Journal Issue

Educational Development: Priorities for the Nineties

International Monetary Fund. External Relations Dept.
Published Date:
January 1990
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Poor education and training systems threaten adjustment efforts and constrain economic growth. The World Bank looks at ways to reverse this trend

A World Conference on Education For All is scheduled for March 5-9, 1990, in Bangkok. Plans for this conference were launched in February 1989 in Washington, DC, at a meeting of the heads of the United Nations Development Programme, the United Nations Educational, Scientific and Cultural Organization, the United Nations Children’s Fund, and the World Bank. Numerous other agencies and governments joined the effort later.

The conference will help focus attention on educational goals for the year 2000, with a view to meeting the basic needs of growing numbers of primary school-age children and adults who lack essential knowledge to cope with the increasing demands of the modern world.

As a contribution to the worldwide discussion of this topic, Finance & Development offers the following articles by our colleagues in the Bank.

Hard hit by the economic crisis and facing a pernicious combination of high population growth and limited financial resources, many developing countries must struggle merely to maintain present low levels of educational quality and access. But once missed, the opportunities for investing in the education of children and adolescents are lost—perpetuating the human capital weaknesses that constrain economic growth and development throughout the Third World.

The success of economic policies promoting international competitiveness and sustained development, after all, hinge to a large extent on the existence of a well-educated labor force. General education and vocational training both play a role in this regard. The former develops the broad capabilities that enable individuals to function effectively in society and on the job, and the latter provides the more specialized learning needed to enter the labor market or increase productivity (see article by John Middleton et al in this issue).

The education and training of men and—although often neglected—of women contributes directly to economic growth through its effects on productivity, earnings, job mobility, entrepreneurial skills, and technological innovation. In addition, education has important indirect effects, stemming mainly from the education of girls, as female participation in schooling slows population growth and spreads better health and nutrition practices (see “Bringing Women into the Economic Mainstream,” by Barbara Herz, Finance & Development, December 1989). These effects accumulate from one generation to the next: children of educated parents grow up in a better learning environment, and well-fed, healthy students take better advantage of educational opportunities.

The industrial countries, recognizing the critical importance of education to the productivity of labor, are launching educational reforms to prepare students better for a rapidly changing economy. In addition to supporting training to upgrade the work force, employers especially are looking more and more to education to develop the broad cognitive and problem-solving skills and personal characteristics that make workers trainable.

The newly industrialized economies of the Pacific Rim—the Republic of Korea, Taiwan Province of China, and Singapore—are moving in this direction, too. These East Asian success cases, though weak in natural resources, are rich in the human resources so crucial for economic efficiency and competitiveness. They also keep up their high level of investments in education and training to improve schooling even more, particularly in science and technology.

Most developing countries lag behind, however. What is most alarming is the widening gap between developing and industrial nations in the academic and technical skill levels of the labor force and, consequently, in the capacity of the former to take advantage of new technologies and new production processes. As a result, developing countries are less able to compete in international markets and less able to improve the quality of life for the poor. Making their predicament even worse has been the stagnation of international aid flows to education in the 1980s.

The education and training gap

For three decades, heavy investments by governments and international agencies brought about substantial educational progress in developing countries. Educational systems extended their reach to previously unserved areas and enrollments grew at an unprecedented rate. In recent years, however, this educational development process has slowed. Several major, interrelated problems are to blame.

Slowing enrollment growth. Between 1960 and 1980, school enrollments at all levels expanded rapidly. But since 1980, education budgets as a percentage of GNP have declined and enrollment growth has slowed considerably (see Chart 1). With the school-age population continuing to increase, enrollment ratios have stabilized and in some countries even declined. The outcome: more than 115 million school-age children who should have been in primary school in 1985 were not, with about 70 percent of these in the low-income countries. Moreover, almost 60 percent of the out-of-school children were girls. In 1985, the enrollment ratio of girls in low-income countries (i.e., the percentage of girls who actually enrolled in schools) was only 60 percent at the primary level, 11 percent at the secondary level, and 0.5 percent in higher education. This meant that in these countries, girls constituted 40 percent of total enrollment at the primary level, 32 percent at the secondary level, and only 24 percent in higher education.

Chart 1Primary and secondary school enrollment rates made impressive gains over 1960-85

Source: Unesco.

Note: Low income -1986 GNP per capita of $425 or less.

Lower middle income -1986 GNP per capita of $426-1,725.

Upper middle income -1986 GNP per capita of $1,726-7,425.

High income - 1986 GNP per capita of above $7,425, excluding the high-income oil exporters.

Low academic achievement. Compounding the problem of numbers is the poor quality of education. Many schools in developing countries do not teach students effectively. They produce students who not only are far behind their industrial country peers on standardized achievement tests in reading, math, and science, but who, more importantly, often do not master the knowledge and skills specified in their national curriculum.

Inefficient student flows. When the quality of instruction is poor, students test poorly, repeat courses, and progress slowly through the system. The high drop-out and repetition rates produce tremendous waste. In 1984, low-income countries took an average nine years of educational inputs to produce one fifth-grade completer. The cost of this inefficiency is as much as 20 percent of the total education budget in some countries.

Skill shortages. In response to increasing international competition and scientific and technological advances, industrial countries devote tremendous resources to training and upgrading their labor forces. In developing countries, recognizing that skill development is a necessary condition for higher productivity and economic progress, governments spend large sums on programs of vocational education and training. But evidence shows that publicly provided training—in both industrial and developing countries—is often ineffective in improving skills and productivity and not responsive to the needs of the economy. Further, training is often used to meet social objectives, such as widespread youth unemployment, for which it is only weakly suited.

Demographic trends. Rapid population growth aggravates the burden on educational systems. Now about one billion, the developing world’s school-age population will increase by 200 million by the year 2000 (see Chart 2). More than half that increase will be in the poorest countries in Africa and Asia. In many, particularly in Sub-Saharan Africa, enrollment growth must substantially outstrip population growth to reduce the number of children out of school—a tall order for nations with few resources, but one that cannot be ducked.

Chart 2School-age population in developing nations to grow rapidly by the year 2000

Source: World Bank.

1 Projected.

Note: For definitions of country groupings, see note on Chart 1.

Inadequate and inefficient resource allocation. Despite their commitment to education, many developing countries do not spend as much for education as developed countries, even though the proportion of their school age population is 75 percent higher. For example, low-income countries allocated less than 3 percent of their GNP to education in 1984, compared with almost 6 percent for high-income countries. Exacerbating the situation is the inefficient allocation of resources. Too much goes to salaries, and too little to textbooks (see article by Stephen Heyneman in this issue), laboratory supplies, and inservice teacher training, despite the demonstrated positive impact of these inputs on student achievement.

Reversing the trend

In the wake of the global slowdown in economic growth and the international debt crisis, the effectiveness of service delivery in the social sectors has declined as nonsalary recurrent expenditures have been cut. This has disproportionately affected the poor, excluding them from income-raising education and training opportunities. It has also put the long-term development prospects of many low- and middle-income countries at risk, thwarting the very purpose of the adjustment process. Reversing this trend and preventing a further widening of the human capital gap between developed and developing countries will entail policy changes, aiming not only at more cost-effective application of available resources but, in many countries, also the mobilization of additional resources. Different countries face different issues, but four priorities are almost universal:

  • improving the quality of primary education;
  • increasing girls’ access to schools;
  • strengthening science and technology education; and
  • developing effective training systems.

These priorities all complement and reinforce one another. Improving the quality of primary education—really the cornerstone of most country strategies—raises student achievement levels and lays the groundwork for all further education and training (see following article by Marlaine Lockheed). It also expands access, by reducing the number of repeaters and increasing the efficiency of student flows through the system, thereby freeing up resources that can be used to provide places for boys and, most important, for girls who are out of school.

Increasing girls’ access to schools is imperative not only on equity grounds but also to capture the substantial contributions to economic growth and family welfare that stem from girls’ education. Better primary education also prepares the foundation for improvements in secondary and higher education. Especially critical at these latter levels are better science and technology courses, which will help countries absorb the new technologies by enhancing the capability of the labor force to be trained, and prepare a cadre of scientists and engineers who can generate and adapt innovations and new technologies. Combined with effective training systems, this will make developing countries more productive and competitive in international markets.

To tackle these issues effectively, most developing nations will have to reinforce educational policy reforms with related human resource policies. First, a slowing down of the population growth rate will ease the strain on governments, especially in Sub-Saharan Africa. Second, better health and nutrition will improve the performance of children in school and prevent the nutritional deficiencies that can impede learning in early childhood. Third, special measures to promote enrollment, attendance, and retention of girls in school will increase the opportunities for schooling and the possibilities for sociocultu-ral change—particularly if curriculums include instruction on health and nutrition.

Effective reforms of education policy also require that human resource development be a central element of a country’s overall development strategy. Educational spending must be treated as investment in human capital—complementing investment in physical capital and technological innovation—not as luxury or welfare spending. Policy reforms on the supply side will need to be matched with reforms on the demand side of the labor market, focusing on wages, employment, and incentive structures.

Of course, almost all developing countries will need to spend more on education, but the inadequacy of available resources is most severely felt in low-income countries. What will it take, therefore, to provide a place in an effective school for all school-age children in low-income countries (excluding China and India, where, based on projected slowing population growth, access should no longer be a financial problem)? Additional capital expenditures will be required roughly equivalent to 1 percent of GNP, plus an increase in recurrent expenditures of about 1 percent of GNP to provide students with books, teaching aids, and teachers. In other words, many low-income countries will need to increase spending on education from 2-3 percent of GNP to the 4-5 percent of GNP that is common in many developed countries.

As additional resources are mobilized, opportunities must also be exploited to contain costs. The key will be to eliminate waste and inefficiency by improving teaching and learning processes, typically translating into higher spending per student but lower cost per graduate. It will be particularly important to:

  • reduce repetition and drop-out rates to move students more efficiently through the system;
  • maintain pupil/teacher ratios at 40-50:1;
  • apply new educational technologies and distance education techniques (broadcast and correspondence courses), especially in secondary and higher education and in vocational and technical training; and
  • reduce subsidies for student living expenses in secondary and higher education, instead using that money for educational purposes.

In addition, sources of funding must be diversified. In many countries an increased public effort will be essential, but it will rarely be enough. Almost everywhere resources will need to be—and can be—mobilized from outside the public sector. Low-income communities can often make contributions in kind. Middle- and upper-income parents should be asked to contribute financially to their children’s education. The business sector should be urged to support the cost of training. International donors should also step up their aid, deploying it more effectively to provide the much needed assistance.

Bank lending for education

The Bank has been the leading provider internationally of capital funds for educational development since the early 1970s—providing about 15 percent of all official external aid to education, which totals about $4 billion a year—and a major source of policy advice on education (see table). Its lending for education started in 1963 and expanded rapidly thereafter, reaching a peak of $936.8 million in fiscal year 1985 (or 6.5 percent of total Bank lending). In FY1989, lending recovered to $936.6 (4.5 percent), and the program planned for FY1990-93, totaling about $5 billion, will accelerate the recent upward trend. A lending program of this magnitude will substantially enhance the Bank’s ability to effectively support educational development in the 1990s, especially if a significant proportion supports policy reforms, targeting the four priority areas discussed above.

Who provides external support for education? 1980-87(In millions of US dollars)
YearWorld BankOther


Bilateral aid

from member

countries of the

DAC of the 0ECO2


of total

Aid to


of total

Aid to


of total

Aid to


of total

World Bank

percent of



Sources: Annual Reports 1980-87 of: African Development Bank. Asian Development Bank, Inter-American Development Bank, Islamic Development Bank. World Bank, and OECD. Unesco, Paris Office, and Unicef. New York Office.

Includes African Development Bank, Asian Development Bank, Inter-American Development Bank, Islamic Development Bank, Unicef, and Unesco.

Includes loans, grants, etc. (excludes contributions to multilateral organizations).

Sources: Annual Reports 1980-87 of: African Development Bank. Asian Development Bank, Inter-American Development Bank, Islamic Development Bank. World Bank, and OECD. Unesco, Paris Office, and Unicef. New York Office.

Includes African Development Bank, Asian Development Bank, Inter-American Development Bank, Islamic Development Bank, Unicef, and Unesco.

Includes loans, grants, etc. (excludes contributions to multilateral organizations).

Over the past 25 years, the Bank has contributed significantly to educational development in many countries. It provided much needed support to the expansion of the educational infrastructure during the 1960s and 1970s, and in several countries (e.g., Brazil, the Republic of Korea, and Ethiopia), it has effectively assisted with the implementation of broad programs of sectoral reform and quality improvement. Successful strategies have been based on strong analytical work concentrated on a few critical policy objectives and have been grounded in a persistent commitment to support—financially and analytically—the implementation of policy change over a decade or more, through a series of lending operations.

The nature of Bank lending for education has gradually changed over the years. Initially, the chief objective was to provide physical infrastructure for secondary education and technical and vocational training. In the early 1970s, this shifted to include basic education programs—adult literacy, nonfor-mal training, and primary education. In the 1980s, lending for education further diversified, reaching out to support the development of a capacity for research and development in science and technology, particularly in several middle-income countries. Most recently, support for broad-based programs of sectoral reform and adjustment has become a high priority, especially in Sub-Saharan Africa.

Similarly, the procedures for preparing and appraising education projects have also evolved. At first, they were mostly patterned after those of the infrastructure sectors, which dominated Bank lending in the 1960s. But a new approach emerged as it became obvious that even the best designed projects would be compromised if distortions in the sectoral policy environment and weak institutions persisted. In the early 1980s, “sector investment loans” were introduced—used mainly with mature borrowers in Asia and Latin America. They typically focused on policy and institutional objectives and delegated the responsibility for detailed project design and implementation to the borrower. In countries with a severely distorted sectoral policy environment—mainly in Africa—support has been channeled through sectoral adjustment loans.

Educational development, especially changes in the quality of education, is socially and technically complex and politically sensitive. It involves changes in the behavior of thousands of teachers and administrators—essentially an incremental process depending heavily on sound management to flexibly adapt programs and create the capacity to monitor and evaluate program cost and effectiveness.

The Bank’s response

The Bank’s World Development Report 1980, examining poverty and human development in the context of adjustment, concluded prophetically that deferring human development would have devastating consequences, and that when austerity programs are necessary, donors and governments should pay attention to the need for investment in the human development of the next generation. Simultaneously providing 200 million additional children with access to primary schooling and implementing system-wide programs of quality improvement is a daunting task for developing countries. Few will be able to do this alone. A joint effort of the international community and developing countries will be necessary to mobilize the financial and intellectual resources necessary to adequately support country programs of educational reform and development.

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