Report No.: 102301-PA Central America Social Expenditures and Institutional Review Panama July 6, 2015 Education Global Practice Health, Nutrition and Population Global Practice Social Protection and Labor Global Practice Latin America and the Caribbean Region Document of the World Bank Panama Social Sector Expenditure and Institutional Review Table of Contents List of Figures ................................................................................................................................. 4 List of Tables and Boxes................................................................................................................. 7 Acronyms ........................................................................................................................................ 8 Acknowledgments......................................................................................................................... 10 I Executive Summary .............................................................................................................. 11 I.1.1 Education ................................................................................................................ 12 I.1.2 Health ...................................................................................................................... 13 I.1.3 Social Protection ..................................................................................................... 15 II Context .................................................................................................................................. 17 III Recent Trends in Social Spending in Panama ...................................................................... 20 IV Performance and Challenges in Education ........................................................................... 29 IV.1 Recent Evolution of Education Public Spending ........................................................... 29 IV.2 Performance of Education Indicators ............................................................................. 36 IV.3 Institutional Arrangements ............................................................................................. 53 V Performance and Challenges in Health ................................................................................. 57 V.1 Recent Evolution of Health Public Spending ................................................................. 57 V.2 Performance of Health Indicators .................................................................................. 60 V.3 Institutional Arrangements ............................................................................................. 68 VI Performance and Challenges in Social Protection and Labor ............................................... 76 VI.1 Recent Evolution of Social Protection and Labor Public Spending............................... 76 VI.2 Perfomance of Social Protection and Labor indicators .................................................. 81 VI.2.1 Social Security ........................................................................................................ 81 VI.2.2 Social Assistance .................................................................................................... 85 VI.2.3 Labor Market Policies and Programs ...................................................................... 93 VI.3 Institutional Arrangements ............................................................................................. 97 VII Conclusion and Policy Recommendations....................................................................... 100 VII.1.1 Education ........................................................................................................... 100 VII.1.2 Health ................................................................................................................ 102 2 Panama Social Sector Expenditure and Institutional Review VII.1.3 Social Protection and Labor .............................................................................. 105 Appendix ..................................................................................................................................... 107 References ................................................................................................................................... 114 3 Panama Social Sector Expenditure and Institutional Review List of Figures Figure 1: GDP growth in Panama and Central America, 2001-2013 ........................................... 17 Figure 2: Poverty headcount ......................................................................................................... 18 Figure 3: Inequality – GINI Index ................................................................................................ 18 Figure 4: Social Spending (PPP, US$ million 2007) .................................................................... 20 Figure 5: Social Spending as a % of GDP by sector (%) 2007-2013 ........................................... 21 Figure 6: Social Spending as a % of GDP by country, 2013 (%) ................................................. 21 Figure 7: Per capita social public expenditure by sector (2012 or latest year available) .............. 22 Figure 8: Distribution of social spending by income quintiles, 2013 ........................................... 23 Figure 9 Budget execution 2007-2013 .......................................................................................... 23 Figure 10: General government overall balance, 2007-2015........................................................ 24 Figure 11: Public Sector Performance and Efficiency in Panama and LAC, 2010 ...................... 26 Figure 12: Production Possibility Frontier (Data Envelope Analysis) for Total Social Public Spending, Panama and LAC, 2010. .............................................................................................. 29 Figure 13: Real public spending on education (US$ 2007 million) ............................................. 30 Figure 14: Public Spending on Education as a % of GDP ............................................................ 30 Figure 15: Public spending on education as % of GDP vs GDP per capita, PPP (constant 2005) 30 Figure 16: Public spending by educational level as a % of GDP (%) 2007-2013 ........................ 31 Figure 17: Per student public spending by level (PPP US$ 2007) ............................................... 32 Figure 18: Public enrollment by level (thousands) ....................................................................... 32 Figure 19: Secondary per student public spending as a % of GDP per capita and GDP per capita (PPP) ............................................................................................................................................. 33 Figure 20: Panama wage bill as % of total public education spending, 2007-2013 ......................................................................................... 34 Figure 21: Wage bill in Central America as % of total public education spending...................... 34 Figure 22: Student-teacher ratio.................................................................................................... 34 Figure 23: Student/teacher ratio in secondary education in relation to GDP per capita, 2012 ..... 34 Figure 24: Average per hour teachers’ salary relative to other professional workers, circa 2000 and 2010 ........................................................................................................................................ 35 Figure 25: Total Students by educational level and quintiles, 2013 ............................................. 36 Figure 26: Public Spending by educational level and quintiles, 2013 .......................................... 36 Figure 27: Gross enrolment rate by educational level 2013 ......................................................... 36 Figure 28: Secondary education, gross enrollment rate (%) vs GDP per capita 2012.................. 36 Figure 29: Enrolment rate in Central America countries, students aged 5-20 .............................. 37 Figure 30: School attendance rate of children aged 4-5 by quintiles 2013 (%) ............................ 39 Figure 31: Gross attendance rate by quintiles 2013 (%) ............................................................... 40 Figure 32: Graduation rate by level, selected provinces (2010) ................................................... 40 Figure 33: Enrolment (%), ages 5-20 (2013) by location ............................................................. 41 Figure 34: Attainment, ages 15-19, by geographic location (2013) ............................................. 41 Figure 35: Enrollment rate of students aged 5-20 by gender (2013) ............................................ 41 4 Panama Social Sector Expenditure and Institutional Review Figure 36: Attainment, ages 15-19, by gender (2013) .................................................................. 41 Figure 37: Main reasons why students aged 15-17 drop out of school in Panama (2008) ........... 42 Figure 38: Tertiary education, gross enrollment rate (%) vs. GDP per capita 2012..................... 43 Figure 39: Percentage of population by age group with some higher education, by quintile (2013) ....................................................................................................................................................... 43 Figure 40: Do you strongly agree that university education provides Access to a good job? ...... 45 Figure 41: Returns to education (control group: primary incomplete or less) .............................. 45 Figure 42: PISA 2009 Mathematics Mean Score by country (15-year-old students) vs. GDP per capita PPP ..................................................................................................................................... 46 Figure 43: LLECE: Mean performance on the mathematics scale for 6th grade students, total .. 46 Figure 44: PISA 2009 Mathematics Mean Score by school type and income quintile in Panama47 Figure 45: Teacher's average years of education 2009-2013 ........................................................ 48 Figure 46: Minutes per week by course ........................................................................................ 49 Figure 47: Wage distribution for teachers compared with other professional occupations, 201350 Figure 48: Panama, public education spending on infrastructure 2008-2012 .............................. 51 Figure 49: % Schools with basic supplies Panama by quintiles (%) ............................................ 51 Figure 50: Demographic trends in Panama 2010 compared with 2050 ........................................ 52 Figure 51: Projected change in the stock of teachers needed in LAC, 2010-2015 ....................... 52 Figure 52: Demographic Projections in Panama: Projections on Student Population .................. 52 Figure 50: Education sector: Main internal institutions ................................................................ 54 Figure 51: Public Spending on Health – Constant dollars – PPP (2007)...................................... 57 Figure 52: Public Spending on Health as a % of GDP (%) .......................................................... 57 Figure 53: Public Spending on Health as a % of GDP by countries............................................. 58 Figure 54: Public Spending on Health – Per capita Constant dollars – PPP (2007) by countries 58 Figure 55: Health expenditure, public (% of GDP) ...................................................................... 59 Figure 56: Public Health expenditure (% of GDP) vs GDP per capita, PPP 2012 ....................... 59 Figure 57: Estimates of Health Spending in Panama (US$ million in constant terms) ................ 60 Figure 58: Panama’s Progress towards meeting the MDGs for U5MR & MMR ......................... 61 Figure 59: Panama’s Distribution of its Burden of Disease ......................................................... 62 Figure 60: Panama’s Child Mortality Rate, National Average compared to Rural and Indigenous Areas ............................................................................................................................................. 63 Figure 61: Geographic (Urban vs Rural) Distribution of Health Workers ................................... 64 Figure 62: Professional consulted by area and indigenous population, 2008 ............................... 65 Figure 63: Utilization of health providers by quintile, 2008 ........................................................ 66 Figure 64: Utilization of health providers by area and indigenous population, 2008................... 66 Figure 65: Reasons for no consultation by area, 2008 .................................................................. 66 Figure 66. Structure of Panama's Health System .......................................................................... 68 Figure 67. Percentage of Coverage of the Population by the CSS in Panama, 2008-2012 .......... 69 Figure 68. Health Facilities by Level of Care ............................................................................... 70 Figure 69: Public spending on SPL constant local currency (2007) ............................................. 77 5 Panama Social Sector Expenditure and Institutional Review Figure 70: Public spending on SPL as a % of GDP (%) ............................................................... 77 Figure 71: Public Spending in SPL as a % of GDP (%) by countries, 2013 ................................ 77 Figure 72: Social Security spending by main categories, 2007-2013 as a % of GDP .................. 80 Figure 73: Social Assistance Spending as a % of GDP 2007-2013 .............................................. 81 Figure 74: Social Assistance Spending by countries as a % of GDP, 2013 ................................. 81 Figure 75: Share of workers contributing to SS by countries ....................................................... 82 Figure 76: Access to social security 2007-2013, % ...................................................................... 83 Figure 77: Social pension: Total beneficiaries vs spending as a % of GDP ................................. 83 Figure 78: Elderly covered by quintiles by countries (%) ............................................................ 84 Figure 79: Elderly covered by quintiles 2007 vs 2013 (%) .......................................................... 84 Figure 80: Social Pension – Distribution of beneficiaries (Targeting Accuracy) % elderly ........ 85 Figure 81: Total spending and Beneficiaries, main SA programs, 2013 ...................................... 86 Figure 82: Distribution of beneficiaries’ main SA programs, 2013, % households. .................... 87 Figure 83: Overlap SA programs .................................................................................................. 88 Figure 84: Public Spending and % beneficiaries main CCTs by country..................................... 90 Figure 85: Generosity main CCTs ................................................................................................ 90 Figure 86: Impact CCT on poverty, 2013 ..................................................................................... 91 Figure 87: Enrollment rates age 5-20 for extreme poor, 2013 ...................................................... 91 Figure 88: Coverage (%) Beca Universal, 2013 (individuals) ..................................................... 92 Figure 89: % of Beneficiaries Beca Universal, 2013 (individuals) .............................................. 92 Figure 90: Electricity Subsidy ...................................................................................................... 93 Figure 91: Unemployment rate ..................................................................................................... 94 Figure 92: Unemployment rate by groups, 2013 .......................................................................... 94 Figure 93: Unemployment rate by education (%)......................................................................... 95 Figure 94: Group share among unemployed (%) .......................................................................... 95 Figure 95: Job creation by educational level 2008 - 2013 ............................................................ 96 Figure 96: Share of employees by educational level 2007-2013 .................................................. 96 Figure 97: Real wages by education ............................................................................................. 96 Figure 98: Budget of Public Training Institutions in Central America, 2013 .............................. 97 Figure 99: SPL- Main institutions................................................................................................. 98 6 Panama Social Sector Expenditure and Institutional Review List of Tables and Boxes Table 1: Selected Human Development Indicators, Panama, LAC, Central America, and Closest Income/Population Comparators, 2000-2014 ............................................................................... 19 Table 2: Trends in MOH Facility Expansion, 1990 to 2012......................................................... 61 Table 3. Role in the Health Sector of Panamanian Public Institutions ........................................ 71 Table 4. Results of MOH Self-Monitoring of the Implementation of the International Health Regulations Requirements in Panama, 2011, 2012 (April), and 2013 (January) ......................... 75 Table 5: Main SP programs in Panama......................................................................................... 78 Table 6: Coverage, Main Social Assistance Programs, 2013 (% households) ............................. 86 Box 1: Public Sector Performance and Public Sector Efficiency Indicators ................................ 25 Box 2: DEA Methodology ............................................................................................................ 28 Box 3: Social Assistance programs – Coverage and Targeting accuracy by rural, urban and comarcas. ...................................................................................................................................... 88 7 Panama Social Sector Expenditure and Institutional Review Acronyms AAUD Authority of Urban and Domestic Sanitation ADePT World Bank’s Software Platform for Automated Economic Analysis ALMP Active Labor Market Program AUPSA Panamanian Authority of Food Security CA Central America CCT Conditional Cash Transfer CEPAL Comisión Económica para América Latina (Economic Commission for Latin America) CONADIS The National Council on Disability CONAVIH National Commission for the Prevention and Control of HIV (CONAVIH in its Spanish acronym) CSS Social Security Fund (Caja de Seguro Social) DEA Data Envelope Analysis DPT Diphtheria, pertussis (whooping cough), and tetanus ECD Early Childhood Care EDSTATS World Bank Education Statistics Database EEC Estrategia de Extensión de Cobertura FECE Fund Equity and Quality in Education. Fondo de Equidad y Calidad en la Educación GDP Gross domestic product GINI The Gini coefficient HIS Health Information Systems HIV The human immunodeficiency virus HMN Health Metrics Network HN Hospital del Niño HRH Human resources for health HST Hospital Santo Tomás ICEFI Instituto Centroamericano de Estudios Fiscales (Central American Institute for Fiscal Studies) ICGES The Gorgas Commemorative Institute of Health Studies ICT Information and communications technology IDAAN Institute of Aqueducts and National Sewage IDB Inter-American Development Bank IFARHU Instituto para la Formación y Aprovechamiento de Rercursos Humanos IHR International Health Regulations INADEH Instituto Nacional de Formación Profesional y Capacitación para el Desarrollo Humano (National Institute for Professional Training) ION Instituto Oncológico Nacional ITS Institutos Técnicos Superiores 8 Panama Social Sector Expenditure and Institutional Review LAC Latin American and the Caribbean LAC7 Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, and Peru LMIC Lower middle Income Country M&E Monitoring and evaluation MDG Millennium Development Goal MEDUCA Ministry of Education MEF Ministry of Economics and Finance MIC Middle-Income Country MIDA Ministry of Agrofishery Development MIDES Ministry of Social Development MINJUMNFA Ministry of Youth, Women, Children and family MITRADEL Ministry of labor MMR Maternal Mortality Rate MOF Ministry of Finance MOH Ministry of Health NCD Non-communicable disease NGO Non-governmental Organization OECD Organisation for Economic Co-operation and Development PAHO Pan American Health Organization PAIL Programa de apoyo a la inserción laboral PAIPI Plan de Atención Integral a la Primera Infancia PAISS Package of Health Care Services PHC Primary Health Care PISA Program for International Student Assessment PSE Public Sector Efficiency PSP Public Sector Performance PSPV Health Protection for Vulnerable Populations RBF Results-based financing RO Red de Oportunidades CCT. RUB Single Beneficiary Registry (Registro Unico de Beneficiarios, RUB). SENADIS National Secretariat for Disability SENAPAN Secretaría Nacional para el Plan de Seguridad Alimentaria y Nutricional SENACYT Secretaria Nacional de Ciencia Tecnologia e Innovacion SIMEPESS Monitoring and Evaluation System of the National Health Strategic Plan SPL Social Protection and Labor SSEIR Social Sector Expenditure and Institutional Review TB Tuberculosis UNDP United Nations Development Program WHO World Health Organization 9 Panama Social Sector Expenditure and Institutional Review Acknowledgments This country note was prepared by a team coordinated by Pablo Acosta, Rita Almeida, and Christine Lao Peña, and also comprised by Carmen Carpio, Emma Mercedes Monsalve, Diego Postigo, and Natalia Santiago under the overall coordination of Kathy Lindert, as part of the Central America Social Sector Spending and Institutional Review. We would like to thank Margaret Grosh, Reema Nayar, Daniel Dulitzky, and Anabela Abreu for their guidance, comments, and support in the elaboration of this note. 10 Panama Social Sector Expenditure and Institutional Review I Executive Summary Panama has experienced impressive and significant economic growth, emerging as one of the better performers in Central America in recent years and one of the fastest growing economies worldwide. From 2003 to 2013, Panama has averaged an annual GDP growth rate of approximately 7 percent, surpassing the average GDP growth in Central America. It has also emerged as one of the fastest growing economies worldwide. Even during the economic crisis of 2008-2009, its economy continued to grow albeit at a lower rate. In parallel, Panama has made good progress in significantly reducing poverty and in improving almost all of its key human development indicators. Poverty notably declined by 12.5 percentage points from 38.3 percent in 2006 to 25.8 percent in 2014 and inequality declined from 53 in 2007 to 51 in 2013. Panama has shown a consistent trend of improvement in in almost all social indicators, making the most progress in reducing unemployment (53 percent), undernourishment (47 percent), and increasing labor employment (10 percent) between the two periods 2000-2006 and 2007-2014. Some of its other notable achievements include universal coverage in primary education and reduced child mortality rates. However, Panama continues to face challenges in improving certain indicators and in closing the enrollment gaps across quintiles and across urban and rural areas. For example, while it has attained universal coverage in primary education, secondary education coverage remains low. Attendance rates of secondary education, especially in upper education are exceedingly unequal across quintiles. In 2013, only 46.2 percent of the lowest income quintile were attending upper secondary education compared to 88.6 percent of the richest quintile In addition, while Panama has reduced child and maternal mortality rates, it has experienced declines in assisted deliveries and immunization coverage rates, as well as increased TB incidence. Moreover, individuals from rural poor and indigenous households have lower health outcomes compared to other parts of the country. Although per capita spending on the social sectors in Panama is among the lowest in LAC, increasing overall spending in the social sectors remains limited due to the widening fiscal deficit; there is also room to improve spending efficiency. Panama’s per capita social public spending is the second highest in Central America although, at $386, it is less than a third of Costa Rica’s per capita social public spending and just slightly higher than that of El Salvador’s ($381) which has a much lower per capita income. However, differences exist among sectors, with per capita spending on education remaining lower than most other countries in the region while per capita health spending is relatively higher than other countries. While there may be a need to increase expenditures, in the case of education, for example, which is low relative to international standards or to improve access to health services of indigenous rural populations, the extent to which the Panama can do so is limited by its fiscal situation, with government 11 Panama Social Sector Expenditure and Institutional Review expenditures having exceeded revenues since 2009. Also, budget execution rates have decreased from 94 percent in 2007 to 88 percent in 2012 suggesting some institutional issues that would need to be addressed. Also the efficiency and effectiveness analyses results indicate that overall social public spending in Panama is considered less effective but efficient than most of the other LAC countries. This means that, on average, other LAC countries get a higher return (improvement in social indicators) per dollar of social public spending. Thus, in view of its fiscal and institutional constraints, Panama would need to focus on enhancing the effectiveness and efficiency of its social spending. This note recommends that Panama prioritize three main aspects: a) improving the effectiveness of social public spending by further enhancing the pro-poor and pro-indigenous features of targeting mechanisms; b) reducing inefficiencies in the various sectors, for example, by improving the coordination between the Ministries of Education, Health, Social Development, and CSS to minimize duplication of efforts and resources; and c) strengthening planning, budgeting, and information tools and systems, legislation, and institutions to support implementation and track progress toward Government goals. Sector-specific challenges aligned with these broad objectives are addressed below. I.1.1 Education Although public spending on education has increased in real terms, its share of GDP remained constant and is still low based on international standards. Between 2007 and 2013 public spending on education increased in real terms at an annual average rate of 3 percent. Nevertheless, the percentage of GDP invested in education decreased in the last few years from 3.9 to 3.4 percent, indicating that it did not take advantage of recent growth to boost investment in education. The percentage of GDP dedicated to education is still low in comparison with other countries. In 2013, Panama public spending on education accounted for 3.4 percent of GDP. This level of spending is lower than both the LAC average (4.9 percent in 2010) and the OECD average (5.6 percent in 2010). Panama has reached universal primary education coverage, but secondary education coverage remains low relative to comparable countries in the region. Panama’s gross enrollment rate in pre-school is 70.7 percent. The gross enrollment rate for primary education was 132.2 percent in 2013. In the same year, gross enrollment in lower secondary education reached 100.9 percent. However, enrollment drops drastically to 68.5 percent in upper secondary. Access to primary education is comparable to the best performers internationally and secondary education is in line with the country’s GDP. Nevertheless, enrollment in secondary education is still low when compared with countries with similar characteristics like Costa Rica and Colombia. 12 Panama Social Sector Expenditure and Institutional Review There are large differences across quintiles and regions in enrollment and graduation rates for lower and upper secondary levels. Access to secondary education, especially in upper education is exceedingly unequal across quintiles. In 2013, only 46.2 percent of the lowest quintiles had access to upper secondary education as opposed to 88.6 percent among the richest quintile. In the same way, graduation rate decreases significantly across quintiles. In 2010, lower secondary’s graduation rate was 57 percent. Graduation rate in upper secondary was only 39 percent with significant variance across provinces. Panamanian students perform poorly when placed in an international context and there are significant achievement gaps between public and private schools. In 2009, Panama participated in the Program for International Student Assessment (PISA) of the OECD. According to PISA’s results, Panamanian students performed at very low levels, especially when compared with other countries in the Latin American region or countries with similar GDP per capita. There are also significant gaps in student achievement across different groups. Additionally, the education young people receive must be made more relevant so that they can adapt to the new demands of society and the labor market. Moving forward, there are five areas of strategic importance for the education sector. First, promoting greater access and completion rates especially at the upper secondary level via the implementation of other interventions to prevent especially the most vulnerable students from dropping out. These include: (a) provision of good quality infrastructure in rural and indigenous population regions, (b) creation of deferred scholarships that delay rewards until the completion of pre-set benchmarks, (c) support to teen pregnancy reduction programs, (d) stimulation of socio-emotional learning, and tutoring availability. Second, increasing the quality of education, by prioritizing teacher’s quality. Third, improving the balance between autonomy and accountability in order to allocate resources efficiently. In particular, the consultation with municipalities, principals and teachers in all major decisions regarding spending, hiring, firing and changes in curriculum could be prioritized. Forth, strengthening and institutionalizing a monitoring and evaluation system in the sector including a systematic measurement and publication of educational results indicators and standardized tests; and finally strengthening the options at the post-secondary level, by developing further technical non-university degrees and facilitating the permeability of the two learning “tracks”. I.1.2 Health Panama is an upper middle income country with increasing health expenditures per capita and health care spending above the Latin America and Caribbean (LAC) regional average . Panama’s per capita health expenditures have risen continuously from 2001 to 2013, and are above the LAC average. In addition, Panama’s current total health expenditures as a percentage 13 Panama Social Sector Expenditure and Institutional Review of Gross Domestic Product (GDP), are higher than the regional average for Latin America and the Caribbean. Two public institutions, the Ministry of Health (MOH) and the Caja de Seguro Social (CSS), provide the majority of health services in the country. The MOH holds the stewardship role and is responsible for establishing and approving national health policies. It also provides a package of health services, although limited, to any individual accessing care at a MOH facility. The CSS also provides health services and covers just above 80 percent of the country’s total population which are made up by those who directly contribute to the CSS system and their direct beneficiaries. Panama’s relatively high spending on health has yielded positive results in certain health outcomes, however, challenges remain with regard to other outcomes. Panama has made progress towards the Millennium Development Goals (MDGs) having met the MDG 4 target for child mortality, but further work is needed to reach MDG 5 related to maternal mortality. The country has also made progress in reducing malnutrition among children, yet has experienced declines in assisted deliveries and immunization coverage, and stagnant HIV incidence rates and increased incidence of tuberculosis. In addition, noncommunicable diseases represent the largest burden of disease in the country. Inequality, in terms of access and quality of health care for the rural, indigenous population is also a main concern. The disparity in health outcomes is due largely to inequitable health access for the poor, with the majority of medical care centralized in the wealthier urban areas. The inequitable access to health services is further accentuated by the concentration of the health workforce in the urban areas as opposed to the rural, indigenous areas. On the institutional side, the Government has successfully implemented several reforms in the health sector although a number of important ones remain to be implemented . As of 2013, the country had completed 75.5 percent of the International Health Regulation Requirements, aside from moving forward with other reforms such as implementing the Extension of Coverage Strategy to remote rural areas, reforming the Health Code, and certification and recertification system of medical personnel. However, there are still changes that could be made to improve efficiency and accountability in the system. In particular, significant efficiency gains are expected by enhancing the coordination between the MOH and the CSS to reduce duplication of efforts and resources. By continuing to address the fragmentation across the MOH and the CSS, coordination can be further improved and health service delivery better integrated for improved health outcomes. In addition, mechanisms though which civil society could participate to hold the MOH accountable remain limited and could be increased. 14 Panama Social Sector Expenditure and Institutional Review In moving forward, recommended short-term priorities in the health sector focus on two main areas: (1) Toward an Equitable Health System: (a) continue to strengthen Primary Health Care (PHC) in rural areas via improved coordination and continuous mobile health team service delivery; (b) implement human resources management strategies to help address the rural/urban gap in health worker presence and distribution in the rural, poor areas of the country; and (c) identify actions to properly identify the elderly population at risk for NCDs and cross-check beneficiary data to determine whether they are enrolled in existing social protection programs appropriate to their context and (2) Toward an Integrated Health System: (a) support the MOH in its current review of the different results-based financing (RBF) approaches used under different schemes with the aim to develop one coordinated RBF mechanism with shared implementation and coordination channels for the rural, poor areas; (b) deepen the health expenditures review conducted as part of this study to identify factors behind the decrease in budget execution rates, especially in the case of CSS) and also ways to reduce CSS and MOH overlap; and (c) develop an action plan to integrate various health information systems into one nationally integrated health information system. Recommended medium-term priorities are centered on three main areas: (1) focus on reducing maternal mortality and in improving maternal health, especially prenatal care and assisted deliveries, among indigenous and other rural poor women and, over time, review the PHC model provided through monthly mobile health team visits to provide recommendations for transitioning to permanent access to quality health services model; (2) strengthen screening and diagnosis for chronic diseases especially for the elderly, beginning with a focus on hypertension and diabetes to identify those most in need of health services; (3) based on a detailed review of public health expenditures, identify an initial set of cost cutting measures that could ensure sustainability with better resource targeting and use of incentive based programs; and (4) assess different scenarios for integrating health sector functions to strengthen MOH stewardship role and CSS role in service provision. I.1.3 Social Protection In the past decades, Panama has been developing a set of contributory and non- contributory programs and interventions aiming to reduce vulnerability, poverty, exclusion and inequality. The paradigm shift in Panama’s social policy and the fight against poverty meant redirecting and targeting action on the poorest population groups with a view to improving mechanisms of distribution and redistribution of incomes, services, and opportunities. The articulation and alignment of social promotion and protection programs, projects and actions has induced an institutional reorganization that is gradually forming new mechanisms for implementing public policies, but which have not yet become fully structured, developed and crystallized. 15 Panama Social Sector Expenditure and Institutional Review Public spending in SPL is still moderate per international standards, but it has increased over the last few years both in real per capita terms and as a share of GDP. Social Security accounts for the bulk of SPL spending, though this share has remained stagnant in the past few years. Social assistance spending remained stable between 2007 and 2013, but as a share of GDP it has declined since 2011. The exception is subsidies, which are on the rise, increasing on average 18 percent per annum from 0.2 percent of GDP in 2007 to 0.6 percent in 2013. Improvements in targeting of large interventions, such as the social pension and subsidies, are key to increase coverage among the poor, and expand other priority interventions, such as ALMPs. There are large imbalances in terms of resource allocation and priorities. While the good targeted RO has relatively small coverage, the large social pension (120 a los 65) is poorly targeted. Subsidies should also be poverty targeted instead of consumption-based, to avoid large exclusion and inclusion errors. On the other hand, ALMPs are virtually non-existent and priorities to improve skills and reduce skill shortage calls for more meaningful investment in training and productive inclusion programs. The set of social protection policies and programs must be articulated in a system to maximize complementarities, efficiency, and impact. For example, social transfers aimed at the same population, like RO, Beca Universal, and school feeding, should be better aligned to reduce administrative costs and maximize impact, understanding that each program has different objectives (RO tackles opportunity costs for enrolment and consumption support; Beca Universal encourages performance; school feeding promotes better nutrition to improve concentration). The contributory (CSS) and non-contributory (120/65) pensions systems should be aligned to offer incentives that do not entice non-contribution and informality in labor markets. Articulated social protection systems can facilitate efficiency gains by exploiting the synergy between different policies, institutions and programs. This can be achieved through the creation and implementation of a single beneficiary registry that harmonizes and facilitates communication across programs for policy design and monitoring purposes. As other LAC countries, Panama would benefit from the institutionalization of harmonized single beneficiary registries and social information systems to map socioeconomic conditions of the poor and vulnerable population and form the basis for analysis of program eligibility, system duplications, and design of new programs addressing other social risks. The Government is already undertaking these steps that need to be finalized and accompanied by appropriate legislation to mandate its use. This would support the consistency of information collection across programs and the linkages of information across same-household beneficiaries from different programs. 16 Panama Social Sector Expenditure and Institutional Review MIDES should also strengthen its monitoring and evaluation capacity. MIDES would benefit from strengthening monitoring and evaluation (M&E) activities for the main social programs. An improved M&E system is critical to gather relevant information about the situation of social programs, process that information, and provide adequate access to it in order to secure a timely and proper monitoring, and to support the design and implementation of impact evaluations (following the RO CCT example). II Context Panama has registered high economic growth, surpassing the CA average growth by far since 2003. Although Panama’s annual GDP growth was initially below the CA average GDP growth in 2001 and 2002, it has consistently outpaced the CA annual average from 2004 to 2013. From 2001 to 2013, Panama’s GDP growth averaged 7.8 percent from 2001 to 2013, peaking at 12 percent in 2007 (Figure 1). Panama even grew during the global economic crisis (at 4 percent) and maintained good growth path afterwards, in contract to the rest of the region. It is also one of the fastest growing economies in the world. Figure 1: GDP growth in Panama and Central America, 2001-2013 Source: IMF, World Economic Outlook Database, October 2014 Growth contributed to significant poverty reduction, but not as much to decreases in extreme poverty and inequality, and poverty pockets remain in indigenous areas. Poverty reduction in the country was greater than the LAC average in the last decade. Poverty notably declined by 8 percentage points from 33.8 percent in 2008 to 25.8 percent in 2014 (Figure 2). Thus, out of a population of about 3.6 million people, the number of Panamanians living below the national extreme poverty line declined by slightly more than 150,000 and those living below the overall poverty line declined by close to half a million.1 However, there are other dimensions where growth has not been so inclusive: for instance, extreme poverty has become increasingly 1 World Bank (2015), “Panama: Systematic Country Diagnosis” 17 Panama Social Sector Expenditure and Institutional Review highly concentrated in remote geographic areas where indigenous peoples live, without much change in the last decade. Inequality based on the Gini index declined from 56 in 2007 to 53 in 2013 (Figure 3), but Panama’s level of inequality remains higher than three other CA countries: El Salvador (0.45 in 2013), Nicaragua (0.46 in 2009) and Costa Rica (0.52 in 2013). Figure 2: Poverty headcount Figure 3: Inequality – GINI Index Source: Ministerio de Economia y Finanzas Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software (Social Protection Module Aside from reductions in poverty and inequality, Panama has also made progress in a number of human development indicators since 2000. Table 1 compares trends in key education, health and social protection and poverty indicators with three comparator groups: i) the top 7 economies in the LAC region; ii) the remaining countries in the CA region; and iii) a set of 6 countries around the world that can be considered “comparator countries” based on certain criteria.2 In order to show progress, the 14-year period (2000-2014) was split into two periods: 2000-2006 and 2007-2014. Panama shows a consistent trend of improvement in social indicators in almost all indicators although a few indicators slightly decreased (gross primary enrollment rates from 106 to 103, measles immunization rate from 96.1 percent to 95.9 percent and hospital beds/1,000 population ratio from 2.4 to 2.3). Compared to the three other comparator groups, Panama made the most progress in terms of reducing unemployment (53 percent); undernourishment (47 percent) and increasing labor employment (10 percent). On average, LAC7 countries and closest comparator (CC) countries have better indicators than Panama while Panama generally fared better in terms of a number of indicators compared to the average for the rest of CA. 2 A group of appropriate international comparators (“comparator countries”) for Panama was defined based on five criteria: GDP per capita, GDP (size of the economy), population (total), population density, and percentage of population in rural areas. The comparators include: Bulgaria, Costa Rica, Lebanon, Lithuania, Malaysia, and Uruguay. 18 Panama Social Sector Expenditure and Institutional Review Table 1: Selected Human Development Indicators, Panama, LAC, Central America, and Closest Income/Population Comparators, 2000-2014 Average Change Closest Indicator Name Rest of Panama LAC 7* Comparators Panama LAC 7* Rest of CA Closest Comparators** CA ** 2000-2006 2007-2014 2000-2006 2007-2014 2000-2006 2007-2014 2000-2006 2007-2014 Education School enrollment, preprimary (%gross) 52.4 64.1 65.8 85.7 47.4 58.4 67.7 79.6 22% 3% 30% -45% School enrollment, primary (%gross) 106.0 103.1 111.7 109.7 110.3 113.3 106.1 103.9 -3% 8% -2% 1% School enrollment, secondary (%gross) 66.8 71.4 78.8 87.9 59.8 72.8 90.3 86.2 7% 10% 12% -32% School enrollment, tertiary (%gross) 42.0 43.0 37.2 48.4 19.0 25.8 44.3 56.4 2% -13% 30% -61% Primary completion rate, total (%) 91.4 95.2 98.4 102.1 78.4 90.7 98.0 96.5 4% 3% 4% -23% Pupil-teacher ratio, primary 24.4 23.6 24.5 23.2 32.0 27.6 17.2 14.4 -3% 4% -5% 38% Secondary completion, age 25+ 41.7 47.5 36.0 41.8 20.5 23.8 46.8 57.5 14% -24% 16% -51% Health Pregnant women with prenatal care (%) 95.8 93.7 96.0 87.6 92.8 90.1 94.8 -2% 2% -9% Undernourishment (% of pop) 21.9 11.6 11.9 9.8 17.5 16.3 5.0 5.1 -47% 2% -17% 78% Immunization, measles (% 12-23m) 96.1 95.9 95.2 94.5 93.0 92.9 88.4 91.8 0% -1% -1% -2% Improved sanitation facilities (% of pop) 68.7 72.1 79.4 83.9 69.3 74.0 95.3 96.2 5% 10% 6% -17% Improved water source (% of pop) 91.5 93.7 90.2 92.6 87.0 90.2 97.6 98.6 2% -4% 3% -6% Hospital beds (per 1,000 people) 2.4 2.3 1.8 2.0 1.0 0.9 5.4 4.4 -5% -19% 10% -51% Births attended by skilled health staff (% of total) 91.5 90.0 93.2 94.9 74.3 87.5 99.0 99.2 -2% 4% 2% -22% Social Protection and Labor Employment to population, 15+ (%) 56.2 61.8 58.6 61.3 58.5 59.8 50.7 52.2 10% -5% 5% -4% Labor force participation, female (%) 46.4 48.7 49.3 52.8 42.3 45.7 43.0 44.5 5% 1% 7% -20% Unemployment, total (%) 12.0 5.7 8.7 7.0 5.2 5.5 9.4 8.0 -53% 53% -20% -25% GINI index 55.8 52.2 53.6 50.0 51.8 49.1 38.8 39.8 -6% 3% -7% 3% Poverty headcount ratio, rural (%) 64.4 57.2 60.1 52.6 65.2 51.4 16.3 7.5 -11% 5% -12% 24% Poverty headcount ratio, urban(%) 23.6 18.5 37.4 23.0 44.2 38.3 27.2 13.8 -21% 101% -38% 92% *Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, and Peru. ** In terms of GDP, GDP per capita, population, population density and percentage of rural population: Bulgaria, Costa Rica, Lebanon, Lithuania, Malaysia, and Uruguay. Source: World Bank Development Indicators (2014). 19 Panama Social Sector Expenditure and Institutional Review III Recent Trends in Social Spending in Panama Social spending increased in real terms and is a likely contributor to decreasing poverty and inequality. From 2007 to 2013, social spending increased in real purchasing power parity terms by almost 24 percent (Figure 4). During this period, social security consistently had the largest share of overall social spending, followed by health, education, and then social assistance and labor. However, while both social security and social assistance and labor’s share of total social spending remained constant throughout this period (around 30 percent and 16 percent respectively), health’s share increased by 8 percent (30 percent in 2013 versus 27 percent in 2007) and education’s share decreased by 6 percent (25 percent in 2013 versus 27 percent in 2007). Figure 4: Social Spending (PPP, US$ million 2007) Source: World Bank SSEIR / ICEFI social spending database In the last few years, Panama’s social spending as a percentage of GDP decreased. From 2007 to 2010, social spending as a share of GDP progressively increased, peaking at 15.5 percent in 2010 (Figure 5). It has since progressively declined, reaching 13.6 percent in 2013. In terms of sectors, health’s spending as a share of GDP in 2013 remained the same, while the shares of education, social security and social assistance decreased by 12.6 percent, 8.8 percent and 7.2 percent, respectively. 20 Panama Social Sector Expenditure and Institutional Review Figure 5: Social Spending as a % of GDP by sector (%) 2007-2013 Source: World Bank SSEIR / ICEFI social spending database Despite the recent reductions in social spending’s share of GDP, Panama is more or less in line with the CA average. Panama’s overall social spending share of GDP ranks third, next to Costa Rica and then Honduras (Figure 6). In terms of sectors, Panama has the second highest social assistance and labor share of GDP in CA, second only to El Salvador. It ranks third in terms of both social security spending’s and health’s shares of GDP but ranks fifth (behind Honduras, Honduras, Costa Rica, Nicaragua, and El Salvador) in terms of education spending as a share of GDP. Figure 6: Social Spending as a % of GDP by country, 2013 (%) Source: World Bank SSEIR / ICEFI social spending database Panama’s per capita social public spending is among the lowest in the LAC region. Although Panama’s per capita social public spending is the second highest in Central America, it is less than a third of Costa Rica’s per capita social public spending. At $386 in constant 2005 prices, Panama just spends slightly more than El Salvador (US$381), a country which has a much lower per capita income (Figure 7). 21 Panama Social Sector Expenditure and Institutional Review Figure 7: Per capita social public expenditure by sector (2012 or latest year available) Source: ECLAC – CEPALSTAT Social public spending is not overall progressive mainly due to health and old age benefits. Figure 8 shows the distribution of social spending by sectors and quintiles. Public spending on education in almost equally distributed among different quintiles. Public spending on health is higher and concentrated on the middle, second lowest, and higher income quintiles. Moreover, social security spending is positively related to income, i.e. benefiting more the rich than the poor. Other social assistance and labor interventions (cash transfers, sickness and disability, etc.) are progressive since most of the spending is allocated to the first two income quintiles. 22 Panama Social Sector Expenditure and Institutional Review Figure 8: Distribution of social spending by income quintiles, 2013 Source: World Bank SSEIR / ICEFI social spending database Note: Distribution of spending was calculated based on the distribution of beneficiaries per sector. For education, the distribution of total students enroll in each level of education by income quintile was taken into account (due to data limitations, it was not possible to disaggregate between public and private students). For health, the distribution of the utilization of public health providers by income quintiles was considered (based on ENV 2008). For old age, we considered the distribution of pension’s beneficiaries by income quintiles and for social assistance the distribution of social assistance beneficiaries. Budget execution problems, particularly in health may partly account for Panama’s relatively lower per capita overall social sector spending. Over-all budget execution for the social sectors declined from 94 percent in 2007 to 88 percent in 2013 (Figure 9). During this period, education and social protection’s budget execution rates only marginally decreased (i.e., from 96 percent to 95 percent and from 92 percent to 90 percent, respectively). However, the health sector’s spending relative to its budget declined from 91 percent to 78 percent , mainly due to decreases in the Caja de Seguridad Social’s recurrent budget execution rates. Figure 9 Budget execution 2007-2013 Source: World Bank SSEIR / ICEFI social spending database 23 Panama Social Sector Expenditure and Institutional Review Deficits in recent years underscore the need to focus on spending. Although Panama’s per capita social spending is among the lowest in the LAC region, increases in social spending may not be fiscally sustainable given the expenditure-revenue trends since 2009. In particular, while revenues exceeded expenditures in 2007 and 2008, expenditures have grown much faster than revenues since 2009, resulting in the largest fiscal deficit (3.9 percent of GDP) in 2014 (Figure 10). While it may not be possible in the short to medium term to increase expenditures, the analysis below indicates that there is room to improve the efficiency and quality of spending. Figure 10: General government overall balance, 2007-2015 Note: IMF Estimations' Start After 2013 Source: IMF, World Economic Outlook Database, October 2014 An analysis of social sector spending efficiency and effectiveness of the social sector shows that Panama’s spending is less effective but efficient compared to other LAC countries . Figure 11 shows a comparison between the levels of Public Sector Performance (PSP) and Public Sector Efficiency (PSE) in Panama and in other LAC countries. The PSP is a composite indicator based on socioeconomic variables that are assumed to be the output of public policies. This indicator summarizes the effectiveness of public spending in improving social outcomes. The PSE indicator then relates PSP scores to the total public spending in these sectors. It represents the “public value” per public dollar spent (Box 1 provides additional information on the PSP and PSE analyses). 24 Panama Social Sector Expenditure and Institutional Review Box 1: Public Sector Performance and Public Sector Efficiency Indicators We analyzed the relationship between social outcomes and spending using the Public Sector Performance (PSP) and Public Sector Efficiency (PSE) approaches developed by Afonso, Schuknecht, and Tanzi (2005, 2010).3 PSP is measured by constructing composite indicators based on observable social variables that are assumed to be the output of pursued social public policies. Specifically, the PSP for country = 1, … , with = 1,2,3 social sectors (education, health and social protection and labor) is determined by: = ∑ ; = 1, … ; ℎ = ( ), = 1, … , . (1) =1 where ( ) is a function of k observable social indicators (for education, we take gross secondary enrollment and literacy rate; for health, we take maternal mortality and immunization rates; and for social protection and labor, inequality (measured by the Gini coefficient) and extreme poverty headcount (percentage of population earning less than $1.25 a day). To obtain PSP indicators we assign equal weights to each sub-indicator, computed as the average of the corresponding outcome indicators, each one of them normalized by its sample mean. The PSP indicator for each country is then obtained by averaging the values of all sub-indicators. Resulting PSP scores are then related to the average value of one of the normalized output indicators. Hence, countries with PSP scores in excess of one are seen as good performers, as opposed to countries with PSP values below the mean PSP Secondary School Gini Index Enrollment Social Education Protection Literacy rate and Labor Poverty headcount (percentage Maternal of population Mortality earning less Health than $1.25 a Immunizati day on rates PSE relates PSP scores to their cost in terms of public spending. PSE weights public sector performance in each social sector by the amount of relevant public expenditure that is used to achieve such performance. To compute PSE scores, public spending in each sector is normalized across countries, taking the average value of one for each of the expenditure categories ( j). This is, for each country = 1, … , with = 1,2,3 social sectors, the PSE is defined by: 3 The methodology follows Afonso, Schuknecht, and Tanzi (2005, 2010) for OECD countries, replicated later on in Afonso, Romero, and Monsalve (2013) for LAC. 25 Panama Social Sector Expenditure and Institutional Review = ∑ ; (2) =1 Figure 11 illustrates the efficiency and performance assessment by placing the countries into four quadrants taking into account those two dimensions. Countries classified as good performers are located in the two right-hand side quadrants which are then split into more efficient (upper quadrant) and less efficient (lower quadrant) performers. On the other hand, the two left-hand side quadrants depict cases of lower performance; the lower left-hand side quadrant, in particular, includes a sub-sample of less effective and less efficient countries. The overall social public spending in Panama is considered less effective but efficient than most of the other LAC countries. This means that Panama is among the countries that obtain lower results in terms of social indicators without taking into consideration the costs incurred to achieve them but this also means that the country gets a higher return (improvement in social indicators) per dollar of social public spending. However, there are differences across sectors. Whereas the education sector is classified as a less effective and less efficient sector, the social protection sector tends to be as a less effective, but efficient sector, while health is classified as both marginally more efficient and effective. In other words, when compared to other LAC countries, Panama’s education sector tends to achieve lower outcomes (gross secondary enrollment and literacy rate) at a higher cost; the SPL sector appears to achieve lower outcomes (inequality and extreme poverty) but at a lower cost and its health sector achieves better outcomes (maternal mortality and child immunization rates) at lower cost. Figure 11: Public Sector Performance and Efficiency in Panama and LAC, 2010 Overall Education 26 Panama Social Sector Expenditure and Institutional Review Health Social Protection Source: World Bank SSEIR team’s, authors’ calculations using CEPAL and WDI databases A LAC “production possibility frontier” analysis shows that Panama could increase its social performance by as much as 3 percent with the same level of public social spending. Figure 12 shows the production possibility frontier for total social public spending for LAC, applying the data envelope analysis (DEA) using the PSP scores as an output and social-public spending-to-GDP ratios as an input. Based on the DEA analysis (explained in Box 2), Panama 27 Panama Social Sector Expenditure and Institutional Review could move toward the LAC “production possibility frontier” and increase its social performance by 3 percent, with the current level of public social spending. Box 2: DEA Methodology The DEA methodology, developed by Farrell’s (1957), assumes the existence of a convex production frontier to construct an envelope around the set of observations. DEA compares each unit with all other units, and identifies those units that are operating inefficiently compared with other units' actual operating results. DEA presents two approaches: 1) input-oriented shows by how much input quantity can be proportionally reduced without changing the output quantities; 2) output-oriented assess how much output quantities can be proportionally increased without changing the input quantities used. Efficiency for each unit can be measured by computing the distance to the theoretical efficiency frontier (or compared to the best practice units). DEA provides an efficiency rating that is generally denominated between zero and 1, which will interchangeably be referred to as an efficiency percentage between the range of zero and 100%. The best practice units are relatively efficient and are identified by a DEA efficiency rating of = 1. The inefficient units are identified by an efficiency rating of less than 1 ( < 1). The Figure illustrates the single input single output DEA production possibility frontier. Countries A, B and C are efficient with output scores equal to 1. On the other hand, country D is not efficient, since its score [d2/(d1+d2)] is below unity. 28 Panama Social Sector Expenditure and Institutional Review Figure 12: Production Possibility Frontier (Data Envelope Analysis) for Total Social Public Spending, Panama and LAC, 2010. Source: World Bank SSEIR team’s, authors’ calculations using CEPAL and WDI databases IVPerformance and Challenges in Education IV.1 Recent Evolution of Education Public Spending Public spending on education has increased in real terms but decreased slightly as percentage of GDP and is still low for international standards. Between 2007 and 2013 public spending on education increased in real terms at an annual average rate of 3 percent (Figure 13). Nevertheless, the percentage of GDP invested on education decreased an average 2 percent per annum (3.4 percent of GDP in 2013 vs 3.9 percent of GDP in 2007) (Figure 14). Therefore, Panama did not take advantage of recent growth to fully boost investment in education. The percentage of GDP dedicated to education is still low in comparison with other countries. In 2013, Panama public spending on education accounted for 3.4 percent of GDP. This level of spending is lower than both the LAC average (4.9 percent in 2010) and the OECD average (5.6 percent in 2010). Public education spending as a shared of GDP is low too when compared with countries with similar GDP per capita Bulgaria (4.1), Costa Rica (5.5), Lithuania (5.37), Malaysia (5.13), and Uruguay (4.5) (Figure 15). 29 Panama Social Sector Expenditure and Institutional Review Figure 13: Real public spending on Figure 14: Public Spending on Education education (US$ 2007 million) as a % of GDP Source: World Bank SSEIR / ICEFI social spending database Source: World Bank SSEIR / ICEFI social spending database Figure 15: Public spending on education as % of GDP vs GDP per capita, PPP (constant 2005) Source: World Bank SSEIR / ICEFI social spending database for Central America. EdStats for rest of the countries. 2010 figure for OECD members. Note: Closest peers in terms of GDP, GDP per capita, population, population density and percentage of rural population: Bulgaria (BGR), Costa Rica (CRI), Lebanon (LBN), Lithuania (LTU), Malaysia (MYS), and Uruguay (URY) Netting out the effect of scholarships, public spending in education decreased across all levels, especially in secondary education. Education spending decreases across all educational 30 Panama Social Sector Expenditure and Institutional Review levels when the category “other” and the scholarship “Beca Universal”4 are not taken into account (Figure 16).5 The “other” category includes administrative spending and some scholarships. This category increased at an annual average rate of 2 percent from 2007 to 2013. Public spending on the scholarship “Beca Universal” increased an annual average rate of 10 percent in the past few years (which is 16 percent of the total public spending on education in 2013)6. But besides that, all other spending by educational level has decreased. Public spending in pre-school education as a percentage of GDP decreased from 0.12 percent in 2007 to 0.09 percent in 2013. In the same period, spending in primary education as a percentage of GDP decreased 0.26 percentage points, secondary education 0.30 percentage points, and tertiary education 0.24 percentage points. Overall, secondary education was the level with the highest drop in spending as a percentage of GDP from 2007 to 2013 and went from being the second biggest share to being the fourth, only higher than pre-school education. Figure 16: Public spending by educational level as a % of GDP (%) 2007-2013 Source: World Bank SSEIR / ICEFI social spending database Note: “Other” refers to spending in education not definable by level, educational subsidiary services, research and development in education and unspecified spending. Total public enrollments increased and per student spending fell, especially for secondary education. Between 2007 and 2013, total per student public spending in pre-school, primary, and secondary education decreased on average by 1 percent per year, from $1,131 to $1,064 (Figure 17). However, per student spending had variations across all schooling levels. Since 2007, spending in pre-school education slightly decreased (on average by one percent per year), 4 For more information on “Beca Universal” (Universal scholarship) refer to the box on page 41 or the more detailed explanation in social protection and labor section (V.2). 5 The Panamanian educational system is structured in the following levels: Pre-school (ages 4 to 5), Primary (grade 1 to 6, ages 6 to 11), Secondary (lower secondary from grade 7 to 9, ages 12 to 14; and upper secondary from grade 10 to 12, ages 15 to 18) and Tertiary (ages 19 to 24). 6 Scholarship is distributed in many categories inside the public spending in education, but the biggest share is in other, specifically in spending in education not definable by level. 31 Panama Social Sector Expenditure and Institutional Review but it increased by 1 percent per year in primary education. The biggest change in per student spending was in secondary education, which decreased 5 percent per year since 2007, while total enrollment grew on average 3 percent per year (Figure 18). Panama’s secondary per student public spending as a percentage of GDP is still low by international standards (Figure 19). In real terms, the secondary per student spending declined from $1,664 in 2007 to $1,302 in 2013. Figure 17: Per student public spending by Figure 18: Public enrollment by level level (PPP US$ 2007) (thousands) Source: World Bank SSEIR / ICEFI social spending database Source: *Preliminary results. Enrolment level: MEDUCA. Note: “total” is the sum of pre-school, primary, and secondary education. Tertiary and other are not added. 32 Panama Social Sector Expenditure and Institutional Review Figure 19: Secondary per student public spending as a % of GDP per capita and GDP per capita (PPP) Source: World Bank SSEIR / ICEFI social spending database for Central American countries and Edstats for the rest. Note: Closest comparators in terms of GDP, GDP per capita, population, population density and percentage of rural population: Bulgaria (BGR), Costa Rica (CRI), Lebanon (LBN), Lithuania (LTU), Malaysia (MYS), and Uruguay (URY) Panama’s wage bill as percentage of public education spending decreased, allocating more to scholarships (Beca) and to infrastructure spending. In 2013, the wage bill accounted for 57.4 percent of the education spending, which is 8.4 percentage points lower than the 65.8 percent of the education spending committed to pay teachers’ salaries in 2007 (Figure 20). However, in real terms, the wage bill increased from $509 million in 2007 to $791 million in 2013. The distribution of wage bill as a percentage of GDP across levels of education remained the same from 2007 to 2013, the highest share devoted to pay teachers’ salaries in primary education and the lowest to pay tertiary education teachers. Additionally, the wage bill as a percentage of public education spending in Panama is behind other countries in Central America (Figure 21). For instance, in Costa Rica, Honduras and Guatemala the wage bill accounted for more than 80 percent of total education spending and in El Salvador the amount was 73.2 percent. Panama allocates more resources as a shared of education spending to other categories such as scholarships and infrastructure than other CA countries. 33 Panama Social Sector Expenditure and Institutional Review Figure 20: Panama wage bill as % of Figure 21: Wage bill in Central America as total public education spending, 2007-2013 % of total public education spending Source: World Bank SSEIR / ICEFI social spending database Source: World Bank SSEIR / ICEFI social spending database Note: “other” refers to spending in education not definable by level, educational subsidiary services, research and development in education and unspecified spending. Even though student/teacher ratio have fallen for all levels of education (and is close to OECD standards for secondary education), teachers’ wages have become less competitive over the past years. Despite the declining trend in the wage bill as a percentage of GDP, the student/teacher ratio in 2010 was 4 percent lower than in 2007. It decreased at an average rate of 2 percent per year (Figure 22). The improvement in the student/teacher ratio is mainly due to an increase in the number of teacher across all levels of education, especially in secondary education, where the number of teachers increased 10 percent from 2007 to 2010. Moreover, in 2012 the student/teacher ratio in secondary education was almost comparable between Panama (14.2 students per teacher) and OECD members (13.5 students per teacher) and higher than most comparable countries. It was lower than other Central American countries such as Nicaragua (30.8), El Salvador (24.4), Costa Rica (14.9) and Guatemala (14.7) (Figure 23). This increase in the number of teachers was accompanied by a deterioration of the teachers’ salaries since 2007. Teachers’ wages have become less attractive when compared to other professional workers. Teachers’ hourly salaries in Panama were comparable to other professional workers in 2000, but they were 11 percent lower in 2010 (Figure 24). However, most of the teachers (52 percent), in primary education, do not complain about their salaries7. Figure 22: Student-teacher ratio Figure 23: Student/teacher ratio in secondary education in relation to GDP per capita, 2012 7 World Bank (2012), “Better Jobs in Panama: The Role of Human Capital”. 34 Panama Social Sector Expenditure and Institutional Review Source: Edstats. Note: Closest comparators in terms of GDP, Source: Ministry of Education (Ministerio de Educación; GDP per capita, population, population density and percentage of MEDUCA) rural population: Bulgaria (BGR), Costa Rica (CRI), Lebanon (LBN), Lithuania (LTU), Malaysia (MYS), and Uruguay (URY) Figure 24: Average per hour teachers’ salary relative to other professional workers, circa 2000 and 2010 Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations, and labor market data for 10 LAC countries, in Bruns, Barbara and Luque, Javier, Great Teachers: How to raise student learning in Latin America and the Caribbean (Washington: 2015) The World Bank Group). Furthermore, education spending is not targeted to the poorest. Figure 25 reports the share of students across all levels of education: primary secondary and tertiary. It shows that 42 35 Panama Social Sector Expenditure and Institutional Review percent of the students enrolled in tertiary education are from the highest income quintile. In contrast, the share of students from the first two quintiles is only 15 percent. This stands in stark contrast with the figures for both primary and secondary education. Figure 26 then computes the share of spending allocated across quintiles. The figure is again clear that spending is highly regressive given the large per student spending and the large enrollments from higher quintiles in tertiary education. Figure 25: Total Students by educational Figure 26: Public Spending by educational level and quintiles, 2013 level and quintiles, 2013 Source: World Bank SSEIR team’s analysis of household Source: World Bank SSEIR / ICEFI social spending database surveys, authors’ calculations using standardized ADePT software (Education Module) IV.2 Performance of Education Indicators Panama has reached universal primary education coverage, but its secondary education coverage remains low. The gross enrollment rate for primary education was 132.2 percent in 2013. In the same year, gross enrollment in lower secondary education reached a 100.9 percent. However, the indicator drops drastically to 68.5 percent in upper secondary (Figure 27). Panama’s gross enrollment rate in pre-school is 70.7 percent. Hence, enrollments in primary education are comparable to the best performers internationally and secondary education is in line with the country’s GDP (Figure 28). Nevertheless, enrollment in secondary education is still low when compared with countries with similar characteristics like Costa Rica and Colombia. Figure 27: Gross enrolment rate by Figure 28: Secondary education, gross educational level 2013 enrollment rate (%) vs GDP per capita 2012 36 Panama Social Sector Expenditure and Institutional Review Source: World Bank SSEIR team’s analysis of household Source: EdStats. Own calculations based on Contraloria data for surveys, authors’ calculations Panama. Note: Closest comparators in terms of GDP, GDP per capita, population, population density and percentage of rural population: Bulgaria (BGR), Costa Rica (CRI), Lebanon (LBN), Lithuania (LTU), Malaysia (MYS), and Uruguay (URY) In Panama the enrollment rate by age is high compared to the other Central America countries, but it follows a similar pattern of evolution. Panama’s enrollment rate of students aged 5-20 is higher than that of most of the other Central America countries in almost every age (Figure 29). It has the highest enrollment rate of 5 years-old students and universal primary enrollment as in Costa Rica. Nevertheless, Panama’s enrollment rate has the same pattern as in other fellow countries. Pre-school enrollment (age 5) is lower than enrollment in primary education and then starts decreasing again in secondary education. In Panama, as in Costa Rica and El Salvador, the enrollment rate starts decreasing constantly around age 15, while for the other countries it begins to decrease at a younger age. Figure 29: Enrolment rate in Central America countries, students aged 5-20 37 Panama Social Sector Expenditure and Institutional Review Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations Education access gaps due to income inequality start early in life, with a low share of children aged 0-5 attending ECD centers. Differences between students in urban and rural areas are magnified at the secondary level but they start early in the system. Several studies have found that early childhood development reduces the likelihood of school failures in the future 8. Attendance rate of children aged 0-5 in ECD centers has increased but disparities remained across quintiles. In 2008, only 6 percent of the 3 year-olds children and 41 percent of the 4 year- olds9 were attending school. The attendance rate to ECD centers of the 5 year-old children increased from 79 percent in 2008 to 85 percent in 201210. However, within the country, large gaps exist in enrollments to ECD centers between the richest and poorest households. At the age of 4, the attendance rate to ECD in 2013 was 32 percent and 51 percent for poorest and richest quintiles, respectively (Figure 30). The attendance rate of 5 year-old children from the highest quintile was 97 percent in contrast to 72 percent from the lowest quintile. According to a survey made by the United Nations Development Program (UNDP, 2014), 54.5 percent of Panamanian children not in pre-school do not know how to write a single letter. This statistic contrasts with 17.9 percent of those who attend pre-school11. 8 Almeida et al. (forthcoming), “How to prevent secondary-school dropout: Evidence from rigorous evaluations.” 9 MEDUCA (2008). “Plan Estrategico perido 2009-2014, Meduca para toda la vida”. 10 Ibid shows that the attendance rate in 2008 is very similar to the one obtained in the household survey: 81%. 11 UNDP (2014). “Informe Nacional de Desarrollo Humano - Panama 2014”. 38 Panama Social Sector Expenditure and Institutional Review Figure 30: School attendance rate of children aged 4-5 by quintiles 2013 (%) Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations A plan to improve Early Childhood Development has been prepared, and its implementation is contingent on the approval of the Integrated Road for ECD Care Law. In 2009, the Panamanian government adopted the Plan for Early Childhood (Plan de Atención Integral a la Primera Infancia; PAIPI). Nevertheless, the system still has some weaknesses in terms of quality of early childhood education, including not accounting for cultural differences across regions, especially in the indigenous territories. Especially in rural and less populated areas, there is also need for higher quality parenting programs to support early on the cognitive and socio emotional development of children and get them school ready. In 2013, a bill called Integral Road for Early Childhood Care12 was designed to overcome some of these problems and to institutionalize arrangements required to ensure the coordination across the institutions involved in early childhood development (e.g., health, education and social assistance). However, as of June 2014, the bill has not yet been approved as law.13 Furthermore, there are large differences across quintiles and regions in attendance and graduation rates for lower and upper secondary levels. Attendance of secondary education is exceedingly unequal across quintiles, especially in upper secondary education. In 2013, only 46.2 percent of the lowest quintiles attended upper secondary education as opposed to 88.6 percent among the richest quintile (Figure 31). In the same way, graduation rate decreases significantly across quintiles. In 2010, lower secondary’s graduation rate was 57 percent. Graduation rate in upper secondary was only 39 percent with significant variance between provinces (Figure 32). For instance, the graduation rate in upper secondary in Darien was only 12 Consejo Asesor de la Primera Infancia de la República de Panamá (2011) “Plan de Atención Integral a la Primera Infancia” 13 UNDP (2014) , Ibid. 39 Panama Social Sector Expenditure and Institutional Review 16 percent in 2010. Darien is the province with the lowest average income in Panama14 (excluding the three “Comarcas Indigenas”15). Figure 31: Gross attendance rate by Figure 32: Graduation rate by level, selected quintiles 2013 (%) provinces (2010) Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT Source: MEDUCA software (Education Module) There is a significant gap in enrollments in upper secondary education across urban and rural areas. Differences in enrollment between students who live in urban and rural areas increase at the secondary level particularly at the upper secondary level (15 to 17 years old). The enrollment rate for 17 years-old students in urban area was 81 percent in 2013, while the same indicator was only 68 percent and 51 percent for rural and indigenous students of same age (Figure 33). These differences in enrollments have led to a considerably lower attainment in rural areas where only 51.6 percent of young people aged 15 to 19 has completed lower secondary (nine years of schooling), compared to 72.9 percent in urban regions (Figure 34). The enrollment rate by gender is almost the same between girls and boys, but girls have a higher enrollment rate at the age of 15, which is the beginning of upper secondary education (Figure 35). Consistently, girls aged 15-19 have more years of schooling (Figure 36). 14Moreno (2012), “Distribución del ingreso de los hogares: Encuesta de propósitos múltiples”. 15Territories of indigenous people in Panama are called comarcas. In Panama, there are three comarcas indígenas as equivalent to a province: Emberá-Wounaan, Kuna Yala and Ngöbe-Buglé. 40 Panama Social Sector Expenditure and Institutional Review Figure 33: Enrolment (%), ages 5-20 (2013) Figure 34: Attainment, ages 15-19, by by location geographic location (2013) Source: World Bank SSEIR team’s analysis of household Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations surveys, authors’ calculations Figure 35: Enrollment rate of students Figure 36: Attainment, ages 15-19, by aged 5-20 by gender (2013) gender (2013) Source: World Bank SSEIR team’s analysis of ho usehold Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations surveys, authors’ calculations 41 Panama Social Sector Expenditure and Institutional Review Lack of funding continues to be the primary reason for dropout at the upper-secondary level. A 2008 regional study found that 34.5 percent of the Panamanian upper secondary students cited financial reasons as the main cause for school dropout (Figure 37). The government of Panama has since launched “Beca Universal” to mitigate the financial burden of education.16 However, in 2015 a MEDUCA and UNICEF teacher survey found that “lack of financial support” was still the main reason for student dropout according to Panamanian teachers17. Teachers also noted teenage pregnancy (58%), criminal and gang involvement (55%), lack of help with homework (54%), lack of confidence in the economic value of school (53%), and indecision (53%) as other major causes of evasion. While programs such as “Beca Universal” and “Red de Oportunidades” have started to address the link between student dropout and financial reasons, a more comprehensive and aggressive portfolio of programs may be required to address the multiplicity of factors at play in student dropout and in order to produce meaningful structural progress. Figure 37: Main reasons why students aged 15-17 drop out of school in Panama (2008) Source: Programa Estado de la Nación. (2011). “Cuarto Informe Estado de la Región en Desarrollo Humano Sostenible” Looking forward, reducing dropout at the upper-secondary level, will require a focus on teen pregnancy reduction policies, deferred scholarships, socio-emotional training, and early-warning systems. In a review of all major policy interventions seeking to reduce school dropout, Almeida, Fitzsimons & Rogers (2015) evaluate the relative effectiveness of these programs. They find that different types of policies are more effective at at the upper secondary level of education, in contrast to lower secondary level of education where conditional cash 16 “Beca Universal” (Universal Scholarship) is a major educational initiative of the Panamanian government to improve educational outcomes and retention. Student-focused and performance-based, this cash scholarship encompasses all educational levels and regions to provide more than 600,000 payments a year for 180,000 eligible children with a total budget of US$125M. A more comprehensive discussion of “Beca Universal” can be found on section V.2 of this report. 17 MEDUCA & UNICEF (2015) “Factores Asociados al Abandono del Sistema Educativo en la Transición Escolar” 42 Panama Social Sector Expenditure and Institutional Review transfers are most effective. For the upper secondary level, deferred scholarships (which delay a substantial portion of the reward until the completion of pre-set benchmarks) have been shown to reduce dropout. More importantly, programs that address teen pregnancy become especially important in this stage to raise the aspirations of girls and the likelihood of them completing the education cycle. On the supply side, early evaluations of experiments with socio-emotional training, including cognitive-behavioral interventions, suggest that these interventions can have large payoffs for at-risk students. Finally, early warning systems are promising tools to improving targeted interventions like academic tutoring and socio-emotional training18. Enrollments in tertiary education are in line with other similar countries, but there are barriers to entry for individuals from lower income quintiles. Tertiary enrollment rate in Panama (42 percent) is in line with the average of countries with similar GDP per capita (42 percent) and countries such as Costa Rica (47 percent) and Malaysia (37 percent) (Figure 38). The difference between the poorest and the richest in terms of access to tertiary education is significant (Figure 39). In 2013, only 8 percent of the people between 20 and 29 years old from the lowest quintiles had some higher education. In the same year, 58 percent of the people in the same group but in the highest quintile had some higher education. Figure 38: Tertiary education, gross Figure 39: Percentage of population by enrollment rate (%) vs. GDP per capita 2012 age group with some higher education, by quintile (2013) Source: World Bank SSEIR / ICEFI social spending database for Panama and Central America. EdStats for the rest of the countries. Note: Closest comparators in terms of GDP, GDP per capita, population, population density and percentage of rural population: Bulgaria (BGR), Costa Rica (CRI), Lebanon (LBN), Source: Household survey, authors’ calculations using Lithuania (LTU), Malaysia (MYS), and Uruguay (URY) AdEPT. Additionally, the education young people receive must be made more relevant so that they can adapt to the new demands of society and the labor market. In Panama, the ratio of professionals to technicians is three to one when projects like the expansion of the Canal require 18 Almeida, Rita, Fitzsimons, Emla, & Rogers, Halsey. Forthcoming. How to prevent secondary-school dropout: Evidence from rigorous evaluations. World Bank 43 Panama Social Sector Expenditure and Institutional Review five technicians for every professional19. The regular system in Panama has two types of formal tertiary education: universities and technical institutes (Institutos Técnicos Superiores; ITS). In 2010, the tertiary education enrollment was 157,786 students; 88 percent of students at the tertiary level were enrolled in university and only 12 percent in ITS. From those enrolled in universities in 2012, only around 7 percent were pursuing a technical degree 20. This is true even when more than half of the students graduating from high school come from technical-vocational training21. The inadequate education of the workforce is one of the top 3 business environment constraints, according to 2010 data. Therefore, the unmet demand for skilled labor has intensified competition for workers and the hiring of foreign work workers22. This lack of well-trained workers with vocational skills may adversely affect economic growth in the near future23. In spite of the positive economic returns to education, there are concerns among youth on the access to high quality jobs. According to Latinobarometro (2011), Panama is one of the countries where few young people believe that university education provides access to a good job (Figure 40). Only 36 percent of Panamanians surveyed strongly agree that university provides access to a good job. This is below the average in LAC (38 percent) and most of Central American countries such as Costa Rica (50 percent), Honduras (45 percent), El Salvador (41 percent) and Guatemala 39 percent. Nevertheless, returns to education are higher in Panama than in Honduras, Costa Rica and El Salvador (Figure 41). Tertiary education institutions are surprisingly not using information to ensure that students know what jobs are available in the labor market and what skills those jobs need, as well as which programs are the best and least costly for specific types of learning and training. 19 UNDP (2014), “Informe Nacional de Desarrollo Humano - Panamá 2014.” 20 Castillo and Fiedler (forthcoming), “La Educación Técnica Vocacional y Profesional en Panamá y su relación con el empleo”. 21 Castillo and Fiedler (forthcoming) graduates from the technical-vocational trainings available in high school: autotronics, construction, electricity, electronics, refrigeration and air conditioning mechanics and computer technology. 22 UNDP (2014) “Informe Nacional de Desarrollo Humano - Panamá 2014” 23 Castillo and Fiedler (forthcoming), ibid 44 Panama Social Sector Expenditure and Institutional Review Figure 40: Do you strongly agree that Figure 41: Returns to education (control university education provides Access to a group: primary incomplete or less) good job? Source: World Bank SSEIR team’s, authors’ calculations Source: World Bank SSEIR team’s analysis of household using Latinobarometro 2011 surveys Panamanian students perform poorly when placed in an international context and there are significant achievement gaps across quintiles and between public and private schools . In 2009, Panama participated in the Program for International Student Assessment (PISA) of the OECD. According to PISA’s results, Panamanian students performed at very low levels, especially when compared with other countries in the Latin American region or countries with similar GDP per capita (Figure 42). Moreover, the latest results from the TERCE examination of Latin American students by UNESCO show that Panama is among the worst performers in TERCE in reading and in mathematics (Figure 43). There are also significant gaps in student achievement across different groups. For instance, students in private schools outperform students in public schools. Also, students from the lowest quintiles, in both public and private schools, have a much lower score than that of the highest quintiles. The difference between public and private gets wider in the highest quintile (Figure 44). 45 Panama Social Sector Expenditure and Institutional Review Figure 42: PISA 2009 Mathematics Mean Score by country (15-year-old students) vs. GDP per capita PPP Source: PISA 2009, EdStats Figure 43: LLECE: Mean performance on the mathematics scale for 6th grade students, total Source: Edstats 46 Panama Social Sector Expenditure and Institutional Review Figure 44: PISA 2009 Mathematics Mean Score by school type and income quintile in Panama Public Private Source: Human Development Network, World Bank (2012) Furthermore, consistent with the decreasing spending per student, perception on quality of public education has declined over time. The share of Panamanians surveyed by the Latino Barometro that said they were “very satisfied” with the way the public education works declined from 21 percent in 2007 to 14 percent in 2011. Accordingly, even though MEDUCA has imposed limitations for the installment of private schools in Panama24, the enrollment rate in private schools increased from 13 percent in 2008 to 16 percent in 2014. This scenario is consistent with the growing number of parents not satisfied with the quality of education in the public system25. Government initiatives such as “Panama Bilingue” bring to the forefront the key importance of skills and competencies in uture job attainment, in this case, foreign languages.26 Private schools provide an early edge over this type of competencies, and this edge may explain part of their attractiveness. Thus, more programs like “Panama Bilingue” can help bridge the quality perception gap between the public and private systems. Recent improvements in teachers’ years of education may be difficult to translate into increased learning, as those coming into the profession are not necessarily the best equipped. According to Bruns et al.27 average education levels for teachers have risen across the 24 Planells (2014) discusses the anecdote where the Private Schools Union (Union Nacional de Centros Educativos Particulares de Panamá; UNCEP) is in conflict with the Consumer Protection Agency (Autoridad de Protección al Consumidor y Defensa de la Competencia; ACODECO) because they want to limit the ability of private schools to set prices and freely choose school uniforms. 26 “Panama Bilingue” (Bilingual Panama) is an initiative from the Ministry of Education to improve education quality through better teacher training, specifically targeted towards the perfecting of teachers’ and students’ foreign language skills. The program is set for the 2014-2019 period with an annual investment of 10 million dollars, and seeks to reach 2,000 teachers per year, and better prepare 20,000 high school students and 30,000 elementary level students. 47 Panama Social Sector Expenditure and Institutional Review LAC region. Panama (together with Costa Rica and Peru) are on top of the list. For instance, teachers’ average years of education in Panama increased from 13.6 in 2009 to 17.5 in 2013 (Figure 45). However, increases in teacher’s educational attainment do not necessarily translate into improvements in students’ learning outcomes. To start with, Latin America is not attracting the high caliber individuals it needs to build world-class education systems. Virtually all countries in the region appear trapped in a low-level equilibrium of low standards for entry into teaching, low quality candidates, relatively low and undifferentiated salaries, low professionalism in the classroom and poor education results28. This low professionalism in the classroom is also reflected in the amount of time Panamanian teachers devote to teach. According to PISA-OECD (2009) the instructional time in Panama in Spanish and Math were the lowest when compared to other countries like Colombia, Chile or Peru (Figure 46). Figure 45: Teacher's average years of education 2009-2013 Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations 48 Panama Social Sector Expenditure and Institutional Review Figure 46: Minutes per week by course Source: PISA-OCDE (2009) Efforts have been made in teachers’ training but the evidence show shortcomings especially in math and natural and physical sciences. Panama invest annually 4 percent of the Fund Equity and Quality in Education (Fondo de Equidad y Calidad en la Educación; FECE) in teacher training, this was approximately $1,472,475 in 201329. According, to MEDUCA30 this resources are sufficient to train around 32,000 teachers per week nationwide. Also, since 2010, Panama has implemented a program to train teachers in how to apply information and communications technology (ICT) in the classroom31. However, the results obtained by the tests applied by SENACYT32 (2014) show serious shortcomings of teachers, especially in mathematics as well as in natural and physical sciences33. For instance, in the test taken by primary education teachers, on average, the percentage of right answers in math was 51.4 percent and in natural and physical science was 62.7 percent34. In addition, a compressed teachers’ wage distribution hinders incentives for better qualified teachers and improved performance. Research over the last decade provides compelling evidence that teacher quality critically impacts learning achievement35. However, the evidence suggests that teacher policies generally across the Latin-American region, and in Panama particularly, have not been able to produce the critical mass of quality teachers required36. In Panama, a very compressed teacher’s salary structure could be driving talented women and men out of the teaching profession. There is little chance of getting a low or high 33 Planells (2014), “Institucionalidad y gobernanza en el sistema educativo Panameño.” 34 SENACYT (2014), “Reporte del laboratorio de evaluación de los aprendizajes y de la enseñanza.” 35 Almeida et al. (forthcoming), “How to prevent secondary-school dropout: Evidence from rigorous evaluations.” 36 Bruns et al. (forthcoming), “Building Better Teachers in Latin America and the Caribbean.” 49 Panama Social Sector Expenditure and Institutional Review wage (Figure 47)37. As a consequence, individuals that tend to be less productive would earn relatively more as teachers, while those more productive would earn less38, producing negative incentives. Besides, the absence of an updated teacher career progression constrains the opportunity to attract, retain and develop better teachers39. Figure 47: Wage distribution for teachers compared with other professional occupations, 2013 Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations In spite of the recent increase in spending, overall the school system still has poor and unequal access to high quality infrastructure. Since 2011, the Panamanian government has increased the public education spending in infrastructure. The amount of money invested in public school infrastructure increased from 2 percent of the total spending on education in 2008 to a 12 percent in 2012 (Figure 48). Many studies have found that the quality of school infrastructure significantly influences the learning of Latin American and Caribbean students40. And the gaps were important as of 2006. According to MEDUCA (2010), only 67 percent of primary schools in Panama had electricity and 59 percent have access to safe water. Furthermore, there are large inequalities across provinces. For instance, in 2010, 92 percent of primary schools in San Miguelito had access to electricity, but only 23 percent of primary schools had access to 37 Bruns et al. (forthcoming), ibid. 38 Hernani-Limarino (2005), “Are Teachers Well Paid in Latin America and the Caribbean? Relative Wage and Structure of Returns of Teachers.” 39 Planells (2014). “Institucionalidad y gobernanza en el sistema educativo Panameño.” 40 Duarte et al. (2011), “Infraestructura escolar y aprendizajes en la educación básica Latinoamericana: un análisis a partir del SECE.”40 Planells (2014), ibid 40 Beca Universal is a program managed by IFARHU which consists of a monthly payment of US$20 (US$180 annually), conditional to academic achievement, to all students in public schools and certain private schools with annual fees lower than US$ 1,000. The program has reached approximately 480,000 beneficiaries in 2012. 40 The Red de Oportunidades is a program managed by Ministerio de Desarrollo Social (MIDES). Consists of a monthly payment of US$ 50 to households in poverty or extreme poverty under the condition that school-age children attend classes, among other requirements. The program reached roughly 70,000 households in 2012. 40 Almeida, Fitzsimons and Rodgers (forthcoming) conduct a review of evidence of policy options to prevent upper secondary dropout. 50 Panama Social Sector Expenditure and Institutional Review electricity in Comarca Embera, which is a territory of indigenous population (Figure 49). Besides, Panama is below the LAC average in access to all basic supplies. Figure 48: Panama, public education Figure 49: % Schools with basic supplies spending on infrastructure 2008-2012 Panama by quintiles (%) Source: Contraloria Source: SERCE-UNESCO (2006) Over the next two decades, the projected increase in the student population will require an increased number of teachers (and of funding) to keep current coverage at the primary and secondary levels. Demographically, Panama has been transitioning from an expansive population pyramid in 1950 to a population pyramid in 2010 much more line with its level of development. Looking forward, UN projections (United Nations, 2013) estimate a continuation of this trend towards a near-stationary population distribution by 2050 (Figure 50). In the next two decades, however, the student population should continue to grow. Bruns and Luque (2015) project a 2.9 percent increase in the Panamanian student population aged 4-18 between 2010 and 2015. Figure 51 shows that, by 2025, to maintain the current student-teacher ratio (and assuming constant enrollment ratios), Panama will need a 4.2 percent increase in the number of teachers41. 41 Bruns, Barbara and Luque, Javier, Great Teachers: How to raise student learning in Latin America and the Caribbean (Washington: 2015) The World Bank Group. 51 Panama Social Sector Expenditure and Institutional Review Figure 50: Demographic trends in Panama 2010 compared with 2050 Total Population by Age group and Sex; Source: ICPD, Country Implementation Profiles: Panama (2012). Population Pyramids are based on medium variant of the 2010 revision of the World Population Projections (WPP) by UN Population Division. This scenario contrasts with that of most Latin American countries with more advanced stages of population aging. In these countries, the forecasted decrease in student enrollment allows them to eventually reallocate resources to improve quality by even maintaining the number of teachers and dedicating the increased funding towards quality (Error! Reference source not found.). In contrast, in the next two decades, Panama will likely need increases in investment to increase school quality. In particular, the UN estimates (United Nations, 2013) show that student enrollment will reach a peak around 2035, after which the population aging process may allow to increase quality by maintaining actual funding levels (Figure 52). Figure 51: Projected change in the stock of Figure 52: Demographic Projections in teachers needed in LAC, 2010-2015 Panama: Projections on Student Population Population Aged 5-14 and Share of Total Population 780 20 Thousands 760 740 15 Percentage 720 700 10 2010 2020 2030 2040 2050 Population Aged 5-14 (thousands) Percentage of Total Population Source: Bruns, Barbara and Luque, Javier (Washington: 2015) Source: United Nations (2013) World Population Prospects: Great Teachers: How to raise student learning in Latin The 2012 Revision, Volume II, Demographic Profiles America and the Caribbean The World Bank Group (ST/ESA/SER.A/345) 52 Panama Social Sector Expenditure and Institutional Review IV.3 Institutional Arrangements Legal framework and key players The Political Constitution of 1971 established the foundation and structure of Panamanian education. Education in Panama is legally grounded on a group of seventeen articles (91 to 108) of the Constitution of 1971 and its modifications between 1978 and 2004. Key constitutional principles with regards to education include: i) the universal right to education, ii) the assignation of responsibility to the state of the management of public education, iii) the freedom to teach, iv) the right of private educational institutions to exist and compete with the public system, v) the free access to education for all pre-universitary levels, and vi) the compulsory nature of basic general education. Regarding higher education, the Constitution also guarantees the autonomy of the Universidad Oficial del Estado (Official State University) to organize curricula and empowers the legislature to create regulatory arrangements for the creation, approval, and supervision of education programs. Panama presents a heavily centralized education system, but changes in education are being increasingly framed by a complex network of actors from the government, the private sector, and civic society such as advisory councils (CONACED), business associations (COSPAE, FUNTRAB), public-private partnerships (CNC), institutions of non-formal education (INADE), teacher unions (MPU, ASOPROF), and private institutions of education. While the Ministry of Education centralizes many functions in the system, other actors (workforce, unions, the private sector, and the public) are gaining a powerful influence in the institutional framework and decision-making process. The Ministry of Education (MEDUCA) is the main player in the daily operations and supervision of education in Panama. The education system is comprised of both public and private institutions (Figure 53 and, for a more detailed explanation, see Planells [2014]). Traditionally the Comisión coordinadora de la educación nacional supports Meduca in the pedagogical areas and CONACED is a consulting body, including prominent representatives of the academic and civil society. Institutions such as the Consejo para la Asistencia Ocupacional (COSPAE) gather representatives from the business sector to help elevate the quality and competitiveness of the education system; the Fundación del Trabajo (FUNTRAB), which unites business and union leaders, had led proposals for educational reforms. The Centro Nacional de Competitividad (CNC) is another important association of multiple sectors (business associations, workforce, and high government officials), which has effectively pushed for better coordination and partnerships between the public and private sectors with initiatives such as “Competiveness Forums”. Finally, the Instituto Nacional de Formación Profesional y Capacitación para el Desarrollo Humano (INADE) is another institution that continues to gain 53 Panama Social Sector Expenditure and Institutional Review relevance, as it provides an alternatives for student to exit formal education towards programs that combine high-level technical education alongside traditional vocational training. Teacher unions play an important role in the education system, and exert political influence through the media, political campaigning, protests and strikes. The unions became especially relevant during reforms of teacher-related issues, such as the recent revision of the Ley Orgánica de Educación and the legislation of the Ley de Carrera Docente. Some of the major teacher unions are the Magisterio Panameño Unido (MPU) and the Asociación de Profesores de Panamá (ASOPROF). Private education, also called “particulares”, are another important and growing actor in the educational supply, encompassing in 2014 16 percent of student enrollment. The sector provides an alternative and thus competition and accountability to the public system, while filling gaps left by public institutions. In effect, private education has benefited from increasing demand of qualified workers and a general lack of satisfaction with public offerings. Similarly, the private sector has gained a more robust role and participation in education as the economy continues to grow, labor training needs become more sophisticated, and vocational training gains predominance. Figure 53: Education sector: Main internal institutions The previous sections have discussed some of the sector’s most important issues. The three main challenges or policy opportunities to improve the delivery of high quality education to Panamanian children (see Planels, 2012) are discussed below. Lack of coordination across the different sector players 54 Panama Social Sector Expenditure and Institutional Review The regulatory framework overseeing the education sector in Panama is complex and uncoordinated. The laws range from the national Constitution42, to laws approved in the Asamblea Legislativa, presidential or ministerial executive degrees (decretos ejecutivos) or resolutions signed by the education minister/secretary. Often these resolutions and decrees are unilaterally defined with a reduced consultation of the main education players ultimately resulting in poor coordination and ownership of the decisions by the civil society. This creates conflicts across different players, promotes centralization of decisions in the political power and fosters discretion and uncertainty in the definition of rules and roles in the sector. One clear example is the lack of strategic vision and coordination is in the area of TVET, where laws and regulations are complex, and often attribute overlapping roles to different players. For example the Ley Orgánica de Educación (artículo 15) recognizes a coordinating role to MEDUCA in the areas of technical education and training. According to this law, MEDUCA should lead the coordination with INADEH. In parallel, Decreto Ley No. 8 del 15 February 2006 (Consejo de Gabinete, 2006) created INADEH as the main state body for TVET. And, at the tertiary level, the Ley Orgánica de la Universidad de Panamá establishes that the four public universities should have full academic, administrative and financial autonomy for the areas of technical education. (Asamblea Nacional, 2005). Moving forward, coordination across the different education players including the private sector especially in tertiary education and technical education and training programs could be strengthened. Outdated legal framework related to teacher selection and career development The Ley de la Carrera Docente, defined in the Constitution, has never been approved and all hiring decisions are highly concentrated in MEDUCA. Instead, some of the most important issues are regulated by the Ley Organica de educacion (Titulo IV). This law, however, does not regulate any issues related to the collective bargaining or solving on the job conflicts. In practice, all the hires, promotions and fires of teachers or school staff have been throughout the years extremely concentrated in MEDUCA. In addition, only few have a temporary nature. One important recent achievement has been, however, the implementation of a more efficient online system to locally request and fill new hires: Modulo de Necessidades del Sistema de la Administracion de la Estrutura de personal (SAEP). Finally, teacher pay is traditionally delinked from performance, with some of the special pay increases being defined ad-doc and with significant time delays. Teacher training programs are also insufficient outdated and have produced limited results. Over the years, there has been an effort to improve teacher training, traditionally executed by the Dirección Nacional de Recursos Humanos in close coordination with the Direcciones Regionales de Educación and the Coordinaciones de Recursos Humanos. The 42 There is a group of 17 articles uin the constitution (art. 91 al 108) which are part of chapter 5 del título III de la CONSTITUCIÓN POLÍTICA de 1972 y sus modificaciones de 1978, 1983, 1993, 1994 y 2004 (CONSTITUCIÓN POLÍTICA DE LA REPÚBLICA DE PANAMÁ, 2004). 55 Panama Social Sector Expenditure and Institutional Review training include different modules including teacher quality, ethical issues and leadership, however, in practice it presents insufficient results. The tests led by SENACYT have shown that there are still large skills gaps in most teachers especially those in the areas of science (including Physics and Math) (see, Secretaría Nacional de Ciencia y Tecnología (SENACYT, 2014). In practice, the training is also offered to a reduced number of teachers (estimated at 1,850 as of 2012 according to Plannel, 2014). Moving forward, the legal framework overseeing teacher career and and pay could be updated so that it becomes more flexible and quality oriented. Autonomy and accountability in managing local school staff could also be promoted. Lack of solid monitoring and evaluation framework Even though MEDUCA regularly presents programs and organizes forums, the quality and frequency of data collection can be significantly improved. MEDUCA regularly organizes discussion forums and presentations on their main programs and initiatives. However, a systematic focus and a monitoring and evaluation culture in the education sector is far from existing. For example, until 2010, MEDUCA published regularly basic education statistics including average years of schooling per graduate, indicators of internal efficiency, share of schools with water, electricity and internet, the student-teacher ratio, share of teachers with qualifications, share of muti-grade schools ( see Ministerio de Educación de Panamá, 2010). However, since then these indicators are no longer systematically available.43 Furthermore, few initiatives by independent organizations are aimed to fill out this data gap. And the costs for this lack of data and precision are high. For example, it is extremely difficult to access information on the real per student spending, often with information poorly accounted and double counting of financial incentives. Moving forward, it would be critical for MEDUCA to revamp the reliability of their data and education indicators (e.g. fostering the participation in standardized tests) and invest more resources in the monitoring and evaluation of programs. It would be essential for the ministry to improve the accounting of information on the investments or costs of education. The most reliable information on spending is still the one published by the Controladoria General de la Republica but it is only available with a two-year lag. In addition, there is a strong consensus that there is need create a national evaluation system promoting the comparison of indicators and results across schools and regions (e.g., Consejo Nacional de Educación (CONACED), 2006). There are also no standardized tests regularly collected to evaluate students or teachers, school or regional directors/supervisors. Also, Panama last participated in PISA in 2009. Thus, it would also be critical to promote the regular participation of Panama in regional and international initiatives such as PISA with the ultimate aim of improving the international benchmarking of education results. 43 For example in the 2010 Meduca report there were 155 indicators included while in the 2013 report there were only 19 ( Meduca, 2010, 2012). 56 Panama Social Sector Expenditure and Institutional Review V Performance and Challenges in Health V.1 Recent Evolution of Health Public Spending Public spending on health grew in real terms but remained constant as a percentage of GDP. From 2007 to 2013, public spending in health grew at 5 percent per year on average and 34 percent cumulatively (Figure 54). In 2007, public spending on health was US$1, 592 and continued to increase throughout the years reaching US$2,127 in 2013. Despite the increase in real public spending in health, public spending on health as a percentage of GDP remained constant at 4 percent from 2007 to 2013 period (Figure 55). This can be explained by Panama’s growth in GDP across this same period. Figure 54: Public Spending on Health – Figure 55: Public Spending on Health as a Constant dollars – PPP (2007) % of GDP (%) Source: World Bank SSEIR / ICEFI social spending database Source: World Bank SSEIR / ICEFI social spending database Panama’s public spending on health as a percentage of GDP among the lowest in CA but among the highest in real per capita terms. In comparing Panama with its neighboring Central American countries, the public spending on health as a percentage of GDP in Panama (4.03 percent) is behind Costa Rica (6.75), Nicaragua (4.67) and El Salvador (4.27) (Figure 56). However, per capita public spending on health is second to Costa Rica and far above the other Central American countries of El Salvador, Honduras, and Guatemala (Figure 57). 57 Panama Social Sector Expenditure and Institutional Review Figure 56: Public Spending on Health as a Figure 57: Public Spending on Health – Per % of GDP by countries capita Constant dollars – PPP (2007) by countries Source: World Bank SSEIR / ICEFI social spending database Source: World Bank SSEIR / ICEFI social spending database Panama’s public health expenditures are in line with its GDP compared regionally and globally. In 2013, Panama’s public health expenditures accounted for 4.03 percent of GDP and its GDP per capita was $ 18,793(PPP constant 2011 international). In comparing Panama to countries outside of Central America with similar GDP per capita, Panama is above Chile, Mexico, Ecuador, Peru, and Malaysia. It is on par with El Salvador and Lichtenstein and below the OECD average, Costa Rica, Uruguay, Lithuania, Colombia, Nicaragua, Brazil, and Bulgaria (Figure 58). In addition, , Panama’s public health expenditures as a percentage of GDP falls right on the GDP line indicating that its level of expenditure is in line with its GDP (Figure 59). 58 Panama Social Sector Expenditure and Institutional Review Figure 58: Health expenditure, public (% of Figure 59: Public Health expenditure (% of GDP) GDP) vs GDP per capita, PPP 2012 Source: World Bank SSEIR / ICEFI social spending database Source: World Bank SSEIR / ICEFI social spending database for Central America except Nicaragua. WDI for the rest of the for Central America except Nicaragua. WDI for the rest of the countries. Note: Bulgaria, Costa Rica, Lithuania, countries. Note: Bulgaria, Costa Rica, Lithuania, Malaysia, Uruguay with similar GDP per capita as Malaysia, Uruguay with similar GDP per capita as Panama. Panama. Since 2001, Government real health expenditures have increased but have continued to absorb a constant share of Panama’s health expenditures. In 2001, the Government covered 67 percent of the country’s health expenses. Across the 2001 to 2012 period, this figure reached its highest point in 2009 with the Government absorbing 75 percent of the country’s health expenses. However, in 2010 and 2011 the Government’s share of the country’s total health expenditures decreased to 70 and 67.5 percent respectively. As a result, despite the yearly fluctuations, overall, the average percentage of health expenditures absorbed by the Government has remained at a constant level. Private health expenditures have increased in real terms and continue to represent approximately 33 percent of total health expenditures across the 2001 to 2011 period (Figure 60). 59 Panama Social Sector Expenditure and Institutional Review Figure 60: Estimates of Health Spending in Panama (US$ million in constant terms) Source: Panama Ministry of Health 2013. Situación de salud de Panamá. Pharmaceutical expenditures in Panama have steadily increased, requiring more attention to availability, affordability and quality of medicines. Total expenditures on pharmaceuticals have steadily increased from USD101.6 million in 2007 to $226.5M in 2012, a large share of which are for the treatment of chronic diseases, followed by the use of medicines to address more complex diseases and the inclusion of new vaccines in the immunization scheme.44 In light of the increasing pharmaceutical expenditures, the MOH has been implementing the National Policy on Medicines since 2009. Also, the Government’s 2010-2015 National Health Policies mandate the health system to redefine the supply chain of medicines to assess how processes can be strengthened and to ensure availability, affordability, and quality of medicines. In order to oversee progress, the availability and flow of information on medicines would also need to be improved. V.2 Performance of Health Indicators Panama has made progress towards the MDGs having met the MDG 4 target to reduce child mortality, yet further work is needed to reach the MDG 5 target for maternal mortality. As the country works to achieve the MDG goals, they have seen a drop in the mortality rate of children under-five from 33 per 1,000 live births in 1990, to 20 in 2011, surpassing the MDG 4 goal for child mortality and falling below the regional average of 23 (Figure 61). Maternal mortality has also seen a decline from 100 deaths per 100,000 births in 44 Instituto Conmemorativo Gorgas de Estudio de la Salud. Acceso, Gasto y Disponibilidad de los Medicamentos en Panama, 2007-2012. Documento Diagnostico. 60 Panama Social Sector Expenditure and Institutional Review 1990 to 92 in 2010, but the country is still far from achieving the MDG 5 target rate of 75 by 2015 and has a higher incidence of maternal mortality compared to the regional average of 80.45 Figure 61: Panama’s Progress towards meeting the MDGs for U5MR & MMR Data Source: WDI 2013 (World Bank World DataBank). Overall, Panama is seeing mixed results in key health outcome indicators despite having made progress related to child health. Mortality of children under-five is steadily declining, dropping from 32 per 1,000 live births in 1990 to 19 per 1,000 live births in 2012, having surpassed the MDG 4 target. Likewise, malnutrition among children under-five has decreased, dropping from 5.1 percent in 2003 to 3.9 percent in 2008 when measured by weight (Table 2). However, maternal mortality rates remain high having risen to 110 per 100,000 live births in 2000 and then decreasing to 92 per 100, 000 live births in 2010, still higher than the regional average and the MDG 5 target. The prevalence of HIV among individuals ages 15-49 has declined from 1.2 percent in 2003 to 0.8 percent in 2011, still higher than the regional average of 0.4 percent in 2011. Incidence of tuberculosis (TB) has seen a slow rise, increasing from 47 per 100,000 people in 1990 to 48 in 2011.46 Immunization coverage for children 12 to 23 months has also seen mixed results. Measles vaccination coverage has increased from 95 percent in 2003 to 97 percent in 2011. DPT vaccination coverage on the other hand has declined from a 98 percent coverage rate in 2003 to 87 percent in 2011. The percentage of women having deliveries by skilled health professionals has risen from 86 percent in 1992 to a high of 93 percent in 2003, but fell more recently to 89 percent in 2009. Table 2: Trends in MOH Facility Expansion, 1990 to 2012 Indicator Starting Year Mid Point Year Latest Year Progress Value Value Value Maternal Mortality (per 100 1990 110 2000 92 2010 Mixed: Rates initially 100,000 births) rose before dropping to current levels. Under Five Mortality Rate 32 1990 24 2003 19 2012 Positive: Steady Decline 45 World Bank DataBank, 2013. 46 World Bank DataBank, 2013. 61 Panama Social Sector Expenditure and Institutional Review (per 1,000 live births) in the deaths of children <5 Malnutrition for Children -- -- 5.1% 2003 3.9% 2008 Positive: Reduced rates