Leveraging ODA to Build Enduring Development Institutions: The Case for Vocational Education and Training

Leveraging ODA to Build Enduring Development Institutions: The Case for Vocational Education and Training

Speech by Dr Ngozi Okonjo-Iweala

Annual Conference of Swiss Development Cooperation École polytechnique fédérale de Lausanne, Switzerland

1. Opening remarks


•I am so happy to be here today to join you in your reflections on the importance of vocational education and training. But I would like to discuss the topic in the context of institutions and why they are necessary as the bedrock of all aspects of sustainable development and a stable and successful and fair society.

•It is important to talk about this context of institutions today because Switzerland is an important player in the field of development aid and cooperation, spending over US$ 3.5 billion a year on bilateral and multilateral ODA. Some of that goes to support institution building in countries of focus in Africa and South Asia. Not too many donors focus on institution building, so I want to congratulate Switzerland and urge it to stay the course. Congratulations also on a steady increase in ODA since the early 2000s, both in volume terms as well as percentage of GNI. You are now at 0.52% of GNI, well above the OECD average, and commendably most of the aid is untied.

•So let me get back to institutions. What do I mean by institutions? According to Douglass North, the Nobel Prize winning economist, “institutions are the humanly devised constraints that structure political, economic, and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights). Throughout history, institutions have been devised by human beings to create order and reduce uncertainty in exchange.”

•So, whether we are talking about education, health, politics, economics, or civil society, it is through solid institutions that rules, laws and social norms enable people to work together effectively and peacefully; they define how power is managed and used, how states and societies make and implement decisions, and how they measure and account for the results.

•Strong institutions are the foundation for human development, economic growth, and well-functioning societies. They help to reduce corruption, promote transparency and ensure that decision-making processes are more inclusive and representative, all of which help to build trust in governments.

2. Switzerland, a model of strong institutions

•For an example of this you need to look no further than this country. Switzerland is a country built on strong institutions that are the envy of the world. It has a long history of social harmony, economic stability and long-term, rational decision-making.

•Strong educational institutions are at the core of Switzerland’s success enabling the creation of a broad, educated, and secure middle class. Switzerland devotes a larger share of public expenditure to education than almost any other OECD country, allocating US$ 16,090 per student, compared with the OECD average of US$ 9,487. This enables the recruitment and retention of highly qualified teachers who receive average salaries at the primary and upper secondary levels that are nearly double the average salaries of their peers in other OECD countries.

•Switzerland is a particular leader in its approach to vocational training. I don’t know how many of you saw a very interesting article in the Financial Times of June 16 on the issue of vocational education and training in the US. It is titled, “Paying Young Americans to Learn.” There, Switzerland is raised along with Germany as one of the countries where vocational training receives as much attention as university degrees. So Switzerland has a global reputation for good vocational training institutions.

•More than 65% of students in upper secondary education in Switzerland were enrolled in pre-vocational or vocational programmes. And these vocational education programmes are highly practical, with 90% of students combining school and work-based learning, unlike other OECD countries that are only school-based. This system equips individuals to find well-paying jobs and provides the country with a high-skilled workforce that has contributed significantly to its economic success.

•Perhaps this is why Switzerland also has such an extraordinary track record for innovation. Although best known for its precision clocks and watches, I probably don’t need to tell you that this is also the birthplace of everything from Velcro, aluminium foil and stock cubes, to the electric toothbrush.

•Switzerland’s public transport network similarly reflects the strength and performance of its institutions. At its core are railways, which connect almost every corner of the country integrating the Swiss Federal Railways (SBB) with private railways and every other form of public transport. Like everything else, the efficiency of the system is judged by high standards. Perhaps that is why the SBB’s drop from 95.9% of trains on time in 2007 to 95.8% in the following year made news headlines.

•The fact is, there is a reason why so few people outside Switzerland can name the Swiss President (presently, Doris Leuthard) and yet so many are willing to put their money here and send their children to Swiss finishing schools. It is because they trust Swiss institutions.

•Just consider the opposite. Without strong institutions, the sustainability of economic growth and development – and even the sustainability of the state itself – is at stake. You need only look at fragile states, such as Yemen, Sudan and Somalia, to see evidence of this.

•This is one reason why institution building will play such an important part in our achieving the Sustainable Development Goals, and why Switzerland will become the epicentre of the work that gets us there. With Geneva home to representatives of around 175 states, nearly three dozen international institutions, bodies and secretariats – including Gavi, the organisation which I chair and to which Switzerland is one of the newest donors (thank you!) – hundreds of NGOs and corporates, and where 200,000 people come every year to have dialogues, Switzerland is where people come to figure out how we survive and thrive together in this complex world.

3. How do we build strong institutions?

•But strong institutions are not easy to build; they require time and sustained effort.

•To take another Swiss example, an institution that goes to the very core of Swiss culture is the Commune. This bottom-up institution underpins social cohesion within Switzerland and it is through this that the government and its institutions are held to account. Yet the commune is something that was not conceived, engineered or designed, but was formed iteratively over centuries.

•Indeed, the strongest institutions were not created overnight, but rather they have emerged through time, sculpted by process. The US Bill of Rights, which forms an integral part of that most revered of American institutions, the US Constitution, is a classic example. It is after all made up of amendments. The point is that it can be difficult to get things right first time.

•In fact, history has shown that some of the strongest institutions have come about through a process of struggle. That doesn’t necessarily mean through conflict, but through a long-term process of development interconnected with broader social development. Think evolution, not revolution. This kind of struggle can provide conditions that produce a testing environment, the iterative loops that can lead to subtle changes, to solutions, allowing systems to co-evolve and ultimately creating a context that can help provide legitimacy.

•The fact that strong institutions are not easy to build, requiring time and sustained effort, presents a quandrary for the development community. Donors, and their tax payers, often have shorter-term expectations with an emphasis on seeing visible results quickly. This means aid is typically project-based, focusing on more easily measurable outputs.

•This has left institution-building somewhat of an orphan. It is actually quite difficult to tease out what is institution building in most countries’s ODA. Most have it under governance and peace. The good news is that more development funding flows to governance and peace than any other sector. This amounted to US$ 17.3 billion – or 15.7% of all ODA – in 2012 according to the OECD. The bad news is that this figure appears to be on the decline, having fallen from 17.9% from three years prior. Moreover, only around half of this was designed to directly strengthen public sector and legal institutions (the rest was designed to support civil society, media and peace-building efforts). Switzerland is the exception to this, investing more into state reform than almost any other sector.

•Perhaps even more telling is that only one third of this support is channelled through the public sector institutions it is designed to support, with the majority flowing to NGOs or multilateral organisations. And most of this is for project-based interventions rather than direct disbursements into national budget systems.

•Why? Because, this provides donors with easier accountability and more measurable and immediate results. But how can we effectively build these institutions if we aren’t willing to invest in them? While parallel structures are easier to build, at the end of the day it is a lack of strong institutions that makes states fragile.

•The relative lack of support for institution building is a particular challenge in rapidly growing economies – such as Nigeria and India – where institutional development has not kept pace with economic growth. Donors are increasingly disengaging from these countries as they reach middle income status, even where those countries continue to need support to strengthen their institutions.

4. First-hand account
•My first-hand experience in two terms as Nigeria’s Finance Minister, 2003-2006 and 2011-2015, convinced me that the true road to sustainable and inclusive growth lies with the development of institutions. Let me just take a moment to tell you why and link it to our health and education agenda.

•When I first became Finance Minister in Nigeria in 2013, I found very weak systems, processes, rules, and regulations—in short, very weak institutions in our public financial management system. Virtually all transactions were cash-based. There was nothing on a technological or electronic platform, meaning that if I wanted to pay the wage bill of a Ministry, we did it in cash transferring monies to the Ministry’s bank account for payments. To compound matters, there was no clarity on the number of civil servants on the payroll. Ministries would send differing numbers each month, sometimes making the wage bill and recurrent government expenditures high, and unpredictable. The cash-based transactions and lack of firm payroll numbers left room for manipulation and corruption. Unscrupulous civil servants in collusion added phantom workers to the payroll and collected their paychecks. This phenomenon was known as ghost workers. Ghost workers even retired to become ghost pensioners!

•I was horrified to see the corruption in government caused by the absence of a financial management system. With the president’s support, I requested the World Bank and DFID to help; USAID also pitched in. With the support of about US$ 92 million in concessional loans from the World Bank, we set about building an electronic payments platform for the federal government, the Government Integrated Financial Management Information System, or GIFMIS. We set up a biometric system to capture and identify all civil servants and eventually pensioners with a system known as IPPIS—Integrated Personnel and Payroll Information System. We also developed the Treasury Single Account (TSA) so that the Ministry of Finance could have an overview of all government accounts. These three systems resulted in much stronger financial management institutions. By 2015, we were able to weed out over 65,000 ghost workers, saving the government over US$ 1.1 billion in fraudulent payroll costs.

•But building these institutions was not easy. Those benefitting—the vested interests fought back, stalling and blocking installation of these systems. In and of themselves, getting the software and hardware and trained staff in place was not easy. It took 10 years to build the systems. When I left government after my first stint in 2006, the pace of work slowed considerably and almost ground to a halt. Completion of these systems was one of the strong motivating factors for my going back for a second term in 2011-2015.

•This example illustrates what I tried to say earlier. Institution building takes time. It requires staying power but the payoffs can be large if you get it right. Not doing it is costly. How can you finance health, and education, especially vocational education and training sustainably, for young people if domestic resources are being siphoned off due to the absence of strong financial management systems and institutions?


5. Challenges

•What I have just said speaks volumes about why it is so important to build strong institutions across sectors in developing countries. I have given you an example of financial institutions in Nigeria. In health, we have seen in Gavi that one of the biggest differentiators in the performance of countries’ immunisation programs is the strength of their health institutions, and especially, personnel systems. That is why Gavi is investing heavily in strengthening leadership and management in immunisation. The University of Rwanda, for example, now has a Centre of Excellence partially funded by Gavi which is devoted to training healthcare professionals across East Africa, creating strong supply chains through strong management.

•So what about educational institutions, particularly in Africa and particularly for vocational education and training. Education today in Africa is a crisis. Today, 300 million out of 350 million children and youth in Africa are not on track to reach minimum levels of secondary school skills by the time they leave school. This is one-third of all children that are not learning around the world. Of these, 240 million are not on track to even achieve primary level learning. Less than 10% continue to post-secondary education to gain skills needed for employment. Yet today our international support for education - all combined education ODA from donor countries and international institutions - amount to less than $10 per child in Sub-Saharan Africa, barely enough money to buy a single textbook!

•As we look ahead, these numbers will just get worse – and a large share of Africa’s growing youth population will be left without the necessary skills for a rapidly changing job market. On current trends, by 2030, close to 370 million (up from the 300 million today) children and young people in Africa will not be on track to obtain basic secondary level skills. That is 4 out of 5 children and young people in Africa.

•What’s even more alarming is that Africa will represent an increasing share of the world’s out-of-school and uneducated populations of young people. While Africa will have one-third of the world’s children, it will be home to 70 percent of the world’s children who are out-of-school, more than 60 percent of all children not on track to achieve primary level skills, and nearly 45 percent of the world’s children who will not be on track to obtain basic secondary level skills by 2030.

•With large parts of the population with no skills and no opportunity, it’s not surprising that forecasts show that in 2030, 90% of the world’s poor will be in Africa and half of the world’s poor will be African young people.

•These shocking numbers should ring alarm bells for us all, as we know far too well that the lack of quality education, skills, and jobs for young people can create vicious cycles of high population growth, economic failure, forced migration, and threats to peace and security. The far-reaching economic, social and political repercussions caused by the skills gap will pose significant risks to stability in the region. As current events sadly demonstrate, discontented, jobless youth are easy prey for extremists who exploit their anger at being left behind.

•On the other hand, around the world, 40 percent of employers feel they cannot find candidates with the necessary skills. This issue will only be amplified in the coming years. As technological changes expand and current tasks and occupations become obsolete, we will need to train people for new skills, new qualifications, and learning how to learn. Some estimate that half of the jobs we do now are at risk of being automated by 2050. The challenge for Africa is how to prepare for these new trends, so its young people are not left further behind. Vocational education and training will be central to creating the 20 million new jobs needed on this continent to absorb job market entrants in the next decade.

6. Opportunities

•So, what can be done? There is some good news. For the past two years, I have been honoured to be a member of the International Commission on Financing Global Education Opportunity – also known as the Education Commission. We are a group of 27 world leaders committed to ensuring every child’s right to a quality education, under the leadership of UN Special Envoy for Global Education Gordon Brown.

•The Commission produced a ground-breaking report last September called The Learning Generation that sets out a vision for getting all young people into school and learning within a generation. We found that if countries progress at the pace of the 25% fastest improvers, we can significantly improve education outcomes and give every child an opportunity to learn within a generation.

•The need for rapid expansion of skills relevant to the world of work will require tailored and practical approaches. Today’s theme is “Vocational Education Creates Prospects” – and for Africa, I could not agree more.

•But African schools, on average, lag behind the rest of the world in terms of the availability of vocational training and post-secondary education. On average in countries around the world, nearly 30 percent of upper-secondary school students attend a vocational secondary school; in Africa, it is less than 20 percent.

•I believe however there is an enormous opportunity to leapfrog into an education future by:
i. learning from existing models that have proven results, including yours here in Switzerland
ii. leveraging innovation,
iii. partnerships with the non-state sector including employers, and
iv. accessing more and better finance for vocational training and education

Opportunity 1: Learning from existing models and investing in what works

•For any reform effort to succeed, we need a focus on performance, results, and learning from what works. Existing models like Switzerland’s highly respected vocational training and apprenticeship programs and Germany's Vocational Gymnasia offer many keys to success. Many of you are very familiar with these approaches. But I think the key is to not just focus on the classroom, but to combine school with work-based learning. In America, under the vocational program mentioned in the FT article, they also pay the students so they earn a wage.

•African countries can also learn from your successes and that of other countries that have more recently developed such as South Korea. In two generations, Korea has gone from being a country with mass illiteracy to becoming an economic powerhouse. Skills development has played a central role in driving Korea’s rapid economic development, with strong leadership from the government to ensure the supply of a skilled workforce. Korea’s education system is now one of the highest performing in the world.

Opportunity 2: Innovation

•Innovation and developing new and creative ways to achieve results will be critical to meet the education challenges ahead. Harnessing technology for teaching and learning provides an exciting opportunity to transform and modernize vocational training. Technology and career-oriented online training can play a significant role in addressing the skills and provision gap.

•The Commission recommends that governments and employers create common digital learning platforms to bring together online and offline content that is mapped, certified, and sequenced in ways that are relevant and consistent with national curricula and local labour market needs.

•Governments and employers should also act to address gaps in provision by incentivizing and investing in the development of high-quality, demand-driven content tailored to local curricula, standards, and needs. This will be especially important in ensuring that digital learning can help reach and engage those at greatest risk of educational exclusion who often stand to gain the most – adolescent girls, refugees, street children, children with disabilities, adults who lack basic skills, and young people with less resources to reinforce learning outside the classroom.

•Technological innovation could allow African governments to quickly expand post-secondary education and skills training without having to follow the expensive, and for many African governments, unaffordable “brick and mortar approach”. Modern technology opens an avenue with online learning, which can enrol students at a fraction of the costs of a "brick and mortar" university. Many organizations are jumping into this field. For example, UNICAF, an online university in Africa, currently enrols nearly 10,000 students at a fraction of the cost of most brick and mortar universities and plans to expand to 100,000 students by 2020.

Opportunity 3: Partnerships with non-state actors

•The private sector has a broad and vital role to play. As an employer, it is essential that the sector has a strong voice in advocating for education and ensuring it stays relevant for future skills needs.

•As an investor, the private sector plays an important role in the expansion of private and innovative financing for education and increasing the focus on results in educational investment.

•As a direct provider of schooling- both vocational and otherwise- the private sector is playing an expanding role in many countries, which brings considerable opportunities as well as challenges.

•As corporate citizens, socially-responsible private sector organizations contribute financially to education, impact the education and skills agenda through their operating models, and can help influence public and policy debate around vocational education and training.

•The success of the private sector depends not only on the future skills of the workforce but on the health and success of the economy as a whole. Governments must recognize that the private sector is much more than just an education provider or investor – much like civil society organizations, the private sector has a powerful leadership and advocacy role to play as well.

•There is great potential for employer-led innovation. Effective training models are proving very successful in supporting transitions into work and further learning. The best models – like those used here in Switzerland – involve employers from the start of program design and offer meaningful exposure to real jobs. Learning is hands-on, often combining practical work-focused skills with theoretical knowledge and the development of soft skills. Young people should be given the chance to intensively practice and embed skills over time and gain qualifications or accreditations to signal their skills to future employers. Critically, young people should be supported to gain general transferable and academic skills alongside any job-specific training, to enable them to work flexibly in the future or pursue further learning.

•To expand the role of employers in education, governments should give employer organizations a seat at the table in the development of education and skills policy – and include the informal sector wherever possible. Sadly, on my continent, this is far from being the case. We really need to push hard for reform here. Governments should also invite and encourage employers to innovate in the design and delivery of training, and ensure that skills systems are sufficiently flexible to make this possible.

•Partnering with high-profile employers and industry bodies can enable governments to promote the value of investing in skills and raise the status of vocational training to employers. Governments can also find ways to incentivize or require employers to invest in skills using fiscal incentives through the tax system. Such investments have delivered high returns.

•Strengthening the links between education and employment also requires giving parents, teachers, and young people better information on labour market needs and the employment outcomes of different learning pathways. Better information will help young people choose training which is most likely to suit their needs and lead to good job outcomes, and force education providers to focus more on their outcomes and on the relevance of training to employers’ needs.

Opportunity 4: Finance

•Creating new and strengthening existing vocational training institutions and programs of course costs money. Countries need to mobilize more and better domestic resources for education, and this should be complemented by increased international financing to improve effectiveness.

•The Commission has also put forward a game-changing proposal for an International Finance Facility for Education which would bring together multilateral development banks alongside public and private donors to raise $10 billion or more in additional financing per year for education by 2020.

•In summary, you can see that building strong vocational education and training programs in place requires building strong institutions that can learn from what works, innovate, and partner with non-state actors to deliver good outcomes. But this takes time. And the question I have for donors is whether they can take the time and patience to build these institutions in an environment increasingly hostile to aid. My hope and wish is that the answer to this question is in the affirmative and Switzerland will lead the way given its long tradition of great and durable institutions.

•So what can Switzerland do? First and foremost, share its strong and successful experience in building vocational education and training programs with developing countries, especially in Africa. I urge you to find ways to substantially expand on the work you are doing now in Africa in this area. Devote more resources and leverage them better for institution building in African countries, especially in the area of vocational training. Stay the course. Building institutions requires long-term commitment. In addition, we need to measure results more easily to encourage your taxpayers.
Conclusion

•Ladies and gentlemen, let me conclude by acknowledging that, even as we gather here to discuss some concrete development challenges, we all realise that we live now in uncertain times where some are turning away from multilateralism towards unilateralism, from international to domestic agendas, times where the gap between the long-term needs of poor countries and the short-term expectations of rich ones who are donors may be widening.

•Times like these leave us worried and troubled, but it is times like these that demand true leadership. I know that in its own low-key and programmatic way, Switzerland can provide the leadership needed by donors to stay the course in the poorest countries and build for the long term. As xxx once said, (pick)

o “A genuine leader is not a searcher for consensus but a molder of consensus.” – MLK

o “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” – MLK

o “It is better to lead from behind and to put others in front, especially when you celebrate victory when nice things occur. You take the front line when there is danger. Then people will appreciate your leadership.” - Mandela

•Thank you, ladies and gentlemen.