Preface

The trend towards market-oriented training systems gives an increasingly prominent role to the private sector. Enterprises, in particular, are expected to undertake a proactive role in training. Conversely, the traditional role of the State is evolving from government-led and government-owned training systems towards creating an enabling environment for enterprises and individuals, employers and workers, to invest and actively participate in a collective training effort.

Partnerships and strategic alliances between the interested parties have become the key strategy to improve the relevance, efficiency, effectiveness, equity and sustainability of training policies, systems and programmes. Training is increasingly conceived and promoted as a cooperative effort in which the various relevant institutions in the public and private sectors must participate and share responsibilities. Moreover, the partners concerned are being called upon to contribute to the overall training effort, and to articulate their inputs, making the best possible use of their respective strengths and comparative advantages.

In practical terms, only a few countries have set up a coherent systemic framework and appropriate incentives for these partnerships to flourish on a large scale. Nevertheless, there is already an assortment of innovative and interesting experiences throughout the world which offer options and lessons for promoting public/private alliances in training.

In order to capture the nature, range, and extent of innovations, the constraints faced and opportunities created by these partnerships, the Training Policies and Systems Branch (POLFORM) of the ILO undertook an extensive research programme Strategic Training Partnerships between State and enterprises . The work between 1995 - 1997 included case studies covering 26 experiences in 14 countries from various regions: Australia, Chile, Denmark, France, Germany, India, Ireland, Ivory Coast, Japan, Malaysia, South Africa, Spain, United Kingdom, United States. Based on these experiences, extensive review of literature and discussions on the subject at national and international levels, analytical, conceptual and policy papers were elaborated.

Preliminary results of the research programme were presented and discussed at numerous seminars and conferences including two major ILO regional meetings, one for Asian countries ( Asian Experiences in Strategic Partnerships between Enterprises and the State , Chiba, Japan, December 1995, in collaboration with the Asian and Pacific Skills Development Programme, APSDEP), and one for Latin American and Caribbean countries ( Strategic Alliances in Training , Santiago de Chile, May 1997, in collaboration with the Inter-American Research and Documentation Center, CINTERFOR).

The research programme also provided a contribution to the ILO Enterprise Forum (Geneva, November, 1996), on the theme Training for Employability .

The collection of papers produced under this research programme are listed at the back of this document as Training Partnership Papers. They are available in English, French and Spanish from the documentation service of the Employment and Training Department.

The results of the work accomplished in this area, and the experiences, concepts and messages conveyed, have raised considerable interest and contributed to demonstrate possible avenues for innovative ways of rebalancing the roles and responsibilities of the private and public sectors in training. Hopefully, the lessons learned from these experiences will contribute towards building trust and fostering cooperation between the two sectors, stimulating their participation and promoting the best use of their respective strengths in training. It should also help to lay the basis for improving awareness and institutional capacity for collaboration and joint ventures on human resources development and training among a wider span of institutions and interested parties in the public and private sectors.

The variety and dynamism in this innovative and promising area is phenomenal and deserves an on-going effort in accumulating, analyzing and exchanging information, and raising debate at the country, regional and international levels. With this aim, the scope of the programme on Strategic Partnerships in Training will be broadened in the coming years. Readers are encouraged to contact the Training Policies and Systems Branch for further exchange of information and experiences on this theme.

María Angélica Ducci
Chief
Training Policies and Systems Branch
Employment and Training Department

1. Introduction

In the mid-1970s, after the collapse of the Socialist Government, Chile initiated a series of comprehensive institutional reforms aimed at creating a market-oriented and open economy. The transition to the new economic model lasted more than ten years, during which time labour relations and employment suffered severe strain. The strategic components of the liberalization process included:

• the redimensioning of the public sector, by means of the privatization of most public enterprises and a massive reduction in the number of civil servants;
• the deregulation of the labour market;
• the creation of private pension and health insurance systems; the liberalization of markets for products and capital;
• the design of a neutral tax system and the significant reduction of import tariffs; and
• the renegotiation of the external debt.
• One aspect of the liberalization process consisted of a series of reforms in the fields of education and training designed to:
• decentralize the provision of these services;
• diversify the supply of technical and vocational education and training (TVET);
• increase the market relevance of work-related education and training; and
• foster closer integration between work-related education and the non-formal training system.

The result has been the increased influence of the private sector in the provision of TVET. In this context, the various forms of enterprise/state partnerships that have emerged form part of a process of increased involvement by enterprises in the provision of these services. Four fundamental mechanisms were adopted to promote this process:

• a system of tax incentives for enterprise-based training programmes;
• the transference of management responsibilities for public vocational schools to municipal authorities and private corporations, and particularly to enterprise associations;
• the voluntary collaboration of enterprises in government-sponsored training programmes designed for workers who are excluded from enterprise-based training programmes; and
• the participation of enterprise associations in national and regional councils for policy formulation and institutional coordination in the field of TVET.
• In addition, some enterprise/state strategic partnerships in the field of TVET have also been initiated by the private sector. This is the case of the Regional Councils for Education and Work (CRET) founded over the past five years in most of the regions in the country. The CRETs are composed of enterprise associations and local authorities at the regional level. Their principal aims are:
• to promote the efficiency, quality and labour-market relevance of TVET, by means of a greater participation of enterprises in policy formulation, curricula design, teacher training and funding;
• to coordinate the activities of the various agencies involved in TVET; and
• to pool the private and public resources allocated for TVET.

But, most importantly these Councils act as organized bodies that are capable of negotiating policy issues of local interest with the central government.

2. Policy environment

The transition to an open market economy

In the mid-1970s, after the collapse of the Socialist Government, Chile initiated a profound structural adjustment process aimed at establishing an outward-looking market economy. The key elements of this process were:

• a reduction of public sector employment and the privatization of most public enterprises, as a means of reducing fiscal deficits and the economic power of the State;
• the deregulation of the labour market to promote employment in the private sector and labour force mobility in response to productivity incentives;
• the reform of the social security system, based on a system of personal savings funds managed by specialized private institutions to replace the state social security common fund, which was in deficit, combined with the creation of a private health insurance system to supplement the existing public health-care scheme;
• the transition to an open economy through a uniform and major reduction in tariffs, and the creation of an institutional environment conducive to foreign investment, in conjunction with an export promotion strategy supported by tax, credit, commercial and foreign exchange policies; it should be noted that foreign trade has grown from less than 15 per cent to over 30 per cent of GDP over the last 20 years;
• the deregulation of capital and production markets through the adoption of policies such as increased tax neutrality and the suppression of price distorting factors, including subsidies, controls, quotas and commercial barriers; and
• the renegotiation of the external debt in order to avoid an excessive financial burden on the balance of payments.

These reforms have resulted in impressive economic and social progress, especially over the past ten years, as shown in table 1. Human capital, measured in terms of labour force educational attainment, has grown consistently from an average of 6.2 years of schooling in 1960 to 9.2 years in 1992. By 1994, more than 7 per cent of the active workers received continuing training in firms benefiting from fiscal incentives, and 25,000 labour force entrants participated in the government-sponsored Youth Training Programme. Nevertheless, in 1992 one-third of the labour force was still in precarious employment, earning an average monthly income slightly over the legal minimum wage of $120 in the informal sector (22.3 per cent of employment), domestic services (6.3 per cent of employment) and small-farming activities (8.4 per cent). In addition, small firms with low productivity rates and salaries accounted for over one-quarter of formal sector workers. In contrast, the average monthly wage of semi-skilled workers in the modern sector amounted to more than $300. The most vulnerable categories of the labour force consist of young workers, whose unemployment rate is more than double the national average, and women, whose average income was 30 per cent below that of men.

The first ten years of economic restructuring profoundly affected the labour market, with labour relations suffering severe strain due to the restrictions imposed on trade unions, the deregulation of salaries and the decentralization of collective bargaining. Unemployment rose to over 25 per cent in 1982 and precarious forms of employment expanded. Government policy measures to combat unemployment included emergency employment programmes and retraining programmes, particularly in railways, coal mining and ports. At the same time, a set of measures were adopted, covering tariffs, taxes, subsidies, the exchange rate and commercial agreements, with the aim of promoting savings and investment, technological modernization and on-the-job training.

During the first stage of economic restructuring, the elimination of labour redundancy and idle capacity, combined with a decrease in real wages and the adoption of exchange rate measures were the driving force behind the growth of export capacity. Later, the modernization of production processes, products, equipment and materials started playing a more important role in Chile s economic expansion, with emphasis being placed on the production of tradeable goods and export-related services, such as low value-added primary products (agriculture, fishing, timber and mining), a small number of manufactured goods (cellulose, printing and food) and financial services.

Table 1. Economic and social indicators

Education and training reforms

During the period 1976-83, a series of major liberal reforms were introduced in the formal education and the vocational training systems. These included:

• the decentralized provision of education and training services as a means of fostering their flexibility, efficiency and labour market responsiveness;
• the diversification of vocational education and training opportunities, with multi-entrance and exit options, with a view to enhancing equity and reducing the numbers of school drop-outs;
• an increase in the relevance of work-related education and training through the closer involvement of enterprises in the provision of these services at the policy and operational level; and
• the increased integration of the vocational education and vocational training systems to reduce duplication in the development of human resources and improve the use of schools, workshops and teaching personnel.

The reform involved the Ministry of Education resigning its role as a direct provider of vocational education and transferring the management of its 159 vocational schools to local authorities or private corporations. Instead, the Ministry exercised responsibility for setting standards and allocating subsidies. Moreover, new types of technical schools were created by private initiative, such as the Technical Education Centres and Professional Institutes.

The vocational training system for adults underwent similar reforms, with the adoption in 1976 of the Vocational Training and Employment Statute, which created a decentralized and market-oriented training system in which the Government, instead of providing free training services through the National Vocational Training Institute (INACAP), subsidizes the training demand of enterprises and monitors the overall performance of the system. Almost 2,000 private training agencies, including universities, vocational and technical schools, training centres, non-profit-making organizations, technology suppliers and consulting firms, compete to sell their services to more than 13,000 private enterprises and to Government-sponsored training programmes. Private firms freely decide the amount and kind of training that they will purchase and the Government subsidizes enterprise-based training programmes through tax rebates, as well as financing public training programmes for workers who are excluded from enterprise programmes. The Government also provides employment mediation services free of charge through a network of over 150 Municipal Employment Agencies.

3. Enterprise/state partnerships in work-related education and training

Strategic partnerships between enterprises and the State in the provision of work-related education and training are the result of a policy to promote enterprise involvement in this field through:

• a tax rebate scheme for enterprise-based training programmes;
• the decentralization of education and training systems, allowing non-profit-making private bodies, such as enterprise associations, to participate in the management of vocational schools and training centres;
• collaboration by enterprises in government-sponsored training programmes; and
• the participation of enterprise associations in national or regional councils responsible for policy formulation and institutional coordination.

Fiscal incentives for enterprise-based training programmes-based training programmes

Under the system introduced by the Vocational Training and Employment Statute, enacted in 1976 in consultation with the leading enterprise associations, the State subsidizes enterprise-based training programmes through a tax rebate and finances public training programmes for workers who do not have access to enterprise-based programmes, such as unemployed and underemployed adults, young labour force entrants and workers displaced by industrial restructuring. The financial cost of the tax rebate scheme and the public training programmes are covered by the state budget. The National Training and Employment Service (SENCE), which is part of the Ministry of Labour and Social Security, monitors the overall performance of the fiscal incentive system, plans and supervises public training programmes and provides technical support to a network of over 150 decentralized public employment services.

Enterprises organize training programmes to upgrade and update the skills of in-service workers, as well as apprenticeship programmes for new recruits. The Government grants fiscal incentives to cover training and apprenticeship costs, up to the equivalent of 1 per cent of the enterprise s payroll. For small enterprises, there is a ceiling of $300 for this incentive. In 1993, more than 13,000 firms spent a total of $64 million, giving rise to a tax rebate of $46 million, to train 362,000 workers. Training expenditure in excess of the amounts that are tax deductible is considered to be current expenditure for tax purposes. The rationale underlying this fiscal incentive is the need to compensate the enterprise for the external benefits of training which do not accrue to it, such as any social or other benefits received by trained workers who demand higher salaries or leave the enterprise. However, there is also a risk that public funding of private training may promote over-investment in human capital or generate windfall gains for certain enterprises. Tax-deductible training expenditure includes:

• the direct costs of internal and external training services;
• the administrative cost of the enterprise s training department, up to the equivalent of 15 per cent of direct training costs;
• training needs assessment, up to a maximum of 10 per cent of direct training costs;
• transport and per diem for trainees, up to a maximum of 15 per cent of direct training costs;
• voluntary contributions to an Intermediate Technical Organization (OTIR); and
• the wages of apprentices, up to a maximum of 60 per cent of the statutory minimum monthly wage (approximately $100).

The content of training programmes designed by training agencies have to be approved by SENCE, which also has to be notified where and when the training activity will take place. At the end of the fiscal year, enterprises are required to report their total training expenditure to SENCE for final approval before submitting their income tax declaration.

Over 1,700 private training agencies, which are registered and authorized by SENCE, offer training services to enterprises and government-sponsored training programmes on a competitive basis. For public programmes, training agencies, which include universities, vocational and technical schools, and training centres, are selected by public tender. Intermediate Technical Organizations (OTIRs) plan and organize training for affiliated firms. They are organized on a sectoral or regional basis, and cater more specifically for small and medium-sized enterprises. Each OTIR pools resources from its affiliates and operates as a buying agent for training services for a group of enterprises that are not large enough to operate their own training department. Voluntary contributions to OTIRs from affiliated enterprises are tax deductible as training expenditure up to the equivalent of 1 per cent of the enterprise s payroll. There are currently seven OTIR in the metal industry (with over 200 affiliate enterprises), construction (over 400 affiliates), manufacturing (over 100 affiliates), commercial (over 80 affiliates), small industry and artisanal (over 30 affiliates) and public transport (over 1,200 affiliates) sectors. There is also a small regional OTIR serving training needs in a southern region. These OTIRs are non-profit-making organizations authorized by the Ministry of Justice and registered by SENCE.

Effectiveness of the fiscal incentives

As shown in table 2, since the adoption of the Vocational Training and Employment Statute, training activities in enterprises have undergone a remarkable increase, exceeding the growth rate of GDP and employment. Training incentives have been used most in the dynamic sectors of the economy, such as manufacturing, financial services, mining, transport and communications. However, enterprise-based training tends to be geared to the needs of the enterprise s internal labour market, which means that its contribution to labour mobility and labour market flexibility is dubious. Indeed, despite the remarkable growth in enterprise-based training, only a small percentage of enterprises participate in the system and the potential of the fiscal incentive is by no means fully utilized. Fewer than 3 per cent of tax-paying enterprises benefited and only one-third of the potential of the fiscal incentive was used in 1990.

Table 2. Training programmes in enterprises

The issue of equity

There are more training opportunities in larger enterprises. More large enterprises engage in training programmes and a higher percentage of their employees therefore receiving training. Larger firms are therefore the major beneficiaries of training incentives, as shown in table 3. Indeed, during the period 1987-91, larger firms accounted for one-third of employment, but benefited from 81 per cent of training incentives.

Table 3. Training programmes by enterprise size (1987-91)

Moreover, some of these firms probably obtain windfall fiscal gains. For instance, before privatization training expenditure was treated as an operational cost by many public enterprises, but is now subsidized. Other evidence of windfall gains was found during a case-study carried out by SENCE in 1981, which showed that the training budget in a group of 18 large private firms had remained stagnant at 0.6 per cent of payroll cost, despite the introduction of the tax rebate. Moreover, restrictions introduced in the tax rebate scheme in 1980, 1985 and 1987, establishing a ceiling on deductible training costs, did not have any dissuasive impact on the training programmes of larger enterprises. It should perhaps be noted in this connection that larger enterprises have less need for training incentives in view of their financial capacity and the fact that the above-average wages that they offer reduce the risk of human capital drainage (the risk of promoting the external mobility of trained workers or increasing the cost of retaining them). There would therefore seem to be no clear reason, in terms of equity or socio-economic efficiency, to subsidize their training expenditure.

Many reasons have been advanced for the weak response by small enterprises to the training incentive. These include:

• ignorance about the tax rebate scheme and its procedures;
• fear of tax audits and bureaucratic controls;
• the financial cost of the deferred reimbursement of training expenditure, since the tax rebate operates in the following fiscal year; and
• the irrelevance of the fiscal incentive, since the maximum deductible amount (1 per cent of payroll or $300) is often insufficient for their training needs.

Moreover, in smaller enterprises the fixed administrative cost of training is a heavy burden. Small enterprises also incur a greater risk of losing trained workers to larger enterprises, or a higher cost of retaining them. Another important factor is that the training needs of smaller enterprises are often less than those of larger enterprises due to their technological backwardness. A recent survey showed that fewer than 3 per cent of small enterprises train their workers regularly and one-third of other enterprises felt no need for training programmes. An additional contributory factor is the lack of adequate training supply, since training agencies rarely meet the needs of small enterprises. Training is either too theoretical or designed for larger enterprises. On the other hand, training agencies claim that catering for smaller enterprises is unprofitable, since their training needs are too heterogeneous, volatile and dispersed.

Another aspect of the equity issue is the fact that a significant proportion of the tax incentive is used to train high-level personnel. Indeed, during the period 1981-88, more than 25 per cent of the subsidy was allocated to the training of professionals and managers. In 1993, almost 17 per cent of the subsidy was still being used to train employees earning more than $15,000 a year and who therefore belong to the 10 per cent of the labour force in the highest income bracket.

The question of efficiency

Training costs have not decreased as a result of competition between training agencies. On the contrary, the cost per trainee-hour has increased in constant values in comparison with the cost of the training programmes formerly conducted by INACAP, from $1.46 in 1976 to $4.44 in 1992. The latter figure corresponds to enterprise-based training programmes, the subsidies for which amount to $3.1. Furthermore, costs per trainee-hour exhibit a high dispersion between different specialties, ranging from less than $1 to more than $60. By way of illustration, 1990 data shows that the average cost per trainee-hour for language courses was almost ten times higher than that of mechanical training courses.

This is a result of the dispersion of training supply and the lack of economies of scale. There are more than 1,700 training agencies in an $80 million market. Moreover, the training market is not free and truly competitive. Distortions arise due to the inefficient behaviour of enterprises in their training decisions induced by subsidies, a lack of information and the diversity of the training services supplied, both in terms of content and quality. SENCE only has a limited capacity to regulate training tariffs. The market therefore offers the opportunity of high profits for training agencies with a monopolistic advantage or aggressive marketing strategies. Typical sources of high profits for training institutions are the non-reimbursement of fees to students who drop out and the overcrowding of training courses.

The training demand of enterprises

Two-thirds of the training demand of enterprises is in the fields of computer operation, languages, management, marketing and secretarial and social skills. Most of these are transferable skills which broaden the worker s functionality ( despecialization ). In 1990, almost half of the subsidized training expenditure of enterprises was focused in white-collar skill areas and less than 10 per cent on production technologies. Specific technical training tends to be provided on the job or internally at the enterprise s expense. It is difficult to know how much of this demand structure reflects a training strategy or is simply the consequence of a shortage of external supply in technical training, since training agencies are less inclined to invest in the more expensive equipment and technology required for technical courses. Moreover, training in most enterprises follows a reactive pattern: training is provided in short courses, lasting an average of 34.3 hours, to meet current needs, rather than as part of a long-term development strategy.

Apprenticeship programmes

Apprenticeship in Chile consists of a legally regulated contract of employment, under which young workers up to 21 years of age acquire practical skills in an enterprise under the guidance of a master. During the period of apprenticeship (maximum 12 months), the wage of the apprentice is subsidized by up to 60 per cent of the statutory minimum wage of $100 per month. The number of apprentices taken on by an enterprise must not exceed 10 per cent of its permanent staff. Subsidized apprenticeship contracts need SENCE s approval. The contracts and subsidies are regulated by the Labour Code and the Vocational Training and Employment Statute, respectively.

Formal apprenticeship in Chile is more of a measure to promote employment than training, since no provision is made for the complementary education of apprentices and on-the-job training activities are only loosely supervised by SENCE. In spite of the tax incentive and the absence of strict control, apprenticeship has expanded very little since its inception in 1988, as shown in table 4.

These rather poor results are paradoxical in the situation of full employment currently enjoyed by Chile. The reluctance of enterprises to hire apprentices is probably due to their ignorance about apprenticeship subsidies and their application procedures, their fear of bureaucratic or fiscal controls and the time restrictions on apprenticeship contracts, which in practice mean that they are restricted to less than 12 months. However, perhaps the principal cause of the lack of success of the apprenticeship scheme is the absence of an apprenticeship culture among Chilean enterprises.

Table 4. Apprenticeship programme

The question of training quality

SENCE lacks the legal and technical capacity to be able to control in an effective manner the quality of the training services provided by the numerous private agencies. Moreover, most enterprises are not particularly demanding in this respect, due to their lack of expertise and the fact that training is subsidized. As a result, the quality of the training services provided is uneven. By way of illustration, prestigious universities compete in the training market with fairly informal training agencies. The training market is therefore ineffective in stimulating investment in quality enhancement through, for example, teacher training, teaching equipment and materials, curriculum design, training needs assessment and research and development.

The role of intermediate organizations

Chile s vocational training system also includes privately managed Intermediate Technical Organizations (OTIRs), organized by economic sectors or regions, which are responsible for planning and organizing training activities for smaller enterprises on a cooperative basis. They are intended to achieve economies of scale by pooling the tax-deductible training investments of small and medium-sized enterprises. However, the OTIR model has expanded only slowly (for example, in 1991 OTIRs managed less than 14 per cent of training incentives) and has not lived up to expectations. There are a number of reasons for this, including the legal difficulties of starting an OTIR, their lack of working capital and the fact that the cooperative principle has been generally neglected, since contributing enterprises are served only within the limits of their individual contributions and do not participate in the management of OTIRs.

Workers participation in vocational training policies

There is no legal provision in Chile for participation by workers in training decisions, either on an individual basis or through their unions, either at the level of the enterprise or at a more collective level. Although there is nothing to prevent the negotiation of participation of this type through collective agreements, this is seldom done. In the current labour relations situation, workers participation in training decisions is a sensitive and complex issue, since the unions claim that enterprise-based training programmes only reflect the interests of the employer and that workers should have the right to participate in decisions concerning the use of public funds. The employers claim that training decisions are a private concern, based on technical and financial considerations, aimed at enhancing productivity and the sustainable growth of the organization.

These views suggest that labour relations still tend to be based on the assumption of conflicting interests. However, from a global perspective, the participation of workers in training decisions can increase the effectiveness of training programmes in enterprises, improve the commitment of workers to the objectives of the enterprise, promote equity in training opportunities and enhance labour force mobility.

Decentralized management of education and training institutions and training institutions

A major decentralization of public education at the primary and secondary levels took place in the early 1980s, including the general and vocational education systems. The management of the formerly centralized public schools was transferred to local authorities and private non-profit -making institutions, preferably those related to employers organizations in the case of vocational schools. The new managers provide education free of charge in exchange for a public subsidy per student, not exceeding the level of the school s expenditure in 1980 in constant value. There are currently 70 vocational schools managed by private corporations and enterprise associations, such as the National Society of Agriculture (SNA), the Chilean Chamber of Construction, the Society for Manufacturing Development (SOFOFA), the Chamber of Commerce of Santiago, the Chamber of Commerce and Industry of Concepcion, the Development Corporation of Temuco, the Metal Industry Association (ASIMET) and the Private Development Corporation of the Sixth Region (CORPRIDE). Some 49,000 students are enrolled in these privately managed schools, known as corporate schools , representing almost 20 per cent of total enrolment in vocational education, as shown in table 5. Most corporate schools also provide training services to enterprises and participate actively in the government-sponsored Youth Training Programme. The experience of one of the leading enterprise associations in the management of vocational schools is described in the box below.

Table 5. Decentralized vocational education, 1990

The decentralized management of vocational schools covers the management of teachers and personnel, the recruitment and selection of students, administrative and financial management and investment policy. The system for the evaluation and certification of students has to be approved by the Ministry of Education. The schools are free to decide the contents of their curricula and their teaching methods, within a general framework established by the Ministry of Education. Almost 200 specialized technical courses are currently offered in five broad areas: commerce, industrial arts, agriculture, technical trades and marine trades. Almost all corporate schools have an advisory committee composed of a group of local enterprises, but only a few municipal schools have set up this type of mechanism.

There is ample consensus regarding the superior performance of corporate schools, both in terms of quality of education and the placement of students on the labour market. But it is only fair to say that these former public schools were already among the best in terms of infrastructure, equipment, teaching personnel and reputation. Despite this success, there are still factors that hinder greater involvement by enterprises in vocational education, such as the hostility of the teachers union to the idea of decentralized education in general; legal uncertainties as to the ownership of assets and responsibilities regarding teachers rights to severance pay; and the risk of an abrupt rescission of the contracts transferring the schools to private corporations.

It should also be noted that private participation at the level of higher education has grown steadily over the past 15 years. In 1980, there were only eight official publicly financed universities. There are now 70 universities, most of them private and self-financed. Other types of institutions have also been created by private initiative, such as 76 professional institutes and 143 technical education centres, providing three to five-year post-secondary technical education courses. Opportunities for higher education have undoubtedly been diversified and have increased, especially for the wealthier students. However, there is a feeling among education experts that this proliferation of supply has resulted in a deterioration in the quality of higher education in general terms and that there is a lot of wastage due to the high drop-out rates among students and underemployment among graduates.

In the field of vocational training, the direct public financing of the former official National Vocational Training Institute (INACAP) was gradually discontinued following the enactment of the Vocational Training and Employment Statute in 1976. INACAP started to become self-financing by selling training services to enterprises and government-sponsored programmes. It also expanded its profit-making operations in the field of post-secondary technical education, which nowadays accounts for most of its income. In 1990, INACAP was transferred to one of the leading enterprise associations, the Trade and Production Federation (CPC). Although still one of the most important vocational training institutions, the bulk of INACAP s activities are designed for new customers, such as secondary-school graduates willing to pay for advanced technological education in telecommunications, electronics, mechanics, information technology, commerce and management.

Participation by enterprises in government-sponsored training programmes

The Government sponsors various training programmes, most of them supervised by the National Training and Employment Service (SENCE). They include:

• the Vocational Training Grants Programme, for unskilled adult workers excluded from enterprise-based training programmes, such as the unemployed or self-employed workers;
• the Training Programme for Low-Income Female Workers, intended for unemployed or underemployed women with a low educational attainment;
• the Youth Training Programme, for hard-core unemployed young workers and socially underprivileged young labour force entrants; and
• the Retraining Programme for skilled workers who have lost their jobs as a result of economic restructuring and technological modernization.
• The target population of the Youth Training Programme is socially underprivileged young labour force entrants and hard-core unemployed or underemployed workers aged between 15 and 24, with no previous vocational education and training. The programme started in 1991 as a four-year programme for 100,000 students nationwide, financed, planned and administered by the Ministry of Labour, with financial support from the Inter-American Development Bank.

The programme has five components:

• pre-employment training, followed by four months of in-firm practice, under an employment subsidy scheme;
• alternative apprenticeship programmes in training centres and private enterprises under an employment subsidy scheme;
• managerial and vocational training, with technical and financial assistance, for self-employment;
• subsidies for investments by training agencies in educational equipment; and
• institutional development projects aimed at strengthening the managerial and technical capacity of SENCE, the Municipal Employment Services and the vocational schools acting as training agencies. Training grants include: free training, a food and transportation allowance for trainees during the training period, insurance for trainees against work-related hazards, and wage subsidies for enterprises employing apprentices or on-the-job trainees.

Training is provided by private agencies which have to submit projects with employment potential. These are selected by the Ministry of Labour and Social Security on the basis of competitive bidding. This procedure favours the decentralized design of training projects sponsored by enterprises that are willing to provide pre-employment on-the-job training. By 1994, more than $64 million had been allocated to over 5,000 training courses by over 300 training agencies, covering almost 100,000 trainees. More than 6,000 enterprises offered opportunities for on-the-job training, with follow-up surveys showing that the post-training placement rate is over 70 per cent. Employment rates and wages are higher than for labour force entrants with no formal training.

The Retraining Programme for Displaced Workers is a pilot project organized recently by the Government with the financial assistance of the Inter-American Development Bank Multilateral Investment Fund (MIF). The programme is mainly designed for skilled adult workers displaced by industrial restructuring and technological progress. The programme is currently focussing on the retraining of over 1,000 redundant coalminers. The programme managed by the Production Development Corporation (CORFO) includes subsidies for counselling, retraining and employment intermediation services for displaced workers. The private agencies that provide these services are selected on the basis of competitive bidding and receive a maximum subsidy of approximately $2,000 per re-employed worker. Enterprises which hire retrained workers receive a subsidy of approximately $900 per worker. The retraining and re-employment programme is part of a broader plan for industrial restructuring in the coal mining region offering a series of incentives for private investment in labour-intensive projects.

Strategic partnerships between enterprises and the State for policy formulation and coordination

The Chilean Government is still highly centralized, even in the area of public education, where a major decentralization took place in the early 1980s. As a result, regional authorities often lack political support for initiatives on local problems. The growing responsibilities of employers in vocational education and training has led to the creation, at the initiative of local entrepreneurs and authorities, of Regional Councils for Technical and Vocational Education and Training (CRETs), of which there are currently 12 covering most of the regions. These Councils serve as a mechanism to promote the efficiency, quality and labour market relevance of technical and vocational education and training through broader participation by enterprises in policy formulation, curriculum design, teacher training and the funding of schools. The Councils also coordinate the activities of the various training agencies and act as an organized community representative to negotiate policy issues of local interest with the central government.

The Regional Council for Technical and Vocational Education and Training (CRET) in the Valparaiso Region

The CRET in Valparaiso was founded in 1992 at the initiative of local enterprise associations and the regional authorities of the Ministry of Education and the Ministry of Labour and Social Security. Its Executive Committee is composed of representatives from enterprise associations, universities, the teachers union, other labour unions, headmasters of local vocational schools and the Government.

The CRET is devoting most of its current efforts to improving the performance of 35 public vocational schools located in socially deprived areas, providing training for teachers, technical assistance for curriculum design and financial support for the investments and expenditure of the schools. An advisory committee has been appointed in each school, composed of three to seven local entrepreneurs and a group of parents. Over 50 large and medium-size enterprises are actively involved in the activities and funding of the CRET. Voluntary contributions from enterprises and admission fees for conferences are the main sources of the financing of the CRET. The Regional Secretariat of Education provides the physical facilities and secretarial support.

The CRET is currently facing two main problems: its limited capacity to provide technical assistance to schools, due to budgetary constraints and difficulties in implementing a long-term strategy, due to the irregular financial support from enterprises and enterprise associations.

4. Findings, conclusions and recommendations

The strong commitment of enterprises to technical and vocational education and training in Chile is illustrated by the fact that enterprise associations and private non-profit-making corporations manage 70 subsidized vocational schools and participate voluntarily in 12 Regional Councils for Technical and Vocational Education and Training (CRETs). They also operate several self-financed post-secondary technical schools. Individual enterprises cooperate with government-sponsored training programmes for the unemployed and disadvantaged groups, and conduct training programmes for in-service workers, the cost of which is partially reimbursed through a tax rebate scheme.

The decentralized management of vocational schools by enterprise associations has been fruitful in terms of the internal efficiency of the schools, the quality and flexibility of the education that they provide and the responsiveness of the schools to labour market needs. It has also fostered closer coordination between two formerly separated systems of education and training, thereby contributing to a better use of common resources, such as teachers, teaching materials, workshops and facilities. The main weakness of the decentralized system lies in the gap between municipal vocational schools and corporate vocational schools in terms of the quality, efficiency and market relevance of vocational education. This affects the overall social equity of the system, since municipal schools tend to cater for the disadvantaged categories of the population.

Public incentives and market signals are not enough to foster a commitment by enterprises to cost-effective technical and vocational education and training, either in terms of productivity gains or social equity. A favourable cultural, political and economic environment appears to be a fundamental prerequisite for the constructive participation of enterprises in technical and vocational education and training. In Chile, the transition to an open market economy not only created an efficient system of market signals to guide private investment in vocational training, but also enhanced a strong commitment by the private sector to demonstrate the superior performance of the new economic model. Nevertheless, the training decisions of enterprises are still mainly guided by self-interest and short-term considerations, due to the volatility of the labour market and the absence of a cooperative culture among enterprises. Each enterprise seeks its own profits rather than thinking in terms of national productivity gains. To reduce the risk of not being able to benefit from training, many enterprises, especially the smaller ones, avoid investments in training that promote the external mobility of workers or have a long pay-off period. Training therefore tends to be enterprise-specific and based on short-term needs.

The tax rebate scheme has contributed to the growth of enterprise-based training programmes, the diversification and flexibility of training supply, and productivity gains at the enterprise level. On the other hand, due to market imperfections and weak controls, there is serious concern about the results of this scheme in terms of the quality and costs of training services and the possibility of windfall gains for larger firms and high-level personnel at the public expense. Closer administrative control by the Government would appear to be necessary in order to prevent distortions in the private use of public funds for training purposes.

It is worth mentioning that a reform to the Vocational Training and Employment Statute has been recently enacted, aiming to improve the effectiveness and equity of the training system.

Selected bibliography

CIDE: Primer encuentro nacional de educación para el trabajo , Centro de Investigación y Desarrollo de la Educación (CIDE), Santiago, 1990.

Ducci, M. Angélica.: Financing of vocational training in Latin America , Training Paper No. 71, ILO, Geneva, 1991.

INACAP: Formulación presupuestaria para 1976 , Instituto Nacional de Capacitación (INACAP), Santiago de Chile, 1976.

Martinez, Eduardo: Efectos del incentivo tributario para la capacitación , Revista de Economía No. 17, Agosto 1983, Universidad de Chile

: Incentivos tributarios para capacitación , Centro de Investigación y Desarrollo de la Educación (CIDE), Santiago de Chile, 1992.

Mikhail, S.W.: The impact of technological change on the technical and vocational education and training , Ryerson Politechnical Institute, Canada, 1992.

Salas, V. et al.: Evaluacion economica de la educacion media en Chile , Universidad de Santiago, Proyecto MECE, Santiago de Chile, 1993.

SENCE: Estudio de casos sobre los efectos de lDL 1446 en las políticas y programas de capacitación de las empresas , Servicio Nacional de Capacitación y Empleo, Santiago de Chile, 1981.

: Boletín estadístico No. 4 , Servicio Nacional de Capacitación y Empleo, Santiago de Chile, 1993.

SERCOTEC: Encuesta sobre necesidades de capacitación en la pequeña industria , Servicio de Cooperación Técnica (SERCOTEC), Santiago de Chile, 1991.

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