"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: education is a fundamental element in sustaining economic growth in any country."

Dr Arjun Sengupta, Member Secretary of the Planning Commission, India

wholeheartedly endorsing Dr Mahbub ul Haq's proposal in a previous panel to divert funds from the military to human development, Mr Haddad also judged that there was room for reallocation of resources from inefficient areas in the public sector, such as highly subsidized parastatals.

Within the education sector, Dr Sengupta argued that a distinction must be made between higher and primary education. Even in the case of higher education, public intervention becomes necessary essentially to correct market imperfections. One can however think of alternative sources of financing for higher education, such as loan scholarship programmes. Indonesia has introduced cost recovery measures from better-off students even though they are associated with market failures. In Nigeria, about 22 per cent of total spending on basic education is generated by an educational levy on all taxable adults. While underlining the importance of all levels of education to a country's development, Mr Haddad noted that the scope for reallocating resources from post-basic to basic education should be examined, as well as within basic education toward inputs that lead to enhancement in the levels of learning, school effectiveness and teacher quality. Teachers' salaries form the bulk of recurrent budgets, and virtually little is available for investment in items such as textbooks, chalk, maps and other classroom materials that have been found to yield the highest returns Insignificant proportions of the budgets are being allocated to items that lead to capital formation, like buildings and furniture. In China, less than two per cent of the total expenditure on primary education goes for capital items like buildings. In Mexico and Bangladesh as much as 95 per cent of the current expenditure on primary schools was devoted to teachers' salaries alone. The situation is beginning to improve In some countries: in Pakistan, the current expenditure constitutes 88 per cent of the education budget.

Building Partnerships

As the first panel underlined. mobilizing additional domestic resources for education goes hand-in-hand with increasing community participation in support of education. "For mobilizing higher resources for education, governments have to look beyond conventional budgeting: they can and should imaginatively draw upon community resources," said Shri Arjun Singh, citing the example of the Total Literacy Campaigns (TLCs) in India for which ten million volunteers have been mobilized. "If one quantities this voluntary effort in financial terms," said the minister, "the contribution of volunteers is at the bare minimum about Rs. 6,800 million or about one third of the governmental allocation." State-community partnerships have flourished in all of the nine countries in recent years, especially in

support of innovative programmes. Bangladesh plans to open some 9,000 additional registered non-governmental schools, most of them run by religious institutions. Pakistan has revived the mosque school, which now provides secular as well as religious instruction, and instituted a system of over 500 home schools run by NGOs. In China, where per student costs have more than doubled since 1985, resources collected from non-governmental sources, including fees and school factories, rose to 38 per cent of the educational budget in 1992, up from 21 per cent in 1991. This, however, has been matched by a strong and sustained political commitment at the central level to the development of education: by 1995, the share of education in China's state budget is slated to rise from 12 to 15 percent.

Sources of non-governmental finances can flow from voluntary contributions of the villagers and organizations such as parent- teacher associations. In Nigeria and Brazil, Companies pay an education tax. Even though community contributions are often not sizeable in quantitative terms, they are important to raising awareness toward EFA. "Our experience is that in rural areas, there is a great desire to contribute," noted R.N. Mirdha, a member of UN- ESCO's Executive Board. He noted that in spite of financial constraints, communities have often been successful in raising funds, such as for the construction of buildings. Mr Vinod Raina, a member of Eklavia, an Indian NGO, observed that local level participation could have a beneficial influence on the process of education: if the school reflects local needs and cultures, it has more chances of maintaining the interest of children, parents and the community at large. One of the most positive aspects of the national literacy mission programme has been the demand for primary education in districts where literacy campaigns were successful. In Indonesia, the community also plays an important role in out-of-school education programmes linked to income-generating schemes.

With their proximity to the grass roots level, NGOs are considered valuable partners in expanding access to education and mobilizing resources. "NGOs can assume greater responsibility for resource mobilization and making people feel that primary education is

"NGOs can assume greater responsibility for resource mobilization and making people feel that primary education is a felt need and not just something thrust on them by government policy."

R.N. Mirdha, Member of Parliament, India

a felt need and not just something thrust on them by government policy," said R.N. Mirdha. "If this happens, they can contribute to reducing dropouts and improving the quality and overall efficiency of the educational system through their local networks, NGOs are well- positioned to link alternative educational programmes with those of other sectors, including health, nutrition anti early childhood care.

Nonetheless, despite some commendable examples of non-governmental financing of education - in China, more than half the expenditure on primary education is generated outside the government system, with fee contributions - the scope for raising

domestic resources from non-governmental sources is extremely limited in developing countries according to Mr. Tilak. A few efforts can be made to generate marginally additional resources for basic education: industries may be made responsible for the education of the workers and their families, or the employers may be charged a beneficiary levy for the same purpose. The discussion paper notes that families in developing countries already spend a very large proportion of their budgets on education Mr. Sengupta also underlined that family investments in education are high. If opportunity costs are also taken into account, the total family investment in education would be very high. Although the role of the private Sector in education received little attention during the panel, the discussion paper warns that policies encouraging privatization in education need to be formu- lated with caution. Private schools in general do not necessarily reduce the financial burden of the government: many depend upon the state for almost the whole of their income. In Bandadesh, about half the education budget of the government goes to private schools in the form of aid. Mr Tilak's paper also notes the limits for expansion of the private school system and envisages little scope for its increased role in basic education, unless equity considerations are sacrificed.

Ultimately, responsibility for funding primary education lies with the state. While, valuable, contributions from the communities should be treated as peripheral sources to supplement government funding, according to Mr Tilak. Otherwise, he warns, as the demand for education rarely coincides in poor countries with the ability of the people to pay for it, extensive reliance on parental and community contributions will produce serious adverse effects on equity. In his discussion paper, he suggests that the state examine raising the general tax revenue by adopting improved methods of progressive taxation. He also recommends that norms regarding talk share of the budget allocated to education, and specifically to basic education, be set in order to promote balanced development of education in the country. In Brazil, the central government is required to allocate at least 18 per cent of the tax revenue on education, and the provincial and regional governments 25 per cent. In Nigeria, a Primary Education Commission was constituted to mobilize resources and ensure their judicial and equitable distribution between several regions and population groups. A National Commission for Mass Literacy has also been established to come up with innovative strategies. In Indonesia, the government has placed high priority on improving the quality of teachers and increasing their salaries. especially of those working in remote and poor areas. In order to reduce disparities and reach underserved students, certain educational programmes have been tied to poverty alleviation schemes.

External Assistance: The Role of Donors

While governments are being urged to increase funding to basic education, donors are also slowly changing their ]ending strategies. The importance of investing in primary education has only been recognized since the mid-1980s, when the, attention of international agencies shifted in favour of poverty alleviation and human development. Several factors contributed to this shift, including a realization that much of the investment in other sectors could not yield

high returns with massively underinvested primary education systems. At the same time, it is not, until recently that countries have showed willingness to borrow for basic education, often despite high interest rates on loans.

External assistance for education takes several forms, including technical assistance in terms of teachers planners and administrators; material inputs in terms of books, didactic materials, furniture, equipment, and construction materials; and budgetary assistance for general and specific programmes such as scholarships, school meal pro- grammes, etc. of late, international donors have been more inclined toward investments in software, in which payoffs are higher (such as textbooks, teaching materials, etc.), and against investment in hardware (e.g., buildings, furniture and other capital intensive activities). Mr Tilak's paper appeals for a sense of balance between the two: it is necessary to recognize that there exists a threshold level of buildings and other capital facilities for meaningful education activities to be carried on.

Relative to a country's domestic education budget, external aid for education is generally small. The discussion paper notes that external assistance for education amounted to only 4.2 per cent of the $100 billion spent on education by the governments of developing countries during the 1981-1986 period, except in the African region. It also highlights the fact that high population countries are at a disadvantage when it comes to external aid. Almost as a rule, the more populous a country, the less education aid per capita it receives. Despite a heightened global awareness toward expanding basic education and targeting girls, "education does not appear in concrete kind substantive form when negotiations are held between donor agencies or at a bilateral level with countries," according to Shahnaz Wazir Ali. Special Assistant for the Pakistani Prime Minister for the social Sector.

A strong case can be made for increasing external assistance to primary education in developing countries according to Dr Sengupta. "Aid in this area has a positive effect on improving income distribution, increasing productivity and expanding trade." In addition, he noted, education strengthens democracy and is the most objective candidate for receiving a share of the peace dividend, even though "how much of the peace dividend is available is it question mark."

Certain countries are, and will continue to be, considerably more dependent on international support than others. Bangladesh, for example, estimates that US $ 2,200 million of international support in the form of grants and concessional loans will be required to enable it to carry through its EFA plans in the 1993-2000 period. During the same period, the country plans to invest over $2.5 billion of its own funds in EFA. The role of the World Bank has become dominant in quantitative terms as well as in relation to the influence on policy and planning of the national education Systems. The World Banks lending for education, including primary education, exceeds by several times the aid of any other multilateral agency. Between the 1986-1989 period and the 1990-1993 period, the, World Bank tripled its total lending for education to $6.5 billion. The share of basic education increased from 24 per cent of educational lending in fiscal year 1990 to 50 per cent in 1993. Within basic

education, there has been a shift toward inputs that enhance learning and effectiveness, and those that target underserved groups, especially girls and the poor. The poorest northeastern states of Brazil have received it $414 million loan from the World Bank to support a protect that is intended to benefit six million primary school students through the training of 625,000 teachers, the distribution of over 1,000 million textbooks and the building or rehabilitation of 119,000 classrooms. Two other programmes are currently running in rural regions of China. The Bank is supporting new areas of lending such as early childhood education in Mexico and Nigeria, scholarships for girls in Bangladesh, recruitment of female teachers in Pakistan, and non-formal education programmes in Indonesia.

"We have to remind ourselves that basic education for all is crucial enough for all of us to go out, be creative, combative and collaborative."

Wadi Haddad, Senior Adviser, World Bank

In order for these trends to continue, and to move away from traditional mechanisms of assistance that emphasize capital intensive inputs and short-term implementation periods, Mr Haddad called for a consortium of donors that call "bring together their own strengths and weaknesses so that they can cover the different outlays amongst themselves. It needs a commitment, maybe a compact between countries and donors for a sufficient period of time in order to make a difference." In Indonesia for example, better co-ordination with multilateral and bilateral agencies has been achieved through the National Development Planning Agency.

New Directions in Funding

In discussing external assistance and urging that recent shifts towards basic education be sustained, delegations from developing countries voiced several concerns:

* Structural adjustment:

Dr. Sengupta warned that structural adjustment cannot be successful if economies deviate from the learn of growth. The success of structural adjustment depends on growth, and growth depends on education. In this light, the opposition between educational expenditure and economic adjustment is a "false conflict. "Strengthening education must be seen as part of economic restructuring and reform, and be treated with a long-term outlook. Indonesia's next Five Year Plan for instance, is based on Human Resource Development. Unfortunately, a tradeoff is appearing in several countries between structural adjustment and related economic reforms on the one hand, and the development of primary education on the other. In the course of remaining budgets during the process of adjustment, it appears that education is an easy prey. A study cited in the discussion paper found that in eleven 'intensely adjusting' countries, public expenditure on education as a percentage of Gross Domestic Product (GDP) declined from 3.5 in 1980 to 2.9 per cent in 1986, while in the 'non-adjusting' countries it has increased. Per capita expenditure and gross enrolment ratios in primary education also declined between 1980 and 1985. Net enrolment ratios fell from 76.1 per cent to 74.4 per cent during the same period in 25 intensely adjusting countries,

including Nigeria, Pakistan and Mexico. Mr Sengupta underlined the importance of compact packages of adjustment programmes that include measures to protect human development sectors like primary education, primary health and child care during the process of adjustment. Mr Haddad of the World Bank noted that "safety net" programmes are being launched with adjustment loans in many countries precisely to protect sectors like education from resource cuts.

* The role of NGOs:

Given the potential role of NGOs in the EFA movement, Ms Wazir Ali, special assistant for the social sector to the Prime Minister of Pakistan, raised the question of direct external assistance to NGOs in the aim of stengthening them institutionally and making them more efficient deliverers of educational services, especially in rural areas. NGOs rely predominantly on local community resources and some support from government. Although the World Bank cannot make direct loans to NGOs, it has started to experiment in a number of situations by creating special funds from the Bank from which NGOs can draw resources to provide education. This is worked out in agreement with governments. The Bank has also developed a social fund mechanism that is set up by the government, funded by the Bank, and earmarked for NGOs in the basic services field, including education.

* The need for capacity building:

Participants underlined that external funding mechanisms must help capacity building in the countries concerned, "Capacity building cannot remain a mere catch word," said Shri Arjun Singh. "it has been said that in order to know something, it is necessary in some sense to have made it. Therefore, the recipients of assistance should be given adequate scope in the designing, formulation and implementation of the projects. This would mean that the recipients should be allowed to learn through experience, even though it may mean committing some mistakes." Externally aided projects should become sustainable over time. Capacity building includes strengthening the analytical and managerial capacities in countries. Projects that concentrate on capital activities like buildings, furniture, durable equipment, etc. should make adequate provision either from the external aid related budgets, or the domestic budgets, for the maintenance of capital items in terms of their recurring liabilities.