Vocational education and training (VET) continues to be a favoured instrument of social engineering for achieving a series of objectives, such as accelerating economic growth, reducing youth unemployment and benefiting from economic globalisation.

In spite of a great deal of scepticism regarding its effectiveness, policy makers face an era of fiscal constraint, there is a declining ability to finance VET as educational costs rose and budget grow tighter. The struggle to find resources will continue for some years to come, and policy makers will be challenged to make better use of the diverse resources available to finance VET.

Although public revenue has played an important role in financing VET over the past two decades, stagnant economic growth coupled with high demand for services has had predictable effects on educational funding. Public education budgets have declined in relative and absolute terms, general tax revenue cannot be

relied on to finance VET because programme quality cannot be sustained. Alternative ways of financing must be employed by making better use of other resources, however, the consequences of initiatives to diversify financial resources must be understood.

Diversification may mean fundamental changes in government policy, alternative forms of taxation, the devolution of authority and control, and new cooperative working relationships between social partners.

Diversification may mean that enterprises themselves assume a greater role in design and delivery of instruction, in some countries this fundamental reorientation may, in fact, the limiting dimension to the use of diverse financial resources.

There is also no alternatives to finance VET, all alternatives have conflicting impacts on policy, programmes and peoples, there are limitations that condition the way funds can be best used, some of these limitations are at the level of policy, others relate to the kind of training that can best be provided, the constituency served, and the implementation of programmes.

There are ways, nevertheless, to mobilise other sources of financing along with pubic resources in order to extend opportunity and enhance the quality of VET, most countries must rely on a combination of financing mechanisms.

Developing countries follow different pathways to human resource development, the structure of their economies varies, as does  the institutional capacities to finance and implement VET, but the ability to sustain training capacity in what ever form that it takes depends on sound financial strategies, these strategies must be based on an understanding of the limitations and opportunities that the different financing mechanisms present.

Funding Issues

The budget for VET in most developing countries is very modest, the unit cost for VET tends to be high, often exceeding that of basic or secondary education by two to three times, the high cost of facilities, equipment and instructional materials, high institutional cost due to small class size, and relatively high teacher salaries combine to make VET an expensive public investment . Hence the need for other means of financing VET as the public should not shoulder the entire burden, the question is what the optimal level of public investment in VET is.

The heavy reliance on public financing has adverse consequences on programmes ranging from under financing to unstable or unpredictable support, based on the revenues generated and the priorities set at the national and sectoral level, apart from the inefficiency in the use of public revenues, governments cannot meet the rapidly increasing educational demands

There are three main activities or events to which the funding of VET can be related:

enrolment, the duration and nature of programme (course length, attendance requirements and infraustructural needs), the outputs produced (qualifications achieved for school based training and or job attainment  with regard to labour market training)

All three mechanisms are elated to the performance of training institutions, measured in terms of enrolment, attendance or attainment. Public funds are used to fund recurrent costs (salaries, instructional and programme maintenance costs) while capital costs (buildings and equipment) are funded through external agencies or partners.

Allocations are usually based on per student or class size, however, this does not usually account for variations in need, capacity or performance; and there is less incentive to strive for quality.

Alternatively funds can be allocated on the basis of programme completion including students performance, allocation on the basis of completion or attainment is probably the best choice under conditions of financial scarcity as resource usage is more effective and programmes enjoy a higher rate of return.

If the primary goal,, however, is to expand opportunity funding on the basis of enrolment may be appropriate. By making a proportion of a training institution’s budget dependent on the attainment of a particular outputs, an incentive is immediately created for institutions to improve or change certain aspects of their training policies in order to increase their chance of generating the desired outputs.

Public financing is often an insufficient and unstable source of support for VET. The consequence is that programme quality is so low that there is little return on the public investment , whatever form of VET of implementing, funding must be at an appropriate level to assure sustainable institutional capacity, for some countries the most prudent policy initiative is to eliminate poor quality programmes and re-allocate resources, however, there are limited alternatives to public financing in low income countries, the best use must be made of the limited resources that are available, and this may require consolidation.

In conclusion, VET is now financed through a variety of sources, governments have devised mechanisms for shifting part of the financial burden for VET to individuals, families, communities and employers, Much more attention is being given to developing alternatives as the limits of public financing are recognised, the problem is clearly to generate more resources and to put them to effective use, however, in all countries their are limits to realising this objectives.