Albanian VET Strategy and Action Plan for the period 2013 - 2020 Workshop on VET System Management and Financing VET System Financing Werner Heitmann Senior VET Policy Consultant Tirana | 13 June 2012

Basic Challenge of VET System Financing Society Government Donor Contribution Government must be interested in satisfying market and social demand. Competitiveness Voters Labour Market Demand from Enterprises Social Demand from Individuals Employability Ability to Study

Efficiency and Effectiveness of VET Low High Market model GovernmentSchool model Partnership model Status Quo Inter-company training model Alternating model Rehabilitation Strategy Co-operation Effectiveness Efficiency: Input-Output-Relation Effectiveness: Impact- orientation Both are needed for sustainable improvement of VET!

Key Elements of VET Financing Systems Vision: Diversification of VET Financing (State, Enterprises, Individuals) Challenges: Public funds are decreasing, but still the main source State budget alone is not sufficient for high-quality VET offers Enterprises hardly contributing Individuals‘ ability-to-pay is limited Donor financing is lacking sustainability Strategy: Efficient and effective allocation of rare resources Objective: Stronger incentive-driven & output-orientated financing mechanisms Result : Replacement of input-driven financing mechanisms through demand-driven financing mechanisms (e.g. vouchers, loans) Control Mechanisms: Ensuring transparency; Avoiding misuse; Monitor & evaluate progress and impact Organisation: Establishment of stakeholder- driven VET Funds in Combination with a National VET Authority

Four Basic Allocation Models Decentralised (market) Approaches Demand-driven allocation through trainees Trainee-centered International Trend Purpose-specific purchasing from providers Contract based Input Orientiation Output Orientation Output-oriented allocation motivates VET providers to increase their internal efficiency. Three reform models: Financing of VET programmes (performance-based) Tender-based purchase of VET services Learner-centered financing model Performance-based distribution to providers Centrally planned, input-based distribution to providers Budget- orientated Program-orientated Centralized (regulated) Approaches

Strengthening Private Sector Involvement Target: Direct contribution | In-Company Training Utilization of workplaces for training increases | Efficiency In-Company Training is employment-relevant | Effectiveness Direct benefit must be recognized ( Cost-benefit analysis) Incentive Systems | Indirect Monetary Contribution Collective VET Levy Levy-Grant-Systems (levy exemption, re-distribution, re-funding) Special taxes A VET Levy System can only be realized in combination with a National VET Fund.

VET Levy Advantages Disadvantages Adequate measure if engagement of companies in VET is weak Purpose-specific utilization of funds Constant flow of funds | Applicable to all companies Disadvantages Informal sector | SMEs: Ability-to-pay is negligible Companies see levies as a burden, not an incentive Particularly tax-paying enterprises being engaged in VET Mistrust in public institutions | Low acceptance Clear regulations for purpose-specific utilization of funds, or combination of levies with pay-back / refunding mechanisms are necessary!

Training Levy | 3 Pay-Back Mechanisms Option 1: Exemption from Training Levy Training providing Company Training cost Administration cost VET Funds Non-Training providing Company Training Levy National VET Fund Training providing Company Training cost Option 2: Re-funding of training cost Direct Allocation to Training Provider, etc. Option 3: Redistributed levy

Management via VET Funds Key characteristics Budget clearly addressed to VET purposes only, no access through other state budget positions Can be fed by sources of the public and/or private sector, donor contributions etc. Frequently (not necessarily) combined with a levy system Advantages Budgets reserved for VET purposes | Reliable financial planning Through ‚Funding Windows‘: Adressing special target groups Cross-subsidisation (between VET sub-systems) easier to control Private sector engagement in financing and forming VET system Independent / performance-based distribution of funds to providers

Common VET Financing Reform Approaches Grants, Loans, Vouchers Government / State Budget Allocation Subsidies, Matching Grants, Tax Benefits Grants / Loans National VET Fund Donors VET Levy Fees Enterprises Trainees Performance / Output-orientated Financing Fees Target groups: Trainees, Workers Public and Private Training Providers Additional Revenues Fees / Vouchers Income-Generating Activities

VET Voucher System | Possible Design Cooperative Training; Partnerships between Industry & VET Providers Government VET Authority: Legislation, Regulation, Coordination, Facilitation National VET Fund including VET Voucher & Levy Administration Public & Private VET Providers Trainees Voucher Schemes Enterprises Employers VET Budget Matching Grants Donors VET Information Center Income Generation Employee Voucher Schemes VET Innovation Fund VET Vouchers Levy-based Grant Grants Temporary Budget Support Tuition Fees Innovation Budget Tax Incentives VET Levy Quality Assurance & Accreditation

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