Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: PAD1589

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$50 MILLION

TO THE

PEOPLE’S REPUBLIC OF CHINA

FOR A

YUNNAN EARLY CHILDHOOD EDUCATION INNOVATION PROJECT (YECEIP)

November 16, 2016 Education Global Practice East Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective: November 3, 2016)

Currency Unit = Chinese Yuan (CNY or RMB) 6.7625 = US$1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

GDP Gross Domestic Product NCB National Competitive Bidding BCR Benefit Cost Ratio NPV Net Present Value BOE Bureau of Education NGO Non-government Organization CPS Country Partnership Strategy OP/BP Operation Policy/Bank Policy CQS Consultants’ Qualifications

Selection procedures PAD Project Appraisal Document

CRC Convention on the Rights of the Child

PDO Project Development Objective

CRPD Convention on the Rights of People with Disabilities

PET Provincial Expert Team

DA Designated Account PIP Project Implementation Plan EA Environmental Assessment PISA Program for International

Student Assessment ECD Early Childhood Development PIU Project Implementation Unit ECE Early Childhood Education PPMO Provincial Project

Management Office EMDP Ethnic Minority Development

Plan PPP Public-Private Partnership

EMIS Education Management Information System

PSC Project Steering Committee

EMP Environmental Management Plan

QBS Quality-Based Selection

FM Financial Management QCBS Quality- and Cost-Based Selection

GER Gross Enrollment Ratio RMB Ren Min Bi (Chinese currency)GRS Grievance Redress Service RPF Resettlement Plan Framework IBRD International Bank of

Reconstruction and Development

SA Social Assessment

IC Individual Consultant SOE Statement of Expenditures ICB International Competitive

Bidding SORT Systematic Operations Risk-

Rating Tool

Regional Vice President: Victoria Kwakwa Country Director: Bert Hofman

Senior Global Practice Director: Amit Dar Practice Manager: Harry Anthony Patrinos

Task Team Leader: Xiaoyan Liang

ICT Information and Communications Technology

SSS Single Source Selection

IFC International Finance Corporation

USD United States Dollar

ISM Implementation Support Mission

WA Withdrawal Application

ISR Implementation Status and Results Report

WB World Bank

IRR Internal Rate of Return YECEIP Yunnan Early Childhood Education Innovation Project

M&E Monitoring and Evaluation YPAO Yunnan Provincial Audit Office

MOF Ministry of Finance YPDE Yunnan Provincial Department of Education

MTR Mid-Term Review YPFD Yunnan Provincial Finance Department

CHINA Yunnan Early Childhood Education Innovation Project (YECEIP)

TABLE OF CONTENTS

Page

I.  STRATEGIC CONTEXT .................................................................................................1 

A.  Country Context ............................................................................................................ 1 

B.  Sectoral and Institutional Context ................................................................................. 2 

C.  Higher-level Objectives to which the Project Contributes ........................................... 5 

II.  PROJECT DEVELOPMENT OBJECTIVE ..................................................................6 

A.  PDO............................................................................................................................... 6 

B. Project Beneficiaries ..................................................................................................... 6 

C. PDO-level Results Indicators ........................................................................................ 7 

III.  PROJECT DESCRIPTION ..............................................................................................8 

A.  Project Components ...................................................................................................... 8 

B.  Project Financing ........................................................................................................ 13 

Project Cost and Financing ............................................................................................... 13 

C.  Lessons Learned and Reflected in the Project Design ................................................ 14 

IV.  IMPLEMENTATION .....................................................................................................16 

A.  Institutional and Implementation Arrangements ........................................................ 16 

B.  Results Monitoring and Evaluation (M&E) ................................................................ 17 

C.  Sustainability............................................................................................................... 19 

V.  KEY RISKS ......................................................................................................................20 

A.  Overall Risk Rating and Explanation of Key Risks .................................................... 20 

VI.  APPRAISAL SUMMARY ..............................................................................................21 

A.  Economic and Financial Analysis ............................................................................... 21 

B.  Technical ..................................................................................................................... 23 

C.  Financial Management ................................................................................................ 23 

D.  Procurement ................................................................................................................ 24 

E.  Social (including Safeguards) ..................................................................................... 24 

F.  Environment (including Safeguards) .......................................................................... 25 

G.  World Bank Grievance Redress .................................................................................. 26 

Annex 2: Detailed Project Description .......................................................................................31 

Annex 3: Implementation Arrangements ..................................................................................39 

Annex 4: Implementation Support Plan ....................................................................................48 

Annex 5: Economic and Financial Analysis ..............................................................................50 

.

PAD DATA SHEET

China

Yunnan Early Childhood Education Innovation Project (YECEIP) (P152860)

PROJECT APPRAISAL DOCUMENT.

EAST ASIA AND PACIFIC

0000009251

Report No.: PAD1589.

Basic Information

Project ID EA Category Team Leader(s)

P152860 B - Partial Assessment Xiaoyan Liang

Lending Instrument Fragile and/or Capacity Constraints [ ]

Investment Project Financing Financial Intermediaries [ ]

Series of Projects [ ]

Project Implementation Start Date Project Implementation End Date

09-Dec-2016 31-Dec-2021

Expected Effectiveness Date Expected Closing Date

31-May-2017 31-Dec-2021

Joint IFC

No

Practice Manager/Manager

Interim Senior Global Practice Director

Country Director Regional Vice President

Harry Anthony Patrinos Amit Dar Bert Hofman Victoria Kwakwa .

Borrower: PEOPLE'S REPUBLIC OF CHINA

Responsible Agency: Yunnan Provincial Department of Education

Contact: Yu Zhang (Ms.) Title: Deputy Director, Project Management Office

Telephone No.: 86 871-65155013 Email: ynxqxm@163.com .

Project Financing Data (in USD Million)

[ X ] Loan [ ] IDA Grant [ ] Guarantee

[ ] Credit [ ] Grant [ ] Other

Total Project Cost: 74.62 Total Bank Financing: 50.00

Financing Gap: 0.00 .

Financing Source Amount

Borrower 24.62

International Bank for Reconstruction and Development

50.00

Total 74.62.

Expected Disbursements (in USD Million)

Fiscal Year

2017 2018 2019 2020 2021 2022 0000 0000 0000 0000

Annual 5.00 10.00 20.00 10.00 5.00 0.00 0.00 0.00 0.00 0.00

Cumulative

5.00 15.00 35.00 45.00 50.00 50.00 0.00 0.00 0.00 0.00

.

Institutional Data

Practice Area (Lead)

Education

Contributing Practice Areas

Proposed Development Objective(s)

The Project Development Objective is to improve the access and quality of ECE provision in the Project counties in Yunnan Province. .

Components

Component Name Cost (USD Millions)

Component 1: Increasing access to ECE programs 42.41

Component 2: Improving ECE quality 28.06

Component 3: Creating an ECE enabling environment 0.33

Component 4: Project management and monitoring and evaluation

0.61

.

Systematic Operations Risk- Rating Tool (SORT)

Risk Category Rating

1. Political and Governance Low

2. Macroeconomic Low

3. Sector Strategies and Policies Low

4. Technical Design of Project or Program Moderate

5. Institutional Capacity for Implementation and Sustainability Moderate

6. Fiduciary Moderate

7. Environment and Social Moderate

8. Stakeholders Moderate

9. Other

OVERALL Moderate .

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects?

Yes [ ] No [ X ]

.

Does the project require any waivers of Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]

Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X .

Legal Covenants

Name Recurrent Due Date Frequency

Subsidiary Agreements X

Description of Covenant Project Agreement, Schedule, Section I, A.1: The Project Implementing Entity shall make available to each of the Project Counties and Participating Universities a portion of the Loan under Subsidiary Agreements satisfactory to the Bank.

Name Recurrent Due Date Frequency

Project Implementation Plan (PIP) X

Description of Covenant Project Agreement, Schedule, Section I, B.1: The Project Implementing Entity, through the Project Counties and Participating Universities, shall carry out or cause to be carried out the Project in accordance with the Project Implementation Plan.

Name Recurrent Due Date Frequency

Provincial Expert Team (PET) X

Description of Covenant

Project Agreement, Section I, B.2(c): The Project Implementing Entity shall maintain a Provincial Expert Team (PET) responsible for providing technical support.

Name Recurrent Due Date Frequency

Safeguards X

Description of Covenant

Loan agreement: Schedule 2, Section I, C: The borrower shall take, and cause the Project Implementing Entity to take all measures necessary to comply with, or all measures necessary to enable the Project Implementing Entity to comply with, the provisions of Section I.D of the Schedule to the Project Agreement (related to the application of the Safeguards Instruments).

Name Recurrent Due Date Frequency

Mid-Term Review report 30-Jun-2019

Description of Covenant

Project Agreement: Section II, A.2: The Project Implementing Entity shall prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank no later than June 30, 2019, a consolidated mid-term review report for the Project.

Name Recurrent Due Date Frequency

Implementation Completion Report 31-Mar-2022

Description of Covenant

Project Agreement: Section II, A.3: The Project Implementing Entity shall provide to the Borrower, not later than three months after the Closing Date, for incorporation in the report referred to in Section 5.08 (c) of the General Conditions all such information as the Borrower or the Bank shall reasonably request for the purposes of that Section (related to the Implementation Completion Report). .

Team Composition

Bank Staff

Name Role Title Specialization Unit

Xiaoyan Liang Team Leader (ADM Responsible)

Lead Education Specialist

Team Leader GED01

Yunlong Liu Procurement Specialist (ADM Responsible)

Procurement Specialist

Procurement Specialist

GGO08

Haixia Li Financial Management Specialist

Senior Financial Management Specialist

Senior Financial Management Specialist

GGO20

Alejandro Alcala Gerez Counsel Senior Counsel Senior Counsel LEGES

Anna Coronado Team Member Program Assistant Program Assistant GED02

Chaoying Liu Team Member Senior Results Measurement Specialist

Results Measurement Specialist

CBCD3

Chau-Ching Shen Team Member Senior Finance Officer

Senior Finance Officer

WFALN

Huma Kidwai Team Member Consultant Education Specialist

GED02

Tao Su Team Member Program Assistant Program Assistant EACCF

Xin Ren Safeguards Specialist

Senior Environmental Specialist

Environmental Specialist

GEN2A

Youxuan Zhu Safeguards Specialist

Consultant Social Development Specialist

GSU02

Extended Team

.

Locations

Country First Administrative Division

Location Planned Actual Comments

China Yunnan Province Yunnan X .

Consultants (Will be disclosed in the Monthly Operational Summary)

Consultants Required? Consultants will be required

1

I. STRATEGIC CONTEXT

A. Country Context 1. China has one of the world’s fastest growing economies. In 2014, China became the largest economy in the world in terms of Gross Domestic Product (GDP) on the purchasing power basis and is increasingly playing an important and influential role in the global economy. The percentage of poor people decreased substantially in the last four decades and by the end of 2013 approximately 1.9 percent of the population lived below the World Bank’s international poverty line of US$1.9 per day. Measured by GDP per capita, however, China is significantly lower in the global ranks at about US$7,924.7 in 2015. The Gini coefficient has remained at a relatively high level between 0.47 and 0.49 during the past 10 years, indicating persistent and sometimes worsening inequality as the economy grows. 2. Yunnan is one of the least developed provinces in China, hosting more than 10 percent of the total poor population in the country. Located at the southwest side of China, bordering Laos, Myanmar, and Vietnam, Yunnan is a medium-sized Chinese province with a population of 46 million, of which 30 million reside in rural areas and 16 million in urban areas. Nearly 84 percent of Yunnan’s land mass is rural and mountainous. Yunnan is considered the third poorest province (next to Gansu and Guizhou) in the country with a per capita GDP of US$4,050 and rural net income per capita of only about US$1,000 in 2013. Approximately 22 percent of its population, or 10 million people, still live below the national poverty line. Out of its 189 counties, Yunnan has 85 national-level poverty counties. Yunnan further distinguishes itself from the other Chinese provinces in that only 66 percent of the Yunnan population is ethnic Han. The remaining one third of the population, or 15 million, is comprised of 25 other ethnic groups out of a total of 55 ethnic groups in the country. 3. Early childhood education (ECE) is gaining attention as an important national education policy agenda. By 2010, China had largely achieved the two “basics” of universal 9-year basic education and the eradication of adult illiteracy. The Chinese Government then began to devote increased attention to policy and program development of ECE. Although China does not yet have a specific ECE law, it has established an elaborate set of guidelines and regulations pertaining to ECE. The most prominent one is the Medium- and Long-Term Education Development Plan Outline (2010-2020), which establishes year 2020 targets for achieving kindergarten enrollment for 95 percent of 5-year-olds, 80 percent of 4-year-olds, and 70 percent of 3-year-olds. 4. In 2012, the Ministry of Education issued Learning and Development Guidelines for 3- to 6-year-old children, which describes children’s development stages with measurable indicators and suggests developmentally appropriate education interventions in health, language, social studies, science, and art. Efforts are now underway to develop a specific ECE law in China. Provinces and local governments are called on to increase financing for ECE and are required to develop a series of Three-Year ECE action plans towards achieving at least the national average goals of ECE enrollments by 2020. China and Yunnan are currently implementing the 2nd Three-Year ECE Action Plan which covers 2015 to 2017.

2

B. Sectoral and Institutional Context 5. China has registered impressive expansion of ECE enrollment during the last few years.1 The gross enrollment ratio (GER) for three-year kindergarten education increased from only 38 percent in 2002 to 75 percent in 2015, which is at par with the level of preschool GER in many developed countries, including the United States. However, kindergarten is not yet part of the free and compulsory basic education system in China. The financing of kindergarten programs comes largely from local governments or the private sector. Based on the 2014 Ministry of Education statistics, kindergarten education accounts for over 13 percent of total education enrollment, but commands no more than 3.5 percent of the national education budget. Over 59 percent of kindergarten education financing comes from nongovernmental sources, which implies a much heavier financial reliance on private investment than primary and secondary education. 6. There are great disparities in enrollment and quality of ECE services across eastern and western provinces. The western provinces consistently lag behind the eastern provinces in terms of enrollment. In 2010, average 3-year enrollment ratio for the western province was 63 percent compared to 72 percent for the eastern provinces. There is a clear inverse relationship between GDP per capita and the student teacher ratio. Kindergarten teacher pupil ratio averages only 10:1 in Beijing and Shanghai but can reach over 25:1 in some western and poor provinces. 7. Within any province, rural gross enrollment ratio is significantly lower than that of urban areas. 2 From 2006 to 2012, the 3-year GER for urban ECE experienced a steady increase (from 58.0 percent in 2006 to 89.1 percent in 2012), while that of rural ECE remained relatively stagnant (from 29.6 percent in 2006 to 29.7 percent in 2012). Consequently, the urban-rural gap of 3-year GER has increased from 28.4 percent in 2006 to 59.4 percent in 2012. Similarly, the urban-rural disparity of 1-year ECE GER increased from 21.9 percent in 2006 to 27.6 percent in 2010, and jumped to 49.5 percent in 2012 (see Table 1).

Table 1: Rural and Urban Preprimary GER, China, 2006-2012 (%)

Year 3-year GER 1-year GER

Urban Rural Disparity Urban Rural Disparity

2006 58.05 29.63 28.42 72.08 50.14 21.94

2007 62.11 29.86 32.25 74.85 49.51 25.34

2008 65.63 31.73 33.9 78.96 50.78 28.18

2009 67.72 33.13 34.59 77.05 49.03 28.02

2010 69.76 34.95 34.81 75.68 48.12 27.56

2011 87.72 28.59 59.13 76.37 29.64 46.73

2012 89.10 29.69 59.41 81.24 31.70 49.54 Data source: China Population & Employment Statistical Yearbook and China Education Statistical Yearbook, in Hong, et al, 2015.

1 Categories of ECE provisions in China: (a) 3-year kindergartens or Youer Yuan, (b) 1-year preprimary class or Xueqian Ban, (c) 3-year kindergartens attached to rural primary schools or Cunxiaofu you, and (d) rural community ECE center or Zaojiao Dian. 2 Hong, at al (2015). The way to early childhood education equity - policies to tackle the urban-rural disparities in China. International Journal of Child Care and Education Policy (2015) 9:5.

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8. The urban-rural gap is also reflected in the quantity and qualification of kindergarten teachers in China. Currently, the urban teacher-student ratio and the average number of teachers per class are up to two, and sometimes three, times higher than those in rural areas.3 In 2012, the average student-teacher ratio in kindergartens was 21:1 in urban areas and 45:1 in rural areas.4 In addition, the overall level of qualifications of rural kindergarten teachers is lower than that of urban kindergarten teachers. In 2012, over 68 percent of urban kindergarten teachers had education qualifications above an associate bachelor degree, and only 46.4 percent of rural kindergarten teachers qualified at this level.5 Evidently, the distribution of qualified teachers is skewed towards urban areas. 9. Yunnan, being one of the poorest provinces, faces more acute challenges in improving ECE access and quality (see Table 2). In 2015, Yunnan’s GER for 3 to 6-year-old children was about 63.8 percent, over 11 percentage points lower than the national average, and the average student-teacher ratio was 21:1 compared to the national average of 18:1. Within Yunnan, there is significant rural-urban disparity. In 2011, rural prefectures such as Zhaotong achieved only 33 percent GER compared to 95 percent in the capital city of Kunming. According to the 2013 World Bank study6 of the state of ECE in Yunnan, a sample of 24 kindergartens across urban and rural parts of Kunming rated significantly low on most attributes (including program structure, activities, personal care, language, and interactions) on the Early Childhood Environment Rating Scale-Revisited (ECERS-R). Moreover, in many rural areas, children have access to only one year of kindergarten classes which are attached to the local public primary schools. These schools tend to have large class sizes, lack of teaching-learning materials, and developmentally inappropriate teaching practices.

Table 2: Selected ECE Indicators in Yunnan and China, 2014 and 2015 Key Indicators Yunnan China

3-year GER (%) 63.8 75.0 1-year GER (%) 88.9 (2014) Not available Number of Public Kindergartens 2,256 (34%) 77,307 (35%) Number of Private Kindergartens 4,284 (66%) 146,376 (65%) Percentage of Children Enrolled in Private Kindergartens

65.0 60.9

Government Expenditure on Kindergartens RMB 2.2 b (2014) RMB 93.4 b (2014） Percentage of Public Education Expenditure on Kindergartens

2.8 (2014) 3.5 (2014)

Student Teacher Ratio 21:1 18:1 Data source: Education Statistics Yearbook of China (2015), Finance Statistical Yearbook of China (2015), and Yunnan Provincial Government website (2016)

3 Hu, B. Y., Zhou, Y., Li, K., and S. K. Roberts (2014). Examining program quality disparities between urban and rural kindergartens in China: Evidence from Zhejiang. Journal of Research in Childhood Education, 28(4), 461-483. doi:10.1080/02568543.2014.944720. 4 Hong, et al (2015). 5Ibid. 6 Liang, et al (2013). Early childhood education in Yunnan: Challenges and opportunities. World Bank. Retrieved http://documents.worldbank.org/curated/en/2013/11/20116721/china-early-child-development-early-childhood-education-yunnan.

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10. In 2013, the World Bank conducted a rural household survey in Yunnan which confirmed that children living in poor rural areas are particularly disadvantaged. The survey showed that approximately one quarter of rural 3- to 6-year-old children in Yunnan are “left-behind” children and being cared for by their grandparents with, at most, primary education.7 The survey also showed that there was little stimulation provided for children in the household: approximately 72 percent of households in poor counties reported rarely playing with their children, and 47 percent reportedly did not read to their children. Rural children from poor counties are also less likely to enroll in any kindergartens than those not living in poor areas. Kindergarten tuition and fees present an additional barrier to enrollment considering that annual fees for a tier-three kindergarten (the lowest level of quality) can account for approximately 20 percent of a rural household’s per-capita annual income. When rural poor children do enroll in kindergartens, they are more likely to enroll in one-year only preprimary classes attached to local public schools or low quality rural private kindergartens. Overall, they scored lower in the cognitive and social development index compared to their peers that do not live in poor areas. 11. In response to the Central Government’s policy direction, Yunnan significantly increased its public ECE expenditure in 2012 to about US$350 million per annum. In 2014, Yunnan’s public expenditure on ECE was approximately 2.8 percent of the province’s total education budget, compared to the 3.5 percent average for China. However, even with the substantial government investment in ECE, there still remains a significant gap in ECE access in the rural counties of Yunnan. While some provinces, including Yunnan’s neighbor Guizhou, have started to establish a specific ECE division within the departments of education for more accountability and better service delivery, Yunnan continues to have ECE functions subsumed under the basic education division. 12. There is a relatively high private provision of ECE services in Yunnan and across China due to historically low public investment. Sixty-six percent of Yunnan’s kindergartens are privately run and absorb approximately 65 percent of total enrollment. This is compared to 65 and 61 percent, respectively, nationwide. Under the current system, private entities are allowed to establish private kindergartens through routine registration at the Department of Industry and Commerce without rigorous verification from the Department of Education. Further, many rural private kindergartens are operating without a legitimate permit from the Department of Industry and Commerce. The 2013 survey results confirm that rural private kindergartens tend to be of poorer quality as manifested in terms of the existing teacher-student ratio and teacher qualification.8 13. Minimum quality standards are urgently needed especially for accrediting the quality of the newly emerging private kindergartens and programs. Yunnan does not yet have a well-functioning quality assurance system to safeguard the quality of private kindergartens. The current public school ECE quality assurance mechanism in China places kindergartens into three grades of quality. Each of these quality grades are further divided into three subgrades, resulting in a nine-tier kindergarten grading system. The grades are based on self-evaluation and external evaluation of several factors which include, but are not limited to, school facilities, equipment, daily activities,

7 “Left-behind” children refer to children who are being cared for by family members other than their own parents since their parent(s) left the location of household registration to seek employment elsewhere. 8 The 2013 survey in Yunnan shows that while all teachers in public kindergartens possess teaching certificates, only 27.8 percent of teachers in rural private kindergartens have certificates. The maximum student teacher ratio in rural private kindergartens can reach as high as 33:1, compared to that of 14:1 in urban public kindergartens.

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teacher qualifications, and child outcomes. The evaluation instrument is primarily used to evaluate and upgrade public kindergartens. Private kindergartens are not required to undergo such evaluations.

14. Yunnan has a shortage of qualified kindergarten teachers. Only about one third of all kindergarten teachers have kindergarten teaching certificates. Rural and private schools in particular find it challenging to find qualified kindergarten teachers. The Bank’s 2013 study9 from Yunnan has shown that public kindergartens tend to have teachers with higher entry qualifications and have access to greater opportunities for professional development than private kindergartens. In Yunnan, while 50 percent of total enrollment is in rural areas, only 22 percent of certified teachers are serving there. The study estimates that to reach the target student-teacher ratio of 15:1 and with the current population projection, Yunnan will face an accumulated shortage of almost 60,000 new kindergarten teachers by 2020. In addition, pre-service teacher education programs at the university level face challenges in providing high quality education with updated curricula, newly trained faculty members, and adequate student internship opportunities at kindergartens.

C. Higher-level Objectives to which the Project Contributes 15. The above country and sector context outlines the main challenges facing China and Yunnan’s Early Childhood Education system. Within the limited Project period and financing, the Project attempts to address some of these challenges. In particular, the Project will concentrate most of its resources on expanding provision in project counties, strengthening the capacity of the system to expand provision of quality ECE services in rural and poor counties, strengthening the capacity of the teaching force by delivering relevant in-service teacher training and pre-service teacher education programs, and establishing a provincial ECE quality assurance and sustainable financing framework. 16. The Project will not only expand rural ECE provision in the short term but also contribute to the development of a more comprehensive, efficient, and effective ECD system in Yunnan. Quality ECE provision has proven to be a powerful instrument for poverty alleviation. The project is consistent with the World Bank Group’s China CPS FY2013-16 approved by the Board on November 6, 2012, specifically with the Strategic Theme Two “Promoting More Inclusive Development”. The Project will directly contribute to the World Bank’s twin goals of eradicating extreme poverty and boosting shared prosperity. The literature on human capital has documented the positive correlation between human capital investment and social and economic development. Investments in education significantly contribute to poverty eradication and wealth creation, as higher educational attainment significantly increases the probability of getting a paid job and has a large and positive impact on monthly wage earnings. This well-known contribution laid the foundation for one of the landmark pledges at the 2000 UNESCO-sponsored World Education Forum in Dakar that provided a sustainable and well-integrated sector framework – Education for All – that clearly linked education with poverty elimination and social and economic development.

9 Liang, et al (2013).

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II. PROJECT DEVELOPMENT OBJECTIVE

A. PDO 17. The Project Development Objective (PDO) is to improve the access and quality of ECE provision in the Project counties in Yunnan Province. The Project will have four main components: (i) increasing access to ECE programs; (ii) improving ECE quality; (iii) creating an ECE enabling environment; and (iv) project management and monitoring and evaluation (M&E). The proposed YECEIP will have a total investment of US$74.62 million, with US$50.00 million from the International Bank for Reconstruction and Development (IBRD) loan and US$24.62 million in counterpart funds. The Project will support activities that complement the Yunnan Government’s own efforts in the implementation of Medium- and Long-term Education Development Plan 2020 and the 2nd 3-Year Action Plan for ECE. Innovative features include partnering with NGOs to deliver rural community-based ECE services, incorporating local culture into the design of ECE centers, establishing university affiliated research ECE centers to improve the access and also the quality of teacher education programs, developing special ECE programs, and piloting quality standards for all types of ECE centers. 18. The YECEIP will focus on seven poor counties in Yunnan (Table 3 presents the Project beneficiary counties and their respective ECE GERs). The counties were selected using a number of criteria, including poverty status, demand for ECE, current government investment in ECE, and local government capacity and ownership by the Provincial Finance Department, Development Reform Commission, and Education, in collaboration with the World Bank.

Table 3: 3-year GER by Project County, 2014 Project Beneficiaries 3-Year GER (%) Township/City 3-Year

GER (%) Rural 3-Year GER (%)

Weishan County 84.5 106.1 73.8 Yangbi County 44.5 93.0 15.0 Eryuan County 63.7 95.0 56.0 Zhanyi County 67.9 71.2 66.7 Xichou County 49.0 55.1 42.9 Qiaojia County 9.6 54.0 0.6 Jianshui County 64.2 83.5 60.1

19. In addition to the seven Project counties, three universities that provide ECE teacher education and training programs have also been selected as Project beneficiaries and will participate in the Project. Yunnan Normal University, Kunming University, and Zhaotong University will receive capacity building assistance and provide pre-service teacher education and in-service teacher training in return.

B. Project Beneficiaries

20. The Project will directly benefit approximately 5,540 children annually, age 0-6 years, who will be able to enroll in the newly constructed kindergartens, rural community ECE centers, and the early childhood special education center. Indirectly, about 45,000 3- to 6-year-old children in

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the 7 Project counties enrolled in various ECE settings will benefit from better quality and care as their teachers, caregivers, and principals will be provided with relevant training and support. The enhanced teacher education programs will also benefit about 60 faculty members and 1,700 teacher trainees in the three Project universities. Further, Kunming University will establish a center focusing on ECE special education program, research, diagnosis, and rehabilitation services for children (age 0-6 years) with minor physical and mental disabilities 10. In an even broader sense, the Project aims to advocate for ECE, improve capacity and quality of teacher education, and develop sustainable models and policies for ECE towards a more ECE friendly society which will be beneficial for all children in Yunnan province, contributing to the economic growth and poverty alleviation goals.

C. PDO-level Results Indicators 21. Project outcomes will be measured by six outcome indicators, including: (i) overall Three-Year ECE GER in Project counties; (ii) Three-Year ECE GER in the rural areas of Project counties; (iii) Three-Year ECE GER by ethnicity in the Project counties; (iv) number of all direct project beneficiaries; (v) percentage of female beneficiaries; and (vi) percentage of teachers with kindergarten teaching certificates. Table 4 outlines key performance indicators including the PDO indicators as well as intermediate results indicators.

Table 4: Key Performance Indicators PDO Indicators

1. 3-year kindergarten GER in the Project counties 2. 3-year kindergarten GER in rural areas in the Project counties 3. 3-year kindergarten GER of ethnic minorities in the Project counties 4. Number of direct Project beneficiaries 5. Percentage of female beneficiaries 6. Percentage of teachers with kindergarten teaching certificates

Intermediate Results Indicators 1. Number of kindergartens that use child development measurement instrument

2. Number of kindergarten classes constructed or renovated under the Project

3. Number of kindergartens that comply with the new kindergarten quality standards

4. Percentage of rural and private teachers that participate in training under the Project

5. Student-teacher ratio

6. Student-teacher ratio in rural areas

7. Number of university faculty with PhD or Masters

8. University graduate employment rate as kindergarten teachers

9. Parental satisfaction towards kindergarten quality

10. Number of policy suggestions developed by the Project, adopted by the Province

10 Kunming University is the only teacher training university in Yunnan that has a program on early childhood special education with faculty that has expertise in diagnosing and treating children with hearing, speaking, as well as cognitive impairments including autistic children. In severe cases, children will be referred to the medical school affiliated with the same university.

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22. A set of ten intermediate indicators have been identified to measure the outputs and outcomes from the various components, and to follow progress towards strengthening the key PDO indicators. The annual measurement of the number of classes constructed or renovated under the project will be used to keep track of the Project’s progress towards the main outcome indicator of 3-year kindergarten GER in the Project Counties, including rural areas. The project influence on compliance to quality standards will be measured by the number of kindergartens that use child development measurement instrument and by following the new kindergarten quality standards, including the prescribed student-teacher ratio. The Project influence on the quality of teacher training and research facilities will be measured by proxy indicators such as participation of teachers in the training provided, employability of the trained teachers, and improvements in academic credentials of the faculty in the three Project universities. Regular surveys will be conducted to get parents’ views and satisfaction with the ECE services. Finally, the Project will measure the Project’s policy influence by keeping track of the number of policy suggestions developed under the Project adopted by the Provincial Department of Education.

III. PROJECT DESCRIPTION

A. Project Components The Project has the following four main components: 23. Component 1: Increasing Access to ECE Programs (total financing US$42.41 million, including US$28.16 million IBRD). This component will focus on: (1a) constructing and equipping 15 kindergartens across the seven Project counties with a total of 138 classes; (1b) constructing and equipping two university-affiliated research kindergartens in Kunming University and Zhaotong University with a total of 24 classes; (1c) piloting rural community-based ECE and parenting education centers in Weishan, Qiaojia, and Zhanyi counties; and (1d) constructing and equipping an early childhood special education center in Kunming University with six full-time special education classes and ongoing diagnosis and rehabilitation services for 0 to 6-year-olds with special needs. 24. Sub-component 1a: Constructing and equipping 15 kindergartens across the seven Project counties, with a total of 138 classes. This sub-component will provide Project counties with model kindergartens which are accessible annually to an estimated 4,140 children age 3 to 6. These model kindergartens will also provide access to non-Project public and private kindergarten teachers/managers to observe Project kindergartens for their model infrastructure, pedagogic practices, midday meal arrangements, curricular and extra-curricular content and emphasis, and teacher-student interactions. In addition to complying with Chinese national and local construction standards, including the national code specifications for seismic safety, the Project will develop quality standards for design to be based on principles of child development and environment friendly construction, inclusive of and respecting local indigenous culture. This sub-component will be implemented by Project Implementation Unit (PIU) established at the Bureau of Education (BOE) in each Project county.

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25. Sub-component 1b: Constructing and equipping two university-affiliated research kindergartens in Kunming University and Zhaotong University, with a total of 24 classes. This sub-component is designed to address the critical need for in-house ECE centers (or clinical sites) within universities to facilitate direct interaction between student teachers and children of the relevant age group for practice teaching and research. This sub-component will: (i) provide a total of 24 classes benefitting 720 children of 0- to 6-years-old; (ii) provide university faculty and student teachers with opportunities to observe classrooms and practice teaching and childcare on campus; (iii) facilitate evidence-based research and scholarship on ECE; and (iv) strengthen the role of academia in provincial and national policy making and programmatic interventions on ECE. The Project will build a research kindergarten in Kunming University with nine classes for 3- to 6-year-old children as well as three classes for 0- to 3-year-old children. At Zhaotong University, the Project will build a research kindergarten with a total of 12 classes for 3- to 6-year-old children. This sub-component will be implemented by the PIUs established at Kunming University and Zhaotong University. 26. Sub-component 1c: Piloting rural community-based ECE and parenting education centers in Weishan, Qiaojia, and Zhanyi Counties. This sub-component is designed to: (i) increase the scope of Project goals and benefits to the hardest-to-reach children in remote villages of Yunnan; and (ii) pilot community-based ECE and parenting education centers supported by local non-government organizations who tend to have a deeper reach into local communities, both in terms of physical access as well as community mobilization influence. In Qiaojia, the Project will establish a total of five rural ECE centers catering to approximately 150 children annually. In Weishan, the Project will establish about 22 rural community-based ECE centers which are projected to annually benefit approximately 450 children ages 3 to 6. Zhanyi County will implement a parenting education program in randomly selected kindergartens. Local Non-government Organizations (NGOs) will be contracted through competitive bids to develop and provide community-based and parenting education ECE services. The BOEs of Weishan, Qiaojia, and Zhanyi Counties will implement the sub-component. An impact evaluation will be carried out to assess the relative impact of the parenting education program in Zhanyi County. 27. Sub-component 1d: Constructing and equipping an early childhood special education center in Kunming University with six full-time special education classes and ongoing diagnosis and rehabilitation services for 0- to 6-year-olds with special needs. The enrollment ratio for children with disability in basic education level has been significantly low, at less than 72 percent in 2012. There is no account of their enrollment at the kindergarten level. The Project has identified the specific needs of the province to improve the access of children with disability to kindergartens and strengthen the technical capacity of Yunnan’s education system on training teachers and caregivers to specialize in educational and developmental needs of 0- to 6-year-old children with mild physical and mental disabilities. Kunming University is the only teacher training university in Yunnan that has an early childhood special education program. The Project will strengthen the capacity of university to expand early childhood special education provision and quality by: (i) constructing an early childhood special education center with six full-time classes at Kunming University to accommodate annually 80 children with special needs; (ii) equipping the center to also operate as a service center for diagnosis and rehabilitation of the province’s 0- to 6–year-old children with mild physical and mental disabilities; and (iii) conducting and publishing research on disability, rehabilitation, early detection, special education, and innovation in treatment

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practices. This sub-component will be implemented by the PIU established in Kunming University. 28. Component 2: Improving ECE Quality (total financing US$28.06 million, including US$21.02 million IBRD). This component will focus on improving the quality of ECE by: (2a) providing structured in-service training of all ECE teachers, managers, and staff; (2b) strengthening teacher education programs in the three participating universities; (2c) establishing ECE research/training centers; (2d) developing an online resource bank and platform for ECE teaching and learning; and (2e) providing a standard package of teaching learning materials in existing rural one-year preprimary classes. 29. Sub-component 2a: Providing structured in-service training of all ECE teachers, managers, and staff. This sub-component addresses the need for improving the quality of in-service training for all categories of ECE teachers, managers, and staff. After extensive consultations across the Project counties and the participating universities, the Project has identified six categories of training that include a total of 15 training packages (see Annex 2, Table 8). Training packages will be developed and delivered to relevant Project counties and teachers through a competitive bidding process. The training will serve the new kindergartens constructed under the Project, all the other public and private kindergartens, and rural ECE centers in the Project counties. Training providers may include universities, private sector, and nongovernment community-based providers of ECE. This sub-component will be implemented by the Provincial Project Management Office (PPMO). 30. Sub-component 2b: Strengthening teacher education (pre-service) programs in Project universities. This sub-component is designed to improve the quality of pre-service teacher education programs, for both associate degree (three-year program)11 and bachelor’s degree (four-year program) programs. The participating universities will revise the design of programs to align them better with the new ECE guidelines issued by the government. The Government of the People’s Republic of China has identified five main domains of child development that ECE programs must focus on: (i) language development; (ii) physical and health development; (iii) arts (visual and performance); (iv) science and math; and (v) socio-emotional development. To incorporate all these areas of development, the revised teacher education programs will have greater focus on learning by practice. This will be done through classroom observations, teaching practice, student internships, and volunteering at on-site kindergartens (proposed to be built in sub-components 1b and 1d) as well as other ECE settings in rural parts of Project counties. Over the course of this Project, the participating universities will develop and implement new curricula, conduct training and professional development of faculty members, invite expert faculty and visiting scholars from other provinces and counties, send faculty members on exchange trips to other provinces and counties, and organize conferences for students and faculty. This sub-component will be implemented by the PIUs established in the participating universities. 31. Sub-component 2c: Establishing three ECE research and teacher training centers in Project universities. The Project will support the Yunnan Normal University to develop a premiere international ECE research and training institute by financing the construction and technical

11 Zhaotong University and Kunming University offer associate degree programs, while Yunnan Normal University offers a bachelor degree program to their students (prospective teachers).

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assistance of a state-of-the-art ECE research and training center. The Project will also finance an ECE teacher training center in Kunming University and a rural ECE teacher training center in Zhaotong University. For all three centers, the Project will not only finance the physical construction, but also provide the technical assistance required to develop long-term strategic plans for the centers and deliver capacity building of faculty and researchers. This sub-component will be implemented by the PIUs established in the participating universities. 32. Sub-component 2d: Developing an online resource bank and platform for ECE teaching and learning. The Project has identified the need for an information and communications technology (ICT) component to overcome the challenges of physical remoteness that have been limiting several stakeholders, mostly teachers, from benefitting from ongoing change and innovation in education policy, knowledge, and teaching-learning resources. Under this sub-component, Yunnan Normal University will design and implement an online resource bank that serves the educational needs of all kindergarten teachers, parents, students, and other stakeholder groups. This sub-component will also be used to strengthen the provincial education management information system (EMIS) by developing and enhancing online portals for databases on kindergartens and other ECE settings, student and teacher profiles, teacher training, etc. This platform will be designed for use on both computers and phones, and user-friendly software and computer and phone applications will be designed to allow for easy usage by parents and teachers across the province. Yunnan Normal University, in collaboration with technology experts in the province, will lead the design and implementation of the platform. 33. Sub-component 2e: Providing a standard package of teaching learning materials in existing rural one-year preprimary classes. Under this sub-component, all rural one-year preprimary classes in the Project counties will be provided with a standard package of basic equipment, such as chairs and tables, and teaching-learning materials, including toys, storybooks, stationary, and arts and crafts supplies, to enhance the quality of ECE experience these children receive throughout the year. This sub-component will be implemented by the PIUs located in their respective BOEs.

34. Component 3: Creating an ECE Enabling Environment (total financing US$0.33 million IBRD). This component has been designed to create a favorable policy and social environment conducive to quality provision of ECE services in the province through: (3a) developing and piloting ECE institutional quality standards; (3b) an information and advocacy campaign for ECE and scientific childrearing practices; and (3c) policy development on ECE.

35. Sub-component 3a: Developing and piloting ECE institutional quality standards. The Project proposes to facilitate a more favorable ECE policy environment by developing and piloting ECE institutional quality standards and a quality assurance system applicable to all categories of ECE institutions, both public and private, regular kindergartens, and rural ECE centers. Under the Project, provincial experts from the participating universities will conduct surveys, interviews, case studies, and focus groups with teachers and kindergarten managers to draft the outline of quality system and assessment guidelines to be completed, piloted, and implemented by the end of the Project. In the process, the Project will produce handbooks, interactive teaching quality assessment tools, and detailed guidelines for provincial- and county-level departments of

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education, kindergarten teachers, teacher trainers, and ECE center managers. This sub-component will be implemented by the PPMO. 36. Sub-component 3b: An information and advocacy campaign for ECE and scientific childrearing practices. This sub-component has been designed to promote scientific childrearing practices among parents and other caregiver groups in the Project counties. The Project will: (i) design and employ televised media (such as campaign advertisements) on appropriate childrearing practices, including considerations for health, hygiene, developmentally appropriate interactions, early stimulation, home literacy, child rights and protection, ECE policies, etc., for parents, grandparents, and other caregiver categories; (ii) design a series of media on WeChat to exchange advisory notes on early childhood care and education; and (iii) develop a standard package of parental education materials including booklets, pamphlets, and other distributable materials on specific issues of ECD and disseminate it through town hall meetings in each town of the Project counties. The component will be implemented by the PPMO. 37. Sub-component 3c: Policy development on ECE. Under this sub-component, the Project will finance evidence-based ECE policy development such as developing sustainable ECE financing mechanisms to inform government policies including the development of the next Three-Year ECE Action Plan. Priority ECE policy development and research will be commissioned to provincial experts, university faculty, and research centers. Methodologically, the Project will engage teachers, teacher networks, parent committees, and other community groups as key informers and sources of policy recommendations. By developing a participatory base for research activities pertaining to ECE policy, this sub-component will strengthen bottom-up planning processes. At each county level, the Project will design and implement a series of systematic consultation activities with participation from teacher, parent, and other community representative groups to support the development of the next 3-year action plan for ECE in the province. This sub-component will be implemented by the PPMO.

38. Component 4: Project Management and Monitoring and Evaluation (total financing US$0.61 million, US$0.37 million IBRD).

39. Sub-component 4a: Project management. The Project has established a management structure and has developed a comprehensive Project Implementation Plan (PIP). This sub-component will routinely finance the capacity building needs of all Project management personnel at the provincial, county, and university levels. They will be routinely trained on procurement, M&E, financial management (FM), and safeguards. Study visits in China and abroad will be organized for select members of the Project management team to develop technical and management skills specific to early childhood education. 40. Sub-component 4b: Monitoring and evaluation. Under this sub-component, the progress and achievement of the PDOs will be monitored and assessed through various types of M&E activities: (i) regular/routine monitoring; (ii) mid-term review (MTR); (iii) end of the Project evaluation including an impact evaluation of the Zhanyi parenting education program. The Project will train the staff of the PPMO and PIUs on M&E and support them in carrying out M&E activities. A set of result monitoring indicators has been developed to measure Project outputs, intermediate outcomes, and final development outcomes. Relevant consulting services will be

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procured via competitive process to provide M&E support to the Project. To the extent possible, the results M&E arrangements for the Project will be integrated into the existing data collection and management processes of kindergartens.

B. Project Financing 41. The total Project cost will be US$74.62 million, with a US$50.00 million IBRD loan and US$24.62 million counterpart funding from the Yunnan provincial government, the Project counties, and the Project universities. Table 5 provides the details of the cost breakdown by component. Retroactive financing of up to US$10 million from the Bank loan will apply for payments made prior to the signing date of the loan agreement but on or after March 4, 2016. Payments will be made only for contracts procured in accordance with applicable Bank procurement procedures. Project Cost and Financing

Table 5: Total Project Cost and Financing (in US$ million) by Project Component

Project Components Project Cost

IBRD Financing

% of IBRD Financing

1. Increasing Access to ECE Programs in Project counties 42.41 28.16 66.39

a. Constructing and equipping 15 kindergartens in the seven Project counties with a total of 138 classes

33.87 21.55 63.61

b. Constructing and equipping 2 university-affiliated research kindergartens in Kunming University and Zhaotong University, with a total of 24 classes

5.78 4.21 72.82

c. Piloting rural community-based ECE and parenting education centers in Weishan, Qiaojia, and Zhanyi Counties

1.28 1.28 100.00

d. Constructing and equipping an early childhood special education center in Kunming University with 6 full-time special education classes and ongoing diagnosis and rehabilitation services for 0- to 6-year-olds with special needs

1.48 1.13 76.04

2. Improving ECE Quality 28.06 21.02 74.91

a. Providing structured in-service training of all ECE teachers, managers, and staff.

4.13 4.02 97.19

b. Strengthening teacher education (pre-service) programs in Project universities

3.65 3.23 88.57

c. Establishing three ECE research and teacher training centers in Project universities

19.08 12.93 67.76

d. Developing an online resource bank and platform for ECE teaching and learning

1.08 0.75 69.73

e. Providing a standard package of teaching learning materials in existing one--year preprimary classes

0.12 0.09 75.00

3. Creating an ECE Enabling Environment 0.33 0.33 100.00 a. Developing and piloting ECE institutional quality

standards 0.22 0.22 100.00

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b. An information and advocacy campaign for ECE and scientific childrearing practices

0.07 0.07 100.00

c. Policy development on ECE 0.04 0.04 100.00

4. Project Management and Monitoring and Evaluation: 0.61 0.37 60.66

a. Project management 0.32 0.08 25.00

b. Monitoring and evaluation 0.29 0.29 100.00

Total Costs 71.41 49.88 69.85

Front-End Fees and Interest 3.21 0.13 100.00

Total Financing Required 74.62 50.00 67.01

C. Lessons Learned and Reflected in the Project Design

42. The Project design draws on the latest global knowledge on ECE and lessons learned from prior development projects in the sector and experience with ECD in China and other countries. Lessons learned and incorporated into the design include the following: 43. Children who participate in quality ECE programs tend to have higher education attainment and are more successful in life. Most importantly, research has shown positive associations between ECE intervention and greater socio-emotional competence and higher verbal and intellectual development among recipient children. Children are more likely to be enrolled in primary school at the right age, less likely to repeat grades and drop out of school, and thus more likely to complete primary school on time. The economic rationale for investing in ECE programs is well established, especially for children in relatively disadvantaged contexts.

44. Teachers are one of the key determinants of quality interaction and quality education. The main importance of teachers lies in their effect on the process and content quality of ECE. Specific knowledge, skills, and competencies are expected of ECE practitioners. Research12 shows that the behavior of those who work in ECE is important and that this is related to their education and training. The qualifications, education, and training of ECE staff are, therefore, an important policy issue. Hence, improving the quality of pre-service education of teachers is one of the core objectives that this Project will fulfill by collaborating with teacher training colleges in Yunnan, revising the curriculum and course designs for ECE teacher trainees, and establishing ECE centers for research, observations, and internships. With regard to in-service training, the Project has identified, based on local and international evidence, that effective professional development of staff should continue over a longer period of time, should be targeted to the specific needs of staff, and reflect the ongoing changes in ECE research and global best practices. The Project universities will hence design a range of training packages for in-service staff that school teachers can opt for based on their specific training needs. 45. University-affiliated laboratory preschools are exemplary models for preschool teacher training that can inform educational practice and research and improve the field of teacher education. The history of and research on university laboratory preschools, especially

12 OECD (2012). Encouraging Quality in Early Childhood Education and Care (ECEC). Retrieved from http://www.oecd.org/education/school/49322232.pdf.

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from the US, testify to their longstanding three-part mission: research (generating knowledge about child development), education (preparing teachers, therapists, and counselors), and service (disseminating evidence-based information about child development and childrearing to parents and the general public). 13 Numerous case studies 14 have been conducted to indicate the effectiveness of preschool teacher training in a laboratory preschool setting. University lab schools, as context for research focused on innovations in ECE, reportedly tend to have a unique and grounded approach to evaluation and improvement of teacher education programs. Current policy discourse on the future of lab preschools in developed countries point out the need for teacher education in a typical community setting with more diverse populations.15 46. Empowering parents can preserve and improve upon the gains made by increasing access and quality of ECE services. Previous research investigations by the World Bank in Yunnan has revealed a serious gap in young children’s home environments, especially in rural, poor, and border counties.16 A large body of research has confirmed that lack of early stimulation and poor quality caregiver-child interaction pose major risks for children’s development. Parents can provide more quality stimulation and interaction with their children by talking, reading, and playing with them. The continuity of children’s experiences across different environments is greatly enhanced when ECE centers cooperate with parents and communities and adopt consistent approaches to child development and learning. An extension of ECE services towards parental education is hence considered an important component of this Project to be tested in the context of Yunnan. Parental education is crucial for educating people in their role, not only as parents, but as those responsible for choosing and sending their children to kindergartens, as well as supporting the governance and accountability structures in kindergartens. 47. Early educational and care intervention for children with disabilities is critical for them to survive, learn, be empowered, and participate in national development. Evidence-based research and multi-country experiences 17 provide a strong rationale for investing in ECD/ECE for children at risk of developmental delay. The first three years of a child’s life are a critical period. They are characterized by rapid development particularly of the brain, and thus provide the essential building blocks for future growth, development, and progress. Both the Convention on the Rights of the Child (CRC) and the Convention on the Rights of People with Disabilities (CRPD) state that all children with disabilities have the right to develop “to the maximum extent possible.” These conventions recognize the importance of addressing not only the child’s health condition or impairment, but also the influence of the environment as the cause of underdevelopment and exclusion. The economic rationale is also clear: children with disabilities

13 Brent A. McBride, Melissa Groves, Nancy Barbour, Diane Horm, Andrew Stremmel, Martha Lash, Carol Bersani, Cynthia Ratekin, James Moran, James Elicker, and Susan Toussaint (2012). Child Development Laboratory Schools as Generators of Knowledge in Early Childhood Education: New Models and Approaches, Early Education and Development, 23:2, 153-164. 14 Arnold-Grine, L. E. (2007). Laboratory schools: A critical link in facilitating and enhancing preschool teacher education. Dissertation. The Ohio State University. Retrieved from https://etd.ohiolink.edu/!etd.send_file?accession=osu1179509794&disposition=inline. 15 James Elicker and Nancy Barbour (2012). Introduction to the Special Issue on University Laboratory Preschools in the 21st Century, Early Education and Development, 23:2, 139-142, DOI: 10.1080/10409289.2012.649665. 16 Liang, et al (2013). Early childhood education in Yunnan: Challenges and opportunities. World Bank. Retrieved from http://documents.worldbank.org/curated/en/2013/11/20116721/china-early-child-development-early-childhood-education-yunnan. 17UNICEF (2015). Disabilities: Early childhood development. Retrieved from http://www.unicef.org/disabilities/index_65317.html.

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who receive good care and developmental opportunities during early childhood are more likely to become healthy and productive adults. This can potentially reduce the future costs of education, medical care, and other social spending. Studies on returns to the investment in education in various developing countries like Bangladesh,18 Nepal,19 and Manila20 emphasize the importance of investment in education for persons with disabilities (physical, hearing, and visual impairment), claiming that it gives two or three times higher returns compared to those without disabilities. The Project will invest in establishing an ECD center for children with disabilities to support the need of the relevant population and facilitate research and teacher training activities at the center. 48. The growing concern for managing and benchmarking the quality of ECE services requires a minimum quality standards framework. Evidence from several developed country contexts, where there has been success in sustaining reforms in education, shows the relevance of establishing minimum quality standards and benchmarking their successive achievements in order to progress along various education indicators. As China will soon witness significant population changes over the next three to four years under its two-child policy, education systems will have to address care and educational needs of a significantly higher quantity of children. Maintenance of quality standards will pose a significant challenge unless a framework is instituted to facilitate M&E of different aspects of a child’s experience at schools. The Project aims to strengthen and sustain a holistic enabling environment for ECE that involves assurance of quality care and education, not only at the institutional level, but at home and community. It will develop a support framework to facilitate compliance among service providers with quality standards. Additionally, it will coordinate and enhance early education provision, through parental involvement and community-awareness campaigns, with a particular focus in policy research and advocacy.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements 49. The Project will be coordinated and implemented by the Yunnan Provincial Department of Education, seven Project counties, and three participating universities. The PPMO in the Department of Education will have the overall day-to-day responsibility for coordinating Project implementation in Project counties and universities and for executing provincial activities. Additionally, the PPMO will facilitate the communication and coordination with the World Bank, as well as with the Project technical experts. The PPMO is staffed with technical experts and officers in charge of procurement, FM, disbursement, monitoring and evaluation, and overall coordination. 50. The PPMO has established a Project Steering Committee, which is headed by the Director-General of the Provincial Department of Education and consists of directors from various functional divisions of basic education, foreign loan management, and private education. The

18 Lamichhane, K. and Y. Kawakatsu (2015). Disability and determinants of schooling: A case from Bangladesh, International Journal of Educational Development, 40, 98-105. 19 Lamichhane, K. (2016). Individuals with visual impairments teaching in Nepal's mainstream schools: a model for inclusion, International Journal of Inclusive Education, 20(1), 16-31. 20 Lamichhane, K., and T. Watanabe (2015). The Effect of Disability and Gender on Returns to the Investment in Education: A Case from Metro Manila of the Philippines, JICA-RI Working Paper No.103.

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Project Steering Committee will provide overall guidance, facilitate project preparation and implementation, and ensure the alignment of the Project with the provincial Medium- and Long-Term Education Development Plan 2020 and the 2nd Three-Year ECE Action Plan (2015-2017). The PPMO will be supported at the technical level by an ECE Provincial Expert Team (PET) mobilized by the Project. The team is composed of prominent expert figures from the local and national universities and think tanks, as well as relevant international ECE experts. 51. Within each of the seven Project counties and three Project universities, a Project Implementation Unit (PIU) has been set up to manage all county- and university-level activities and support some provincial-level activities. The county PIUs are headed by officials of the local education bureau, and all PIUs are staffed by designated personnel and have ECE expertise, as well as knowledge on finance, procurement, and M&E. Furthermore, a Project Implementation Plan (PIP) has been prepared. The PIP will provide implementation guidelines for all aspects of the Project including general administration, procurement, FM, safeguards management, and M&E (see Figure 1).

Figure 1: Project Implementation and Organization Arrangement

B. Results Monitoring and Evaluation (M&E)

52. Project implementation and effectiveness will be monitored and assessed through a series of M&E activities. 53. The objectives of the M&E activities will be to: (i) track the progress and provide timely feedback to Project management, PIUs, and to the World Bank team on implementation status and deliverables; (ii) estimate the effectiveness of the intervention; and (iii) summarize lessons learned from the design and implementation that can be applied to future similar interventions in other regions.

Arrangements for Results and Evaluation 54. Monitoring: Regular/routine monitoring is concerned with the extent to which a planned Project activity has been implemented on time and the expected outputs have been achieved with good quality. It also is a mechanism to monitor changes in the Project’s outcome indicators over

Project Steering Committee

PPMOProvincial Expert Team

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shan

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y

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time. A systematic monitoring and reporting of the achievement of the Project’s outputs and outcomes will provide information on the progress of the implementation and help make adjustments as needed. The PIU (or PPMO) will also prepare a project report every six months and will send it to the Bank no later than 60 days upon completion of the six-month period. 55. A set of indicators capturing the Project’s results has been developed and agreed by the Project and World Bank teams and detailed in Annex 1: Results Framework and Monitoring. Most of these indicators will be tracked on an annual basis by the implementation units, consolidated by the PPMO, and reported in the project reports as well as the World Bank’s Implementation Status and Results Reports (ISRs). To the extent possible, arrangements for the results monitoring will be integrated into the existing data collection and information systems of the implementation units. 56. Mid-Term Review (MTR): The MTR will be conducted during the third year of Project implementation and PPMO will consolidate an MTR report that submit to the Bank by June 30, 2019. In addition to monitoring the achievement of the Project Development Indicators and intermediate results indicators, the MTR will also attempt to analyze the early results of effectiveness of the Project including possibly looking at the emerging evidence of the Project’s effect on children: child development outcomes. 57. Additionally, a series of focus group discussions, interviews with teachers, parents, and the implementation management team; and case studies will be conducted to summarize lessons learned and experiences accumulated during the first half of the implementation. The findings of the MTR will be fed into the Project implementation and help the Project refine and adjust the next stage of activities as needed.

58. Evaluation: The evaluation will assess the Project’s effects and the extent to which its final development objectives have been attained. Specifically, the evaluation will focus on assessing the impact of the intervention on PDO as well as intermediate results indicators. The evaluation will be designed at two levels. At the overall Project level, the assessment will be carried out at the Project entry, mid-term, and closing. The analysis will look at trends over the Project implementation period and compare three data points on the key outcome measures. At the component level, an in-depth impact evaluation will be carried out in Zhanyi County to assess the child development outcome in relation to the parenting education intervention using a standard child development outcome instrument. These analyses will provide information on the magnitude of changes that has occurred and time-related trends. 59. Moreover, the evaluation will identify lessons on types and modalities of interventions that work effectively and efficiently in contributing to the Project achievement, as well as highlight factors that can enhance or hinder the effectiveness and efficiency of various interventions. 60. To complement the quantitative data analysis, the evaluation will collect qualitative data from various stakeholders to enrich information and analysis, such as by interviewing stakeholders (teachers, parents, and school principals/key administrative personnel and Project leaders, and PPMO staff), and a desk review of a variety of forms such as research articles, policy notes, and other knowledge products.

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61. M&E Implementation Arrangement: The provincial PPMO will provide overall leadership and management of the regular Project monitoring, MTR, and evaluation. The PPMO is part of the Provincial Department of Education which has existing personnel and system for regular collection and analysis of key education indicators including early childhood education. In addition, the PPMO has recruited a monitoring and evaluation specialist. Independent consultants/consulting firms will be procured to undertake the M&E activities, including baseline data collection, database establishment, data aggregation, data analysis, and other data collection efforts during the MTR and Project evaluation.

62. To strengthen PPMO and implementation units’ M&E capacity, the World Bank team will provide technical assistance on M&E capacity building during the Project implementation on a need basis to ensure that the M&E function has been established and integrated into the Project implementation.

C. Sustainability 63. The key elements for achieving Project sustainability are political commitment, economic and financial viability, and stakeholder participation. At the level of political commitment, the Government of China recognizes the critical importance of ECD and is fully committed to further investment in this sector. The commitment is reflected in the Government’s Medium- and Long-Term Education Development Plan Outline (2010-2020) and its 12th Five-Year Development Plan. The Yunnan Province closely follows the Central Government’s initiative and has developed its own Medium- and Long-Term Education Development Plan as well as a 2nd Three-Year ECE Action Plan with ambitious goals for ECE and with substantial increases in political and financial commitment. 64. An economic and financial analysis was carried out per the current design which indicates that the Project will have an internal rate of return (IRR) of about 10.4-12.9 percent. The analysis further establishes that the Project’s total investment of US$50 million loan and US$24.62 million counterpart funds, shared by seven Project counties and three Project universities, will result in a relatively small financial obligation for each Project county and Project university, given the past trend of the revenues and expenditures. In the end, the IBRD loan is also guaranteed by the national Ministry of Finance (MOF).

65. Relevant county local governments and university management have already secured teacher posts and operating costs for the 15 county kindergartens and the two university-affiliated kindergartens. The rural community ECE centers to be piloted in Weishan and Qiaojia will use a model that is potentially more sustainable, including the use of local minimally educated parent volunteers as teachers and by charging a small fee which was consulted and a priori agreed with the villagers. Evidence suggests that with high quality and well-structured in-service training programs, parent volunteers with only high school graduation diploma can be very effective teachers.

66. In terms of stakeholder participation, the Yunnan Provincial Government requested the Project, based on its assessment of the financial gaps and its confidence in the World Bank to bring relevant global knowledge and practices to the ECE arena. Each component and activity were

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prepared in close consultation with the relevant counterparts in the province. Multiple stakeholder consultations have been carried out as part of the Project preparation as well as during the environmental assessment (EA) and social assessment (SA) for the Project to ensure maximum buy-in, especially by the local communities.

V. KEY RISKS

A. Overall Risk Rating and Explanation of Key Risks

67. The overall rating for Project preparation and implementation risk is moderate. China has a low risk rating related to operating environment, including political and governance risks as well as macroeconomic risks for IBRD borrowing. Sector strategies and policies related to ECE are also low risks given that the Government has already established a clear direction for investment in ECE. The Government has also encouraged provinces and local governments to improve the coverage and quality of ECE so that they minimally reach national-level average targets established in the Medium- and Long-Term Education Development Plan. Local governments are further encouraged to pilot innovative financing and partnerships, such as public/private partnerships, for ECE provision. 68. There may be moderate risks related to Project design, given the multiple Project entities involved in Project implementation, including the Yunnan Provincial Department of Education (YPDE), the seven Project counties, and the three Project universities. There are also multiple interventions, including construction; teacher education and training; curriculum development; rural community ECEs; ECE research and training centers; a parental education and information campaign; and development of policies, standards, and a quality assurance process. 69. Institutional capacity and sustainability risks are rated moderate. The Yunnan provincial government agencies have experience in implementing World Bank projects. The Project will build on the existing strength and continue to focus on capacity building of Project staff at the provincial, county, and university levels. Sustainability is rated moderate because of the potential difficulty in keeping the rural ECE centers operating in the sparsely populated areas. Efforts will be made to work with the provinces and counties to mitigate the risk as part of the Project preparation and implementation.

70. Fiduciary risks are rated moderate. The IBRD loan proceeds, including overseeing the Designated Account (DA), will be managed by the Yunnan Provincial Finance Department (YPFD). The PPMO is housed in the Yunnan Provincial Department of Education (YPDE). In addition to the PPMO, the Project has 10 implementing units (PIUs), including seven counties’ departments of education and three universities. The FM assessment was conducted upon the PPMO and all the PIUs and concluded that with the implementation of the proposed actions, the Project’s FM arrangements satisfy the Bank’s requirements under OP/BP 10.00.

71. The FM capacity assessment had identified the following principal risks: (i) the PPMO and most of the PIUs are new to Bank operations and, thus, are not familiar with Bank FM policies and requirements; (ii) counterpart funding from local governments could be not in place as committed due to low fiscal capacity; (iii) delays in Bank loan disbursement, Project accounting,

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and financial reporting could occur, partially caused by inefficient working and/or document flows between the PPMO, PIUs, and finance departments. Mitigation measures to address the above risks are as follows: (i) preparation of a Project FM manual to specify the roles and responsibilities of each party as well as the working procedures and documents flow among the parties in FM/disbursement arrangements; (ii) workshops and/or hands-on guidance will be continuously provided by YPFD in addition to FM training to be provided by the Bank; and (iii) counterpart funding demands should be formulated in government annual fiscal budgets.

72. The major risks identified from the procurement capacity and risk assessment of the implementing agencies are delays and possible non-compliance with Bank’s procurement policies due to unfamiliarity with Bank procurement policies and procedures. These risks will be mitigated through: (i) at the PPMO, employment of a qualified procurement agent with requisite experience in procurement financed by the Bank or other multilateral financial institutions; (ii) preparation of a procurement manual to guide procurement cycle management; (iii) close coordination with the PPMO and PIUs and necessary guidance and supervision from the Bank; (iv) PPMO and each PIU required to be staffed with a procurement specialist; and (v) targeted training and capacity building of the procurement staff of PPMO and each PIU. Based on assessment, the procurement staff of the project implementing agencies have adequate capacity and experience to carry out the project procurement work, with the support and guidance of a qualified procurement agent. 73. Environmental and social risks are rated moderate. An Environmental Assessment (EA) was carried out to investigate social-environmental baselines, including pollution control facilities, and analyze the impacts. An Environmental Management Plan (EMP) was developed based on the consolidated EA covering all subprojects. As per the World Bank policy OP4.01, public consultation in all Project cities was carried out, and the final EMP was disclosed locally in the Project counties as well as in the InfoShop on December 2, 2015. In addition, among Project counties, about 28 percent of people are ethnic minorities, triggering OP/BP 4.10. Ethnic minorities appear more concentrated in rural townships and villages. The Project has conducted extensive Social Assessment (SA) and has finalized an ethnic minority development plan (EMDP). A due diligence review of land acquisition and compensation was also carried out. The review confirmed that all land acquisition and compensation was carried out in accordance with national regulations as well as the Bank’s OP/BP4.12. However, to cater to possible site changes during Project implementation, the Project developed a resettlement plan framework (RPF). EMDP was finalized and disclosed in China on February 25, 2016 and Infoshop on February 29, 2016 and RPF was finalized and disclosed in China on February 25, 2016 and Infoshop on March 7, 2016.

VI. APPRAISAL SUMMARY

A. Economic and Financial Analysis

74. Research to date shows that quality ECD programs can have important implications for children’s physical, cognitive, and socio-emotional development. Attendance in quality ECD programs can also have a positive impact on individuals’ educational attainment and productivity later in life. Furthermore, ECD brings significant social benefits, contributing to lower crime rates and social inequality. Given its extensive individual and social benefits, ECD proves to be a highly

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cost-efficient education investment. Results from evaluations of quality ECD programs worldwide suggest that the real internal rates of return can range from seven percent to 18 percent depending on the study. 75. The benefits of the Project are expected to manifest in: (i) higher ECE enrollment in Project counties; (ii) higher eventual education attainment for those who attended ECE programs (taking into consideration the increase in education and opportunity costs); (iii) higher employment rates; (iv) higher wages (the analysis will also consider that investments into ECE teacher training are likely to have disproportionate benefit for women, improve their wages, and may have a positive impact on ECE enrolments over the long term, particularly for girls); and (v) lower risky behaviour. The costs of the Project will include: (i) Project investment costs; (ii) Project recurrent costs; and (iii) the direct cost for children enrolled in the kindergartens and flexible ECE services under the program. 76. ECE makes a strong case for public financing. ECE, particularly for disadvantaged children, has the potential to break the intergenerational transmission of poverty. State-of-the-art brain science research reveals that human brains tend to be more malleable in the early years of life. According to Carneiro and Heckman (2003), investing in ECD and education has a higher rate of return than interventions targeted at later stages of life. Thus, publicly financed ECD has become a powerful instrument to reduce poverty and inequity by boosting child development outcomes and improving odds of higher education attainment for children from disadvantaged backgrounds and greater productivity later in life. 77. The economic analysis conducted specifically for YECEIP (Annex 5, Table 22) confirms that the Project investment will have a considerable IRR, ranging from a low of 6.69 percent to a high of 10.14 percent. These analyses have not yet taken into consideration the indirect benefits accruing to parents and communities. In conclusion, the cost benefit analysis performed makes a strong case for investment in YECEIP.

78. Financial analysis was also carried out to examine the fiscal capacity of the Project entities in loan and interest repayment as well as the financial sustainability of investment. YECEIP, as currently designed, will not pose a significant financial risk for the seven Project counties or the Project universities. For the Project counties, the sum of loan, interest, and counterpart obligation constitutes a very small proportion of the total projected county expenditures on an annual basis at lower than 3.24 percent (Annex 5, Table 26). In fact, after the new kindergartens become operational, the fee income itself will be more than able to cover the remaining loan payment in Eryuan and Jianshui counties. In the other counties including Weishan, Yangbi, Zhanyi, Xichou and Qiaojia, the total fee income will be able to pay off at least 68 percent of the remaining loan on an annual basis.

79. The financial analysis concludes that the Project’s total investment of US$50 million loan and US$24.62 million counterpart funds, when shared by seven Project counties and three Project universities, will result in a relatively small financial obligation for each Project county and Project university, given the past trend of the revenues and expenditures. In the end, the loan is also guaranteed by the national MOF.

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B. Technical 80. The Project is designed to support the provincial Medium- and Long-Term Education Development Plan and its 2nd Three-Year ECE Action Plan (2015-2017). The Project is further aligned with the global knowledge and practices on effective ECD policies, programs, and interventions. It is well established that children who participate in quality ECE programs tend to be more successful in later years of schooling, are more socially and emotionally competent and adaptive, and tend to show higher linguistic and cognitive development during early childhood than children who are not enrolled in similar programs. The literature emphasizes that interventions aimed at younger and disadvantaged children result in greater and longer-term impacts on education attainment and productivity. Accordingly, the Project supports the development of sustainable ECE service delivery models in Yunnan. Effective ECE models incorporate integrated and comprehensive quality standards and monitoring systems, which the Project aims to improve by strengthening service delivery systems, including a provincial-level ECE quality assurance framework, as well as Project management and evaluation strategies. To deliver interventions effectively, research suggests that ECE teachers, managers, and staff be provided with systematic pre-service and in-service training and supervision, a key element of the Project. 81. The Project further builds on the Bank’s knowledge and experience of working in China and Yunnan Province in the education sector, specifically in ECE. An extensive study, published as “Challenges and Opportunities – Early Childhood Education in Yunnan,” was carried out to scope the sector and issues in ECE in Yunnan in 2013. The YECEIP design reflects on the policy recommendations made by the study.

C. Financial Management 82. The IBRD loan proceeds, including overseeing the Designated Account (DA), will be managed by YPFD. The PPMO is housed in YPDE. In addition to the PPMO, the Project has 10 implementing units (PIUs), including the seven counties’ departments of education and participating universities. Both the PPMO and the PIUs are already staffed with FM personnel. The FM assessment was conducted upon the PPMO and all the PIUs and concluded that with the implementation of the proposed mitigation actions, the Project’s FM arrangements satisfy the Bank’s requirements under OP/BP 10.00. Please refer to Annex 3 for detailed FM arrangement and mitigation measures. The FM and disbursement requirements provided are: (i) disbursement deadline date which in this case is “four months after the closing date”; (ii) DA to be established in a commercial bank or financial institution acceptable to the Bank with a ceiling of US$5,000,000 with reporting of eligible expenditures monthly—all information in the Disbursement Letter; (iii) date that unaudited financial statements are due; and (iv) when the annual audit is due each year. The unaudited semi-annual Project financial statements will be prepared and furnished to the Bank by the PPMO as part of the Progress Report no later than 60 days following each semester (the due dates will be August 31 and February 28 of each Project year).

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D. Procurement 83. PPMO and its 10 PIU subsidiaries will be responsible for procurement and contract management of specific contracts under the Project. The PPMO will be responsible for the overall coordination and communications with the Bank, as well as submitting procurement documents for Bank review. 84. The procurement staff at PPMO and at some of its PIUs have previous experience or knowledge with Bank procurement policies and procedures. Furthermore, most of the procurement staff at PIUs have experience in conducting procurement under the national and local procurement laws and regulations. 85. A draft procurement plan for the whole Project has been prepared by the client and submitted and reviewed by the Bank. The procurement plan will be updated in agreement with the Bank annually or as required to reflect actual Project implementation needs. Further details on procurement are provided in Annex 3.

E. Social (including Safeguards) 86. Involuntary Resettlement Safeguards (OP4.12). A due diligence review was conducted for all the project sites that have completed land acquisition in the Project counties. Based on review of relevant documents and discussions with affected parties, the due diligence review concluded that all building sites have been obtained properly, and affected people had been provided with compensation in compliance with national law and local regulations with no remaining problems. Nevertheless, the World Bank team and the counterparts both agree that the Project still triggers the Bank’s Involuntary Resettlement Policy, to cater to possible changes of construction sites during Project implementation. A Resettlement Plan Framework (RPF) was developed and disclosed February 25, 2016, in country, and at the InfoShop on March 7, 2016. The RPF establishes objectives, principles, eligible criteria for entitlements, compensation methods, participation and the consultation process, and the claims solution mechanism in order to ensure that the affected people’s living standards and households are restored, at least to the same levels as before the Project. 87. Indigenous People Safeguards (OP4.10). Given that the Project’s beneficiaries include ethnic minorities, the World Bank’s policy on Indigenous Peoples is triggered. There are 52 officially recognized ethnic groups covering 15.6 million people and accounting for 35 percent of the total population in Yunnan. In the seven Project counties, 28 percent of population are ethnic minorities, ranging from 5 percent to 69 percent. To ensure broad support by the minority population in the Project counties, particularly for those kindergartens in rural areas where there are large concentrations of ethnic minority communities, extensive consultations were conducted through a social assessment, based on which, an EMDP was developed. Based on the consultations, issues concerning minority children, parents, and kindergarten teachers were identified, and concrete measures for ECE improvement are incorporated in Project design and included in the EMDP. The EMDP has been disclosed locally on February 25, 2016, and at the InfoShop on February 29, 2016. The key social benefits of the Project include increasing enrollment and quality of ECE in the Project areas, particularly among ethnic minorities, through

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development of new kindergartens, provision of teacher training, and improvement of ECE policy and social support. All these recommendations have been accepted by the PPMO and were built into the Project design. 88. One important issue concerning ethnic minorities is how to improve access to ECE in Project counties, particularly in rural areas. During the SA and EMDP preparation, social economic surveys and group discussions were conducted among minority parents and teachers in order to seek their views and suggestions regarding development of rural community-based ECE centers in Weishan and Qiaojia Counties. Under the EMDP, a series of concrete measures had been identified with detailed budgets, responsible agency, and key monitoring indicators in order to address concerns raised by minority population. The PIU of each Project county will lead the implementation of the EMDP under the oversight of the PPMO. An experienced external monitoring agency will be contracted to conduct independent M&E over the course of Project implementation. The monitoring results will be reported twice a year, and, if needed, remedial actions will be designed. 89. Gender Impacts. Gender equality is important for the Project, and efforts will be made to increase girl enrollment for ECE education, particularly in rural areas. Gender and ethnic group disaggregated indicators, like increased ECE enrollment, recruited teachers, and trainings participated, will be included in the Project’s overall monitoring framework.

F. Environment (including Safeguards) 90. The Project will achieve its objectives through the building of 15 standard kindergartens in built-up areas or suburbs of seven counties, three ECE research and training centers and two model kindergartens within existing campuses in two cities, and about 45 rural community ECE centers in the villages. Given the nature and scale of the activities, environmental impacts during construction will be limited and largely confined to the sites. The majority of Project sites are connected with sewer network and covered by garbage collection of the cities/towns. Therefore, impacts during operation (sewage, manure, and solid wastes) are expected to be moderate and can be readily mitigated. The Project is category B. 91. In line with the OP4.01 on EA and domestic requirements, an EA has been carried out by a certified EA institute which has experience in preparing an earlier WB Project on education in the province. The EA was conducted in parallel with the feasibility studies to integrate environmental and social consideration into technical designs to maximize the benefits. An EMP was developed based on the consolidated EA covering all subprojects and adopted by the PPMOs. 92. Public Consultation and Information Disclosure. There were two rounds of public consultation undertaken following public disclosure. The first round was in August 2015 with notification about the Project disclosed mainly at the bulletin boards of each subproject. For the second round, the draft EA/EMP was disclosed in local newspapers and the official website of each Project city/county with information about access in the hardcopy. The primary objective was to collect public opinions about the Project, the EA findings, and the sufficiency of mitigation measures. Altogether 476 people with a wide range of backgrounds were surveyed. Most of them were highly supportive of the Project. Their suggestions and concerns have been incorporated in

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the EA/EMP and conveyed to the PPMO. The final EA/EMP has been disclosed locally and in the World Bank’s InfoShop on December 2, 2015.

G. World Bank Grievance Redress

93. Communities and individuals who believe that they are adversely affected by a World Bank-supported Project may submit complaints to existing Project-level grievance redress service (GRS) or the Bank’s GRS. The GRS ensures that complaints received are promptly reviewed in order to address Project-related concerns. Project-affected communities and individuals may submit their complaint to the World Bank’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of World Bank non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank’s attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate GRS, please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.

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Annex 1: Results Framework and Monitoring

.

CHINA: Yunnan Early Childhood Education Innovation Project (YECEIP) (P152860)

Results Framework.

Project Development Objectives .

PDO Statement

The Project Development Objective is to improve the access and quality of ECE provision in the Project counties in Yunnan Province.

These results are at

Project Level

.

Project Development Objective Indicators

Cumulative Target Values

Indicator Name Baseline YR1 YR2 YR3 YR4 YR5/End

Target

3-year kindergarten GER in the Project counties (Percentage) 54.00 57.00 60.00 63.00 66.00 69.00

3-year kindergarten GER in rural areas in the Project counties (Percentage)

45.00 48.00 60.00 63.00 66.00 69.00

3-year kindergarten GER of ethnic minorities in the Project counties (Percentage)

64.00 65.00 66.00 67.00 68.00 69.00

Number of direct project beneficiaries (Number) – (Core)

0.00 380.00 2586.00 6806.00 11851.00 17291.00

Percentage of female beneficiaries (Percentage - Sub-Type: Supplemental) - (Core)

0.00 48.00 49.00 49.00 50.00 50.00

Percentage of teachers with kindergarten teaching certificates (Percentage)

43.00 46.00 49.00 53.00 57.00 59.00

.

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Intermediate Results Indicators

Cumulative Target Values

Indicator Name Baseline YR1 YR2 YR3 YR4 YR5/

End Target

Number of kindergartens that use child development measurement instrument (Number)

0.00 30.00 46.00 64.00 77.00 88.00

Number of kindergarten classes constructed or renovated under the Project (Number)

0.00 79.00 109.00 134.00 145.00 170.00

Number of kindergartens that comply with the new kindergarten quality standards (Number)

0.00 46.00 80.00 110.00 132.00 158.00

Percentage of rural and private teachers that participate in training under the Project (Percentage)

0.00 64.00 68.00 74.00 80.00 90.00

Student-teacher ratio (Project county) (Percentage) 20.00 19.00 17.00 16.00 15.00 14.00

Student-teacher ratio in rural areas (Project county) (Percentage) 24.00 22.00 20.00 19.00 17.00 17.00

Number of university faculty with PhD or Masters (Percentage) 0.00 4.00 8.00 12.00 16.00 20.00

University graduate employment rate, as kindergarten teachers (Percentage)

68.00 73.00 79.00 83.00 88.00 91.00

Parental satisfaction towards kindergarten quality (Percentage) 76.00 80.00 84.00 86.00 90.00

Number of policy suggestions developed by the Project, adopted by the Province (Number)

0.00 0.00 0.00 0.00 1.00 2.00

.

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Indicator Description.

Project Development Objective Indicators

Indicator Name Description (indicator definition etc.) Frequency Data Source / Methodology

Responsibility for Data Collection

3-year kindergarten GER in the Project counties

Total enrollment over total population of 3 to 6 year olds Annual Administrative records

Implementation unit

3-year kindergarten GER in rural areas in the Project counties

Total rural enrollment over total population of 3 to 6 year olds Annual Administrative records

Implementation unit

Direct Project beneficiaries Direct beneficiaries are children who are able to enroll in all types of early childhood centers constructed under the Project.

Annual Administrative records

Implementation unit

Female beneficiaries Female beneficiaries (percentage). Based on the assessment and definition of direct Project beneficiaries, specify what proportion of the direct Project beneficiaries are female. This indicator is calculated as a percentage.

Annual Administrative records

Implementation unit

3-year kindergarten GER (ethnic minorities) in the Project counties

No description provided. Annual Administrative records

Implementation unit

Percentage of teachers with kindergarten teaching certificates

Number of teachers with kindergarten teaching certificate over total number of teachers

Annual Administrative records

Implementation unit

.

Intermediate Results Indicators

Indicator Name Description (indicator definition etc.) Frequency Data Source / Methodology

Responsibility for Data Collection

Number of kindergartens that use child development measurement instrument

Number of kindergartens that use child development measurement instrument

Annual Administrative records

Implementation unit

30

Number of kindergarten classes constructed or renovated under the Project

Number of kindergarten classes constructed or renovated under the Project

Annual Administrative records

Implementation unit

Number of kindergartens that comply with the new kindergarten quality standards

Number of kindergartens that comply with the new kindergarten quality standards

Annual Administrative records

Implementation unit

Percentage of rural and private teachers that participate in training under the Project

Number of rural and private teachers participating in training over total number of rural and private teachers

Annual Administrative records

Implementation unit

Student-teacher ratio (Project county)

Number of students over number of teachers in the Project counties

Annual Administrative records

Implementation unit

Student-teacher ratio in rural areas (Project county)

Number of students over number of teachers in rural areas of the Project counties

Annual Administrative records

Implementation unit

Number of university faculty with PhD or Masters

Number of university faculty with PhD or Masters Annual Administrative records

Implementation unit

University graduate employment rate, as kindergarten teachers

Number of graduates that take up kindergarten teaching upon graduation over the total number of graduates

Annual Administrative records

Implementation unit

Parental satisfaction towards kindergarten quality

Percent of parents of the Project kindergartens that express satisfaction with quality using standard parent satisfaction survey on an annual basis. The surveys will serve as beneficiaries engagement and feedback collection mechanism.

Annual Administrative records

Implementation unit

Number of policy suggestions adopted

Number of policy suggestions adopted by the Bureau of Education or Department of Education in Yunnan

Annual Administrative records

Implementation unit

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Annex 2: Detailed Project Description

CHINA: Yunnan Early Childhood Education Innovation Project (YECEIP) 94. The PDO is to improve the access and quality of ECE provision in the Project counties in Yunnan Province. The Project will have four main components: (i) increasing access to ECE programs in the Project counties; (ii) improving the quality of ECE; (iii) creating an ECE enabling environment; and (iv) project management and M&E. The proposed YECEIP will have a total investment of US$74.62 million, with US$50.00 million from an IBRD loan and US$24.62 million in counterpart funds. 95. The Project will support activities that complement the province’s own efforts in the implementation of the Yunnan’s Medium- and Long-Term Education Development Plan 2020 and the 2nd Three-Year Action Plan for ECE. Components and activities have been designed in consultation with the counterparts to fill the gaps and complement the Government’s own actions in ECE. YECEIP will focus on seven poor counties in Yunnan. The counties were selected using a number of criteria including poverty status, demand for ECE, current government investment in ECE, and local government capacity and ownership, by the Provincial Finance Department, Development Reform Commission, and Education. In addition, participating universities specializing in kindergarten teacher education programs were also selected as Project beneficiaries to receive capacity building and provide pre-service and in-service training in return.

Table 6: Project Counties and Universities

Counties Universities 1. Weishan County 1. Yunnan Normal University 2. Yangbi County 2. Kunming University 3. Eryuan County 3. Zhaotong University 4. Zhanyi County 5. Xichou County 6. Qiaojia County 7. Jianshui County

Table 7: Categories of ECE Institutions and ECE Teachers/Staff

Categories of ECE Institutions Categories of ECE Teachers/Staff 3-year kindergartens (You er yuan) 1-year preprimary class (Xue qian Ban) 3-year kindergartens attached to rural primary

schools (Cun xiao fu you) Rural community ECE center (nong chun she

qu you er ban)

Senior teachers or “backbone teachers” Regular teachers or “frontline teachers” Caregivers or Assistant teachers Principals/Managers Administrative staff Non-teaching staff (kitchen and maintenance)

96. Component 1: Increasing Access to ECE Programs (total financing US$42.41 million, including US$28.16 million IBRD loan). This component will focus on: (1a) Constructing and equipping 15 kindergartens across the seven Project counties, with a total of 138 classes; (1b) constructing and equipping two university-affiliated research kindergartens in Kunming University and Zhaotong University with a total of 24 classes; and (1c) Constructing and equipping an early childhood special education center in Kunming University with six full-time special

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education classes and ongoing diagnosis and rehabilitation services for children 0- to 6-yearsold with special needs. The following sub-components detail the objective, activities, beneficiaries, implementing body, and financing. 97. Sub-component 1a: Constructing and equipping 15 kindergartens across the seven Project counties, with a total of 138 classes. The key objective is to address challenges related to access to quality ECE programs by 3- to 6-year-old children in the Project counties. This sub-component will construct and/or renovate 15 model kindergartens with 138 classes accessible to an estimated 4,140 3- to 6-year-old children annually, thereby contributing to an overall increase in enrollment by the end of Project period. Quality standards will be employed for the design and construction of each kindergarten. In addition to complying with Chinese national and local construction standards, including the national code specifications for seismic protection, the Project will follow the design principles of child and environment friendly construction, inclusive of children with special needs, and respecting local indigenous cultures. The new kindergartens will be public ones and have provision for children from low-income families. In addition to benefitting children, these model kindergartens will benefit in-service and pre-service teachers for learning and observations. This sub-component will be implemented by the PIU established at the boards of education in each of the seven Project counties. The total cost of the sub-component is US$33.87 million, including IBRD loan of US$21.55 million. 98. Sub-component 1b: Constructing and equipping two university-affiliated research kindergartens in Kunming University and Zhaotong University, with a total of 24 classes. The key objectives are to: (i) improve the ECE coverage; and (ii) address the critical need for in-house ECE centers (or clinical sites) within a university setting to facilitate direct interaction between student teachers and children of the relevant age group for practice teaching and research. This sub-component will: (i) construct and equip two research kindergartens with a total of 24 classes benefitting 720 0- to 6-year-old children; (ii) provide university faculty as well as student teachers with opportunities to observe classrooms and practice teaching and childcare on campus; and (iii) facilitate evidence-based research and scholarship on ECE. More specifically, the Project will build a research kindergarten in Kunming University with nine classes for 3- to 6-year-old children as well as three classes for 0- to 3-year-old children. In Zhaotong University, the Project will build a research kindergarten with a total of 12 classes for 3- to 6-year-old children. The universities will be assisted in designing the centers’ physical infrastructure, their specific operational and research objectives, and management models. This Project will be implemented by the PIUs established in the Kunming University and Zhaotong University. The total cost of the sub-component is US$5.78 million, including IBRD loan of US$4.21 million. 99. Sub-component 1c: Piloting rural community-based ECE and parenting education centers in Weishan, Qiaojia, and Zhanyi Counties. The key objectives are: (i) to increase the scope of Project goals and benefits to the hardest-to-reach population in remote villages of Yunnan; and (ii) to pilot the modality of community-based ECE centers. In consultation with the local governments, Weishan and Qiaojia counties were identified as Project sites for piloting rural community-based ECE centers. Both counties have mountainous terrain and sparse population in rural areas. They were also selected based on the willingness of the local governments to pilot community-based ECE models as well as the rural urban disparity in the 3-year GER. While the overall 3-year GER in Weishan and Qiaojia is 84.5 percent and 9.6 percent, respectively, the rural 3-year GER is

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significantly lower at 73.8 percent and 0.6 percent, respectively. In Weishan, the Project will establish a total of 22 rural community-based ECE centers for approximately 450 children annually. In Qiaojia, the Project will establish five rural community-based ECE centers catering to approximately 150 children annually. NGOs with local presence and technical capacity will be contracted through competitive bids to develop and provide sustainable ECE services in the identified sites. The team has already reviewed the potential and coverage of a few nongovernment providers of community-based ECE services in the region and will call for proposals from all prospective providers in the region. In Zhanyi, a parenting education program will be piloted in selected kindergartens to promote parenting education centering on shared reading activities. The sub-component will be implemented by the PIUs established in the BOEs of Weishan, Qiaojia, and Zhanyi Counties. The total cost of the sub-component is US$1.28 million, all financed by IBRD loan. 100. Sub-component 1d: Constructing and equipping an early childhood special education center in Kunming University with six full-time special education classes and ongoing diagnosis and rehabilitation services for 0- to 6-year-olds with special needs. The Project has identified the specific need of the province to improve the access of children with disabilities to kindergartens and strengthen the technical capacity of Yunnan’s education system on training teachers and caregivers to specialize in educational and developmental needs of 0- to 6-year-old children with disabilities. The Project will construct and equip an early childhood special education center providing: (i) 6 full-time classes with up to 80 enrollment spaces annually; (ii) ongoing diagnosis and rehabilitation service for 0- to 6-year-old children with disabilities; and (iii) research on disabilities, rehabilitation, early detection, special education, and innovation in treatment practices. Direct beneficiaries of this sub-component include 0- to 6-year-old children with special needs and special education teachers. The total cost of this sub-component is US$1.48 million, including IBRD loan of US$1.13 million. 101. Component 2: Improving ECE Quality (total financing US$28.06 million, including US$21.02 million IBRD loan). This component will focus on improving the quality of ECE by (2a) providing structured in-service training of all ECE teachers, managers, and staff; (2b) strengthening teacher education programs in participating universities; (2c) establishing ECE research/training centers; (2d) developing an online resource bank and platform for ECE teaching and learning; and (2e) Providing a standard package of teaching learning materials in existing rural one-year preprimary classes.

102. Sub-component 2a: Providing structured in-service training of all ECE teachers, managers, and staff. This sub-component addresses the need for high quality in-service training for all categories of ECE staff: regular teachers (frontline teachers), teacher trainers, key teachers (backbone teachers), teacher assistants, new teachers, and manager training. The Project proposes to deliver a comprehensive in-service kindergarten teacher and manager training program. The development of the training program will be informed by an in-depth needs assessment. After extensive consultations across the Project counties and the participating universities, the Project has identified six categories of training that include a total of 15 suggested training packages (Table 8). Training packages will be developed and delivered to relevant Project counties and teachers through a competitive bidding process. The training will serve the new kindergartens constructed under the Project as well as all the other public and private kindergartens in the Project counties.

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Direct beneficiaries of this sub-component include the following categories of teachers: senior teachers or “backbone teachers” (responsible for training/guiding regular teachers), regular teachers or “frontline teachers”, caregivers or assistant teachers, principals or managers, administrative staff, and other non-teaching staff. This sub-component will be implemented by the PPMO. Training providers may include universities, private sector, and nongovernment community-based providers of ECE. The total cost of this sub-component is US$4.13 million, including IBRD loan of US$4.02 million.

Table 8: Proposed Training Categories and Types of Teacher Trainings

Six Categories of Training Specific Trainings Projected

Beneficiaries1. In-service training for regular ECE

teachers in the Project counties i. Teacher certification training for non-

certified teachers 948

ii. Principal training in rural and ethnic minority areas

716

iii. Induction training for new teachers 716 iv. Training for teachers transferred from

primary schools 1,400

v. Training on the use of teaching manual 2,387 2. In-service training for teacher assistants

and caregivers in the Project counties vi. Training for nursery teachers/caregivers 624

vii. Medical training of assistant teachers 80 viii. Training of cooks on nutrition, health, and

hygiene 442

ix. Administrative and accounting staff 600 3. Training for teachers of rural preprimary

classes and community-based ECE centers in the Project counties

x. Training for teachers of rural preprimary classes and community-based ECE centers

500

4. Teachers for 0- to 3-years-old children in the Project counties

xi. Teachers for 0-to 3-years-old children 250

5. Training of trainers from Project counties

xii. Training of trainers from Project counties 350

6. Training of management teams in Project counties

xiii. Training of ECE officials in Project counties

148

xiv. Advanced training for principals 536 xv. Principal’s basic qualifications training 100

103. Sub-component 2b: Strengthening teacher education (pre-service) programs in Project universities. The key objective is to improve the quality of pre-service teacher education programs for both associate degree (three-year program)21 and bachelor degree (four-year program). The participating universities will revise the design of programs to align them better with the new ECE guidelines and the kindergarten teacher standards issued by the Government. The Government of the People’s Republic of China has identified five main categories of developmental areas that ECE programs must focus on: (i) language development; (ii) physical and health development; (iii) arts (visual and performance); (iv) science and math; and (v) socio-emotional development. To incorporate all these areas of development, the revised teacher education programs will have greater focus on learning by practice. This will be done through classroom observations, teaching practice, student internships, and volunteering at on-site kindergartens (proposed to be built in sub-

21 Zhaotong University and Kunming University offer associate degrees, while Yunnan Normal University offers bachelor degrees to their students (prospective teachers).

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components 1b and 1d as well as other ECE settings in rural parts of Project counties. Over the course of this Project, the participating universities will develop and implement new curricula, conduct training and professional development of faculty members, invite expert faculty and visiting scholars from other provinces and counties, send faculty members on exchange trips to other provinces and counties, and organize conferences for students and faculty. Pre-service teachers are the direct beneficiary group. This sub-component will be implemented by the PIUs established in the three participating universities (Yunnan Normal University, Kunming University, and Zhaotong University. The total cost of this sub-component is US$3.65 million, including IBRD loan of US$3.23 million. 104. Sub-component 2c: Establishing three ECE research and teacher training centers in the Project universities. The key objectives are to: (i) promote education research; and (ii) training of kindergarten teachers. Under this sub-component, three ECE research and teacher training centers will be constructed in the participating universities. The Project will support the Yunnan Normal University to develop a premiere international research institute for ECE research and teaching towards the southwestern areas of China, as well as the bordering countries of Myanmar, Laos, and Vietnam, by financing the construction of a state-of-the-art ECE research center and by recruiting and developing faculty and research associates. In Kunming University, the Project will finance a premium ECE teacher training center. And in Zhaotong University, the Project will support the establishment of an ECE teacher training center focusing on rural teachers. In addition to financing the physical construction of the centers, the Project will provide technical assistance to support the centers to craft long-term strategic plans and also capacity building to the universities faculties. The sub-component will be implemented by the PIUs established in all three participating universities. The total cost of the sub-component is US$19.08 million, including IBRD loan of US$12.93. 105. Sub-component 2d: Developing an online resource bank and platform for ECE teaching and learning. The Project has identified the need for an ICT component to overcome the challenges of physical remoteness that have been limiting several stakeholders, most particularly teachers, from benefitting from ongoing change and innovation in education policy, knowledge, and teaching-learning resources. Under this sub-component, Yunnan Normal University will design and implement an online resource bank that serves the educational needs of all pre-school teachers, parents, students, and other stakeholders. This platform will be designed for use on both computers and phones, and user-friendly software and computer and phone applications will be designed to allow for easy use by parents and teachers across the province. For teachers, this platform will serve to: (i) provide kindergarten teachers with teaching-learning resources they can use in their classrooms; (ii) facilitate teacher networks and sharing of ideas and learning across the province; (iii) encourage teachers to share, through videos, pictures, or writing, their ideas, experiments, and innovations with the larger education community; (iv) update teachers of important policy changes at the national and provincial levels; (v) notify teachers of important trainings and facilitate applications and registrations for such trainings; and (vi) update the teaching community of the national and international best practices and encourage online forums and discourse on education reform. 106. For parents, the platform will: (i) provide necessary information on policy news that directly impacts parents and students; (ii) implement parent education programs to build awareness

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on parenting roles and practices; (iii) introduce teaching-learning materials that parents can use with their children, thereby strengthening their home-literacy environment; and (iv) provide parents with a forum through which they can share their experiences, feedback, complaints, and suggestions. For children, the platform will establish a separate link that will share education resources such as games, videos, songs, downloadable picture books, activity books, story books, etc. This sub-component will also be used to strengthen the provincial EMIS by developing and enhancing online portals for database on kindergartens and other ECE settings, student and teacher profiles, teacher training, etc. This sub-component will be implemented by the PIU established in Yunnan Normal University. The university, in collaboration with technology experts in the province, will take the lead in the design of the overall structure. The education content and information will be designed by all participating universities and their research centers. Some content may also be procured from external sources. On an ongoing basis, graduate students of the university will be hired (on a stipend) and trained to maintain the platform and regularly update the content, thereby providing sustainability to this sub-component beyond the Project period. The total cost of the sub-component is US$1.08 million, including IBRD loan of US$0.75 million. 107. Sub-component 2e: Providing a standard package of teaching learning materials in existing one-year preprimary classes. There are about 779 preprimary classes with more than 22,000 children enrolled in the seven Project counties. Most of these centers are single-class and multi-grade settings located in remote villages and are often severely underequipped with necessary teaching-learning materials. The objective of this sub-component is to provide a standard package of teaching and learning materials to these classes. Under this sub-component, all 1-year preprimary classes in the Project counties will be provided with a standard package of basic equipment such as chairs and tables and teaching-learning materials, including toys, storybooks, stationary, and arts and crafts supplies to enhance the quality of ECE experience these children receive throughout the year. The key beneficiaries include all 3- to 6-year-old children in rural 1-year preprimary classes in the seven Project counties. This sub-component will be implemented by the PIUs located in their respective boards of education. The total cost of the sub-component is US$0.12 million, including IBRD loan of US$0.09 million. 108. Component 3: Creating an ECE Enabling Environment (total IBRD financing of US$0.33 million). This component has been designed to create a favorable policy and social environment conducive to quality provision of ECE services in the province through: (3a) developing and piloting ECE institutional quality standards; (3b) information and advocacy campaigns for ECE and scientific childrearing practices; and (3c) policy development on ECE. The following sub-components outline the mechanisms planned to address this need. 109. Sub-component 3a: Developing and piloting ECE institutional quality standards. Currently, China does not have a quality assurance framework or institutional standards for accreditation. The need for a nationally applicable framework of quality assurance standards is most pronounced in settings that are lagging behind on basic education indicators, such as rural and ethnic minority areas. The Project hence proposes to facilitate a more favorable ECE policy environment by developing and piloting ECE institutional quality standards and a quality assurance system. Under the Project, provincial experts from the participating universities will conduct surveys, interviews, case studies, and focus groups with teachers and kindergarten managers to draft the outline of a quality system and assessment guidelines to be completed, piloted, and implemented by the end of the Project. In the process, the Project will produce

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handbooks, interactive teaching quality assessment tools, and detailed guidelines for provincial and county-level departments of education, kindergarten teachers, teacher trainers, and ECE center managers. This sub-component will cover all categories of ECE settings in the Project counties. The quality assurance system will apply to both public and private settings and regular kindergartens, as well as rural ECE centers. This sub-component will be implemented by the PPMO. The total cost of the sub-component is US$0.22 million, all financed by IBRD loan. 110. Sub-component 3b: Information and advocacy campaign for ECE and scientific childrearing practices. This sub-component has been designed to promote scientific childrearing practices among parents and other caregiver groups in the Project counties. The Project will: (i) design and employ televised media (such as campaign advertisements) on appropriate childrearing practices, including considerations for health, hygiene, age and developmentally appropriate interactions, early stimulation and the relevance of home literacy, child rights and protection, ECE policies, etc., for parents, grandparents, and other caregiver categories; (ii) design a series of media on WeChat to exchange advisory notes on early childhood care and education; and (iii) develop a standard package of parental education materials, including booklets, pamphlets, and other distributable materials on specific issues of ECD which will be disseminated through town hall meetings in each town of the Project counties. This intervention is relevant from the point of view of Project’s sustainability and engagement with the local community in the Project sites, and hence all effort will be made to engage local experts to ensure that the disseminated information and campaign content builds upon local best practices of childrearing and is culturally sensitive. Direct beneficiaries include parents and other caregivers, such as grandparents. The sub-component will be executed by the PPMO. The total cost of this sub-component is US$0.07 million, all financed by IBRD loan. 111. Sub-component 3c: Policy development on ECE. Under this sub-component, the Project will finance evidence-based ECE policy development such as developing sustainable ECE financing mechanisms to inform government policies including the development of the next Three-Year ECE Action Plan. Priority ECE policy development and research will be commissioned to provincial experts, university faculty, and research centers. The key methodological feature of this sub-component will be to engage teachers, teacher networks, parent committees, and other community groups as key informers and sources of policy recommendations. By developing a participatory base for research activities pertaining to ECE policy, this sub-component will strengthen bottom-up planning processes. In addition, at each county level, the Project will design and implement a series of systematic consultation activities with participation from teachers, parents, and other community representative groups to support the next Three-Year ECE action plan in the province. This sub-component will be implemented by the PPMO. The total cost of this sub-component is US$0.04 million, all financed by IBRD loan. 112. Component 4: Project Management and Monitoring and Evaluation (total financing US$0.61 million, including US$0.37 million IBRD loan). This component is designed to finance activities under: (4a) Project management; and (4b) monitoring and evaluation. 113. Sub-component 4a: Project management. This sub-component will routinely finance the capacity building needs of all Project management personnel both at the provincial and at the county level. Provincial and county-level Project management personnel will be routinely trained on procurement, M&E, FM, and safeguards. Study visits within China and abroad will be

38

organized for select members of the Project management team to develop relevant skills. The direct beneficiaries include PPMO and PIU staff, and the sub-component will be implemented by the PPMO. The total cost of this sub-component is US$0.32 million, including IBRD loan of US$0.08 million. 114. Sub-component 4b: Monitoring and evaluation. The key objectives are to routinely monitor and assess the progress and achievement of the Project, as well as evaluate it at the end. M&E activities include: (i) regular/routine monitoring; (ii) mid-term review (MTR), and (iii) evaluation of the Project including an impact evaluation of the parenting education component in Zhanyi County on a set of child development outcomes. The Project will train the staff of the PPMO and PIU on M&E and support them in carrying out M&E activities, producing mid-term and completion reports. A set of result monitoring indicators has been developed to measure Project outputs, intermediate outcomes, and final development outcomes. To the extent possible, the M&E arrangements for the Project will be integrated into the existing data collection and management processes of kindergartens. Consulting services will be procured on a competitive basis to deliver critical M&E for the Project. It will be implemented by the PPMO. The total cost of this sub-component is US$0.29 million, all financed by IBRD loan.

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Annex 3: Implementation Arrangements

CHINA: Yunnan Early Childhood Education Innovation Project (YECEIP) Project Institutional and Implementation Arrangements

Project Administration Mechanisms 115. Project Steering Committee (PSC). The Project will be implemented by the Yunnan Provincial Department of Education, seven Project counties, and three universities. The PPMO has established a Project Steering Committee, which is headed by the Director-General of the Provincial Department of Education and consists of directors from various functional divisions of basic education, foreign loan management, and private education. The PSC will provide overall guidance, facilitate Project preparation and implementation, and ensure the alignment of the Project with the provincial Medium- and Long-Term Education Development Plan and the 2nd Three-Year ECE Action Plan (2015-2017). 116. The Provincial Project Management Office (PPMO). The PPMO in the Department of Education will have the overall day-to-day responsibility for coordinating Project implementation in Project counties and universities and organizing provincially managed activities. The PPMO will facilitate the communication and coordination with the World Bank and also coordinate with Project technical experts. The PPMO is staffed with technical experts and officers in charge of procurement, FM, disbursement, and coordination. 117. Project Implementation Unit (PIU). Each Project county and university has established a PIU to manage all county- and university-level activities and support some provincial-level activities. The PIU in counties are headed by an official of the local education bureau, and all PIUs are staffed with designated personnel and functions in ECE expertise, finance, procurement, and M&E. 118. Provincial Expert Team (PET). The Project has established a PET to serve as an advisory group. The PET will provide technical guidance to PPMO and PIUs. The PET is composed of prominent experts from local and national universities and think tanks, as well as potential international ECE experts.

119. Project Implementation Plan (PIP). A PIP has been prepared and will be finalized prior to negotiation. The PIP will provide implementation guidelines for all aspects of the Project, including general administration, procurement, FM, safeguards management, and M&E. Financial Management, Disbursements, and Procurement

Financial Management

120. The financial management risk is rated as Moderate. Please refer to Paragraph 71 and 72 for details of financial management risk and related mitigating measures.

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121. Funding sources for the Project include the Bank loan and counterpart funds. The World Bank Loan Agreement will be signed between the World Bank and MOF. The on-lending agreement will be signed between MOF and the Yunnan Provincial Finance Department (YPFD), on behalf of the Yunnan Provincial Government; then, in turn, between YPFD and prefecture finance bureaus; and finally between prefecture finance bureaus and county finance bureaus. 122. Audit Arrangements. The Yunnan Provincial Audit Office (YPAO) will be the Project auditor. The annual audit report on the Project financial statements will be due to the Bank within six months after the end of each calendar year. According to the agreement reached with MOF and China National Audit Office, the audit report and audited financial statements will be made publicly available in both World Bank and YPAO’s official websites. 123. Budget. The annual Project implementation plan, including the funding budget and the resources, will be prepared by the PPMO and PIUs, based on their annual work program. YPFD will review the annual budget and will release Project funds based on actual implementation progress. Budget variance analyses will be conducted regularly, thus enabling timely corrective actions. 124. Funds Flow. The Designated Account (DA) of the Bank loan will be opened and managed by YPFD. To ensure proper usage of Project funds, disbursement requests will be prepared by each PIU, reviewed by their county and prefecture finance bureaus, and then passed to the PPMO for review and finally approved by YPFD. The Bank loan proceeds will be disbursed from the DA in YPFD directly to contractors or to the PIUs when they pre-finance. The proposed funds flow arrangement and related processing period should ensure contractors receive payments within the dates stipulated in the signed contracts. The Bank will closely monitor disbursement efficiency during implementation. If significant payment delays occur, the Bank will guide the Project to explore more streamlined funds flow arrangements. 125. Accounting and Reporting. The administration, accounting, and reporting for the Project will be set up in accordance with Circular #13: “Accounting Regulations for World Bank-financed Projects” issued in January 2000 by the MOF. All the PIUs and PPMO will manage, monitor, and maintain Project accounting records in accordance with Circular 13 for its implemented Project activities. Original supporting documents for Project activities will be retained by the PPMO and each PIU, respectively. The PPMO will consolidate Project financial statements of all the PIUs and incorporate DA information maintained by YPFD to prepare consolidated Project financial statements. The unaudited semi-annual Project financial statements will be prepared and furnished to the Bank by the PPMO as part of the Progress Report no later than 60 days following each semester. 126. Internal Control. The related accounting policy, procedures, and regulations have been issued by MOF and will be followed by all the PIUs. Detailed internal control procedures, including segregation of duties, review, approval, and reporting procedures, as well as the safeguard of assets, have been established and documented in the Project FM manual.

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Disbursement 127. Four disbursement methods, advance, reimbursement, direct payment, and special commitment, are available to the Project. The primary Bank disbursement method will be advances to the DA. Withdrawal Applications (WA) will be prepared to request Bank disbursements and to document the use of Bank financing. WAs will include supporting documents in the form of Statement of Expenditures (SOE) which is a cash-based statement and source document identified in the Disbursement Letter issued by the Bank. 128. The disbursement deadline date is four months after the closing date specified in the Loan Agreement. A Designated Account (DA) will be established in a commercial bank or financial institution acceptable to the Bank. Disbursement arrangements such as ceiling and the minimum value of application, for Direct Payment, Reimbursement and insurance of Special Commitment are detailed in the disbursement letter. 129. The Bank loan would disburse against eligible expenditures (taxes inclusive) as in Table 9 below. Measures will be taken by both YPFD and PPMO to ensure that both Bank funds and counterpart contributions will be properly utilized and accounted for during Project implementation.

Table 9: Disbursement Categories and Percentages

Disbursement Category Amount of the Loan

Allocated (in US$)

Percentage of Expenditures to be Financed (inclusive of Taxes)

(1) Works, goods, and non-consulting services

40,648,000 100

(2) Consultants’ services, training, and incremental operating costs

9,227,000 100

(3) Front-end fee 125,000 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07(b) of the General Conditions

TOTAL AMOUNT 50,000,000

Procurement

130. Procurement institutional arrangement. The Project organization is comprised of one Provincial PMO (referred to as PPMO) and 10 subsidiary PIUs including 3 universities and seven counties. According to the internal arrangement, the PPMO takes charge of the overall procurement management and supervision of the Project, is responsible for overall coordination and communication with the Bank, and also carrying out the procurement of all goods and consulting services contracts of the Project. Meanwhile, each PIU is responsible for the procurement of the works contracts and other types of simple contracts, as well as administration of all contracts including those to be procured by PPMO. The procurement work undertaken by each entity includes preparing the procurement plan and its updates, the bidding documents, and the request for proposals, organizing the bidding/selection process, procurement and contract monitoring and obtaining the required domestic approvals. The procurement documents prepared by ten PIUs including bidding documents, request for proposals, bid evaluation reports, contract

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documents shall be reviewed and approved by the PPMO before each PIU proceeds with its next step work. 131. Procurement risk assessment and mitigation measures. The PPMO is undertaking another Bank funded TVET project, therefore has procurement experiences with Bank funded projects. It was observed that the procurement staff at PPMO and some staff of its ten PIUs have prior experiences or knowledge about Bank procurement policies and procedures. The procurement staff assigned by other PIUs are familiar with the local procurement procedures under the domestic laws and regulations. The key risks concerning procurement for implementation of the Project are: (i) procurement delays and non-compliance with Bank procurement guidelines due to either unfamiliarity with specific Bank procurement policies and procedures or a tendency to comply with local procedures when they conflict with Bank procurement guidelines, when the procurement is conducted by the domestic government bidding transaction centers; and (ii) weak capacity of the staff in procurement cycle management and contract management. 132. In order to mitigate these risks, the following actions will be carried out during Project preparation and implementation: (i) employment of a procurement agent with experience in procurement for Bank-financed projects to support and guide the procurement work of PPMO and its 10 subsidiaries; (ii) provision of training sessions to the procurement staff on the Bank’s procurement policies, methods, and procedures, as well as the use of standard bidding/ request for proposal documents and evaluation principles; (iii) preparation of a procurement procedures manual to provide guidance to Project implementers, the draft manual has been completed and reviewed by the Bank before negotiations; (iv) where necessary, early procurement support missions by the Bank’s procurement specialist; (v) annual field procurement supervision missions to review procurement actions where needed; (vi) close coordination between the PPMO and PIUs and the Bank team; and (vii) The procurement staff continuously attend Bank procurement training sessions organized by the local universities or supported by the Bank. 133. Considering that most of the Bank loan proceed will be used for constructing and equipping 15 standard kindergartens and hiring consultants for relatively small services, therefore, nearly most of the works and good contracts, because of its size, will be procured via National Competitive Bidding (NCB) and it is expected that Consultants’ Qualifications Selection (CQS) procedures will be the most common selection method to be used for hiring these services, which will be mostly of small value and be executed by NGOs and/or universities. Because the PPMO has sufficient experiences with Bank projects and it will be supported by a procurement agent selected competitively, the overall procurement risk for the Project is assessed as moderate. 134. Procurement policies and guidelines. Procurement for the proposed Project would be carried out in accordance with the World Bank’s "Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers" dated January 2011 (revised July 2014), and "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers" dated January 2011 (revised July 2014), and the provisions stipulated in the legal agreements. 135. Procurement of goods and works. Procurement will be done by using the Bank’s Standard Bidding Document for all International Competitive Bidding (ICB) contracts in case of

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any and National Model Bidding Documents agreed with or satisfactory to the Bank for all NCB. Further details on the scope of the procurement are provided in Annex 2 and in the Procurement Plan. 136. Selection of Consultants. The Bank loan will finance consulting services contracts to assist the PPMO and its subsidiaries in capacity building during Project implementation. The Bank’s Standard Request for Proposal shall be used for all consulting assignments with firms. Short lists of consultants (firms) for services estimated to cost less than US$500,000, equivalent, per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 137. Procurement Plan. A draft Project procurement plan for the first 18 months of Project implementation has been prepared and reviewed by the Bank and will be finalized before negotiations. It will also be available in the Project’s database and on the Bank’s external website and is also available at the clients’ offices. The procurement plan will be updated in agreement with the Bank annually or as required to reflect actual Project implementation needs and improvements in institutional capacity. 138. Procurement Methods and Bank Prior Reviews. The thresholds for procurement methods and Bank prior review as indicated in Table 10 below will be followed for Project procurement implementation. Specific prior review requirements will be indicated in the Project procurement plan. In addition to the prior review supervision carried out from the Bank offices, Bank procurement supervision missions will visit the field to carry out procurement supervision or post-review of procurement activities at least once every 12 months. The post review sampling ratio would be one out of 10 contracts. 139. Advance Contracting and Retroactive Financing. Retroactive financing of up to US$10 million from the Bank loan will apply for payments made prior to the signing date of the loan agreement but on or after March 4, 2016. Payments will be made only for contracts procured in accordance with applicable Bank procurement procedures.

Table 10: Thresholds for Procurement Methods and Prior Review Expenditure Category

Contract Value Threshold (US$)

Procurement Method Prior Review Threshold (US$)

1. Civil works

≥40,000,000 ICB All <40,000,000

NCB

First NCB Contracts by PIU irrespective of value and all contracts ≥USD 15 million

<200,000 Shopping

2. Goods ≥10,000,000 ICB All <10,000,000 NCB First NCB Contracts by each IA

irrespective of value and all contracts ≥USD 3 million

<100,000 Shopping Direct Contracting All DC contracts regardless of value

≥300,000 QCBS/QBS/LCS/FBS

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3. Consultant services

<300,000 CQS First contract under each selection method and all contracts ≥USD 1 million

Individual Consultants Only in exceptional cases Single Source Selection (Firm) > USD 100,000 Single Source Selection (Individual) ≥USD 50,000

Notes: ICB: International Competitive Bidding NCB: National Competitive Bidding DC: Direct Contracting QCBS: Quality- and Cost-Based Selection QBS: Quality-Based Selection LCS: Least Cost Selection FBS: Fixed Budget Selection

CQS: Selection Based on the Consultants’ Qualifications SSS: Single Source Selection IC: Individual Consultant selection procedure NA: Not Applicable

Environmental and Social (including Safeguards)

140. Activities of the Project involve building kindergartens in built-up areas or suburbs and training centers within existing campuses. Environmental impacts during construction will be limited and confined to the sites, including noise, dust, construction waste disposal, and limited social disturbance due to the small scale of each subproject. Major impacts during operation are moderate, mainly sewage, manure and solid wastes, including domestic wastes and a small amount of medical wastes. The majority of Project sites are connected with the sewer network, which already existed or is being constructed, and are covered by garbage collection of the cities. Most of them have a wastewater treatment plant (WWTP) and sanitary landfill. Therefore, long-term impacts during the operation can be readily mitigated if subprojects are properly designed and operated. 141. Alternative analysis of different design options was undertaken as part of the EA process, including a without Project scenario. Site selection for all kindergartens and training centers was analyzed. Different design of toilets and types of sewage treatment were compared, respectively, for kindergartens in cities/county seats and those in township/countryside. Alternatives with less social and environmental impacts and more suitable for local condition were recommended. These recommendations have been incorporated in the feasibility studies and will feed into the design process. 142. The EMP specifies mitigation measures, based on experience from similar projects; the WB/International Finance Corporation’s (IFC) General Guidelines on Environmental, Health, and Safety; and recommendations from the EA and public consultation of the Project. It outlines the supervising mechanism and monitoring plan in order to facilitate the environmental management. The EMP will be referred to in bidding documents and contracts with contractors and operators to ensure its implementation. 143. Capacity Building of the Clients has been an integral part of the Project preparation process, especially at city and county levels. The PPMO has recent experience in a Bank Project on vocational education and has assigned a staff member on environmental management. To ensure EMP implementation, the EMP includes a budgeted training plan. Extensive training by

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the Bank safeguard specialist will be continued during the entire Project period to enhance institutional capacity on preparing and implementing environmental and social safeguards. 144. Involuntary Resettlement Safeguards (OP4.12). A due diligence review was conducted for all sites having completed land acquisition in Project counties. Based on review of relevant documents and discussions with affected parties, it is concluded that all building sites have been obtained properly, and affected people had been provided with compensation in compliance with national law and local regulations with no remaining problems. Nevertheless, the World Bank team and the counterparts both agree that the Project still triggers the Bank’s Involuntary Resettlement Policy in order to cater to possible changes of construction sites during Project implementation. A resettlement plan framework (RPF) was developed and disclosed in country on February 25, 2016, and in the InfoShop on March 7, 2016. The RPF sets up objectives, principles, eligible criteria for entitlements, compensation methods, participation, and the consultation process and the claims solution mechanism in order to ensure that the affected people and households will restore their living standards, at least to the same levels as before the Project. 145. Indigenous People Safeguards (OP4.10). Given that the Project’s beneficiaries include ethnic minorities, the World Bank’s policy on Indigenous Peoples is triggered. There are 52 officially recognized ethnic groups, covering 15.6 million people and accounting for 35 percent of the total population in Yunnan. In the seven Project counties, 28 percent of the population are ethnic minorities, ranging from 5 percent to 69 percent. To ensure broad support by the minority population in the Project counties, particularly those schools in rural areas where large concentrations of ethnic minority live, extensive consultations were conducted through a social assessment, based on which, an EMDP is being developed. Based on the consultations, issues concerning minority children, parents, and school teachers were identified and concrete measures for ECE improvement are incorporated into Project design and included in the EMDP. The EMDP was disclosed in country on February 25, 2016, and through the InfoShop on February 29, 2016. The key social benefits of the Project include increasing enrollment and quality of ECE in the Project areas, particularly among ethnic minorities, through development of new schools; provision of teacher training; and improvement of ECE policy and social support. All these recommendations have been accepted by the PPMO and were built into the Project design. 146. One important issue concerning ethnic minorities is how to improve access of ECE in Project counties, particularly in rural areas. During the SA and EMDP preparation, social economic surveys and group discussions were conducted among minority parents and teachers in order to seek their views and suggestions regarding the development of rural community ECE centers in Weishan and Qiaojia Counties. Under the EMDP, a series of concrete measures had been identified with detailed budgets, responsible agency, and key monitoring indicators in order to address concerns raised by the minority population. The PIU of the Project county will lead the implementation of the EMDP under the oversight of the PPMO. An experienced external monitoring agency will be contracted to conduct independent M&E over the course of Project implementation. The monitoring results will be reported twice a year, and, if needed, remedial actions will be designed. 147. Gender Impacts. Gender equality is important for the Project, and efforts will be made to increase girl enrollment for ECE education, particularly in rural areas. Gender and ethnic group

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disaggregated indicators like increase of ECE enrollment, recruited teachers, and trainings participated in will be included in the overall Project monitoring framework.

Monitoring and Evaluation 148. Project implementation and effectiveness will be monitored and assessed through a series of M&E activities. 149. The objectives of the M&E activities will be: (i) to track the progress and provide timely feedback to the Project management, Project implementation units, and the World Bank team on the implementation status and deliverables; (ii) to estimate the effectiveness of the intervention; and (iii) to summarize lessons learned from the design and implementation that can be applied to future similar interventions in other regions. 150. Monitoring. Regular/routine monitoring is concerned with the extent to which a planned Project activity has been implemented on time and the expected outputs have been achieved with good quality. It also is a mechanism to monitor changes in the Project’s outcome indicators over time. A systematic monitoring and reporting of the achievement of the Project’s outputs and outcomes will provide information on the progress of the implementation and help the team make adjustments as needed. 151. A set of indicators capturing Project results has been developed and agreed to by the Project and the World Bank teams. Most of these indicators will be tracked on an annual basis by the implementation units. To the extent possible, arrangements for the results monitoring will be integrated into the existing data collection and information systems of the implementation units. The project implementation unit (or PPMO) will also prepare a project report every six months and will send it to the Bank no later than 60 days upon completion of the six-month period. The Bank will use these reports when conducting the Implementation Support Missions (ISMs.)  152. Mid-Term Review (MTR). The MTR will be conducted during the third year of Project implementation. The MTR will analyze the early results of effectiveness of the Project. In addition to quantitative analysis of the trends of the indicators, a series of focus group discussions; interviews with teachers, parents, the implementation management team; and case studies will be conducted to summarize lessons learned and experiences accumulated during the implementation. The findings of the MTR will be fed into the Project implementation and help the Project refine and adjust the next stage of activities as needed. 153. Evaluation. The evaluation will assess the Project’s effects and the extent to which its final development objectives have been attained. Specifically, the evaluation will focus on assessing the impact of the intervention on PDO as well as intermediate results indicators. The evaluation will be designed at two levels. At the overall Project level, the assessment will be carried out at the Project entry, mid-term, and closing. The analysis will look at trends over the Project implementation period and compare three data points on the key outcome measures. At the component level, an in-depth impact evaluation will be carried out in Zhanyi County to assess the child development outcome in relation to the parenting education intervention using a standard

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child development outcome instrument. These analyses will provide information on the magnitude of changes that has occurred and time-related trends. 154. Moreover, the evaluation will identify lessons on types and modalities of interventions that work effectively and efficiently in contributing to Project achievement, as well as highlight factors that can enhance or hinder the effectiveness and efficiency of various interventions. 155. To complement the quantitative data analysis, the evaluation will collect qualitative data from various stakeholders to enrich information and analysis, such as interviews with stakeholders (teachers, parents, school principals/key administrative personnel, Project leaders, and PPMO staff) and a desk review of a variety of forms such as research articles, policy notes, and other knowledge products. 156. M&E Implementation Arrangement. The PPMO will provide overall leadership and management of the regular Project monitoring, MTR, and overall evaluation for the Project. Independent consultants/consulting firms will be procured to undertake specific M&E activities, including baseline data collection, database establishment, data aggregation, data analysis, and other data collection efforts during the MTR and the impact evaluation of the parenting education component in Zhanyi County.

157. To strengthen PPMO and implementation units’ M&E capacity, the World Bank team will provide technical assistance on M&E capacity building during the preparation period and will continue to do so during the Project implementation as needed to ensure that the M&E function has been established and integrated into the Project implementation.

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Annex 4: Implementation Support Plan

CHINA: Yunnan Early Childhood Education Innovation Project (YECEIP) Strategy and Approach for Implementation Support 158. The Project implementation support plan has been developed based on the assessed risk ratings for the Project. The Bank will support the implementation of the Project by using a variety of strategies including policy dialogues, regular supervision missions, designing and implementing capacity building in procurement, FM, M&E, and safeguards. Further, the Bank will bring in technical consultants in relevant areas, including ECE pre-service teacher education, teacher in-service training, development of the strategic plan for the research and training centers, ECE center accreditation standards, and policy development. 159. Procurement. During the Project implementation period, the Bank team will ensure that procurement is conducted in accordance to Bank guidelines and procedures by: (i) providing training to procurement staff in the PPMO and university PIUs, as needed; (ii) reviewing procurement documents and providing timely feedback on procurement issues; (iii) providing detailed guidance on the Bank’s procurement guidelines; and (iv) monitoring progress against the procurement plan. 160. Financial Management. The supervision strategy for this Project is based on its FM risk rating, which will be evaluated on regular basis by the FM staff. The FM staff uses periodic site visits, desk reviews, and correspondence with borrowers to provide technical support to and work closely with borrowers to resolve problems as they arise and to monitor the continuing adequacy of the FM arrangements including accounting, auditing, budgeting, financial reporting, internal control, and funds flow. The FM staff also follows up on action plans agreed to during Project appraisal, as well as on observations derived from reviews of audit reports, management letters, and Unaudited Interim Financial Reports (IFRs). 161. Monitoring and Evaluation. The Bank team will organize training of the provincial departments, PPMO, and university PIUs on M&E as needed. Further, through regular interaction with Project entities, the Bank team will emphasize Project reports and annual plans to be completed in accordance with the results framework. 162. Environmental and Social Safeguards. The Bank team will supervise the implementation of the agreed safeguards instruments on a regular basis. 163. Technical Support during Implementation. Key areas of technical support for the Project include, but are not limited to, ECE pre-service teacher education, teacher in-service training, development of the strategic plan for the research and training centers, special education, ECE center accreditation standards, policy development, and impact evaluation. The Bank team will organize training for these areas at strategic times during Project implementation.

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Table 11: Summary of the Main Focus of Implementation Support Plan Time Focus Skills Needed Resource

Estimate First 12 months Procurement training

Financial management Monitoring and evaluation ECE technical areas Design of ECE centers, Design of rural community ECE centers

Procurement Financial management Monitoring and evaluation ECE curriculum, teacher education and training, accreditation standards, early childhood special education Civil engineer

2 staff weeks 2 staff weeks 1 staff week 2 staff weeks 2 staff weeks

12-60 months Procurement Financial management Monitoring and evaluation, environmental and social specialists, social specialist ECE technical specialists

Other

Table 12: Skills Mix Required Skills Needed Number of

Staff Weeks Number of Trips Comments

Procurement 4 Once a year

Financial management 2 Once a year

Monitoring and evaluation 2 Once a year

Architect 2 Twice during the Project

Social specialist 2 Twice during the Project

Environmental specialist 2 Twice during the Project

ECE specialists 10 Various

Table 13: Partners

Name Institution/Country Role Korea Development Institute Korea Co-financing of project impact

evaluation

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Annex 5: Economic and Financial Analysis

CHINA: Yunnan Early Childhood Education Innovation Project (YECEIP) The Development Impact of the Project 164. Early childhood development yields significant benefits for children’s physical, cognitive, and socio-emotional development. Attending ECD programs can also positively impact children’s education attainment and productivity later in life. Longitudinal evaluations of ECD projects for disadvantaged children in the United States, such as the High/Scope Perry Kindergarten Program, found not only short-term gains in cognitive skills among children in the program; those who enrolled in the program also had higher rates of high school completion, higher monthly earnings, and higher rate of home ownership at age 27 than their counterparts who did not (Schweinhart, et al. 2005). In China, the 15-year-old students in Shanghai that had attended preprimary school for more than a year scored more than 60 points higher than those who had not in the 2009 Program for International Student Assessment (PISA). The difference remains substantial after socioeconomic factors are accounted for (Schleicher 2010). 165. ECD has been shown to positively impact education indicators across other levels of education. The benefits of the Project are expected to manifest in: (i) higher ECE enrollment in Project counties; (ii) higher eventual education attainment for those who attended ECE programs (taking into consideration the increase in education cost and opportunity cost); (iii) higher employment rates; (iv) higher wages (the analysis will also consider that investments in ECE teacher training are likely to have a disproportionate positive benefit for women, improve their wages, and may have a positive impact on ECE enrolments over the long term, particularly for girls); and (iv) lower risky behaviour. The costs of the Project will include: (i) Project investment costs; (ii) Project recurrent costs; and (iii) the direct cost for children enrolled in the kindergartens and flexible ECE services under the program. 166. ECE makes a strong case for public financing. ECE, particularly for disadvantaged children, has the potential to break intergenerational transmission of poverty. State-of-the-art brain science research reveals that human brains tend to be more malleable in the early years of life. According to Carneiro and Heckman (2003), investing in ECD and education has a higher rate of return than interventions targeted at later stages of life. Thus, publicly financed ECD has become a powerful instrument to reduce poverty and inequity by boosting child development outcomes and improving odds of higher education attainment and more adult productivity for children from disadvantaged background. 167. The Project, however, does not make the argument that ECE provision has to be entirely public. In fact, YECEIP will support specific PPP in the provision of ECE. The imbalance in the demand and supply of ECE services has rendered it a real possibility for the PPP arrangements to leverage on the different strengths of the private and public sectors. For example, the Project plans to provide financing for rural ECE teaching points, but some of the rural ECE provision may be provided by private entities, including NGOs.

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Project Description Highlights 168. YECEIP addresses ECE access and quality in Yunnan Province in China, including children in the rural areas of the Project counties. The Project will be implemented over a five-year period from 2016 to 2021 with a total investment of US$74.62 million, including US$50.00 million as an IBRD loan and US$24.62 million as counterpart contributions. To achieve the Project objective, YECEIP proposes the following main activities, structured under the following four Project components (see Annex 2).

Component 1: Increasing Access to ECE Programs a. Constructing and equipping 15 kindergartens in the seven Project counties with 138

classes b. Constructing and equipping 2 university-affiliated research kindergartens in Kunming

University and Zhaotong University with 24 classes c. Piloting rural community-based ECE centers in Weishan and Qiaojia Counties d. In Zhanyi, piloting of a parenting education program in selected kindergartens e. Constructing and equipping an early childhood special education center in Kunming

University with 6 full-time special education classes and ongoing diagnosis and rehabilitation services for 0- to 6-year-olds with special needs

Component 2: Improving ECE Quality a. Providing structured in-service training of all ECE teachers, managers, and staff. b. Strengthening ECE teacher education programs in Project universities c. Establishing three centers, including a premium ECE research center in Yunnan

Normal University, an ECE teacher training center in Kunming University, and a rural ECE teacher training center in Zhaotong University

d. Developing an online resource bank and platform for ECE teaching and learning e. Providing a standard package of teaching learning materials in existing 1-year rural

kindergartens

Component 3: Creating an ECE Enabling Environment a. Developing and piloting ECE institutional quality standards b. Information and advocacy campaign for ECE and scientific childrearing practices c. Policy development on ECE

Component 4: Project Management and Monitoring and Evaluation a. Project management b. Monitoring and evaluation

169. The Project will directly benefit the following groups:

a. 3- to 6-year-old children that enroll in the newly built kindergartens. A total of 138 classes, each enrolling an average of 30 children, will be built, with an estimated total of 4,140 enrollment spaces every year after becoming operational.

b. 3- to 6-year–old children that enroll in the rural community ECE centers in the natural villages in Weishan and Qiaojia Counties. An estimated total of about 600 children will be enrolled in these centers.

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c. 0- to 6-year-old children with special needs in the province that receive ongoing diagnosis and rehabilitation services from the early childhood special education program in Kunming University. An estimated 80 children with special needs will receive full time ECE intervention.

d. Teachers, managers, and staff that receive training under the Project. e. University ECE faculty members and administrators that receive short- or long-term

training financed by the Project f. Teacher trainees who are enrolled in the three teacher education programs in the

project universities will benefit from improved programs. 170. Indirect beneficiaries will include the following:

a. Parents and guardians whose children participate in the program. The parents and guardians gain more knowledge of good ECE practices.

b. Kindergartens whose teachers participate in training under the Project. Teachers could enhance the overall capacity of the kindergartens.

c. Universities whose ECE faculty members participate in the Project. The ECE faculty members could share the knowledge and skills gained from the Project with other faculty members and contribute to the overall development of the discipline.

d. Communities that host the program. They will have improved physical environments and greater female participation (most kindergarten teachers and staff are female).

e. Society. Social benefits of ECE investment include better health status and lower medical costs, higher productivity, reduced crime, and reduced social inequality.

Cost Benefit Analysis

171. The Project interventions are estimated to be cost effective in the long run. They include improving access and quality of ECE services in the Project counties and strengthening provincial capacity in coordination, policy development, and M&E. ECE programs can yield several benefits, in both private and social terms, including: (i) higher education attainment, private; (ii) higher levels of income, private; (iii) decreased level of crime, public; (iv) increased level of healthy lifestyle and reduced medical cost, private and public; and (v) intergenerational transmission of benefits, private. 172. Methodology. In calculating the Project benefits, it is necessary to acknowledge the complexity of estimating the benefits of broad and long-term categories mentioned above. Project economic analyses for previous World Bank ECE programs have focused mainly on long-term private wage returns for children participating in the program. For YECEIP, the following methodology has been adopted to estimate the private wage returns for the participants in the program. It is important to note that the benefit estimate will be in the lower bound because other benefits mentioned above are not taken into account. There are five steps to the estimation process:

Step 1: Estimate the number of full beneficiaries in the program Step 2: Estimate the cost of YECEIP Step 3: Estimate the effect of the program on educational outcomes of participants Step 4: Estimate the effect of the change in participants’ educational outcomes on their

wages

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Step 5: Analyze cost and benefit of the Project by the cost benefit ratio (CBR) and the internal rate of return (IRR)

Step 1: Estimate the Number of Full Beneficiaries 173. This study assumes an annual depreciation of 10 percent as shown in Table 14. This assumption makes the benefits of the Project last until 2026.

Table 14: Percentage of Annual Availability of Benefits with 10% Depreciation Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Depreciation 10% 100 90 80 70 60 50 40 30 20 10 0

174. We assume that participants will experience benefits in each year of the service equally, which means that children will benefit one third (33.3 percent) for each of the three years of their time at a kindergarten. Table 14 shows an example of the procession of Project beneficiary cohorts through a 3-year period. Cohort A enters the program one year before enrolling into primary education; thus, they can benefit from only one third of the program. So the beneficiaries from Cohort A is equal to (1/3) of the number of students. In this analysis, we assume 30 students per classroom; therefore, the beneficiaries for one classroom of Cohort A is 30/3 = 10. The beneficiaries for one classroom of Cohort B is equal to (30/3) + (30/3) = 20 and the beneficiaries for one classroom of Cohort C is (30/3) + (30/3) + (30/3) = 30. Cohorts D and E will experience only two and one years of benefit, respectively. Then the beneficiaries from Cohort D are equal to those from Cohort B, and those from Cohort E are equal to those from cohort A. Altogether, the beneficiaries of a 3-year project per classroom is 10 + 20 + 30 + 20 + 10 = 90.

Table 15: Cohort Progression of Standard 360-child Kindergartens, Five-year Cycle Grades 2016 2017 2018 3-4 years old group C D E 4-5 years old group B C D 5-6 years old group A B C

175. The Project investment will begin in 2016 and would finish when the depreciation of the capital reaches 100 percent. It shows the predicted amount of beneficiaries. Step 2: Estimate the Cost of YECEIP 176. The Project cost includes the Project costs from the World Bank and counterparts and the operational cost of the Project. Note that this study does not include a household expenditure to enroll children into the program. To calculate the cost spending of the Project, we assume that the Project costs from 2016 to 2020 are distributed equally every year. This means that the budget of the Project is spent by 20 percent each year as shown in Table 16.

Table 16: Cost Share of the World Bank (%) Year 2016 2017 2018 2019 2020 Accumulation of cost share per year 20 40 60 80 100

Note: Unit of the actual cost is in a million USD.

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177. The cost for operating the Project (kindergarten) is assumed to be the unit cost to operate the existing kindergarten in local area which is US$150. The total operation cost is from the multiplication of the unit cost to the number of beneficiaries of each year. Step 3: Estimate the Effect of the Program on Educational Outcomes of Participants 178. One key impact of the early childhood development program is an increased level of education as evidenced from numerous studies, the most prominent being the High/Scope Perry preschool project (Gramlich 1986; Rolnick and Grunewald 2003; Schweinhart, et al 2005; Belfield et al 2006; Heckman et al 2010).22 Table 16 summarizes the estimated educational outcome of the treatment and control groups for YECEIP. It shows that the treatment group children have a greater chance of entering primary school, transitioning to secondary school, and then graduating from senior secondary school. Table 17: Impact of ECD YECEIP on School Enrollment, Transition, and Graduation (%)

Stage of Schooling Treatment Control Ready to enter primary school at 5-years–old 67 28 Transition to secondary school at 14-years–old 61 38 Graduation from senior secondary 77 60

Source: Schweinhart et al 2005.

179. Table 18 lists three scenarios of the effect of YECEIP impact for primary, secondary, and tertiary levels of enrollment. The scenarios are adapted from the impact of the High/Scope Perry project as shown in the study by Schweinhart et al (2005). The middle impact scenario is the average effect of the high/scope Perry project, which increases the possibility to enroll in primary education by 39 percent, secondary education by 20 percent, and tertiary education by 12 percent. The high and low scenarios are higher and lower impact from the middle scenario by 20 percent respectively.

Table 18: Scenarios of the Impact of YECEIP on School Enrollment (%) Level of Education Low Scenario Middle Scenario High Scenario

Primary 31 39 47

Secondary 16 20 24

Tertiary 10 12 14 Source: Estimated by the authors based on Schweinhart, et al (2005).

22 Gramlich, E. M. (1986). Evaluation of education projects: The case of the Perry preschool program. Economics of Education Review, 5(1), 17-24. Rolnick, A., and R. Grunewald (2003). Early childhood development: Economic development with a high public return. The Region, 17(4), 6-12. Belfield, C. R., Nores, M., Barnett, S., and L. Schweinhart (2006). The High/Scope Perry Preschool Program cost–benefit analysis using data from the age-40 followup. Journal of Human resources, 41(1), 162-190. Schweinhart, L. J., Montie, J., Xiang, Z., Barnett, W. S., Belfield, C. R., and M. Nores (2005). Lifetime effects: The High/Scope Perry Preschool study through age 40. Heckman, J. J., Moon, S. H., Pinto, R., Savelyev, P. A., and A. Yavitz (2010). The rate of return to the High/Scope Perry Preschool Program. Journal of public Economics, 94(1), 114-128.

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Step 4: Estimate the Effect of the Change in Participants’ Educational Outcomes on Their Wages 180. To calculate the increase of participants’ wages that result from improvements in their educational attainment, the following were taken into consideration: (i) the rate of return to improved education, which is deduced; and (ii) the cost of an additional continued education, which consists of the direct education cost, such as tuition fee, and the indirect cost, such as a forgone income from staying at school. To estimate the increased earnings from improved education, the following earning equation was run: ln

where is the wage level of an individual . , , and are binary variables. They indicate the completed education level of an individual for primary education, secondary education, and tertiary education, respectively. The quadratic form of an individual experience on work is presented in the equation as and . is a constant term, and to are unknown parameters to be estimated. is a disturbance term. 181. The estimated coefficients are used to calculate the rate of return to education as the formula below:

Return to primary education = / Return to secondary education = / Return to secondary education = /

182. The equation is estimated by the ordinary least squares (OLS) with the individual level data from a recent national or Yunnan-specific household and labor force survey. Table 18 shows the estimated result of the earning equation.

Table 19: Estimated Result from the Earning Equation Education Level Coefficient Standard Error Return to Education

(%) Return to Education

(US$) Primary 0.349 0.103 5.82 82.7 Secondary 0.547 0.133 3.30 46.8 Tertiary 0.798 0.155 5.02 71.3

Note: The results of the constant term and quadratic form of experience are omitted from illustration.

183. To calculate the cost for the continued education, we must combine the direct and the indirect cost of continued education. The direct cost is the education for staying in school and the indirect cost is the opportunity cost to participants for staying in school (forgone income). Table 20 shows the details of the analysis of the cost for continued education.

Table 20: Cost for Continued Education (US$) Education Level Cost for Education per Year Forgone Income from Staying in School

(Opportunity Cost) per Year Primary 392 5,954 Secondary 862 3,369 Tertiary 2,460 3,422

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Step 5: Analyze Cost and Benefit of the Project by the Benefit Cost Ratio (BCR) and the Internal Rate of Return (IRR) 184. In calculating the benefit cost analysis, we need to convert the value of benefit and cost into a present value. The formula to calculate present value is shown below:

1

185. Then, the net present value (NPV) is to combine the present value of both benefit and cost. If the NPV shows a positive value, then the Project is applicable. For the BCR, we divide the total present value of benefit by the total present value of cost. If BCR is greater than unity, then the Project benefit exceeded its cost. While proceeding with IRR is to calculate a discount rate which makes NPV equal zero. In many cases, IRR is the rate of return of the Project. 186. Tables 20, 21, and 22 show calculated results of NPV, BCR, and IRR, respectively. For NPV and BCR, there are four levels of discount rate, which are two percent, four percent, six percent, and eight percent, to reflect the current interest rate. The result from NPV shows a positive value in most of the cases, except for the low scenario with the discount rate of eight. The BCRs are over unity in every case, except for the low scenario with discount rate of 8. The NPV and BCR suggest the same result of the benefit of the Project. They show that the Project is profitable in most cases. The result of the Project IRR shows 6.69 percent in the low scenario, 8.56 percent in the middle scenario, and 10.14 percent in the high scenario. The IRR confirms the results from NPV and BCR and illustrates a potentially efficient investment of YECEIP.

Table 21: Net Present Value (NPV) (US$ million) Discount Rate Low Scenario Middle Scenario High Scenario

2 79 124 168

4 36 68 99

6 7 30 53

8 -11 5 22

Table 22: Benefit Cost Ratio (BCR) (%)

Discount Rate Low Scenario Middle Scenario High Scenario

2 1.82 2.28 2.73

4 1.4 1.75 2.1

6 1.09 1.36 1.63

8 0.85 1.07 1.28

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Table 23: Internal Rate of Return (IRR) (%) Low Scenario Middle Scenario High Scenario

IRR 6.69 8.56 10.14 187. The above economic analysis confirms that YECEIP will have an internal rate of return ranging from a low of 6.69 percent to a high of 10.14 percent. These estimates are likely to be on the low side as they have not yet taken into consideration of the indirect benefits accruing to parents and communities. In conclusion, the cost benefit analysis performed makes a strong case for investment in YECEIP. Financial Analysis 188. The YECEIP has a total investment of US$74.62 million with US$50 million from the World Bank’s IBRD loan and another US$24.62 million from counterpart funds contributed by the Project counties, Project universities, as well as Yunnan Province. Table 24 details the loan and counterpart funding from each of the Project entities.

Table 24: Loan and Counterpart Funding by Project Entity IBRD Loan

(US$ millions) Counterpart funding

(US$ million) Total

(US$ million)

Project Universities 23.00 10.24 33.24 Yunnan Normal University

8.00 4.49 12.49

Kunming University 10.00 3.22 13.22 Zhaotong University 5.00 2.53 7.53 Project Counties 27.00 14.14 41.14 Weishan County 4.00 1.73 5.73 Yangbi County 3.00 1.23 4.23 Eryuan County 4.00 3.73 7.73 Zhanyi County 6.00 2.26 8.26 Xichou County 2.00 0.79 2.79 Qiaojia County 6.00 2.89 8.89 Jianshui County 2.00 1.52 3.52 Provincial 0.24 0.24

Total 50.00 24.62 74.62 189. Each Project entity is expected to repay the loan with interest and also to mobilize counterpart funds as planned. In addition, project investment especially the construction of new public kindergartens in the Project counties will require obligated recurrent costs including staff salary and other operational expenditures. This section provides a brief analysis of the financial situation of the Project entities to: (i) assess its capacity for loan and interest repayment and payment of counterpart funding; and (ii) financial sustainability of the investment. After an overall picture of the revenues and expenditures for the Yunnan Province as a whole (Table 25), analysis is conducted separately for Project counties and Project universities.

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190. A brief examination of the total revenue, public finance revenue, and total public expenditures in Yunnan in the past three years reveals that overall all three indicators have been steadily rising during the past three years. Table 25: Yunnan Provincial Revenue and Expenditures 2012 to 2014 (100 Million RMB) 2012 2013 2014 Total Revenue 2624.20 2975.68 3160.00 Public finance revenue 1337.98 1610.69 1697.79 Total public finance expenditure 3573.41 4096.56 4438.32

Project Counties 191. Trend of Project County Fiscal Situation. The seven Project counties are nationally designated poor counties in China and in reality cannot balance its revenue and expenditures on their own. Instead, each of them has been relying on provincial and central fiscal transfers to balance their accounts. Looking at the total expenditures from 2012 to 2014, total expenditures in the counties have much fluctuation but overall the expenditure trend has been rising and with annual increases of at least three percent (with the exception of Eryuan County in 2014 when it experienced a three percent drop in expenditures). We will therefore use the minimum three percent expenditure increase for projections related to future county expenditures.

Table 26: Project County Revenue and Expenditure Situation (100 million RMB) Year Index

2012 2013 2014

Weishan County

Total Financial Revenue 4.28 5.04 5.12

Local Public Financial Budget Expenditure 13.81 15.02 17.33

Increase of annual expenditures (%) 9 15

Yangbi County Total Financial Revenue 1.93 2.00 1.28

Local Public Financial Budget Expenditure 7.40 9.11 9.38

Increase of annual expenditures (%) 23 3

Eryuan County Total Financial Revenue 2.85 3.62 4.25

Local Public Financial Budget Expenditure 12.70 17.77 17.30

Increase of annual expenditures (%) 40 -3

Zhanyi County

Total Financial Revenue 11.99 14.00 11.08

Local Public Financial Budget Expenditure 16.93 19.20 21.56

Increase of annual expenditures (%) 13 12

Xichou County

Total Financial Revenue 1.66 2.22

Local Public Financial Budget Expenditure 12.53 14.46

Increase of annual expenditures (%) 15 Qiaojia County Total Financial Revenue 3.70 5.02

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Year Index

2012 2013 2014

Local Public Financial Budget Expenditure 21.50 35.60

Increase of annual expenditures (%) 65%

Jianshui County

Total Financial Revenue 10.97 12.48 13.95

Local Public Financial Budget Expenditure 20.48 26.21 27.53

Increase of annual expenditures (%) 28 5

192. Loan, interests, and recurrent implication of the investment. The financial obligations as a result of the Project are estimated based on three main components, the loan and interests, the counterpart funds, and the estimated recurrent implication of the new investment. The seven counties have a total loan obligation of US$27 million and an additional counterpart funding obligation of US$14.14 million. Further, the recurrent implication of the 15 new kindergartens constructed will include annual operational costs as well as staffing costs after the kindergartens become operational. We assume that salary costs will increase by five percent every five years and other operating costs increase by 10 percent every five years. Another relevant information is that these new public kindergartens will charge a monthly fee of about RMB220 (US$35) per child enrolled. This fee is estimated based on the current fee charged at the best public kindergartens in the Province. 193. By comparing the total loan/interest obligation, the counterpart funds, and the recurrent implementation against each county’s projected expenditures during the Project implementation period (2016-2020) as well as the Project operation period from 2021 to 2050, we are able to provide a good picture of the county’s ability to shoulder the various cost implications as a result of the project investment. We assume the total loan repayment period is from 2021 to 2050. 194. Results (Table 26) conclude on the following:

During the Project implementation period of 2016 to 2020, the financial obligation including the loan and interest payment as well as counterpart funds constitutes annually only between 0.02 percent and 3.24 percent of total projected expenditures for the counties

During the Project operational period from 2021 to 2050, the annual financial obligation including the loan/interest payment and maintenance costs constitutes between only 0.21 percent and 2.74 percent of total projected expenditures for the counties

During the loan period from 2016 to 2050, the annual financial obligation for loan/interest repayment constitutes only 0.03 percent to 0.84 percent of total Project expenditures for the counties

During the Project operational period from 2021 to 2050, If taking into account the fee income from the newly constructed kindergartens, total fee income itself constitute between 68.89 percent and 169.43 percent of the total loan and interest obligations. In other words, after 2016 and when the kindergartens become operational, the fee income itself will be able to more than re-pay the loan and interest obligations in Eryuan and Jiansui counties. In the other counties, at least 68.89 percent of the loan and interest obligation can be absorbed by fee incomes.

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Table 27: Annual Project Cost of Total Financial Revenue (%)

Item

Project County

Implementation Period (2016-2020) Counterpart Fund &

Debt Servicing to Total Financial

Revenue

Operating Period (2021-2050)

Debt Servicing & Maintenance Cost to Total

Financial Revenue

Loan Period (2016-2050)

Debt Servicing to Total Financial

Revenue

Operating Period (2021-2050)

Fee income to Debt Servicing

Min Max Min Max Min Max Min Max

Weishan 0.08 1.14 0.86 1.04 0.18 0.28 84.05 129.19 Yangbi 0.23 3.24 2.20 2.74 0.55 0.84 73.49 112.96 Eryuan 0.19 3.10 1.32 1.54 0.22 0.34 110.23 169.43 Zhanyi 0.05 0.67 0.60 0.72 0.13 0.19 73.49 112.96 Xichou 0.11 1.64 1.37 1.61 0.29 0.45 75.16 115.52 Qiaojia 0.13 1.94 1.90 2.26 0.28 0.43 68.89 105.90 Jianshui 0.02 0.33 0.21 0.25 0.03 0.05 110.23 169.43

195. In conclusion, from the seven Project county point of view, the YECEIP project as currently designed will not pose significant financial risk for them. The sum of loan, interest, and counterpart obligation as well as the recurrent cost as a result of the investment constitute a very small proportion of the total projected county expenditures on an annual basis at lower than 3.24%. In fact, after the new kindergartens become operational, the fee income itself will be able to more than able to cover the remaining loan payment in Eryuan and Jianshui counties. In the other counties including Weishan, Yangbi, Zhanyi, Xichou and Qiaojia, the total fee income will be able to pay off at least 68 percent of the remaining loan on an annual basis.

Project Universities 196. University revenue. The three Project universities will together borrow IBRD loan of US$23 million. Additional counterpart funding requirement of the three universities is US$14.21 million. In addition, the universities may incur recurrent costs associated with the additional investments. Since most of the YECEIP investment in the universities are for quality improvement in faculty capacity building, curriculum revisions, establishing research centers, we assume that the recurrent implication of the investment is minimal. 197. Table 27 below details the universities financial revenues from 2012 to 2014. While capital investment revenues tend to fluctuate, overall, the participating universities experienced steady increase on a yearly basis in the “true revenue” row which consists of student fee income and other revenue generating university projects with the exception of Yunnan Normal University in 2013 when it experienced a drop in revenue of about 10 percent but quickly recovered in 2014 with 29 percent increase. Kunming University which has a practical approach and train much of the Province frontline kindergarten teachers increased its revenue by 27 percent in 2013 and another 15 percent in 2014. Zhaotong University which is located in one of the poorest provinces and target rural teacher training experienced 18 percent increase in 2013 and 31 percent in 2014. These trends confirmed the increasing demand for ECE investment and ECE teacher education programs.

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Table 28: Financial Revenues of the Project Universities (Unit: million RMB) Yunnan Normal University 2012 2013 2014

Fiscal Allocation 1239.1523 524.09 563.56

Government Fund 0.08 1.23

Subsidy from higher authority

Institutional revenue 299.83 267.52 344.61

Institutional revenue Annual increase (%) -11 29

Operating Revenue

Payment from Affiliate 71.07 24.85 42.89

Other Revenue 55.73 66.67 91.73

Total 1665.78 883.13 1042.79

Kunming University 2012 2013 2014

Fiscal Allocation 455.0324 143.90 822.97

Government Fund 628.2125

Subsidy from higher authority 31.18 29.84 49.94

Institutional revenue 100.59 127.86 146.42

Institutional revenue Annual increase (%) 27 15

Operating Revenue

Payment from Affiliate

Other Revenue 23.26 17.07 31.49

Total 610.06 318.67 1050.83

Zhaotong University 2012 2013 2014

Fiscal Allocation 54.61 74.2126 63.24

Government Fund

Subsidy from higher authority 0.00 Institutional revenue 28.46 33.54 43.92

Institutional revenue Annual increase (%) 18 31

Operating Revenue

Payment from Affiliate

Other Revenue 0.20 3.34 0.87

Total 83.27 111.08 108.04 Source: Project universities

198. University Expenditures. The universities’ main expenditure (Table 28) includes recurrent expenditure and program-specific expenditure. The recurrent expenditure is composed of: (i) staff salaries; (ii) administration costs; and (iii) financial aid for students from low-income households. The program-specific expenditure is composed of: (i) infrastructure programs; (ii) earmarked for special purpose; (iii) other capital; and (iv) other expenditures. 199. Comparing Table 28 and Table 29, we conclude that the participating universities overall have higher total revenues than total expenditures from 2012 to 2014.

23 Building purchase 945.46 24 Interest on domestic debt 248.00 25 Land development expense 628.21 26 Building purchase 21.58

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Table 29: Financial Expenditures of the Project Universities (Unit: million RMB) Yunnan Normal University 2012 2013 2014 Wages & Benefits 260.54 285.64 316.46 Commodities & Services 182.29 213.06 204.77 Subsidy to Individuals 90.58 78.24 103.38 Other Capital Expenses 1,035.97 99.72 173.53 Interest 8.49 0.42 45.83

Total 1,577.87 677.07 843.97 Kunming University 2012 2013 2014 Wages & Benefits 148.24 156.83 168.39 Commodities & Services 82.27 93.94 107.79 Subsidy to Individuals 42.95 32.44 35.60 Other Capital Expenses 66.39 11.20 15.18 Interest 263.00 15.00 46.18

Total 602.84 309.41 373.14 Zhaotong University 2012 2013 2014 Wages & Benefits 33.88 42.86 55.92 Commodities & Services 10.65 11.02 12.35 Subsidy to Individuals 14.63 15.66 12.17 Other Capital Expenses 12.24 23.38 10.51 Interest 5.14 9.75 7.93

Total 76.53 102.67 98.88 Source: Project universities

200. Analysis of counterpart funds and loan affordability. The participating universities will each have obligation for mobilizing counterpart funds and for loan and interest repayment. Table 29 details the total financial obligation each university has as a result of the project investment, including the loan and interest payments as well as the counterpart funds. Below we analyze each university’s ability to pay back the loan and to come up with the counterpart funding by comparing the relative size of the obligation compared to the total institutional revenue.

Table 30: Annual Counterpart Funds and Loan Repayment Obligation (RMB million RMB)

Project universities 2016 2017 2018 2019 2020 2021 Total Yunnan Normal University 1.6 6.0 9.2 7.6 2.0 0.7 27.2 Kunming University 1.3 4.6 7.1 5.9 1.6 0.5 20.9 Zhaotong University 1.0 3.5 5.5 4.5 1.2 0.4 16.1

Source: Project universities 201. Yunnan Normal University: The institution revenue from 2016 to 2021 is estimated to increase by about five percent per year based on the enrollment expansion plan of the university as well as the general increase in fees and government transfers. This is considered to be a conservative estimate, as we learned from Table 28 that the average annual increase from 2012 to 2014 far exceeds five percent. Yunnan GER in tertiary education remains lower than the national average still. From 2016 to 2021 during Project implementation, the overall burden of the counterpart funds plus the loan and interest repayment only constitutes between 0.4 percent and

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2.3 percent of the university’s projected revenue. Thus we conclude that Yunnan Normal University financing plan is adequate (Table 31).

Table 31: Analysis of Counterpart Fund Availability-Yunnan Normal University Yunnan Normal University 2016 2017 2018 2019 2020 2021 2016-21Institution revenue (million RMB) 379.9 398.9 418.9 439.8 461.8 484.9 2584.3 Counterpart Fund and loan repayment (million RMB)

1.6 6.1 9.7 8.4 3.0 1.7 30.6

% of Institution revenue 0.4 1.5 2.3 1.9 0.6 0.4 1.2 Source: The World Bank task team 202. Kunming University. The institution revenue from 2016 to 2021 is estimated to increase by about 5 percent per year based on the enrollment expansion plan of the university. This is considered to be a conservative estimate. From 2016 to 2021 during Project implementation, the overall burden of the counterpart funds plus the loan and interest repayment only constitutes between 0.8 percent and 4.3 percent of the university’s projected revenue (Table 31). Thus we conclude that Kunming University’s financing plan is adequate.

Table 32: Analysis of Counterpart Fund Availability- Kunming University

Kunming University 2016 2017 2018 2019 2020 2021 2016-21Institution revenue (million RMB) 161.4 169.5 178.0 186.9 196.2 206.0 1098.0 Counterpart Fund and loan repayment (million RMB)

1.3 4.7 7.7 6.9 2.8 1.8 25.2

% of Institution revenue 0.8 2.8 4.3 3.7 1.4 0.9 2.3 Source: The World Bank task team

203. Zhaotong University. The institution revenue from 2016 to 2021 is estimated to increase by about 5 percent per year based on the enrollment expansion plan of the university. This is considered to be a conservative estimate. From 2016 to 2021 during Project implementation, the overall burden of the counterpart funds plus the loan and interest repayment only constitutes between 1.7 percent and 10.8 percent of the university’s projected revenue (Table 33). Thus we conclude that Zhaotong University’s project financing plan is adequate.

Table 33: Analysis of Counterpart Fund Availability- Zhaotong University Zhaotong University 2016 2017 2018 2019 2020 2021 2016-21Institution revenue (million RMB) 48.4 50.8 53.4 56.1 58.9 61.8 329.4 Counterpart Fund and loan repayment (million RMB)

1.0 3.6 5.8 5.0 1.8 1.0 18.2

% of Institution revenue 2.0 7.1 10.8 9.0 3.1 1.7 5.5 Source: The World Bank task team

204. The university by university analysis above conclude that total counterpart funds and loan repayment requirements constitute a small proportion of the overall university institutional revenue during the project implementation period and will not pose significant financial burden to the universities. Project universities will raise the additional funds from institution revenues, fiscal allocation, special fund, and the balance of their university accounts. The Project universities have confirmed that they will list the counterpart fund and loan repayment requirements on an annual basis in the universities’ budget plans from 2017 to 2021.

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205. Project University Indebtedness. Yunnan Normal University, Kunming University, and Zhaotong University each had loan from domestic banks by the end of 2014. The repayments were mainly listed as university budgetary expenditures and certain funds have been guaranteed. The repayment period is from 2013 to 2021, with a minimum overlap with the repayment period of the World Bank loan. The historical repayment record of all participating universities is good.

Table 34: The Project Universities’ Debt Status (Unit: million RMB)

Project universities Debt by the end of 2014

Repayment Period

Repayment Source

Yunnan Normal University

1078.1 Repayment for capital and interest will be undertaken by city level public finance.

Kunming University 181.7 2011-2017 Repayment for capital and interest will be undertaken by city level public finance.

Zhaotong University 91.0 2009-2020 Repayment for capital and interest will be undertaken by city level public finance.

206. The above financial analysis concludes that the Project’s total investment of US$50 million loan and US$24.62 million counterpart funds, when shared by seven Project counties and three Project universities, will result in a relatively small financial obligation for each of the Project county and Project university, given the past trend of the revenues and expenditures. Additionally, the loan is also guaranteed by the national MOF.