Seite 1 Seite 1 Training 4 Profit Profit 4 Trainers Benefits 4 Society Some reasons to promote a vibrant training industry Manfred Häbig May 7, 2010

Seite 2 Seite Training 4 Profit – Profit 4 Trainers Profit-making has transformed India – why shouldn’t it transform the skills development landscape? So many ways to cash in on the skills crunch (4 tested business models) Yet, sometimes you need Government – but in which flavor: Subsidy or Partnership? Public Task - Private Delivery – Public Benefit: New Business Models Required?

Seite 3 Seite 3 Unemployed seeking self employment micro-business start-ups formal TVET system Skills Development Centers Education System SOCIETY next generations of school children INDUSTRY Up-gradation training for industry staff Industry oriented courses for jobseekers start-up training for would-be entrepreneurs projects/practical as part of degree courses So many ways to cash in on the skills crunch: 4 tested business models

Seite 4 Seite 4 1.Up-gradation training for industry staff Short duration(3 to 12 days), advance level, customized courses High investment in real life machinery and equipment, commercial price for software, high training fee, profitable but more difficult to sell (takes time in building credibility) IGIAT offered trainings to about 1000 Industry staff in first 4 years. Training price Rs 150 to 250 per hour. 2. Industry oriented courses for jobseeker Medium duration (4 to 24 weeks), advance level, standard courses Medium level investment- mixed of real life machinery/equipment and prototypes, subsidized software, moderate training fee, less profitable but easier to sell (focus on employment) IGIAT offered trainings to about 5000 Jobseekers in first 4 years. Training price Rs. 50 to 100 per hour

Seite 5 Seite 5 3. Start up Training for would be entrepreneurs Medium duration( 4 to 12 weeks), Medium level investment- mixed of real life machinery/equipment and prototypes, moderate training fee, medium profitable, difficult to get interested trainees IGIAT offered trainings to about 500 would be entrepreneurs in first 4 years. Training price Rs 100 to 150 per hour. 4. Students Training as part of project/value add to formal qualification Short duration (1 to 4 weeks), basic level, standard courses Medium level investment- mixed of real life machinery/equipment and prototypes, subsidized software, low training fee, profitable due to large batch size and easier to sell IGIAT offered trainings to about 4000 students in first 4 years. Training price Rs 40 to 80 per hour The cost of training broadly is Rs 250 to 500 per hour depending on investment in technology. Thus a batch of 6 trainees usually break- even the costs.

Seite 6 Seite Yet, sometimes you need Government 2 reasons why a private training provider would need government Land: Paying market prices would blow up the business model High-value machines & equipment (e.g. CNC machines): depreciation would eat up all your profits → Initial VIABILITY GAP covered by public subsidy/grant Subsidy or Partnership? What´s the objective of Government involvement: Subsidy (onetime or permanent) or Governance/Steering? If it´s just subsidy: Why bother with the pitfalls of clumsy PPP mechanisms? If it´s Steering: Why not steering through grant, subsidy and promotional measures? A Business Case for Govern- ment Involvment

Seite 7 Seite And, sometimes Government wants to steer private training providers To guarantee access to disadvantaged groups or regions To promote specific sectors of the economy A Public Case for Govern- ment Involvment

Seite 8 Seite Public Task – Private Delivery? Guaranteeing access (e.g. to disadvantaged groups) doesn´t require public delivery – private delivery can be more effective & efficient Steering & Promotion of private delivery as business Getting the framework conditions (business & investment climate) right Strengthen the supply side (e.g. credits, facilitate start-ups, etc.) Making the market work better (e.g. Information, benchmarking, acreditation, testing and certification, etc.) Strengthen the demand side (e.g. subsidising disadvantaged groups through vouchers, etc.)

Seite 9 Seite 9 Improving the Business & Investment Climate BIC (in the broader sense) Access to productive infrastructure (water, energy, telecomm., transport) Access to qualified labor Access to business Know- how, BDS and technology Access to loans and other financial services Access to land and property Improving the legal, political and institutional framework conditions BIC (in the narrow sense)

Seite 10 Seite Promote a vibrant training industry! Training 4 Profit can transform the skills development landscape! Consider the Training Industry a priority sector – and promote it! Safeguard the public interest through smart subsidies and governance mechanisms! (there are many alternatives to PPP, which is NOT a magic bullet)