1. Competitive Funding for Higher Education Richard Hopper Senior Education Specialist The World Bank Baku, Azerbaijan – May 13, 2009

2. Knowledge Economy

3. Challenges in higher education Draft State Program on Higher Education Identified key weaknesses in Azerbaijan’s higher education system Quality of teaching and learning Rational allocation of public resources Accountability in the use of public resources

4. Overview 51 universities in Azerbaijan 36 public institutions 15 private institutions At 27 public universities overseen by Ministry of Education –105,000 students enrolled 99,000 bachelor’s level 6,000 master’s level –25,000 staff employed 12,000 teaching staff 1,000 research staff 12,000 administrative staff –Per-student cost: 1,070 Manat in 2008 At 15 private universities –4,000 students enrolled 3700 bachelor’s level 200 master’s level

5. Autonomy with accountability Steps to increase accountability –Introduction of quality assurance Accreditation –Introduction of rational financing mechanisms Recurrent budget (salaries, operating costs) Investment budget

6. World Bank World Bank has experience in addressing these challenges in many countries Ministry of Education seeks World Bank support to help address the challenges facing Azerbaijani higher education Higher education project is being prepared

8. Project Objectives Develop Ministry of Education capacity –Higher education oversight Develop quality assurance capacity –Accreditation system Develop rational financing mechanisms –Per-capita financing Base resource allocation –To cover core recurrent budget –Allocated according to transparent formula –Distributed through demand-side vouchers –Competitive funding Supplemental investment allocations –To improve quality of teaching and learning –Allocated according to promised results –Distributed through transparent procedures

9. Many financing mechanisms to transfer public resources Supply-side financing –Direct transfers funds to institutions Negotiated budgets, line-item budgeting, block grants, formula funding, competitive funding, or performance-based funding Demand-side financing –Channels funds to institutions indirectly through students Scholarships, vouchers, subsidized student loans, or service commitments

10. Each country unique –Governments develop a blend of financing mechanisms Combine supply-side with demand-side financing Gradually introducing innovative ways to provide support A way to drive government priorities Competitive funding Performance- based funding Supply-side: Historical or formula based core funding to institutions Demand-side: Through students via student financial assistance and vouchers

11. Gradual introduction of financing innovations is important Allows flexibility to adapt funding to evolving priorities Provides opportunity to gradually modify organizational behaviors –collaboration, transparency, accountability, and the inclusion of stakeholders Permits ways to reward universities for quality Encourages budget stability Lessons of experience –There is no ideal mix –Should be introduced gradually and prudently –Impact of each new mechanism should be evaluated –Adjustments to each mechanism can be made before scaling up

12. Competitive Funding Government grants to universities –Investments to improve the quality of teaching and learning –Grant procedures are key to success Proposal process –Eligibility criteria –Selection criteria and process Implementation –Sufficient financial management and procurement capacity required –Monitoring of performance is critical Rationalizes public expenditure –Involves frontline service providers (academic departments and faculty) in the design, financing, and execution of activities and investments with the goal of improving education quality

13. Promotes autonomy with accountability Encourages greater… –Independence of financial management –Independence in human resource management –Independence of physical plant management –Independence of decision making –Greater accountability for results

14. Benefits Flexible mechanism Can target key problems Output-oriented Engenders culture of competition, peer review Requires clear rules –eligibility, selection and implementation criteria Requires institutional capacity –decentralized managerial freedom and accountability

15. GovernmentMinistry of Education UniversitiesProfessorsStudents and Parents Investments Target priorities Internships Laboratory improvements Strengthening of data collection capacity Strengthening of decision making Pedagogical training Industry partnerships Strengthening of administrative capacities Education and training  continuing education  short courses  degree programs o domestic o foreign Pedagogical infrastructure Scientific information Pedagogical support Pedagogical infrastructure Laboratory improvements Library improvements Support for teaching and learning Scientific information Improvement in faculty contact Internships and better linkage to the labor market Mechanism Reform Competition Responsiveness to state objectives Performance contracts with public entities Accountability Evaluation capacity Data collection Stimulate a culture of quality, reflection, evaluation  Organizational behaviors Flexibility Improvement in financial management Planning and strategy Additional resources Oversight for investments Greater participation in decision making Participation in proposal evaluation process Sensitization to the needs of students and faculty Participation in decision making related to investments Faster acquisition of materials Greater relevance of activities Greater responsiveness to the needs of faculty Participation in decision making about investments in teaching and learning Sensitization of professors to the needs of students

16. Steps Capacity assessments for procurement and financial management Draft operational procedures manual –Identify driving purpose of funds –Identify key beneficiaries –Develop eligibility criteria –Develop operational procedures for grant selection –Develop operational procedures for grant implementation –Develop procedures for monitoring and evaluation –Integrate clear ways to regularly update procedures Launch competition –Calls for proposal –Proposal writing workshops –Selection process Reinforcement of management capacities as needed Grant allocation Grant supervision

17. Thank you

18. Proposed timeframe March 2009 –PHRD effectiveness March 2009 May 8 – 15 –Preparation mission –PHRD action planning Jun 29 – Jul 2 –Technical mission –Commence PHRD activities Oct 5 – 17, 2009 –Pre-appraisal mission Jan 12, 2010 –Decision meeting Jan 18 – 29, 2010 –Appraisal mission Mar 8 – 19, 2010 –Negotiations Jun 9, 2010 –World Bank Board review August 2010 –Loan signing October 2010 –Loan effectiveness

19. Project Development Objective Components –Environment –Social Results Framework Economic Analysis Implementation arrangements Procurement Financial Management PHRD activities