Dameat of
The World Bank
FOR OFFICIUL USE ONLY
Report No. P-4249-KE
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL DEVELOPMENT ASSOCIATION
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED CREDIT OF SDR 35.0 MILLION
TO THE
REPUBLIC OF KENYA
FOR A
SIXTH EDUCATION PROJECT
February 28, 1986
TIis document has a restricted distribution and may be used by recipients only in the performance
of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.



CURRENCY EQUIVALENTS
Currency Unit          -           Kenya Shilling (KSh)
US$1.00                -           KSh 16.0 1/
KSh 1.00               -           US$0.06
US$1.00                -           SDR1.07165 2/
TERMS AND ABBREVIATIONS
A-level         - Advanced secondary school qualification
EMS             - Educational Media Service (at KIE)
Form            - Grade of secondary school
GDP             - Gross domestic product
Harambee school - Community-established and operated school
JP              - Junior Polytechnic (formerly VP)
KIE             - Kenya Institute of Education
KSES            - Kenya School Equipment Scheme
KUC             - Kenyatta University College
MEST            - Ministry of Education, Science and Technology
MoW             - Ministry of Works
NCEOP           - National Committee on Educational Objectives and Policies
0-level         - Ordinary secondary school qualification
PIU             - Project Implementation Unit
PPAR            - Project Performance Audit Report
PTTC            - Primary Teacher Training College
Standard        - Grade of primary school
TSC             - Teachers Service Commission
FISCAL YEAR
July 1 - June 30
1/ Since August 1985, the Kenya Shilling has been pegged to the SDR at a
rate of SDR = KSh 17.74. The rate vis-a-vis the dollar has fluctuated
since that time. A rate of US$1.00 = KSh 16.0 has been used in
evaluating this project.
2/ As of October 31, 1985.



FOR OFFICIAL USE ONLY
KENYA
SIXTrH EDUCATION PROJECT
Credit and Proj ect Summary
Borrower:              Republic of Kenya.
Amount:                SDR 35.0 million (US$37.5 million equivalent).
Beneficiary:           Ministry of Education, Science and Technology.
Terms:                 Standard.
Project Description:  The main objectives of the project are to iprrove
the equity and quality of Kenya's educational system
and to promote institutional development in the
education sector. The project would provide
ci) seven new primary teacher training colleges,
(ii) three new arid zone primary schools, (iii)
equipment, specialist services, and training for the
development of educational materials for delivery by
mass media, (iv) assistance for the preparation and
testing of new curricular materials for secondary
and technical education, (v) assistance for the
Planning Unit of MEST, and (vi) computer and
microfilm equipment for the Teachers Service
Comission.
Benefits:              a)  Improved quality of: i) primary education by the
provision of additional teacher training
facilities and equipment for educational
broadcasting, and ii) secondary, secondary
teacher, and technical education by support of
curriculum development.
b) Increased equity through provision of boarding
primary schools in remote and deprived areas.
c) Improved planning and projlect Implementation
capacity in the education sector.
Risks:                 High and increasing recurrent costs in the education
sector are a cause of continuing concern. The
Government is taking steps satisfactory to IDA to
bring those costs under control.
This document ha s retricMd ditibuton and may be used by recipients only in the performane
of dair official duties Its contents may not otherwise be dislosed wihout World Bank autboration.



- ii. -
Estimated Project Costs:
Local        Foreign       Total
US millions
Primary Education
Primary Teachers Training               17.53            9.56      27.09
Arid Zone Primary Schools                1.54            1.00        2.54
Education Media Training                 0.32            1.05        1.37
19.39          11.61      31.00
Secondary and Technical Education
Curriculum Development                   1.99            2.41       4.40
Institutional Development
Ministry Planning Unit                   0.12            0.24       0.36
Teachers Service Commission              0.02            0.09       0.11
0.14           0.3         0.47
Professional Services                         1.36           1.05        2.41
Project Administration                        1.29           1.05        2.41
Total Baseline Cost                     24.17           16.45      40.62
Physical Contingencies                   1.93            1.00       2.93
Price Contingencies                      7.95            4.56      12.51
9.88           5.56       15.44
Total Project Costa/                    34.05           22.01      56.06
.-
Financing Plan
(USS million equivalent)      Z of Total
Local    Foreign    Total       Financing
Government of Kenya           18.56        -        18.56         33
IDA                           15.49      22.01      37.50         67
Totala/                   34.05      22.01      56.06        100
a/ Including taxes and duties of US$6.30 million equivalent.



- iii -
Estimated Disbursements:
(US$ million equivalent)
FY87     FY88      FY89     FY90     FY91      FY92
Annual                              4.1      8.0       8.4      7.4       6.3      3.3
sumulative                         4.1      12.1     20.5      27.9     34.2      37.5
Economic Rate of Return:   Not applicable.
Staff Appraisal Report:    Report No.  5864-KE, Date: December 23, 1985.
Nap: IBRD No. 19359



INTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT AND RECOMMENDATION OF THE PRESIDENT
TO THE EXECUTIVE DIRECTORS
ON A PROPOSED CREDIT TO THE
THE REPUBLIC OF KENYA
FOR A KENYA SIXTH EDUCATION PROJECT
1.        I submit the following report and recommendation on a proposed
Development Credit to the Republic of Kenya of SDR 35.0 million
(US$37.5 million equivalent), on standard terms, to help finance a sixth
education project. The Government would bear the foreign exchange risk.
PART I - THE ECONOMY
2.        A Country Economic Memorandum (Report No. 4689-KE) dated October
5, 1983, has been distributed to the Executive Directors. An economic
mission visited Kenya during June/July 1985, and its draft report will be
discussed with the Governnent in February. A summary of social and
economic data is in Annex I.
Trends in the 1960s and 1970s
3.        Kenya became an independent nation in 1963.  Kenya's first decade
as an independent nation was one of remarkable growth and structural trans-
formation. Total GDP grew at an annual average rate of 6.6% during
1964-73. Both agriculture and manufacturing grew rapidly, at 4.7% and 8.4%
per annum respectively. The expansion of agriculture was stimulated by the
conversion of considerable high-potential land from extensive use to small-
holder cultivation, the introduction of high-value production activities,
and the adoption of high-yielding maize varieties. Growth of manufacturing
was made possible very largely by the expansion of domestic demand due to
rising agricultural incomes, while investment for domestic production was
being encouraged by high levels of protection, a liberal attitude towards
foreign investment, and active Governwent promotion of and participation in
manufacturing ventures.
4.        Following the first oil crisis of 1973, growth decelerated to 4%
p.a., or virtual stagnation in per capita terms, reflecting not only the
oil shock, but also the emergence or intensification of structural con-
straints largely unrelated to the post-1973 terms of trade deterioration.
These problems are briefly described below.
(a) First, agricultural growth decelerated, due partly to the
tapering off of the specific positive factors which had sustained
agricultural growth in the first decade after independence.
Government policies, including trade and exchange rate policies
which turned the internal terms of trade against the agricultural
sector, and inefficient, monopolistic Government involvement in
agricultural marketing which discouraged production and placed
undue burdens on the budget.



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(b) Second, industrial growth also decelerated, and was being
accomplished at an increasingly higher cost in terms of the
capital-intensity of investment, low labor absorption, and the
burden on the balance of payments of a sector which imported a
substantial volume of intermediate goods for 'final touch'
processing and assembly, but exported very little. These
undesirable features resulted from Government policies which
included high and increasing levels of protection, and
inadequately selective Government financial participation in
industrial firms.
(c) Third, energy supplies became relatively more expensive, due to
increases in world oil prices, and imbalances between consumption
and replenishment of domestic woodfuel.
(d) Fourth, the public sector overexpanded and was inadequately
managed.
(e) Fifth, export volume grew by less than 1% annually, and exports
became more concentrated on coffee, tea, and petroleum products.
(f) Sixth, population growth accelerated to one of the highest rates
in the world, reflecting a decline in mortality, and health
improvements enabling fertility to move closer to its biological
limit.
Macroeconomic Management and Performance
5.        The above structural issues were generally well recognized in the
Fourth Development Plan (1979-83) and the Fifth Development Plan (1984-88),
which have provided broad guidance to the Government's economic policies
during the first half of the 1980s. The Fourth Plan stated that
quantitative import restrictions (ORs) for purposes of industrial
protection would be discontinued, and that restrictions on private sector
agricultural marketing activity would be relaxed. It projected GDP growth
of 6.3% annually. The Fifth Plan declares that 'Growth in the private
sector is the core of the development process in Kenya," and proposes to
provide a more favorable environment for private sector activity by
lowering the claim of Government expenditure on available resources;
curtailing or in some cases eliminating Government investment in
non-essential activities; and reviewing Government procedures for obtaining
various approvals and licenses to determine whether any can be eliminated
,or simplified. GDP growth is projected to be 4.9% annually.
6.        Actual developments in the Kenyan economy during the first half
of the 1980s have been less favorable than projected in the Fourth and
Fifth Plans.  Because of the second oil crisis, the deterioration in the
external terms of trade was sharper than had been projected in the Fourth
Plan; additionally, in the wake of the "coffee boom' of the late 1970s
there had been an erosion of fiscal discipline. As a result, at the
beginning of the decade the Kenyan economy was characterized by very large
financial imbalances. The large excesses of domestic demand over domestic
supply, of expenditure over revenue, and of imports over exports, meant
that the Kenyan economy was on an unsustainable path.



- 3 -
7.        The period since 1980 has been characterized by a steady
reduction in the excess of domestic demand over domestic supply, and by a
somewhat erratic growth of domestic supply, at a trend growth rate which
has been somewhat less than the population growth rate. The Government has
restrained domestic demand by lowering its budget deficit; decelerating
monetary growth; raising interest rates so that they become positive in
real terms; and permitting real wages to fall, beginning in 1982.  In 1981
the Government also began to use exchange rate policy to switch demand away
from imports, and towards exports. In addition, in 1982 import
restrictions were intensified. As a result of these measures, by 1984 real
domestic demand was 5X less than in 1980, despite the fact that the
population increased by almost 17% during this period. The burden of the
reduction in domestic demand has fallen more on investment than on
consumption. On the external side, the resource gap has been
narrowedentirely by a reduction in imports, since exports have declined in
real terms.
8.       Real gross domestic product grew by 3.7% annually during 1980-83,
and then by only 0.9% during the drought-affected year 1984. During this
period of time, Kenya's external terms of trade have deteriorated, and
therefore its real income grew more slowly than its real product. From
1980 to 1984, real product per capita fell by 5%, real income per capita
fell by 10%, and real domestic expenditure (i.e. consumption plus
investment) per capita fell by 18%.
9.        The record current account deficits by 1980-82 were financed
partly by a record level of borrowing, and partly by a substantial
reduction in the level of gross reserves. In the period since 1982, the
Government has succeeded at bringing the borrowing requirement down to a
level which could be financed largely by official sources.  Because of the
combination of rising debt service payments and generally lower export
receipts, the debt service ratio rose sharply from 13% in 1980 to 29% in
1984.
Sectoral Policies and Developments
10.       The Agricultural Sector.  Agricultural growth during 1980-84 was
affected by poor rainfall in 1979-80 and a serious drought in 1984. Value
added grew at about 3% p.a.; somewhat lower than in the late seventies.
Growth in the last ten years-- about 3.5X p.a.-has been higher than in
most developing countries, but somewhat below the rate of growth of
population. While production of traditional export crops has performed
impressively, production of domestic crops has stagnated or declined,
requiring growing imports of wheat, edible oils and milk. Except for
horticultural exports, minor agricultural exports (i.e., those other than
coffee and tea) have stagnated.
11.       If Kenya is to adequately meet the challenges of agricultural
intensification, it will be necessary for the farmers to be provided with
adequate incentives, inputs, and technical advice. Within this context, it
will be necessary for the Government to determine what the role of the
public sector in agricultural marketing, pricing and the provision of
agricultural services should be, and what roles can best be left to market
forces and the private sector.



-4-
12.       Two areas in which recent policies and programs have been
importantly supportive of increased agricultural production are producer
prices and agricultural extension. Within the present framework of
substantial parastatal involvement in marketing, producer prices for the
major import-competing crops have been substantially increased, and for the
grain crops--maize and wheat-brought closer to import parity.  Second, the
Training and Visit extension system has been implemented since 1982 to
increase yields on small holdings which produce 90% of output. However, in
other areas, government policies need to be improved in order to reinforce
the effectiveness of producer price policies and extension programs in
encouraging agricultural production. These areas are: (a) excessive
government involvement in marketing (and, in some cases, production)
contributing to parastatal deficits and price controls and marketing
restrictions that reduce incentives to smallholders; (b) availability of
farm inputs, particularly fertilizer; (c) the adequacy and focus of the
research effort; (d) poorly performing public credit institutions which
have drained public resources and contribute little to private capital
formation.
13.       The Industrial Sector.  Value added in the manufacturing sector
grew by 3.7% p.a. during the period 1980-84. Since the volume of
manufactured exports declined, the growth was entirely attributable to
production for the domestic market, reflecting expenditure-switching away
from imports in the wake of exchange rate depreciation and intensification
of import restrictions, particularly on consumer goods.
14.       Implementation of the Government's program for reforming the
protective system has lagged behind the schedule originally envisaged. Due
to inadequate coordination of exchange rate, demand management, and trade
policies, a foreign exchange shortage developed in 1982, following which
the Government re-restricted some of the import items which had been
liberalized. Progress has recently resumed. The June 1985 budget
contained the first increase in several years in the number of items on the
free list, and there has been an increase in foreign exchange
authorizations for imports. The June 1984 and June 1985 budgets also
included lowering of many tariffs. Despite the recent resumption of
progress, it appears that effective protection has remained high and
uneven. Because the protective system remained largely in place duiring
1980-84, its consequences of inward-looking bias and encouragement of
inefficient use of capital spread deeper into the manufacturing sector.
15.       Aside from exchange rate depreciation, relatively little was done
to promote exports, until the June 1985 budget when an increase in the rate
of export compensation (a fiscal incentive For selected nontraditional
exports) to 20% (of export value) was announced. During 1980-84, the
volume of Kenya's manufactured exports declined by 38%, to a level of only
4.5% of gross output. The low level of manufactured exports is
attributable to the incentive structure which has remained biased against
exports, while the decline seems to be attributable to foreign exchange
problems in neighboring African countries.



Public Finance
16.       Central Government Finances.  The Central Government budget
deficit went down from 9% of GDP in FY81 to 4% of GDP in recent years,
despite a significant decline in the ratio of revenue to GDP, because of
sharp reductions in expenditure and an increase in grants from abroad. The
ratio of government revenue to GDP decreased from 25% in FY81 to 22% In
FY85. The decline in revenue is due to decreased collection of import
duties, arising primarily from contraction of Import volume and secondarily
frond lowering of tariff rates. The observed decline in the revenue yield
has been consistent with the view, recommended in the Report of the Working
Party on Government Expenditures (RWPGE) and adopted in the Fifth Plan,
that the revenue yield should be permitted to decline in order to free up
more resources for private sector activity.
17.       The ratio of government expenditure to GDP has decreased sharply
from 352 in FY81 to 28% in FY85. Among expenditure categories, interest
payments increased and personnel expenditure was relatively protected,
while non-wage operating and maintenance expenditure, fixed capital
formation expenditure, and transfers to parastatals are the three
categories which were reduced. The problem of inadequate non-wage
operating and maintenance expenditure, which has existed since the late
1970s, has thus been exacerbated. At the same time, because lower levels
of capital expenditure have been spread out over a large number of ongoing
projects, not all of which have been of equally high priority, completion
dates for many projects have been postponed.
18.       The Government has begun to address these expenditure issues
through its Budget Rationalization Program. The objective of the program
is to increase the productivity of Government investment, by concentrnting
capital expenditures on a smaller number of projects, all of which are of
high priority, and by providing adequate resources for operation and
maintenance of the existing Government capital stock. In order to
implement the budget rationalization concept, ministries are now required
to prepare policy statements on recurrent and development expenditure
priorities, and to rank projects in their portfolio according to priority
criteria. Additionally, the Government intends to develop norms and
standards for capacity utilization, and to achieve greater collections of
user charges, as part of the program.
19.       The Parastatal Sector.  In the pe-iod since the submission of the
Report of the Working Party on Government Expenditures in 1982, the
Government has been engaged in an effort to rationalize and improve the
efficiency of the parastatal sector. The Government's intention has been
to implement a two-pronged strategy, consisting of divestiture of some
investments to the private sector, and strengthening the performance of
those parastatals which remain in the public sector. A Task Force on
Divestiture was established in 1983. Its principal task, which has been
completed, was to classify the parastatals into those which should remain
in the public sector, and those which are suitable for divestiture.
How-ever, so far no enterprises have been divested. The Government has
checked the further expansion, through utilization of budgetary funds, of
the parastatal sector. However, during FY83 and FY84 the parastatals
responded to the decrease in budgetary transfers by increasing their



- 6 -
utilization of benking system credit. It is difficult to assess, due to
lack of readily available and consistent data, what progress there has
been in improving the economic efficiency and financial performance of the
sector. In the area of institutional and procedural strengthening, the
pace of progress has been relatively slow.
Population
20.       Kenya's population growth rate, currently 3.9% per annum, is the
bighest in the world. Fertility has begun to decline in Kenya, hut at a
slow rate, from an extremely high level.  The total fertility rate has
declined from a peak of 8.1 in 1977 to 7.9 in 1979, and 7.6 (provisional
estimate) in 1984. At the present time, Kenya is one of only three
countries in the world with a total fertility rate greater than 7.0. The
recent rate of fertility decline of about 1% per annum is well below the
declines of 2% per annum or more, which has been achiev-ed by countries with
vigorous population programs. The Government has recently intensified its
commitment to addressing the problem of rapid population growth. The
National Council on Population and Development (NCPD) has adopted a target
of slowing population growth to 3.3Z p.a. by 1988, the end of the Fifth
Plan period. This would represent a dramatic acceleration in the rate of
fertility decline. However, an adequate program to meet this objective has
not yet been defined. In order to achieve or move closer to the
demographic objective, an expansion of both demand-creating education
activities and service delivery will be needed.
Summary Assessment
21.       In view of the combination of t..e economy's structural problems
and adverse exogenous developments such as terms of trade deterioration and
drought, the deceleration of growth and decline in per capita incomes which
took place in Kenya during the first half of the 1980s were inevitable.
What was not inevitable, was whether this deceleration would take place in
an orderly fashion, with declining financial imbalances and rates of
inflation, and maintenance of a manageable external position; or, as in
many other developing countries, in a disorderly fashion, with persisting
large financial imbalance, high rates of inflation, and external payments
difficulties. Of those developing countries which faced large financial
imbalances at the beginning of the decade, Kenya is among those which have
successfully reduced them toward sustainable levels in an orderly fashion.
At the same time, an acceleration in the pace of implementation of policy
measures to increase the efficiency of investment, expand exports, and
mobilize domestic resources will be needed to bring about sustained growth
of per capita incomes.
Prospects for the Kenyan Economy
22.       Short-term Prospects.  Reflecting good rainfall beginning in late
1984 and the Government's prudent financial policies, the prospects were
for a recovery in the Kenyan economy beginning in 1985 and extending
through 1986, even before the recent developments in the world coffee
market. Because the drought in Brazil has led, not only to an increase of
50% in coffee prices expected for 1986-87, but also to a suspension of
export quotas, the short-term prospects for the Kenyan economy have become



-7-
highly favorable. During 1986-87 there will he substantial increases in
export recexpts, national income, and government revenue.  It will be
important for Government policy to reflect that the higher coffee revenues
are expected to be temporary. During the previous 'coffee boom' of
1977-78, there were large and unnustainable increases in both government
expenditure and gross domesti'c expenditure, following which difficult
adjustments were necessary. On this occasion, only modest and sustainable
increases in expenditure should be permitted. The windfall of financial
resources should be devoted primarily to reducing the economy's absorption
of foreign savings during 1986-87 in order to reduce the external debt
burden.
23.       Medium-term Prospects.  The medium-term prospects for the Kenyan
economy depend critically on the pace of implementation of policy measures
along the general lines discussed earlier. With vigorous policy
Implementation, it should be possible to accelerate agricultural growth to
4.5Z per annum, and accelerate industrial growth to 5.5% per annum. GDP
growth would then be 4.9% per annum, the rate envisaged in the Fifth Plan.
24.       External Capital Requirements.  The Fifth Plan provides for
current account deficits (net external borrowing) averaging 4% of GDP over
the Plan period. This is an appropriate and sustainable level, taking into
account the concessionality of Kenya's capital inflow, and assuming that
export growth can be accelerated as intended. Due to the increase in
coffee export receipts in 1986-87, it is expected that the current account
deficits during 1986-87 will be lower than usual - about 2-3% of GDP.
During 1986-87 it is expected that gross loan disbursements from official
sources will be about $400 million annually, while gross loan disbursements
from private sources (chiefly previously arranged suppliers' credits) will
be about $100 million annually. In addition, Kenya receives grant aid from
about $100 million annually. Over the next two years, the stock of
external debt owed to private sources is expected to remain approximately
constant, as the private-source debt incurred during 1979-81 is retired
while the stock of debt owed by official sources would grow by 5%
annually. The debt service ratio is expected to drop sharply from 32% in
1985 to 24Z in 1986, reflecting higher coffee receipts, and then decrease
gradually to 19% in 1990.
PART II - BANK GROUP OPERATIONS IN KENYA
25.       To date, Kenya has received 45 Bank loans, including three on
Third '4indow terms, and 44 IDA credits, including one Special Fund Credit,
amounting to US$1,853.7 million, in support of 77 operations. In addition,
Kenya was one of the beneficiaries of 10 loans totalling US$244.8 million
which were extended for the development of common services (railways,
ports, telecomunications, and finance for industry), operated regionally
for the three partner states of the former East African Community (EAC).
Annex II contains summary statements of Bank loans and IDA credits to
Kenya.
26.       Since 1980, Bank Group bending has been oriented towards
assisting the Government in its efforts to restructure the economy,
resulting in the inclusion in the program of structural adjustment



- 8 -
assistance. For the future, since structural adjustment lending has proved
to De problematic in the short term, sectoral operations are to be
substituted in support of structural adjustment nbjectives. Sector loans
for agriculture, industry and energy are included in the Bank's future
lending program, and are now under preparation. Recent economic work has
also focused on the structural problems in specific sectors. The selection
of projects for financing and the design of such projects have been
influenced by the need to complement policy actions under the structural
adjustment program. Continuing priority has thus been given to the
agricultural and development finance projects, but increasing emphasis also
has been placed on infra-structure projects. In FY84, the Kiambere
Hydroelectric Power Project, the Second Highway Sector Project and a
Geothermal Exploration Project were approved. In FY85, a Nairobi Third
Water Supply Engineering project and a Third Telecommunications project
were approved.
27.       In contrast to FY82 and FY83, when disbursements improved over
immediate prior years, FY84 disbursements on projects as a percentage of
amounts outstanding at the beginning of the year fell slightly to 13% (19%
including disbursements against structural adjustment operations) compared
with 16% in FY83. Improvements during this period were explained by
greater use of Procedure III (direct payments), and the application of a
Treasury Circular requiring operating ministries to make prompt
reimbursement claims under penalty of freezing funds. In FY85, the
disbursement percentage rose sharply to over 37% due primarily to the
introduction of Special Accounts, the rationalization of problem projects
and the cancellation of funds, and a few projects with unusually high
disbursements.
28.       Project implementation has deteriorated in recent years, in
contrast to the successful implementation performance in the past. Factors
accounting for implementation delays have varied widely, hut some of the
more pervasive factors have been institutional/management constraints,
procurement problems, and budgetary constraints leading to a lack of local
financing. These factors, together with delays in preparing and submitting
reimbursement claims, have led to Kenya's poor project disbursement
record. An in-depth review of the causes of this situation has been
undertaken by the Bank Group and the problems and possible solutions have
been discussed with the Government at Country Implementation Review (CIR)
meetings. During these discussions, the Government and the Bank are
continuing to review the Government's development objectives and investment
priorities in the context of implementation capacity and resource
constraints. Recent improvements in budgetary and firnancial management in
one of the line ministries, which are to be introduced gradually to other
ministries, are expected to reap benefits in the future. The project
portfolio is under constant review to determine the scope for reducing
project costs through reformulation, rephasing or cancelling projects which
cannot be adequately funded. As a result, substantial cancellations of
funds have been made from the Sugar Rehabilitation Project (Ln. 1636-KE)
(US$58.0 million) and the Second Integrated Agricultural Development
Project (Cr. 959-KE) (US$38.0 million), and the project scope for the Bura
Irrigation Settlement Project (Ln. 1449/Cr. 772-KE) has been reduced to a
level commensurate with available local resources. To respond swiftly to
urgently required drought relief assistance, US$20.0 million for



-9-
fertilizer, chemicals, and agricultural seasonal credit has been
reallocated under the Fourth Agricultural Finance Corporation Project (Loan
1995-KE/Cr. 1143-KE) from loan funds which would otherwise have heen unused
and cancelled. Additional possibilities for project rationalization are
currently being explored.
29.       At the end of 1984, IBRD held 25%, and IBRD/IDA combined held
39% of Kenya's stock of external debt. During 1984, IBRD's share of
Kenya's debt service payments was 22%, and IBRD/IDA's share was 23%. Over
the next few years, our expectation is that Kenya's debt owed to private
sources will grow more slowly than Kenya's debt owed to official sources,
such as the Bank Group, reflecting the Government's success at reducing,
through stabilization measures, the country's borrowing requirements.
Therefore, in 1985, the IBRD/IDA share of the stock of external debt is
expected to increase to 40% (IBRD only, 2 5%), while the share of debt
service payments will increase to 25X (IBRD only, 21%).
International Finance Corporation (IFC)
30.       As of June 30, 1985, IFC has committed a total of US$68.5 million
for twelve operations in Kenya. These include loans for seven companies:
Pan African Paper Mills, Ltd.; Kenya Hotel Properties, Ltd.; Tourism
Promotion Services (Kenya) Ltd.; Rift Valley Textiles, Ltd.; Ramburi
Portland Cement Company, Ltd; Tetra Pak Converters, Ltd; and Leather
Industries of Kenya, Ltd. Also included are a US$2.0 million credit line
to the Kenya Commercial Bank, Ltd., a US$5.0 million credit line to the
Kenya Commercial Finance Company, Ltd., and equity investments in
Development Finance Company of Kenya, Ltd. (US$1.3 million), Diamond Trust
of Kenya, Ltd. (US$0.8 million), and Industrial Promotion Services of
Kenya, Ltd. (US$0.5 million). As of June 30, 1985, IFC held for its own
account US$42.4 million, comprising US$30.7 million of loans and US$11.7
million of equity. Since June 1985, IFC has committed US$37.6 million in
two additional operations (i.e. Madhupaper and Quatorial Beach Properties)
and approved, but not yet committed, USS10.2 million Oil Crop Development.
A summary of IFC Investments in Kenya is included in Annex II.
III. THE EDUCATION SECTOR
31.       The education system of Kenya is one of the the most developed
and diversified in Africa. In 1984, primary education enrolled some 4.4
million pupils, more than four times as many as 20 years earlier.
Quantitative expansion in secondary education (which presently enrolls
about 19% of the relevant age group) has been even more pronounced, with
enrollments in general education rising from 27,000 in 1963 to over 508,000
in 1984. Growth at the secondary level has been facilitated by extensive
community (Harambee) and private participation, resulting in non-Government
institutions accounting for almost 60% of secondary level enrollments.
The expansion of secondary education and the need to train high level
manpowpr have also resulted in increased demand for higher education.
About 7,300 were enrolled in 1983/84 in degree-granting institutions. An
additional 4,900 students attended the major Government-sponsored technical
training institutions at the diploma level, 12,000 in primary teacher



- 10 -
training, and another 3,000 were in secondary teacher training. At least
9,000 additional students attend university programs overseas, and a
further 30,000 take part in other post-secondary courses of various types
and sponsorship. The dramatic quantitative growth in school enrollment has
been achieved, to some degree, by allowing academic quality to decline,
particularly at the primary and secondary levels. To counter this trend,
the Government has resolved to increase Its efforts to maintain and improve
the quality of education, even as enrollment levels continue to grow in
response to population pressures.
Government Policies for Education
32.       Government policy for the education sector, as expressed in the
Fifth Development Plan (1983/84-1987/88), consists of: I) establishment of
a new "8-4-4 structure" for education based on eight years of primary, four
years of secondary and four years of higher education; ii) universalization
of eight years of primary schooling free of charge for all children of the
appropriate age group; iii) slower quantitative growth of the education
system at the upper levels and increased efforts toward job creation; iv)
increased cest sharing by local communities and students at the secondary
and higher education levels; v) revision of curricula towards greater
emphasis on practical subjects and preparation for employment; and vi)
expansion of nonformal education and training. The Association is in
agreement with these policies to the extent that they do not increase
education system costs beyond reasonable limits.
Structure of the Education System
33.       The education system of Kenya is in a state of flux, in large
part because of the shift in structure which was introduced in 1985. The
total years of schooling remains the same, for those few who go the whole
way, but the quantitative demands on primary schools and the university
increase by one grade each. The transition from the old system to the new
will inevitably be compllcated.  There are several benefits of the new
system which offset its difficulties. Overall, the intention of the 8-4-4
structure is to increase, over time, the relevance and social equity of
education in Kenya.
34.       The 8-4-4 structure is already being put in place.  Physical
facilities for the standard 8 have been built with community resources in
most locations; teachers have been hired for the new grade; and students
were enrolled in standard 8 throughout the country for the 1985 school
year. By 1990, the new system will be fully in place, and the universities
will have admitted their first students in the new four year program.
Meanwhile, it is the first order of technical business of the Ministry of
Education, Science and Technology (MEST) to execute the necessary
organizational, administrative and qualitative modifications to enable the
education system to adapt to the new structure.
35.       At all levels of schooling, strong social demand for education is
demonstrated by the dramatic increase of enrollments and by the willingness
of individuals and communities to provide resources for education, notably
physical facilities, but also operational costs in many cases. This level



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of non-Governmental activity reflects the commonly held public perception
of the value of education and training to the future economic well being of
today's youth. It becomes the Government's job, therefore, to assess that
value in a more systematic fashion and to modify education and training
programs so that they, in fact, contribute effectively to the economic
benefit of individuals and also to the nation as a whole.
36.       The quality of the primary schools is a reflection of the
material and human imputs provided to those schools. Construction,
furnishing, and maintenance of primary school buildings are almost totally
the responsibility of local communities. Teachers are supplied and paid by
the Government through the Teachers Service Commission (TSC), a
semi-autonomous body within the MEST which recruits, assigns, promotes and
disciplines teachers. In 1984, about 30% of primary school teachers were
untrained a reflection of past population growth and of the recent addition
of standard 8.
37.       The development and production of school materials is coordinated
by the Kenya Institute of Education (RIE), which is directly responsible
for the preparation of syllabi and curricula for primary, secondary,
technical and teacher education below the university level. Schooling at
the primary level is enriched by radio broadcasts prepared at the KIE and
transmitted by the Voice of Kenya. These programs are of 30 minutes
duration per day per grade for eight weeks of each term. The programs are
received on radios which are provided to each school through the Kenya
School Equipment Service (KSES).
38.       Teacher Education.  Teacher training has grown rapidly along with
school enrollments, though in the case of primary education not rapidly
enough to keep pace. There are 15 primary teacher training colleges (PTTC)
with an annual output of some 5,600 new trained teachers (about 80% of
teacher training candidates are previous untrained teachers). An average
of 1,000 unqualified primary school teachers also become trained annually
through in-service training. With the expectation of continually
increasing primary level enrollments, the deficit in trained teachers is
expected to remain at serious levels unless additional teacher training
facilities are provided.
Female Participation in Education
39.       The enrollment of girls in primary education grew from about 40%
in 1968 to some 48Z in 1981, where it has leveled off. In secondary
schools, the rate of increase has been more pronounced, growing from some
25% in 1967 to almost 41% in 1981. Primary school teachers in 1984 were
about 32% female. The percentages are higher for PTTC students, who
increased from 37.3% in 1975 to 41.2% in 1984. At the university level,
the record is less positive, with only about 23% of undergraduate
enrollments being female outside of the education faculty. In the latter,
some 48% were female in 1983/84.
Management and },nance
40.       Management.  Formal education is the responsibility of the MEST.
The Association has assisted in strengthening the management capacity of
the MEST through the Fourth and Fifth Education Projects, through support



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to the Kenya National Examinations Council, the training of school
headmasters, and the Planning Unit of NEST.
41.       Finance.  The priority attached to education and training by the
Government is reflected in the high share allocated to the sector in the
Government recurrent budget. About 30% goes to education under the NEST
an amount more than twice that devoted to any other Ministry, including
defense. To this must be added education and training programs under other
ministries. The Government is showing increasing concern over the level of
these expenditures and the need to control them. In the short term, it has
reaffirmed its intention to keep recurrent education expenditures within
30% of the total recurrent budget, though this seems unlikely to be
feasible in the immediate future. To deal with the longer term issue, a
Presidential Working Party on Education and Manpower Training has recently
been established which will deal with the costs of education, inter alia.
The Working Party is composed of four Permanent Secretaries and other
distinguished representatives from a broad cross section of Kenya's
society. Its establishment represents a significant step forward as such
bodies constitute an effective institutional mechanism in Kenya for dealing
with difficult policies and/or broad issues which cut across several
ministries and other entities. Though free primary schooling is seen as a
national responsibilit3y, increasing use of other sources, including fees,
will be considered by the Working Party for the higher levels, whose
expansion puts heavy burdens on the education sector budget.
The Role of the Bank Group in Education Development
42.       Since 1966, the Bank Group has assisted Kenya in five education
projects with loans and credits totaling USSR6.1 million equivalent. The
First and Second Edutcation Projects (Credits )3-KE and 185-KE) are the
subjects of Project Performance Audit Reports (PPAR) Nos. 328 of February
13 , 1974 and 2540, dated June 12, 1979. The PPAR for the First Education
Project concluded that the overall objectives of the project aimed at
construction of 42 general secondary schools, nine technical secondary
schools and 11 PTTCs were successfully achieved. For the Second Project,
the PPAR found that, while quantitative targets were met or exceeded,
project appraisal probably paid insufficient attention to the training of
staff in certificate level institutions, and that quality was below
staqdard. The Project provided for the preparation of a comprehensive
national education development plan, and a Project Implementation Unit
(PIU) was set up for that purpose. The expected plan, however, was never
prepared due to staffing contraints in the PIU. The Third Education
Project (Loan 1184-KE) has not yet been audited. The Project Completion
Report (PCR) of May 1985 found that the project had experienced serious
delays arising primarily from a shortage of manpower in the Ministry of
Works and the weak technical and administrative capacity of the PIU.
Reluctance by the Government to use Loan funds to finance technical
assistance also had adverse effects on implementation. Nonetheless, the
major physical objectives of the project were met, and the institutions
supported under the Project are functioning satisfactorily. The Fourth
Education Project (Credit 797-KE) was reduced in scope due to
implementation difficulties. The Project did achieve considerable success
in curriculum reform, improved project development and management
capability, increased capacity in agricultural education and training, and



-13 -
expanded access to primary education. Implementation delays arose in part
from pressures on the PIU which was implementing the Third, Fourth, and
Fifth Education Projects concurrently. Several ministries were responsible
for project components, straining the Government's generally weak
coordination.
43.       Lessons Learned.  Experience with past education projects
provides lessons with respect both to project design and to
implementation. The need for an effective ongoing dialogue regarding
education sector issues must be recognized, especially because many
problems of a continuing nature need to be dealt with. These include,
inter alia, the impact of population policy on enrollment growth, rising
education sector costs and the associated need for efficient use of
resources, improved planning and management for all parts of the sector,
and effective implementation of Bank Group projects. In view of the
Government's reluctance to fully utilize project resources for technical
assistance, the latter point requires special attention on project design.
There is also a need for adequate organizational status and technically
qualified staffing of the Project Implementation Unit (PlU), created under
the Second Education project, and for timely availability of counterpart
funds to support Government financial participation in the project. The
administrative simplicity which arises from basing all project components
in a single ministry is also noted. Also, technical functions must be
maintained and/or strengthened in the PIU. These include advanced
technical preparation of key project components, capability to supervise
effectively the architectural and engineering work done for the project,
and prompt and effective tendering, particularly for highly specialized
items.
44.       Bank Group Lending Strategy for the Education Sector.  As
inc-reased financial constraints and uncoordinated expansion threaten the
viability of the system, the education development process needs to be
reassessed with emphasis on planning, financing, and management.
Institution building is called for to improve management, to rationalize
operations, and to reduce costs, as well as to strengthen the capability
for project implementation. Quantitative expansion does not call for
assistance, other than to promote increased equity for the more remote
regions, but the qualitative aspect is much in need of improvement. The
Bank Group would continue to support efforts to increase equity of
educational opportunity in deprived areas, and to improve quality in all
parts of the system. Finally, with regard to secondary and vocational
education, there is lack of coordination and supervision, and duplication
of efforts among the various organizations which sponsor education and
training institutions. The system must, at the same time, he helped to
respond more effectively to manpower needs.
IV. THE PROJECT
Background
45.       The proposed project was identified during an IDA mission to
Kenya in June 1984. It was prepared by the Ministry of Education, Science
and Technology (MEST), with assistance from the UNESOD Cooperative



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Program. The appraisal of the project took place in April/May 1985.
Negotiations were held in Washington, D.C., November 18-22, 1985. The
Government's delegation was led by Mr. David Mwiraria, Permanent Secretary,
NEST. A Staff Appraisal Report entitled, "Sixth Education Project in the
Republic of Kenya", No. 5864-KE, dated December 23, 1985, has heen
distributed to the Executive Directors separately. A Credit and Project
summary appears at the beginning of this report, and a supplementary data
sheet is given in Annex III.
Project Objectives
46.       The main objective of project would be to assist the Government
to increase the effectiveness, relevance to socio-economic requirements,
and efficiency of the education system within the new 8-4-4 structure, and
to adjust the system to overall financial constraints in the environment of
increasing social demand which results from a high rate of demographic
growth and a consistently high value attributed by the population to
education. Specifically, the project would: U) improve equity and
quality of the education system by constructing a limited number of primary
schools in deprived remote areas, by providing additional teacher training
facilities, and by raising the level of educational quality through
curriculum development and increased capacity to deliver educational media;
and ii) promote institutional development through strengthening the
capability of the Government to plan effectively for the education sector
and to manage its expansion at all levels.
Project Description
47.       The project would consist of:
Primary Education
Seven new primary teacher training colleges with a total capacity
of 4,080 trainees;
Three new primary schools in remote, arid locations, each with a
total capacity of 360 pupils in eight grades; and
Equipment, specialist services and training to support the
development of educational materials for delivery by mass media,
for use in schools and in teacher training.
Secondary and Technical Education
Assistance to the preparation and testing of new curricular
materials for secondary and technical education.
Institutional Development
Assistance to the Planning Unit of MEST to help improve its
management capabilities and to increase efficiency in the use of
existing resources; and



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Computer and microfilm equipment to the Teachers Service
Commission to enhance its capacity to manage teacher resources
effectively.
Detailed Features
48.       Primary Teacher Training Colleges.  The growth of primary
schooling, under heavy population pressures and a policy of free primary
education for all, together with normal attrition from the teaching force,
brought the number of untrained primary school teachers to more than 41,000
in 1985 (over 30Z of the total number). This quantity is expected to
remain as high as 34,000 in the year 2000, if no new teacher training
facilities are provided. The proposed project would seek to reduce the
deficit by providing seven new PTTCs with a total capacity of 4,080
trainces. These would be located in districts where teacher training
facilities do not yet exist, and within a reasonable distance of existing
primary schools to facilitate practice teaching. The schools would be
residential and would follow the established two-year curriculum for
PTTCs. Furthermore, about 2,720 additional in-service teachers would be
upgraded to qualified status each three years by distance-teaching,
correspondence, and vacation programs based at the new colleges. The total
additional output of trained teachers would therefore average 2,830
annually. It is the Government's intention to limit the lmpact of these
additional teachers as recurrent education expenditures by recruiting 30%
of all pre-service teacher trainees at the P3 level (those recruited for
training after eight years of primary education). This proportion of P3
level teachers can be utilized by the system without detriment to the
quality of instruction. Equitable distrihution of qualified teachers of
various levels would be assured by the Government policy of recuiting
teacher trainees on a geographically equitable basis, and of returning
trained teacher to their district of origin.
49.       Sites at Bondo, Murang'a, and Tambach (720 students each) and at
Garissa, Narok, Voi and Baringo (480 students each) have been chosen for
these schools. The sites were chosen in order to promote more even
geographical distribution of these facilities, and, at the same time, to
maintain reasonable unit costs. The PTTCs are national institutions, and
students are assigned to them in a manner which promotes mixing of trainees
from different regions. Therefore, the question of catchment area does not
arise as a primary criterion for their location. In the case of the
proposed PTTC at Garissa, however, regional factors do come into play, in
order to provide a focus for teacher training in the sparsely populated
North Eastern Province, where the incidence of trained teachers is lower
than elsewhere in the country. At negotiations, the Government provided a
staffing plan satisfactory to the Association for the new PTTCs.
50.       Arid Zone Primary Schools.  Three primary schools in remote, arid
areas would be provided under the proposed project, at Kanayao, Barsaloi,
and Mokowe. These would bring to a total of nine the number of such
schools, six of which were provided under the Fourth Education Project.
They would be located in areas where tribesmen routinely move about in
pursuit of pastoral activities. Though day schools are provided in those
areas, as elsewhere, for children whose parents are settled in one place,
the children of nomadic families require boarding facilities in order to



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benefit from schooling. The schools under the proposed project would be
located at sites in deprived areas where other means of pupil boarding are
not available. It is therefore the aim, in providing these schools, to
increase equity by providing educational opportunities in some of the
poorest locations. The schools would also be used as community centers for
adult education, in conformity with general practice. The development of
settled agriculture in the areas where these schools would he sited is a
long-term objective of the Government. These schools would therefore be
located near water resources, and practical studies in agriculture would be
included in the curriculum. Each school would have a workshop, classrooms,
and related facilities for total of 360 pupils in eight grades. Eight
modest houses for teachers and staff would be provided at each school. The
curriculum for these schools would be the same as for other primary
schools, and the supply of teachers would be guaranteed by the Government
through tie TSC.
51.       Education Media Support.  The Education Media Service (EMS), a
part of the KIE, prepares for broadcast the radio programs used in primary
education and in-service teacher training. Educational television programs
are also prepared by the EMS to a certain extent. Technical equipment for
the EMS was provided under the Third Education project and has been
effectively used by that institution in the development of its present
operational capability. The proposed project would provide additional
equipment for the preparation and recording of educational materials using
audio and visual media, five man-years of specialist services to improve
and guarantee program quality through effective utilization of that
equipment, and ten man-years of fellowships in the field of education
media.
Secondary and Technical Education
52.       Curriculum Development.  To assist in improving the quality of
education, the KIE is developing standardized curricula for use in all
schools below the university level. Assistance under the Fourth and Fifth
Education Projects has been instrumental in the preparation and pilot
testing of curriculum materials for primary schools, and in preparation of
the resulting instructional materials for publication. Support for such
activities in secondary and technical education has already began and would
be continued under the proposed project. That support would provide, inter
alia, equipment, travel, subsistence, and other operational expenses for
steering committees, subject and course panels, and academic boards to
develop courses for secondary and technical schools and for teacher
education. The cost of printing and distribution of materials to be used
in testing the new curricula would also be included, as would that for
sumiative evaluation and for ten man-years of fellowships to upgrade KIE's
curriculum development staff. The cost under the proposed project for the
present enrollment of about 500,000 students in the affected schools is
approximately US$12 per student. This outlay is actually an investment,
since use of the resulting curricula will be spread over a number of years
to come, and will contribute to the improvement of educational quality
without any significant further increase in cost. Courses in population
and family life education would be included in the work of curriculum
development for both secondary schools and teacher training. It is
expected that these would be developed in collaboration with the National



- 17 -
Council of Population and Development. In order to assure a proper
relation between technical education curricula and manpower requirements,
at negotiations the Government provided assurances that those curricula
take into account the results of the manpower and training requirements
study being carried out under the Fifth Education Project.
4nstitutional Development
53.       The pressures of quantitative growth of the education sector and
the simultaneous need for qualitative improvement of education services,
each within the limitations imposed by constrained financial resources, has
placed severe burdens on the management capabilities of the MEST. It is
evident that increased efficiency in the use of existing resources would
greatly improve the capacity of the MEST to fulfill its mission.
Assistance to this end has already commenced under the Fourth and Fifth
Education Projects, through the provision of training and equipment,
including computer hardware and software, to the Planning Unit of the
MEST. Continued assistance of the same kind, including three man-years of
specialist services, 30 man-months of short-term training, plus equipment
and operational expenses, would be provided under the proposed project in
such a way as to integrate that assistance with the activities which have
gone before.  The development of an effective Planning Unit is not only
technical but also an institutional development job, one which will take a
number of years to bring to a reasonable level of completion.  It is the
intention of this component to carry on with that process.  In addition,
the capacity to manage effectively the teacher resources of Kenya would be
augmented by the provision of computer and microfilm equipment to the
TSC, which is the largest single employer in the country. The
implementation capabilities of the PIU would also receive enhancement under
the project.
54.       The provisions under the proposed project for institution
building at the MEST, both for overall and for project management, run
parallel to other steps being taken by the Government. The Working Partyon
educational issues is principal among these, and significant improvements
in sector management are expected to result from its work. At the same
time, the NEST is striving to upgrade both its management and its planning
capabilities, improved planning heing an essential element of improved
management. The Association is providing technical assistance and software
support for the computation of cost projections, in addition to the
assistance included in the proposed project.
Summary of Technical Assistance
55.       Specialist Services.  About 38 man-years of specialist services,
locally contracted to the extent feasible, would be provided under the
proposed project. These would be allocated as follows: i) five man-years
to the EMS in connection with the utilization of education media equipment;
ii) three man-years for the Planning Unit of the MEST; and iii) 30
man-years of locally hired technical staff for the PIU over the life of the
project. Specialists financed under the project would be selected in
accordance with Bank Group guidelines. Qualifications, experience and
terms of employment would be subject to review and agreement by the
Association. All expatriate specialists, as part of their terms of
reference, would be expected to train local counterpart staff.



- 18 -
56.       Fellowships and Training.  About 23 man-years of long and
short-Jterm fellowships, plus other training, would he included under the
proposed project. The fellowships would include: i) 10 man-years of
fellowships in educational media; ii) 10 man-years of fellowships in
curriculum development; and iii) 30 man-months of short-term training for
the MEST Planning Unit. Other training would be: i) in-country training
for learning resource center technicians at the PTTCs; and ii) training in
the use of equipment for TSC staff. The curricula vitae of fellowship
recipients, all courses of study, training institutions, and estimated
costs would be subject to review by the Association.
Environmental Impact
57.       No negative impact on the environment is expected as a result of
the proposed project.
Project Cost and Financing
58.       The total cost of the project is estimated at US$56.06 million
equivalent (including about US$6.3 million equivalent in taxes and duties),
with a foreign exchange component of US$22.01 million, or about 42% of
project cost. Cost estimates for civil works, furniture, equipment and
vehicles were derived by Bank Group staff from a review of data from
contracts awarded for similar components in the Fourth and Fifth Education
Projects, from other Government development projects, and from the private
sector, including, inter alia, locally based firms of architects and
quantity surveyors. The project costs are based on December 1985 prices.
Unit cost of proposed construction of the PTTCs varies from US$227 to
US$285 equivalent per sq m, due to different location factors, but compares
favorably with similar unit costs elsewhere in Africa. For physical
contingencies, 10% has been added to the base cost of civil works and 5% to
the base cost of furniture, equipment, vehicles, and professional
services. Price increases, above base cost (dated December 1985) plus
-physical contingencies, have been applied in accordance with the project
implementation schedule. Foreign price contingencies are based on
estimated annual foreign cost increases of 7.0% in 1986 and 1987, 7.5% in
1988, 7.7% in 1989, 7.6% in 1990, and 4.5% thereafter. Local price
contingencies for building construction, civil works, and other local
expenditures reflect an estimated annual increase in local costs of 9.0%
in 1986, 8.0% in 1987, 7.5% in 1988, 7.7% in 1989, 7.6% in 1990, and 4.52
thereafter. The total price increase for the project is estimated at 24%
of base cost plus physical contiltgencies. Items directly imported for the
project would be exempt from import duties and taxes.
59.       The proposed IDA credit of SDR 35.0 million (USS37.5 million
equivalent) would finance all foreign exchange costs (US$22.01 million) and
US$15.49 million equivalent in local costs, representing about 75.0% of the
total project cost net of taxes and duties. The Government's share of the
costs would represent about 0.8% of the Government's capital budget in the
year of greatest expenditure, FY1990, and about 0.7% average annually over
the six-year implementation period, under the assumption that the budget
will remain stable in real terms during the period of project
implementation. Effects of the project on the recurrent budget would arise
almost entirely from the cost of operating the proposed new PTTCs and from



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the increased salary costs of the trained teachers which they would
produce. These additional costs would commence about 1989, with the first
operation of the PTTCs. In that year, the additlonal cost would be about
0.2Z of Government recurrent budget. By 1995, It would reach about 0.42 of
that budget, and in the year 2000 about 1.02. These figures represent some
0.62, 1.4% and 3.3Z of the MEST budget, respectively, assuming that the
present 302 relation between the MEST and total Government budgets
continues to be observed. In view of the impact of these costs on the MEST
budget, and because of the overall concern regarding increasing education
sector costs, at negotiations, the Government provided for discussion the
terms of reference for the Working Party on Education and Manpower
Training, and agreed to present for review and discussion by December 31,
1987, (a) detailed plans to increase the cost-effectiveness of education,
and (b) measures which the Government proposes to take to carry out those
plans. Continued support for the education sector through future
Bank/TDA-financed projects would be contingent upon adoption of a
cost-effectiveness program satisfactory to the Association.
Project Implementation
60.       The proposed project would be implemented over a period of about
six years. The project is expected to be completed by December 31, 1991,
with a Closing Date of June 30, 1992. The implementation schedule is
based, inter alia, on experience derived in particular from the Fourth and
Fifth IDA Education Projects in Kenya. Disbursement profiles related to
the country, the region, and the sector have also heen taken into account.
61.       Execution of the proposed project would be the responsibility of
the PIU, which was estahlished to implement the Second Education Project
and has been responsible for carrying out all subsequent Bank and IDA
education projects. The PIU is an agency of the MEST, though it is
physically separated from the main Ministry offices. The large majority of
PIU staff are regular MEST emp'loyees provided by the Government at no
direct cost to the projects which they administer. Some key technical
services are paid for with proJect funds, through the hiring of contract
employees or consultants, to strengthen the Unit's effectiveness in project
execution. The PIU is presently staffed with a director, a deputy
director, an accountant, a procurement officer, an educator and two
architects, all local staff, except for one of the architects whose
position is that of a locally recruited expatriate employee. To assist the
PIU in implementing the Third and Fourth Education Projects, the MOW
provided technical assistance and coordination. The services of private
architectural, engineering and quantity surveying firms were used for the
Fifth Education Project under the supervision of the Ministry of Works
(MOW). Additional technical assistance is needed to enable the unit to
provide stronger administrative services. Though improvements to this end
have been made under the Third, Fourth and Fifth Education Projects, the
PIU is still in need of greater effectiveness. The proposed project would
add or continue to support locally contracted technical staff to oversee or
attend to key aspects of implementation, such as architectural design, site
supervision, procurement and accounting. In addition, the organizational
structure of the PIU requires revision to make it more responsive to the
technical and administrative requirements placed upon it. To accomplish



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this, the PIU would report directly to the Deputy Secretary for Planning
and Development of the MEST, and its staff would be correspondingly
incresaed.
62.       The PIU will be headed by a Director, whose rank shall not he
less than Under-Secretary, and who shall report directly to the Deputy
Secretary for Planning and Development of the NEST.  A Deputy Director will
also be appointed, who shall be a qualified architect or civil engineer.
The terms of reference and the experience of both the Director and the
Deputy Director shall be satisfactory to the Association. A Technical
unit, composed of the new Deputy Director, two architects, a civil engineer
and two site supervisors, will be established within the PIU. The
accounting section and the procurement section would also be assisted with
the hiring of at least two new experienced staff members. About 50% of the
operational expenses for project administration (excluding local
Governmental salaries, hut including salaries of fixed term technical
staff, such as architect, accountant, and procurement specialist) would be
financed under the project. The new staff would be hired locally, with
terms and conditions acceptable to the Bank Group. Because of difficulties
in securing qualified professional services, architectural, engineering and
quantity surveying consulting firms would be used whenever needed, and
funds for their services would be provided under the proposed project.
Consultants would be hired on terms and conditions satisfactory to the Bank
Group and in accordance with the Bank Group guidelines. At negotiations,
the Government provided a detailed action plan for reorganizing and
upgrading the PIU along the lines outlined above. As a condition of credit
effectiveness, the PIU would be strengthened as set forth in the agreed
action plan.
63.       The technical unit of the PIU would be responsible for overall
physical implementation of the project. In consultation with the MOW, it
would select and nominate all required consulting firms, draft their
contracts and terms of reference, monitor and approve the work of
consultants, and assist in preparation of all tender documentation, in the
opening of tenders, in tender analysis and in contract awards. Design of
facilities wonld also be monitored by the technical unit for quality and
for adherence to schedules of accommodation agreed between the Association
and the Government. Particular emphasis would be given to the use of
construction materials produced locally or procured in the vicinity
of the construction site, both in the design and in the execution stage, in
order to limit or reduce project costs. The technical unit would also
assist in construction supervision, periodically visiting construction
sites and reporting on the ongoing activities. Any deviations from the
agreed building areas, construction details and implementation schedule
would be promptly flagged and brought to the attention of the Government
and the Bank Group. Standardized architectural plans prepared for
previously Bank Group financed education projects would be utilized
whenever feasible. Repetition of building designs and standardization of
construction elements would be emphasized in order to reduce costs.
64.       Sites have been selected by the NEST and local authorities for
the PTTCs. All sites are available, being communal property or having been
obtained through private donation. Every site needs a certain amount of
work for infrastructure. Road connections, water supply, electricity
supply and sewage disposal vary from site to site, and this has been taken



- 21 -
into consideration in costing the proposed project. For the arid zone
primary schools, the availability of land is not an issue, all being on
land tribally owned.
65.       Funds for preparation of site surveys, architectural and
engineering design, and preparation of educational equipment lists have
been made available under the ongoing Fifth Education Project. The PIIT,
with the cooperation of the MOW,is proceeding with the selection of the
architectural/engineering consulting firms which would implement the
physical side of the proposed project. Building and construction plans, as
well as equipment lists for similar institutions already implemented under
the Fifth Project, would he used to the extent possible, or altered as and
where required. The preparation of the proposed project consequently would
be fairly advanced prior to effectiveness, in order to minimize delays in
its subsequent implementation.
66.       Semi-annual progress reports on implementation would he submitted
to the Bank Group by the PIU each January and July after Credit
effectiveness, following the format already used for the ongoing education
project. This format would be modified as deemed necessary during the
implementation of the project. Not later than six months after Credit
Closing Date, the PIU with the assistance of the MEST, would prepare and
provide the Bank Group with a report evaluating the implementation, initial
operation, costs and benefits of the proposed project, and the performances
of the Government and of the Bank Group, including the significant lessons
learned during implementation.
Procurement
67.       Procurement arrangements are summarized in Table 1.  Contracts
for civil works, furniture and equipment, to be directly procured by the
PIU, would be awarded on the basis of international competitive bidding
(ICB) in accordance with the Bank Group guidelines for procurement. All
vehicles included in the project would also be procured through ICB.
Exceptions to the above are: (i) civil works contracts costing less than
US$500,000 equivalent each; and (ii) furniture and equipment purchase
contracts costing less than US$100,000 equivalent each. Contracts for such
items would be awarded on the basis of competitive bidding advertised
locally and in accordance with local procedures satisfactory to the Bank
Group (estimated at an aggregated value of US$1.0 million equivalent
including contingencies).



22
TABLE 1:  Procurement
(USS Millions) 1/
2/
Project Categories              ICB      LCB    Other      N.A.      Total
1. Civil Works                30.98    3.64       1.82     -         36.44
(20.13)  (2.37)    (1.18)             (23.68)
2. Furniture                   0.52    1.95       0.13      -         2.60
(0.40)  (1.51)    (0.10)               (2.01)
3. Equipment/Vehicles          4.04    0.48       0.24      -         4.76
(3.65)  (0.42)    (0.21)              (4.28)
4. T.A. Specialists                -       -       -      2.44        2.44
(1.71)      (1.71)
5. Fellowships                    -        -       -      0.82        0.82
(0.62)      (0.62)
6. Educational
Operations                   -        -      0.25   4.59         4.84
(0.15) (2.75)       (2.90)
7. Administrative
Operations                   -        -      0.05   0.90         0.95
(0.03) (0.54)       (0.57)
8. Professional Services          -        -       -      3.13        3.13
(1.68)      (1.68)
9. In-Country Training            -        -       -      0.08        0.08
(0.05)      (0.05)
Totals                   35.54    6.07       2.49  11.96        56.06
(24.18)  (4.30)    (1.67) (7.35)      (37.50)
1/  Figures in parenthesis indicate IDA share.
2/ Not applicable.
68.       Architectural sketch designs, draft tender documents, and master
lists of furniture, equipment and vehicles, indicating proposed grouping
and estimates of cost, would be reviewed by the Bank Group. Items would be
grouped to the extent practicable to encourage competitive bidding and to
permit bulk procurement. Review of tender evaluations by the Bank Group
prior to award would be required for contracts for civil works costing more
than US$500,000 equivalent each, and for contracts for furniture, equipment
and vehicles costing more than US$100,000 equivalent each.
69.       When ICB is used: (i) domestic manufacturers of furniture,
equipment and vehicles would be allowed a preference of 15Z, or the
existing applicable rate of import duties, whichever is lower, over the



- 23 -
c.i.f. price of competing foreign suppliers; and (ii) if applicable,
qualified domestic civil works contractors would be allowed a preferential
margin of 7.5% over the prices of competing foreign contractors.
Disbursements
70.       In accordance with the Association's current disbursement
practice, all reimbursements, direct payments and agreements to reimhurse
will only be made against applications for individual amounts in excess of
US$20,000 equivalent. Disbursements would on the basis of: (i) 65X of
expenditures for civil works; (ii) 100X of foreign expenditures and 80% of
local expenditures for furniture and equipment; (iii) 1002 of foreign
expenditures for vehicles; (iv) 100% of foreign expenditures and 60% of
local expenditures for technical assistance specialists and fellowships;
(v) 60% of local expenditures for operational costs of education and
project administration, and for in-country training, excluding local
government salaries; and (vi) 60% of local expenditures for professional
services. All disbursements would be fully documented except for those
carried out under item (v) above (operational and training expenses)
and contracts, purchase orders, and training costing less than USS20,000
equivalent, which would be made against statements of expenditure (SOE),
documentation for which would not be submitted to the Bank Group for review
but would be retained by the Borrower and would be subiect to an annual
audit. In addition, the documentation should be readily available for
review by IDA representatives during the course of project supervision.
Although the typical disbursement profile is 10 years, the proposed project
is expected to be completed in five years. The four previous Bank
Group-financed education projects were completed on average of six and
one-half years. With the experience and lessons learned from these
projects - in particular, the simplification of project design, dealing
with only one ministry, and strengthening of the PIU - and with the
advanced stage of project preparation, a six-year implementation and
disbursement period is considered adequate.
Auditing
71.       Annual auditing would be required for all expenditures financed
under the project, in particular for those expenditures reimbursed under
SOE. Completely separate project accounts would be maintained by the
project accountant, and auditing would be performed by independent audltors
acceptable to the Bank Group, applying satisfactory auditing procedures.
Audit reports would be submitted to the Bank Group within six months
following the end of each of the Borrowers's fiscal years. The Government
has complied with the audit covenant under the ongoing Fifth Education
Project.
Benefits and Risks
72.       The proposed project would support the ongoing Government program
for development of the education sector, by providing assistance to
increased equity of educational opportunity in primary schools, improved
quality of primary, secondary and technical education, and institutional
development by enhancing the capacity of the government to use effectively
the resources it has available for the education sector. In particular,



- 24 -
the proposed project would provide the following specific benefits: (i)
increased equity through provision of boarding primary schools in remote
and deprived areas specially chosen for their need for such schools; (ii)
improvement in the quality of primary education by the provision of
additional teacher training facilities and equipment for educational
broadcasting; (iii) improvement in the quality of secondary, secondary
teacher and technical education by support of curriculum development at
those levels; and (iv) institution building by strengthening the MEST
Planning Unit and the PIU.
73.      The high and increasing recurrent costs of the education sector
are issues which cause continuing concern to both the Association and the
Government. The Government has taken steps to bring those costs under
control by establishing a Working Party on Education and Manpower Training
which is, inter alia, dealing with this matter (paragraphs 43 and 61).
PART V - RECOMMENDATION
74.       I am satisfied that the proposed Credit would comply with the
Articles of Agreement of the Association and recommend that the Executive
Directors approve the proposed Credit.
A. W. Clausen
President
Attachments
Washington, D.C.
February 28, 1986



-25-                                  ANNEX I
Page 1
DWNONS OF SOCIAL WDICA1D
Noe Atgh t dom  arc dn fn.sm  ginaly judf tbe moK  anat  nd  hei it shoul also be oded tai tbeymy no be smelronIl
ea_abk becm  of de lck of _ndrdidd dnlom sd emum   mm by diffeni comun  mI cectuns e tdat. The da are. nonethelsi. useful to
6ibeordai of matude n          ti, adchaid _eoenin mnjor dilke i ben count 
The mekIu  puap ae (I  the m  country rop  the mwlbit coumry md (23 a couny sroup wih  -hat bige avge ncme than the eountr
amp ofali subjeccounory lezp for-Hagh Inacme Oi Exporee  gop where Middie lne North Afnc and Middle East a coen bemue of stronr
socio.cuiu  auitisaj In the r mup data the averalp are popultion wgted atithme mot for mcb dctor and sbown only when mjomy
dtheeommai in a Sroup bldata fbr dtat idtor S te coeawrage of countre among the indators depoql on the availabflity ofdata n is no unifann.
conumt he be eied in udatig avaou  ofme indcor to aaoder Thes averages am only uefiuli mcompanng inhe vale done indictor at a utn among
the contry  d  Ienoe grop
AREA (thousand uq.km.)                                          Criude Nth Rate (per thasand)-Number of live binbs in the year
Tea--Total surface area compriing land arm and inland wat;     per thousand of mid-year populaion; 1960. 1970. and 1983 data.
1960. 1970 and 1983 data.                                      Crude Deat Rse (per thus-Nd)-Number of deaths in the year
A     _ Eckwl-Fatimate of agricultural aua used temporary or   per thousand of niid-year population; 1960. 1970. and 1983 data.
pemanently for crops. patures. market and kitchen gardns or to  Gr= Reprdac_  Rate-Average number of daughters a woman
lie fallow. 1960.1970 and 1982 data.                           will bear in her normal reproductive perod if she experiences
prsent agespecific fertility rates; usually five-yar averages ending
GNP PER CAPA (USS)-GNP per capita esimates at current          in 1960. 1970. and 1983.
market prices. calcaed by same converuon method as World       ramiy Pleantg-Accepterz Anna (rheauauds)-Annual num-
Bork Aglas (1981-83 basis). 1983 data                          ber of accptors of birth-control devices under auspices of national
ENERGY CONSUMPTION  PER CAPITA-Annual apparent                 family planning program.
conumpton of commercial priary cnery (coal and lignite.         &nvily Phnui-      s (pereei ofm-sried -se)-The percen-
petroleum. nanual gas and hydro-. nuclear and geothermal elec.  tage of married women of child-bearing age who are practicing or
tricity) in kilogrms of oil equivalent per capita; 1960. 1970. and  whose husbands are practicing any form ofcontraception. Women
1982 data.                                                     of child-bearing age are generally women aged 1 5-49. although for
some countries contraceptive usage is measured for other age
POPULATION AND VITAL STATISTICS                                groups.
Tan   PopuIaoeu Mid- Year dahu  sas,--As of JWuly 1 1960, 1970.  FOOD AND NUTRMON
and 1983 data.
VbIndx afFood Peoduction Per Caita (1969-71 - )6-lIdex of per
prpun a epo;iff  (percetd  ot  t)-Rtso Of urban to total       capita annual production of all food commodities. Production
abpity of difeeamnt euons outri  a 1960 1970r and 983 data.    exdudes ammal feed and seed for agriculture. Food commodities
ability of datamngcoutris;1961 aninclude prmary commodities (e.g. sugarcane instead of sugar)
Ppelaia P1*Cri.                                                which are edibk and contain nutients (e.g. coffee and tea are
Populatian it year 2000-The projection of population for 2000.  excluded): they comprise cereals, root crops. pulses. oil seeds.
made for each economy sepanatdy. Starting with information on  vegeLabks. fruits nuts. sugarcane and sugar beets. livestock, and
total population by age and sx. fertility rates. mortality rates. and  livestock products. Aggregate production of each country is based
international migration in the base year 1980. these parameters  on national average producer price weights. 1961-65. 1970. and
were projected at five-year intervals on the basis of gencralized  1982 data.
assunptions until the population beme stationary.              Pr Cpa Supply efCalores (pecent efreqaareaseats)-Comput-
Stauionary populazuon-Is one in which age- and sex-specific mor-  ed from calorie equivalent of ne food supplies availabie in country
tality rates have not changed over a long period. while age-specific  per capita per day. Available supplies comprise domestic produc-
fcrtility rates have simultaneouly remained at replacement level  don. imports less exports. and changes in stock. Net supplies
(net reproduction rate - I1. In such a population, the birth rate is  exdude animal feed. seeds for use in agriculture. quantities used in
constant and equal to the death rate. the age structure is also  food processing. and losses in distribution. Requirements were
constant, and the growth rate is zero. The stationary population  estimated by FAO based on physiological needs for normal activitn
siz was estimated on the basis of the projected cbaracteristics of  and health considering environmental ternperature. body weights.
the population in the year 2000. and the rate of decine of fertility  age and sex distribution orpopulation. and allowing 10 percen for
rate to replacement level                                      waste at bouschold level; 1961. 1970 and 1982 data.
Popsdnam Momenunrm-ls the tendency for population growth to    Per Capta Sapply of Prtein (,ram  per dayj-Protein content of
continue beyond the time that replacement-level fertility has been  per capita net supplv orfood per day. Net supply offood is defined
achieved; that is. even after the net reproduction rate has readied  as above. Requirements for all countries established by USDA
unity. The momentun of a population in the year t is measured as  provide for minimum allowances of 60 grams of total protein per
a ratio of the ultimate stationary population to the population in  day and 20 grans of animal and pulse protein. of which 10 grams
the year t. given the assumption that fertility remains at replace-  should be animal protein. These standartds are lower than those or
ment level from year r onward. 1985 data.                      75 grams of total protein and 23 grams of animal protein as an
p-lAtio  D-t*y                                                 average for the world. proposed by FAO in the Third World Food
Per sqim.-Mid-year population per square kilometer (100 hec-   Supply. 1961. 1970 and 1982 data.
tares) of total area; 1960. 1970. and 1983 data.               Per CatWa P'e,em Supply Jaie  Auimn and PNe-Protein suppl
Per sq.km. agricultural land-Computed as above for agricultural  offood derived from animals and pulses in grams per day. 1961 -65.
land only. 1960. 1970. and 1982 data.                          1970 and 1977 data.
Populan Age Stwrce (percet)--Children (0-14 years). work-      CAW dages 1-4) Dethk Rate (per tJhosandj-Number of deaths of
ing age (I5-64 years). and retired (65 years and over) as percntage  children aged 1-4 years per thousand children in the same age
of mid-vear population; 1960. 1970. and 1983 data.             group in a given vear. For most developing countries data derived
from life tbles. 1960. 1970 and 1983 data.
Ppnd  Grewtl Rw (pretJtroetf Annual growth rates of
total mid-year population for 1950-60. 1960-70. and 1970-83.   HEALTH
PApuie Grthk Rae (percant)-arban-Annual growth rates           Life Expetanr at Birth (yearsj-Number of years a newborn
of urban population for 1950-60. 1960-70. and 197043 data.     infant would live if prevailing patterns of mortality for all people



-26-                                      Am411i
Pate 2
at the ime of of its birth wre to 'ay the se thougbout its fife;  PM-taadher Rota. - prlwy and ecoudi-tal stuet en-
1960.1970 and 1983 data                                        rolled in prinary and mecondary klve  divided by numbm  of
1*M Meuvls  Awe (per thmd)j-Numbcr of infanu who die            tachr in the coeponding leves.
berm resching one yer of agc per thousnd live births in a given
year 1960. 1970 and 1983 dats.                                  CONSUMPTION
Aam  t 5*  Wow (per    qf                       111_0t116 Md    Phn&qu  Co  (per tosad p.pulaeimu-P assenger cars comin
i uralNumber of pople (totaL urban. and    l) with resnble      prise motor cas sting les than eight persons: excludes ambul-
aomu to safe water Supply (inldes tated surface waers or       ances. hease and militay vehies.
untrated but unconutmaed water such a tat from protcted        R          h   (   t     neA  types of receivers
bo      prIn an  uXs  ag  ud sanitary wells) as pe ntai of tsr  re  for radio bro    g       eral public per thouand of population:
ted p maorn thIn a0 meurb  am a p ml      m ecntaindor  d      estxludes unicensed mve  in countris and in years when
la bno -ithan 200 metes fr ta hous - n he c a.s                registration of radio setS was in effect. data for remnt ycrs may
rabeingw ithinr.nable a.      ta   tha houfe. or ,rbra .       not be comparable since most counties abolished licmsing.
reasonbe c asamudiy  that thehousewieormenbens otne
housihold do not have to spend a dproportonate part of the day  TVRCIIIws (pet _ lVdpop l)--   reociver forbroadcast
in fetching the ftioy's                         eradL  t° public per tbousad populion excludes umlused TV
receover in countre  nd in yars whn registrion of TV sts was
Am a. Ewta   im  (pceutd of .pudu-a.a  wh.,
and vrnf--Number of people (totaL u    and mral) erved by      in dcct.
exwta disposl as percnae of their  pspective p        ons.  G* uSPi, Q'cuta_   (Per tdmpf cep.aion).Shows the aver-
Excreta diposal may inude the colletion and disposaL with or   age circulation of -daily genral inte  newspaper.- defined as a
without tratmet, of human exeeta and wat-water by water-       pnodical publicaon dvoted priarily to recording genral news
borne systems or the usw of pit privie and similar intabaons.  It is con5idered to be -dail  if it apper at least rour times a week.
bpulpriu pgr Physadu.-Fbpulatson divided by number of prac-    CiGm   A_nu  Anteace per CV&a pgr YeR-Based on the
tising physicians qualified fron a medical school at university level.  numbcr of tickets sold during the year. induding adnissions to
Population per Nursi  Persm-opulation divided by number of     drive-in cinemas and mobile units.
practcing mle  an  female grduate nures, assistant nurB
pracical nures and nursing al                                  LABOR FORCE
FP.i  s d   Pgr pital Rd- s Ue  uAN6  .d *-a   opulation       Tod aLake Form (teamu)-Economically active pcrsons. in-
(totL. urba  and rnral) divided by tbir respecti  number of    duding amed forces and unemployed but exduding bouswivs.
hospal bed   ilable in public and priva  gcneral and specined  students. tc.. covering population of al ages. Definitions in
ospitas and rehabILi        o nert  Hospitals are establidsmnts  various countnes are not comparabl; 1960. 1970 and 1983 data.
prmanently staffed by at kst one physicia  Esblishments prov-  Fank (percmu,b-Fmzalc labor force as percentagc of total labor
:id  principally cugtodial cae rce not included. Rural hospitals,  forc.
ho       include hcelth and medic centers not perzmaently staffed  Agricuhue rpaicntJ-Labor force in farmig forestry. hunting
by a physan (bt by a medical aistt, nurse, midwi  etc)         and fishing as pacentagc of toal labor fome 1960. 1970 and 1980
which offer in-patent accon_nodaton and provide a limited rAng  data.
Of medical failiis                                               dnd y (ptriceu)-Labor force in mining, constnuon. manu-
AAdsuiepr Hpespita BEd-Total number of admissions to or        facring and electricity. watcr and gas as pecentage of total labor
ddischarpesfo  hospitals divided by the number of beds         force; 1960, 1970 and i980 dat
pb'rai Rte (percent)-a, mal_e, _fJmndfe-a pation
H-OUSING                                                       or aatvity rates are computed as totaL malec and fenale labor force
Am.mg- Szr of HAeW  (pes   per                      xr&te4     as percentages of totaL male and remale population of a aes
rndruu-A household cousts ofa group of individuals who share   rcsptivly. 1960, 1970, and 1983 dat These are based on ILO's
living quat r and their main malA boarder or lodgr may or      participation ras reflecting age-sex structure of the populatio and
may not be inchided in the household for statistical purposs   lonRg tinc trend- A few estimaes are from national sources.
Avrg N ber of PJsu pgr Roe-m.sa  mhen, and rwi-                 Economic Dependency Ratio-Rato of population under 1. and
Avrag  number of persons per room in all urban. and rural      65 and over. to the working age population (those aged 15-64).
occupied conventional dwdlings, respectively. Dwdlings exclude
non-permae  suure and unoccupied parts                         INCOME DISRIBTIB ON
Prcae of Diveng  i              et       whn. and awal-        Prce e of Total Disposableceuw (both n cask mad  hEd)-
Conventional dweling with elctricity in living quarters as percen-  Accruing to percentile groups of households ranked by total house-
tage of total urban, and niral dwllings respectively.          hold income.
EDUCATION                                                      POVERTY TARGET GROUPS
Adjswd Ewgr1  Red=                                             The following esimates arm very approximate measures of poverty
Prbnary school - totaL mole and fe Gal-Cross total, malc and   levels. and should be interpeted with considerable caution.
femal enrollment of all ages at the primay levd as percentages of  Estiweed Absohore Pbwery incow Level  LUSS per capt)-m-_bn
respectivc pmary scbool-age populations While many countnes    and rural-Absolute povertv income levcl is that income level
consider pmnary school age to be 6-11 years, others do not. The  below which a minimal nutritionally adequate diet plus ssenteal
diffcrncs in country practices in the ages and duration of school  non-food requirements is not affordable.
are reflcted in the ratios given. For somet countnes with universal  Esrtimaed Relative Poverty lIcome Level (US$ per cpita -urbpn
educatiom gross enrollment may exceed 100 percent since some   and rurad-Rural relative poverty income level is one-third of
pupils are below or above the countrv's standard primary-school  average per capita pa-sonal income of the countrv. Urban le%el is
age.                                                           derived from the rural level with adjustment for higher cost of
Secondary s3cool - total. ma  and femal-Computed as above:     livine in urban areas.
secondary education requires at least four years of approved pri-  Estjed P'opalaton koe  Abselvte Powerty Ino   Lewd (per-
mary instruction: provides genral. vocational, or teacher training  cent)--urban and rral- Percent of population (urban and rural
instructions for pupils usually of 12 to 17 years of age: correspond-  who are -absolute poorT.
ence courses are gcneally exduded.
Vocational Enrolmni (peret of secondr w j-Vocational institu-             Comparative Analysis and Data Division
tions inldude tedcicaL industrial or other programs which operate      Economic Anahsis and Projections Departmcnt
independently or as departments of secondary institutions.                              3une 1985



- 27 -
Populetion.  19.7  til1iln (1984)                                                 ANNTX 1
CNP per Cpita:  US$300 (1984)
KENYA  KCONI4!C MINCATRSU
Amount                    Annual growth rate (2) at Constant Price.
(nilliLoe M5
at currcnt.artes)                     ActuPl Pro isono
1984            I 0   1981   1962   1983   1984   915             1115
NATIONAL ACCOUNTS
Grosa dme_tic productla          5.958             4.8    3.9    1.7    3.1    0.9          4.0       4.7
Agriculture                     1.593            1.1    5.9    4.7    4.5   -3.5          *.0       4.4
Industry                         935             5.1    4.3   -0.6    1.8    2.1          4.0       5.2
Services                        2.607            5.5    6.9    0.8    3.5    3.          4.0        4.7
Comueptlon                       4.7U4            -1.5   -1.5    4.4    4.4   -4.8          2.3       4.3
Croon investment                  1.2e9           39.0   -2.1  -23.1   -4.8    4.0          4.3       6.1
Export. of CIIS                  1.580             5.5   -4.5    0.3    0.n   -.1          8.3        4.4
Imports of CNS                    1.706           10.5  -20.7  -16.6   -6.2    0.0         2.0        4.5
Groan domstic aavinga             1.114           40.7   25.3   -6.5    1.7   -1.0        -0.9        4.9
PRICCS
GDP deflator (1984-100 in US$)                      51.5   62.8   75.8   92.4  100.0    111.0.
Exchange rate (CrhbSS)                               7.4    9.0   10.9   13.3   14.4         16.5
Share of CDP at Nerket Prieeo CZ)           Average Anmal Incr_ee (2)
(at current prices)                     (at conecant nricea)
1980    1984    1986    1990    1970-75  1975-0  1911-84  191-86  1986-90
Croa domestlc product/' 100.0   100.0   10O0.    100.0        9.4      6.0      2.2      4.0     4.9
Agriculture             27.5    26.7    26.7    26.4         5.e     3.2      2.1      4.0     4.5
Industry                18.8    15.7    15.8    16.1        15.'     7.9      1.2     4.2      5_4
Services                38.6    43.8    43.7    43.8         7.5     5.4      2.7      4.0     4.9
Coneusption               81.4    80.3    78.8    77.6        11.5     6.2      3.0      3.1     4.4
Gros investPmnt           30.0    21.6    21.7    Z3.2       -3.5    12.2    -8.9        4.2     6.6
Export- of GIS            28.6    26.5    30.3    27.2         1.7     1.3    -2.2    11.2       2.1
Imports of GUTS           40.0    28.6    30.9    28.0       -2.0      6.4    -8.4      8.0      2.3
Croan natlonal savin      17.5    18.5    19.2    21.5       -0.9    11.2    -0.2       8.7      1.8
As 2 of CDP
CUENTRL COVERIO   FINANCE /b                                              Provision  LPr    on
1980181    1981182   1982/83   1983/84    19U/R5    1911586
Ravenue mad Grant-                 26.1      26.0       24.7      24.1       23.8       24.0
Revenue                        25.3      24.6       23.1       22.8      22.1       21.9
Crants                          0.8       1.4        1.5        1.2       1.7        2.1
Expenditures                       34.8      33.4       28.4      28.6       27.9       28.0
Current expendIture            24.7      23.5       22.2      21.0       20.7       20.7
Capital ependiture             10.1       9.9        6.2       7.6        7.2        7.3
Overall cash deficit               9.5        6.7        3.1       4.2        5.0       4.1
Aver*ge Aneial Growth (U)
(at conatant price)
1960-70    1970-75    1975-80     1984-t6    1986-90
02311 INDICATORS
GNP growh  rate (2)                      5.2         5.5        4.3         4.2         5.2
GIP per capita growth rate (Z)           2.2         2.2         1.3        0.2         1.2
Energy consnuption growth rate (:)        -           -         4.9          -          -
lC02                                     6.1         4.2        4.R         5.3         4.8
Herginal savinp race                      .27        0.00       0.21        0.355       0.069
Import elasticity                        0.9        -0.2         1.1        0.1         0.9
/a At _arket pricee; coponents are nWreaned at factor coot mad will not add due to exlusion of
new indirect ta  and _nboidit_.
lb Pineal yearz endtng June 30.
Hareh 1984



- 28 -
Population:      19.7 million (1984)                                                               ANNEX I
GNP Per Capita: USS300 (1984)                                                                      Page 4
KENYA: EXTERNAL TRADE
Amount         - - - - - - - - -  Annual Growth Rates I) - - - - - - - - -
(million USS                        (At constant 1984 prices)
Indicator                  at current prices)                    Actual                           Prolected
1984           1980    1981    1982    1983   19R4            1985    1986
EXTERNAL TRADE
Merchandise exports            1,078             3.2   -5.2    -3.3   -1.5   -1.9               9.5    18.9
Primary                       917             -7.3     6.7    13.9   -1.1   -2.0             10.5    21.3
Manufactures                   161            29.6  -16.3  -16.5    -3.0   -0.8               4.0     4.0
Merchandise imports            1,548            14.7  -22.8  -12.5  -11.3         7.3           2.8     5.3
Food                          155             57.6  -48.4    58.4  -10.1        8.8           6.8  -15.7
Petroleum                      523            16.7  -21.5   -6.7  -18.2         0.4          -0.4     3.5
Machinery and equipment        450            19.0  -22.0  -19.2  -13.4    12.1               4.2    10.0
Others                        420              5.0   -7.1    -3.6   -1.3    11.5              3.7    10.6
PRICES
Export price index               100.0          57.6    63.2   69.4    83.3  100.0             R5.8  105.5
Import price index               100.0          50.4    64.4    74.0   94.R   100.0            97.2   101.4
Terms of trade index             100.0         114.4   98.1    93.7    87.9   100.0            RR.3  104.0
Composition of Merchandise
Trade (2)                           Average Annual Growth
(at current Prices)                      (at constant prices)
1981     1984     1986      1990      1974-79   1980-84  1N84-86   1986-90
E7ports                             100.0    100.0    100.0     1000           -       -2.2       14.1      1.5
Primary                          87.7      85.1     87.6      84.8         2.1        2.2      15.8      0.7
Manufactures                      12.3     14.9     12.4      15.2       -11.3      -3.4        4.0      6.7
Imports                             100.0    100.0    100.0     100.0          -       -7.-        4.0      4.2
Fo~jd                             4.8      10.0      8.4       7.7       -10.4        5.9      -5.1      2.2
Petroleum                        36.9      33.1     32.2      30.1        -2.R      -8.5        1.5      2.5
Machinery and equipment           27.2     29.0     30.7      33.1          1.7     -7.6        7.1      6.2
Others                           31.2      27.2     28.8      29.1          -         0.9       7.1      4.6
Directlon of Trade
Share of trade with         Share of trade with        Share of trade with capital
Industrial countries (X)   developing countries (X)       Rurplus oil exporters (C)
1979     1981     1984      1979      1981     1984      1Q79      19R1      19R4
Exports       54.4     42.1     56.3       34.0     45.0     33.8        1.8       2.3       0.7
Imports       67.4     57.3     56.5       10.0      8.2     17.7      20.3       33.5      24.1
March 1986



29 -
Population:   19.7 million (IQR4)                                                                               ANNEX I
GNP per Capita:  USS300 (1904)                                                                                  Page 5
KENYA: BALANCE Of PAYMENTS. EXTERNAL CAPITAL ANi) DEBT
(milliona USS at current prices)
Actual                                   Estimated
19RO)       IqRI        IqR2        19R1        19114      I1RS         19R6
BALANCE OF PAYMENTS
Exports of goods and services             2.0311       1,747       1,616       1,507       1.621       1,577       2.10n
Exports of goods                         1.243       1,050         934         921       1.07R       1,013      1T4an
Exports of services                        795         h97         682         5A4         543         564         621
Imports of goods and services             3,070        2.5R4       2.161       1,7R7       1,°56       1,966       2.289
Imports of gooda                        1.637       2,14R        1.721     1T426         1.56q       1 547       I,8441e
Imports of servi.es                       437          436         440         361         405         4Iq         445
(of which:  interest)                  (131)       (162)       (178)        (162)       (IRI)       (191)       (19R)
Transfers (net)                              140          95          67         115          147        104          87
Current Account Balance                     -892        -743        --477       -165        -I1S        -2R5        -101
Direct investment (net)                       78          60          6n          74          An          42          41
Public MLT  loans (net)                      444         275         217          84         167         215         274
Gross disbursements                        h62         437         397         ?,67        3R2         46A         406
Repayments                                 IIR         162         IRn         17R         215         751         222
INF Credit (net)                              69          27         147          96         -11          44         -92
Purchases                                   7R          35         165         142          47         111         -
Repurchases                                  9           R          19          46          99          69          92
Other capital (net) /s                       16R         131          33          76           H         -36         -14
Change in Gross Reserves                    -153        -250         -2n         165           2         -20        ln
Memorandum items:
Gross reserves at year's end               5nn         250         230         396         198         178         48R
Reserves as weeks imports                   10           6           7          10          11           9          1o
Current account deficit as 2 of COP
Tncluding official grants /b           12.5        1l.n         7.7         2.8          3.1         4.7         1.S
Excluding official grants /c           14.2        12.3         9.0          5.n         5.5         6.%         2.8
EXTERNAL CAPITAL AND DEBT
Gross Disbursements
Official grants /d                      123          82          8O          125         15n
Concessional loans                      17A          169         191          92         204
Bilateral-DAC                          66         104          RS          46          qI
Bilateral-OPEC                         -            R           6           4           38
IDA                                    72          15          115         2n           36
Other                                  41          22           IS          24          39
Nonconcessional loans                      3R3         2RR         206         171         179
Official export credits                   16         31           16          Sl          17
IBRD                                     44          S4          R5          99          12R
Other multilateral                       16           IS          2%           Ft         IR
Private-source                          3n7          183         an           13          16
Public MLT loans - total                   562         417         397         262         3R2
/a  Includes short-term capital, commercial hank's net foreign position, errors and omissions and valuation
adjustment.
/b  Including official grants -ahove the line" as an item contributing to the determination of the current
account deficit.
/c  Treatting officiei grants as a -below the line- item which contrihutes to the financing of the current
accounc deficit.
/d  'Covernment transfer receipts' in the halance of payments.
7T  Including the purchase of the gun boats and airplanes.
March 19R6



30                              ANNEX II
Page 1
THE STATUS OF BANK GROUP OPERATIONS IN KENYA
A. Statement of Bank Loans and IDA Credits an of September 30, 1985
- USS Million
Loan or                                                               Amount (Less Cancellations)
Credit 1    Year   Borrower   Purpose                                Bank I/    IDA    Undisbursed
Twenty-one (21) Loans and Twenty-eight (28) Credits and three (3)
Third Window Loans Fully Disbursed*                                   440.78    347.63
1449       1977    Kenya      Bura Irrigation Settlement              34.00              12.20
1550       1978    Kenya    (Second Urban                             25-0n              24.80
797       1978    Kenya      Fourth Education                                  23.0n      3.33
1636       1979    Kenya      Sugar Rehabilitation                    14.00                1.34
1637       1979    Kenya      Rural Water Supply                      20.00              I.20
1684       1979    Kenya      Highway Sector                          90.00              10.15
914       1979    Kenya      Smallholder Coffee Improvement                    27.00    22.RO
959       1980    Kenya      Second Integrated Agric. Dev.                     12.00      7.00
962       1980    Kenya      Baringo Semi-Arid Areas                            6.50      1.38
1799       1980    Kenya      Third Power (Olkaria Geothermal)        40.00 2/            2.40
1817       1980    IDB        Fourth Industrial Dev. Bank             30.00              13.45
1045       1980    Kenya      Export Promotion Technical Asst.                   4.50     3.75
1051       1980    Kenya      Fiqheries                                         10.00     9.84
1107       1981    Kenya      Fifth Education                                   40.00    27.18
1976       1981    Kenya      Railway                                 5R.00              19.06
(1143      (1981   (Kenya    (Fourth Agriculture                                 10.00     0.30
(1995      (1981   (Kenya    (Fourth Agriculture                       25.00               10.60
2065       1982    Kenya      Petroleum Exploration                    4.0n                0.63
(2098      (1982   (Kerya    (Forestry III 31                          21.50              21.50
(1213      (1982   (K.!nya    (Forestry III                                      16.00      5.98
1237       1982    Kenya      Cotton Proc. & Marketing 3/                       22.00   1.01
1238       1982    Kenya      Integrated Rural Health &
Family Planning 3/                              23.00    14.04
2155       1982    Kenya      Second Telecommunications               44.70               18.52
1277       1983    Kenya      Agric. Technical Assistance 3/                     6.00     2.60
2237       1983    Kenya      Olkaria Geothermal Expansion            12.00       -       7.00
1387       1983    Kenya      National Extension 3/                             15.00     9.79
(2319      (1983    Kenya    (Secondary Towns                           7.00               6.98
(1390      (1983    Kenya    (Secondary Towns 3/                                 22.00    15.66
2359       1984    Kenya      Kiambere Hydroelectric                  95.nn              6q.9R
(2409      (1984   (Kenya    (Second Highway Sector                    50.00             (49.88
(F017      (1984   (Kenya    (Second Highway Sector                              40.00   (37.80
1486       1984    Kenya      Geothermal Exploration                            24.50    23.I0
1566       1985    Kenya      Water Engineering 3/                               6.00     5.77
2574       1985    Kenya      Third Telecommunications 4/            32.60               32.60
Total                               1,043.58    655.13   528.12
of which haa been repaid            116.79       6.77
Total now outstanding                 926.79    64R.36
Amount sold                  11.81
of which has been repaid  11.81        .00
TOTAL now held by Bank and IDA                   914.98    648.36
TOTAL undisbursed                                319.29    208.R3   528.12
*   In addition, Kenya was one of the beneficiaries of 10 loans totalling UJSS244.R million
which were extended for the development of common services (railways, ports,
telecommunications, and finance for industry), operated regionally for the three partner
states of the former East African Community (EAC).
1/  Prior to exchange adjustment.
2/ Includes Loan S-12 (S9.0 million).
3/ IDA-6 Credit amounts expressed in dollar equivalents of SDR's.
41 Not yet effective.



-31 -                                    ANNEX II
Page 2
B. Statement of IFC Investment in Kenya as at
September 30, 1985
Fiscal Year  Obligor                        Type of Business         Amount in USS Million
Loan   Equity   Total
1967, 1968,  Kenya Hotel Properties         Hotels                    5.2      0.7      5.9
and 1973
1970, 1974,  Pan African Paper Mills        Pulp and Paper           22.2      6.3     28.5
1977, 1979
and 1981
1972         Tourism Promotion              Hotels                    2.4      -1/      2.4
Services
1976         Rift Valley Textiles Ltd.   Textiles                     6.3      2.8      9.1
1977          Kenya Commercial Bank Ltd.  Capital Market              2.0      -         2.0
1980          Development Finance           Development Finance       4.3      1.3       5.6
Company of Kenya Ltd.
1981         Kenya Commercial Finance    Money & Capital Market  5.0          -         5.0
1982         Bamburi Portland               Cement & Construction   4.4       -         4.4
Cement Co., Ltd.              Material
1982         Diamond Trust of Kenya         Monev & Capital Market  -          0.8      0.8
Limited
1982          Industrial Promotion          Money & Capital Market  -         o.6       0.6
Services (Kenya) Ltd.
1983          Tetra Pak Converters          Pulp & Paper Products   2.2        0.3      2.5
Limited
1984         Leather Industries of          Tanning                   1.6      0.6      2.2
Kenya Limited
1986         Equatorial Beach               Tourism                   3.7     -         3.7
Properties
1986         Madhu Paper International   Pulp & Paper Products  36.6           1.8     38.4
Limited
Total Gross Commitments                                95.9    15.2    111.1
less cancellations, terminations,
repayments and sales                                   52.7      1.7     54.4
Total Commitments now held by IFC                      43.2    13.5      56.7
Total Undishursed                                      12.5      1.8      14.3
1/ $51,395.



- 32 -
ANNEX III
KENYA
Sixth Education Project
Supplementary Data Sheet
Section I: Timetable of Key Events
(a) Time taken by the country with Bank
Group assistance to prepare the project:        6 months
(b)  Agencies which prepared project          :      Ministry of
Education, Science
and Technology,
with UNESCO
Cooperative Program
assistance.
(c)  First presentation to Bank                      March, 1985
(d)  Completion of negotiations                      November, 1985
{e)  Planned date of effectiveness                   July, 1986
Section II: Special Bank Group Implementation Actions
None
Section III: Special Conditions
Credit effectiveness would be conditional upon strengthening the
project Implementation Unit in accordance with an agreed plan.
/
,/



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