Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and

ADB and the Government cannot be held liable for its contents.

Project Number: 51355-001 June 2020

Rapid Response for Strategic Reforms A Review of Vocational Education Sector Reforms Implementation

in the Republic of Azerbaijan

Prepared by Hitendra Pillay, Consultant (Australia)

Zaur Aliyev, Consultant (Azerbaijan)

For State Agency on Vocational Education

under the Ministry of Education of Azerbaijan

Table of contents

LIST OF ACRONYMS .......................................................................................................................................... I

ACKNOWLEDGMENTS ...................................................................................................................................... II

1. EXECUTIVE SUMMARY ..........................................................................................................................IIIII

2. INTERNATIONAL BEST PRACTICES IN VOCATIONAL EDUCATION AND TRAINING ..................................... 1

2.1 Context of Skills Demands and Vocational Education and Training Sector Planning ............................ 1 2.2 Efficient and Transparent TVET Sector Governance ............................................................................. 2 2.3 Industry Validated VET Program Design Aligned With Industry/Occupational Standards ..................... 3 2.4 Mechanism to Support Authentic Work-integrated Learning .................................................................. 4 2.5 Robust VET Sector Performance Monitoring and Evaluation ................................................................ 5 2.6 Financing and Incentivizing the VET Sector .......................................................................................... 6

3. ASSESSMENT OF NATIONAL STRATEGIC VET ROADMAP IMPLEMENTATION ........................................... 7

3.1 Strategic Target #1. Integrate Employers with Vocational Education and Training ............................... 7 3.2 Strategic Target #2. Establish a Strong Performance-based Funding System .................................... 12 3.3 Strategic Target #3. Establish Focused Professional Development Programs .................................... 14 3.4 Strategic Target #4. Establish Sector Specific Programs .................................................................... 16 3.5 Strategic Target #5: Implement Key Enablers to Realize Vocational Education Training Aspirations . 18

4. SUMMARY OF OUTCOMES AGAINST IMPLEMENTATION OF THE ACTION PLAN .................................... 20

RAPID ASSESSMENT OF VET ROADMAP ACTION PLAN: 2016–2020 ............................................ 21

5. INCREASE PARTICIPATION AND STRENGTHEN VET CAREER PATHWAYS ................................................ 29

6. FINANCIAL SUPPORT FOR THE VET SECTOR ........................................................................................... 30

7. INDICATIVE RESULTS FRAMEWORK ...........................................................................................................

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List of acronyms

ADB Asian Development Bank AZNQF Azerbaijan National Qualification Framework CPD Continuous Professional Development ERP Enterprise Resource Planning EU European Union GIZ Deutsche Gesellschaft Für Internationale Zusammenarbeit Gmbh IAC Industry Advisory Committee ICT Information and Communication Technologies M&E Monitoring and Evaluation MTEF Medium-Term Expenditure Framework MOA Ministry of Agriculture MOE Ministry of Education MOLSPP Ministry of Labor and Social Protection of People NQF National Quality Framework OER Open Education Resource OS Occupational Standards PPP Public-Private Partnership RPL Recognition of Prior Learning STR Student/Teacher Ratio SME Small and Medium-Sized Enterprises SOCAR State Oil Company of Azerbaijan Republic TVET Technical and Vocational Education and Training VET Vocational Education and Training

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ACKNOWLEDGMENTS This discussion paper was prepared by Hitendra Pillay, International Education Sector Development Consultant, and Zaur Aliyev, National Education Sector Consultant, under Asian Development Bank’s Technical Assistance 9445: Rapid Response to Strategic Reforms. Aziz Haydarov, Senior Portfolio Management Specialist of the Asian Development Bank’s Azerbaijan Resident Mission (AZRM) and Project Officer for the Technical Assistance 9445 provided contributions and edited the report. The support of Sabina Jafarova, Project Officer and Education Focal Point at AZRM is thankfully acknowledged. Nariman Mannapbekov, Country Director, AZRM provided overall supervision and guidance to the team. The discussion paper benefited from valuable inputs from the Central and West Asia Department Social Sector Division. The valuable advice and inputs of Rie Hiraoka, Director, CWSS and Kevin Corbin, Education Specialist (skills development) are gratefully acknowledged. The team would like to convey their deep appreciation to their counterparts at the State Agency on Vocational Education (SAVE), the Ministry of Education, the Ministry of Labor of Social Protection of Population, the Ministry of Finance, the Ministry of Economy, State Statistics Committee, and the Center for Analysis and Communication of Economic Reforms, for excellent facilitation and inputs during the research and preparation of the discussion paper. Special thanks go to Jeyhun Bayramov, Minister of Education, Idris Isayev, Deputy Minister of Education, Parviz Yusifov, Director of SAVE, and Majid Bayramli, Head of SAVE’s Department of Vocational Education Content. We are grateful to our development partners, the World Bank, United Nations Development Program, the European Union’s Delegation to Azerbaijan, and Deutsche Gesellschaft für Internationale Zusammenarbeit [GIZ] GmbH, for providing important perspectives on vocational education sector issues. The report represents research in progress and seeks to elicit comments and encourage debate. The views expressed in this discussion paper are those of the authors and do not necessarily reflect the views and policies of ADB, the Government of Azerbaijan or its agencies. The information in this discussion paper is of 31 December 2019, unless noted otherwise.

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1. Executive Summary

This report represents a rapid assessment of the 2017–2019 agenda (Phase 1) of the Government of Azerbaijan’s Strategic Roadmap on Vocational Education and Training (VET) adopted in December 2016. Drawing from international experience, the report charts an indicative action plan for 2020–2025 (Phase 2) for attaining the objectives of the Strategic Roadmap on VET.

In line with the provisions of the Strategic Roadmap on VET, in 2016 the Government of Azerbaijan established the State Agency on Vocational Education (SAVE) and in 2018 adopted the country’s first Law on Vocational Education. In partnership with development and industry partners, the SAVE has supported piloting initiatives as (i) industry partnerships for workplace experience, (ii) Azerbaijan National Qualifications Framework (AzNQF) for VET programs, (iii) industry advisory committees to develop high-quality and relevant VET programs, (iv) recruitment of newly qualified VET teachers, (v) developed and delivered several VET programs on AzNQF Levels 3 and 4, (vi) built new VET schools in Baku, Gabala and Ganja with seven more in progress as per the Strategic Roadmap on VET.

In parallel, the Ministry of Labor and Social Protection of Population (MLSPP), with support from development partners, has established the National Labor Observatory to undertake regular labor market analysis and advise stakeholders of the demand for skills. The MLSPP’s State Employment Service monitors job vacancies and provides short-term skills training for the unemployed. These initiatives are at an early stage of implementation and will require continued support during Phase 2 to ensure they become routine procedures and practices in the VET system. Several Phase 1 actions have yet to be implemented. These are noted among the measures for consideration for implementation during Phase 2 highlighted below.

Government-wide approach to VET. The government is investing in VET through many mechanisms, but this government-wide investment is difficult to capture. For example, when the VET budget is mentioned it only considers recurrent funding of VET facilities (vocational lyceums, education centers, schools, and training centers) under the Ministry of Education and managed by SAVE. It does not include the special secondary schools, which are also under the Ministry of Education, or the capital expenditures on VET. Various sector agencies (e.g., the Ministry of Agriculture, State Tourism Agency, MLSPP) also provide VET services that follow each agencies’ planning, budgeting, and governance arrangements. To raise effectiveness of VET reforms and funding efficiency, there is a need for an integrated government-wide approach to VET planning, setting standards, and resourcing. This approach does not entail institutional centralization of VET and can significantly raise the efficiency of the existing model of VET services delivery by various government agencies.

Drawing on its experience, the government can consider establishing a national skills council as a government-wide coordination platform on VET activities of various government agencies. An empowered SAVE, whose effectiveness seems to be affected by the disconnect between its authority in sector planning and financing and the assigned reform agenda, could act as the secretariat of the national skills council and provide government-wide VET sector information to decision-makers. A government-wide approach to VET could also be considered for the rollout of the Medium-Term Expenditure Framework (MTEF) in education. This means that SAVE and the Ministry of Education and other agencies involved in VET delivery will need to submit medium-term funding requests and the associated results.

VET sector infrastructure gap and efficiency. A one-size-fits-all approach, used in a planned

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economy, can no longer respond to a market-driven model. Modern VET is expensive, thus efficiency and responsiveness to market demand is critical. There is a need for more purpose-built VET schools for different program types and AzNQF levels with industry equivalent facilities. The current large number of VET facilities and specialized secondary schools, with overlapping programs and low enrollments is not cost efficient. Low enrollment and poor perceptions of VET result from a combination of poor and unsafe infrastructure, mismatched programs, and poorly trained teachers. Evidence from three new VET schools in Baku, Gabala and Ganja show that VET enrollments and graduate employment rates improve when these issues are resolved. The Ministry of Education initiated optimization of the management of VET schools by clustering three or four schools under a common management, but other aspects of VET school costs have remained the same. AzNQF approved VET programs may be delivered through a range of modalities with varying infrastructure design. For AzNQF Levels 4–5, the SAVE is exploring new modalities, such as site-based training in technology parks and universities.

During Phase 2, the government can prioritize accelerating completion of the remaining seven VET facilities to be built under SAVE auspices and envisaged under the Strategic Road Map on VET. It will be critical to ensure effective inter-agency coordination among central government agencies and with the local administrations and adequate financing for consensual relocation of internally displaced people who may still occupy some VET facilities or the related land.

In conjunction with the government-wide approach to VET, the government can consider reviewing VET school optimization done so far; map the quality of current VET infrastructure, quantum and quality of human resources; quality and types of VET programs; and then expand optimization to all VET providers in the country. As part of this review, it will be useful to undertake analysis of the number of VET education institutions required for (i) offering Level 3–4 and Level 4–5 programs; (ii) types of programs such as engineering, business, and agriculture; and (iii) adult learning and professional development programs. The review could also suggest options, building on the online learning experience during COVID-19 quarantine, on how to mainstream modern Information Communication Technologies (ICT) in VET, including e-learning resources and fully or partly shifting certain VET programs to online delivery.

Adequate and sustainable state budget financing of VET. Despite an increase in 2019, the state budget financing of VET in Azerbaijan is low compared to the EU average and other countries in the region. There is an unfortunate assumption that VET should be self-financing by establishing VET facilities as public legal agencies that would surrender part of their commercially generated income to a central VET fund because it can charge the industry as its main beneficiary. International experience suggests that the role of government in financing of recurrent and capital costs in VET remains significant. The government’s lead role in VET sector financing is important in Azerbaijan, given the evolving private sector and the need for high-productivity technical skills in agriculture, tourism, manufacturing, and ICT, the four sectors expected to drive the country’s strategic agenda on economic diversification away from oil. Otherwise, these sectors will remain in the hands of low productivity labor thereby adversely affecting competitiveness. The ongoing rollout of MTEF in education presents a good opportunity to strengthen the sustainability and adequacy of the state budget financing of Phase 2 of the Strategic Road Map on VET.

With the government-wide review of VET infrastructure, human resources, and programs, the government can consider conducting a comprehensive study of government-wide VET financing needs toward the attainment of the objectives of the Strategic Roadmap on VET and VET-related elements of other sector strategic Roadmaps. Results of this study will inform the next round of MTEF in the education sector and contribute to the process of transitioning the VET sector to results-based state budget financing envisaged in the

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Strategic Road Map on the National Economy.

Modern VET program content. The prolonged neglect of the sector has led to a disconnect between industry skills and practices and the VET program. While the new SAVE pilot programs attempt to teach modern skills, they still require further development to align with the demand for emerging skills. The majority of the new programs have been at AzNQF Level 3, risking the VET sector remains at a low level and reinforcing negative perceptions of VET. There is, therefore, a need to target Level 4 and 5 skills to offer a more promising career path and enable access to modern and emerging skills for working in high technology areas such as machine-learning, electric vehicles, artificial intelligence, 3D printing, robotics, and nano- and bio-technologies. Although the Law on Vocational Education allows VET schools to offer programs up to Level 5, none have been developed or implemented yet. During Phase 2 of the Strategic Road Map implementation on VET, there is a need to extend skills programs to Levels 4 and 5, establish and raise public awareness on VET professional career paths, shift more to using e-learning resources and online delivery of programs to align the VET system to contemporary industry practices, and introduce programs on high technology skills relevant to the needs and structural features of Azerbaijan’s economy. New VET teacher development framework. VET sector teachers have been disconnected from contemporary industry’s professional skills and modern teaching practices. The new VET programs will entail modern instructional content requiring different levels of qualification and professional practice. To attract appropriately qualified young VET teachers there must be attractive job conditions, modern learning environments, and attractive salaries for teachers. Lessons from teacher recruitment experiences in the three new VET schools, including engaging industry experts, can be applied to develop and implement a new VET teacher development system. During Phase 2, it will be important to develop and adopt new occupational and associated qualification standards (comprising technical content, industry experience and pedagogy) for VET teachers. It will also be important to adopt plans on (i) gradual implementation of the new training program and the new recruitment policy for teachers in the new VET schools, (ii) support to existing VET teachers to upgrade their competencies, and (iii) managing teacher attrition by recruiting new teachers in accordance with the new criteria and qualifications for VET teachers. Effective industry engagement in VET program design. The AzNQF initiative has increased industry participation in developing VET courses. The government has also established the legal framework and started piloting industry advisory committees to develop more industry relevant programs. This is expected to strengthen relevance and minimize the mismatch of skills, raise public perceptions of VET, increase enrollments and employment of VET school graduates. During Phase 2, the mechanisms to achieve industry-aligned programs need to be further supported and institutionalized in the procedures and practices of the VET sector. Developing VET programs based on national VET standards benchmarked against internationally recognized standards needs to continue. This will enable VET school graduates to continue education or find employment in markets that use the pertinent international standards. It will also be important to ensure that VET programs are available to public and private VET providers. Increase industry-based learning. Workplace learning is a core feature of VET programs and the government has initiated some pilot initiatives. The arrangement on workplace learning partnerships with industry needs to be further developed with a clear outline of VET

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knowledge and skills included in workplace learning activities and formally included in all VET programs. Another pathway is for schools to partner with private companies or industry parks to jointly deliver VET programs. During Phase 2, it will therefore be important to consider industry incentives for workplace learning and establish a transparent school and industry workplace learning legal framework to be implemented in VET facilities. This will ensure sustainability of workplace learning. It will also be important to adopt a regulatory framework for joint VET program delivery by schools and industry. Effective skills-demand forecasting. The current ad hoc demand forecasting is ineffective for policy making and continues to focus on traditional skills associated with labor intensive, low productivity sectors. The recently established National Labor Observatory is expected to regularly research, analyze and provide more accurate and disaggregated skills-demand data by sectors, types and levels of skills required to support the diversification of the economy and ensure regional and global competitiveness. The labor forecast should consider skills required for contemporary and emerging industries such as those associated with the 4th Industrial Revolution currently not covered in the Strategic Roadmap on VET. It is essential to accelerate operationalization and ensure adequate resourcing of the National Labor Observatory (staff, budget, surveying and forecasting tools) so the government can plan and ensure direct delivery or facilitate private sector provision of the types and levels of vocational and technical skills required to support high value economic diversification. Accelerate recognition of prior learning. In Azerbaijan, a sizable share of the skilled workforce is in the informal sector. It is important to recognize their skills so they may continue to upskill and diversify to new emerging skills before they become redundant. This informally skilled workforce is a potential asset and through accreditation and providing options to upgrade and diversify, it can accelerate the supply of highly skilled workers in the formal economy. This action is linked to adult and lifelong learning noted in the Strategic Roadmap on VET, as both are part of continuous professional development linked to recognition of prior learning. Prior learning recognition will also be an important contributor to the government’s agenda on deshadowing the economy and sustainably reducing informal economic activities in the country. During Phase 2, it will be important to develop and implement procedures to (i) assess and accredit informal skilled workers, and (ii) undertake additional training to make up for gaps in the current skills of informal workers to meet qualification levels. Increase non-public participation in VET. The government is interested in promoting private sector participation on supply and demand sides. On the supply side, SAVE is actively considering options to promote VET infrastructure delivery or maintenance through public-private partnerships, while retaining VET service delivery. There is also a framework for fully private sector providers to register and deliver AzNQF endorsed programs. The rather bureaucratic and lengthy process to obtain VET provider accreditation has deterred private sector interest. On the demand side, there seems to be no mechanism to enable VET students on government stipends and allowances to attend private VET schools if a student should choose to attend such schools. Neither is there a government-sponsored VET student loan system that would enable students to select the best value for money and competitive VET provider, public or private.

During Phase 2, it will be important to (i) review and streamline the existing regulatory framework and procedure for accreditation, licensing and control of private VET providers; (ii) enable VET students on government stipends and allowances to attend private VET schools; and (iii) review the feasibility of introducing soft loans for VET students.

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2. International Best Practices in Vocational Education and Training

2.1 Context of Skills Demands and Vocational Education and Training Sector Planning

1. In industrialized countries like the United Kingdom, Germany, Republic of Korea, and Australia, human capital development, including Vocational Education and Training (VET), is a shared enterprise between government, private and public sector industry, and unions or professional associations. To support this tripartite arrangement, legal frameworks, structures, and procedures are necessary. Industry is the client that recruits VET graduates and thus needs to be involved at every stage of the design and delivery of VET programs. Involving industry helps gain the respect of employers and prevents industry complaining about skill mismatches as they are equally responsible for the quality of graduates. 2. In developed economies, the Ministry of Labor and Social Protection of Population (MoLSPP) and the Ministry of Economy or their equivalents, forecast skill demands in partnership with industry.1 In Singapore, it is the Ministry of Manpower, and in Malaysia, the Ministry of Human Resource Development.2, 3 In Azerbaijan, labor demand information is collected via an ad hoc process the MoLSPP and published by the State Statistical Committee. The Government of Azerbaijan has recently passed legislation to establish a labor observatory. Skills-demand data is presented variously by countries, however, the more disaggregated the data, the better targeting may be achieved by VET policy makers and training service providers. The national skills-demand analysis reports and data are public information to help VET planners and training institutions respond to national skills development needs. 3. Labor demand analysis must respond to the projected socioeconomic trajectory noted in the government’s national development plans. It is acknowledged that, given the recent disruptions evidenced in many industries, the skills-demand forecast needs to be updated periodically. Nevertheless, a significant percentage of core skills will remain stable and will be required in many countries in transition to a knowledge-based economy. In most international systems, the government and industry jointly analyze and prepare short- and medium-term VET skills-demand reports, set minimum standards for occupations, design programs, and monitor the delivery of services. 4. In developed economies like Australia and Germany, governments are still the largest provider of VET services. However, governments recognize the need to involve private providers to address the increasing diversification, continuously evolving new skills, and the uncertainty of skill types required. In addition, the growth in demand for VET makes it apparent that governments alone cannot provide all types of VET programs. To expand VET opportunities, governments are providing enabling environments, through legislation and incentives, to attract private sector investment in VET. The private sector can be agile and highly responsive to rapidly changing demands. 5. As potential employers, industry and professional associations are critical for a number of reasons: (i) they give confidence to VET students that there is a career in VET, (ii) they can change public perceptions of the VET sector, (iii) they generally use the latest technology and procedures, and (iv) they are well informed and can advise on content for VET programs. Unions and professional associations ensure conditions of employment are

1 http://lmip.gov.au/ 2 https://www.mom.gov.sg/about-us/divisions-and-statutory-boards/human-resource-department 3 https://www.ilmia.gov.my/index.php/en/dashboard-datamart/kilm

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reflected in the levels of training and recruitment, and career advancement is based on individual performance, which encourages individuals to engage in lifelong learning. 6. In many CIS countries the private sector plays a minor role in the economy and professional associations and unions are still developing. Hence, the provision of VET has been largely a supply side role of the government. Consequently, governments have developed and adopted a mix of legislation and public sector regulations for the VET sector. Their continued support during the transition years will be needed to reform the existing system and change the mindsets of the people involved in the VET sector, and to integrate industry guidance into the design and delivery of VET programs.

2.2 Efficient and Transparent Technical and Vocational Education and Training (TVET) Sector Governance

7. Many countries have recognized the need to develop a simple and transparent VET governance system built on checks and balances and the trust of the private sector, particularly industry.4 To build the confidence of industry, they have adopted clear separation of (i) legal and regulatory functions, (ii) standard setting, monitoring compliance and certification, and (iii) service delivery. The first and second functions deal with national systems and are usually managed centrally, whereas service delivery may be undertaken by any registered training organization including in-house training service providers within companies.5, 6 In the Philippines, the Technical Education and Skills Development Authority has combined functions (i) and (ii) and contracts out service delivery. 8. For good governance, it is important to have separation between those who set and monitor standards and those who deliver services based on those standards to avoid collusion and conflicts of interest. The rationale is that, (i) these are different functions requiring different expertise and, (ii) if placed together, there is the risk of creating a conflict of interest, collusion, and rent seeking. For instance, if the Ministry of Education (MoE) is the regulator and the service provider, it is then in competition with other service providers such as private sector providers. This can give the MoE an unfair advantage. Increasing transparency of governance increases the confidence of industry partners and encourages more active engagement. 9. Developed economies like Australia have established a National Skills Council to provide high-level policy and strategic advice and to coordinate quality standards and compliance issues for the whole VET sector. The National Skills Council is supported by other entities such as industry advisory committees and state level skills councils to help work across state jurisdictions and line ministries and actively engage with industry partners to design and monitor VET services throughout the country. 10. The efficiency of a VET system depends on access to data and information. A highly fragmented system makes it difficult to monitor activities or understand the rationale and strategy underpinning proposed actions. VET strategies in developed economies are based on sound research and evidence which requires empirical research and feasibility studies. Evidence-based and results-based planning is possible when there is reliable data and

4 See Australian National Skills Council, https://www.aisc.net.au/. For the UK system, see https://www.gov.uk/government/organisations/uk-commission-for-employment-and-skills. Germany also has a similar industry integrated VET system. 5 In Azerbaijan, examples of registered training providers include SOCAR and Marriott Hotels, private providers such as Profi-Resurs, and public sector providers such as MoE VET centres. 6 In India, the Tata Training Institute typically trains skilled workers for its own companies and now accepts additional candidates paid for by the Indian government. This fee-for-service arrangement eliminates the need for the government to establish VET centres. Also, in-house training by industry ensures graduates will meet industry expectations.

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periodic analytical reports to inform performance monitoring and evaluation and the reports are shared publicly. In Azerbaijan, the Strategic Roadmap for Vocational Education and Training recommended several analytical studies as a basis to develop reform interventions. Unfortunately, many recommended reforms have yet to be undertaken.7 11. Sharing information with internal and external stakeholders increases transparency and is a legal requirement in most developed economies. Information gathered through publicly funded activities should be shared with the constituents. It is acknowledged that some information may be sensitive and only for internal use, but all other information related to the VET sector should be uploaded to a national VET website. Hence, there is a need for mechanisms and protocols to decide what information can be shared with the general public and what is for in-house use only. Generally, the more information that is made public, the greater the transparency of the system.

2.3 Industry Validated VET Program Design Aligned With Industry/Occupational Standards

12. As noted above, industry (state-owned and private sector enterprises) are the employers of graduates from the VET system. Therefore, involving industry at every stage of VET system processes is prudent as it helps (i) to mitigate skills mismatches as industry is best placed to judge the appropriateness of training programs for agreed qualification levels for respective occupational standards; (ii) enhance employer confidence in graduates; (iii) increase the employability of VET graduates; and (iv) improve public perceptions of VET careers. 13. To achieve a high level of industry participation, most high income countries like Australia, the Republic of Korea, Germany and upper and middle-income countries like Malaysia, Thailand and Turkey have established industry advisory committees (IACs) for each major industry sector of the national economy.8 IACs are formally established under VET legislation and are comprised of a mix of industry and VET experts. Their role and functions are formally noted in policy and the participation and contributions of IACs are officially recorded and published on a website to ensure the transparency of the process. It is not an ad hoc arrangement based on the goodwill of industry—it has formal recognition by all stakeholders and the contribution of industry representatives is taken seriously and integrated into VET programs.9 14. VET standards and programs are national and should be listed in a national register and shared with all training providers.10 Industry minimum standards are common throughout the country and allow for national benchmarking. Training providers respond to these standards to provide the required VET training. How they deliver the training is their competitive advantage, but they must all comply with the minimum standards. 15. Some developed countries go beyond setting minimum standards and produce

7 Comprehensive VET sector analysis, VET teacher development and labour demand analysis. 8 See the Australian National Skills Council, https://www.aisc.net.au/. The German system has a similar industry-led VET organisation. 9 The EU, the European Training Foundation, and GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH, a German development agency) support the VET system in Azerbaijan and are aware of the need for a robust industry validation process, but establishing mechanisms to achieve this is not yet fully developed or institutionalized. Most industry validation is still ad hoc and based on the goodwill of industry. Qualification standards and respective training programs are sent to industry personnel for validation, many of whom have little understanding of the Occupational Standards or the Azerbaijan National Qualification Framework or the requirements for validating training programs. 10 The Philippines Technical Education Skills Development Authority is a good example. http://www.tesda.gov.ph/About/TESDA/22174.

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sample courses and programs including training materials.11 Providing such additional resources helps ensure rural VET centers have the same level of resources as urban VET centers to maintain minimum standards and equivalence. In recent years, the use of e-learning and open education resources (OER) have helped teachers deliver high-quality VET programs.

2.4 Mechanism to Support Authentic Work-integrated Learning

16. VET skills development requires a mix of theory, workshop simulated experience and work-based learning. The latter two components form a significant part of the VET learning experience.12 The extensive amount of practical work in simulated workshops and in industry is necessary for students to appreciate the link between classroom learning and authentic work practices, including work culture, ethics, and best practices. USAID has incorporated work-based learning into many VET initiatives successfully in Lebanon and Southeast Asian countries (see USAID COMET Projects). 17. In developed economies, skills development practical work and work-integrated learning may be provided in:

• industry standard workshops and laboratories in VET colleges,

• industry placement to increase work-integrated learning, including apprentices, and

• increased use of IT simulations to supplement expensive real-life practices.

18. To provide facilities to simulate an authentic learning experience requires sound planning and long-term demand analysis. All VET institutions require the latest equipment to simulate what is used in the respective industry but may not require the same infrastructure investments.13 For instance, VET centers focusing on tourism and business programs will not require engineering workshops. Similarly, only agriculture VET centers require farmland. Also, there will be a difference between offering basic skills programs and more advanced VET qualifications. VET facilities are expensive investments and when they are under-utilized it is a cost to the government. 19. To support an authentic learning experience there is increasing use of Information and Communication Technologies (ICT) to develop simulations of industry practices and to deliver programs online using open education resources (OER).14 Use of ICT can help support lifelong learning and continuous professional development without compromising work time. OER are now used extensively to supplement textbooks and teaching and learning materials. For example, YouTube clips to demonstrate applications, use of three-dimensional animated simulations of complex procedures, and simulating office practices using accounting software can provide authentic VET learning experiences. Most OERs are under creative commons licenses which allow the use of materials under specific conditions

11 See Australian Skills Training Package at https://www.asqa.gov.au/about/australias-vet-sector/training-packages. Also see the section, India: The National Programme for Technology Enhanced Learning in Open educational resources: Enhancing education provision and practice by Sarvi, Dhanarajan & Pillay, 2015; and Open educational resources: Enhancing education provision and practice. Asian Development Bank, Manila, Philippines. 12 There has been some discussion regarding universities teaching AzNQF Level 4 and 5 and in some cases university-owned Lyceums offering AzNQF Levels 1–3. University academics are generally theoretical experts and have limited practical experience so it is unclear how they will teach VET programs. 13 Examples are the VET colleges in Baku funded by Korea Exim Bank and the Government of Azerbaijan funded VET colleges in Ganja and Gabala. These VET institutions have new infrastructure and equipment that match contemporary industry standards. 14 Open educational resources: Enhancing education provision and practice by Sarvi, Dhanarajan&Pillay, 2015. Open educational resources: Enhancing education provision and practice. Asian Development Bank, Manila, Philippines.

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(e.g. noncommercial use, attribution of source).15

2.5 Robust VET Sector Performance Monitoring and Evaluation

20. A fragmented approach to supporting the VET sector can result in duplication, redundancies, mixed messages, and rent seeking, all of which, collectively, create inefficiencies and unsustainable development. Harmonization of investments in the VET sector through adoption of a whole-of-government framework will help all stakeholders, public and private, to work toward a common set of agreed results.16 Such a framework will help both the State Agency for Vocational Education (SAVE) and their development partners coordinate their work around:

• national priorities and indicators being maintained through harmonization and alignment of all stakeholder objectives,

• increased information exchange to support common understandings and consistent methodologies to reinforce practices and accelerate institutionalization,

• an agreed set of processes for national VET sector performance reviews of indicators and results with mechanisms to resolve and realign interventions that may have stagnated,17

• pooled funding to increase available finance to undertake more substantive and sustained reform interventions, and

• improved efficiency of the national VET system through harmonized planning, implementation, monitoring and reporting mechanisms.

21. The Strategic Roadmap for Vocational Education and Training in the Republic of Azerbaijan has placed VET on the government’s reform agenda and guided many developments to enhance the VET sector. In 2016, the government established the Center for Analysis of Economic Reforms and Communication which has since evaluated the progress of all eleven Roadmaps being implemented by the government.18 Their annual evaluation is at a macro level and presents an aggregated percentage of achievement for each Roadmap. The current mechanism does not help strategic policy making and resourcing to achieve the results. Any performance review should be about accountability and not just an account of progress or lack thereof.19 22. A sector monitoring and evaluation (M&E) system requires some program to monitor. In most developed economies, a comprehensive VET sector strategic plan exists, including all VET activities and services in the country (initial and professional upgrade programs etc.) with key indicators and targets by timelines which provide a basis for developing an M&E system. Sector performance targets are cumulative, and several actions may contribute to a single target. Developing a performance-based or results-based system requires careful planning and ensuring the anticipated causal logic is realistic and the outcomes measurable. An M&E analysis should help stakeholders understand any underlying problems that cause failure and factors that lead to success. The VET sector

15 A Creative Commons (CC) license is one of several public copyright licenses that enable the free distribution of an otherwise copyrighted "work". A CC license is used when an author wants to give other people the right to share, use, and build on a work the author has created. 16 See Turkish 10th Development Plan for recognition and emphasis on monitoring and evaluation capacity to ensure high Return on Investment. Ministry of Development, Tenth Development Plan 2014–2018. Government of Turkey, Ankara. 17 A joint process to include the State VET agency, MoE, MoLSPP development partners, and the private sector. 18 The Centre was established within the Ministry of Economics in 2016 to ensure expansion of the scope of economic reforms conducted and efficient coordination of works in this area. See http://www.ereforms.org/ for details. 19 Honig and Pritchett (2019). The Limits of Accounting-Based Accountability in Education (and Far Beyond): Why More Accounting Will Rarely Solve Accountability Problems; Working Paper 510, May 2019. www.cgdev.org

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needs the capacity to collect and use data to show demand, perform return on investment analysis, and calculate graduate completion and employment rates to attract more funding from MOF. M&E capacity is essential for a results-based management approach.

2.6 Financing and Incentivizing the VET Sector

23. In developed economies, governments still provide the major share of the VET budget. This investment is considered a public good as it provides well-qualified human resources for industry which increases national competitiveness, attracts foreign investment, and helps advance national socioeconomic growth. In countries like Australia, the UK, and Germany, the public sector contribution may be a combination of federal and state or regional government contributions. Shared funding is only possible when states and regions have reasonable independent revenue sources. 24. The growing middle class transitioning from labor intensive sectors like agriculture to industry and the service sector increases demand for a diversified VET system. The increased demand has seen governments seek alternative funding support to provision VET programs such as (i) traditional public VET schools which are funded through the government budget; (ii) industry in-house training by large companies such as Broken Hill Propriety Ltd. in Australia and Tata Enterprise in India.20 The cost for this training is met by the company; (iii) the private sector, which views knowledge and skills as a commodity and sees training as a business opportunity. The cost is determined by the market. Examples of this are the Cisco training academy and Aptech learning, both of which are online, plus face-to-face global training service providers.21, 22 Similar private sector VET schools can be seen in Malaysia where people are willing to pay for internationally recognized VET programs which increase their regional workforce mobility; (iv) foundations and trusts. In some countries, large companies have corporate social responsibility policies through which they fund skills development programs.23 In India, Tata supports a community enterprise which provides skills development for youth; and (v) public-private partnerships (PPP).24 These are increasingly being used where the investment, risk and benefits are shared by public and private sector stakeholders. There are various models of PPP in the education sector.25 25. Unfortunately, many countries over-emphasize higher education despite the shortage of skilled VET workers. The Republic of Korea and Australia, for example, have high university graduate unemployment, but a shortage of skilled VET workers. Recognition of this mismatch has encouraged these countries to create special schemes to support VET students. Australia has VET student loan schemes, the Philippines has VET voucher schemes that students can use with public or private providers, and then there is the traditional scholarship and stipend for VET students. Governments need to stimulate supply of labor in areas with high shortages by incentivizing students to enroll and ensuring there is a clear career path to advanced qualifications to make these high demand areas attractive.

20https://www.bhp.com/our-approach/work-with-us/graduate-and-student-programs/australia/; https://www.tatasteel.com/media/newsroom/press-releases/india/2018/jn-tata-vocational-training-institute-jntvti-scales-new-horizons-in-providing-quality-training-employment-to-the-youth/# 21 https://www.netacad.com/ 22 https://www.aptech-education.com 23 https://schoolofskills.edu.my/; http://vis.edu.my/ 24 https://www.tatatrusts.org/our-work/skill-development 25 Sarvi, Jouko, Balaji, Venkataraman, & Pillay, Hitendra K. 2015. Public–private partnerships in information and communication technology for education. Asian Development Bank, Manila, Philippines.

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3. Assessment of National Strategic VET Roadmap Implementation

3.1 Strategic Target #1. Integrate Employers with Vocational Education and Training

26. Building partnerships with employers. The objective of VET products and services is to respond to labor market demands and provide well-qualified VET graduates for industry. Hence, a strategy needs to engage industry at every stage of the VET program—identification of skills demands, establishing skills competency levels, and the development, delivery, and assessment of VET courses.26

27. To support involvement of industry in skills demand analysis for the VET sector, the government has established a labor observatory within the MoLSPP which will be operational in 2020. This action is supported by the EU. The MoLSPP has established procedures for the Observatory to work closely with industry bodies and the Ministry of Economy to provide regular labor market forecasts. The Observatory is in the early stage of development and is yet to provide analytical reports. MoLSPP, through its State Employment Services Department (SES), is strengthening its capacity to monitor employment vacancies and recruitment trends and to identify and deliver short courses to meet demand. Again, MoLSPP has established processes and procedures for the State Employment Services to work with industry to gather employment information. The information gathered by the State Employment Services would be made publicly available through the web-based system being trialed by MoLSPP.

28. To date, the MoLSPP, with assistance from the World Bank, has developed and validated 289 occupational standards (OS) and 63 qualification standards.27 Since the project ended in 2015, the work on OS has stalled. In 2020, the government announced that it will develop OS for an additional 200 priority occupations and qualification standards for another 100 occupations. While this initiative is welcomed, many of the OS will still not be translated into qualification standards and validated by industry experts. Hence, this work requires continued support. To restart this work after a five-year lapse will be challenging and it will take time to re-establish mechanisms and develop the necessary human resource capacity. This proposed work is expected to be funded from the government’s employment insurance fund.

29. Expected result for this strategic action:

(i) There was no expected result for this strategic action in the Roadmap. Nevertheless, understanding labor market demands and trends is central to a

26 See Exhibit #2 in the Strategic Roadmap for Vocational Education and Training in the Republic of Azerbaijan, 2016. Also see experience from Turkey, Australia and Korea. Industry is a key partner in developing and delivering a VET program that is respected by employers. 27 Development of İmproved Occupational Standards Project (2011–2015) jointly implemented by the Ministry of Labour and Social Protection of Population and the World Bank.

MoLSPP/Industry bodies

Labor Observatory provides demand forecasts. Employment Department develops OS: What

skills are required for occupations. State Employment Services supports people to get

back into the workforce.

SAVE/Industry Skills Council

Qualifications and Standards:

What graduates need to know to be able to perform the

necesary tasks.

SAVE/Industry Advisory Committees

Courses: Develop and aggregate training modules that teach the required job

competencies.

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robust and effective VET system. The establishment of a labor observatory is a good result in the right direction but will require support to make it fully operational.

30. Mechanism to involve industry in vocational standards and VET curriculum development. Through EU support and a partnership with SAVE, several industry-school partnerships are being piloted. Most have a Memorandum of Understanding but details of what each partner contributes and how the risks and benefits are shared between the partners are vague. In these pilots, some industry experts have been involved in the design of VET programs but these are at a school/project or individual course level and often vary in quality and design between schools, sectors, and courses and thus are not sustainable or scalable to the national level. However, lessons learned from these projects may help develop national prototypes for courses and partnerships to ensure equivalence across the country and these may be centrally registered and made available to all VET service providers. Common prototypes and a registry will help monitor and strengthen national VET programs and partnerships. While pilot projects are being implemented through the support of development partners in various regions in the country, it is difficult to comprehensively assess what has been completed, what is in progress, and what remains at the planning stage.

31. Since the end of the Rapid Review Mission for implementing the Strategic VET Roadmap in November and December 2019, the government approved two decrees:

• Rules for the Development, Approval, Registration, and Prolongation of Occupational and Qualification Standards (Decree 474 of the Cabinet of Ministers of the Republic of Azerbaijan dated December 12, 2019), and

• Establishment of Sector Commissions for Skill Development and Approval of Regulations (Decree 475 of the Cabinet of Ministers of the Republic of Azerbaijan dated December 12, 2019).

These achievements indicate the government’s commitment to reforming the VET sector. As these decrees were not approved and available during the mission in November and December 2019, it would be prudent to review and understand how they may be best implemented. 32. The EU, in collaboration with SAVE, has supported the following projects: (i) in Gabala, Gakh and Ismayilli, four programs were developed for AzNQF Level 3 in the tourism and agriculture sectors; (ii) in Ganja and Lankaran, non-credit short courses were developed in four occupations (tour animator, conference and events hostess, animal husbandry worker and fish breeder); 16 modules for credit courses (wine making, the housing industry, domestic heating and cooling systems, farming, mining industry worker, and crop specialist). Finally, the EU with assistance from NIRAS International Consulting is working on programs for the following vocations: sewing machine operator, HVAC heating ventilation and air conditioning, fish specialist, electrical line installer and repairer, tailor, auto body worker, plumber, vehicle electrician, auto body sheet metal worker, and automotive painter. 33. In parallel with the pilot projects, the EU, in partnership with SAVE, have also supported the establishment of the Azerbaijan National Qualification Framework (AzNQF)

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which was adopted by the government in July 2018.28, 29 The AzNQF has found an institutional base and will be situated in the Institute of Education. A uniform template for VET courses is being developed, along with a national assessment mechanism, 14 industry advisory committees supporting program validation, and a national register for VET programs has been created. Most of the above are at an early stage of development and little detailed information is available on progress of the VET part of the AzNQF. Regardless of the slow start, this is an essential part of improving VET quality and gaining the respect of employers. 34. Expected results for this strategic action:

(i) To increase the number of students in pilot vocational schools by 50%. There is no baseline for this indicator, but consultations with selected stakeholders indicated that enrollments at Ganja and Gabala VET centers increased by 35% and 61% respectively, compared to their 2016 enrollments. While enrollments increased in pilot VET centers, overall VET enrollments decreased during the same period. The target of 50% is ambitious and despite the late start of some VET pilots, the progress is commendable. The consultations also found that enrollment figures for sensitive populations increased by 11.7% and for refugees by 6.8%.

(ii) To increase the employment rate of graduates of pilot vocational education centers by up to 50% within six months. Again, there is no baseline data for this indicator but consultations with the established VET centers indicated an increase in the employment rate to 40% when the average employment rate for VET graduates is 30%. The targets for this are also ambitious.

35. Optimization of VET schools and colleges. The VET system in Azerbaijan consists of vocational centers, schools, and lyceums that are under the State Agency on Vocational Education.30 There are also secondary specialized schools, sometimes referred to as VET colleges, that are under the supervision of the Ministry of Education. This arrangement does not provide for a single VET system that would enable an efficient continuum between AzNQF Level 1 up to AzNQF Level 5. Only an integrated system can produce measurable efficiency gains. For example, for Levels 1–3, the required infrastructure and equipment can be different from what is required for Levels 4–5, but both categories must be considered together to ensure pathways to higher professional qualifications are available.31 36. Unfortunately, when VET is discussed in Azerbaijan the assumption is that it is only about vocational centers, schools, and lyceums under the State Agency on Vocational Education. Thus, the recent optimization of VET institutions focused on these facilities only.32 While the total number of VET schools might have decreased, the physical existence

28 AzNQF for all levels of the education system is a huge task. The VET sector has to fit within this overall framework. Setting up an effective National Quality Framework took most developed economies decades to achieve an effective system so this initiative will require continued support to establish an effective national system. 29 Resolution No. 311 of the Cabinet of Ministers of the Republic of Azerbaijan of 18 July 2018 "National Qualifications Framework for Lifelong Learning of the Republic of Azerbaijan" was approved by Novruz Mammadov, the Prime Minister of the Republic of Azerbaijan. 30 There is no clear information on why the vocational facilities are of types of schools, lyceums, and centres for

training of education purposes. Also, some reports reflect a different number of VET facilities under SAVE and VET colleges under the MOE.

31 The Korean Exim Bank supported VET Centre in Baku is equipped to deliver AzNQF Levels 4 and 5 programs whereas the VET centre in Jalalabad with the new workshop may be able to deliver Levels 1–3 in a few specialisations. 32 See section on internal efficiency through VET school rationalization in the report.

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of VET schools has not changed. The management of VET schools has been optimized by clustering three to four VET schools under one management and calling the merged institution a Vocational Education Center instead of a VET school. It is unclear as to what the optimization was intending to achieve and how effective the process was. 37. The Roadmap indicated that ten VET institutions were to be developed for a range of specializations, but it is unclear if they are just for Levels 1–3, just for Levels 4–5, or for all Levels 1–5. The levels and types of programs provided will affect the design and cost of these institutions.

38. Expected result for this strategic action:

(i) To organize 10 differently specialized pilot vocational educational schools. The Korean Exim Bank supported VET center in Baku has new infrastructure and equipment, boarding facilities, teachers recruited and paid for under the new scheme, but is not yet fully operational. It is expected to be operating in the 2020 school year. This center has excellent facilities and can provide AzNQF Level 4–5 programs. The programs include engineering and automotive, automation and electronics, and construction. Gabala VET Center, through support from the EU, has new infrastructure and boarding facilities but does not have sufficient modern equipment for advanced level programs. It mainly offers Level 1–3 programs with a few Level 4 programs. Programs include agriculture and tourism. Ganja VET Center was also supported by the EU and received some refurbishment and equipment to provide VET programs for Levels 1–3. Programs include mining, services and communications, ICT, and automation. Jalalabad VET center received a few new workshops and some equipment from EU support and can mostly offer VET programs for Levels 1–3 with a few Level 4 programs. A new boarding facility is also being constructed. Programs include agriculture, welding, furniture, and services. The mission team was advised that two more VET centers are under construction and five are at the planning stage.

39. Attract new professional specialists to the VET system. The comprehensive assessment of teaching personnel and ways to improve their knowledge and skills noted in the Roadmap is an excellent action but it appears no study was undertaken. No report was available during the mission. Such a study should consider not just teachers in the VET facilities under the State Agency on Vocational Education but also teachers in the specialized secondary schools. From the available data, which presumably is for VET schools only, approximately 20% of VET teachers are over 60 years of age and will retire in the next five years. These are teachers who were trained during the Soviet era and decisions must be made about investing in further training for them given they will soon retire. The current average student/teacher ratio is about one to ten which is low and inefficient.33

40. The stakeholder consultative meetings revealed that most of these older teachers are paid what is equivalent to their pension. Therefore, retiring them and paying a pension will not create additional costs nor disadvantage the older teachers. It will open opportunities to recruit new teachers with contemporary VET knowledge and skills. The VET sector does not require more teachers, it needs better qualified and more innovative teachers with industry experience. It is highly recommended that the suggested comprehensive study of teacher development, supply and performance monitoring be undertaken urgently so a

33 It is acknowledged that the STR in Azerbaijan may be distorted given that most teachers are not employed fulltime (40 hr/week).

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more informed approach to VET reform can be adopted.

41. In developed economies like Australia, Germany, and the Republic of Korea, teachers are often recruited from industry and trained as VET teachers. New graduates from universities with good technical knowledge relevant to an industry sector are recruited as temporary teachers and then provided training in teaching competencies and six months of industry experience before they are confirmed as permanent VET teachers. In Azerbaijan, VET teachers are recruited from general education teachers and given some in-service training to become VET teachers even though they have no industry experience. There is no specific program or institution for VET teacher development. 42. There is a need to review OS for VET teachers to develop new standards with a mix of VET content knowledge, industry practices, and teaching competencies. Future recruitment criteria should be based on the above mix of competencies and all VET teacher training should comply with the OS and qualification standards. Teachers currently in the system who do not meet the minimum standard should be given options to upgrade their professional knowledge and skills through lifelong learning programs to become qualified as VET teachers. Without OS and qualification standards, developing any teacher performance system may not produce any significant change. 43. Attracting high-quality young graduates to VET teaching is a challenge when the salaries are below the national average and the working environments and workshops are poorly equipped. The MoE increased salaries of teachers, including VET teachers, and is piloting schemes like ‘market loading’ for teachers in VET centers such as the Baku Vocational Education Center for Industry and Innovation. The risks noted in the Roadmap are real (low salaries for VET teachers and industry reluctance to be involved) but there is little discussion about options.

44. Expected results for this strategic action:

(i) To create 195 new jobs. During the consultation meetings it was mentioned that 50 new teachers were recruited, 26 for the Baku Vocational Education Center for Industry and Innovation and the rest for Jalalabad, Ganja and Gabala VET centers. However, it is unclear if these are newly established positions or new teachers filling old positions. Through SAVE’s leadership, it appears these teachers were recruited through special arrangements which seems to work as a strategy to attract qualified new VET teachers.

(ii) To create 176 new jobs in vocational education centers as a result of attracting 264 industry specialists who will be recruited to support VET teaching and 176 seconded adjunct teachers to vocational education. There was no clarity regarding how this would work. What are the 176 jobs and what is the job role of the two types of people. Who are the 176 seconded adjunct teachers and where are they being seconded from? How will these two groups be financed. Is this in addition to the 5,000 plus VET teachers in the system? What does it mean for increasing efficiency of the system?

45. Improve governance in vocational education. As seen in developed economies, the wide scope of the VET sector and its impact on national economies is significant and cannot be managed as a department under MoE only. Recognizing this as an obstacle, the Government of Azerbaijan established SAVE to coordinate and implement the VET Roadmap. While the intention was to create a state agency, it is still under MoE and involved mainly with VET schools. This undermines its ability to function as a whole-of-government VET agency and lead national dialogue on VET strategy, policy, funding, performance

12

monitoring, and supporting VET research. Currently, SAVE spends most of its time managing the VET schools on behalf of MoE. It is acknowledged that MoE is the largest VET service provider but the role of SAVE should be more than managing VET schools only. Currently, SAVE does not deal with the specialized secondary schools under MoE supervision, let alone VET across other ministries. 46. Nevertheless, the establishment of SAVE is a significant step in the right direction. The agency is trying to facilitate better coordination in the VET sector, establishing a database to support better understanding of the sector, and lobbying for additional resources to accelerate the implementation of the Roadmap. To support this work, the agency requires more autonomy and resources to function effectively. In the long term, the VET law needs to be reviewed to reconsider SAVE as a whole-of-government agency. 47. Expected result for this strategic action:

(i) To establish a state VET agency. The SAVE VET agency was established under VET law in 2016. There is a need to further develop specific policies and procedures to develop the structural designs for VET Levels 1–5 (one-size-fits-all is no longer sustainable); develop sector performance targets, adopt a sectorial approach and include all VET providers (public and private); establish VET institutional responsibilities for providing demographic data; develop and adopt new programs in collaboration with the AzNQF; recruit new staff and monitor their performance; and practice demand driven infrastructure investment. Many of these activities are happening by default but are fragmented and lack coordination.

3.2 Strategic Target #2. Establish a Strong Performance-based Funding System

48. Additional finance for VET. Government funding for VET decreased over the last five years from 2.4% to 1.4% of the education budget in 2018.34 The Government of Azerbaijan has made all VET schools and colleges public legal entities so they can open a bank account and are encouraged to raise their own funds. However, it should not be assumed that VET facilities under SAVE and the specialized secondary schools under the MOE (VET colleges) have the necessary equipment, knowledge, and skills. Providing high-quality products and services in a competitive market may require rethinking this strategic target. Some VET schools, particularly agricultural schools, have some farmland that may be leased to the private sector under share-farming arrangements, but these are few and may not generate much revenue for the school.35 The equipment in most VET schools is from the Soviet era and most is not in working condition. Rural VET schools are in communities that depend on subsistence economies, thus the market for VET school graduates and services may be limited. 49. The strategy is further complicated by expectations created by the result indicator for this action, i.e. that additional revenue will be enough to increase the VET per-capita funding by 20%. The Roadmap further notes that schools should generate an additional profit of AZM 105 per student annually. These are ambitious expectations and there may be few VET institutions outside metropolitan centers that could generate such revenue. The majority will struggle to achieve these targets. The risk with VET institutions becoming businesses to raise funds to survive may seriously distract from their core business of

34 Education Sector Budget Brief. Vusala Jafarova, CEREC. Republic of Azerbaijan. 35 Share farming is referred to as profit sharing where a farmer operates a farm business without providing the upfront capital required to own farmland. Most commonly, a farm owner (with land and fixed equipment, in this case the school) enters into a share farming agreement with another farmer with labour and machinery.

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providing high-quality education. 50. Finally, the expectation in the strategy paper is to split the revenue generated by the schools: 40% to be retained by the schools and 60% transferred to a central VET fund. The central fund will be redistributed to other VET schools in need of more resources and to supplement the VET sector budget. A charter to facilitate the central VET fund has been developed and submitted to MoE.

51. There are several issues related to Strategy Target #2 in the Roadmap:

(i) To develop high-quality products that meet market demand, good facilities and equipment are required. Most VET schools have poor quality workshops and hardly any contemporary machines.

(ii) To be competitive, there is a need for high-quality raw materials (timber, metal, plastic, fabric, finishing products, fertilizer, farm animals, etc.) which require capital investment currently not available.

(iii) If schools can raise funds (usually these would be small amounts), where is the incentive when 60 percent of the revenue will go to MoE to supplement its VET budget?

(iv) Finally, establishing and running a central VET fund has an operational cost that might be more expensive than what schools receive as additional income.

52. International practice, particularly as part of a decentralization strategy, encourages VET schools to generate revenue to supplement their income, but not at the cost of compromising the core business of education. The revenue generated is additional income to be used by the school to develop its competitive advantage by providing upgraded facilities, engaging expert teachers, and adopting innovative teaching practices. It is not intended as a substitute for government funding. As in any other public legal entity, these funds are governed by the public finance and accounting legislation of the country. There is no need to create additional legislation to manage a VET fund account. 53. As noted elsewhere in this report, increasing internal efficiency can bring significant savings but this will require political will and serious commitment by the government. Better coordination of development partner funding to focus on high priority issues and provide continued support to institutionalize practices and procedures is required, rather than just piloting various concepts with no continued support to institutionalize the reform initiatives.

54. Expected results for this strategic action are:

(i) To get 65% of VET schools to participate in the program and for these schools to generate AZM 104 average annual profit per student. This is an ambitious target. The assumptions underpinning this action may require further analysis to assess viability. During the mission there was no evidence of this happening in any VET school or in the reports reviewed.

(ii) To increase funding per student by 20% in vocational education. If linked to the 65% target, this may be a challenge and require rethinking. Again, during the mission there was little information to show if there was any increase in VET funding generally or in the new VET schools.

55. Performance incentive mechanism. To implement a performance-based incentive scheme for the VET sector there must be clearly defined and agreed sector performance indicators and targets and school level performance indicators and targets. As advised by SAVE, there are seven VET performance indicators for the sector, but these were not available for review during the mission. An effective performance-based system must:

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(i) have realistic and achievable sector level indicators and targets, (ii) include disaggregated indicators and targets linked to VET schools and

individual levels (teachers and school leadership levels), (iii) have mechanisms to collect data to verify performance outcomes, and (iv) have transparent analysis and reporting mechanisms.

56. Determining performance indicators and targets is a joint process between the central MoE/VET Agency and the VET institutions. Considering the current under-resourced state of the VET sector, indicators and targets must be carefully determined. In the VET financing section of this report, performance indicators and targets must be appropriately resourced, or the system is unlikely to deliver the reform outcomes. 57. Given the current fragmented nature of the VET sector and the many development partner-supported projects implemented outside the MoE/VET agency system, there is a need for a comprehensive assessment of the sector to understand what is expected as regular performance and what may require performance incentives. Performance incentives may be used (i) to encourage private VET providers to support rural areas or VET areas that may not be covered by the public system and (ii) as bonus payments for exceeding the agreed targets such as enrollment numbers, quality of programs, and graduate employment rates. 58. While the overall expenditure on VET by the government is low, there was an increase to the VET budget in 2019, but most of that went to teacher salaries. The salary increase was for all teachers and it was necessary to attract high-quality candidates. This increase was not based on any performance improvement, nevertheless it helped attract better quality candidates. The salary increases and work conditions appear to be working considering the young, qualified university graduates recruited for the new and renovated VET schools in Baku, Gabala and Ganja.

59. Expected results from this strategic action:

(i) To increase the quality of VET education and the productivity of VET graduates. The adoption of performance-based resourcing can increase the efficiency of the system but will require other factors such as a minimum quality of infrastructure, teaching and learning materials, industry respected programs, and well-qualified teachers to improve the quality of VET graduates.

(ii) To double the number of teaching personnel in VET schools. The VET system in Azerbaijan has an excess of teachers. It has approximately 5,000 teachers with an average student/teacher ratio of about one to ten. The issue with teachers is not about quantity but quality.

3.3 Strategic Target #3. Establish Focused Professional Development Programs

60. National Qualification Framework for Lifelong Learning. The government has approved the National Qualification Framework for Lifelong Learning to support the implementation of Strategic Target #3.36 The adoption of this decree shows the commitment of the government to modernize the VET sector. However, implementing the AzNQF and the specific component for VET and lifelong learning has been slow and operates outside the comprehensive AzNQF system.

36 National Qualification Framework for Lifelong Learning of the Republic of Azerbaijan. Cabinet of Ministers Decree #311, Baku, 18 July 2018.

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61. A national qualification framework covers both initial and lifelong learning and for all levels of the national education system, including the VET sector. In Azerbaijan, the National Qualification Framework for Lifelong Learning Decree (Levels 3–5) draws on the EU example, which is similar to other developed countries like Australia, Germany, and Malaysia. The AzNQF for VET and lifelong learning is a subset of the comprehensive AzNQF (from Levels 1–10) and helps workers upgrade or diversify their skills to increase employability for 21st century jobs.37 62. In Azerbaijan, some lifelong learning programs for workers made redundant are provided by the State Employment Service in the MoLSPP. In the section on financing the VET sector, short courses to support lifelong learning are funded through the unemployment insurance fund and function separately from VET programs under the MoE or SAVE. It is not clear how the demand for short lifelong learning programs is determined and monitored to increase employability. Since the ministerial decree for lifelong learning was approved, MoLSPP provided 2,000 adults with short courses under the lifelong learning training initiative in 2019 and there is a plan for another 2,000 in 2020. In parallel, in September 2019, a MoE ministerial order was approved for short courses for adults in 26 specialties. Mechanisms for delivering short courses have been developed and submitted to the MoE. It is unclear how these new MoE short courses compare with those already provided by MoLSPP. 63. Since the purpose of lifelong learning programs and short courses is to upgrade or diversify participants’ skills, delivery of these programs should not require additional infrastructure. Consideration should be given to increasing the use of new VET schools and VET centers. This will help VET schools and centers generate additional revenue and ensure appropriately qualified personnel are involved in the training.38 Many companies have in-house training facilities for professional development programs. Thus, using industry facilities to conduct short courses also presents a viable option. SAVE is exploring some of these alternative delivery modalities. Careful analysis of the demand for dedicated infrastructure for lifelong learning is necessary, including a business plan showing the level of use of such facilities. 64. Lifelong learning and continuous professional development courses, despite EU support, has not yet been formally adopted by the government. This is a critical action for improving the VET system and the short courses should be validated and uploaded to the AzNQF registry. This will help benchmark them against similar programs from other jurisdictions such as the European Qualifications Framework and the regional Eurasian frameworks and facilitate labor mobility. 65. Expected results of this strategic action:

(iii) A 17% annual increase in participation in adult lifelong learning courses. Without any baseline or complete data about the types of courses and number of participants in both the MoLSPP and MoE short course programs, it is difficult to determine if this result was achieved.

(iv) To create 177 new workplaces of which 140 are in vocational education centers. There are no annual targets set and no available data to verify this result.

37 Lifelong learning is used in the context of continuous professional development to upgrade worker skills or to help diversify into new skills required by emerging industries. It is often targeted to unemployed workers to help then get back into the workforce. 38 It is assumed that VET facilities will be significantly improved to match industry standards and VET teachers trained under the new Teacher Qualification Standards will be able to provide high quality training. The current VET facilities and quality of teachers do not present an attractive proposition for people to want to use the VET school/centres for delivering short courses.

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3.4 Strategic Target #4. Establish Sector-Specific Programs

66. The long history of the socialist system entrenched certain mindsets which hinder the development of market-oriented systems and entrepreneurial thinking. Only 12% of registered business entities are small and medium-sized enterprises (SMEs) which contribute to 6.3% of employment.39 It will take time before the percentage of SMEs is comparable to similar sized EU member countries. Most people prefer fulltime work in private companies or the public sector. The public sector is currently the largest employer in Azerbaijan. Despite the challenges, the government has supported the development of SMEs through the Strategic Roadmap on Producing Consumer Goods and Small and Medium Business Levels. 67. Expected result of this strategic action:

(i) The Strategic Roadmap for VET does not specify the results indicators or targets for this action. It was referenced to respective sector Roadmaps but to date there is no data on what was achieved in other ministries. In the next phase of implementation, the state VET agency should engage with other ministries and agencies involved in VET and seek information for national planning and performance monitoring.

68. School-industry partnerships. Establishing model factories at the level of small and medium-sized enterprises is not the core function of the MoE or SAVE. However, providing a qualified workforce to support SMEs is a MoE/SAVE function, including developing partnerships with SMEs to identify needed skills and negotiate industry placement for VET students. The scarcity of SMEs and the reluctance of SME operators to work with VET schools because of their poor quality is a major hurdle to developing strong workplace learning opportunities in the VET system. 69. Several EU-supported projects have initiated partnerships with local industries.40 Most of these corporations are weak and often driven by individual connections or dependent on the goodwill of local industry. There are several models of memoranda of understanding being used by VET institutions, resulting in different expectations from the partnerships. Any disruption to the productivity of a company is a cost to the business, especially when the company is expected to release their expert workers to teach. This is particularly concerning for SMEs struggling to make ends meet in a highly competitive market and are then burdened with VET students. There is also the issue of insurance liability when VET students are injured while working at a company site. Who is responsible for covering such risks? Can such injuries be covered under the employment insurance scheme? As the VET system in the country matures, more SMEs will be established, trust between industry and VET will increase, and the value in providing work placements for VET students will be better appreciated. 70. Drawing on lessons from EU-supported pilot VET projects regarding the development of industry partnerships, a more formal agreement template is needed to ensure sustainability and clearly outlining the contributions of and benefits to both parties, along with a program outline for the workplace learning component of VET programs. In many developed countries, mechanisms such as corporate social responsibility and tax incentives are used to compensate costs incurred by companies taking on VET students. In Australia, companies are incentivized by cash payments to provide workplace experience. In the section on financing VET, there are options such as tax rebates, voucher schemes to purchase work placements, and direct financial subsidies to compensate

39 Torino Process 2018–2020: Azerbaijan National Report. November 2019. 40 ibid

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industry for student placements. These options need to be explored and integrated with partnership agreements during the next phase of the VET Roadmap implementation.

71. Expected result of this strategic action:

(i) The Strategic Roadmap for VET does not specify the results indicators or targets for this action. It was referenced to respective sector Roadmaps but to date there is no data on what was achieved in other ministries. In the next phase of implementation, the state VET agency should engage with other ministries and agencies involved in VET and seek information for national planning and performance monitoring.

72. Developing entrepreneurial mindsets. This requires long-term intervention and might be embedded starting from the secondary school system. However, at the VET level, specific subjects on entrepreneurship plus embedding the principles of entrepreneurship across other subjects to continuously reinforce the thinking has been found to be effective in developed countries like Australia and the Republic of Korea and upper-middle income countries like Thailand and Turkey. The EU supported the development of an entrepreneurship module for inclusion in VET programs as a mandatory foundation module. This module remains a project output but has not yet been validated or uploaded to the AzNQF register. 73. The State Employment Service developed and offered a short course on Principles of Entrepreneurship to 6,120 people between 2017 and 2018, and 212 during the first quarter of 2019. As per the mandate given to the SME development agency, it is anticipated they will organize special training in entrepreneurial thinking and offer it to SMEs and VET institutions. It is unclear what these courses involve or how they will be delivered.41 While there have been some entrepreneurship training programs offered, none have been validated by industry as per the AzNQF requirement and they are not available on any public registry.

74. Expected result of this strategic action:

(ii) The Strategic Roadmap for VET does not specify the results indicators or targets for this action. It was referenced to respective sector Roadmaps but to date there is no data on what was achieved in other ministries. In the next phase of implementation, the state VET agency should engage with other ministries and agencies involved in VET and seek information for national planning and performance monitoring.

75. Sectorial alignment of VET products and services. Education is a service sector which develops human capital needs to support national socioeconomic development. Therefore, coordination with other sectors regarding human resource needs is critical for meaningful VET program development and sustainable investments. Besides liaising with other line ministries, there is also a need to liaise with industry bodies such as the Confederation of Entrepreneurs Organization, the team in the MoLSPP working on OS, the State Employment Services, and the National Labor Observatory in the MoLSPP to confirm gaps in skill types and the required number of people to be trained in each skill.42 76. The government has established SAVE, which can assume the role of whole-of-

41 Torino Process 2018–2020: Azerbaijan National Report. November 2019. 42 Occupation standards for current and future jobs in all sectors are developed by MoLSPP and industry partners but the human capacity development processes and programs responding to those demands are the function of the VET Agency.

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government coordination. It is important the government recognizes that SAVE has to be a national agency to work across sectorial boundaries and not be seen as the MoE’s VET agency. As in many developed countries, VET policies, regulations, standards, resourcing, and monitoring are done centrally but the delivery of VET services can be done by any registered training provider who meets the minimum standards and can be from across line ministries and the private sector. SAVE can be the institution responsible for all functions to be managed centrally. To do this, SAVE needs resources and a higher level of autonomy. 77. The AzNQF is another tool to help coordinate and monitor the quality of VET programs across the country. It maps the progressive complexity of knowledge and skills in the VET sector and categorizes them from Levels 1 to 5 in each occupation.43 Typically, in international examples, Levels 1 and 2 are covered as part of secondary education with a focus on workplace literacy, numeracy, and soft skills like critical thinking and communication. Levels 3–5 are industry related VET content and Level 6 and above are higher education. This concurs with the current AzNQF levels framework. The AzNQF initiative is supported by the EU and provides a strong basis to manage the quality of programs and equivalence between similar programs across ministries and private sector VET providers.44 It may also be used to benchmark the quality of VET programs with other regional and international frameworks to support workforce mobility. 78. Many VET programs and short courses have been developed and piloted by ministries, private stakeholders, and development partner projects.45 Many have not been validated by industry experts, have not been uploaded to the AzNQF registry, and are not considered industry endorsed programs. To develop a robust whole-of-government VET system, it is essential to support the AzNQF and make it mandatory that all VET programs be validated by an industry advisory committee and uploaded to the VET course registry.

79. Expected result of this strategic action:

(i) The Strategic Roadmap for VET does not specify the results indicators and targets for this action. It was referenced to respective sector Roadmaps but to date there is no data on what was achieved in other ministries. In the next phase of implementation, the state VET agency should engage with other ministries and agencies involved in VET and seek information for national planning and performance monitoring.

3.5 Strategic Target #5: Implement Key Enablers to Realize Vocational Education Training Aspirations

80. Recognition of prior learning. Workforce data indicates that almost 66% of the people in active employment do not have formal qualifications. This occurred in the absence of a trusted, high-quality VET system combined with high opportunity costs. In its efforts to diversify the economy, the government has passed an employment law that requires workers to have formal qualifications at AzNQF levels for specific jobs. A draft framework governing recruitment for VET Level 1–5 occupations has been developed and submitted. 81. However, to implement the employment law, current employees without qualifications need to be assessed and certified. An EU-supported project initiated work on recognition of prior learning (RPL) to assess and certify skilled workers in the system. This

43 https://www.aqf.edu.au/sites/aqf/files/aqf-2nd-edition-january-2013.pdf--framework 44 The AzNQF ensures a VET program for vehicle electricians offered in Jalalabad is the same one offered in Ganja. It helps develop national recognition of qualifications. 45 The EU supported the development of 26 courses from six occupational areas, but none are registered in the AzNQF course register yet.

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work is at an early stage and there are ongoing policy debates as to how to assess prior knowledge. The procedures for assessing RPL have been prepared and submitted to the Cabinet. Unlike other advanced economies, the current thinking in Azerbaijan is to use a formal written test, which undermines the role of years of practical experience. In developed countries like Australia, the UK, and many EU member countries, a portfolio approach is adopted which has a mix of literacy and numeracy tests plus practical competency assessments. The OS and national qualification framework should provide the basis for judging the equivalence of work experience against the necessary competencies. Both these standards are works-in-progress and require continued support. 82. While the RPL work was initiated with EU support, a mechanism for institutionalizing this process is still required. RPL is not a one-time task and should be seen as an ongoing process and must have an institutional base. Strengthening and formalizing the VET sector, including implementing RPL for the 66% of employees currently without qualifications, will be a long-term process and will require an appropriate level of continued investment. Many ADB member countries are trying to strengthen the VET sector and recognize that a large number of skilled workers are trained through informal mentoring and unpaid apprentice type programs.46 These countries have developed rigorous RPL processes to bring these informally trained workers into the formal VET sector. Sharing lessons learned from other countries such as Australia could help accelerate the process and also be mindful of the need to have a robust, transparent, and respected system.

83. Expected result of this strategic action:

(i) An increase in the number of qualified workers joining the labor market in the country. The RPL process has not started yet and the tools to collect and verify data have not been established. Since the OS and qualification framework has not been developed for many sectors and occupations, it is not possible to set up the process and start assessing worker competencies. Accelerating this should be a priority in Phase 2 of implementing the Roadmap.

84. Integrated VET database. Reliable and comprehensive data is a prerequisite for good planning, resourcing, and monitoring and will be critical for adopting and implementing a results-based financing and performance monitoring approach of governance. Currently, VET sector data is fragmented, making it difficult for whole-of-government level planning and resourcing. At present, the MoE has comprehensive data for VET schools and the Department of Specialized Secondary Schools has data for the VET colleges. All other VET information is collected by line ministries and agencies and aggregated by the State Statistics Committee.

85. As noted in the Roadmap, the first step should be a comprehensive analysis of purpose for which data and information is required. The analysis should consider possible IT structures to accommodate all data, interoperability of systems to cross-share and aggregate data, types of analysis required, and access options for the end user (VET institutions capacity, both human resource and infrastructure). Such a detailed report can guide integrated web-based data and information collection, analysis, and knowledge sharing. Without a unified process and templates, data is collected as per the requirements of each stakeholder institution. The accuracy of the data is problematic because each VET

46 India: to recognise the competency level of people in the informal sector and align with appropriate wage, help transfer across companies, and engage with lifelong learning to upgrade or diversify skills. Sri Lanka: to recognise the competency level of people in the informal sector and align with appropriate wage and help workforce mobility across companies. Vietnam: to supply certified qualified workers to the increasing investments by multinational companies. Bangladesh: to lift the overseas workers program from just unskilled workers to a skilled workforce and to increase earning capacity.

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stakeholder has their own data fields and definitions and assumptions regarding what is considered appropriate for each data field. Thus, when aggregating national data, adjustments are necessary which further compromise data quality. For instance, VET graduates classified as employed could range from working 5 to 40 hours a week. They may be employed but not full time doing 40 hours per week.

86. SAVE has created an integrated VET database using the MoE Enterprise Resource Planning (ERP) system.47 Basic demographic data and some infrastructure and equipment information is being collected but it is still fragmented and dependent on the availability of funds. Since there are yet no VET sector performance indicators or targets, these are not factored into the data templates, nor is there any consideration of the analytical work required to provide periodic sector level monitoring reports. SAVE has also developed a website to increase information sharing with the public plus prospective students and potential employers.

87. Like most other actions in the VET Roadmap, this is also at an early stage and will require more conceptual thinking so it may be set up to easily capture data and analysis to support results-based management and financing.

88. Expected result of this strategic action:

(i) Create approximately 10 workplaces. There is no information regarding the nature and purpose of these 10 workplaces. No data was available during the mission regarding progress on the action. This should be analyzed further so it may be implemented during Phase 2.

4. Summary of Outcomes Against Implementation of the Action Plan

89. The Strategic VET Roadmap 2016–2020 was developed and implemented by the government as a strategy to diversify the economy when dependency on oil revenue created an economic and fiscal crisis in the country. Against this backdrop and due to its direct link to industry, VET was expected to be self-financing. As is the case in developed economies like Germany, Australia, and the Republic of Korea, VET still requires government financing of recurrent and capital costs. To ensure high and sustained growth in a diversified economy comprising priority sectors of agriculture, tourism, manufacturing, and ICT, the government should significantly increase and improve the efficiency of spending on VET. Otherwise, these sectors will suffer from a low productivity labor force and remain uncompetitive and unsustainable. 90. The action plan attached to the VET Roadmap has five strategic directions with several sub-activities under each (1x3 sub-actions, 2x2 sub-actions, 3x1 sub-actions, 4x2 sub-actions, and 5x2 sub-actions). An evaluation of the implementation of the action plan is presented below. The matrix presents a summary of comments in light of the above discussion against the actions and strategic targets noted in the plan.

47 The ERP infrastructure, systems design, and the human resources to successfully operate the system were not physically seen or evaluated. The ERP is the same as the one used by the MoE, hence it should be a robust system and VET may have a partitioned section in the same ERP. It is prudent to have a shared ERP, as this increases efficiency and allows tracking of students beyond the formal school system.

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Rapid Assessment of VET Roadmap Action Plan: 2016–2020

№ Action Result

Indicators/Targets Performance Review

Dec 2019 Review Comments

Strategic Target 1. Integrate Employers with Vocational Education and Training System

1.1 Building partnerships with employers

1.1.1. Identify strategic employment areas and forecast workforce demand.

• AZN 1 million real GDP increase in 2020.

• Organize 10 differently specialized pilot vocational educational schools.

• Increase the employment rate of graduates of pilot vocational education schools by up to 50% within 6 months.

• Increase the number of students in pilot vocational education schools by 50%.

• Increase the share of students from sensitive population groups in the total number of vocational

• No data available on GDP increase.

• 3 VET schools organized and operational, 2 under construction, and 5 in the planning phase.

• Graduate employment rate in 2 established schools increased by 40%. Average employment rate in VET schools is 30%.

• Ganja and Gabala pilot schools increased enrollment by 35% and 61%, respectively, compared to 2016.

• 11.7% from sensitive populations; 6.8% from refugee families, and 14% from single parent families.

Labor demand forecast not achieved. Observatory will be established in the MoLSPP in 2020 to provide forecast information. Some EU-supported project-base demand analysis was done for specific EU projects. Optimization is done by clustering 3–4 VET schools under one management. All other functions of the schools are retained. There are now 72 clustered VET school systems but 102 actual school facilities. Baku and Gabala have modern TVET infrastructure but Gabala does not yet have equipment for National Qualifications Framework Levels 4 & 5. Ganja has partially refurbished infrastructure and equipment for only National Qualifications Framework Levels 1–3. How employment is classified needs to be analyzed. It varies in number of hours of employed and is not always full time equivalent per week. Despite Ganja and Gabala reforms not being fully implemented. VET enrollment has improved. While

1.1.2. Prepare an action plan to study and optimize the current status of vocational education schools.

1.1.3. Implement an optimization process in large industrial centers and in regions.

1.1.4. Establish pilot vocational education schools.

1.1.5. Build mechanisms for the partnership of pilot vocational education schools with employers and develop vocational standards and curricula.

1.1.6. Ensure public awareness of pilot vocational education schools and implement enrollment.

1.1.7. Organize the monitoring and control of partnership programs.

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№ Action Result Indicators/Targets

Performance Review Dec 2019

Review Comments

1.1.8. Communicate information on the efficiency of partnership programs to the public.

education students to over 5%.

the enrollments in the reformed schools have increased, the overall VET enrollment has decreased. Suggest improved learning environment, and better trained teachers to motivate students to enrol.

1.1.9. Apply vocational standards and educational programs (curricula) of pilot vocational education schools to other vocational education schools.

1.2 Attract new professional specialists to the vocational education system

1.2.1.

Assess current teaching personnel in vocational education schools and increase their knowledge and skills.

• AZN 2 million real GDP increase in 2020.

• Create 195 new jobs in total and 176 new jobs directly in the vocational education sector as a result of attracting 264 specialists and 176 seconded adjunct teachers to vocational education.

• Data not available on GDP increase.

• Approximately 50 new teachers were recruited: 26 for Baku State Vocational Education Center for Industry and Innovation, and the rest for Jallabad VET school, Ganja and Galbala VET schools.

No assessment of VET teacher knowledge and skills has been done to date. 20% of personnel in VET are over 60 years of age and over 1,000 will need to be replaced in the next five years as per retirement law. New teachers must have industry experience. Most new teachers received some training but this was fragmented and varied in scope and quality. Since 1.2.1 is missing, the new VET teacher training is not yet developed. If the VET teacher OS is not developed, the job description is not developed and it is not possible to develop a performance monitoring system (1.2.4).

1.2.2.

Determine actions to attract new teaching personnel to vocational education and training process.

1.2.3.

Select new teaching personnel with industry expertise and organize training.

1.2.4. Monitor the performance of new teaching personnel.

1.3 Improve governance in vocational education

1.3.1.

Organize State Committee for Vocational Education under the Ministry of Education.

• Establish a VET agency.

• A new state VET agency was established under in 2016.

Based on the law there is need to develop specific policies and procedures and to allocate resources for the agency to function effectively.

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№ Action Result Indicators/Targets

Performance Review Dec 2019

Review Comments

Strategic Target 2. Establish a Strong Performance-Based Funding System

2.1 Identify additional public, private and international funding sources to ensure future development of vocational education system

2.1.1.

Improve legal framework related to the sales of products and services produced by vocational education schools and assess production capabilities of selected pilot schools.

• AZN 2 million real GDP increase in 2020.

• Increase funding per student by 20% in vocational schools.

• Involve at least 65 percent of vocational education schools in the program.

• Ensure vocational education schools on average generate an additional AZN 105 annual profit per student.

• No data on increased GDP.

• Vocational Education Law (2018) has a provision for VET schools raising extra-budgetary funds.

• No data on increased funding available from non-government sources.

• A list of possible programs is being developed but how they will be financed and delivered, and how the quality of products and services will be regulated and sold in a competitive market is not clear.

• No data available yet but a charter to facilitate this has been developed and submitted to the MoE.

• Funds raised by schools are to be split 60/40. School to retain 40% to supplement its operational budget, and 60% will be sent to a central

Under the VET law, schools are now public legal entities and can have a bank account. This is positive as school budgets can now be sent directly to schools thereby reducing transaction costs and leakage. Instead of increasing government funding for VET, encouraging schools to take on production and revenue generation may distract from their core business of VET education. Given the diverse communities in which VET schools are located, the assumption that all VET schools can generate AZN 105 per student can be a challenge. Many communities have mainly subsistence agricultural economies and few SMEs; the capacity to raise funds may not be easy in such communities. This requires more analytical work. Most VET schools may have capacity to generate a little revenue which could supplement low operational budgets. Transferring a portion of this money to a central fund is a disincentive for VET schools to generate any revenue. The policy expects VET schools to contribute to the government’s VET budget instead of receiving support from the government. Governance of the nonbudgetary funds should be aligned with the national public finance laws as is the case for all public legal entities.

2.1.2.

Determine the scope of products and services to be produced by vocational education schools and the minimal standards for those products and services.

2.1.3. Governance and monitoring system for nonbudgetary funds.

2.1.4. Organize the sale of products and services produced by vocational education schools.

2.1.5. Evaluate production activities in vocational education schools carried out for sales.

2.1.6. Identify alternative financing sources.

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№ Action Result Indicators/Targets

Performance Review Dec 2019

Review Comments

TVET fund for distribution to other schools.

• 2.2 Implement performance-based incentive mechanisms

2.2.1. Determine key performance indicators for vocational education schools.

• No direct GDP impact is expected.

• Double the salaries of teaching personnel in pilot vocational education schools.

• We have been advised there are 7 performance indicators for VET schools.

• TVET teacher salary in pilot schools has been increased 1.5 times.

We could not review these indicators. These must be measurable and realistic indicators aligned to the reform objectives. Indicators may be for VET sector level. These are aggregated for national planning and resourcing or school level for VET school planning, budgeting and reporting. Must have incentives to motivate enhanced performance. The teaching load (stavka) system does not always provide a full week equivalent load. Many teachers have to find a second job to supplement their income. Little has been achieved in regard to developing a transparent third party validated monitoring system for VET schools or teachers’ performance.

2.2.2. Establish performance-based funding system.

2.2.3.

Monitor the performance-based funding system continuously.

Strategic Target 3. Establish Focused Professional Development Programs

3.1 Provide adult vocational training and upskilling

3.1.1.

Establish appropriate legal framework for adult training and upskilling courses in vocational education schools.

• AZN 1 million real GDP increase in 2020.

• Increase the number of participants in adult courses by 17% a year.

• Data not available.

• Data is fragmented and incomplete.

Cabinet of Ministers has approved decree #311, National Qualification Framework for Lifelong Learning of the Republic of Azerbaijan. The Employment Center in the MoLSPP provided adult learning in various directions. In 2019, 2,000 3.1.2.

Discuss the organization of adult education and upskilling courses with interested parties.

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№ Action Result Indicators/Targets

Performance Review Dec 2019

Review Comments

3.1.3. Prepare mechanisms to organize adult education and upskilling courses.

• Create 177 new workplaces in total and 140 new workplaces directly in the vocational education sector.

• No data was available. students received training and another 2,000 training places are planned for 2020. In September 2019, a MoE Ministerial Order was approved for short courses in 26 specialties. The number of courses conducted and the number of participants involved is not available.

Mechanisms to organize and deliver adult learning were developed and submitted to the MoE.

3.1.4. Organize the monitoring of quality of courses.

Strategic Target 4. Establish Sector-Specific Programs

4.1 Establish model factories for small and mid-size enterprises and organize vocational education and training schools so they are oriented toward the promotion of an entrepreneurial mindset

4.1.1. Build cooperation between vocational education schools and model factories.

• The impacts of this priority are specified in the relevant sectorial Strategic Roadmap.

• No information was available.

Model factories are yet to be developed by the SME agency. Cooperation will be developed when model factories are ready. EU supported the development of an entrepreneurship module to include in the VET program as a mandatory foundational module. Some teacher training has been provided to implement this in schools.

4.1.2. Promote an entrepreneurial mindset in the vocational education system.

4.2 Support sectorial needs

4.2.1. Support alignment with overall sectorial requirements.

• The impacts of this priority are specified in the relevant sectorial Strategic Roadmap.

• No data available. Not completed as part of this review. However, some general observations: Development of OS is ongoing and managed by MoLSPP. This cross-sector OS is being used to develop the AzNQF standards for all sectors. Developing the AzNQF for all OS is ongoing.

4.2.2. Support alignment with sector-specific requirements.

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№ Action Result Indicators/Targets

Performance Review Dec 2019

Review Comments

Sector level VET programs such as those in MoLSPP, Ministry of Transport, Communications and High Technologies, and Ministry of Agriculture need to align with national standards and qualifications and thus share data and information with the State VET agency for national level monitoring. Budget support for VET in other ministries should also be consolidated as a single VET budget for better planning and management.

Strategic Target 5. Implement Key Enablers to Realize Vocational Education and Training Aspirations

5.1 Recognition of competencies acquired through informal and non-formal schemes

5.1.1.

Prepare mechanisms to recognize competencies and skills acquired through informal and non-formal schemes.

• Increase the number of qualified workers joining the labor market.

• Too early to assess this result. The tools and mechanisms for assessing this result are being developed and will be implemented when ready.

EU support has initiated some work on recognition of skills acquired through informal schemes. Study tours have been undertaken to selected countries to analyze lessons to be learned. The process to assess knowledge and skills has been developed and submitted to the Cabinet of Ministers. Draft framework governing qualification certificates and documents required for VET recruitment has been developed and submitted to the MoE.

5.1.2.

Form legal framework regarding compulsory documents to confirm craft professions at the time of recruitment.

5.2 Ensure transparent data monitoring and a single database

5.2.1. Analyze current data infrastructure.

• Direct impact on real GDP is not expected.

• Create approximately 10 workplaces.

• No information available regarding the nature and

VET data is fragmented because VET services are provided by many ministries and not just the MoE. The data is often conflicting. The VET agency has collected demographic data and is archiving important documents.

5.2.2. Establish a database.

5.2.3. Create a website on which to publish information about the vocational education system.

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№ Action Result Indicators/Targets

Performance Review Dec 2019

Review Comments

5.2.4. Ensure public awareness of the website.

purpose of these 10 workplaces and how many have been created to date.

The actual ERP system and technical infrastructure was not reviewed. It was assumed to be integrated with the MoE database and ERP. The VET agency has developed a VET website which is gradually being populated. The assumption that schools and the general public have Internet access to visit the site may require analysis using web analytics. The agency also has an online presence through social media and has organized events to develop public awareness of VET as a viable career option.

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5. Increase Participation and Strengthen VET Career Pathways

91. The public perception of VET in Azerbaijan is low, which is not too different from many other developing countries. This is due to unregulated wages and a large informal sector competing with VET graduates for similar jobs and industry not seeing value in the current quality of VET programs.48, 49 Anecdotal evidence suggests that low skilled workers coming through the VET system need to be retrained by industry which incurs an additional cost to them. Without retraining, low skilled workers produce lower quality products which limits access to high-end markets locally and internationally. The MoE/SAVE needs to develop and run advocacy programs to show how a skilled labor force has been the backbone of advanced economies like Germany, the Republic of Korea, and Australia to change public perceptions. An advocacy program should focus on:

• Increasing the employability of VET graduates and providing high-quality learning environments which can change public perceptions. The current VET facilities are sometimes hazardous and a disincentive to attracting students. Evidence of increased enrollments because of safe and attractive learning environments and industry relevant facilities can be seen in the new VET colleges in Baku, Ganja and Gabala.

• The current VET programs are limited to Levels 1–3, which sends a message that it is a dead-end career. If Levels 4 and 5 are also developed as part of the VET system, it will change the current dead-end career perception and parents and students will see a pathway to higher levels.

• The lack of confidence employers have in the current VET system needs to be addressed. The quality and relevance of the training seems to be a major concern where employers would rather recruit a Grade 11 graduate instead of a VET Level 3 graduate. Despite the support of various development partners to address these concerns, the transformation is slow. Also, employers believe one year of VET training may not be sufficient for someone to become productive in the workplace.

• Continuous Professional Development (lifelong learning) opportunities to advance VET careers all the way to the management level should be included in the VET system. This is similar to what happens in developed economies like Australia, Germany, and the UK.

• Due to the perceived lack of quality and relevance, the system has a high attrition rate. While enrollments have increased slightly, net student numbers in the system have decreased (24,302 students in 2015; 23,703 in 2016; 23,840 in 2017; and 23,522 in 2019).

• Ongoing promotion of VET career opportunities. SAVE is hosting promotional events, TV news coverage of VET career opportunities, and online campaigns to showcase careers in the VET sector. Given the years of neglect that have contributed to the low public perception of VET, it will take time for things to turn around. VET facilities need to be significantly improved and programs should earn the respect of industry, and most important, all the above efforts must be supported with real jobs for VET graduates with respectable wages.

92. Career guidance and advocacy to change perceptions and increase demand for VET careers. Many ADB member countries have developed career guidance systems run by qualified people to promote VET to secondary school students. It will be useful to review the experience from selected countries and analyze what was implemented in Phase

48 The Employment Service Department under the MoLSPP has recently initiated an employment qualification policy. Employees must have an approved qualification for the job they are applying for. This initiative is linked to the OS work being undertaken by the MoLSPP. 49 Approximately 67% of economically active people in Azerbaijan do not have formal qualifications. They are trained through informal systems.

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1 and what still needs to be done to increase awareness among potential VET students and employers.

6. Financial Support for the VET Sector

93. Current situation. Since the VET sector is fragmented, it is difficult to ascertain the total government funding allocated to VET. The MoE is the largest VET service provider in the country and allocates 1.7% from the total MoE budget (AZM 42 million in 2019) for the delivery of VET programs. Approximately AZM 30 million is used for teacher salaries, principals, and other support staff. AZM 10 million goes to scholarships and stipends for students. AZM 1 million is for utilities, and AZM 1 million for purchasing training materials. The VET budget for 2020 is expected to increase to AZM 54 million. The VET funding provided through the MoE budget barely covers the operational costs for AzNQF Levels 1–3 VET programs. The budget for all capital works regarding infrastructure and equipment for VET schools under the jurisdiction of the MoE, is managed by the Building and Procurement Department in MoE. These funds do not form part of the MoE VET school budget. Maintenance and upgrading of equipment presumably also fall under this department but years of neglect have seen VET facilities deteriorate to levels that are neither safe nor compatible with contemporary industry standards. 94. There are 89 VET institutions (AzNQF Levels 1–3) under the MoE which are seen as the default for all VET services in the country. However, there are VET services offered in 56 specialized secondary schools (VET colleges) which are expected to serve AzNQF Levels 4–5 also under the MoE.50 This is managed by a different department and not SAVE, yet these services are not considered in most VET reform discussions. According to the 2019 budget, the MoE allocated approximately 2% of its budget (AZM 44.8 million) to specialized secondary education, but these secondary schools offer general academic plus vocational education programs. Thus, it is unclear how the VET part of the specialized secondary schools is funded. There is a need to review and modernize the VET sector further, as can be seen in neighboring countries like Turkey, which has streamlined the VET sector into a single vertically integrated system. The new Azerbaijan VET law has incorporated some changes to accommodate contemporary VET practices (the Law allows VET schools to offer AzNQF Levels 3–5 programs) but it has also retained a lot from the old Soviet model VET system, such as the secondary specialized schools. 95. VET programs are also offered through the Ministries of Agriculture, Tourism, and Labor and state agencies like the State Oil Company of Azerbaijan Republic (SOCAR) and financed through their respective line ministries. The types of programs and their funding are not aggregated into the national VET sector budget. Besides the state budget there is the unemployment insurance fund which is managed by the MoLSPP. The budget of the unemployment insurance fund earmarked around AZM 5.5 million for vocational education and additional training, and a consulting service to support VET and develop professional standards.51 There is other funding such as the EU support for the VET sector (approximately 30 million Euros), the Korean Exim Bank VET support, plus other development partner support which does not seem to be recorded in either the MoE or VET budget despite the activities all being linked to VET functions and services.52, 53

50 The specialised secondary schools provide both general secondary academic and vocational education. Thus, it is difficult to separate the cost for VET only. The AzNQF Levels 4–5 being provided by the colleges is an assumption by the authors. There is also the new category of VET Education Centres which are supposed to offer Levels 4–5. There is a need for a clear and explicit structure for the VET sector to streamline expensive investments in standardised infrastructure when the VET programs offered are only Levels 1–3. 51 AZER News # 123 (1526). 3 December 2019. 52 Education for Employment in Azerbaijan, 2018–2020. CRIS # ENI/2018/041-537. 53 The total funding amount was not available during the mission but considering the quality and size of the VET infrastructure and equipment it must be a significant amount.

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96. It is acknowledged that the provision of VET programs is expensive, hence careful planning and increasing internal efficiency is important to ensure regular maintenance and upgrading of equipment and practices are carried out to retain the value of the VET facilities and the training offered. While most developed economies leverage private sector and industry stakeholders to supplement the provisioning of VET services, the Government of Azerbaijan remains the major contributor. The VET budget was increased slightly in 2019 but most of the increase was absorbed by salary costs, specifically an increase in teacher salaries to attract qualified young people to VET teaching, particularly in the new Exim Bank financed Technology Innovation Center in Baku and the upgraded VET centers at Ganja and Gabala. The salary increase succeeded in attracting good VET experts and provides a basis to review salaries for future VET teachers. 97. Compared with models used by developed economies and the average VET budget of EU member countries and neighboring countries, Government of Azerbaijan support for VET is low at approximately 0.49% of GDP.54 While innovations such as attracting the private sector to offer VET and developing public-private partnerships to share VET costs are good, the government’s share of the VET budget still needs to increase in parallel with seeking internal efficiency. 98. VET institutions revenue generation. The Strategic Roadmap for Vocational Education and Training in Azerbaijan under Strategy #2 notes actions related to revenue generation. The assumption is that VET schools will produce products for sale, lease facilities, and charge tuition fees to raise revenue to supplement the VET budget.55 Then, 60% of the revenue generated by schools is to be sent to a national VET fund to be managed by the MoE for redistribution to schools that require additional funding. It must be cautioned that the core business of VET schools is to deliver high-quality VET programs and not to operate as commercial enterprises. In developed economies, when VET schools generate additional revenue (usually small amounts) it is retained by the school and used to upgrade equipment, buy training materials, and pay for additional teachers. The funds are managed by the schools as per the public finance law of the country. 99. A review of 2018–2019 data showed that approximately AZM 2.0 million was raised by all VET institutions (85 VET schools plus 52 VET colleges). This is approximately AZM 14,600 per institution per year, without taking into consideration the operational costs to set up and run this VET fund. However, further scrutiny of the disaggregated data showed that the majority of the funds were from fees paid by students who did not receive a scholarship or for additional subjects and short courses and student stipends. Only a small percentage was from the sale of products and services or from leasing facilities. 100. There is a need for a detailed financial analysis and development of a business process for this school revenue generation action to fully appreciate the cost-benefit outcomes and viability of such a VET fund. 101. Internal efficiency through VET school rationalization. To increase the internal efficiency of the VET system, the MoE attempted to rationalize VET schools as a strategy to balance the demand and cost of maintaining facilities and providing programs of acceptable quality. Under current public financing, it was not possible to sustain all the 140 plus VET institutions. Unfortunately, the rationalization ended up as a management

54 Ministry of Education, Republic of Azerbaijan. 55 Approximately 3,000 students in the VET system do not receive scholarships, so the schools charge a fee and collect additional funds.

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restructuring of VET schools.56 Three to four VET schools were clustered under one management, but the facilities and staff remained. As a result, the rationalization brought few efficiency gains since the bulk of VET school operation costs remained the same. 102. Annual planning and budgeting process. The government currently uses norm-based financing and the VET budget is consolidated under the MoE budget. Also, there are several public sector stakeholders in VET and the public financing of VET is channeled through various agencies and ministries other than MoE. Therefore, planning and monitoring resource allocation for VET is complex and not easily achieved. In the absence of any consolidated approach with sector performance indicators linked to resource allocations, evaluating VET sector performance to increase efficiency and effectively respond to labor market demands can be difficult. 103. For instance, the Roadmap for Tourism notes that in five years several VET institutions for tourism will be constructed. It is unclear if these are included in the 10 VET institutions the MoE is expected to construct or if these are additional. There is a need for national level oversight and coordination, perhaps strengthening the SAVE to coordinate the planning and resourcing of the national VET system could help deal with the centrally planned but diversely delivered approach. SAVE will require more nuanced and disaggregated performance indicators, appropriate financial and resourcing data, mechanisms to collect the necessary data and analyze and monitor VET sector performance. As noted elsewhere in this report, VET sector data is fragmented and at a macro level, which makes it difficult to understand causal effects and how best to address gaps and obstacles in the system. 104. The Strategic Roadmap for VET provides a reform plan and has some indicators but these are not well aligned with the resource inputs and proposed actions. There is no resource allocation noted in the action plan to support MoE/SAVE achieving the agreed results. This disconnect between resource allocation and indicators and targets makes it difficult to achieve results. Consequently, many activities in the VET Roadmap have not yet been implemented. 105. Moving forward with Phase 2 implementation of the Roadmap, there is a need for a comprehensive financial gap analysis study to understand the capital and recurrent fiscal space in the VET sector. The financial analysis should respond to the comprehensive VET sector study noted earlier in this report. 106. Industry VET partnership. The role of industry in providing work placements for VET students is a key feature that differentiates VET programs from other types of education and training. While industry work placement is a partnership with private companies it is not usually the same as a public-private partnership (PPP). Work placement with industries are informal arrangements managed through memoranda of understanding. Through the support of development partners, these industry placement partnerships are being piloted in several institutions and industry sectors. To formalize these partnerships there is a need for policy to define the obligations of all partners. PPPs are official and legal arrangements describing the contributions of each party (the government and the private company), how the risks and benefits are shared by each party, and the agreed indicators and timelines for delivery of outcomes and include robust performance monitoring of the partnership.57 It is a business proposition and return on investment for all partners is a key indicator for the viability of the partnership. This is unlike dealing with state-owned

56 The number is a conservative estimate and includes all VET schools plus VET colleges under the MoE only. There were 107 iVET schools and 65 VET colleges in 2018 before the rationalisation. After rationalisation there were 85 iVET schools and 52 VET colleges. 57 https://www.adb.org/publications/public-private-partnerships-adb-education-lending-2000-2009.

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enterprises, which may be requested through an appropriate policy framework to provide certain services because they receive public funding. PPPs can help reduce government costs in financing VET but should not be seen as a substitute for government responsibility. The ADB-supported student accommodation in Baku is an example of a PPP project where the government and a private company are working together to increase the supply of affordable student accommodation. 107. While the industry placement is usually guided by a policy framework, it is still a cost to industry when they take on VET trainees, not just in terms of salary and allowance costs but also in productivity as their expert employees have to spend time with VET trainees teaching them industry practices. In developed countries like Australia and Germany, industry is incentivized to take VET trainees into their workplaces. The incentive may be through training levy rebates, tax rebates or direct payments. The student stipends may be used by students to buy industry placements (like the ADB-supported voucher schemes used in the Philippines where students receive vouchers from the government to cash with any recognized VET training provider) or the government subsidizes the industry for the salary or allowance paid to the trainees while studying (see Australian apprentice program). 108. Adoption of a Medium-Term Expenditure Framework (MTEF) and results-based financing and management. The government uses norm-based financing and budgeting. This is done as an annual budget activity in May each year. The formula for calculating the normative levels of funding was not available during the mission but anecdotal evidence suggests that little has changed in the VET funding formula since the Soviet times. Some recognize that norm-based funding is no longer sufficient to address the diversified service portfolio provided by the MoE and required of the VET sector. 109. There are discussions regarding results-based financing and the adoption of a three to four-year MTEF as a planning and financing option by various stakeholders, but this is at an early stage. Typically, transition to a new budget process is initiated by the MOF and may require significant restructuring of existing mechanisms. Many developing countries, including some neighboring countries, have sought assistance from development partners like the Asian Development Bank and the World Bank to implement results-based financing or program-based financing and to adopt an MTEF for resource planning. 110. Since the MOF is yet to adopt results-based financing and fully implement the MTEF process, it may be premature to consider how this may affect the MoE and the VET sector. Usually, the MOF provides the necessary information and training for line ministries together with templates for the new approach as they have to aggregate line ministry budgets into the national budget. For now, the MoE and the VET sector may consult the MOF to understand how they anticipate the MTEF might be structured, review how the MTEF and annual budget process may work for the VET sector, and how the Annual Operational Plan, the annual budget, and the MTEF are aligned. Changing from norm-based to results-based financing will require new formulas, new structures of VET programs and results indicators, and annual and cumulative targets for the MTEF cycle.

111. To help the MoE and the VET Agency prepare for a transition to MTEF and results-based financing, a comprehensive assessment of national spending on VET is required. This will require a restructuring of VET services aligned to key programs, a financial gap analysis study on sustaining current operational costs, a projection on resources required to implement the Strategic Roadmap for VET and to identify key indicators, and targets and timelines for performance monitoring. Such a report will help initiate policy dialogue in anticipation of the change to a new budget and planning process.

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7. Indicative Results Framework

112. The information in the indicative results framework below has been extracted from the Strategic Roadmap for Vocational Education and Training in the Republic of Azerbaijan. Although the Roadmap suggested several analytical studies to guide the implementation of the Roadmap, unfortunately these have not yet been done. The VET Roadmap’s unfinished agenda is highlighted below:

• Infrastructure: Construction of seven VET schools in progress and not yet completed.

• Financing: Adoption of results-based financing at early discussion stage.

• VET teacher development framework: Suggested study in this area not yet done. Some ad hoc teacher training workshops being delivered.

• Labor demand analysis and forecast: Legal status of the National Labor Observatory established but yet to be fully resourced and capacity developed to be functional.

• Adult training and continuous professional development: Continuous upgrading and diversifying skills to respond to emerging skills demands is a new concept in Azerbaijan.

• Recognition of prior learning to accredit skilled people in the informal sector. Yet to accredit the first person through the recognition of prior learning process.

• Non-public participation in VET: Despite interest from the private sector, the highly bureaucratic procedures and extended delays are an obstacle.

113. Without detailed VET sector analysis including financial analysis, the VET context in Azerbaijan remains vague and fragmented. Lack of detailed information makes it difficult to develop a realistic results framework, nevertheless, the indicative results framework is an elaboration and operationalization of the comments noted in Section 3. Summary of Outcomes Against Implementation of the Action Plan. The results framework took ‘the possible actions for the period 2021 to 2025’ and mapped them over the next five years and prioritized the actions. This indicative results framework should be considered a working document that should be strengthened and made more concrete through broader consultation with all stakeholders. The key reform directions in Phase 2 implementation 2021–2015 are listed below. These are embedded in the actions previously noted in the VET Roadmap.

• Adopt whole-of-government planning and governance.

• Increase VET sector efficiency.

• Strengthen VET financing.

• Accelerate skills demand forecast capacity.

• Modernize VET program content.

• Increase industry engagement.

• Accelerate recognition of prior learning to accredit informal skilled workers.

• Address infrastructure gaps.

• Adopt new VET teacher development framework.

• Increase non-public participation in VET.

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Draft VET Results Matrix58

Results by end-2021

Results by end-2022

Results by end-2023

Results by end-2024

Results by end-2025

Strategic Target #1: Integrate Employers with Vocational Education and Training System

1.1 Building partnerships with employers

Results Indicator 1.1.1 Establish labor observatory and align with Employment Center in MoLSPP. Accelerate the development of OS.

Legal framework for collecting data, analyzing, and forecast national labor demands approved by Cabinet of Ministers.

Organization established, HR provided, data collection mechanism agreed, analytical system and outcomes agreed and established.

Annual 2020 National Labor Forecast report developed and shared with stakeholders and public.

Annual 2023 National Labor Forecast report developed and shared with stakeholders and public.

Annual 2024 National Labor Forecast report developed and shared with stakeholders and public.

Annual 2025 National Labor Forecast report developed and shared with stakeholders and public.

Team established to continue defining OS for new and remaining occupations.

50% of occupations have OS developed and shared with AzNQF team and uploaded to Ministry of Labor website.59

60% of occupations have OS developed and shared with AzNQF team and uploaded to Ministry of Labor website.

70% of occupations have OS developed and shared with AzNQF team and uploaded to Ministry of Labor website.

80% of occupations have OS developed and shared with AzNQF team and uploaded to Ministry of Labor website.

Results Indicator 1.1.2 Organize 10 Vocational Education Centers with priority specializations.

Comprehensive VET sector assessment including VET schools & colleges in MoE, VET in other line ministries and private

Purpose driven design for selected specializations and level of programs approved.

58 Since VET reform is ongoing, it is prudent to keep it aligned with the last five years of VET reform. Therefore, this results matrix reflects the aspirations noted in the Strategic Roadmap for Vocational Education and Training in the Republic of Azerbaijan, 2016. 59 Since much of the OS development work has already been done, there is need to agree on a baseline for this target.

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sector completed and endorsed by the MoE.

Need to review if there are only 10 new VET centers planned or there are others under other line ministries. This will affect the results targets.

Priority specializations and demand locations and the scope of these 10 VET institutions. Discussed and agreed if these will be for Levels 1–5 or 1–3 or 4–5.

2 VET centers for Levels 4–5 and 5 VET centers for Levels 1–3 completed.60

2 VET centers for Levels 4–5 and 5 VET centers for Levels 1–3 completed.

2 VET centers for Levels 4–5 and 5 VET centers for Levels 1–3 completed.

2 VET centers for Levels 4–5 and 5 VET centers for Levels 1–3 completed.

Financial analysis to support the targets for new and refurbished VET centers in the next 5 years completed and agreed by the MoE.

Planning and budgeting for 2 new VET centers for Levels 4–5 and 5 VET centers for Levels 1–3, compliant with minimum industry standards approved.

Planning and budgeting for 2 new VET centers for Levels 4–5 and 5 VET centers for Levels 1–3, compliant with minimum industry standard approved.

Planning and budgeting for 2 new VET centers for Levels 4–5 and 5 VET centers for Levels 1–3, compliant with minimum industry standards approved.

Planning and budgeting for 2 new VET centers for Levels 4–5 and 5 VET centers for Levels 1–3, compliant with minimum industry standards, approved.

Results Indicator 1.1.3 Build mechanisms for industry to be engaged with development of vocational education standards and curricula for Levels 1–5.

Industry advisory council for each industry sector established to support VET program design and validation process initiated by the AzNQF work and formally adopted.

All existing programs and associated learning modules for each program, processed through AzNQF validation and uploaded to the national VET course register.61

Facilitating national uptake of the new curriculum and sharing the new VET programs with VET institutions without

Priority programs developed and training packages to support teaching and learning for programs approved and resourced.

10 additional programs developed and validated through the AzNQF and uploaded to the national VET register.

10 additional programs developed, validated through the AzNQF and upload to the national VET register.

10 additional programs developed, validated through the AzNQF and uploaded to the national VET register.

10 additional programs developed, validated through the AzNQF and uploaded to the national VET register.

60 Currently, three VET centers are completed (new or renovated) but in the absence of any comprehensive VET study it is unclear how these fit priority areas and levels of programs offered. 61 Apparently, there are approximately 26 modules for 6 programs from 2 sectors (Agriculture and Tourism) but they have not gone through the AzNQF process and are not listed in the National Register.

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equipment may not be useful.

National approach to establishing partnerships with industry for workplace attachments template approved and implemented.

Teaching and learning training package developed for the 10 additional programs.

Teaching and learning training packages developed for the 10 additional programs.

Teaching and learning training packages developed for the 10 additional programs.

Teaching and learning training packages developed for the 10 additional programs.

Financing mechanism and process for writing program outlines and developing teaching and learning resources approved by the government.

Number of students successfully completing workplace learning increased by 50%.62

Number of students successfully completing workplace learning increased by 70%.

Number of students successfully completing workplace learning increased by 70%.

Number of students successfully completing workplace learning increased by 70%.

Results indicator 1.1.4 Increase enrollment & graduate employment in the new and refurbished VET schools using new industry approved programs and latest teaching and learning resources.

National and individual school level VET enrollment and VET graduate employment data collection process agreed and baseline established.

Enrollment in 7 new/refurbished VET schools increased by 50% of the 2020 baseline.

Enrollment in 7 new/refurbished VET schools increased by 50% of the 2020 baseline.

Enrollment in 7 new/refurbished VET schools increased by 50% of the 2020 baseline.

Enrollment in 7 new/refurbished VET schools increased by 50% of the 2020 baseline.

Above baseline includes disaggregated data for sensitive population groups in the VET program.

VET graduate employment in the above schools increased by 50% of the 2020 baseline.

VET graduate employment in the above schools increased by 50% of the 2020 baseline.

VET graduate employment in the above schools increased by 50% of the 2020 baseline.

Participation of students from sensitive groups in

Participation of students from sensitive groups in VET

Participation of students from sensitive groups in VET increased by 5% of the 2020 baseline.

62 There is no baseline for this yet; has to be developed in 2020.

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VET increased by 5% of the 2020 baseline.

increased by 5% of the 2020 baseline.

Results Indicator 1.1.5 Support advocacy and career guidance to make VET a career of choice.

Marketing and advocacy plan developed and budget approved by the MoE.

Advocacy plan implemented and enrollments & completion rates increased by 20%.

Advocacy plan implemented and enrollments & completion rates increased by 40%.

Advocacy plan implemented and enrollments & completion rates increased by 60%.

Advocacy plan implemented and enrollments & completion rates increased by 80%.

Marketing and advocacy team in the state VET agency strengthened.

1.2 Attract new professional specialists to vocational education system

Results Indicator 1.2.1 Create new cadre of VET teachers by improving teacher development and supply.

Comprehensive assessment of current supply and quality of VET teachers, training and development, performance monitoring & remuneration completed and endorsed by MoE.

First cohort of 200 VET trainee teachers recruited as per new guidelines and have completed one year of professional training including industry experience.

Second cohort of 200 VET trainee teachers recruited as per new guidelines and have completed one year of professional training including industry experience.

Third cohort of 200 VET trainee teachers recruited as per new guidelines and have completed one year of professional training including industry experience.

Fourth cohort of 200 VET trainee teachers recruited as per new guidelines and have completed one year of professional training including industry experience.

New OS for VET teachers developed and approved by MoE. Qualification framework developed and registered with AzNQF.

100% of graduating teachers appointed to work in new and refurbished VET schools offering new VET programs.

100% of graduating teachers appointed to work in new and refurbished VET schools offering new VET programs.

100% of graduating teachers appointed to work in new and refurbished VET schools offering new VET programs.

100% of graduating teachers appointed to work in new and refurbished VET schools offering new VET programs.

VET teacher training institutions identified and equipped as preferred providers and agreed by MoE.

100% VET teacher annual attrition replaced with new trained teachers.

100% VET teacher annual attrition replaced with new trained teachers and student/teacher ratio increased to 1:15.

100% VET teacher annual attrition replaced with new trained teachers.

100% VET teacher annual attrition replaced with new trained teachers and student/teacher ratio increased to 1:20.

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Plan to manage attrition of VET teachers to replace with qualified teachers plus increase the student/teacher ratio developed and approved by the MoE.

Results Indicator 1.2.2 Create new cadre of VET principals to coordinate, implement and monitor progress against national sector targets.63

1.3 Improve performance of vocational education

Results Indicator 1.3.2 Organize State Committee for VET under the MoE.

Develop legislation and establish a state VET agency.64

VET sector performance indicators identified and agreed by all stakeholders.

Annual VET sector performance report developed and shared with stakeholders.

VET state agency legislation reviewed and updated to better define its role and functions to coordinate the national VET sector.

Annual VET sector performance report developed and shared with stakeholders.

Adequate physical, human, and financial resources for effective functioning of the VET agency agreed and

VET ERP established and data populated to support VET agency to

Annual VET budget developed based on previous year’s performance and submitted to MoE.

Annual VET sector performance report developed and shared with stakeholders.

Annual VET budget developed based on previous year’s performance and submitted to MoE.

63 This is currently not mentioned in the Strategic Roadmap for Vocational Education and Training in Azerbaijan. 64 This has been done but implementation remains a challenge.

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included in the VET agency budget by MoE.

monitor sector performance.

Mechanism to coordinate all VET services in the country agreed and approved by MoE.65

VET agency mandated to prepare national VET budget as subsection of the MoE budget.

Annual VET budget developed based on previous year’s performance and submitted to MoE.

Strategic Target #2: Establish Strong Performance-Based Funding

2.1 Identify additional public, private and international funding sources to ensure future development of vocational education system

Results Indicator 2.1.1 Increase VET student funding by 20% per student.

Comprehensive financial analysis of the VET sector completed and endorsed by MoE.

Government share of VET finance increased by 5%.

Government share of VET finance increased by 5%.

Government share of VET finance increased by 5%.

Government share of VET finance increased by 5%.

It is unclear how the 20% figure was derived and if that is sufficient to modernize the VET system and improve quality.

Financial gap analysis based on comprehensive VET sector analysis and the Roadmap completed and endorsed by MoE.

Optimization of VET schools and colleges results in efficiency gains of 5% of total 2020 budget.

Optimization of VET schools and colleges results in efficiency gains of 5% of total 2020 budget.

Optimization of VET schools and colleges results in efficiency gains of 5% of total 2020 budget.

Optimization of VET schools and colleges results in efficiency gains of 5% of total 2020 budget.

Assessment study of VET school capacity to produce products and services for sale completed and endorsed by MoE.66

15% of VET schools involved in revenue generation.

30% VET schools involved in revenue generation.

45% VET schools involved in revenue generation.

60% VET schools involved in revenue generation.

65 This may require the Cabinet of Ministers to approve the process of VET sector data sharing across ministries and agencies to plan and monitor the national VET system. 66 Need to determine current funding level as a baseline.

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Mechanisms to coordinate all development partner support through state VET agency to reduce redundancies and parallel systems approved by MoE.

Mechanisms to coordinate all development partner support through state VET agency to reduce redundancies and parallel systems approved by MoE.

Mechanisms to coordinate all development partner support through state VET agency to reduce redundancies and parallel systems approved by MoE.

Mechanisms to coordinate all development partner support through state VET agency to reduce redundancies and parallel systems approved by MoE.

2.2 Implement performance-based incentive schemes

Results indicator 2.2.1 Establish performance- based incentive system for VET schools.67

School level performance indicators identified and agreed by MoE.68

Annual school performance report developed and published.

Annual school performance report developed and published.

Annual school performance report developed and published.

Annual school performance report developed and published.

Incentive triggers for higher level of performance or sanctions for low performance levels agreed and approved by MoE.

Incentives and sanction payments schools determined and uploaded to VET agency website.

Incentives and sanction payments schools determined and uploaded to VET agency website.

Incentives and sanction payments schools determined and uploaded to VET agency website.

Mechanism for VET agency to collect data, analyze performance and report to schools established and approved by MoE.

Strategic Target #3: Establish Focused Professional Development Program

3.1 Provide adult vocational education and training and upskilling

Results Indicator 3.1.1

Mechanisms for joint assessment and identification of adult

Adult education and upskilling courses (including

Adult education and upskilling courses (including

Adult education and upskilling courses (including

Adult education and upskilling courses (including entrepreneurial

67 VET teacher salaries were recently increased but the increase was not based on performance expectations. VET teacher salaries were below the national average wages in the country. 68 It appears there are seven performance indicators for the VET sector but these were not available for review. These indicators need to be linked to performance targets to retain their funding levels or be increased to match higher levels of performance.

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Increase annual participation rate for adult courses by 17%.69

education and upskilling (short courses) demand and agreed by Ministry of Labor and Ministry of Education.

entrepreneurial courses) participation rate increased by 17% of 2020 baseline.

entrepreneurial courses) participation rate increased by 17% of 2020 bas line.

entrepreneurial courses) participation rate increased by 17% of 2020 bas line.

courses) participation rate increased by 17% of 2020 bas line.

All adult education and upskilling courses including entrepreneurial courses aligned with OS and AzNQF and uploaded to national register.

Training providers for adult education and upskilling courses are preselected and approved my MoE.70

Strategic Target #4: Establish Sector-Specific Programs

4.1. Establish model factories for small and medium-sized enterprises and organize activities of VET so they are oriented toward the promotion of an entrepreneurial mindset

Results Indicator 4.1.1 Build Cooperation between vocational education schools and model factories.

VET agency in partnership with model factories (SMEs) develop a national approach and action plan for workplace attachments and obtain MoE approval.71

100% of students in the 2021 new and refurbished VET institutions have completed industry placements.

100% of students in the 2022 new and refurbished VET institutions have completed industry placements.

100% of students in the 2023 new and refurbished VET institutions have completed industry placements.

100% of students in the 2024 new and refurbished VET institutions have completed industry placements.

69 There is no baseline for this indicator. 70 Need to make it competitive bidding plus options to maximize use of existing and new VET facilities including facilities owned by industry. 71 Embedded in the workplace learning will be a course for developing an entrepreneurial mindset among VET students and industry staff.

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4.2 Support sectorial needs

Results Indicator 4.2.1 Strengthen alignment and sectorial needs and customize investments accordingly.

State VET agency map VET actions in all sector Roadmaps and the comprehensive VET sector analysis report to prepare action plan for sectorial VET alignment and obtain MoE approval.

AzNQF reports show all sectors using common industry validated programs and resources.

AzNQF reports show all sectors using common industry validated programs and resources.

AzNQF reports show all sectors using common industry validated programs and resources.

AzNQF reports show all sectors using common industry validated programs and resources.

50% of VET activity data from all sectors captured in the VET ERP and annual sector performance report.

60% of VET activity data from all sectors captured in the VET ERP and annual sector performance report.

80% of VET activity data from all sectors captured in the VET ERP and annual sector performance report.

100% of VET activity data from all sectors captured in the VET ERP and annual sector performance report.

Strategic Target #5 Implement Key Enablers to Realize Vocational Education and Training Aspirations

5.1 Recognition of prior competencies acquired through informal and non-formal schemes

Results indicator 5.1.1 Develop mechanism to recognize competencies acquired through informal experiences.

Revised process to recognize prior competencies consisting of a mix of written and practical tests and portfolio assessment developed and approved by AzNQF and MoE.

10% of skilled workers without qualifications assessed for recognition of prior learning and certified.

20% of skilled workers without qualifications assessed for recognition of prior learning and certified.

30% of skilled workers without qualifications assessed for recognition of prior learning and certified.

40% of skilled workers without qualifications assessed for recognition of prior learning and certified.

Remedial options for those who lack all competencies for an occupation developed and approved by AzNQF and MoE. 72

100% of people taking remedial option reassessed and certified.

100% of people taking remedial option reassessed and certified.

100% of people taking remedial option reassessed and certified.

100% of people taking remedial option reassessed and certified.

72 Recognition of prior learning can be done only for those occupations and skills that have qualification standards developed and approved by AzNQF. Recognition of prior learning assessment must be done against standards set in the AzNQF.

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Dedicated human resources trained and assigned to conduct RPL assessments.

5.2 Ensure transparent monitoring and an integrated single VET database

Results indicator 5.2.1 Establish a comprehensive ERP system to capture all VET data including document archiving system.

Feasibility analysis of infrastructure, hardware, and institutional arrangements to establish and run an ERP for the VET sector completed.

ERP system designed and established.

Biannual analytical school and sector performance reports developed and shared for monitoring outcomes and resourcing 2023 activities.

Biannual analytical school and sector performance reports developed and shared for monitoring outcomes and resourcing 2024 activities.

Biannual analytical school and sector performance reports developed and shared for monitoring outcomes and resourcing 2025 activities.

Plan for key data fields for analyzing VET schools and VET sector level performance agreed.

Human resource capacity in the VET agency and end users who upload and use data at VET school level developed and approved by MoE.

Data capture and analytical mechanism agreed.