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					                      PROGRAM INFORMATION DOCUMENT (PID)
                                  APPRAISAL STAGE
                                                                   Report No.: AB4661
 Operation Name           Pakistan Higher Education Support Program
 Region                   SOUTH ASIA
 Sector                   Tertiary education (70%); Central government administration (30%)
 Project ID               P102607
 Borrower(s)              GOVERNMENT OF PAKISTAN
                          Pakistan Higher Education Commission
                          Sector H-9
                          Tel: (92-51) 904-0120 Fax: (92-51) 925-7505
 Date PID Prepared        April 17, 2009
 Date of Appraisal        April 14, 2009
 Date of Board Approval   June 4, 2009

1. Sector Background

The higher education sector in Pakistan (public and private universities and degree awarding institutes has
suffered from neglect for many years. Thus, the sector lacks the capacity to leverage the knowledge
economy that the country aspires to become. Regardless of the indicator used, participation in higher
education in Pakistan is low. Sector-wide governance issues are a pervasive impediment to the optimal
functioning of universities. Administrative responsibilities in so public universities are not clearly
defined. Performance is not rewarded, let alone measured. Accountability is non-existent. The playing
field of higher education is far from being even: public institutions are privileged and despite its growing
quantitative importance, private provision of higher education services is not optimal.

Until the early 2000s, the university sector had been blatantly under-funded. The huge and unprecedented
increase in the sector budget since 2002 has been accompanied by parallel growth in student enrollments.
Therefore, in real per-student terms, the surge has been more modest, and with less than one-half of one
percent of GDP spent on its universities, Pakistan continues to lag behind other comparable countries.

Created in 2002, the Higher Education Commission (HEC) has launched a series of measures to
rehabilitate HEIs and to address the issues mentioned above. These measures are encapsulated in the
Medium Term Development Framework (MTDF-HE), which covers the 2005-2010 period. They
encompass all critical areas in urgent need of improvement: faculty development, access, learning and
research, relevance, governance and management, quality enhancement and technological development.

The measures launched – and those planned – have the potential to redress the effects of the long period
of neglect of Pakistani Higher Education Institutions (HEIs) and transform them into engines of growth.
These measures can be categorized into four pillars: (i) improving the quality and relevance of teaching
and research; (ii) broadening access to, and equity of, higher education; (iii) strengthening the governance
and management; and (iv) increasing the fiscal sustainability and effectiveness of expenditure.

The HEC’s track record constitutes a good omen for the implementation of the MTDF-HE. The Bank’s
technical assessment of the MTDF-HE, published in a 2006 Policy Note, found that the Framework was
an articulate response to the decay that characterized the sector until recently. By attacking up-front the
factors underlying the poor quality of HEIs – including the lack of qualifications, accountability and
motivation of faculty staff – HEC has started to address the root of the problems facing the sector. Bank
support is critical in helping maintain implementation momentum of key reforms.

2. Operation Objectives

Create the conditions to enhance the stock of skilled Pakistanis able to contribute to an economy
increasingly based on knowledge and technology, through an overhaul of the university sector. The HESP
supports the completion of reforms undertaken by the Government of Pakistan to increase equitable
participation, enhance quality and relevance and strengthen the efficiency and sustainability of higher
education with a view to sustaining momentum of the core reform program.

3. Rationale for Bank Involvement

HESP will contribute to the rehabilitation of the higher education sector of Pakistan by helping sustain
momentum of the core program and key accompanying reforms being undertaken by HEC through the
current period of fiscal stress. The HESP also supports the completion of upfront reforms in the areas
where it is critical to signal a strong political will and to establish credibility of the reforms, vis à vis the
academic community, the Ministry of Finance, and the private sector.

4. Financing: US$100 million

5. Institutional and Implementation Arrangements

The overall implementation and monitoring of reforms is being coordinated and managed by HEC.
HEC has an impressive track record, and has managed to launch and carry out a number of key reforms,
including some politically sensitive ones. In addition, both the Ministry of Finance and the Planning
Commission share responsibility for the financial sustainability of the program which HEC is committed
to implement with diligence. The Medium-Term Financing Framework (MTFF) prepared by HEC and
approved by the Ministry of Finance is expected to introduce predictability of resources and to avoid
major turbulences in the implementation of the program.

6. Benefits and Risks


Science and technology: Universities remain the most important forum where research will take place. By
supporting measures to encourage academic research, and to link it with industry, the HESP will
contribute to the renewal of research with higher quality standards and will help to build the chain linking
research and innovation.

Knowledge Society: The proposed operation is expected to help Pakistan to improve its position in the
Global Competitiveness Ranking and to increase the supply of a sufficient pool of youngsters with
employable skills. By increasing access, boosting quality and improving relevance, the HESP will be a
direct input to the Government’s strategy aimed to harness the potential of the younger generation, and to
improve labor productivity.

Sustainability of the higher education sector: The long neglect into which higher education has been kept
in Pakistan has cost the country to lag behind. The proposed program will help to reinvigorate the whole
sector, and the reforms supported through the operation will contribute to the long-term financial
sustainability of HEIs.

Signaling effect: By supporting the Government’s reforms to introduce accountability, transparent
management and governance structures in universities, the HESP is expected to have spill over effects
outside of the higher education sector, thanks to the emergence of a new cohort of leaders trained in an
improved governance environment. Similarly, the efforts to bring closer together the public and private
sectors in providing quality teaching and research are expected to have long term positive externalities.

Poverty reduction: The increased participation in higher education is expected to have a direct impact on
growth and on the general level of poverty. The Government forecasts an increase of the GDP per capita
from its current $900 level to $1250 by 2010. Improving the general level of education and especially of
those who will be working in the sectors driving growth is a prerequisite to achieve these results.

Risks and Risk Mitigation Measures

Political situation

Risks: Pakistan has been through a period of high turbulences. Despite recent encouraging signs, there are
still concerns regarding possible disagreement amongst main political parties on a variety of issues,
against the backdrop of local fundamentalism, regional conflicts, and intense international pressure.

Mitigation: The most recent developments lead to believe that the reform momentum will be sustained.
While the political risks remain substantial at a global level, they may not affect higher education thanks
to unanimous support to the sector.

Uncertain macroeconomic situation

Risks: Despite years of efforts to consolidate the macroeconomic framework, risks remain of increased
external shocks, trade deficits, lower capital and remittance inflows, and growing fiscal unbalances, all
resulting in a loss of confidence which would in turn trigger a vicious circle and weaken growth

Mitigation: The IMF Stand-by arrangement and the authorities’ determination to ensure macroeconomic
stability and to encourage the business environment minimize the risk of a worsening of the situation. At
the same time, both the PRESO and the Fiscal Responsibility and Debt Limitation Act will mitigate risks
that measures to reduce budget deficits lead to a reduction of spending on education.

Inter- and intra sectoral Trade-offs

Risks: While education and higher education in particular are currently high in the priority ladder of the
country’s leaders, a shift in inter-sectoral priorities remains possible. There is a risk that the recent
emphasis given to higher education will be questioned on the grounds that basic education should be
given the absolute priority until Education for All is achieved and primary education becomes universal.

Mitigation: There is a wide national consensus regarding the need to offset Pakistan’s higher education
sector lagging performance, and to raise universities to international standards, so that they will become
real engines of growth. Both the “Vision 2030” and the PRSP put higher education as one of the main
ingredients to build “Pakistan Inc”. The risk that higher education would crowd out basic education is
mitigated through the capping put on the share of the education budget allocated to higher education.
Internal resistance

Risks: They could originate from various quarters. First, it could come from faculty staff uncomfortable
with the new emphasis on accountability and academic performance (e.g. Tenure track system). Second,
it could come from administrators who feel threatened by the introduction of stringent accountability
rules. Thirdly, it could come from students ideologically opposed to any reform that results in greater
cost-sharing and/or partnership with private business. All three constituents may paralyze reform efforts.

Mitigation: A major effort to engage in earlier consultation and in continuous dialogue with stakeholders
should allow to reduce – but not to eliminate-- these risks. HEC will initiate a communication strategy to
engage the academic community and to spell out the benefits expected from the reforms. However,
universities can always become hostage of political rivalries regardless of the scope of reforms engaged
(and of the expected benefits), and there is no recipe to fully avoid this risk.

Uneven institutional capacity

Risks: Institutional vulnerability exists at two levels. At the HEC level, the scope and variety of the
reforms may overstretch the implementation capacity of the Commission. Additionally, if HEC were to
lose its special autonomous status, it would lose its reformist capacity and its efficient modus operandi. At
the HEI level, capacity is quite uneven, often very weak.

Mitigation: The program is carefully sequenced, and reforms are introduced gradually. An institutional
review will be carried out, and will lead to a redefinition of tasks and skill mix. The rationalization of
resource management is expected to promote long-term institutional durability for HEC. Finally, the
benefits of keeping HEC an autonomous agency are understood by the Government. Improvements in the
governance structure and massive training programs aim at reinforcing managerial capacity of HEIs.

Fiduciary Issues

Risks: Budget support operations carry the generic risks associated with weak financial management (FM)
and procurement capacity.

Mitigation: Fiduciary risks are mitigated by: (i) improved accounting and recording practices under the
PIFRA regime; (ii) introduction of new audit methodology; (iii) capacity building of the FM staff in
HEIs; and (iv) progressive alignment of procurement rules to international best practices.

7. Poverty and Social Impacts and Environment Aspects

By supporting the Commission’s actions to expand access, the proposed operation will contribute to
reduce social biases that have been prevalent in the tertiary education sector. However, HEC is going
further than simply increasing enrollments, and is also planning to implement a program of scholarships
which will proactively address equity concerns and open up university doors to children of families for
whom higher education was until now unaffordable. The scholarship program will be paralleled by a loan
scheme targeting students who do not fall in the poorest category, but still need support to continue
studying. In addition to its direct equity impact, the HESP will also contribute to poverty reduction in the
long run by contributing to growth and social mobility, as had been documented in other countries.

The reforms and policies supported by the proposed credit do not entail significant negative effects on
Pakistan’s environment, forests, or other natural resources. The Government’s reform program includes
the rehabilitation of university buildings and minor extension of existing infrastructures. These civil
works could be associated with minor negative environmental effects.
8. Contact point

Contact: Naveed Hassan Naqvi
Title: Sr Education Econ.
Tel: 5722+157
Location: Islamabad, Pakistan (IBRD)

9. For more information contact:

       The InfoShop
       The World Bank
       1818 H Street, NW
       Washington, D.C. 20433
       Telephone: (202) 458-4500
       Fax: (202) 522-1500