Does Private School Competition Improve Public School Performance?

5 May 2017

DOES PRIVATE SCHOOL COMPETITION IMPROVE PUBLIC SCHOOL PERFORMANCE? THE CASE OF NEPAL Amrit Thapa Submitted in partial fulfillment of the requirements for The degree of Doctor of Philosophy Under the Executive Committee of the Graduate School of Arts and Sciences COLUMBIA UNIVERSITY 2011 © 2011 Amrit Thapa All Rights Reserved ABSTRACT DOES PRIVATE SCHOOL COMPETITION IMPROVE PUBLIC SCHOOL PERFORMANCE? THE CASE OF NEPAL Amrit Thapa In developed countries, the evidence on the impact of school type on student performance is mixed.

Researchers are also interested in finding out the effect of private school competition on educational outcomes. The evidence on this for developed countries is mixed as well. What is the effect in developing countries? There are not sufficient studies for developing countries to reach one conclusion. Using data from the survey of the Ministry of Education, Nepal-2005 for School Leaving Certificate Exam (SLC), this dissertation attempts to seek answers to the above two issues for the case of Nepal.

Does Private School Competition Improve Public School Performance? Essay Example

The first part of this study analyzes private and public school performance using OLS and logistic models. The study adopts the propensity score matching technique to account for the selection bias problem. The second part of this dissertation attempts to explore the impact of private school competition on public school performance using the number of private schools in the neighborhood as a continuous measure of competition. A binary measure of competition is also used where school is defined to face competition if there is more than one private school in the vicinity of the sample public school.

However, in this analysis, there exists an identification problem because private school enrollment is likely to be correlated with public school performance. To address this problem, the study uses the existence of a motorable road within an hour’s walking distance from the sample school as an instrument for number of private schools in the neighborhood. The results from the OLS and logistic estimation on the effect of school type on student performance show that public schools consistently have a negative relationship with student performance.

On the impact of private school competition on public school performance, the OLS results show no significant relationship using both continuous and binary measures of competition. In contrast, the IV method indicates a positive and significant impact of private school competition on public school performance, which holds true for both types of measures of private school competition. TABLE OF CONTENTS Chapter Page INTRODUCTION ………………………………………………………………………………………………………….. Background ………………………………………………………………………………………………………………… 1 Motivation of this study……………………………………………………………………………………………….. 2 Research Questions……………………………………………………………………………………………………… 4 Significance of the Study……………………………………………………………………………………………… EDUCATION SYSTEM IN NEPAL ………………………………………………………………………………… 7 Country Background……………………………………………………………………………………………………. 7 The Educational History ………………………………………………………………………………………………. 9 The Present Education System ……………………………………………………………………………………. 10 Education Administration and Governance in Nepal ……………………………………………………… 2 Department of Education ………………………………………………………………………………………… 16 Other Agencies under the Ministry of Education ……………………………………………………….. 18 Education Expenditure and Finance in Nepal………………………………………………………………… 22 Financing of Education in Nepal ……………………………………………………………………………… 24 Challenges and Problems in Education Finance…………………………………………………………. 7 Current Situation and Issues ……………………………………………………………………………………. 29 Public and Private Schools in Nepal…………………………………………………………………………….. 30 Private Schools: Evolution and Current Issues …………………………………………………………… 36 Teachers Market ……………………………………………………………………………………………………….. 38 School Leaving Certificate (SLC) Examination …………………………………………………………….. 9 i DATA …………………………………………………………………………………………………………………………. 50 The context ………………………………………………………………………………………………………………. 50 Data Source and Sampling Strategy …………………………………………………………………………….. 54 Information on Missing data……………………………………………………………………………………….. 5 Fixing missing data problem……………………………………………………………. ……………………… 56 Exploratory Data Analysis………………………………………………………………………………………….. 59 Variable Description ………………………………………………………………………………………………….. 60 Summary Statistics…………………………………………………………………………………………………. 5 Correlations………………………………………………………………………………………………………………. 67 AN ANALYSIS OF PRIVATE AND PUBLIC SCHOOL PERFORMANCE IN NEPAL …….. 72 Introduction………………………………………………………………………………………………………………. 72 Theoretical Framework………………………………………………………………………………………………. 73 Literature Review ……………………………………………………………………………………………………… 3 Evidence on Developed Countries……………………………………………………………………………. 73 Evidence on student performance in developing countries ………………………………………….. 81 Evidence on student performance in Nepal ……………………………………………………………….. 82 Evidence on Private Tutoring ………………………………………………………………………………….. 87 Models and Identification Strategy………………………………………………………………………………. 0 The Basic Empirical Model …………………………………………………………………………………….. 90 Probit Model for SLC Result …………………………………………………………………………………… 91 Probit Model for The Medium of Exam ……………………………………………………………………. 92 Probit Model for Private Tutoring ……………………………………………………………………………. 93 Empirical Issue: Self Selection ………………………………………………………………….. …………… 94 ii Propensity Score Matching ……………………………………………………………………………………… 94 Chow Test …………………………………………………………………………………………………………… 104 Estimation and Results……………………………………………………………………………………………… 106 Specification and Diagnostic Analysis ……………………………………………………………………. 06 Initial Results ………………………………………………………………………………………………………. 109 Chow Test …………………………………………………………………………………………………………… 111 Blinder- Oaxaca Decomposition…………………………………………………………………………….. 114 Results from Propensity Score Matching ………………………………………………………………… 115 Results from Probit Models …………………………………………………………………………………… 17 Conclusions…………………………………………………………………………………………………………….. 122 THE IMPACT OF PRIVATE SCHOOL COMPETITION ON PUBLIC SCHOOLS ………….. 130 Introduction…………………………………………………………………………………………………………….. 130 Theoretical Framework…………………………………………………………………………………………….. 131 Background on Education Market and Competition …………………………………………………….. 31 Literature Review ………………………………………………………………….. ……………………………….. 133 Evidence Using Herfindahl Index…………………………………………………………………………… 135 Evidence using Private School Enrollment………………………………………………………………. 137 Evidence Using Other Measures of Competition ……………………………………………………… 138 Evidence on Nepal ……………………………………………………………………………………………….. 40 Models and Identification Strategies ………………………………………………………………………….. 141 The Basic Empirical Model …………………………………………………………………………………… 141 Identification Problems & Strategy ………………………………………………………………………… 142 Estimation and Results……………………………………………………………………………………………… 145 iii Specification and Diagnostic Analysis ……………………………………………………………………. 45 Validity Check for Instrument Variable ………………………………………………………………….. 148 Power Check of the instrument………………………………………………………………………………. 150 Empirical Results …………………………………………………………………………………………………. 150 Continuous Measure of Private School Competition……………………………………………… 150 Binary Measure of Private School Competition ……………………………………………………. 54 Conclusions…………………………………………………………………………………………………………….. 154 CONCLUSIONS………………………………………………………… ………………………………………………. 160 Summary of Findings……………………………………………………………………………………………….. 160 Discussion………………………………………………………………………………………………………………. 62 Policy Implications ………………………………………………………………………………………………….. 164 REFERENCES …………………………………………………………………………………………………………… 170 APPENDIX………………………………………………………………………………………………………………… 181 iv LIST OF FIGURES Figure 2. 2. Number of Schools by School-Type and Level ………………………………………………… 11 Figure 2. 1.

Map of Nepal……………………………………………………………………………………………….. 48 Figure 2. 3. Comparative SLC Result: 1990 – 2009 ………………………………………………………….. 489 Figure 4. 1. The distribution of residuals of the regression equation in the basic model ………… 107 Figure 4. 2. Residuals Plotted against the fitted values …………………………………………………….. 108 Figure 4. 3. Detecting outliers: Leverage vs. normalized residual squared …………………………… 109 Figure 5. . The Distribution of Residuals of the OLS Regression Equation………………………… 146 Figure 5. 2. Residuals Plotted against the fitted values …………………………………………………….. 147 Figure 5. 3. Detecting Outliers: Leverage vs. Normalized Residual Squared ……………………….. 147 Figure A. 1. Box Plot Diagrams of Variables used in the Study …………………………………………. 182 Figure A. 2. Histograms of Variables used in the Study ……………………………………………………. 185 v LIST OF TABLES Table 2. . Gross Enrollment Rate (GER) and Net Enrollment Rate (NER) by level and gender 12 Table 2. 5. Education Budget…………………………………………………………………………………………… 23 Table 2. 6. Foreign Aid in Education………………………………………………………………………………… 26 Table 2. 7. Performance in SLC Exam -2004 by School-type and Gender …………………………….. 38 Table 2. 1. Basic Statistics of Nepal and South Asia…………………………………………………………… 43 Table 2. . Total Schools by School-Type, Level and Development Region………………………….. 44 Table 2. 3. Percentage of Public and Private School’s Enrollment in Total Enrollment by Level and Development Region……………………………………………………………………………………………….. 45 Table 2. 8. Percentage Trained Teachers and Student-Teacher Ratio in Public and Private Schools ……………………………………………………………………………………………………………………………………. 46 Table. 2. 9.

Comparative Regular SLC Result (1990 -2009)…………………………………………………. 47 Table 2. 10. Regular SLC Result 2009 ……………………………………………………………………………. 477 Table 3. 1. Original and Modified Sampling Frames ………………………………………………………….. 56 Table 3. 2. Variables Between 5 to 25 Percent Missing Values ……………………………………………. 57 Table 3. 3. Mean score and pass rates in SLC by School-Type and Gender …………………………… 66 Table 3. Summary Statistics ………………………………………………………………….. …………………….. 69 Table 3. 5. Correlation Coefficient: SLC Outcome and school type ……………………………………… 71 Table 3. 6. Correlation Table: SLC Score and Private School Competition …………………………… 71 Table 4. 2. Summary of estimates of the effect of school type on student’s performance in SLC Exam …………………………………………………………………………………………………………………………. 13 vi Table 4. 5. Estimates from Oaxaca-Blinder Decomposition ………………………………………………. 115 Table 4. 6. Average Treatment Effect on the Treated Estimated by Nearest Neighbor Matching ………………………………………………………………………………………………………………………………….. 117 Table 4. 1 Variance Inflation Factor ……………………………………………………………………………….. 125 Table 4. 3.

OLS Estimates of the Effect of School Type on Student’s Performance in SLC Exam ………………………………………………………………………………………………………………………………….. 126 Table 4. 4. Probit Estimates of the Effect of School Type on Student’s SLC Result……………… 128 Table 5. 2. First-stage equation of 2SLS………………………………………………………………………….. 149 Table 5. 3. Estimates of Private School Competition on Public School Student’s SLC score… 152 Table 5. 1.

Variance Inflation Factor ………………………………………………………………………………. 157 Table 5. 4. Estimates of Effect of Private School Competition on Student’s SLC Performance by School Type ……………………………………………………………………………………………………………….. 158 Table 6. 1 Variables that are consistently significant in explaining student’s SLC performance 167 Table A. 1. Agencies under the Ministry of Education, Nepal……………………………………………. 181 vii ACKNOWLEDGEMENTS

My heartfelt thanks to my advisor, Professor Henry M. Levin, for his great help, support, guidance and encouragement throughout the four years of my doctoral study. He is not only an inspiring teacher and devoted professor, who teaches by setting a good example, but also a very kind soul. It has been a blessing for me to know, interact and learn from him. I sincerely thank Professor Mun C. Tsang, Professor Francisco Rivera-Batiz, Professor Ira Gang and Professor Randall Reback for having accepted to be on my dissertation committee and take the time to read and comment my work.

In addition, I would like to thank Professor Jennifer Hill, Professor Thomas Bailey and Professor Judith Scott-Clayton for their valuable comments. I am very grateful to Dr. Saurav Bhatta and the Ministry of Education of Nepal for helping me with the necessary data for this dissertation. Dr. Bhatta’s prior study and valuable suggestions have indeed been a significant help for this work. I would also like to thank all my friends in the Economics and Education program for sharing their knowledge and being so helpful during my years at Teacher College.

Finally, I am grateful to the Program in Economic Policy and Management (PEPM) at School of International and Public Affairs for awarding me with the teaching fellow position from 2009 to 2011, and for providing the financial assistance for my final dissertation defense. viii DEDICATIONS To my beloved Swami, Bhagawan Sri Sathya Sai Baba, for His ever flowing Divine Grace and Blessings. To Nepal, my motherland. To my parents for their immense love, care and blessings. This work is my humble gift to them. To all my teachers, from my primary school till today who have been idols for me to observe, listen, learn and be inspired by.

To Hal, for his continuous help, encouragement and support. God bless him. To my wife, my best friend and co-traveler of this journey of life. To my brother, Amrish and sister, Amrita, for being so full of love. To all my friends and the members of Sai family for their well wishes and goodness of heart. ix 1 Chapter 1 INTRODUCTION Background The issue of private versus public education has been of great significance both to the developed as well as developing countries. Further, the study of the dynamics that occur between public and private schools is attracting educational researchers around the world.

The definition of public and private schools vary depending on who owns, manages and/or finances education. The concept of private and public may also vary depending on different education systems; and, for the purposes of comparisons it should be defined in a broad sense (Walford, 1999). In its pure form, we define public schools as those which are owned managed and financed by the state. On the other hand, private schools are those owned, managed and financed by parents’ association, business, non-profit organization or a religious institution and sometimes by the government. However, schools need not be ategorized as fully public or fully private; and could be a combination of both. For example, community managed schools are schools funded by the government, but managed by some non-government body, such as a community. The inclination of any school towards a particular system (public or private) depends on the degree of i) the prevailing provision (or management) and ii) financing of education. When one of these dimensions is not under total government control, and responsibilities between public and private sectors over education are shared, we say that public education is privatized. One common example of this initiative is the government voucher schemes or subsidies to finance student’s education in private schools (see Friedman, 1962). Recent trends around the world also show that many developed and developing countries are seeking partnerships between the public and private sector to share costs and improve the provision of education. Governments in these countries are looking for alternative mechanisms of education delivery and financing outside of the public realm. These initiatives are promoted by budgetary stringencies and a greater reliance on the market to correct inefficiencies (CuellarMarchelli, 2003).

Another important aspect of public-private school dynamics is the growing competition in the private sector, and its impact on school and student performance. Along with the study of public and private school performance, this dissertation focuses on the impact of private school competition on public school performance for the case of Nepal using data from the School Leaving Certificate (SLC) exam1. A background on the country and a discussion on the education system in Nepal, including the SLC exam are discussed in the second chapter of this dissertation. Motivation of this study

Though Nepal’s education system has progressed significantly over the last few decades2, it continues to face huge challenges amidst its prolonged political instability. For example, the NER for primary students in 1980 was just around 16 percent, but by 2003, it had risen to 83. 5 percent (MOES, 2005a). Similarly, the number of schools and colleges has risen exponentially This is equivalent to 10th grade final examination, and the exam is administered by the government of Nepal every year. 2 Recent educational statistics on Nepal is presented in chapter 2. 1 3 over the last few decades.

The retention of students, especially at the primary level, has always posed a big challenge to this country of 28 million. Still, 19 percent of the total school age population (age 5 to 16) are not in school. At the secondary level, the figure is even more alarming with 40 percent out of school (MOE, 2008). There is a very low participation rate in the upper stages of schooling. The literacy rate was only 55. 6 percent in 2009 (MOE, 2010). Disparities in gender, ethnic and economic groups, and locations are increasing year by year. For example, only 43. 3 percent of Nepal’s women are literate, compared to 70. percent of men (MOE, 2010). Schooling quality in public schools interpreted in terms of achievement rates is found to be very low. In addition, the public schools are left behind, and there is much disparity between the private and public schools in terms of quality and student performance. For example, based on the 2004 SLC results, compared to an average pass rate of 85 percent for private schools, the pass rate of public schools was only 38 percent. Similarly, while an overwhelming majority of private schools had pass rates in the 80–100 percent range, less than 7 percent of the public schools had such high pass rates.

Furthermore, the average SLC score of private schools was around 39 percent above that of public schools (Bhatta, 2004). Given this consistent low performance of public school performance, private school competition is increasing day by day, especially in the urban areas. This increase in private school competition can also be attributed to various other reasons such as the ease of establishing a private school, the profitability of private schools, and the absence of limiting regulations on these schools by the government.

In such a scenario, in addition to comparing private and public school performance, it is interesting to pose a question if private school competition has any impact on public school performance. In this regard, although there are many studies with data from developed countries, there is hardly any study in the case of developing countries. So far, to the 4 best of my knowledge, there has not been a single study on this topic that uses data from Nepal. This study attempts to fill this gap in the literature using data from the Nepalese Ministry of Education’s Survey and by applying various empirical techniques.

Research Questions There are two main research questions in this study: i) Do private school students perform better than their public school counterparts after controlling for student, family, school and teacher characteristics? ii) Keeping other things constant, does private school competition have any impact on public school performance in the case of Nepal? The empirical models associated with the first and the second research questions are presented in Chapters 4 and 5, respectively. Significance of the Study The study of private versus public schooling is a topic of great interest at the present time.

The topic is more interesting in the case of developing countries where demand for a better education system is rising day by day. In such a situation, a genuinely comparative study on the performance of private and public education becomes crucial to both education researchers and the policy makers. In addition, given the new movements of privatization of education in developing countries, the study of the effect of private school competition on educational outcomes is of even more importance. 5 This study is unique in several ways.

First, the data for this study come from Nepal, a focus of very few Economics of Education researchers. Many people around the world have been taking a keen interest in Nepal, which has taken some significant turns over the years: from autocratic regimes to a democratic kingdom, to a Federal Democratic Republic. Nepal is at a turning point in its political history. It needs good information for both policy makers and the general public. Education is a crucial sector and the delivery of good education is very critical for the development of this poor nation.

Unfortunately, very little literature is available that examines educational developments and their dynamics in Nepal. The Nepalese population has been shifting to private schools without clear evidence of their superiority and with great financial sacrifice for the majority of the population. In this context, this dissertation explores public and private schooling and examines the public-private linkages in the education sector. Thus, it can help fill this gap in the literature. Secondly, School Leaving Certificate (SLC) examinations are, by far, the most important school-level exams for the majority of Nepalese (Bhatta, 2005).

This study uses data on the SLC examination collected by the SLC study team under the sponsorship of the Ministry of Education, which is one of the most comprehensive data sets collected so far in Nepal relating to SLC examinations. In Nepal, there are just a few studies that explore private and public school performance, and they lack systematic empirical evidence. Even among those that use empirical models, they fail to take account of the selection bias problem that usually cripples such an analysis. By this I refer to the fact that the two groups of schools do not enroll the same types of students.

For example, private schools have more resources and certainly have students from families with higher socio-economic status for peer effects. These are omitted variables or non-observables. Thus, it is very likely that these differences account for the overall differential in achievement between public and private 6 schools rather than the sponsorship. This study adopts the propensity score matching and instrumental variable method to address such problems. This makes the study richer as compared to those that do not account for such serious methodological issues.

Moreover, this study is one of the first empirical studies on the impact of private school competition on public school performance in a developing county. Therefore, in addition to Nepal, this study may also provide some insights for other countries that share similar characteristics in the education sector. The rest of the dissertation is organized in the following way. Chapter 2 presents an overview of education system in Nepal. The chapter discusses historical developments in the field of education in Nepal, features of public and private schooling in Nepal, and a description of School Leaving Certificate (SLC) exam.

Chapter 3 deals with the data source, the missing data problem, method used to address this, and a description of the study variables. Chapter 4 presents a comparative analysis of private and public school performance. The chapter includes the guiding theoretical framework, the relevant literature, the model and identification strategy, and the study findings. Chapter 5 addresses the second research question, and studies the impact of private school competition on public school performance.

Similar to the structure of Chapter 4, this chapter discusses the relevant background, the previous literature, the model and identification strategy and the empirical results. Finally, Chapter 6 concludes with a discussion on the policy implications of the findings of this study. 7 Chapter II EDUCATION SYSTEM IN NEPAL Country Background Nepal is a tiny landlocked country in Asia located between India and China with population of about 28 million. After the overthrow of King Gyanendra in 2005 by the people’s movement, the country became a Federal Democratic Republic.

Geographically, the country is divided into five development regions, 14 zones and 75 districts3. The five development regions are: Eastern, Central, Western, Mid -Western, and Far-Western. Kathmandu, the capital of the country, and the only metropolitan city of the nation, is located in the Central region. In terms of ecological belts, it is divided into three regions: Mountain, Hill and the Plains, where the Mountain region lies in the north sharing a boarder with Tibet, and the Plains shares a boarder with India in the south. The hilly region is the central region that includes the Kathmandu Valley4, which has a population of around 1. million. The majority of the population in Nepal belongs to the Hindu religion. According to the 2001 Census, Hindus comprise 88. 87 percent and Buddhists 8. 59 percent of the total population, whereas the rest of the population belongs to other religions (CBS, 2002). The Hindu system is further categorized into four castes: Brahmin, Chhetri, Vaisyas (Newars) and Sudra (Dalits), where Brahmin is the highest caste, and Dalits are the lowest and most disadvantaged caste. Besides this, there are ethnic groups (Janjatis) that belong to the community which have their 3 4

Map of Nepal with 5 development regions and 75 districts is given in Figure 2. 1 Note that Kathmandu Valley consists of three major districts: Lalitpur, Bhaktapur and Kathmandu. The capital of the country refers to Kathmandu district. 8 own mother tongues and traditional cultures, and yet do not fall under the conventional four-fold Hindu hierarchical caste structure. Historically, many of these Janajati groups used to occupy a particular habitat or territory, and thus many of them claim that they are the true “first settlers” (Adivasi) of Nepal.

As per the census report of 2001, of the total population, 65 percent belong to the Hindu caste system, 31 percent belong to Janjatis (ethnic groups), and 4 percent belong to the other caste/ethnicity. There are at least 92 languages spoken as mother tongues in various parts of the country (CBS, 2002). Although Nepal is known to the world as land of the Himalayas, and is very rich in biodiversity, cultural and linguistic diversity, it is still one of the poorest countries in the world. As shown in Table 2. 1 that reports the basic national indicators for Nepal5, its poverty rate6 is 30. 8 percent with GDP per capita of only $473 (CBS, 2010).

Life expectancy at birth is 64. 1 years, and the literacy rate for citizens15 years and older is 55. 6 percent, 70. 7 for males and 43. 3 for females (CBS, 2010). According to the United Nations Development Programme (UNDP, 2010), the human development index (HDI) ranks Nepal at 144 out of 169 countries with an HDI value of 0. 428. The country’s economy has suffered badly due to prolonged political disturbances in the country, especially the Maoist guerrilla war that spanned the years from 1996 to 2005. Although the war has now ended, the country is not still able to recuperate from the damage sustained in all sectors of the economy.

The education sector is also one of the most affected. The sections below discuss Nepal’s educational history and the education system at present including the description of the SLC examination. 5 6 Also presented in Table 2. 1 is Statistics on South Asia for comparison purpose. The poverty rate is around 55 percent using the international definition of those earning $1. 25 a day. 9 The Educational History Nepal has come a long way in the education sector. Modern education in Nepal is believed to have begun with the establishment of the first school in 1853. However, this school was confined only to the ruling families and their courtiers.

The general population gained access to education only after 1951 when a popular movement overthrew an autocratic family regime and initiated a democratic system. In 1951-52, the adult literacy rate (15 +) of the country was just 5 per cent with about 10,000 students in just 300 schools and two colleges (CBS, 2003). With the introduction of a comprehensive Education Plan in 1971, the education sector began to expand. The National Education Sector Plan (NESP) of 1971, financed by USAID, attempted to create a single unified system of public education in order to empower district education offices to run schools.

However, under this law there was no inclusion of School Management Communities (SMCs). Due to this situation, only elite groups who utilized SMCs benefited from public education, and local communities were left out. As centralized rural development initiatives failed, there was demand for decentralization of state services. As a result, the Decentralization act of 1982 and its by-Laws from 1984 tried to empower local panchayats7 by giving them functional responsibilities in various central political programs (Carney & Bista, 2009).

By the late 1980s, the need for urgent reform in schooling was felt and hence a comprehensive US- funded study was undertaken called ‘Improving Efficiency of Educational Systems’ (IEES). This study identified systematic management weaknesses in the central educational bureaucracy and recommended renewed decentralization of educational management (MOEC/ USAID, 1988). 7 A village council in Nepal, India and Southern Pakistan is referred as Panchayat. 10 After the people’s movement of 1990 established a democracy in the country, education development was realized more successfully and more rapidly.

A simple example was seen in the rapid rise of the Net Enrollment Ratio (NER). The NER for primary students in 1980 was just around 16 percent, but by 2003 it had risen to 83. 5 percent (MOES, 2005a). Yet, the quality of public schools still remained very poor and; the demand for private schools increased rapidly. The private sector started to expand in size dominated by resource- rich families. By 1998, there was a significant growth in the private sector due to the prevailing school liberalization policy (Carney & Bista, 2009).

The problems arising from this expansion were rampant fee charge and considerable variability in the quality of private schools. Eventually, the Government’s poor performance and laissez-faire approach was aggravated by Maoist activists keen to bring changes to the country. In spite of the fact that Maoists had ended the war and joined the mainstream politics after the people’s movement in 2005, political instability and disturbances continue to cripple most of the key sectors of the country, including the education sector. The Present Education System

The structure of the present education system constitutes six sections: Pre-primary (below Grade 1); Primary (Grade 1 to 5); Lower Secondary (Grade 6 to 8); Secondary (Grade 9 and 10); Higher Secondary (Grade 11 and 12); and Higher Education (University level) (MOE, 2010). Table 2. 2 gives the present number of total schools by school level, school type and development region in the country. As shown in the table, there are presently 31,655 primary schools, 11,341 lower secondary schools, 6,928 secondary schools, and 2,512 higher secondary schools in the 11 country.

Out of these, the central region has 9,538 schools, the highest among all the regions, with 2,213 schools in the Kathmandu valley alone. In terms of school type, as figure 2. 2 shows, presently there are 41,959 public schools and 10, 477 private schools in the country, with predominance in the number of 31,655 primary schools. In percentage terms, public schools constitute around 80 percent of these schools and private schools only 20 percent. At the secondary grades (9th and 10th), there are 4,715 public schools and 2,213 private schools. In higher education, there are five universities with 834 constituent and affiliated campuses.

In total, including all levels of education, there are 7. 9 million students and 251,805 teachers involved in this teaching learning process. Table 2. 3 reports the percentage of enrollment of the total enrollment in public and private schools. In the secondary grade, the percentage of public and private school enrollment of the total enrollment is 83. 1 percent and 16. 9 percent, respectively. Figure 2. 2. Number of Schools by School-Type and Level Public and Private Schools by level 45000 40000 35000 30000 S c h o o ls 25000 20000 15000 10000 5000 0 P LS S School level HS Total Public Private Source: MOE (2010) 2 Table 2. 4 shows the gross enrollment ratio and net enrollment ratio by school levels8. As shown in the table, in 2009, the combined gross enrollment ratio (GER)9 was 98. 6 percent, with 141. 4 percent, 88. 7 percent and 65. 7 percent enrollment at the primary, lower secondary and secondary levels, respectively. The combined net enrollment rate (NER) was 65. 9 percent, with 93. 7 percent, 63. 2 percent and 40. 8 percent enrolled in primary, lower secondary and secondary levels, respectively. Table 2. 4. Gross Enrollment Rate (GER) and Net Enrollment Rate (NER) by level and gender Levels Female 146. 89. 3 64. 5 24. 6 100. 0 GER Male 137. 1 88. 2 66. 8 22. 6 97. 4 Total 141. 4 88. 7 65. 7 23. 6 98. 6 Female 92. 6 61. 9 40. 1 6. 8 64. 9 NER Male 94. 7 64. 3 41. 4 6. 8 66. 8 Total 93. 7 63. 2 40. 8 6. 8 65. 9 Primary LS Secondary HS Combined Source: MOE (2010) Note: Combined is for Primary, Lower Secondary and Secondary Grades Education Administration and Governance in Nepal The Ministry of Education (MOE), established in the country after the dawn of democracy in 1951, is the supreme body of all educational organizations and responsible for the 8

The Gross Enrollment Ratio (GER) is given by the ratio of actual students enrolled to the number of potential students enrolled. The Net Enrollment Ratio (GER) is given by enrollment of the official age group for a given level of education expressed as a percentage of the corresponding population. 9 Combined is for primary, lower secondary and secondary grades. 13 overall development of education in the country. In 2002, it was renamed the Ministry of Education and Sports. Again in 2008, with the decision of the cabinet, it was renamed as the Ministry of Education and has remained so until the present.

A Cabinet Minister at the political level heads the Ministry whereas two secretaries head the MOE at the bureaucratic level (MOE, 2010). The Ministry is responsible for formulating educational policies and plans, and managing and implementing them across the country through the institutions under its jurisdiction. For example, the Central Level Agencies (CLAs) under the Ministry are responsible for designing and implementing programs and monitoring them. Five regional Education Directorates (REDs) are responsible for monitoring the programs undertaken by the district level organizations.

There are 75 District Education Offices (DEOs) at the district level and 1,091 Resource Centers (RCs) at the sub- district level as the main implementing agencies for the educational policies, plans and programs at the local levels. At the function level, the Ministry oversees the following four divisions, each headed by a joint secretary who is a gazetted first class officer: i) An administrative division ii) A higher education and educational management division iii) A planning division, and iv) A monitoring, evaluation and inspection division. The main functions of the administration division are personal management and development.

It is responsible for recruitment, transfers, promotions and capacity building of the staff as well as procurement and property management. The major areas of work of higher education and educational management division are related to school education scholarship and higher and technical education. The planning division assumes responsibility for policy development and analysis. This division is the entry point for donor agencies in the education sector and coordinates foreign aid for designated for implementing programs and projects in education.

The monitoring, 14 evaluation and supervision division carries out monitoring activities in conjunction with program implementation and maintains a database on educational statistics (MOE, 2010). The Ministry of Education has undertaken many programs and projects since its establishment. Among the completed projects are the following. With the help of the Asian Development Bank (ADB), it completed the Teacher Education Project (TEP) that was implemented from 2002 to 2009 with the total budget of US $24. million. The main objectives of the project were i) to conduct quality pre-service, in-service and refresher training for primary teachers ii) improve institutional capacity to conduct training programs, and iii) improve the participation of women and disadvantaged groups in teaching careers. Another project named the School Management Transfer and Incentive Program was implemented from 2003 to 2008. With the assistance of the World Bank, the total budget of the project was US$ 5. 11 million.

The objectives of the project were i) to increase parent’s participation in the management of community schools ii) improve the access, quality and capacity of students in the community school, and iii) make all stakeholders accountable by increasing the transparency of functions of the community school. In the area of secondary education, the Ministry, with the help of grant from Denmark and a loan from the Asian Development Bank (total budget US $ 75 million) completed a program entitled Secondary Education Support Program (SESP).

The aim of the program were i) to improve the quality and relevance of public secondary schooling ii) to improve access to public secondary schooling, with a particular emphasis on girls, students with disabilities and students from poor and disadvantaged groups and districts, and iii) to develop institutional capacity and management of central and district education institutions and public secondary schools based upon a decentralized system of planning and management.

Another widely known program is Education for All (EFA). This was implemented from 2004 to 2009 15 with the help of multiple international organizations and donor nations and with a total budget of US$ 814. 5 million. The major objectives of this program were to: i) ensure access and equity in primary education ii) enhance the quality and relevance of primary education iii) improve efficiency and institutional capacity.

With the partnership of the World Food Program (WFP), the MOE also undertook Food for Education Program (FEP) from 2002 to 2011 with the total budget of US$ 224. 25 million. The objective of the program was to increase access to basic primary education and improve the nutrition and health of children within regions with food deficits and low access to education. Partnering with the United Nation Population Fund, the MOE undertook the Population Education Program over the period 2008 to 2010 with the total budget of US$ 2. million. The goals of the program were to i) include reproductive health issues in school curriculum ii) develop policy programs for gender equity, and iii) increase national support for gender equity. There are many programs that are on-going. For example, with the partnership of the Asian Development Bank (ADB), the Ministry has been implementing the Skills for Employment Project (SEP) since 2005 with a total budget of US$ 25 million.

The project’s specified aims are to: i) increase access to market oriented short-term skills training particularly for women, Dalits (oppressed caste) and the disadvantaged ii) strengthen training for providers to enhance access and improve the relevance and quality of training, and iii) develop and articulate a new national policy to achieve greater integration, relevance and efficiency in the Technical Education and Vocational Training (TEVT) sector. Another ongoing project being implemented since 2007 and with the assistance of the World Bank is the Second Higher Education Project (SHEP).

The project has a total budget of US$ 60 million with goals to: i) enhance the quality and relevance of higher education and research through a set of incentives for promoting effective management 16 and financial sustainability of academic institutions, and ii) improve access for academically qualified under-privileged students, including girls, Dalits and educational disadvantaged Janjati to higher education through financial assistance and enhancing the capacity of higher secondary schools. Another big and important project that the MOE has been implementing since 2009 with the help of the World Bank, ADB, Denmark and

Norway is the School Sector Reform Program (SSRP). With a total budget of US$ 2,626 million, the project aims to: i) strengthen the policymaking process in education ii) reform the educational sector through an integrated approach and iii) expand and consolidate the concept of Education for All (EFA) best practices and lesson learnt, and iv) build the capacity of stakeholders. There are various agencies under MOE at the central, regional, district and local levels that help in the functioning of these efforts to achieve the Ministry’s objective and goals.

This is presented in Table A. 1 of the appendix section. Department of Education One of the principle agencies under the MOE is the Department of Education (DOE). The DOE was established in 1999 to institutionalize and regularize activities related to the Basic and Primary Education Program (BPEP). After the establishment of the Department, most of the activities performed by the BPEP were shifted to the Department and the BPEP as a project ceased to function. Due to this, basic and primary education related activities carried out by the Department were also referred to as BPEP II.

Presently, the Department, with its direct line of command with the regional and district offices and with full administrative and financial authority takes the responsibility off implementing and monitoring educational programs in the country. The Department is headed by the Director General, a gazetted first class senior officer 17 belonging to education service cadre. The five Regional Education Directorates (REDs) and 75 District Education Offices (DEOs) fall under DOE and perform their tasks to meet the Department’s objectives.

The Department has the following three divisions each headed by a director, a gazetted first class officer: i) An administration division ii) A planning and monitoring division, and iii) An educational management division. The main role of the administrative division is to take responsibility relating to general and personnel administration, financial administration, educational materials distribution and physical services. The planning and monitoring division is in charge of planning, monitoring, research and development.

Finally, the educational management division is entrusted with the responsibility relating early childhood education, basic and primary education, women’s education, special education and educational statistics. The roles of the Department of Education as specified by the Ministry of Education include: i) providing equal access to education ii) developing quality reforms iii) improving internal and external efficiencies, and iv) developing education as a development-friendly venture. Soon after the establishment of the Department of Education, a few important programs were put forth.

For basic and primary education, these programs included improvements of access to primary education, school management, and the upgrading of teachers’ standards at the primary level. In terms of increasing women’s access to education, the programs included increasing female enrollment, encouraging greater numbers of educated women to go into teaching as a profession, increasing the competition rate of the primary education of female students, and providing scholarships to female students at various levels.

Finally, to improve general literacy levels, a campaign was instituted to eliminate illiteracy altogether (MOE, 2010). According to the education regulations of the DOE, public or government-aided schools are managed by School Management Committees (SMCs). The compositions of SMCs, 18 academic content, textbooks, and examination systems are uniform throughout the country. The DOE is also responsible for appointing the teachers, including the head-teachers. In addition, the DOE nominates the District Education Committee (DEC) which in turn nominates the SMCs.

The government District Office, within the DEC, is headed by a District Education Officer in all of the 75 districts in the country. In fact, this is the most influential unit that designates tasks for each school to implement. It is the responsibility of the DEC to set the school calendar, provide teacher salaries, organize teacher training programs, perform supervisions, and audit the school accounts (MOE, 2010). Other Agencies under the Ministry of Education There are other important agencies that were established to help the MOE set its objectives.

For example, National Center for Educational Development (NCED) was established in 1993 along with the nine Primary Teacher Training Center (PTTCs) in various parts of the country at the recommendation of the National Education Commission, 1992. Since 2004, the NCED has been the main body under the MOE that is responsible for human resource development in the education sector. Presently, the NCED conducts training programs through its 34 Educational Training Centers (ETCs) established at different strategic locations of the country.

Another important academic institution under MOE is the Curriculum Development Center (CDC), which was established in 1997 with an aim of designing curricula and textbooks along with other instructional materials for school education. This center conducts annual as well as periodical discussions, interactions and dissemination programs on the usefulness of the instructional materials. In addition, it also conducts research-oriented programs to make education relevant, practical and competitive. 9 The Office of the Controller of Examinations (COE) established as the secretariat of the SLC board in 1934 operates and manages the School Leaving Certificate (SLC) examinations in the country. Although the OCE mainly conducts the SLC examinations, it also organizes shortterm trainings, workshops, seminars and carries out researches related to school level evaluation system. In the non formal sector, Non Formal Education Center (NFEC) was established in 1951 along with Adult Education Section within the MOE in order to carry out adult literacy programs in the country.

The center has been taking the responsibility of all non-formal education programs, primarily the basic literacy program as the only scheme for reducing illiteracy in the country. The agency under the MOE that keeps the record of public school teachers is called School Teacher Record Office (STRO). Established in 1998, the major functions of the STRO is keeping and provision of necessary data and information related to the permanent teachers of the community (public) schools.

It also helps to facilitate delivery of post-service benefits to retired teachers like pension benefits, gratuities, family allowances, education allowances and children’s allowances. The Teacher Service Commission (TSC) was established in 1999 to make recommendations to the government for the permanent appointment and promotion of the teachers of public schools. The commission provides the teaching license necessary to the candidates for securing the post of a teacher, and also provides suggestions on the issues related to service terms and conditions and facilities for the teachers.

With the introduction of the New Education System Plan (NESP) in 1971, the Regional Education Directorate (REDs) was established with the purpose of enhancing the efficiency of educational administration processes as well as to bring these closer to the people and the school. The five REDs are located in the 5 development regions of the country and are responsible for bringing out uniformity in district level programs and for coordinating, monitoring and 20 supervising the school level teaching learning as well as development activities within the region.

For the district level offices in the educational administration, the District Education Offices (DEOs) are established in each of the 75 districts of the country. With a major role to facilitate the task of school administration and supervision, each district is sub-divided into different supervision clusters ranging from 3 to 27 on the basis of school population and geographic locations. A Resource Center (RC) is established in each of the cluster with a Resource Person (RP) to provide professional support and services to the schools within the cluster.

RPs are selected among the teachers of RC catchments areas. Presently, there are altogether 1,053 RCs through out the country, which are supervised, evaluated and monitored by a School Supervisor. The Higher Secondary Education Board (HSEB) is responsible for the 10+2 education system in the country. Established in 1989 under the Higher Secondary Education Act, the board works towards the needs for addressing middle level manpower requirements and for importing necessary knowledge and skills to those students who want to continue their education at the undergraduate level.

In the higher education division, the supreme body is the university senate, which is responsible for making policy decisions. The University Grants Commission (UGC) established under the University Grants Commission Act 1993 assists the government in managing the fiscal aspects and funding policies of higher education. The commission’s major role is the proper allocation of grants obtained from different sectors for the management and development of the Universities in the country. Tribhuvan University, established in 1959 is the first university in the country.

It was only after the establishment of this University that higher education within the country was available to the general Nepalese people. Presently there are five other universities located in different parts of the country. The main institution for 21 conducting educational research in Nepal is the Center for Educational Research, Innovation, and Development (CERID), which is affiliated with Tribhuwan University. The CERID is headed by an Executive director and undertakes educational research projects, including collaborations with several foreign institutions.

Likewise, commissions like the Nepal National Commission for UNESCO, established in 1954 that functions under the chairmanship of the education minister has been serving the Ministry in establishing mutual relationships amongst the member states of the UNESCO. The commission also advises the government of Nepal in the field of education, science, culture, social and communications that is within the jurisdiction of UNESCO (MOE, 2010). In the private sector, the Private and Boarding Schools’ Organization, Nepal (PABSON) is an active and widespread umbrella organization of Private and Boarding Schools in Nepal.

It was established in 1991AD and registered with the Government (the then HMG) of Nepal. PABSON is guided by its own constitution and acts as an umbrella organization for all its member schools. It performs its functions through various central, regional and district committees, sub-committees and departments, duly elected as per the provisions of its constitution. The PABSON is also acting as a nodal agency in coordinating with various government agencies, non-government agencies and other stake holders on all matters pertaining to school education, especially those concerned with private sector education.

In addition, the other functions of the PABSON are i) coordinating with all education stake holders in trying to resolve all issues relating to private schools including framing policies to control private schools ii) determining criteria for basic fees structuring iii) protecting private investment in schools iv) safe guarding the interests of employees, and iv) ensuring the discharge of social responsibilities by private schools. 22 Education Expenditure and Finance in Nepal The government of Nepal has specified that the educational budget is distributed in the schools across the countries in the following ways (SMAERC, 2009).

The first and the most usual method is called ‘incrimination’. In this method, the budgeting decisions (increase or decrease) in education or some particular sub-sector for a particular year is done on the basis of the previous year. The second is called ‘formula funding’. The kind of budgeting is based on some rationale so it is distributed only on the basis of some specified objective principle with emphasis on equitable opportunity, responsibility and accountability. The third is called ‘program budgeting’ with a special focus on a specific program.

In this type of budgeting, the budget is allocated in such a way that it is sufficient to cover all expenditures required by the specified program. The fourth is the hybrid or mixed strategy, where resources are managed and mobilized in more than one way. From 1975-1990, Nepal spent about 10 percent of its annual budget on education and this increased to 13 percent in the Eighth Five-Year Plan during 1992-1997. As a percentage of the Gross Domestic Product (GDP), this spending ranged between 1. 3 percent and 2. 0 percent between 1975 and 1990 (MOF, 2004). After 1990, these figures improved to a significant level.

Table 2. 5 reports data on the educational budget from 2000 to 2010. As seen in the table, the national effort on education (percent share of education in GDP) has slowly been increasing over the years. For example, in 2000, it was 2. 5 percent and it was 3. 8 percent in 2010. The percentage of the government budget allocated to the education sector has been 15. 3 percent on average in the last decade. At present, 16. 3 percent of government budget is allocated to the 23 education sector. The growth rate of the educational budget is also constantly increasing over the years with the ten-year average being 16. 1 percent. The subsector distribution is dominated by primary education, which is more than 60 percent of the total education budget. Table 2. 5. Education Budget Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 National Budget (N. Rs) 77238226 91621335 99792219 96124796 102400000 111689900 126885100 143912300 168995600 236015897 285930000 Education Budget (N. Rs) 10176074 11749579 14072847 14402421 15613274 18059654 21250447 23005525 28390000 39086407 46616672 % of GDP in Education 2. 5 2. 8 3. 0 3. 1 3. 1 3. 5 3. 6 3. 7 3. 6 3. 7 3. 8 % of Education Budget 13. 17 12. 82 14. 14. 98 15. 25 16. 17 16. 75 15. 99 16. 8 16. 56 16. 30 AGR of Education Budget 15. 5 19. 8 2. 3 8. 4 15. 7 17. 7 8. 3 23. 4 37. 7 19. 3 Source: MOE (2010), EFSF (2009) Note: AGR= Annual Growth Rate The major portion of government expenditures for school education in Nepal is usually spent on teacher and staff salaries and fringe benefits. For example, a study by Center for Educational Research, Innovation, and Development in mid- nineties found that in public primary schools, the expenditure on teacher and staff salaries was 86 percent, as compared to 63 percent in private primary schools.

In public secondary schools, this expenditure on salaries was found to be 76 percent in the public sector as compared to only 52 percent in the private sector (CERID, 1996). A more recent paper by Ministry of Education by EFSG (2009) has stated that out of the total grants that a public school receives in an academic year, around 80 percent goes 24 to teacher salary and construction support. The study also points out that the expenditure on teaching learning materials, capacity development of teachers, library development and computer education is very small.

Financing of Education in Nepal The first modern school, Durbar High School was established in Nepal during the Rana regime in 1853. The school was initiated with the view to providing education mostly to the children of the ruling class, but was not for the common people. School education was financed mostly by the national treasury and partly by community households. Besides this school-based education, the practice of home-based tutoring was also established where this would be financed by the households alone. This system still seems to be in practice, though in a somewhat modified way.

When the democracy was established in the country in 1951, the financing of education evolved in two ways: i) community financing in the case of schools established by the public, and ii) through a system of joint financial contribution – shared by the community (parents) as well as the government, in the case of government supported schools (SMAERC, 2009). The National Education System Plan was introduced in 1971. After this, schools that were established and run by community financing were transformed into government-owned entities, and were financed mostly by the government and artially by the parents through the tuition fees. However after 1980s, a more liberal approach was established by the government where new schools were allowed to open as a result of the efforts of the community or by private initiatives. Hence, with the introduction of the private schools in the country, there was a clear distinction on 25 the two types of financing: government financing and parent/student financing. This system has remained in practice to the present time. There are basicall

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