67349 MATCHING ASPIRATIONS Skills for Implementing Cambodia’s Growth Strategy MATCHING ASPIRATIONS Skills for Implementing Cambodia’s Growth Strategy ©2012 The World Bank The World Bank 113 Norodom Blvd. Phnom Penh +855 (0)23 217 304 www.worldbank.org/kh Technical Papers are published to communicate the results of The World Bank’s work to the development community with the least possible delay. The typescript manuscript of this paper therefore has not been prepared in accordance with the procedures appropriate to formally edited texts. Some sources cited in the paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed herein are those of the author(s), and do not necessarily reflect the views of the International Bank for Reconstruction and Development / The World Bank and its affiliated organizations, or those of the Executive Directors of The World Bank or the governments they represent. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. Report number: 67349-KH Cover Location: The Royal University of Agriculture in Phnom Penh Photographer: Dylan Walker FOREWORD Workforce skills influence a nation’s performance in economic development, poverty reduction, and jobs creation. Investment in the skills of the workforce not only contributes to higher productivity and enhanced competitiveness but also provides employment and more inclusive growth. Member nations of ASEAN, including Cambodia, recognize the importance of skills for prosperity and seek to promote skills development and the free flow of skilled labor. A skills development agenda is vital for Cambodia. Owing to Cambodia’s comparatively young population, the country will see its future economic performance, technological change, and new jobs determined by young people’s ability to acquire skills. Accordingly, the Royal Government of Cambodia has recognized the importance of acquiring skills as part of the Rectangular Strategy for Growth, Employment, Equity and Efficiency. The Supreme National Economic Council (SNEC) invited the World Bank to contribute and collaborate on an analysis of the emerging imbalance of skills facing Cambodia’s economy, underlying causes, and possible responses. The result of this fruitful collaboration is this report. Both the report’s early findings and the proposed skills development action plan were discussed at a roundtable meeting held in Phnom Penh on March 31, 2011. The discussion involved representatives of multiple ministries, private companies, and other stakeholders. The discussion highlighted the importance of adopting a life-cycle approach to skills development – recognizing that a critical foundation for skills is established in early childhood as part of basic education. Furthermore, private sector representatives emphasized the need to match the skills learned in Cambodia’s education and training systems with the needs of the labor market. This report provides valuable insight for Cambodia to develop the skills necessary to match the country’s development aspiration. At the same time, it outlines specific actions to create opportunities for access to information in the skills market, to expand household-oriented interventions, to improve school retention, and to strengthen second-chance options – including technical and vocational education and training. This report further proposes how to expand financing for early childhood development effectively, to strengthen institutions, and to promote incentives toward better results among skills providers, including higher education institutions. The analysis in this report represents an important collaborative contribution to Cambodia’s growth strategy and human development agenda. We hope you will find it useful. Hang Chuon Naron Qimiao Fan Secretary of State Country Manager for Cambodia Ministry of Economy and Finance The World Bank ACKNOWLEDGMENTS This report was prepared by a World Bank team led by Hana Brixi in cooperation with experts of the Supreme National Economic Council (SNEC). Arvil Van Adams, Sandra D’Amico (HR Inc Cambodia), and Alexander Krauss contributed background studies. The team consulted with and received valuable feedback from government officials of various government ministries and agencies, including the Ministry of Economy and Finance (MEF), the Ministry of Labor and Vocational Training (MLVT), the Council for the Development of Cambodia (CDC), and other government and partner institutions, such as AusAid. Many senior officials and experts provided comments and suggestions at the Skills Roundtable in Phnom Penh on March 31, 2011. The team would like to recognize the invaluable guidance provided by H.E. Hang Chuon Naron Secretary of State MEF and Permanent Vice-Chairman of SNEC, H.E. Pich Sophoan Secretary of State MLVT, and H.E. Pak Pan Secretary of State MLVT. The team would also like to express a very special thanks to the following officials for technical contribution to this analysis: H.E. Sok Chenda, Secretary General CDC, H.E Mey Kalyan, Office of the Council of Ministers, H.E Laov Him, Director General of TVET, HE. Heng Sour, Director General MLVT, H.E. Hong Chuon, Head of NEA, H.E Mak Ngoy, Director General MoEYS, Dr. Chin Heang Thavrith, Director of ITC, H.E Ros Seilava, Deputy Secretary General SNEC, H.E. Phan Phalla, Deputy Secretary General SNEC, H.E Chea Vuthy, Deputy Secretary General SEZ Board CDC, H.E. Sann Vathana, Deputy Secretary General CARD- SPCU, Mr. Tep Oeun, Deputy Director General MLVT, Mr. Ung Luyna, Head of Social Policy Research and Analysis Division SNEC, Mr. Suon Sophal, Deputy Director SEZ CDC, Mr. Hay Sovuthea, Deputy Head of Social Policy Division SNEC, Mr. Lay Sokkheang, researcher for SNEC, and Mr. Sou Chan Kresna, staff member of CARD-SPCU. The team would also like to recognize the contribution of non-government partners that provided helpful insights and information: Ms. Lili Sisombat FO/IFC G-PSF (Government-Private Sector Forum), Mr. Pierre Tami (Founder Hagar International), Ms. Nicky Enriquez (HR Manager, Mobitel), Mr. Si Len (Training Manager, CAMFEBA), Mr. Ken Loo (Director, GMAC), Mr. Yok Sothy (Director, NTTI), Mr. Chea Marong (Senior Researcher, BDLINK Cambodia Co., Ltd), Mr. Hem Tola (Associate Consultant, BDLINK Cambodia Co., Ltd), Mr. Peou Sam (CEO, Nautisco Seafood Manufacturing), Mr. Kuoch Kim (CSDEC), Ms. Has Dina (Sok Sokkha), Mr. Chhar Khemarin (NTTI), Dr. Tan Monivann (Vice President, Mong Rethy Group), and Ms. Hay Sithet (Loran Imp.Ezp.com., Ltd). Many World Bank staff and consultants, including Mathew Verghis, Stephane Guimbert, Carlos Sobrado, Omporn Regel, Timothy A. Johnston, Christian Bodewig, Jamele Rigolini, Simeth Beng, Tsuyoshi Fukao, Julian Clarke, Mr. Harold H. Alderman, Mariana Infante Villarroel, and Vanny Peng contributed useful comments and suggestions. Mariana Infante Villarroel, Vanny Peng, and Ravan Chieap assisted in the developing the report, printing, and translating. The NATI Khmer Company translated this report into Khmer. Finally, the team would like to express sincere thanks for the strategic guidance of Qimiao Fan (Country Manager for Cambodia, the World Bank), and for valuable advice of Annette Dixon (Country Director for Cambodia, Lao PDR, Malaysia and Thailand and representative for Myanmar, the World Bank), Xiaoqing Yu (Human Development Sector Director), and the former and current Education Sector Managers Eduardo Velez and Luis Benveniste, respectively. CONTENTS EXECUTIVE SUMMARY 1 1. CAMBODIA’S GROWTH STRATEGY DEMANDS BETTER SKILLS 4 2. WHAT IS THE NATURE OF THE SKILLS MISMATCH AND ITS CAUSES? 8 2.1 What skills and mismatches do employers face? 8 2.2 Where are the gaps in skills provision? 10 2.3 What are the causes of the skills gaps and mismatches in Cambodia? 19 3. ACTIONS AND STRATEGY FOR SKILLS TO ADVANCE CAMBODIA’S ECONOMIC DEVELOPMENT 22 3.1 Developing a skills action plan 22 3.2 Implementing the action plan and considering a more comprehensive strategy beyond 28 REFERENCES 30 ACRONYMS AusAid Australian Agency for International Development CAMFEBA Cambodia Federation of Employers and Business Associations CARD Council for Agricultural and Rural Development CDC Council for the Development of Cambodia CSES Cambodia Socioeconomic Survey D&D Decentralization and De-concentration ECD Early Child Development EMIS Education Management Information System GDP Gross Domestic Product GMAC Garment Manufacturers Association in Cambodia IFC International Financial Cooperation IT Information Technology ITC Institute of Technology of Cambodia MEF Ministry of Economy and Finance MEYS Ministry of Education, Youth and Sports MLVT Ministry of Labor and Vocational Training NEA National Employment Agency NGO Non-Governmental Organization NTB National Training Board NTTI National Technical Training Institute RGC Royal Government of Cambodia SEZ Special Economic Zone SNEC Supreme National Economic Council SPCU Social Protection Coordination Unit STEP Skills toward Employment and Productivity TVET Technical and Vocational Education and Training UNESCO United Nations Educational, Scientific and Cultural Organization 1 EXECUTIVE SUMMARY The Government has rightly emphasized skills 62 percent of employers noted that vocational as part of Cambodia’s Rectangular Strategy for training graduates do not have the right skills Growth, Employment, Equity and Efficiency.1 (while 38 percent suggested that there are too Over the past decade, Cambodia improved the few vocational graduates). Moreover, 31 percent skills of its workforce at a slower rate than other of employers noted that it is difficult to train or countries in East Asia. And, although Cambodia’s upgrade their existing workforce – this may reflect firms do not perceive skills as their main business not only a low quality and availability of training constraint, skills shortages may negatively affect programs but also a weak skills foundation on the process of both industrial and agricultural which to build. upgrading and economic diversification. The percentage of firms reporting skills as a major Employers perceive the sharpest skills constraint to growth in the 2007 Investment shortages in senior management; they identify Climate Survey increased to 15.5 percent from soft skills as the most important type of skills 6.5 percent in 2003. Furthermore, 22 percent lacking in employees. In the HRINC 2011 survey, of Cambodia’s foreign firms identified skills as over 70 percent of employers reported a major a “severe� or “very severe� constraint to their shortage in management skills, 36 percent in businesses. Because foreign direct investment middle management and supervisor skills, and appears positively correlated with technology 34 percent in professional staff skills. Among the adoption and skilled workforce utilization, any most deficient soft skills, 52 percent of employers unrealized foreign direct investments generates identified work attitudes in unskilled workers; 45 opportunity cost. Moreover, with 56 percent of percent cited decision-making skills in semi-skilled the population below 25 years of age in 2008, workers; and 64 percent mentioned analytical the ability of young people to acquire skills will skills in skilled workers. Furthermore, employers influence Cambodia’s economic performance and complained about difficulties in finding employees growth opportunities. with not only specific vocational skills but also basic skills such as literacy and numeracy. Employers point to a structural imbalance in skills supply, including a relative shortage of Many employers provide formal training vocational training graduates compared to to address skills gaps; however, they report university graduates. In a new survey of 78 difficulties in accessing good training employers by HRINC 2011, 73 percent of providers. The survey conducted for this policy employers reported that university graduates do note found that 55 percent of employers are not have the right skills (while only 12 percent said training at least half of their workforce; whereas, that there are not enough university graduates); most other employers train at least some of 1 This note follows on the 2010 World Bank report, Providing Skills for Equity and Growth and complements the World Bank 2010 note Implementing Cambodia’s Growth Strategy after the Crisis. It builds on the discussions during the World Bank Social Protection mission in November 2010 and on the policy debates at the Cambodia Economic Forum of 2011. It aims to support the Government in identifying actions to address constraints and to outline Cambodia’s skills strategy for the future. 2 Executive summary their workforce (HRINC 2011). This survey also Secondary education – and technical and revealed that 64 percent of employers experience vocational education and training (TVET) – major difficulties in finding good training faces not only low attendance but also an providers. As a remedy, employers demand more underestimation of its value. Net enrollment information – including information on workplace rates remain low at about 32 percent for lower- training providers, quality of vocational training secondary education, about 12 percent for upper- centers, availability of particular skills, and quality secondary education, and less than of universities – and they would like to develop 6 percent for TVET. (EMIS 2010 and CSES 2009) links with universities. Less than one-half of students complete their secondary education. The reasons for non- In the supply of skills, Cambodia is facing attendance and dropouts are mainly financial, with major constraints in the earlier stages of 52 percent of those not attending lower-secondary the life cycle, starting with early childhood education, and two-thirds of those not attending development. Empirical evidence shows that upper-secondary education – reporting poverty, effective early childhood development programs requirements to earn income, and household have a very high payoff; conversely, handicaps chores as the main reasons. (CSES 2009) built early in life are difficult and costly, if not impossible, to remedy later. In Cambodia, The Ministry of Education, Youth and Sports however, acute malnutrition remains widespread (MEYS) has begun to recognize and subsidize – negatively affecting children’s mental households to keep children in school. Further development and future skills potential. Lack of initiatives, although urgently needed, seem food in the household has been associated with constrained by Cambodia’s low level of education lower school attendance and completion. expenditure. Moreover, household perceptions of the immediate financial loss from keeping a child in Primary education exhibits weaknesses in school seem compounded by underestimating the completion and learning. Government policies value of education, owing to a lack of information have raised net enrollment rates at the primary about financial return from both secondary level to nearly 95 percent in 2009/10 in both urban education and TVET. For instance, returns and rural areas. Wastage in primary education is, to TVET at the secondary level – reaching 60 however, high with repetition and dropouts at 11 percent compared to primary education and 112 percent and 49 percent, respectively. Reasons for percent for post-secondary TVET compared to non-attendance and dropouts are linked primarily lower-secondary education. But only 17 percent to conditions in households including poverty, of students express a desire to enroll in TVET. household chores, and income generation Consequently, low attendance at the secondary (reported as the main reasons by 13 percent level calls for both second-chance programs and of children aged 6-11 not attending school). non-formal training. Additional reasons for non-attendance include children being perceived as too young to attend Finally, to produce high-level skills, Cambodia is – although they have reached the official age disconnected from the market and fields of study, of attendance (54 percent) – and a disinterest which is becoming a more critical challenge than to attend (17 percent). Reasons for being low tertiary enrollment. Cambodia’s institutions of uninterested or considered too young for school higher education supply a relatively large amount of may reflect early childhood problems, including graduates in accounting, finance, and management development delays and mental impairment owing (one-half of all bachelor students in 2009/10), to malnutrition and reduced mental activity due compared to civil engineering (1.5 percent of to insufficient stimulation in the early years of life. students), and science and technology (0.1 percent Furthermore, the national student assessment of students). Despite agriculture and off-farm rural tests for Khmer language skills and math (grade 3, activities being Cambodia’s main industries in 6, and 9) demonstrate that students’ basic learning need of improvement, only 2.3 percent of students achievements, although improving somewhat, study related disciplines. Part of the explanation remain low. Teachers’ availability and qualifications stems from recent youth surveys that show that appear to be a key constraint. students neither understand the skills demanded by employers nor possess access to reliable information on study and career opportunities. Executive summary 3 Overall, the causes of Cambodia’s skills services, quality assurance, licensing, regulation, gaps and mismatches appear in the areas of and accreditation) to connect the demand with information and coordination, as well as in the supply of skills. Market institutions are unlikely education financing, coverage, and quality. to emerge in the private sector due to their public Employers seem to lack channels either to goods nature. communicate their demand for specific skills or to influence skills development policies. Complementing policy initiatives already Strengthening the National Training Board (NTB) underway; Cambodia’s skills action plan needs to enable firms to convey their needs to the to address the main impediments for skills government and the provider community can to match its aspirations. As an immediate play an important role in addressing information priority, the government can create opportunities problems. On the supply side, the causes include to access information in the skills market, to the challenge of managing resources in ways expand household-oriented interventions to that create incentives for good performance improve school retention, and to strengthen and accountability for results, the challenge of second-chance options – including TVET. To lay a teaching soft and technical skills, and the ability foundation for the future, the government should of bringing schools and industries closer together expand financing for early childhood development, to promote quality and relevance to market strengthen institutional development, and promote demand. This also covers the challenge to further incentives toward good results among skills assist households to prepare children for school providers, including higher education institutions. and to have them attend. Finally, the skills market The proceeding table summarizes the proposed mainly suffers from weak market institutions actions for consideration. (such as coordination mechanisms, employment Skills Development Action Plan: Immediate priorities and laying the foundation for the future Objective Skills supply Laying the foundation for the future 1 • Enhance employment counseling and • Enhance the NEA’s capacity and partnership with the Information access job search services private sector • Use media to show study and career opportunities, promote TVET 2 • Mainstream good TVET programs • Strengthen the capacity of the NTB to deliver employer- Coverage in the focused reform of education and training “missing middle� • Consider ways to encourage employers to invest in training their workforce 3 • Begin upgrading a small number of • Reform secondary curriculum to improve the teaching Quality and market skills providers, including non-formal of science, math, engineering and other technical relevance training centers, in collaboration with disciplines, entrepreneurship, and soft skills local industries • Strengthen accountability of communities and schools as part of the D&D process 4 • Expand household-oriented financing • Increase expenditure on cost-effective interventions Financing instruments for school retention early in the life cycle efficiency • Explore different financing tools to promote incentives toward good results among skills providers, including higher education institutions 4 1 CAMBODIA’S GROWTH STRATEGY DEMANDS BETTER SKILLS Cambodia has begun laying the foundation The upgrading and diversification of the for a more diversified, productive economy. industrial structure faces multiple coordination Following the crisis, the government has not only and information challenges.4 In particular, seized short-term opportunities for recovery but market information and coordination failures also moved Cambodia’s growth strategy to the inhibit entrepreneurship and new business next stages: (a) diversifying the economy based development, which would otherwise create on existing comparative advantages; and (b) employment in new industries of the economy. upgrading endowments to move up the ladder The World Bank’s Doing Business Survey of comparative advantages – beyond the current ranks Cambodia 147th out of 183 countries in mix of abundant land, a geographically strategic 2010 – suggesting that it is costly to set up a position, and a low-cost labor force.2 business there. The Investment Climate Survey identified governance, regulatory policies and Cambodia’s existing skills constraints and administration – along with tax rates and access bias toward low-skill labor-intensive industries to electricity – as the main constraints to growth. undermine its growth strategy. Low wages and labor costs, attributable to the large supply In the labor market, information and of unskilled labor, are influencing the types of coordination challenges surface as both industries coming to Cambodia. Low-skill, labor- persistent skills shortages and surpluses. intensive production has expanded, with clothing Schools and training centers – together with and apparel accounting for 88 percent of the students and trainees – appear to be locked country’s exports. In the near future, Cambodia into patterns of investment that perpetuate skill expects to continue attracting low-skill, labor- imbalances. While the economy is focused on intensive industries that compete on the basis low-skill production, there are simultaneously of low labor costs.3 This trend, together with unmet demands for higher level skills in selected Cambodia’s low human resource base, slows the industries and occupations. Lack of adequate desired change from low-tech agriculture, agri- market information and coordination are parts businesses, light manufacturing, and tourism to of this structural problem. the adoption of more advanced technology-based industries. This in turn, discourages individual incentives to invest in skills. 2 For discussion, see for instance World Bank (2010a). Cambodia’s Rectangular Strategy for Growth, Employment, Equity and Efficiency emphasizes the following areas: agriculture; water and irrigation system; transport infrastructure; electricity; human resource development; labor-intensive industry and food processing industry for exports; tourism; oil, natural gas and other minerals; information / communication technology; and trade. 3 The Government has identified 19 priority sectors that largely conform as part of its Trade Integration Strategy: beer, cashew nuts, cassava, corn, fishery, footwear, garment, livestock, rice, rubber, silk, soybeans, fruits and vegetables, wood products, light manufacturing assembly, tourism, labor services (including construction), transport-related services, business processes / web-based services. 4 Coordination and information challenges belong to three key constraints – along with challenges of appropriation and costs of electricity and logistics – of Cambodia’s growth (World Bank 2010a). The appropriation challenge refers to Cambodia’s weak system to resolve disputes and fight corruption. High costs of electricity and the costs and unreliability of logistics (including trade) prevent entrepreneurs from engaging in viable projects. Cambodia’s growth strategy demands better skills 5 Importantly, Cambodia’s development challenges being below 25 years of age in 2008, the ability include poverty and rising inequality. More than of today’s young people to acquire skills will two-thirds of households in the lowest income influence Cambodia’s economic performance and quintile depend on agriculture; at the same time, growth opportunities for the future. In particular, intra-rural disparity is the dominant reason for technology adoption and skills development Cambodia’s rising inequality.5 Analysis suggests that throughout the working life tend to be determined reducing poverty and reversing the trend of rising by the skills foundation developed in early life. inequality entails not only the upgrading of agricultural Limited education among young people entering practices but also the release of labor to pursue Cambodia’s labor force restricts the scope for employment off the farm. This requires functioning the creation of decent jobs – as well as for future labor markets, entrepreneurship, and equitable industrial upgrading and technological change. access to basic public services such as education and health. These services would also support the Although skills are not the most important country’s future growth prospects. constraint to Cambodia’s growth currently, they will influence its economic performance in the Meeting these challenges and developing an future. The 2009 Investment Climate Assessment adequate skills base is essential for realizing the showed that Cambodia’s firms ranked skills as the potential of the large numbers of young people 9th most important constraint to growth from a entering Cambodia’s labor force. The working list of 18 skills. (World Bank 2009) The percentage age population increased from 54 percent in 1998 of firms reporting skills as a major constraint to 62 percent in 2008, largely owing to the increase to growth in this survey, however, increased to of young people in the country. (National Institute 15.5 percent from 6.5 percent in a similar survey of Statistics 2010) Although Cambodia is moving conducted in 2003. Firms evidenced their interest toward the end of this demographic transition in skills with half providing training for their workers and fertility rates have declined from 5.3 in 1998 (Table 1). Experience suggests that education to 3.1 in 20086, a large influx of young people into is closely linked with occupational employment the labor force is expected to continue. Skills will outside agriculture (Figure 1) and secondary largely determine the ability of young people to education leads to higher value-added production engage in productive jobs or entrepreneurship. off the farm (Figure 2). Hence, if not developed quickly, the current inadequate skills base will Skills will influence Cambodia’s future jobs restrain Cambodia’s ability to develop its economy opportunities. With 56 percent of the population and to become a middle-income country. Table 1 Firms’ feedback on skills supply and demand Skills supply Skills demand Share of unskilled workers Firms offering formal training Firms reporting workforce reported by firms (%)* to workers (%) skills as a major constraint (%) CAMBODIA 25.7 48.3 15.5 India 36.3 15.9 14.5 Indonesia 20.4 4.7 4.5 Lao PDR 11.1 18.7 Malaysia 65.0 50.1 20.2 Nepal 35.8 8.8 5.9 Pakistan 19.1 6.7 8.1 Thailand 83.5 75.3 38.4 Vietnam 20.8 43.5 8.9 Avg. for selected countries 38.3 29.4 15.0 World Average 33.7 34.1 26.1 Source: World Bank’s Enterprise Surveys, 2006-09. For methodology see, World Bank 2011. Note: *For some countries, the 2006-07 survey data covers the share of unskilled workers in manufacturing sector only. 5 Income inequality in Cambodia is high by regional standards, with Gini coefficient approaching 45 percent. For data see East Asia Regional Poverty Monitoring Database. 6 Similarly, to National Institute of Statistics (2010), Cambodia Demographic and Health Survey (2011) shows a decline in total fertility rates from 4.0 in 2000 to 3.0 in 2010. 6 Cambodia’s growth strategy demands better skills Figure 1 Occupations by education among 20-29 years old, 2009 100% Elementary occupations 90% Plant and machine 80% operators, and assemblers 70% Craft 60% Agricultural, forestry and fishery 50% Service and sales workers 40% Clerical support 30% Technicians 20% Professionals 10% Managers 0% Armed forces . . ) ling ary d ary dary sec - sec rsi ty ge oo m ET ost ive ra ch Pri ec on econ TV ve os rs rs ET p Un (a N we pe TV tal Lo Up To Source: CSES 2009. Figure 2 Secondary enrollment and agriculture as a share in GDP 70 60 y =68.95e-0.029x Agriculture, value added (%of GDP) R2 =0.4465 50 One third of countries 40 (51) with strongest depedency on agriculture 30 Cambodia 20 10 0 0 20 40 60 80 100 120 140 160 School 2010. Source: World Development Indicatorsenrolement, secondary (%gross) Cambodia’s growth strategy demands better skills 7 Over the past decade, Cambodia has improved for skilled labor to work with this capital. Capital the skills of its workforce at a slower rate than brings with it new technology that leads to other countries in East Asia. Cambodia and skill-biased technological change. At that point, Mongolia are the only two countries in the region Cambodia’s economy will shift from competing on that experienced a stagnating proportion of skilled the basis of low wages to competing on the basis workers among workers with reported earnings. of high productivity. This pattern has been seen (This can be attributed to the increasing share of in Korea, Taiwan, and Hong Kong; it is now taking workers with tertiary education being counteracted place in Guangdong and other provinces along by the declining share of workers with upper- China’s east coast. secondary education in Cambodia).7 From 1997 to 2007, wage premiums have Waiting until this transition point is reached remained the same with the exception of returns without taking action on the skills agenda risks to post-secondary education, which might be a waiting too late to develop the policies, source of this stagnation. Industry wage institutions, and capacities needed for a more premiums at this time exceeded skill wage advanced economy. Developing policies, premiums, suggesting that industry premiums institutions, and capacities to create opportunities are the main reason for wage differentials in the for skills development requires substantial time economy. In turn, the higher dispersion of before it can be fully realized. For example, Korea industry premiums suggests that the labor market took steps in the 1980s to build the capacity of its in Cambodia is more segmented than in other higher education system, well in advance of the surveyed countries in the region. actual emergence of demand for these graduates. (Di Gropello and Sakellariou 2010) In view of the substantial time needed for this process (even though skills may not be at the Persistent skills shortages negatively influence top of Cambodia’s present investment climate foreign direct investment and its corresponding agenda) the government is right to pursue the contribution to technology advancement. In skills agenda to lay the foundation for a more the 2007 Investment Climate Survey, 22 percent of diversified and productive economy. Cambodia’s foreign firms (compared to 15.5 percent of all firms) identified skills as a “severe� or Workforce skills will contribute to implementing “very severe� constraint to their business. Because Cambodia’s economic development strategy. foreign direct investment appears positively Improvements in workforce skills will correlated with technology adoption and skilled promote diversification in the medium-term; workforce utilization, any unrealized foreign direct simultaneously, it will advance Cambodia’s investment generates opportunity cost. Moreover, comparative advantage in the long-term. Such data from Cambodia and other East Asia countries improvements will ease the move of Cambodia’s show that firms with more educated managers firms up the value chain; at the same time, it will (managers that have more than secondary not only boost entrepreneurship but also stimulate education) are also more likely to employ more the development of small and medium enterprises educated workers. (Almeida 2009) – thus supporting job creation. Skills will also help agricultural upgrading and increase added value Cambodia expects to move to the next stage of at the farm level and further down the chain. This development after the comparative advantage of will manifest sustainable management of land and its low cost labor is exhausted and wages begin natural resources; it will also create the transfer to rise. This pattern is found in virtually all market of labor from agriculture to industry and services economies that have moved to a higher income with higher returns. Moreover, skills will assist status and a more knowledge-intensive economy. the government in economic management and Labor markets, if working efficiently, will signal growth facilitation; simultaneously, it will provide this transition by increasing wages of low skilled a strong foundation for an effective civil service labor as the supply of this labor is exhausted; in and the public administration in Cambodia’s so doing, they will provide the incentive for more increasingly decentralized environment. capital investment and an increased demand 7 For analysis see Di Gropello and Sakellariou (2010). Surveyed countries include Cambodia, China, Indonesia, Mongolia, the Philippines, Thailand and Vietnam. The study defines skilled workers as workers with upper secondary and above education. 8 2 WHAT IS THE NATURE OF THE SKILLS MISMATCH AND ITS CAUSES? In analyzing the available evidence on skills gaps and mismatches in Cambodia, this section explores the situation from the perspective of the employers and providers, particularly – but not limited to – the education system. This section identifies a number of important skills imbalances facing the economy in the near future. Finally, it reveals the underlying causes of the gaps and mismatches in terms of market failures and points to possible actions in response. 2.1 What skills gaps and mismatches do employers face? Although not a severe constraint to current Box 1 What are “soft skills�? growth performance, skills shortages are increasingly pronounced in certain specific “Soft� (or “life�) skills generally refer to areas. Employers point to a structural imbalance competencies and personal attributes that in skills supply, including a relative shortage enable individuals to deal effectively with the demands and challenges of everyday life, e.g. of vocational training graduates compared to problem solving, creativity, communication, university graduates, and a big shortage of and teamwork. graduates “with the right skills�. In 2008, a survey of 220 employers by CAMFEBA (2008) found According to the 2007 World Development that only 13 percent of employers agree that Report (World Bank, 2006), soft skills can be graduates have “all or most� of the right skills classified into two groups: a) thinking skills such as critical and creative thinking; and b) for the job market, while 11 percent reported behavioral skills, which include perseverance, that young people do not possess the right skills self-discipline, teamwork, and the ability to at all. In a survey of the three booming sectors negotiate conflict and manage risks. Some outside of agriculture (namely garments, tourism, behavioral soft skills such as punctuality and and construction), only one out of five firms teamwork, can be learned on the job. Others, reported that vocational training graduates have such as self-discipline are best founded in the necessary set of skills to perform their job. early childhood. (HRINC 2010) Thinking skills are probably best learned in institutional settings like schools and training Other surveys confirm the skills mismatch. centers. The more recent literature emphasizes In a new survey of 78 employers by HRINC (2011), the importance of soft skills, both in the 73 percent of employers reported that university process of human capital development and as graduates do not have the right skills (while only 12 a determinant of schooling and employment outcomes. percent said that there are not enough university graduates); 62 percent of employers noted that Generally, “soft� skills complement “hard� vocational training graduates do not have the right skills, which are technical abilities specific to a skills (while 38 percent suggested that there are task or activity. Examples of hard or technical too few vocational training graduates). Moreover, skills include machine operation and computer 31 percent of employers noted that it is difficult to literacy. These skills are usually easier to observe and quantify, and are relatively easier train or upgrade their existing workforce, which may to impart in schools or at the workplace. reflect a low quality of available training programs — as well as a weak skills foundation on which to What is the nature of the skills mismatch and its causes? 9 build. A survey of 24 leading companies by HRINC Then, employers report difficulties in finding (2010) found that 63 percent of employers felt that specific vocational and occupational skills. it is becoming more challenging to find the needed As discussed in World Bank (2010b), foreign skills in the market. Although not hindering the languages, IT, sewing, plumbing, carpentry, firms’ current performance, shortages of technical and blacksmithing are all skills that are in high skills complicate the adoption of new, more demand but difficult to find. In the hospitality productive technologies. These problems have sector, employers identify difficulties finding chefs, been recognized by the government in the 2011 receptionists, and food and beverage managers. In Cambodia Economic Forum and a recent report the garment sector, positions that stand out as the released by the National Institute of Statistics (2010). most difficult to fill are in sales and sewing. In the construction sector, it is hard to recruit carpenters, Some employer surveys indicate that plumbers, blacksmiths, and electricians. Cambodia is experiencing growing shortages in management skills. Available information Finally, employers complain about difficulties suggests that the sharpest skills shortages (and in finding employees with basic skills such as the ones that employers perceive as the greatest literacy and numeracy. This reflects the relatively constraint) are in senior management. In the low literacy rate in Cambodia’s population, 15 HRINC 2011 survey, over 70 percent of employers years old and above (77.6 percent) and 15-24 years reported major shortage in management skills, 36 of age (87.5 percent), which in turn reduces the percent in middle management and supervisor effectiveness of training at later stages. skills, and 34 percent in professional staff skills. Shortages in management, middle management, To address some of these skills gaps, many supervisor, and professional skills represented a employers provide formal training. CAMFEBA major constraint for 64 percent, 48 percent, and 50 (2008) indicated that employers pursue the percent of employers, respectively.8 Also, shortages following training priorities: technical skills, of management skills may be surfacing in civil decision-making and problem-solving, service and public administration – especially in the communication, teamwork and leadership, process of decentralization and de-concentration – marketing, sales, and customer service skills.9 which requires a wider dispersion of skills for policy Many of these skills are not taught in schools and analysis and implementation. vocational training centers. According to the World Bank’s 2007 Investment Climate Survey, 48 percent Next, employers report a growing unmet of employers provide training to at least some of demand for workers with a mix of soft and their workforce (a higher level than in the majority of technical skills (Box 1). Such a mix of skills is not other countries, as illustrated in Table 1). The survey sufficiently provided up and down the education conducted for this policy note found that 55 percent ladder, including vocational training. In particular, of employers provide formal training to at least half employers identify soft skills as the most important of their workforce while most others provide training type of skills lacking in most employees. In the to at least some of their workforce (HRINC 2011). CAMFEBA 2008 survey, 76 percent of employers To conduct such training, employers generally deemed that graduates are not equipped with use in-house programs (53 percent of employers), the required set of skills – in particular soft skills local providers (43 percent of employers), or rather than technical competencies – they need foreign training providers, particularly for senior to perform their jobs. Among the soft skills most management (27 percent of employers). Employers difficult to find, 52 percent of employers identified are more likely to train a workforce that already has work attitudes in unskilled workers; 45 percent basic skills. cited decision-making skills in semi-skilled workers; and 64 percent mentioned analytical skills in skilled Limited access to good training providers workers. Many employers also complained about constrains enterprise training. In the HRINC skills shortages in leadership (for management 2011 survey, 64 percent of employers identified staff), problem solving, and communication. the lack of good training providers as their single Moreover, soft skills appear to be a severe largest constraint in providing adequate training to limitation for recent young graduates: 89 percent of their employees. Other main constraints included employers indicated difficulties working with recent high training costs, lack of time, high employee young graduates because of behavioral issues. turnover, and a lack of information about training 8 World Bank 2010b and HRINC 2011. More rigorous surveys of employers and employees would be needed to provide reliable evidence on the exact extent and type of skills gaps and mismatches. 9 Cambodia Skills Development Center recently revealed employers’ training priorities in more detail as part of a confidential study, highlighting interpersonal skills, human resources and industrial relations skills, sales and marketing skills, business and computing skills, and financial management skills. 10 What is the nature of the skills mismatch and its causes? opportunities. Such constraints appear more information – including information on workplace severe for small and medium-sized enterprises than training providers, quality of vocational training for larger firms. This is a pattern observed in many centers, availability of particular skills, and quality countries with particular importance to economies of universities. They also want to develop links with large informal sectors. To overcome their with universities (Figure 3). skills shortages, employers demand more Figure 3 Employers’ proposed solutions to overcome skills shortages More information on workplace training providers More information on the quality of particular vocational training centres More information on the market supply and demand of particular skills in Cambodia More information on the quality of particular universities Establish links with particular universities through an employer association Establish direct links with particular universities Others More information on internships and scholarships More information on overseas training opportunities Advice on how determine what our firm’s real skill need are Make it easier to recruit from other countries 0% 10% 20% 30% 40% 50% 60% Source: Survey by HRINC Cambodia, March 2011. 2.2 Where are the gaps in skills provision? A life-cycle skills development framework, Internationally, there is a growing recognition which starts with early childhood development of the importance of early child development and continues into the working life, helps (ECD) in establishing the foundation for lifelong organize the analysis of skills development learning. Nobel Laureate James Heckman issues and policies. This framework breaks and others have demonstrated that ECD is the life cycle of an individual into several distinct the most cost-effective form of human capital stages: starting with the early foundation of investment compared with primary education childhood development and basic education or any subsequent schooling.10 Three types of that prepares an individual for acquiring skills outcomes in early childhood are critical for future for employment. It continues with the pre- development in life: (i) physical growth and well- employment stage when the individual is acquiring being; (ii) cognitive development; and vocational and technical skills in apprenticeships, (iii) socio-emotional development. ECD policies schools, and training centers for their first job. It and programs can directly affect these outcomes culminates at the work and re-skilling stage when and therefore benefit both individuals workers are upgrading their skills and re-skilling and societies. for employment in a changing market. Each stage involves a different mix of actors, policies, funding Empirical evidence shows effective early sources, and performance monitoring mechanisms childhood development programs have a very for skills development. high payoff. Evidence has proven that interventions in the form of mother’s health Cambodia seems to be facing major constraints and knowledge, child nutrition, and activities in skills development in the earlier stages of the to promote cognitive and socio-emotional life cycle, starting with early childhood. development of young children (such as positive caring practices and rich language and exploration a) Establishing the foundation for skills in opportunities) have a positive impact on school early childhood: The challenge of nutrition preparedness and learning performance throughout and stimulation their life with strong social and private returns on 10 See, for instance, Heckman, Stixrud, and Urzua (2005). Early childhood development is generally taken as the period from when a child is conceived to when that child is six to eight years of age. What is the nature of the skills mismatch and its causes? 11 such investments. (Alderman 2011 and Barnett Pre-primary education and community 2008) Conversely, international evidence shows outreach programs are expanding but still that the handicaps built early in life are difficult limited. Cambodia has nearly doubled pre- and costly, if not impossible, to remedy later. primary enrollment over the past decade, with Acute malnutrition negatively affects Cambodia’s pre-primary gross enrollment reaching about 13 skills development potential. The 2010 Cambodia percent. The expansion has been supported by Demographic and Health Survey indicates both private and public institutions, with private that the share of children stunted, wasted, and institutions accounting for 30 percent of the underweight in their first 59 months of life has provision in 2008/09 compared to 20 percent in remained high, reaching 40 percent, 11 percent 2000/01. Pre-primary enrollment in Cambodia and 28 percent, respectively in 2010. These is, however, still relatively low by international levels are similar – and in case of stunting, which standards. Gross pre-primary enrollment exceeds refers to acute malnutrition – even higher in 2010 45 percent globally, and is about 44 percent compared to 2005. Internationally, malnutrition in China and Indonesia, and 88 percent in and insufficient stimulation have been shown to Thailand.11 Separately, ECD programs, including imply impaired mental development, dropouts, community outreach programs to improve behavioral problems, and failures later in life. nutrition and child rearing practices, are being piloted and evaluated. Lack of food in the household has been associated with lower school attendance b) Primary education: Strong enrollments but and completion. (See Figure 4) According to weak completion and learning the Cambodia Socioeconomic Survey (CSES), every fifth child lives in a household without Government policy to achieve universal access enough food. Such children are less likely to to basic education has been successful in attend and complete school. Among children raising net enrollment rates, particularly at 6-17 years of age, 20 percent of children living in the primary level. Primary net enrollment rates households without enough food never attended increased from under 83 percent in 2000/01 to school, compared to 8 percent of children from nearly 95 percent in 2009/10. According to EMIS households with enough food. A similar difference data, enrollment rates are strong in both urban and (21 percent compared to 8 percent) is reported rural areas, including remote areas. The expansion among 18-22 year olds. Among those who ever has been largely supported by public institutions, attended school in the 15-17 age group, only 52 which cater to 99 percent of primary students. percent of children living in households without enough food were reported to be currently Uncompleted primary education remains a attending school compared to 61 percent of challenge. According to the 2009 CSES, one in children with enough food. The relationship ten children 6-17 years old have never attended between food and schooling also applies across school. At age 15-19, only 71 percent completed generations: 59 percent of respondents above 15 primary education (69 percent of 20-24 years old). years of age in households without enough food Among non-Khmer and non-Cham ethnicities, have no schooling. less than 22 percent of 15-19 years old and Figure 4 Share of children/youth with and without enough food who ever attended school, 2009 100 80 60 Living in households with enough food at home Living in households without enough food at home Age 40 6 8 10 12 14 16 18 20 24 Source: Calculations based on data from CSES 2009. Note: The survey sample covers 22,914 observations for those living in households with sufficient food and 4,576 for those living in households without sufficient food. 11 For more country data, see World Development Indicators (2010). 12 What is the nature of the skills mismatch and its causes? Table 2 Share of children who are not in school and the reasons for non-attendance, 2009 Primary Primary Lower secondary Upper secondary Total (age 3-5) (age 6-11) (age 12-14) (age 15-17) (age 6-17) Share of age group out of the school system Share who never attended 84.3 14.7 4.8 6.2 9.9 Share who attended but not currently 1.1 1.4 10.9 40.3 14.7 Reasons why not attending or never attended Did not want to 2.0 16.8 18.3 12.4 14.8 Did not do well in school 2.1 4.1 16.1 17.2 12.7 No suitable school available/school too far 0.9 6.7 4.7 3.0 4.5 No teacher/supplies 0.4 2.4 2.0 0.9 1.6 High cost of schooling .. .. 0.2 0.2 0.1 Must contribute to household income 0.1 0.7 14.3 27.9 16.6 Must help with household chores 0.1 1.9 14.3 15.9 11.0 Too poor 1.0 10.5 23.5 17.6 16.2 Too young 93.1 53.5 2.2 0.8 18.6 Number of observations 2,839 1,186 595 1,793 3,574 Source: Calculations based on data from CSES 2009. 19 percent of 20-24 years old have completed Finally, concerns remain about learning primary education. As a source of concern, the outcomes. The national student assessment recent increase in overall primary enrollment was tests on Khmer and math (grades 3, 6, and 9) accompanied by declining completion rates. The showed that students’ learning achievements, EMIS data indicated that the primary completion although improving somewhat, remain low. Teacher rate peaked at 90 percent in 2005/06 and declined availability and qualifications appear to be a to 83 percent in 2009/10. Moreover, wastage constraint. In primary education, the pupil-teacher in primary education is high with repetition ratio exceeds 49,13 being high by international and dropouts at 11 percent and 49 percent, standards and above average among the low respectively. Hence, the future challenge is not income countries in the region (Figure 5). Over the only how to enhance completion rates for those past decade, the share of teachers with upper- now in school, but also how to address further secondary or higher education increased from 29 skills needs of the young people that fail to percent to 50 percent. Still, 46 percent of teachers complete primary education. acquired only lower-secondary education and 4 percent only primary education, which is perhaps Reasons for non-attendance and for dropouts not sufficient for quality teaching. (EMIS) are linked primarily to conditions in households. Among children aged 6-11 not attending school, c) Developing core skills in both secondary non-attendance was mainly explained by the education and technical and vocational following: (a) lack of schools, teachers, and supplies education and training (TVET): Low (9 percent); (b) poverty, household chores, and attendance and recognition of benefit income generation (13 percent); (c) perceived as too young — even after reaching the official Compared to primary education, secondary age of attendance12 (54 percent); and (d) being enrollments have shown a slower improvement uninterested in attending (17 percent). Reasons since 2007 and remain low. According to for being uninterested or perceived as too young EMIS data, net lower secondary enrollment was for school may reflect childhood development about 32 percent in 2009/10 with a pronounced problems, including development delays and disparity amid urban (48 percent), rural (29 mental impairment owing to malnutrition or reduced percent), and remote (11 percent) areas. The level mental activity because of insufficient stimulation in is low by international comparison (Figure 6). Net the early years of life (Table 2). (CSES 2009) upper-secondary enrollment is especially 12 Cambodia’s official age of primary school attendance is consistent with international practice. 13 EMIS 2009. What is the nature of the skills mismatch and its causes? 13 Figure 5 Primary and secondary pupil-teacher ratios in East Asia 50% 40% Primary pupil-teacher 30% ratio 20% Primary pupil-teacher ratio 10% 0% a e a ia ic . r s lam laysi om an d hin ones ina cif an po re na m ep ma -Lest e DR ine om e IA ssa nc ail ,C Ch Pa Jap ga t ,R an oP ipp inc OD ru Ma hi Th AR Ind & Sin Vie r ea My oe La hil w MB Da Hi g oS As ia Ko Tim P Lo CA ei ca st un Ma Ea Br Source: EdStats (latest available during 2005-09). Note: East Asia & Pacific refers to developing countries only. Figure 6 Net enrollment rates in primary and a readily available option or an appealing choice secondary education in the East Asia region for students. The low secondary, and particularly TVET, completion rates are constraining the 100 Korea, Rep. creation of a skilled labor force in Cambodia. In 90 80 this respect, international experience suggests Secondary net enrollment rate that the availability of TVET as a choice for 70 60 Thailand secondary students can increase both retention Malaysia and graduation rates, while contributing to overall 50 Lao PDR economic competitiveness.14 40 Cambodia 30 The reasons for non-attendance in secondary 20 education are mainly financial. As shown in 10 Table 2, 52 percent of young people not attending 0 70 80 90 100 lower-secondary education reported poverty, Primary net enrollment rate a necessity to earn income, and household Source: EdStats (latest year available during 2005-09). chores as their main reasons. These reasons Note: EdStats figures for Cambodia somewhat differ from EMIS. were echoed by two-thirds of young people not attending upper-secondary education in the low: estimated at about 12 percent. Among given age group. (CSES 2009) The Ministry of people 20-24 years old, less than 6 percent report Education, Youth and Sports (MEYS) has already attending TVET (only one third of this 6 percent started addressing such financial obstacles attend post-secondary TVET). (CSES 2009) through a scholarship program subsidizing households for keeping children in school. Low completion and limited choices in Internationally, such programs, raising the secondary education remain a significant private returns to schooling, have been found to challenge. Lower-secondary completion rates increase enrollment. (Filmer and Schady 2009) lingered around 49 percent during 2007-10. In Further initiatives, although urgently needed, 2009, only 29 percent of young people 15-19 seem constrained by the low level of education years old, and 36 percent of those 20-24 years spending in Cambodia at 1.6 percent of GDP in old, completed 9 or more years of schooling; 2007 in comparison with nearby countries like only 17 percent of young people 20-24 years old Bangladesh (2.4 percent), India (3.2 percent), completed 12 or more years of education, and Indonesia (3.5 percent), Lao PDR (2.3 percent), less than 2 percent received a TVET certificate. Malaysia (4.5 percent), Vietnam (5.3 percent), (CSES 2009) In contrast, 99 percent of this and Thailand (4.9 percent). (World Development eligible age in China now receives 9 years of basic Indicators 2010) Similarly, the capacity of the education. Enrollments in secondary technical Ministry of Labor and Vocational Training (MLVT) and vocational education in Cambodia are among to create opportunities for the expansion of formal the lowest in Asia — suggesting that TVET is not TVET appears limited. 14 See, for instance, Bishop and Mane (2005) and OECD (2010). 14 What is the nature of the skills mismatch and its causes? Household perceptions of immediate financial to enroll in TVET compared to 30 percent who loss from keeping a child in school may be prefer to find a job and 50 percent who wish to compounded by underestimating the value obtain a university education after high school.16 of education. Information about financial This discrepancy reveals market information and returns to secondary education and TVET is not coordination failures, and possibly, an underlying easily available. This may prevent households social bias against TVET education. from fully appreciating the value of education for future earnings, a problem common in Low attendance at the secondary level developing countries. Actual estimates of the implies a stronger role for second-chance value of education in Cambodia are favorable, programs and non-formal training. International indicating positive economic benefits to those experience suggests that second-chance who remain in school. The estimated wage programs (particularly those emphasizing premium for lower-secondary education is 38 entrepreneur support and combined workplace percent compared to primary education and 24 and classroom training) tend to be cost-effective percent for upper-secondary compared to lower- and have a positive labor market impact.17 In secondary education. (CSES 2009) Returns to Cambodia, a large and increasing mix of providers overall secondary education appear comparable offers non-formal training to prepare young with those in the Philippines but lower than those people, including dropouts, for a first job, or to in Indonesia and Thailand. (World Bank 2010b) upgrade and retrain older workers. Attendance in non-formal training, however, has been limited Returns to TVET are perhaps the most thus far. Only 6 percent among those 15-59 years underestimated. Returns to TVET reach 60 old report having ever attended a non-formal percent for TVET at the secondary level compared training class (13 percent among 15-19 years old to primary education and 112 percent for post- and 9 percent among 20-24 years old). (CSES secondary TVET compared to lower-secondary 2009) Among those who have attended non- education. In fact, recent household surveys and formal classes, 82 percent of respondents learned private sector salary and benefit surveys indicate foreign languages, 6 percent computer literacy, (Figure 7) that returns to post-secondary TVET 6 percent vocational skills, and nearly 3 percent are nearly equal to those for tertiary education basic literacy. Among young people 15-19 years (and more than three-fold among technicians and old, 90 percent of those who have attended non- associate professionals).15 Surprisingly, however, formal training classes learned foreign languages. only 17 percent of students express a desire (CSES 2009) Figure 7 Monthly wages by level of education and occupational groups, 2009 (Riels) 3,000,000 Armed forces Managers 2,500,000 Professionals Technicians 2,000,000 Clerical support Service and sale workers 1,500,000 Agriculture workers Craft 1,000,000 Machine operators and assemblers 500,000 Elementary occupations 0% Total No Primary Lower Upper TVET sec. TVET post-sec. Higher education secondary secondary education Source: Calculations based on CSES 2009. 15 Survey findings from CSES 2009 and HRINC 2011. 16 For details, see CAMFEBA (2008). 17 For examples and analysis, see for instance, World Bank Youth Employment Inventory at http://www.youth-employment-inventory.org/ What is the nature of the skills mismatch and its causes? 15 Non-formal training and TVET, however, lags d) Producing higher level skills: Mismatches behind. In particular, non-formal training and in disciplines at the tertiary level TVET appear to be under-funded, are of uneven quality, and are somewhat disconnected from Higher education must meet the needs of current market demand. (World Bank 2010b) The industries and new industries yet to come. This diversity of training programs requires a market enables workers to upgrade their skills and keep that matches job seekers and workers with skills pace with technological change. Higher education that are in demand. This necessitates market institutions are important not only for enabling information and information about quality. research and development but also helping to For the time being, public programs lack transfer and adapt technology to meet the local certification accepted by employers. The National industry’s needs. This is critical for moving to a Qualification Framework for setting competency more advanced economy. standards, now being developed by the MLVT, would support the needed certification system. Total higher education enrollments in public and Furthermore, the National Training Board private institutions in Cambodia have grown (NTB) with government, industry, and other rapidly over the past decade, albeit from a very low organizational representation was re-instituted starting point. Currently, 5 percent of the tertiary in 2006 to oversee TVET policy formulation and age group is enrolled in tertiary education, with 7 implementation, and to provide a governance percent for males and 4 percent for females. These framework for harmonizing the diverse provider enrollment rates are only about one-third of those community. However, the progress in developing in other developing countries in the region (Figure standards, qualifications, and assessment 8), but consistent with the current labor-intensive practices has been slow. economy and wage differentials. Teaching soft skills. Teaching practical and life A more critical challenge than low enrollment is skills is already required in the curriculum (and the poor connection from the market to fields of demanded by employers). Schools, however, are study. Cambodia’s institutions of higher education short of teachers trained to teach practical and supply a relatively large amount of graduates in life skills. The share of secondary school teachers accounting, finance, and management (46 percent with upper-secondary or higher education of all bachelor students in 2009/10), compared increased from 40 percent to 71 percent in the to civil engineering (1.5 percent of students) and past decade. While qualifications are being science and technology (0.1 percent of students). raised, teachers may still lack training in teaching Moreover, the proportion of female students in soft skills. In particular, teachers may need engineering, science, and technology is minimal skills in using different methods of instruction, (Table 3). Although agriculture and the off-farm rural for example, learning in teams, written and oral economy are Cambodia’s key industries in need of presentations, role playing, and group problem upgrading, only 2.3 percent of graduate students solving exercises to develop practical and life study disciplines related to these industries. skills within the existing curricula. The amount of graduates in disciplines related to agriculture, education (including teacher training), Figure 8 Gross enrollment rates in tertiary education by gender Total Cambodia Female Male Lao PDR Indonesia China Thailand 0 10 20 30 40 50 60 Source: UNESCO Institute for Statistics (2009 or closest year). 16 What is the nature of the skills mismatch and its causes? Figure 9 Share of tertiary graduates by discipline internationally 100% Unknown or unspecified fields 90% Social science, business, law 80% Services 70% Science 60% Humanities and arts Health 50% Engineering, manufacturing 40% and construction 30% Education 20% Agriculture 10% 0% r . sia a a DR am ma ep an hin na m esi IA oP sal an ,R Jap lay ,C t on OD La Da ru My or ea Ma R Vie Ind MB i K SA CA ne ng Br u Ko ng Ho Source: EdStats (latest year available during 2005-09). Note: The aggregate discipline groups are based on categories established in the questionnaire collected from the UNESCO Institute for Statistics (2009): Education (Teacher training; Education science), Humanities and arts (Arts; Humanities), Social sciences, business and law (Social and behavioral science; Journalism and information; Business and administration; Law), Science (Life sciences; Physical sciences; Mathematics and statistics; Computing), Engineering, manufacturing and construction (Engineering and engineering trades; Manufacturing and processing; Architecture and building), Agriculture (Agriculture, forestry and fishery; Veterinary), Health (Health; Social services), and Services (Personal services; Transport services; Environmental protection; Security services). engineering, manufacturing, and construction percent of current students believe their biggest are low – particularly by international comparison challenge is that education providers do not teach (Figure 9). The mismatch between the tertiary skills the right skills (whereas 16 percent of employed being generated by schools and those needed by young people believe this is their biggest the market is becoming visible. (World Bank 2010c) challenge). (HRINC 2011) Furthermore, some Graduate unemployment and underemployment is surveys showed that young people may have a concern with 10 percent of graduates reporting limited access to reliable information on study an “unpaid� employment status and 5 percent and career opportunities (Figure 10). In particular, of graduates 29 years old and younger reporting information provided by the government and unemployment. (CSES 2009) employers fails to reach young people, and formal methods of support, such as career counseling, The low number of graduates in engineering appear weak. (HRINC 2011 and CAMFEBA 2008) and sciences – along with the small numbers Information sharing and coordination appear of TVET graduates with post-secondary difficult because many public and private actors training – will restrain Cambodia’s ability to are involved in higher education, including as upgrade its agriculture and industrial base. many as nine government ministries and agencies Based on its current development pattern, providing higher education services, in addition The World Bank study (2010b) estimates that to private institutions operating under the control Cambodia will see an over-supply of higher of the MEYS. Little access to reliable information education graduates in business and law, while and formal support, plus reliance on informal shortages will remain in engineering and the networks in making study and career choices, are sciences. Moreover, continuing weaknesses a common problem in developing countries with a in teachers’ training and studies of education proven adverse effect on the labor market.18 related disciplines may hinder efforts to enhance the performance of the country’s education and Higher education financing contributes to the training system. distortions. Government spending on higher education (low at 0.1 percent) has focused more Information and coordination problems partly on expansion than strategy or quality. (World explain the structural imbalances in higher Bank 2010c) Public subsidies may be distorting education. Recent youth surveys indicated that private economic returns for social science students do not have a good understanding of the disciplines. In these oversupplied disciplines, skills required by employers. For instance, only 7 higher fees could facilitate market incentives for 18 World Bank Youth Employment Inventory at http://www.youth-employment-inventory.org/. What is the nature of the skills mismatch and its causes? 17 Table 3 Disciplines studied by bachelor students, academic year 2009/10 Discipline of study Share Number of Share of female students students Accounting, and Accounting and Finance 13.0% 20,978 74.7% Finance and Banking 11.0% 17,760 41.1% Business Management and other Business and Management 10.3% 16,694 36.4% English Language and Literature 11.3% 18,325 54.4% Management and General Management 7.2% 11,640 28.2% Computer Sciences and other computer related sciences 6.4% 10,323 7.4% Medicine, Nursing, Pediatrics, Dentistry and Pharmacology 5.8% 9,407 46.8% Law, and Law Science 5.4% 8,787 22.4% Economics and related disciplines 5.3% 8,485 34.9% Education and related disciplines 2.4% 3,808 29.1% Agriculture, including Fishery and Forestry Sciences, and Rural Development 2.3% 3,753 29.1% Khmer Literature and Science 1.7% 2,794 43.6% Marketing and Marketing Management 1.7% 2,694 26.5% Tourism, Hotels and Hospitality 1.7% 2,771 39.3% Civil Engineering 1.5% 2,371 1.7% Other Social Sciences (Public Administration, Political Science, and Sociology) 1.4% 2,310 39.5% Architecture and Design 1.3% 2,058 21.3% Mathematics 1.3% 2,071 21.5% Biology and Chemistry 0.9% 1,386 40.8% Engineering and related disciplines 0.9% 1,399 4.5% Arts, Humanities and Languages, and Philosophy and Religion 0.8% 1,306 30.9% Human Resources Management 0.6% 991 17.0% Physics 0.6% 908 24.3% Animal Science and Veterinary Medicine 0.5% 879 19.1% Other languages (Korean, Japanese, French, and Thai) 0.5% 873 47.1% Geology 0.3% 476 39.9% History 0.3% 558 32.8% Science and Technology 0.1% 201 6.0% Other disciplines (Military, Police Academy etc.) 3.4% 5,510 33.0% Total 100.0% 161,516 39.4% Source: Calculations based on EMIS data. individual investment. Conversely, disciplines like low level of public spending on education and engineering, science, and math (which are almost the large numbers of young people who are completely missing) are necessary for advancing not acquiring a basic education, these findings Cambodia’s economic base. These required indicate an urgent need to review the allocation of disciplines in the hard sciences are not receiving education spending in Cambodia and to reset the the needed strategic focus and resources priorities for the use of public resources. throughout the education system. Given the 18 What is the nature of the skills mismatch and its causes? Figure 10 Sources of information on study and careers 62% Advice from friends and parents 66% 50% 47% Websites 43% 59% 43% Articles in newspapers and magazines 43% 42% 34% Vocational training centers 35% 29% 30% Recruitment agents 31% 27% 28% Universities 27% 35% 24% High school teachers 12% 28% 23% Non-government organization (NGOs) 24% 21% 22% Career days 21% 25% 12% Government departments 12% 10% 11% Employer associations 11% Total 14% Students 3% Employed youth Others 2% 4% 0% 10% 20% 30% 40% 50% 60% 70% Source: Survey of youth conducted by HRINC Cambodia, March 2011. Figure 11 Identifying the causes of skills gaps and mismatches in Cambodia Skills Gaps and Mismatches: What are the Causes in Cambodia? Demand Side Supply Side Skills Market Do skills constrain growth? Why is the education and training system Is information available to providers, firms, Why are employers not providing sufficient signals not producing the skills needed? and individuals about skills benefits and cost, and opportunities? availability and quality? Are markets open to competition? Challenge Challenge of Challenge Financing and Quality and Coverage Challenge Challenge Challenge of signaling facilitating of efficiency: relevance and of of defining of demand for training influencing Challenge to market obstacles integrating a the role of strengthening specific skills for its own skills of spending demand: in access: community the public market workforce development resources Challenge Challenge of providers and private institutions policies in ways of teaching of further around the sectors for skills that create soft skills assisting goals of a development incentives and technical households to national and for good skills, keep children development facilitating performance and bringing in schools strategy access to and schools and information accountability industries for results closer together Source: Survey of youth conducted by HRINC Cambodia, March 2011. What is the nature of the skills mismatch and its causes? 19 2.3 What are the causes of the skills gaps and mismatches in Cambodia? The possible causes of the skills gaps and to market demand. It also covers the challenge of mismatches in Cambodia appear particularly how to best assist households in keeping children in the areas of information and coordination. in schools. These challenges require careful Information and coordination failures are obvious attention and perhaps different responses at each in both the labor market (on the demand side) and stage of the life cycle. Policies will need to define the skills market. On the supply side, the causes the roles of both the public and private sectors in are more complex. Figure 11 summarizes the the provision, financing, quality, and coverage of main causes identified in this policy note.19 education and training. On the demand side, firms seem to lack The existing weaknesses in the skills market channels to communicate their needs. Wage predominantly reflect weak market institutions. signals appear insufficient, and firms seem to be To connect demand with the supply of skills, ineffective in communicating their demand for market institutions involve five key functions: specific skills and in influencing skills development policies. As evidenced in the preceding illustration, • coordination to bring both sides of the labor private companies’ difficulties in contributing to market together (the role of the NTB); the right type of training for their own workforce • employment services to advise job seekers also highlight information-related causes. The on job vacancies and where skills can be introduction of the National Training Board (NTB), obtained (the role of the newly formed with membership from the private sector, is to National Employment Agency – NEA); offer a mechanism whereby firms can convey their • quality assurance to set, test, and certify needs for specific skills both to the government skill standards (the role of the National and to the provider community. In other countries, Qualification Framework under NTBs are often engaged in the review of development); government policies for education and training and • licensing and regulation to set minimum the allocation of public finance for this purpose. standards for private skills providers and Strengthening the NTB to play its role and to create opportunities for consumer empowering employers as members can play an protection; and important role in addressing information problems. • accreditation to provide information on the quality of education and training offered by On the supply side, the set of causes relates to schools and training centers. financing, quality, and coverage of education and training. This particularly includes the Such institutions facilitate the efficient operation challenge of managing resources in ways that of skills markets; it is unlikely that the private create incentives for good performance and sector can develop these skills markets owing to accountability for results, the challenge of their public goods nature. The government can teaching soft and technical skills (and teachers’ fill this gap and play a lead role in monitoring the qualifications and training in general), and the performance of labor markets and developing challenge of bringing schools and industries appropriate policies. closer together to promote quality and relevance 19 Understanding the causes of skills gaps and mismatches requires looking at potential market and governance failures that move the supply and demand of skills away from a “social optimum�, and affect the matching between skills supply and demand in the labor market. Some of these failures are related to the structure of the education and training systems, others involve constraints facing individuals in terms of information and access to credit, yet others may simply reflect knowledge weaknesses at the house- hold level. Certain characteristics of the labor and product markets can also affect the incentives of firms to pay for certain skills or train workers, and workers to invest in higher level skills. 20 3 ACTIONS AND STRATEGY FOR SKILLS TO ADVANCE ECONOMIC DEVELOPMENT Cambodia’s human resource base points to of public and private expenditure. By reallocating a number of strengths on which the country its own spending for education and training and can build. In its current labor-intensive stage of working in partnership with non-governmental development (and laying the skills foundation to providers of skills to meet the social demand for realize its growth strategy) Cambodia needs to skills, the government can use its resources in a ensure adequate early childhood development more strategic manner to meet market needs and to and the completion of nine years of good quality support diversification of the economy. basic education for all young people. Building this foundation for later skills development is essential Led by the NTB, good initiatives are already for not only efficiency but also equity. It will not underway for pre-employment skills and their be possible to adequately train workers at a later utilization. The NTB intends to complement stage in the life cycle without providing a good its focus on policy development and system quality basic foundation for training. This was the governance with the practical work of developing approach taken by China as it opened its economy standards, qualifications, and assessment in 1979, and by other countries such as Chile, practices. In 2009, recognizing the need for Mexico, Singapore, and South Korea. Each of better market information, the NTB established these countries began by providing a good quality the National Employment Agency (NEA) to basic foundation for later skills development. provide employment services and labor market information services to job seekers, employees, Cambodia should prioritize quality basic skills employers, training providers, and the general foundation and pre-employment skills – particularly public. Finally, the NTB has been coordinating the in math, science, and engineering. This will Strengthening TVET project (co-financed by the require a partnership with the non-governmental ADB). The objective of the project is to develop sector in the delivery and financing of these skills, an expanded and more integrated training system including higher education. By strengthening that is endorsed by industry and better aligned market institutions that promote quality and with the basic and mid-level skills required in core relevance of the investments made in education industries and fields. and training, Cambodia can improve the results 3.1 Developing a skills action plan Complementing policy initiatives already retention, and strengthen second-chance options, underway, Cambodia’s skills action plan needs as well as TVET. To lay the required foundation, to address the main impediments for skills to the government should expand financing for ECD, match its aspirations. As an immediate priority, strengthen institutional development, and promote the government can create opportunities for incentives for skills providers, including higher access to information in the skills market, expand education institutions. Table 4 summarizes the household-oriented interventions to improve school proposed actions for consideration. Actions and strategy for skills to advance Cambodia’s economic development 21 Table 4 Skills development action plan: Options for Cambodia Objective Immediate priorities Laying the foundation for the future 1 • Enhance employment counseling and • Enhance the NEA’s capacity and partnership with the Information job search services private sector access • Use media to show study and career opportunities, promote TVET 2 • Mainstream good TVET programs • Strengthen the capacity of the NTB to deliver Coverage in the employer-focused reform of education and training “missing middle� • Consider ways to encourage employers to invest in training their workforce 3 • Begin upgrading a small number of • Reform secondary curriculum to improve the teaching Quality and market skills providers, including non-formal of science, math, engineering and other technical relevance training centers, in collaboration with disciplines, entrepreneurship, and soft skills local industries • Strengthen accountability of communities and schools as part of the D&D process 4 • Expand household-oriented financing • Increase expenditure on cost-effective interventions Financing efficiency instruments for school retention early in the life cycle • Explore different financing tools to promote incentives toward good results among skills providers, including higher education institutions 1. Facilitating access to information the quality of information and services provided in the skills market by these units. The capacity of these units can be strengthened by MLVT and MEYS (as well Adequate access to information generates as relevant personnel in TVET institutions) by efficiencies in the labor market and benefits not creating opportunities for the development of a only households but also employers. Achieving training program for the units’ counseling staff. adequate access to information requires Employment and career-related services and job strengthening market institutions discussed seminars should also be provided at the secondary in Section 2.3, which will take time. Targeted school level. The NEA should attempt to build actions, however, can help remove limitations stronger links with such employment counseling more rapidly. Steps taken to improve employment units and to assist actively in their access to services and labor market information for job relevant market information. matching in the transitional economies of Central Europe in the 1990s, for instance, created good Priority 2: Use television and radio to show study results in promoting labor mobility and the efficient and career opportunities, promoting TVET use of labor. The government can promote public-private a) Immediate priorities to facilitate access partnerships for public service radio and to information in the skills market television programs on education and career opportunities, with a focus on industries and As an immediate priority, Cambodia could occupations facing persistent labor shortages. consider steps to enhance employment counseling It can further focus on the role of TVET as a and job search services; in addition, it could use respected alternative to a university education. the media to share information on study and career opportunities, which promote TVET: Programs can be downloadable from the internet, distributed on DVD and CD at the annual career Priority 1: Enhance employment counseling forum, provincial training centers, communities, and job search services village festivals, and other venues where young people gather. Singapore has been particularly Some universities and TVET institutions successful in raising the image of TVET institutions maintain employment counseling units to provide through these means and by investing heavily employment information, career advice, and job to improve the quality of TVET services offered. search assistance to their students. However, Investments have included support from the there is considerable room for improvement in private sector through public-private partnerships. 22 Actions and strategy for skills to advance Cambodia’s economic development b) Laying the foundation for access to three different groups: education and training information in the skills market in providers, potential employers, counselors the future and students. To lay a foundation for the future, the government Finally, to provide information on education should consider how to enhance the NEA’s and employment services, the NEA can seek capacity and partnership with the private sector. to consolidate and extend the provision of information on education and employment For the Future 1: Enhance the NEA’s capacity opportunities, which at present is far from and partnership with the private sector comprehensive. This effort could involve partnerships with employment service providers The NEA may need capacity building and in the private sector, as well as NGOs, who also partnerships with the private sector in the provide such information. The aim is to create a following three main areas related to its core truly effective online ‘career portal’ to be used by responsibilities: (i) labor market information students and their advisors. This career portal collection and analysis; (ii) the development could be used in secondary schools and by of labor market information systems; and employers. The portal can contain information (iii) the provision of information on education on higher education providers, courses, and and employment services. occupations, with links to the NEA’s labor market information system. First, with respect to the collection, analysis, and dissemination of labor market information, 2. Expanding coverage in the “missing the NEA can reach providers of basic training in middle� labor market models and surveys, basic and advanced training in data analysis, and The 2011 Cambodia Economic Forum and training in presentation, communication, and the Cambodia Outlook Conference21 rightly information dissemination. prioritized strengthening the “missing middle� of skills. Overcoming the low secondary Second, to refine and expand its labor enrollment, including extremely low enrollment market information system, the NEA can seek in TVET, partnerships with employers is needed collaboration with employer associations and to prepare the large number of young people private sector research providers. Specifically, entering the labor force for employment and the NEA can review labor market models already further skills upgrading. available in Cambodia (possibly in cooperation with MEYS and the private sector) to update and a) Immediate priorities in expanding refine a supply and demand model. International coverage in the “missing middle� agencies such as the ILO provide technical assistance to developing countries for this purpose. As an immediate priority, the government could In line with international good practice, the NEA mainstream good TVET programs (and expand can work with schools and training bodies to household-oriented financing instruments as implement a tracer survey on the labor market discussed under financing efficiency). outcomes of graduates – perhaps starting as a pilot project involving one or two large universities. Priority 1: Mainstream good TVET programs Complementing these possible approaches, Cambodia already offers some excellent TVET the NEA can undertake regular telephone-based programs, such as computer courses at CIST, surveys targeting employers who have recently which could serve as a model for mainstreaming advertised for positions in selected occupations, and expansion. Training programs could be with the aim of identifying positions that are identified by MLVT that are highly regarded difficult to fill.20 Finally, the NEA can publish brief by employers. These programs could then be annual employment statistics by subject, replicated in public TVET schools. In addition, by enrollment in subjects, and by institutions. MLVT could help these programs access bigger This will help new entrants make more informed facilities and enroll more students. In partnership decisions when applying for training. Such with private industries, MLVT could invest information dissemination efforts could target in one or more well established centers in several 20 Perhaps private employer associations such as CAMFEBA or local research agencies could assist in such a survey, which in turn could also involve creating more job opportunities in training and building capacity of youth. 21 As reflected, for instance, in speeches by H.E. Hun Sen, Prime Minister in both events. Actions and strategy for skills to advance Cambodia’s economic development 23 regions for secondary technical and vocational systems administered through national training education. Such actions could enlarge the share funds are more effective under conditions in of young people developing good technical and which employers play an important role in their vocational skills that are linked to industry needs. governance and policies. Separately, tax credits Mexico’s National Technical Professional Schools on education and training tend to be effective for (CONALEP) offer a successful model for guiding small firms, which tend to be exempted from the school-industry partnerships. levy due to compliance costs. b) Laying the foundation for expanding 3. Improving quality and market relevance coverage in the “missing middle� in in skills development the future To improve the relevance and quality in skills In the future, the government may consider development, Cambodia needs to reform new ways to strengthen the capacity of the NTB schools and training centers. It also needs to and encourage employers to invest in training connect them with industry. School-based their workforce. reforms need to accomplish the following: (i) change to a competency-based curricula and For the Future 1: Strengthen the capacity of place greater emphasis on training outcomes the NTB to deliver employer-focused reforms rather than inputs for improving efficiency and of education and training accountability; (ii) alter the method of instruction from a teacher-centered approach to a learner- Strengthening the NTB’s capacity may involve centered approach – consistent with helping the streamlining the membership of the board, students and trainees become lifelong learners; increasing employer representation and influence, (iii) introduce methods of instruction that develop and developing the capacity of the not only the soft skills sought by industry but NTB secretariat. It may also involve NTB also entrepreneurship skills to benefit the private playing a more active role in the practical work sector and to reduce poverty; and (iv) strengthen of developing standards, qualifications, and school and training center management to assessment practices, in addition to promoting improve efficiency and responsiveness to broader policy development and system changing local markets. Australia and Singapore, governance. To promote the NTB’s performance for instance, have considerable experience with further, the government could introduce key such reforms. China is testing a comprehensive performance indicators for NTB and monitor package of such reforms in schools along its east progress in this manner. Many countries have coast. In addition, a number of countries offer NTBs under a variety of names; covering various valuable experience on connecting schools and roles and responsibilities. Strong secretariats industry. Successful approaches include the are an essential feature to empower these NTBs Japanese model in which schools place students to carry out their assigned functions; NTBs can in industry upon graduation; the Singapore model provide an umbrella organization for oversight in which industry uses production problems for of other market institutions for labor market training; the German model in which schools information, employment services, quality and industry cooperate in dual training; the assurance, regulation, monitoring, and United States’ approach in which career policy development. academies provide work-based learning; Mexico’s CONALEP partnering in which industry connects For the Future 2: Consider new ways to with modular, competency-based secondary encourage employers to invest in the education; or Brazil’s Senai and Senac, in which training of the workforce employers lead training centers. Cambodia cannot expect to finance all its training a) Immediate priorities in promoting quality needs from public sources. It needs to diversify and market relevance this financing and encourage private spending. A majority of large enterprises are already While the effort led by MEYS and MLVT in providing training to their workers, but more can formulating comprehensive reforms and capacity be encouraged. Malaysia and Singapore, for building should continue, the government could instance, successfully encouraged enterprise immediately begin upgrading a small number of training through a levy-grant system, which has non-formal training centers in collaboration with been particularly effective for medium-sized local industries. enterprises. Experience shows that levy-grant 24 Actions and strategy for skills to advance Cambodia’s economic development Priority 1: Begin upgrading a small number of countries like Finland and Singapore, and more skills providers in collaboration with recently from China’s Shanghai municipality. local industries Practical case studies and project work can be Focusing on development zones and key growth introduced on a pilot basis to assist in building sectors in the economy, the government could entrepreneurship skills. While such curricula can foster local partnerships between industry and be offered in secondary and tertiary institutions — skills providers, not only including non-formal, from international experience — it is most relevant and formal training centers but schools as well. when offered in non-formal training institutions These partnerships give industry a role in the that reach adults who may be currently self- governance of training institutions and their employed or working for others but aspiring to management of training services. In schools open their own business. For people interested and training centers, public and private financing in becoming an entrepreneur, these programs can can support improvements in management, provide useful tools for improving businesses. instruction, facilities, and equipment. Work Regarding soft skills, secondary curriculum could experience and training can be combined to pilot modules for teaching multiple soft skills improve the quality and relevance of the training subsets. Such pilots should be monitored and offered (Mauritius has been successful in evaluated before brought to scale. adopting this approach to serve a number of its special economic zones). Furthermore, localized For the Future 2: Strengthen accountability skills strategies developed and implemented of communities and schools as part of the by local governments in partnership with local decentralization and de-concentration employers and skills providers would exemplify (D&D) process the benefits of staying in school and obtaining technical qualifications – as opposed to becoming Cambodia’s ongoing D&D process offers an unskilled laborer. an opportunity to promote autonomy and accountability for results in education at the b) Laying the foundation for promoting quality local level. In the context of D&D and the and market relevance in the future national public administrative reforms, MEYS could work with other ministries in In the future, Cambodia needs to reform its identifying the role and functions for the different secondary curriculum and to strengthen sub-national government levels. In areas such accountability of its communities and schools. as monitoring, evaluation, and performance management, a coordinated allocation of For the Future 1: Reform secondary curriculum functionalities at the different government to improve the teaching of science, math, levels with respect to education, health, and engineering, and other technical disciplines, as other social sectors could create better results well as entrepreneurship and soft skills management in the decentralized context. A coordinated approach across sectors could also Reflecting Cambodia’s economic development facilitate the necessary capacity building for strategy, a renewed effort can be launched by sub-national government officials and school MEYS to adapt the school curriculum, particularly staff. Furthermore, school operational guidelines to shift emphasis to technical disciplines and (complemented by already tested initiatives to modernize teaching methods. Such efforts such as the School Report Card Initiative22) should — with a strong attention to teacher training — enable communities and commune council would naturally complement the promotion of participation in school performance monitoring and the early grade math program led by MEYS at in developing an action plan to improve teacher the primary level. At the higher education level, performance management. these efforts could be accompanied by steps to strengthen at least one higher education 4. Enhancing financing efficiency in skills center of either science, math, engineering, or development IT, which could test and demonstrate possible approaches for consideration in future reforms of Financing the cost of skills development raises higher education. Experience in promoting better two sets of issues: the first issue is how to instruction in math and science can be drawn from mobilize resources in the public and private 22 This initiative has been piloted and evaluated under the Cambodia Education System Support Project co-financed by the World Bank to gather and analyze parents’ and community experience, and encourage parents to take an active interest in, and demand improvement from schools. Actions and strategy for skills to advance Cambodia’s economic development 25 sectors at each stage of the life cycle; the second for employment but also acquiring skills for their issue is how to spend the resources in ways first job. For example, additional financing will that create incentives for good performance be required to realize MEYS’s core breakthrough and accountability for results. These issues run indicators aimed at the following: across other public services — not just skills (i) expanding the coverage of education, starting development — and the response requires with early childhood programs and the completion adherence to good public finance principles such of primary education; and (ii) improving the quality as those who benefit most should bear more of and efficiency of education services, including the cost. This is especially true in building job- a reduction of repetition rates in schools and an relevant skills where households and businesses increase in standardized national assessment of can realize the benefits of skills development and student achievements. The imperative will be to share the financing burden. support teacher training and national assessment systems — as well as the ability of poor a) Immediate priorities in enhancing financing households to keep children in school. efficiency in skills development In this context, government financial allocations As an immediate priority, the government should recognize the importance of early should increase expenditures on cost-effective childhood as human capital development with household-oriented financing instruments for high social and economic returns; therefore, it school retention. should increase support to highly cost-effective investment in young children. International Priority 1: Expand household-oriented experience shows that this can be effective financing instruments for school retention through targeted social protection programs — such as cash transfers with child development Cambodia’s strong experience in implementing co-responsibilities that are envisaged under the scholarship program to promote secondary Cambodia’s National Social Protection Strategy.23 enrollment offers useful lessons to build on. Such cash transfers could be conditional on Experience shows that the demand of such participation in cost-effective interventions, subsidy programs can be cost-effective in including nutrition; maternal and child health; maintaining children in schools. Similar and parental and early childhood education. programs can be considered also for TVET— This could be done in a similar manner to the in partnership with the private sector. Experience scholarships that are currently paid to households in several countries throughout Latin America, on the condition of school attendance. as well as in Indonesia and Bangladesh, has demonstrated the success of these programs For the Future 2: Explore different financing in encouraging retention and completion in tools to promote incentives toward good education programs. results among skills providers, including higher education institutions b) Laying the foundation for future financing efficiency Internationally successful reforms such as: (i) performance-linked budgeting; (ii) the use of In the future, the government needs to increase competitive skills development funds; and (iii) expenditures on cost-effective interventions the empowerment of beneficiaries through the in early childhood; it also needs to explore use of vouchers and learning accounts for skills different financing tools to promote incentives development, takes time. Chile, through its toward good results among skills providers, national skills agency SENCE, has encouraged including higher education institutions. better services from public and private skills providers by procuring these services For the Future 1: Increase expenditures on competitively. Australia is taking steps to promote cost-effective interventions early in the competition and to ensure more relevant training life cycle through the use of targeted vouchers. Such approaches to demand-side financing shift Continuing the trend of rising public expenditure the incentive framework for performance by on education as a share of GDP, Cambodia needs empowering beneficiaries of skills development. to make more resources available to improve the For the public sector, they encourage a focus preparation of children for not only acquiring skills on the outcomes of training to justify public 23 Cambodia’s National Social Protection Strategy was approved by the Prime Minister and Full Cabinet Meeting in March 2011. 26 Actions and strategy for skills to advance Cambodia’s economic development expenditure. As Cambodia has done in the the possible distortions caused by the existing context of the voucher program under the ADB financing mechanisms in higher education. TVET project or various scholarship programs, Lessons from Cambodia and elsewhere suggest pilots could be designed and tested in the short that the action plan should be time-bound, with term. With careful monitoring and evaluation of strong oversight, monitoring, and disclosure of their effectiveness they could then be used to results. Key performance indicators should be inform future policy decisions. identified for monitoring. These indicators should include both intermediate and final milestone The higher education financial mechanism needs indicators subject to rigorous evaluations. A clear to enhance efficiency and transparency. Given the division of responsibilities for implementation rapid growth in higher education and low public and thorough oversight will be critical to remain financing supporting these higher education on schedule. In developing the action plan, the institutions, fees collected by both public and above outlined set of actions provides specific private institutions can support long-term options that can serve as an input for discussion sustainability. MEYS will need to evaluate the between the government and other stakeholders. utilization of resources in higher education and 3.2 Implementing the action plan and considering a more comprehensive strategy beyond To facilitate such discussion and implementation, integrated approach as captured by the life- the government can establish a “skills community�. cycle skills development framework (Figure 12). The community could include mid-level officials A simple conceptual framework, Skills toward across ministries and the private sector, as well as Employment and Productivity (StEP), can help government agencies. International experience policymakers in designing the systems that has shown that such communities can be effective impart skills leading to higher productivity and in promoting policy debates and can serve as growth. While Cambodia is likely to reap the the embedded ambassadors of reforms during highest returns in focusing on the first three implementation. They tend to be established steps, entrepreneurship training (under Step 4) for a limited period of time, meet on a periodic and easing information constraints (under Step basis, participate in training, and actively share 5), are also necessary to effectively transform insights and disseminate reform proposals in their skills into productivity gains. The integrated respective sectors. approach should build on a rigorous analysis: this analysis should comprise the causes of skills Finally, considering the skills development agenda gaps, the mismatches, and an evaluation of the for the medium-term, Cambodia can adopt an effectiveness of past policies and actions. Actions and strategy for skills to advance Cambodia’s economic development 27 Figure 12 Systems to support the development of skills in the life cycle Productivity and Economic Growth Job Matching, Labor Mobility and Job Search Knowledge, Information, * Easing information Innovation and constraints (labor Enterpreneurship market outcomes for Building job-relevant skills different skills, search * Partnerships between * Diplomas and special assistance, certification universities and firms/ training courses systems) Basic/secondary industries * “Activation� programs * Easing group-specific cognitive education * Innovation subsidies/ and training for informal market failures (e.g., * Learning standards training sector for youth, women, Starting right * Teachers * Public information * Flexible vocational and excluded groups) * Nutrition * Resources systems tertiary education * Labor regulations * Cognitive and behavioral * Regulatory environment * Knowledge incubation * Role of firm-provided for efficient social stimulation support training insurance * Entrepreneurship * Life-long learning training and support Source: World Bank (2010d). 28 REFERENCES Adams, Arvil V. 2009. 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