Demand-driven training funding mechanism
Launched in 2004, the Project has piloted a demand-driven training funding mechanism that achieved satisfactory results for firms and training providers alike. It served a total of 34,500 trainees in 1,155 private firms using a industry-wide training approach and involving cost-sharing among the parties concerned. The project created a demonstration effect by improving employers’ perception about the value of technical training for improving worker performance. The highly positive results provide grounds for national scaling-up of the demand-driven approach for skills development.
As a small pilot operation, the project had to focus sharply on the specific development challenges in the Egyptian economy. The difficult environment was acknowledged at the outset of project preparation in that: (i) firms found it difficult to recruit qualified workers while decent jobs remained elusive for job-seekers; (ii) employers’s businesses suffered from the low productivity of workers, but they were nonetheless reluctant to upgrade their workers’ skills for fear of poaching by other employers and by lack of knowledge on how to locate qualified technical trainers; and (iii) training providers were supply-driven with weak incentive to tailor the course curriculum to the needs of employers or to update their equipment for practical training.
The Project was designed to pilot a training funding mechanism with best practice characteristics such as employer-driven training, competitive bidding selection, cost-sharing in service delivery, performance-based contracts, and a clear incentives and arrangements for accountability. Considering the challenges in the technical training market, implementing a pilot project was instrumental in achieving progressive results which would probably not have materialized in an operation promoting system-wide reforms. The project adopting an industry-wide approach in assessing the training needs of firms based on inputs from employers about their training requirements. Operationally, the projected used a simplified competitive bidding procedure which helped to improve the project’s credibility in the eyes of various parties involved, as well as to attract the participation of the few qualified training providers operating in the country. The management of the training contracts was put in the hands of project intermediaries in order to enhance outreach to employers and to facilitate follow-up with employers at the local level.
At the time of project closing in June 2010, the project had successfully set up a funding mechanism that operated to the satisfaction of the key parties involved: the beneficiary firms, the training providers, and the intermediary agencies. The quantitative results include: (i) 1,155 private sector firms served; (ii) 34,500 trainees trained; (iii) improved employers’ perception of the impact of training on their workers’ performance (90% favorable in June 2010 versus 80% in January 2007; and (iv) favorable scores by the beneficiary firms (4.0 on a 1-5 likert scale), by project intermediaries (score of 3.0) and by training providers (score of 3.6) regarding their experience of the tproject mechanisms.
The Bank’s IBRD loan financed US$5.5 million of the projects’ total cost of US$12.5 million. Noteworthy is innovative feature of using the Bank’s support to leverage $1.0 million in contribution from the beneficiary firms whose workers were trained under the project under a cost-sharing arrangement.
A strong partnership was developed between the project and a parallel TVET project supported by the European Commission (EC). While the Bank-financed project addressed the demand for training, the EC-financed project focused on training delivery and the governance of the training system. The provisions for governance is set out in the country’s TVET Policy Statement, a document that was developed in 2002 with joint support from the Bank and the EC. During project implementation, some of the training providers upgraded under the EC-financed project (for courses in ready-made garments and furniture) competed for and won contracts financed under the Bank-financed project.
The Bank-financed project has helped to enhance the competitiveness of private manufacturing firms in Egpyt by upgrading worker skills through a skills development fund that operated under an effective governance arrangement. In this way, it has laid the groundwork for scaling-up a promising intervention to foster private sector development in the country. The government intends to finance the cost of scaling up from its own resources. The project unit will be reconstituted as the Skills Development Unit in the Ministry of Trade and Industry. This unit will continue to use the project’s Operations Manual as its modus operandi following its formal endorsement by the Ministry.
The Bank-financed project has triggered a change toward a positive perception by employers regarding the value added by technical training. In particular, ,more and more firms have been writing to the Project Management Unit to thank the staff for the positive impact of training on improving product quality, minimizing production downtime (which fell as much as 200% in one company); reducing the number of accidents related to cranes (which led one firm to request additional training runs) and boosting workers accuracy in performing their tasks.