I was asked over 1 year ago by colleagues at Proparco (the French equivalent to the IFC) to write about the schools voucher scheme I had been working on during my stint in the Philippines during the first half of 2013. I am told an edited version of my article below will be forthcoming in the next edition of the Proparco Private Sector & Development magazine, available online here.
Since it's been such a long time and not yet published, I've finally gotten round to self-publishing the long, unedited version of the article below, for any who may be interested in such matters.
Since it's been such a long time and not yet published, I've finally gotten round to self-publishing the long, unedited version of the article below, for any who may be interested in such matters.
Education Development and the Private Sector and is the Philippines
leading the way?
3m students expected, 3 years left till the first day of term
What do you do when you need to create
classroom spaces for almost 3 million secondary school students, and you only
have three years in which to do it? This is the question facing civil servants
at the Department of Education (DepEd) within the Philippines. A Presidential reform
has introduced (to commence from 2016 onwards) two additional years of Senior
Secondary schooling within the Philippines’ basic education system, moving from
the current ten year system to the global norm of twelve years. During early 2013 members of GEMS Education Solutions’
consultancy team were deployed by the Asian Development Bank to help DepEd find
a way to answer this and other important questions around the education system
design.
The aims behind this senior secondary
high school reform are clear and highly commendable: to extend the duration of
basic education in order better to prepare Filipino students for the
increasingly competitive world into which they graduate. Making the reform
actually happen however, presents some colossal logistical, educational and
financial challenges. How to build approximately 4,500 brand new senior high
schools in only three years, in a country comprised of over 7,000 islands? How
to find the additional 68,000 subject specialist teachers to work inside those
new schools? How to train all these
teachers? How to pay for all the additional resources these two additional
years of schooling require?
Outsource the problem to the private sector
One major part of the Government’s
strategy for answering this supply-side challenge is to turn to the private
sector to absorb what could be as much as 30% or more of the expected new
senior high school market. Private sector in this context means the
existing private Junior High Schools (many of which are Faith based), the
private Higher Education Institutes (who would effectively be opening feeder
schools for their main undergraduate admissions) and private Technical and
Vocational Training Institutes (who could specialise in vocational training
while also offering a core mainstream academic curriculum). It would be feasible for new market entrants
(particularly domestic businesses who are large-scale employers) also to apply
for a school licence and begin new senior high schools – this has in fact already
happened with the opening this year of the first of the Affordable Private
Education Centres, a joint-venture between a leading Filipino conglomerate
names Ayala and Pearson, the international education business. The new APEC business sees significant demand
in the Manila market, and has ambitions to open as many as 500 new schools by
2018.
How has it come to pass that a
government can take such a pro-private sector viewpoint? Around the world it is highly unusual for
governments to consider allowing so much of their education system to be
delivered by private providers; by way of comparison even in America where the
Charter School movement has been running for over two decades, only about 5% of
total public school enrollment is managed privately.[1]
Part
of the answer behind the government’s benign attitude towards the private
sector is purely practical: DepEd recognises that the sheer scale of the task
and the limited time available to prepare, necessitates using whatever existing
and future school supply is at hand. Having
an insufficient number of schools and teachers in place by 2016 for the anticipated first cohort of over 1m
students is simply not an option, as
it will breach constitutional requirements and carries great political
risks.
Part of the answer is ideological:
the current administration won its election campaign on a pro-private sector
ticket, and have already seen through a number of public-private partnerships (PPPs)
which have generally been perceived as successful. For example, Manila residents
speak gratefully about the consistent supply of clean water now available in
the capital city, which has been managed privately under concession by two
water utilities since 1997.
Part of the
answer is historical precedent: the Philippines has, since as early as 1986,
been operating what has now become one of the world’s largest education PPPs,
the Education Service Contracting Scheme or ESC. This scheme provides flat-fee per pupil annual
subsidies from the government to purchase a set number of student places (or
“slots”) within nearly 3,000 of the country’s 4,500 registered private junior
high schools (JHS). Given how formative
the ESC scheme has been for paving the way for the upcoming senior high school
reform, it is worth understanding its key features and functions.
The ESC: buying places for over 750,000 public students in private
schools
When first introduced in pilot form
in the mid-80’s, the ESC was described as a way to get “poor but deserving
students” a scholarship fee to help them into good, local private junior high
schools. It was a policy response to
overcrowded public school classrooms, where excess students sitting in the
aisles of the local public schools – dubbed “aisle students” – would be moved
into the often under-populated private school classrooms as a way of easing
congestion and better distributing local resources. The selection of which particular aisle
students deserve to relocate and how many scholarships are actually available is
still performed by a local school selection committee (a supply-side measure,
see Figure 1 below.)
The ESC is not a full subsidy, rather a flat per pupil fee
of 6,500 pesos (or $151 USD) everywhere in the country, except the National
Capital Region (which includes Manila city), where it is priced at 10,000 pesos
(or about $232 USD). Parents of the ESC students are required to pay the
difference between the ESC grant and the total cost of tuition at their child’s
private JHS, known as a “top-up fee”. In 2009 the average household top-up fee
amount nationwide was 4,298 pesos (or $99 at today’s exchange rate)[2]. Given
that DepEd’s own estimated national annual average per pupil capitation fee for
their own government schools is around 14,000 pesos (or $325 USD), the ESC is
driving significant cost savings for the government by shifting some of the
costs onto households.
FAPE, the non-governmental organisation in charge of
administering the ESC, has successfully increased the number of private schools
contracted every year since 1996, and the total volume of participating ESC
students (the unofficial target is a full 1m total ESC students from the
current 0.75m total). The partnership
works because the government successfully obtains increased school access for
its rapidly growing youth population without needing to invest in further
expensive school infrastructure, whilst the private schools get the commercial
comfort of stable year-on-year student demand and the accompanying guaranteed
subsidy revenues.
The ESC as currently established is
far from perfect, and a number of evaluation studies draw attention to several
flaws in the scheme which could and should be improved[3]. One area where civil society actors focus
their criticism is around the inequity of the subsidy allocation, which largely
is a consequence of the subsidy pricing.
Since the ESC scheme requires top-up fees from parents, it is rarely the
poorest students in a community that can afford to take advantage of the switch
into private schools. Student selection
committees take this into account (part of their purpose is to ensure the full
volume of ESC slots are allocated) and so they tend to choose students from
families that can afford to shoulder the top-up fees.
Equity is also problematic between regions –
a consequence of the two-tier price points of the current ESC subsidy – since
population density, property prices, and household income levels are wildly
different between the three main urbanised regions (NCR, region 4A, and region
3) and the other more rural, remote island regions (see Figure 2 which shows
the differences in average JHS full tuition levels of participating ESC schools
by region by way of illustration).
Finally, being a supply-side contracting
scheme isn’t particularly elegant from DepEd’s administrative perspective;
every year involves individual contracting negotiations on allocated student
volumes with each one of the nearly 3,000 ESC participating private JHS, and
then follow-up school administration to ensure the correct disbursement of the
appropriate subsidy payments.
Despite its flaws, which can still be
addressed, the ESC has embedded the idea of private sector participation within
DepEd’s and wider Filipino society’s approach to public schooling. Given the precedent at JHS level, DepEd is
now considering what version 2.0 of this education PPP should look like for the
2016 reform. Interestingly, the appetite
from existing and new private sector providers to participate in SHS and invest
in new schools is very high, and many providers and associations are lobbying
DepEd to issue early guidance on locations, price points, and curriculum in
order for them to make their investment decisions and start building prior to
2016. DepEd have therefore taken a first
fundamental decision, following PPP design options and scenario planning
assistance conducted by GEMS Education Solutions, and formally announced in
September 2013 that they will deploy an education voucher as the subsidy
mechanism. This SHS voucher will enable
certain public school students to enrol within the new private Senior High
School (SHS) from 2016 onwards.
Vouchers as a school access strategy, but can they also drive up school quality?
It is probably the inherent
simplicity of a voucher scheme that makes it administratively attractive to
DepEd. Since it is a demand driven
mechanism, and only redeemable after a student has successfully enrolled at a
private school, a voucher should, in theory, limit funding wastage and pay only
for student places where demand has been successfully met by school supply. If
the private sector mobilises surprisingly fast in certain locations and absorbs
high levels of student demand, DepEd can easily issue more vouchers. If funding for voucher places runs out
(unlikely given that vouchers will be priced at or below the government’s own SHS
per capita levels), DepEd can move to a lottery system to manage the excess
demand for places.
A voucher then is a simple way to provide
transparency to all parties involved: students and parents know how much the
voucher will be worth and can make the decision about which school to attend
and how much additional top-up funding they consider worth investing for the
quality levels available; private operators will know what portion of fees are
government backed and will be able to make individual commercial judgements
about local demand and competition and pricing levels. The main lever DepEd therefore has for
stimulating private investment into new SHS school supply is the pricing level
of the voucher. The free market dynamics
of the voucher open up the range of suppliers eligible to participate in the
SHS arena, and DepEd can begin to manage the SHS market on a regional basis and
deal with its pressing short-term school access challenge.
The voucher may be a useful tool for
easily funding large volumes of school places within private schools – as it
does in Pakistan, Chile, and Columbia – but are there strategic ways to build
in improving school quality levels as part of the partnership package?
Figure 3
shows a summary of the education voucher system proposed by GEMS Education
Solutions, which features a number of components designed to drive up quality
levels throughout each and every private school participating in the voucher
scheme. The two key bodies that will need
incorporating into the voucher scheme’s operations – the payment processing
unit (PPU) and the secondary schools assessment agency (SSAA) – reflect the
twin strategies which DepEd will need to put in place for long-term quality
improvement to occur.
The first strategy
involves linking voucher funding with demonstrable outcomes at the school
level, with three payments proposed over the year each linked to key student
milestones (the first payment after successful start of year enrollment, the
second mid-year payment after achieving or exceeding an average student
attendance threshold, and the third end-of-year payment after achieving or
exceeding both the average student attendance threshold and a pre-determined
threshold for student scores on the national exam). The purpose of multiple
payments is not only to make operational cashflows easier for participating
private SHS, but also to underscore DepEd’s seriousness behind the minimum
quality levels around student attendance and competency levels expected, and to
give private schools a real financial incentive for achieving them.
The second strategy involves creating a
meaningful inspection regime – with real teeth in the worst-case instance to
take away voucher students from failing private schools - and with the
resources to unlock consumer choice and a flight-to-quality via easily
accessible public comparative information about participating SHS school
quality levels, course availability, and tuition fee levels. Both of these
operational entities, the PPU and SSAA, could be managed by private specialist
units.
DepEd’s appetite for instituting
such entities is at the moment not clear, and many further details about the
viability of this governance structure still need to be worked out. However the
argument in favour of turning the voucher scheme into a vehicle for long-term
quality improvement throughout the system (in addition to simply creating new
school supply) has been recognised.
Targeted pro-poor vouchers: private sector schools can also participate
in development
A final notable benefit of the
proposed education voucher over the existing ESC scheme grant is the way in
which eligibility criteria combine with a student’s self-selection and personal
investment decision to make the allocation mechanism more transparent and
equitable. Intuitively, vouchers which are
universally available and that require top-up fees will be most attractive to
those who can already afford to switch into private schools. However, if
certain students at the higher socio-economic deciles are excluded from
eligibility, then fewer total student volumes means higher per pupil subsidy
amounts on each voucher. The voucher
design therefore proposed included a means-test and five (rather than the
current two) price points, to better match the different regional tuition fee
levels with the likely volumes of student demand (see figure 4 for analysis
about the stark levels of rural vs. urban demand at different socio-economic
deciles).
The principle currently proposed for
targeting voucher eligibility is that all students whose household income falls
at or under the median national household income level of around 150,000 Php
(or about $3,486 USD) should be eligible to redeem their voucher. Though that will require higher per voucher
funding levels and will still challenge the poorest households with additional
top-up tuition requirements, it will limit the regressive nature of subsidising
middle and upper class households who already can afford the switch into
private schooling. The additional
rationale of subsidising poorer students into switching into better quality
private schools for longer term educational gains also helps redress the
traditional imbalance between the private and public school intake
patterns. With such a targeted pro-poor
voucher private providers will only consider participating when they know their
fees are affordable by the bottom 50% of household incomes; this could, it is
hoped, go even further into creating a competitively priced market of lower
cost private SHS across the Philippines.
Post-2015 Millennium Development Goals: use the private sector to drive
up system quality
We know that MDG 2 which targeted
universal primary school access has, in several places, successfully driven up the
numbers of students attending school but often at the expense of quality. The Philippines is, like many emerging
markets, still grappling with the school access challenge and that challenge is
not going away any time soon. The
introduction of the SHS reform in 2016 will no doubt be a scrambled and messy
affair – how could it not, with less than three years remaining and such a huge
volume of students needing school places? But the Philippines government is to
be applauded for taking such a bold step in recognising early that its own
private sector offers both a way for additional supply to be created and as
well as a way to improve the quality of schooling. It will be some time before the voucher
scheme is fully introduced across the Philippines, and even more time before
evaluation studies can conclude whether or not learning outcomes have indeed
improved relative to government schools.
In the meantime, other countries and education policy makers might do
well to consider the possibilities around private providers in their own
contexts, particularly with regards to school quality. In the Philippines private schools, Universities,
and TVET institutes are vocal about wanting to participate in this national
scheme and wanting to help educate those from the lower half of the
socio-economic scale, to help improve the entire nation’s standing. If this strength of feeling and this willingness
to invest private capital upfront and at scale in such critical national
infrastructure is palpable in the Philippines, who’s to say it won’t be
elsewhere?
Figure 1: ESC versus Voucher
student selection process
Source: GEMS analysis
Figure 2: Average ESC Junior High School Tuition Fee by Region, 2011-12
Source: FAPE 2011-12 data
Figure 3: Summary diagram of proposed Targeted Education Voucher Scheme in
the Philippines
Source: GEMS & EISDP
Figure 4: Student SHS demand by region and socio-economic levels, 2016
Source: EISDP data, GEMS analysis
[1]
Source: National Allicance for Charter Schools, Nov 2012 http://publiccharters.org/data/files/Publication_docs/NAPCS%202012%20Market%20Share%20Report_20121113T125312.pdf
[2]
See World Bank report, Education Service
Contracting Study: A Review of the Philippine Government’s Education Service
Contracting Program; June 20, 2010 (p. v).
[3]
See World Bank report (June 2010) for critiques of the regulatory framework
surrounding ESC; see E-Net Philippines’ 2012 report (Education Service Contracting In the Philippines: Assessing
public-private partnership in education from the perspective of the
marginalized sectors) for details of the inconsistency in grant allocation
and the inequity issues that therefore arise.
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