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Karine Harutyunan Armenia is a small, landlocked, Eastern European country situated in the southern part of the Caucasus and with a population of 3.7 million spread over a territory of approximately 30,000 square kilometres. It is a presidential democracy, a part of CIS, and regained independence from the Soviet Union in 1991. The country is divided into 10 administrative regions, called “Marsis” and its gross domestic product is approximately USD 1.66 billion. It is a relatively homogenous country as 96% of the population is Armenian alongside small Kurdish and Russian minority groups. The official language is Armenian but Russian is also spoken along with other less widespread languages. Armenia is an ancient nation with a long cultural and educational tradition based on 1,600 years of literary heritage. Education has long been regarded as the key factor in maintaining national identity, especially during the past 6 centuries when Armenia was not an independent state. The Armenian alphabet is unique to the Armenian language and its script was invented in 405, the year in which the first school was opened in the country. The first scholarly textbook was written in the 7th century on Mathematics. Currently 15,000 examples of ancient manuscripts are stored in the Matenadaran Museum in the capital Yerevan. The history of the Armenian educational system can be divided into three main phases. In the 4th century Armenia adopted Christianity as the state religion and became the first officially Christian country in the world. All schools were officially supported by the Church, although they were not religious schools, until 1920 when the Soviet Socialist Republic of Armenia was established and the whole system of Christian schools was overhauled and reformed according to socialist principles. The current system is essentially that inherited from the Soviet era and there are a large number of educational institutions of varying types. Although these were previously centralised under Moscow, Armenian has remained the principle language of instruction in schools. At the time of the break-up of the Soviet Union, Armenia was considered to have one of the best educational systems in the Soviet bloc and its main achievements included: 10 years of basic compulsory education; complete enrolment of the school age population in schools; free education at all levels from pre-school to higher grades; universal access; negligible dropout and repetition rates and a high completion rate; gender equity; co-educational and unstreamed classes; and a well qualified teaching force. The adult population is bilingual and literate with 25% achieving university graduation. In spite of its successes the system had shortcomings. It was highly centralised and had an excessively strong focus on ideology, to the exclusion of Armenian history and culture. The curriculum was rigid, overly academic and there was no interactive teaching in schools or any individualisation in approach to the children at all. Parental participation was, and remains, limited. All education was state initiated with a total absence of shared decision making or, of course, democracy within the school system. The project design for the rental scheme began in 1995 with visits to Armenia from the World Bank and International Book Development Ltd. The implementation plan and overall development of the project took place in 1996. It was piloted in 1997 and began full-scale operation in 1998. It will close in 2001. Project funding comes from World Bank credit. The total cost of the education project is USD 15 million, out of which approximately USD 8-9 million will be spent on textbook production. After this initial investment the country will be able to finance textbooks through the revolving fund created by the project. It is crucial here to note the importance of planning. The initial phase involved intensive consultation on the project design. Head teachers, school teachers and parents from approximately 1000 of the 1,400 state schools operating in Armenia were involved in discussions concerning the project, as were ministries, publishers and printers in the country, and it was out of all this that the projects' design emerged. When the discussions were over it was clear that the ideas of a rental scheme and revolving fund were well understood, accepted and would be supported by the population. This was in part due to the fact that this was not an entirely new idea in Armenia and partially because it provided a solution to many problems. In the Soviet era there had been a tradition of donating books to schools, of storing them in school libraries as stock, and of loaning them to children to be returned by the end of the school year. This was very popular in the 60’s and 70’s, but in the 80’s the lending program began to decline as more and more textbooks (paid for out of the state budget) were given free to the children with no requirement to return them to libraries. When Armenia became independent in 1991, it was clear that the government would not be able to finance textbook publishing in Armenia as its budget was so low it barely covered the teachers' salaries (USD 7-8 per month). Furthermore, a large number of old, soviet textbooks were rejected by schools, especially in humanities subjects, because of their ideological content, as well as a perceived need for new more nationally-oriented textbooks. History and geography textbooks were rejected by both parents and teachers. Textbooks in mathematics and core sciences such as biology and physics were less in need of replacement, but there were in fact few textbooks in the schools because the government was not funding their purchase, they had last been printed at the end of the 80’s and they were completely worn out. The only publisher of textbooks in Armenia was publishing for the market, their print runs were very low and their prices were so high that only a small minority were able to afford the books. The project was designed to overcome these problems. Currently, textbooks that are printed using World Bank credit are supplied to all children and the cost of textbooks has been reduced for parents. Furthermore the monopoly in publishing, printing and distribution has been ended and competition introduced. This will in turn provide further opportunities and encourage the development of local publishing and printing capacity, as well as raising standards to an international level. The ultimate objective was to make the project self-sustainable because it was clear that the government would not be able to fund further textbook production, or be interested in borrowing money whenever textbooks were needed, so some sort of facilitative mechanism was required. The best solution appeared to be a revolving fund where textbooks would be rented out. This was not an original concept but it did require adaptation to work in the Armenian context. The principle mechanism was clear, textbooks would be procured centrally through national or international competitive tendering. They would then be delivered to schools and kept in the libraries as school property to be loaned to the children to use for one year and return by the end of each school year. The children would be asked to pay rental fees. This was the central structure of this rental scheme, but there was a need to develop the details. After consultation, several decisions were made centrally by the Minister of Education, with the general agreement of the main stakeholders. It was decided that the rental scheme would be applied at all 10 grades of basic education (8 of which are compulsory). 115 titles would be printed to cover the core compulsory curriculum. It was decided that while all 115 titles would be included in the rental scheme, they would be introduced gradually over 4 years with approximately 30-35 new titles printed each year using the loaned money. By the end of the project all the textbooks would be in the revolving fund and rental scheme. It was also decided that after the textbooks had entered the school no changes should occur in the curriculum for 4 years so that the books would remain usable for the whole period. The key policy decisions were: to include all state schools in the rental scheme; to offer no choice, at least in the initial phase of the project, and only one textbook per subject for each grade. Gradually, over the life of the project, a system of textbook choice should be developed in Armenia. In the second phase when the advance ordering system will be introduced, the schools will be able to choose the textbooks themselves according to their preferences. Only compulsory subjects will be provided with textbooks to rent and no optional subjects will be included in the rental scheme. Implementation of the plan encountered a number of difficulties. The first was that initially schools were not legal entities and could not hold private school accounts. There were several possible ways around this problem. All schools hold an account in the treasury as budgetary institutions and the government thought it would be possible to open another account for the school in the treasury system. However, it was not thought advisable for parents and schools to place their money in the treasury as Armenian schools had previously had a very negative experience of this. In 1996, when the government had allowed them to open non-budgetary accounts in the treasury system, some schools had done so with funds they had raised independently. These accounts were then frozen and the money sent to the central budget to be used for essential costs such as paying salaries to civil servants. There was a risk that the same thing might happen again because nobody can guarantee that, were the country to face such urgent financial difficulties once more, a government might consider the rental scheme's funds as expendable. Consequently, the idea of keeping the money in the treasury, or even in a non-budgetary treasury account was rejected. It was also suggested that the ministry or another state agency open an account and all the money be gathered in this central account and managed by one of the ministries or another state agency. However this would reduce incentives for schools because the whole idea was that the schools should manage their own accounts and make their own decisions about their own money. Eventually, another solution was found: a separate, non-governmental entity would manage the money. The decision to establish a non-governmental organisation (NGO) which would be in charge of the whole financial operation was taken and in 1997 and the Textbook Revolving Fund (TRF) was created in Armenia and registered with the Ministry of Justice as a separate, independent NGO. According to the law of Armenia the government has no right to interfere in the affairs of an NGO. According to its charter the members of the TRF are the school principals on behalf of their schools and the parent’s communities. The supreme body of this NGO is the General Meeting of School Principals where all designated core decisions are made. It is managed by a Board of fifteen members who are selected at that meeting and should comprise of one member from each 'Marz' (region). The representative can really facilitate the work of the rental scheme on a Marz level and is selected by the school principals of that region. There are 10 regional representatives and 5 government representatives. It was suggested that they should be candidates approved at the general meeting. The aim of having government employees on the board was to engage people who could facilitate the work of the NGO in the government and help to solve the main issues that come up with regard to the ministries. Thus, two people from the Ministry of Finance and three people from the Ministry of Education who are responsible for the textbook project were included on the board. The board of the NGO decided to keep the money in a commercial bank and although there were a number of local banks who could provide higher interest rates, the final decision was to use the Midland Armenia Bank, a branch of the Midland Corporation. It was chosen because it was considered a safe bank, the safest bank in Armenia at the time, rather than on the basis of the interest rates. The Bank has helped in developing the details of the project. Each school has opened two bank accounts and two people from the school (the school principal and the school accountant) are responsible for all transactions with their school account. The Project Management Unit (PMU) staff members travelled throughout the country in 1997, visiting each school and helping the school principals to fill in the form and attach all the documentation required by the bank to open the school account. With each state school holding two accounts the NGO now has 2,800 accounts in the bank. One account contains 'hard' currency in US dollars and the other holds local currency (the Armenian Dram ( AMD)). All these accounts are actually sub-accounts of the main account which is called an “interest generating account” but which is not really a bank account in the common sense because no transactions can be made from it, it is simply a mechanism from which the balance of all 2,800 accounts can be seen. It also generates a higher rate of interest on all the accounts. Interest is paid by the bank to the account on the total balance and the interest is redistributed to the individual schools in proportion to the money they have collected. It was considered both legal and prudent, given the difficulties of the country, for the schools to hold two separate accounts. Under Armenian law the only official currency is the Armenian Dram and schools are not permitted to make transactions in dollars. They collect money in Drams which they then transfer from the nearest local branch of the bank to the Dram account in Midland. By the end of the same day the money is converted to US dollars and is kept in the dollar account as a hedge against inflation and to protect it from devaluation. The system is locally administered, which means that the revolving fund really belongs to the school. Nobody can make any transactions with the account apart from the school principal and the school accountant. In line with the underlying principle of the concept of sustainability, nobody at the school level receives any additional salary in order to preserve the revolving fund. The idea was to convince the school that this is part of their regular job. The incentive for the school is that they collect the money for themselves and they keep it in their individual school account and only they can withdraw any money from their account at the completion of the first phase of the project. Currently all these old accounts are deposit accounts which just earn interest. By the time the textbooks need replacing these accounts will be converted into current accounts so that money can be withdran and books ordered to replace the old ones. As well as the main “interest earning account” there is also a “donation account” for the fund although unfortunately, up to now there have not been any donations. Still, it is now a priority to seek out donors who can give money to the fund to subsidise those who cannot pay the rental fees and also to administer the fund, because currently the fund does not have any money to cover administration costs and it is administered completely by the PMU and by the “Marz” employees from the regional education departments. With a work load that increases each year along with an increased number of titles, this issue urgently needs to be addressed. The most common problem faced by the schools was that because they had never been a legal entity the school accountants were consequently not used to making bank transactions or using banks. They filled in forms incorrectly and failed to provide the bank account number, consequently the money did not reach the account. Sometimes there was confusion among local banks. Often the bank employees at these banks were surprised to see that the same revolving fund could have several accounts. They told the school principals that they had filled in the account number incorrectly and as a result one lucky school in the region received all the money from that region into their bank account. Together with the Midland Bank we developed special account reconciliation forms for the school accounts. These are filled in when the schools receive their bank statements twice a year. Other report forms were also introduced, although there were efforts to minimise the paperwork as much as possible because if there are too many forms to fill out and too much paperwork, the school administration won't support the scheme especially as they are not being paid any additional money for their work. Some forms, however, are very important, for example the contract between the students' parents and the school. The idea was to make the parents responsible for returning the books they were renting from the school at the end of the year and to help the child look after the textbook. From the school library the textbooks are given to the class teacher. There is also a report on the school in general which is submitted to the regional education department and yet another form that summarises the textbooks that the region has received and which is submitted to the Ministry as well as the revolving fund managers. There is also a advance-order form and the school textbook requirement forms. Setting the rental fee is interrelated with the issues of curriculum and textbook life. When discussions were held on this the Ministry decided that the optimum period for a book's life in the schools would be four years to be in line with the curriculum, a more frequent revision of which would not make sense. In addition to this it was thought that the textbooks would not be likely to survive for more than four years. Thus the rental fee was calculated on the basis of a four year life for the textbook. It is now produced using a formula which also includes the inflation rate, annual loss and damage at approximately 5% of value per year, thus enabling replacement at the end of four years, as well as the cost of one free textbook and a teachers' guide per teacher. All in all, it comes to somewhat more than 25% of the textbook's real cost but it ensures the possibility of replacing the books when the time comes. Another issue raised was as to whether there should be a different rental fee for each textbook, and if it should differ from year to year. At first glance it seemed unfair that the parents and students should pay the same amount for a book that has already been used for 3 years and is no longer new. Consequently some of the parents and teachers wanted to have a differentiated approach, i.e. to have higher rental fees in the first year and to decrease it by year 4, but there were arguments against this as it was also considered unfair to the parents who would pay more for the textbook in the first year. There is also the psychological aspect in that the parent who has already paid less one year might question whether they really need to pay more for a new book. All these things were taken into account and it was decided to have the same rental fee price for the same textbooks accross all four years. Different rental fees for each year would also have been difficult to manage. There are 460 titles (115x4) which would men that if there were 115 rental fees that differed annually there would be 460 different rental fees in all which would be unmanageable for teachers, school principals as well as the people at the central or regional level. Thus it was decided that the simpler the rental scheme the better as it is easier to explain to the parents and is more likely to be successful. The rental fee in the first year was different for each title but it was then decided that even this would be the same and now there is now one rental fee per grade, the mathematical average of all the textbooks for each grade is calculated, meaning that there are only ten rental fees. One does not need to explain to the parents why one textbook fee is 200 AMD and another is more. They just know that if they take one textbook they need to pay once and if they take 10 textbooks they pay ten times the rental fee. It is very easy to manage and control. Although the rental fee is low in Armenia, it is still unaffordable for some people. Currently 30% of the school population in Armenia is considered to be poor, but the government is not able to pay for all of them. As a result, it was decided that only the very poorest students would receive free textbooks and the government agreed to pay for 10% of the children enrolled in schools. The distribution of the government allocation among the schools and the children was also a very involved process. It was particularly difficult in Armenia because there is no official way of registering the real income of a family, and until now there has been no official data on the poverty level of communities. The Ministry of Finance and the Ministry of Education have jointly issued a special decree which contains the guidelines for allocating the government subsidies for free textbooks to socially unprotected children. 20% of money contributed for these children will go to those in special institutions and orphanages because they form an exceptionally poor part of the population and all such children receive free textbooks. The remaining 80% of the government contribution is allocated to general schools and approximately 8% of children in each school receive free textbooks. Penalties are applied if a child does not return a book to the school by the end of the school year and there are two options to remedy the situation. Parents can either purchase the textbooks and give them to the school library, or they can pay the replacement cost which is actually the commercial price of these textbooks. So this penalty is actually higher than the original cost of the textbook to the project. The management of the scheme is a part of the regular job of the school principal, the school accountant, the school librarians and also the school head teacher. The librarian receives the books and gives them to the head teacher and everyone in the school is actually involved in running the rental scheme. At a regional level there is one representative selected by the general meeting of the principals who voluntarily does this unpaid work. At the central level it is managed by ministerial and NGO staff. In order to help in the management and running of the project a special booklet has been produced. It is widely distributed and has really helped everyone to understand the details of the scheme. It has special sections for parents, teachers, principals and Marz Officials. An intense information campaign has always been carried out where not only has the booklet been circulated and given to all the schools, but there have also been regular announcements on T.V and in local newspapers. A short film was transmitted on national T.V as well as local T.V stations in the regions to explain the aims and details of this fund.
The establishment of our rental scheme and revolving fund was designed to achieve a reasonable mixture of central and local management by the schools. The schools manage their own revolving funds. Central supervision and overseeing of what happens helps to overcome any difficulties, to assess, to evaluate and to make corrections when required as well as to help solve problems. With this kind of structure for the rental scheme, and with the planned introduction of a computerised advance ordering system in the near future, by the completion of the project each school will know exactly how much money they have in their revolving funds, what textbooks they need, how many books and the amount of money required. The revolving fund will collate all the advance orders from all individual schools and there will be central procurement of textbooks once more.
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