DOCUment of

The World Bank

FOR OMCLAL USE ONLY

ICR12FICt6E 6MOE'TReport T- h13/ TYpe E1 ReportNo. 10216

THIAS, / XZ147 2 / -?'~0DD

PROJECT COMPLETION REPORT

MEXICO

SECOND TECHNICAL TRAINING PROJECT(LOAN 2559-ME)

DECEMBER 30, 1991

Human Resources Operations DivisionCountry Department IILatin America and the Caribbean Regional Office

This document has a restricted distribution and mav be used by recipients only in the performance oftheir offilcial duties. Its contents may not otherwise be disclosed wFithout World Bank authorization.

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GLOSSARY

CONALEP National Agency for Vocational and Technical Education(Colegio Nacional de Educaci6n Profesional T6cnica)

ICB International Competitive Bidding

IBRD International Bank for Reconstruction and Development

LCB. Local CompetiLive Bidding

NAFIN Nacional Financiera S.N.C.(National Finance Co., Inc.)

PCR Project Completion Report

SAR Staff Appraisal Report

SEP Ministry of Education(Secretaria de Educaci6n Publica)

SPP Ministry of Programming and Budgeting(Secretaria de Programaci6n y Presupuesto)

STPS Ministry of Labor and Social Security(Secretaria de Trabajo y Previsi6n Social)

THE WORLD BANK FOR OFCIAL USE ONLYWashington. D.C. 20433

U.S.A.

Office of Dwrectou-GenwaIOptatinns Iv^aItknn

December 30, 1991

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Mexico SecondTechnical Training Proiect (Loan 2559-ME)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on Mexico Second Technical Training Project (Loan 2559-ME)"prepared by the Latin America and the Caribbean Regional Office with Part II ofthe report contributed by the Borrower. No audit of this project has been madeby the Operations Evaluation Department at this time.

Attachment

I 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.

FOR OFFICIAL USE ONLY

PROJECT COMPLETION REPORTMEXICO

SECOND TECHNICAL TRAINING PROJECT(Loan 2559-ME)

TABLE OF CONTENTS

Page No.

Preface........ ....................... ........... iEvaluation Summary .............................................. iii

I. PROJECT REVIEW FROM BANK'S PERSPECTIVE .......... ........... 1

A. Project Identity ..................................................... 1B. Project Background .......... ....................... .... * ..... 1..... C. Project Objectives and Description ................... .... 3D. Project Design and Organization ..... ..................... 3E. Project Implementaticn ....... ..... . ...................... 4F. Major Results of the Project ...... .................... 5G. Project Sustainability ....... ............................ 10H.1 Bank Performance ........................................... 11I. Borrower Performance ....... ................. ............. 12J. Project Relationships ... .... .................... ........ 14K. Technical Assistance . ......... so ........ ........ 14L. Project Documentation and Data ..... ...................... 14

II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE ................. 15

A. Adequacy and Accuracy of Factual Information in Part III.. 15B. Evaluation of Bank's Performance and Lessons Learned ..... 15C. Evaluation of Borrower's Own performance and Lessons

Learned .................. . .......................... 15

III. STATISTICAL INFORMATION ................................. 16

A. Related Bank Loans . ................................. 16B. Project Timetable ............................ ......... 17C. Loan Disbursements ................... .... ............. 18D. Project Implementation ..................... 19E. Project Costs and Financing ...................eo..o.ai..... 20F. Project Results ................................ 00 ... 23G. Status of Loan Covenants .................. ......... 27H. Use of Bank Resources ..................... .0 .. ........ 29

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

i

PROJECT COMPLETION REPORT

MEXICO

SECOND TECHN,CAL TRAINING PROJECT(Loan 2559-ME)

PREFACE

This is the Project Completion Report (PCR) for the- Second TechnicalTraining Project in Mexico, for which Loan 2559-ME in the amount of US$81.0million was approved on May 28, 1985. The Loan was closed on June 30, 1991 andthe funds fully disbursed by July 26, 1991.

The PCR was jointly prepared by the Human Resources Operations Division,Country Department 2, of the Latin America and the Caribbean Regional Office(Preface, Evaluation Summary, Parts I and III), and the Borrower (Part II).

In order to incorporate lessons for the preparation of a Third TechnicalTraining Project, preparation of this PCR was started during the Bank'ssupervision mission of the project in June 1990, followed by PCR missions inNovember 1990 and March 1991; it is based, inter alia, on the Staff AppraisalReport, the Loan Agreements, supervision reports and internal memoranda.

iiiPROJECT COMPLETION REPORT

MEXICOSECOND TECHNICAL TRAINING PROJECT

(Loan 2559-ME)

EVALUATION SUMMARY

Introduction1. This was the second IBRD assisted technical training project in Mexico.It was appraised in November 1984 and approved on May 28, 1985. Total projectcost was estimated at US$162.2 million, of which US$81.0 million was financed byan IBRD Loan. The Project was completed in December 1990. The Loan was closedon June 30, 1991. In scope, the project remained essentially as planned, exceptfor a decision made by the Government of Mexico in 1988 to increase the numberof centers targeted for construction from 97 to 130 (para. i2(b)). Because ofhigher than expected price increases for civil works, and because of theinclusion of 33 additional centers requiring additional furniture and equipment,the actual total cost of the project at t',e time of completion amounted toUS$164.41 million, 1.3Z over appraisal estimate.

Project Obiectives and Content2. Consonant with the Government's efforts to increase the supply of skilledworkers and technicians in Mexico, this project supported phase II of CONALEP'stechnical training program (para. 3). The project's objectives were to: improvethe operational efficiency and effectiveness of central and localadministrations; increase the supply of skilled workers and technicians; improvethe quality of training; develop an advanced maintenance system for buildings andequipment and introduce cost reduction measures; and provide flexible support forthe program as a whole, eliminating undesirable distinctions between project andnon pro4ect centers, and facilitating the development of strategic trainingoptions and institution building. The project, at signing, included: (a)improvement of CONALEP'S operational efficiency and effectiveness throughspecialist assistance, fellowship and management training; (b) upgrading andexpansion of instructor training and teaching materials; (c) development of amaintenance system for buildings; (d) increasing the supply of skilled workersand technicians through the construction, equipping and furnishing of about 97new training centers; and (e) studies of other efficiency measures anddevelopment of strategic training options.

Implementation.3. For full implementation of the project, six years were needed from the dateof Board approval until Loan closing. The implementation delay of 24 monthsresulted from: (a) an initial confusion as to the proper routing ofcommunications between the major participants of the project--i.e., the Bank,NAFIN (the borrower), CONALEP (the executing agency), and the Government (theguarantor)--and consequent delays in the effectiveness of the Loan (para. 12(a)); (b) the Government decision in 1988 to expand the number of trainingcenters served from 97 to 130, and the consequent additional implementation timerequired for both civil works and equipment (para. 12(b)); and (c) two completechanges in the upper levels of CONALEP's administration, and consequent lack offamiliarity by new administrations with Bank processes and procedures (para.12(c)).

iv

Project Reoults.4. Project objectives were met and in some aspects exceeded. In particular,the attainment of some quantitative goals was significantly in excess of plannedones.

5. Improvements in CONALEP's operational efficiency, as a result of the inputsfrom specialist assistance, fellowships and management training, were: (a) anincrease in the completion rate of the new student body from 401 on the averageover the period 1979-86 to 522 at present; (b) more effective use of the advisorycommittees and industrial associations in setting training program priorities andin improving program effectiveness, as a result of establishing a more conciseset of regulations for the activities of the local and national committees inabout 902 of CONALEP's centers, which helped bring about a large flow ofdonations that CONALEP received from industrialists and provided guidance forgraduate placement; (c) 654 staff-years of specialist assistance and 76 staff-months of short study tours abroad, for improved administrative efficiency;(d) the upgrading of the graduate placement program; and (e) extension of agraduate tracer system to all centers that have been operational sufficientlylong to have produced graduates (para. 16).

6. The implementation of the component for increasina the supply of skilledworkers and technicians through the construction, equipping, and furnishing oftraining centers greatly exceeded the planned quantitative goals. Specifically,as th'a result of additional local funding becoming available, CONALEP II was ableto establish 130 training centers (para. 12(b)), for a total of 252 centers forCONALEP I and CONALEP II combined; thus, a substantial increase in the number oftrainees as proposed in the SAR was realized. In fact 129,000 students enrolledin regular as well as in upgrading programs in phase II centers (includingenrollments made possible by the expanding mobile training system (Annex 11)),surpassing the 90,000 expected at the time of appraisal, and resulting in a totalenrollment in phase I and II centers combined, of 239,000 (as opposed to anappraisal estimate of 200,000). Outputs from the regular three-year program weresomewhat lower than expected (about 14,000 from phase II centers vs. an appraisalestimate of 21,600; and 40,400 from phase I and II centers combined vs. theappraisal estimate of 48,000) due to a Government/CONALEP decision to allocatea large number of training places for the upgrading of trainees of the ManpowerTraining Program, under Loan 2876-ME; as a result of the same decision, however,the number of workers upgraded in CONALEP II centers was 31% over estimates(21,100 actual vs. 16,200 estimated at appraisal; 41,000 workers receivedupgrading training under both projects combined, as opposed to an appraisalestimate of only 36,000). The total output from phase II centers was 35,100trainees vs. the appraisal target of 37,800 (para. 19).

7. Improvements in the guality of instruction were attained through: (a)enhancements in instructional capabilities; a total of 17,6951 instructorsreceived pedagogical training during the implementation of the CONALEP II projectto finally reach a total of 27,965 instructors in both projects combined (theappraisal target for total number of instructors receiving training under both

l This figure includes double counting of instructors taking more than onecourse.

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projects combined was 10,000, but corresionding numbers actually attained are notavailable)i and (b) course syllabi improvements in about 40S of courses throughapproximately 367 M/Y of specialist services; during the project's life, 1,111publications were produced by CONALEP, totaling 6.8 million copies that includedtextbooks, bulletins, syllabi, training materials, guidelines, handbooks,leaflets, extension bulletins, journals and manuals (para. 20).

8. In the context of improving quality of instruction, the project alsosupported the introduction of pilot production trainina programs in 70 centers(24 were targeted at appraisal), designed to enhance training (by makingfurniture and equipment and by providing practical hands-on trainingopportunities), to improve student motivation and to reduce training costs andcapital investment costs financed from the regular budget. This program produced62,000 items of furniture, hand tools and equipment, and had a net savings ofabout US$930,000 for CONALEP (para. 21).

9. The project also supported further develovment of a maintenance system forbuildinRs. furniture and equi2ment, which, in addition to training enhancement,also resulted during 1990 alone in: (a) an estimated value of about US$1.05million of maintenance activities being conducted by trainees and instructors;and (b) the development and utilization of operational manuals for the repair andpreventive maintenance of 549 items of specialized equipment (para. 22).

10. As a result of its strengthened efficiency and institutional capacity,CONALEP's achievements in developing and implementing strategic training nrotramssurpassed appraisal targets. In fact, four innovative pilot programs, notanticipated under the Loan, were carried out during the implementation of theproject, in support of the Government's 1989-94 development plan, without furthersupport from the Bank (using Government and private funding). The major thrustof these programs was directed at assistance to marginal populations, micro-industry, self-employment and the in-bond assembly industries (maquiladoras)(para. 26).

Pro ect Sustainabilitv11. The sustainability of project benefits is closely linked to the questionof the long-term technical relevance and financial sustainability of CONALEP asa predominantly federally financed and operated training system. Since itsinception in the late 1970s, CONALEP has established itself as the backbone ofthe entire Mexican system of workforce training and upgrading, and has enjoyedstrong support from politicians, entrepreneurs and the labor sector, which hasessentially protected it from budget cuts even during recent severe austecItyprograms. Nevertheless, CONALEP is actively seeking to diversify its funding,including updating its strategy for improving cost recovery/cost sharing ofoperational costs of training from the private sector (espacially under aproposed Third Technical Training Project); cost recovery in cash and in kind(not including land) in 1990 amounted to US$12.9 million, or almost 141 ofCONALEP's total recurrent budget, up from US3.1 million in 1989 and US$2.3million in 1988. CONALEP maintains close links and good standing with employers,providing the best guarantee that it will remain relevant to the training needsof enterprises. These links include: establishment and maintenance ofindustrial advisory boards for each center and region to advise CONALEP indetermining training priorities and course content; contracting of courses with

vi

employers; production of industrial prototypes under contract with erterprisesand public agencies; development of learning aids (including simulator equipmentand video programs); and production of finished goods such as school furniture(to the extent such production is consistent with efficient practical training).Close to US$1.0 million was earned in 1990 through production-for-revenueprograms. CONALEP in also raising tuition fees for its regular cour-es (suchfees have always been charged but amounts have been eroded by inflation) to coverabout 101 of training costs. In addition, the project has enabled CONALEP tosave on recurrent expenditure, for instance through the maintenance system whichhas produced annual savings of over US$1.0 million through systematic use ofinstructors and students to do qualified maintenance work. These and otherefficiency measures introduced by CONALEP, some as part of the project and someon its own initiative, also serve to ensure the long term sustainability ofproject benefits.

12. Lessons Learned. The principal lessons learned with implication for futureprojects, as a result of the experiences during project implementation and thepreparation of the PCR are summarized as follows.

(a) In view of observed delays in project implementation, as a result ofthe lack of familiarity by new CONALEP Administrators with Bankprocess and procedures. a short seminar on project implementationshould be conducted by Bank Supervision Missions when such changesoccur; moreover, Bank missions should ensure that multiple copies ofall project related documents are maintained in projectimplementation unit archives (para. 12(a)).

(b) In view of the fact that installation difficulties experienced in afew institutions where large quantities and heavy or sophisticatedequipment was involved, such installation should be contracted tothe respective suppliers as part of the equipment supply contract(para. 13).

(c) In view of the fact that advisory committees were instrumental inbringing about a large flow of donations that CONALEP received fromindustrialists during the 1984-90 period (Annex 4) and in providingguidance for graduate placement, and considering the potential forgreater private sector involvement in improving the placement recordof pre-service trainees through assistance in course design, suchlinkages with private sector industries should continue to receivehigh priority (paras. 16 and 24).

(d) In view of the still acute problem of internal inefficiency (such aslow completion rates and high unit costs in some training centers),CONALEP should investigate the causes of inefficiency and takeproper remedial actions (paras. 17-18).

(e) In view of the surplus training capacity in a few agriculturalprograms in some more remote areas of the country, where the demandfor training is not well defined, qualified personnel fromprofessional organizations must participate in the analysis ofdemand and of development of programs (para. 19).

vii

(f) In view of relatively rapid developments in technology in Mexico andtheir implications on space planning criteria and requirements forshop., laboratories and other support spaces, as well as forequipment redistribution requirements, consideration must be givennot only to the expected immediate use of these spaces but theirpossible m-. ium and longer term uses resulting from technologychAnges (para. 19).

(g) In view of the shortcomings of the design of the graduate follow-upsystem (such as a short follow-up period and a lack of controlgroups for comparison of the effectiveness of CONALEP trainingprograms) and of the method for evaluating effectiveness of CONALEPprograms, CONALEP should take proper remedial actions to improvegraduate tracer systems, and the Bank should at an early stage ofproject preparation focus more attention on the design of aneconomic evaluation of trainlng programs (para. 24).

(h) In view of the sporadic slowdowns in project implementation,especially whan CONALEP's adm£nis.ration was changed, and of the twoyear delay in project implementatior. due partly to the lack ofcoordination among participating agencies, greater and more frequentsupervision efforts should be made in large and complex projectssuch as this one (para. 31).

PROJECT COMPLETION REPORT

MEXICO

SECOND TECHNICAL TP' IG PROJECT(Loan 255, _j

PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE

A. Project Identitv

- Project Name: Second Technical Training Project- Loan No.: 2559-ME- RVP Unit: Latin America and Caribbean Region Country

Department II- Country: United Mexican States- Sector: Education- Subsector: Technical and Vocational Education

B. Project Background

1. Sector Development Obiectives. At the time of appraisal (November 1984)Mexico was slowly emerging from its worst economic and financial crisis of theprevious 50 years. In the early 1980s, a trend toward structural economicimbalance was evident, but the government outgoing in 1982 did not address someof the essential economic and financial issues with the vigor that was required,particularly in the fiscal area. The new Government's stabilization program,which was introduced in 1983, had brought the situation under control, buteconomic growth was suffering; unemployment rose from less than 2% in 1980 toabout 14% in 1984. In 1983, the new Government identified the resumption ofeconomic growth and the expansion of gainful employment as two of its majorpriorities.

2. The Government's strategy combined special efforts to recover from theprevailing economic crisis with a longer term perspective for regaining balancedand stable growth to overcome structural problems. These structural problemsincluded: a high rate of population growth (2.5% annu'al average estimated forthe decade), and even higher labor force growth (about 3.1% per year) togetherwith low levels of human capital formation, slow growth in agriculture,widespread poverty, highly skewed interpersonal and interregional incomedistributions, and an economy too dependent on oil revenues. The medium termstrategy focused on the need for structural changes in the economy: a greaterexport orientation for the industrial system; decentralization of the commercialstructure; poverty alleviation through policies designed to meet basic needs; andincreased productivity and absorption of individuals into the labor force,brought about by proper training. Consonant with these overall developmentobjectives, the Mexican Government made an effort to increase the number ofskilled workers and technicians who are vital to economic growth and developmentby putting greater emphasis in the education sector on the improvement andexpansion of upper-middle terminal technical training.

2

3. folicg Context. The focus of this emphasis was the National Agency forVocational and Technical Education (CONALEP). CONALEP had been created in 1978as an independent agency responsible for upper-middle level terminal technicaltraining. Because of the difficulties involved in the creation of a new trainingsyatem, it was conceived as a two-phase effort. The first phase of the CONALEPprogram (1979-84), which involved creating the program, testing its majorcomponents and initiating its development, was supported by Bank Loan No. 2042-ME, approved by the Board on July 21, 1981 and signed on July 31, 1981. By 1984,with Bank assistance under the first project, CONALEP had already begun to havesignificant impact on the proportion of graduates from terminal technicaltraining programs entering the labor force. The CONALEP system, which in 1980had no schools in operation, in 1984 had 122 new and well-equipped schoolslocated throughout the country, with an enrollment capacity of about 110,000students. CONALEP had initiated close ties with industry, which had been wellrepresented in advisory boards for each CONALEP center, and had initiated a jobplacement and follow-up system. The CONALEP schools had gained in prestige andwere in strong demand because they were generally well staffed and withindustrially experienced instructors. Phase II of the CONALEP program (1985-88) consisted of further increasing the capacity of the CONALEP system and makingnecessary adjustments in institutional, administrative and training aspects ofthe program, and was supported by Bank Loan No. 2559-ME, approved by the Boardon May 28, 1985 and signed on July 16, 1985.

4. CONALEP differs from other upper-middle technical traiaing programs inthat: (a) its partial autonomy facilitates greater responsiveness to thechanging needs of the productive sectors, and encourages their participation; (b)its administration is decentralized, which facilitates delegation of operationaldecisions to local training authorities and industrial advisory boards; (c) itscurriculum has a practical orientation and strong emphasis upon evaluation,"hands-on" experience, follow-up and feedback; (d) its training programs, bothregular and part-time, are strictly terminal and job market oriented; (e) itsunique student promotion activities enhance the program's public image andencourage active support from the productive sectors; (fj students pay a tuitionrelatively higher than that of other segments of the educational system; and(g) its technical instructors are from industry, they teach part-time (typically12-14 hours/week) and cannot belong to the teachers' union.

5. The CONALEP training program objectives are: (a) to expand the supply ofskilled workers and technicians through its network of upper-middle levelterminal training centers in close cooperation with the productive sectors andin the quantities required by the economy; (b) to improve the quality of trainingby emphasizing a practical curriculum that maintains its relevance to changingregional and sectoral needs; (c) to increase the efficiency of such training bykeeping training cost down, achieving higher retention rates and improvingemployability of trainees; and (d) to upgrade the quality of the existingworkforce by designing special programs and using CONALEP's facilities for the

2 For details on implementation experience and project results of Loan 2042-ME, see the World Bank Operations Evaluation Department's (OED) ProjectPerformance Audit Report (No. 7136, March 1, 1988), which includes the ProjectCompletion Report (March 31, 1986).

3

training of both employed and unemployed adults.

6. Linkages Between Proiect. Sector and Macro Policy Obiectives. The CONALEPtraining progrem's objectives (para. 5), were consistent with the sectoralobjectives (pAra. 1) and thus also helped advance the macro policy goals set bythe Government (para. 2).

C. Proiect Oblectives and Descriptions

7. Project Objectives. In support of phase II of CONALEP's technical trainingprogram, the project's objectives were: (a) to improve the operationalefficiency and effectiveness of central and local administrations; (b) toincrease the supply of skilled workers and technicians; (c) to improve thequality of training instruction; (d) to develop advanced maintenance systems forbuildings and equipment on a pilot basis, and introduce significant costreduction measures; and (e) to facilitate the development of strategic trainingoptions and institution building.

8. Proiect Description. To achieve its objectives, the project included:

(a) improvement of CONALEP'S operational efficiency and effectivenessthrough specialist assistance, fellowships and management training;

(b) increasing the supply of skilled workers and technicians through theconstruction, equipping and furnishing of about 97 new trainingcenters;

(c) upgrading and expansion of instructor training and teachingmaterials;

(d) development of a maintenance system for buildings; and

(e) studies of other efficiency measurcs and development of strategictraining options.

D. Proiect Design and Organization

9. Based on experience with the first project and other information availableto the appraisal mission of November 1984, the conceptual foundation for theproject was clear. The project addressed the major policy objective of expandingterminal education and the supply of qualified workers and technicians. Becauseit was proposed and prepared by the CONALEP administration, with assistance fromthe Bank, the project reflected CONALEP'S medium and longer-term planningefforts.

10. The project was well prepared. Its design was clearly defined andappropriately set forth so as to ensure that project objectives were attained bythe respective project components, which were feasible and economical. If therewas any shortcoming, it was that the project still placed too much emphasis onphysical expansion and less on the effectiveness of administration and efficiency

4

of training programs for the project objectives set forth. The extensiveparticipation of key staff in the project institutions--i.e., CONALEP, NAFIN andthe Government--resulted in full agreement and a clear understanding by allconcerned parties.

11. As for the scope of the project, certain modifications were made during theprocess of appraisal in accordance with the evolving understanding of thecountry's financial capacity--notably, a reduction in the number of centerstargeted for construction (from 130 to 97), as well as in the Loan amount (from$115.0 million to $81.0 million), made during negotiations in April 1985 (para.12(b)). (These changes also reflected: (a) the price changes from the time ofappraisal; and (b) price contingency adjustments in accordance with revised Bankestimates of international inflation.)

E. Proiect Implementation

12. Critical Variances in Prolect Implementation. Three factors contributedto a delay of one and half years in project completion (Table 2).

a) at the beginning of the project there was some confusion as to theproper routing of communications between the major participants ofthe project--i.e., the Bank, NAFIN (the borrower), CONALEP (theexecuting agency), and the Government (the guarantor). Thus,although Loan 2559-ME was approved in May 1985, and was signed onJuly 16, 1985, it did not become effective until December 18, 1985,after the Bank, NAPIN and CONALEP, through appropriate dialogue,agreed that all communications between CONALEP and the Bank would bechanneled through NAEIN. This lag between Loan signing andeffectiveness put equipment procurement and installation for 40centers about eight months bphind schedule.

b) The decision made by the Government in 1988 to increase the numberof centers targeted for construction from 97 to 130 centers resultedin the need for additional implementation time for both civil worksand equipment procurement. 130 centers had originally beenappraised for construction, but as a part of the Government'sausterity measures, this number was reduced to 97, and the Loanamount was reduced from US$115.0 million to US$81.0 million, duringnegotiations in April 1985. In 1988, however, additional localfunding became available, and the number was increased back to 130.

c) Two complete changes in the upper levels of CONALEP'sadministration, and consequent lack of familiarity by new CONALEPadministrations with Bank processes and procedures resulted indelays that were compounded by unavailability to incomingadministrations of some critical project-related documents.

13. One additional shortcoming worth mentioning is that during implementation,some delays in the installation of large quantities and heavy or sophisticatedequipment were experienced when plans were made for instructors to carry out suchinstallation. This points out the need for installation of such equipment to be

5

contracted to the respective suppliers as part of the equipment supply contract.

14. Proiect Risks. The potential risks identified by the appraisal missionwere mitigated through careful and responsive planning. The ability of CONALEPto pay competitive salaries diminished the problem of teacher recruitment;favorable student/teacher ratios and well equipped facilities to aid in practicalapplication of course work improved student retention; and CONALEP'S provencapacity for implementing innovations diminished the risks of non-materializationof expected benefits from the production units.

F. Ma1or Results of the Project

15. Proiect Obiectives. Project objectives were met and in some aspectsexceeded. In particular, and with few exceptions, the attainment of quantitativegoals was significantly in excess of planned ones.

16. Improvements in CONALEP's operational efficiency, as a result of the inputsfrom specialist assistance, fellowships and management training, were: (a) anincrease in the completion rate of the new student body from 40Z on the averageover the period 1979-86 to 52% at present (if the student dropouts in the firstsemester are not counted, this rate is more than 90%) (paras. 17 and 18); thecompletion rate is expected to continue to increase considerably as all trainingcenters reach their third full year of operation (although it is unlikely thatthe overly optimistic appraisal target of 78% for regular programs will bereached in the near future unless some extraordinary measures are taken byCONALEP); (b) more effective use of the advisory committees and industrialassociations in setting training program priorities and in improving programeffectiveness, as a result of establishing a more concise set of guidelines forthe activities of the local and national committees in about 90% of CONALEP'scenters; Annex 3 shows CONALEP's present regulations and working procedures forboth levels of committees; it is worth mentioning that advisory committees wereinstrumental in bringing about a large flow of donations that CONALEP receivedfrom industrialists (Annex 4) and in providing guidance for graduate placement;(c) 654 staff-years of specialist assistance and 76 staff-months of short studytours abroad, for improved administrative efficiency; (d) the upgrading of thegraduate placement program; and (e) extension of a graduate tracer system to allcenters that have been operational sufficiently long to have produced graduates(Annex 7); this system was in an incipient stage at the time of appraisal ofCONALEP II.

17. The improvement of student-flow efficiency in the CONALEP system has provento be as difficult an issue as for the rest of the educational system. Thecompletion rate for the student cohort ending in 1990 was 52%. This includes allthe students that were entitled to a training certificate--e.g., as "tecnicosauxiliares", and those who completed the three year terminal technician program.This percentage is about the same as the one for academic general secondaryschools.

18. One main problem with the student flows has been clearly located at the endof the first semester, when about 40Z of the initial enrollment drops out. (Boththe PCR and the Project Audit Report for CONALEP I have identified this problem

6

and advanced possible causes for it.) The reasons for this situation are notclearly defined, although it has been a secular problem in Mexico. Factorsseemingly associated with this problem are: (a) inadequate student selection andorientation; (b) high academic/training standards; (c) relatively high tuitioncharges of CONALEP (Mex$70,000 contrasted to Mex$1,000 paid by public universitystudents); and (d) the continuing strong preference for academic secondaryeducation as a means of university entrance. CONALEP authorities are aware ofthis problem and took some corrective measures in September 1990, the results ofwhich will not be available until after the end of the school year (June 30,1991). At any rate, CONALEP has also agreed to further analyze the problem andhas included an in-depth study and the development of a consequent action planas part of a proposed Third Technical Training Project.

19. The implementation of the component for increasing the supply of skilledworkers and technicians through the construction, equipping, and furnishing oftraining centers greatly exceeded the planned quantitative goals. Specifically,as the result of additional local funding becoming available, CONALEP II was ableto establish 130 training centers, for a total of 252 centers for CONALEP I andCONALEP II combined; thus, a substantial increase in the number of trainees asproposed in the SAR was realized. In fact 129,000 students enrolled in regularas well as in upgrading programs in phase II centers (including enrollments madepossible by the expanding mobile training system (Annex 11)), surpassing the90,000 expected at the time of appraisal, and resulting in a total enrollment inphase I and II centers combined, of 239,000 (as opposed to an appraisal estimateof 200,000). Outputs from the regular three-year program were somewhat lowerthan expected (about 14,000 from phase II centers vs. an appraisal estimate of21,600; and 40,400 from phase I and II centers combined vs. the appraisalestimate of 48,000) due to a Government/CONALEP decision to allocate a largenumber of t-aining places for the upgrading of trainees of the Manpower TrainingProgram, under Loan 2876-HE; as a result of the same decision, however, thenumber of workers upgraded in CONALEP II centers was 312 over estimates (21,100actual vs. 16,200 estimated at appraisal; 41,000 workers received upgradingtraining under both projects combined, as opposed to an appraisal estimate ofonly 36,000). The total output from phase II centers was 35,100 trainees vs. theappraisal target of 37,800 (Table 8b). The implementation of this component alsocontributed to increases in enrollment in industrial, administration and healthtraining programs; those in agriculture and fisheries were somewhat lesssuccessful than planned, which points to a need for review of ongoing programsin agriculture and fisheries by qualified personnel, including professionalorganizations and employers, to reevaluate its objectives and curriculum content.It is worth noting that due to rapid developments in technology in Mexico,changes in the needs for shops, laboratories and other support spaces, as wellas occasional needs for equipment redistribution, were noticed, emphasizing theneed for space planning criteria to take into account both expected immediate useof these spaces and items, as well as possible medium and longer term usesresulting from such technological changes.

20. Improvements in the auality of instruction were attained throught

7

(a) *nhancements in instructional capabilities; a total of 17,6953 instructorsreceived pedagogical training during the implementation of the CONALEP II projectto finally reach a total of 27,965 instructors in both projects combined (theappraisal target for total number of instructors receiving training under bothprojects combined was 10,000, but corresponding numbers actually attained are notavailable) (Table 8b); and (b) course syllabi improvements in about 40Z of thecourses, through approximately 367 M/Y of specialist services (Annex 6); duringthe project's life, 1,111 publications were produced by CONALEP, totaling 6.8million copies that included textbooks, bulletins, syllabi, training materials,guidelines, handbooks, leaflets, extension bulletins, journals and manuals.

21. In the context of improving quality of instruction, the project alsosupported the introduction of pilot production training programs in 70 centers(24 were targeted at appraisal). This program was designed to enhance training(by making furniture and equipment and by providing practical hands-on trainingopportunities), to improve student motivation and to reduce training costs andcapital investment costs financed from the regular budget. The pilot productionprogram to enhance cost recovery in high capital and recurrent costs programs wasoriginally financed under the Loan with an input of US$600,000; this amount wassupplemented with additional local funding, which enabled expansion of theprogram to 70 centers. Through this program, trainees produced 62,000 items offurniture, hand tools and equipment. These items to be used by CONALEP centershelped as well to furnish and equip the 33 additional centers reinstated in theproject (para. 12(b)). These items have an estimated commercial value of aboutUS$2.2 million and a production cost, not including the value of student labor,of about US$1.27 million. (Annex 7 shows a list of items produced and acomparison of commercial cost with CONALEP's cost per item.) Thus, in additionto enhancing quality of training, this program had a net savings of aboutUS$930,000 for CONALEP. This savings enabled more training places to be equippedunder the project. CONALEP intends to continue with this program and plans touse items produced to furnish other Government training centers under theproposed Third Technical Training Project.

22. The project also supported further development of a maintenance system forbuildings. furniture and eguipment, which, in addition to training enhancement,also resulted during 1990 alone in: (a) an estimated value of about US$1.05million of maintenance activities being conducted by trainees and instructors;and (b) the development and utilization of operational manuals for the repair andpreventive maintenance of 549 items of specialized equipment. However, policiesfor spare parts inventory control and procedures for replacing equipment have notbeen officially established. In its modernization program, CONALEP isestablishing in each of the 252 training centers a maintenance unit appropriatelyequipped to handle general building and ground maintenance and furniture repairat the local level; these activities will be carried out with the assistance ofinstructors and advanced students.

23. Impact of Proiect. An analysis of the full impact of the project will haveto await a few more years until all CONALEP centers can have produced graduates,

3 This figure includes double counting of instructors taking more than onecourse.

8

and such graduates can have obtained some work experience. Nonetheless, thegraduate tracer studies incorporated as part of the project have already producedsome preliminary data on the economic and social impact of the project andCONALEP training programs. Also, the development of strategic training optionsand efficiency improvement measures taken by CONALEP on its own initiative canbe taken as evidence of the preliminary impact of the project on CONALEP'Rinstitutional capacity.

24. Through the graduate tracer system (para. 16), it has been determined thatabout 622 of the graduates of CONALEP's three-year program find paid employmentwithin three months after course work completion (it is worth noting that thesethree months constitute a major vacation period, and thus hiring of graduates isnot completed); about 84% of these are employed in their area of trainingspecialization. The follow-up program has also provided evidence that theaverage income of graduates in 1991 is about Mex$6.7 million or about US$2,280per year--170% of the minimum wage (currently at about Mex$4 million per year);it has also shown that the labor market entry wage of CONALEP graduates rose tothis level from 150% of minimum wage in 1987; the graduates do not have anyprevious earnings since most have never worked before. The follow-up studies,however, do not provide information about stability in employment for CONALEP'sgraduates; an assessment of employer satisfaction, though, can serve to a certainextent as a proxy. In the survey, 92% of the employers, representing ninedifferent economic sectors, who have hired CONALEP graduates expressedconsistently over the four year period that the training of these employees was"good" or "excellent"; dissatisfied employers were less than 1%. Since employerstend not to dismiss workers with whom they are satisfied, it is very probablethat those workers hired are retained beyond the initial three months. Moreover,based on the fact that most employers were satisfied with the training of CONALEPgraduates, it is also quite likely that such employers hire additional graduates,beyond the 622 mentioned above, after the first three months. The follow-upstudies do not cover changes in employment status and salary levels or changesresulting from the variety of shorter courses (in-service and retrainingprograms) that CONALEP offers, and thus do not allow a precise economicevaluation of these training programs. However, there are separate studies andestimates in terms of their levels of employment and earnings after training.'CONALEP's overall placement performance, including the retraining of thoseunemployed before the course, is estimated at about 78% (weighted average for allcourses); these preliminary findings would have to be followed up, however, withthe amplification of the graduate tracer system (information and analysis of datapresented by CONALEP is included in Annex 5). Deeper analysis is needed aboutplacement and earnings, including comparison of earnings and employment historiesof those with training and those without training at several time intervalsfollowing graduation, and with regard to direct and indirect costs of the variousprograms.

4 The Mid-Term Evaluation Report (March 1991) prepared by the Secretary ofLabor under the Bank-financed Manpower Training Project (Loan 2889-ME, 1987), anda special Bank study to evaluate the impact of the retraining program under theproject, carried out by Population and Human Resources Technical Division,Country Department II, Latin America and the Caribbean Regional Office (LATPH)(February 1991).

9

25. As mentioned earlier, achievements with regard to CONALEP's institutionalcapacity and efficiency were considerably greater than what was planned atappraisal. Indeed, in addition to the improvements already mentioned, thefollowing increases in efficiency were also realized:

(a) The eligibility criteria for the creation of new centers developedby CONALEP, its National Advisory Council and the Bank missionsduring the first project were revised for the second project, andwere utilized in all cases for the creation of new centers. WithBank assistance, CONALEP refined the eligibility criteria for thecreation of future training institutions, and developed guidelinesfor the allocation of equipment funds.

(b) Cost recovery from the student body is almost 101 (this rate isclose to CZ for the technical secondary schools) and fromenterprises more than lOZ, not counting contributions in kind, whichconstitute the majority of contributions (Annex 8). About US$36million equivalent of cash or in-kind (furniture, equipment and landsites) donations have been received between 1984-1990 (Annex 4).During budget year 1990 CONALEP received from non-budget sources--private and public enterprises and associations--other cash incomeand donations in kind amounting to a value of about US$13 million,and equal to about 14% of total 1990 recurrent expenditures (Annex9).

(c) Other efficiencies have been attained through: increases in thesize of existing institutions where employment demand justifies it;a continuous implementation of the certification system; and a moreintensive use of CONALEP facilities (Annexes 11 and 12).

26. As a result of the strengthened efficiency and institutional capacity,CONALEP's achievements in developing and implementing strateaic training Rrogramssurpassed appraisal targets. In fact, four innovative pilot programs, notanticipated under the Loan, were not only developed but also carried out duringthe implementation of the project, in support of the Government's 1989-94development plan, without further support from the Bank (using Government andprivate funding). The major thrust of these programs was directed at assistanceto marginal populations, micro-industry, self-employment and the in-bond assemblyindustries (maquiladoras). The major outcomes of these programs were: (a)marftinal poDulations - 70 low income groups in the federal district were trainedin home maintenance, utilizing mobile training units constructed in CONALEPtraining centers (Annex 11), and through the actual repair of 212 selected lowincome homes; and 391 heads of families were trained in the 12 basic skillsrequired for the repair and maintenance of public school furniture and utilities;(b) self employment - through a series of supplemental courses offered for thebetter students in selected career programs, about 9,100 third year traineesreceived special training, by qualified and experienced specialists, in thevarious aspects of self employment development including planning, initiating,operating and marketing of goods and services for which there is an unfulfilleddemand, and in the preparation of applications of credit; this program wasinitiated in 42 training centers in 1987-90. So far, 103 small businesses havebeen established, generating employment opportunities for 326 workers directly,

10

and 1,300 indirectly; National Finance Co., Inc. (NAFIN) has established alimited line of credit to assist them; and (c) maguiladora industry - about 30maquiladora enterprises benefited from CONALEP's pilot program in the trainingof in-plant trainers, by whom a total of 2,536 workers received training in 834companies; nearly all of the costs were recovered from the participatingenterprises. These strategic programs would be strengthened and expanded underthe proposed CONALEP III project, based upon thorough evaluation of their impacton low income groups.

27. Additionally, CONALEP explored under this project and is presentlypromoting the initiation of outreach training systems to develop flexiblealternatives to meet short and medium term local and regional needs, including:(a) for the second semester 1991, flexible modular training programs in whichapplicants who have not met the formal entrance requirements, or who cannotattend on a full-time basis, can be admitted to study in the evening for thetechnician certification; (b) beginning in 1991/92, a technological serviceprogram which would provide support to other CONALEP centers as well as to micro,small and medium enterprises, and contribute to the enhancement of teachertraining quality, advanced technology pre-service training, and high level in-service training in eight selected centers; and (c) also beginning in 1991/92,implementation of pilot mobile training programs linked with productiveactivities designed to foster cost reduction and recovery for CONALEP.

28. CONALEP has also benefited from administrative experiences gained in theimplementation of a project of this magnitude and complexity, and particularlythrough the following activities: (a) the introduction of improved procurementprocedures--notably, the development and implementation of a computerizedprocurement program, with complete specifications maintained on-line, and withitems/contracts packaged into highly homogeneous groups that facilitatetendering; (b) the rationalization of classroom areas in school design; (c) themanagement of technical assistance programs; and (d) the redistribution oflaboratory equipment and teaching aids between centers in accordance withcurricula and changes in the demand for training.

G. Prolect Sustainabilitv

29. The sustainability of project benefits is closely linked to the questionof the long-term technical relevance and financial sustainability of CONALEP asa predominantly federally financed and operated training system. Since itsinception in the late 1970., CONALEP has established itself as the backbone ofthe entire Mexican system of workforce training and upgrading,5 and has enjoyedstrong support from politicians, entrepreneurs and the labor sector, which hasessentially protected it from budget cuts even during recent severe austerityprograms. Nevertheless, CONALEP is actively seeking to diversify its funding,

' It should be noted that CONALEP provides both training and upgrading atthe skilled worker level, and at the same time compensates to some extent for thelack of a post-secondary system for training of technicians in Mexico; about 40Zof CONALEP graduates are employed as technicians, including in high-techindustries.

11

including updating its strategy for improving cost recovery/cost sharing ofoperational costs of training from the private sector (especially under aproposed Third Technical Traini-ng Project); cost recovery in cash and in kind(not including land) in 1990 amounted to US$12.9 million, or almost 14% ofCONALEP's total recurrent budget, up from US3.1 million in 1989 and US$2.3million in 1988. CONALEP maintains close links and good standing with employers,providing the best guarantee that it will remain relevant to the training needsof enterprises. These links include: establishment and maintenance ofindustrial advisory boards for each center and region to advise CONALEP indetermining training priorities and course content; contracting of courses withemployers; production of industrial prototypes under contract with enterprisesand public agencies; development of learning aids (including simulator equipmentand video programs); and production of finished goods such as school furniture(to the extent such production is consistent with efficient practical training).Close to US$1.0 million was earned in 1990 through productior-for-revenueprograms. CONALEP is also raising tuition fees for its regular courses (suchfees have always been charged but amounts has been eroded by inflation) to coverabout 10% of training costs. In addition, the project has enabled CONALEP tosave on recurrent expenditure, for instance through the maintenance system whichhas produced annual savings of over US$1.0 million through systematic use ofinstructors and students to do qualified maintenance work. These and otherefficiency measures introduced by CONALEP, some as part of the project and someon its own initiative, also serve to assure the long term sustainability ofproject benefits. Under a proposed follow-up project, the Third TechnicalTraining Project, CONALEP intends to further develop, systematically, links withemployers, to diversify and introduce flexibility in the services it offers toenterprises, and to strengthen its cost recovery systems so as to consolidate itsposition and ensure future relevance and financial viability in an environmentof constant change.

H. Bank Performance

30. Maior strengths and weaknesses. Bank assistance to the project allowedacceleration of investment programs in technical education and training tosupport the Government's efforts in expansion of and institution building in theterminal technical training system. Bank staff contributed to the success of theproject through supportive working relationships and professional advice andthrough constructive dialogue and rapport between Bank staff, NAFIN and CONALEPstaff. Project implementation was closely monitored by the Bank, drawingattention to potential difficulties, especially those in furniture and equipmentprocurement.

31. The Bank's supervision effort was adequate. The Bank fielded twelvesupervision missions in the six year disbursement period, with an average of 6.17staff-weeks per year. There was good staff continuity between missions; Table11 shows levels of specialization, frequency and number of staff in charge of thesupervision work. The supervision staff weeks represent a smaller amount thanaverage for the country, which is partly due to the maturity of CONALEP;nonetheless, a greater amount of staff weeks could have accelerated projectimplementation and sporadic slowdowns of the implementation, especially when thenew administration of CONALEP took over the p-oject implementation.

12

32. Lssogns Learned. The principal lessons learned with implication for futureprojects, as a result of the experiences during project implementation and thepreparation of the PCR are summarized as follows:

(a) in view of observed delays in project implementation as a result ofthe lack of familiarity by new CONALEP Administrators with Bankprocess and procedures, a short seminar on project implementationehould be conducted by Bank Supervision Missions when such changesoccur; moreover, Bank missions should ensure that multiple copies ofall project related documents are maintained in projectimplementation unit archives (para. 12(a));

(b) in view of the fact that installation difficulties were experiencedin a few institutions where large quantities and heavy orsophisticated equipment was involved, the Bank should ensure thatsuch installation is contracted to the respective suppliers as partof the equipment supply contract (para. 13);

(c) in view of the still acute problem of internal inefficiency (such aslow completion rates and high unit costs in some training centers),the Bank should ensure that the causes of such inefficiency areinvestigated and that proper remedial actions are taken (paras. 17-18);

(d) in view of the shortcomings of the design of the graduate follow-upsystem and of the method for evaluating the effectiveness of CONALEPprograms, the Bank should at an early stage of project preparationfocus more attention on the design of an economic evaluation oftraining programs (para. 24); and

(e) in view of the sporadic slowdowns in project implementation,especially when CONALEP's administration was changed, and of the twoyear delay in project implementation due partly to the lack ofcoordination among participating agencies, greater and more frequentsupervision efforts should be made in large and complex projectssuch as this one (para. 31).

I. Borrower Performance

33. Major Strengths and Weaknesses. As expected at appraisal, and except forthe initial delay in project implementation (para. 12), NAEIN'S performance incoordinating the project, and CONALEP'S performance in executing it were of highstandards and very satisfactory, as was CONALEP's proficiency in project planningand implementation and its competence in project management. Projectcoordination, implementation, supervision and monitoring was the responsibilityof the administrative directorates of CONALEP, which performed creditably inimplementing Loan 2559-NE as they had previously done with Loan 2042-ME. Allcomponents were implemented efficiently and effectively, and appropriate staffwere deployed as necessary. A major strength of the Borrower was the extensiveinvolvement of key staff in the implementation of the project. It is worthmentioning that, with regard to procurement, the project benefited from CONALEP's

13

well-designed, staffed and experienced procurement system, which includes theutilization of an *dvanced computerized procurement program.

34. Lessons Learned. Major lessons learned by participating teams were thefollowing:.

(a) multiple copies of all project related documents such as SAR workingpapers, monitoring tables, Bank guidelines, etc., should be placedin appropriate institution files and be available for daily use(para. 12(c));

(b) in view of the fact that installation difficulties were experiencedin a few institutions where large quantities and heavy orsophisticated equipment was involved, such installation should becontracted to the respective suppliers as part of the equipmentsupply contract (para. 13);

(c) in view of the fact that advisory committees were instrumental inbringing about a large flow of donations that CONALEP received fromindustrialists during the 1984-90 period (Annex 4) and in providingguidance for graduate placement, and considering the potential forgreater private sector involvement in improving the placement recordof pre-service trainees through assistance in course design, suchlinkages with private sector industries should continue to receivehigh priority (paras. 16 and 24);

(d) in view of the still acute problem of internal inefficiency (such aslow completion rates and high unit costs in some training centers),CONALEP should investigate the causes of inefficiency and takeproper remedial actions (paras. 17-18);

(e) in view of relatively rapid developments in technology in Mexico,and their implications on space planning criteria and requirementsfor shops, laboratories and other support spaces, as well as forequipment redistribution, consideration should be given not only tothe expected immediate use of these spaces but their possible mediumand longer term uses resulting from technology changes (para. 19);

(f) in view of the surplus training capacity in a few agriculturalprograms in some more remote areas of the country, where the demandfor training is not well defined, qualified personnel fromprofessional organizations must participate in the analysis ofdemand and of development of programs (para. 19); and

(8) in view of the shortcomings of the design of the graduate follow-upsystem (such as a short follow-up period and a lack of controlgroups for comparison of the effectiveness of CONALEP trainingprograms), CONALEP should take proper remedial actions to improvegraduate tracer systems (para. 24).

14

J. Project Relationships

35. Imiact of Relationship on Project Implementation. One of the contributingfactors to the successful implementation of the project was the result of thegood working relationships (once a short term problem between NAFIN and CONALEPwas resolved (para. 12(a)]) between the Bank, NAFIN, and CONALEP.

K. Technical Assistance

36. Role. Performance Level and Implications of Involvement. For the SecondTechnical Training Project, CONALEP'S administration requested support to financethe costs of specialist assistance and short study tours/internships abroad forstaff to observe, study and participate in administrative and industrial advisoryactivities which were applicable to the CONALEP system. A total of onlyUS$780,000 was provided under the Loan. However, during implementation,expenditures under this category were substantially supplemented by about US$4.6million of local funds to assist in: (a) designing and constructing anadditional 33 project schools (para. 12(b)); (b) carrying out training programsfor professional staff; (c) improving the existing instructor recruitment andtraining system, including the development and improvement of training materials;(d) strengthening CONALEP'S capabilities to identify new training alternativesas raquired to address local and regional needs; and (e) conducting study tours,fellowship training, and observation tours. In the implementation of theproject, 2,420 S/Y (compared with 352 S/Y originally planned; the cost oftechnical assistance was increased by 6.87 times, mainly from non-Loan funds)covered the above needs (Annex 6).

L. Prolect Documentation and Data.

37. Adequacv of Staff Appraisal Report and Maior Workint Papers. The AppraisalReport, Loan, Project, and Guarantee Agreements, were quite adequate for projectimplementation. The PCR mission was informed by CONALEP that the SAR workingpapers, which were most necessary to project implementation had been misplacedand were not available when the current CONALEP administration took office inmid-1989 (para. 12(c)).

15

PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE6

A. Adequacy and Accuracy of Factual information in Part III

38. The project implementation data (Table 4), proje^t costs and financing data(Tables 5 and 6), direct benefits of the project (Table 8) and the status of LoanCovenants (Table 10) defining the project profile at completion, were allprepared by the Borrower. They were discussed thoroughly while the Bank PCRmission was in the field in March 1991.

B. Evaluation of Bank's Performance and Lessons Learned

39. The Bank made significant contributions in the evolution, preparation anddevelopment, through appraisal, of the project. However, there were aspects ofthe supervision of project implementation which should have been strengthened.These included: supervision of the agriculture and fisheries programs byqualified specialists; earlier assistance in developing methodologies fortechnical assistance implementation; and finally, the services of projectimplementation specialists when internal changes in CONALEP took place becausethe arrival of a new CONALEP administration.

40. The malor lessons learned were: (a) a short seminar should be conductedby the Bank missions on project implementation, particularly in Bank processesand procedures in Bank supervision of project implementation; and (b) the overallcommunication between the Bank and the Borrower should be sufficiently welldocumented so that when the changes in government or mission personnel occur,such changes will not adversely affect project implementation.

C. Evaluation of Borrower's Own Performance and Lessons Learned

41. The performance of the participating institutions, NAFIN and CONALEP, inoverall project planning was good. The implementation of Civil Works, Furniture,Equipment and Materials, and Technical Assistance, were carried out with littleor no problems. However, equipment procurement temporarily suffered when somechanges in the administration of the Institution took place in mid 1989;fortunately the new administration soon gained appropriate insight, and projectimplementation proceeded with only about 2-3 months of delay.

42. The maior lessons learned were: (a) for future projects, carefulconsideration is required for establishing the space planning criteria and spacerequirements for classrooms and shops, because of cost implicationsa (b) whenequipment redistribution is required because of shifting of programs from oneschool to the other, it should be based mainly on weekly hours of use, size andtype of programs; and (c) regarding equipment procurement, when large numbers ofinstitutions and large quantities of heavy or sophisticated equipment areinvolved, the installation should be contracted to the respective suppliers (asthe Bank has recommended since the beginning of the project).

6 This section was jointly prepared by CONALEP and NAFIN, with theassistance of a Bank mission.

16

PART III. STATISTICAL INFORMATION

A. Related Bank Loans

Table 1 : IBRD LOANS RELEVANT TO THE PROJECT

Loan Number Year of Purpose of Status CommentsProject Title Approval Project

Ln 2042-ME 1981 A technical Completed SuccessfullyCONALEP I training project implemented

to support thefirst phase ofCONALEP'sdevelopmentprogram.

Ln 2876-ME 1987 Support tot Under Proceeding(a) training for implementation well.unemployed youth CONALEP is aand adults; major(b) training for provider ofSTPS staff in this shortlabor market retrainingmonitoring; and course.(c) planning andpromotion of in-service trainingby enterprises.

17

B. Proiect Timetable

Table 2: PLANNED, REVISED, AND ACTUAL DATES OF PROJECT TIMETABLE

Item Planned Date Revised Date Actual Date

Identification Mission 09/84 08/84

Prep.Appraisal Mission 11/84 ----- 11/84

Loan Negotiations 04/85 ----- 04/85

Board Presentation 05/85 ----- 05/85

Loan Signature 07/85 ----- 07/85

Loan Effectiveness 10/85 01/86 12/85

Project Completion 06/89 06/90 12/90

Loan Closing 12/89 12/90 06/91

Comments-on Timetable

The delay between Loan signing and Loan effectiveness put equipmentprocurement and installation for 40 centers about eight months behind schedule.The Bank supervision mission from June 12-17, 1989 was pleased to note that thenew administration of CONALEP had become, in a very short time, fully aware ofthe current status of project implementation and of the remaining projectactivities to be completed.

18

C. Loan Disbursements

Table 3: CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS(US$million)

CY 1985 1986 1987 1988 1989 1990 1991 La

Appraisal Est. 6.9 23.5 49.0 72.0 81.0

Actual 11.5 30.7 54.0 65.4 75.2 79.3

Actual as % of Est. 49% 63% 75% 81%La Actual disbursements as of May 23, 1991; the Loan was fully disbursed byJuly 26, 1991.

Comments on Timeline of Disbursements

The delay of about one year as shown in the timeline of the planned and actualdisbursements schedule (Table 3) is only four months longer than the delay inimplementation that resulted from the delay in Loan effectiveness referred to in para.12(a). The inclusion of the 33 additional centers (para. 12(b)) also increased theimplementation time. The remaining balance of the Loan is expected to be disbursed byearly June to finance the procurement of the last package of equipment, which isexpected to arrive at CONALEP by the end of May.

TIME LINE OF DISBURSEMENT SCHEDULE

USs Cm} I1 lon)10.0,

0.0i9as 1966 1967 1968 16 90 19

* Appra lea Estimte - ActtLa I

80 0 -11,111111-ll" Il "'l,l" Il" II ... ...........- * .......... M-2........

19

D. PROJECT IMPLEMENTATION

Table 4: PLANNED AND ACTUAL COMPLETION DATES OF COMPONENTS

Training Centers Civil Works Furniture andEquipment

Planned Actual Planned Actual

1 2 3 4 5

Existing ( 8) Phase A - (40) 12/86 } ----- 03/87 12/90Phase B - (24) 03/87 } ----- 06/87 12/90

}Phase C - (20) 03/88 } ----- 06/88 12/90

Phase D - (5) 12/90 } 12/90 03/89 12/90}

Phase E - (31) 06/89 } ----- 12/89 6/91

1282 (Centers financed from bilateral assistance)

Total 130

Comments on Prolect Implementation

Civil works was not carried out on a phased basis; all civil works were completedby December 1990.

Furniture and equipment installation was completed essentially in accordance withcolumn 4. However, some supplementary equipment procured, was not delivered andinstalled until the date shown in column 5. The remaining balance of the Loan isexpected to be disbursed by early June to finance the procurement of the last packageof equipment, which is expected to arrive at CONALEP by the end of May.

The increase in the number of centers from 97 to 133 (para. 12(b)) resulted inadditional implementation time for both civil works and furniture and equipmentprocurement.

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E. Pro1ect Costs and Financing

Table 5: PROJECT COSTS(US$ million)

Estimated Costs Actual Costs------------------------------------------

Local Foreign Total Local Foreign TotalCosts Costs Costs Costs Costs Costs

-----------------------------------------------------------------

1 2 3 4 5 6

Existing Civil Works 7.42 1.86 9.28 10.36 5.20 15.56New/Additional works 40.64 10.16 50.80 47.67 47.67Furniture & Equipmt. 16.52 60.15 76.67 13.15 76.77 89.92Production Supplies 0.30 0.30 0.60 5.13 0.62 5.75Technical Assistance 0.39 0.39 0.78 4.88 0.62 5.50

--------------------------------------------

Total Base Costs 65.27 72.86 138.13Physical Contingencies 2.89 3.55 6.44Price Contingencies 11.29 6.36 17.65

----------------------------------------------

TOTAL PROJECT COSTS 79.45 82.77 162.22 81.20 83.21 164.41

Comments on Prolect Costs

Contingencies are not disaggregated in actual costs (Columns 4, 5 and 6) as theynaturally are included in the actual costs figures for each category of expenditure.

As the Loan did not disburse against construction costs and all construction wasprocured locally, the percentage of foreign cost is not known; but was estimated at 20% as was used in the SAR cost estimate.

The cost overrun for furniture & equipment was due entirely to the inclusion of33 centers added to the project (Table 4).

Additional costs of the production supplies which were used in the highlysuc=essful pilot production program to enhance cost recovery and savings resulted fromthe greatly expanded pilot production program as shown in Table 8 (c).

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Table 6: PROJECT FINANCING(US$ million)

Source of Funds Planned (Z) Revised Final (2)

IBRD Loan 81.00 (49.9) - 81.00 (49.3)

Local Funds 81.20 (50,1) - 83.41 (50.7)

Total Project Coats 162.20 (100.0) 164.41 (100.0)

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Table 7 : ALLOCATION OF LOAN PROCEEDS(US$ million)

Original ActualCategory Allocation Disbursements a/

(1) Equipment (includinginstallation), productionmaterials and supplies 70,800,000 78,813,000

(2) Technical assistance andtraining materials forstrengthening managementcapabilities 780,000 474,000 b/

(3) Unallocated 9,400,000 -

81,000,000 79,287,000

a/ As of May 23, 1991; the Loan was fully disbursed by July 26,1991.

b/ Expenditures in this category were supplemented by aboutUS$4.6 million of local funds, thus reducing the need for Bankdisbursements in this category (para. 36).

23

F. Pro1ect Results

Table 8 (a): DIRECT BENEFITS OF PROJECT FOR TOTAL CONALEP SYSTEM

Actual BenefitsEstimated at ARDraisal (June 30. 1991)for for for forCONALEP II CONALEP I and II CONALEP II CONALEP I and II

combined combined

CIVIL WORKS

Training Centers 97 219 130 252Mobile Training Units 4 4Units under construction 15 15

PURN..EQPT..& MATERIALS

Purchased (2) 100 100 100 115Installed Z 100 100 100 96

Comments on Proiect Benefits

The increase in the number of training centers is a result of the return, in1988, to the full number of centers originally appraised but which, because ofGovernment austerity measures, were removed from the project at the time of Loannegotiations (para. 12(b)).

About 15% more furniture and equipment was purchased than was planned, as aresult of the increased number of centers.

24

F. Proiect Results.(Cont.)

Table 8 (b): DIRECT BENEFITS OF PROJECT FOR TOTAL CONALEP SYSTEM

Actual BenefitsEstimated at Appraisal (June 30. 1991)for for for forCONALEP II CONALEP I and II CONALEP II CONALEP I and II

combined combined

STUDENTS & INSTRUCTORS

Students Enrolled:Regular Programs 72,000 160,000 85,682 173,682Up-grading Prog. 18,000 40,000 43,466 65,466

-------------------------------------------------------

Totals 90,000 200,000 129,148 239,148

Instructors:No. Employed 7,500 16,700 6,050 12,770No. of Hours/Week (10) (12-14)of Teaching

Receiving pedag. training 10,000 27,695

EFFICIENCY & OUTPUTS

Completion Rate Z .3 52

ANNUAL OUTPUTS

Technicians &Skilled Workers(3-year programs) 21,600 48,000 13,982 40,382

Workers Upgraded 16,200 36,000 21,140 40,950-------------------------------------------------------

Totals 37,800 84,000 35,122 81,332

Comments on Proiect BenefitsThe actual number of instructors who received pedagogical training (27,695)

includes double counting of instructors taking more than one course.

Outputs from regular three-year programs--technicians and skilled workers--aredown because of the Government/CONALEP decision to have CONALEP provide training forparticipants in the Manpower Training Project as described below.

Outputs of workers upgraded, are up by 311 over estimates as a result of adecision to provide a very large number of training places for the trainees of theManpower Training Program, under Loan 2876-ME.

25

F. Proi-ct Results.(Cont.)

Table 8 (c): DIRECT BENEFITS OF PROJECT FOR TOTAL CONALEP SYSTEM

Actual BenefitsEstimated at Appraisal (June 30, 1991)

CONALEP II CONALEP II

TECHNICAL ASSISTANCE (S/Y) 352 2,420

PILOT PRODUCTION UNITSNo. Centers Participating 24 70

MAINTENANCE SYSTEMZ of Centers Participating 100 100

FOLLOW-UP SYSTEMZ of Centers Participating 100 100

Comments of Proiect Benefits

During project implementation, expenditures for technical assistance weresupplemented by US$4.6 million of local funds, thus allowing an increase of 6.87 timesthe amount of technical assistance originally planned at appraisal.

The maintenance system has been soundly initiated under the project, but will besignificantly strengthened in the proposed CONALEP III project, especially in respectto regional maintenance centers for sophisticated and high precision equipment.

The follow-up system is operational in all centers which have been functioningsufficiently long to have produced graduates.

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F. Proiect Reaults.(Cont.)

Table 8 (d):DIRECT BENEFITS OF PROJECT FOR TOTAL CONALEP SYSTEM

Actual Benefits(June 30, 1991)

EndCON.II

INNOVATIVE PROGRAMS (Not anticipated in SAR or Loan Agreement)

Self-emDlovment, No. individuals who took coursess 9,118

Home maintenance usinR mobile units.for Low Income Groups (marginal populations)

No. Groups Trained in home maintenance 70Repairing of low income homes 212

Maintenance Public School Furniture and Utilities:

No. of workers trained: 2,536No. of Companies Benefitted: 834No. Maquiladora enterprises: 31

Comments on Proiect Benefits

As a result of the fact that appraisal targets for efficiency and institutionalcapacity were surpassed, CONALEP's ability to develop and implement strategic trainingprograms was also significantly improved. These four innovative pilot programs, notanticipated under the Loan, were carried out during the implementation of the project,in support of the Goveranent's 1989-94 development plan, without further support fromthe Bank (using Government and private funding). The major thrust of these programswas directed at assistance to marginal populations, micro-industry, self-employment andthe in-bond assembly industries (maquiladoras) (para. 26).

27

G. Status of Loan Covenants

Table 9 : COMPLIANCE WITH LOAN COVENANTS

Section/Covenant Status ofCompliance

2.01 CONALEP shall carry out the Project with Yesdue diligence and efficiency with appro-priate policies and practices, and withqualified and experienced personnel.

2.02 Except as the Bank shall otherwise agree, Yesprocurement of the goods and consultantservices required for the Project and tobe financed out of the proceeds of theLoan shall be governed by the provisionsof the Schedule to the Project Agreement.

2.03(a) CONALEP shall:(i) use criteria acceptable Yesto the Bank for selecting the trainingcenters;and (ii),(a) furnish to the Bank,for its comments, by December 31, 1985,a transitional program to enable thosecenters which do not comply with thecriteria referred to in (i) above, tofulfill such criteria, and (b) implementsuch program during the years 1986through 1988.

2.03(b) CONALEP shall: (i) put into operation by YesSeptember 30, 1985, a provisional systemfor the maintenance of its equipment andbuildings; (ii) by December 31, 1986,furnish to the Bank for its comments, arevised version of it; and (iii) by March31, 1987, or such later date as may beagreed between the Bank and CONALEP putinto operation such system.

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Table 9: COMPLIANCE WITH COVENANTS (Cont.)

Section /Covenant Status ofCompliance

2.04 CONALEP shall not change or fail to Yesenforce any provision of the contractualarrangements with the Borrower withoutBank approval.

2.06 (a) CONALEP shall, at the Bank's request Yesprovide information on progress of theProject and other related matters.

2.06 (b) CONALEP shall promptly inform the Bank of Yesany condition which interferes with theprogress of the Project.

4.01 (a) CONALEP shall maintain records and acco- Yesunts adequate to reflect in accordancewith sound accounting practices itsoperations and financial condition.

4.01 (b) CONALEP shall: (i) have its accounts and Yesfinancial statements for each fiscalyear audited; (ii) furnish to the Bank(a) certified copies of its financialstatements, (b) the report of auditors;and(iii)any other information concerningaccounts and financial statements thatthe Bank may reasonably request.

4.01 (c) CONALEP shall, for all expenditures with Yesrespect to which withdrawals are reques-ted from the Loan account, maintainseparate records and accounts; retainrecords; enable Bank's representativesto examine such records; ensure thatsuch separate accounts are included inthe annual audit referred to in (b).

29

H. Use of Bank Resources

Table 10: STAFF INPUTS BY STAGE OF PROJECT CYCLE

Stage of ActualProject Cycle Staffweeks a/

Through Appraisal 48.5

Appraisal throughBoard Approval 52.9

Supervision 84.2

a/ TRS data until 01/10/91.

Comments on Staff Inputs

Staff Inputs through appraisal were appropriate both in staff weeks and missioncomposition (Table 11) to ensure a well prepared and appraised project. Data on staffinputs at Headquarters was not available.

Table 11 : MISSION DATA BY STAGES Ot'' PX0OJ`CT

StaffMonth/ No. of Area Weeks Performance

Mission Year Persons '/ in field b/ c/

Identification 10/84 3 EP,TE,A 5Prep./appraisal 11/84 5 EP,FP,TE,E,EE,LO 8

TOTAL 8 13 G P M 1

Superv. 1 08/85 1 EP 1 1 1 2 1Superv. 2 02/86 3 EP,2TE 4 1 1 2 1Superv. 3 05/86 3 EP,2TE 3 1 1 2 1Superv. 4 10/86 2 EP,TE 2 1 1 1 1Superv. 5 10/87 1 TE 2 1 1 1 1Superv. 6 05/88 2 2TE 3 1 1 2 1Superv. 7 11/88 3 2TE,TM 6 n.a.Superv. 8 01/89 2 2TE 6 1 1 1 1

O D C M F

Superv. 9 06/89 2 2TE 2 1 1 1 1 1Superv. 10 11/89 3 2TE,E 3 1 1 1 1 1Superv. 11 06/90 3 E,TE,IS 4 1 1 1 1 1Superv. 12 11/90 1 TE 1 1 1 1 1 1

TOTAL 26 37

PCR 11/90 1 IS I 1 1 1 1 1

TOTAL 1 1

it E - Economist, EE Education Economist, A = ArchitectEP - Education Planner, IS Implementation Specialist,TE - Technical Educator, LO - Loan Officer, TM - TrainingOrganization and Management Specialist.

b/ G - General Status, P = Procurement, M - Management, F = Financial

0 - Overall Status, D - Project Development Objectives,C - Compliance with legal Covenants, M = Project ManagementPerformance, F = Availability of Funds.

1 - Problem Free or Minor Problems.2 - Moderate Problems.3 - Major Problems.