Project Appraisal Document. World Bank

121 Pages·2009·1.96 MB·English

by  World Bank Group

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PROPOSED LOAN

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April 21, 2009

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This document has a restricted distribution and may be used by recipients only in the performance of their
official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS
(Exchange Rate Effective April 9, 2009)
Currency Unit = Jordanian Dinar (JD)
JD 0.71 = US$1
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS

ABU Al'Balqa Applied University M&E Monitoring and Evaluation
BOT University Boards of Trustees MENA Middle East and North Africa Region
CAS Country Assistance Strategy MIS Management Information System
CBJ Central Bank of Jordan MoF Ministry of Finance
CC Community College MoHESR Ministry of Higher Education and Scientific Research
CFC Competitive Fund Coordinator MoL Ministry of Labor
CIDA Canadian International Development Agency MoPIC Ministry of Planning and International Cooperation
CPI Corruption Perceived Index NAC National Assessment Center
CQS Selection based on Consultant's Qualifications NCB National Competitive Bidding
DA Designated Account NCHRD National Center for Human Resource Development
DoS Department of Statistics OECD Organization of Economic Cooperation and Development
EMIS Education Management Information System OM Project Operational Manual
ESW Economic Sector Work PAD Project Appraisal Document
ETF European Training Foundation PAP Policy Analysis and Planning Unit
EU-AA European Accession Accord PDO Project Development Objective
FBS Fee-Based Services PDU Program Development Unit
FM Financial Management PER Public Expenditure Review
FO Financial Officer PFM Public Financial Management
GoJ Government of Jordan PFS Project Financial Statement
HEAC Higher Education Accreditation Commission PICC Project Implementation Coordination Committee
HEC Higher Education Council PMO Project Management Office
HEDF Higher Education Development Fund PMOC PMO Coordinator
HEDP Higher Education Development Project PSC Program Steering Committee
HEI Higher Education Institute QA Quality Assurance
HERfKE Higher Education Reform for the Knowledge Economy QCBS Quality- and Cost-Based Selection
HERMC Higher Education Reform Monitoring Committee QE Quality Enhancement
ICB International Competitive Bidding SAA Student Aid Agency
ICR Implementation Completion and Results Report SBD Standard Bidding Document
ICT Information, Communication and Technology SE Student Evaluation
IFMCA Institutional Financial Management Assessment SG Secretary General
IFR Interim Un-audited Financial Report SIL Specific Investment Loan
ISA International Standards on Auditing SOE Statement of Expenditures
JD Jordanian Dinar STC Special Tender Committee
JICA Japan International Cooperation Agency TA Technical Assistance
LC Liaison Committee TFP Total Factor Productivity
LCS Least-Cost Selection TVET Technical and Vocational Education and Training
LM Labour Market US FTA United States Free Trade Agreement
LMIS Labour Market Information Systems WA Withdrawal Application

Vice President: Daniela Gressani
Country Director: Hedi Larbi
Sector Director: Steen Jorgensen
Sector Manager: Mourad Ezzine
Task Team Leader: Ghassan N. Alkhoja
FOR OFFICIAL USE ONLY
JORDAN
Higher Education Reform for the Knowledge Economy

CONTENTS
Page
I. STRATEGIC CONTEXT AND RATIONALE...............................................................................1
A. Country and Sector Issues................................................................................................................1
B. Rationale for Bank Involvement......................................................................................................5
C. Higher Level Objectives to which the Project Contributes..............................................................6
II. PROJECT DESCRIPTION..........................................................................................................7
A. Lending Instrument..........................................................................................................................7
B. Government Program Objective and Phases....................................................................................7
C. Project Development Objective and Key Indicators........................................................................8
D. Project Components.........................................................................................................................8
E. Lessons Learned and Reflected in the Project Design...................................................................10
F. Alternatives Considered and Reasons for Rejection......................................................................11
III. IMPLEMENTATION.................................................................................................................11
A. Partnership Arrangements (if applicable)......................................................................................11
B. Institutional and Implementation Arrangements............................................................................12
C. Monitoring and Evaluation of Outcomes/Results..........................................................................13
D. Sustainability.................................................................................................................................14
E. Critical Risks and Possible Controversial Aspects........................................................................15
F. Loan/Credit Conditions and Covenants.........................................................................................16
IV. APPRAISAL SUMMARY..........................................................................................................16
A. Economic and Financial Analyses.................................................................................................16
B. Technical........................................................................................................................................17
C. Fiduciary........................................................................................................................................18
D. Social.............................................................................................................................................19
E. Environment...................................................................................................................................21
F. Safeguard Policies..........................................................................................................................21
G. Policy Exceptions and Readiness...................................................................................................21
Annex 1: Country and Sector or Program Background..............................................................................22
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies........................................39
Annex 3: Results Framework and Monitoring............................................................................................41
Annex 4: Detailed Project Description.......................................................................................................47
Annex 5: Project Costs................................................................................................................................57
Annex 6: Implementation Arrangements....................................................................................................59
Annex 7: Financial Management and Disbursement Arrangements...........................................................63
Annex 8: Procurement Arrangements.........................................................................................................73
Annex 9: Economic and Financial Analysis...............................................................................................82
Annex 10: Safeguard Policy Issues.............................................................................................................96
Annex 11: Statement of Sector Policy........................................................................................................97
Annex 12: Project Preparation and Supervision.......................................................................................105
Annex 13: Documents in the Project File.................................................................................................107
Annex 14: Statement of Loans and Credits..............................................................................................109
Annex 15: Country at a Glance.................................................................................................................110
Annex 16: Map IBRD 33424....................................................................................................................112
This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

JORDAN

HIGHER EDUCATION REFORM FOR THE KNOWLEDGE ECONOMY

PROJECT APPRAISAL DOCUMENT

MIDDLE EAST AND NORTH AFRICA

MNSHD

Date: April 21, 2009 Team Leader: Ghassan N. Alkhoja
Country Director: Hedi Larbi Sectors: Tertiary education (100%)
Sector Manager/Director: Steen Lau Jorgensen Themes: Education for the knowledge economy
(P)
Project ID: P102487 Environmental screening category: Not Required
Lending Instrument: Specific Investment Loan

Project Financing Data
[X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others:
Total Bank financing (US$m.): 25.00
Proposed terms: Variable-Spread Loan (VSL) with level repayments for 22 years maturity, including a
grace period of 6 years.
Financing Plan (US$m)
Source Local Foreign Total
Borrower 9.00 1.00 10.00
International Bank for Reconstruction and 0.90 24.10 25.00
Development
Financing Gap 14.00 16.00 30.00
Total: 23.90 41.10 65.00
Borrower:
Ministry of Planning and International Cooperation
P.O. Box 555, Amman, Jordan 11118
Tel: [phone] Fax: [phone]

Responsible Agency:
Project Development Unit, Ministry of Higher Education and Scientific Research
PO Box 138, Jordan
Tel: [phone] Fax: NA
[email protected].
Ministry of Higher Education and Scientific Research
Amman, Jordan 11121
Tel: [phone] Fax: [phone]

Estimated disbursements (Bank FY/US$m)
FY 2010 2011 2012 2013 2014 2015 2016
Annual 0.60 3.80 7.00 5.70 5.00 2.40 0.50
Cumulative 0.60 4.40 11.40 17.10 22.10 24.50 25.00
Project implementation period: Start July 1, 2009 End: June 30, 2015
Expected effectiveness date: July 1, 2009
Expected closing date: December 31, 2015
Does the project depart from the CAS in content or other significant respects? Ref.
[ ]Yes [X] No
PAD I.C.

Does the project require any exceptions from Bank policies?
[ ]Yes [X] No
Ref. PAD IV.G.
[ ]Yes [X] No
Have these been approved by Bank management?
Is approval for any policy exception sought from the Board? [ ]Yes [X] No
Does the project include any critical risks rated “substantial” or “high”?
[X]Yes [ ] No
Ref. PAD III.E.
Does the project meet the Regional criteria for readiness for implementation? Ref.
[X]Yes [ ] No
PAD IV.G.

Project development objective Ref. PAD II.C., Technical Annex 3
The proposed project will support the Government’s program to improve equitable access for male and
female students to a higher education system that is financially and institutionally sustainable, with
incentives to improve system quality and relevance. The project will support policy reforms that will: (i)
improve the Government’s capacity to diversify and improve financing mechanisms; (ii) modernize the
governance and management efficacy of the sector; and (iii) strengthen quality assurance and
accreditation mechanisms.
Project description [one-sentence summary of each component] Ref. PAD II.D., Technical Annex 4
Component 1: Sustainable Financing for Quality. The objective of this component will be to build the
capacity of MoHESR to introduce new funding mechanisms to promote transparency, innovation and
effective resource management, including support for competitive program funding and establishing a
Student Aid Agency. The project will finance training, consulting services, and goods for the
development of the funding formula; establishment and operation of the competitive fund; and the
establishment of the student aid agency.

Component 2: Modernize Governance, Accountability and Management Systems. This component
aims to strengthen the management performance and accountability of universities and the overall sector
by strengthening the transparency and quality of decision making. The project will finance training,
consulting services, and goods for the establishment of the education management information system;
establishment of the Higher Education Council’s Policy Analysis and Planning Unit; and the
establishment and operation of the Project Development Unit.

Component 3: Strengthen Quality Assurance and Accreditation. This component aims to improve the
employability of men and women graduates of university and community colleges programs, and to help
enhance the international competitiveness of higher education institutions in Jordan, through more
effective quality assurance mechanisms and accreditation standards. The project will finance training,
consulting services, and goods for the development of accreditation standards and capacity building for
program review, assessment, and quality assurance at the national and at the university level.
Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10
Not Applicable
Significant, non-standard conditions, if any, for:
Ref. PAD III.F.
Board presentation: Not Applicable
Loan/credit effectiveness: Submission to the Bank of the Project Operational Manual.
Covenants applicable to project implementation: Not Applicable
I. STRATEGIC CONTEXT AND RATIONALE
A. Country and Sector Issues
Country Context:

1. Despite a limited natural resource base and regional conflict, Jordan’s economy has
performed well over the past five years with a growth rate of 5-7 percent. Comprehensive structural
reforms over the last decade have underpinned its good economic performance. This growth has been
broad-based, supported by exports and manufacturing expansion.

2. In terms of human development indicators, Jordan ranks above average with respect to
lower middle-income countries. The 2006 Household Income and Expenditure Survey conducted by the
Department of Statistics (DoS) estimated the incidence of poverty to stand at 13 percent. Education
indicators have improved consistently since the mid-nineties; the illiteracy rate is 8.9 percent, the third
lowest illiteracy rate in the Arab world; the primary gross enrollment ratio has increased from 71 percent
in 1994 to 98.2 percent in 2006; the transition rate to secondary school has increased from 63 percent to
97 percent over the same period; and transition rates to higher education have varied between 79 percent
and 85 percent of secondary school graduates over the past five years. The university gross enrollment
rate for the population between 18 and 25 years has increased from 18.5 percent in 2001 to 22 percent in
2006, among the highest in the Arab world.

3. Alongside good economic performance, Jordan continues to face challenges, including a
tight fiscal situation requiring fiscal discipline, oil prices that are putting pressure on inflation,
unemployment, particularly among the young, and geographically uneven economic development.
The influx of an estimated 500,000 displaced Iraqis during the last two years is another challenge.
Unemployment has been hovering between 13 and 15 percent of the labour force in the last four years,
around 12-13 percent for males and 20 percent for females. Furthermore, as pointed out by the recent
World Bank Labour Market Report,1 Jordan’s economy has indeed created jobs, but the majority of those
jobs demand low skills. Unemployed Jordanians appear hesitant to take such jobs, indicating a high
reservation wage, leading many to be unemployed rather than take lower paying jobs. Instead, those jobs
are filled in by immigrants; a huge influx of workers, mostly from neighboring countries, has been
recorded. Jordan’s economy is yet to put itself on a growth path that would create higher productivity
jobs.

4. At 2.7 percent annually, Jordan’s population growth is among the highest in the region and
nearly 70 percent of the population is under the age of 30. Projections indicate that about 80,000 new
jobs and continued strong growth of 7 percent or more would be needed each year to avoid higher levels
of unemployment and increasing poverty. Unemployment of university graduates for the past four years
has remained about 14.7 percent and 22 percent for women. For community college (CC) graduates, it is
11 percent and 31 percent for women. Poverty reduction and job creation remain Jordan’s most important
challenges.

5. The recent Bank study “Investing in Jobs for Jordan” shows that Jordan’s future growth is
likely to come from manufacturing exports to markets outside the region and service exports to
regional markets. The EU-AA and the Free Trade Agreement (FTA) with the US will continue to open
large and deep markets to Jordanian exporters. Jordan has a clear advantage in tourism and an edge in the
region in medical services and private provision of higher education. In the Information and
Communication Technology (ICT) sector, in addition to activities aimed at increasing Internet

1 Jordan’s Labour Paradox of Concurrent Economic Growth and High Unemployment, World Bank, 2007.
1
penetration, the Information Technologies and Business Process Outsourcing and the international call
center industry are growth poles. Substantial investments, an improved investment climate, and an
enabling legal and regulatory framework are needed to consolidate those trends.

6. A focus on making Jordan an attractive location for knowledge-based private investment in
order to support job creation is a key element of the Government’s National Agenda. The National
Agenda aims to ensure greater policy and operational consistency between the numerous programs and
policies directed to support the private sector to invest in Jordan. Improving the quality of labour is key to
raising employment opportunities and thus improving the links between education and labour markets,
and putting in place policies to improve Jordanians’ capacity to get jobs at both the high and low end of
the skill scale. To this end, the National Agenda seeks to align the post-secondary education sector with
the needs of a knowledge-based economy by improving the quality and relevance of programs, and the
employability of young Jordanians.

7. In 2005, Jordan allocated about 15 percent of public expenditures to education,
representing about 4.5 percent of GDP, although the proportion to higher education is low
compared to international averages. Higher education receives only 14.7 percent of total education
expenditures or equivalent to 0.65 percent of GDP which is low when compared to other middle-income
countries and to the Organization of Economic Cooperation and Development (OECD) average of 1.6
percent of GDP. Public financing for higher education has been declining over the past five years.
Transfers to universities have declined from JD 60.4 million in 2004 to JD 52.6 million in 2007 and JD 45
million in 2008, representing a decline of 14 percent per year since 2004.

Sector Issues:

System Expansion and Financing Constraints and their Impact on Quality and Equity

8. Jordan’s higher education system has evolved over the past five years but not fast enough to
meet the needs of a high growth knowledge-based economy. Demand for university education has
grown rapidly between 2000 and 2007, with enrollments almost tripling between 2000/2001 and
2006/2007, or growing at an annual rate of 14 percent from 77,841 to 218,900 students, and the number
of public universities has increased from 7 to 10. Over the same period, enrollments in 12 private
universities grew by about 18 percent annually from 36,642 to 55,744. Enrollments in CCs, however,
declined slightly from 30,000 to 26,215, indicating a bias to 4-year university education in Jordan. CCs,
due to social, financial, and regulatory constraints, have not been able to put in place a system which
trains young people with the technical skills necessary for a knowledge-based economy.

9. Rapidly growing demand for university education is driving the system. The demand for
higher education is forecast to grow much more rapidly than in the past due to: (i) the rapid growth of
school-aged population; (ii) improvements over the past five years in secondary enrollment rates and
improving completion rates for primary and secondary levels; and (iii) the rising incomes in Jordan which
have increased the demand for higher education. Projections of future enrollments in higher education,
taking into consideration these factors, show that the numbers of students entering university will increase
to 92,000 per year by 2013 up from 50,469 in 2005. Currently, the regulatory framework for private
universities (with a cap on enrollment) is highly restrictive, limiting their ability to respond to the influx
of students.

2
Reforming Higher Education in Jordan: A Unique Window of Opportunity

A unique window of opportunity currently exists for the implementation of deep reforms in the sector. The
system in Jordan is characterized by very high demand for higher education, with high expected returns both
socially and financially. As such, the system is subject to pressures from multiple sources within the country
(and externally as evident by the demand for jobs in the Gulf). The GoJ has been keen to undertake reforms that
will increase the quality, equity and relevance of higher education. However, the complex political economy
around the sector has meant that progress has been slow. A brief timeline of key developments is presented
below:

• A clear call for reform was initiated at the Higher Education Development Forum held at the Dead Sea in
February 2007. The Forum was held under the auspice of H.M. the King, and the discussion clearly
indicated the need for reforms in the sector, as reported in the Forum’s final statement.
• While high hopes emanated from the Forum, the follow-up on establishing a clear mechanism for initiating
and implementing the reforms was not carried through comprehensively, despite a cabinet retreat in May
2007 on higher education, from which the 2007-2012 Strategy for Higher Education was developed.
• A ministerial change took place in November 2007. While reforms continued to be widely discussed in
various forums, other priorities seem to have taken over the main reform agenda.
• Managed by the Project Development Unit, technical work to provide practical, yet strategic policy
solutions continued into the summer of 2008, specifically for the sector’s financing strategies, the
governance structures, the equity (in-equity), and the quality assurance and accreditation mechanisms.
• The technical discussion and reports clearly indicated the need for immediate reform of the system to save
it from an ongoing and increasing decline. A strong response was evident in H.M. the King’s call to the
Presidents of the public universities (in a meeting held at the University of Jordan on September 14, 2008)
to assess progress in implementing the 2007-2012 Strategy for Higher Education and to propose measures
to accelerate reforms. This culminated in the preparation of the Higher Education Policy Framework
(Annex 1) by a task team composed of university and government officials. A presentation by the Director
of the Project Development Unit to H.E. the Prime Minister on September 25, 2008 of all the reforms that
need to be undertaken in the sector elicited high level government support.
• Subsequent discussions within the Cabinet and the Finance Sub-committee of the Cabinet took place, with
endorsement provided to move forward on the reforms. In December 2008, H.E. the Prime Minister
presented the reforms in a two-day session at Parliament, which included a lively discussion of issues, and
further calls for reforms. Most recently, a Cabinet Sub-committee, headed by the Prime Minister, and
composed of the Ministers of Higher Education, Finance, Education, and Justice was convened to review
and revise higher education legislation towards ensuring the implementation of the reforms.
• It is at this point that the Government’s reform plan stands, with a clear and unique window of opportunity
for introduction of substantive reforms, as buy-in is clear from the highest level in the country, particularly
following the endorsement by Cabinet of the Statement of Sector Policy (Annex 11). Given the shifting
priorities and the regional geo-political situation, it is important to grasp this window of opportunity at this
time, and to provide steady leadership over the medium- to long-term at all levels of the system to ensure
that policy goals are reached.

10. Financing constraints on higher education are arguably the biggest challenge for the future.
Due to the declining government transfers, the rapidly increasing student enrollments, and a cap on
raising student fees, universities introduced parallel fee-paying programs in the late 1990s. Regular tuition
fees for students admitted based solely on grades in the high school exit exam (Tawjihi), are on average
JD 1,000 for tuition only. In 2001, student fees accounted for about 64 percent of university operating
costs and government transfers provided 36 percent. By 2005, student fees for both regular and parallel
programs covered 78.2 percent of operating costs. Student faculty ratios have worsened from 23 in 2000
to 31 in 2004 and 30 in 2007 in public universities. The same trend is occurring in private universities
3
with ratios going from 23 to 1 to 25 to 1 between 2000 and 2007. Universities have not reduced their non-
academic staff to absorb expenditure cuts and the non-academic to academic staff ratio in public
universities has worsened to 2.8 to 1, far worse than international averages.

11. Government’s financing strategies do not promote a culture of quality in post-secondary
education. The resource management system in higher education does not create an environment that
permits a transparent funding formula which aligns key sector priorities with budget decisions.
Negotiating budgets on an annual basis does not provide an environment conducive for universities to
plan strategically and operate effectively as predictable medium-term financing frameworks would. Thus,
the degree to which the Ministry of Higher Education and Scientific Research (MoHESR) can influence
decision-making at universities and community colleges (CCs) is highly limited.

12. This has led to the perception of a declining quality in public higher education. As a
consequence of the impact of the parallel fees on the quality of the student body and the lack of recurrent
funds to update faculty and curriculum, there is a strong perception that the quality of higher education is
deteriorating. There is also concern about the quality of graduates from the rapidly growing private higher
education system. The accreditation system, under the Higher Education Accreditation Commission
(HEAC), has applied only to private higher institutions and is focused mainly on licensing of programs.
The Government of Jordan (GoJ), in April 2008, expanded the autonomy of HEAC and established it
with responsibility to both the public and private universities.

13. The relevancy of CCs is essential for the economic diversification and growth of Jordan’s
economy, and will need to be significantly restructured. CCs have long suffered from frequent
changes in leadership, the absence of clear policy objectives for the system, lack of commitment to
building the required institutional infrastructure, weak employer community linkages, an academically
oriented-faculty profile with a low level of practitioner experience, deviation from the CC mandate in
terms of high numbers of students transferring to university programs, program quality, and no
performance accountability mechanisms, in addition to a large and growing number of redundant
administrative staff. However, recent indicators are slightly positive. Unemployment rates of CC
graduates have improved over the past three years, reaching 12.7 percent in 2007. In addition, the
relevance of CCs has been strengthened as the curricula of 10 out of 11 programs (a total of 92
specialties) offered have been revised, updated and tested in collaboration with enterprises. However,
structural issues around management, governance, and composition of faculty will continue to put
negative pressure on the CCs and on the quality of their programs.

14. The affordability of higher education for those wishing to have a higher degree is creating
an equity imbalance. The increasing enrollments rates in secondary education, and the higher transition
rates, mean that more students from lower income households will go to university and thus the question
of equity is raised. As things stand now, the most affordable option for poor families is CCs and this
suggests that reforming and improving the relevance of CC programs could be a pro-poor policy option
for Jordan.

15. Enrollments of students from the richest wealth quintile represent over three times those
from the poorest wealth quintile. In 2002, the top two quintiles benefited from 58 percent of public
expenditures in higher education and the poorest quintile received only 11 percent (World Bank, Public
Expenditure Review, 2004). Because student exit exam scores, in general, are correlated with
socioeconomic status, there is a risk that many of the less advantaged meritorious students will not be able
to access to higher education. Frequently, those same students are compelled to enter a lower fee program
(e.g., humanities), leading to much reduced prospects for future employment. A robust student aid
program can help to reward institutions for good quality by allowing students to apply for financial aid to
attend the institution of their choice. However, with improved means-testing and targeting capacity and
4