technical and vocational education and training financing...

TECHNICAL AND VOCATIONAL EDUCATION AND TRAINING FINANCING IN MONGOLIA

Dr. Saha Meyanathan

April 2016

2

TECHNICAL AND VOCATIONAL EDUCATION AND TRAINING FINANCING IN MONGOLIA

Dr. Saha Meyanathan

© Vocational Education and Training Policy

Coordination Department (VETPCD)

Ministry of Labour, Mongolia

Support to Mongolia’s Technical and Vocational

Education and Training sector (STVET-1)

Europe AID/132815/C/SER/MN

3

CURRENCY EQUIVALENTS (As of 2015)

Currency = Tugrug

US$1.00= MNT 1970

FISCAL YEAR

January 1- December 31

WEIGHTS AND MEASURES

Metric system

4

ACRONYMS AND ABBREVIATIONS

CVT Cooperative Vocational Training Project CESA Council of Economic and Social Agreement DFAT Department of Foreign Affairs and Trade, Australia DKM Malaysia Diploma Skills DLKM Malaysia Advanced Diploma Skills DPL Development Planning Law Mongolia EPF Employment Promotion Fund GoM Government of Mongolia GIZ Gesellschaft für Internationale Zusammenarbeit GBV Gender Based Violence HERP Higher Education Reform Project ISC Industry Skills Council IPO Integrated Project Office KOICA Korean International Cooperation Agency LMIS Labor Market Information System LTSDV Long Term Sustainable Development Vision Mongolia MoL Ministry of Labour MoECS Ministry of Education, Culture, and Science MoF Ministry of Finance MPDSW Ministry of Population Development and Social Welfare MEA Mongolian Education Alliance MCA Millennium Challenge Account MCC-M Millennium Challenge Corporation Mongolia MON- KOR Mongolian Korean Technical College NCVET National Council of Vocational Education & Training NPSB National Productivity and Standards Board OT LLC Oyu Tolgoi LLC PPP Public Private Partnerships PSMB Pembangunan Sumber Manusia Berhad, Malaysia RPL Recognition of Prior Learning SDC Swiss Development Cooperation SKM Malaysia Skills Certification SDC Skills Development Scotland SETA Sector Education and Training Authorities TVET Technical and Vocational Education and Training TOR Terms of reference TVETPF TVET Promotion Fund TAFE Tech and Further Educational Colleges UNESCO United Nations of Education, Science, Culture Org VETPCD Vocational Education and Training Policy Coordination

Department WB World Bank

5

ACKNOWLEDGEMENTS

The writer would like to acknowledge the support and comments from the STVET-1 team; Mr. Bill Fairbairn who provided the overall framework for this assignment and Mr. George Kolath who provided detailed comments on the

earlier drafts of this Report. The comments of officials at the Ministry of Labor (MoL) and other stakeholders at the review meeting of the Report is gratefully

acknowledged, especially those of the officer from the Ministry of Finance (MoF). Moreover, the views of the development partners, the private sector,

MONEF and the Association of TVET Colleges helped to sharpen the TVET financing issues in Mongolia. Ms. Enkhmaa Baatar provided excellent

interpretation of the Mongolian documents.

The content of this publication is the sole responsibility of the Consultant and can in no way be taken to reflect the views of the European Union

6

Table of Contents EXECUTIVE SUMMARY

PART I: TVET FINANCING STRUCTURE IN MONGOLIA

Executive Summary………………………………………………………………………………………………………8

1. Background and Context……………………………………………………………………………………………. 12

2. Methodology applied…………………………………………………………………………………………….13

3. Education/Training System In Mongolia…………………………….…………….………….………….13

A. Education and Training system in Mongolia B. TVET System in Mongolia C. General training market and financing of TVET (State and Private financing)

4. TVET Financing System in Mongolia……..……………………………..…………….…………………….17 4.1. TVET funding sources in Mongolia

5. Government financing……..……………………………..…………………………….……………………….19 5.1. Budget preparation process in Mongolia 5.2. Uses of funds 5.3. The General school funding formula 5.4. Variable cost per student

6. Financing from special funds…………………….………………………………….……………………….29

Employment Promotion Fund

Foreign Worker Levy

TVET Promotion Fund

7. Financing from development partners’ and large corporations…………………………………32

Outcomes of TVET funding

Earlier proposal on the Employer Levy system by the MCA

PART II: ALTERNATIVE FINANCING SYSTEMS 8. Background and context……………………………………………………………………………………………44

Alternative TVET Financing Systems: Summary

Review of Country experiences in TVET financing

9. Transition Economies……………………………………………………………………………………………51

Hungary

Moldova

Czech Republic

Slovenia

10. TVET financing in other countries……………………………………………………………………………54

South Africa

Singapore

Canada

Denmark

11. Key Findings from country examples………………………………………………………..…..….……60

7

12. TVET and Higher education institutions Reforms

13. Conclusions and recommendations…………………………………………………………………………63

14. References……………………………………………………………………………………………………..……67

15. Annex……………………………………………………………………….…………………………………...……72

LIST OF TABLES Table 1. TVET Students by Discipline Table 2. Public Expenditure on Education in Mongolia Table 3. Country Comparisons on Education Expenditure as a Percentage of GDP Table 4. School funding formula, Mongolia, Government Regulations Table 5. Teachers’ Salaries’ Increase - School funding formula, Mongolia Table 6. Changes in normative means funding formula: TVET Table 7. Partners’ projects in the TVET sector according to selected strategic themes Table 8: Funding Sources Table 9. Cost weight factors for Moldovan schools Table 10. Cost weight factors for TVET school funding: country comparison Table 11. Cost Weighting Based on Moldovan Example LIST OF CHARTS Chart 1. Structure of Mongolian Education System Chart 2. Number of TVET schools in Mongolia Chart 3. General Training Market and Financial Flows Chart 4. Total funding of TVET sector in 2016 Chart 5. MoL expenditure to 38 public TVET schools, by categories and share of cost Chart 6. Variable cost per student by regions, 2016 Chart 7. General funding formula Chart 8. Annual cost per student by regions Chart 9. Annual Cost per Student in TVET vs. those in secondary and higher education Chart 10. Arkhangai TVET budget expenditure in 2016 Chart 11. SouthGobi TVET budget expenditure in 2016 Chart 12. Variable cost per TVET student Chart 13. Change in normative means funding formula: TVET Chart 14. MEA Proposal 2013 = Funding Formula: GSE Chart 15. Foreign Worker Levy Fund Flow Chart 16. Employment Promotion Fund Expenditure- Planned Budget 2016 Chart 17. TVET Promotion Fund 2016 Expenditure Chart 18. Partners’ Current Projects in TVET Sector (cumulative) Chart 19. MCA Support in TVET Sector Chart 20. Public Private Three Way Partnership: Dornod Polytechnic College Chart 21. TVET Graduates’ Employment Rate, 2008-2015 Chart 22. MCA Levy-Grant proposal 2010 Chart 23. Summary of Financing Systems Chart 24. Moldova per student funding formula planned reforms Chart 25. Mongolia Higher Education Reform Framework Chart 26. Aligning TVET and National Human Resource Strategies to the Long Term Development Strategy and Plan 2016-2030

8

This Report was prepared as part of the assignment that was carried out between December 2015 and February 2016 for the Support to Technical, Vocational Education and Training Project 1 funded by the European Union (EU-STVET-1 Project). As part of the Terms of Reference (TOR), the assignment was to conduct a situational analysis of the funding of the Technical and Vocational Education and Training (TVET1) system in Mongolia. The TOR also outlined the need to contrast the Mongolian TVET funding system with those of other countries; former transition countries, and other developing and developed economies. This Report is divided into two parts. The first part of this Report provides a background on the TVET system in Mongolia and the strong reforms that were undertaken with the onset of the mining boom in 2009. With the commodity boom years of 2006- 2008, the need for a qualified labor force was realized by those in industry and government. Around this period,

1The term TVET needs to be defined as its focus differs around the world. For example, VET (vocational education and

training) is more commonly used in Anglophone countries. ‘Technical education”, ‘vocational education’ and ‘training‘ are

all distinct, if somewhat related concepts. None of these are mutually exclusive, and indeed an important element in making

TVET attractive is because national frameworks have pathways into these aspects of learning and education. Education can

be defined in a broad sense as a preparation for adult life or for a phase of adult life. Since a significant part of most adults’

lives is spent in paid employment, vocational education is that part of their education that prepares them for this aspect of

their lives. Vocational education should be clearly distinguished from training. Training is essentially concerned with the

inculcation of knowledge and routine activities so that they can be carried out with competence and confidence. This does

not mean that they should be carried out without the exercise of judgment and discretion. Someone who is conditioned, on

the other hand, performs a routine without much thinking or exercising much judgment. Training is, in fact, a significant part

of the education and not just part of our vocational education, to the extent that competence and confidence in certain routine

and regularly performed activities are preconditions of more sophisticated forms of learning. Technical education usually

involves in the preparation of a person for the use of techniques, usually in vocational activities. These techniques are

derived from the application of scientific principles to practice. Indeed, it is sometimes said that those whose expertise

comes from the application of science, or more generally of systematic knowledge to practice, are technicians even when

their occupation is classified as a profession. See, UNESCO-UNEVOC Revisiting Global Trends in TVET, 2013.

TVET in Mongolia

EXECUTIVE SUMMARY

9

Mongolia (along with other countries) was awarded development funding from the Millennium Challenge Corporation (MCC) and the Millennium Challenge Account Mongolia (MCA-M) was established as an entity in Mongolia to oversee the funding to a number of sectors, including the TVET sector. The sector received from MCA-M during 2009-2013, an amount equivalent to 52 million USD, that was expended on (i) policy and institutional reforms to modernize the sector, and (ii) investment in TVET assets in schools around the country. Building on the initial set of reforms supported by the MCA, other development partners have joined in the efforts to further embed the reform system in TVET. The Gesellschaft für Internationale Zusammenarbeit- German Cooperation (GiZ), Swiss Development Cooperation (SDC), Oyu Tolgoi (OT) LLC, European Union (EU), Department of Foreign Affairs and Trade Australia (DFAT), Korean International Cooperation Agency (KOICA), and Asian Development Bank (ADB) have all joined the partnership since the end of the MCA project, to continue supporting the reforms in the sector towards a more “flexible and quality” driven TVET system. One part of the TVET reform agenda, which has been prioritized by the Ministry of Labour (MoL) includes the emphasis on the need for a “sustainable and diverse financing system” for the TVET schools in Mongolia. The current financing system undertaken by the Government and the MoL relies on a formula based system using what is called “normative funding means” for schools since it was introduced in 1988. That formula has been modified a number of times over the years, and has remained the same since 2012, even after the move of the TVET portfolio from the Ministry of Education, Culture and Science (MoECS) to the MoL. The year 2012 also marked a transition in the institutional oversight of the TVET system in Mongolia. Prior to 2012, TVET sector issues were part of the MoECS, which oversaw the development and funding of the sector. The MCA project initiated amendments to the TVET law in 2009 and established the National Council of Vocational Education and Training (NCVET) and the Agency for TVET to implement policies but overseen by the MoECS. Since 2012, the MOL oversees TVET and funding formula for the TVET schools follows the same methodology that was used by the MoECS. The formula employed is based on the size of school (in terms of student numbers). The variable costs are based on costs of teachers and other variable costs (teaching materials etc.), and these are differentiated (weighted) according to the administrative districts of Mongolia (bagh, soum, aimag and capital city). Fixed costs on the other hand are negotiated with the MOF based on annual budget ceilings imposed by the MOF. In Part II of this Report cross country examples of TVET school financing are provided as comparators. It is noted that most countries also adopt such a system, instead of an “incremental financing2” system for the government owned schools. However some

2Under the traditional incremental budgeting concept, departmental managers justify only variances in financing needs compared to past years, based on the assumption that the "baseline budget" is automatically approved.

10

transition and developed countries have tied such funding formulae to some sort of performance by the schools. In fact, the Ministry of Health in Mongolia has already transitioned to a hospital funding formula that has moved from the per-capita funding (per-patient-funding) formula for patients, to a funding formula based on the “diagnostic related group of illnesses” and is working towards a performance based contract methodology with state funded hospitals. This application of this type of reform in the TVET sector is explored further in the Part I of this Report. The recommendations drawn in this Report are based on both international best practices and successful strategies carried out in Mongolia. In general terms, the OECD (Fazekas, 2012) identifies a number of overall lessons on TVET financing across countries: (a) the need for diversifying the source of funding to motivate effective and efficient institutional management of TVET (b) financing policies that are expected to ensure stability of funding to TVET schools while improving outcomes (c) “training funds” should be performance based and linked to training outcomes, and there should be transparency and accountability in the use of such funds. In specific terms, this Report identifies 6 key conclusions on the current TVET financing framework in Mongolia:

• A major conclusion of the analysis conducted in this Report is the need to review the

funding formulae (of 2012) for TVET schools in Mongolia over a reasonable period of time to ensure sustainable financing that is “performance” based, and the associated criteria agreed upon by the TVET schools. The 2012 “normative means” funding formula is still being used today. In the case of Ulaanbaatar it is 516,000 MNT (USD 269) per student (lowest, annually); and 614,000 MNT (USD 321) in Bayan-Ulgii Aimag (highest). These variable costs per student are expected to be higher than high school variable cost per student, and in fact they are higher by 40 percent. The formula does not as yet incorporate the adjustment for disciplines but only accounts for regional cost differences. The school funding formula could be reformed based on diverse disciplines3, regional needs, student needs, and overall performance by the TVET schools in terms of employment of their graduates reaching 70% in line with the current TVET strategy. It is to be noted that the current TVET strategy of the MOL does in fact recognize the need to move to a funding model based on disciplines by 2021. The Moldovan example of recent reforms in this area would be useful for the Mongolian situation considering both countries share similarities, both politically and economically. Many countries, reviewed in this Report have moved from a per capita student-funding model, to one where student performance is also taken into account (including retention rates and job placement rates among others). Some progress towards such government (outcome-based) spending has already been implemented in the health sector of Mongolia, and this provides a basis for similar reforms in the TVET sector.

3 The duration and costs for a welding course should be differentiated with a 6-month hospitality course for instance.

11

• The study also identified the need to review how funds from the foreign worker levy,

which are meant for skills upgrading of the Mongolian labor force, are being utilized. The Employment Promotion Fund (EPF) is a key vehicle for the funding of TVET and almost half of its funding comes from the Foreign Worker Levy, and about 23% of the EPF is transferred to the TVET Promotion Fund (as a result of the Amendment to the Law on Employment Promotion in 2014, effective January 2015). The TVET Promotion Fund is used to pay students’ stipends and also the variable costs to TVET schools. The idea proposed by the MCA Project on “payroll levy” (2010) is resisted by the corporations, as they are already being taxed to support skills development and training through the Foreign Worker Levy (estimated to be 384,000 MNT per month, per worker). The study also recommends reviewing the effectiveness of the use of the funds from the foreign worker levy. In many countries such skills development funds are governed by a Board that is represented by industry representatives, as they are the ones who contribute to such funds, and the use of such funds are subject to performance assessments in meeting the emerging skill needs of the market.

The rationalization of the higher education sector that has taken place through various means including stiffer accreditation procedures which has reduced the number of Higher Education Institutes (HEI’s) by 30% in the last few years. The overall objective of the ongoing HEI reform process is to upgrade the quality of public HEIs by rationalizing them so that development resources can be concentrated into fewer, higher quality HEIs. The HEIs that are not selected as lead institutions (by applying rigorous criteria, such as accreditation, number of students etc.) are given the choice to either merge with stronger HEIs, close, or gradually transform themselves into TVET institutions under an incentive scheme. A similar exercise could be undertaken in the TVET sector over the course of the medium term to streamline the system to meet the specific skill needs of industries that are growing nationally and regionally.

• The experience of a range of countries on TVET school financing reviewed in this

Report, indicate the need for diverse sources of funding, not only from the state but also from the private sector and other sources including, strategies to derive income for their training needs from services offered to enterprises. This mechanism also encourages TVET schools to meet the “market test” of the type of training that is demanded by industries. In countries such as Jordan and Moldova TVET schools derive about 11-12% of their current expenditures from services and training to companies and by renting out premises for school related services. Denmark also provides an excellent example of how the details of this policy could be implemented in Mongolia.

• Partnerships for sector development are critical, and especially in the current

context as Mongolia has entered a low growth scenario and with a tight fiscal space. The study recommends stronger alignment of partner activities as a critical priority: to reduce duplication, integrate grant financing into the sector’s budget, and to get better impact on the needed reforms and investments for the sector’s

12

modernization. In this regard an international development partner coordination system could be reintroduced, with the MOL and the Ministry of Finance (MOF) playing key roles to align and coordinate investments and support to the sector. This effort takes on added relevance since policy makers are moving forward with greater emphasis on the diversification of the economy. For this, new and upgraded skills are essential. This would also be in line with the New Development Planning Law (DPL) of December 2015 and the Long Term Sustainable Development Vision (LTSDV) 2016-2030 that was passed by the Mongolian Parliament in February 2016. Thus, alignment of the TVET strategy into the LTDV would be necessary and higher investment both from the state budget or other sources would be needed, to give the TVET sector the added importance to achieve the long-term LTDV goals.

• Given the findings of this TVET financing status report, a follow-up study on TVET

financing through alternative revenue generation to complement the state financing is needed to expand on the recommendations outlined here. Further research and studies are needed to assist the MOL and MOF in terms of performance based budgeting, options for revenue generation by schools, and to use the financing system to “steer the TVET schools” towards an overall optimal and efficient structure, compared to one that is thinly spread-out at present.

13

PART 1: Situational Analysis of the TVET Financing in Mongolia

14

Since 2009 the Mongolian TVET sector has been undergoing a series of reforms for the modernization of the sector. The system, planned and organized during the socialist era, broke down with the transition in the early 1990’s as in many other transition economies4. In 2009 with the assistance of MCA, GiZ and other external partners, a number of reform initiatives were identified, and this led to a reform-oriented TVET law amendment that was passed in early 2009 by. This Law Amendment ushered the creation of the enabling environment for policy and institutional reforms in the sector. Following the passage of that Law Amendment, the National Council on TVET (NCVET) and the TVET Agency were established in 2009. While the Council is still in existence the Agency had been restructured and placed in the Ministry of Labor (under the Vocational Education and Policy Coordination Department, VETPCD), which oversees the policy implementation and coordination, while financing and partner coordination issues are overseen by the newly created Integrated Project Office, IPO). Although the institutional framework and the first-steps towards reforms are in place, these are however short-term solutions-- that have to be complemented by longer- term overhaul of the system as a whole that will produce graduates with internationally recognized trades qualifications that are relevant to industry

4 Four major periods were identified in the AUM Education Report on Mongolia in terms of the development of the TVET system in Mongolia. Before the revolution of 1921, there was no structure to train workers in Mongolia as national industry was yet to be developed. (1) During the period 1921-1930s there were few and small enterprises with simple equipment and few workers. Workmen were trained as a group under a traineeship or apprenticeship scheme. The main content of the training was to provide practical knowledge and skills on the usage of equipment and tools. (2) Between1930-1950s witnessed new economic sectors came in being with the establishment of new enterprises. As a result, there was a need to prepare professional workers in large numbers and short-term courses and industry-based training were popular in preparing workers for various occupations. (3) In the 1950- 1960s large national enterprises were established and key economic sectors grew rapidly. New technology was introduced in production and land was cultivated, and more skilled workers were needed. The Government of Mongolia implemented activities to develop the education sector and initiated actions to transfer boys and girls with incomplete secondary education to the enterprises and be trained as workers. Between1964-1990, a comprehensive system of technical and vocational education and training, consisting of two sub-systems (technical and vocational schools, and on-the job-training) was established in Mongolia in tandem with the rapid development in the agriculture and industrial sectors. With the creation of massive enterprises, there was a growing demand for skilled workers. However, until 1980, TVET was the responsibility of industry and technical ministries, and it was delivered by agencies, which were directly answerable to technical ministries independent of the Ministry of Science and Education. In 1984, the General Authority for Technical and Vocational Schools was established under the Ministry of Science and Education, which became responsible for planning and reporting of technical and vocational education. (4) During the years 1985-1986, the Ministry of Science and Education was given responsibility for policy on TVET, but training institutions remained under the supervision of other ministries. It was not until the structural reform of the economy at the beginning of the 1990s and the concomitant restructuring and closure of state companies and technical ministries, that the full responsibility was transferred to the Ministry of Science and Education under the 1991 Education Acts. With the economic and political transition in 1992, different types of institutions came into being, offering various levels of training after the eighth and tenth years of schooling. The administrative system and governance of technical and vocational education was then, formed. See: AUM, “Assessment of Current and Future Mongolian Education System Capacity for Labor Force Supply in Mongolia,” Report prepared for OT LLC, 2012.

1. BACKGROUND AND CONTEXT

15

needs. The present EU-STVET-1 Project5 is also designed to provide support to the Government of Mongolia (GOM) to carry out the longer-term set of TVET reforms.

The methodology adopted in this Report was through a desk review of previous reports on the Mongolia and a series of interviews with stakeholders at the Ministry of Labor, Ministry of Finance, Ministry of Education, and the Association of TVET colleges. In addition, development partners were consulted and two TVET colleges in Ulaanbaatar were also interviewed. A desk review and analysis of previous studies was undertaken in other countries. There has been an extensive set of reports by academics and international agencies on education in Mongolia. However on the particular issue of TVET school funding, there has been a dearth of studies. Moreover, extensive gathering and analysis of data on the sector from the various national sources were undertaken. Data on the school funding formula was difficult to come by, and the data on the various sources and uses of funds for the TVET sector was obtained from the MOF and are tentative. A stakeholder meeting (with public sector officials, the private sector, development partners and VETP) was also held to present the initial results of this Report, and the comments from these stakeholders have been incorporated into the present Report.

A. EDUCATION AND TRAINING SYSTEM IN MONGOLIA

Public expenditure on education as a whole in 2015 reached MNT 1.1 trillion (USD 558 million), which was 15.1% of the government total expenditure and 4.7 % of GDP in the same year. Of the total education expenditure in 2015, 47% was spent on primary and secondary schools, 22% spent on kindergartens, 7.6% on universities. The central education authority in Mongolia is the Ministry of Education, Culture and Science (MOECS), and is mandated with the promotion and dissemination of education, science, and culture. MOECS is the central administrative body that formulates the national educational policy. The administrative fields of the Ministry used to include not only pre-school, primary, secondary, vocational, higher education and educational research, but also cultural and scientific affairs, and non-formal education. After the change of Government in 2012, the Ministry of Labor became the Ministry to oversee the technical and vocational education system in Mongolia. The schooling system in Mongolia now follows a 12-year system (from the earlier 10 year system) and the TVET education is provided at the high schools levels at grade 9 and at grade 11. In the case of the former, the students receive both a vocational diploma and an academic diploma. In the latter case the students when students enter the system at grade 11, they pursue TVET diploma courses of lengths that vary between 2 and 2.5 years (Chart 1).

5 In 2015, the STVET2 project in Mongolia was initiated. This project is presently aimed at upgrading the training and capacity building of the TVET schools’ curricula to “best practices” found in the country and targeted to the predominant industries in the rural sector.

2. METHODOLOGY APPLIED

3. EDUCATION/TVET SYSTEM EXPENDITURE IN MONGOLIA

16

Chart 1. Structure of Mongolian Education System

Source: Asian Development Bank, 2010

B. TVET SYSTEM IN MONGOLIA

As of 2016, the total number of TVET institutions in Mongolia had reached 81 (Chart2). Private sector TVET colleges have increased in numbers since the mining boom started in 2006. There are about 32 private TVET institutions (compared to 49 public institutions) that operate on tuition fee revenues and variable cost subsidies from the state. (These tend to receive erratic support from bilateral partners and the Ministry of Population Development and Social Welfare (MoPDSW), and are specialized by sectors with courses of varying duration and quality.) Given that the outcomes at the TVET schools are still to meet the industry standards and needed competencies, the larger mining and construction companies have started building their own training facilities, and in some cases serving the needs of related companies in their sectors. The number of students attending the TVET streams has also increased recently, since the stipends for both private and public students were introduced. In terms of courses, the construction and transportation sector related courses are the most sought after, followed by hospitality, plumbing and sewing (Table 1). Before reviewing the TVET financing system in Mongolia, the next section reviews the “general training market model” found in many countries.

17

Chart 2. Number of TVET schools in Mongolia

Source: MoL

Table 1. TVET Students by discipline

Students by disciplines %Industry 20%

Plumber 30%

Sewer 21.0%

Bakery 6.7%

Factory electrician 5.9%

Operator 3.6%

Food factory service technician 3.3%

Dairy products factory worker 2.8%

Other 27.0%

Construction 28.4%

Transportation 9.9%

Mining 6.2%

Agriculture 3.5%

Environment 2.8%

Culture- art 4.5%

Service 13.2%

Information technology 4.7%

Health 5.0%

Finance and business tardes 1.1%

Urban development 0.3%

Education 0.2%

Total student number 2015-2016 42,633

Source: MoL

Source:MoL

18

General Training Market and financing of TVET (State and Private financing) The market and financing of TVET is more complex than the financing of the general education sector. In the case of general education, the stakeholders are parents, government and students. However in the training markets, public and private enterprises play a critical role in training workers. In a summarized view, the training market highlighting the major providers and resource flows are shown in Chart36. Technical and vocational training can be provided by public sector institutions (1), private training institutions (2) or at firms/companies (3). Companies compete with public training institutes as an alternative form of skill creation and upgrading. But they are also a financing source for training in the form of on-the-job training, apprenticeships, paying fees for specialized training of their employees at training institutions (public and private) or through payroll taxes or other forms of taxes (e.g. the foreign worker levy in the case of Mongolia). Chart 3. General Training Market and Financial Flows Source: Adapted by author from Middleton and Ziderman.

6 Adapted from John Middleton, A. Ziderman and A. V. Adams, Skills for Productivity: Vocational Education and Training in Developing Countries, World Bank, 1996, Oxford University Press.

6

Taxpayers

2

Private training institutions

4 Workers

1

Public Training

Institutions

5

Government

3

Firms

External Development

Funding

Own training

19

2009 2010 2011 2012 2013 2014 2015

GDP in Current Prices (MNT billion) 6590.6 9756.6 13173.8 16688.4 19174.4 22227.1 23166.8

GDP Growth Rate (% nominal) -1.3 6.4 17.3 12.3 11.6 7.8 4.2

Public Expenditure (MNT billion) 2336.6 3076.3 4997.0 5993.8 6164.7 7144.6 7136.9

Public Expenditure as % of GDP 35.5 31.5 37.9 35.9 32.2 32.1 30.8

Education Sector Budget (MNT billion) 430.5 546.5 706.4 898.3 946.8 1204.0 1100.9

Education Sector Budget as % of GDP 6.5 5.6 5.4 5.4 4.9 5.4 4.8

Education Sector Budget as % of Public

Expenditure 18.4 17.8 14.1 15.0 15.4 16.9 15.4

Expenditure by Ministry of Labor (MNT billion) 318.18 352.47 385.16 190.94 198.52 181.99 152.87

Expenditure by MoL as % of GDP 4.83 3.61 2.92 1.14 1.04 0.82 0.66

Ministry of Labor expenditure on TVET (MNT

billion)* * * 59.13 66.37 78.45 70.72

MoL expenditure on TVET as % of MoL total

expenditure* * * 30.97 33.43 43.10 46.26

MoL expenditure on TVET % of GDP * * * 0.35 0.35 0.35 0.31

Education sector budget + TVET Budget 430.53 546.48 706.45 957.41 1013.15 1282.46 1171.61

Annual Inflation Rate 4.2 13 8.9 14 12.5 11 1.9

Source: NSO* MECS was the central administrative body in charge of TVET until 2012

By and large governments (5) through taxpayers7 (6) fund most of the training at state TVET schools and specialized training institutes. Government funds are also used to subsidize trainees through training grants, loans or subsidies –as incentives for training. External development partners have also channeled substantial development funds for skills development through the government (as also found in the case of Mongolia).

In a number of countries (described in part II of this Report), special training levies are collected by industry for disbursement to firms for training, or training levies are collected by the state where they are earmarked for the support of industry training.

Workers (4) on the other hand purchase training services from the public sector training institutions and private training institutions at full cost or from companies by accepting reduced wages during the training period.

Companies may purchase training services directly from private training institutions though contracts or fee payments on behalf of their employees. Companies may also set-up their in-house training programs if the training market does not meet their quality and relevance requirements (and also provide training to other enterprises).

Mongolia’s TVET sector receives financing from various sources, but the bulk of financing is derived from the state budget (Table 2). In 2014, more than 95% of financing came from the State Budget, nearly 1-2% from tuition and around 1-3% from self-income generating activities of TVET schools. Based on earlier data (World Bank, 2010), in terms of educational expenditure, the TVET sector received the smallest part of the public education expenditure (6%). Country comparisons of educational expenditures find that Mongolia’s expenditures are comparable to other transition economies. Poland seems to have the highest per capita expenditure on education (Table 3, Table 4). In terms of comparative tertiary sector expenditure, the sector in Mongolia seems to be underfunded and this has caused the system of being termed as a “low-cost and low-quality” tertiary system8 (Table 2). Table 2. Public Expenditure on Education in Mongolia

Source: MoF and National Statistics Office (NSO)

7 This also includes funding from bilateral and multi-lateral partners. 8 See World Bank, 2010.

4. TVET FINANCING SYSTEM IN MONGOLIA

20

Table 3. Country Comparisons on Education Expenditure as a Percentage of GDP

Source: Education Statistics, World Bank

Table 4. Government expenditure on tertiary sector as % of GDP per capita

Source: Education Statistics, World Bank

4.1. TVET FUNDING SOURCES IN MONGOLIA

The state TVET sector financing in Mongolia has main 4 sources: (a) government (b) foreign worker levy (private sector) (c) funding from international development partners and (d) funding from large private corporations. Chart 4 details the recent trends in terms of TVET financing sources of the state schools. Government sources and the TVET Promotion Fund provide the largest components of the sources of funding. Other sources are from a number of development partners and the large corporations. In total, for the year 2016, all sources are expected to invest about $40 million into the sector (Chart 4). Chart 4. Total funding of TVET sector in 2016

*Development partners’ current total investment is US$ 104 million

Source: Ministry of Finance, 2016

2000 2004 2008 2010 2011

Moldova 4.48% 6.7% 8.2% 9.5% 8.5%

Hungary 4.8% 5.3% 5% 4.8% 4.64%

Poland 17.5% 21.3% 18.3% 20.6% 20.5%

Slovakia 3.9% 3.9% 3.5% 4.1% 3.9%

Mongolia 5.6% 4.3% 4.7% 5.4% 5.5%

2010 2011

Mongolia 5.90% 3.37%

Moldova 44.80% 42.90%

Poland 20.60% 20.55%

Slovak Republic 18.67% 22.23%

Hungary 24.90% 28.40%

21

The Ministry of Finance provides financing to the Ministry of Labor (MoL) to allocate the funding to the TVET institutions. There are 38 public TVET schools that receive funding for operating and capital expenditures from the MoL. For 2016, the MoL allocated a sum of MNT 46.4 billion (USD 23.6 million) in total to 38 public TVET schools. This comprises 46% of the total MoL budget expenditure in 2016 (which was 43% in 2015, Table 2). The previous Public Sector Finance and Management Law, the new Budget Law (Annex 1) and the budget preparation process are outlined below. The Public Sector Finance and Management Law (PSFML) enacted in 2003 was meant to enhance the transparency and efficiency of public spending and had important implications for the education sector9. The following are specific ways in which the education sector was affected by the new law: (a) by centralizing the financial management system, it limited schools’ use of self- generated revenues; (b) it restructured the budget process, introducing further checks throughout the system and strengthening the controlling role of central authorities; (c) it introduced performance-based contracts for all civil servants including teachers; (d) it reorganized the responsibilities of provincial officials in charge of budget approval and disbursement, shifting power away from the Ministry of Education and to the Ministry of Finance; and (e) it eliminated cross-sectoral reallocations of the budget after approval, allowing only re-allocations among schools. The recent Integrated Budget Law (IBL) (see Annex 1) has now replaced the PSFML and allows for more decentralization of the budget process. Under the Integrated Budget Law, the Local Development Funds (LDF) that are allocated to soums can be used for the upgrading of capital expenditures of schools. 5.1. Budget preparation process in Mongolia The annual budget preparation process follows specified dates and is followed by the various budget institutions. Budget governors (ministries, departments, agencies, and local governments) have 5 weeks to prepare their budget estimates. The guidance circular with expenditure ceilings on recurrent and capital budget and the Medium Term Budget Framework (MTBF) are approved by the Government prior to its distribution in April of each year. Over the past several years, 2012-2015 the budget was approved by the parliament before the beginning of the next fiscal year (January-December). Typically, the budget preparation process for the following year starts on April 15th of each year with the presentation of the Medium Term Budget Framework and other instructions from the MOF to the budget entities/ministries. The process of review and finalization takes place until November of each year, before the budget for the next year is approved by the legislature by the end of November each year. 5.2. Uses of funds More than half of the total funding to the public TVET schools are spent on salaries and bonuses of staff. Of the total expected spending (USD 23.6 million) on 38 public TVET schools in 2016, 56% will be spent on wages, salaries, and bonuses for teachers. Seventeen percent spent on electricity, heating, and clean water, sewage, 6% for social insurance

9 See World Bank, 2015, Public Finance Management Performance Report.

5. GOVERNMENT FINANCING

22

contributions, 7% on standard costs such as meals, housing, bedding and medicine, 5% spent on current transfers (pensions etc.), and the rest on office supplies and inventory, travel and guest expenses, furniture and current repair expenses, purchase of other goods and services etc. (Chart 5).

Chart 5. MoL expenditure to 38 public TVET schools, by categories and share of cost, 2016 Source: MoF data, 2016

5.3. The General school funding formula

Government Resolution No. 94, 2012 (See Annex 1). It should be highlighted, that based on the Law on Pre-school education on Article 15.1, 15.2 and the Law on Education on Article 40.2 and 40.3, and the Law on Vocational Education and Training on Article 23.1.1 and 23.1.2, the Government of Mongolia determines the variable cost per student accordingly to specific principles. Schools are allocated variable costs according to Government Resolution 94 (Details in Annex 1 to the said Resolution). The variable costs per student can be expected to vary depending on a number of school factors and also location, especially in the remote regions of Mongolia. These variables costs, which are expected to be higher than that of high school students, differ by regions (see Chart 6 below). In the case of Ulaanbaatar, it is 516,000 Tugrug per student (lowest, annually); and 614,000 Tugrug (highest, annually) in Bayan-Ulgii Aimag. (The formula does not as yet incorporate the adjustment for disciplines but only accounts for regional cost differences.) Chart 6. Variable cost per student by regions, 2016

Source: MoL data, 2016

23

The amount of funding received by a particular school is dependent on its location, the size of its student body and staff, and its type. Schools in Mongolia plan their budget based on this funding formula that distinguishes between variable and fixed costs. Variable cost allocation is proportional to the projected student enrollments in the following year and also cover teacher remuneration categories - such as salaries, supplements, bonuses, insurances, taxes and pension plans - and other expenses such as stationary, books, periodicals, postage and communication costs (Chart 7). Chart 7. General funding formula, 2012

Source: Mongolian Education Alliance, 2013

Fixed costs cover items such as heating, water, electricity and sewage and are estimated from past expenses and negotiated with the MOF. Based on estimations of student numbers and inflation rates, MoECS/MOL and MoF are supposed to propose an annual per-student budget every fiscal year, which is called the "normative means" that apply to the variable cost component of the education budget. Such as formula is also extensively used for school funding in other parts of the world (discussed further in Part II of this Report)

Due to the fact that schools receive different funding levels based on regional differences, the annual cost per student differs among regions. For instance, the national annual average cost per student is MNT 2.2 million with the southern regions having lower average funding costs according to the formula being used (Chart 8). Chart 8. Annual TVET cost per student by reions


National Average

24

Chart 9. Annual Cost per Student in TVET vs. those in secondary and higher education

Source: MoL In general, the average cost of funding TVET students is generally higher than that of funding students in primary and secondary schools, and in the case of Mongolia, students in institutions of higher learning (Chart 9). Investments in TVET tend to be higher as funding facilities and assets for training tend to be higher. In the last five years, the average budget allocated to a public TVET school nationally was MNT 1.3 billion (USD 701,790) a year. For instance, a TVET school in Arkhangai that has an average student number of 657 and an average staff number of 75, had an average budget of MNT 1.19 billion (USD 608,180) over the last five years. Whereas in Umnugobi, a school that has 768 students had costs of MNT 1.23 billion (USD 570,263) over the same period and with an average staff number of 74 (Charts 10 and 11). This indicates that per student expenditure by the government for the school in Arkhangai and Umnugobi was MNT 1.8 million (USD 925) and MNT 1.4 million (USD 742) respectively whereas the national average was MNT 1.7 million (USD 887) over the last five years. Breakdown of school expenditures by regions. A further review of the expenditures by regions indicates the following features:

Arkhangai’s TVET school’s budget expenditure indicates that 68% of it is expected to be spent on wages and salaries. Given that their average staff number is 75 (over the last five years), the average monthly salary of a staff (management, executive, service) would be MNT 679,000 (USD 345).

For Umnugobi TVET schools, the employer is expected to spend 57% on salaries and bonuses and 6% on social insurance contributions. Given their average staff number of 74 (in the last five years), the average monthly salary of a staff (management, executive, service) would be MNT 625,000 (USD 317).

25

Chart 10. Arkhangai TVET school expected budget expenditure in 2016


It is interesting to note that according to the MoL budget data (2014) about 3% of the revenue source of the public TVET schools was derived from the income of “core and auxiliary operations” (services provided to others). In the case of the Arkhangai TVET School, the state budget financed 99% of expenditures and about 1% was from income originating from core and auxiliary operations. Chart 11. South Gobi TVET school expected budget expenditure in 2016


Variable cost per student The variable cost per student differs by region according to a set formula. As indicated above, the GoM had set the variable cost per TVET student in 2012 via Government Resolution 94. The formula is still being applied today, with no change. In the earlier years,

26

MoECS and MoF were supposed to determine these “normative means” (variable costs) every year. However, the 2012 “normative means” is still being used today. Some regional trends of the variable cost per student are as follows: Bayan Ulgii has the highest variable cost per student at MNT 614,700 (USD 312), followed by other western aimags such as Khovd (MNT 613.1), Zavkhan (MNT 612.9), and Khuvsgul (MNT 612.9). These variable costs per student are expected to be higher than high school variable costs per student, and in effect they are higher by 40 percent. Chart 12. Variable cost per TVET student

Source: Government Resolution 94, 2012

The detailed funding formula used, according to Government Resolution 94 (2012) is given in Table 4. In essence, (1) schools are categorized into regions (2) teachers salaries are computed according to their level of teaching in the school (lower/upper secondary etc.) (3) other components of the variable costs are then imputed. Then the components are weighted and added. The base of the weights are as follows: (a) the city schools and primary schools are indexed and assigned weights (base) of 1, (b) all other regions and categories of schools are indexed as a multiple of this base. During the boom years (2011-2012), there were pressures to rationalize wages and salaries of teachers and civil servants, and accordingly, teachers’ salaries in the formula increased between 33-40% and other variable costs increased by 9% (Table 5). Inflation had also reached above the 10% points during these years (Annex 2). The formula has remained the same in recent years, as the economy has now entered a phase of lower growth, inflation and fiscal revenues. Chart 13 and Table 6 indicate the various changes in the funding formula since it was introduced in 1988. A major dilemma for such formulae is the level of detail that is imputed into the formula to capture differences among schools in the regions and by student characteristics. A series of changes were seen since 1988 in terms of simplifying the formulae on the one hand, and

27

adding complexity to it on the other, in an attempt at fine-tuning the formulae for regional differences, as costs generally tend to higher in remote locations. Proposals for changes in the Funding Formula by the Mongolian Education Alliance Based on a study, sponsored by the ADB during the “crisis” year of 2009, the MEA10 consultants reviewed the funding formula and proposed alternatives to the present formula. In summary, it takes into account the efficiency of the funding and the use of resources by the schools (in terms of performance) and it also takes into account the equity aspects of the funding in terms of student characteristics. The proposal advances 5 sets of funds as a basis for school funding: (a) fund 1= salaries (b) fund 2= other variable costs (c) fund 3 = students living in dormitories (d) fund 4 = school size and type of school (e) fund 5 = taking into account student characteristics (performance, poverty and disabilities). Perhaps the recent economic downturn has stalled the review of this proposal by the MoECS.

10 See, Mongolian Education Alliance, 2013

Table 4. School funding formula, Mongolia, Government Regulations, 2012

Source: Mongolian Education Alliance 2013, based on Government Resolution 94: 2012

2012

Primary Lw Sec Up Sec All levels Primary Lw Sec Up Sec Primary Lw Sec Up Sec Average Primary Lw Sec Up Sec

Bag Primary 556.8 41.8 598.6 2.38 2.38 1

Primary 298.3 20.9 319.2 1.27 1.27 1

Basic 298.3 464.3 20.9 319.2 485.2 1.27 1.36 1.32 1 1.52

Full Sec 278.3 402.5 423.6 14.6 292.9 417.1 438.2 1.17 1.17 1.17 1.17 1 1.42 1.5

Primary 262.2 12.9 275.1 1.1 1.1 1

Basic 262.2 379.1 12.9 275.1 392 1.1 1.1 1.1 1.1 1 1.42

Full Sec 262.2 379.1 386.5 12.9 275.1 392 399.4 1.1 1.1 1.07 1.09 1 1.42 1.45

Primary 238.1 13.1 251.2 1 1 1

Basic 238.1 342.8 13.1 251.2 355.9 1 1 1 1 1.42 1.49

Full Sec 238.1 342.8 360.6 13.1 251.2 355.9 373.7 1 1 1 1 1 1.44 1.48

Soum

Aimag

and UB

outskirts

City

School location/ type

Teachers' salaries (including

insurance paid by GoM)

Other

variable

TOTAL= Salaries + Other variable costs

MNT thous Index (City=1) Index (Primary=1)

Primary Lw Sec Up Sec All levels

Bag Primary 40% 19%

Primary 0 -27%

Basic 40% 40% 20%

Full Sec 40% 40% 40% 20%

Primary 33% 0%

Basic 40% 40% 0%

Full Sec 40% 40% 40% 11%

Primary 28% 13%

Basic 28% 28% 13%

Full Sec 40% 40% 40% 20%

33% 38% 40% 9%

Soum

Aimag

and UB

outskirts

City

School location/ type

FY2011/2012 change

Teachers' salariesOther

variable

Table 5. Teachers’ Salaries’ Increase - School funding formula, Mongolia 2011-2012

Source: MEA 2013

Chart 13. Change in normative means funding formula: TVET

Source: Adapted from Mongolian Education Alliance, 2013

1988

1999

2003

2004 2004 2004

2006

2007

2012

30

Table 6. Changes in normative means funding formula: TVET

Year introduced/ changed

Details Comments

1988 Per student allocation 21 aimag + UB

Moved from incremental budgeting to per student financing: money forms students + weighs

1999 Introduced coefficients based on the distance of each schools from the aimag and soum centers

Highly disaggregated formula, but was not very transparent

2003 Simplified- not by aimag but by 4 regions

System was thought to be oversimplified

2004 Western Region disaggregated into two parts (Bayan-Ulgii +3 other aimags )

Educational needs of Bayan- Ulgii’s Kazakh speaking community needed higher level of funding

2006 Central Region also disaggregated into 2 parts: 4 Gobi aimags and the rest of Central Region (Selenge, Tuv, Darkhan, UB)

Between 2003-2006, the formula was being re- disaggregated gradually, but not all the way back to 21 aimags + UB

2007 Trend reversed: System was simplified once more – according to administrative groupings

Schools categorized into 4 locations: bagh, soum center, aimag center, city schools

2012 Same system maintained

Teachers’ salaries increased

While simpler, the consolidation of the 4 locations may seem inefficient and unfair

Source: Comments on the funding formula by Mongolian Education Alliance, 2013

Chart 14. MEA Proposal 2009, Funding Formula GSE

Source: MEA, 2013

Fund 1 Fund 2 Fund 3 Fund 4 Fund 5

PER STUDENT FUNDING

31

In addition to the “formula funding’ described earlier, there are two major “special funds” that are used to support the TVET sector; these are the Employment Promotion Fund and the TVET Promotion Fund. These are analyzed in this section. Also of importance is the contribution of the private sector in terms of the foreign worker levy, which provides a large part of the funding for skills and employment generation in Mongolia. Employment Promotion Fund (EPF)

The MoL is the central administrative body that manages the EPF. The Fund was established

in 2001 for the purposes of financing the employment promotion activities in line with the

Law on Employment Promotion (2001). The Law states that its financing sources shall be

from:

Funds allocated from the state budget

Funds allocated from the local budget

Interest on bank deposit of the remaining balance of the Employment

Promotion Fund

Payments from employers for hiring foreign citizens on contractual basis

(foreign worker levy)

Loans granted from foreign countries, international organizations for the

purposes of employment promotion

Donations and assistance granted to the Employment Promotion Fund

Funds from foreign countries, international organizations, national and foreign

business enterprises, organizations, non-government organizations and

individuals

Payments from business entities and organizations for not employing people

with disabilities

Other sources

Planned budget for 2016: The planned budget

for the EPF 2016 has decreased by 9% from the

planned budget allocated for the EPF in 2014,

and this is to be expected since the economic

downturn has affected the major contributor to

the Fund--from the foreign worker levy.

Financing sources of the EPF of about $41.7

million (for 2016) are as follows (from MoF):

48% to come from Foreign

Worker Levy

6. FINANCING FROM SPECIAL FUNDS

32

51% to comes from state budget (2015 remainder, perhaps from previous

workers’ levies)

1% to come from fees paid for not hiring physically challenged people by

enterprises.

The Foreign Worker Levy: This levy operates like the levy-grant system in other

countries (discussed in part II of this Report), except that employers do not as of now,

have a say on its performance and efficiency in creating the needed skills as done in

other countries (Singapore, Malaysia, Jordan etc). Chart 15 shows the manner in which

the funds flow in the case of the foreign worker levy. The levy is paid in accordance with

the labor contract that is signed with the employee by enterprises. To issue a visa for

foreign workers to work in Mongolia (in addition to other conditions) employers have to

pay the levy in advance in most cases. This fund is transferred to the account of the MOL

and from there to the MOF and back again to the MOL for promoting skills and training

of the local labor force.

Chart 15. Foreign Worker Levy Fund Flow

Source: MoL, 2016

The largest share of expenditure of EPF is transferred to the TVET Promotion Fund. About twenty three percent of the total EPF goes to the TVET Promotion Fund reaching MNT 19.7 billion (USD 9.9 million) being allocated from the EPF in 2016. The planned expenditure of 2016 budget of the EPF is given in Chart 16 (data sourced from the MOF). What is surprising is that the Fund also allocates money for small loans and SME support, when the Ministry of Industry and other agencies (Ulaanbaatar Municipal government) also administer similar facilities for SME’s. There is a need to review these specific functions of the EPF while consolidating the SME funding elsewhere, and letting the EPF to focus mainly on the skills creation function, based on a set performance criteria as found in other countries.

33

Chart 16. Employment Promotion Fund Expenditure- Planned Budget 2016

Source: MoF, MoL 2016

TVET Promotion Fund (TVETPF)

The MoL is also the central administrative body that manages the TVETPF. Prior to the

Amendment in 2014 to the Law on Employment Promotion, the TVET Promotion Fund was

“technically” financed from the state budget. Following the Amendment in 2014 (Law on

Employment Promotion, Article 23.1.1311), 75 % of the TVET Promotion Fund is to come

from the Employment Promotion Fund. Twenty five percent of the Fund is to be financed

from the state budget. However the actual sum received for the TVTEPF (from the EPF) is

smaller than that stated in the Law, and is mainly used to subsidize the variable cost per

student in private TVET schools and to pay monthly stipends for all TVET students (both

public and private) (Chart 17). A review of the arrangements is warranted, given the existing

regulations to support the TVETPF.

11 Law on Employment Promotion Article 23.1.13 (Amendment 2014)- The Employment Promotion Fund should allocate funding to the TVET Promotion Fund to support vocational education (to be effective from 2015 January).

34

Chart 17. TVET Promotion Fund 2016 Expenditure

Source: MoF data on MoL, 2016

It ought to be noted that development partner funding took on added importance in the TVET sector following the entry of the MCA into the sector in 2009. Prior to this period, the ADB, which took lead in the financing and reforms of the education sector as a whole, had supported the sector. The GiZ also had a strong hand in developing TVET skills in the early years of the TVET reforms. In addition, under the Education for All –Fast Track Initiative overseen by the World Bank in the mid 2000’s, an “Education Donor Consultative Mechanism (EDCM)” was set up with the ADB and JICA as co-chairs of the Meetings. To access funds from the EFAI, the Education Master Plan was prepared and grant funding was obtained for primary schools of about USD 30 million. Together with the MCA funding ($52 million that started in 2009) other development partners (SDC, GiZ, ADB etc.) joined in to develop the TVET sector further. As of 2015, there were 9 main multi-year projects financed by the international development partners and OT LLC (Chart 18) to support the development of the TVET sector in Mongolia. In the recent past the ADB and the OT LLC have been the larger contributors of the sector. The MCA TVET project that ended in 2013 expanded a significant amount into the sector over the course of 5 years, beginning in 2009. Since 2009, together with the grant funding from OT LLC, there have been investments amounting to over $230 million by the “combined development partners” into the sector (Stephen Duggan, 2015).

7. FINANCING FROM DEVELOPMENT PARTNERS AND LARGE CORPORATIONS

35

Chart 18. Partners’ Current Active Projects in TVET Sector (cumulative)

Source: VETP

Total capital investments by the previous MCA project reached USD 27.8 million; more than half of that was spent on equipment financing followed by construction in colleges and other assets (Chart 19). Colleges in Ulaanbaatar were the main beneficiaries of such capital investments. With the cessation in external development partner coordination by the MOF since the mining boom years of 2006-2013, a select group of partners (OT LLC, SDC, GiZ, DFAT, EU) have begun to collaborate on joint investments, sector strategy alignments and overall sector upgrading. This has been exemplified by the formation of VETP with support from a number of development partners and local institutions, such as MONEF and the Association of TVET colleges.

36

Chart 19. MCA capital investment support in TVET Sector

Source: MCC, 2015

Focus areas of international partner assistance. Table 7 below summarizes and places development partners’ activities into six main categories when these are related to the New National Development Plan and the present government’s strategy document. The strategy is expected to promote human resource development (skills & employment) as a key goal of the National Development Strategy 2016. The six themes/clusters are: (1) Develop competency based training and assessment framework; (2) Improve quality assurance mechanism; (3) Improve financing framework; (4) Improve capacity building of HR and management in the sector; (5) Expand and improve social partnership and cooperation; and (6) National qualification framework. One theme that changed from the strategy from 2015, was the exclusion of the governance theme, which is key to further rationalization of the sector.

Table 7. Partners’ projects in the TVET sector according to selected strategic objectives in the National TVET Strategy document, 2016

Strategic Objectives in the National TVET Strategy

Development Partners

Projects Status Comments

“Skills, Employment, Human Development”

Involved

1. DEVELOP COMPETENCY BASED

TRAINING AND ASSESSMENT FRAMEWORK

KOICA

Improving TVET schools' learning environment

Completed Asset investments in MON-KOR College

Expansion of MON-KOR Polytechnic College

Ongoing Advanced specialization training of teachers of welding, fashion design, computer & technology, auto mechanic, electrician and interior design.

Support to preparing participants (trainers and students) for World Skills

2015

Completed Completed Brazil event and will prepare for the next World Skills Competition

Government of India

Technical Support to Art Production Polytechnic

College Ongoing

Teachers training for: IT, offset printing, car mechanics, car body repair, welding, industry electronics

OT LLC TVET Teacher Training

Project Completed

Total of 2400 TVET teachers will achieve Certificate IV of Training and Assessment (TAE40110)

SDC Support for Vocational

Education reforms Ongoing Creating occupational standards, training of teachers

GIZ Cooperative Vocational Training in the Mineral

Resource Sector Ongoing

100 Mongolian teachers have received further education and training in Europe and Mongolia through the qualification measures for technical teaching staff and in-company instructors in the fields of electrics, electric welding, electro pneumatics, CNC simulation, mechanics, concrete construction, heating, air-conditioning and sanitation

ADB Skills for Employment Ongoing Training of TVET teachers of selected TVET providers; industry-based technical and vocational skills training programs for teachers of the key occupations

38

EU MQF Development Ongoing Building the framework for a National Qualifications Framework that would include those trained in the formal and informal sectors, and pathways into the higher education as well

2. IMPROVE QUALITY ASSURANCE MECHANISM

MCA Vocational Education and training project

Completed

Established NCVET and AVET, developed 19 policy and methodological documents, Provided 28 Competitive Grant Projects to TVET schools, established NLRC, developed amendment to TVET Law in 2012. NVQF is developed and approved by NCVET in 2012. Teacher Qualification Framework is developed in 2013. Provided technical assistance for TVET teacher center

Singapore Government/

Temasek

Assessment and certification program for

TVET institutions

Completed 2013-2015

Quality Assurance Framework, CBTA, 600 trainers in 5 trades

OT LLC

Apprenticeship course

Ongoing 2009-2016

Since 2010, 567 trainees were trained. Of these, 335 already completed the apprenticeship-training program successfully; 232 trainees will have completed the program by end of 2014. Assisted in the creation of a TVET training Center Teacher training

SDC/GIZ Cooperative Vocational Training in the Mineral

Resource Sector

Ongoing 2013-2016

Increasing the image of TVET; preparation of training materials in selected trades; Assisting RMC in Western region to assist TVET schools

EU

Support to Mongolia's Technical and Vocational Education and Training

Sector

Ongoing 2014-2019

Capacity-building to MoL and other TVET-related groups (National Vocational Education and Training Council), Sector Councils and TVET institutions to strengthen strategy and decision-making skills to support the implementation of a nation-wide TVET program as well as to support development partner coordination; development of the MQF

KOICA Improving TVET schools'

learning environment Completed

Constructed 2 storey school building, apartment complex for 15 teachers and dormitory for 120 students; Refurbished and equipped 7 labs and provided 4 tomes truck, Land Cruiser-80 and CL 315 Excavator, Trailer

39

3. IMPROVE FINANCING FRAMEWORK

Government of India


College Ongoing

Improve training environment of IT, offset printing, car mechanics, car body repair, welding, industry electronics

OT LLC/DFAT TVET Equipment Supply

program Completed

Supply of training equipment and tools for 5 TVET Schools; provided training equipment worth of about 5 billion Mongolian Tugrug (MNT) (~ $2.7M USD); funding construction of TVET school with GIZ/DFAT

UNFPA Youth Development

Program Ongoing Equipped classrooms of Life Skills for 50 TVET schools around the country

MCA Vocational Education and Training project

Completed

Established 13 Centers of Excellence, refurbished over 100 classrooms and workshops at 12 TVET schools, constructed new spaces (3,000m2) for practical classrooms. Provision of training equipment 12 trades, established 13 models schools, provision of library furniture to 3 Centers of Excellence, provision of 10 buses to 10 TVET schools, provision of 13 types to 18 HM to 7 TVET Schools, 48 employers invested MNT 1 billion investment to 13 TVET schools through PPP. Total investments in TVET sector by the MCA reached US$ 27.8 million (2013) and more than half (65%) of it is spent on equipment financing.



Funding of facilities in the “3D” Program of upgrading “centers of excellence” in Dalanzadgad, Dornod and Darkhan

ADB

Third Education Development Project; Skills for Employment

project

Closed; Ongoing

Provision of training equipment for 2 trades in priority sectors; Provision of testing equipment; Provision of CBT relevant equipment for key occupations. The project focuses on three areas—agriculture, construction, and road and transportation. It will be supporting partnerships with private companies to ensure that skills training leads to good jobs, and is upgrading equipment and facilities for at least 20 training centers.

EU Developing new TVET

financing systems Ongoing

Review of current funding structures for the TVET system and proposing new models of sustainable financing

OT LLC National Skilled

Workforce Program Completed

SDC/UNFPA Support for Vocational

Education reforms Ongoing

Increased availability of life skills education for young men and women in target areas/institutions. Gender-based violence (GBV) prevention model institutionalized and capacity of educational staff built to reduce GBV and foster positive gender relations.

40

4.IMPROVE CAPACITY BUILDING OF HR AND MANAGEMENT IN THE

SECTOR

- Improved and expanded provision of youth-friendly sexual and reproductive health (YFSRH) services in target areas


Resource Sector Ongoing Improving vocational counseling services

ADB Skills for Employment Ongoing

Implementation of 8th and 9th grades civic education curriculum which integrate career guidance modules in all schools, and (ii) the establishment of 30 independent senior secondary schools which will offer occupation-oriented technology elective courses

5. EXPAND AND IMPROVE SOCIAL

PARTNERSHIP AND COOPERATION

MCA Setting up of NCVET Completed Set up NCVET as a collaborative and social partnership vehicle on TVET policy deliberations

OT LLC Apprenticeship course Ongoing

2009-2016

Since 2010, 567 trainees have trained. Of these, 335 already completed the apprenticeship-training program successfully. 232 trainees will have completed the program by end of 2014.

SDC

Vocational Education and Training (VET)

Project in the western region of Mongolia

Completed 2012-2015

Involvement of regional industry associations with TVET schools


Resource Sector

Ongoing 2013-2016

The cooperation of industry and TVET schools; Establishment of “Vocational Education and Training Partnership” (VETP) to promote the harmonization of activities of the partners and knowledge management in the VET sector; involvement of local social partners in TVET schools

ADB

Skills for Employment Ongoing Development of occupational standards for agriculture, construction, road & transportation (15 key occupations); establishment of accredited assessment and certification centers, to also involve industry associations

Skills Training for Unemployed Youth and

Adults Completed

Implementation of 8th and 9th grades civic education curricula

which integrate career guidance modules in all schools, and (ii) the establishment of 30 independent senior secondary schools which will offer occupation-oriented technology elective courses

6. NATIONAL QUALIFICATION

OT LLC National Skilled

Workforce Program Completed Total 13,500 trainees trained in 17 trades at over 50 different TVET schools

41

FRAMEWORK UNFPA

Youth Development Program

Ongoing Development of occupational standards

SDC Cooperative Vocational Training in the Mineral


Provide with practical training equipment and help to improve training environment; Development of Occupational Standards



Five curricula for long-term and five for short-term courses in industrial electronics, industrial mechanics, heating/air conditioning/sanitation, construction carpentry and structural engineering were developed in cooperation with companies, associations and vocational schools.

ADB Skills for Employment Ongoing Developing CBT programs & assessment for key occupations

Temasek Foundation-Singapore

Curriculum Design and Development for TVET

Completed Implementation of TVET Master Trainer Capability Development Program; TVET curriculum design and development specialist program focusing on pedagogy

Indian government


College Ongoing Providing with books and manuals

Source: VETP and each organizations’ data base.

As mentioned earlier, some development partners have taken cooperative measures between themselves and the government in developing the TVET sector of Mongolia; one example is the CVT Project of GIZ/SDC/DFAT/KOIKA/and OT LLC. The collaboration exemplifies the move towards a new form of PPP (public--private –development agency partnerships) in the education sector. The ‘3 D” (Dornod, Dalanzadgad and Darkhan school) project aims to create “centers of excellence” in selected trades and for these schools to become regional centers (magnets) to upgrade capacity of other regional schools (satellites) in the provinces. It should also be noted that in the recent past grant financed projects are not included in the budget and therefore no information on disbursements is available to the Government12. There is no reporting of financial information by development partners on project and program aid.

An excellent example of PPP is the Dornod Polytechnic College. In this case, collaboration is with the school’s administrators, the private sector, international partners (as referred to earlier) to create a “bottom-up” approach to governance reforms, impact and relevance of training to the private sector (Chart 20). The development partners and industries jointly, have been involved in creating: a professional Board at the College, reforms of the curricula, upgrading of the textbooks, improving “bottom-up” approaches toward better qualifications standards for the graduates, financing of the facilities and learning materials, and upgrading their teachers’ skills, and even those of other colleges. Chart 20. Public Private Three Way Partnership: Dornod Polytechnic College

Source: GIZ

12 See, World Bank, Mongolia Public Financial Management Performance Report, 2015.

Outcomes of TVET funding The funding model of TVET schools in Mongolia follows the input model as described earlier in this Report. This formula is not differentiated by disciplines or by impact. Under the current TVET strategy of the MOL, there is a plan to modify the funding formula to link it to TVET disciplines. It is noted that output-funding systems (analyzed in Part II of this Report) strengthen the linkages between budget allocation and desired TVET study outcomes. It is to be noted that one measure of outcome, the average employment rate of TVET school graduates, has been about 63% in the last 7 years, which is higher than the employment rate of fresh graduates from the universities. The impact of TVET studies on wages and employment needs to be explored further. Past studies have shown the following: a) people with TVET degrees earn between 21-24% more than secondary school graduates b) rates of return on TVET education have ranged from 9.1 % to 10.4 percent (see RAND Mongolia study, 2015). However international comparative studies have shown a rate of return of about 18% (and in Croatia--42%, Denmark--87%; UNESCO, 2013). Under the recent TVET Amendments (February 2016, see Annex 1), public TVET schools will now be allowed to generate outside income for their operational costs; however the implementation guidelines of this aspect are being worked out by the MOF and MOL. This is a positive movement as in many other countries; the trend in TVET is to benefit from a diversified source of financing and being relevant to industry. TVET schools in these countries charge fees to train company trainees, sell short courses to trainees, sell products produced within the TVET institutions, rent out school premises when school is not in session, etc. A detailed regulatory framework on this issue is discussed further in the country case of Denmark, presented in Part II of this Report.

Chart 21. TVET Graduates’ Employment Rate, 2008-2015*

*Some graduates continue to further studies and this must be taken into account for the measurement of the rate. Source: MoL, Labor Exchange

44

Earlier proposal on the Employer Levy system by the MCA In Chart 22 the proposal by the MCA on the “levy-grant” system is outlined for the creation of the TVET Promotion Fund. Conceptually the Fund was to be supported by both the state and the private sector, and from international partners. When this “levy” was proposed in 2010, it was not approved by parliament since the corporations had already been paying the foreign worker levy for local skills development. An abridged version of the plan was subsequently approved in 2014/2015, with the EPF providing funding for the TVETPF as discussed above. This was a positive move for the TVET sector. However, while the levy was paid by the private sector and intended for the upgrading of skills and employability of Mongolian workers, the second part of the model as suggested by the MCA study-- on the use of the funds from the levy-- needs to be addressed, and tied to some form of performance and training results by training recipients, as done in other countries, and suggested by the MCA report on the training levy proposal. The companies in other countries that contribute to the levy have access to their contribution for the training of their own workers, or in some cases benefit from a tax deduction for the levy contributed. In Part II of this Report, which follows next, other country examples of TVET financing are analyzed and compared with that of Mongolia. Chart 22. MCA Levy-grant proposal 2010

Source: Peer, A. (2009) “Financing and Funding VET Report: Policy and Operational Framework

Reform Project “Millennium Challenge Account – Mongolia (MCA-M).

45

PART 2: Review of Alternative TVET Financing Systems

46

8.1. Alternative TVET Financing Systems: Summary

How does the Mongolian TVET financing system compare with other systems in the world? This is the subject of the discussions in this part of the Report. When the TVET financing systems across countries are examined, a number of characteristics can be discerned. In summary, as shown in Chart 23 below, four major directions can be found for TVET financing systems globally. Most countries started with an input orientated system with some type of formula funding. Many have now moved towards the outcome oriented funding system. Moreover, countries have also moved form a centralized funding system that was tied with the input oriented framework. The more advanced and progressive countries in TVET financing have moved to a more decentralized and market- driven approach. Examples of such countries include Singapore Canada, Scotland and Denmark; they have moved to outcome oriented and decentralized modern approaches. Another group of countries such as Jordan, Malaysia, South Africa, and Australia, have moved towards the outcome oriented financing system but yet to move to decentralized approaches. Based on the review of their financing experiences, most transition economies, including Mongolia, fall into the southeast quadrant of Chart 23 in terms of the characteristics of the TVET funding; using input oriented formulae and centralized approaches. For transition economies, Moldova seems to have moved the farthest in terms of an outcome orientation framework compared to all the other transition economies. Implementation of the reforms within this new framework is in its initial stages, with more complex funding formula for schools to be tested and implemented in subsequent years. In the case of Mongolia, the challenges for the financing framework are to define the direction of the TVET financing reform process: to move from input oriented, centralized southeast quadrant of Chart 23 to the northeast quadrant of Chart 23. Obviously the financing framework needs to be studied further and phased, with incremental steps that would take Mongolia to the northeast quadrant, perhaps over a defined period of time. The choices for Mongolia need to be examined further, based on the experiences of other countries and especially with countries with similar backgrounds. In this regard, Moldova offers a relevant example for Mongolia to examine further, in terms of the TVET financing framework. The section below examines the financing experiences of a number of transition and other developing and advanced economies, with regard to their TVET financing. The inclusion of the transition economies in this review is obvious; they have had similar backgrounds to Mongolia and had to rebuild their TVET systems. A number of other rapidly developing economies have also been included, such as Malaysia, Jordon that have adopted significant measures to finance skill development programs. The examples of another group of countries is also included, those with a dependence on mining resources, such as South Africa, Canada and Australia. The inclusion of these countries in the review is also based on

8. BACKGROUND AND CONTEXT

47

the recommendations of leaders in the business sector and officials at the Ministry of Labor in Mongolia. The review also includes the cases of Singapore, Scotland and Denmark; countries considered to implement better practices in TVET financing globally. The examination of the country experiences in the next section is followed by some conclusions on the overall TVET financing system of Mongolia, in comparison with those of the other countries in the last section of this Report.

8.2. Review of country experiences in TVET financing In essence, two principal methods have been used in funding TVET schools and systems. The first is the state funded component, which includes either funding based on the principle of “incremental budgeting” that reviews all budget line items and then approves increases for the next year, or funding that is made on a formula basis. Education specialists introduced the formula based funding in a number of countries in the 1980’s. In Table 8, a summary of the country funding features described in this part of the Report is categorized into (1) state financing of TVET schools and (2) other sources of funding. The transition country examples are examined first, followed by the examples of other economies. Central government’s state funding is at the core of the funding of the TVET sector, and some of these countries have already moved from “incremental budgeting” to formula based funding principles. In some cases local governments are also providing funding for TVET schools. The disbursement of such funds goes either directly to the schools concerned from the central governments, or channeled through local governments. Chart 23. Summary of Financing Systems

Source: Adapted from Belinda Smith by Author

13 Based on the Law of Employment and Counteracting Unemployment (1996)

Table 8: TVET Funding Sources of Country Examples

Countries State financing- TVET schools Other source/s of funding

Czech Republic

State budget: finances most of public TVET schools. Currently, 76.2% of the schools are covered by the School Act, which channels funds from the Ministry of Education, municipal budget and regional budget accounts.

Twenty one percent of the schools are private.

Majority of private schools receive subsidy and some revenue from tuition fees.

Some revenue from business activities (such as renting school property) and private donations

Education Fund has been initiated recently in the government's Council of Economic and Social Agreement (CESA), with contributions based upon a % of the wages (to be determined).

Tax Deduction: Employers are allowed to deduct training costs from their taxable income.

Lithuania State budget: Ninety two percent of funding comes from state budget

School Revenue earning activities: 8% from revenues earned by schools.

Education Fund: 2% of residents’ income tax is forwarded towards education to increase private investment into education.

Tax deduction: Employers are allowed to deduct training costs from their taxable income.

Poland State budget is the main source of funding. Additional funds from donations and special funds.

Revenue earning activities: The Law on education allows schools to establish their own special budgets (depending on entrepreneurial talents and the school's assets- premises can be rented out)

Labor Fund: finances the training schemes13 for the unemployed

Training Fund: created in 2004 financed by employers' voluntary contributions.

49

Slovenia Mostly funded from national budget by Ministry of Education and Sport.

Public funds partially finance groups of employees who are in danger of losing their jobs.

Plans exist to secure financing of training from enterprises, European Funds and other sources.

Studies indicate that employers tend to invest primarily in their core workforce and the less skilled workers have very limited access to company financed training programs.

Romania Main source of TVET financing is the central budget.

Local public administrations also contribute to building, repairing and maintaining schools.

Employment Fund

Made up largely of employers' contributions (5% of their overall gross payroll costs) and employees (1% of their gross salaries).

About 20% of the Fund is used for continuing training of the unemployed.

Budget subsidies also contribute to cover funding gaps.

There are also sector level funds in the shipbuilding and aviation industries financed by one-off payment per company per year, which has been replaced by a levy imposed via collective agreement within the sectors.

Hungary The national funding for school-based training is based on a formula-the number of students- from the state budget.

These funds are transferred directly to the schools to cover maintenance and operating costs. The schools supplement this support with their own income.

Vocational Training Contribution (by companies) has been for decades one of the major sources of funding for school-based vocational training.

Companies are allowed to use a third of the contribution (0.5% of the payroll costs from the total contribution of 1.5%) for the training of their own employees, but only on training programs included in the National Vocational Qualification Register.

50

South Africa

State funding is based on student outcomes (in terms of pass and placement rates) and capacity of institutions to respond to the skill needs of the labor market.

Adopted the levy-grant system.

There is a National Skill Authority, National Skill Fund and Sector Education and Training Authorities (SETA) at the sector level, which exist for 27 different sectors including the mining sector.

Employers pay 1% of wages to the National Skill Fund.

Of the collected revenue by imposing levies for the National Skill Fund, 20% is for financing of national priorities determined by the National Training Authority and 80 % is channeled back to the sector.

The levy collection agency is the South African Revenue Service and the money is then transferred to the Department of Labor together with a description on which firms paid what amounts etc. The Department of Labor then transfers the funds to the respective SETAs.

Scotland State funding from regional or local authorities use their own revenue for funding schools

Some funds for capital expenditure (rebuilding and refurbishment) are also available through the competitive application process 'Scotland's schools for the future'.

Employability Fund (EF) supports services, which have been developed to address the specific needs of local areas. Skills Development Scotland (SDS) administers and manages the Employability Fund on behalf of the Scottish Government

By working closely with partners the EF is aligned to local areas and maximizes opportunities for individuals. Local training providers work with employers to understand their skills needs and help them find and train the right individuals.

With a strong focus on work experience, the Employability Fund responds to the different needs of each individual, while also adapting to employer demands on a local basis.

51

Denmark Vocational education is administered by the Ministry of Education, VET Department

The government allocates funding to TVET schools to cover basic costs such as teacher salaries, buildings, and maintenance.

It also funds TVET using a flexible, “taxi meter” system that links grant amounts to the number of full-time students in a specific program.

Vocational schools are organized as private non-private, non-profit and independent institutions (as in the case of ISU in Mongolia)

Public (block) grants are not earmarked and schools are free to allocate these resources as they see fit, with accountabilities attached

Instructors wages are negotiated

Singapore Mainly funded by the Government via the Workforce Development Agency (WDA) and has a complex system of institutions for skills development

All employees (full-time, casual, part-time, temporary and foreign workers) pay 0.25% of all remuneration to the Skills Development Levy

The collection of SDL and disbursement are managed separately by a Board

From the Skills Development Levy, Central Provident Fund Collects for WDA

Under the Skills Development Fund- WorkPro encourages recruitment of older workers, back-to-work locals, or employee flexible work arrangements (FWAs)

Malaysia Government is the main provider, with several ministries and agencies involved:

Ministry of Education

Ministry of Higher Education (TVET is offered in polytechnics and community colleges)

Ministry of Human Resource and Development (under which the Department of Skills Development, National Vocational Training

The Human Resource Development Fund (HRDF), introduced in 1993 is a training levy-reimbursement scheme that aims to provide accelerated industrial training and offer opportunities and avenues for companies, industry associations and public/private industrial training institutions to contribute to a more responsive and relevant skill development

Human Resources Development Levy is 0.5-1% on employees’ wages and is collected by the employers and deposited at the Public Bank or the RHB Bank

Employers who paid funds into their levy accounts are allowed to draw down on

52

Council (NVTC), Industrial Training Institutes, etc., are placed),

Ministry of Youth and Sports,

Ministry of Community Development

State governments ((under which institutions such as Terengganu Advanced Institute (TATI), where Skills Training Centers, etc., are placed.))

their accounts, when they carry out their training on pre- approved programs.

Jordan Direct budget support is based on formula (unit cost of school) and accounts for 79% of expenditures

Formula is based on previous year’s allocation, and then adjusted

Schools can sell “services” to recover costs, this constitutes about 11-12% of their expenditures

The rest of the school budget (8-9%) is contributed by the Training Levy

The Training Levy (Fund) aims to subsidize the cost of training activities; Fund was established in 2001

The Training Levy Fund is used by schools for equipment and raw material purchase, and for the development of better training programs

The Fund is managed by a Board (as in Singapore)

These countries in the former socialist countries of Central and Eastern Europe (including Mongolia) inherited a system of vocational education which was based on the assumption that everyone had to be trained for a specific occupation before starting work, and that it was the job of the vocational schools to provide such training. Although individual countries varied in the extent to which this model was adopted, the narrowly specialized vocational education tended to be provided early in schools and relied heavily on site for practical experience in state enterprises. With the economic transition (falling investments, fiscal problems, poorly trained teachers and the privatization of State Owned Enterprises for which the students were being trained), the survival of the traditional TVET system became increasingly difficult to maintain. Some efforts over the last decade have been instituted in the EU 8 countries14, by focusing on quality, relevance and employability of their TVET graduates. This has also meant that reforms in the financing systems of TVET had to be undertaken. 9.1. Financing in transition economies Financing of TVET training in these countries, by and large, follows the traditional centralized public funding (plus in some cases supplemental funding from special funds, from provincial governments and the EU). Most of these countries have also embarked on diversifying TVET funding by establishing either Employment Funds, Training Funds or Education Funds. Employers pay these levies as a certain percentage (1% or 1.5%) of wages or payroll, and in some cases as part of their collective agreements. The levies are collected by ministries or on a sector basis by sector associations. Disbursements from these funds are made to TVET schools and back to enterprises (as training grants or reimbursements) in varying proportions. (A variant of this scheme is where the enterprises are allowed to deduct their training costs from their taxable income.) The most elaborate scheme is that of Hungary where the Training Fund which is contributed by enterprises (1.5% of payroll), and one third of that flows back to the enterprises for training of their employees (but only in courses included in the National Vocational Qualifications Register) or training for students at enterprises. The country cases of financing the TVET sector are addressed next, starting with Hungary.

14 These are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia, which joined the EU in 2004. See World Bank, Vocational Education in the New EU Member States, 2007.

9. TRANSITION ECONOMIES

54

Hungary

There are three main sources of financing schools in Hungary. First, the national funding for school-based training (based on the number of students) is from the state budget. These funds are transferred directly to the schools to cover maintenance and operating costs as laid down by law. The schools supplement this support with their own income. The second source is the Vocational Training Contribution, which for decades has been one of the major sources of funding for school-based vocational training. Companies are allowed to use third of the contribution (.5% of the payroll costs from the total contribution of 1.5%) for the training of their own employees, but only on training programs included in the National Vocational Qualification Register. The vocational training contribution has increased significantly since early 1990s, reaching an estimated 173 million Euros by 2000. A large part of this fund is available to vocational schools, but up to one third can be spent by companies on training their own employees. Companies can transfer finances directly to vocational schools, can finance the training of their own employees, and can provide practical training for students. A department for the Management of the Fund within the Ministry of Education administers the national contribution of the fund to vocational education and training. The third source is the Employment Fund (part of Labor Market Fund) used for vocational training of the unemployed.

Moldova

More recently, Moldova has modernized its TVET financing system and instituted a performance oriented funding part in its overall government funding formula. The formula comprises of 3 factors, which cover the specific circumstances of the Moldovan VET system, and needs. These 3 factors are: introducing performance characteristics in the funding system, such as the “retention factor”, which is a factor to adjust the funding of drop-outs; the “Competitive Fund” created by the VET school themselves; and the “Premium Weighting” which introduces a factor that favors the study programs which are very much in need in the labor market. The Basic Funding Formula required a

55

monetary value derived from existing costs of a typical VET school. The National TVET funding rate and the cost rate once established, are to be balanced in a “zero-sum” context i.e. the total expenditure for VET may not surpass the budget ceiling for VET that is set by the Ministry of Finance. (A more detailed explanation of the components to the new funding formula is given later in this part of this report.)

Czech Republic

State budget finances most of public TVET schools in the Czech Republic. The majority of private VET schools receive subsidies. Some revenues are generated from tuition fees. Currently, 76.2% of the schools fall under regional administration and 21.4% of the schools are private. Funding for regionally administered schools are covered by the School Act (Act on pre-school, basic, secondary, higher professions and other education), which channels funds from the Ministry of Education, municipal budget and regional budget accounts. Some revenue from complimentary business activities (such as renting school property) and private donations exist. Recently, an Education Fund has been initiated in the Government's Council of Economic and Social Agreement (CESA), with contributions based upon a percentage of the wages. In addition the Czech Republic allows employers to deduct training costs from their taxable income.

Slovenia

Schools in Slovenia are mostly funded form national budget by the Ministry of Education and Sport. In addition to public funds, there are plans to secure financing from enterprises, European Funds and other sources. Restructuring at the firm level during the transition period had significantly reduced firms’ investment into employee training. However, the Slovenian Labor Relations Act (the main labor law) does not directly address the issue of financing of training done by employers. It is left to collective agreements to specify the costs involved in training and who shall bear what part of the

56

costs among the employers and employees. According to recent studies, employers tend to invest primarily in their core workforce and the less skilled workers are seen as easily replaceable, and as such have very limited access to company financed training programs. Public funds partially finance groups of employees who are in danger of losing their jobs. The only example of existence of private funds is in the crafts sector, which is financed exclusively by employers through contributions of 1% of their gross earnings.

South Africa

South Africa exemplifies a country, which had to upgrade urgently its skills base given its history. Starting in 2001, it implemented a new system that shifted from the classical input-based approach to technical training to an outcome-based approach. The Further Education and Training Act passed in late 1998, instituted central government funding changes to state training colleges and institutes, where funding was based on student outcomes (in terms of pass and placement rates) and capacity of institutions to respond to the skill needs of the labor market. In parallel, after reviewing the various training financing models, it adopted the levy-grant system (similar to that of Hungary above). Given the importance of the mining sector, its experience is relevant for Mongolia. South Africa established its National Skills Authority, National Skills Fund and Sector Education and Training Authorities (SETA) at the sector level, which exist for 27 different sectors including the mining sector. Its Skills Development Act introduced a 1 % payroll tax to be paid by employers to the National Skills Fund. Of the collected revenues at National Skills Fund, 20% “off the top”, is for financing national priorities determined by the National Training Authority (for training of the unemployed etc.). Half of the remaining 80% is distributed back to the employers of the sector for funding the training of workers and the remaining 40% is redistributed back to the sector according to the SETA’s priorities, including the promotion of vocational education in the sector, support of vocational schools and financing of apprenticeship practices. The levy collection agency is the South African Revenue Service and the money is then transferred to the Department of Labor together with a description on which firms paid what amounts etc. The Department of Labor then transfers the funds to the respective SETAs. Each SETA

10. FINANCING IN OTHER COUNTRIES

57

receives the contribution of those firms-- which are associated with it. Once funds have been allocated to each SETA, monitoring and evaluation will take place by the Department of Labor for accountability on the use of funds.

Singapore

With almost no natural resources (except its location) Singapore has become a developed country by the sheer dint of its will by upgrading the education and skills of its labor force. The Skills Development Fund was established in 1979 as an instrument towards increasing the skills level of the Singapore workforce. The Fund is financed by a compulsory payroll tax levied on low salaried workers. Grant reimbursement is paid for approved training in enterprises but which increasingly focuses on the development of corporate training plans and support to smaller enterprises15. The current levy rate is 1% on all salaries less than $1000. The National Productivity and Standards Board (NPSB) administers the Fund. The Board of Directors of NPSB is made up of representatives from employers, unions, government, professional bodies and academia. The Fund awards grants in two main areas: (1) Skill upgrading of under-educated and older workers in order to enhance their employability (2) Skill acquisition in “critical high-end areas”16. Grants are awarded to companies on the basis of a cost-sharing principle. Details depend on the type of training concerned17. The amount of the grants that a company can obtain is not tied to its levy contribution, it can be more than the contribution. The training however must meet minimum quality criteria; for example it has to be led by qualified instructors leading to some form of certification. The success and steady growth of the Fund is attributed to an incremental strategy of implementation. In the first two years, efforts were focused on creating awareness of the Fund among employers, with ad hoc reimbursement of approved courses. In the second stage, priority was given to in-plant training, and as an incentive, and reimbursement increased to 90% of costs. The third stage encouraged the development

15 A separate Vocational and Industrial Training Board focuses on pre-service training of skilled workers. 16 Grants for the first area make up the bulk of the subsidized training positions - over half of a million

training positions were subsidized in this category in 1998-1999 (one training position for every three

employees in the low-wage category). About half of them were positions in company-based training. 17 For example, in-house training leading to national or industry-wide certification is subsidized at $6 per

hour, while course fees for external training leading to same type of certification is subsidized at 80%, but

no more than $8 per trainee per hour.

58

of corporate training plans by paying grants in advance of expenses. Later the focus was on reaching smaller firms and improving training quality18 (See also Annex 3).

Canada

First, Canada has had an apprenticeship system for continuing education that was developed upon agreement between unions and employers through collective bargaining. While based on bargaining, often employers carry the major part of the cost and therefore, making it an employer-financed system. Apprenticeship has been a separate program from Canada’s schools based vocational education (high school based TVET courses and community colleges) since the very beginning. The popularity of apprenticeship has been in decline largely due to the cost incurred to employers. Apprenticeship cost in Canada is particularly high because of longer training periods and minimum wage requirements. Second, for initial vocational education, high schools and community colleges provide vocational training, receiving their financing either from the government or tuition fees. However, in Canada youth participation is very low compared to European countries. Third, and perhaps most significant in Canada today, is the organization of 34 industry councils that have been in existence since 1993 in order to innovate the vocational education system in the country.19 The Sector Council programs are running in partnership with the Government. The Sector Council is a promising approach of involving employers in anticipating skills shortages and the provision of workplace training. Rather than each company training its own workforce, Sector Councils, as permanent representatives of particular industries, through collaboration and collective action on skill needs, promote economies of scale in addressing human resources challenges which benefit all industry partners. The government of Canada supports these initiatives as a facilitator, and through some funding to help these groups come together and take ownership of their human resource issues. Resources to run these programs come mainly from employers. All sector councils are results based. The province of Quebec uses a levy system to fund the construction sector.

18 Middelton, J., A. Ziderman and A. Adams, 1996, Skills for Productivity: vocational education and training in developing countries, World Bank. 19 Human Resources and Skills Development in Canada: http://www.rhdcc-hrsdc.gc.ca/eng/workplaceskills/sector_councils/listsectorcouncils.shtml. The established Councils include those for mining, petroleum, food, and construction sectors amongst others.

http://www.rhdcc-hrsdc.gc.ca/eng/workplaceskills/sector_councils/listsectorcouncils.shtml

59

Denmark

In Denmark, there was a fast transformation from agrarian to industrial development in the 1950’s, which demanded a drastic expansion of the vocational and technological education and training. The active participation of the labor market (social) partners in this process ensures that the system is always updated and fully flexible and recognized by industry. Half of the TVET training or more takes place in industry, and the students can advance to higher education, under the NQF. The system is flexible, allowing for different access routes and transition between levels. Almost 2/3’s of all young Danes enroll in vocational programs. This is a very high figure in the vocational programs of any country and is an indication of the popularity of the programs, and it also reflects the prestige attached to the occupations following completion of the programs. The Danish vocational education and training programs are governed by target and performance management frameworks. The Danish Parliament decides on the general framework for the vocational education and training system. This applies to both the management, (a) structure and objectives of the programs and also (b) the frameworks for the institutions’ tasks and development. The school-based part of the vocational education and training programs is financed by the state on the basis of a ” taximeter system (pay per student”). The flexible “taxi meter” system links grant amounts to the number of full-time students in a specific program. This incentivizes schools to align supply and demand, drop unpopular programs, and continually seek ways to increase the efficiency of their operations. The student receives wages from the company for his or her work during internship. The Employers’ Reimbursement Fund reimburses the company for the trainee’s wages when the student is attending college. All companies, both public and private, contribute a fixed annual amount to this Fund for each of their employees. The students are expected to finance their wages through productive work during their internships. During the school-based part of the program, TVET pupils receive a weekly school allowance from the state.

The “Taximeter System” management deals with the state’s total financial framework for educational purposes. The taximeter system is the primary appropriation model for distributing state funding. State grants amount to approximately 80 per cent of the total funding and are thus, the primary source of revenue for the institutions. Of this amount, activity-level determined grants (teaching, building and maintenance, or collective “expenses taximeters”) total approximately 92 per cent, so that by far the greatest part

60

of state funding consists of “taximeter funding”. The national financial management system is aimed to meet the demand for the efficient distribution of funds and, at the same time, support the educational political objectives-- such as the geographical availability of educational programs and the development of special areas of initiative, which requires a variety of management tools. The self-governing educational institutions have two sources of revenue for financing their educational programs: state grants and their own income from income-generating activities, participant fees and fees paid for unemployed people in activation programs.

The legislation concerning training institutions allows for the possibility of the institutions performing income-generating activities in open competition with private sector enterprises. The intention is partly to ensure flexible and efficient utilization of capacities and resources, and partly to take advantage of the academic synergy-effects and opportunities for competency development. The surplus from these income-generating activities can be used for financing new needs, for example in relation to the development of new educational programs. The training institutions are subject to conditions for carrying out income-generating activities, which means that:

The income-generating activities must be a natural extension of the regular activities of the institution.

The institution must be able to separate the production of goods and services that are intended to generate income from the institution’s other tasks.

The surplus or loss in one financial year can be carried over to a later financial year.

The accumulative result of the income-generating activities may not be negative for four years in a row.

Apart from this, there are rules governing the pricing of goods and services that are provided as income-generating activities. As a general rule, the pricing must be such that it does not compromise the competitiveness of private or public competitors and such that the long-term average costs are covered. In accordance with the legislation applicable to institutions, it is made additionally clear that those institutions that practice income-generating activities must follow good marketing practices and must not impose unfair price competition on others. The Ministry of Education is responsible for supervising institutions with income-generating activities. The municipal expenses for TVET apart from expenses for guidance, administration, trainees’ wages etc. are financed partly by state reimbursement and partly by budgetary guarantees through the municipal block grant scheme.

In the Danish case, a few educational institutions are so small that, according to the Ministry of Education, they will have a difficult time maintaining a sustainable financial situation. These institutions usually only offer one type of educational program and are, therefore, vulnerable to even the slightest deviation in the number of students. In such situations, the Ministry of Education can recommend that these institutions look for

61

possibilities for merging with another and financially more sustainable institution. In certain instances, the Ministry has even made such a merger with a better-grounded institution a requirement of providing funds for needy institutions, thereby using the strategy of funding to “steer” the system.

62

To move towards a “demand- driven” competency based and flexible TVET system, most of the countries reviewed above have a taken a longer-term view of restructuring their systems, and in some cases it has taken almost 15 years for such a transformation. In tandem with the system overhaul of the public sector TVET institutions, new financing models have been adopted. To involve the private sector in TVET training within the (Public Private Partnership) PPP model the payroll levy-grant model (Hungary, South Africa, Singapore, Malaysia) seems to have broad appeal. Although it is possible to provide incentives for training by allowing employers to deduct training costs from their taxable income (as done in Estonia, Lithuania, and the Czech Republic) this still involves a cost to the taxpayer. Conceptually the levy/grant scheme tries to internalize the training externalities (to industry and society) by refunding the costs of such training to those who train in specific and transferable skills, without the cost to the taxpayer. For this to work, some basic principles are needed:

industry sector councils should (be formed and) participate in defining the training needs of their particular sectors,

administration of the scheme and the “fund” should ideally be held by employers (industry boards) rather than Governments (with prudential safeguards to ensure that those who say they are doing the training are actually doing so, in approved fields demanded by the labor market),

training fields should be defined “up-front” in jobs needed by enterprises in specific sectors, and

monitoring and evaluation of the scheme/s (in terms of successful numbers of industry recognized certified workers) and accountability on the collection and use of funds should be ensured.

As far as school funding models are concerned, the trend is to move from centralized and input based models to decentralized and performance based models. In terms of transitioning to a new funding model, the funding formula that Moldova has developed has relevance for many countries and would be of relevance to Mongolia. In Chart 24 and Table 9, the first set of reforms are presented, whereby the basic funding formula is made up of -- the number of students in the study programs (by disciplines) multiplied by the per student funding rate and cost weighting per program. This is the basic part of the funding formula that also weights the cost of programs. In the Moldovan case the highest cost programs are in the Arts and Music colleges. Table 10 compares the cost weighting systems of other advanced countries (Denmark and Great Britain) with the Moldovan case and it is found that the weights move roughly in the same direction, with the training of a veterinarian nurse being the highest in Moldova. The base is set at the courses which are provided in informatics, tourism and business, all other courses are weighted at a factor compared this base. As part of the next phase of the funding reforms, the performance-oriented part of the funding will be introduced and piloted, whereby the retention factor at schools (in cases of dropouts) will be factored in. The premium weighting part would then be introduced, as it would take into account how

11. KEY FINDINGS FROM COUNTRY EXAMPLES

63

COLLEGES PROFESSIONAL SCHOOLS

MDL / student per Cost weight-factor MDL / student per Cost weight-factor

Examples of study program Class class of study programs class of study programs

Informatics, business, tourism Base A 6,401 1.00 A 9,345 1.00

retail, sport, textile Low - cost B 0 0.00 B 10,743 1.15

hair and beauty, crafts, food Lower medium C 0 0.00 C 12,435 1.33

construction, transport, manufacturing Upper medium D 9,027 1.41 D 15,570 1.67

agriculture, medical assitance, art High-costs E 16,826 2.63 E 18,651 2.00

College Musuc and Pedagogic Specialist F 38,636 6.04 F 0 0.00

art college: "Stefan Neaga" Specialist G 50,919 7.95 G 0 0.00

H 0 0.00 H 0 0.00

VET Funding Rate: 6,401 MDL / student 9,345 MDL / student

the schools are incorporating the premium skills needed in the country, into their training programs. This would, to a large extent reflect the relevance criteria of such TVET training, that would be tied to market needs. (There is also a part of the planned funding equation that would allow schools to compete for parts of a “Competitive Fund” to be established20) This Model in Moldova exemplifies the funding reform movement for a country that is moving from an input oriented and centralized approach to a more performance oriented and outcome based approach. Perhaps in the future it could move up also into the quadrant that incorporates decentralized approaches to funding as in Singapore, Canada, Scotland and Denmark. Another innovation that Moldova is experimenting is to keep the overall budget allocation to TVET schools the same; that is to keep the overall budget envelope as ‘budget-neutral” but within that budget envelope, the distribution between the components of the funds could change. Chart 24. Moldova per student funding formula, planned reforms

Source: GOPA, Moldova Peer TVET Financing: New financing mechanism recommendation report, 2012

Table 9. Cost weight factors for Moldovan schools

Source: GOPA, Moldova Peer TVET Financing: New financing mechanism recommendation report, 2012,

(1USD=19 Moldovan Leu)

20 It can also be envisaged that this “Competitive Fund” in the Moldovan context can be made up (in other country cases) of a category called “income from services rendered”, the more services rendered, the more income retained for the school’s expenditures.

64

Table 10. Cost weight factors for TVET school funding: country comparison

Cost-weight factors Denmark Great Britain Moldova

Electrician 1.80 1.30 1.67

Veterinarian nurse 1.80 1.72 2.00

Vehicle mechanic 1.80 1.30 1.67

Agricultural mechanic 1.80 1.72 1.67

Hairdresser 1.53 1.30 1.33

Waiter 1.53 1.30 1.33

Black Smith 1.53 1.30 1.33

Retail 1.20 1.20 1.15

Tourism (event coordinator) 1.00 1.00 1.00

Banking 1.00 1.00 1.00

Source: GOPA Moldova Peer TVET Financing: New financing mechanism recommendation report, 2012

In Table 11, the cost weighting example used in the Mongolian case, employs the same approach taken by Moldova. If the base (1.0) is imputed to courses on services, IT, finance and business trades, urban development and education, then the cost weight factors can be assigned to the other study programs. For example health and agriculture could entail highest cost weights (obviously the cost weights would have to be rigorously done for Mongolia). These multiplied by the TVET funding rate (base rate) would give the varying costs of study by disciplines. This is just an example if this approach were to be adopted in Mongolia.

65

Table 11. Example of Cost Weighting for Mongolia based on Moldovan example

Source: Author’s calculation based on the Moldovan example

The higher education sector of Mongolia has undergone a significant rationalization of institutions and faculties recently. In a similar way, rationalization and modernization of the number of public TVET schools might be warranted--to focus on the costs and benefits of the number of state schools serving sparse population numbers. The exercise for the reform of the higher education sector began with the ADB project in early 2010 (Chart 25). At the start of transition from the socialist system, there were only 14 state owned (public) higher education institutions (HEIs) when the government authorized the establishment of private HEIs. By the end of 2009, there were a total of 146 HEIs, including 42 public and 99 private HEIs, and five branches of foreign universities. Based on the mandate given by the Government (Resolution No. 15 dated 20 January 2010), the MOECS started activities to rationalize the public HEIs to 101 universities in 2015. From an institutional collaboration perspective (between HEIs and TVET) it would be useful to set up, under the forthcoming new government later this year (2016), a

12. TVET and Higher Education Institutions Reforms

66

Tertiary Education Commission. This was a key recommendation by the World Bank in 201021.

Chart 25. Mongolia Higher Education Reform Framework

Source: ADB HERP, 2016 adapted by author

The recommendations drawn in this Report are based on both international best practices and successful strategies carried out in Mongolia. In general terms, the OECD (Fazekas, 2012) identifies a number of overall lessons on TVET financing across countries:

(a) the need for diversifying the source of funding to motivate effective and efficient institutional management of TVET

(b) financing policies that are expected to ensure stability of funding to TVET schools while improving outcomes (c) “training funds” should be performance based and linked to training outcomes, and there should be transparency and accountability in the use of such funds.

21 See (World Bank, 2010).

13. CONCLUSIONS AND RECOMMENDATIONS

67

In specific terms, this Report identifies 6 key conclusions on the current TVET financing framework in Mongolia:

• A major conclusion of the analysis conducted in this Report is the need to review

the funding formulae (of 2012) for TVET schools in Mongolia over a reasonable period of time to ensure sustainable financing that is “performance” based, and the associated criteria agreed upon by the TVET schools. The 2012 “normative means” funding formula is still being used today. In the case of Ulaanbaatar it is 516,000 MNT (USD 269) per student (lowest, annually); and 614,000 MNT (USD 321) in Bayan-Ulgii Aimag (highest). These variable costs per student are expected to be higher than high school variable cost per student, and in fact they are higher by 40 percent. The formula does not as yet incorporate the adjustment for disciplines but only accounts for regional cost differences. The school funding formula could be reformed based on diverse disciplines 22, regional needs, student needs, and overall performance by the TVET schools in terms of employment of their graduates reaching 70% in line with the current TVET strategy. It is to be noted that the current TVET strategy of the MOL does in fact recognize the need to move to a funding model based on disciplines by 2021. The Moldovan example of recent reforms in this area would be useful for the Mongolian situation considering both countries share similarities, both politically and economically. Many countries, reviewed in this Report have moved from a per capita student-funding model, to one where student performance is also taken into account (including retention rates and job placement rates among others). Some progress towards such government (outcome-based) spending has already been implemented in the health sector of Mongolia, and this provides a basis for similar reforms in the TVET sector.

• The study also identified the need to review how funds from the foreign worker

levy, which are meant for skills upgrading of the Mongolian labor force, are being utilized. The Employment Promotion Fund is a key vehicle for the funding of TVET and almost half of its funding comes from the Foreign Worker Levy, and about 23% of the EPF is transferred to the TVET Promotion Fund (as a result of the Amendment to the Law on Employment Promotion in 2014, effective January 2015). The TVET Promotion Fund is used to pay students’ stipends and also the variable costs to TVET schools. The idea proposed by the MCA Project on “payroll levy” (2010) is resisted by the corporations, as they are already being taxed to support skills development and training through the Foreign Worker Levy (estimated to be 384,000 MNT per month, per worker). The study also recommends reviewing the effectiveness of the use of the funds from the foreign worker levy. In many countries such skills development funds are

22 The duration and costs for a welding course should be differentiated with a 6-month hospitality course for instance.

68

governed by a Board that is represented by industry representatives, as they are the ones who contribute to such funds, and the use of such funds are subject to performance assessments in meeting the emerging skill needs of the market.

• The rationalization of the higher education sector that has taken place through

various means including stiffer accreditation procedures which has reduced the number of HEI’s by 30% in the last few years. The overall objective of the ongoing HEI reform process is to upgrade the quality of public HEIs by rationalizing them so that development resources can be concentrated into fewer, higher quality HEIs. The HEIs that are not selected as lead institutions (by applying rigorous criteria, such as accreditation, number of students etc.) are given the choice to either merge with stronger HEIs, close, or gradually transform themselves into TVET institutions under an incentive scheme. A similar exercise could be undertaken in the TVET sector over the course of the medium term to streamline the system to meet the specific skill needs of industries that are growing nationally and regionally.

• The experience of a range of countries on TVET school financing reviewed in this

Report, indicate the need for diverse sources of funding, not only from the state but also from the private sector and other sources including, strategies to derive income for their training needs from services offered to enterprises. This mechanism also encourages TVET schools to meet the “market test” of the type of training that is demanded by industries. In countries such as Jordan and Moldova TVET schools derive about 11-12% of their current expenditures from services and training to companies and by renting out premises for school related services. Denmark also provides an excellent example of how the details of this policy could be implemented in Mongolia.

Chart 26. Aligning TVET and National Human Resource Strategies to the Long Term Development Strategy and Plan 2016-2030

Source: MOF 2016, adapted by author

69

• Partnerships for sector development are critical, and especially in the current

context as Mongolia has entered a low growth scenario and with a tight fiscal space. The study recommends stronger alignment of partner activities as a critical priority: to reduce duplication, integrate grant financing into the sector’s budget, and to get better impact on the needed reforms and investments for the sector’s modernization. In this regard an international development partner coordination system could be reintroduced, with the MOL and the MOF playing key roles to align and coordinate investments and support to the sector. This effort takes on added relevance since policy makers are moving forward with greater emphasis on the diversification of the economy. For this, new and upgraded skills are essential. This would also be in line with the NDPL of December 2015 and LTDV 2016-2030 that was passed by the Mongolian Parliament in February 2016. Thus, alignment of the TVET strategy into the LTDV would be necessary and higher investment both from the state budget or other sources would be needed, to give the TVET sector the added importance to achieve the long-term LTDV goals.

• Given the findings of this TVET financing status report, a follow-up study on

TVET financing through alternative revenue generation to complement the state financing is needed to expand on the recommendations outlined here. Further research and studies are needed to assist the MOL and MOF in terms of performance based budgeting, options for revenue generation by schools, and to use the financing system to “steer the TVET schools” towards an overall optimal and efficient structure, compared to one that is thinly spread-out at present.

70

References Akoojee, S., Gewer, A. & McGrath, S. (2005) “VET in Southern Africa: A Comparative Study,”

Report of Research Program on Human Resources Development by Human Sciences Research

Council, South Africa.

ADB, (2011) “Higher Education Reform Project,” RRP, PRC 43007.

ADB, (2008} “Evaluation Study Report Mongolia: Education Sector.”

Ball, K. (2005) “Funding and Financing Vocational Education and Training: Australia,” Research

report by National Centre for Vocational Education Research (NCVER), Australia.

Bartak, F. et. al, (2005) “Focus on Vocational Education and Training in the Czech Republic –

National Profile,” Refernet: The European network of reference and expertise for VET

established by CEDEFOP, Czech Republic.

Boon, G.Ch., Gophinatah, S. (2006) “The Development of Education in Singapore since 1965,”

Background paper prepared for the Asian Education Study Tour for African Policy Makers:

National Institute of Education and Nanyang Technological University, Singapore.

Bosch, G., Charest, J. (2008) “Vocational Training systems in five countries and its link with

education and the labor market, ”Jacobs Foundation Conference 2007: Transition from School to

Work, Berlin, Germany.

Burke, G. (2005) “Financing and Regulating vocation education and training in Australia,”

International Seminar on Employment/Unemployment Insurance, Seoul, Korea.

Canadian Auto Workers (CAW) (2006) “Encouraging New Opportunities for Training and Skills

Development in B.C.” Canadian Auto Worker: Submission to the B.C. Ministry of Finance

concerning a New Tax Credit Program, Canada.

CEDEFOP: European Centre for the Development of Vocational Training (2008) “Vocational

Education and Training in Slovenia: Short Description,” Luxembourg Office of Official

Publications of the European Communities, Slovenia.

Dirk-Jan Kraan, “Off budget and Tax Expenditures,” OECD Journal of Budgeting, Vol.4, No1.

Dornod Polytechnic College (2014), “Dornod Polytechnic College Brochure”, Ulaanbaatar,

Mongolia.

EU, GOPA (2015). “Moldova Finance VET sector”. Support for VET sector in the Republic of

Moldova, Moldova.

71

EU and GOPA, (2015). “International And Jordanian Evidence For High Benefits & Rates Of

Return From Public Funding Of E-Tvet”. Technical Assistance of the Programme in Support to the

Employment and TVET Reforms, Jordan.

EU and GOPA, (2014). “Transforming the Labor Market through Investing in the E- TVET sector”.

Technical Assistance of the Program in Support to the Employment and TVET Reforms, Jordan.

ETF, ILO, UNESCO, (2012) “Proposed Indicators for Assessing Technical and Vocational Education

and Training.”

EU and GOPA, (2015). “International And Jordanian Evidence For High Benefits & Rates Of

Return From Public Funding Of E-Tvet”. Technical Assistance of the Program in Support to the

Employment and TVET Reforms, Jordan.

European Commission/EACEA/Eurydice, (2014). “Financing Schools in Europe: Mechanisms,

Methods and Criteria in Public Funding”. Eurydice Report. Luxembourg: Publications Office of

the European Union.

European Training Foundation and World Bank, (2005) Integrating TVET into the knowledge

Economy: Reform and Challenges in the Middle East and North Africa.

Fazekas, M. (2012), “School Funding Formulas: Review of Main Characteristics and Impacts”,

OECD Education Working Papers, No. 74, OECD Publishing.

http://dx.doi.org/10.1787/5k993xw27cd3-en

Government of Mongolia, “Master Plan to Develop Education of Mongolia in 2006-2015,”

Ulaanbaatar.

GTZ: (2007) Proceedings of High Level Consultative Meeting on Vocational Education and

Training, March 27, 2007, Ulaanbaatar, Mongolia.

GIZ, (2012), Cooperative Vocational Training in the Mineral Resource Sector, GIZ, Ulaanbaatar,

Mongolia.

Howard Shatz et. al, (2015) Improving the Mongolian Labor Market and Efficiency: Opportunities

for Youth, RAND.

Human Capital Development Fund, Malaysia, Retrieved from

http://etp.pemandu.gov.my/Human_Capital_Development-@ Human_Capital_Development

(HCD).aspx

Human Resources Development Fund, (2009), Malaysia, Retrieved from

http://www.skillsmalaysia.gov.my/fund/human-resources-development-fund/


http://www.trainingmalaysia.com/v4/kiosk/tugrugm8chap5.php

http://dx.doi.org/10.1787/5k993xw27cd3-en

http://www.skillsmalaysia.gov.my/fund/human-resources-development-fund/

http://www.trainingmalaysia.com/v4/kiosk/tgm8chap5.php

72


https://www.hrdf.com.my/wps/portal/PSMB/MainEN/Corporate-Profile/About-HRDF

Jager, M., Buhrer, T. (2000) “Financing TVET” Prepared by KODIS Consult GMBH on behalf of

Swiss Agency for Development and Cooperation under the TVET backstopping mandate.

Kingombe, C. (2012) “Lessons for Developing Countries from Experiences with Technical and

Vocational Education and Training”, International Growth Center, LSE, London, Working Paper

11/1017.

Lyons, J., Randhawa, B. & Paulson, N (1991) “The Development of Vocational Education in

Canada.” Canadian Journal of Education 16:2, Canada.

Legal Info, (2012), “Law on Technical and Vocational Education”, Ulaanbaatar, Mongolia.

Legal Info, (2012), “Law on Employment Promotion”, Ulaanbaatar, Mongolia.

Legal Info, (2012), “Government Resolution #94 on Variable Cost per Student”, Ulaanbaatar,

Mongolia.

MCA-Mongolia, (2013) “Baseline Report for the TVET Admissions Survey (2010-2012),

November, Prepared by Innovations for Poverty Action.

MCC, (2001), Mongolia Secretariat “MCC total investment in TVET sector in Mongolia,”

Ulaanbaatar, Mongolia.

Ministry of Finance data- Annual Budget Plans and Performances, Ulaanbaatar, Mongolia.

Ministry of Labor, (2016), “TVET Statistics”, Ulaanbaatar, Mongolia.

Ministry of Labor, (2015), “2010-2011 Graduate Employment Study”, Ulaanbaatar, Mongolia.

Masson, J.R. (2005) “Financing Vocational Education and Training in the EU new member states

and candidate countries: recent trends and challenges,” European Training Foundation (ETF).

Meyanathan, Saha.D, (2010) “TVET Issues in Mongolia: An Update” Note prepared for GTZ

Mongolia.

Misko, J. (2006) “Vocational education and training in Australia, the United Kingdom and

Germany,” Report by National Centre for Vocational Education Research (NCVER).

M, Kuczera, (2013) A Skills Beyond Schools Commentary on Scotland, OECD Reviews of

Vocational Education and Training.

Mohd Zain, Zuraidah. (2008) “TVET in Malaysia”, University Malaysia Perlis. Malaysia.

OECD, (2014) Skills Strategies in the Czech Republic: Reviews on Local Job Creation, Skills

Strategies.

https://www.hrdf.com.my/wps/portal/PSMB/MainEN/Corporate-Profile/About-HRDF

73

Parliament of Mongolia (2009) “Law of Mongolia on Professional Education and Training.”

Ulaanbaatar, Mongolia.

Peer, A. (2009) “Financing and Funding VET Report: Policy and Operational Framework Reform

Project “Millennium Challenge Account – Mongolia (MCA-M).

Peer, A. (2010) “Charter on Collection, Expenditure and Monitoring of VET Promotion Fund”, 12,

May 2010, MOECS

Peer. A, (2010), Overview of the model for financing of VET, MCA Mongolia, May 2010

Philips, K., Raul, E. (2005) “Vocational Education is in need of reform “European Industrial

Relations Observatory Online:

http://www.eurofound.europa.eu/eiro/2005/10/feature/ee0510103f.htm

Philips. Lauringston,A. (2005) “Large gaps in wages of educational workers” European Industrial

Relations Observatory Online:

http://www.eurofound.europa.eu/eiro/2005/05/inbrief/ee0505101n.htm

Raffe, 2003, “Simplicity itself: The Creation of the Scottish Credit and Qualifications

Framework”.

Referent Hungary Factsheet (2009) “Hungary, Romania: VET in Europe – Country Report” Part of

a series of reports on VET for each EU member state plus Norway and Iceland by members of

Referent, a network established by CEDEFOP.

Referent Poland Factsheet (2009) “Poland: VET in Europe – Country Report” Part of a series of

reports on VET for each EU member state plus Norway and Iceland by members of Referent, a

network established by CEDEFOP.

Refernet Romania Factsheet (2009) “Romania: VET in Europe – Country Report” Part of a series

of reports on VET for each EU member state plus Norway and Iceland by members of Refernet, a

network established by CEDEFOP.

Sharpe, A., Gibson,J. (2005) “The Apprenticeship system in Canada: Trends and Issues” Centre

for the Study of Living Standards (CSLS) Research Report.

Skills Development Fund, (2001), Malaysia, Retrieved from http://www.ptpk.gov.my/

Smith, B. (2013) “innovative Financing Models for TVET, Case Studies from Singapore, India,

Ausralia and Malaysia, “ Prepared for the ADB conference on Sustainable Vocational Education

Training Towards Industrial Upgrading and Economic Transformation.

Stephen Duggan, (2015) “Approaches to the quality improvement of TVET teachers in Mongolia:

a lost opportunity’.

http://www.ptpk.gov.my/

74

Tutlys, V. (2007) “Vocational Education and Training system in Lithuania” Vytautas Magnus

University: Centre for Vocational Education and Research.

USAID, (2011) “Jordan Fiscal Reform Project II, Education Public Expenditures Working Paper.”

UNESCO, UNEVOC, (2012) “Promising Practices: Third International Congress in TVET, Shanghai.”

UNESCO/UNEOC, (2013) “Revisiting Global Trends in TVET: Reflections on Theory and Practice.”

VETP, (2015), “TVET Project Survey”, Ulaanbaatar, Mongolia

World bank, (2005), “Mongolia Public Financial Management Performance Report”, Washington

DC.

World Bank, (2010), “Tertiary Education in Mongolia: Meeting the Challenges of the Global

Economy,” Washington DC.

World Bank, (2009), “Mongolia: Public Expenditure and Financial Management Review”, World

Bank, Washington DC.

World Bank, (2007), “Vocational Education in the New EU Member States: Enhancing Labor”,

Washington DC.

World Bank, (2009), “Mongolia: Public Expenditure and Financial Management Review”,

Washington DC.

World Bank, (2014) “Implementation Completion and Results report (TF-05804) on agrantin

the amount of US$29.4 million to Mongolia for an Education For All Fast Track Initiative (Efa-Fti)

Catalytic Trust Fund Project”, Washington DC.

World Bank, (2006), “Public Expenditure Tracking Survey Mongolia”, World Bank, Washington

DC.

World Bank, (2007), “Building the skills for the New Economy”, World Bank, Washington DC.

75

Annex 1. List of laws and regulations on TVET sector in Mongolia Source: Legalinfo.com

Name of the Law

Article

Provisions

Year introduced

Law on Education

Article 40.3

The average fitness-for-purpose of the variable cost for one student attending preschool, elementary, secondary and vocational trainings shall be defined and renewed by the government each year

2006

Article 40.5

The variable cost per student shall be aligned with the school location, type, professional direction and special needs of disabled children, thus it should be defined differently by institutions stated in Article 40.3 and should be spent in an efficient manner

2012

Law on Technical and Vocational Education

Article 20.3

Depending on the sector and industry, companies, entities, and organizations MAY provide financial support to vocational education and training from their salary fund in the amount to be set by the National Council (referred to in Article 6.1 of this Law)

2009

Article 21.1 The funding for TVET is to be allocated from TVET Promotion Fund, which should be managed by the governmental administrative organization on vocational training issues

2012

Article 21.2 The Government of Mongolia shall approve the guidelines and procedures on compiling, allocating and monitoring of resources of the Fund.

2012

Article 22 Financing sources of the TVET promotion fund shall be as follows:

State budget

Local budget

Loans and grants from donors

Contributions and assistance from companies and organizations

2012

Expenditure of TVET Promotion Fund shall be as follows:

76

Article 23.1-23.1.5

Fixed cost at public TVET schools and expenses for dormitories;

Variable cost per student and stipend for public and private TVETs;

Expenses for arrangement of courses to acquire professional re-training;

Expenses for organizing trainings for individuals and private businessmen to help them acquire more skills;

Expenses for on-the-job trainings

2012

Law on Technical and Vocational Education (latest Amendment)

Article 13.3 The cabinet members in charge of finance and budget (MOF) and vocational education (MOL) will jointly approve the procedures for revenue generation from their own activities, and their spending and their reporting of the Vocational and Technical Education Institutions.

2016

Law on Employment Promotion

Article 23.1.13

Employment Promotion Fund should allocate funding to TVET Promotion Fund to support vocational education (to be effective from 2015 January)

2014

Government Resolution

Resolution # 94

As stated in the Law on Pre-school education on Article 15.1, 15.2 and the Law on Education on Article 40.2 and 40.3, Law on Vocational Education and Training on Article 23.1.1 and 23.1.2, the Government of Mongolia determines the variable cost per student accordingly to specific principles (attached).

2012

Government Resolution

Resolution # 477

As of January 2016, stipends granted to young vocational students will now be transferred directly to their bank accounts. The Cabinet Secretariat on 7 December approved the motion, which puts stipends directly in the hands of students 24 years old or younger.

2015

The State Central Administrative Body Responsible for Finance and Budget

77

Integrated Budget Law


Article 12

Matters has the following authorities: 12.1.1. Prepare the Medium-term

Fiscal Framework Statement and the

economic and fiscal projections

reflected in the Medium-term Fiscal

Framework Statement;

12.1.2. Prepare proposals for the

state budget, Social Insurance Fund

budget and Human Development Fund

budget and their amendment;

12.1.3. Prepare annual budget

ceilings for each general budget

governor within the indicators

specified in the Medium-term Fiscal

Framework Statement approved by

the State Great Khural;

12.1.6. Monitor budget execution

of general budget governors;

12.1.8. Monitor the

implementation of activities of

budgetary entity under the authority

of general budget governors and the

activities of local budgetary entities

financed with state budget funds

2011


Article 17

17.1. A project unit operated with loans or grants rendered by international organizations and donor countries to Mongolia through Government shall be a budgetary entity.

2011


Article 25

25.1. Grant revenues shall be in

the following forms:

25.1.1. Development grants

to be obtained in accordance

with international

agreements;

25.1.2. Grants and

donations obtained from non-

2011

78

state and locally owned

bodies;

25.2. Budgetary entities that

provide only the following social

services can obtain grants and

donations in accordance with the

procedure specified in this law:

25.2.1. Health services;

25.2.2. All level education

services; and

25.2.3. Cultural services.

25.3. The value of grants and

donations obtained by general budget

governors shall not exceed 50 percent

of the approved budget of the

particular budgetary entity.

25.4. Budgetary entities through

their general budget governor can

obtain grants and donations in the

form of cash and movable property

from non-state and locally owned

entities in the following

circumstances:

25.4.1. To continue

implementation of programs

and activities due to the lack

financing sources; and

25.4.2. To implement

training programs aimed at

strengthening organizational

human resource capacities;

The development of project proposals

and detailed estimates of the projects

in specific sectors and regions in

accordance with the foreign loan

policy, medium-term development

2003

79

Law of Mongolia on Coordination of

Foreign Loans And Grant Aid

Article 5

Article 5

strategy and priorities shall be done

by a relevant ministry and submitted

to the State Central Administrative

Organization in charge of Foreign

Loans and Grant Aid.

5.2 The development of project

proposals and selection of project

Executing agency shall be governed

by the Law on Regulations on

Procurement of goods, works and

services to be funded from state and

local government budgets”, if parties

agree, the procedure of the donor

shall be followed.

5.3 The State Central Administrative

Organization in charge of Foreign

Loans and Grant Aid shall review the

project proposals submitted by the

line ministries in compliance with the

medium term development strategy,

state budget, investment plans, the

priority sectors for foreign aid, the

social and economic impact, policies

and procedures of the counterpart

organizations and present the

projects to the Government for

resolution.

5.4 Government shall take decision on

the proposed projects to be

presented to international

organizations and donor countries

upon a review of the social and

economic impact and project duration

2003

6.2. Principle of integrated framework

of debt management stated in the

provision 5.1.1 of this law shall be

implemented as following manner:

80

Law on Debt Management

Law on Debt Management

Article 6.2

Article 6.2

6.2.1. Government and local

Government’s borrowing, and

Government debt guarantee shall be

in line with Concepts of National

Safety, Public investment Program,

long, medium and short term

development policies approved by the

State Great Hural;


Government’s borrowing, and

Government guarantee shall be

reviewed by State central

administrative body responsible for

finance and budget matter;

6.2.3. Government borrowing and

debt guarantee shall be approved by

the State Great Hural, and local

Government borrowing shall be

approved by the respective Citizen’s

Representative Hural;


Government’s borrowing, debt

guarantee, and all types of contracts

and deals incurring financial

obligations shall be reflected in the

budget.

2014

2014

Sources: Legal Info.com and Ministry of Finance

82

ANNEX 2: Annual Inflation Rate, 2010-2015, Mongolia, Dec 2010=100

Source: NSO

83

ANNEX 3. Singapore Continuing Education and Training Source: Smith, Innovative Financing Models for TVET, 2013

84

ANNEX 4. Malaysia TVET Financing Model Source: Smith, Innovative Financing Models for TVET, 2013

85

ANNEX 5. Country cases: TVET Financing Model

Estonia

There are state, municipal and private vocational education institutions in Estonia. Centralized public funding scheme form state budget applies for the most part of the system. Financial needs expressed by schools are channeled through local or regional authorities, but decisions are taken at the national level, directly by the Ministry of Education and Research. The vocational education system in Estonia is seen as greatly under-financed and outdated by Estonian enterprises. In the past, sixteen business organizations made an appeal to the Ministry of Education and Research recommending a significantly increased funding into vocational education sector of the country or risk labor market crisis. However, exclusively for work related training, individuals or employers pay related costs as they can be exempted from income tax to the extent of the sum spent on training.

Poland

Ninety two percent of school funding in Poland comes from the state budget while 8% comes from revenues earned by schools. There is also an initiation that forwards 2% of resident's income tax towards the education sector, in order to increase private household investment into education. Employers are allowed to deduct training costs from their taxable income.

86

Lithuania

The state budget is the main source of funding for Lithuania. Additional funds are from local administration budgets, donations and special funds. The law on education allows schools to establish their own special budgets. The size of such budgets depends on the school management's entrepreneurial talents and the school's assets, such as premises that can be rented out. Regional labor offices are in charge of administering training schemes for the unemployed, financed out of the Labor Fund and based on the Law of Employment and Counteracting Unemployment (1996). A Training Fund was created in 2004 after an agreement between the state and the social partners, according to which the Training Fund would be financed by employers' voluntary contributions of at least .25% of the payroll in 2004, increasing to 1% and becoming compulsory in 2008. In addition, state support would be made available in the first years through reimbursement of 50% of the costs of training activities. Romania

The main source of TVET financing is the central budget. Local public administrations also contribute to building, repairing and maintaining of schools. The Ministry of Labor and Social Protection contributes to the Employment Fund to finance training of the unemployed, made up largely of employers' contributions (5% of their overall gross payroll costs) and employees (1% of their gross salaries). About 20% of the Fund is used for continuing training of the unemployed. Budget subsidies also contribute to cover funding gaps. There are also sector level funds in the shipbuilding and aviation industries financed by a one-off payment per company per year, which has been replaced by a levy imposed via collective agreement within the sectors. The Fund’s main

87

purpose is to train workers, support sector level TVET institutions and develop recognized training profiles.

Malaysia

TVET schools were introduced into Malaysia in the late 1970’s upon the recommendations of the World Bank. These were conceived as polytechnics and technical colleges (for training technical assistants and supervisors), in addition to vocational skills training schools (for training skilled and semi-skilled workers). Many agencies and Ministries are involved in skills and human resource development, and in fact there is a rationalization process that is being undertaken to streamline the policies and state funding of the many institutions. Also, improvements in monitoring and evaluation of the vast expenditures on this sector are being implemented, including rationalization of the sector. Under the under Human Resource Development Scheme (a levy-grant scheme) employers can apply and are eligible for financial assistance in getting recognition for their employees’ skills and experiences according to the competency level of their employees. It is also to support the efforts by the Ministry of Human Resources in implementing the Malaysia Skills Certification through the RPL scheme. This scheme is to encourage workers with skills and experience to apply for the Malaysia Skills Certification, Malaysia Skills Diploma or for the Malaysia Advanced Skills Diploma according to their competency levels. The Industry Training Scheme enables employers to obtain financial assistance at the rate of 100% if the employer sponsors students from a university, college or training institution for practical training at their premises. However, the financial assistance granted is subjected to a maximum of 20% of the total levy balance at the time of application (see also Annex 4).

Jordan

Jordon relies on the state budget, international concessional aid, trainee contributions and internal generation of funds by the schools as funding sources. The country is divided into 4 educational regions. The directors of the vocational education departments of the 4 regions negotiate with the MOF for the budgets of their schools. Direct budget support, based on a formula (unit cost of school) accounts for 79% of

88

school expenditures. The formula is based on the previous year’s budget and is then adjusted. Schools can “sell” their services to recover some of their costs. Jordon has also implemented the Training Levy Grant System.

Australia

Out of the total TVET expenditure for Australia, the government finances 80% and the rest is done by the private sector. In publicly funded TVET schools (TAFE23 colleges), tuition fees are charged but they are very low, covering only 10% of actual costs. At the beginning of 1990s, a training levy system was adopted for a few years. The program required employers to provide evidence of training expenditure to the extent of 1.5% of payroll unless the employer was a very small business owner. The program was unpopular with employers and was eventually abandoned in the mid-1990s. Currently, the national government and state and territory governments provide financial support to employers who hire a trainee through the Australia Workforce Development Fund. The two forms of financial supports are (1) a cash payment to an employer by the Australian government on commencement of an apprentice or trainee and a cash payment on completion for Certificate III or IV programs and (2) exemptions from state and territory payroll taxes. Australia established its Industry Skills Council (ICS) (http://www.isc.org.au/about.php) in 1997, representing the country’s 11 core industries. The Australian government funds the ICS. State governments also provide subsidies for training.

Scotland

Scottish post-secondary vocational education and training (VET) includes a wide range of provision for populations with various needs, including school leavers, disadvantaged young people, the older unemployed and those in the middle of their career who wish to upgrade their competencies. Among the main post-secondary vocational programs

23 These are Technical and Further Education Colleges.

http://www.isc.org.au/about.php

89

are Modern Apprenticeships (industry designed programs which support employees to acquire certificated competencies required to deliver their job role through work-based learning and or off-the-job training), and Higher National Certificates (HNC) and Higher National Diplomas (HND) provided mainly in colleges (job-related courses offering a mix of practical skills and theoretical knowledge also allowing progression onto a degree program). Recent reforms have aimed to increase the effectiveness and accountability of postsecondary VET through better co-ordination between agencies and services, more accountable colleges, more consistent quality frameworks for evaluating provision of education and training, and better data on student transition to the labor market.

State funded schools at the secondary level engage in contracts with Polytechnic Colleges for their students to also acquire technical and vocational skills. Scotland’s Employability Fund supports training services, which have been developed to address the specific needs of local areas. Skills Development Scotland (SDS) administers and manages the Employability Fund on behalf of the Scottish Government. It supports the Youth Employment Strategy by delivering over 17,000 new opportunities across Scotland. It does this by working with local employability partners, to maximize the resources that are available in their area and avoids duplicating existing employability services. By working closely with partners, the Fund is aligned to the needs of local areas and maximizes opportunities for individuals. Local training providers work with employers to understand their skills needs and help them find and train the right individuals. With a strong focus on work experience, the Employability Fund responds to the different needs of each individual, while also adapting to employer demands on a local basis. Evidence of individual achievement and progression is followed closely. The Government's skills strategy (SFC), Skills for Scotland: Accelerating the Recovery and Increasing Sustainable Economic Growth sets out a new, flexible, responsive partnership approach to meeting Scotland's skills needs in their economic development. The strategy is closely aligned with the Government Economic Strategy that sets out the Scottish Government's central purpose of creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth. For the improvement of effectiveness, efficiency, equity and accountability of TVET funding, Scotland uses a performance-based funding formula. Outcome Agreements set out what colleges and universities plan to deliver in return for their funding from SFC.

http://www.gov.scot/Publications/2010/10/04125111/0



http://www.sfc.ac.uk/funding/OutcomeAgreements/OutcomeAgreementsOverview.aspx

http://www.sfc.ac.uk/funding/OutcomeAgreements/OutcomeAgreementsOverview.aspx

technical and vocational education and training financing...

Documents