Azerbaijan: Modernizing Vocational Education and Training for Economic Diversification Sector Development Program

Education / Education sector development - Technical and vocational education and training

The proposed sector development program (SDP) will help transform vocational education and training (VET) in Azerbaijan to develop the human capital needed for economic diversification and the fourth industrial revolution (4IR), and promote gender equality. The SDP is closely aligned with the Government of Azerbaijan's strategic objective of transforming the country's human capital into a driving force to accelerate sustainable, inclusive, private sector-led, and diversified growth. It is also an integral part of the country partnership strategy of the Asian Development Bank (ADB) for Azerbaijan and its strategic pillar of improving infrastructure and strengthening human capital. In addition, the SDP is aligned with ADB's Strategy 2030 and its operational priorities of addressing remaining poverty and reducing inequalities, accelerating progress in gender equality, and strengthening governance and institutional capacity; and with the human development cluster of the Central Asia Regional Economic Cooperation (CAREC) Strategy 2030.

Transforming Azerbaijan's VET system requires sector policy reforms to overcome the binding constraints, and modern VET institutions. In this context, the two-tranche, stand-alone policy-based loan (PBL) component will support the government's medium-term reforms to strengthen the financing, quality and relevance, and institutional set-up of VET; while the project component will help modernize the selected VET institutions and bolster the institutional capacity to deliver the reforms.

The expected impact is the modernization of Azerbaijan's human capital into a driving force for accelerating sustainable, inclusive, private sector-led, and diversified economic growth. The expected outcome will be the improved responsiveness of the VET system to the needs of the labor market and 4IR. The SDP's three outputs are: (i) Financing of vocational education and training improved, (ii) Quality and relevance of vocational education and training strengthened, and (iii) Institutional framework of the vocational education and training sector strengthened.

Azerbaijan's economy still depends on the oil industry and is vulnerable to volatile oil production and prices. To accelerate economic diversification, the government's focus since 2016 has been on developing agricultural production and processing, heavy industry and mechanism engineering, tourism, logistics and trade, and information and telecommunication technology (ICT). Growth in these non-oil sectors is constrained by a skills shortage. Young workers often lack job-specific technical and soft skills such as problem solving, communication, teamwork, and leadership.

The SDP builds on the strategic recommendation that ADB program in Azerbaijan should have a greater focus on building human and social capital in parallel with developing and improving physical structure and support policy reforms. Addressing the long-standing VET sector's issues needs both the policy reform support and modernized VET institutions. The proposed program builds on the demand-driven technical and policy advice on VET and youth employment in 2020, the assessment of the impact of 4IR on Azerbaijan's high-growth potential sectors, and the ongoing support to public sector management and PPPs in Azerbaijan.

Modernized human capital as a driving force for accelerating sustainable, inclusive, private sector-level, and diversified economic growth.

Responsiveness of the VET system to the needs of the labor market and 4IR improved.

Financing of VET improved