-economic and education characteristics of the project and non-project schools. The updated table will be submitted to the Bank on an annual basis every end of July starting in 2010. Progress towards the achievement of this task will be measured by the MOPE’S ability to timely produce the above-mentioned table once year once the school year statistics have been finalized.

This component will finance an impact evaluation study of the overall BEP to be conducted by a qualified consulting firm or individual under terms of reference satisfactory to the Bank.

The main agency to coordinate activities for this component will be the MOPE’SMain Department for the Development and Organization ofthe Teaching/ Learning Process in General Education Schools.

42 UZBEKISTAN: Basic Education Project Project Schools and Preschools Oblast Rayon Total number of Total number of pre- general schools schools Peshku 44 30 Bukhara Romitan 41 34 Giiduvon 11 10 Total for Oblast I 96 74 Guzar 74 29 Dehkonobod 88 7 Kamashi 84 17 Kasbi 19 0 Koson 93 34 36 16 Muborak 28 18 Nishon 32 24 Chirokchi 170 18 I Yakkabon I 0 I 1 I

I Konimeh 36 10 I I I I Nurota 12 19 Uchkuduk 15 10

'. Total for Oblast I 148 I 51 I Samarkand I Pavarik I 98 I 43 I

Altinsoy 9 4 Sherobod 66 29 Surhandarya Shorchi 62 34 Angor 0 4 Muzrobod 0 3 Jarkurgan 0 9 Termez 0 4 Kizirik 0 6 I Total for Oblast I 350 I 173

I TOTAL IN UZBEKISTAN I 1514 I 598 I

43 Annex 5: Project Costs

UZBEKISTAN: Basic Education Project - Phase Two

1. Providing Learning Materials and Resources for 6.6 21.5 26.2 Grades Five through Nine of General Secondary Schools

2. Strengthening School-Based Training for 0.8 0.4 1.2 Teachers and Directors in Preschools and General Secondary Schools

3. Strengthening School Boards and Providing 2.5 0.1 2.6 Competitive Grants to Selected Schools for School Improvement

4. Improving Education Financing, Budgeting, and 0.1 0.3 0.4 Management

5, Supporting Project Management and Results 0.7 0.5 1.2 Management

Total Baseline Costs 10.7 22.8 33.5 Physical Contingencies 0.5 1.1 1.7 Price Contingencies 0.5 0.3 0.8 Total Project Costs' 11.7 24.3 36.0

Total Financing Required 11.7 24.3 36.0

1 Identifiable taxes and duties are US6.4 million, and the total project cost, net of taxes, is US$29.6 million. Therefore, the share of project cost net of taxes is 82.22%.

44 Annex 6: Implementation Arrangements UZBEKISTAN: Basic Education Project - Phase Two

The project will continue to be implemented directly by the MoPE, using the same approach in BEP2 as in BEPl. The Deputy Minister, as Project Director, will be responsible for overall leadership, management and oversight of the project with Heads of Departments responsible for implementation of specific components. To provide needed help and expertise in implementing the project, BEP2, like BEPl, will finance local consultants with relevant skills and experience. The number of local consultants is increased from 11 to 14. The support from the local consultants will help ensure that the MoPE implements the project in accordance with the procedures set forth in the Financing Agreement, the Project Appraisal Document, the Grants Manual and the Operational Manual. Component 1: Providing Learning Materials and Resources for Grades Five through Nine of General Secondary Schools

The MOPE’SMain Department for Development and Organization of TeachingLearning Processes in General Education Schools will be responsible for the implementation of this component, including decisions on the list of learning materials, exhibition fairs, procedures to be used for guiding schools in the preparation of their requests, review of school requests, and all tasks related to procurement and distribution of materials to schools. A local consultant will continue to support implementation of this component. In addition, the Department of School Endowment, with the local consultant for procurement, will assist in the development of technical specifications of the learning materials and work on all stages of procurement.

Eligible schools will be provided with a list of available materials and they - with the participation of school boards, the community and other stakeholders - will select what they consider to be the most essential items for their respective schools. Before school boards make their selections, the MoPE will hold exhibition fairs in each oblast so that school boards, teachers and others in the community can see the materials. Rayon education authorities will receive the requests from schools, group the requests from all the school boards into a package and send the package immediately to the oblast for review. The oblast education authorities will review the forms and the MoPE will aggregate all requests for procurement purposes. Rayon education authorities will assist schools with their proposals if needed. Component 2: Strengthening School-Based Training for Teachers and Directors in Preschools and General Secondary Schools Implementation of this component will be undertaken by the MOPE’SMain Department for the Development and Organization of the Activity of Education Institutions, the Avlonyi Institute and the FUPTT. The MoPE Department will have responsibility for the overall coordination of component implementation while the two institutes will be responsible for developing expertise and overseeing the quality of the teacher training programs. Three local consultants will continue to support implementation of this component. BEPl provided training and technical assistance to experts of the Avlonyi Institute and the FUPTT who then trained 165 facilitators (oblast specialists and rayon methodologists). The facilitators will use their newly developed capabilities to bring training directly to schools/pre-schools in 35 rayons in 7 oblasts. In each of the participating schools/preschools, the project will train directors and teams of three to five teachers, called methodological groups, who will in turn be responsible for going back to their schools/preschools to train their colleagues and introduce student-centered and active teaching approaches, student assessment methods consistent with the new teaching, effective use of teaching aids and materials, and for creating a culture of collaboration and continuous learning within the school/preschool. Methodological groups and teachers will receive coaching and mentoring support from teams of facilitators and experts responsible for their training to help school and preschool teachers strengthen what they learned and thus build up their skills.

45 Component 3: Strengthening School Boards and Providing Competitive Grants to Selected Schools for School Improvement The MoPE’s Main Department for the Development and Organization of the Activity of Education Institutions will be responsible for the overall implementation of this component in accordance with the Grant Manual prepared by MoPE and satisfactory to the Bank, including sending the yearly announcement, approval of the yearly winning school board proposals based on the assessment undertaken by the oblast education authorities, selection and hiring of qualified technical assistance (for training, evaluation, etc.), entering and signing of the grant agreements with the winning school boards, allocation of required funds, and overall monitoring and evaluation of this scheme. One local consultant and three assistants the implementation of the activities included in this project component. On the local level, school boards will play a key role in the identification of grant activities and preparation of proposals. Rayons will be responsible for carrying out the required on-site supervision of the implementation of approved school board proposals, while oblast education authorities will be active in the evaluation of grant proposals. Upon specific request by the school boards, both rayon and oblast qualified staff would provide process-related assistance to the school boards during the preparation of their proposals.

Component 4: Improving Education Financing, Budgeting and Management

The Department of Financing, Accounting and Reporting in the MoPE has the main responsibility for coordination and implementation of this component. The MOF’s Treasury Training Center will continue carrying out training of school principals and accountants using the training modules for per capita financing, budgeting, management and accounting that were developed under BEPl . To facilitate the distribution of relevant information to the wide range of stakeholders, the government will form an interministerial working group, consisting of representatives of MoPE, MoF, and Regional Public Education and Finance Departments. The Department of Financing, Accounting and Reporting of the MoPE will act as the Secretariat for the working group with responsibility for submitting the minutes of meetings, semi-annual progress reports and annual evaluation reports (by mid-February each year) to the Bank. A local consultant will continue to assist the Department in implementing this component, coordinating with other components of the project and liaising with other stakeholders.

Component 5: Supporting Project Management and Results Management

Four local consultants will support project implementation: procurement, financial management, project coordination, and translator/administrative assistant. Working closely with the Department of School Endowment (DSE) and the international procurement consultant hired under the project, the local consultant on procurement will be responsible for preparation of a procurement plan and for ensuring that all tendering processes are consistent with Bank procedures and guidelines. Working closely with the Finance and Accounting Department (FAD), the consultant on financial management will be responsible for tracking all project expenditures, and ensuring consistency with Bank guidelines. The Chief Accountant in FAD will continue to approve payment- related transactions. The local consultant on coordination will work closely with the Project Director to coordinate the activities of all five project components, ensuring that activities move forward in a sequenced and structured fashion.

The MoPE’s Main Department for Development and Organization of Teachinaearning Processes in General Education Schools will be responsible for all aspects of the assessments of student learning for grades 4 and 8, including selection and oversight of the consulting firm to support the assessments, coordination of the follow-up survey to the baseline survey carried out under BEP1, hiring and overseeing the firm that will carry out classroom observations for evaluation of Components 1 and 2, and collection and reporting of data on project indicators. The MoPE’s Main Department for the Development and Organization of the Activity of Education Institutions will oversee the implementation of the follow-up survey. The local consultant for M&E will provide support in managing, monitoring and coordinating the M&E activities for all components.

46 Annex 7: Financial Management and Disbursement Arrangements UZBEKISTAN: Basic Education Project - Phase Two

Summary of Financial Management Assessment

An assessment of the financial management arrangements being implemented by the MoPE was undertaken during the pre-appraisal mission on January 26 - 28, 2009 and in a follow-up visit in April 2009, to determine if the financial management arrangements are acceptable to the Bank. These financial management arrangements include systems of budgeting, accounting, financial reporting, auditing, and internal controls.

During the preparation of the BEP 1, it was agreed that MoPE would have direct responsibility for all implementation activities, including fiduciary responsibility. While this presented significant opportunity for capacity building within MoPE the financial management arrangements for the project remained marginally satisfactory, and the expected integration of the project accounting system with that of the MoPE did not happen. Although the Finance and Accounting Department (FAD) of MoPE retained overall responsibility for the financial management aspects of the project, the project accounting system remained separate from that of the MoPE.

To support FAD, the project MoPE hired a local financial management consultant, who implemented computerized accounting system, using the 1-C accounting software. The software was already being used by MoPE to record transactions for one specific area of the accounting function. However, the expectation that the Ministry’s 1-C software would be expanded to support project financial management requirements of both the World Bank and the Government was not realized. Even the project’s own stand-alone I-C software had not been fully operational and had not been generating financial monitoring reports as was expected. As of May 15, 2009, however, the software has been upgraded to process all financial transactions under BEP1, and the IFRs generated by the 1-C software have been submitted and approved by the Bank

Fiduciary Risk at the Project Level. Overall, the financial management arrangements for the proposed BEP2 are adequate in terms of staffing, budgeting and internal control. Following the upgrade, the accounting system is now capable of supporting the preparation of regular and reliable financial statements. From a financial management perspective, the proposed project is considered a Substantial Risk, particularly given the weak fiduciary environment and the involvement of School Boards in financial transactions under Component 3 (Competitive Grants). However, adequate mitigating measures have been implemented, including making the project accounting system fully operational with built-in controls, and updating the OM to provide adequate safeguards in the management of Competitive grants, to reduce the residual risk is reduced to an acceptable level.

For BEP2 the FAD will retain the support of a local consultant, financed under the Credit, as a financial specialist, under terms of reference acceptable to the Bank to support the department for the duration of the project. The OM developed for BEPl will be updated to include specific accounting and reporting requirements for BEP2. The financial management function for the project will be the responsibility of the Chief Accountant, who will be assisted by the financial management consultant.

Fiduciary Risk at the Country Level. Based on the assessments of the country PFM system, only some elements of the country PFM systems - staffing, budgeting and Treasury system for payments in local currency - are planned to be used under the project. Full use of the country PFM systems for project implementation will be considered, as project implementation progresses, particularly after the roll-out of the accounting program for budget organizations. Fiduciary risk at country level is considered Substantial before mitigation measures.

47 Summary of Financial Management Assessment and Risk Ratings

Country level Weak PFM institutions (see I S Project implementation arrangements satisfactory to IDA M text below) will be maintained and suitably qualified and experienced consultants will be retained to support key component coordinators, and the chief accountant. Entity level Risk ofpolitical interference I S n organizational structure and in entity’s management to IDA. Any changes to structure or

Project level Project is small sized, but will S be implemented by a ministry that has only limited financial management capacity, operating in weak fiduciary environment Overall Inherent Risk S

CONTROL RISKS

Budgeting: Budgeting S procedures under BEP 1 have not been effective

Accounting: Automated S project accounting system for ect accounting transactions a BEP 1 has not worked a1 statements. In addition sati satisfactorily

Internal Controls, including S internal audit. There is no internal audit fimction Funds flow M

Financial Reporting: Financial S reports under BEPl have been produced manually and often submitted to the Bank with delays Auditing: BEPl has not been S audited.

Overall Control Risk S OVERALL FMRlSK S Legend: H - High; S - Substantial; M- Moderate; L - Low

48 Country Issues

According to the draft Country Financial Accountability Assessment (CFAA) report for Uzbekistan, capacity of the accounting profession in the country is still low, and there is no critical mass of professionally qualified accountants. Knowledge of internationally recognized accounting and auditing standards, such as IFRS, IPSAS, ISA, is limited, in both the public and private sectors. Although Uzbekistan has a large number of bookkeepers who are trained in the basic concepts of accounting and are proficient in their application, there are significant capacity constraints which hinder the development of a modern system of accounting and financial reporting in the public sector. Accounting systems used at the central and local government levels are predominantly manual. There is no central management information system, and significant reliance is placed on banking records and computer spreadsheet packages.

Bank-financed projects in the country are implemented through stand-alone project implementing agencies that install parallel accounting systems to those used in the respective line ministries. The project implementing entities use the cash basis of accounting, which is not in accordance with IFRS, but is allowed under IPSAS, and in many cases sufficient for proper project accounting. Internal audit function exists in the form of Control and Revision Units (CRU) that carry out inspections in budget organizations, mainly to ensure compliance with laws and regulations. External audit is conducted by the Chamber of Accounts, but due to capacity constraints the Bank does not place any reliance on audits conducted by this agency. Audit of Bank-financed projects in the country has been performed by private sector firms that meet the Bank’s eligibility criteria. In 2004, the Bank conducted a review of local audit firms to determine their capacity to audit Bank-financed projects. At present, three firms are eligible to conduct such audits, although other firms from outside the country can and do participate in tenders for audit of Bank-financedprojects.

Due the above factors the Bank does not rely on the country’s PFM systems of accounting, financial reporting and audit, and Bank-financed projects continues to rely on stand-alone financial management systems for project implementation. The country risk is assessed as Substantial.

Implementation Arrangements

Project implementation for BEP2 would use the same approach as in BEPl with the MOPE having full responsibility for project implementation, and local consultants working with Department heads on implementation of specific components or administrative functions. The consultants for coordination, procurement, and financial management, and the translator will report to the Deputy Minister of Public Education in his role as project manager. With MoPE having direct responsibility for fiduciary activities, it will have the advantage of allowing the ministry to build capacity through hands-on experience of managing the project. The first financial consultant under BEPl is now one of the Deputy Chief Accountants in MoPE and should be able to provide back-up support in the event of absence of the financial specialist. Additional training of other FAD staff would also ensure a pool of staff with knowledge of project specific financial management procedures. The local consultant for financial management will also continue to work with the Finance and Accounting Department, and approval of project-related payments would still require prior approval of the MoPE Chief Accountant. In this regard the chief accountant will require some training to familiarize him with financial management requirements and procedures under the project.

Strengths: MoPE has been implementing BEP 1 and has gained some experience with Bank financed projects. The MoPE has established automated accounting systems that have been upgraded and are now fully operational. The current FM consultant, though not having long experience, has demonstrated good understanding of World Bank procedures. One of the Deputy Chief Accountants was the first FM consultant under BEPl and has good understanding of World Bank financial management requirements.

Weaknesses and Action Plan: As noted above the accounting system has not operated optimally and interim financial reports prepared in excel spreadsheet have been submitted with some delay. The current chief

49 accountant is relatively new and does not have any experience with financial management arrangements in World Bank financed projects. The following actions are required to ensure satisfactory financial management arrangements for the proposed project:

I I period from effectiveness to December 3 1,2008

Risk associated with implementing agency is Substantial before risk mitigation and Moderate after mitigation measures.

Staffing of the Accounting/Finance Function

FAD has eight staff supporting the budgeting and accounting function of the Ministry, including some 40 subordinate budgetary institutions and extra-budgetary funds. Overall responsibility for implementation and overall quality of financial management within the project will rest with the Director of FAD, supported by the Chief Accountant and a financial consultant. The financial management consultant will support the Department during project implementation, and will be responsible for day to day aspects of project financial management and disbursement, including managing the Designated Account, maintaining books of accounts, reporting day- to-day transactions and preparing accounting reports and financial statements, as well as monitoring financial flows to the project. The current financial specialist, though not formally trained on project financial management, has acquired some skills and experience and is at this point relatively familiar with World Bank financial management and disbursement procedures. It is envisaged that the financial management consultant, along with key accounting staff of the FAD, will require training to familiarize them with project financial management requirements and procedures. The risk associated with staffing is Moderate and no further actions are required except for additional training for capacity building.

Internal Control Systems and Internal Audit

The MoPE, with the support of a consultant, developed an OM for BEP1, which includes the financial procedures, key internal control mechanisms to be followed by the Ministry in the application and use of funds. The manual reflects the structure as well as the flow of funds to support project activities under BEP1. The manual will be updated, as a condition of effectiveness to incorporate specific aspects of BEP2, in particular the Grants Manual, satisfactory to IDA, which will provide specific guidelines on the management, procedures and processes of competitive grants under Componen: 3 of BEP2.

There is no internal audit department within the MoPE and none is proposed in the near future. However, MoPE is subject to periodic compliance audits by the Control and Revision Units of the Ministry of Finance (CRU), and the Chamber of Accounts (COA). For the purposes of the project, no reliance will be placed upon the audits performed by CRU or COA. The risk associated with internal control is Substantial before and Moderate after risk mitigation measures.

’* The main change in the OM is in respect of Component 3 - School grants. No changes are expected on the FM and Procurement sections except for the Chart of Accounts that should be revised to correspond to the nature of BEP2. 50 Accounting and Recording Systems

Accounts and records for the project will be maintained by the FAD which will operate and maintain a financial management system (FMS) capable of generating Interim Un-audited Financial Reports (IFRs) in accordance with formats agreed with the World Bank. Books of accounts for the Project will be maintained by the Ministry based on generally accepted accounting principles. FAD will generate and maintain accounting vouchers and supporting documentation for expenditures on all activities of the project, and will document the accounting transaction information flows..

MOPE will also maintain appropriate financial records and reports in accordance with existing government financial regulations and project specific procedures established in the Project Implementation Plan. Project accounts will reflect all financial transactions during the project period for the Credit by project components and by expenditure categories. The 1-C software installed under BEPl has been upgraded and now has the capacity to automatically generate financial reports required under BEP2. Live-testing of the software has been carried out under BEP1, with IFRs for the first quarter of 2009 (due by May 15, 2009) generated by the accounting system. A review of the accounting system and its ability to process a whole range of project financial transactions has been carried out and is satisfactory. The risk associated with accounting and record is Substantial before and Moderate after risk mitigation measures.

Auditing Arrangements

Due to low volume of activities, as a result of slow implementation, BEPl has not been audited. However, arrangements are in place for the first audit, covering the period since effectiveness to December 3 1, 2008, with the audit report due for submission to the Bank by June 30, 2009. BEP2 will be subject to annual audits in accordance with the Guidelines “Financial Management Practices in World Bank Financed Investment Operations ”, dated November 2005.

As noted above, the World Bank does not intend to place reliance on the government external auditing activities conducted by the Chamber of Accounts. The external audit will be carried out by independent auditors in accordance with International Standards on Auditing (ISA) and under terms of reference acceptable to the Bank. The terms of reference will stipulate both the audit of financial transactions and an assessment of the operation of the financial management system (FMS), including a review of the internal control mechanisms.

Project financial statements (PFS). The PFS include Project Balance Sheet, Within six months of the end of Sources and Uses of Funds, Uses of Funds by Project Activity, SOE each fiscal year and also at the Withdrawal Schedule, Designated Account Statement, and Notes to the closing of the project financial statements, and Reconciliation Statement

The risk associated with external audit is Substantial before and Moderate after risk mitigation measures.

Reporting and Monitoring

Under BEPlIFRs have been submitted irregularly and with delays; and these reports have not been generated by the accounting system as was expected. However, the accounting system has been upgraded and now has the capacity to generate financial reports required under BEPl as well as BEP2. The MOPE will prepare and submit Interim Un-audited Financial Reports (IFRs) in a form and frequency agreed with the Bank (sample forms to be included in the OM). The IFRs will be customized to reflect the specific characteristics of BEP2, while meeting the Bank’s minimum information requirements for the financial monitoring of the Project. The risk associated with reporting and Monitoring is Substantial before and Moderate after risk mitigation measures.

51 Planning and Budgeting

Budgets, prepared in accordance with the IFR format (disbursement categories, components and activities, financial sources, account codes, and by quarter) , will establish physical targets to ensure linkage between expenditures and physical progress, and proper comparison between actual and budgeted performance. A detailed budget for the first full year of project implementation, broken down by quarter, will be prepared before the Credit becomes effective. The document and information flowing between the Office of School Endowment and FAC are documented within the POM. The risk associated with budgeting is Substantial before and Moderate after risk mitigation measures.

Flow of Funds and Disbursement Arrangements

Funds will be transferred from the Designated Account to pay for eligible expenditures in accordance with instructions contained in the Disbursement Letter to be issued upon approval of the Credit. Funds will flow to the project via disbursements to the designated accounts (DA) maintained by the MoPE. The project will follow transaction-based disbursement procedures (Advances to the DA, documentation of the Advances based on Summary Statements and supporting documentation, direct payments and special commitments). Withdrawals from the Credit Account will be requested in accordance with the guidance given in the Disbursement Letter. Withdrawal applications will be signed by two persons: (i)an authorized representative of the Recipient (MoF) and (ii)another designated official, possibly the Project Director (Deputy Minister of Education), or other designated persons as authorized by written delegated authority of the MoF.

Disbursements would be made on the basis of full documentation for: (a) goods contracts costing more than US$lOO,OOO equivalent each; (b) contracts for services under consulting firms are costing more than US$lOO,OOO equivalent each; and (c) contracts for individual consultants costing more than US$50,000 equivalent each. Disbursements below these thresholds and for training, competitive grants and operating costs would be made according to certified Statement of Expenditure (SOEs). Full documentation in support of SOEs would be retained by the MoPE for at least one year after IDA has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made. This information will be made available for review during supervision by Bank Staff and for annual audits which will be required to specifically comment on the propriety of SOE disbursements and the quality of the associated record keeping.

Direct Payments. The Minimum Application Size for direct payments and for issuance of Special Commitments will be communicated to the Recipient in the Disbursement Letter. All withdrawal applications for direct payment, or for issuance of special commitments, will be supported by full documentation.

Project Accounts: Any funds provided by the Recipient in the form of counterpart funds will be deposited into a project account managed separately from the designated account. The project account may also be used as transit accounts for payments in local currency.

Country Financing Parameters. The Country Financing Parameters for the Republic of Uzbekistan, approved in May 2005, will be applied to determine the level of IDA financing. These parameters allow cost sharing of up to 100 percent, no country-level limit on financing of recurrent costs, and local and foreign costs may be financed in any proportions required for the project. Taxes, with the exception of customs duties, excise taxes and Road Fund charges on vehicles, may be finance.

Designated Account. To facilitate project implementation, a Designated Account (DA) for the IDA Credit will be opened in a commercial bank acceptable to IDA and on terms and conditions acceptable to IDA. IDA will make the initial deposit to the DA upon request by the Ministry of Finance after Credit effectiveness. The ceiling of the DA is set at US$2,000,000 and the statement of expenditure limits are specified in the DL which provides additional instructions for the withdrawal of Credit proceeds. Advances to and documentation of the Designated Account from the Credit account will be made against withdrawal applications, supported by

52 Category Amount of the Percentage of Expenditures to Financing Allocated be Financed (expressed in SDR)

(1) Goods and consultants’ 100% (excluding taxes) services, including 16,640,000 Training

(2) Competitive Grants 100% under Part C.2 of the 1,760,000 Project

(3) Operating Costs 500,000 100% (excluding taxes)

TOTAL AMOUNT 18,900,000

The risk associated with the Flow of Funds is Moderate.

Information Systems

While the FAD has automated a number of accounting procedures using spreadsheets and partial use of 1-C accounting software that was installed during preparation of BEP1, at present the Department does not have an integrated computerized double entry bookkeeping system for all the operations of the Ministry. The FAD has been using 1-C accounting software to record limited transaction for certain activities of the Ministry. Use of the 1-C software by the Ministry is now doubtful given that the Ministry of Finance plans to introduce an accounting program for budget organizations. Use of the 1C accounting software will be, for the most part, limited to project-specific operations during implementation. In other words, the project will have a stand-alone accounting software, and will initially not be linked to the MoPE accounting system. Potential for integrating project accounting system with the Ministry’s accounting system will be assessed when the program of accounting system for budget organizations is finally rolled out. The risk associated with information system is Substantial before and Moderate after risk mitigation measures.

FM Supervision Plan

As part of implementation support missions, IDA will conduct risk-based financial management supervisions for BEP2, every six months for the first two years, and thereafter at appropriate intervals based on the level of risk. These supervisions, which will continue the practice now used in BEP1, and will pay particular attention to: (i) project accounting and internal control systems; (ii)budgeting and financial planning arrangements; (iii)review of the Interim Un-audited Financial Reports; (iv) review of audit reports, including financial statements, and remedial actions recommended in the auditor’s Management Letters and (v) disbursement management and financial flows, including flow of counterpart funds. FM supervision will pay particular attention to any incidences of corrupt practices involving project resources at all levels of the project implementation chain.

53 Annex 8: Procurement Arrangements UZBEKISTAN: Basic Education Project - Phase Two

Procurement for BEP2 will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 and revised in October 2006 (Procurement Guidelines); and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 and revised in October 2006 (Consultant Guidelines) and the provisions stipulated in the Financing Agreement. The various procurement actions under different expenditure categories are described below. For each contract to be financed under the FA, the various procurement or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame have been agreed between the Recipient and the Bank in the Procurement Plan (PP). The PP will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. A General Procurement Notice (GPN) will be published by July 1, 2009 in the UNDB on-line and in its printed version as well as in dgMarket online. Specific Procurement Notices (SPN) will be published for all ICB procurement and Consulting contracts as per Guidelines as the corresponding bidding documents and RFPs become ready and available.

Assessment of the Agency's Capacity to Implement Procurement The MoPE will be responsible for the overall project management and coordination. With a view to helping the MoPE build its overall capacity to implement projects, the Bank has agreed that MoPE relevant departments will be responsible for the implementation of the components relevant to them. Assessment of the procurement capacity ofthe MoPE, including the DSE, was conducted by the World Bank procurement specialist, on October 10,2008 and also during the pre-appraisal mission during the week of March 9-14,2009, The DSE is the main unit of MoPE charged with procurement responsibilities. There were issues noted during implementation of the BEP Iwhich precluded the active engagement of the DSE in project procurement, including inadequate staffing arising from two staff positions in DSE that were made redundant. Temporary help from other departments in the Ministry are usually resorted to in cases where there are work overloads. During the visit, seven such persons were temporarily working in the DSE, in addition their existing staff. Consultant support from one international and one local procurement specialist will enable MoPEDSE to facilitate the project procurement activities. During implementation of BEPl, no issues were identified relating to record keeping and filing. Procurement Risk Assessment The combined results of the findings and recommendations of the CPAR dated February 2003 and the recent assessment puts the overall risk before mitigation for procurement under the project as Substantial (see Table below). The risks associated with procurement and the mitigation measures were identified in the assessment of MoPE.

54 Summary of Procurement Assessment and Risk Ratings

Description of risk Ratingaof Mitigation measures Ratinga risk of residual risk

MoPE’s excessive reliance on S Full integration of procurement into M consultants, together with long and MoPE, with streamlined approval bureaucratic approval procedures, procedures for procurement activities. seriously slow down procurement Contract Registration requirements are S The team will work with the CMU and S arduous and take long time which may the responsible government agencies, seriously impact timeliness of especially MFERIT, to reduce the steps procurement and project and time needed for contract implementation. registration.

Delay in contract effectiveness due to S Bank team to agree on the process to be non approval of award after Bank followed in the approval of contract issue no objection award by the relevant agency. Average S !

Procurement Implementation and Arrangements Procurement activities will be carried out by the MoPE with the help of international and local consultants. An international procurement consultant will be hired to help strengthen the capacity of the MoPE in procurement procedures and processes. A local consultant for procurement will be responsible for preparation and updating of procurement plans and for ensuring that all tendering processes for the project are consistent with World Bank procedures and guidelines. The local procurement consultant will work very closely with the MoPE’s DSE.

Procurement ofWorks: Works are not planned under the project.

Procurement of Goods: Goods contracts procured under this project will include learning materials, office equipment, training materials and manuals. Domestic preference in accordance with clause 2.55 and Appendix 2 ofthe guidelines will apply to goods contracts.

Selection of Consultants: Consultants’ services contracts procured under this project will include individual consultants, assignment for student assessments, baseline school surveys and project audit. Shortlists for consultants’ services for contracts estimated to be less than US$200,000 or equivalent may be composed entirely of national consultants. It is also expected that consulting offices associated with local universities may be included in the shortlists. University-based consultants will not be given preference over other private consultants.

Single Source Selection. This method shall be used for selection of facilitators and experts trained under the First Phase of the APL for training and mentoring activities under Part B, Schedule 1. The facilitators and experts are from the Republican Institute for Teacher Training and Retraining after A. Avloniy, Regional Training Institutes and from the Republican Institute for Preschool Teacher Training and Retraining. This work shall be carried out outside their regular working hours.

55 Training: Training activities include school-based training for teachers and directors of general schools and pre- schools, introductory and refresher training on school budget planning, execution and accounting for schools, rayons and oblasts involved in per capita financing, and seminars on student assessment. The MoPE will submit an annual training plan which will include details and budget of training to be financed for IDA’S agreement before implementation of training activities.

Operating Cost: The Credit would finance incremental operating costs of the MoPE to oversee and manage the project. Operating costs include vehicle rent, in-country travel and local accommodation costs for site visits and supervision, space, furniture and equipment rentals for exhibition of learning materials, utility and communication costs, translation costs, bank charges, office supplies, advertisement cost, photocopying, mail, and meeting or workshop costs. An annual operating costs budget approved by the Bank would be procured using the implementing agency’s administrative procedures which were reviewed and found acceptable to the Bank. Operating costs will not include salaries of civil servants.

Procurement under the Competitive Grants shall be conducted as specified in the Grants Manual.

Filiny and records keeping: The MoPE is responsible for records keeping and will dedicate a place for the safe storage ofthe procurement files in its premises before project effectiveness.

Procurement Plan The MoPE has developed an initial PP for the entire project, consistent with the implementation plan, which provides information on procurement packages, methods and procurement review arrangements. The attached PP as agreed between MoPE and the Bank during negotiations is attached below. The PP will be updated annually, or as required, to reflect the actual project implementation needs and improvements in the implementing agency institutional capacity and will be subject to the Bank’s prior approval.

Frequency of Procurement Supervision In addition to the prior review supervision to be carried out by the Bank team, and based on the experience under BEP1,20 percent of the contracts will be subject to post review. It is expected that a supervision mission in the field will be conducted every six months during which post reviews will be conducted. As a minimum, one post review per year will include physical inspection of sample contracts including those subject to prior review. Not less than 10 percent of the contracts will be physically inspected.

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r N i;c g.s Y Annex 9: Economic and Financial Analysis UZBEKISTAN: Basic Education Project - Phase Two

Economic AnalysisI3

Since the mid 1990s, Uzbekistan has devoted a very high percentage of its GDP (ranging from 5.6 to 9.6 percent) and of the government budget to education, higher than any other countries in the region and even most OECD countries. In 2007, 7.5 percent of GDP or 25.1 percent of the consolidated expenditure was spent on education. However, until 2004, considerable budget growth was concentrated in the National Program for Personnel Training (NPPT) 1997-2009-the programs for specialized secondary education, under financing the other sub-sectors. Preschool education has suffered from severe budget constraints after independence because there was no alternative funding once enterprises and communities that had financed the subsector in the pre-independent period could no longer afford it.14 Not only have preschool and basic education received relatively low allocation of the education budget, it has also been predominantly spent on wages, leaving less than five percent of the total recurrent budget for non-wage items to improve teaching and learning conditions. Moreover, education expenditure has been inequitably distributed. A study on school financing has observed that per student spending has been allocated inequitably between oblasts, rayons and school^.'^ Such inequitable distribution of resources has been reflected in inequitable learning conditions and attendance as discussed below. As a result, the high reliance on informal private spending on uniforms, textbooks, learning materials and informal contributions to schools has limited access to good quality education and reduced enrollments and attendance, especially among the poor in rural areas.16

The economics literature recognizes two grounds for the use of public resources: market failure and equity. In Uzbekistan, where the focus is on basic education that is overwhelmingly publicly provided and with near universal coverage, market failure does not constitute an important ground for public intervention. Therefore, the primary rationale for using project funds to increase public funding of basic education in Uzbekistan rests on equity grounds. The specific attributes of basic education in Uzbekistan are such that the inequities do not lie predominantly in enrollment or attendance rates (which are near universal). Instead, they manifest themselves in the school infrastructure as well as availability of learning and teaching inputs, and they are apparent between urban and rural and remote areas. Addressing these types of inequities is a worthy use ofpublic funds since school resources have an impact on learning outcomes for basic education students.

In terms ofavailable evidence in this regard, the Program for International Student Assessment (PISA) has assessed the learning achievement of 15-year-olds in the three educational domains of reading, mathematics, and science in OECD countries as well as some non-OECD countries The PISA findings were that, on average in OECD countries, school resources, school context (including location), and student characteristics (including socioeconomic background, which is relevant here given higher poverty rates in rural areas) together explain a large percentage ofthe differences between schools in student performance.

l3 As the APL is a two phase project originally designed as one project, the main economic analysis underlying the program was developed when the initial project was being designed. World Bank, 2006, Project Appraisal Document on a Proposed Credit in the Amount of SDR 10.1 Million (US$ 15 Million Equivalent) to the Republic of Uzbekistanfor a Basic Education Project in Support of the First Phase of a US$40 Million Equivalent Adaptable Lending Program. l4In 2007, 70 percent of 5-6 year-olds in the country, or 87 percent in villages, were not enrolled in preschool. World Bank, 2007, Republic of Uzbekistan: Living Standards Assessment Update, p. 73. Avanesyan, Vahram, 2006, Per Pupil Funding Formula for Uzbekistan General Education, Drafi. l6 The average education-related expenditure per student in basic education in 2000 was more than the poverty level monthly expenditure on food (World Bank, 2007, Republic of Uzbekistan: Living Standards Assessment Update, p. 89).

59 The findings are that the above five sets offactors explain together 75 percent ofthe variance between schools in OECD countries, with 50 percent ofvariance explained by student characteristics alone, 18 percent by school context, and 6 percent by school climate, policies, and resources. This last share is higher for several East European and Former Soviet Union countries, i.e. FYR Macedonia, Poland, and the Russian Federation, where 10 percent or more of between-school variance in student performance is explained by school climate, policies, and resources. From the point of view ofProject interventions, perhaps the most relevant finding is that on average in OECD countries, school resources, school context, and student characteristics together explain 69 percent of the differences between schools in student performance. The corresponding shares for individual Eastern European and Former Soviet Union countries are 86 percent for the Czech Republic, 82 percent for Albania, 81 percent for Hungary, 78 percent for Bulgaria, 74 percent for FYR Macedonia, 68 percent for Poland, 58 percent for Latvia, and 49 percent for the Russian Federation, averaging at 72 percent slightly above the OECD average.

Having established the importance of addressing inequities in school infrastructure and learning and teaching materials for improving student learning, it remains necessary to examine the extent and nature of these inequities in Uzbekistan. To this end, data from the first wave of the Uzbekistan Regional Panel Survey, fielded in 2004, were analyzed.” The household survey data include data on enrollment and attendance ofthose aged 7 years and above, while the community survey data include information on the distance ofthe community from the rayon and oblast center, as well as information on the characteristics of schools in general in that community.

Overall, the enrollment rate is near universal, at 98.1 percent. At 98.7 percent enrolment, the highest rate is in urban areas, followed very closely by rural communities that are close to both the rayon and oblast center. There is a roughly 1 percentage point drop when communities are remote from either the oblast or rayon center. Finally, there is a further roughly 1 percentage point drop for communities that are remote from both the rayon and oblast center. Thus, although the enrolment rate does vary by the community’s geographic location, for all types ofcommunities the rates are above 96 percent, and the gap between the communities with the highest and those with the lowest rates is only 2-3 percentage points. These findings therefore arguably do not point to important inequities in basic education enrolment by geographic location in Uzbekistan.

The picture that emerges when analyzing the attributes of schools in different types ofcommunities is very different from an equity point ofview. Data collected from school officials in the community on aspects such as whether schools have sufficient numbers of teachers, rooms, desks, boards, manuals, and heating equipment, and whether those physical materials available are in good condition. It is first important to note that overall shares of schools with sufficient numbers of inputs, or inputs in good condition, leave much to be desired. Thus, for both urban and rural communities, only 83 percent of schools have sufficient numbers of teachers, and 79 percent sufficient numbers of boards. The next range is for rooms and desks, where 72 and 66 percent respectively of schools overall have sufficient numbers. Finally, the greatest need lies in manuals and heating equipment, where only 57 and 56 percent respectively ofschools overall have sufficient numbers. In terms ofoverall quality of schools, only 40 percent of schools are deemed in good or excellent condition, while 18 percent have experienced deterioration in their condition over the last five years.

Beyond this sobering big picture, schools in urban communities fare better in almost every aspect, followed by schools in rural communities that are close to the rayon and oblast center. Clear

The survey was conducted in Kashkadarya oblast in Nishanskiy rayon and other rayons; in Andijan oblast in Markhamatskiy rayon and other rayons; and in Tashkent City. The Regional Panel Survey included both a household survey (3,000 households) as well as a community survey (190 communities, or technically speaking, primary sampling units). Given that this is a regional survey, findings are not nationally representative but do nonetheless provide valuable insights that may very well apply on the national level.

60 disparities are apparent between urban schools and rural remote schools, whether these are remote from the oblast or rayon center or both. Indeed, it is of interest to note that distance from the oblast center in many instances has more of an impact on school attributes than distance from the rayon center. Across the board, however, schools in rural communities that are remote from both the rayon and oblast center fare worst, in many instances exhibiting as little as half the share that is observed in urban schools, e.g. only 38 percent of schools in these communities have sufficient numbers of rooms or desks, as compared to roughly 80 percent of urban schools.

Cost Effectiveness of the Project Design

While the government is committed to increase investment primarily in school infrastructure and teacher wages, BEP2 will continue complementing the government’s strategies by focusing on improvement of effectiveness of teaching and learning and equity and efficiency gains in resource allocations. To redirect the government budget more towards basic education, the government launched the off-budget School Education Development Program (SEDP) 2004-2009, adding about 30 . percent of the consolidated government spending on education annually between 2005 and 2009. BEPl was designed to complement the government’s efforts in developing preschool and basic education by investing in quality improvement activities such as provision of teaching and learning materials, in-service teacher training, and activation of school boards. Also, the project aimed to make basic education financing more efficient by introducing per capita formula-funding on a pilot basis. More recently, in the Welfare Improvement Strategy (2007), the government readdressed various strategies to improve preschool and basic education, for instance, by boosting investment in school infrastructure and teacher wages; expanding per capita financing for more efficient distribution of public funds and creating incentives at the service delivery level, and privatizing underused preschool facilities at no purchase costs, among others. Given the government’s commitment to improving preschool and basic education, the decision that BEP2 will continue investing in complementary activities to enhance quality, equity and efficiency is appropriate.

The project reflects in its design various lessons from international experience to improve effectiveness of teaching and learning in basic and preschool education.

Community participation. An increasing number of developing countries have been decentralizing education decision-making to the school level-a strategy popularly known as school-based management (SBM)-expecting that this would increase responsiveness to local needs and improve access to and quality of education. Indeed, evidence from Honduras and El Salvador, for instance, suggests correlations between SBM reforms and improved school access and coverage in rural areas and poor communities.I8 Various evaluations of SBM programs in the United States have found evidence of decreased dropout and student suspension rates but no impact on test scores.19 Despite its popularity, there are only a small number of rigorous studies of the impact of SBM. Among the most rigorous studies, some found that SBM policies actually changed the dynamics of the school because of parental participation or behavioral change among teachers. Several studies found that SBM led to reductions in repetition rates, failure rates, and, to a lesser degree, dropout rates. On the other hand, those studies using rigorous techniques presented mixed evidencee2’

This range of positive evidence on the effectiveness of SBM supports the approach included in BEPl and BEP2 to activate school boards and strengthen their capacities in the decision-making process.21

~~ World Bank, 2007, Impact evaluation for school-based management reform, Doing impact evaluation, No. 10, Washington, DC. World Bank, 2007, What Do We Know About School-Based Management?, Washington, DC. Ibid. 21 The two-phase project builds in a rigorous impact evaluation of the project investment on the learning outcomes as measured by a new standardized test oflearning achievement.

61 This will help raise the level ofcommunities’ involvement in working together with local government agencies and influencing in the policy making process.

School-based teacher training. School-based teacher training has not only cost advantages compared to institution-based training but also complementarities to the existing training programs as follows. School-based teacher training has logistical advantage because many teachers, particularly female teachers, face difficulties in being away from home and participating in institution-based training courses. It is also usually cheaper because it does not require costs associated with institution-based training such as accommodation, travel and per diem. Moreover, school-based teacher training is more cost-effective for some types of training which aim to build team work at the school level and/or provide general skills across technical subjects.

Per capitajnancing. The per capita financing system has been introduced in many countries all over the world, and successfully implemented in many countries to improve efficiency, equity and transparency in resource allocations. In Uzbekistan, the preliminary evaluation of implementation of per capita financing in the Bukhara Oblast under the first phase has already shown certain positive outcomes. For instance, many schools have consolidated classes and reduced the average number of stafka (teaching load) per teacher, lowering the average recurrent cost per class (teacher salaries, utilities, etc.). In Bukhara, the number of classes has decreased by 106 (1 percent of the total classes, 10,563) in 2008 due to class consolidations at the school level. The class consolidation has resulted in reducing the total teacher salaries22 by 170 million sums (US$ 122,000) between September and December 2008 alone in Bukhara. This would be US$ 487,000 annual saving in total-slightly more than one percent of the total spending on salaries (66.1 billion sums, or US$ 50.4 million) in 2008. Assuming that Tashkent and Fergana (the other two pilot regions) had also reduced the number of classes by one percent, the annual saving would have been US$ 1.1 million in 2008.

With the same assumptions, such rationalization of the school system at the school level would save US$ 7.1 million in total, had PCF been introduced nationwide in 2008. BEP2 will support the implementation of PCF in 6 oblasts (3 supported under BEPl and additional 3), which would save about US$ 2.2 million per year at 2008 prices, which is exactly the same as the estimated cost of the relevant component supporting this activity (US$ 2.3 million). The return to the investment is, hence, extremely high. The government could save more with further class consolidation, wherever possible, and school network restructuring at the rayon level in the future once nationwide expansion of the new school financing scheme is completed.

Financial Analysis

A major breakthrough in basic education financing took place in May 2004 when the Government put forward the SEDP shifting the focus to general education. Government spending on basic education has steadily increased since then. The off-budget School Education Development Fund23was created to finance the SEDP 2004-2009. The total cost of the program was estimated at US$ 1.2 billion in 2005 constant prices, ofwhich US$240 million was to be funded by development partners. By 2008, the government invested US$ 741 million (US$ 529 million at 2005 prices) for new construction, rehabilitation and repair of schools and US$ 269 million (US$ 189 million. at 2005 prices) for furniture, learning materials and lab equipment, computers and sport equipment. In 2009, the government intends to invest another US$ 429 million (US$ 213 million at 2005 prices). In terms of recurrent budget, the government has increased teacher salaries considerably in the last few years-by

” Based on an estimated average monthly teacher salary at 400,000 sums, or US$305. 23 The government collected US$ 146 million in 2005, US$ 191 million in 2006, US$289 million in 2007 (prelim.) and US$ 329 million in 2008 (proj.) through the Education fund (designated taxes).

62 50 percent in 2007 and by 65 percent in 2008.24 Wages and other benefits consisted of 94-96 percent of the total basic education recurrent budget in 2006-2008. The average teacher salary in 2008 is estimated at US$ 305 per month, or about 370 ercent ofGDP per capita (US$ 974). This is relatively very high, compared to international standards.P5

Figure A9-1: Consolidated budget on education by level of education and SEDP (US$ million at Implied PPP exchange rate) .I - - 6’ooo DEduc. development tax (SEDP) I1 OHigher education 3 5,000 11 .Prof. college B academic lycea e

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: MOF (education budget); WE0 (exchange rate).

The overall fiscal impact of BEP2 investment on the basic and preschool education budget is small. In 2009, the government allocated recurrent budget of USD 1,358 million to basic education and USD 275 million to preschool education, and capital budget (SEDP) ofUSD 429 million to basic education. However, because around 95 percent of the recurrent budget is spend on wages, non-wage recurrent budget is estimated at only around USD 54 million for basic education and USD 17 million for preschool education. Hence, BEP2 investment over 3 years is expected to have a substantial impact on quality improvement through providing learning materials and resources (USD 22.5 million); strengthening school-based training (USD 1.4 million); and strengthening school boards and providing competitive grants for school improvement (USD 2.8 million). Even though the Uzbek economy is relatively insulated from the direct impact of the financial crisis due to its rather closed nature and the country’s strong macro position, the deepening of the crisis poses serious risks to the economic outlook of2009 and 20 10. As a result fiscal pressures are going to increase and some choices in public expenditures will have to be made. It is possible that the government may not be able to spend on basic education as generously as the SEDP has in the last 4 years. Therefore, since the wage level of teachers is already sufficiently high, it is the right time for the government to start increasing non- salary recurrent spending such as teaching materials and teacher training based on the experience of BEPl and BEP2.

Since the student population in these age groups (5-14 year olds) is projected to continue growing after around 20 10,26 it is necessary that the government continue increasing education spending for these

24 Data source: MoPEIMoF. *’ Relative to GDP per capita, salaries for teachers with at least 15 years of experience (in primary and lower secondary education) are relatively low in, for instance, Hungary (0.82), Norway (0.67), Estonia (0.52) and Israel (0.68), while highest in Korea (2.34 in primary and 2.33 in lower secondary), Mexico (2.01 in lower secondary) and Turkey (2 54 in primary) among OECD and partner countries (OECD, Education at a Glance ZOOS). 26 Due to the sharp drop in the birth rate in the mid-I990s, there have been and will continue being deviant demographic changes in the school-aged population since 2000 (Figure A9-1). The size of tlie 5-9 year cohort shrunk quite sharply between 2000 and 2005, and then started to grow very slowly thereafter. The size of the 10-14 year cohort will follow the

63 levels. Indeed, the government is currently preparing the next medium-term education program and plans to keep the SEDP Fund to continue development of basic education and to address preschool. Unlike basic education, spending on preschool education has not increased much except in 2008. Realizing this, the government intends to focus more on development of under-funded preschool education, in addition to the continuing investment in basic education, under the new program. It is an appropriate decision because preschool enrollments are so low and many of the existing preschools lack adequate facilities-only 33 percent ofthe preschools have all the basic facilitie~.~’In 2007, on1 30 percent of 5-6 year-olds in the country, and 13 percent in villages were enrolled in preschool.2 While the government will need to improve school facilities and expand physical capacities to increase preschool enrollments, it should also scale up the provision of teaching and learning materials and teacher training based on the experience in BEPl and BEP2.

same pattern with a 5-year lag. Hence, preschool and basic education school-aged population (age 5-14), in total, will decline until around 2010, and then start increasing thereafter (Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2006 Revision and World Urbanization Prospects: The 2005 Revision, http:Nesa,un,org/unpp). ’’ Republic of Uzbekistan, 2007, Weyare Improvement Strategy of Uzbekistan: Full Strategy Paper for 2008-2010, p. 32. 28 World Bank, 2007, Republic of Uzbekistan: Living Standards Assessment Update, p. 73. The ratio between preschool enrollments and basic education enrollments ranges from 4.3 percent (Kashkadarya) to 29.0 percent (Tashkent city) with a median at 8.6 percent (Surdarya). Because basic education enrollments are near universal, if we assume that the ratio between the population in each age group is more or less the same, the wide gap is due to the very low preschool enrollments in rural oblasts.

64 Annex 10: Safeguard Policy Issues

UZBEKISTAN: Basic Education Project - Phase Two

There will be no civil works under the Project. No safeguards policies are triggered. An Environmental Category Rating of “C” has been assigned for the Project.

65 Annex 11: Project Preparation and Supervision UZBEKISTAN: Basic Education Project - Phase Two

Planned Actual PCN review 11/26/2008 11/26/2008 Initial PID to PIC 11/26/2008 12/03/2008 Initial ISDS to PIC 11/26/2008 12/03/2008 Appraisal 04/29/2009 04/29/2009 Negotiations 05/06/2009 05/06/2009 BoardlRVP approval 06/25/2009 Planned date of effectiveness 09/30/2009 Planned date of mid-term review 10/17/2011 Planned closing date 03/31/2014

Key institution responsible for preparation of the project: Ministry of Public Education

Bank staff and consultants who worked on the project included: Name Title Unit Maureen McLaughlin Lead Education Specialist ECSHD Dilnara Isamiddinova Sr. Country Officer ECCUZ Imelda Mueller Operations Analyst ECSHD Sachiko Kataoka Education Economist ECSI-ID Naushad Khan Lead Procurement Specialist ECSPS John Otieno Ogallo Sr. Financial Management Sp. ECSPS Fasliddin Rakhimov Procurement Specialist ECSPS Gabriel Francis Program Assistant ECSHD Gulnora Kamilova Program Assistant ECCUZ Ana Maria Sandi Consultant Juan Prawda Consultant Matluba Umurzakova Consultant

Bank funds expended to date on project preparation: 1. Bank resources: US$197,3 12.74 2. Trust funds: none 3. Total: US$197,3 12.74

Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$29,067.26 2. Estimated annual supervision cost: $1 50,000

66 Annex 12: Documents in the Project File UZBEKISTAN: Basic Education Project - Phase Two

Concept Note and Meeting Summary

Aide Memoires

Country Assistance Strategy

PAD for Uzbekistan Basic Education Project - Phase I

The Basis for the Achievement of Strategic Goals, UNESCO, September, 2000.

Doing Business around the World, 2004 (World Bank);

IFC PEP’SAnnual SME Survey for Uzbekistan, 2004.

The Public Expenditure Review (World Bank, 2005).

Uzbekistan Regional Panel Survey, 2004.

Republic of Uzbekistan: Living Standards Assessment Update, The World Bank

Welfare Improvement Strategy Paper (2005-20 10)

World Development Indicators (2005)

Review of Social and Economic Analysis by Region, For all Regions

67 Annex 13: Statement of Loans and Credits

UZBEKISTAN: Basic Education Project - Phase Two

Active Proiects Difference Between Expected and Actual Original Amount in US$ Millions

Frm Project Project Name ID Year IBRD IDA GRANT Cancel. Undisb. Revtd

PO94042 BASIC EDUC 2007 15 0.00 0.00 14.56192 14.07218 PO49621 BUKHWSAMARKAND WS 2002 20 20 O.O0 O.O0 10.53101 6.7847338 5.544033 DRAINAGE, IRRIG & WETLANDS 0.00 0.00 PO09127 MPRVMT 2003 35 25 25.93998 11.661096 PO51370 HEALTH 2 2005 40 O,O0 O.O0 21.83085 18,156221 4.282307 RURAL ENTERPRISE SUPPORT 0.00 0.00 P109126 PROJECT I1 2008 67.96 59.79222 -0.499997 TOTAL 55 167.96 O.Oo O.O0 132.656 50.174233 9.82634

UZBEKISTAN STATEMENT OF IFC's Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed Outstanding

**Quasi Partici **Quasi Partici FY Approval Company Loan Equity Equity pant Loan Equity Equity pant

2003 Asaka bank 1.6 0 0 0 1.6 0 0 0 1996 Rbs Uzbekistan 0 1 0 0 0 1 0 0 1997 Sef fayz 0.01 0 0 0 0.01 0 0 0 2007 Sef hamkorbank 3 0 0 0 2 0 0 0 2001 Sef parvina 0 0 0.64 0 0 0 0.09 0 0/95/00 Uzbek leasing 3 0.54 0 0 0 0.54 0 0

Total Portfolio: 7.61 1.54 0.64 0 3.61 1.54 0.09 0

68 Annex 13: Country at a Glance

UZBEKISTAN: Basic Education Project - Phase Two

Uzbekistan at a glance 9/24/06

Europe (L POVERTY and SOCIAL Central LOW- Usbrklstsn Asla Income 2007 Population, mid-year (mililons) 26.9 445 1,296 Life expectancy GNI per capita (Atlas method, US$) 730 6,052 578 GNI (Atlas method, US$ billions) 19.7 2,694 749 Average annual growth, 2001-07 T Population (%) 0.0 1.2 2.2 GNi Gross Labor force (%) 2.8 0.5 2.7 per primary Most recent e8tlmate (latest year available, 2001-07) capita enrollment Poverty (% of population below national poverty line) Urban population (% of total population) 37 64 32 Life expectancy at birth (years) 67 69 57 1 infant mortality (per 1,000 live births) 38 23 85 Child malnutrition (% of children under 5) 4 29 Access to improved water source Access to an Improved water source (% of population) 88 95 66 Literacy (% ofpopulation age 15+) 97 61 ' Gross primary enmllment f% of school-age populafion) 95 97 94 Uzbekistan Male 97 98 100 - Low-income gmup Female 94 96 89 KEY ECONOMIC RATIOS and LONQ-TERM TRENDS 1987 1097 2008 2007 GDP (US$ billions) 14.7 17.0 22.3 Gross capital formationIGDP 28.6 21.7 22.3 19.9 Trade Exports of goods and servicaYGDP 27.0 37.5 32.8 Gross domestic SavingsIGDP 20.3 18.7 33.9 30.3 I Gross national savings/GDP 17.7 36.2 32.2

Current acwunt balancelGDP -4.0 13.9 12.0 Domestic Capital Interest paymentsIGDP 1.1 1 .o savings formation Total debVGDP 19.6 22.9 Total debt service/exports 12.8 14.1 1 Present value of debVGDP 22.2 Present value of debtiexports 57.6 Indebtedness 198797 1997-07 2006 2007 2007-1 1 (average annual growth) *.+ II GDP -1.6 5.4 7.3 9.5 4.3 Uzbekistan GDP per capita -3.7 4.1 6.0 7.9 2.9 -Lowmcorne gmup ~xportsof goods and services .. 6.0 183 14.6 2.0

STRUCTURE of the ECONOMY 1087 1007 2006 2007 (% of GDP) 7 AQdCUltUre 27.8 32.2 26.1 24.4 Industry 36.3 26.1 27.4 26.9 Manufacturing 28.0 12.1 10.8 9.9 Services 34.1 41.7 46.5 48.7 Household final wnsumptton expenditure 608 784 508 538 _- .^ - General gov't final wnsumptton expenditure 14 205 153 159 ** GCF ~GDP-' Imports of goods and services 30 0 259 222

(average annual growth) Aaricuiture -0.1 8.0 6.2 7.0 30 T I Industry -37 39 Manufactunng 17 servtces -35 58 03 w 05 OB 117 Household final wnsumption expenditure General oov't final wnsumDtion emenditure -20 - I Gross capital formation -75 44 73 86 *" - Exports -1mpoltr Imports of goods and services

Note: 2007 data are preliminaryestimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the wuntry (in bold) compared with its inwme-gmup average. If data are missing, the diamond will be inwrnpiele.

69 Uzbekistan

PRICES and GOVERNMENT FINANCE 1997 2006 2007 Domestic prices (% change) Consumer prices 70.9 15.0 12.5 Implicit GDP deflator 66.1 21.5 24.0 Government finance (% of GDP, includes current grants) Current revenue 39.3 25.1 21.2 Current budget balance 6.3 3.4 2.9 I n7 O7GDPdeflalor O4 +CPIIK Ofl Overall surplus/deficit -2 3 -0.4 -0.3 1

TRADE 1997 2006 2007 (US$ miilions) Total exports (fob) 3,695 5,615 6,437 Cotton 1,390 1,097 1,194

Gold 738 1,471 2,057 8 000 Manufactures 354 1 ,w2 994 Total imports (tin 4.186 3,953 4,130 4 000 Food 873 307 319 Fuel and energy 25 92 95 2 on0 Capital goods 2,076 1,975 2,064 0 Export price index (2000=100) 114 117 116 import price index (2000=100) 107 112 115 n EXPO~~S aimports 1 O' O2 O3 O4 O5 O6 ''1 Terms of trade (2000=100) 107 104 101

BALANCE of PAYMENTS 1997 2006 2007 (US$ millions) Exports of goods and services 3.987 6,390 7,272 Imports of goods and services 4,424 4,404 4,955 Resource balance -437 1,986 2,317 Net income -175 23 -28 Net current transfers 29 364 379 Current account balance -584 2,374 2,669 Financing items (net) 104 -2,206 -2,501 Changes in net reserves 480 -167 -167 Memo: Reserves including gold (US$ millions) 1,167 2,460 2,593 Conversion rate (DEC, localNS$) 66.3 1,218.9 1,263.5

EXTERNAL DEBT and RESOURCE FLOWS 1997 2006 2007 (US$ millions) Total debt outstanding and disbursed 2,916 3,892 IBRD 155 316 317 166 316 IDA 0 26 43 Total debt service 510 924 IBRD 10 37 43 IDA 0 0 0 Composition of net resource flows Official grants 29 46 Official creditors 32 -46 Private creditors 200 -460 Foreign direct investment (net inflows) 167 164 Portfolio equity (net inflows) 0 0 World Bank program Commitments 75 0 15 Disbursements 13 46 33 Principal repayments 0 21 25 Net flows 13 25 8 Interest payments 10 16 18 Net transfers 3 9 -10

Note: This table was produced from the Development Economics LDB database. 9/24/06

70 55°E 60°E 65°E 70°E KAZAKHSTANKAZAKHSTAN TToo Atyrau Aral 45°N 45°N Sea 2001 level of Aral Sea

1990 level of Aral Sea UZBEKISTAN Syr D a r 1960 level of Aral Sea ya

Ustyurt Plateau Muynak KAZAKHSTANKAZAKHSTAN KARAKALPKARAKALPAKSTANAKSTAN K A y z m y u l D K a r y u a m Nukus d KYRGYZ n NOVOINAVOI TToo Qyzylorda Adelunga TToghioghi (4301 m) REPUBLIC a Uchkuduk TToo TToo l Qyzylorda NAMANGAN Bishkek w Urgench ANDIZHANANDIJON o Muruntau KHOREZM L SYRDARYASYRDARYA TTASHKENTASHKENT Namangan a n TASHKENTTASHKENT Andizhan 0 50 100 150 200 Kilometers r A Sy T u r D m a r u y D a Kokand a Gagarin Fergana r TToo 0 50 100 150 Miles ya Guliston DZHIZAKJIZZAKH Kashi 40°N 40° BUKHOROBUKHARA N Ze ra DzhizakJizzakh FERGANA v shan Navoi BukharaBukhoro SAMARKAND This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Samarkand shown on this map do not imply, on the part of The World Bank TURKMENISTTURKMENISTANAN Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 60°E KASHKADARYAYA TAJIKISTANTAJIKISTAN Qarshi TToo Khorugh TToo UZBEKISTAN MarMaryy Denau

SELECTED CITIES AND TOWNS SURKHANDARYA OBLAST (VILOYATI) CAPITALS NATIONAL CAPITAL TTermizermiz RIVERS MAIN ROADS TToo RAILROADS Kabul IBRD 33508R MARCH 2009 OBLAST (VILOYATI) BOUNDARIES AFGHANISTANAFGHANISTAN PAKISTANPAKISTAN INTERNATIONAL BOUNDARIES 65°E 70°E