PANEL TWO
"EXTERNAL AND INTERNAL FINANCIAL
 RESOURCES FOR EFA" (GOVERNMENT
 OF INDIA)
 

"External and Internal

Financial Resources for EFA

(Government of India)

* National Educational Expenditures: The Current Scenario

* The Financial Implications of EFA

* Investment in EFA and Economic Growth: A Positive Relationship

* Reviewing Current Methods of Educational Financing

* Strengthening Management Systems

* Mobilizing Resources for Education

* Building Partnerships

* External Assistance: The Role of Donors

* New Directions in Funding

* Resource Mobilization Schema for Basic Education

* Conclusion: EFA - A Crucial Investment

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Chairperson: Shri Arjun Singh, Minister of Human Resource Development (India)

The Panelists:

Professor Hussein Kamel Bahaa El-Din, Minister of Education, Egypt. Professor Kamel has played an instrumental role in stepping up resources for education in Egypt by prevailing upon his government to consider education as an integral component of national security.

Dr Arjun Sengupta, a distinguished economist and Member Secretary of the Planning Commission of India.

Wadi D. Haddad, Senior Adviser for Human Development, World Bank, Office of the Vice President, Africa Region. Mr. Haddad was Chief Co- ordinator of the World Conference on Education for All, held in Jomtien, Thailand in March 1990.

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Although developing countries

and donor agencies no longer question

the long-term economic and social

benefits of financing primary

education, a large gap prevails between

this recognition and current levels

of funding.

Under-investment in elementary education has been note(] as one of the most important factors responsible for the failure of its universalization in many countries. There continues to be a dire lack of qualified teachers, learning materials and adequate physical infrastructure. Large gender disparities prevail. External public debt of the education sector has been very high in some of the African countries. The stabilization and structural adjustment programmes of the International Monetary Fund/World Bank have produced several undesirable effects on primary education in many countries.

National Educational Expenditures: The Current Scenario

Since the Jomtien conference in 1990, only 13 countries have increased their educational budgets, out of the 121 countries for which information was available. In most developing countries, less than four per cent of Gross National Product (GNP) is allocated to education, compared to six per cent in developed countries. Some of the 'poorest' countries however, allocate higher proportions of their national income to education than certain richer ones. The background discussion paper prepared by Jandhyala Tilak points to the example of Egypt. Although the World Bank classifies it as a low income country with a GNP per capita of $610, it invested as high as 6.7 per cent of GNP in education in 1990. Very few developing countries invested even a half of the $324 per student world average. China spent nearly $13 per student, Bangladesh $16, while the sum reached $133 in Brazil. In some of the countries, the real expenditure per student has declined over the years. Relative to the needs of the primary education system and in comparison with other levels of education, expenditure on primary education per student is trivial in many developing countries. The present levels of spending are inadequate to provide meaningful quality education for all. Despite sonic recent improvements, the amount invested in primary education hardly touches one per cent of GNP in most developing countries, except in a few like Brazil and India. Although the intra-sectoral allocation of resources in favour of primary education has improve(] over time - one third to half of the recurrent budgets on education in the high population countries are being allocated to the primary level this is still insufficient to reach the goals of Education for All.

In the coming years, persistent high fertility rates in many countries will continue to spawn rapid population growth, taxing the education system and creating more demand. The populations of the developing world are predominantly young and are urbanizing rapidly. While economic growth is forecasted to be significant in a number of the developing countries, it will be much lower in others, making the education sector vulnerable, to continued underfunding unless a firm commitment is adopted to work towards the goals of EFA. Faced with these facts, any discussion on financing education for all revolves around three issues: better

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utilization of existing resources, the mobilization of additional resources for education, and increased support by multilateral and bilateral agencies. "Availablility of resources will ultimately determine how all the ideas that are being articulated and the vision that is being expounded are translated into practice," said Shri Arjun Singh, Indian Minister for Human Resource Development. "For in the absence of adequate financial resources, EFA would be long on rhetoric and short on action."

The Financial Implications of EFA

What are the financial implications of EFA? As a strategy of development, it envisages a holistic approach to education, encompassing the formal and nonformal streams, adult education, and literacy. Most importantly, it prescribes quality education for all. The discussion paper Prepared for the panel by Jandyala Tilak puts it set of figures on the table: first the number of pupils in the 5-14 age group to be enrolled in schools by the year 2000 in the world will be around 1255 million. With no improvement in quality or efficiency, the amount of public current budget resources devoted to primary education in the world would need to increase front $160 billion In 1985 to about $400 billion by the year 2000, in 1985 prices, at an annual rate of growth of 6.5 per cent it] real terms. In the developing countries, the real expenditure should Increase by 3.6 times from $23.4 billion in 1985 to $83.1, billion by the turn of the century. The share of the developing countries in the world expenditure on EFA will have to increase from 11.6 per cent in 1985 to 20.5 per cent in tilt- year 2000. This is a bare minimum. In the spirit of jomtien, which puts access and quality on an equal footing, Wadi D. Haddad, Senior Adviser for Human Resource Development at the World Bank, suggested that unit student costs should be based upon the level of learning achieved upon radiation. This would raise resource requirements for EFA to a much higher level than those estimated by Mr. Tilak. The President of the, OPEC Fund stressed that the relevance of the educational system to a country should receive Specific consideration. "Education is not like other sectors," he said. "it takes up to a-e 8 or 12 before one can adequately measure the kind of education that a child has received during primary school years. The measurement of relevance and the variety of education should receive more attention so that we don't make mistakes that take it very long tune to correct, and in fact, might never he corrected at all because it is not easy to reeducate the educated."

"Meeting, the demands of Education for All requires creative thinking very tough policy decisions and long-term commitments," Said Mr Haddad. Economists, sociologists, political scientists, thinkers and planners in development unanimously recognize the high returns gained from investigating in primary education. Several studies show that rates of, return to primary education are higher both to the individuals and the society at large than the returns to investment in physical capital and those in secondary and higher levels of education. "Many truths once accepted as truths have been given up, but one element has proved to be consistent in its ability to withstand the empirical test," said Dr Arjun Sengupta, an economist and member of the Indian Planning Commission, referring to changes in economic thinking. "Education is a fundamental element in sustaining economic growth in any country."

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Highlighting the importance of Education for All, Professor Hussein Kamel Bahaa El-Din, the Egyptian Minister of Education, stated that EFA is not only a critical factor in increasing productivity and advancing development in general, but that it is also crucial for internal and external security, and thereby in the overall global peaceful environment. "EFA is a bulwark in countries to avoiding internal conflicts. It will also be a factor in international understanding, paving the way towards the mutual understanding of civilizations." In the end, he noted, "it can solve the issue of fanatacism that is such a problem in today's society."

Investment in EFA and Economic Growth: A Positive Relationship

The case for financing primary education is no longer solely built around arguments such as education for promotion of human values, more democracy and better citizenry, but also around economic payoffs. This is a major shift in thinking from the early 1960s, when Professor Malcolm Adiseshiah, current director of the Madras Institute of Development Studies, recalls being asked by the executive director of the World Bank to provide a case on why the Bank should lend to education. The analysis of education's effect on income levels is not new: in the 1920s, the Russian economist G. Strumulin demonstrated that investment in primary education yielded the highest economic returns to society. Today, studies done in East Asia show that education has contributed substantially to economic growth. It is recognized that education is a critical factor in poverty reduction that enhances the participation of the poor in development and strengthens democratic institutions. It also contributes to better environmental protection. Most importantly, the impact of education, and especially of female education, on health, infant mortality, reduction in fertility rates and population

"EFA is a bulwark in countries to avoiding internal conflicts. It will also be a factor in international understanding, paving the way towards the mutual understanding of civilizations."

Professor Hussein Kamel Bahaa El-Din, Minister of Education, Egypt

growth has been estimated to be positive, high and significant. Education, and more specifically primary education, is associated with a large set of external economies and is a crucial factor for sustainable development.

If the allocation of resources were based on these facts, funding of primary education would be well above current levels. "Choices are not technical. There is a politics to choice," said Mr Haddad. "The allocation of resources is not made on the basis of technical formulae, otherwise resources would automatically go on rates of return, anti we know that primary education rates are very high." Funding EFA has several dis-advantages: it is characterized by long gestation "periods and high current/capital investment ratios. Benefits of education tend to be less tangible than ones from other sectors. The lobby for the human resource sector is not always very strong within Finance Ministries. Furthermore, the discussion paper suggests that the benefits of' primary education tend to favour the masses while those of higher education accrue more to the elite, often leading powerful classes to discriminate against the primary level.

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Reviewing Current Methods of Educational Financing

Governments are the major financiers of basic education in developing countries. In most, states have an explicit policy of providing free compulsory education to all, which requires 100 per cent financing of primary education by the government. Although raising the share of GNP allocated to education was judged desirable by panelists, equal attention must be paid to how current resources are utilized. In many countries, a sober look at education expenditure reveals a sizeable degree of' wastage. "In a period of structural adjustment and economic reform, maximum emphasis has to be put on avoiding wastage," said Dr Sengupta. Drop-out rates and repetition are one measurement of wastage. In Brazil, for example, the repetition rate (national average) in first grade is 53 per cent, reaching 73 per cent for children from poor families. On average, every Brazilian child needs 2.1 years of schooling to be promoted to the next grade. Annual costs of primary school repetition are calculated to reach US $2,580 million. The education budget is further strained by increasing bills to meet the retirement benefits of teachers. In a country where the government earmarks a reasonable sum to education - the central government allocates at least 18 per cent of the tax revenue to education, and the provincial and regional governments 25 per cent - measures to increase efficiency could have a significant impact on improving quality.

Recognizing and identifying these areas of wastage is a first step towards better utilizing resources. When asked to review educational financing in the Indian state of Tamil Nadu, a committee headed by Professor Adiseshiah found that wastage in the budget ran as high as 15 per cent. "I hope that in this Conference we will have the courage to tell ourselves that such wastage of resources in the education budget should be identified and reduced, not in order to reduce the educational resources that are already inadequate, but to redeploy them into more effective uses in primary education," he said. Policymakers should identify and adopt measures that lead to better utilization of teachers, including multigrade teaching in low- population areas, and more efficient use of space. Nigeria for example, has placed emphasis on school inspections to insure that each school respects required standards and that wastage of scant resources is minimal.

Strengthening Management Systems

Strengthening management systems through decentralization is another aspect of better resource utilization. "In most educational discourses, management is a neglected dimension and the focus of discussions should perhaps shift from what needs to be done to how it is done," said Mr Singh. Decentralization of planning, management and control of resources is often perceived as a means to improve the quality of education and introduce an element of accountability in the school system to the commmunity. It is expected to result in improvements in school enrolment rates, reduction in wastage and increased resources. The Indian constitution has recently been amended for the purpose of decentralization in development, including education. To (late, decentralization has a mixed track record. In China, it has led to a 12 per cent increase in resource mobilization as local governments are allowed to levy an education fee. In India, Village Education Committees have played an important role

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in the Total Literacy Campaigns. Wherever these committees have been active, the delivery of education services has been qualitatively better, according to the Indian Minister of Human Resource Development. In Indonesia, the role of local Governments has been strengthened in order to cope with the expansion of compulsory education from six to nine years in 1994. Decentralization, however, has to be treated with caution. In many countries, a piece-meal approach was adopted, which did not pay high dividends. The Brazilian Minister of Education pointed out that decentralization often fails to reach the levels it should, and that schools have little autonomy or freedom in planning. In his discussion paper, Mr Tilak cites several studies highlighting the potentially negative consequences of decentralization. In Mexico, the relative contribution of provincial Governments and the, private sector declined after decentralization. In sub-Saharan Africa, schools built by the local communities were generally found to be inferior in quality to government-built schools. "We, have to be very careful that decentralization is not a panacea", said Mr Haddad. Nor can it be synonymous with an abdication of the responsibilities by the national government in education. "Decentralization will make every problem worse if the central government does not simultaneously expand and strengthen its role in at least three areas", said Mr Haddad. "Monitoring of global taxation and expenditures equalizing distribution of resources across and within regions, and prospecting the education interests of the under- served populations."

Mobilizing Resources for Education

The critical issue of mobilizing additional resources for education is two-pronged. Firstly, how much of the national cake should be allocated to education? After all, as the Nigerian delegation put it, "all competing sectors know how to argue forcefully for a greater share." EFA cannot be achieved without political commitment at the highest level. "In the ultimate analysis, it is the governments themselves who have to mobilize adequate financial resources for catering to the basic learning needs of their citizens," said Shri Arjun Singh, Indian Minister for Human Resources Development. Recognizing that there are exceptional situations in which internal resources are not sufficient to meet

"For mobilizing higher resources for education, governments have to look beyond conventional budgeting; they can and should imaginatively draw upon community resources."

Shri Arjun Singh Minister of Human Resource Development, India

these needs, he estimated that "in the majority of countries, higher allocation of resources for education, particularly basic education, has to be provided for by restructuring budgets."

If decision-makers decide to reallocate existing resources, they will be faced with three "very difficult policy choices" according to Mr Haddad. "The first is how much should be invested in education compared to other sectors. The second is what kind of balance to strike and trade-offs to make between competing demands among different levels and types of education, and third, how to balance expansion and quality." While