Chile - Second Vocational Training Project

FILE CoPY- RESTRICTED Report No. PE- 1 Za This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A SECOND VOCATIONAL TRAINING PROJECT IN CHILE February 25, 1970 Education Projects Department  CURRENCY EQUIVALENTS (June/July 1969) US$1 - Escudos 9.0 Esc. 1 - US$ 0.11 Esc. 1 million - US$110,000  CHILE SECOND VOCATIONAL TRAINING PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ....................................... I. INTRODUCTION .1 II. EDUCATION AND TRAINING. 2 A. The Formal Education System ......................... 2 B. Technical Education and Vocational Training ......... 3 C. INACAP .............................................. 3 III. FINANCING AND EXPENDITURES OF INACAP ................... 6 IV. MANPOWER AND TRAINING NEEDS. . . 8 V. THE PROJECT ........................................ 11 A. Technical Features .11 B. Cost of Project .14 C. Execution of Project .15 VI. RECOMMENDATIONS 17 This report was prepared by Messrs. K. Bahr, F. J. Pidgeon, W. van der Wal and A. Stam (consultant).   ANNEXES 1. Employment and GDP. by Sector, 1960 and 1965 2. The Education System 3. Structure of the Education System, 1969 4. Total Enrollments in Primary and Secondary Schools, 1962-1967 and Estimates for 1968, 1969, and 1975 5. Organization of INACAP, 1969 6. Numbers Trained by INACAP, 1965 - 1969, and Estimates for 1970 - 1975 7. Types and Levels of INACAP Courses 8. Structure of Relation between INACAP, Labor Market and Educational System, 1969 9. Expenditure on Education, 1964 - 1968 10. Expenditure on Education, Growth Rates, 1964 - 1968 11. Income of INACAP by Sources for 1969 and Estimates for 1969 12. INACAP Recurrent Costs per Trained Person, 1965 - 1969 13. Labor Force and Employment, 1965 and Estimates for 1975 14. Estimated Total Vocational Training Needs, 1965 - 1975 and Estimated Training Needs by Field of Training 15. Estimated Annual Vocational Training Output 1966 - 1968, and Estimated Needs for 1969 - 1975 16. Description of Individual Project Items 17. Summary of Estimated Project Costs 18. Schedule of Construction and Estimated Expenditure   C H I L E BASIC DATA A. General Size of country 741,766km2 (286,396 sq. mi.) Total population (1969) 9.3 million Annual Rate of population growth (1961-69) 2.1% Average density of population 12.6 inhabitants per km2 (32.5 per sq. mi.) Labor Force (1969) 3.1 million Gross domestic product (1969) $5.1 billion GNP per capita (1969) $530 Government current revenue as percent of GDP (1969) 21.1% B. Education/ Population aged 7-14 1.8 million Enrollment in primary school 70% of 7-14 age group Population aged 15-18 730,000 Enrollment in secondary school 24.6% of 15-18 age group Enrollment in secondary industrial and agricultural schools 16,800 Vocational training (INACAP) enrollments (1968) 30,400 Education expenditure financed by Ministry of Education: as proportion of GDP (1968) 3.6% as proportion of budget (1968) 12.5% Total education expenditure (including non-government): as proportion of GDP (1968) 5.4% per capita $34 P/ 1967 unless otherwise specified.   CHILE APPRAISAL OF A SECOND VOCATIONAL TRAINING PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project for the expansion and improve- ment of vocational training for agriculture, fishery and industry in Chile, for which a Bank loan of US$ 1.5 million equivalent is recommended. ii. The project is intended to provide an increased supply of trained manpower to meet Chile's needs. It would alleviate significantly the shortage of industrial and agricultural personnel at lower and middle- levels. iii. The proportion of semi-skilled, skilled and middle-level techni- cal personnel in the labor force is lower than the requirements. Both quantitatively and qualitatively, a shortage of vocational training con- stitutes a major limitation for the development of the country's economic resources. i iv. The formal education system under the Ministrr of Education of- fers technical secondary school courses but the school are inadequate. The main responsibility for vocational training falls bn the Instituto Nacional de Capacitacion Profesional (INACAP), a subs diary of the pub- lic Corporacion de Fomento de la Produccion (CORFO). Its training programs are almost exclusively guided by labor market needs. However, INACAP is not large enough to meet the estimated training demands by em- ployers. The growth in the number of training places and the improvement in quality as a result of the proposed project would enable INACAP to bet- ter meet labor market demands. v. This project was preceded by a first Bank financed project which was successfully implemented between 1966 and the end of 1969, and which doubled the training capacity of INACAP. The Bank has completed negotia- tions for a third education project, this time to assist the Ministry of Education in financing the implementation of the 1966 educational reform act, primarily through expanding primary teacher training. vi. The proposed project would consist of: (a) the construction and equipment of workshops, class- rooms, laboratories, and related facilities to ex- pand four existing training centers and to create one new center; (b) the provision of mobile units and their equipment for training programs in agriculture and fishery; and (c) equipment for existing training programs.  - ii - The project would assist INACAP's training programs in the fields of agri- culture, fishery, metallurgy, auto-mechanics, garment trades, refrigera- tion and air-conditioning; it would also include programs for apprentice training. vii. INACAP needs to increase the rate of utilization of its facili- ties, including instructor time, through improved supervision, close co- operation with enterprises, and efforts to limit activities in social fields unrelated to manpower demands. viii. The proposed project would cost US$ 3.0 million equivalent. Contracts would be awarded on the basis of international competitive bidding. The project is not likely to attract foreign bidders for con- struction work. Assuming that local contractors would carry out con- struction, but that all equipment would be imported, the foreign exchange component of total project costs would be about 50%. ix. The project is suitable for a Bank loan of US$ 1.5 million equivalent, for a term of 25 years including a grace period of 5 years. This would cover about 50% of the total project costs. The remainder would be met by CORFO, which has adequate funds for this purpose. The borrower would be CORFO, which would make the proceeds of the loan avail- able to INACAP on a grant basis. The Republic of Chile would guarantee the proposed loan.  APPRAISAL OF A SECOND VOCATIONAL TRAINING PROJECT IN CHILE I. INTRODUCTION 1.01 In 1965 the Bank made a loan of $2.75 million to the Corporacion de Fomento de la Produccion (CORPO), a government-owned development organi- zation, to finance an expansion program of its training subsidiary, the Servicio de Cooperacion Tecnica (Servicio). During the second half of 1966, CORFO and Servicio organized the Instituto Nacional de Capacitacion Profe- sional (INACAP) as a subsidiary of both, entrusted with discharging the func- tions of Servicio's Professional Training Department, originally responsible for the execution of the Bank project. The substitution of INACAP for Ser- viclo was reflected in an amendment to the loan documents dated July 20, 1967, which became effective on March 1, 1968. Implementation of this first project was completed by the end of 1969, after extensions of the closing date, originally foreseen for June 1968. 20% of the total project cost of $3.8 million were used for construction of training facilities. 80% went into the purchase of equipment for all fields of training offered by INACAP. The project has fully attained its objectives by successfully contributing to increasing the number of trainees from about 16,000 in 1965 to about 30,000 in 1969, and to improving the quality of training as well as the di- versification of courses in accordance with changing manpower demands. The use of mobile training units rather than centers for training in mining and agriculture has proven particularly encouraging in terms of both training results and costs. The Bank has completed negotiations for a third educa- tion project, designed to help finance implementation of the 1966 education- al reform. It would finance educational institutions for which the Ministry of Education carries direct responsibility, mainly primary teacher training colleges. 1.02 In May 1969, CORFO requested Bank financial assistance for a 5//- further expansion of INACAP. The project was appraised in June 1969, by a Bank mission composed of Messrs. K. Bahr (economist), F.J. Pidgeon (techni- cal education), A. Stam (architect), and W. van der Wal (agricultural edu- cation). During appraisal, the project was modified in order to adapt it more closely to the needs of industry and agriculture as well as to the or- ganizational capacity of INACAP. In particular, (a) equipment lists and building items were reduced, (b) an administrative building was deleted as not being directly related to training, and (c) a boat for the fishery train- ing program and (d) four buildings were added to render existing training programs more effective. 1.03 The amended project, as approved by INACAP and CORFO, consists of: (a) 7 new buildings (comprising 20 workshops, 8 class- rooms, 3 laboratories and related facilities, one dormitory and one combined dining-assembly hall) for training in agricultural mechanics, auto-mechanics, sheetmetal work, refrigeration and air-conditioning and garment manufacturing;  - 2 - (b) 22 mobile units for agricultural training; 7 mobile units and 1 vessel for fishery training; and (c) equipment for all training programs. Social and Economic Background 1.04 Chile extends over a narrow and long area between 180 and 550 southern latitude, with a coastline of about 4,500 km. It comprises a wide range of climatic and geological zones, from sub-tropical desert in the North to cold and humid steppe in the South. Economic activity and population are concentrated between the Aconcagua valley and Puerto Mont. Economic activities in the northern part of the country are dominated by mining. In the South, agriculture, forestry and fishing are major eco- nomic activities. 1.05 Estimated total population in 1969 is 9.3 million. About 50% is below 20 years of age; close to 70% is living in urban areas. The labor force is approximately 3.1 million (see para. 4.01). Unemployment is estimated to be about 6%. Underemployment exists in parts of the serv- ices sector and in agriculture. In terms of employment, services and agri- culture are the largest sectors (about 26%) followed by manufacturing (19%). (Annex 1). 1.06 In terms of GDP, manufacturing (27%), services (22Z) and commerce (21%) hold the largest shares in 1968 while agriculture contributes only 8%. The mining sector's share is 10%; however it earns about 87% of the country's export income (1968), copper alone accounting for 73%. Chile is a net importer of foodstuffs, imports of which almost doubled between 1960 and 1967 (from $60 million to $115 million). 1.07 The industrialization and modernization of the economy are pro- ceeding but there is an urgent need to improve productivity and increase production in agriculture. Both of these features are dependent on im- proved and expanded training and hence related to the proposed project. II. EDUCATION AND TRAINING A. The Formal Education System 2.01 The Minister of Education is responsible for policy, finance, administration, curricula and supervision of public primary and secon- dary education. He controls curricula and examinations of private schools. State and private universities are autonomous. In 1966 the National Education Reform Act was passed, committing the Government to improve the structure and content of primary and secondary education. Major reform measures are: (a) extension of primary education from six to eight years and a corresponding reduction of secondary education from  six to four years; (b) increased admission requirements for primary teach- er training colleges and upgrading of these colleges to post-secondary level; (c) curriculum reform in secondary education; (d) rationalization of secondary technical and agricultural schlools, involving a reduction in numbers of schools, creation of large economic units, and changes of cur- ricula towards more practically oriented pre-vocational education. A de- tailed description of the educational system is given in Annexes 2, 3 and 4. B. Technical Education and Vocational Training 2.02 Responsibility for technical education and vocational training rests primarily with the Ministry of Education and with INACAP. The uni- versities and other public and private bodies also play a role in this field but on a small scale. 2.03 The Ministry of Education provides technical education at the secondary level in its agricultural, industrial, commercial and home sci- ence schools. As explained in Annex 2, these schools have serious defi- ciencies. They are inadequate in regard to staff, equipment and teaching materials. Curricula are largely outdated. Students enter technical and agricultural education without a sufficient basis of general education. As a result, standards of technical and agricultural education have dete- riorated and an increasing number of successful school leavers apply for INACAP vocational training courses in order to obtain marketable skills. The Government plans to improve secondary agricultural education but there is little indication that the deficiencies of industrial education will be overcome soon. 2.04 The universities, in particular the two technical universities, offer technician training. The Technical University of Santa Maria, Valparaiso, has organized, in conjunction with certain enterprises, an apprentice-type training. 2.05 A few private enterprises are engaged in technical training. Hlowever, these activities are limited in scope and directly related to the immediate and short-term needs of the individual firms. 2.06 A small number of agricultural training courses are offered by the Instituto de Educacion Rural (I.E.R.), the Instituto de Desarollo Agropecuario (I.N.D.A.P.), the Corporacion de la Reforma Agraria (C.O.R.A.), and the Instituto de Capacitacion e Investigacion de la Re- forma Agraria (I.C.I.R.A.). C. Instituto Nacional de Capacitacion Profesional (INACAP) 2.07 The Instituto Nacional de Capacitacion Profesional (INACAP), carries the main responsibility for the entire field of vocational, tech- nical and agricultural training. It was founded in 1966 as a subsidiary of CORFO, to carry on the training functions previously assigned to a de- partment of CORFO. The Corporacion de Fomento de la Produccion (CORFO),  - 4 - founded in 1939, is a public corporation promoting economic development through a variety of programmes, ranging from participation in mixed com- panies in all sectors of the economy, financing and operating public de- velopment programmes, financing and controlling legally autonomous subsi- diaries engaged in production and distribution of goods and services, to research and training. The Minister of National Economy is, ex-officio the President of CORFO. CORFO's annual budget needs approval by Parlia- ment to become effective. In 1969, for example, 83% of the budget of Escudos 1,356 million and $171.5 million was funded by the National Treas- ury or - in the case of the foreign exchange budget - consisted of foreign funds made available to the Government but allocated and administered by CORFO. 65% of the domestic income from non-government sources, (i.e. of 17% of Escudos 1,356 million) is spent to cover CORFO's operating expenses. Thus virtually all development activities of CORFO, including the financing of INACAP. are in fact financed out of public funds. 2.08 INACAP operates on a non-profit basis, obtaining its finances mainly through CORFO. It is governed by a council which represents gov- ernment departments, including the Ministries of Education and Labor, the universities, representatives of private employers and the trade unions. The institute caters primarily for persons above the age of 18 years, i.e., for adult workers, the unemployed and school "drop-outs." In 1968 an apprentice training program was started. 2.09 INACAP is well organized (Annex 5). The subject, level, con- tent, duration, and location of the courses offered are closely linked to labor market needs. The training program is highly flexible and adaptable to changing needs. Curricula and syllabi are continuously updated. Equipment and training facilities are appropriate for the present programme. Instructors are well qualified, work on a full-time basis and earn competitive salaries. INACAP provides its own instruc- tor training and retraining courses. The instructor-trainee ratio is between 1:10 and 1:15, depending on the type of course. Planning of INACAP training programs is based on the expressed demands of employers, sector studies of manpower developments and follow-up studies of former trainees. 2.10 Courses are given in 22 INACAP training centers, and through mobile units. Whenever appropriate, INACAP uses the facilities of private firms, farms and farm-cooperatives, and industrial schools be- longing to the Ministry of Education, other public and private institu- tions and the universities. INACAP employs 420 instructors and super- visors out of a total of 700 employees. More than 500 courses were plan- ned for 1969. 2.11 INACAP has experienced a rapid growth, from 16,000 trainees in 1965 to close to 30,000 trainees in 1969 (see also Annex 6). An increase of annual training capacity to more than 40,000 is foreseen by 1975. For INACAP's success it is essential that training programs be highly flexi- ble in responding to short-term labor market changes. INACAP, therefore, does not draw up detailed long-term development plans but plots its future  - 5 - expansion along a cautious course which is well within the limits of its organizational and financial capacity and of economic needs. The expan- sion of 30% foreseen by 1975 which is below estimated manpower needs (chapter IV) has been determined by INACAP's policy to maintain high train- ing standards, which can be achieved only if the annual increase in activi- ties does not outgrow the organizational ability to handle the activities. 2.12 The duration of courses varies from 10 days to 3 months; ap- prentice training extends over 3 years. The types and levels of courses offered are: (a) basic training courses ("Formacion") for unskilled persons; (b) upgrading training courses ("Capacitacion") leading to qualification as a fully skilled worker; (c) specialized courses ("Especializacion Profesional") providing specialist skills; (d) courses for secondary school graduates at intermediate technician level; (e) apprentice training courses; (f) Labor Promotion Courses ("Promocion Superior de Trabajo, P.S.T.) providing general education, with a technical bias, for persons in industry who did not complete a formal education, upgrad- ing them to the level of qualified foreman or shop-floor techniciani; (g) instructor training courses; (h) in-plant training courses at various levels; (i) mobile training courses, also at various levels; (for further details see Annex 7). These courses are being offered in the fields of mechanics and metallurgy, construction, agriculture, fishery, garment manufacturing, mining, elec- tricity, refrigeration and air-conditioning. Annex 8 shows how these training activities correspond with occupational levels, and how INACAP complements, and to some extent supplements, formal education. 2.13 INACAP employs well qualified instructors, who are graduates from secondary technical and agricultural schools or from universities, and who have received specialized instructor training by INACAP. Many have had industrial experience and some have had teaching experience.  - 6 - Salaries and fringe benefits are competitive with those in public serv- ices and compare well with those in industry. It will not be difficult to recruit 50 additional instructors to implement the proposed project. 2.14 In connection with the past and foreseen development of INAGAP two problems have arisen: (a) the effectiveness of supervision may decline as a result of the increased workload (i.e., the growing amount of supervision information to be evaluated for incorporation into operational de- cisions); and (b) the utilization of instructor time, equipment and workshops may become too low as a result of the large number of short ad hoc courses. 2.15 These difficulties could be overcome (a) by setting up and carry- ing out, with the help of data processing equipment to be acquired under the project, continuous course evaluation procedures, and the utilization of the evaluation information in the day-to-day operational decisions, and (b) by increasing the direct involvement of department heads and other senior staff of INACAP in course supervision. During negotiations assur- ances were obtained to this effect. 2.16 Chile has no laws requiring minimum training for occupations and, unlike similar training organizations in other Latin American coun- tries, the budget of INACAP is not financed directly by industry. There- fore, industry does not yet take as close an interest in INACAP's acti- vities as is desirable and as might be the case with direct financial contributions by industry. Pending such an arrangement, which seems to be excluded for some time, INACAP should make a systematic effort to en- list industry's interest and participation in increasing the utilization of INACAP's training facilities. Industry should assist by releasing workers during part of the day to attend day-time training courses. In this way industry could assume indirectly part of the training cost for its own employees. During negotiations assurances were obtained that INACAP will develop a program, in close consultation with the appropriate industrial organizations, to increase the attendance of workers at day- time training courses. III. FINANCING AND EXPENDITURES OF INACAP 3.01 Chile's total public and private education expenditure has in- creased substantially over the last five years, from approximately 4.6%0 of GDP in 1964 to approximately 5.4% of GDP in 1968 (Annexes 9 and 10). Ministry of Education expenditures on vocational and technical education show a downward tendency, thus indicating the increasing role of INACAP in this field.  - 7 - 3.02 Over 90% of INACAP's budget is financed through contributions from CORFO (Annex 11) which in turn obtains its funds mainly from the government budget and from foreign borrowings (see para. 2.07). The proceeds of foreign loans to CORFO, contracted to help finance INACAP's expansion programs, amounted to 31% of INACAP's budget in 1968 and an estimated 6% in 1969. The remainder of INACAP's budget is financed main- ly from fees for training services sold to the Ministry of Education. 3.03 Details regarding the development of INACAPts expenditure are as follows (see also Annexes 9 and 10):