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Portugal: Technology Education Project (Loan 2867-PO)

The Portugal Technology Education project, supported by Loan 2867-PO for US$32 million, was approved in FY88. In 1991, over US$23 million of the loan was canceled at the request of the borrower. The loan was closed as scheduled on March 31, 1995, at which time the undisbursed balance of US$1.6 million was canceled. The Implementation Completion Report (ICR) was prepared by the Europe and Central Asia Regional Office. The borrower's full report on the implementation and achievements of the project is included as Appendix B.

The project was designed to improve the quality and relevance of: (a) scientific and technological research and training by supporting three applied research institutes (in biotechnology, materials science, and water resources) and (b) agricultural education by supporting two agricultural polytechnic institutes. The project also sought to modernize the teaching of science and mathematics in selected secondary and primary schools. For these purposes, the Bank financed civil works, training, and technical assistance. The project was the last in a series of education projects designed to upgrade Portugal's manpower development before the country's "graduation" from the World Bank.

Few of the planned project activities took place. Due to policy changes that were apparently never clearly enunciated to the Bank, counterpart funds did not become available as expected; by the end of the project, only 22 percent of the loan had been disbursed. There was no disbursement for activities to strengthen mathematics and science instruction. Bank financing was used to build and equip two agricultural colleges, but the applied research institutes component was not really carried out. The European Community had also loaned US$15.9 million for education, and some of these funds were reportedly used for these institutes. The Bank was accommodating to the changing policy environment in Portugal but did not take initiatives to promote implementation. It assigned minimal resources and time to project supervision, despite the increasing disbursement lags.

The Operations Evaluation Department agrees with the ICR and rates project outcome as unsatisfactory, institutional development as negligible, and sustainability as uncertain. However, OED rates Bank performance as unsatisfactory. The Bank did not adequately take into account past difficulties with counterpart funds in Portugal and did not deal effectively with non-performing components. The fact that lending to Portugal was about to end does not relieve the Bank from its supervision responsibilities.

This project illustrates the problems that may arise before a country "graduates" from the Bank. Incentives to borrowers to abide by loan covenants may diminish, and supervision missions may have less leverage. It is also important to assess a government's commitment to implement a given project and to heed the emergence of alternative sources of financing, which may be more advantageous to a borrower.

The ICR is satisfactory; nevertheless, a greater effort could have been made to find out exactly why Portugal chose not to proceed along the policy lines outlined during appraisal. The ICR includes borrower comments, but they are cursory and provide no insight into why so little of the project was implemented. Future plans are not discussed. No audit is planned.

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