Jiangxi Shangrao 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 China 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 Yugan County. 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. 3 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