Mexico - Technical Education and Training Modernization Project

Ekopat of The World Bank FOR OMCIAL USE ONLY Repwt No. P-6405-E MEMORANM AND RE NION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOr, RECONSTRUCTION AND DEVELOPMN TO THE ECUTIVE DIRECTORS ON A PROPOSED LOAN IN TEE AMOUNT EQUIVALENT TO US$265 MILLION TO NACIONAL FINANCIERA, S.N.C. WITH THE GUARANTEE OF THE UNITED MEXICAN STATES FOR A TECHNICAL EDUCATION AND TRAINING MODERNIZATION PROJECT OCTOBRM 5, 1994 MICROGRAPHICS 1bis document bas a restricted distribution anad teir frcial dies. its conts may not otlv Report No: P- 6405 ME Type: MOp  CURRENCY EQUIVALENTS Cunrency Unit = New Peso (N$) US$1.00 = 3.38 New Pes (August 1994) FISCAL YEAR January D- December 31 ACADEMIIC YEAR September 1 - June 30 ACRONYMS AND ABBREVIATIONS CEAs Accredited Testing Centers (Cenro de Eauacidn Acretado) CECATI Training Center for Industria Skills (Centm de CapaiacOin pam el Trabajo Indwstial) CErl Center for Industral Technical Education (Centro de Eensefla Tnica hndtial) CETIS Center for Technical Studies in Industry and Servces (Cewi de Estudos Tecnoldgicos dwusriales y de Servcdos) CIMO Multiple Support Service Program to MSMEs (Programa de Calidad Integral y Modenaci6n) CONALEP National System for Vocational and Technical Education (Colegio Nacional de Eduad6n Tdcnica Profesional) Counci Council for Normalition and Certification of Competency Standards (Consejo de Nonmaizain y Cerqwal6n de Competencias Lab7orales) ICB Inteaional Competitive Bidding LCB Local Competitive Bidding MSMFs Micro, Small, and Medium-sized Enuprises NAFrA North Ameican Free Trade Agreement NAFIN National Finacing Company (Nacional Frnanciera, S.N.C.) NVQ National Vocational Qualifications OCs Certification Agencies (Organsmo de Cerdyicacifn) PAU Project Administration Unit IPROBECAT Labor Retaining Program (Progrnma de Becas de Capacitaci6n para Wqjadors) SEP Secreiat of Education (Secretarla de Aducadn Pdbwco) SHCP Secetariat of Finance and Public Credit (Secretara de Hacienda y C o Publio) SMES Small and Medium-sized Enterprises SNC National System of Competency Standards (Sistema Nomaizado de Copwencas Laborales) SNET National System of Technical Education (Sistema Nadonal de Educacidn Tecnoldgica) STPS Secretari of Labor and Social Welfare (Secretarfa del Trabajo y Preivsn Socia)  FOR OFFICIAL USE ONLY MEYICO TE AINICL EDUCATION AND TRAING MODERNIZATION PROJECT WAN AND PROJECT SUMRY Blorro~wer Nacional Faclera, S.N.C. (NAFIN) Guaanntor United Mexcan States Executing Agencies Seeriat of Educain (SEP), Se iat of Labor and Socia - Weimre (STPS), and the Council for Normalization and Catfication of Competency Standards ("Council") aWorkers seeldng tining and/or certfication of their skills; employers seeldng qualified employes Amount US$265 million equivalent Term Repayment in 15 years, including 5 years of grace at the standard variable interest rate g Plan Local Foreig Total --Ss$ million- overment of Mexico 118.3 0.0 118.3 IRD 155.8 109.2 265.0 Beneficiaries 28.7 0.0 28.7 TOTAL 1.2 Povety Catory Not applicable. Program Objective The establishment of the compeency standards and certfication Category system and modularization of tng courses wil have a potntally positive impact on the poor, first by making their participaion in the training easier through shorter and less cosdy courses, ard second by providing them with means of validating their skills acquired outside of the taining insttions. Similarly, fte gender-blind naure of the competency standards and certfication sysem will alleviate biases aganst women in selected technical occupatons Economic Rate of Return Not Applcable Staff Apprail Report Report No. 13416-ME; dated October 5, 1994 . document has a srcd distin-in and may bo se by recipient cly in hO a; of dir lofWdudebl Wtsontets may oto Weedicsed withot Word! -itodtih I>o  MEMORANDUM AND RECOMMENDATION OF THE PRES)ENT OF THE IERD ITHEXEUTIVE DIRECTORS ON A PROPOSED LOAN TO NACIONAL FINANC1ERA. S.N.C WITH THE GUARANTEE OF THE UNITED MEXICAN STATES FOR -A TICNCAL EDUCATION AM TRAINING MODERNIZATION PROJECI 1. I submit for your approval tbe following memrnum and recmme aon n a pposed loan to Nacional flmaciera, S.NC. (NAFIN) with the garante of the United Mexican Stas for the equivalet of US$265 milion to help finance a Technial Education and Training Modenizan Project. The loan would be at the Bans ndrd wariable interewt rate, with a mtuity of 15 years, inrluding five yearsof ge. NAFMIN would be the Boor and the Sectats of Public Education (SEP) and Libo- and Social Were (SIPS) and the Council for Norzation and Certificaton of Competency Standards ('Council) would be the ecting agecies. 2. Bwckgiomd. Mexico's success in stabiizing, ibealzing and privazing fte economy has set the stage for long-term econonic development. With the tatcation of NAFTA, Meco will face accelatd cianges in the industry profiles and in the technolo lvels reqired to be i tionally competitive. To sustain private sector-led growth, Maico wil need an educated and slilled labor force that can resod to the rapidly chaging needs of the labor market. During the last decade, Mexico has made Subtantial advances in the expansion of education and taining opportnities, epecially in the field of technical and vocational training. Achievements in this area include txpansion of the SNEr sysm (Natioa System of Techil Education), the estblshment of CONALEP (Nation System for Vocational and Technical Education) for mid-leve tminal skll traing, and the ongoing PROBECAT progam (Labor Rtrining Program). The SNET system, which includes the publc t insstitutons such as CECATls and CETnS, trains some 500,000 youths annually for mid-level, pre-service technical taining. CONALEP trais over 170,000 new mid-levlc technicins and upgrdes the skills of over 60,000 workes annually. The PROBEAT program has been reaining approximately 50,000 unemployed workr annually in the last five years. In addition, SI supports in-plant training of workers rough CIMO, a multiple upport service program to micro, smal and medium sized enterrises, which has provided training for over 14,000 enterprises annually over the last three years. 3. Despite the progress made in recent years, however, technical traiing in Meco still does not meet the inmediate and future needs of the rapidly changing productive sector. The reasom e twofold. First, the poor quality of basic education is an impediment to the productivity ices of the Medcan labor force. The Government's stategy is to increase investments and recurrent budget resources in basic education to imprv its quaity, espeially in poor sates with u ioy educational indicators. To support the Government's effort i improving the quality of rimary educafion, the Bank has apoved two lons (First and Second Primary Education Projects, Ln. 3407-ME, 1991 and Ln. 3722- ME, 1994, respectively). Second, the technical education and trin system in Mxico suffers from three man wakns: (a) Supply-Driven Programs. Most of the tining offered follows a rigid, academic model, rather than flexible, work-oriented curricla. Long, rigid courses limit access to skll upgrading for the majority of those already employed. Theoretcl subjects and skills prtie are generally not integed, reducing the reeance of the training courses. The suply-d n structureof fte progras does not respond flexibly and rapidly to the changing needs of the labor market; (b) Uneven Quality.  -2- There is very little stndardiztion of outputs of tranin institutions. The quality of training is known to vary greatly across insdtutions, but there is no objective, reliable measur with which to gauge the quality and effectivness of taining programs. Thus, a diploma or ceicate provided by a training institution does not convey much usef infomation to employers about an individual's skiUs. Nor do individuals have clear information about the quality of the raning received and its useuness in the labor market; and (c) Inadequae Pivate Sectr Much of the technical eductio and training, particulaly pre-svice training, is conidered as an integral prt of the public educadon system, and thus is divorced from the wodd of work Policy measures md stategic incentives have been insufficient to induce m