1. 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

2. 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

3. 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!

4. 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

5. 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

6. 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.

7. 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!

8. 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

9. 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

10. 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

11. 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

12. Thank you for your attention…