Early Childhood Education Demonstration Program (RRP PRC 51434)

PROGRAM SOUNDNESS ASSESSMENT

A. Program Description

1. The Jiangxi Shangrao Early Childhood Education (ECE) Demonstration Program will support Shangrao Municipal Government’s ECE Reform and Standardized Development Implementation Plan, 2020–2035 during 2020–2025.1 The municipal government’s ECE plan was prepared in response to the State Council’s Opinions on Deepening ECE the Reform and Standardized Development of Preschool Education, 2020–2035.2 The plan aims to achieve the universal coverage of 3-year, affordable, safe, and quality ECE across the 12 counties and districts of Shangrao Municipality by carrying out 11 broadly defined tasks that can be grouped into (i) expanding the provision of ECE services, (ii) improving financing mechanisms for ECE, (iii) strengthening ECE staffing and teaching force, (iv) enhancing management systems for ECE, (v) improving regulations and support for private kindergartens, (vi) enhancing the quality of ECE, and (vii) establishing adequate governance mechanisms for ECE.

2. The Asian Development Bank (ADB) results-based lending (RBL) program will support the implementation of the municipal government’s plan, which covers public and private kindergartens, while focusing on key interventions designed to improve access to quality ECE, especially in rural areas and for children from low-income families and disadvantaged backgrounds. The RBL program’s impact will be universal coverage of quality 3-year ECE achieved. The outcome will be children receiving quality 3-year ECE increased. The 11 broadly defined tasks in the plan have been further grouped into four outputs of the RBL program to increase synergy between actions specified in the plan and provide a focus on key results. The four outputs of the RBL program are (i) provision of affordable 3-year ECE increased; (ii) systems for preparation and professional development of ECE teachers, principals, and childcare staff established; (iii) models and mechanisms for improving the quality of ECE developed; and (iv) systems for assessing, monitoring, and ensuring the quality of ECE strengthened.

3. The RBL program expenditures are estimated to be $750.8 million during 2020–2025, whereas the municipal government’s ECE program expenditures are estimated to be $3,350.4 million during 2020–2035. ADB’s RBL will provide $100 million, the government will finance $289.4 million, public kindergartens (tuition and other fees) will contribute $156.4 million, and private kindergartens (including tuition and other fees) will contribute $83.7 million. Loans from commercial banks may be sought to fill the financing gap. The scope of the municipal government’s ECE program and the RBL program is in Table 1.

Table 1: Program Scope Item Broader Government Program Results-Based Lending Program Outcome Universal coverage of 3-year, affordable, Children receiving quality 3-year ECE safe, and quality ECE achieved increased Key outputs Provision of ECE expanded, ECE financing Provision of affordable 3-year ECE mechanisms improved, ECE staffing and increased; systems for preparation and teaching force strengthened, ECE professional development of ECE management systems enhanced, regulations teachers, principals, and childcare staff and support for private kindergartens established; models and mechanisms for improved, and adequate ECE governance improving the quality of ECE developed; mechanisms established and systems for assessing, monitoring,

1 Communist Party of Shangrao Municipal Committee and Shangrao Municipal People's Government. 2020. Early Childhood Education Reform and Standardized Development Implementation Plan, 2020–2035. Shangrao. 2 Central Committee of the Communist Party of China and State Council. 2018. Several Opinions on Deepening the Reform and Standardized Development of Preschool Education, 2020–2035. Beijing. 2

Item Broader Government Program Results-Based Lending Program and ensuring the quality of ECE strengthened Activity types Physical infrastructure improvement, Same as the broader government enhanced regulations and support for private program, with focus on key interventions kindergartens, establishment of pre- and in- to improve access to and quality of ECE, service training systems for ECE staff, establish pre- and in-service ECE staff recruitment of ECE teachers and childcare preparation and professional development staff, enhanced support systems for rural systems, and strengthen ECE program kindergartens, ECE research, and monitoring and management systems development of ECE quality assessment and monitoring systems Program $3,350.4 million $750.8 million expenditure Main financiers Government: $1,949.2 million; households Government: $289.4 million;a households and the respective (tuition and other fees): $959.2 million; ADB: (tuition and other fees): $240.1 million;a financing amounts $100.0 million; financing gap: $341.9 million ADB: $100.0 million; financing gap: $121.3 million Geographic Shangrao Municipality Shangrao Municipality coverage Implementation 2020–2035 2020–2025 period ADB = Asian Development Bank, ECE = early childhood education. a Excludes financing from Dexing City, Hengfeng County, and . Sources: ADB and Shangrao Municipal Government.

B. Program Soundness

1. Relevance and Justification

4. Although the People’s Republic of China (PRC) has achieved remarkable success in alleviating poverty, reducing inequality remains a challenge. Inequality reflects disparities in income and access to quality basic services between rural and urban areas and between provinces and regions. Whereas high-quality ECE brings social and economic benefits, especially to children from disadvantaged backgrounds, and reduces intergenerational inequality and poverty, such gains have largely been unrealized because of limited access to quality ECE, particularly in rural areas and for disadvantaged children. Public funding for ECE is generally insufficient and depends on the management and financing capacity of local governments, resulting in large disparities in per child funding for ECE across municipalities and counties. Households bear the cost of ECE in the form of tuition and other fees regardless of public or private provision of ECE, which discourages low-income families from enrolling children in ECE. Recognizing the gap, the Government of the PRC has been scaling up its efforts to expand the provision of 3-year ECE since 2010, through the implementation of the first (2010–2013), second (2014–2016), and third (2017–2020) action plans for ECE development, and through the national policy on ECE reform and standardized development (2018) (footnote 2).

5. In Shangrao, private provision of ECE remains dominant, although the share has decreased in terms of the number of kindergartens (from 66% in 2017 to 57% in 2019) and children enrolled (from 73% in 2017 to 58% in 2019). The major expansion in public ECE provision has been in rural areas, through the conversion of idle primary schools and classrooms into kindergartens and the expansion and upgrading of existing kindergartens. Along with this increase in the proportion of public ECE, the gross enrollment ratio for 3-year ECE improved from 72% in 2017 to 80% in 2019.

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6. Yet, disparities in access to quality ECE persist in Shangrao, especially between rural and urban areas. Compared with urban areas, ECE in rural areas (particularly in villages and primary schools) lack stimulating environments rich in quality ECE support and resources and qualified ECE teachers, and experience high ECE teacher–child ratios (1:25.2 in rural public kindergartens in 2019). Private kindergartens also vary in quality, with high-standard private kindergartens in urban areas charging fees more than four times higher than public kindergartens and substandard private kindergartens (mostly in rural areas) charging marginally higher fees. Against this background, the municipal government’s ECE program, ECE Reform and Standardized Development Implementation Plan, 2020–2035, adopts various measures to improve access to quality ECE by expanding public provision of quality ECE and incentivizing private kindergartens to meet the standards and charge affordable fees with the aid of subsidies.

7. Public interventions in ECE can be justified because of equity concerns and information asymmetries between parents and private kindergartens regarding the quality and cost of ECE. Inequality starts in early childhood and tends to widen as children get older. Children without quality ECE often fall behind in overall development and readiness for school and life, and encounter difficulties with making a good start at primary school. This in turn leads to negative learning experiences and poorer foundational skills, and affects their subsequent school career and labor market success. In this context, quality ECE brings social and economic benefits, especially to children from low-income families and disadvantaged backgrounds who are less likely to receive stimulation, care, and protection from stress at home. The benefits of quality ECE last a lifetime as it provides a basis for human capital accumulation and higher labor productivity, and improves long-term health outcomes. Research also shows that quality ECE boosts female employment and reduces intergenerational inequality and poverty.

8. Beneficiaries. The direct beneficiaries of the program will be (i) children aged 3–5 (about 293,000 in 2019) and their parents, grandparents, and other caregivers; (ii) ECE staff (22,626 in 2019), including 13,364 teachers; 2,188 principals; and 3,911 childcare staff; and (iii) teacher educators (more than 400) and students (about 1,500) in ECE teacher and childcare staff preparation programs at Shangrao ECE Normal College and secondary vocational education schools.

9. Stakeholder support. The State Council’s Opinions on Deepening Reform and Standardization Development of Preschool Education, 2020–2035 (footnote 2), on which the municipal government’s ECE plan is based, was prepared by the Ministry of Education based on wide consultations and research in the PRC. Following the State Council’s Opinions and Jiangxi Province’s ECE Reform and Standardized Development Implementation Plan, 2020–2035,3 the municipal government’s plan was prepared considering local issues and challenges in ECE, and through consultations with ECE teachers and principals at public and private kindergartens, teacher educators at Shangrao Normal ECE College, and other ECE researchers. During the RBL program preparation, further consultations were held through (i) an online survey with 50 principals, 517 teachers, and 5,080 parents or caregivers of children enrolled in 50 kindergartens (39 public and 11 private, including 3 “inclusive” private kindergartens that meet the standards and are subsidized by local governments to offer ECE at affordable fees); and (ii) 20 key informant interviews with management teams at Shangrao ECE Normal College; kindergarten principals

3 Jiangxi Provincial Government. 2019. Early Childhood Education Reform and Standardized Development Implementation Plan, 2020–2035. . 4 and teachers; and staff of municipal government agencies. 4 The RBL program design incorporates their suggestions and recommendations.

10. Poverty reduction and social impacts. Shangrao is one of the 11 municipalities comprising Jiangxi Province, which is located in the southeastern part of the PRC.5 Shangrao has the second-lowest GDP per capita in Jiangxi Province, at CNY36,836 in 2019—just over half the national average (CNY70,892). With mountains and hills accounting for 75% of its total land area, Shangrao remains largely rural with an urbanization rate of 52% in 2019. Most ethnic minorities (12,900 people or 0.19% of the total population) live in mountainous rural areas. Per capita disposable income in has grown slowly in rural areas, and at CNY13,346 in 2018, was only about one-third of that in urban areas (CNY34,656). The population living below the minimum living standards (set at per capita income of CNY640/month) accounted for 4.8% of the total population in Shangrao in 2019, higher than the national average of 3.3%. They are concentrated in rural areas (0.29 million or 4.3% of the total population in 2019), with a higher proportion in rural areas (6.1% in 2018) than in urban areas (2.9%, as opposed to the national average of 1.2%). Low income limits households’ capacity to afford tuition and other fees for children’s ECE. The government provides financial support for children from low-income families to enroll in ECE and 6.7% of children enrolled received financial assistance in 2019. In addition, since the 1990s, Shangrao has seen large numbers of out-migrants, mainly from rural areas to the surrounding municipalities with higher gross domestic product (GDP) per capita, and consequently, large numbers of children have been left behind by their parents. In 2019, 74,748 or 31.8% of all children enrolled in ECE were left-behind children. Left-behind children are often cared for by their grandparents or other caregivers and are less likely to receive stimulation, care, and protection from stress at home.

11. The program has incorporated key design features to ensure benefits for the poor, the disadvantaged, and ethnic minorities, such as (i) increasing places in affordable public kindergartens and inclusive private kindergartens; (ii) ensuring financial assistance for children from families living below the minimum living standards; (iii) improving the competencies of ECE teachers, principals, and childcare staff to interact with children in meaningful ways; and (iv) piloting community-based parenting programs to reach out to left-behind children and their grandparents and caregivers.

12. Gender impacts. Women make up about 84.3% of total ECE staff. The lack of male staff in ECE workforce is because of the (i) stereotyped image of ECE as women’s work and insufficient awareness of men’s role in children’s socialization, (ii) low salary, (iii) uncertain career prospects because of the limited public employee teacher quota, and (iv) low social status of ECE staff. Studies of the 1990 and 2010 censuses revealed that there were “millions of unreported female births” that ‘appear’ in older cohorts because of administrative bias favoring registration of boys than girls at birth. The sex ratio at birth in Jiangxi Province was 138 males for every 100 females in 2000, the highest in the PRC, and 113.1 in 2018, while in Shangrao it was 114 in 2015. These studies show that girls are likely to enroll in ECE later than the official age of 3, and are more likely to drop out of kindergartens or not be enrolled at all. According to the online survey conducted during program preparation, women are the dominant caregivers for children in their families, which constrains women’s labor participation. About 96% of housewives responded that they want to work outside the home, and 41.6% of these respondents wish to work full-time. Fathers’

4 Interviews were conducted with staff of the Civil Affairs Bureau, the Ethnic and Religious Affairs Bureau, the Education Bureau, the Health Commission, the Statistics Bureau, the Human Resources and Social Security Bureau, and the Women’s Federation. 5 The population in Shangrao Municipality was 6.81 million in 2018. 5 participation in child-rearing is 44.5%, lower than that of mothers. The online survey also revealed that there is no policy on addressing gender bias and stereotyping in ECE, including in environments, textbooks, toys, and games. The program includes gender targets in the disbursement-linked indicator (DLI) matrix, the program results framework, and the design and monitoring framework; and gender actions in the program action plan.

2. Adequacy

13. Effectiveness. The sector assessment revealed that the ECE system faces the following issues and challenges: (i) inadequate provision of affordable 3-year ECE, especially in rural areas; (ii) ineffective mechanisms for professional development of ECE teachers, principals, and childcare staff; (iii) poor quality of ECE, especially in rural areas; (iv) poor accessibility to kindergartens in rural areas; and (v) insufficient systematic assessment, monitoring, and evaluation of ECE quality. It showed that the ECE system in Shangrao needs to (i) develop measures and models to address issues with the accessibility of kindergartens in addition to building new kindergartens; (ii) develop and strengthen the ECE workforce, while improving the attractiveness of the ECE teaching profession; (iii) support ECE teachers and childcare staff in interacting with children in more meaningful ways and improving children’s learning and developmental outcomes; and (iv) introduce ECE quality assessment and monitoring.

14. The four outputs of the RBL program have been designed to address the issues and challenges above. Building on the municipal government’s strong commitment to reform and develop the ECE system with an emphasis on quality, especially in rural areas, the RBL program will focus on key interventions designed to improve access to quality ECE, establish pre- and in- service ECE staff professional development systems, and strengthen ECE program monitoring and management systems. Based on detailed implementation plans for key outputs identified in the municipal government’s plan and the findings of the sector assessment, a robust results chain has been established to increase synergy between the key outputs and identify key results on which to focus under the RBL program. The RBL program design, therefore, is deemed adequate and appropriate for the problems at hand and for the intended results.

15. Efficiency and economy. To provide more focus on key results, nine DLIs—two outcome indicators and seven output indicators—have been selected from the program results framework as they represent the overarching goal of the municipal government’s plan; reflect the municipal government’s priority to improve the quality of ECE through various pilot initiatives that require knowledge, expertise, and close monitoring; and are under the control of the Shangrao Municipal Bureau of Education (SBE), the implementing agency of the RBL program, which will guide and coordinate the 12 county and district education bureaus.

16. The RBL program will enhance regulations and support for private kindergartens by more strictly requiring licensing and registration, and incentivizing those that meet the standards to offer ECE at affordable fees. ECE teachers, principals, and childcare staff at private kindergartens will benefit equally from professional development programs and activities. As the private provision of ECE remains dominant in Shangrao and private kindergartens’ contribution to the program outcome is considered significant, these measures are expected to achieve efficiency and economy.

17. Sustainability. The nine DLIs, derived from the government program, incentivize the government to achieve results related to its new initiatives, building on existing program systems with necessary measures to strengthen them. They also allow sufficient flexibility for the government to determine how to achieve the results. These results are expected to be sustainable, 6

as they will be underpinned by improvements in the overall ECE system and program system to be supported through the DLIs and program actions.

3. Financial and Economic Analysis

18. Economic benefits. Many studies support the importance of investments in ECE for economic growth. Quality ECE provides a basis for human capital accumulation and higher labor productivity, and improves long-term health outcomes. It is also found to decrease dropouts from schools, and improve learning and labor market outcomes. The most significant measurable benefits of ECE are increased lifetime earnings that stem from higher educational attainment. Employers are more likely to pay higher wages to better educated workers because these individuals are perceived as more productive and tend to have more experience than less- educated workers, having spent more time in employment.6 Parents also benefit from the time freed up from taking care of their children to work or do other activities if affordable, accessible, and quality ECE services are available. By returning to work sooner after having children, parents can increase their lifetime earnings.

19. The economic analysis was conducted using a standard method of cost–benefit analysis to estimate the economic internal rate of return, calculating the discount rate that equates the net present value of the cost stream with that of the benefit stream.

20. Specific to the RBL program, the following assumptions are made: (i) the gross enrollment ratio will increase to 83.9% in 2020, and to 88.0% by 2025; (ii) the program will start to benefit parents from 2025; (iii) the number of children who will benefit from the program annually is in Table 2; (iv) for children who will gain access to ECE because of the program, annual salary is assumed to be 3.0% higher, or CNY955;7 (v) for children who have access to ECE regardless of the program, annual salary is assumed to be 2.0% higher, or CNY636;8 (vi) the children enrolled in ECE are assumed to work and earn for 30 years in their lifetime;9 (vii) according to the household survey conducted during the program preparation, 9.9% of parents responded that they had to leave their work to take care of their children;

6 J. Mincer. 1979. Human Capital and Earnings. In A. B. Atkinson, ed. Economic Dimensions of Education. Washington, DC: National Academy of Education Reprinted in Wealth, Income and Inequality, Oxford: Oxford University Press, 1980. 7 Longitudinal studies in the United States suggest that receiving ECE can increase earnings in adulthood by 1.3%– 3.5% (for example, E. Cascio. and D. Schanzenbach. 2013. The Impacts of Expanding Access to High Quality Preschool Education. Brookings Papers on Economic Activity. 127–192). A figure of 3.0% has been applied to the median value of the lowest 10th percentile of salaries (CNY31,818 in 2019) reported by the Shangrao Bureau of Human Resources and Social Security to estimate the value of additional income (CNY955). The children enrolled in ECE in 2025 are most likely to start working in 2040 at the age of 18. 8 A figure of 2.0%, rather than the minimum increase of lifetime earnings (1.3%) found in the longitudinal studies in the United States (footnote 7), has been applied to the median value of the lowest 10th percentile of salaries (CNY31,818 in 2019) reported by the Shangrao Bureau of Human Resources and Social Security to estimate the value of additional income (CNY636). The program will benefit especially children in rural kindergartens (84% of all children enrolled in ECE in 2019), where the quality of ECE will be improved significantly. The children enrolled in ECE in 2025 are most likely to start working in 2040 at the age of 18. 9 The retirement age in the PRC is 60 for men and 55 for women (civil servants). This is expected to be raised in the future. The assumption of 30 years spent at work in their lifetime considers periods when they do not work. 7

the number of parents who will benefit from improved lifetime earnings is in Table 2; (viii) the parents of children enrolled in ECE will earn an additional 1-year average income of CNY33,664 by gaining employment;10 and (ix) the discount rate used is 6.0%.

21. Table 2 presents a summary of the benefits for children and their parents.

Table 2: Projected Benefits for Children and Parents (CNY) Additional Earnings for Additional Earnings for Children Children Already Enrolled in Additional Earnings Year Newly Gaining Access to ECE ECE for Parents 2025 0 0 33,664 2026 0 0 33,664 2027 0 0 33,664 2040 955 636 33,664 2041 955 636 33,664 2042 955 636 33,664 ECE = early childhood education. Source: Asian Development Bank estimates.

22. Economic costs. The economic costs identified for the program were capital costs (excluding taxes and duties) of CNY736.61 million in 2020–2025, 11 and operation and maintenance costs (recurrent costs) of CNY1,453.65 million in 2020–202512 (as new or upgraded facilities will be in operation under outputs 1 and 2 of the program) and CNY406.46 million annually from 2026.

23. Economic internal rate of return and sensitivity analysis. The economic net present value for the program is CNY3,254.37 million and the economic internal rate of return is 8.25%. This is greater than the discount rate of 6.0% that can be applied to social sector projects. In addition to the base case scenario, five other scenarios were analyzed: (i) 10% decrease in benefits, (ii) 20% decrease in benefits, (iii) 10% increase in costs, (iv) 20% increase in costs, and (v) 20% decrease in benefits and 20% increase in cost (the potential impacts of the coronavirus disease [COVID-19]). The results suggest that the program is economically viable under all scenarios (Table 3).

Table 3: Sensitivity Analysis Decreased Benefits Increased Costs EIRR ENPV Scenario (%) (%) (%) (CNY million) Base Case 8.25 3,254.37 1 10.0 7.80 2,483.61 2 20.0 7.31 1,712.85 3 10.0 7.85 2,809.04 4 20.0 7.75 2,688.11 5 20.0 20.0 6.82 1,146.59 EIRR = economic internal rate of return, ENPV = economic net present value. Source: Asian Development Bank estimates.

10 Based on the household survey conducted during the program preparation, the average income in 2020 was CNY33,664. ECE in the PRC lasts 3 years, but parents (most likely mothers) are assumed to benefit from enrolling their children in ECE for 1 year, given that not all of them are able to work. 11 Taxes and duties on capital costs are estimated to be 10% of the cost of construction, upgrading, and repair. 12 The figure includes the cost of ECE staff for the operation of new kindergartens in line with the target ECE staff–child ratio (1:15) in 2025. 8

24. Adequacy and sustainability. Three major sources of financing for the RBL program are the municipal government’s budgets (including intergovernmental transfers), revenues from tuition and other fees for public kindergartens, and revenues from private kindergartens (including from tuition and other fees). Applying conservative assumptions of a GDP annual growth rate of 6.0%–7.0% in Shangrao; a government revenue growth rate of 5.0%–6.0%; a government education budget growth rate of 7.5%–8.0%; and a government ECE budget growth rate of 14.0%–15.0%, the municipal government’s education budgets in 2020–2025 are estimated to be $13.9 billion, and the total ECE budgets, $445.8 million, which can provide the required government financing ($289.4 million). Using the 2019 rate of tuition and other fees for public and private kindergartens with an annual growth rate of 3.0%, multiplied by the estimated number of children enrolled in 3-year ECE, revenues from tuition and other fees are estimated to be $156.4 million for public kindergartens and $83.7 million for private kindergartens, which can also provide the required funding. The financing plan is therefore considered adequate and the three sources of financing are therefore deemed sustainable.

4. Implementation Arrangements

25. The Shangrao Municipal Government is the executing agency. Through the World Bank- financed projects, it has developed and demonstrated solid capacity to manage and implement challenging projects. The SBE is the implementing agency and will implement and manage the program through its program management office in coordination with the 12 county and district education bureaus. The municipal government has established a leading group for the utilization of foreign loans, comprising the municipal government, the Shangrao Municipal Bureau of Finance, the Shangrao Municipal Development and Reform Commission, the SBE, and other relevant bureaus, to provide strategic guidance and direction. The SBE will establish an ECE expert committee to strengthen technical guidance based on ECE research.

26. The RBL program implementation will rely on the country’s program fiduciary and safeguard systems. Existing financial management systems for the SBE, county and district education bureaus, and kindergartens will be used to manage the loan proceeds. The SBE and county and district education bureaus will mainly undertake procurement of civil works, goods, and services in accordance with procurement laws and regulations of the PRC and Jiangxi Province, and procurement procedures and systems in Jiangxi Province and Shangrao Municipality. The RBL program is categorized B for environment, involuntary resettlement, and indigenous peoples safeguards. A safeguards unit will be established at the SBE and county and district education bureaus with staff appointed to coordinate and manage involuntary resettlement and environment safeguards, set up a safeguard monitoring system to allow proper coordination and facilitation with relevant bureaus, and institute a grievance redress mechanism. The fiduciary and safeguards program actions are included in the program action plan.

27. Disbursement arrangements. Disbursement will be made in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and ADB. The loan proceeds will be disbursed to an account to be designated by the government based on verified achievement of the DLIs. Financing of prior results achieved not more than 12 months before loan signing is allowed for DLIs 1 and 9. The total amount of such financing will not exceed 20% of the total loan amount. Disbursements are allowed for early and/or late achievement of DLIs. All DLIs should be achieved on or before the program completion date. Before the disbursement of loan proceeds, the municipal government will prepare and submit, after approvals by relevant government agencies, a withdrawal application, along with evidence to support the achievement of the DLIs in accordance with the verification protocols. 9

28. Financial reporting and external audit arrangements. No later than 9 months after the close of each fiscal year, the municipal government will (i) prepare annual financial statements for the program; (ii) have the financial statements audited annually by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB, in accordance with auditing standards acceptable to ADB; and (iii) submit to ADB the audited financial statements and audit report in the English language, including the auditors’ opinions on the financial statements, use of the loan proceeds, and compliance with the financial covenants of the loan agreement, and a management letter.

29. Monitoring and evaluation system. The RBL program will be monitored and evaluated against the program results framework and nine DLIs related to key program results. Rigorous verification protocols, including independent third-party verification of the outcome DLIs and some output DLIs, have been established. The SBE, through its program management office, will prepare and submit to ADB semiannual program implementation progress reports no later than 8 weeks after the close of the first (March–August) and second (September–February) halves of each year. ADB will undertake review missions to verify the achievement of the DLIs, review general program progress, and discuss annual work plans and budgets.

C. Managing Risks and Improving Capacity

30. The soundness assessment confirmed that the program is justified for its (i) support for public interventions in ECE because of equity concerns and information asymmetries between parents and private kindergartens regarding the quality and cost of ECE; (ii) effectiveness in achieving the intended results, efficiency and economy in the use of the program resources, and sustainability of the program results; (iii) economic viability and financial sustainability; and (iv) soundness of implementation arrangements.

31. The overall risk of the RBL program was assessed as moderate. The key risks identified include (i) the quality, reliability, and timely availability of data disaggregated by lower administrative units are limited, making it challenging to monitor the program performance and quickly address problems as they arise; (ii) limited capacity of county and district education bureaus to plan capital expenditures, compounded by limited management and supervision authority of the SBE over county and district education bureaus, reduces the effectiveness of capital expenditures; (iii) internal controls are mainly geared toward transactions and do not give sufficient attention to the efficiency and effectiveness of fund use; (iv) institutional arrangements, staffing, and mechanisms for safeguards screening, categorization, planning, documentation, monitoring, and information disclosure are lacking to ensure compliance with ADB’s safeguard policies and requirements; and (v) the closure of kindergartens and loss of jobs and household incomes because of the COVID-19 pandemic negatively impacts the operation of private kindergartens and the ability of households to pay tuition and other fees.