33

Chapter Three

INVESTMENT IN EDUCATION:RESOURCES AND SERVICEDELIVERY

3.0 Introduction3.1. Investment in education isone of the central pillars ofgovernment policy in Sri Lanka.The objectives of investingpublic resources in education areto promote equity and socialmobility, contribute to high andsustained economic growth, andenhance human development. Inaddition, private householdsinvest resources in education toimprove employment prospects,earnings and social status. Threekey factors determining thequantity and quality ofeducation outputs are the level,composition and distribution ofeducation expenditures, theinternal efficiency of theeducation system and theeffectiveness of educationservice delivery mechanisms.This chapter analyzes educationinvestment in Sri Lanka, with a

special focus on publicinvestment, internal efficiencyand the quality of servicedelivery. The magnitude andpattern of private investment ineducation is also examined.

3.1 Public Investment inEducationPublic education expenditure ininternational perspective

3.2. Government educationexpenditure in Sri Lankacurrently amounts to about LKR40,000 million (USD 415million) annually [see Table3.1]. In recent years, theeducation budget has accountedfor approximately 3% ofnational income and 7%-9% ofgovernment spending. Thisrepresents a comparativelymodest level of public educationinvestment by developing

country standards [see Table3.2]. Sri Lanka devotes thelowest share of the publicbudget to education of the entireset of countries, shown in Table3.2, mostly high performingEast Asian countries orneighboring South Asiannations. The group of lowermiddle-income countries, towhich Sri Lanka is expected tobelong in the near future,allocate about 4% of theirnational income to publiceducation. Countries such asSouth Korea, Malaysia,Thailand and Singapore, whichact as models for Sri Lankanpolicy makers, devote 18%-31%of government expenditures toeducation. South Asiancountries and low incomenations allocate, on average,about 3.2% of national incomeand 11% of government

expenditures to education.Further, in South Asia, onlyPakistan and Bangladesh spend

a lower proportion of nationalincome on public education.There are five main reasons for

the relatively modest level ofpublic education investment inSri Lanka: (i) the broad range of

34

Table 3.1. Public Investment in Education as a Proportion of National Income andGovernment Expenditure, 1998-2002

Source: Calculated from Revenue and Expenditure Statements and Budget Estimates, Government of Sri Lanka and Provincial Councils,and Annual Reports, Central Bank of Sri Lanka.

1998 28,689 3.1 8.4 11.5 4.11999 29,368 2.9 8.9 11.2 5.02000 35,348 3.1 7.8 11.4 3.52001 39,995 3.2 8.2 11.7 3.32002 40,017 2.9 6.8 10.3 2.5

Year Public education Education Education Education recurrent Education capitalexpenditure expenditure as a expenditure as a expenditure as a expenditure as a

(nominal prices) percentage of percentage of percentage of percentage ofGDP government government government

expenditure recurrent capital(rupees million) % % expenditure % expenditure %

Table 3.2. Education Expenditure as a Share of National Income andGovernment Expenditures, Sri Lanka and Selected Other Countries

Source: Sri Lanka, calculations from Government of Sri Lanka Budget Estimates, Central Bank of Ceylon Annual Reports, various issues;Other Countries, World Development Indicators (World Bank) and UNESCO Statistics, various issues. The information above forSri Lanka is computed from 2002 data. Other countries and regions are from the closest available year in the late 1990s andearly 2000s.

Country Education Education Education Recurrent Average Expenditure as a Expenditure as a Expenditure per Teacher Salaries

Proportion of Proportion of Student as a as a Proportion ofNational Income Government Proportion of National Income

Expenditure National Income per capita% % per capita % %

Sri Lanka 2.9 6.8 9.7 1.5India 4.1 12.7 16.3 3.0Bangladesh 2.5 15.7 3.3Pakistan 1.8 7.8Nepal 3.7 14.1 14.5Malaysia 6.2 26.7 20.7 2.9Maldives 3.9 11.2Bhutan 5.2 12.9Thailand 5.4 31.0 25.3 3.1South Korea 3.8 17.4 4.1Singapore 3.7 23.6Phillipines 4.2 20.6Costa Rica 4.4 22.8South Asia 3.2 11.2 14.5 2.8Low Income Countries 3.2 16.3Lower Middle Income Countries 4.1 18.5Upper Middle Income Countries 5.0 23.0

public services, such asuniversal free health care andwide-ranging access to povertyoriented safety nets, such as theSamurdhi program, which aregenerally not available in mostother developing countries, andcompete for governmentresources; (ii) high defenseexpenditure, which absorbs over5% of GDP and crowds outother investments; (iii) lowpublic revenue, which hascontributed to large budgetdeficits and constrainedgovernment expenditures; (iv)comparatively low teachersalaries, with Sri Lankanteachers receiving salaries abouthalf or less, as a proportion ofnational income per capita, thanteachers in countries such asIndia, Bangladesh, Malaysia,Thailand and South Korea; and(v) the fact that Sri Lanka builtup its capital stock of schoolsduring the 1950s-1970s, so thatthere is now no need for majorinvestment in the construction ofclassrooms and new schoolbuildings.

3.3. The tight budgetconstraint in recent years hasfallen especially heavily on thecapital budget. The educationcapital budget declined steeplyfrom 5% of government capitalspending in 1999 to 2.5% in2002. In terms of shares of theeducation budget, the capitalbudget decreased from about20% in 1998-2000 to 16% in2001-02 [see Figure 3.1]. Thisfall in capital investmentconstrained expansion and

development of the educationsystem. In particular, it restrictedinvestment in physical facilitiesto expand and increase urbanschools; supply basic services,such as water supply andsanitation, to rural schools; andinvest in quality inputs, such asIT centers, science laboratories,libraries, activity rooms andmulti-purpose rooms. As a resultof the decline in governmentcapital resources to education, ahigh proportion of investmentexpenditure has been financedthrough donor funded projects.For instance, in 2002, thecontribution of donor assistanceto the Ministry of HumanResources, Education andCultural affairs was equal toapproximately 68% of thecapital budget. Whengovernment counterpart fundingto donor projects is included,this share rises to about 81%.

The trend and composition ofpublic education expenditure

3.4. The recent trend of publiceducation expenditure showsconsiderable fluctuation in realspending [see Table 3.3].Overall, public educationspending per student declined in2002 by about 4 percent incomparison to the level in 2001.Further, both recurrent andcapital spending per studentdecreased between 2001 and2002. However, educationexpenditure per studentincreased sharply in 2000 and2001 in relation to the levels in1998 and 1999, mainly due toinvestment in new publicuniversities. As such, the levelof expenditure in 2002 wasabove the spending levels in1998-99, despite the declinerelative to 2001. The decline inper student public educationspending in 2002 can partly beattributed to the fiscal

35

81 79 80 84 84

19 21 20 16 16

-

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001 2002

Per

cent

Share of the Recurrent Education Budget Share of the Capital Education Budget

Years

Figure 3.1. Shares of Public Capital andRecurrent Education Spending, 1998-2002.

Source: World Bank estimates, calculated from UNDP (2003).

difficulties of the period, whichforced a tight budgetary policy.Such major fluctuations within ashort span of time make itdifficult for education policymakers, managers andadministrators to develop long-term investment decisions andplans.

3.5. The recurrent educationbudget accounts for about 79%-84% of public educationexpenditure. The chiefcomponent of recurrenteducation expenditure,accounting for about 85%-90%of the combined central andprovincial recurrent educationbudgets, is salaries and wages.The major share of the salarybill is on teacher salaries,followed by the salaries ofprincipals, educationadministrators and other grades.After salaries, the next highestshares of recurrent educationspending are on textbooks,which receive about 3% of thetotal recurrent budget, andschool uniforms, which accountfor about 2% of the total

recurrent education budget. Thebalance funds are mainly usedfor administrative and operatingcosts such as electricity,communications, water andpostal charges, and staff travel.The main challenge faced by therecurrent education budget is toallocate sufficient funds, oncesalaries and administrative costshave been met, to supporteducation quality processes,such as professionaldevelopment of teachers andprincipals and delivery of on-site academic and administrativesupport to schools, and meet theoperating costs of capitaleducation investment.

3.6. The main share of capitalor investment expenditure in theschool system, accounting forover 80% of capital educationinvestment, is on constructionactivities, mainly building ofclass room blocks. Only arelatively small proportion ofresources, less than 20%, areinvested in quality inputs, suchas equipment, technology,furniture and tools. The

classroom constructionactivities in the school systemalso appear ad hoc, withoutsound forward planning basedon enrolment needs. Inconsequence, many ruralschools carry excess capacitywith empty classrooms, whileurban schools are heavilycongested and over-crowded.Construction activities in theuniversity system, too, appearuncoordinated, with heavyexpenditure on buildingswithout a clear plan based onneeds assessments ofuniversities. As a result of thelow investment in quality inputs,such as equipment andtechnology, the country couldfind itself on the wrong side ofthe digital divide and beseriously constrained inequipping future generationswith the knowledge, skills andcompetencies required in themodern global knowledgeeconomy. The main challengesfacing the education capitalbudget are to rationalizeconstruction activities in the

36

Year Real Public Real Public Real PublicEducation Recurrent Education Capital Education

Expenditure Expenditure Expenditureper Student per Student per Student(1996 = 100) (1996 = 100) (1996 = 100)

Source: Calculated from Revenue and Expenditure Statements and Budget Estimates, Government of Sri Lanka, Central Bank Reports,School Census Statistics and UGC Statistical Handbook, various issues.

Table 3.3. Time Trend of Public Education Expenditureper Student in Real Terms, 1998-2002

1998 5,747 4,631 1,1161999 5,626 4,467 1,1592000 6,241 4,963 1,2772001 6,286 5,284 1,0022002 6,032 5,046 987

school system and universities,allocate greater resources toexpanding and increasing urbanschools, and devote more fundsto high level quality inputs, suchas IT centers, sciencelaboratories, libraries, activityrooms, equipment andtechnology.

Distribution of public educationexpenditure by education leveland international comparisons

3.7. Total public educationspending is about LKR 40,000million. Out of this sum,approximately 32% (13,000million rupees) is spent onprimary education, 50% (20,000million rupees) on secondaryeducation, 14% (5,600 millionrupees) on tertiary education,and 3% (1,400 million rupees)on technical education [seeTable 3.4].

3.8. Unit recurrent costs perstudent are lowest for primaryschooling, about 6,500 rupeesper student, followed bysecondary schooling,

approximately 7,500 rupees perstudent. Technical education, at15,000 rupees per student, ismore expensive than primaryand secondary education.

Unit recurrent costs are highest,by a long way, for universityeducation, costing around66,000 rupees per student. As aproportion of GDP per capita,primary and secondaryschooling cost 8% - 9% perstudent and technical educationabout double that at 18% perstudent. University education isconsiderably more expensive,costing 79% of national incomeper capita per student.

3.9. This pattern of costs isfairly typical for educationsystems, with primary educationbeing the least costly anduniversity education the mostexpensive. These expenditurelevels, unit costs andproportions reflect enrolmentnumbers and shares, andvariations in production costsacross education cycles.

University education is normallythe most expensive level ofeducation, requiring highlyqualified staff, sophisticatedtechnology and advancedequipment and material,resulting in higher humancapital and physical resourcecosts. Technical education alsotends to be expensive, as itrequires highly specializedequipment and staff resources.Primary and secondaryeducation are less expensivethan university or technicaleducation as they afford greaterscope for economies of scaleand require less sophisticatedtechnology and capital inputs.However, secondary educationis normally more expensive thanprimary education, as secondaryteachers tend to be betterqualified and paid, and theproduction technology is morecapital intensive, especially atthe senior secondary level.

3.10. By internationalstandards, average recurrenteducation expenditures per

37

Table 3.4. Education Investment by Education Level, 2002

Source: Calculated from Government of Sri Lanka, Revenues and Expenditure Statements, Statistics of the Ministry of Education, Ministryof Higher Education, Provincial Councils and University Grants Commission. Note: Numbers may not add up precisely due torounding.

Primary 12,904 11,001 1,903 32 6,471 8Secondary 20,184 17,207 2,977 50 7,481 9University 5,577 4,416 1,161 14 65,697 79Technical 1,352 848 503 3 14,834 18Total 40,016 33,472 6,545 100 8,064 10

Education Total Recurrent Capital Share of Unit UnitLevel Expenditure Expenditure Expenditure Education Recurrent Recurrent

Expenditure Costs Costs as aby Level Proportion of

(Rupees (Rupees (Rupees GDP per capita million) million) million) % (Rupees) %

student in Sri Lanka are modestat primary and secondaryeducation levels, but high at thetertiary education level [seeTable 3.5]. Average recurrenteducation expenditure perstudent as a share of nationalincome per capita on primaryand secondary education, atabout 9% and 11% respectively,are among the lowest in SouthAsia and East Asia. In contrast,average tertiary educationexpenditure per student as ashare of national income percapita, at 100%, is slightly

higher than India, andsubstantially above the level inEast Asian countries such asSouth Korea, Singapore,Malaysia, Thailand, Indonesiaand the Philippines. The mainreason for the high share ofpublic recurrent spending ontertiary education is the largeunit cost of governmentuniversities. Overall, the patternof average recurrent expenditureacross education levels suggeststhat, in contrast to highperforming East Asiancountries, the balance of public

resources in Sri Lanka may betilted unduly in favor of tertiaryeducation, at the expense ofprimary and secondaryschooling.

3.2 Private Investment inEducation3.11. Households investconsiderable resources oneducation. In 1995/96, the mostrecent date for whichinformation on householdeducation expenditure iscurrently available, private

38

Country Primary education Secondary education Tertiary educationexpenditure per expenditure per expenditure per

student as a student as a student as aproportion of proportion of proportion of

national income national income national incomeper capita % per capita % per capita %

Source: Sri Lanka, calculations from Government of Sri Lanka, Revenue and Expenditure Statements and Budget Estimates, Central Bankof Ceylon Annual Reports, various issues; other Countries, World Development Indicators (World Bank), UNDP HumanDevelopment Reports, and UNESCO Statistics, various issues. The information above for Sri Lanka is computed from 2002 data.Other countries and regions are from the closest available year in the late 1990s and early 2000s. Note: Numbers may not addup precisely due to rounding.

Table 3.5. Unit Recurrent Expenditure on Major Education Cycles:Sri Lanka and Selected Countries

Sri Lanka 9 11 100India 8 16 93Bangladesh - - -Pakistan - - -Nepal 9 12 111Malaysia 11 17 54Maldives - - -Bhutan - - -Thailand 12 11 25South Korea 17 12 6Hong Kong 8 13 -Singapore - - 34Indonesia - - 12Phillipines 9 10 15Costa Rica - 18 -South Asia - - 84Low Income Countries - - -Lower Middle Income Countries - - -Upper Middle Income Countries - - -

expenditure in seven provinces12

was about 4,688 million rupees[see Table 3.6]. At 1995/96public education investmentlevels, this was equal to about23% of government educationexpenditure. It was also greaterthan public capital educationexpenditure by about 13%. 13

3.12. The major proportion ofhousehold education spending isby the richest consumptionquintile, which accounts forabout 52% of total householdeducation expenditure. Theshare of private educationinvestment then progressivelydeclines as the consumptionquintiles become less affluent,with the poorest quintileaccounting for only about 6% oftotal private educationexpenditure. The poor, whowere 25% of the population in

1995/96, account for 7% ofhousehold education spending,while the non-poor spend thebalance 93%. These findings canbe attributed to several factors,including: (i) the higherdiscretionary income availableto prosperous households toinvest in child quality througheducation; (ii) the survival ofstudents from wealthy homes tohigher levels of the educationsystem, which require greaterexpenditure and, at the tertiarylevel, is comparatively open toprivate investment, especiallyoutside the university system;and (iii) the normally highereducation levels of affluentparents, which induces them toinvest more heavily in theeducation of their children.

3.13. The largest component ofannual private education

expenditure, about 590 rupeesper student (45% of total unitprivate education expenditure),is on tuition fees [see Figure3.2]. This is followed byequipment and stationary, 360rupees per student (28%) andschool fees, 103 rupees perstudent (8%). Other types ofexpenditure, such as textbooks,boarding fees, facility fees,donations and miscellaneousexpenses, account for about 246rupees per student or 19% oftotal private education spending.The dominance of tuition inprivate household educationspending is the outcome ofseveral factors, such as: (i)extreme competition to enteruniversity; (ii) the high stakesgrade 5 scholarshipexamination; (iii) perceivedinadequacies in teaching and

39

12. Information for the conflict affected North-Eastern Province was not collected in the 1995/96 household income andexpenditure survey, due to the armed secessionist conflict in the area.

13. Note that these estimates underestimate total private education spending, as information for the North-Eastern Province isnot available. This is the poorest province, with about 72% of the per capita income of the next poorest province, North-Central. On the assumption that household education spending in the North-Eastern Province is equal to 72% of the North-Central Province, private education expenditure in the former would be about 162 million rupees. This would have raisedtotal household education expenditure to 4,830 million rupees in 1995/96.

Table 3.6. Household Education Expenditure, 1995/96

Source: World Bank estimates, calculated from the Department of Census and Statistics Household Income and Expenditure Survey,1995/96. Note: Figures may not add up due to rounding.

Consumption Annual Household Share of ExpendituresQuintile Expenditures Across Economic Groups

(Rupees '000) %

Quintile 1-20 290,400 6Quintile 21-40 400,800 9Quintile 41-60 602,400 13Quintile 61-80 925,200 20Quintile 81-100 2,448,000 52Poor 331,200 7Non-poor 4,344,000 93Sri Lanka 4,668,000 100

examination preparation byschools, especially for majorpublic examinations such as theGCE O/L and GCE A/L; and (iv)a culture of attending tuitionclasses, which has now becomevirtually institutionalized [seeNEC (2003)]. The problem oflow teacher salaries, too, hasforced many teachers to searchfor secondary income sources,and private tuition is an obvioussecond job for school teachers.

Current Levels of PrivateEducation Expenditure

3.14. The present level ofhousehold educationinvestment can be estimatedbased on certain assumptionsabout the income elasticity ofdemand for education. Aconservative assumption is thathousehold education spending

per student increases at the samerate as per capita consumption.Based on this assumption, andthat households in the North-

Eastern Province spend 72% ofthe level in the North-CentralProvince14, total privatehousehold educationexpenditure in 2002 can beestimated to be about 10,600million rupees in 2002 prices.This would be equal to about26% of total public educationexpenditure, and is 62% higherthan the public capital educationbudget. In fact, privatehousehold education spending islikely to be greater than thisconservative estimate, as theincome elasticity of demand foreducation is typically higherthan unitary. Hence, at present,it is likely that private householdeducation spending may benearer 30%-35% of publiceducation spending and aboutdouble the government capitalbudget for education. This level

40

ProvincialCouncils

8%

CentralGovernment

65%

Donors6%

Households21%

Figure 3.3. Shares of Education Financing by Source, 2002.

Source: World Bank estimates, based on the Government of Sri Lanka Budget Estimates,and estimated private education expenditure.

Stationary,equipment

28%

Texbooks4%

Boardingfees4%

Tution fees45%

Facilities fees3%

School fees8%

Other4%Donations

4%

Source: World Bank estimates, based on the Department of Census and Statistics,Household Income and Expenditure Survey 1995/96.

Figure 3. 2. Shares of Private Education Expenditureper Student by Spending Category.

14. The North-Central Province is the poorest province, next to the North-Eastern Province. The per capita income of the North-Eastern Province was about 72% of the per capita income of the North-Central Province in 2002.

of private investment could beincreased if the NEC (2003)proposals are implemented andthe legal restriction on privateschools is lifted.

3.3 Sources of EducationFinancing 3.15. The central governmentfinances the major share ofeducation expenditure in thecountry, accounting for about65% of total public and privateeducation investment [seeFigure 3.3]. Slightly more thanhalf these resources, about 53%,are spent directly by centralgovernment educationinstitutions. The balance, about47%, is awarded as grants to theprovincial councils. After thecentral government, householdsfinance the second highest shareof education investment, about21%. This is followed byprovincial councils through theirown revenues, 8%, and donor

funds, 6%. Credits from theWorld Bank and the AsianDevelopment Bank constitutethe main sources of donor funds.JICA is the chief source of grantaid, followed by UN institutionssuch as UNICEF, and countriessuch as the U.K., Germany andSweden.

3.4 Internal Efficiency ofInvestment in EducationInternal efficiency of studentflows through the primary andsecondary education cycles

3.16. The internal efficiency ofprimary schooling (grades 1-5)and junior secondary schooling(grades 6-9), measured in termsof flow rates, are high [see Table3.7]. Repetition rates and dropout rates range from 2%-7%,with slightly higher repetitionand drop out among boys thangirls. The high student flow ratescan be attributed to several

policy measures: (i) the supplyof sufficient school places,through the island-wide networkof primary and secondaryschools, to meet the demand foreducation from parents andstudents; (ii) incentive schemes,such as free textbooks, schooluniforms and subsidizedtransport, to enroll and continuethrough the school system; and(iii) automatic promotion fromgrades 1-11, with no formalmechanisms to fail pupils,unless students voluntarilyrepeat grades. In addition topublic policy measures, thedemand for education fromparents is also strong, and makesan important contribution to thehigh student flow rates throughthe compulsory education cycle.The marginally higher repetitionand drop out rates among boyscompared to girls, observedmainly at grades 8-9, can beattributed chiefly to the higheropportunity cost of schooling for

41

Table 3.7. Compulsory Education Cycle:Repetition Rates and Drop Out Rates, by Gender, 2001

Source: School Census, Ministry of Education.

Boys Girls Both Sexes Boys Girls Both SexesRepetition Repetition Repetition Drop Drop Drop

Rate Rate Rate Out Rate Out Rate Out Rate% % % % %

Grade 1 2.2 1.6 1.9 -0.7 -0.7 -0.8Grade 2 4.5 3.7 3.9 0.01 0.01 0.07Grade 3 4.8 3.2 4.0 -0.01 0.01 0.01Grade 4 4.3 2.9 3.6 1.1 0.6 0.9Grade 5 3.7 2.5 3.2 1.8 0.9 1.4Grade 6 5.5 5.2 5.4 3.2 2.1 2.7Grade 7 3.1 2.0 2.6 3.9 2.5 3.2Grade 8 2.6 1.8 2.2 6.0 3.8 4.9Grade 9 1.8 1.5 1.6 7.1 4.9 6.0

teen-aged boys, who are able toobtain jobs as unskilled workersin the informal labor market.

3.17. Repetition rates at the keyexamination grades in the seniorsecondary education cycle,grades 11 and 13, however, arehigh [see Table 3.8]. In grade 11,about 27% of students arerepeaters, with the proportion ofrepeating boys and girls close toeven. This is a high percentage,as it implies that about one infour students in grade 11 is inthe class for the second time. Ingrade 13, the proportion ofstudents repeating rises further.Among GCE A/L sciencestudents, 35% of students arerepeaters, among GCE A/L artsstudents, 37% of students takethe class for the second time;and among GCE A/L commercestudents, 35% of students arerepeaters. The repetition ratesof boys and girls are verysimilar across grades 11 and 13,and among types of subjects.The GCE A/L repetition ratesshow that about 1 in 3 studentsin grade 13 is taking the classfor the second time. The highrepetition rates at grade 11 andgrade 13 suggest the existenceof considerable cost

inefficiencies in the educationsystem at these levels. The mainreason for these high repetitionrates at grade 11 and grade 13are the low learning levels ofstudents through the primaryand secondary cycle up to grade11, which is exposed at thepublic examinations.

Size and distribution of schools

3.18. Sri Lanka maintains a

large and geographically widelydispersed network of publicschools. This school networkwas established, over successivepast generations, to serve apopulation residing largely inrural areas. However, witheconomic development andexpansion of the service andindustrial sectors, the proportionof population living in cities andtowns has been increasing in

42

Table 3.8. Proportion of Repeaters in the GCE O/L and GCE A/L Grades, 2002

Source: School Census, Ministry of Education.

GCE O/L 27 27 26GCE A/L Science 35 34 36GCE A/L Arts 37 37 36GCE A/L Commerce 35 34 34

Grade Cycle Proportion of Proportion of Proportion ofStudents Boys Girls

Repeating Repeating Repeating% % %

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

- 10 20 30 40 50 60 70 80 90 100

Num

ber

of S

choo

ls

Student Teacher Ratio

Figure 3.4. Cumulative Number of Schools byStudent Teacher Ratio

Source: World Bank estimates, based on the School Census, Ministry of Education.

recent years. In addition, bettertransport and communicationsnetworks have placed ruralvillages in touch with schoolsin urban centers. Inconsequence, there has beensharply increasing demand forpopular, prestigious urbanschools and decreasing demandfor rural and less prestigioussemi-urban schools. This shiftin demand has led to theexistence of a large number ofvery small schools. About5,900 schools (60% of schools)have less than 300 students.Further, about 2,700 schools(27% of schools) have under100 students, and 1,360 schools(14% of schools) have less than50 students. This network ofsmall schools is expensive tomaintain and operate. Inparticular, student-teacher ratiosin small schools tend to be low,resulting in high unit recurrentcosts. About 1,000 schools (10%of schools) have student-teacherratios as low as 7:1 or less [seeFigure 3.4]. Around 1,700schools (17%) have student-teacher ratios less than 10:1, andabout 6,000 schools (60%) havestudent-teacher ratios of 15:1 orless.

3.19. Schools with such smallstudent-teacher ratios are farmore expensive to operate [seeFigure 3.5], and typically haveunit recurrent costs about 100%greater than large schools withstudent-teacher ratios of about25:1.

3.20. Schools with such smallunit recurrent costs are

expensive to maintain [seeFigure 3.5]. The annual unit costper teacher ranges from about295 rupees in small primaryschools and 290 rupees in smallschools with GCE O/L classes toabout 150 rupees in largerschools with high enrolmentnumbers.

Government strategy to increasecost efficiency

3.21. Government strategy toenhance the cost effectiveness ofthe school system contains twoprincipal components.

a. Attempts to providefacilities and equipment tosmall schools to makethem sufficientlyattractive to preventstudents from leaving forother, more popularschools. This strategy hasbeen largely ineffective,as urbanization hasgenerated strong

countervailing power. Inaddition, small ruralschools do not havereputations that can matchschools in cities andtowns, and the provisionof facilities andequipment alone is notadequate to stem the flowof students to prestigiousschools. However, thisstrategy remains popularwith many educationists[see NEC (2003)].

b. Efforts to limit the growthof schools in cities andtowns by imposingconstraints on enrolmentnumbers, combined withvery slow establishmentof new urban schools.This strategy to forcestudents to attend lessprestigious schoolsthrough administrativefiat has also largely beenineffective, and existing

43

100

150

200

250

300

350

School Type 3 School Type 2 School Type 1C School Type 1AB

Rup

ees

Type of School

Small primary schools

Schools up to GCE O/L

GCE A/L Arts and Commerce

GCE A/L All Subject Streams

Figure 3.5. Unit Recurrent Cost of a Teacher by School Type

Source: World Bank estimates, based on Ministry of Education, School Census, 2002.

urban schools haveincreased to the extent thatthey now sufferdiseconomies of scale,with over-crowded andcongested class rooms.Some schools inColombo, for instance,exceed 5,000 students,and the largest school hasabout 8,000 students.

3.22. The government had athird strategy to address theproblem of high cost smallschools which was effective, buthas recently been suspended dueto social pressure. This was aschool rationalization strategy,where small schools wereamalgamated and consolidatedwith larger schools in theirneighborhoods. This strategyworked well in all parts of thecountry except the North-Eastern Province, where it washardly tried. However, thebenefits of this strategy, both interms of providing students fromsmall schools with a superiorlearning environment in largerschools and increasing the cost-efficiency of the system was notwidely understood by localcommunities. In consequence, itdrew widespread criticism,compelling the government tosuspend the process. However, itis an important educationstrategy which needs to bereintroduced, in combinationwith an effective mediacampaign to explain theobjectives and benefits of theschool rationalization programto local communities and

pressure groups. Care shouldalso be taken to ensure that theschool rationalization processdoes not damage access toeducation to any students. Inaddition, new schools need to beestablished in urban areas, toabsorb student demand aspopulation migrates fromvillages to towns and cities.

Internal efficiency and unit costsof university education

3.23. Public universityeducation in Sri Lanka isexpensive, with high unitoperating costs in comparison toother developing countries. Inaddition, there are widedifferences in unit costs amongpublic universities, ranging fromabout 40,000-120,000 rupeesper student per year [see Figure3.6]. Generally, unit costs arerelated to student enrolmentsize, with smaller universitiesexperiencing high costs and

larger universities, which canreap economies of scale,enjoying low unit costs. Themost expensive universities tendto be small, new institutionssuch as the Wayamba, Easternand South-Eastern Universities.Larger, older universities suchas Kelaniya, SriJayewardenapura, Colombo andJaffna have the lowest unit costs,apart from the special case of theOpen University, which onlyoffers distance educationcourses and has high enrolmentnumbers and very low unitcosts. The exception to thegeneral rule above of an inverserelationship between unit costsand enrolment size is PeradeniyaUniversity, which is the secondlargest university in terms ofstudent numbers, but has unitcosts comparable to the smallSouth-Eastern University. Themain reason for the high unitoperating cost of Peradeniya

44

20,000

40,000

60,000

80,000

100,000

120,000

5,000 10,000 15,000 20,000

Rec

urre

nt C

ost p

er S

tude

nt, 2

002

(Rup

ees)

Students on Roll in Public Universities

Figure 3.6. Unit Recurrent Cost of Public Universitiesas a Function of Students on Roll

Source: World Bank estimates, based on University Grants Commission statistics.

University appears to be itssmall student-teacher ratio (9:1)and student-employee ratio(6:1), and the high maintenancecost of its spacious, widelyspread campus and largeresidential facilities.

3.24. The principal componentof university average recurrentexpenditure is the student-teacher ratio [see Figure 3.7].Universities such as Wayamba,Eastern, South-Eastern andPeradeniya, which have lowstudent-teacher ratios, have highunit costs; while universitiessuch as Kelaniya,Jayewardenapura, Colombo andJaffna which have high student-teacher ratios have low unitcosts. Overall, the negativerelationship between student-teacher ratios and unit recurrentcosts is strong through the entireuniversity system. Thisrelationship is the result ofuniversity salary costs, whichare largely dependant on thelevel of academic salaries.Universities with high studentteacher ratios havecomparatively lower averagesalary expenditure, and hencesmaller unit recurrent costs, thanuniversities with low studentteacher ratios. The second mostimportant determinant of unitrecurrent costs is the ratio ofstudents to non-academic staff,as the latter strongly affects theuniversity wage bill and hencerecurrent expenditures. Thepublic universities haveextremely low student-non-academic staff ratios: ranging

from 3:1 in universities such asWayamba, Eastern, South-Eastern and Peradeniya to 8:1 inSri Jaywardenapura. Theaverage for student-non-academic staff ratio for the 12public universities which offeron-site degree courses is only4:1. In terms of academic staff tonon-academic staff, too, theratio is 1:4. This suggests a costinefficient system, with anunduly large proportion ofresources devoted to non-academic staff salaries.

3.25. Capital investment in thepublic university sector is alsoheavily weighted, in per studentterms, towards the new, smalluniversities such as Wayamba,Rajarata, Eastern, South-Easternand Sabaragamuwa. This isnecessary as the basicinfrastructure of theseuniversities, such as lecturetheatres, libraries, laboratoriesand offices, needs to be

constructed. However, theinvestment in construction forthe new universities has divertedresources away from qualityinputs, such as equipment,technology and tools, for theuniversity system as a whole. Asthe basic construction activitiesdiminish, resources need to beinvested in quality inputs andquality processes.

Government strategy to enhancebudget management of theeducation sector

3.26. The government hascommenced a medium-termbudget framework to increasepredictability of resource flowsand enable education planningover a longer horizon than ispossible with annual budgeting.In the first stage, the mediumterm budget framework willlargely focus on implementingpolicies to increase the internalefficiency of public educationspending, reallocate resources

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Figure 3.7. Unit Reccurent Cost of Public UniversitiesRelated to Student-Teacher Ratios, 2002.

from low priority to higherpriority investments within theexisting resource envelope, andincrease transparency andaccountability of financialprocesses. Additional resourcesfor education will mainly bepossible only if privateinvestment can be encouraged.This first budget stage isdesigned over a three yearplanning horizon. The secondstage, over a further three yearcycle, can also focus onincreasing public resources foreducation, as the overallmacroeconomic balancesstabilize and greater resourcesbecome available for publicspending.

3.5 Education ServiceDelivery: Organizationaland Operational Challenges3.27. The quantity and patternof public expenditure oneducation is an extremelyimportant determinant ofeducation attainment andlearning in a country. Equallyimportant, however, is thequality and effectiveness ofservice delivery. In this context,Sri Lanka enjoys importantpositive features. A network ofeducation institutions alreadyexists to formulate policy; staff,plan and administer the schooland university system; developcurricula and syllabi for schoolsand degree programs inuniversities; provideprofessional developmentopportunities for schoolprincipals, section heads and

teachers, and universityacademics; and conductexaminations and providecertification that enjoys publicconfidence. Legally definedcadres exist for importantservices, such as the teachers'service, teacher educators'service and educationadministrators' service. Thegovernment also has reasonablefinancial managementprocedures, with double entrybookkeeping and cashaccounting, although not yetaccrual accounting. Further,there is both a supreme auditinstitution, the Auditor General'sDepartment and an internal auditwithin the education system.Hence, the service deliverynetwork of the education systemis built on a strong foundation.

3.28. However, Sri Lanka alsofaces a set of important policychallenges as its educationsystem seeks to take off beyondthe first stage of development,providing universal access tobasic education to a largely ruralpopulation, to the second stageof development, establishing ahigh quality education system inthe context of a rapidly growingurban population. In thiscontext, the education servicedelivery network faces a set ofmajor structural challenges thatit needs to overcome.

3.29. Weak teacher deployment.Teachers prefer to reside incities, towns and prosperousrural areas, while avoidingdisadvantaged rural areas.

Schools in congenial locationstend to be overstaffed andschools in uncongenial locationsunderstaffed. Educationadministrators complain thatteacher transfers from surplusschools to deficit schools arehindered by politicalinterference, with widespreadpolitical intervention tocountermand transfer orders.Weak teacher deploymentchiefly hurts poor children, asthe highest rates of teacherunderstaffing occur ineconomically disadvantagedrural communities. However,such communities typically haveless voice and power, and areunable to act as a countervailingforce to teacher deploymentpatterns which place them at adisadvantage.

3.30. High teacher absenteeism.Teacher absenteeism poses amajor problem, especially inschools located in difficult areas.Administrative records showthat teachers take about 7million days of legitimate leaveper year. The average leavetaken per teacher in an academicyear ranges from 33 days in theNorth-Western Province to 42days and 43 days in the Uva andNorth-Central Provinces,respectively [see Figure 3.8]. Asa proportion of the school year,the incidence of teacherabsenteeism varies from 15% inthe North-Western Province to20% in the North-Central andUva Provinces. This amounts,across the 192,000 strongteaching force, to around 18% of

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the academic year for thecountry as a whole. Further,these are absenteeism ratesbased on leave days taken.Anecdotal evidence and casualempiricism suggest that leaveregulations are not strictlyenforced, and that de factoteacher absenteeism mayactually be higher.

Government policy to improveteacher deployment and reduceteacher absenteeism

3.31. Recent governmentthinking to improve teacherdeployment and reduce teacherabsenteeism contains threepolicy measures: (a) providingincentives, such as extra salaryincrements, swifter promotion,preferential access to popularschools for children andconstruction of teachers'quarters, to teachers taking up

appointments in disadvantagedareas; (b) allowing teachers toencash unutilized leave; and (c)recruiting teachers directly toschools, rather than acentralized, transferable service.The first two measures have notbeen implemented effectively inthe past due to a shortage offinances. The last measurerequires amendments to thelegislation governing teacherrecruitment, and needs to beconsidered by parliament.

3.32. Low teacher salaries andpoor teacher motivation.Education policy makers haveargued that teacher status,motivation and work attitudeshave been deteriorating over theyears and stressed theimportance of re-motivating andimproving the attitudes ofteachers [see NEC (2003)].

Teacher salaries have beendeclining in real terms over thepast 25 years [see Figure 3.9],which supports the notion thatteacher status has been falling.Teachers in 2002 earned onlyabout 85% of the salary, in realterms, that teachers received in1978. Other governmentservants currently earnsomewhat more, in real terms,than in 1978, although realwage increases have not keptpace with economic growth.But teachers have not shared inthe fruits of economic growth atall over the past generation orso. On the positive side, lowteacher salaries have enabledthe Sri Lankan education

system to deliver basiceducation services at a fairly lowcost to the government budget.On the negative side, however,low teacher salaries is likely tohave hurt teacher morale andperformance, and weakened thequality of new entrants into theteaching service.

3.33. Inadequate managerialand academic empowerment ofkey education service deliveryinstitutions, such as schools,National Colleges of Education(NCOEs) and Teacher Centers(TCs). Schools, NCOEs andTCs, which are the keyeducation service deliveryinstitutions within the schoolsystem, have limited managerialand academic responsibilities. Inparticular, managerial functionssuch as staff recruitment,financing and resourceutilization, and administration,

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Source: : World Bank estimates, based on the School Census, Ministry of Education.

tend to be concentrated atcentral or intermediategovernment levels. For instance,employment of teachers andteacher educators are tocentralized, transferableservices. Similarly, purchases ofequipment, material andconsumables for schools werehighly centralized until recently.TCs do not have accounts andTC managers lack authority topurchase equipment or materialfor their centers. Academicfunctions of NCOEs and TCs,too, are heavily centralized. Thecurricula for teacher educationcourses, examinations andcertification for the 17 NCOEsare all provided by the center. Assuch, the NCOEs and TCspossess limited scope foracademic and managerialleadership, and institutionalgrowth and development.Similarly, school leadership anddynamism are inhibited by the

managerial restrictions onschools.

Government policy to devolvemanagement and empowereducation institutions

3.34. Government policythinking for the future is todevolve greater managerialpowers and responsibilities toschools and teacher educationinstitutions. As a first step,schools have been empoweredto purchase quality inputs, suchas equipment, books, tools andconsumables, through capitaland recurrent education budgets,up to fairly generous thresholds.This measure has been highlypopular, with quality inputpurchases becoming moresensitive to local school needs,and purchased more swiftly andefficiently than throughcentralized methods ofprocurement. As further steps todevolve school management, the

government proposes toestablish school boards,encourage communityparticipation in school affairs,raise school quality inputpurchase thresholds even higher,and eventually allow schoolbased recruitment of teachers.These measures are intended toimprove the quality of servicedelivery at the school level byproviding greater scope fordynamic school leadership,better community support, andhigher proximity andaccountability of serviceproviders to beneficiaries. Thelast measure is also intended tosolve the problem of teacherdeployment in disadvantagedschools, as teachers would notbelong to a centralizedtransferable service but beappointed directly to schools.

3.35. Policy interest indecentralizing management toteacher education institutions,such as NCOEs and TCs, havenot yet evolved into concreteplans. The long-term objective isto develop NCOEs to a levelwhere they prepare teachers fordegree level teacher educationprograms. However, the changesrequired to the managerial andacademic roles andresponsibilities of key agents inthe system, such as the Office ofthe Chief Commissioner for theColleges of Education, theNational Institute of Education,and the Presidents of theNational Colleges of Education,and the new structure ofresponsibility and

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Figure 3.9. Real Value of Salaries of Teachers in Relation toOther Government Servants (1978 = 100)

Source: Central Bank of Sri Lanka, Annual Reports.

accountability, need to bestudied further to advance thepolicy agenda in this area.

3.36. Administrative capacityconstraints. The educationadministrative system as awhole experiences technical andoperational capacity constraints.In consequence, even routineand day-to-day administrativefunctions can take considerabletime. For instance, recruitmentof teachers to fill vacancies inconflict affected areas takeabout 2 years fromadvertisement to appointment.The administrative processes forthe promotion of universityacademics can take considerableperiods of time, sometimes oneyear from application toappointment. Claims for loansby teachers and principals, too,can take years before they aregranted. Similarly, activitiessuch as processing teachertransfers, and deliveringtextbooks and school uniforms,have sometimes been delayedover the past few years. Threekey problems hamperingefficient administration are: (i)excessive reliance on manualoperations instead of automatedand computerized systems; (ii)the absence of basic internalmechanisms, such as organizedfiling systems and inventorycontrol methods; and (iii)insufficient forward planning.

3.37. External interference inadministration. Educationpolicy makers highlightinterference by external forcesin education administration as a

major impediment to efficientservice delivery [see NEC(2003)]. Further, thisinterference can arise even insimple, basic administrativefunctions, such as schooladmissions, the appointment ofminor staff to universities andteacher transfers. This hindersservice delivery by weakeningrule compliance. Further, ithampers decision making,which becomes vulnerable toforces outside the formalexecutive framework ofgovernment.

3.38. Procurement weaknesses.An important area wheregovernment technical capacity isseverely limited is procurement.Procurement implementation isweak for several reasons, suchas: (i) difficulties in drawing uptechnical specifications; (ii)problems in preparing tenderand bidding documents; (iii)slow execution of technicalevaluations; and (iv) weaknessesin producing clear and accuratetechnical evaluation and tenderboard reports and minutes.Further, these weaknesses applyat all levels of the educationsystem, including universitiesand central governmenteducation agencies. Forinstance, procurement ofuniversity wide tenders forcomputers are known to havetaken up to two years. Similarly,tenders for school computerequipment have sometimestaken more than a year in recenttimes. Other major civil worksand equipment tenders of high

value, too, can take well inexcess of a year.

Specific factors constrainingservice delivery in publicuniversities

3.39. The public universitiesenjoy a high degree of academicautonomy. Curriculumdevelopment, standards setting,examinations, certification, andemployment and promotion ofacademic staff, are within thediscretion of each university.Central government functions,exercised chiefly through theUniversity Grants Commission,are overall policy formulation,rationalization of universitiesand degree programs, financing,student admissions andrecruitment of non-academicstaff. In principle, the academicautonomy enjoyed byuniversities should easeproblems of service delivery andenable the production of highquality teaching and research.However, service deliverywithin the university system isconstrained by several factors.

3.40. Low academic salaries,leading to staffing difficulties. APh.D qualified senior lecturer orprofessor earns in the range ofabout USD 200-350 per month.This is a competitive salary inthe public sector, althoughmodest by private sectorstandards. However, thecompetition for highly qualifiedhuman capital, such as Ph.Dqualified individuals, is mainlyfrom overseas universities andresearch institutions. Such

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individuals, if employed in adeveloped country university,can earn more in a month thanhe/she could earn in a year in SriLanka. This salary differentialhas made it difficult to attractand retain highly qualifiedacademic staff in Sri Lankanuniversities. The problem hasbeen compounded, in the case ofuniversities located outside theprincipal urban centers ofColombo and Kandy, by thedifficulty of attracting qualifiedindividuals to reside insubsidiary towns or semi-urbanlocations. Hence, while inColombo or Kandy baseduniversities, such as Moratuwa,Colombo, Kelaniya,Jayewardenapura andPeradeniya, the ratio ofacademic staff withpostgraduate qualifications(such as Professors and SeniorLecturers) to academic staffwithout postgraduatequalifications (such asLecturers) averages about 1.5 to1, in the universities located insubsidiary towns or semi-urbanlocations such as Rajarata,Eastern, South Eastern,Wayamba and Sabaragamuwa,this ratio is only about 0.25 to 1.The inability of the latter set ofuniversities to attract highlyqualified staff clearly hamperstheir quality of research andteaching.

3.41. Rigid administrative andmanagement structures. Thepublic university system waslargely laid to provideundergraduate teaching, and theadministrative and management

arrangements of universitiesreflect this focus. However,modern universities produce arange of outputs in addition toundergraduate teaching, such asresearch, postgraduate teaching,consultancy services andcommunity activities. Theadministrative and managerialprocedures and practices inuniversities have not evolved tosupport the production of thisfull range of outputs, althoughsome universities have advancedfurther than others. One of theconsequences is that about 95%of university income comesfrom the central government,with only 5% of income comingfrom other sources. Animportant structural featurehindering entrepreneurialincome generating activity inuniversities, for instance, is thatmoney earned by a publicuniversity legally belongs to theMinistry of Finance, and there isno guarantee that this moneywill be reinvested in theuniversity.

3.42. Student unrest. The publicuniversity system is vulnerableto periodic bouts of studentunrest, with certain universitiesworse affected than others.During periods of student unrestuniversities can even be closeddown, disrupting academic workand delaying course completiondurations. In addition, the extentof violence has sometimes beenso severe that there have beenepisodes of physical violence.Attempts to introduce fee payingcourses in public universitieshave met with particularly

virulent opposition from certainstudent groups, who perceivethese as efforts to privatizeuniversity education.

3.43. Government strategy toincrease internal efficiency andraise the quality of servicedelivery in the university systemcontains four major strands.

a. Controlling expansion ofthe public universitysystem and encouragingprivate degree awardinginstitutions, professionalassociations and overseastertiary educationinstitutions, includingdistance modeinstitutions, to meet thedemand for tertiaryeducation. This is arational strategy whichincreases resources for thetertiary sector and alsodirects its focus towardsemployment orientedcourses. Further, asprivate degree awardinginstitutions charge fees,student unrest hardlyexists.

b. Further devolvingadministrative andmanagerial power touniversities. In particular,the government envisagesgranting powers to setacademic salaries, admitstudents and recruit non-academic staff touniversities. Thesemeasure could improvethe ability of universitiesto attract and retain highquality academic staff,

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compete to obtain goodstudents and developinstitutional loyaltyamong non-academicstaff. Also, if a gradualreduction of the quantityof non-academic staffcould be introduced, moreresources would becomeavailable for investmentin measures to enhanceacademic quality.

c. Building institutionalcapacity by strengtheningnational planning,monitoring and evaluationcapacity in the universitysystem and establishing aBoard of QualityAssurance to takeresponsibility for policydevelopment andmonitoring on qualitycriteria.

d. Introducing performancebased funding into thepublic university system.Linking financing toperformance is expectedto provide incentives forquality enhancement ofdegree programs. Inaddition, it is expected toincrease the labor marketrelevance of universitycourses.

3.44. Overall, these are usefulmeasures. In particular, the rapidgrowth of enrolment in privatetertiary level institutions is afavorable trend. In addition, thedevolution of greater autonomyto universities is a promisinginitiative.

3.6 Conclusions andOptions for the Future3.45. The government facesseveral key challenges toincrease the quality ofeducation, enhance equity ofpublic spending, strengthenservice delivery within thesystem, and improve theeconomic and social relevanceof schools, universities andtechnical education institutions.These challenges exist at a timewhen public investment ineducation is low by developingcountry standards, governmenteducation spending has beendeclining in real terms and thestate experiences a heavy fiscaldeficit which compels it to adopta conservative fiscal policy. Inthis context, the government canconsider four sets of measures toincrease education investmentand enhance the efficiency andequity of public educationspending.

Options for educationinvestmentIncrease private sectorinvestment and participation ineducation

3.46. Promoting private sectorparticipation in education,especially at tertiary level.Relaxing legal obstacles andintroducing strategic initiativesto counter the adverse politicaleconomy environment to privatesector participation in educationcould produce several benefits.First, it would increase theoverall volume of resourcesinvested in the education sector.

Second, since the studentsattending private schools andeducation institutions are likelyto be drawn from upper incomefamilies, it would release morepublic resources, on a perstudent basis, for students frompoorer families. Third, it wouldstimulate economic activity in asector where investment hasbeen artificially restricted andcontribute to higher growth.Fourth, it would provide analternative mode of servicedelivery, with considerablepower and responsibility at thelevel of the individual educationinstitutions, such as privateschools and institutes. Theseprivate education institutionswould be compelled to offerhigh quality services to remainviable in an economic contextwhere they are in competitionwith free public educationinstitutions.

3.47. The National EducationCommission has recognized theimportance of creating afavorable environment forprivate investment in educationand recommends three types ofprivate schools (NEC 2003): (i)fee-levying private schools,which finance their entireexpenses, teach the nationalcurriculum and prepare studentsfor national examinations; (ii)fee-levying internationalschools, which finance all theirexpenses, teach foreigncurricula and prepare studentsfor overseas examinations, butwithin an accreditationframework set by the education

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authorities; and (iii) non-feelevying assisted schools, whichteach the national curriculumand prepare students for nationalexaminations, but where there iscost-sharing between the stateand the schools, with thegovernment typically payingteacher salaries and the schoolsbearing capital expenditures andrecurrent costs net of teachersalaries. Creating a favorableenvironment for privateinvestment in school educationrequires developing a neweducation act and repealing thelegislation, passed in the early1960s, which acts as a majorbarrier to the establishment ofprivate schools.

3.48. The establishment ofprivate universities has been anextremely contentious issue,with several past attemptsresulting in student violence andsocial unrest. Hence, it is highlyunlikely that private universitiescan be established in Sri Lankain the medium-term. GOSL hasresponded to the opposition toprivate universities byencouraging the private sector toparticipate in non-contentiousareas. These have mainly beenthe establishment of privatedegree awarding institutions,usually linked to foreignuniversities, and investment intertiary level programs such asprofessional and technicalcourses. GOSL needs to exploreoptions to expand privateparticipation in tertiary levelnon-university education,especially in professional and

technical fields where thedemand for labor, both withinand outside the country, isstrong.

Protect and gradually increasepublic investment in education

3.49. Government policy toimprove education qualityenvisages important measures tomodernize curricula; expandchild-friendly, activity basededucation; promote child-centered pedagogical methods;strengthen school leadership byprincipals; enhance theprofessional development ofteachers; and increase the use ofequipment and technology inschools and other educationinstitutions. These policyinitiatives to improve the qualityof education would requireconsiderable investment ofresources in the educationsystem. Given the low level anddecreasing trend of real publiceducation spending, and themajor challenges Sri Lankafaces in improving the qualityand economic and socialrelevance of the educationsystem, it is important that thegovernment preserve the currentlevel of real expenditure in theshort-term and increase publicinvestment in educationgradually over the medium-term. The government needs toconsider the possibility of atleast maintaining the real valueof the education budget from2005 onwards, and graduallyraising public educationinvestment, especially in thecompulsory basic education and

senior secondary educationcycles, as the tight overall fiscalconstraint eases over the years.

Enhance the equity of publiceducation spending

3.50. The pattern of studentenrolment over major gradecycles, and the unit costs ofeducation by grade level, showthat investment in primaryeducation and secondaryeducation are relativelyprogressive and benefit studentsfrom low and middle incomehouseholds, while investment intertiary education tends tobenefit students from upper-income households. Inconsequence, there is a strongcase for allocating the majorshare of any increase in publicresources for the educationsector to primary and secondaryschooling, while carefullycontrolling the expansion of thepublic university system andallowing enrolment expansion intertiary education take placemainly in the private sector.Opportunities for poorerstudents to access tertiaryeducation could be expandedthrough schemes such as studentvouchers and student loans,rather than through directprovision.

Increase cost-effectiveness ofthe education system

3.51. The tight resourceconstraint faced by thegovernment makes it extremelyimportant that the educationsystem generates internalsavings to reduce costs. In this

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context, three important policymeasures are available.

a. School rationalization.The cost-effectiveness ofoperating the schoolsystem can be enhancedby consolidating andamalgamating small,uneconomical schools,where this can beaccomplished withoutreducing access toschooling and damagingenrolment and attendance.The public schoolnetwork is such that asizable proportion ofsmall schools are locatedclose to other, largergovernment schools.MHRECA and theprovincial councilsdesigned andimplemented a successfulschool rationalizationprogram, during 1998-2002, which consolidatedand amalgamated small,unviable schools. Thisprogram was temporarilysuspended due to intensepolitical pressure.However, the governmentcould consider re-openingthis school rationalizationprogram, but with carefulsafeguards to protectaccess for poor andvulnerable groups.

b. Increasing the student-teacher ratio in schoolsand tertiary educationinstitutions. Currently, thestudent teacher ratio inschools, at 21:1, is low.

Countries withoutstanding educationsystems and far higherincome levels, such asSouth Korea, Singaporeand Hong Kong, havehigher student-teacherratios and more cost-effective systems. Thecurrent teacheremployment anddeployment policy isbased on a target student-teacher ratio of 22:1 forsecondary grades and 26:1for primary grades. Thegovernment couldconsider increasing thetarget student-teacherratio to about 23:1 forsecondary grades and 28:1for primary grades in themedium term. In addition,the student-teacher ratioin the public universitysystem tends to be verylow, at 14:1. Thegovernment couldconsider increasing thisstudent-teacher ratio toabout 18:1, so that costsavings can be generatedwithin the system.

c. Rationalization ofadministrative staffing.The roles, functions andresponsibilities of staffwithin the complex, multi-tiered educationadministrative systemtend to be rather unclear.A careful analysis of workloads, and de jure and defacto roles, functions andresponsibilities of staff in

the various educationministries, provincialcouncils, zonal educationoffices, division educationoffices and tertiaryeducation institutions islikely to identify bothduplication of roles andfunctions, and gaps andshortages of staff. Overall,there may be an excess ofstaff, which a carefullydesigned voluntaryretirement scheme coulddecrease, reducingpressure on the budget andreleasing more resourcesfor investment. A study ofroles, functions andresponsibilities of staffwithin the educationsystem, as first step,would be extremelyuseful.

3.52. In order to increaseresources for quality enhancingeducation policy initiativesthrough the implementation ofcost saving measures within theeducation system, it is vitallyimportant that the Ministry ofFinance permits funds saved tobe channeled back into theeducation system forinvestment. If the funds savedthrough cost-reducing measuresare not re-invested in theeducation system the objectiveof enhancing education qualitywould be defeated. Further, theeducation system would lose theincentive to implement difficultmeasures such as schoolrationalization and higherstudent-teacher ratios.

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Shift resource allocation infavor of equipment andtechnology

3.53. Over time, the balance ofcapital and recurrent spendingwithin the education budgetneeds to shift to allocate agreater share of resources tocapital expenditure. Within thecapital budget, a higherproportion of resources needs tobe invested in quality inputssuch as IT centers, sciencelaboratories, libraries, activityrooms, multi-purpose rooms,equipment, technology andtools. The construction andexpansion of buildings, whichabsorbs the highest share of thecapital budget, needs to berationalized, prioritizing theurban school system which isexperiencing rising demand.Within the recurrent budget, too,resources need to be reallocatedfrom salaries and administrativeexpenses to quality processes,such as teacher education andtraining, management andacademic training of schoolprincipals, and the purchase ofteaching material and learningresources.

Options to Improve the Qualityand Efficiency of EducationService Delivery

3.54. Development initiativesand strategies to wideneducation access to the poorestand most disadvantagedeconomic groups, improveeducation quality and learningoutcomes, and orient theeducation system to the world ofwork, also requires

strengthening the efficiency andquality of service delivery in theeducation system. Severalimportant initiatives areavailable to the government toimprove and strengthen thedelivery of education services.

Empowering frontline servicedelivery institutions, such asschools and universities

3.55. A key government policyinitiative under consideration isto devolve managerial power tofrontline service deliveryinstitutions, such as schools anduniversities. In the schoolsystem, the aim of devolvingmanagerial authority is toempower principals,headmasters andheadmistresses, and teachers;enable schools to forge linkswith local communities toimprove resource mobilizationand public accountability; andimprove the speed andsensitivity of decision makingby decreasing administrativelayers. In devolving managerialautonomy to schools, it isimportant that different modelsof school development boardsbe pilot tested, as thegovernance capacity of schoolsvaries significantly, dependingon such factors as location, sizeand history. For instance, themain public schools in cities andtowns are likely to possessvastly greater managerialcapabilities and sophisticatedcommunity support than smallrural schools in remote villages.

3.56. Universities already enjoyconsiderable autonomy, but

further powers to recruitadministrative staff, tailoracademic salaries to individualstaff members, and decide onstudent admissions, couldincrease the motivation,responsibility and accountabilityof university staff andauthorities. These measures,however, may be controversialfrom a political economyperspective. For instance,providing universities freedomto tailor academic salaries toindividual staff members can behighly controversial in a contextwhere academics areaccustomed to a uniform salaryscale. Similarly, devolvingresponsibility for studentadmissions to individualuniversities has to be madeconsistent with the policy ofallocating student quotas todisadvantaged districts.

3.57. The government couldalso consider applying theprinciple of devolvinggovernance to other educationinstitutions, such as NationalColleges of Education (NCOEs)and Teacher Centers (TCs).Currently, the NCOEs have littlemanagerial responsibility andautonomy. Curriculum design,assessment and certification ofteacher education coursesoffered by NCOEs areundertaken by the NationalInstitute of Education (NIE).Recruitment of academic staff isto a centralized teachereducators' service, and NCOEsrarely have a voice in the choiceof academic staff allocated tothem. TCs operate in an

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inefficient administrativestructure. The NIE designs thecurricula of continuing teachereducation programs offered byTCs. The NCOEs act asacademic advisors to TCs. Foradministrative purposes,including finances, the TCscome under the zonal educationoffices. This complexadministrative and academicstructure has badly hamperedthe development of TCs.Devolving a greater degree ofmanagerial autonomy andresponsibility to NCOEs andTCs could increase theoperational efficiency of theinstitutions and enhance thequality of service delivery.

Developing performanceappraisal systems andintroducing fiscal incentives forperformance

3.58. The strengthening ofperformance appraisal systemscould contribute strongly tohigher quality service delivery.Within the university system,performance appraisal hascommenced, especially foracademic staff. However,measures to introduceperformance appraisal to theschool system have provedcontroversial, and leftundeveloped. Three keyinitiatives are required todevelop performance appraisalwithin the school system:

a. the value of performanceappraisal systems asfeedback mechanisms tostrengthen service

delivery and reward goodperformance, rather thanas punitive measures forpoor performance, needsto be communicated tostakeholders, especiallyeducation unions;

b. performance appraisalsystems need to bedesigned for the variouseducation services, suchas the teachers' service,education administrators'service, principals' serviceand the teacher educators'service, in closeconsultation withstakeholders, includingthe relevant unions; and

c. the technical capacity ofeducation institutions andeducation administratorsto manage and utilizeperformance appraisalsystems needs to bestrengthened.

3.59. Introducing financialincentives for performance,especially for key services, canbe a promising initiative. Forinstance, poor teacherdeployment and high teacherabsenteeism in difficult areas isa key constraint on effectiveservice delivery within theeducation system. Further, theimpact of weak teacherdeployment fallsdisproportionately on poorstudents, as the most unpopularregions, where teacherabsenteeism is highest, aretypically remote, economicallydisadvantaged, rural locations.To improve teacher deployment

and attendance, the governmentcould implement the NEC(2003) proposals to offerfinancial incentives to teacherslocating in schools in difficultareas. In addition, to reduceteacher absenteeism, teacherscould be entitled to encashunutilized leave. The mainconstraint to introducing fiscalincentives for performance is thetight budget situation, whichprecludes expensive new policymeasures. However, if costsavings could be generatedwithin the education system,some of the resources obtainedcould be allocated to introducesuch performance incentivesmeasures.

Streamlining roles,responsibilities andaccountability within theeducation system

3.60. Many of the measuressuggested to improve educationservice delivery would requiregovernment officials in thecentral ministry, provincialcouncils and zonal offices toassume new and additional rolesand responsibilities, whiledevolving some of their currentpowers to frontline servicedelivery institutions, such asschools, national colleges ofeducation and teacher centers.During this process ofdecentralization andempowerment of localinstitutions, the current patternof responsibility andaccountability and the futuremodels required need to beanalyzed carefully.

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Human resource development ofcentral, provincial and zonaleducation authorities

3.61. The complex system ofeducation governance, withmultiple tiers of administrationat the central, provincial andzonal levels, requires a widerange of administrative,technical and operations skillsand competencies from staffworking at each tier. An overallhuman resource strategy needsto be developed andimplemented, across thedifferent tiers of the educationsystem, to equip central,provincial and zonal educationstaff with the necessaryadministrative, technical andoperations skills andcompetencies. In addition, thisstrategy needs to provide forregular and continuous updatingof skills and competencies astechnical and operations skillsadvance and develop.

Institutional strengthening ofcentral, provincial and zonaleducation authorities

3.62. Strengthening theoperational procedures,capabilities and performance ofcentral, provincial and zonaleducation authorities cancontribute significantly to thequality and efficiency ofeducation planning,administration and servicedelivery in the future. Lessonsfrom recent policy measures anddevelopment initiatives,including reforms supported bydonors such as the World Bankand Asian Development Bank,

suggest some key areas whereinstitutional strengthening isurgently required.

Administrative processing

3.63. The administrativeprocesses in central, provincialand zonal offices tend to be longand cumbersome, resulting inconsiderable delays inoperational activities. One majorreason for these delays are theuse of outdated manual systemsfor important administrativetasks, including correspondence,filing, record keeping andinventory control. Developingcomputerized operating systemsfor normal and routineadministrative tasks wouldsubstantially increase theefficiency of governmentoperations.

Strengthening procurementcapabilities

3.64 The ability of governmentofficials to draft biddingdocuments, prepare technicalspecifications, appraiseproposals, and draw up technicalevaluation reports and tenderboard recommendations tointernational standards islimited, resulting in lengthyprocurement processes.Strengthening the procurementcapabilities of governmentofficials, hence, is an importantarea for future institutionaldevelopment.

Addressing political economyconstraints

3.65 Communicating therationale for controversial but

important policy measures tostakeholders and beneficiariesand building stakeholderparticipation in reforms is animportant area wheregovernment capacity is weak.For instance, the governmentimplemented a schoolrationalization program over1998-2002, which achieved over75% of its target. In numericalterms, this was a successfulrationalization program.However, it generated intensecontroversy, central andprovincial education authoritieswere unable to explain therationale for the program clearlyto local communities, resultingin its temporary suspension in2003. Similarly, the governmentcommenced a multiple textbookpolicy, to widen choice andimprove quality, whichgenerated intense controversyand delayed implementation forseveral years. Again, central andprovincial education authoritieslacked the capability tocommunicate the policyeffectively. The country alsohas, in the aggregate, a surplusof school teachers, althoughthere are deficiencies in certainsubjects, especially English, andin the Tamil medium. However,there is intense pressure toemploy more teachers, inter aliato reduce the pressure ofunemployed educated youngpeople. Again, governmentagencies have often found itnearly impossible to withstandthis pressure. Hence,strengthening the ability ofgovernment education agencies,

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at each level of theadministrative tier, tocommunicate the rationale forpotentially controversial policymeasures and build stakeholdersupport is a vitally importantarea for future institutionalstrengthening.

Capacity development toundertake education researchand analysis, policy formulationand planning

3.66 There are three keyinitiatives that would contributeto the development of a highperforming education system,especially at the level ofanalysis, policy formulation andplanning.

Medium-term budgeting and amulti-year planning horizon

3.67. A priority initiative toimprove education planning andresource management is thedevelopment of a medium-termbudget framework to facilitatemulti-year planning. Themedium term budget couldcover a period of about threeyears, with provision for annualupdating to take into accountfresh information and needs.The medium-term budget couldalso be embedded in a long-termrolling plan for educationdevelopment. It would facilitateeducation planning andmanagement by improving thepredictability of resources andproviding a longer-termdevelopment horizon than ispermitted by the current annualbudgets.

Public expenditure tracking

3.68. A public expendituretracking system wouldconstitute an importantmanagement tool for educationpolicy makers and financeofficials and complement themedium-term budgeting system.It would provide the centralgovernment and the provincesinformation on the flow of fundsthrough the education systemand the actual level of resourcesreaching various servicedelivery points, such as schools,universities, national colleges ofeducation and teacher centers. Itwould also increase thetransparency of resource flowsthrough the system. Suchinformation could then feedback into policy formulation andresource allocation as educationdevelopment needs evolve, andcentral government andprovincial plans are refined.

Promoting education research,monitoring and evaluation

3.69. Sound research,monitoring and evaluation,based on statistically validprocedures and measurableindicators, is extremely valuablefor policy makers. In advancededucation systems analyticallyrigorous education research andevaluation constitutes thefoundation for policyformulation. The Sri Lankaneducation system currently hasseveral promising initiatives,such as the annual schoolcensus, the assessment of grade4 learning outcomes by NEREC,

and the NEREC qualitativestudy of education managementpractices, that provide a basis fora rich and informativemonitoring and evaluationframework. This educationmonitoring and evaluationsystem could be developed withspecial emphasis on the analysisof education performance andcausal factors useful for policymaking. Education monitoringand evaluation activities can beencouraged to utilize bothquantitative and qualitativemethods, and use modernresearch techniques such asexperimental designs,randomized trials andlongitudinal surveys.

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