concept as much as providing a monetary incentive. However, both sectors are dominated by large and some medium-sized firms. To insure the efficient use of government funds, it is important to differentiate between those sectors where networks will take place organically, from those that need a stimulus.

There is no available information on how many PROFOs “graduate” from Government subsidies to independent, self-financing status as a network. While there is anecdotal evidence of success, there is no systematic collection of information on PROFOs related to improved profitability, new markets, new product designs, and other concrete impacts for participating firms. A new evaluation, using the survey methodology developed by the University of Chile and expanded to include sectoral and regional subsets, would be an important step toward identifying the “graduation potential” of PROFOs and the limitations of the networking methodology. This would enable the Government to improve its targeting and medium term support.

The effects of regional network promotion programs on firm growth and productivity are less clear. To deepen the local ownership of private sector development products, the Government pushed for the creation of local resource allocation committees ( _Comités Regionales de Asignación de Fondos,_ CARs). The CARs articulate the various private sector development initiatives with regional development strategies and local priorities. The Government also created the Integrated Territorial Program ( _Programa Territorial Integrado_ , PTI) to support regional development coordination with local governments and other development institutions and take full advantage of synergies between the initiatives. No in-depth evaluation of the PTI has been carried out yet, so it is still unclear whether such synergies have been produced through this coordination mechanism. An impact evaluation of this program would be advisable.

# **MANAGEMENT AND WORKER TRAINING**

Chile is also a leader in vocational training. Its vocational training model is an exception to the dominant Latin American model, which favors public sector-based training programs. Chile favors private sector solutions to skills improvement through training. As a result, since 1976, the Government’s National Training Institute ( _Instituto Nacional de Capacitación_ , INACAP) has competed for training investments from private sector firms on a level playing field. It competes with more than 2,000 universities, schools, centers, and consulting firms.<sup>31</sup> Chile uses payroll levies to provide an incentive for training. These levies can be used in a variety of ways to achieve different objectives. In some countries, the levies can subsidize smaller firms and training services providers. In other countries, they co-finance training investments with a variety of providers. Best practices promote: (i) keeping employers in charge, and keeping the system voluntary; (ii) increasing competition to foster a wide range of providers; (iii) earmarking funds strictly, using levies rather than government grants; and (iv) ensuring that smaller firms are eligible for and informed about available services.

However, most entrepreneurs identified the availability, quality and costs of human resources as one of the least important obstacles to growth—event though the lack of human capital at the managerial level is a major cause of SME failure. In response, management training has become a central part of the Government’s SME development policy. For example, the Management Centers Program (CEGES), begun in 1995, supports small and medium producers to improve their business management skills. Professional multidisciplinary business teams deliver specialized courses and technical services to center members. Other programs include: (i) the _Fondo de Asistencia Técnica_ (FAT), (ii) the _Programa de Asistencia a la Gestión_ , (iii) the _Proyecto Asociativo de Fomento_ (PROFOs, discussed above), (iv) the _Proyectos de Desarrollo de Proveedores_ (Supply Network

> 31  de Ferranti, et.al (2002), Table 4.4, page 84.

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