INTERNATIONALBANK FOR WORLD BANK R E T C N O E N STRUCTION PM AND DEVELO February 2003 No.19 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region PROVIDING SKILLS FOR THE KNOWLEDGE ECONOMY THE WORLD BANK IN TERTIARY EDUCATION IN LATIN AMERICA AND THE CARIBBEAN Lauritz B. Holm-Nielsen, Andreas Blom and Patricia Garcia Knowledge based economies have an advantage in today's economic progress, universities increasingly need to in- liberalized global market. OECD countries with extensive tegrate with society. In LAC, interaction is low, as mea- knowledge assets are able to drive rapid technological sured by a low score in meeting the economy's need (5.3 progress and reap the benefits in economic growth and rising and 5.1 in G7 and LAC, respectively, on a 1-10 scale), living standards. Yet, Latin American and Caribbean (LAC) under-supply of technical workers, and insufficient re- countries struggle to provide their citizens with the educa- search collaboration between companies and universities. tional levels and advanced skills needed to create and apply new knowledge. In addition, case-studies from around the region indicate the following two issues: Recent empirical work by Sánchez-Páramo and Schady (2002) documents a remarkable shift in labor demand to- · Low quality. Expanded enrolment has not been matched wards advanced skills in LAC countries. Producing skilled by staff recruitment and up-grade programs. Apart from and knowledgeable people requires a strong education sys- Brazil, LAC countries cannot recruit university profes- tem, including access to good secondary and tertiary educa- sors with doctorates because of the paucity of effective tion. This note provides information about World Bank as- doctoral study programs in the region. This problem is sistance to LAC countries to increase access to quality ter- exacerbated by global mobility of Ph.D. graduates.2 Also, tiary education. a lack of accreditation mechanisms allows extreme qual- ity. The State of Tertiary Education in LAC Figure 1 An analysis of tertiary education in LAC--pre- Tertiary enrollment 1997 sented at a glance in Figure 1--points to three 7.00 6.00 main issues:1 5.00 Public expenditure on University education meets Tertiary as % of total public 4.00 the needs of a competitive · Low enrolment. In LAC, about 20 percent expenditure on education* 3.00 economy (2001 IMD) of the relevant age cohort attend tertiary 2.00 1.00 education. This compares to more than 50 0.00 percent in the OECD. · Under-investment in education. LAC gov- Professional and technical ernments clearly under-invest in education. Public spending on workers as % of the labor education as % of GDP, force (2000 ILO) However, the share of education budgets al- 1999 (WDI 2001) located to tertiary education in LAC is equivalent to that in G7 countries (21 per- Research collaboration cent) and below the share in Western Eu- between companies and G7 Latin America universities (2000 WEF) rope (26 percent) and East Asia (29 per- cent). · Source: World Bank Institute (2001); * OECD (2001) and UNESCO (2001a,2001 b,2001c) Low relevance. With the growing impor- Note: Each indicator is rescaled to a scale from zero to ten, where zero is the lowest country value found tance of knowledge and innovation for in the world and ten the highest 1 differentials to persist. Poor quality tertiary education Tertiary education projects make up 17 percent of the total outcomes in LAC have negative effects on secondary education portfolio in LAC (Figure 3). These projects are education, the public administration and mid-level closely related to the World Bank's support for Science and management in the business sector. Technology, and are complementary to support for preschool, primary, secondary and vocational education. In addition to lending operations, the Bank also supports tertiary education · Low equity. Tertiary education is primarily for the chil- through technical assistance. dren of affluent households in LAC. Available data show that three out of four students come from the two The Strategy for Tertiary Education in the Latin American and wealthiest quintiles of the population. Caribbean Region has two pillars: (i) building a market for tertiary education, and (ii) improving the accountability and This "snapshot" analysis of the shortfalls in tertiary educa- responsiveness of the Public Sector. The strategy is translated tion in LAC countries hides a very diverse pattern of coun- into five specific action lines (Figure 4): try successes and stagnation. Figure 2 illustrates the diver- sity in gross enrolment profiles over time and across coun- · Institutional capacity building to support improvements tries. There is similar variety in other aspects of tertiary education, including provision, governance, quality, and fi- in designing the legal, institutional and policy framework nance. So strategies and projects have to be tailored to each that governs the system. country's reality. · Competitive and performance based for- mula funding, applied mainly to public institu- 50 Argentina Figure 2 - Gross Tertiary Enrolment in tions to foster efficiency and accountability by 45 linking funding to performance. Achieving ef- tne Latin America2 Chile 40 ficiency in the public sector is key for two rea- ml 35 sons: (i) to increase enrolment in relevant ar- rone V enezuela 30 eas of education; (ii) to assure that education is ryairt provided in disciplines with perceived social 25 Colombia impact that are not offered by private provid- Te 20 Latin America & ers (i.e. Basic Sciences3). ssor 15 Caribbean G10 Mexico · Quality assurance mechanisms. As a het- 5 erogeneous sector emerges with many new Brazil 0 institutions, it is increasingly important to in- 1970 1975 1980 1985 1990 1995 1999* duce a culture of self-evaluation, monitoring and external quality assessment. Quality Source: World Development Indicators (WDI) *1999 or latest available. standards must be met and the general public must be Note: Argentina has long completion times, thus the presented enrolment ra- well informed about the quality and relevance of edu- tio possibly overestimates the share of youth attending tertiary education. cation courses. New institutions must meet minimum The World Bank's Role and Strategy teaching standards to be allowed to operate. The World Bank's assistance to tertiary education in LAC seeks to generate economic growth as a mechanism for sus- Science & tainable poverty eradication. This goal is promoted by: Technology 6% Tertiary · building advanced human capital; 17% · supporting local research for adapting foreign technolo- Primary Vocational 48% gies; 12% · preparing individuals for less profitable, but socially im- portant careers, such as the civil service, community de- Secondary Figure 3 - World Bank velopment, public health, and especially, high quality pri- 17% Education Portfolio in mary and secondary school teachers. LAC By building skills and research capacity domestically, the pri- vate sector will enhance capacity to develop, assimilate and ap- · Labor market observatories (LMO) provide the popu- ply new knowledge and technologies. This will help diversify lace, business sector and public and private institutions the economy, foster competitiveness and spur the economic with current information on patterns of supply and de- growth necessary for sustained poverty reduction. An integral mand for high level skills. LMOs are becoming essen- goal is better access to tertiary education for low-income stu- tial in guiding demand towards opportunities. dents, which will improve social mobility. 2 · Student loans. Building a market for tertiary education · Sector studies, as an introductory stage or as a comple- would be incomplete without making it financially pos- ment to an intervention, have been extremely helpful in sible for qualified students to make use of educational achieving a comprehensive view of the tertiary educa- offerings. Student aid programs are critical in any mod- tion sector. ern tertiary education system. The challenge is to find the right mechanisms to provide an incentive to people · Integration of comprehensive teams that combine to invest in their own education, while reducing their risk to acceptable levels. Student aid systems often combine World Bank staff with world class education specialists subsidies for the poorest students and loans for wealthier and experts from educational institutions within the students. country. The Bank is currently working with eight governments to en- Moreover, the existence of complementarities should be hance and strengthen their tertiary education systems. Project stressed: designs have been based on each country's vision and existing system. They include students loans to increase access for low · Without strong initiatives in preschool, primary and income students, quality assurance mechanisms, labor market secondary school, there is no foundation for expansion observatories that gather indicators of relevance in the labor of tertiary education. market, and public funding for innovation and institutional ca- pacity building (Table 1). · Without broad based economic reform, to promote macroeconomic stability, free trade, a favorable invest- Chile is an outstanding case of successful implementation and ment climate, and effective labor markets, the eco- positive outcomes in capacity building and efficiency (Box 1). nomic value of tertiary education falls far below its full potential. Lessons Learned It is too soon to determine if these operations are helping The experiences drawn from these operations have inspired LAC economies to participate better in the global knowl- new projects, not just in tertiary education, but in the na- edge based economy, because the real impact of tertiary scent effort towards a Lifelong Learning approach in Latin education has a long time lag and knowledge building takes America. Overall, outcomes have been very satisfactory, but decades. However, it is expected that the countries of the they are highly dependent on the country's situation, par- region which have taken on the challenge to reform their ticularly the level of political support. tertiary education systems will be able to close the knowl- edge and income gaps with the leading economic regions of Two practices have proven successful throughout the plan- the World. ning and implementation of operations: ******* Table 1. Active projects in Tertiary Education in LAC Region Project Components Analytical Work Institutional Public Quality Labor Market Student Background Comprehensive Country Capacity Competitive- Assurance Observatory Loans Studies Sector Studies Building Funding mechanisms Argentina * * * x P(FY03/04) Brazil P x x (Red Cover) Bolivia x Chile * * * * x Colombia P x x (Green Cover) Jamaica * * x Mexico * * Venezuela x x x x x x (White Cover) Key: * - Disbursing Loans P - In Preparation x - Closed /Completed Note: In addition the LAC tertiary education team is engaged: (i) LAC Flagship study for 2002 (knowledge economy); (i) ESW for tertiary education in the Caribbean countries; (ii) LAC thematic study on internalization of higher education (with the OECD); and (iv) LAC re- gional thematic 3 Box 1 - MECESUP Project in Chile The Chilean government began the MECESUP project (Programa de Mejoramiento de la Calidad y Equidad de la Educación Supe- rior) in 1998, with World Bank support. The project aims to achieve coherence in the system, institutional and financial efficiency, quality, relevance and equity through three components: (i) Policy framework and capacity building, which enhances the legal, regu- latory and institutional framework, and develops a policy congruent with the environment and able to support the objectives. Two in- formation tools were created: a management information system and a labor market observatory. (ii) Quality Assurance, through de- signing standards for all educational levels and fields, and creating a national accreditation board. (iii) Financing, using a competitive fund to provide incentives for quality improvement and institutional performance, and to increase accountability. Student aid, in the form of loans and scholarships was expected to improve equity in access. At mid-term, the project has proven successful in all components. (i) Institutional capacity: Anew legal framework proposal was fi- nalized in 2002; a new integrated management information system for Higher Education (NEHUEN) with indicators became opera- tional in 2001; and a competitive bid for establishing and operating the labor market observatory was won by Universidad Adolfo Ibañez. (ii) Quality assurance: Two accreditation bodies were created, the National Commission of Undergraduate Accreditation (CNAP) and the National Commission ofAccreditation for Graduate Programs (CONAP). Results include the production of materi- als for institutions to perform auto-evaluations towards accreditation, and accreditation of 58 doctorate programs and 7 undergraduate programs, with 83 more underway. (iii) Financing: Competitive funding was successful in attracting innovative proposals; calls for proposals in 1999, 2000 and 2001 resulted in 209 approved projects, from diverse institutions at the undergraduate, postgraduate and technical levels. Moreover, 68% of the approved funds went to projects in areas outside of the main cities. Competitive funding now amounts to more than 10 percent of total public funding to tertiary education compared to zero at project initiation. Also, perfor- mance indicators for equity of access have surpassed the project's goals. Figure 4 - World Bank Strategy for Tertiary Education About the Authors Project Addressing Lauritz B. Holm-Nielsen is a Pillar Components Needs Lead Education Specialist in the Bank's Human Develop- ment Department. Andreas Improving 1. Institutional Blom is a consultant working Capacity Building Increased Increased with the Economic Policy Public Sector's Relevance Relevance Group and Patricia Garcia also Performance 2. Public Competitive Funding works in the Education Group. Improved Improved 3. Quality Assurance Quality Quality For more information Building a Mechanisms Market for Higher 4. Labor Market http://www.worldbank.org/ Tertiary Enrollment Observatories laceducation Education http://www1.worldbank.org/ 5. Student Loans Improved Improved education/ Equity Equity Notes 1These findings are common to other developing regions, World Bank (2002a), Technical paper on Tertiary Education. 2 For example Brazil is the LAC country with the highest share of faculty holding a PhD degree, 19%, World Bank (2002c). At the other end of the scale, only 2 percent of Colombian faculty have a doctoral degree, World Bank (2002b). 3 Private enrollment in Basic Sciences is about 6% compared with 94% in Public institutions in Argentina, 0% vs. 100% in Bo- livia, and 4.5% vs. 95.5% in Chile. About "en breve" To subscribe to "en breve" please send an email to "en_breve@worldbank.org" 4