Improving the Quality of Basic Education in the North Pacific Project

Report and Recommendation of the President to the Board of Directors

Project Number: 49456-002 June 2017

Proposed Grants and Administration of Grant Republic of the Marshall Islands and Federated States of Micronesia: Improving the Quality of Basic Education in the North Pacific Project

Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

The United States dollar is the currency of both the Marshall Islands and the Federated States of Micronesia.

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund FSM – Federated States of Micronesia GAP – gender action plan MOE – Ministry of Education (RMI) NDOE – National Department of Education (FSM) PAM – project administration manual PIU – project implementation unit RMI – Republic of the Marshall Islands SDOE – state department of education TA – technical assistance US – United States

NOTES

(i) The fiscal year (FY) of the Government of the Marshall Islands and the Government of the Federated States of Micronesia and their agencies ends on 30 September. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2017 ends on 30 September 2017. (ii) The school year is from August to May in both countries. (iii) In this report, “$” refers to US dollars, unless otherwise stated.

Vice-President S. Groff, Operations 2 Director General X. Yao, Pacific Department (PARD) Director E. Veve, Urban, Social Development and Public Management Division, PARD

Team leader C. Thonden, Senior Education Specialist, PARD Team members M. Abao, Project Analyst, PARD F. Asistin, Sr., Operations and Institutional Coordination Officer, PARD N. Carandang, Safeguards Specialist, PARD T. Morita, Counsel, Office of the General Counsel C. Tinio, Associate Economics and Statistics Analyst, PARD Peer reviewer B. Panth, Technical Advisor, Sustainable Development and Climate Change Department

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page PROJECT AT A GLANCE MAP I. THE PROPOSAL 1 II. THE PROJECT 1 A. Rationale 1 B. Impact and Outcome 3 C. Outputs 3 D. Investment and Financing Plans 5 E. Implementation Arrangements 6 III. DUE DILIGENCE 7 A. Economic and Financial 7 B. Governance 8 C. Poverty, Social and Gender 9 D. Safeguards 9 E. Summary of Risk Assessment and Risk Management Plan 10 IV. ASSURANCES 10 V. RECOMMENDATION 10

APPENDIXES 1. Design and Monitoring Framework 11 2. List of Linked Documents 14

Project Classification Information Status: Complete

PROJECT AT A GLANCE

1. Basic Data Project Number: 49456-002 Project Name Improving the Quality of Basic Department PARD/PAUS Education in the North Pacific /Division Country REG Executing Agency Department of Finance and Borrower Regional Administration, Ministry of Finance 2. Sector Subsector(s) ADB Financing ($ million) Education Pre-primary and primary 13.00 Total 13.00

3. Strategic Agenda Subcomponents Climate Change Information Inclusive economic growth Pillar 2: Access to economic Climate Change impact on the Low (IEG) opportunities, including jobs, made Project more inclusive Regional integration (RCI) Pillar 4: Other regional public goods

4. Drivers of Change Components Gender Equity and Mainstreaming Governance and capacity Civil society participation Effective gender mainstreaming development (GCD) Institutional development (EGM) Knowledge solutions (KNS) Knowledge sharing activities Pilot-testing innovation and learning Partnerships (PAR) Bilateral institutions (not client government) Civil society organizations Implementation 5. Poverty and SDG Targeting Location Impact Geographic Targeting No Regional High Household Targeting No SDG Targeting Yes SDG Goals SDG4

6. Risk Categorization: Low . 7. Safeguard Categorization Environment: C Involuntary Resettlement: C Indigenous Peoples: C . 8. Financing Modality and Sources Amount ($ million) ADB 13.00 Sovereign Project grants: Asian Development Fund 13.00 Cofinancing 1.80 Government of Australia - Grant 1.80 Counterpart 2.00 Government 2.00 Total 16.80

Source: Asian Development Bank This document must only be generated in eOps. 18112016110858083483 Generated Date: 06-Jun-2017 16:58:34 PM

REPUBLIC OF THE MARSHALL ISLANDS AND FEDERATED STATES OF MICRONESIA IMPROVING THE QUALITY OF BASIC EDUCATION IN THE NORTH PACIFIC

NORTHERN MARIANA ISLANDS National Capital N State Capital Saipan Reef/Atoll

0 150 300 State Boundary MARSHALL ISLANDS Taongi Country Groupings Kilometers Hagåtña Boundaries are not necessarily authoritative. GUAM Bikar Enewetak Bikini Rongelap Rongerik Utirik Ailinginae Taka FEDERATED STATES OF MICRONESIA Ailuk Ulithi Likiep MEJIT Ujelang Wotho Yap Fais Gaferut Wotje Colonia Lae Kwajalein Ulul Murilo Ujae Faraulep West Fayu Fayu Erikub Minto Reef Maloelap Pikelot Namonuito Nomwin LIB Aur Olimarao Ngulu Sorol Chuuk Lamotrek Pulap Weno Namu JABAT Woleai Kolonia Majuro Puluwat Nama Pakin Ifalik Elato Oruluk Pohnpei Ailinglaplap Kuop Losap Ant Arno Satawal Eauripik Pulusuk Mokil Jaluit Mili Namoluk Palikir Knox Lukunor Pingelap Tofol Namorik STATE OF YAP Etal Ngatik Kili Satawan Kosrae STATE OF CHUUK Ebon STATE OF POHNPEI STATE OF KOSRAE REPUBLIC OF Nukuoro PALAU Makin KIRIBATI Butaritari N O R T H P A C I F I C O C E A N Marakei 17-1456 ABV This map was produced by the cartography unit of the Asian Development Bank. Abaiang The boundaries, colors, denominations, and any other information shown on this Tarawa map do not imply, on the part of the Asian Development Bank, any judgment on Kapingamarangi the legal status of any territory, or any endorsement or acceptance of such Maiana boundaries, colors, denominations, or information. Abemama Kuria

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on (i) a proposed grant to the Republic of the Marshall Islands (RMI) and (ii) a proposed grant to the Federated States of Micronesia (FSM) for the Improving the Quality of Basic Education in the North Pacific Project. The report also describes the proposed administration of a grant to be provided by the Government of Australia, and if the Board approves the proposed grants, I, acting under the authority delegated to me by the Board, approve the administration of the grant.

2. The proposed project will assist the governments of the RMI and FSM to improve the quality of basic education in the remote and dispersed island countries, while ensuring efficiency and effectiveness through shared solutions to common challenges across the two neighboring countries. The project will build on the successes and lessons learned under previous regional technical assistance (TA) in the North Pacific.1 It takes a comprehensive and sustainable approach for effective reforms, rooted in strengthening existing institutions until 2023 when the United States (US) Compact of Free Association ends.2 The project will improve learning outcomes for primary school students, with a focus on literacy and numeracy, through improvements to teacher quality, assessment for learning, access to bilingual teaching and learning resources for literacy and numeracy, and improved educational leadership and management including parent and community engagement in education.

II. THE PROJECT

A. Rationale

3. Both the RMI and FSM recognize the need to improve the quality of basic education, even with the gains made in increasing access to education. Student performance is alarmingly low, with only 21% of sixth graders meeting or exceeding the minimum competency in mathematics and 32% meeting or exceeding the minimum competency in reading in the FSM.3 In the RMI, 20% of sixth graders meet or exceed proficiency levels in mathematics and 19% meet or exceed proficiency levels in reading.4

4. Weak education outcomes stem from many factors, notably poor teacher quality. The minimum qualification for teaching, the 2-year associate’s degree, has not been met by 17% of teachers in the FSM and 38% in the RMI (footnotes 2 and 3). In addition, only the second year of the associate’s degree focuses on teacher education courses, and professional learning opportunities are not continuous or necessarily coherent. Urban teachers and schools receive more

1 ADB. 2012. Technical Assistance for Quality Primary Education in the North Pacific. Manila. The Japan Fund for Poverty Reduction-financed TA piloted early grade learning assessments, teacher training, and teaching and learning resource materials. Results from a comparative baseline of early grade learning assessment conducted 1 year apart indicate an increase in literacy and numeracy performance by an overall average ranging from 24% to 32% for both groups of randomly selected students from grade 3 and 5 in three different project sites in RMI and FSM. 2 The Compact of Free Association is an international agreement establishing and governing the relationships of free association between the United States and the three Pacific Island nations: the Federated States of Micronesia, the Marshall Islands, and Palau. In the FSM and the RMI, compact funds comprise the majority of expenditures in education, health, and infrastructure. In FSM annual Compact Sector Grants to education are around $25 million, and in RMI around $11 million. 3 Government of the Federated States of Micronesia, National Department of Education. 2015. FSM National Joint Economic and Management Committee Indicators for Education 2015. http://www.fsmed.fm/index.php/public- info/jemco-indicators 4 Government of the Republic of the Marshall Islands. 2016. RMI Education Digest 2015–2016. http://www.pss.edu.mh/index.php/en/pss-documents 2 support than rural and remote teachers and schools. Low student learning outcomes at the primary education level become magnified and more expensive to resolve at higher levels of education, when disenfranchised youth create larger societal issues. A young population in both countries offers a substantial labor force that must be capitalized on to maximize potential growth.

5. A major challenge for RMI and FSM is adjusting to regular cuts in the US Compact of Free Association grants, which fund most of the operating budgets in education, health, and infrastructure. The urgency of improving education is heightened by the end of the Compact and the US supplemental education grant funds in 2023, which compromise 100% of state education budgets in the FSM and about 69% of the national education budget in the RMI. Compact funds support recurrent costs but are insufficient to address significant training needs or teaching and learning resources. The potential cessation of supplemental education grant funds (estimated at $10 million annually for FSM and $5 million for RMI) after 2023 is a larger issue, as these are not included in the projections for sustainable disbursement from the established trust fund after 2023 since the trust fund is modeled on education sector grant funds only. This 6-year project is critically positioned to strengthen the capacity of local educational institutions, which provide strong foundations to work together more effectively and efficiently to build resiliency following 2023.

6. The project is included in the ADB Pacific Department’s Regional Operations Business Plan, 2017–2019; and education is a core area under the Pacific Approach, 2016–2020.5 The project aligns with both countries’ national development plans and education sector plans, and the Asian Development Bank (ADB) is providing support to review and develop the next sector strategic plan for each country in 2017.6 Demand for education support from ADB in the North Pacific is very strong, as ADB is the major education donor aside from the Government of the United States. The Government of Australia’s Department of Foreign Affairs and Trade, Japan International Cooperation Agency volunteers, and the US Peace Corps volunteer program operate in the education sector, mainly at primary level, and synergies between those initiatives will be harmonized with the project as was done under the previous TA. The Government of Australia has been supporting the education sector and ADB TA in the RMI and FSM through the Pacific Technical Assistance Mechanism advisors and volunteers in both countries. The Government of Australia is also a co-financier on the project for the FSM.

7. The project will build on the previous TA, which worked in a small number of schools, and will be most effective where supportive institutional backing exists. In the FSM, it will work in the states of Pohnpei and Kosrae (where a preceding TA was piloted) and Yap state, which has shown strong institutional backing. After mobilization, the project will consider the most strategic entry points to Chuuk, which has the largest education and development challenges7. As the project becomes embedded in the other states, it will be better positioned to take on Chuuk’s more serious education challenges. In the RMI, the project will focus on Majuro, Ebeye, Jaluit and Wotje outer islands.

5 ADB. 2016. Pacific Approach, 2016–2020. Manila; ADB. 2016. Pacific Regional Operations Business Plan, 2017– 2019. Manila. 6 ADB. 2013. Technical Assistance to the Federated States of Micronesia and the Republic of the Marshall Islands for National Education Planning and Management. Manila. ADB is providing support with additional grant cofinancing from the Global Partnership for Education to develop sector strategic plans for the RMI and FSM. 7 Chuuk is the most populous state of FSM with lowest rates of education performance historically. The US Department of Interior in partnership with the FSM National Government and Chuuk State Government completed a 10-point reform action plan to help the state get to a basic level of functional education services. A new permanent director was confirmed in April 2017 and should help to address the delayed progress due to a lack of leadership for the past 4 years.

8. Improving the quality of basic education in the RMI and FSM requires strengthening the collaborative and collective efforts of existing stakeholders to work together more effectively and efficiently. Primary partners and stakeholders include tertiary institutions responsible for educating RMI and FSM teachers and principals; FSM national department of education (NDOE), state departments of education (SDOEs), and the RMI Ministry of Education (MOE); relevant nongovernment organizations; and above all, parents and community. It is anticipated that all primary school students and primary school teachers (29,236 students and 2,485 primary school teachers) will benefit from the project (footnotes 2 and 3). This represents about 20% of the combined total population of 157,450 people across the RMI and FSM.8

B. Impact and Outcome

9. The project is aligned with the following impact: improved quality of basic education in the FSM and the RMI. The project will have the following outcome: improved primary education learning outcomes in literacy and numeracy, with 50% of grade 6 students meeting or exceeding the minimum competency for reading and mathematics.9

C. Outputs

10. The project will deliver four outputs: (i) teachers in primary education are better prepared; (ii) capacity to use student assessment to improve learning strengthened; (iii) access to and usage of teaching and learning resources and materials for literacy and numeracy expanded; and (iv) educational leadership and management of schools, including parent and community engagement, strengthened.

11. Output 1: Teachers in primary education are better prepared. Under the project, teaching quality will be enhanced through strengthened teacher in-service programs and preservice programs. A total of 400 teachers will be trained in quality pedagogy in RMI and 800 teachers will be trained in the FSM. The project will support implementation of a quality teacher education program that includes experiential and project-based learning, use of Open Education Resources,10 and ensures a foundation for all teachers in Quality Pedagogy Framework.11 The project holds student learning as the driving emphasis of teacher practice, drawing on local evidence of what works and responding to cultural differences.

12. Activities that will support better prepared teachers in primary education 12 include (i) developing professional learning policy frameworks; (ii) training teachers on literacy and numeracy across the curriculum within a quality pedagogy framework; (iii) improving alignment between preservice teacher education and in-service teacher education; (iv) establishing a new

8 World Bank Data, 2015. http://data.worldbank.org/indicator/SP.POP.TOTL 9 The design and monitoring framework is in Appendix 1. 10 Open educational resources. https://www.oercommons.org/ 11 The quality pedagogy framework uses evidence-based factors required for improving student learning: social interaction, prior knowledge, learning outcomes and success criteria, time and varied opportunities for learning, active processes, relevant and meaningful activities, assessment for learning, reflection, and teacher expectations. These key components need to be understood and modeled in all lessons in college courses by teacher educators, and by all trainees in their classroom practice, so that the processes become internalized. The framework is also central to all professional learning offered by the MOE and/or the National Department of Education (NDOE) and explicit in all materials and templates used for preservice and in-service teacher education. 12 Primary education in both the RMI and FSM generally includes grades 1–8, with kindergarten classes attached to primary schools. The project will place greater emphasis on kindergarten to grade 6. High school comprises grades 9–12.

4 system of lead teachers and induction that at least 40% of schools will implement; and (v) developing career pathways for teachers.

13. Output 2: Capacity to use student assessment to improve learning strengthened. The quality, validity, and utility of current student assessment tools raise some concerns, and the policies and practices that enable their successful implementation need to be reviewed. The project will expand the knowledge base of DOE and MOE staff and schools about principles and guidelines from current research on student learning assessment systems. DOE and MOE officials and stakeholders will be provided with a framework for discussion and, with technical support, participate in the development of a sound and sustainable student assessment system that will support improved education, quality, and learning for all.13

14. The project will support a review and exploration of student assessment systems, including the use of alternative assessments, to inform the development of a new national student assessment policy framework in each country. 14 The frameworks will comprise policies and processes that will strengthen the capacity of the system to use assessment to improve learning. Through government teachers’ academy and institute training programs, the project will support classroom assessment practices that inform teaching and learning. At least 50% of teachers will use student assessment data to tailor teaching practice to meet student learning needs, and at least 50% of teachers will use alternative assessments such as early grade learning assessment and short assessments in literacy and mathematics. Activities will include strengthening policy and practice by (i) establishing a student assessment policy framework, and (ii) training teachers on alternative assessments for learning.

15. Output 3: Access to and usage of teaching and learning resources and materials for literacy and numeracy expanded. The project will support the RMI and FSM to strengthen their inventory of existing resources and materials for teaching and learning. Many types of resources beyond textbooks—such as readers in the vernacular language, hands-on manipulatives for numeracy skills, e-resources, open education resources, and low-cost mobile learning tools—will be used to address a range of learners, including in more rural and/or remote outer islands without internet services. At least 75% of teachers will access resources through flash drives, online catalogues, or a resource center; and at least 90% of teachers will participate in professional learning on using resources to improve learning. Activities will include (i) the establishment of a new resource center in the RMI and, possibly, the FSM; (ii) the development of multiple types of teaching and learning resources including prints, digital, and hands-on manipulative resources; and (iii) supporting community and school partnerships in developing teaching and learning resources.

16. Output 4: Educational leadership and management of schools, including parent and community engagement, strengthened. Strong leadership and management in schools is critical to enable effective teaching and learning to occur. The professional learning framework described in output 1 will include important policies, process, and structures developed during the project that will support principals as well as teachers. New principal performance standards developed by the NDOE and MOE that highlight educational leadership will guide professional learning opportunities to strengthen effective management skills and capabilities to be a leader of learning, including community participation. At least 90% of principals will participate in such professional learning.

13 M. Clarke. 2012. What Matters Most for Student Assessment Systems: A Framework Paper. Systems Approach for Better Education Results (SABER) Student Assessment Working Paper. No. 1. Washington, DC: World Bank. 14 Alternative assessments are not only designed and structured differently from traditional tests, but are also graded or scored differently. They measure performance in forms other than traditional paper-and-pencil and multiple choice and short answer tests. The early grade learning assessment and short assessments for literacy and short assessments for mathematics are examples of alternative assessments.

17. Parental engagement is critical to supporting and ensuring the key areas of teacher quality and school leadership. The project will conduct wide stakeholder consultations with parents and civil society to develop and support the implementation of strategies to promote broad public awareness of the importance of education and increased parental engagement in education as fundamental to improving the school readiness of students. Churches and nongovernment organizations, as strong community mobilizers, have the potential to strengthen literacy and numeracy significantly through parent and community education workshops, and will contribute to project efforts. The principals’ training programs will integrate and strengthen parent and community engagement as a key aspect of educational leadership. Activities include (i) the establishment of principal performance standards (the RMI only); (ii) the training of school leaders in educational leadership; (iii) supporting the development of parents as partners in the school education program; and (iv) the expansion of school-based sustainable development projects.

D. Summary Cost Estimates and Financing Plan

18. The project is estimated to cost $9.3 million for the FSM and $7.5 million for the RMI (Table 1) for a total of $16.8 million.

Table 1: Summary Cost Estimates ($ million) Amounta Item FSM RMI A. Base Costb Output 1: Teachers in primary education are better prepared 1.90 2.26 Output 2: Capacity to use student assessment to improve learning strengthened 1.82 0.86 Output 3: Access and usage of teaching and learning resources and materials for literacy and numeracy expanded 2.98 1.95 Output 4: Educational leadership and management of schools, including parent and community engagement, strengthened 1.31 1.36 Subtotal (A) 8.01 6.44 B. Contingenciesc 1.29 1.06 Total (A+B) 9.30 7.50 RMI = Republic of the Marshall Islands, FSM = Federated States of Micronesia. Note: Numbers may not sum precisely because of rounding. a Includes taxes and duties of $14,814 (FSM) and $26,463 (RMI), which will all be 100% financed through exemption by the government. Such amount does not represent an excessive share of the project cost. b In mid-2017 prices. c Physical contingencies computed at 10% of base costs. Price contingencies based on local and origin inflation rates. Source: Asian Development Bank estimates.

Table 2: Summary Financing Plan Amount ($ million) Share of Total (%) Source FSM RMI FSM RMI Asian Development Fund (country allocation) 4.0 4.0 43.0 53.4 Asian Development Fund (regional allocation) 2.5 2.5 26.9 33.3 Government of Australia (grant)a 1.8 0.0 19.4 0.0 Government 1.0 1.0 10.7 13.3 Total 9.3 7.5 100.0 100.0 RMI = Republic of the Marshall Islands, FSM = Federated States of Micronesia. a Administered by the Asian Development Bank. This amount also includes the Asian Development Bank’s administration fee, audit costs, bank charges, and a provision for foreign exchange fluctuations (if any), to the extent that these items are not covered by the interest and investment income earned on this grant, or any additional grant from the Government of Australia. Source: Asian Development Bank estimates.

19. The governments of the RMI and FSM have requested an amount of $6.5 million each in the form of grants from ADB’s Special Funds resources (Asian Development Fund [ADF]— $2.5 million originating from the ADF regional source and $4.0 million originating from the ADF country allocation source) to help finance part of the project. The FSM will receive cofinancing of A$2.4 million ($1.8 million) of grant funds from the Government of Australia, to be administered by ADB on cost-sharing basis. The RMI will contribute up to $1.0 million toward the project in the form of taxes and duties, recurrent costs in the form of deputized staff from its MOE, and other recurrent costs in the form of office space, including utilities, and will contribute toward project components. The FSM will contribute $1.0 million toward the project in the form of taxes and duties, recurrent costs in the form of deputized staff from its NDOE and SDOEs, and other recurrent costs in the form of office space, including utilities, and will contribute toward project components. The financing plan is in Table 2. ADB will finance the expenditures in relation to teaching supplies and resources, training and capacity building, equipment and consulting services.

E. Implementation Arrangements

20. Regional initiative. Project management and implementation involves two countries in a regional initiative that will address their common educational challenges. The project brings together multiple agencies working closely together to provide needed resources and expertise to improve the quality of education, while allowing for synergies and cost efficiencies and effectiveness through a regional approach. The project administration manual (PAM) details the implementation, procurement, and financial arrangements at the country level, but countries will share lessons, experts, and resources on a regular basis—meeting annually and developing regional expertise, approaches, and solutions. 15 The procurement plan details each country’s procurement packages following country budget allocations. Both countries will have project startup support, focusing on procurement and financial management. The project will also support partnership agreements between the DOE and MOE and two colleges and a university—the College of the Marshall Islands, the University of the South Pacific (RMI), and the College of Micronesia (FSM). These will be service providers to improve preservice, in-service education, and related project activities; and will be capacitated along with DOE and MOE from project-supported international consulting expertise where gaps exist in technical expertise.

21. Republic of Marshall Islands. As the implementing agency, the MOE will be responsible for project management, oversight supervision, and monitoring; ensuring cooperation among other government agencies and agencies under the MOE including the public school system during project implementation; and providing guidance to the PIU. The PIU will be established in the MOE public school system to carry out day-to-day project implementation activities. The PIU will comprise a full-time project director and key technical staff acceptable to ADB. The implementation arrangements are summarized in Table 4 and described in detail in the PAM.

22. Federated States of Micronesia. As the FSM implementing agency, the NDOE will be responsible for national level project management, coordination, and monitoring; ensuring cooperation among other government agencies and agencies under the NDOE during project implementation; and providing guidance to project implementation unit (PIU) staff. The PIU will be established in the NDOE and SDOEs to carry out day-to-day project implementation activities. The implementation arrangements are summarized in Table 3 and described in detail in the PAM.

15 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

Table 3: Implementation Arrangements (Federated States of Micronesia) Aspects Arrangements Implementation period 1 August 2017–31 July 2023 Estimated completion 31 July 2023 (estimated financial closing date 31 January 2024) date Management (i) Oversight body Project steering committee (National Department of Finance and Administration, NDOE, state directors of education, and the College of Micronesia – FSM) (ii) Executing agency National Department of Finance and Administration (iii) Implementing agency National Department of Education (with PIUs in each state) (iv) Implementation unit The National Project Coordination Unit, headed by a national project director, will be located in the NDOE office, and will coordinate project reporting and consultants among the state PIUs (located in each state department of education). Procurement Shopping (goods) Various contracts $300,000 Consulting services QCBS (international) One contract $900,000 QBS (national) Two contracts $850,000 ICS (international) 16 person-months $320,000 ICS (national) 72 person-months $324,000 ICS (states) 288 person-months $600,000 Advance contracting Advance contracting may be undertaken for procurement of PIU and startup consultants. Disbursement ADB and ADB-administered grant funds will be disbursed following ADB’s Loan Disbursement Handbook (2015, as amended from time to time) and detailed arrangements agreed between the government and ADB. ADB = Asian Development Bank, FSM = Federated States of Micronesia, ICS = individual consultant selection, NDOE = National Department of Education, PIU = project implementation unit, QBS = quality-based selection, QCBS = quality- and cost-based selection. Source: Asian Development Bank.

Table 4: Implementation Arrangements (Republic of Marshall Islands) Aspects Arrangements Implementation period 1 August 2017–31 July 2023 Estimated completion date 31 July 2023 (estimated grant closing date 31 January 2024) Management (i) Oversight body Project steering committee (MOF, MOE Board of Education, CMI, and USP) (ii) Executing agency Ministry of Finance (iii) Key implementing agency MOE (iv) Implementation unit A PIU will be housed at the MOE public school system. It will work closely with the public school system, CMI, and USP staff as a technical team. Procurement Shopping (Goods) Various contracts $300,000 Consulting services QCBS One contract $980,000 QBS Two contracts $600,000–700,000 ICS (international) 54 person-months $1,080,000 ICS (national) 144 person-months $318,000 Advance contracting Advance contracting may be undertaken for hiring of PIU and start-up consultants. Disbursement The grant will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2015, as amended from time to time) and detailed arrangements agreed between the government and ADB. ADB = Asian Development Bank, CMI = College of the Marshall Islands, ICS = individual consultant selection, MOE = Ministry of Education, MOF = Ministry of Finance PIU = project implementation unit, QBS = quality-based selection, QCBS = quality- and cost-based selection, USP = University of the South Pacific. Source: Asian Development Bank.

III. DUE DILIGENCE

A. Economic and Financial

23. The economic benefits of the project result mainly from improved literacy and numeracy foundational skills in primary education, and the higher levels of education and training students

8 can access with those skills. It is reasonable to expect that system-wide improvements in quality education in bilingual and multilingual contexts will benefit all students in public education in the RMI and FSM. Such benefits will be quantified as incremental benefits of basic education, resulting from improved student learning outcomes as measured by national assessments.

24. The economic analysis confirms that the economic rationale for the project is sound, the case for ADB involvement in the project is sound, and the project design represents a cost-effective option for reaching project objectives. The project is nonrevenue generating, so a financial internal rate of return and financial net present value cannot be calculated. Since no investments will be made in tangible assets such as civil works, it is not necessary to demonstrate ability to allocate funds for maintenance of assets through the government budget. The financial commitment required from government is to allocate funds in the budget during each year of project implementation as counterpart funding for the project.

25. The financial analysis assessed the sustainability of the project at national and project levels, and evaluated the impact of the proposed investment given current and projected public education subsector funding levels. The analysis concluded that the government has the capacity to absorb and sustain the costs of the project, but that institutional strengthening of both the RMI MOE and the FSM national and state departments of education is required.

26. The project will not impose unsustainable costs on the system after it ends, as it is designed to minimize downstream recurrent costs. The medium-term fiscal outlook for both countries is not encouraging, however, and with the end of the Compact sector grants in FY2023, the delivery of basic social services could be problematic without significant reforms being implemented or alternative external support identified.

27. The project is based on several assumptions about the determinants of early grade learning outcomes. To mitigate risks, it is proposed to (i) monitor progress in reforms targeted at providing fiscal space; (ii) conduct a robust demand analysis early in project implementation; (iii) strengthen MOE and DOE capacity to conduct research and policy analyses related to key assumptions; and (iv) include a mid-project review and exit strategy if outstanding risks have not been addressed.

B. Governance

28. Financial management and procurement capacity assessments were carried out at the country and executing agency levels in both countries. Assessment of financial management capacity included accounting, internal control, disbursement, cash flow management, financial reporting, and auditing. Procurement capacity assessment included rules and regulations governing procurement practices, staff capacity, knowledge and experience of procurement staff, procedures, transparency, and integrity of procurement practices. Findings indicate that legal and regulatory frameworks as well as standard operating procedures are in place for financial and procurement management, and are followed by ministries and departments concerned in each country. The executing agency in each country has staff to handle financial and procurement management under the project. Computerized accounting and reporting systems (FundWare and 4-Gov Fund Accounting) are used in the RMI for financial management, but some functions such as bank reconciliation and fixed assets management are still being done manually. These weaknesses will be strengthened during project implementation. Periodic financial reporting needs to be improved and some internal audit oversight needs to be established to assess and develop internal controls. Retention of experienced staff remains the most important factor for good financial management. The overall inherent risk and control risk have been assessed moderate.

29. Both countries have a well-established public procurement system, governed by the Procurement Code for the RMI and the Financial Management Regulations for the FSM. The public procurement systems in both countries ensure transparency, accountability, efficiency, and responsibilities, among others, of government agencies and individuals involved in carrying out procurement activities. The overall procurement risks in both countries have been assessed average. All procurement will follow ADB’s Procurement Guidelines (2015, as amended from time to time) and Guidelines on the Use of Consultants (2013, as amended from time to time). ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the governments and, as executing agencies, the FSM National Department of Finance and Administration, and RMI Ministry of Finance. The specific policy requirements and supplementary measures are described in the PAM.

C. Poverty, Social, and Gender

30. A social, poverty, and gender analysis undertaken determined that the project’s objectives and goals are consistent with ADB’s Pacific regional strategies and both countries’ national development plans. A gender action plan (GAP), stakeholder communication strategy, and summary poverty reduction and social strategy inputs were prepared. At the initial poverty and social analysis stage, the project was classified general intervention. The project is categorized effective gender mainstreaming, and includes sex-disaggregated data in the project design and monitoring framework and GAP for targets and baselines where possible. The GAP addresses potential gender inequality risks and promotes women’s empowerment through targets for equal participation in project activities.

31. Implementing agencies and PIUs will be responsible for ensuring that social and gender- related design measures and targets are implemented, properly resourced, and monitored. The GAP provides for training on gender awareness to be incorporated into training workshops for teachers, principals, and parent and community. The Pacific Community gender specialist in the FSM and the Women’s Affairs Unit in Majuro will also support gender focal points identified in the PIU and implementing agency of each country. The PIUs will collect sex-disaggregated baseline data, and all project reports will contain sex-disaggregated data.

D. Safeguards

32. In compliance with ADB’s Safeguard Policy Statement (2009), the project’s safeguard categories are as follows.16

33. Involuntary resettlement (category C). No civil works are planned during the project, and no potential exists to involve involuntary land acquisition resulting in physical and economic displacement.

34. Indigenous peoples (category C). As the dominant populations of both the RMI and FSM are indigenous to the islands. Project activities are designed to include all students and teachers as well as parents and communities, with no differentiation in benefits accruing to any group.

35. Environment (category C). No negative environmental impacts will occur as no civil works will take place. No environmental management plan is required.

16 ADB. Safeguard Categories. https://www.adb.org/site/safeguards/safeguard-categories

E. Summary of Risk Assessment and Risk Management Plan

36. Significant risks and mitigating measures are summarized in Table 5 and described in detail in the risk assessment and risk management plan.17

Table 5: Summary of Risks and Mitigating Measures Risks Mitigating Measures Limited absorptive capacity of PIUs will be established in the MOE and national and state DOEs, and government, MOE, and DOEs to trained in day-to-day project financial management, procurement, and implement large projects, implementation. Training will be on the use of appropriate technology to especially in remote islands facilitate the delivery of training in remote areas. Increases in cuts or cessation of The project is designed to strengthen existing institutions to engage in US Compact funds in the education collective action to deliver improved services cost efficiently and effectively sector place intensifying pressure using low-cost technologies and building regional support on shared on the MOE and DOEs challenges. The regional project approach across two countries will allow for more efficiencies in terms of sharing resources and lessons learned. Insufficient budget allocations to The project is designed to be sustainable, with most activities occurring sustain project components after through training of existing institutions and staff. Key to sustainability for the the project ends project and sector will be governments taking ownership. DOE = Department of Education, MOE = Ministry of Education, PIU = project implementation unit, US = United States. Source: Asian Development Bank.

IV. ASSURANCES

37. The governments of the RMI and FSM, and the National Department of Finance and Administration and the Ministry of Finance, respectively, have assured ADB that implementation of the project shall conform to all applicable ADB policies, including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the PAM and grant documents.

38. The governments and the National Department of Finance and Administration and the Ministry of Finance have agreed with ADB on certain covenants for the project, which are set forth in the grant agreements.

V. RECOMMENDATION

39. I am satisfied that the proposed grants would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve: (i) the grant not exceeding $6,500,000 to the Federated States of Micronesia from ADB’s Special Funds resources (Asian Development Fund) for the Improving the Quality of Basic Education in the North Pacific Project, on terms and conditions that are substantially in accordance with those set forth in the grant agreement presented to the Board; and (ii) the grant not exceeding $6,500,000 to the Republic of the Marshall Islands from ADB’s Special Funds resources (Asian Development Fund) for the Improving the Quality of Basic Education in the North Pacific Project, on terms and conditions that are substantially in accordance with those set forth in the draft grant agreement presented to the Board. Takehiko Nakao President 8 June 2017

17 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

Appendix 1 11

DESIGN AND MONITORING FRAMEWORK

Impact the Project is Aligned With Quality of basic education improved in the Republic of Marshall Islands and the Federated States of Micronesia (Marshall Islands Education Strategic Plan, 2017–2023, and Federated States of Micronesia Education Strategic Plan, 2017–2023)a

Data Sources Performance Indicators with Targets and and Reporting Results Chain Baselines Mechanisms Risks Outcome FSM: Project Teacher incentives Primary education 50% of grade 6 students (of which 50% are progress are not enough to learning outcomes in female) meet minimum competency or reports retain and attract literacy and numeracy higher on the NMCT for reading by 2023 Annual NDOE qualified teachers. improved (2015 baseline: 32% for grade 6) and SDOE reports 50% of grade 4 and 6 students (of which 50% are female) meet minimum NMCT report competency or higher on the NMCT for math by 2023 (2015 baseline: 25% for grade 4 and 21% for grade 6)

RMI: 50% of grade 3 and 6 students (of which 50% are female) meet or exceed the Project proficient level on the MISAT for English progress reading by 2023 (2015 baseline: 25% for reports grade 3 and 19% for grade 6) Annual MOE reports 50% of grade 3 and 6 students (of which 50% are female) meet or exceed the MISAT report proficient level on the MISAT for math by 2023 (2015 baseline: 37% for grade 3 and 20% for grade 6) Outputs FSM and RMI: DOE and MOE Financial stability of 1. Teachers in primary A national teaching professional learning records, new PTEs significantly education are better framework is drafted by 2019 and approved policy weakens during prepared and implemented by 2022 documents project period. (e.g., induction, FSM: alignment), 800 teachers trained in QPF to teach project numeracy and literacy across the progress curriculum in the medium of instruction by reports 2021 (2017 baseline: 100; male/female) Annual DOE 40% of participating schools implemented a and MOE system of lead teachers and induction by reports 2021 (2017 baseline: 0)

RMI: 400 teachers (of which 50% are female) are trained in QPF to teach numeracy and literacy across the curriculum in Marshallese and English by 2021 (2017 baseline: 40; male/female) 40% of participating schools implemented a system of lead teachers and induction by 2021 (2017 baseline: 0)

2. Capacity to use FSM and RMI: Project student assessment to New national student assessment for progress improve learning learning framework developed by 2021 and reports, DOE strengthened approved and implemented by 2022 and MOE

12 Appendix 1

Data Sources Performance Indicators with Targets and and Reporting Results Chain Baselines Mechanisms Risks reports, 50% of participating teachers (of which 50% teacher are female) use student assessment data to observation tailor teaching practice to meet student data from learning needs by 2021 (2017 baseline: Accreditation, 140) Teacher Evaluation RMI: System At least 250 teachers (of which 50% are female) participate in professional learning about using alternative assessments for learning (e.g., EGLA, SAL, SAM) by 2020.

3. Access to and usage FSM and RMI: Project of teaching and learning 75% of teachers (of which 50% female) progress resources and materials access resources via flash drive, online reports, DOE for literacy and catalogue, or resource center using newly an MOE numeracy expanded established process by 2022 records, (2017 baseline: 0) observation tools 90% of teachers (of which 50% are female) have participated in professional learning on resource use to improve student learning by 2021(2017 baseline: 0)

4. Educational FSM and RMI: Project reports, leadership and 90% of principals (of which 40% are principal management of female) participate in professional learning evaluation, schools, including (2017 baseline: 15%; 70% male and 30% annual DOE parent and community female) and MOE engagement reports strengthened All school improvement plans include five activities or projects that engage parents and community by 2021.

Key Activities with Milestones 1. Teachers in primary education are better prepared 1.1 Develop national and state professional learning policy frameworks 1.1.1 Develop national and state outlines for professional learning frameworks by 2020 1.1.2 Draft and finalize frameworks, including existing and new policies and structures (i.e., lead teacher induction, and career pathways) by 2023 1.2 Train teachers on QPF, focused on literacy and numeracy, across the curriculum 1.2.1 Conduct workshops on QPF and literacy and numeracy to PIUs, TLC, and SDOEs by Q1 2020 1.2.2 Conduct workshops on QPF, focused on literacy and numeracy, led by PIUs, TLC, and SDOEs, with principals and teachers (including outer island teachers) by Q4 2019 and continue throughout project 1.2.3 Pilot test blended ICT for the provision of PTE and ITE in Pohnpei, Kosrae, and Yap by 2020 1.2.4 Implement blended approaches for professional learning activities with participating schools by 2021 and continue throughout project 1.3 Increase alignment between PTE and ITE 1.3.1 Establish a TLC by 2020 1.3.2 Establish and implement alignment, continuity, and collaboration between and university/community college PTE and MOE/DOE ITE programs, especially related to QPF and literacy and numeracy, by 2021 1.3.3 Conduct study of supply-demand for teacher quality and preparation services to inform policy by 2020 1.3.4 Review and improve existing teacher performance/competency standards developed at various points along the teaching continuum (graduating, provisional, registered) and include QPF by 2021 1.3.5 Use National Minimum Competency Test and Pacific Island Literacy Numeracy Assessment data for decisions about PTE and ITE to support teachers/principals by 2021 1.4 Establish new system of lead teachers and induction 1.4.1 Develop, pilot, and finalize a lead teacher system for ongoing continuous ITE through school-based learning communities, and pilot at 10 schools in three states by 2021

Appendix 1 13

1.4.2 Develop, pilot, and finalize blended learning package for lead teachers at 10 trial schools by 2021 1.4.3 Implement learning package for participating schools by 2021 and continue throughout project 1.4.4 Develop, pilot, and approve induction program for provisional teachers in participating schools by 2021 1.4.5 Develop and pilot mentor teacher certificate program for supervisors of provisional teachers by 2021 1.4.6 Implement induction program with all participating schools by 2021 and continue throughout project 2. Capacity to use student assessment to improve learning strengthened 2.1 Develop a new national student assessment framework 2.1.1 Conduct participatory study on student assessment systems for learning with key stakeholders by 2020 2.1.2 Develop a national student assessment framework based on the study and NDOE assessment experiences by 2020, draft the framework by 2021, and approve by 2022/2023 2.2 Establish alternative assessments for learning 2.2.1 Conduct state-level professional learning on alternative assessments for classroom use by 2019 2.2.2 Develop and implement blended learning support (training, guidance) to participating schools by 2021 2.2.3 Assess and trial integrate alternative assessment data into SDOE education data system by 2023 3. Access to and usage of teaching and learning resources and materials for literacy and numeracy expanded 3.1 Increase access to teaching and learning resources 3.1.1 Create state-level inventories and digitize resources for flash drive distribution to teachers by 2020 3.1.2 Review existing curriculum at basic education level, with a focus on literacy and math resources and materials, and determine gaps and needs by 2019 3.2 Increase the number and quality of resources 3.2.1 Implement a plan of resource and material development for numeracy and literacy by 2019 3.2.2 Print in-country 1,000 resources and materials for schools and homes and communities by 2020 3.2.3 Print off-shore at least 1,000 copies each of five titles of hard cover resources annually from 2018-23 3.3 Increase community and school partnerships in resource development 3.3.1 Conduct community and school resource development workshops at 60% of project schools by 2021 3.4 Increase teacher and community workshops on newly developed resources and materials 3.4.1 Provide training on using and developing classroom resources for 90% of project teachers by 2021 4. Educational leadership and management of schools, including parent and community engagement, strengthened 4.1 Train school leaders on educational leadership and management 4.1.1 Have 50% of principals participate in QPF training with teachers by 2021 4.2 Establish parents as partners program 4.2.1 Conduct stakeholder consultations with parents and civil society to develop promotion strategy by 2020 4.2.2 Conduct workshops about literacy and numeracy, especially in early grades, by 2022 4.3 Increase number of whole school sustainable projects 4.3.1 sustainable development projects in school improvement plans of 50% of participating schools by 2021 Inputs Government (FSM): $1,000,000 Government (RMI): $1,000,000 ADB: $13,000,000 Australia: $1,800,000 Total estimated amount: $16.8 million Assumptions for Partner Financing Not applicable. ADB = Asian Development Bank, DOE = department of education, EGLA = early grade learning assessment, FSM = Federated States of Micronesia, ITE = in-service teacher education, MISAT = Marshall Islands Standards Achievement Test MOE = Ministry of Education (RMI), NDOE = National Department of Education (FSM), NMCT = National Minimum Competency Test, PTE = preservice teacher education, QPF = quality pedagogy framework, RMI = Republic of the Marshall Islands, SAL = short assessments in literacy, SAM = short assessments in math, SDOE = state department of education, TLC = teacher learning collective. a Government of the Federated States of Micronesia. 2023. Education Strategic Plan (2017–2023). Pohnpei; and Government of the Republic of Marshall Islands. 2023. Education Strategic Plan (2017–2023). Majuro. Source: Asian Development Bank.

14 Appendix 2

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=49456-002-2

1. Grant Agreement (Special Operations: Federated States of Micronesia) 2. Grant Agreement (Special Operations: Republic of the Marshall Islands) 3. Grant Agreement (Externally Financed: Federated States of Micronesia) 4. Sector Assessment (Summary): Education 5. Project Administration Manual 6. Contribution to the ADB Results Framework 7. Development Coordination 8. Economic and Financial Analysis 9. Country Economic Indicators 10. Summary Poverty Reduction and Social Strategy 11. Gender Action Plan 12. Risk Assessment and Risk Management Plan

Supplementary Documents 13. Financial Management Assessment 14. Poverty and Social Analysis 15. Procurement Capacity and Risk Assessment Report 16. Technical In-Depth Report on Teacher Preparation, Recruitment, and Retention 17. Economic Analysis on Cost-Effectiveness