Albanian VET Strategy and Action Plan for the period 2013 - 2020

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

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

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

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 budgetaloneis 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 Contractbased 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 • 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 incentiveParticularly 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 Trainingcost Administration cost VET Funds Non-Training providing Company Training Levy National VET Fund Training providing Company Trainingcost 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 Additional Revenues Public and Private Training Providers Target groups: Trainees, Workers Fees / Vouchers Income-Generating Activities

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

12. Thank you for your attention…