Document of The World Bank Report No. 16463-HU STAFF APPRAISAL REPORT Republic of Hungary Youth Training Project August 21, 1997 Human Development Sector Unit Europe and Central Asia Region CURRENCY EOUIVALENTS (as of July 1997) Currency Unit = Forint US$1= 192.5 Forint AVERAGE EXCHANGE RATES 1993 1994 1995 1996 July 1997 US$1.00= 91.9 105.2 125.7 152.6 192.5 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS CAS Country Assessment Strategy DEM Deutsche Mark EU European Union EU-PHARE European Union - Pologne Hongre Action pour la Reconversion GOH Government of Hungary HHRD Hungary Human Resources Development IBRD International Bank for Reconstruction and Development IDA International Development Association MOL Ministry of Labor NGOs Non-Governnental Organizations OECD Organization for Economic Cooperation and Development PCU Project Coordinating Unit PIM Project Implementation Manual SAR Staff Appraisal Report SOE Statement of Expenditures YTP Youth Training Project REPUBLIC OF HUNIGARY FISCAL YEAR January 1 - December 31 Vice President: Johannes Linn, (ECAVP) Country Director: Roger Grawe (ECC07) Acting Sector Director Chris Lovelace (ECIIDS) Responsible Staff: David Fretwcll, Task Manager, (ECI/2HR) Michael Mertaugh, Principal Education Economist (ECl/2HR) Jim Stevens, Operations Officer, (EC 1/2HR) Gyorgy Novotny, P'rocurement Specialist (EC2HU) Edith Santos, Sr. Staff Assistant (EC 1/2HR) Peer Reviewers: Indermit Gill, Economist, (LA I C 1) Clarence Burdette, Education Specialist (Consultant) STAFF APPRAISAL REPORT Republic of Hungary Hungary Youth Training Project Contents LOAN AND PROJECT SUMMARY ........................................................ i I. BACKGROUND .........................................................1 A. COUNTRY CONTEXT .........................................................1 B. SECTORAL CONTEXT ........................................................ 2 C. RATIONALE AND STRATEGY FOR WORLD BANK INVOLVEMENT .................................... 7 II. THE PROJECT ......................;. 9 A. PROJECT OBJECTIVE ...................... 9 B. PROJECT DESCRIPTION ...................... 9 COMPONENT A: POST-SECONDARY, JOB-ORIENTED TRAINING ............................... 9 PROJECT COORDINATING UNIT ....................................................... 9 CURRICULUM DEVELOPMENT .................... .................................... I 0 INSTITUTIONAL INFRASTRUCTURE DEVELOPMENT ............................................010 STAFF DEVELOPMENT UNIT ........................................................ 10 COMPONENT B: SECONDARY VOCATIONAL ORIENTATION ................. ................... 1 1 INFRASTRUCTURE FOR CORE CURRICULA ....................................................... 1 1 OCCUPATIONAL FAMILIES CURRICULA ........................................................ 1 1 C. PROJECT COSTS ....................................................... 1 2 D. PROJECT FINANCING ........................................................ 14 III. PROJECT IMPLEMENTATION ........................................................ 16 A. IMPLEMENTATION ARRANGEMENTS ........................................................ 16 B. PROJECT MANAGEMENT ARRANGEMENTS ........................................................ 17 C. PROJECT PROCUREMENT ARRANGEMENTS ........................................................ 18 D. DISBURSEMENT AND FINANCING SCHEDULES ........................................................ 21 E. SPECIAL ACCOUNT ....................................................... 22 F. STATUS OF PREPARATION ....................................................... 22 IV. BENEFITS AND RISKS ....................................................... 23 A. BENEFITS ....................................................... 23 B. RISKS ..................................... 23 V. AGREEMENTS AND RECOMMENDATIONS ..................................... 24 A. AGREEMENTS ..................................... 24 B. RECOMMENDATIONS ..................................... 25 TABLES TABLE 1: UNEMPLOYMENT RATES BY AGE GROUP (1 995) ..................................................2 TABLE 2: DISTRIBUTION OF THE TOTAL NUMBER OF REGISTERED UNEMPLOYED BY EDUCATIONAL QUALIFICATIONS AND AGE GROUP BETWEEN MARCH 1995 AND MARCH 1997 ....................................................................3 TABLE 3: PROJECT SUMMARY BY COMPONENT ................................................................. 12 TABLE 4: PROJECT SUMMARY BY TYPE OF EXPENDITURE ....................... .......................... 13 TABLE 5: COST SUMMARY BY COMPONENT AND SOURCE OF FINANCING .......................... 14 TABLE 6: COST SUMMARY BY EXPENDITURE CATEGORY AND SOURCE OF FINANCING ..... 15 TABLE 7: PROCUREMENT ARRANGEMENTS ............................................................. 21 TABLE 8: PROPOSED DISBURSEMENT AND FINANCING SCHEDULES ................................... 22 FIGURES FIGURE 1: CHANGING PROFILES OF SECONDARY EDUCATION ENROLLMENT, 1990-1995 ....4 ANNEXES ANNEX I: NUMBER OF SECONDARY EDUCATIONAL INSTITUTIONS .................................... 26 ANNEX II: PROCUREMENT PLAN ................................................................... 30 ANNEX III: PROJECT DESIGN SUMMARY ................................................................... 31 ANNEX IV: KEY CRITERIA FOR SELECTION OF INSTITUTIONS AND PROGRAMS ................ 36 MAP IBRD 28708 - i - Republic of Hungary Youth Training Project Loan and Project Summary Borrower: Republic of Hungary Implementing Agency: Ministry of Labor Beneficiary: Youth in secondary schools and in post-secondary/post- compulsory school age settings Poverty: Program of targeted interventions Amount: DEM 62.9 million Terms: Standard amortization term, grace period, and interest rate for fixed-rate DEM single currency loans with an expected disbursement period of 0-3 years. Commitment Fee: 0.75 percent on undisbursed credit balances, beginning 60 days after signing, less any waiver. Financing Plan: See Table 5. Net Present Value: Not applicable Staff Appraisal Report: 16463-HU Map: IBRD 28708 Project ID Number: HU-PE-8485 Vice President: Johannes Linn, (ECAVP) Country Director: Roger Grawe (ECC07) Acting Sector Director Chris Lovelace (ECHDS) Responsible Staff: David Fretwell, Task Manager, (ECHDS) Gyorgy Novotny, Procurement Specialist (ECCHU) Michael Mertaugh, Principal Education Economist (ECHDS) Jim Stevens, Operations Officer, (ECHDS) Edith Santos, Sr. Staff Assistant (ECHDS) Peer Reviewers: Indermit Gill, Economist, (LAICI) Clarence Burdette, Education Specialist (Consultant) Republic of Hungary Youth Training Project STAFF APPRAISAL REPORT i. BACKGROUND A. COUNTRY CONTEXT 1.1 Hungary experimented with market type reforms much earlier than the other Central and Eastern European countries. The "new economic mechanism" introduced in the late 1 960s aimed at substituting market prices for the plan as an allocative mechanism. The pace of reform was significantly accelerated in the late 1980s, and was strongly supported by both Bretton Woods institutions. These efforts were successful in building up some of the basic legal and institutional infrastructure of a market economy. A new government came to power through free parliamentary elections in the spring of 1991 with a mandate to establish a fully-fledged market economy. At the same time, Hungary took a major step toward realizing its vision of full integration with Europe by entering into an Association Agreement with the European Union (EU) in 1991, and joined the OECD in 1996. 1.2 The economic transition requires an extensive reorientation in the way Hungary develops and uses its human resources. This work has been underway since 1991 using a combination of national, bilateral and multilateral resources, including the US$150 million Human Resource Project, which closed in June 1997. These efforts have been instrumental in helping Hungary cope with emerging unemployment and redeployment of labor to higher productivity uses, in retraining adults for the new skills needed as a result of economic restructuring, in reorienting the narrow and rigid vocational training for youth in order to develop a more mobile and technically adaptable labor force, and in narrowing the technology gap between Hungary and Western Europe by reforming and expanding higher education and professional training, especially in the fields of management and scientific research and development. The central theme of the reforms has been to address the need to redirect human resources investments so as to maximize their contribution to economic competitiveness. 1.3 The proposed Youth Training Project would extend two of the successful initiatives supported under the Human Resources Project. Chapter I of this report gives the sector background to the proposed Youth Training Project. Chapter II describes the project objective, activities; project costs and financing. Implementation arrangements are discussed in -2 - Chapter III. The benefits and risks of the Project, and the policy agreements reached with the Government of Hungary (GOH) are set out in Chapters IV and V, respectively. B. SECTORAL CONTEXT 1.4 Youth Unemployment. Starting from a negligible level at the start of the transition, unemployment in Hungary developed rapidly in 1991, and reached a maximum of 13.6 percent in 1993. Although the unemployment rate has subsided slightly since then, it remains high: 475,000 people are currently unemployed -- 10.2 percent of the labor force, according to registration data. Youth unemployment is a particular concern for the Government. As shown in Table 1, below, unemployment rates are highest for workers aged 16 - 19 (38.5 percent), and decline progressively with age. (Of the current unemployed, 22.5 percent are 25 years old or less; 50.8 percent are 35 years or less.) Table 1: Unemployment Rates By Age Group (1995) 1 Unemployment Age Group rate (%) 16-19 years 38.5 20-29 years 23.4 30-39 years 10.9 above 55 07.2 Total 11.8 Source: 1995 Household Survey 1.5 The success of new labor force entrants in finding jobs differs markedly by their educational experience. Unemployment rates vary inversely with level of education. As shown in Table 2, fully seventy-five percent of the unemployed consists of people with the lowest educational qualifications: "less-than eight-year primary school", "primary school", and "apprenticeship" (primary plus two or three years of vocational training, most of it in enterprises). Unemployment rates range from 12 percent to 25 percent for labor-market participants with less than a secondary level education. Unemployment rates drop sharply for labor-market participants who have a secondary education or more, and are lower for graduates of secondary vocational schools than for gimnazium (grammar-school) graduates. - 3 - Table 2: Distribution of the Total Number of Registered Unemployed by Educational Qualifications and Age Group between March 1995 and March 1997 Period Grad. Graduated Graduated Graduated Grad. Total From the total number of registered from from from from sec. from number of unemployed eight- grammar apprentice tech. higher registered year school school and school, education primary secondary and institution unempl. Younger between between 56 years of school level voc. polytechnic than 17 17 and 25 26 and 55 age and school years of older _ _ _ _ _ _ _ _ ___ ____ __ _ ___ ____ ____ ___ ____ ___ ag e Mar-95 42.6 7.7 35.9 11.7 2.1 540718 1.9 25.0 71.2 1.9 June 43.6 7.9 34.5 11.7 2.3 482744 1.6 21.9 74.4 2.1 September 40.3 9.2 34.1 13.6 2.8 491413 2.7 24.8 70.5 2.0 December 40.9 8.6 35.2 12.8 2.5 495890 2.2 24.4 71.6 1.8 March 1996 41.0 8.4 36.1 12.3 2.3 528364 1.6 24.5 72.1 1.8 June 41.8 8.2 34.8 12.4 2.7 481949 1.1 21.6 74.9 2.4 September 40.9 8.5 34.1 13.3 3.2 501041 1.9 22.9 72.8 2.4 December 41.8 7.7 35.6 12.3 2.6 477459 1.5 22.2 74.2 2.0 March 1997 41.7 7.3 36.5 11.9 2.4 493281 0.6 22.2 74.6 2.4 1.6 The Inherited Education and Training System. Hungary in 1968 had abandoned central planning in terms of physical output targets; public enterprises had financial performance targets, but were free to pursue them in response to evolving markets for inputs and outputs. Thus Hungary entered the transition without the rigid linkage between the education/training system and the manpower requirements for meeting planned output targets which characterized many of the other transition countries. Even so, Hungary's education system at the start of the transition had several features in common with other transition countries. Its management was highly centralized. It had achieved a high level of literacy in the population and a relatively high level of skill qualification in the labor force. It did so through essentially universal coverage at the secondary level -- much of it in the form of vocational, technical, or apprenticeship training. Higher education coverage was more limited, and concentrated upon science and engineering education. 1.7 There were a number of serious problems with the inherited education and training system. I Secondary level vocational training was provided in too specialized form and too early (age 14), before students were mature enough to make a reasoned choice between occupations. Specialized vocational education and training provided detailed practical instruction for highly specific occupations, but little theoretical instruction in the underlying scientific and quantitative principles of the occupation. The graduates of these programs were productive only within the confines of these narrow job specializations, and only as long as the technology remained unchanged. They were not well equipped to adapt to changes in the prevailing technology, or to change occupations in response to the needs of an evolving market economy. Moreover, the training relied heavily upon on-site practical experience in enterprises. Under the market pressures of the transition, many of these enterprises have closed or lost their 1 These are described in detail in Hungary: the Transition to a Market Economy -- Critical Human Resource Issues (World Bank Report No. 8665-HU; August 1990). - 4 - capacity to provide such training. Finally, the training programs were almost exclusively pre- service and concentrated in industrial and agricultural specializations. Very few programs of training were available to members of the labor force -- either working or unemployed -- to upgrade their skills or to change occupations after leaving the formal education and training system. Very few training programs of any kind existed in the service sectors, which have experienced the most rapid growth in output and wages since the start of the transition. 1.8 The economic upheavals which occurred under the transition revealed the weaknesses of the education and training system. Apprenticeship and vocational schools are having increasing difficulty in finding enterprises willing to provide training places for their students, and students who complete vocational and apprenticeship training programs without secondary school matriculation are having increasing difficulty in finding jobs. For these reasons, enrollment in these programs and the number of schools which offer them have declined since the start of the transition (see Figure I and Annex I). Increasingly, non-diploma vocational secondary schools are being absorbed or converted into diploma-level secondary technical schools. There is growing demand for diploma-level secondary technical education and post- secondary specialized programs of technical training in areas like computer skills and foreign languages, which are in high demand in the post-transition economy. Enrollments in diploma- level secondary courses -- in both academic grammar schools and secondary technical schools -- have increased since the start of the transition. Figure I: Changing Profiles of Secondary Education Enrollment 1990-1995 45 ' -- _. - - - - - - Apprentice school 40- 35 - ...~~~~~~~~~~~~~~~~~. . .. . . . . . . 35 Secondary vocational school L= 30 -- 25 - Grammar school 20 15 10 -Secondary level vocational school _, ---0-91-1991-92-192-931993941994 -,9 - 199_9 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1.9 Education and Training Reforms. Recognizing the limitations of its prior programs of vocational education and training, Hungary moved early in the transition to make its education system more flexible.2 With support from the World Bank3 and EU PHARE, it launched in 1991 an extensive program of reforms -- the most extensive reform of vocational education undertaken in any of the transition countries -- designed to make the system more flexible, more efficient, and more responsive to student demand and evolving labor market needs. The main features of the reform are: a) a major decentralization of responsibility for managing education and training, including the involvement of employers and trade unions in the management of vocational training, b) extension of general education by two years (grades 9 and 10) prior to the start of vocational orientation, c) development and delivery of vocational orientation in the form of 13 broad job families in place of the well-over-100 separate occupational specializations previously offered, d) development of career counseling for students to inform them of employment prospects and associated training opportunities in alternative occupations, and e) development of post-secondary training, including a network of Regional Human Resource Development Centers, to update skills, to upgrade skills, and to support a move from one occupation to another. The underlying objective of these reforms is to extend and improve general education in basic quantitative, scientific, and problem-solving skills for all young people while still providing vocational orientation prior to specialized vocational training at the post-secondary level. This is meant to provide a better basis for later work, whether students choose to pursue further academic studies, to pursue specialized vocational training, or to enter the labor market directly. Under the Government's reform program, compulsory education is being extended from eight years to ten years, and the outmoded apprenticeship programs are being progressively replaced with secondary vocational orientation programs, along with the development of job-specific focused training programs at the post-secondary level. Taken together, these changes are developing a more cost-effective education and training system which is more adaptable to the skilled manpower needs of an evolving economy, and more consistent with education and training systems in the EU and OECD countries. 1.10 The Human Resources Project is supporting these and a number of related reforms. The project has been successfully implemented. One of the key reform activities supported under the project was the development of seven new core curricula and 13 new consolidated vocational orientation curricula, and the implementation of these programs in 79 of the approximately 400 secondary vocational schools in the country. On the basis of the very positive reception to these new programs by teachers and students, EU PHARE supported implementation of the new curricula in another 79 secondary vocational schools. Another small group of schools have joined as "follower schools" without external financial support. The proposed Project would support expansion of the number of schools implementing the new core curricula and vocational orientation curricula to encompass most secondary vocational schools not yet equipped to offer them. 2 Described in A New Vocational Training Model for Hungary, MAria Sallay, editor, 1996. 3 Described in Staff Appraisal Report No. 9183-HU, Hungary Human Resources Project (March 11, 1991). -6 - 1.11 Another key activity supported under the Human Resources Project is the development of flexible training programs for adolescents and young adults at the post-secondary and post-compulsory school level. The project supports the development of flexible, modular training programs to meet regional manpower needs. The specializations covered by the programs in each locale are jointly agreed by employers, trade unions, and local governments. The training programs are being successfully delivered under the project by nine Regional Human Resource Development Centers4. Under the proposed Project, this training model would be diversified to support, on a competitive basis, training for agreed programs to be provided to young adults by public schools, private schools, NGOs5, and the nine Regional Human Resource Development Centers. Procedures would be developed to promote development of local consortia to ensure that duplication and overlap of programs is minimized and common services shared when possible and appropriate. As in the HHRD project, actual training delivery would be jointly financed by employers, by local governments, and by the state budget. Decisions about specific training to be offered would continue to be made jointly by employers, trade unions, and local governments, following criteria and principles agreed with the Bank (Annex IV). 1.12 Financing of Vocational Training. Vocational education and training is financed through five main sources: the state budget, local budgets, employers' contributions to a national Vocational Training Fund, commissioned training with specific enterprises, and training carried out under the Employment Fund. The evolution of financing from these sources is presented on page 4 of Annex I. State funds are available to finance the training of youth, who are receiving their first vocational qualification, up to the age of 22 (the major focus of the proposed Project). State budget financing used to be the main source of financing, but since 1993 has been eclipsed by local government contributions and commissioned training. In addition to these main sources, vocational schools can and do supplement their budgets by selling products and services, and renting spare capacity to a variety of users. The state budget provides about 50 percent of the total costs of vocational education, which is meant to cover at least the full costs of teacher salaries. Under the Local Self-Government Act, counties are responsible for administration of secondary education, including vocational and technical education. State budget funds for vocational education are transferred to county governments primarily on the basis of a normative grant, which stipulates per-student allocations for each type of program.6 The state budget transfer is not limited to public schools; it is also paid, under the In 1995, the average cost of these modern training programs for the unemployed was approximately US$750 for programs of about 5 months duration. Job placement rates are in the range of 80% as compared with a national average of slightly less than 40%. In comparison, the unemployment benefit was US$100 per month, or US$500 for five months in 1995. At present, there are some 165 NGOs which offer a range of vocational training in Hungary. (See Annex L.) 6 The per-student allocation for secondary vocational education was formerly higher than for gimnazium, reflecting the higher costs of providing vocational education due to equipment and materials, smaller class sizes, etc., and also to encourage large share of vocational education. Per-student allocations have recently been changed in order to encourage a shift towards baccalaureate-level programs. In the 1997 draft budget law, the per-student allocations were HUF 64,000 for grades I through six of primary school, HUF 68,000 for grades 7 and 8 of primary school, HUF 70,000 for grades 9 and Io of gimnazium and technical secondary - 7 - same formula, to private and NGO schools which are registered as schools and follow the approved public curriculum. In addition, state budget funds can be paid on a "program" basis to institutions which are not registered as traditional "schools", including the nine Regional Human Resource Development Centers. 1.13 All employers -- excluding the army, the civil service, prisons, and the Hungarian National Bank -- are required to contribute an amount equal to 1.5 percent of gross wages to a National Training Fund. Employers who provide training to their employees or to others, or who contribute to training through provision of equipment, staff, or facilities, may be granted a partial exemption from paying the training levy. Monies from the Vocational Training Fund are distributed to counties on the basis of the number of vocational training students enrolled in each county. Decisions on the use of these funds are taken by regional tripartite councils, with representatives of employers, workers, and government. The regional tripartite councils decide the priorities for training in the region, establish norms for unit costs of each type of training, and invite and judge training proposals from private and public training providers. C. RATIONALE AND STRATEGY FOR WORLD BANK INVOLVEMENT 1.14 The rationale for government and Bank involvement in the proposed Project is economic. In principle, individuals' decisions about training are subject to the same profitability calculus which guides other investment decisions: Individuals should seek training to the extent that the benefits of training in the form of enhanced expected earnings exceed the cost of training, including foregone income. Firms should provide training for their employees to the extent that firm-specific productivity gains exceed the costs of training. In practice, there tends to be a suboptimal provision of both types of training because of market failures. Individuals tend to purchase too little training because credit is not freely available to finance the training in spite of the expected benefits -- a market failure which results from the absence of suitable collateral to secure the human capital investment. Employers tend to finance too little training because of the fear of losing the trained employee before the training investment is fully amortized through increased productivity. This, too, is a market failure, which reflects the impracticability of binding employees to work until the full cost of their training is repaid to their employers. Like many countries, Hungary deals with these market failures through the combination of a training levy (which ensures cost recovery for training in the aggregate) and public involvement in -- though not necessarily government provision of-- training. 1.15 The Bank's assistance strategy in Hungary, as described in the President's Report for the recently approved Enterprise and Financial Sector Adjustment Loan,7 has the broad objectives of: a) helping maintain macroeconomic stability and accelerate growth to facilitate Hungary's accession to the European Union, b) reforming social policies and strengthening the school, HUF 60,000 for all grades of vocational and apprenticeship school, and HUF 87,000 for grades 11 through 13 of gymnasium and technical secondary school. Allocations under the normative grant for earlier years are presented on page 2 of Annex 1. Report No. P-6826 - HU; February 6, 1997. -8 - human resource base, c) improving environmental management, and d) attracting know-how, especially in the infrastructure sectors. Consistent with this general thrust, the investment lending proposed in the CAS is intended to respond to particular priorities of the Government, to support implementation of agreed policy changes, and to make use of the Bank's experience with what works in other countries.8 The proposed Youth Training Project responds to a request from the Government to help address the problem of youth unemployment through the expansion of two activities developed under the Human Resources Project which are successfully training and placing young people in productive jobs. Job placement rates for graduates of the programs are in the range of 80-90 percent. Alternative designs were not considered for the proposed Project in view of the successful and cost-effective experience with the same activities under the former project. However, key lessons learned in the first project have been incorporated in this follow- on operation. These lessons include, but are not limited to: the use of contracted procurement agents to expedite large equipment purchases, the involvement of employers in the selection of training programs to be financed, the development of networks between institutions at the local level to increase efficiency of resource use, and the inclusion of ample local financing to ensure sufficient local staff development and training. The Bank is involved in policy development to help reorient youth and adult training to labor-market needs in a number of countries, including FYR Macedonia, Bosnia and Herzegovina, Romania, Poland, and Russia. It is also supporting the implementation of vocational training reforms in Romania and Russia, as well as under the Hungary Human Resources Project. -9 - 2. THE PROJECT A. PROJECT OBJECTIVE 2.1 The objective of the proposed Project is to help adolescents and young adults make the transition from school to work, thus reducing youth unemployment. The expanded use of the improved vocational orientation curriculum in secondary schools in place of the former excessively narrow secondary level vocational training programs will provide a better basis for improved productivity and improved job mobility as the economy continues to evolve. It will also reduce recurrent costs, as unit costs for some of the new programs to be extended under the Project are about ten percent less than for the former programs. By supporting market-driven specialized training for youth and adults, the Project is expected to reduce youth unemployment, thereby reducing income support payments and helping young people to make a positive contribution to the economy. B. PROJECT DESCRIPTION 2.2 The proposed Project would provide equipment, software, technical assistance and training (US$60.1 million equivalent total cost) 9 to continue development and strengthening of youth vocational orientation and training programs to address the above objective. The Project would be implemented over a three-year period by the Ministry of Labor. It has two major components: 2.3 Component A: Post-Secondary, Job-Oriented Training (US$26.2 million). The objective of this component is to strengthen and modernize post-secondary and post- compulsory school specialized training programs for young people to facilitate their entry into the labor market. These programs of customized training to meet identified local labor-market needs are offered to young people who have completed the baccalaureate level or are past compulsory school age (after 10th grade or age 16). All training proposals to be financed under this component would be submitted to the National Vocational Training Council for review and endorsement. (a) Project Coordinating Unit (PCU) (US$0.3 million). This sub-component would finance limited technical assistance,10 including limited funds for project 9 This includes all project costs including Loan financing and local financing, including taxes and contingencies, 0 Assistance would include limited financing to support country and regional project promotion and coordination activities and four months of international training financed by the Loan, plus 12 months of local consultants financed by the Government. - 10- coordination and promotion, fellowship training, equipment, and software to support ongoing operation of the Project Coordination Unit (PCU) established under the Human Resources Project. The PCU would serve the needs of both components of the Project, and would serve as the project "business office" for all liaison with the Bank, including procurement and reporting. (b) Curriculum Development (US$5.3 million). This sub-component would finance technical assistance1' and limited hardware and software to support approximately 15 writing teams which would define occupational skills and knowledge, develop modular training curricula, and specify materials and equipment necessary to implement the curricula for approximately 85 occupational specialties. Priority curriculum areas would be identified using procedures, principles, and criteria agreed with the Bank. 12 The primary criteria would be evidence of labor market demand at the local and national levels as ascertained by employer input and evidence of high job placement rates from existing programs. (c) Institutional Infrastructure Development (US$18.7 million). This sub- component would finance technical assistance,'3 equipment, hardware and software to support implementation of new and revised training curricula in approximately 170 sites (an average of two sites per curriculum). The institutions receiving support would be selected on a competitive basis following procedures, principles, and criteria agreed with the Bank (see Annex IV and PIM). Primary institutional criteria would include: i) involvement of employers, employees and government in managing the institutions and programs, and in selecting the training which they provide; ii) evidence that the investment would not duplicate existing programs in the region, iii) ability of institutions to operate flexible-entry and flexible-exit modular training programs, iv) availability of job counseling and placement programs; and v) willingness of the institution to sign performance- based training contracts with local labor offices for training the unemployed. The competition would be open to public, private, and non-governmental training providers -- including, but not limited to, secondary vocational schools, regional labor development centers, foundations, and private schools. (d) Staff Development (US$1.9 million). This sub-component would finance staff training for key individuals involved in directing and implementing the new Assistance would include 85 months of international consultants and 15 months of international training financed by the Loan, and 1,020 months of local consultants and 15 months of local training financed by the Government. 12 Key criteria are listed in Annex IV, and detailed procedures are in the Project Implementation Manual (PIM). 3 Assistance would include 15 months of international consultants financed by the Loan, and 160 month s of local consultants financed by the Government. - II - modular training programs:'4 instructors and managers in training-provider institutions, and representatives of local governments, employers' associations, and employees' associations. The staff development activities would include both international and local training sessions. 2.4 Component B: Secondary Vocational Orientation (US$33.9 million). This component would expand the number of secondary vocational schools which apply the new core curriculum and occupational orientation programs developed under the Hungary Human Resource Project. (a) Infrastructure for Core Curricula (US$9.1 million). This sub-component would provide hardware, software, and limited technical assistance and staff training16 to assist approximately 100 secondary vocational schools to implement the seven new academic core curricula for grades 9 through 12 developed under the Human Resources Project. Selection of schools would follow principles, criteria, and procedures agreed with the Bank (see Annex IV and PIM). Selection of schools would be limited to those which did not receive support under the Human Resources Project and which have agreed to implement the new vocational orientation curricula starting at grade 11 (see following sub- component). In addition, approximately 35 schools which were to receive limited support under the previous EU PHARE project to implement the new core curriculum would be eligible to receive support to implement the new curriculum. (b) Occupational Families Curricula (US$24.8 million). This sub-component would provide hardware, software, and limited technical assistance and staff training 17 to assist approximately 135 secondary vocational schools to implement an average of two vocational orientation curricula each in grades 11 and 12. Selection of schools would follow principles, criteria, and procedures agreed with the Bank (see Annex IV and the PIM). Selection of schools would be limited to those which did not receive support under the Human Resources Project and which agree to implement the new core curricula (see previous sub-component). Assistance would include 15 months of international consultants and 170 months of international training financed by the Loan, and 15 months of local consultants and 150 months of local training financed by the Government. 5 In general, schools that received support under the Human Resources Project and the EU PHARE project would not be eligible. However, PHARE schools which were to receive minimal support for core curriculum implementation (i.e. grades 9 and 10 only), and no support of the vocational orientation program, would be eligible for supplementary project support. 16 Assistance would include 70 months of international training financed by the Loan, and 70 months of local consultants and 945 months of local training financed by the Government. 17 Assistance would include 270 months of international training financed by the loan, and 168 months of local consultants and 270 months of local training financed by the Government. -12- 2.5 During negotiations, agreement was reached that: (a) the Borrower shall ensure that training institutions included in, and programs supported under parts Component A (Post Secondary, Job-Oriented Training) and Component B (Secondary Vocational Orientation) of the Project shall meet the criteria (Annex IV) agreed by the Borrower and the Bank; (b) the Borrower shall ensure that all training proposals to be included under Component A (Post Secondary Job-oriented Training) of the Project shall be submitted to the Borrower's National Vocational Training Council for review and endorsement; and (c) the Adult Labor Market Training Department (Munkaeropiaci Kepzesek Foosztaly) of the Borrower's Ministry of Labor (MOL) will be responsible of technical implementation of Component A (Post Secondary Job- oriented Training) of the Project, and Youth Training Department (Szakoktatasi Foosztaly) of MOL will be responsible for technical implementation of Component B (Secondary Vocational Orientation). In addition, during negotiations, assurances were given that: (a) approval procedures for training under the Post Secondary, Job-Oriented Training component of the Project would permit project financing of any training program which is on the national training list, but, for programs which are not on the list special procedures are available to put these programs on the list if there is clear evidence of labor-market demand; and (b) state budget financing for vocational education in schools will be provided through normative grants, and program financing grants will be available for other institutions at approximately the same levels; for training carried out by private and public secondary vocational schools, NGO schools, and Regional Human Resource Development Centers. C. PROJECT COSTS 2.6 Summary of Project Costs. Total project costs are estimated at US$60.1 million, including contingencies, local taxes and duties. Total contingencies (physical and price) amount to US$3.4 million, representing about 6 percent of total base costs (US$56.6 million). Project costs includes consulting services, fellowships and training, furniture, equipment and materials and local staff training costs. Base cost estimates were calculated in US dollar equivalent, and reflect costs at the time of pre-appraisal in March, 1997. Estimated project costs are summarized in Tables 3 and 4 below. Detailed cost figures are provided in the Project Implementation Manual. Table 3: Project Summary by Component (US$ thousands) Total (US$) Foreign Base Local Foreign Total Exchange Cost S A. Post Secondary, Job-Oriented Training 10,137.3 14,779.8 24,917.0 59 44 B. Secondary Vocational Orientation 12,349.0 19,475.0 31,824.0 61 56 22,486.3 34,254.8 56,741.0 60 100 Physical Contingencies 238.0 442.0 680.0 65 1 Price Contingencies 1,034.3 1,664.8 2,699.1 62 5 Total 23,758.5 36,361.6 60,120.1 60 106 - 13 - Table 4: Project Summary by Type of Expenditure (US$ Thousands) Post Secondary Job- Secondary Oriented Vocational Training Orientation Total Investment Costs A. Equipment 15,514.8 23,505.9 39,020.7 B. Technical Assistance 3,420.4 2,473.3 5,893.7 C. Local Staff 4,109.1 3,243.6 7,352.7 Development D. Materials & Software 3,142.1 4,711.0 7,853.1 Total 26,186.4 33,933.7 60,120.1 Taxes 6,529.9 9,875.9 16,405.8 Foreign Exchange 15,547.4 20,814.2 36,361.6 2.7 Basis of Cost Estimates. Project costs were estimated on the following basis: (a) Base Costs. All project costs were estimated in US$, given that inflation of the Forint is difficult to predict. The average cost of foreign specialist consulting services (US$16,000 per month) is based on recent contracts for comparable services in other Bank-financed projects in the central and eastern European region. This unit cost includes fees, relocation/recruitment costs, housing and subsistence, and overheads. The average cost of local consultants has been estimated at US$3,000 per month. Overseas fellowships and study visits are estimated to cost US$7,000 per staff month, on average. Local training is estimated to cost US$2,000 per month. Price estimates for equipment, including computers, and furniture are based on current market prices in Hungary and recent experience in purchasing similar equipment under the Human Resources Project. (b) Contingency Allowances. Project costs include a six percent contingency allowance for unforeseen physical contingencies for all equipment and furniture. The total physical contingency of US$0.68 million is equal to about one percent of the estimated base cost. The low physical contingencies reflect the absence of civil works in the Project. In the absence of credible forecasts of annual local price escalation and exchange rates, price increases have been applied to both local and foreign costs in US dollar terms at the rate of 3 percent per annum. Estimated price contingencies total US$2.7 million. (c) Foreign Exchange Component. The foreign exchange component was estimated on the basis of the following projected shares of foreign expenditures for each category of expenditure: (i) equipment (65 percent), (ii) materials and - 14- software (65 percent), (iii) expatriate consulting services, fellowships and studies (100 percent), and (iv) local staff development, including local consultants, local training, local staff salaries (0 percent). The resulting foreign exchange component, including contingencies, is estimated at US$36.4 million, or about 60 percent of total project costs. (d) Taxes. The Project has been costed inclusive of import taxes and duties, estimated at 35 percent of all goods. The funds are included as part of the Borrower's counterpart contribution, and amount to US$16.4 million. 2.8 Recurrent costs. No significant incremental recurrent costs are foreseen, as the Project primarily supports upgrading or replacement of existing programs rather than expansion of existing programs. Indeed, in the case of the Secondary Vocational Orientation Component, it is expected that recurrent costs will be reduced by approximately 10 percent due to lower unit costs for implementing the new vocational training programs. The significant local staff development costs (estimated at US$7.4 million) are included as part of total project costs, to help ensure that these amounts are budgeted annually as Borrower counterpart funds. D. PROJECT FINANCING 2.9 The proposed Loan of US$36.4 million would finance 60 percent of estimated total project costs, or 100 percent of the estimated foreign exchange component. The Borrower would finance the remaining 40 percent of local costs and all taxes and duties, estimated to total US$23.7 million equivalent. The project financing plan is shown in Tables 5 and 6, below: Table 5: Cost Summary by Component and Source of Financing (US$ Thousands) IBRD Government Total Amount Amount Amount 1. Post Secondary, Job-Oriented Training 15,547.4 10,639.1 26,186.4 2. Secondary Vocational Orientation 20,814.2 13,120.0 33,934.2 Total 36,361.6 23,759.1 60,120.6 - 15 - Table 6: Cost Summary by Expenditure Category and Source of Financing (US$ Thousands) IBRD Government Total Amount Amount Amount 1. Equipment 25,363.4 13,657.2 39,020.7 2. Materials and 5,104.5 2,748.6 7,853.1 Software 3. Technical Assistance 5,893.7 0 5,893.7 4. Local Staff 0 7,352.7 7,352.7 Development Total 36,361.6 23,758.5 60,120.1 - 16- 3. PROJECT IMPLEMENTATION A. IMPLEMENTATION SCHEDULE 3.1 The Project is scheduled to be implemented by the Ministry of Labor over a three- year period. The implementing staff will be integrated, to the degree possible, directly into existing staff units in the Ministry to simplify administration, build on experience gained in the Human Resources Project, and to enhance the transfer of technology. The implementation team will include: a) a small Project Coordinating Unit (PCU) which will be maintained to serve as liaison with the Bank; and b) individual technical teams to implement each of the two components of the Project. 3.2 The Project Coordinating Unit will act as a "business office" for the Project and will facilitate and coordinate all contacts with the Bank, all reporting and Loan disbursement activities, and procurement. The Ministry will maintain a minimum of three staff in the PCU: a director, procurement or financial officer, and suitable support staff. The PCU will administratively report directly to the Deputy Secretary of State. 3.3 One technical team will be located in the Adult Labor Market Training Department (Munkaeropiaci Kepzesek Foosztaly) of the Ministry of Labor, and will be responsible for managing implementation of the post-secondary, job-oriented training component. This Department has extensive and successful experience in developing and implementing specialized modular labor market training as a result of their work on the Regional Human Resource Development Centers under the Human Resources Project. Thus, they are well placed to undertake similar work under the post-secondary component of the proposed Youth Training Project. A second technical team will be located in the Youth Training Department (Szakoktatasi Foosztaly) of the Ministry of Labor, and will be responsible for implementation of the Secondary Vocational Training component. This Department was responsible for the successful design and implementation of the core curriculum and vocational orientation program under the Human Resources Project, which will be expanded under the proposed Youth Training Project to include approximately 135 additional schools. These staff will be supplemented by a cadre of local consultants, as needed, financed by the Government under the Project. During Negotiations, the Government provided assurances that the Youth Training Department (Szakoktatasi Foosztaly) will be responsible for technical implementation of the Secondary School component, and the Adult Labor Market Training Department (Munkaeropiaci Kepzesek Foosztaly) will be responsible for technical implementation of the Post-Secondary Training Component. - 17 - B. PROJECT MANAGEMENT ARRANGEMENTS 3.4 Project Coordination Unit (PCU). To help ensure that project objectives, performance targets and schedules are met successfully, a Project Coordination Unit (PCU) has been established in the MOL under the Human Resources Project. This unit will be maintained under the Youth Training Project under the direction of the Deputy State Secretary. The PCU would be responsible for coordinating all project-related tasks. During Negotiations, the Borrower agreed that the Government will maintain a Project Coordination Unit (PCU) under the supervision of suitably qualified Director and procurement or financial officer and supported by support staff in adequate numbers. The day-to-day implementation of individual project components would be the responsibility of the technical teams in the Departments for Youth Training and Adult Labor Market Training. The PCU's role would be one of support and facilitation. 3.5 Project Commitment and Sustainability. The Project was prepared largely by the Ministry of Labor. During preparation, the Ministry developed individual components through dialogue with project beneficiaries and stakeholders, including representatives from labor and employers. A working group is being established to provide guidance for implementation of each component of the Project. The Government has demonstrated its commitment to the Project, inter alia, by agreeing to provide the necessary counterpart funding for the Project, amounting to 40 percent of total costs. Finally, the Borrower has committed itself to the staffing of small but critical technical teams to support both components. 3.6 Monitoring and Reporting. The PCU would be responsible for Project monitoring. The Project Implementation Manual (PIM) includes a framework for systematic monitoring and evaluation of progress in project implementation. During negotiations, assurances were given that the contents of the Project Implementation Manual (PIM), including terms of reference, dated July 8, 1997, were agreed. This document will serve as a technical working document for the Project. However, it is understood that the contents of the Manual may be updated from time-to-time if needed, with the mutual agreement of the technical staff of the Borrower and World Bank. It identifies a set of performance indicators to be used in project supervision. On a semi-annual basis, the PCU would submit to the Bank a consolidated report on the status of project implementation, covering each component, its objectives and activities, and including: a) current status and issues, b) deviations, if any, from the implementation plan and project targets, c) recommendations for actions and forward planning, and d) actual and planned expenditures. The Borrower will carry out, with the Bank, a mid-term review of the project implementation about eighteen months after effectiveness. During negotiations it was agreed that the Borrower shall: maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the indicators (PIM Section 3 (B)) agreed upon between the Borrower and the Bank, the carrying out of the Project and the achievement of the objectives thereof; prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, on or about May 31, 1999, report integrating the results of the monitoring and evaluation activity activities, and review with the Bank, by June 30, 1999, or such later date as the Bank shall request, the report. In addition, during Negotiations, assurances were given that the May 31, 1999, project monitoring and evaluation report will include: a summary of progress - 18 - on each objective and activity of the Project, a summary of progress toward each project performance and outcome indicator, a summary any issues or problems and alternative methods of overcoming them, a financial summary comparing budgeted vs. actual expenditure for each component and expenditure category, if appropriate and necessary recommendations for reallocation of funds between project components and/or cost categories, and a revised procurement plan for the remainder of the Project 3.7 Project Completion and Evaluation. Project completion is expected by December 31, 2000. The closing date will be June 30, 2001. The PCU would be responsible for preparing the Borrower's contribution to the Project Implementation Completion Report. 3.8 Bank Supervision. Because this is the second project with the Ministry, it is expected that the Project would not require intensive supervision. It is estimated that an average of 10-15 staff weeks per year, and possibly more in the first year of implementation. Project monitoring reports and indicators, the PIM, and a careful review of project expenditures and availability of project resources would form the basis for the supervision missions which would be held at least twice a year. Staffing for supervision missions would need to include, in addition to the task manager, a project implementation specialist. There will be no project launch workshop as this is a follow-on project and the Borrower is fully conversant with Board procedures. 3.9 Project Audits. Project Accounts and the Special Account will be audited in accordance with the Bank's Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank, dated March 1982. During negotiations agreement was reached that the Borrower shall furnish to the Bank as soon as available, but in any case not later than six months after then end of each fiscal year, the report of auditors, of such scope and in such detail as the Bank shall have reasonably requested (including a separate opinion by an independent auditor acceptable to the Bank, on disbursements against certified statements of expenses (SOEs). The separate opinion should mention whether the SOEs submitted during the fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawal applications. C. PROJECT PROCUREMENT ARRANGEMENTS 3.10 Procurement of Goods. Equipment contracts which are estimated to cost more than US$300,000 equivalent per contract will be procured following international competitive bidding (ICB) procedures in accordance with the Bank's Guidelines for Procurement Under IBRD Loans and IDA Credits, dated January 1995, Revised January and August 1996. A detailed project procurement plan appears in Annex II. Hardware and software will be primarily procured through ICB, and will account for about 65 percent of the total equipment/materials value (US$21.8 million out of a total equipment cost of US$30.3 million, excluding duties and taxes). Specialized hardware and software for unique curricula, primarily in the post-secondary component, will be primarily procured through LIB and will account for about 15 percent of the total equipment value (US$4.9 million out of a total equipment cost of US$30.3 million - 19 - (excluding duties and taxes). Taxes for hardware and software are estimated at US$16.4 million. The remaining 20 percent of the equipment value will be in packages suitable for procurement other than ICB. In the comparison of bids for equipment to be procured through ICB, local manufacturers, which have established to the satisfaction of the Borrower and the Bank that: a) labor, raw materials and components from within the country of the Borrower will account for more than 30 percent of the ex works price of the product offered, and b) the production facility in which the goods will be manufactured or assembled has been engaged in manufacturing/ assembling such goods at least since the time of bid submission, would receive a preference in an amount equal to: i) the amount of duties and other related import charges which a non-exempt importer would have to pay for the importation of the goods offered, or ii) 15 percent of the CIF or CIP bid price of such goods if said duties and charges exceed 15 percent of such price. Appropriate Bank standard bidding documents will be used for procurement of goods and equipment. (The General Procurement Notice for the Project is scheduled to appear in the July 1997 edition of Development Business Forum). Table 1 of Annex II shows the major procurement packages for goods. Methods other than ICB 3.11 Limited International Bidding (LIB) and International Shopping (IS). Contracts for purchase or customization of application software, and purchases of customized and specialized hardware, estimated to cost US$4.9 million equivalent, would be awarded under Limited International Bidding procedures in view of the fact that they would require limited amounts of specialized hardware and software and associated services available from only a limited number of sources. As noted in the previous paragraph, this procedure will be used for the Post-Secondary Training component, which requires goods for a wide variety of programs and from different suppliers. Procedures for International Shopping will be used for small amounts of equipment where the cost of ICB and LIB would clearly outweigh possible price advantages. Contracts for equipment and software, materials, and books, not to exceed an aggregate amount of US$2.0 million equivalent, and up to US$300,000 per contract, may be awarded under International Shopping procedures, based on comparing price quotations obtained from at least three suppliers from two eligible countries, in accordance with Bank procurement guidelines. 3.12 National Shopping (NS). Minor sundry items, such as small lots of information technology and office equipment, not exceeding US$50,000 per contract, up to an aggregate amount of US$0.5 million, may be purchased on the basis of prudent national shopping by comparing price quotations obtained from at least three local suppliers, in accordance with Bank procurement guidelines. 3.13 Direct Contracting (DC). Goods and technical licenses which the Bank agrees: a) are of proprietary nature, b) are required on a timely basis for efficient project implementation, or c) need to be compatible with other installed equipment, may be procured through direct negotiations with property and/or copyright owners, on terms and conditions acceptable to the Bank. Such items include contracts for intellectual property such as books, technical journals, training materials, audio-visual materials, computer applications software, including annual - 20 - upgrading and licensing arrangements, copyrights, translation and reprinting rights for training materials for the 85 different post-secondary curricula, 7 core programs, and 13 vocational orientation prograrns. In aggregate, these items are estimated to cost under US$1.6 million equivalent. 3.14 Civil Works. Minor civil works to upgrade facilities to accommodate the new and revised training programs are not included in the Project. When needed, they will be financed entirely by the Government. 3.15 Technical Assistance. Qualified firms will be invited to submit proposals for foreign technical assistance (TA) in accordance with the Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency, dated January, 1997. Terms of reference for the two major TA components have been drafted and agreed with the Borrower, and are contained in the Project Implementation Manual. To keep the evaluation process manageable, no more than six (but at least three) proposals will be invited from a shortlist acceptable to the Bank, based on the "quality and cost-based" selection process. It is anticipated that technical assistance will be procured in two packages, totaling US$5.6 million. As needed, the services of individual specialists or firms for advisory services will be contracted on the basis of shortlists of eligible candidates. Out of the total TA, it is anticipated that about US$0.3 million equivalent of the aggregate for technical assistance would be for individual specialists. 3.16 Bank Review. For goods, the Bank shall review the Borrower's procurement plans, decisions and procedures in accordance with Appendix 1 of the Guidelines for Procurement under IBRD Loans and IDA Credits, dated January, 1995, revised January and August 1996. In particular: a) all ICB contracts estimated to cost US$300,000 or more, which will cover all ICB contracts; and b) all direct contracts shall be subject to prior review, in accordance with paragraph 2 of Appendix 1 of the Guidelines. Other goods contracts costing less than US$300,000, shall be subject to post review in accordance with paragraph 4 of the Appendix 1 of the Guidelines. For technical assistance contracts, the applicable review procedures are discussed in various sections of the Guidelines for the Use of Consultants by World Bank Borrowers and by The World Bank as Executing Agency, dated January, 1997. Terms of reference for all consulting contracts would require prior review by the Bank. Consultants contracts above $100,000 for firms and above $50,000 for individuals would require prior review by the Bank. However, for technical assistance contracts under US$50,000 for individuals, the Bank will require prior review of only the terns of reference and short lists of potential consultants. - 21 - Table 7: Procurement Arrangements a (US$ Million) Category of Expenditure ICB LIB Other N.B.F b/ Total 1. Technical assistance Policy Development 0.2 0.2 (0.2)c/ (0.2) Project Implementation 0.1 0.1 (0.1)_/ (0.1) Capacity Building 1.3 1.3 (1.3)c/ (1.3) 2. Training 3.7 3.7 (3.7)c/ (3.7) 3. Equipment, furniture/ materials 33.5 7.5 d/ 5.6 e/ 46.6 (21.8) (4.9) (3.5) (30.3) 4. Local Staff Development 7.4 7.4 (0) (0) Total 33.5 7.5 11.4 7.4 60.1 (21.8) (4.9) (9.4) (0) (36.4) Note: Figures in parentheses are the respective amounts financed by the Bank. a/ Figures may not add up exactly due to rounding. b/ N.B.F. - Non-Bank Financed expenditure. c/ Services of consultants/institutions (advisors, experts, fellowships/training) to be engaged in accordance with Bank Guidelines for the Use of Consultants. d/ Limited International Bidding (aggregate US$4,900,000); e/ National shopping (aggregate US$500,000) packages estimated at less than US$50,000 per contract; Intemational Shopping (Aggregate $2,000,000 estimated at less than US$300,000 per contract; and direct contracting (aggregate US$1,600,000) proprietary items such as joumals, Hungarian books, and computer software. D. DISBURSEMENT AND FINANCING SCHEDULES 3.17 Disbursements against contracts for goods costing less than US$300,000 equivalent would be made on the basis of statement of expenditures (SOEs). Statement of Expenditures would also be used for all consulting firm contracts less than $100,000 and individual consultants contracts less than US$50,000 and for all expenditures on training, fellowships and studies. All related SOE documentation would be retained by MOL, the implementing agency, and made available for subsequent examination by independent auditors and Bank supervision missions. The proposed Project is expected to be disbursed over a period of three years, which is considerably shorter than the relevant profile in the Region (about seven years). The shorter implementation period is appropriate in view of the Ministry's experience in implementing the equivalent activities under the Human Resources Project. The Project - 22 - completion date will be December 31, 2000. Disbursements of World Bank Funds will be made as shown in Table 8. Table 8: Proposed Disbursement Categories Category Amount of Loan Percent of Expenditures to be (US$ Million equivalent) Financed Goods 27.5 100 percent of foreign expenditures and 100 percent of local expenditures (ex- factory cost) and 85 percent of other local expenditures Consulting Services 5.3 100 percent of expenditures Unallocated 3.4 Total 36.4 E. SPECIAL ACCOUNT 3.18 The Borrower will establish and maintain a Special Account (as specified in the Loan Agreement) with an authorized allocation of US$4 million. This will be exclusively for making payments from the proceeds of the Bank Loan. An initial deposit into the Special Account is to be made upon the Borrower's request upon effectiveness, in the amount equivalent to US$2 million, until the aggregate amount of withdrawals from the Loan plus outstanding commitments entered into by the Bank shall be equal to or exceed the equivalent of $4 million. (a) All applications for direct payment or special commitments must be for an amount not less than 20 percent of the authorized allocation to the Special Account, once available; and (b) applications for replenishment of the Special Account would be submitted on a monthly basis or when one third of the amount deposited has been withdrawn, whichever occurs earlier. F. STATUS OF PREPARATION 3.19 The Project was appraised in May 1997 on the basis of a draft Project Implementation Manual (PIM), which includes detailed costing and implementation schedules, criteria and procedures for selection of participating institutions and programs, project output and performance indicators, and sample bidding documents and Terms of Reference for technical assistance. Procurement will be initiated for the technical assistance packages as soon as negotiations are completed. Identification of institutions programs to be supported under the Project will begin as soon as negotiations are completed. - 23 - 4. BENEFITS AND RISKS A. BENEFITS 4.1 The major benefit expected from the proposed Project is to help adolescents and young adults to make the transition from school to work, thus reducing youth unemployment. The expanded use of the improved vocational orientation curriculum in secondary schools in place of the former excessively narrow secondary level vocational training programs will provide a better basis for improved productivity and improved job mobility as the economy continues to evolve. It will also reduce recurrent costs, as unit costs for some of the new programs to be supported under the Project are about ten percent less than for the former programs. By supporting market-driven specialized training, the Project is expected to reduce unemployment, thereby reducing income support payments and helping young people to make a positive contribution to the economy. B. RISKS 4.2 There is a risk that project resources could be used to support training which is either inappropriate for local labor needs, or delivered by unsuitable training providers. To ensure that project-supported training is appropriate for local labor needs, training programs will be developed in consultation with tripartite regional training boards, and training providers will be required to assist with job placement of trainees and to achieve a negotiated rate of job placement, as they are under the current Human Resources Project. In selecting training providers under the Project, strict criteria will be applied to ensure that training providers have the technical qualifications to provide modem, demand-driven youth training under flexible-entry and flexible-exit programs which meet the needs of employers and trainees. - 24 - 5. AGREEMENTS AND RECOMMENDATIONS A. AGREEMENTS 5.1 Agreements were reached that: (a) The Borrower shall ensure that training institutions included in, and programs supported under Component A (Post Secondary Oriented Training) and Component B (Secondary Vocational Orientation) of the Project shall meet the criteria (Annex IV) agreed by the Borrower and the Bank (paras. 2.3b, 2.3c, 2.4a, 2,4b, and 2.5; (b) The Borrower shall ensure that all training proposals to be included under Component A (Post Secondary Job-oriented Training) of the Project shall be submitted to the Borrower's National Vocational Training Council for review and endorsement (paras. 2.3 and 2.5); (c) The Adult Labor Market Training Department (Munkaeropiaci Kepzesek Foosztaly) of the Borrower's Ministry of Labor (MOL) to be responsible for technical implementation of Component A (Post Secondary Oriented Training) of the Project, and Youth Training Department (Szakoktatasi Foosztaly) of MOL to be responsible for technical implementation of Component B (Secondary Vocational Orientation) (paras. 2.5 and 3.7); (d) During execution of the Project, the Borrower shall maintain Project Coordinating Unit (PCU) under the supervision of a suitably qualified director and procurement or financial officer and supported by support staff in adequate numbers (para. 3.8); (e) The Borrower shall: (i) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the indicators (PIM Section 3 (B)) agreed upon between the Borrower and the Bank, the carrying out of the Project and the achievement of the objectives thereof; (ii) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, on or about May 31, 1999, report integrating the results of the monitoring and evaluation activity activities, and (iii) review with the Bank, by June 30, 1999, or such later date as the Bank shall request, the report (para. 3.10); (f) The Borrower shall furnish to the Bank as soon as available, but in any case not later than six months after the end of each fiscal year, the report of auditors, of - 25 - such scope and in such detail as the Bank shall have reasonably requested (paras. 3.13). 5.2 Additionally, during Negotiations, assurances were given that: (a) The contents of the Project Implementation Manual (PIM), including terms of reference, dated July 8, 1997, were agreed. This document will serve as a technical working document for the Project. However, it is understood that the contents of the Manual may be updated from time-to-time if needed, with the mutual agreement of the technical staff of the Borrower and World Bank (para. 3. 10); (b) The May 31, 1999, project monitoring and evaluation report will include: (i) a summary of progress on each objective and activity of the Project, (ii) a summary of progress toward each project performance and outcome indicator, (iii) a summary any issues or problems and alternative methods of overcoming them, (iv) a financial summary comparing budgeted vs. actual expenditure for each component and expenditure category, (v) if appropriate and necessary recommendations for reallocation of funds between project components and/or cost categories, and (vi) a revised procurement plan for the remainder of the Project (para. 3.10); (c) Approval procedures for training under the first post-secondary component of the Project would permit project financing of any training program which is on the National Training List, but, for programs which are not on the list special procedures are available to put these programs on the list if there is clear evidence of labor-market demand (paras. 2.3(b) and 2.5); (d) State budget financing for vocational education in schools will be provided through normative grants, and program financing grants will be available for other institutions at approximately the same levels; for training carried out by private and public secondary vocational schools, NGO Schools, and Regional Human Resource Development Centers (paras. 2.3(c), and 2.5). B. RECOMMENDATIONS 5.2 Subject to the above, the proposed operation would provide a suitable basis for a Bank Loan of US$36.4 million to the Republic of Hungary under standard Bank terms. -26 - Annex I Page I of 4 Republic of Hungary Youth Training Project Staff Appraisal Report Number Of Secondary Educational Institutions Between 1980-1994 en./$1 1NS/"6. 19210gl1 1991^12 1 199W4. .Vocational is- - Secondary School Number of StdetsinSeonayduatonlnsiutn Secondary lwel V 'A ~~~~~~~~~~~~Vocational School 20% ~ ~ . - ~ - ~ Von. Training school _~~~~~~~~~~~~~~~~~~~~r ' A Grammar Voc. sec. VGrammar School school'AA~< Grammar School and ' Von. Sec. School 10/1 19=1156 199011 1991192 1992193. 199119 199419. Number of Students in Secondary Educational Institutions between 1980-1995 100 40% 20% - __ 0% 198018 1985)8 1 99019 1991(9 1992/9 1993/9 1994/9 1995/9 Grammar Voc.'sec. Voc. training Sec. level school school school voc. school - 27 - Annex 1 Page 2 of 4 Republic of Hungary Youth Training Project Staff Appraisal Report The Sources of Financing of Vocational Training Name 1991. | 1992. | 1993. | 1994. | 1995. 1991. I 1995. 1996 HUF million distribution Total budgetary expenditure 24490.9 30666.3 41104.0 46810.4 56172.5 70.0 76.7 73.9 Of which: state normative contribution 19059.1 23000.0 22871.6 22814.3 22632.6 54.5 30.9 28.4 self-government and other expenditure 5431.8 7666.3 18232.4 23996.1 33539.9 15.5 45.8 45.5 Vocational training contribution 9366.0 10365.0 11537.0 12792.0 13773.0 26.8 18.8 21.6 Of which: Vocational Training Fund 2077.0 1977.6 2120.6 2256.8 2745.8 5.9 3.8 4.1 company training 4938.0 5689.0 6080.0 5908.0 5880.0 14.1 8.0 6.4 direct support to schools 2351.0 2698.4 3336.4 4627.2 5147.2 6.7 7.0 11.1 part of the Employment Fund spent on training 1117.0 2752.0 3679.0 4076.0 3250.0 3.2 4.4 4.4 Total limit spent on training 34973.9 43783.3 56320.0 63678.4 73195.5 100.0 100.0 100.0 Tax base allowance 2963.0 2560.0 2189.0 1934.0 2352.0 8.5 3.2 Other data: Number of pupils Secondary vocational school 178973 186225 192388 196965 208415 44.2 54.1 Apprentice school 204655 188570 174187 163330 154294 50.6 40.0 at school workshop from this 40040 46337 52593 55902 57089 at company workshop from this 69506 52178 42028 33725 27773 vocational school 21058 28186 30411 27967 24132 5.2 6.3 Total 404686 402981 396986 388262 386841 100.0 100.0 Per-student expenditures (current prices, HUF) Levels of education 1985 1986 1987 | 1988 |1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 1996* Kindergarten 15919 17049 18706 22207 29804 39583 50952 59584 75082 93415 105714 130931 Primary school 13651 14257 15352 18691 26748 37169 50112 63613 77476 99332 110829 103245 Grammar school 17339 18189 20357 26590 37169 48877 62007 73891 88372 106034 121486 134331 Vocational training 21448 22609 23909 28613 37242 47728 61079 79866 110440 121503 133664 132401 Voc. sec. training 24576 25597 27686 34189 45592 58974 74403 88018 103460 113469 123946 139341 Higher education 78013 82447 89447 108142 147409 200133 246698 314214 339942 377474 392189 n.a. * Preliminary estimates of the Ministry of Finance - 28 - Annex 1 Page 3 of 4 Republic of Hungary Youth Training Project Staff Appraisal School Graduates by Qualification, 1982 through 1996 1000 student Name 1) 1982. 1985. 1990. 1991. | 1992. 1993. | 1994. | 1995. 11996.* year Graduated from higher level institution 14.7 14.4 16.2 16.9 17.1 16.8 19.1 20.9 22.0 Graduated from secondary vocational school 28.7 31.6 28.7 37.2 41.9 50.7 48.4 45.9 46.0 or dropped out from higher level institution From this: graduated from grammar school 7.8 9.6 7.5 12.6 13.1 17.4 17.8 17.8 16.5 graduated from secondary vocational school 20.9 22.0 16.5 19.3 22.4 26.7 19.7 19.7 15.5 graduated from polytechnic .. .. 4.7 5.3 6.4 6.6 10.9 10.9 14.0 graduated from apprentice school 43.1 52.3 51.6 55.4 63.0 60.0 56.4 50.9 46.0 graduated from a typist school 1.7 2.1 2.4 2.0 1.7 1.3 1.2 1.0 graduated from health vocational school 3.0 1.6 1 .3 1.5 2.0 1.8 1.4 0.9 0.8 graduated from other and special vocational .. .. 0.8 1.0 1.6 5.7 9.0 8.7 8.4 school Completed the eight grades of primary 30.5 30.0 41.4 40.7 35.0 32.8 28.1 18.3 15.0 school but did not study further or dropped out from secondary level educational institution Did not complete primary school, are over 6.2 6.1 10.3 12.4 10.0 6.8 6.6 5.0 4.8 the age of 16 Youthlaborforceinthe given year 126.2 137.7 152.4 167.5 172.6 176.3 170.3 151.8 144.0 Of this: with qualifications 81.7 92.0 93.2 101.8 114.5 119.3 117.8 111.4 107.7 without qualifications 44.5 45.7 59.2 65.7 58.1 57.0 52.5 40.4 36.3 proportion (%) without qualifications 35.3 33.2 38.8 39.3 33.7 32.3 30.8 26.6 25.2 1 graduated from full-time course 21 Together with graduates from special vocational school up to 1993 31 Without students admitted to HEis up to 1990, but starting their studies later, with young people intending to go to HE, but not admitted (from 1991) temporary labor force * Preliminary data Source: Statistical Year Book, 1995, KSH (Central Statistical Office) - 29 - Annex 1 Page 4 of 4 Republic of Hungary Youth Training Project Staff Appraisal Report Number of vocational trainees according to the place of their practical training between 1980-95 #of stud. 60000 _ _.._.._ __7 __ 70000 ._ _____ .__ in school workshop 50D000 t _-- ----------1 -----.------72 o - 1 9-- _ _other, not in groups 40000 0 V j= oS,# in factory workshop 20000 . L___ _ in factory production environment FoUNDATIONS RELATED TO SECONDARY-LEVEL EDUCATIONAL INSTITUTIONS Voc. sec Vocational Voc. sec. school I school and Voc. traininl sch T Gramma Grand Type secondary Gfi hI and Voc.l TOTAL sho OA school Grammar school training school TOTAL school school Technical 15 1 3 2 21 0 21 General 10 4 2 1 17 78 95 Commerce/ catering 9 2 4 1 16 0 16 Agricultural 8 0 1 2 11 0 11 Economic 6 2 0 0 8 0 8 Information Technology 6 0 0 0 6 0 6 Medical 3 1 0 0 4 0 4 Tourism 3 0 0 0 3 0 3 Enviromental protection 0 0 0 1 1 0 1 TOTAL 60 10 10 7 87 78 165 - 30 - Annex 11 Republic of Hungary Youth Training Project Staff Appraisal Report Procurement Plan Procurement Plan Total Cost Total Bank Procurement Notice/ Document Contract Procurement Package Financing Method invitation Issue Award US$'000 US$'000 Equipment, Furniture & Materials ICB 7 Equipment Packages (Sec) 4,913 3,193 ICB 04/98 5198 7/98 13 Equipment Packages(Sec) 18,592 12,084 ICB 05198 7/98 9/98 43 Equipment Packages(PS) 7,500 4,875 ICB 06/98 8/98 1/99 I Material Package (PS) 972 632 ICB 05/98 8/98 1/99 1 Material Package (Sec) 521 338 ICB 05/98 7/98 10198 Material Package (Sec) 1,048 681 ICB 02/98 9/98 11/98 Subtotal ICB 33,546 21,803 ICB LIB 42 Equipment Packages (PS) 7,500 4,875 LIB 7/98 9/98 1/99 LIB Subtotal LIB 7,500 4,875 IS 2 packages (PS) 380 247 IS na na 1997/98 5 Material Package (PS) 972 632 IS na na 97/98 5 Material Package (Sec) 815 338 IS na na 97/98 5 material package (Sec) 1,048 681 IS na na 97/98 Subtotal IS 2,911 1,898 IS na na DP 40 packages (PS) 972 632 DP na na 1997/98 7 packages (Sec) 521 338 DP na na 98/99 13 packages (Sec) 1,048 681 DP na na 98/99 Subtotal DP 2,541 1,651 DP NS Project Coord. Unit 79 51 NS na na 97/98 Post. Sec. Component 167 108 NS na na 97/98 Sec. Component 80 52 NS na na 97/98 Subtotal NS 326 211 NS Technical Assistance & Training Project Coordination Unit 160 160 CQ 09/97 10/97 12/97 2 Packages (Program Development) 5,733 5,733 QCBS 09/97 10/97 12/97 Local Staff Development 7,352 NBF NA na na 1997/00 Subtotal TA & Training 13,345 5,893 TOTALS 60,100 36,400 LIB = Limited Intemational Bidding DP Direct purchase for proprietary items or training materials SL = Short listing of firms NS = National Shopping (three price quotations) ICB = International Competitive Bidding . NBF = Non Bank Financed CQ = Consultant Qualification QCBS = Quality and Cost-based Selection - 31 - Annex III Republic of Hungary Youth Training Project Staff Appraisal Report Project Design Summary Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks (KPI) IS CAS Objective (CAS OBJECTIVES TO BANK MISSION) In the 1995 CAS the "most 1. Strengthening of post Ongoing supervision of HHRD The scenario envisaged in the CAS desirable" scenario for secondary specialized vocational Project and the Proposed assumes continued economic stability adjustment lending includes education Youth Training Project. and good progress on economic support for critical social policies reforms. Some of the policy and investment projects in 2. Completion of implementation measures in the areas of public education which would be taken of Secondary Vocational school finance, enterprise privatization, and as sector policies permit. The reform started under the Human education will require a strong latter would aim at attracting the Resources Project, thus enabling political consensus and the private sector and/or raising the the education. and training sector willingness of the public to accept efficiency of social and economic to produce graduates, knowledge further painful adjustments. If these infrastructure. Although the and services needed by the adjustments are slowed, the direction scenario goes on to discuss market economy and a future EU of labor force development, and support to higher education, a key country member. youth and adult training initiatives, focus is on "enabling the will be somewhat obscure but it will education sector to produce become even more important to graduates, knowledge and create human resource development services needed by a market institutions that are flexible and can economy and a future EU sense and respond rapidly to changes member country". This is the in the economy and labor market.. major objective the Youth Training Project defined in this SAR. Strategy updates developed by the Hungary Resident Mission for the 1996 Annual Meetings broadened discussion of the sector to include "education and training" and noted that the Government was considering asking the Bank for follow-up support, in the field of training, to the existing Human Resource Project. 18 Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and full impact. - 32 - Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ~(KCPI) ' Project MONITORING AND (DEVELOMENT OBJE(CTIVES Development Objectives SUPERVISION TO CAS OBJECTIVES) The objective of the Project is to All post secondary institutions The rapid emergence of employment improve enterprise productivity and secondary vocational in small and medium sized and competitiveness, the schools will be selected by enterprises, as contrasted with the transition to a market economy, the Ministry of Labor previous dominance of large state and accession to the EU by technical implementation enterprises, and increasing levels of continuing development of the teams and monitored in technology require: (a) significant human resource base; in accordance with the changes in the skills and attitudes of particular by improving the monitoring and evaluation the workforce; (b) related changes in effectiveness and efficiency of the program outlined in the representation and input from social use of public financial resources Project Implementation partners, particularly from employers used to prepare youth and young Manual, to be reviewed which represent the demand side of adults to make the transition from periodically by supervision the labor equation; and (c) related school to work, thus reducing missions. changes in traditions and the content youth unemployment. of training provided by "supply side" institutions. Existing patterns of A. Post Secondary A. 1 Identification and selection social partner representation, and Job-oriented training of approximately 170 sites in some operating policies of supply private, public, and non- side institutions, will be difficult to governmental institutions, on a change, but if they do not change the competitive basis and based on effectiveness of public investments in local and national labor market human resource development will not demand, which will help to improve. develop, and implement, new specialized training curricula curricula to support the emerging market economy. A.2 Provision of modernized modular specialized training to approximately 4,250 young adults a year, which is an approximate doubling of the number of graduates from existing programs in existing Regional Human Resource Development Centers A.3 Job Placement rates, or transfer to higher education, for graduates from specialized training programs at approximately 75% within 6 months after completion of programs with the understanding that placement rates in communities will vary due to economic conditions. - 33 - Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks (KPl 18_ Project Development Objectives (Con't) B. Secondary Vocational B. I Identification of Orientation approximately 135 secondary vocational schools which are interested and willing to implement the new Core Curricula in grades 9-12, and Vocational Orientation programs at grades 11 and 12 which reflect the economy in their region. B.2 A 25% increase in the enrollment of secondary school students in the new programs by the end of the Project. B.3 A reduction in the unemployment rate of post- compulsory /post-secondary school young adults by 20 % when students complete the new programs, with the understanding that placement rates in communities will vary due to economic conditions. - 34 - Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks (KPI)'I PROJECT OUTPUTS: MONITORING AND (OUTPUTS TO DEVELOPMENT SUPERVISION OBJECTIVES) A. Post Secondary Specialized Technical team and PCU Support for the reform of secondary training. management of Project technical schools, for which enabling I Development of Curricula A. I Development of implementation and Bank legislation has been passed, will approximately 85 new/revised supervision missions, continue without abatement. Opening specialized training focused on of the market and promotion of new and emerging needs of the increased competition for provision economy. of post-secondary (pre -university) training will be fully supported by the 2. Provision of resources to A.2 Provision of required Ministry and participating selected sites/institutions. curriculum, materials and institutions. There is a risk that some equipment to the approximately traditional institutions, and Ministry 170 selected sites to enable them personnel, may not support open to implement the curricula. competition for Project investment resources, particularly among post- 3. Staff Development A.3 Provision of staff secondary/post-secondary training development and training to providers which may find it difficult approximately 170 lead to meet minimum requirements for instructors and managers in the delivery of modern demand driven selected institutions to assist them youth/adult training. The social in implementing the curriculum. partners will participate in definition and development of human resource development programs. There is a B. Secondary Vocational Schools B. I Provision of staff training, risk that it will be difficult to obtain 1. Infrastructure for Core materials, and equipment to sufficient representation from small curricula approximately 135 schools to and medium sized businesses in some allow them to implement the new localities because they are not well core curricula at grades 9-12 organized and mechanisms for gaining input are not well developed. 2. Vocational Orientation B.2. Provision of staff training, A National Register of Vocational Curricula equipment, and materials to allow Qualifications exists, and the approximately 135 schools offer Ministry proposes to use it as a an average of two vocational method of identifying priorities, orientation programs in grades 11 especially for post-secondary and 12. training. There is a risk that this list may be dated, and that mandating it's use will curtail development of needed labor market training. Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks (KPI) tS PROJECT COMPONENTS: INPUTS AND COSTS: MONITORING AND (COMPONENTS TO OUTPi (US$'000) SUPERVISION A. Post Secondary Specialized The Ministry of Labor can manage Training. project implementation without major problems. It is successfully 1. Project Coordinating Unit 1. 1 A PCU with a minimum of Bank supervision completing implementation of youth 3 full-time staff by Dec. 1997 of PCU activities. and adult training components of the 1.2 Technical Assistnce and Involvement of MOL staff. previous Human Resources Project. training for PCU staff in 1998. ($0.3 Mil) The Ministry has the legislative mandate to continue development of 2 Development of Curricula 2.1 Approximately 170 sites Close monitoring of course labor market training program at the identified through a competitive design and delivery by MOL secondary and post secondary (pre- process, 15 writing tams Technical team. Review of university) levels and chairs the established, and approximately procedures by Bank existing National Vocational 85 new modular curriculum supervision missions. Training Council. written along with specifications for materials and equipment by The existing Project Coordinadng end 1998 (S5.3 mil) Urit is familiar with administration of Bank financed projects and will be 3. Provision of resources to 3.1 Materials and equipment Involvement of MOL and continued to support the new project selected sites/institutions. procured for approximately 85 writing teams, involvement of program and delivered to PCU in procurement process, The Government has committed approximately 170 implementing supervision by Bank staff. US$24 Million in counterpart sites by the end of 1999 (S18.7 Field visits and site inspection financing.. mil) by MOL and Bank staff 4. Staff Development 4.1 Staff development provided Involvement of MOL to approximately 170 individuals technical team, Technical at sites implementing new Assistance consultants and curriculum by the end of 1999 Bank supervision staff. ($1.9 mil) B. Secondary Vocational Schools 1.1 Approximately 135 schools Involvement of MOL stff and 1. Core curricula selected which will implement the review of procedures by Bank new seven core curriculum by supervision missions.. December. 1997. 1.2 Materials and equipment Involvement of MOL staff, procured for sites by December, using materials developed 1998. ($ 6.4 mil) under the previous HHRD 1.3 Staff training provided to all project. PCU assistance and participating sites by end 1999 monitoring, and Bank ($2.7 mil) supervision. 2. Vocational Orientadon 2.1 Approximately 135 schools Involvement of MOL Curricula selected which will implement an technical team, Technical average of two vocational Assistnce consultants and orientation curricula each by Bank supervision staff. December, 1997. Involvement of MOL staff and review of procedures by Bank supervision missions.. 2.2 Materials and equipment Involvement of MOL staff, procured for sites by December, using materials developed 1999. (US$ 21.7 mil) under the previous HHRD project. PCU assistance and monitoring, and Bank supervision. 2.3 Stff training provided to all Involvement of M OL participating sites by end 2000 technical team, Technical ($3.0 mil) Assistance consultants and review by Bank supervision missions. - 36 - Annex IV Page 1 of 2 Republic of Hungary Youth Training Project Staff Appraisal report Key Criteria for Selection of Institutions and Programs 1. Component A: Post Secondary Job Oriented Programs Minimum Criteria for Qualifying Institutions and Programs (a) Legal Status: are a legally incorporated entity (Hungarian or Joint Hungarian-foreign Enterprise) which has a main field of activity in vocational training, has satisfied their tax and social security payment obligations, and commits to the continuous provision of training needed for the implementation of the project.. (b) Social Partners: Possess a management board composed of the social partners, or have established such a board for the management of the program to be financed. (c) Client Services: are committed to training young people over compulsory school age, young people with final examinations, and adults who are unemployed or wish continuing education. (d) Counseling: can provide job counseling and placement services either from their own capacity or by contracting with other organizations. (e) Delivery: can provide flexibly entry/exit training on a modular basis to clients. (f) Evaluation: undertake, upon program completion and six months after program completion, to provide the Ministry of Labor with data concerning the work and educational status of program completers. (g) Placement: Agree to sign service contracts, including negotiated rates ofjob placement, for training the unemployed, if requested by County Labor Centers. Weighted Criteria for Ranking those Applicants Meeting Minimum Criteria (a) Demand: evidence of Labor Market Demand (i.e. local tripartite council endorsement, enterprise hiring commitments, labor market information/data, job placement rates from similar programs). Programs without sufficient evidence will be rejected. (b) Supply: need for additional or upgraded training capacity to meet demand (i.e. evidence that demand exceeds current supply, evidence that the program will not duplicate existing programs). (c) Counseling: method of providing job-counseling and placement services (i.e. higher weight will be placed on provision of on-site rather than off-site services). (d) Services: including experience with post-secondary job oriented adult labor market training, experience with flexible entry /exit modular training, breadth of experience in serving different client groups (youth, adults, company specific training), (e) Facilities: existing and needed materials, equipment, and facilities. (f) Staff: quality and experience, including on-job work experience in the program to be financed. (g) Evaluation: expected placement of graduates in jobs and further training. (h) Proposal: overall quality and completeness of the proposal. 2. Component B: Secondary Vocational Orientation Minimum Criteria for Qualifying Institutions and Programs (a) Legal Status: financing open to any Hungarian state, non-state, or private education institution which is legally constituted as a "secondary level school" and which has a main field of activity in provision of secondary school youth vocational training. (b) Program: are committed to use the seven core, and 13 job family, curricula and materials developed under the previous World Bank project, and offer at least two job family curricula. - 37 - Annex IV Page 2 of 2 (c) Timeline/delivery: are committed to launch classes from the beginning of the 1998/99 academic year, and continue for at least five consecutive years. (d) Counseling: agree to provide career orientation/counseling information and services. (e) Staff and facilities: commit to involve staff in inservice training and make necessary support facilities and materials available to support installation of the new programs. (f) Graduate Status: agree to provide information the status of graduates (i.e. work or in further education) to the MOL six months following program completion. (f) Previous Support: have not obtained support previously from World Bank or PHARE financed projects. (g) Local Support: have provided letters of intent from administrative and teaching staff for participation and a letter of endorsement by the local government. Weighted Criteria for Ranking those Applicants Meeting Minimum Criteria (a) Demand: evidence of Labor Market Demand for the job family(s) for which support is being requested (i.e. local tripartite council endorsement, enterprise hiring commitments, labor market information/data, job placement rates from similar/existing programs). Programs without sufficient evidence may be rejected. (b) Linkages/Articulation: evidence of linkages with enterprises and other schools in Hungary and abroad, including articulation agreements with post-secondary programs which are willing to provide advance credit for completion of secondary level job family programs. (c) Financial Support: evidence of local financial support from the school, community, and local government. (d) Services: availability of existing equipment for the proposed job families, availability of needed facilities for new core and job family curricula,. (f) Staff: quality and experience, including on-job work experience in the job-family programs to be offered. (g) Experience with Job Family Curricula: additional weight will be given to schools which have already attempted to initiate the new job family curricula, even without outside PHARE or World Bank project support (h) Proposal: overall quality and completeness of the proposal. MAP SECTION IBRD 28708 16 HUNGARY 20' 22' YOUTH TRAINING PROJECT V *r o U / z( v C8dusnemell ~> wT. U,.,rd UK RA IN E _ MOTORWAYS WM NATIONAL CAPITAL / 0 S 2 AUSTRIAkOADS) COUNTY JMEGYEI CAPITALS' S-L V AD K R E-ABAUJ d-T RAIIRQADS ° OTHERKMAJORCITIES, CANALS COUNTY (MEGYE) BOUNDARIES G7 a ~~~~~~~RIVERS - INTERNATIONAL BOUNDARIES ¢vT uoe /g¢. Ksodi T. vi- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~ ,,,, A 46 o 0 AD 25h So-RnEeP. O FYUGOSAI 1 LLo RA T. N-~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L/AN,Eb r 0u d a ' P E S 20D30 f0 50 M ILES l8' < t \ 20' 1 Le6A 4 ' A .. "' Kopoovor i>.o ;tUGU5o 1 99 Tr6/goh Darn 'ASZ- YKU -''TAo Eo'90 SZOLNO S ' o,d{-166' BAJ ROMANIAt04 - 40 ~~o 425 ~~ ALSTEFA4ju16c06/ \ 4zp' l1ES,7PRFM f FJFR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1106 0 EKES ~ ~ ~ ~ ~ ~ ~ 1 o~0o~,r r < 0LO 10I 20 20 40OGLE .",hf %~ / OL 22-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~rc47A6A1 N. i. CSON RA I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~6/JTIp IMAGING Report No.: 18463 HU Type: SAR