world bank document · 2017. 4. 3. · document of the world bank for official use only report no.:...
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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No.: PAD1884
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$120 MILLION
TO THE
PEOPLE’S REPUBLIC OF CHINA
FOR A
GANSU TECHNICAL AND VOCATIONAL EDUCATION AND TRAINING PROJECT
March 10, 2017
Education Global Practice
East Asia and Pacific Region
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.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective: February 27, 2017)
Currency Unit = Chinese Yuan (CNY)
US$1 = CNY 6.87
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
CBT Competency-based Training
CNAO China National Audit Office
DA Designated Account
ESMP Environmental and Social Management Plan
FM Financial Management
GAO Gansu Audit Office
GDP Gross Domestic Product
GDoE Gansu Department of Education
GPFD Gansu Provincial Finance Department
ICB International Competitive Bidding
IE Impact Evaluation
IRR Internal Rate of Return
LND Lanzhou New District
M&E Monitoring and Evaluation
MOE Ministry of Education
MOF Ministry of Finance
MTR Midterm Review
NCB National Competitive Bidding
PDO Project Development Objective
PET Provincial Expert Team
PIP Project Implementation Plan
PIU Project Implementation Unit
PMO Project Management Office
SA Social Assessment
TOR Terms of Reference
TVET Technical and Vocational Education and Training
WA Withdrawal Application
Regional Vice President: Victoria Kwakwa
Country Director: Bert Hofman
Senior Global Practice Director: Amit Dar (Acting)
Practice Manager: Harry Anthony Patrinos
Task Team Leader: Liping Xiao
CHINA
Gansu Technical and Vocational Education and Training Project
Table of Contents
Page
I. STRATEGIC CONTEXT .................................................................................................1
A. Country Context ............................................................................................................ 1
B. Sectoral and Institutional Context ................................................................................. 3
C. Higher Level Objectives to which the Project Contributes .......................................... 7
II. PROJECT DEVELOPMENT OBJECTIVES ................................................................8
A. PDO............................................................................................................................... 8
B. Project Beneficiaries ..................................................................................................... 8
C. PDO Level Results Indicators ....................................................................................... 9
III. PROJECT DESCRIPTION ..............................................................................................9
A. Project Components ...................................................................................................... 9
B. Project Financing ........................................................................................................ 11
C. Lessons Learned and Reflected in the Project Design ................................................ 12
IV. IMPLEMENTATION .....................................................................................................14
A. Institutional and Implementation Arrangements ........................................................ 14
B. Results Monitoring and Evaluation ............................................................................ 15
C. Sustainability............................................................................................................... 16
V. KEY RISKS ......................................................................................................................17
A. Overall Risk Rating and Explanation of Key Risks.................................................... 17
VI. APPRAISAL SUMMARY ..............................................................................................17
A. Economic and Financial Analysis ............................................................................... 17
B. Technical ..................................................................................................................... 18
C. Financial Management ................................................................................................ 19
D. Procurement ................................................................................................................ 19
E. Social (including Safeguards) ..................................................................................... 20
F. Environment (including Safeguards) .......................................................................... 21
G. World Bank Grievance Redress .................................................................................. 21
Annex 1: Results Framework and Monitoring .........................................................................22
Annex 2: Detailed Project Description .......................................................................................26 Annex 3: Implementation Arrangements ..................................................................................31 Annex 4: Implementation Support Plan ....................................................................................42 Annex 5: Economic and Financial Analysis ..............................................................................45 Annex 6: Terms of Reference ......................................................................................................60
Figures
Figure 1. School Reform Cycle .................................................................................................... 19 Figure 3.1. Loan Proceeds Flow of Funds Diagram ..................................................................... 33
Figure 5.1. China’s GDP per capita and Urbanization Process by Province ................................ 45 Figure 5.2. Correlation between GDP per capita and Education Index among Chinese Provinces
....................................................................................................................................................... 45
Figure 5.3. Share of Total GDP and Allocation of Labor by Industries ....................................... 46 Figure 5.4. Gansu’s Sectoral GDP per capita over the Years ....................................................... 46
Figure 5.5. Change in Industrial Composition .............................................................................. 47 Figure 5.6. Share of Total Industrial Profits Generated by Traditional Pillar Industries .............. 47 Figure 5.7. Percentage of Tertiary-level Students among New Enrollments ............................... 52
Tables
Table 1. Project Cost and Financing ............................................................................................. 12 Table 2.1. Four Project Schools .................................................................................................... 26
Table 2.2. Skills Council Vs School-Industry Committees .......................................................... 27 Table 3.1. Loan Disbursement ...................................................................................................... 34
Table 3.2. Thresholds for Procurement Methods and Prior Review............................................. 36 Table 3.3. M&E Activities ............................................................................................................ 39 Table 4.1. Focus of Implementation Support................................................................................ 43
Table 4.2. Skills Mix Required ..................................................................................................... 43 Table 5.1. Market Failures in Gansu's TVET Sector .................................................................... 47
Table 5.2. The 10 Most Fragmented Majors in Gansu ................................................................. 49 Table 5.3. Spending per student on General Education versus TVET in Gansu in 2014 (CNY) . 50
Table 5.4. Share of Rural and Low-income Students in Each School .......................................... 50 Share of Rural Students (%) ......................................................................................................... 50 Table 5.5. Current Starting Salary and Projected Starting Salary in 2022 ................................... 51
Table 5.6. Assumptions on the Distribution of World Bank Loans during the Project Period .... 53 Table 5.7. Sensitivity Tests ........................................................................................................... 54 Table 5.8. Financial Revenues of the Project Schools (CNY, millions) ....................................... 56 Table 5.9. Financial Expenditures of the Project Schools (CNY, millions) ................................. 57
Table 5.10. Annual Counterpart Funds Requirement during Implementation (CNY, millions) .. 57 Table 5.12. Interest Coverage Ratio and Debt Service Coverage Ratio ....................................... 58 Table 5.13. Estimated Extra Cost Incurrent by the Project, Expressed as Percentage of Total Debt
....................................................................................................................................................... 59
i
PAD DATA SHEET
China
Gansu Technical and Vocational Education and Training Project (P154623)
PROJECT APPRAISAL DOCUMENT
EAST ASIA AND PACIFIC
Education Global Practice
Report No.: PAD1884
Basic Information
Project ID EA Category Team Leader(s)
P154623 B - Partial Assessment Liping Xiao
Lending Instrument Fragile and/or Capacity Constraints [ ]
Investment Project Financing Financial Intermediaries [ ]
Series of Projects [ ]
Project Implementation Start Date Project Implementation End Date
31-March-2017 31-Dec-2022
Expected Effectiveness Date Expected Closing Date
03-July-2017 30-June-2023
Joint IFC
No
Practice
Manager/Manager Senior Global Practice Director Country Director
Regional Vice
President
Harry Anthony
Patrinos Amit Dar Bert Hofman Victoria Kwakwa
.
Borrower: People's Republic of China
Responsible Agency: Gansu Provincial Department of Education
Contact: Wei Li Title: Director, Project Management
Office
Telephone No.: 86-931-4630104 Email: [email protected]
Project Financing Data (in US$ millions)
[ X] Loan [ ] IDA Grant [ ] Guarantee
[ ] Credit [ ] Grant [ ] Other
Total Project Cost: 144.52 Total Bank Financing: 120.00
Financing Gap: 0.00
ii
Financing Source Amount
Borrower 24.52
International Bank for Reconstruction and Development 120.00
Total 144.52
Expected Disbursements (in US$ millions)
Fiscal Year 2017 2018 2019 2020 2021 2022 2023 2024 0000 0000
Annual 0.00 2.00 10.00 26.00 36.00 21.00 20.00 5.00 0.00 0.00
Cumulative 0.00 2.00 12.00 38.00 74.00 95.00 115.00 120.00 0.00 0.00
Institutional Data
Practice Area (Lead)
Education
Contributing Practice Areas
Proposed Development Objective(s)
The Project Development Objective is to improve the quality and relevance of project schools in Gansu
and strengthen the school and industry linkage.
Components
Component Name Cost (US$ millions)
Strengthen the Demand-driven TVET System 1.67
Strengthen TVET Delivery through Comprehensive School Reforms 105.84
Project Management and Monitoring and Evaluation 1.45
Systematic Operations Risk-Rating Tool (SORT)
Risk Category Rating
1. Political and Governance Moderate
2. Macroeconomic Moderate
3. Sector Strategies and Policies Low
4. Technical Design of Project or Program Low
5. Institutional Capacity for Implementation and Sustainability Substantial
6. Fiduciary Moderate
7. Environment and Social Low
8. Stakeholders Moderate
9. Other
OVERALL Moderate
iii
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [X]
Does the project require any waivers of Bank policies? Yes [ ] No [X]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy waiver sought from the Board? Yes [ ] No [X]
Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [ ]
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X
Legal Covenants
Name Recurrent Due Date Frequency
Provincial Expert Team (PET) X Continuous
Description of Covenant
Project Agreement, Section I, B 2(c): Obligation of the PMO to maintain a Provincial Expert Team
responsible for providing technical support to the PMO.
Name Recurrent Due Date Frequency
Project Implementation Plan (PIP) X Continuous
Description of Covenant
Project Agreement, Section I, B 1: Obligation of the PMO to carry out the project in accordance with the
PIP.
Name Recurrent Due Date Frequency
Annual Work Plan X continuous
Description of Covenant
Project Agreement, Section I.B.3 (a): Obligation of the PMO/PIUs to work out consolidated annual work
plan.
iv
Team Composition
Bank Staff
Name Role Title Specialization Unit
Liping Xiao Team Leader (ADM
Responsible)
Senior
Education
Specialist
Education GED02
Alejandro Alcala Gerez Counsel Senior
Counsel
Legal LEGES
Jingrong He Procurement Specialist (ADM
Responsible)
Procurement
Specialist
Procurement GGO08
Yi Geng Financial Management
Specialist
Senior
Financial
Management
Specialist
Financial
Management
GGO20
Yiren Feng Safeguards Specialist Senior
Environmental
Specialist
Environment GEN2A
Ning Fu Team Member Education
Specialist
Economic
Analysis
GED02
Xuan Peng Team Member Program
Assistant
Program Assistant EACCF
Tianxiu Kang Team Member Program
Assistant
Program Assistant EACCF
Extended Team
Name Title Office Phone Location
Eduardo Velez Bustillo Consultant, Education 12022303299 Washington, D.C.
Wenjin Wang Consultant, TVET 8613651095099 Beijing
Xiaoyan Wang Consultant, Program
Management and M&E 8613911325520 Beijing
Youxuan Zhu Consultant, Social Safeguards 17032067418 Washington, D.C.
Jun Yang Consultant, Civil Works 8613910505309 Beijing
Locations
Country First Administrative
Division
Location Planned Actual Comments
China Gansu Province Tianshui X
China Gansu Province Lanzhou X
1
I. STRATEGIC CONTEXT
A. Country Context
1. While China has experienced unprecedented economic growth and urbanization over the
past three decades, poverty has remained heavily concentrated in the rural areas as well as in the
interior and western regions of the country. The average gross domestic product (GDP) per
capita of the least five developed provinces is less than a third of that among the top five
developed provinces. Consequently, the country’s growth has been accompanied by increases in
inequality. Between 1980 and 2010, the Gini coefficient rose from about 0.3 to just below 0.5,
making it among the least equal 25 percent of countries worldwide. The urban-rural income gap
is a significant underlying factor of the country’s income inequality, contributing to 51 percent of
the overall inequality in 2011.
2. Urbanization and industrialization have supported China’s national economic growth and
impressive reduction in poverty and could largely explain the regional variations in growth and
poverty reduction. To ensure a more equitable growth in poverty reduction, the Government’s
Urbanization Plan (2014-2020) calls for a people-centered development that ensures sustained
economic growth and social development. This is to be achieved by shifting growth patterns
from low- to higher-value industries, bringing labor sources closer to the industries through the
urbanization process, and finally, promoting inclusive growth and environmental protection.
3. Located in the ancient Silk Road trade route in Northwest China, Gansu Province has rich
resources and cultural heritage and is home to 26 million people. Despite recent economic
growth, Gansu is still one of the least developed provinces in China both in income and human
development measures. Gansu’s 2015 GDP per capita (US$4,201) is the lowest among all the
provinces in China and is nearly half of the national average GDP per capita (US$7,924).1 Gansu
is also the least urbanized province in China, with nearly 60 percent of its population residing in
rural areas.2 Gansu is among the least developed provinces in the country with regard to its
human development index and education index, at 0.630 and 0.631, respectively.3
4. With a good industrial foundation, Gansu’s economy has traditionally relied on heavy
industries. In 2014, Gansu’s secondary industry contributed to more than half, 50.7 percent, of its
gross regional product growth, while the tertiary industry and the primary industry only
accounted for 42 percent and 7 percent, respectively, of the gross regional product growth. With
its abundant natural resources, Gansu’s existing industries centered on energy, raw materials, and
petrochemical sectors. As a result, these traditional pillar industries accounted for the vast
majority, 88 percent, of the province’s total industrial outputs.
5. As part of the broader national development strategy, the Gansu government prioritized
urbanization, industrial transition, and a closer integration within the Silk Road Economic Zone
in its implementation road map for the 13th Five-Year Plan (2016-2020). Specifically, six pillar
strategies have been formulated as Gansu’s development priorities in the next five years: (a)
1 National Bureau of Statistics.
2 According to the China Statistical Yearbook 2015, the percentage of urban population is 41.48 percent and the
national average is 54.77 percent. 3 Retrieved from http://www.stats.gov.cn/tjzs/tjsj/tjcb/dysj/201402/t20140220_513674.html.
2
create an enabling environment for economic development, including a more equitable society
with lower poverty incidence; (b) increase economic ties with neighboring provinces and with
Central Asia; (c) become a regional hub for logistics and transportation; (d) foster clean energy
industries; (e) promote Gansu’s unique cultural heritage and tourism; and finally, (f) foster
sustainable development by introducing more environmental protection and efficient energy use
measures.
6. The province’s new development plan calls for an upgrade and diversification for its
economic composition as part of its urbanization process. In recent years, because of a decline in
global demand for industrial inputs, Gansu’s traditional pillar industries have suffered a dip in
profitability and this puts further pressure on the government to accelerate the province’s
industrial transformation. The provincial government is seeking to increase the share of the
service sector’s contribution to the overall provincial GDP to more than 50 percent by 2020.4
Gansu has also identified the following emerging industries as new drivers for the province’s
economic growth: advanced equipment manufacturing, new materials, new energy, modern
agriculture, biotechnology, and tourism.
7. Much of Gansu’s industrial transformation has been enabled by its urban initiatives,
notably, the new district of its capital city Lanzhou. As a traditional industrial base in Northwest
China and the province’s economic center, Lanzhou has faced constraints in its industrial
development because of the city’s limited physical space in the Yellow River valley and its
growing population density and environmental protection standards. The Gansu government has
set up the Lanzhou New District (LND) outside of Lanzhou covering six townships in two
counties with the size of 1,744 square kilometers. The LND included designated industrial zones
that provide an opportunity for the traditional petro chemistry industries to relocate and upgrade
and for the emerging industries such as the advanced equipment manufacturing and
biotechnology industries to develop.5 The LND is under rapid development as one of the five
national-level new districts in China. The investment had been increased for the industrial zones
with total investments of US$6 billion during 2012-2015 and US$0.88 billion in 2016. To date,
317 enterprises have signed agreements to move into the LND, of which 34 are among the top
500 international and domestic companies in China, and 49 have already completed construction
and are in full production. The total employment in the LND reached 70,000 in 2016.
8. In addition to the physical investment, Gansu’s industrial transformation requires
adequate human resources; however, the majority of the province’s labor force is still
concentrated in the low productivity primary sector and requires a human capital upgrade. At the
aggregate level, the majority, 58 percent, of Gansu’s labor force is employed in the primary
industry despite the sector’s small, 7 percent, contribution to Gansu’s overall economy. On the
other hand, 93 percent of the province’s economy is driven by less than half of the province’s
labor force employed in the secondary and tertiary industries4. In light of this labor market
allocation, Gansu’s urbanization process will increase labor mobility and create more
opportunities for rural labor force in urban economy. In tandem, a human capital upgrade
through vocational schools and on-the-job training would play a key role in facilitating the low
4 Retrieved from http://gs.people.com.cn/n2/2016/0720/c183283-28696907.html.
5 China National Development and Reform Commission. 2012. “Guiding Opinions for the Development of Lanzhou
New District.”
3
skilled labor force transition into more productive employment, especially given LND’s
projected urban growth.
B. Sectoral and Institutional Context
9. China’s rapid growth in the past 30 years was led by substantial physical capital
investments and a large supply of medium- and high-skilled labor produced by the country’s
education system. Among the provinces, growth patterns and productivity differences are largely
attributed to different human capital levels. By 2030, China’s economic growth is expected to
decline to about 5 percent.6 Besides a slower pace, China’s economy is also going through a
major structural change. As old drivers of growth are being replaced by new ones, China will
increase its reliance on human resources and human capital.
10. China has made remarkable progress in education with regard to expansion in
enrollments, including the technical and vocational education and training (TVET) sector. The
average years of education among China’s labor force has reached 10 years in 2015, owing to the
large increase in education enrollment at all levels. To date, China has virtually universalized
basic education with near 100 percent enrollment rates. Gross enrollment rates for upper
secondary education (87.2 percent) and tertiary education (40 percent) are also increasing. To
meet the demand of the industry, China has recently redoubled its focus on expanding skills
development or TVET: 7
the Modern Vocational Education Strategy (2014-2020) seeks to
increase the number of students in vocational education institutions from the present figure of
29.3 million to 38.3 million by 2020. The higher enrollment is supported by a growing
investment in education, which is economically justified by the high returns to education in
China, at 10.25 percent.
11. High-quality skills development programs have an important role to play—particularly in
China. As the country’s economy strives to transition from production to innovation, its labor
force will need to acquire the right balance between general skills, occupation-specific skills, and
learning on the job. This is particularly important as the current skills mix in China does not
compare favorably with that of industrialized countries. While there is growing demand for
qualified technicians and skilled workers, only half of China’s 140 million employees in urban
enterprises can be classified as skilled. Literature on economic returns of education indicate that
technical and vocational secondary education seems to serve graduates better in entering wage
employment, compared with general secondary education.
12. Gansu’s skills development has expanded in the past decade because of a growing pool of
student supply and increased government investment in the TVET sector. Because of the virtual
universalization of basic education, the number of TVET applicants has surged. The enrollment
6 World Bank and Development Research Center of the State Council, the People’s Republic of China. 2013.
“China 2030, Building a Modern, Harmonious, and Creative Society.”
7 As documented in “Post-Primary Education and Skills Development,” the background paper of the Paris meeting
of the Working Group for International Cooperation in Skills Development, TVET is “used to refer narrowly to the
regular provision of vocational education” whereas skills development “refers more easily to the multiple sites of
provision” and the emphasis is on the skills gained rather than the primary service provider in the traditional sense of
vocational education.
4
of secondary TVET schools in Gansu has increased from 175,0008
students in 2004 to 315,0009
in 2015. Gansu’s tertiary TVET education started in 1999 and by 2014, the enrollment reached
160,000.10
By 2020, the number of tertiary TVET students will account for half of all students in
school at the tertiary level. The expansion in Gansu’s TVET education was also enabled by the
government’s increased spending in the TVET sector. Tuition and school fees have been waived
at the secondary TVET level and students from low-income households receive additional
financial support. By 2017, spending per student at the tertiary TVET level will reach CNY
12,000. Considering that many of Gansu’s TVET students are from low-income households, the
increased government spending would substantially decrease students’ financial burden.
13. Despite its growing importance, Gansu’s vocational education has not reached its full
potential. During the preparation stage of this project, a survey was conducted by the World
Bank to identify demand for skills. For each school, around 10 relevant enterprises and art
organizations were identified and surveyed to explore the dynamics of skills demand in the next
few years. The survey also examined the current status of the demand-side involvement in
developing new training areas and designing training courses, together with their internship and
apprenticeship practices. The findings indicate that the demand for the skills will remain high in
the coming years. Although there are nascent good practices in demand- and supply-side
collaborations in various aspects, there is a need for these practices to be institutionalized. This
was evidenced in the 2016 Annual Report on Gansu’s tertiary TVET system produced by the
Gansu Department of Education (GDoE), which revealed that in the past decade, despite a
growing demand from both the employers and job seekers in Gansu (a) the skills mismatch
remains a challenge and is explained in part by weak linkage between school and industry,
outdated curriculum, and inefficient management; (b) the quality of the teachers lag behind as
some of the secondary schools upgrade to tertiary level; and (c) finance has been limited for
infrastructure and educational reforms. As educational enrollment continues to improve across
all levels, these issues have been exacerbated.
14. A newly established TVET Park located within the LND will take a leading role in
Gansu’s skills development reform. Under the government’s plan, the TVET Park will serve as a
major source of labor supply for the industrial zones in the LND and the rest of the province.
Much of the TVET Park’s advantage will come from its proximity with the industries in the
LND and its role as a platform for a consolidation of TVET resources in Gansu. The proximity
would promote better school-industry cooperation and the consolidation of schools would reduce
fragmentation making resource allocation more efficient. In total, the TVET Park will host 31
vocational schools—some of which have been merged from smaller schools scattered in the
province—with a total of 150,000 students, accounting for nearly 60 percent of all TVET
students in the entire province.
15. However, increased enrollment and agglomeration alone may not necessarily be
associated with increased educational quality and relevance. In fact, Gansu’s TVET schools,
including the proposed project schools (see Annex 2), face several challenges, as manifested in
five areas:
8 Retrieved from http://www.moe.edu.cn/jyb_sjzl/moe_364/moe_1172/moe_1197/tnull_7298.html.
9 Retrieved from http://www.scio.gov.cn/xwfbh/gssxwfbh/xwfbh/gansu/Document/1397273/1397273.htm.
10 Retrieved from http://www.scio.gov.cn/xwfbh/gssxwfbh/xwfbh/gansu/Document/1397273/1397273.htm.
5
Linkage between schools and industry: the lack of industrial linkage determines
that the skills offered are supply-driven rather than demand-driven. Some of the
schools lack industrial guidance on the skills’ needs. In consequence, some skills
demanded by the labor market are not offered by the schools’ education system.
Teaching quality: the quality of the teaching force needs to be improved. In many
of the tertiary schools that were upgraded from secondary schools, the previous
teaching force remained and did not keep up with the upgrade in teaching
qualification. Also, many of the teachers are from pure educational background and
lack necessary industrial experience. As a result, there is a lack of teachers with both
technical and teaching qualifications for the level of training they are providing.
School management: the management needs improvement. Schools need to set up
or update their school charters and regulations in accordance with the priorities
highlighted in the 13th Five-Year Plan (2016-2020). As some of the schools have
been recently merged and upgraded, there is also a need to review their management
and organizational arrangements. Extracurricular activities need to be expanded to
provide more services for students.
Curriculum, pedagogy, and assessment: the curriculum, pedagogy, and
assessment mechanisms are generally not competence based. This is due partially to
the lack of good national standards. The Ministry of Human Resources and Social
Security (MHRSS) standards are widely regarded as being outdated and lacking
relevance. The Ministry of Education (MOE) standards are too theoretical and do
not fully reflect real competencies required in practice. At the school level, the lack
of school-industry linkage also shows that little is done by the schools to
complement the standards set up by the Government. As a result, the training does
not cater to the skills the students need for their future work.
School facilities and equipment: as the schools expand enrollment and upgrade to
tertiary levels, the facilities and equipment required will change. Many schools
require additional space for practice training and classroom instruction. Some of the
new skills offered also require a new set of equipment for hands-on practice.
16. In light of these challenges, the MOE and the Gansu government launched the Joint
Decision on Accelerating the Development of a Modern Vocational Education System in May
2016. The Joint Decision sets priorities for Gansu’s TVET sector with specific focus on the
TVET Park located in the LND as the main platform for experimenting with the proposed
reforms. Specifically, it sets reform directions for each of the five challenges facing Gansu’s
TVET system:
Linkage between schools and industry: at the policy level, institutional
mechanisms for a modern TVET system need to be established where the
government provides policy support; industrial associations bring general guidance;
and enterprises and the society participate in the training process. At the school
level, skills offered should be market oriented and the school-industry connection
needs to be strengthened. Each school should identify its own competitive advantage
6
and each student should acquire marketable skills. Uncompetitive skills offered by
schools will be subject to review and possible elimination.
Teaching quality: the teaching force needs to be strengthened with the emphasis on
dual technical and teaching qualifications and industrial experience. Under the
arrangement of several government programs, a large number of teachers with both
teaching and technical qualifications are recruited annually by Gansu schools from
partnering universities in economically advanced regions with the emphasis on
industrial experience. For the existing teachers, their overall capacity will be
improved through knowledge exchange programs and through in-service training
domestically and abroad.11
School management: TVET schools are allowed to have more autonomy in the
admission process and create pathways for TVET graduates who wish to pursue
higher education through school charter and regulations. High-performing,
demonstrative schools will help lower-performing schools through resource sharing,
academic partnership, “entrusted management” (contractual agreement between
schools for co-management) partnership, and collective management partnership.
The Gansu TVET schools are also encouraged to partner with industries and high-
performing schools in more economically advanced regions through various forms.
TVET schools should improve job counseling services and support for student
entrepreneurial activities.
Curriculum, pedagogy, and assessment: the TVET curriculum needs to be
enhanced based on employer demand, with practical vocational skills prioritized.
Students’ creativity and entrepreneurial spirit need to be stimulated and hands-on
capabilities need to be improved. Faculty performance and student employment
outcomes need to be aligned. Students’ learning experience needs to be highly in
line with vocational standards.
School facilities and equipment: by 2020, 90 percent of TVET schools in Gansu
will meet the national standards for basic TVET school conditions. This entails
expanding and enhancing education space and facilities for practical training and
establishing a network of training centers on campus, in public space, and within
enterprises. By 2020, 20 shared comprehensive practical training centers, 100
professional laboratories, and numerous on-site training centers hosted by
enterprises will be established.
Rationale for World Bank Involvement
17. The World Bank has an important role to play in facilitating skills development in Gansu.
The Joint Decision, endorsed by both the national and Gansu provincial governments, articulates
the greater role an improved TVET sector can play in Gansu’s urbanization process and poverty
11
Although not mentioned specifically in the Joint Decision, the existing teachers are also required to accumulate at
least six months of total practice experience in the industry every five years, according to the National Guidelines on
Vocational Teachers’ Industrial Experience, effective in May 2016.
7
reduction agenda. By way of specifying the TVET sector’s strategic importance at the current
stage of Gansu’s development, the Joint Decision creates an enabling environment for reforming
the TVET sector. With clear measurable objectives, the Joint Decision also creates a mandate for
the GDoE to act swiftly with full support from the other government agencies. The directions of
reform set out by the Joint Decision are consistent with the reform agenda in the World Bank-
supported projects elsewhere in China, making the World Bank well placed for supporting the
TVET sector reform in Gansu.
18. The World Bank has a long record of supporting TVET reforms all over the world and in
China. The knowledge and lessons drawn from this and other international experience provide a
rationale for involvement in this sector. In China specifically, the World Bank has recently
accumulated experience during the implementation of four TVET projects in the Guangdong,
Liaoning & Shandong, Yunnan, and Xinjiang provinces/regions. The successful implementation
of these projects proved that the World Bank is able to fill an important gap by introducing
international experience and innovation in school-based reforms and supporting policy studies of
key sector and system wide issues to further inform government policies and investments.
19. In Gansu, the World Bank will support the reform of the TVET sector as outlined in the
Joint Decision, via the demonstration of the four schools chosen by the government. All World
Bank-supported schools will contribute to Gansu’s priority sectors. Two of the project schools
located within the TVET Park specialize in petro chemistry, energy, trade, and finance. The two
project schools located in other economic centers will serve Gansu’s electronics, mechanics,
engineering, and cultural industries. All the schools are in the process of upgrading to the tertiary
level or shifting to an applied university, or expanding their programs. As such, they require an
enhancement in the quality and relevance of their training programs. In addition, the schools in
the TVET Park can also pilot innovative approaches to school-industry collaboration under the
technical support from the World Bank so they can better take advantage of their proximity with
industries. The lessons learned from the World Bank-supported project will benefit reform
efforts in other schools in the TVET Park and other schools outside those supported under this
project in Gansu Province.
C. Higher Level Objectives to which the Project Contributes
20. The project serves the Gansu government’s 2016-2020 Development Plan. The 2016
Provincial Government Report made an ambitious objective to create 1.4 million urban jobs
between 2016 and 2020, up from 1.3 million from the previous five-year period. The increased
jobs are to be filled by a more educated workforce. The targeted number of years of education
increases to 9.2 years by 2020,12
up from eight years in the previous period.13
21. The project is aligned with China’s 13th Five-Year Plan, the Medium to Long-term
Education and Talent Development Plans (2010-2020), and the new Skills Development Policy.
These plans give priority to workforce development in China’s western region, provide more
support to poor regions, enhance capacity for provision of a skilled workforce, and encourage
innovations in governance. Under these plans, skills development plays a key role in supporting
12
Retrieved from http://leaders.people.com.cn/n1/2016/0123/c58278-28078803-2.html. 13
Retrieved from http://www.chinathinktanks.org.cn/content/detail?id=2930008.
8
China’s economic transition and improves its services to better meet the needs of the industries
and students. It will also contribute to the poor’s access to better education.
22. Relationship to the Country Partnership Strategy. The project is consistent with
Outcome 2.2 of Strategic Theme Two “Promoting More Inclusive Development” of the World
Bank Group’s China Country Partnership Strategy for FY13-16 (Report No. 67566-CN) which
was discussed by the Board of Executive Directors on November 6, 2012. By developing model
schools serving a primarily rural population, the project will build the capacity of the poor by
delivering skills training that is more closely integrated with the needs of industry and hence job
creation. The project will leverage its impact by disseminating lessons from this experience to
other schools in Gansu and nationally.
23. Twin goals. The project will also contribute to the achievement of the World Bank
Group’s twin goals of ending extreme poverty and boosting shared prosperity. Skills
enhancement is expected to contribute to poverty reduction in Gansu by improving access to
pertinent, high-quality TVET. Access to quality education is associated with good employment
and higher income. In addition, the students, a significant proportion of which come from low-
income rural families, who will benefit from the project will enjoy better employment prospects
after graduation. Both China’s and international experience show that better education is
instrumental for poverty reduction, and a skilled workforce is vital to economic growth and
productivity increases.
II. PROJECT DEVELOPMENT OBJECTIVES
A. PDO
24. The Project Development Objective (PDO) is to improve the quality and relevance of
project schools in Gansu and strengthen the school and industry linkage.
B. Project Beneficiaries
25. The project will directly benefit 29,916 students in the project schools. More than 78
percent of the schools’ students are from rural areas, and about 74 percent are from poor
households eligible for government subsidies, which suggests that the project is likely to help
meet the education needs of poor students in poverty. At the end of the project period, total
students in the project schools are projected to increase to about 45,900 from 29,926 in 2016. In
addition, the project schools will offer short-term training programs to about 12,980 rural
farmers and urban migrant workers from 3,898 in 2016.
26. Other beneficiaries include teachers and administrative officials both at the school and
provincial levels who will be trained on a variety of subjects such as management, curriculum
development, student-centered pedagogy, and assessment. The project will also encourage
twinning arrangements so that project schools will support similar reforms, share the lessons
learned, and maximize the development impact in non-project schools.
9
C. PDO Level Results Indicators
27. Achievement of the PDO will be measured by the following three key result indicators,
which are the standard administrative indicators used by the Government to measure the quality
and relevance of TVET schools in China and Gansu:
(a) Percentage of graduates finding initial employment within six months in the
specialties in which they were trained (by gender)
(b) Percentage of graduates obtaining both skills certificate and diploma (by gender)14
(c) Number of graduates working in enterprises with which schools cooperated
III. PROJECT DESCRIPTION
A. Project Components
28. The project will have three main components: (1) Strengthen the Demand-driven TVET
System; (2) Strengthen TVET Delivery through Comprehensive School Reforms; and (3) Project
Management and Monitoring and Evaluation.
Component 1: Strengthen the Demand-driven TVET System (Total US$1.82 million, IBRD
US$1.67 million)
29. This component is designed to promote school and industry cooperation both at the
system and school levels and improve coordination among all TVET shareholders. It will be
implemented mainly by the Project Management Office (PMO) with support from government,
enterprises, associations, and the Project Implementation Units (PIUs). It will have three
subcomponents:
Subcomponent 1.1: Promote TVET coordination and management
30. The project will introduce a Skills Council for selected skills in the LND and support the
activities of the Project Leading Group through organizing campus visits, reporting project
implementation progress, and sharing policy briefs.
Subcomponent 1.2: Promote provincial policy development
31. This subcomponent is designed to address some systemic skills development issues in
Gansu and sustain project impact beyond the project schools. The project will support evidence-
based policy studies on selected key topics and produce policy briefs identifying lessons distilled
from project implementation to inform provincial-wide reforms.
14
To obtain an official skill certificate, students need to meet qualifications required to practice in a discipline and
adhere to a range of levels of competencies and capabilities that need to be achieved at these levels. Skills
certificates are increasingly required for graduation and by the employers.
10
Subcomponent 1.3: Strengthen school and industry linkage
32. This subcomponent is designed to strengthen and institutionalize the linkages between
schools and industry at the school level by: (a) establishing or improving the School-Industry
Collaboration Committees at the school level and sector-specific Technical Advisory
Committees at the departmental level to engage industry into the reform process; and (b) piloting
new models of school-industry cooperation based on inputs from the committees and the
competitive advantages of project schools.
Component 2: Strengthen TVET Delivery through Comprehensive School Reforms (Total
US$122.57 million, IBRD US$105.84 million)
33. This component is designed to improve the capacity of project schools to deliver high-
quality and relevant TVET programs through four subcomponents.
Subcomponent 2.1: Improve instructor quality
34. This subcomponent is designed to address key challenges related to improving
management and instructional capacity in delivering quality training programs such as lack of
professional skills competence and student-centered approach. The project will: (a) elaborate
sustainable professional development plans for instructors and administrators and set up or refine
the incentive mechanism for high performance; and (b) organize various domestic and overseas
training programs targeted at different cohorts of instructors and top- and middle-level school
administrators.
Subcomponent 2.2: Promote modular and competency-based curriculum, pedagogy, and
assessment reforms
35. This subcomponent is designed to promote competency-based curricula reflecting the
needs of the industry, transform pedagogy from the traditional teacher-centred to a student-
centred one, and reform teaching and learning assessments reflecting the new curricula and
result-oriented approach both for degree programs and short-term training programs. This
subcomponent will: (a) develop or update competency-based standards for core curricula which
will be based on results from enterprises surveys, graduates surveys, and updates from the
School-industry Collaboration Committees and Skills Council; (b) develop and adapt modular
competency-based curricula and other teaching learning materials and establish a school-level
teaching and learning resource library; (c) promote student-centred pedagogy to improve
teaching effectiveness; (d) develop competency-based evaluation instruments to assess students’
learning outcomes and teachers’ teaching effectiveness, which will be used as formative
assessment; and (e) develop competency-based short-term training programs for rural farmers
and migrant workers based on demands from local enterprises and communities.
Subcomponent 2.3: Improve school management
36. This subcomponent is designed to enhance school management by various activities to
improve the quality and relevance of TVET provision. The project will support the following
activities: (a) set up or update the school charters and/or other regulations in accordance with the
priorities highlighted in the Government policies; (b) improve support systems for students
11
outside of classroom, including extracurricular activities, student associations, mental health
seminars and counselling services, job services, and entrepreneurial activities; (c) improve
efficiency of school administration by: (i) conducting management diagnosis to streamline
management and personnel arrangement; and (ii) establishing a digitalized management system;
and (iii) partner with other non-project schools.
Subcomponent 2.4: Upgrade facilities and equipment
37. This subcomponent is designed to support new training centers and key training
equipment in the project schools to extend access for more students. The project will provide
financing to (a) expand and upgrade facilities, including construction of training centers within
existing school campuses of the selected schools; (b) provide key training equipment needed for
the revised training programs; and (c) develop school guidelines for the management of all
training facilities and equipment.
Component 3: Project Management and Monitoring and Evaluation (Total US$1.45
million, IBRD US$1.45 million)
38. This component is designed to support capacity building for the PMO and PIU staff in
project management and knowledge sharing. A systematic and results-based project monitoring
and evaluation (M&E) will be conducted. It will have two subcomponents.
Subcomponent 3.1: Project management
39. This subcomponent will support capacity building for the PMO and PIU staff for project
activities and project management. It will also support knowledge-sharing activities such as
workshops and seminars and publish papers and technical documents produced by the project.
Subcomponent 3.2: Monitoring and evaluation
40. This subcomponent is designed to support a systematic and results-based project M&E.
In addition to routine monitoring, an impact evaluation (IE) will be designed and conducted with
the objective of comparing outcomes between treatment and control groups. Due to the
impossibility of random assignment of the selected schools, the evaluation will not be a rigid IE,
but will be based on a quasi-experimental design (See annex 6).
B. Project Financing
41. The proposed lending instrument for this project is Investment Project Financing (IPF).
The borrower has selected a U.S. dollar-denominated, commitment-linked variable spread loan
with a 30-year loan period including a 5.5-year grace period. It has also selected the currency
conversion option, level repayment of principal, and a repayment period of 30 years.
Project Cost and Financing
42. The total project cost is estimated to be CNY 953.85 million, equivalent to US$144.52
million. It is proposed to be financed through an IBRD loan of US$120 million and counterpart
12
funds of US$24.52 million. Table 1 presents the distribution of project costs and financing by
component. The details of the project cost and financing plan are in annex 3.
Table 1. Project Cost and Financing
Project Components Project Cost
(US$, millions)
Project Cost
(CNY,
millions)
IBRD Financing
(US$, millions)
% IBRD
Financing
1. Strengthen the Demand-driven
TVET System 1.82 11.98 1.67 92
1.1 Promote TVET coordination and
management 0.15 1.00 0.15 100
1.2 Promote provincial policy
development 0.39 2.60 0.39 100
1.3 Strengthen school and industry
linkage 1.27 8.38 1.13 89
2. Strengthen TVET Delivery
through Comprehensive School
Reforms
122.57 808.96 105.84 86
2.1 Improve instructor quality 8.66 57.18 7.41 86
2.2 Promote modular and CBT
curriculum, pedagogy, and assessment
reforms
3.56 23.50 3.42 96
2.3 Improve school management 2.20 14.52 1.41 64
2.4 Upgrade facilities and equipment 108.15 713.76 93.60 87
3. Project Management and
Monitoring and Evaluation 1.45 9.60 1.45 100
3.1 Project management 1.18 7.80 1.18 100
3.2 Monitoring and evaluation 0.27 1.80 0.27 100
Total Baseline Costs 125.84 830.54 108.96 87
Physical and Price contingencies 7.67 50.59 0.00 0
Total Project Costs 133.50 881.13 108.96 82
Front-End Fees 0.30 1.98 0.30 100
Commitment Fee 0.96 6.35 0.96 100
Interest During Implementation 9.76 64.39 9.76 100
Total Financing Required 144.52 953.85 120.00 83
C. Lessons Learned and Reflected in the Project Design
43. This project design incorporates lessons learned in designing and implementing technical
and vocational education projects in China and other countries. Over the past several decades,
investment in training has increased in both low- and high-income countries, with a mixed record
worldwide, but some elements of the program designs are identified as critical. Several reviews
of hundreds of programs run in different settings and different countries have found that 30
percent to 40 percent of programs have had a positive impact. The most significant finding is that
the most successful projects are the ones that have close links with employers and that give
careful attention to labor market conditions. These emerge as critical to ensure quality and
responsiveness of programs to demand. As to delivery modes, programs that: (a) combine in-
classroom and workplace training as compared to in-classroom training alone; and (b) use
comprehensive training packages with wraparound support services for trainees—including
13
counseling, mentoring, monitoring, job search and placement assistance. Soft and life skills
training have been found to increase the likelihood of project success. Another lesson found in
the international literature points out that the combination of classroom teaching and practical
training in industry is critical for success. The experience in China with World Bank-supported
TVET reform projects in Guangdong, Shandong & Liaoning, Yunnan Provinces and Xinjiang
Autonomous Region corroborates these findings. Specific lessons learned and incorporated into
the Gansu project include the following:
Strong links between schools and industry are an underlying factor for success
of school reforms. Training success is tied to how closely the programs are linked
to the real demands of the labor market, which requires employers to be involved in
the teaching and learning process at the school level. The project will continue to
support schools to explore further mechanisms to incentivize enterprises’
participation in the training process.
Systematic reform at the provincial level helps the project achieve its objectives
and allows the project results to be sustainable in the long run. As learned from
the previous projects, it is also clear that school reforms need to be accompanied by
structural and institutional reforms. This project will support institutional reform on
school-industry cooperation through provincial-level interventions, including the
Skills Council, and more coordination with governments and enterprises and other
players. From the experience of the previous projects, the constraints include limited
buy-in from the government and limited capacity in coordination. For the piloted
Skills Council in this project, the buy-in from the government is strong because of
the mandate set out by the Joint Decision to improve the school-industry cooperation.
The proximity between the project schools and industries located in the LND makes
the intervention logistically feasible. The limited capacity is also addressed by the
project.
To enhance the effectiveness of instructor training, schools should consider
developing a customized training plan based on the instructor’s professional
development plan that accurately reflects instructor training needs, the
industry skills demand, and/or good training practices. Such customized training
plans lay out the employment, deployment, and career development for all
instructors and administrators. The instructor training activities supported by the
project expect to overcome the common issues of being overly ad hoc and irrelevant,
and will incorporate incentive mechanism and link their performance goals. To this
end, the project will support a provincial-level study to guide the effectiveness of
instructor training.
Promote lifelong learning through modular, competency-based training (CBT).
The growing technological advancement and capital mobility in the global economy
require workers to constantly upgrade and acquire new skills during their working
lives. Modular, CBT promotes flexible entry to and exit from training over a
worker’s career lifecycle and is inherently demand driven. Trainees come with a
range of capacities and experience. Modular and competency-based curricula can
help accommodate a variety of needs. This project will support the project schools to
14
design and deliver modular and competency-based short-term training courses for
enterprises.
Importance of pathways to further education. Pathways to further studies at the
tertiary level can increase the demand for secondary technical and vocational
education. This requires attention to the mobilization of training programs in
curriculum development. The project will support a provincial-level study on
demand-driven curriculum development to guide the mobilization between
secondary and tertiary TVET programs in Gansu.
Blueprint project design versus more flexible annual plans. Past experience
indicates that the detailed project blueprint developed in project preparation may not
always be followed through in implementation. Adjustment to the initial plan
typically occurs in both the civil works and soft components of the project. For
instance, the equipment lists reviewed and approved in the initial package often have
to be adjusted subject to the pace of building construction and market availability.
Because of unforeseen circumstances, the number of curricula reformed is
constantly adjusted. Hence, in addition to the five-year project plan developed
during the preparation stage, annual plans are also developed as an effective tool to
refine project implementation.
The importance of capacity building at the institutional level cannot be
overstated. One of the key lessons learned from the TVET portfolio in China and
elsewhere is the practical focus on strengthening institutions at the local level. In the
case of China, the projects have all been designed in a simple and clear way with
emphasis on capacity building at the school level. The school capacity has increased
from the implementation of project interventions as they are involved in all aspects
of project implementation under the guidance of the World Bank’s technical experts.
Importance of strong M&E. International experience has also shown that the
impact of training largely depends on labor market conditions, characteristics of
trainees, and type of training. Given the large sums invested, it is critical that these
programs be accompanied by a strong M&E able to monitor outcomes and inform
policy makers so that the program design and implementation can be modified
whenever needed. Developing capacity to undertake tracer studies and follow-up of
trainees beyond placement also seems important to measure impact accurately as
there is some evidence suggesting that the impact of training is larger when
measured one to two years after completion.
IV. IMPLEMENTATION
A. Institutional and Implementation Arrangements
44. Gansu will implement the project through the GDoE and its provincial PMO. The GDoE
will be responsible for the overall coordination and supervision of project implementation. The
PMO, together with the four project schools, will implement the project, manage World Bank
15
loan utilization, and pay back the loan under the guidance of the Gansu Provincial Finance
Department (GPFD).
45. Leading Group. The Gansu Foreign Loans Administration Committee served as an
inter-bureau Project Leading Group to provide oversight and coordination of key project
implementation issues and ensure the availability of counterpart funds and other resources
required for project implementation. This group was led by the vice governor and includes
representatives of GDoE, Gansu Development Reform Commission (GDRC) and GPFD.
46. PMO. The PMO is located at the Lanzhou TVET Park Management Office of the GDoE.
It will have the overall day-to-day responsibility for coordinating project implementation in the
four project schools and executing provincial-level activities. The PMO is headed by a director
and composed of four full-time staff for different aspects of project implementation, including
school reform, procurement, financial management (FM), M&E, and social safeguards. The
PMO has also established a Provincial Expert Team (PET) to provide technical guidance to the
PMO and the schools. Each of the project schools has established a PIU at the school level. The
PIUs are fully staffed with technical experts and administrators in charge of school reform,
procurement, FM, M&E, and social safeguards.
47. A Project Implementation Plan (PIP) has been prepared and will provide implementation
guidelines for all aspects of the project, including general administration, procurement, FM,
safeguards management, and M&E.
B. Results Monitoring and Evaluation
48. The progress and achievement of the PDO will be monitored and assessed through three
types of M&E activities: (a) regular/routine monitoring; (b) Midterm Review (MTR); and (c) an
evaluation of project outcomes at project conclusion. A set of results monitoring indicators has
been developed to measure project outputs, intermediate outcomes, and final development
outcomes. To the extent possible, the results M&E arrangements for the project will be
integrated into the existing data collection and utilization mechanism of schools.
49. Regular/routine monitoring will look at the extent to which the proposed project activities
are being implemented as planned and their direct outputs. An MTR will be conducted at the end
of the second year or during the third year of project implementation and it will focus on
assessing early results/effectiveness of project activities. Most data measuring outputs and
intermediate outcomes will be collected through school administrative sources. Individual school
data will be aggregated at the project level for analysis at the MTR to help the project refine the
next stage activities as necessary.
50. An IE based on a quasi-experimental design, will be conducted to assess the final
development impact through third-party by conducting surveys of students and enterprises. The
evaluation will assess the program’s effects and the extent to which its final development
objectives have been attained. It will also identify lessons on the types and modalities of
interventions that work effectively and efficiently in contributing to the project achievement as
well as conditions or factors that can enhance or hinder the effectiveness and efficiency of the
various intervention strategies at both the institutional and policy levels.
16
51. To strengthen the schools’ capacity for data collection, documentation, and utilization,
the World Bank has, through the PMO, provided technical assistance on M&E capacity building
for the proposed project staff during the preparation period and will continue to do so during the
project implementation, as needed, to ensure that the M&E function has been established and
integrated into the school reform process.
C. Sustainability
52. The proposed project has strong political support as the supported activities are in close
alignment with the reform priorities outlined in the Central Government’s and Gansu’s
provincial government’s development plans. With high levels of political commitment, the
Government of China recognizes the critical importance of skills development to growth and
poverty reduction and is fully committed to further investment in this sector. This commitment is
reflected in the Government Medium- and Long-Term Education Development Plan Outline
(2010-2020) and its 13th Five-Year Development Plan; in the Gansu Medium and Long-Term
Education Reform and Development Plan (2010-2020); and in the recently released Joint
Decision on Accelerating the Development of a Modern Vocational Education System in Gansu,
by the MOE and the Gansu government. As the first demonstrative project for the
implementation of the new policy, the GDoE promised to scale up the results and effect by
disseminating good practices to other schools in Gansu and nationally. For example, the
Divisions of Vocational Education and Higher Education of the GDoE are engaged in designing
the provincial activities on policy study and knowledge sharing and will continue to engage in
the implementation of these activities.
53. Financial sustainability is expected to be sound. Financial analysis shows that the
government allocation for TVET has recently increased and will continue to increase in line with
the implementation of the Gansu development strategies. The incremental costs because of the
project will have a limited impact on financial sustainability of project schools. The revenue for
each project school will be adequate to provide the required counterpart funds for project
implementation. Counterpart fund requirements for the project will not significantly affect the
schools’ normal operation and budgets of project schools and the GDoE. The Gansu authorities
have confirmed their willingness to provide adequate counterpart financing to ensure that all
activities will be adequately financed. At the same time, the Gansu government will mobilize
other resources such as other bilateral programs and transfer programs to support other TVET
schools for promoting equitable development of the TVET system in Gansu.
54. A key element for achieving project sustainability is stakeholder participation. This
project is built on a good understanding and ownership by the government and consultation with
school administrators and instructors. The investment package of reforms proposed by schools
will be embedded into the schools’ development plans. The results will be sustained by increased
capacity of administrators and instructors and institutionalized new school regulations and
policies. In addition, each project school will support partner schools sharing their reforms
results and resources. Therefore, more students and schools beyond the project will benefit from
this project.
55. Finally, the implementation arrangement will ensure the spillover of project results. The
PMO is located at the Lanzhou TVET Park Management Office of the GDoE. The TVET Park
17
will host 31 vocational schools, accounting for 60 percent of all TVET students in Gansu. The
good practices from the project schools will be shared with other vocational schools within the
TVET Park through the same Management Office and with schools outside the TVET Park
through partnership programs and GDoE.
V. KEY RISKS
A. Overall Risk Rating and Explanation of Key Risks
56. Based on the Systematic Operations Risk-Rating Tool, the overall implementation risk is
Moderate. China has a stable macroeconomic and political situation. The Chinese Government is
committed to education and upgrading skills of its labor force to sustain economic and social
development and to avoid the ‘middle-income trap’.
57. The main risks relate to Institutional Capacity for Implementation and Sustainability risks
wherebv the PMO and the project schools do not have prior experience with implementing
World Bank-financed projects. These will be mitigated by appropriate measures, including the
following: (a) training on the World Bank procurement, FM, and safeguards policies will
continue throughout project implementation, and compliance will be monitored by the World
Bank during project implementation; (b) adequate funds have been allocated for M&E and
project management to help the PMO and PIU staff implement the project; (c) adequate funds
have also been allocated for the PMO to engage experienced consultants to assist with
implementation supervision; and (d) the Results Framework includes indicators to monitor
progress of all these aspects.
VI. APPRAISAL SUMMARY
A. Economic and Financial Analysis
58. Economic analysis15
focused on the analysis of the economic impact as well as the
rationale for public sector involvement and for World Bank support.
59. First, a broad economic background analysis shows that there is an increasing demand for
a human development upgrade TVET in Gansu. Gansu is among the poorest provinces in China
and its economic progress is hindered by its low levels of urbanization and lack of human
capital. An upgrade in human capital through vocational training can help excess labor in the
rural area transition into more productive urban economic sectors and can help Gansu’s
industrial transition and revenue generation activities.
60. Next, an overview of Gansu’s TVET shows that several key failures are associated with
Gansu’s skills development market and warrants interventions from the government and support
from the World Bank. In the past decade, Gansu’s TVET sector has contributed to Gansu’s
provincial development agenda by supplying a large volume of skilled labor and will continue to
play a significant role. For instance, by 2020, the number of tertiary TVET students will account
for half of all the students in school at the tertiary level. Despite the growth in volume, Gansu’s
15
The economic analysis of the project has been carried out in accordance with the World Bank’s Economic
Analysis Guidance Note.
18
TVET sector is associated with main market failures in equity, innovation and vacancy
externalities, capital market imperfections, and information asymmetries (see details in annex 5).
Because of these market failures, Gansu’s TVET market can draw strength from the government,
which will help align its TVET policies with broad national and provincial visions, address
systematic inefficiencies through better coordination, and promote equity and redistribution. It
can also draw on the World Bank’s support, which can help the vocational education system
address its equity and capital market constraints and can help address other market failures such
as information asymmetries through a reform in the training system.
61. A cost-benefit analysis showed that the net economic benefits as measured by wage
premiums, as a result of the project, would outweigh the costs. The project will generate a
considerable Internal Rate of Return (IRR) between 7.8 and 10.2 percent depending on different
sets of assumptions. The monetarized benefits associated with an investment in technical and
vocational education normally accrue to private individuals through improved employment and
earnings prospects. The cost-benefit analysis does not include monetarized value of externalities
of training and education in general because of the unavailability of proper data. However,
positive spillover effects have been well documented. Details of the economic evaluation are in
annex 5.
62. The Gansu government will repay the World Bank loan through the project schools and
the GDoE from: (a) institutional revenue; and (b) the government’s fiscal allocation to the
schools. Financial analysis was conducted to ensure that sufficient funds from these sources
would be available for project implementation, loan repayment, and the project schools’ other
responsibilities. Counterpart funding for project implementation will primarily come from
institutional revenues and fiscal allocations. Project implementation will require only about 3.1
percent of the project schools’ total projected revenue as counterpart funding during the project
implementation period and will not have a negative financial impact on the project schools’
ongoing operations. The schools’ repayment ability is demonstrated in the interest coverage ratio
and debt service coverage ratio analysis. Details of the financial analysis are in annex 5.
B. Technical
63. The proposed project design builds on the international experience of developing
demand-driven TVET systems. In particular, the project design reflects international trends in the
following areas of TVET: (a) improving governance and management through Skill Councils
and coordination with all players at the provincial level and developing sustainable mechanisms
for school-industry collaboration at the school level; (b) using the mechanisms to constantly
improve curriculum content, teaching methodology, and assessment to reflect the competency
standards required by industry; (c) importance of improving practical teaching skills through
teacher training and mechanism for high performance; and (d) cultivating a results-oriented and
evidence-based policy making culture and behaviors among administrators. This design is
consistent with the recently approved new TVET policy.
64. The proposed project further reflects and builds on the World Bank’s knowledge and
experience of working in China and elsewhere, both within the education sector and specifically
in the TVET subsector. Study visits to Yunnan and Xinjiang were organized for the Gansu
counterparts to learn about TVET systems in other provinces in China.
19
65. The proposed project follows a similar conceptual framework and design as the TVET
projects in other provinces. In particular, the project adopts the same school reform cycle as in
the other TVET projects for school-level reforms, as illustrated in figure 1. In addition to
Component 2 on school-level reform, the project highlighted the system-level reform at the
provincial level with the overall management responsibility resting with the GDoE. The project
establishes an Inter-Departmental Leading Group to improve the governance of TVET in the
province, minimize resource wastage, coordinate policy, and ensure coverage of TVET across
the province. The project will set up Skills Councils in the Lanzhou TVET Park to address the
gap of skill demand and supply and guide the school reforms.
Figure 1. School Reform Cycle
C. Financial Management
66. The IBRD loan proceeds, including overseeing the Designated Account (DA), will be
managed by the GPFD. An FM assessment of the provincial PMO, four project schools, and
concerned finance bureaus conducted by the World Bank identified the following principal risks:
(a) most project financial staff are new to the World Bank’s operation; (b) a large number of
operational expenditures for school-based reforms and innovations increase project management
complexity and risk of the World Bank loan not being used for its intended purpose; and (c)
planned counterpart funds may not be provided on time. An action plan to strengthen FM
capacity has been agreed upon with the implementing agencies. The FM Assessment concluded
that with the implementation of the proposed actions, the project’s FM arrangements satisfy the
World Bank’s requirements under OP/BP 10.00.
D. Procurement
67. The PMO will be responsible for the overall project procurement management and
executing provincial-level activities. The PIUs at the four project schools will be responsible for
executing activities of their respective schools. A Procurement Assessment was carried out
Assessment of performance of
teachers and students
and quality assurance
Skill testing and certification
Recognition by the National
Qualifications Framework
Participation of industry in defining
Competency Standards
Development of curriculum based on
defined standards
Provision of resources:
Teachers, facilities, and technology for
the delivery of curriculum
20
during the project preparation mission and the following risks were identified: (a) weak
procurement capacity at both the PMO and the PIU levels because of the absence of international
financing institution-financed project implementation experience; and (b) possible slow
implementation caused by contract award delay and lengthy procurement processes because of
ambiguous technical specifications provided in the procurement documents. The recommended
mitigation measures would be (a) hiring of a qualified procurement agent and technical
consultants to assist the PMO and the four PIUs with procurement documents preparation, bid
evaluation, and contract management; (b) PMO and PIU staff’s active participation in the
procurement training provided by the World Bank and/or Tsinghua University; and (c)
preparation of a Project Procurement Manual governing project procurement management.
68. The initial 18 months’ Procurement Plan dated November 18, 2016 was prepared and
commented by the World Bank. A final document incorporating the World Bank’s comments
was agreed before the loan’s negotiation. The Procurement Plan will be updated at least
annually (or as required) to reflect the project implementation needs and posted on the World
Bank web.
E. Social (including Safeguards)
69. The project will not trigger the World Bank’s Safeguard Policy OP/BP 4.12 (Involuntary
Resettlement). The two schools outside of the TVET Park had no land acquisition and
resettlement requirement as all the proposed school buildings will be built within the current
campuses. For the two schools located in the new TVET Park where land acquisition took place
in recent years, due diligence review by a third party was conducted. The due diligent report
concluded that land acquisition took place before the World Bank’s identification mission and all
compensations for the affected people had been completed in compliance with national laws and
provincial regulations and consistent with the objectives of OP 4.12. The project will also not
trigger the World Bank’s Indigenous Peoples policy OP4.10 as the project schools are not
located in ethnic minority concentrated areas.
70. The project will bring large social benefits to 1,872 teachers and 29,916 students from
four project schools through improved teaching and learning, especially for students from rural
areas who account for 78 percent. These students will benefit from improved teaching and
learning and will receive better and more relevant skills required by the labor market. The social
assessment (SA) concluded that rural farmers and migrant workers will benefit from this project
through improved skills. The draft SA report and the due diligence report were disclosed on
October 21, 2016, at the GDoE and on November 28, 2016, at the World Bank InfoShop.
71. Gender impacts. The gender impacts were analyzed based on the SA. Among the four
project schools, female students account for 53 percent of total students and female teachers
account for 50 percent of total teachers. They will benefit equally from the project activities.
Efforts will be made to provide more training opportunities to female teachers, recruit more girls
for post-secondary education TVET programs, and increase their employment during project
implementation. Gender-disaggregated enrollment, graduation, and employment indicators have
been included in the project monitoring results framework.
21
F. Environment (including Safeguards)
72. The project triggered OP 4.01 (Environmental Assessment) because it will finance the
construction of new school buildings for additional training space and skills training. All
planned civil works will be built on existing land within the campus of the four project schools.
The project will have very limited adverse impacts during the construction and operation phase.
The project is classified as Category B by considering the type, location, sensitivity, and scale of
the proposed project and the potential environmental and social impacts.
73. The negative environmental impacts include ambient air, water, noise, solid wastes, and
worker safety. These negative impacts will be limited, short-term, temporary, and site specific.
The Environmental and Social Management Plan (ESMP) was selected as the environmental
instrument because of the nature of the project. The ESMP was reviewed by the World Bank
safeguards team, which found it to be satisfactory. The ESMP will be included in the bidding
documents and the corresponding contracts.
74. Public consultation and information disclosure were carried out during project
preparation. Public opinions were incorporated into the project design and the ESMP. The full
draft of the ESMP was disclosed on August 24, 2016, at the GDoE, each project school, and
nearby communities and at the World Bank InfoShop on October 31, 2016.
G. World Bank Grievance Redress
75. Communities and individuals who believe that they are adversely affected by a World
Bank (WB) supported project may submit complaints to existing project-level grievance redress
mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints
received are promptly reviewed in order to address project-related concerns. Project affected
communities and individuals may submit their complaint to the WB’s independent Inspection
Panel which determines whether harm occurred, or could occur, as a result of WB non-
compliance with its policies and procedures. Complaints may be submitted at any time after
concerns have been brought directly to the World Bank's attention, and Bank Management has
been given an opportunity to respond. For information on how to submit complaints to the
World Bank’s corporate Grievance Redress Service (GRS), please visit
http://www.worldbank.org/GRS. For information on how to submit complaints to the World
Bank Inspection Panel, please visit www.inspectionpanel.org.
22
Annex 1: Results Framework and Monitoring
Country: China
Project Name: Gansu Technical and Vocational Education and Training Project (P154623)
Results Framework
Project Development Objectives
PDO Statement
The Project Development Objective is to improve the quality and relevance of project schools in Gansu and strengthen the school and industry linkage.
These results are at Project Level
Project Development Objective Indicators
Cumulative Target Values
Indicator Name Baseline YR1 YR2 YR3 YR4 YR5 End Target
Percentage of graduates
finding initial
employment within 6
months in specialties in
which they were trained
(by gender)
(Text)
Total: 37
Female: 32
Total: 36
Female: 33
Total: 37
Female: 36
Total: 39
Female: 38
Total: 45
Female: 43
Total: 48
Female: 46
Total: 52
Female: 50
Percentage of graduates
obtaining both skills
certificate and diploma
(by gender)
(Text)
Total: 54
Female: 53
Total: 57
Female: 57
Total: 57
Female: 57
Total: 60
Female: 61
Total: 62
Female: 62
Total: 63
Female: 62
Total: 64
Female: 64
Number of graduates
working in enterprises
with which schools
cooperated
(Number)
3,173 6,361 9,448 13,289 18,583 25,050 31,372
23
Intermediate Results Indicators
Cumulative Target Values
Indicator Name Baseline YR1 YR2 YR3 YR4 YR5 End Target
Number of briefing notes
(Number) 0.00 1.00 2.00 4.00 6.00 8.00 9.00
Number of research
reports
(Number)
0.00 1.00 2.00 4.00 4.00 4.00 4.00
Number of enterprises
having cooperated with
schools based on the
agreement
(Number)
178.00 206.00 225.00 253.00 276.00 301.00 328.00
Number of trainees who
participated in short-term
training programs
(Number)
3,898.00 5,430.00 6,670.00 8,120.00 9,640.00 11,380.00 12,980.00
Number of instructors
practiced in the
enterprises
(Number)
248.00 332.00 424.00 497.00 587.00 642.00 704.00
Percentage of students
enrolled in modular and
CBT curricula
(Percentage)
0.00 0.00 12.00 19.00 25.00 30.00 34.00
Number of new or
enhanced internal school
policies and regulations
(Number)
0.00 14.00 32.00 56.00 79.00 102.00 126.00
Square meter of new
construction area (m2)
0.00 0.00 0.00 148,980.40 155,080.40 155,080.40 155,080.40
Number of training events
organized by the PMO
(Number)
0.00 2.00 5.00 8.00 11.00 14.00 15.00
24
Number of exchange
workshops organized by
the PMO
(Number)
0.00 1.00 3.00 5.00 7.00 9.00 10.00
Indicator Description
Project Development Objective Indicators
Indicator Name Description (indicator definition) Frequency Data Source/
Methodology
Responsibility for Data
Collection
Percentage of graduates
finding initial employment
within 6 months in specialties
in which they were trained
(by gender)
Number of graduates finding initial employment in
specialties in which they were trained at the end of
that year / Total number of graduates in the year (by
gender)
Annual Tracer study/school
administrative records School
Percentage of graduates
obtaining both skills
certificate and diploma (by
gender)
Number of graduates who obtain diplomas and
vocational qualification certificates at the graduation /
Total number of graduates (by gender)
Annual School administrative
records School
Number of graduates working
in enterprises with which
schools cooperated
Number of graduates recruited by the enterprises
which cooperated with school Annual
School administrative
records School and PMO
.
Intermediate Results Indicators
Indicator Name Description (indicator definition etc.) Frequency Data Source/
Methodology
Responsibility for Data
Collection
Number of briefing notes The number of policy notes made to the Leading
Group by the PMO Annual PMO record PMO
Number of research reports The number of research reports under the project Annual PMO records PMO
Number of enterprises having
cooperated with schools based
on the agreement
Number of enterprises that cooperated with schools
under the agreement. The cooperation had been
implemented by work plans and demonstrated outputs
such as internship and reviewed curricula.
Annual School administrative
records School
25
Number of trainees who
participated in short-term
training programs
All the short-term training programs organized by the
school Annual
School administrative
records
PMO records
School and PMO
Number of instructors
practiced in the enterprises
Number of instructors who practiced in the enterprises
for at least one month per year and six months within
five years
Annual
School administrative
records
PMO records
School and PMO
Percentage of students
enrolled in modular and CBT
curricula
Number of students enrolled in the modular and CBT
curricula / Total number of students Annual
School administrative
records
PMO records
School and PMO
Number of new or enhanced
internal school policies and
regulations
All new or enhanced internal school policies and
procedures formulated or improved by the school Annual
School administrative
records
PMO records
School and PMO
Square meter of new
construction area Newly constructed school buildings Annual
School administrative
records
PMO records
School and PMO
Number of training events
organized by the PMO All the trainings events organized by the PMO Annual
School administrative
records
PMO records
School and PMO
Number of exchange
workshops organized by the
PMO
All the exchange workshops organized by the PMO Annual
School administrative
records
PMO records
School and PMO
26
Annex 2: Detailed Project Description
CHINA: Gansu Technical and Vocational Education and Training Project
1. This project will be implemented by the Provincial Management Office (PMO) situated
in the Management Committee of the TVET Park under the Provincial Education Department. It
will support four project schools which were selected by the Gansu government. The lessons
learned from the project schools will benefit reform efforts in other schools in the TVET Park
and other parts of Gansu Province.
2. The four project schools face the same challenges and serve for pillar industries although
they offer different specialities for different sectors with different sizes and locations (listed in
table 2.1). All schools committed to pilot a set of school-based reforms for enhancement in the
quality and relevance of their training programs. Two of the largest project schools have been
recently merged from 11 smaller schools and the newly consolidated campuses are located in the
TVET Park in the LND. Therefore, the two schools will take advantage of their proximity with
industries to pilot innovative approaches to school-industry collaboration. Gansu Senior
Technical School of Mechanics located at Tianshui, offering technical training in mechanics,
electronics, and engineering, has a need to update its programs and facility to meet the industry
demands. The Lanzhou University of Arts and Science is transforming to applied university
development as one of the five piloting provincial universities. It is located at Lanzhou,
consisting of the Gansu Art School, the TVET colleges, and the undergraduate school.
Table 2.1. Four Project Schools
Schools Locations Total Students
in 2016 Level Specialty/Sectors Administration
Gansu Vocational
College of Energy and
Chemical Industry
Lanzhou
TVET Park 4,044 Tertiary
Energy,
chemical
engineering
GDoE
Gansu Finance and
Trade Vocational
College
Lanzhou
TVET Park 6,653 Tertiary
Finance,
trade GDoE
Lanzhou University of
Arts and Science Lanzhou 10,793 Tertiary
Folk performance
art, media GDoE
Gansu Senior
Technical School of
Mechanics
Tianshui 8,426 Tertiary
Mechanics,
electronics, and
engineering
GDoE
3. The total investment cost of the project will be US$144.52 million, of which US$120
million is financed through the World Bank loan while US$24.52 million is financed by the
project schools and the GDoE. The project will cover a period of five years.
4. The PDO is to improve the quality and relevance of project schools in Gansu and
strengthen the school and industry linkage. This objective will be achieved by (a) strengthening
of the demand-driven TVET system; (b) strengthening of the TVET delivery through
comprehensive school reforms; and (c) project management and M&E.
27
Component 1: Strengthen the Demand-driven TVET System (Total US$1.82 million, IBRD
US$1.67 million)
5. This component is designed to improve coordination among all TVET shareholders and
address systematic problems on TVET governance at the provincial and local levels. It will be
implemented by the PMO, PIUs, enterprises, associations, and governments. It will have three
subcomponents.
Subcomponent 1.1: Promote TVET coordination and management
6. This subcomponent is designed to address the needs of providing industrial guidance on
the skills required and strengthen the overall coordination of TVET in Gansu. The project will
finance the establishment of a Skills Council for selected skills in the LND and conduct surveys
and seminars regularly. The Skills Council will be an advisory board consisting of technicians
from enterprises in the LND, experts from the GDoE, and instructors from the project schools. It
will take a leading role in providing skills demand information through updated occupational
standards, employment perspectives, and other information such as competence standards. The
other project and non-project schools outside of the TVET Park will also benefit from
occupational standards, employment perspectives, and competence standards developed by the
Skills Council. The LND provides a good environment for this pilot because of the proximity
between schools and the industries. It will also guide and complement the school-industry
cooperation at the school levels (see the difference of these two activities in table 2.2). The other
two project schools outside of the TVET Park will also benefit from the occupational standards
and employment perspectives. The subcomponent will also finance the activities of the Project
Leading Group through organizing campus visits, reporting project implementation progress, and
sharing policy briefs.
Table 2.2. Skills Council Vs School-Industry Committees
Industry-led Skills Council School-led School-Industry Committees
Coordinator PMO Project schools
Component Subcomponent 1.1 Subcomponent 1.3
Composition
Human resource representatives and technical
experts from industries, experts from the GDoE, and
instructors from project schools
School management, instructors, and
partnering employers
Responsibility Guide curriculum development based on specific
skills demanded
Participate in broad-based school reforms
including curriculum, pedagogy, and
assessment reforms
Prior
Experience
Proven successful internationally. Will serve as an
innovative component in this project.
Have been successfully implemented in
prior TVET projects in China
Subcomponent 1.2 Promote provincial policy development
7. This subcomponent is designed to address some systemic TVET issues in Gansu and to
help sustain project impact beyond the project schools. The project will support evidence-based
policy studies on selected key topics and produce policy briefs identifying lessons distilled from
project implementation to inform provincial-wide reforms. This subcomponent will be
implemented by the PMO and the Divisions of Vocational and Adult Education and Higher
Education of the GDoE. After discussions with the PMO and the two divisions, the following
topics were selected for the policy studies: (a) conducting a survey on the skills demand in Gansu;
28
(b) assessing the effectiveness of TVET teacher trainings; (c) developing capacity-building plans
for TVET headmasters; and (d) conducting a survey on setting and utilizing a database bank.
Subcomponent 1.3: Strengthen school and industry linkage
8. This subcomponent is designed to strengthen and institutionalize the linkage between
schools and industry by establishing or improving the School-Industry Collaboration Committees
at the school level and sector-specific Technical Advisory Committees at the departmental level
to engage in the teaching process. The Collaboration Committees will better coordinate various
cooperative activities between schools and industries by conducting surveys, holding seminars,
working out guidelines, and assessing and signing the agreements. The Advisory Committees
will review and revise CBT curriculum standards and programs, arrange internship and practical
trainings in enterprises, and recommend part-time instructors from enterprises. The committees
will be composed of representatives from the enterprises, industrial associations, or other civil
society entities (at least 50 percent) and will be piloting new models of school-industry
cooperation based on inputs from the committees and the competitive advantages of project
schools. For example, the Lanzhou Arts and Science School will combine teaching and
performing and incorporate extensive practice into its curriculum, including recitals of local
drama and folk song and dance and development of new plays. Other activities supported by this
subcomponent include establishment of Vocational Education Groups,16
conducting skills
competition with enterprises, designing, and delivering short-term training programs for rural
farmers and migrant workers.
Component 2: Strengthen TVET Delivery through Comprehensive School Reforms (Total
US$122.57 million, IBRD US$105.84 million).
Subcomponent 2.1: Improve instructor quality
9. This subcomponent is designed to address the key challenges related to improving
management and instructional capacity in delivering quality training programs such as lacking
professional skills competence and teacher-centered approach. The project will:
(a) elaborate continually professional development plans for instructors and
administrators set up or refine the incentive mechanism for high performance. The
regulations include instructor employment, deployment, training in enterprises,
upgrading academic degrees and so on; and
(b) organize various capacity-building programs targeted at different cohorts of
instructors and administrators. The project will support domestic and overseas
trainings for school administrators and backbone teachers. Need-based trainings will
be organized related to school management, student management, research,
competency-based curriculum development and assessment, student-centred
pedagogy, enterprise attachment, and so on.
Subcomponent 2.2: Promote modular and CBT curriculum, pedagogy, and assessment
16
Vocational Education Group is a collective effort between schools and enterprises within certain industries and is
typically initiated by a leading school in this trade.
29
reforms
10. This subcomponent is designed to promote industry-driven and competence-based
curricula, transform pedagogy from the traditional teacher-centred model to student-centred
model, and reform teaching and the accompanying learning assessments. This subcomponent
will (a) develop or update competence-based standards for core curricula which reflect the
occupational standards demonstrated in enterprises surveys and graduates’ surveys; the core
curricula will also be revised based on the guidance received from the School-Industry
Committees and the Skills Council; (b) develop and adapt modular competency-based curricula
and other teaching learning materials and establish a school-level teaching and learning resource
library; (c) promote student-centred pedagogy through teacher training to improve teaching
effectiveness; (d) develop competency-based evaluation instruments to assess students’ learning
outcomes and teachers’ teaching effectiveness, which will be used as formative assessment; and
(e) develop modular and competency-based short-term training programs for rural farmers and
migrant workers according to demands from local enterprises and communities. This project will
engage enterprises in designing, delivering, and evaluating the skills provisions.
Subcomponent 2.3: Improve school management
11. This subcomponent is designed to enhance school management by various activities to
improve the quality and relevance of TVET provision. The project will support the following
activities: (a) setting up or updating the school charters and/or other regulations in accordance of
the priorities highlighted in the Government policies; (b) improving support systems for students
outside of classroom, including extracurricular activities, student associations, mental health
seminars and counselling services, job services, and entrepreneurial activities; (c) improving
efficiency of school administration by conducting management diagnosis to streamline
management and personnel arrangement and establishing a digitalized management system; and
(d) partnering with other non-project school through resource sharing, academic partnership, and
‘entrusted management’ partnership and collectivize management partnership. Emphasis will be
placed on front-loading these activities during the first year of the project implementation to
strengthen capacity for implementation, especially for the two new colleges located in the TVET
Park.
Subcomponent 2.4: Upgrade facilities and equipment
12. This subcomponent is designed to support new training centers and key training
equipment in the project schools to extend access for more students. The project will provide
financing to (a) expand and upgrade facilities including construction of training centers within
existing school campuses of the selected schools; (b) provide key training equipment needed for
the revised training programs; and (c) develop school guidelines for the management of all
training facilities and equipment.
Component 3: Project Management and Monitoring and Evaluation (Total US$1.45
million, IBRD US$1.45 million)
13. This component is designed to support capacity building for the PMO and PIU staff in
project management and knowledge sharing. A systematic and results-based project M&E will
be conducted. It will have two subcomponents.
30
Subcomponent 3.1: Project management
14. This subcomponent will support capacity building for the PMO and PIU staff for project
activities and project management. The project will finance (a) the training of provincial- and
school-level project staff in project management, financial, and procurement management; (b)
provincial and school-level procurement and FM activities; and (c) knowledge-sharing activities
such as workshops and seminars and publishing of teaching and learning materials developed
from the project.
Subcomponent 3.2: Monitoring and evaluation
15. This subcomponent is designed to support a systematic and results-based project M&E.
In addition to routine monitoring, a quasi-experimental designed IE will be conducted to
compare outcomes between treatment and control groups collecting primary information through
surveys of students and enterprises. The project will support M&E of project activities by (a)
training staff of the PMO and the PIUs; (b) producing progress reports and midterm and
completion reports; and (c) conducting an IE for project results and impact.
31
Annex 3: Implementation Arrangements
CHINA: Gansu Technical and Vocational Education and Training Project
Project Institutional and Implementation Arrangements
1. Gansu will implement the project through the GDoE and its provincial PMO. The GDoE
will be responsible for the overall coordination and supervision of project implementation. The
PMO, together with the four project schools, will implement the project, manage World Bank
loan utilization, and pay back the loan under the guidance of the GPFD.
2. Leading Group. The Gansu Foreign Loans Administration Committee served as an
inter-bureau Project Leading Group to provide oversight and coordination on key project
implementation issues and ensure the availability of counterpart funds and other resources
required for project implementation. This group was led by the vice governor and include
representatives of GDoE, GDRC and the GPFD.
3. PMO. The PMO is located at the Lanzhou TVET Park Management Office of the GDoE.
It has the overall day-to-day responsibility for coordinating project implementation in the four
project schools and executing provincial-level activities. The PMO is headed by a director and
composed of four full-time staff for different aspects of project implementation, including school
reform, procurement, FM, M&E, and social safeguards.
4. PIU. Each project school has established a PIU. The PIUs are fully staffed with technical
experts and administrators in charge of school reform, procurement, FM, disbursement, M&E,
social safeguards, and coordination. The PIUs will manage all school-level activities and support
some provincial-level activities.
5. PET. The project has established a PET to serve the project as an advisory group. The
PET consists of leading experts in key areas of the project such as vocational education, school
reform, and M&E. These experts will be called upon as consultants to provide comments and
suggestions on project content and proposals, prepare terms of references (TORs), monitor
project progress, evaluate the results, analyze the issues of the research work financed by the
project, summarize best practices and experience, and provide technical assistance in the
decision-making process and project management.
6. A PIP has been prepared and will provide implementation guidelines for all aspects of the
project, including general administration, procurement, FM, safeguards management, and M&E.
Financial Management, Disbursements and Procurement
Financial Management
7. Overall, the residual FM risk, after taking into account mitigation measures, is rated as
Moderate. The FM capacity assessment identified the following principal risks: (a) staff at all
project schools are new to the World Bank operations and lack World Bank operational
experience; (b) school-based reforms and innovations comprise a large volume of operational
activities and expenditures being carried out by the project schools which present project
32
management difficulties and the risk of the World Bank loan not being used for its intended
purposes; and (c) planned counterpart funds may not be provided on time.
8. Mitigation measures agreed on include the following: (a) preparation of a designated
Financial Management Manual so that project FM procedures for coordination and reporting are
standardized, especially for controls over school-based reforms and innovations; (b) extensive
workshop and hands-on guidance will be continuously provided by the GPFD in addition to FM
training to be provided by the World Bank; (c) detailed definition of school-based reforms and
innovations are specified in the Legal Agreement; (d) the World Bank loan and counterpart funds
will finance different contracts and activities to improve disbursement efficiency and counterpart
funds financing plan will be realist; and (e) the PMO will closely guide and monitor the
implementation status and quality of project schools.
9. Budgeting. All the counterpart funds will be institutional revenues and government fiscal
funds. The annual PIP, including the funding budget and the resources, will be prepared by the
project schools based on their annual work program. The GPFD will finance government funds
covering schools’ operational cost and the project schools will mobilize their institutional
revenues to support project implementation. Budget variance analysis will be conducted
regularly, thus enabling timely corrective actions.
10. Funds flow. The World Bank loan proceeds will flow from the World Bank into the
project DA to be set up at and managed by the GPFD. To ensure proper usage of the project
funds, Withdrawal Applications (WAs) will be prepared by project schools and reviewed by the
PMO and the GPFD. Most of the World Bank loan proceeds will be disbursed from the DA by
the GPFD to contractors or project schools based on the WA instructions. The proposed flow of
funds and funding requests or WAs are as shown in figure 3.1.
33
Figure 3.1. Loan Proceeds Flow of Funds Diagram
11. The World Bank Loan Agreement will be signed between the World Bank and China
through its Ministry of Finance (MOF). The on-lending agreement will be signed by the MOF
and the GPFD on behalf of Gansu government and then by the Gansu government and project
schools. Loan repayment will be borne by the project schools.
Accounting and Financial Reporting
12. All project schools will establish a separate cost center for the project activities within
their existing accounting system, either manual or computerized, in accordance with Circular No.
13: Accounting Regulations for the World Bank-financed Projects issued in January 2000 by the
MOF.
13. Each project school will manage, monitor, and maintain project accounting records for its
implemented project activities, in accordance with Circular No. 13. Original supporting
documents for the project activities will be retained by the PMO and the project schools.
14. The PMO will consolidate project financial statements of each project school and
incorporate DA information maintained by the GPFD to prepare consolidated project financial
statements. The unaudited semiannual project financial statements will be prepared and furnished
to the World Bank by the PMO as part of the Progress Report no later than 60 days following
each semester (the due dates will be August 31 and February 28).
World Bank
DA at XUARFD
Contractors/Suppliers
WAs/document flow Funds flow
PMO
Project Schools
DA at GPFD
34
15. Internal controls. The related accounting policy, procedures, and regulations have been
issued by the MOF and will be followed by related implementing agencies. Detailed internal
control procedures, including segregation of duties, review, approval, and reporting procedures
as well as the safeguard of assets, have been established and documented in the project Financial
Management Manual, which has been reviewed by the World Bank.
16. Audit. The Gansu Audit Office (GAO) will be assigned by the China National Audit
Office (CNAO) as auditor for the project. The annual audit report will be issued by the GAO.
The World Bank accepts audit reports issued by the CNAO or the provincial/regional audit
bureaus/offices, for which the CNAO is ultimately responsible.
17. The annual audit report of the project financial statements will be due to the World Bank
and submitted to the World Bank by the PMO within six months after the end of each calendar
year. According to the agreement reached with the MOF and the CNAO, the audit report and
audited financial statements will be made publicly available in both the World Bank’s and the
GAO’s official websites. This requirement is stipulated in the Loan Agreement.
Disbursements
18. Four disbursement methods are all available for the project: advance,
reimbursement, direct payment, and special commitment. The primary World Bank disbursement
method will be advances to the DA. WAs will be prepared to request World Bank disbursements
and to document the use of World Bank financing. The WAs will include supporting documents
in the form of Statement of Expenditures, prepared on cash basis, as specified in the
Disbursement Letter issued by the World Bank. The Funds Flow description (Figure 3.1)
provides additional disbursement information.
19. The World Bank loan will disburse against eligible expenditures (taxes inclusive), as in
table 3.1.
Table 3.1. Loan Disbursement
Category
IBRD Loan
Allocated
Amount (US$)
Percentage of Expenditures
to be financed
(1) Works, Goods, Non-consulting services,
Consultants’ services, Trainings, workshops, and
Incremental Operating Costs for the Project
108,940,000 100
(2) Front-end Fee 300,000
Amount payable pursuant to Section 2.03
of Loan Agreement in accordance with
Section 2.07(b) of the General
Conditions
(3) Interest and Commitment Fees 10,760,000 100
(4) Interest Rate Cap or Interest Rate Collar
premium 0 —
TOTAL AMOUNT 120,000,000
20. The Bank loan and counterpart funds will in parallel finance respective contracts for civil
works and goods under components 1 and 2, as identified in the procurement plan agreed to
between the Bank and the project, and subject to periodic review and agreement. Measures will
35
be taken during project implementation by both the provincial PMO and GPFD to ensure that the
above financing arrangements are carried out and both Bank loan proceeds and counterpart funds
are utilized to finance those intended contracts or expenditures.
21. Retroactive financing will be available for this project in the amount of US$24 million,
20 percent of the loan, for payments made under the project before the date of signing of the
Loan Agreement but on or after September 29, 2016, for eligible expenditures.
Procurement
22. Capacity assessment. The PMO and the four PIUs have limited experience with World
Bank-financed projects’ procurement. According to the roles and responsibilities provided by the
PMO, it will be responsible for the overall project procurement management and executing
provincial project activities. The PIUs at the four schools will be responsible for executing
activities of their respective schools. To ensure the project’s smooth implementation, both the
PMO and the PIUs should be equipped with appropriate procurement capacity. The Procurement
Assessment has identified the following risks: (a) weak procurement capacity at both the PMO
and the PIU level because of the absence of international financing and institution-financed
project implementation experience; and (b) possible slow implementation caused by contract
award delay because of ambiguous technical specifications provided in procurement documents.
The recommended mitigation measures are the following: (a) the hiring of a qualified
procurement agent and technical consultants to assist the PMO and four PIUs with procurement
document preparation, bid evaluation, and contract management; (b) the PMO and PIU staff’s
active participation in procurement training provided by the World Bank or the Tsinghua
University; and (c) preparation of a Project Procurement Manual governing project procurement
management. Considering these identified procurement risks, the proposed mitigation measures,
and the fact that a substantial portion of the contracts are of low value and low risk, the overall
procurement risk for the project is rated as Moderate.
23. Applicable guidelines. Procurement will be carried out in accordance with the
‘Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans
and IDA Credits and Grants by World Bank Borrowers’, dated January 2011 and revised July
2014; the ‘Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA
Credits and Grants by World Bank Borrowers’, dated January 2011 and revised July 2014; and
the provisions stipulated in the Loan Agreement.
Procurement Arrangements and Procurement Plan
24. Procurement of works and supply and installation of plant and equipment. Works
procured under this project will include buildings for teaching, experimental laboratories,
campus roads, and so on. Procurement of these works will be done using the World Bank’s
Standard Bidding Documents for all International Competitive Bidding (ICB) and National
Model Bidding Documents issued by the MOF in 2015 and agreed to by the World Bank.
25. Procurement of goods and non-consulting services. Goods procured under this project
will include campus network, teaching equipment, practical devices, and office/computer
equipment, and so on. The procurement will be carried out using the World Bank’s Standard
36
Bidding Documents for all ICB and National Model Bidding Documents issued in 2015 for all
National Competitive Bidding (NCB). Non-consulting service procurement would be used for
procuring organizers of training or workshops and for public awareness activities regarding
school development and improvement of enrollment and so on.
26. Selection of consultants. Consulting services will be required under this project and will
cover a variety of tasks at both the province and project school levels, for improving of the
quality of teaching, curriculum development and teacher training activities, capacity building on
school management and school operation, improving of performance evaluation system in
project school, and so on. The World Bank’s standard request for proposals will be used for the
competitive selection of consulting firms. Individual consultants will be selected using the
procedures in section V of the Consultant Guidelines.
27. Training and workshops. Training, including study tours and workshops, will be
required under the project. Detailed programs will be developed by the PMO and project schools
during project implementation, included in the project annual work plan, and submitted to the
World Bank for review. Actual expenditures incurred in accordance with the approved detailed
programs will be used as the basis for reimbursement.
28. Procurement Plan. A consolidated Procurement Plan for the first 18 months of project
implementation was prepared by the PMO and commented on by the World Bank. The
Procurement Plan was finalized and agreed with the World Bank. The plan has been available in
the project files and on the World Bank’s external website. The plan will be updated annually or
as required to reflect implementation needs and improvements in institutional capacity.
29. Frequency of procurement supervision. Regular procurement supervision would be
carried out at least once a year. Procurement post reviews will be carried out by the World Bank
or by independent external auditors every 12 months. The procurement post review sampling
ratio will be one out of ten contracts.
30. Thresholds for procurement methods and prior review. The Procurement Plan has set
forth those contracts which are subject to prior review by the World Bank. The procurement
method and prior review thresholds for the initial period of project implementation are indicated
in table 3.2.
Table 3.2. Thresholds for Procurement Methods and Prior Review
Expenditure Category
Contract Value
Threshold (US$
thousands)
Procurement Method Prior Review Threshold (US$
thousands)
Goods and Non-
Consulting Services ≥10,000 ICB ALL
<10,000 NCB >=USD4,000
<500
--
Shopping
Framework Agreement
No prior review
First contract and all contracts
valued >=USD4,000
37
Note: CQS = Selection based on Consultants’ Qualifications; QBS = Quality-Based Selection; QCBS = Quality- and
Cost-Based Selection.
Environmental and Social (including safeguards)
31. The project triggered OP 4.01 (Environmental Assessment) because the proposed project
will finance the construction of new school buildings for additional training space and skills
training.
32. All planned civil works will be built on existing land within the campus of the four
project schools, and no land acquisition or resettlement is involved. The civil works of each
school basically comprise buildings of five or six stories, with the construction areas ranging
from 6,100 m2
to 58,013 m2 in each school. The project will have very limited adverse impacts
during the construction and operation phase. The negative environmental impacts include
ambient air, water, noise, solid wastes, and safety of the public and workers. These negative
impacts will be limited, short-term, temporary, and site specific. During the operational stage, the
main environmental impacts are expected from domestic waste management.
33. The GDoE engaged an accredited environmental assessment consultant to conduct the
Environmental Assessment for the project. The project is classified as Category B by considering
the type, location, sensitivity, and scale of the proposed project and the potential environmental
and social impacts.
34. The ESMP was selected as the environmental instrument because of the nature of the
project. The ESMP was prepared based on national norms, practice proven in other World Bank-
financed projects, and the practice recommended in Environmental Health and Safety
Guidelines. It specifies each aspect of environmental management during the whole project
cycle, including, but not limited to, site preparation, construction dust management, air pollution
control, noise impact control, water pollution control, waste management, and public and
workers’ health and safety. The environmental sensitive sites of each project school have been
identified and assessed with the specific mitigation measures incorporated into the project
-- Direct Contracting >=USD4,000
Works and Supply and
Installation of Plant
and Equipment
≥40,000 ICB All
<40,000 NCB >=15,000
<500 Shopping No prior review.
Consultants Services ≥300 QCBS/QBS >=USD2,000
<300 CQS No prior review
Single-Source Selection
(firm)
>=USD1,000
Individual Consultant
and SSS Individual
>=400
Fixed Budget Selection
Least Cost Selection
>=USD2,000
>=USD2,000
38
design, construction, and operation phase, especially the route of the transportation vehicles in
each project school, which has been carefully designed to avoid or minimize the potential
impacts on the public within the schools. It also includes the institutional arrangement,
environmental monitoring plan, environmental protection investment cost estimate, the training
and capacity building, and reporting and supervision arrangements for the implementation phase
of the project. Proper implementation of the mitigation measures required by the project will
minimize the impacts to an acceptable level or eliminate them entirely. The ESMP was reviewed
by the World Bank safeguards team and found to be satisfactory. The ESMP will be included in
the bidding documents and the corresponding contracts.
35. Consultation and disclosure. Public consultation and information disclosure were
carried out in line with the domestic and World Bank requirements during project preparation.
Public opinions were incorporated into the project design and the ESMP. Before project
appraisal, the full draft ESMP was disclosed locally on August 24, 2016, at the GDoE, each
project school, and nearby communities and at the World Bank InfoShop on October 31, 2016.
36. Involuntary Resettlement and Indigenous Peoples. Based on social screening and the
SA carried out in the project areas, the proposed project will not trigger the World Bank’s
Safeguard Policy OP/BP 4.12 (Involuntary Resettlement). The two schools outside of the TVET
Park had no land acquisition and resettlement requirement as all proposed school buildings will
be built within the current campuses. For the two schools located in the new TVET Park where
land acquisition took place in recent years, due diligence review by a third party was conducted.
The due diligence report concluded that land acquisition had been completed before the World
Bank’s identification mission and all compensations for the affected people had been completed
in compliance with national laws and provincial regulations and consistent with the objectives of
OP 4.12. The project will also not trigger the World Bank’s Indigenous Peoples policy as all
project schools are not located in ethnic minority concentrated areas. Both the SA report and due
diligence report were disclosed locally on October 21, 2016, at the GDoE, each project school,
and local communities and at the World Bank Infoshop on November 28, 2016.
37. Gender impacts. The gender impacts were analyzed based on the SA. Among the four
project schools, female students account for 53 percent of total students, and female teachers
account for 50 percent of total teachers. Because of traditional customs and different job
requirements, there is considerable variation among schools with regard to female enrollment,
ranging from 32 percent for Gansu Vocational College of Energy and Chemistry Industry to 68
percent for the Lanzhou University of Arts and Science. They will benefit equally from the
project activities. Efforts will be made to provide more training opportunities to female teachers,
recruit more girls for post-secondary education TVET programs, and increase their employment
during the project implementation. Gender-disaggregated enrollment, graduation, and
employment indicators have been included in the project monitoring framework.
Monitoring & Evaluation
38. The objectives of M&E activities are to (a) monitor the progress of project
implementation and provide timely feedback to the project management, the World Bank, and
the project schools; (b) assess and summarize the achievement (outputs, outcome, and impact);
39
and (c) draw lessons in project design and implementation that can guide future replication
efforts in other regions.
39. Three types of M&E activities need to be carried out systematically during and at the end
of the intervention, as outlined in table 3.3. The M&E activities are part of the project design, the
Component 3.
Table 3.3. M&E Activities
Activity Timing Key Questions
Regular/routine
Monitoring
Ongoing during the
implementation
Have activities been implemented as planned?
Have expected deliverables/outputs been achieved?
Reasons for achieving or not achieving
MTR At the mid-point of the
implementation/Year 3
If expected intermediate outcomes have been achieved?
If expected final outcomes move forward in the right direction
(trend)?
Reasons for achieving or not achieving
Overall evaluation At the start and end of
the project
If expected final outcomes/PDOs have been achieved?
Reasons for achieving or not achieving?
Lessons learned and experiences
Arrangements for Results and Evaluation
Regular/routine Monitoring
40. To the extent possible, arrangements for the results monitoring will be integrated into the
existing school data collection and utilization system.
41. Regular/routine monitoring is concerned with the extent to which an individual activity
has been implemented in a timely fashion and expected outputs have been achieved against a set
of targets. It is also a mechanism to collect and monitor, in a systematic fashion, changes in the
project’s outcome indicators over time. Systematic tracking and reporting of the achievement of
the project’s outputs and outcomes will provide information on the progress of the
implementation and help make adjustments as needed.
42. A set of indicators capturing the project’s results was developed and agreed to by the
project’s schools and the World Bank team. It will regularly track the results for intermediate
outcome indicators pertaining to each reform area during the implementation. Schools will use
the existing school administrative system and project management mechanism.
43. Key outcome indicators such as employment, enterprises, and students obtaining both
skills certificate and diploma at graduation will be monitored annually through the student tracer
studies and the school administrative system. Graduates from the schools or reformed
departments will be surveyed. In addition to collecting key outcome data, the tracer studies will
seek information on graduate satisfaction with the training received and their recommendation
for improvements, if any.
40
44. An independent consultant/consulting firm will be engaged to help design a standard
survey instrument and methodology including sampling to ensure the consistency, quality, and
comparability of the result data across schools.
45. The progress and results of the provincial-level activities will be tracked and analyzed by
the PMO.
46. The project’s results will be tracked and reported at two levels: (a) school-level results
and (b) aggregate results at the provincial level. On an annual basis, both types of results will be
reported to the World Bank, via the PMO, as part of the Project Progress Report.
Midterm Review
47. The MTR will be conducted during the third year of the project implementation. The
MTR will analyze the early results/effectiveness brought by project activities. More specifically,
it will look at the extent to which the schools’ performance has improved with respect to the
reform and innovation areas. It will assess the improvements at the student level following the
school-level reforms.
48. At the MTR, data collected at both output and outcome levels will be analyzed at both the
school and provincial levels. In addition, the MTR will summarize some lessons learned and
experiences accumulated during the implementation. The results of the analysis will be fed into
project implementation and help the project refine the next stage of activities as needed.
49. The provincial PMO will lead the MTR for the entire project. An independent
consultant/consulting firm will be hired to carry out the MTR, including data aggregation,
analysis at the project level, and production of a review report to the World Bank four weeks
before the MTR commencement.
Evaluation
50. A quasi-experimental designed IE will be conducted for the project. The assessment will
evaluate the project's effects and the extent to which its final development objectives have been
attained through third-party by conducting surveys of students and enterprises. It will also
identify lessons on types and modalities of interventions that work effectively and efficiently in
contributing to the project achievement. It will also help highlight conditions or factors that can
enhance or hinder the effectiveness and efficiency of the various intervention strategies at both
the institutional and policy levels. A draft TOR for the IE has been drafted (see annex 6) that it
will be discussed and finalized during the start of project implementation.
51. Because the project schools have been pre-selected by the government, it is not likely to
employ a rigid experimental design for the assessment. Within the available resources, the
project proposes a pre- and post-design and difference-in-difference evaluation. The analysis will
look at performance trends over the project implementation period and compare among three
data points on the key outcome indicators: project entry, mid-term, and conclusion. The analysis
will control for external variables (for example, school demographics, academic achievement,
local labor market fluctuation, and social and economic status). Analysis of the student-level
outcome data in relation to different school reform activities and modalities of various
41
interventions will be conducted. These analyses will provide information on the magnitude of
change that has occurred and time-related trends.
52. In addition, the evaluation will collect qualitative data from various stakeholders to
enrich information and analysis, including (but not limited to) (a) interview of a sample of
stakeholders (graduates, industry experts served for industrial advisory committees, school
principals/key administrative personnel, project leaders, and the PMO staff) and (b) desk review
on a variety of forms such as research articles, policy notes, and other knowledge products (press
releases and newspaper and popular publications, reports on school, and provincial websites). In
addition, workshops for education policy makers and school administrators will be conducted
during the project period.
53. The assessment is planned as part of Component 3. The PMO will provide overall
coordination and leadership for the evaluation. An independent consultant/consulting firm will
be sought to design and implement the evaluation.
54. To strengthen the schools’ capacity for data collection, documentation, and utilization,
the World Bank will, through the PMO, provide technical assistance on M&E capacity building
for project staff during the preparation period and will continue to do so during the project
implementation on a needs basis to ensure that the M&E function is established and integrated
into the school reform process.
42
Annex 4: Implementation Support Plan
CHINA: Gansu Technical and Vocational Education and Training Project
Strategy and Approach for Implementation Support
1. The PIP, first year annual plan, and Financial and Procurement Management Manuals
were developed and reviewed by the World Bank team. The implementation arrangement was
finalized and the PET was set up, which is based on the risk ratings for the project as detailed in
the Systematic Operations and Risk-Rating Tool. The World Bank will support the
implementation of the project by using a variety of strategies including policy dialogues, regular
supervision missions, and designing and implementing capacity building in procurement, FM,
M&E, and safeguards. Further, the World Bank will bring in technical consultants as needed for
the development of CBT programs and new pedagogy.
Implementation Support Plan
2. Procurement. During the project implementation period, the World Bank team will
ensure that procurement is conducted in accordance with the World Bank guidelines and
procedures by (a) providing training to procurement staff in the PMO and school PIUs as
needed; (b) reviewing procurement documents and providing timely feedback on procurement
issues; (c) providing detailed guidance on the World Bank’s Procurement Guidelines; and (d)
monitoring progress against the Procurement Plan.
3. Financial management. The supervision strategy for this project is based on its FM risk
rating, which will be evaluated on a regular basis by the FM staff. The FM staff will use periodic
site visits, desk reviews, and correspondence with borrowers to provide technical support to and
work closely with borrowers to resolve problems as they arise, and monitor the continuing
adequacy of the FM arrangements including accounting, auditing, budgeting, financial reporting,
internal control, and funds flow. The FM staff will also follow up on action plans agreed during
project appraisal and negotiations, as well as on observations derived from reviews of audit
reports, management letters, and interim unaudited financial reports.
4. Monitoring and evaluation. The World Bank team will organize training of the
provincial departments, PMO, and school PIUs on M&E as needed. Further, through regular
interaction with project entities, the World Bank team will emphasize project reports and annual
plans to be done in accordance with the Results Framework.
5. Environmental and social safeguards. The World Bank team will supervise the
implementation of the agreed ESMP and SA on a regular basis.
6. Technical support during implementation. Key areas of technical support for the
project include, but are not limited to, development of competency-based standards and
curriculum; implementation and evaluation of the new curriculum; outreach to potential training
providers for teachers and school managers; and review of technical specifications for the
procurement of equipment, development, and institutionalization of graduate tracer study and
employer surveys in schools. The World Bank team will organize training in these areas at
strategic times of project implementation.
43
7. Focus on implementation and skills mix. Most of the World Bank team members are
based in Beijing in the China country office. Formal supervision and field visits will be carried
out semiannually. There will also be need-based visits by small groups to review technical
aspects. Estimated inputs from different specialists during different stages of project
implementation are summarized in table 4.1.
Table 4.1. Focus of Implementation Support
Time Focus Skills Needed Resource Estimate
(Staff Weeks) Partner Role
First 12 months
Team leadership
Procurement management
FM
M&E
Education Specialist
Civil Engineer/Architect
Environmental Specialist
Social Specialist
Task Team Leader
Procurement
FM
M&E
Curriculum
development
training
Civil works
Safeguards
Safeguards
6
4
2
1
4
2
1
1
12–48 months
Team leadership
Procurement management
FM
Civil Engineer/Architect
Environmental Specialist
Social Specialist
Equipment Specialists
Education Specialists
M&E Specialist
Task Team Leader
Procurement
FM
Civil Works
Safeguards
Safeguards
Laboratories –
workshops
Standards Curriculum
M&E
18
4
3
3
3
3
2
12
3
Other — — — —
Table 4.2. Skills Mix Required
Skills Needed Number of Staff Weeks Number of Trips Comments
Procurement 4 Once a year
FM 2 Once a year
Curriculum Development
Specialist 8 Various
44
Skills Needed Number of Staff Weeks Number of Trips Comments
M&E 2 Once a year
Engineer/Architect 1 Once a year
SA 1 Once a year
Environmental Specialist 1 Once a year
45
Annex 5: Economic and Financial Analysis
CHINA: Gansu Technical and Vocational Education and Training Project
1. This analysis summarizes the economic rationale for the World Bank’s investment in
Gansu’s TVET sector. First, it introduces the main market failures in Gansu and why
government mechanisms can help address misallocation between the supply and demand for
skills in the province. It then compares the net benefit resulting from the project with the net cost
in a cost-benefit analysis. Finally, a financial analysis is conducted to demonstrate the project
schools’ financial status and their ability to service the repayments of the World Bank loans.
Provincial Economic Background
2. Gansu is among the poorest provinces in China and its economic progress is
hindered by its low levels of urbanization and lack of human capital. In 2015, Gansu’s GDP
per capita was CNY 26,165, the lowest among all provinces, as shown in figure 5.1. Perhaps
unsurprisingly, Gansu is also among the least urbanized provinces in China with 58 percent of its
population still in rural areas. This is in contrast to 45 percent for China as a whole.17
Urbanization has become a driving force behind China’s economic growth in the past three
decades where more people now can take advantage of the more advanced infrastructure and
agglomeration affects from being closer to the industries and services in urban locations.
Additionally, as shown in figure 5.2, Gansu’s economic progress was also hindered by its lack of
human capital as its education index is also among the lowest in the country. Gansu’s
development strategy under the 13th Five-Year Plan (2016–20) prioritizes an acceleration in
Gansu’s urbanization process and ensures that its investment in urban infrastructure is in tandem
with an upgrade to its human development.
Figure 5.1. China’s GDP per capita and
Urbanization Process by Province
Figure 5.2. Correlation between GDP per capita
and Education Index among Chinese Provinces
17
The information is retrieved from China Statistical Yearbook 2015 (www.stats.gov.cn).
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
20,000
40,000
60,000
80,000
100,000
120,000
Tian
jin
Shan
ghai
Zhe
jian
g
Fujia
n
Liao
nin
g
Ch
on
gqin
g
Hu
bei
Hu
nan
Hai
nan
Xin
jian
g
Hen
an
Jian
gxi
Gu
angx
i
Tib
et
Yun
nan
GDP per capita 2015 urbanization 2014
Gansu
0.4
0.45
0.5
0.55
0.6
0.65
0.7
0.75
0.8
0.85
0.9
0 50,000 100,000 150,000
46
3. An upgrade in human capital through vocational training can help excess labor in
the rural area transition into more productive urban economic sectors.18
As shown in figure
5.3, 58 percent of the labor force is in the primary industry that contributes only 13 percent of the
GDP. A vast majority of the labor force working in the primary sector resides in the rural areas.
As demonstrated in figure 5.4over the years, the increase in the productivity in the primary sector
is very limited in comparison with the secondary and tertiary industries.
Figure 5.3. Share of Total GDP and Allocation of
Labor by Industries
Figure 5.4. Gansu’s Sectoral GDP per capita over
the Years
4. Gansu’s industrial transition and upgrade also requires a new set of skills for its
labor force. Over the past decade, there has been a steady shift in Gansu’s economy toward
more service-oriented sectors. As shown in Figure 5.5, the share of Gansu’s economy in tertiary
industry has increased from only 34 percent in 1995 to 44 percent in 2014. There are many
driving forces for this increase. For instance, in 2015, Gansu’s total revenue in the tourism sector
has increased by 25 percent. The tourism sector alone would contribute 0.78 percentage points to
provincial GDP growth.19
Service sector expansion is consistent with that of the structural
change in the national economy, where the service industry currently accounts for more than half
of the GDP and is projected to take up 61 percent of total GDP by 2030.20
5. Contrary to a growing service industry, both the primary and secondary industries have
seen a gradual decline in the percentage share of Gansu’s total economy. The decline in the
primary industry is consistent with the national trend and is partially explained by the province’s
urbanization process. The decline in the secondary industry is driven by a gradual diversification
away from the province’s reliance on heavy and resource-driven industries. For instance, as
shown in Figure 5.6, the traditional pillar industries centered on energy, raw materials, and
petrochemical that used to contribute about 87 percent of the province’s total industrial profits
now contribute only about 77 percent. This trend is expected to continue as Gansu reduces its
excessive industrial capacity as in the rest of China. The emerging industries in Gansu include
material science, new energy, advanced equipment manufacturing, biotechnology, and
18
It is equally important to make those who stay behind more productive as well. 19
Retrieved from http://www.fupin.gov.cn/helpnews/viewnews-7799.html. 20
World Bank, and Development Research Center of the State Council, the People’s Republic of China. 2013.
China 2030, Building a Modern, Harmonious, and Creative Society.
13%
43% 44%
58%
16% 26%
0%
10%
20%
30%
40%
50%
60%
70%
PrimaryIndustry
SecondaryIndustry
TertiaryIndustry
Percentage share of provincial GDP
Percentage of labor
0
2000
4000
6000
8000
10000
12000
14000
2000 2005 2010 2011 2012 2013 2014
Primary Industry Secondary Industry
Tertiary Industry
47
information science. These emerging industries have maintained a growth rate of more than 20
percent in the past few years.21
Figure 5.5. Change in Industrial Composition
Figure 5.6. Share of Total Industrial Profits
Generated by Traditional Pillar Industries
Gansu’s TVET Sector and Market Failures
6. Gansu’s TVET sector has contributed to Gansu’s provincial development agenda by
supplying a large volume of skilled labor. In the past decade, there has been a growing pool of
students trained in the TVET sector. Due in part to the virtual universalization of basic
education, the number of TVET applicants has surged. Enrollment in secondary TVET schools
in Gansu has increased from 175,000 students in 2004 to 315,000 in 2015. Gansu’s tertiary
TVET education started in 1999, and by 2014 the enrollment reached 160,000. By 2020, the
number of tertiary TVET students will account for half of all students in school at the tertiary
level.
7. However, Gansu’s TVET sector is associated with several main market failures. Like in many other economies, skills development is considered a public good in Gansu as the
benefit of skills training does not accrue entirely to the workers or the firms, and can be shared
by other people in society. Also, training may likely be under-provided when left entirely to a
competitive market of private service providers because of the failures associated with the
market for skills development mentioned in table 5.1.
Table 5.1. Market Failures in Gansu's TVET Sector
Equity
The percentage of rural students who pursue further study after basic education had
been relatively low because of a poorer educational foundation and a relatively higher
cost associated with post-compulsory education. However, it has been steadily
increasing in the past few years because of a higher Government budget allocated to
skills development to make it more affordable.
Externalities
Innovation externalities: Workers may be reluctant to pursue cutting-edge skills in
Gansu's petrochemical and machinery industries for the concern that the number of
employment options may be fewer after graduation, making their investment not
worthwhile.
21
Page 35 of Government proposal.
20% 18% 16% 14% 13% 13%
46% 40% 43% 47% 43% 43%
34% 42% 41% 39% 43% 44%
0%
20%
40%
60%
80%
100%
1995 2000 2005 2010 2013 2014
Primary Industry Secondary Industry
Tertiary Industry
87% 87% 87%
79% 77%
70%
75%
80%
85%
90%
2010 2011 2012 2013 2014
48
Vacancy externalities: Because of the lack of school-industry collaboration
mechanisms in Gansu, employers face an even higher information barrier and
administrative cost to find the workers with the right skills. Instead, they have a high
tendency to settle for unskilled workers.
Capital market
imperfections
Commercial banks are reluctant to provide student loan services. Some Government-
initiated student loan programs are available but are generally for university students.
Information
asymmetries
Purchasers of training services have limited information on the quality of training and
return of investment on training. This is contributed by a couple of factors. First, the
training providers have limited information themselves because of a lack of
mechanism collecting information on their graduates’ labor market performance.
Second, the fragmentation of Gansu’s skills development market makes it difficult for
a prospective student to gain comprehensive information on the strength and weakness
of each provider.
Draw on Government strength
8. Because of the market failures listed in table 5.1, Gansu’s TVET sector can leverage the
strength of the Government for three main reasons.
(a) Alignment with broad national and provincial visions
9. The Government can help align its TVET policies with broad national and
provincial visions. As shown in the province’s broad economic context earlier, Gansu is among
the least urbanized provinces in China with a disproportionate share of its labor allocated in the
less productive agriculture sector. Under the Government’s facilitation, Gansu’s TVET sector
can help support the province’s urbanization strategy by absorbing large amounts of rural youth
and helping them integrate into more dynamic urban economies. It can also propel the province’s
industrial transition by upgrading the province’s human capital. The alignment of policies is
articulated by the Joint Decision carried out by the national MOE and Gansu’s provincial
government.
(b) Address systematic inefficiencies by better coordination
10. A Government intervention can help address the lack of allocative efficiencies in the
TVET market caused by fragmentation. By addressing the fragmentation issue, the
Government can also help promote agglomeration effects of its urban economy. Based on a
Government survey, more than 38 percent of the TVET majors are offered by eight or more
schools in Gansu. For instance, Table 5.2 demonstrates the most repeated 10 majors offered in
Gansu. The most frequent major offered in Gansu is computer application technology, and it is
offered in 28 schools in the province. Fragmentation causes redundancy in the training resources
and it is difficult for each of the schools offering these repeated skills to develop a competitive
advantage in this discipline. On the contrary, a reasonable consolidation of the fragmented
training resources will help achieve economies of scale for the training process.22
22
However, over concentration of training resources will introduce new inefficiencies because of a lack of
competition.
49
Table 5.2. The 10 Most Fragmented Majors in Gansu
Majors Offered Number of TVET Schools that Offer
the Major
Computer application technology 28
Primary education pre-service
training 27
E-commerce 15
Construction engineering 14
Accounting computerization 14
Logistic management 14
Digital control technology 13
Mechatronics technology 13
Computer network technology 13
Applied electronics 13
11. In Gansu, some major coordination efforts led by the Government have been under
way. Many of the scattered programs and schools in Gansu have been merged and relocated to
the TVET Park in the LND. As a result of this effort, the Gansu Province will aim to establish
30–40 backbone-secondary TVET schools with 3,000 to 5,000 students and 10 tertiary-level
TVET schools with more than 8,000 students. These consolidated schools will also serve as
demonstration schools and provide assistance to lower-performing schools through various forms
of partnership. By bringing skilled labor close to industry, the Government can help promote
agglomerate effects in Gansu’s urban economy. Close geographical proximity to other people is
found to enhance the mutual exchange of ideas and knowledge.
(c) Promote equity and redistribution
12. With the Government’s involvement, TVET has become an important instrument
for redistribution and urbanization as it becomes more affordable to rural youth. Since
2010, the Government’s investment in the TVET sector has increased by 10 percent a year. The
increased financial resources in the TVET sector allows students from rural areas to receive
skills training at a more affordable rate via tuition waivers at the secondary TVET schools and
financial assistance at the tertiary TVET schools.23
As a result, more rural students have an
opportunity to continue education after basic education and learn a skill that is demanded in a
more productive urban economic sector. Given the high percentage of rural population in Gansu
and its high poverty rates, TVET plays more an even more important role for redistribution.
13. Vocational education is also an instrument for poverty reduction in Gansu. Gansu
has the second highest poverty incidence in China and the majority of its 4.2 million population
living in poverty resides in rural areas. Vocational education has been leveraged as an important
instrument for poverty alleviation. The provincial government has set a goal of ensuring that 100
percent of those who cannot enroll in academic tracks of the upper secondary education system
receive TVET education by subsidizing the tuition and providing extra financial aid to students
from low-income families. For secondary TVET schools, the Government spending per student
is CNY 7,000–8,000 annually, depending on the skills provided. Additionally, 92 percent of the
23
Retrieved from
http://www.moe.gov.cn/jyb_xwfb/xw_fbh/moe_2069/xwfbh_2015n/xwfb_151202/151202_sfcl/201512/t20151202_
222293.html.
50
students receive tuition waivers and 40 percent of the students receive additional financial aid.
For tertiary TVET education, spending per student is currently CNY 10,000 and will reach CNY
12,000 by 2017, with at least 25 percent of the students receiving financial aid.24
As a result,
low-income students have taken up an increasing share, often the majority share, of many TVET
schools in the recent years.
14. The contrast of the unitary cost between vocational and general education in Gansu
is not as large as in some of the more advanced economies, allowing TVET to be a
financially viable instrument for redistribution. As shown in table 5.3, at the secondary level,
the average Government spending per student in secondary TVET schools is 34 percent higher
than that of the spending in general high school. At the tertiary level, the average Government
expenditure per student for TVET students is 18 percent lower than that of the spending for
higher education students. On average, spending per student on TVET is only 7 percent higher
than that of general education in Gansu. This is in contrast with the Organization for Economic
Co-operation and Development countries where there has been an ongoing debate on the cost
effectiveness between TVET and general education because of the relative high cost of
vocational education. In Germany, for instance, the dual TVET system costs €10,800 (CNY
80,777) per year per student and nearly doubles the cost per student of academic education.25
Table 5.3. Spending per student on General Education versus TVET in Gansu in 2014 (CNY)
General Education TVET
Secondary level 6,678 8,954
Tertiary level 12,179 10,000
Weighted average 8,926 9,512
Source: The MOE and the provincial government documents.
Note: The statistics are retrieved from http://www.moe.edu.cn/srcsite/A05/s3040/201510/t20151013_213129.html,
except for the spending per student figure at tertiary level, which is obtained from
http://www.jyb.cn/zyjy/zyjyxw/201511/t20151114_643127.html.
Draw on the World Bank’s support
15. The World Bank’s support in school infrastructure will help address equity and
capital market constraints. As more education space is made possible under the project, the
schools will be able to enroll more unskilled rural students. In two of the schools that receive 75
percent of the World Bank financing, the percentage of rural students is 80 percent. As
households typically have a lower income in the rural areas, the project schools also tend to have
a large proportion of low-income students, as shown in table 5.4.
Table 5.4. Share of Rural and Low-income Students in Each School
School Share of Rural
Students (%)
Share of Students from
Low-income Households
(%)
24
Retrieved from http://www.xszz.cee.edu.cn/jianbao/gongzuoxinxi/2016-03-04/2464.html;
http://www.jyb.cn/zyjy/zyjyxw/201504/t20150408_618455.html;
http://www.jyb.cn/zyjy/zyjyxw/201511/t20151114_643127.html. 25
Retrieved from http://www.oecd.org/education/innovation-education/41538706.pdf.
51
School Share of Rural
Students (%)
Share of Students from
Low-income Households
(%)
Gansu Vocational College of Energy & Chemical Industry 84.1 47.9
Gansu Senior Technical School of Mechanics 78.7 41.4
Gansu Finance & Trade Vocational College 65.8 62.2
Lanzhou University of Arts & Science 63.0 22.0
Source: Project schools.
16. The school reforms conducted under the World Bank project will help address
externalities and information asymmetries. For instance, the World Bank project supports the
Government policy to institutionalize mechanisms for school-industry linkages. This includes
establishing or improving the School-Industry Collaboration Committees at the school level and
sector-specific Technical Advisory Committees at the departmental level to engage in the
teaching process. The project is also piloting new models of school-industry cooperation. A close
school-industry cooperation helps address both deficiencies in innovation and vacancy
externalities. The World Bank project will also improve the M&E mechanisms for each school.
This includes a more systematic tracking of training results, which will help inform the
prospective trainees of the school’s performance, and therefore address the information
asymmetry in the skills development market.
Cost-benefit Analysis
17. The cost-benefit analysis considers net benefit and net cost as a result of the World Bank
lending.
18. Net benefit. The net benefit is measured by private returns, that is, aggregate wage
increase as a result of the project investment. The net benefit only accounts for the wage
premium contributed by the project. Table 5.5 shows estimated counterfactual starting salary in
2022, considering only inflation. The average inflation rate leading up to the end of the project is
based on the average inflation rate of the past 10 years in Gansu (3.48 percent). It also shows
estimated starting salary in 2022, assuming the project has been successfully completed. The
estimation of post project salaries is collected from the schools.
Table 5.5. Current Starting Salary and Projected Starting Salary in 2022
Schools
Current
Average
Starting Salary
Estimated Starting
Salary in 2022
Considering only
Inflation
(counterfactual)
Projected Starting
Salary in 2022
under the Project
Gansu Vocational College of
Energy & Chemical Industry 2,800 3,438 4,700
Gansu Senior Technical School of
Mechanics 2,000 2,763 3,700
Gansu Finance & Trade Vocational
College 2,250 2,456 3,500
52
Schools
Current
Average
Starting Salary
Estimated Starting
Salary in 2022
Considering only
Inflation
(counterfactual)
Projected Starting
Salary in 2022
under the Project
Lanzhou University of Arts &
Science 2,300 2,824 3,700
Source: Project schools.
19. When the schools estimate starting salary after the project, two dimensions are taken into
account. The first dimension is the quality of training. As a result of a higher quality training
because of the reforms carried out by the project, the participating schools are expected to serve
the industry’s needs more closely and the courses are more student-centered. As such, students
are expected to earn, on average, a higher salary than business-as-usual. This applies to all
project schools.
20. For the two project schools in the TVET Park, the quality premium is also achieved by
the overall upgrade from secondary to tertiary schools and through the higher returns of tertiary
education in comparison to secondary education. As shown in Figure 5.7, the percentage of
tertiary degree earning students is projected to increase. The percentage of tertiary students in the
two schools will increase from less than 20 percent in 2015 to around 60 percent in 2022, the
year when the project will be completed. The assumption that returns to education will be higher
is based on both international and domestic evidence. Globally, the rate of return at the tertiary
level averages 15 percent versus 7 percent return at the secondary level (Montenegro and
Patrinos 2014). Within China, based on the wage data collected by the National Bureau of
Statistics over the past two decades, the gap between the average salary earned by workers with
only secondary degree and those with a tertiary degree has widened from 7 percent in 1988 to 49
percent in 2009, controlling for gender, work experience, and geographic locations.26
Figure 5.7. Percentage of Tertiary-level Students among New Enrollments
21. The second dimension contributing to the wage premium is opportunity, that is, the
additional students the schools are able to admit because of extra training space and facilities
26
Retrieved from http://www.csstoday.net/xuekepindao/jiaoyuxue/27435.html.
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019 2020 2021 2022
Lanzhou University of Arts & Science
Gansu Finance & Trade Vocational College
Gansu Vocational College of Energy & Chemical Industry
Gansu Senior Technical School of Mechanics
53
added to the campus under the project. For those additionally admitted students, it is assumed
that they would otherwise engage in activities requiring only minimum skills without training.
This is a reasonable assumption as the expansion in Gansu’s TVET sector has included mostly
rural and disadvantaged population. The wage premium for these students is, therefore, the
difference between the expected wage at the end of the project and the prevailing wage for
unskilled workers, which in the baseline scenario is assumed to be the official minimum wage.27
22. Externalities. This analysis does not include monetarized value of externalities of
training and education in general because of unavailability of proper data. However, positive
spillover effects have been well-documented in the literature. For instance, at the macro level,
empirical evidence suggests that the transfer of knowledge and human capital externalities are
important for explaining cross-country variations in growth rates (Klenow and Rodriguez-Clare
2005). At the micro-level, a large body of literature has shown that more educated individuals
have enhanced the productivity of others (Rauch 1999; Moretti 2004). Wantchekon et al. (2015)
found that more educated individuals are more politically active and bring benefits to their
extended families and peers. Globally, it is calculated that the social rate of return for education
is 13.1 percent at the secondary level and 10.8 at the tertiary level (Psacharopoulos and Patrinos
2004).
23. Net cost. The net cost mainly comprises the World Bank-funded investment, the
associated administrative cost, and opportunity cost for students who would otherwise work in
lieu of training. It assumes that the investments are allocated throughout the project cycle from
2017 to 2022 as shown in table 5.6.
Table 5.6. Assumptions on the Distribution of World Bank Loans during the Project Period
Year 1 10%
Year 2 20%
Year 3 30%
Year 4 20%
Year 5 10%
Year 6 10%
24. For the additional students the schools are able to enroll, their foregone wage from
attending the training, that is, the opportunity cost for not working, is also included as part of the
net cost. To be consistent with the assumptions in calculating the net benefit, it is also assumed
that the foregone wage is the minimum wage.
25. Some other general assumptions for the cost-benefit analysis are the following:
Duration of the training programs: The duration of the training programs is three
years.
27
It is reasonable to assume the minimum wage for the unskilled entry-level workers considering a large number of
the unskilled youth may earn less than the minimum wage from subsistence farming or receive an even lower pay in
the informal sector.
54
Beneficiary cohorts: Ten cohorts of students will benefit from the project. For
instance, the first cohort will enter the schools in 2017, graduate in 2020, and join
the workforce in the same year. Similarly, the tenth cohort will enter the schools in
2026, graduate in 2029, and also join the workforce in the same year.
Duration of beneficiary’s work life: Assumption is that students graduate at the
age of 2228
and retire at the age of 60. As such, the first cohort of students under the
project will retire in 2057 and the tenth cohort will retire in 2066.
26. Internal Rate of Return. The IRR to the World Bank investment for the Gansu TVET
project can be estimated by finding the rate of discount (r) that equalizes the stream of
discounted benefits to the stream of costs at a given point in time.
∑ ∑𝑆𝑡𝑜𝑡𝑐 × 𝑊𝑔𝑎𝑝 + 𝑆𝑛𝑟𝑐 × 𝑊𝑔𝑎𝑝′
(1 + 𝑟)𝑡
10
𝑐=1
49
𝑡=4= ∑ ∑
𝑆𝑛𝑟𝑐 × 𝑊𝑚𝑖𝑛𝑡
(1 + 𝑟)𝑡
3
𝑡=1
10
𝑐=1+ ∑
𝐶𝑡
(1 + 𝑟)𝑡
6
𝑡=1
27. In the above formula, t denotes the number of years accumulated since the beginning of
the project; c is the number for the cohorts, for example, c is 1 for the cohort entering in 2017
and 2 for the cohort entering in 2018, and so on;29
Stot is the total number of students admitted in
a cohort; Snr is the number of additional students in a cohort in comparison with the first cohort;
Wgap is the estimated wage gap between the wages earned by the trainees after graduating from
the World Bank-supported schools and the counterfactual wage and it measures wage premium
because of a rise in training quality; Wgap' is the difference between the counterfactual wage and
the minimum wage, which measures opportunity aspect of wage premium by including students
who would otherwise be engaged in low-skilled work; Wmin is the minimum wage; and C is the
annual investment of the project and the associated administrative cost during the project period.
Note that Wgap is calculated for all graduates while Wgap' and Wmin are only needed for the
additionally admitted students.
28. Based on these assumptions, the baseline IRR is 10.2 percent.
29. A series of sensitivity tests are conducted to assess the variations in IRR within a
reasonable range of adjustments to the assumptions (table 5.7).
Table 5.7. Sensitivity Tests
IRR under Different Sensitivity Tests Percent
Scenario 1 Gap between post-project salary and counterfactual salary decreases by 20 percent 8.8
Scenario 2 Foregone wage of the additional students enrolled by the project schools increases by
20 percent 9.3
Scenario 3 Administrative expenses of the project schools are doubled from the baseline
assumption 10.1
28
Calculated based on the proportion of secondary and tertiary students. 29
Based on the assumption, at the maximum the aggregate of benefits for 10 cohorts can be calculated in a given
year. In the early years, if there are fewer than 10 cohorts of students in the job market, then fewer than 10 cohorts
of aggregate benefits are calculated for a particular year.
55
Scenario 4 All of the above scenarios take place simultaneously (worst-case scenario) 7.8
Financial Analysis
Revenue and Expenditure Status
30. The Gansu government will repay the World Bank loan through the project schools. In
this section, we present a financial analysis to demonstrate the project schools’ revenue streams
and their ability to service the repayments.
31. Sources of school revenue. Based on the design of the project, the majority of the loans
are allocated in each school. The provincial-level activities account for a small share of the total
loans that are managed by the PMO. Even though the PMO is under the direct supervision of the
GDoE, the project activities are jointly funded by the project schools. Therefore, this financial
analysis only focuses on the financial viability of the project schools rather than the GDoE. The
rest of the analysis provides more details on the projected revenue and expenditure for each
school. The revenue streams from each school consist of the following:
Fiscal allocation from the provincial government: All four project schools are
public schools and one of the main sources of revenue is allocation per student.
Currently, for the tertiary TVET programs, the schools will receive an annual budget
allocation of CNY 12,000 per person. For the secondary TVET programs, the
schools receive an annual budget allocation of CNY 7,000–8,000 per person
depending on the skills offered. Because of the Government’s plan to strengthen the
TVET sector, the allocation per student has increased over the years. This proportion
of the Government funding is the most predictable as it hinges on the number of
students enrolled. Another form of Government budget allocation is through special,
earmarked funds depending on the financial need for the school.
Institutional revenues: Institutional revenues mainly consist of payments collected
from students, including tuition and fees and charges for room and board, and so on.
Institutional revenue from secondary TVET programs are limited, but in the recent
years, the vast majority of secondary TVET programs is tuition free.
Other revenues: Other revenues come from various forms and typically account for
a small share of the schools’ total revenue. This includes subsidies from industry
associations, earmarked funds for specific purposes, revenues from affiliated units,
and so on.
32. The majority of the school revenue is from the Government in the form of spending
per student. In 2015, for instance, the share of fiscal allocation of the total revenue was between
65 percent for Gansu Senior Technical School of Mechanics and 79 percent for Gansu
Vocational College of Energy and Chemical Industry. The proportion of the fiscal allocation to
the total revenue has gradually increased in the past five years because of (a) an increase in
56
Government spending per student; (b) tuition waivers becoming more prevalent at the secondary
TVET level; and (c) increased financial aid for students.
Table 5.8. Financial Revenues of the Project Schools (CNY, millions)
Items 2011 2012 2013 2014 2015
Gansu Vocational College of Energy &
Chemical Industry
Fiscal allocation 50.7 58.1 54.8 53.1 60.7
Institutional revenue 54.3 27.1 19.9 34.6 6.5
Other revenue 77.9 29.4 18.2 40.1 9.9
Total revenue 182.9 114.6 92.9 127.8 77.0
Gansu Senior Technical School of
Mechanics
Fiscal allocation 24.1 35.9 37.8 28.0 73.8
Institutional revenue 17.3 23.4 30.0 33.6 36.5
Other revenue 11.0 16.2 2.4 1.7 3.2
Total revenue 52.4 75.5 70.2 63.4 113.5
Gansu Finance & Trade Vocational
College
Fiscal allocation 55.0 58.8 54.4 57.9 68.1
Institutional revenue 13.7 10.2 10.7 8.8 6.7
Other revenue 19.4 20.7 21.1 20.9 20.0
Total revenue 88.2 89.6 86.2 87.6 94.8
Lanzhou University of Arts & Science
Fiscal allocation 96.0 116.2 157.2 142.5 167.2
Institutional revenue 41.6 64.2 45.0 56.0 62.0
Other revenue 3.5 1.7 2.5 4.1 5.0
Total revenue 141.1 182.1 204.7 202.6 234.2
Source: Project schools.
33. The trajectory of the schools’ ability to attract students is optimistic. Based on the
sources of revenue listed, a key factor determining the project schools’ financial viability is the
schools’ ability to recruit students as it affects both the Government funding per student as well
as the tuition income (for the tertiary students). The trajectory of the schools’ ability to attract
students is optimistic for the following reasons: (a) all schools have a long history and are the
leaders of their perspective areas of training provision; (b) with the existing reputation, the
schools’ quality will improve through merging and the reform interventions; and (c) population
growth could be a concern but it could be mitigated.
34. School expenditure is in two broad categories: recurrent expenditure and program-
specific expenditure. The recurrent expenditure supports the schools’ day-to-day operations and
57
is composed of (a) staff salaries; (b) administrative costs; and (c) financial aid. The program-
specific expenditure comprises, among others, infrastructure cost, and earmarked spending for
special purposes. The expenditure of the schools is listed in table 5.9.
Table 5.9. Financial Expenditures of the Project Schools (CNY, millions)
Items 2011 2012 2013 2014 2015
Gansu Vocational College of Energy & Chemical
Industry
Recurrent expenditure 84.7 138.7 65.1 64.8 57.9
Program expenditure 12.1 28.1 27.6 32.9 51.2
Total expenditure 96.8 166.7 92.7 97.7 109.1
Gansu Senior Technical School of Mechanics
Recurrent expenditure 43.7 42.7 42.7 44.8 55.1
Program expenditure 6.2 26.2 21.5 14.7 64.4
Total expenditure 49.9 69.0 64.2 59.5 119.4
Gansu Finance & Trade Vocational College
Recurrent expenditure 61.0 59.4 75.7 69.6 70.0
Program expenditure 4.9 8.1 4.6 10.0 16.3
Total expenditure 65.9 67.5 80.3 79.7 86.3
Lanzhou University of Arts & Science
Recurrent expenditure 83.7 114.4 109.9 107.7 119.3
Program expenditure 57.4 65.2 76.7 79.6 103.5
Total expenditure 141.1 179.6 186.6 187.3 222.8
Source: Project schools.
35. Counterpart funds. Overall, the percentage of counterpart funding of the overall project
investment is 20.4 percent and is small with the exception of the Gansu Senior Technical School
of Mechanics, which accounts for two-thirds of the total investment. Table 5.10 shows the
percentage of counterpart funding as a percentage of overall investment by school. It also shows
how the counterpart funding is allocated by year during the project period. With the exception of
the Gansu Senior Technical School of Mechanics, the counterpart funding required will not
exceed more than one-third of the projected revenue in each year. Project implementation will
require only about 3.3 percent of project schools’ total projected revenue as counterpart funding
during the project implementation period.
Table 5.10. Annual Counterpart Funds Requirement during Implementation (CNY, millions)
Schools 2017 2018 2019 2020 2021 2022
Gansu Vocational College of Energy & Chemical Industry 15.7 18.8 0.6 0.6 0.9 0.6
% total revenue 15 13 0 0 0 0
Gansu Senior Technical School of Mechanics 26.0 24.0 10.0 2.0 1.7 1.0
% total revenue 36 37 15 3 2 1
Gansu Finance & Trade Vocational College 26.0 14.0 1.1 1.1 1.0 1.0
% total revenue 29 11 1 1 1 —
58
Lanzhou University of Arts & Science 3.0 2.5 1.6 1.0 7.7 —
% total revenue 1 1 0 0 2 0
Source: Project schools.
36. Repayment ability and sustainability. The Gansu government will repay the World
Bank loan through the four project schools. The debt allocation by each school is presented in
table 5.11. The main sources of repayment are revenues from each school, which consists of
Government fiscal allocation and the tuition and fees collected from students.
Table 5.11. Project Schools’ Repayment Plan (CNY, millions)
Schools Total Principal Total Interest Total Debt
US$ CNY US$ CNY US$ CNY
Gansu Vocational College of Energy & Chemical Industry 45 297 4 24 49 321
Gansu Finance & Trade Vocational College 45 297 4 24 49 321
Lanzhou University of Arts & Science 15 99 1 8 16 107
Gansu Senior Technical School of Mechanics 15 99 1 8 16 100
Total 120 780 8 50 128 830
37. The debt repayment ability is calculated using the interest coverage ratio and debt service
coverage ratio. The interest coverage ratio calculates the school’s annual earnings as a multiple
of the annual interest cost. The debt service coverage ratio demonstrates the school’s annual
earnings as a multiple of annual debt obligations due. Table 5.12 provides the range of the
interest coverage ratio and debt service coverage ratio during the repayment period, which
demonstrates that the schools are capable of repaying the loan obligations based on their earnings
projections.
Table 5.12. Interest Coverage Ratio and Debt Service Coverage Ratio
Schools Interest Coverage Ratio Debt Service Coverage Ratio
Gansu Vocational College of Energy & Chemical
Industry 3.60–147.22 2.09–4.26
Gansu Senior Technical School of Mechanics 5.92–123.90 3.58–4.89
Gansu Finance & Trade Vocational College 2.63–123.97 1.69–3.58
Lanzhou University of Arts & Science 7.16–245.94 3.77–4.20
38. During the project implementation period, extra cost associated with the project could
incur, such as maintenance and additional personnel. These extra costs are estimated by each of
the schools as a sustainability exercise. Based on the estimate by the schools, the incremental
costs associated with the project implementation account for less than 5 percent of the annual
school budget and should have relatively small impact on overall FM.
59
Table 5.13. Estimated Extra Cost Incurrent by the Project, Expressed as Percentage of Total Debt
Schools 2017 2018 2019 2020 2021 2022
Gansu Vocational College of Energy & Chemical Industry 0.3 1.1 2.3 3.1 3.8 4.3
Gansu Senior Technical School of Mechanics 0.8 0.8 1.0 0.9 0.9 0.9
Gansu Finance & Trade Vocational College 0.3 0.5 1.9 2.5 2.1 2.1
Lanzhou University of Arts & Science 1.0 1.0 3.0 4.0 1.0 1.0
Source: Project schools.
60
Annex 6: Terms of Reference
Impact Evaluation for
CHINA: Gansu Technical and Vocational Education and Training Project
Background and Research Motivation
1. China’s rapid growth in the past 30 years was contributed by substantial physical capital
investments and a large supply of skilled labor produced by the country’s education system.
Skills development via TVET institutions has played a significant role in this process and
continues to grow. However, the quality and relevance of skills development remain bottlenecks
for the human development outcomes and the Government is seeking ways to improve the
overall performance.
2. Located in Northwest China, the Gansu Province has rich resources and cultural heritage
and is home to 26 million people. Despite recent economic growth, Gansu is still one of the least
developed provinces in China both in income and human development measures. New
development plans have been formulated to promote sustainable economic development. As part
of the development plan, skills development has been prioritized to meet the demands of the
province’s urbanization process and industrial transformation.
3. The Joint Decision on Accelerating the Development of a Modern Vocational Education
System launched by the MOE and the Gansu government articulates Gansu’s reform priorities
for its skills development sector with specific focus on the TVET Park located in the LND as the
main platform for experimenting the proposed reforms. The Gansu TVET Project funded by the
World Bank will support the provincial reforms outlined in the Joint Decision through the
demonstration of four project schools that supply skilled labor for high-priority economic sectors
like petro chemistry, electronics, machinery, modern services, and cultural tourism. Under the
project, the reforms will focus on (a) school-industry linkage; (b) teaching quality; (c) school
management; (d) curriculum, pedagogy, and assessment; and (e) school facilities and equipment.
4. From a research perspective, overall there has been a lack of evidence on effectiveness
among World Bank-supported TVET reforms. As highlighted in a systematic review of youth
employment programs by the Independent Evaluation Group,30
there were only a few tracer
studies that found positive employment and earning effects of TVET reforms supported by the
World Bank; however, the causal chain is difficult to establish without trend and counterfactual
data. In China, the recent World Bank-supported TVET projects in the Guangdong, Liaoning,
and Shandong Provinces have moved in the right direction by collecting both trend and
counterfactual data for a quasi-experimental IE design, but still lack statistical techniques to
control for the sample design biases.
5. These efforts have provided insights into the effectiveness of implementing school-level
reforms that improve the quality and relevance of the skills development programs using quasi-
30
World Bank. 2012. Youth employment programs. An evaluation of World Bank and international finance
corporation support.
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experimental designs. From a research perspective, this IE will contribute to this growing body
of literature, by identifying the presumed attribution effect of the reforms.
Objective
6. The objective is to evaluate the impact of the school-based reforms carried out in the
Gansu TVET Project on the student outcomes, which include the chance in the percentage of
students: (a) obtaining both skills certificate and diploma; (b) finding initial employment in their
trained discipline within six months of graduation; and (c) number of graduates working in
enterprises with which schools cooperated.
7. The specific issues to be evaluated are the following:
The extent to which the overall reforms supported by the Gansu TVET Project are
adequately serving Gansu’s needs to improve the quality and relevance of their skills
development programs and eventually what lessons can be learned for similar
reforms elsewhere
Wherever possible, establish causality of specific elements of the school-based
reform on student outcomes; the evaluated reforms have been designed by the
project to specifically address the challenges impeding Gansu’s skills development
sector, which include the strengthening of (a) linkage between schools and industry;
(b) teaching quality; (c) school management; (d) curriculum, pedagogy, and
assessment; and (f) school facilities and equipment; the causality is established
through the identification of an effective counterfactual group, the comprehensive
collection of performance and control data, and the use of proper econometric
techniques to control for sample biases
Methodology
8. The following elements must be included in the IE proposal. A detailed rationale for
which the following elements are specified is included in the last part of this TOR.
Data collection:
Longitudinal panel data should be gathered in at least two points in time, including
data from control groups.
Quasi-experimental evaluation design should be used where appropriate
counterfactual group(s) are identified.
The sample design should allow for representation of the project schools, gender,
and disadvantaged students.
The surveyed individuals can be linked to the specific educational reforms or the
lack thereof.
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The surveyed individuals’ demographic and socioeconomic indicators, including
family background information are collected.
The surveyed individuals’ primary outcome indicators are collected at the end line—
whether they obtained both skills certificate and diploma or not, their chance of
finding initial employment in their trained discipline within six months of
graduation, and number of graduates working in enterprises with which schools
cooperated.
The end line survey should include additional modules on student satisfaction and
employer satisfaction. The employers’ survey is confidential between the surveyor
and the employer and can be linked to the students who participated in the survey.
Analysis and report writing:
Descriptive analysis on the survey participants’ background information, the type of
trainings they are undertaking, starting salary of graduates, and the overall progress
in the outcome indicators should be included. The results are disaggregated by
treatment and control groups and, where possible, by gender and school.
A combination of econometric techniques should be employed to control for the
sample biases in a quasi-experimental design:31
difference-in-difference, propensity
score matching, regression discontinuity, multivariate regression analysis,
instrumental variables, and so on.
Time Frame and Output
9. The study would be undertaken under contract with the PMO throughout the duration of
the Gansu TVET Project (five years) with at least the baseline and end line measurements for the
surveyed individuals with high qualifications and experience in research and education policy
analysis. Preliminary results will be submitted for the MTR.
10. Outputs include the research proposal, baseline report, and final report.
Other Details of Research Proposals
Elements of proposal
11. The final research proposals should include the following elements:
Specification of main research (IE) questions;
Design of sample, including the identification for both treatment and control groups;
Design of information gathering instruments;
31
We place particular emphasis on the rigor of the econometric analysis to use these techniques as it is where this
evaluation can improve the most from the evaluations in previous World Bank projects supporting the TVET reform
in China.
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Definition of the logistics of field work, including mechanisms to reduce the attrition
rate;
Definition of schedule of field work;
Definition of data processing;
Definition of statistical models and methods of analysis to be used;
Implementation schedule specifying the tasks to be done and their respective
durations; this element should also include report schedule; a report should be
produced and delivered to the PMO and the World Bank for both the baseline and
the end line; a final report should incorporate the longitudinal analysis;
Detailed budget, including costs by activity and type of expenditures, that is, direct
(personnel and others) and indirect costs. The implementation schedule and the
detailed budget would allow the contract to be divided into several phases and
payments to allow World Bank review and approval on intermediary steps (for
example, design of questionnaires and tests, sample selection, review of first report);
and
Coordination mechanisms with the PMO, PIUs, and PET.
Criteria for proposal selection
12. The criteria for proposal selection include the pertinence between the methodological and
technical aspects of the proposal and the specified research elements; the pertinence of the
schedule proposed (adequate relation between tasks and time proposed for implementation); and
experience of the researchers in education research, particularly in IE. Contracts would be signed
with institutions rather than with individuals.
Research methodology of proposal
Why not use experimental design
13. At the school level, the fact that the project schools are not randomly chosen rules out
experimental (or random) designs at the school level as there are inherent biases in the selection
process of the schools. The Gansu TVET Project targets several schools in the priority sectors
and as a demonstrative project, the selected schools typically have a good capacity for reforms.
14. Even within a project school, not all students may receive a certain intervention
simultaneously, if at all, because of budgetary or logistical constraints. The variations to the
extent the interventions are applied within the same school can be further explored for evaluation
purpose. However, there are both observable and unobservable reasons as to why a subgroup in a
school receives the intervention at a given project phase and the allocation process is not
completely random. For instance, a project school plans to pilot the CBT and the priority for this
reform might be given to programs with existing school-industry linkage as such linkage
provides a good basis for the crucial aspects of the reform, such as incorporating industry
standards into the revisions of training curriculum.
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Use of quasi-experimental design
15. Because of the biases mentioned earlier, the best approach for the IE is to use quasi-
experimental design with proper econometric techniques to control for sample biases.
16. A quasi-experimental design first requires a good identification strategy for a
counterfactual group. A good comparison school is one that has very similar characteristics with
the treatment school with regard to the underlying factors that determine the overall
performance—distribution of training resources, quality of teachers, school management, size,
and existing infrastructure. However, such comparison schools are hard to come by in Gansu's
context because (a) each project school offers a variety of disciplines and it is difficult to find
two schools with similar training structure; (b) some of the project schools are already the
leading schools in the province and are becoming larger in scale because of their recent merging
activities, making it more difficult to find a mirroring school; and (c) some of the key
interventions are not conducted school-wide.
17. Therefore, a more realistic approach is to conduct a comparison between subgroups
within a school or among different schools. Once the counterfactual group is identified, the IE
analysis relies on econometric techniques to statistically control the biases between comparison
and the counterfactual groups. Ideally, a combination of the following techniques should be
adopted as part of the IE analysis.32
Difference-in-difference: it calculates the effect of a treatment on an outcome by
comparing the average change over time for the control group. This technique is
more advanced than the reflective or the before and after comparison typically
adopted in a tracer study, which cannot control aggregate effects or trends in the
outcome variable. For instance, the improvement of performance at the end line in a
before and after analysis might be attributed to a national education reform rather
than the school-based reforms carried about by the project. Adding a dimension of
comparison between treatment and control groups can help eliminate such aggregate
effects.
Propensity score matching: is a statistical matching technique that attempts to
estimate the effect of a treatment by taking into account a series of covariates that
predict receiving the treatment. In the context of this IE, some participants may self-
select into a treatment program (school) because of the positive signals associated
with the reforms.33
An effective covariate for matching purpose would be entrance
scores of aptitude tests. Typically, several covariates are used for the propensity
score matching exercise.
32
For additional information, see Blundell and Costa Dias (2000) for an overview of the difference-in-difference
and matching methodologies; and Hahn and others (2001) for details on the regression discontinuity design. 33
Contrary to the experiences in other countries, the educational reforms tend to have a positive connotation and
typically send out good signals of programs undertaking the reform. The reason is that such reforms are often used
as demonstrative initiatives and schools or programs selected for the demonstrative initiative are perceived as having
a higher chance to succeed.
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Regression discontinuity: these techniques consist of comparing individuals just
above an artificial threshold to individuals below this threshold. For instance, if a
project school decides to enroll students above a certain entrance score into a special
training program that is undertaking pedagogy reform, the threshold for the entrance
score serves as a regression discontinuity mechanism to distinguish the treatment
and control groups in lieu of a randomized process.
Multivariate regression analysis: use multivariate regression analysis and control
for a student's (or the parents') decision to attend a treatment school. The regression
analysis may include demographic, economic characteristics. It will also take into
account school and geographic differences using fixed effects.
Instrumental variable: if the intervention is endogenous—correlated to the
program outcome—an effective instrumental variable that is exogenous—not
correlated with the outcome of interest—will help determine the causal effect of the
intervention on the outcome.