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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank RESTRUCTURING PAPER ON A Report No: KH PROPOSED PROJECT RESTRUCTURING OF THE HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT (CREDIT NUMBER 4796-KH; GRANT NUMBER H607-KH) BOARD APPROVAL DATE August 5, 2010 TO THE KINGDOM OF CAMBODIA March 21, 2011
2 ABBREVIATIONS AND ACRONYMS CAR HEQCIP MEF MoEYS POC Council of Administration Reform Higher Education Quality and Capacity Improvement Project Ministry of Economy and Finance Ministry of Education, Youth, Sports Priority Operating Costs Regional Vice President: James W. Adams Country Director: Annette Dixon Sector Manager / Director: Eduardo Velez Bustillo / Emmanuel Y. Jimenez Task Team Leader: Omporn Regel 2
3 A B C CAMBODIA HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT P CONTENTS SUMMARY PROJECT STATUS PROPOSED CHANGES Page 3
4 HIGHER EDUCATION QUALITY AND CAPACITY IMPROVEMENT PROJECT SUMMARY RESTRUCTURING PAPER The proposed restructuring reflects the Kingdom of Cambodia s (Cambodia) decision to cancel the Merit-Based Performance Incentive, Priority Mission Group and all other salary supplement and incentive schemes with effect from January 1, 2010, regardless of the source of financing, and to replace it with the establishment of the Priority Operating Costs (POC) scheme. While the financing of such a scheme was envisaged at the time of the Higher Education Quality and Capacity Project s (the Project ) design (as reflected in the Project Appraisal Document), the regulatory framework for such a scheme was not yet in place when the project was negotiated. Now that the POC sub-decree has been approved, the corresponding disbursement category for the Project can be created. An overarching regulatory framework for salary supplement and incentive schemes has been agreed between Cambodia and its development partners. The Government-Donor Coordination Committee has agreed on a twin-track approach for implementing this compensation reform: Under Track 1, a compensation reform is being defined in the short-term and will be implemented over the medium term, as part of the National Program for Administrative Reform; Under Track 2, a temporary scheme known as Priority Operating Costs that addresses the short-term issue of service delivery and reform implementation has been agreed and will now be implemented. Both tracks are expected to progress in parallel with regular reviews by development partners to (i) assess progress toward compensation reform; (ii) feed lessons from the POC scheme to compensation reform; and (iii) decide on the merits of revising, continuing, or stopping the POC arrangement. The framework for the second track was articulated by a Government sub-decree that was approved on July 12, Under this framework, the POC scheme outlines meritocratic equity and transparency principles and applies to business with all development partners. It is explicitly conceived as a complement to track 1 reform, i.e., a temporary mechanism that will be discontinued once the compensation reform is agreed and in place. The agencies where a POC scheme is established will ensure that it is unified across the various projects for which it is established. With regard to Ministry of Education, Youth, and Sports (MoEYS), the POC scheme covers two projects: (i) supported by the Education for All Fast Track Initiative Catalytic Fund; and (ii) supported by the World Bank for improving higher education. The POC scheme under MoEYS will be unified across both of these projects. 4
5 The proposed restructuring will allow for the financing of POC by creating a new disbursement category for POC within the existing HEQCIP financial management arrangements. A disbursement condition will be added for this new category, requesting that the POC arrangements (comprising terms of reference, a management contract, and implementation agreement as per the POC guidelines) agreed between MoEYS and the Council of Administration Reform (CAR) and the Ministry of Economy and Finance (MEF), is acceptable to the Bank and will not be changed without prior consultation with the Bank. PROJECT STATUS HEQCIP is just beginning its implementation. The official project launch was held by MoEYS in November 2010 and attended by over 100 participants connected to Higher Education sub-sector. The Procurement Plan and the Project Implementation Plan have been updated and the Financial Management Technical Advisors are on board. Several training sessions for the project preparation have been conducted internally with support from the other ongoing Bank education project, the Cambodia Education Sector Support Project. To date, there has been no disbursement since this project has only recently become effective on 30 December PROPOSED CHANGES Financing Reallocation There was no POC category in the original budget; however, the PAD, under para 42, indicated the possibility of allocation of funds for POC financing. The POC fund of SDR 107, equal to 100% of the scheme would be financed from the Unallocated expenditure category. 5
6 Category of Expenditure Amount of the Credit Allocated (SDR) Amount of the Grant Allocated (SDR) % of Financing Current Revised Current Revised Current Revised Current Revised 1. Goods, Works, 1. Goods, Works, 7,020,000 7,020, % 100% Consultant Services, Training and Workshops, and Incremental Operating Cost Consultant Services, Training and Workshops, and Incremental Operating Cost 2. Fellowships 2. Fellowships 0 0 2,146,000 2,146, % 100% 3. Scholarships 3. Scholarships 0 0 3,524,000 3,524, % 100% 4. Competitive 4. Competitive 2,180,000 2,180, % 100% Development and Innovation Grants Development and Innovation Grants 5. Unallocated 5. Unallocated 830, , N/A 6. POC n/a 107,200 n/a 0 n/a 100% Total 7,850,000 7,850,000 7,850,000 7,850,000 The following condition will apply for disbursement under POC category: No withdrawal under category (6) shall be made until POC arrangements (comprising terms of reference, number of positions, the management contract, and implementation agreement as per the POC guidelines) acceptable to the Association are agreed between the concerned agency and the CAR and the MEF. Such arrangements will not be changed without prior consultation with the Association. Financial management Overall FM arrangements will remain unchanged. The Supplementary Financial Management Manual for the Project will be updated to incorporate payment of the POC. The POC will be audited as part of the project financial statements annually. 6
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