67204 LEADING WITH IDEAS Skills for Growth and Equity in Thailand LEADING WITH IDEAS Skills for Growth and Equity in Thailand ©2012 The World Bank The World Bank 30th Floor, Siam Tower 989 Rama 1 Road, Pathumwan Bangkok 10330, Thailand (66) 0-2686-8300 www.worldbank.org/th 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: 67204-TH Cover photo (left to right ): Mrs. Sarunya Srisakulchairak, Mr. Duangrit Bunnag, Mr. Pornthep Tirawiboon Location: Duangrit Bunnag Architect Limited, Bangkok, Thailand Photographer: Gerhard Joren FOREWORD Across countries, workforce skills development has become a key element in the quest toward raising productivity, enhancing competitiveness, facilitating employment and promoting inclusive growth. To create jobs, produce higher incomes and reduce poverty, the increasingly important challenge is ensuring that the workforce acquires and is able to utilize the skills that match employer needs. ASEAN member nations, including Thailand, have recognized the key role of skills for prosperity and seek to promote skills development and the free flow of skilled labor as part of the ASEAN Economic Community integration agenda. In Thailand, enhancing workforce skills and promoting innovation is part of the country’s strategy to facilitate the transformation toward a more knowledge-intensive and creative economy generating good jobs. The Royal Thai Government has placed human capital at the heart of the country’s strategy toward sustainable and inclusive growth and competitiveness. In this respect, Thailand’s strategy corresponds to the emerging recognition that the ability of labor to acquire and utilize skills will influence both the competitiveness and sustained growth of the Thai economy and the equity and cohesion amid the Thai society in the future. This raises the bar for Thailand’s labor market institutions as well as for its education and training systems. The National Economic and Social Development Board (NESDB) invited the World Bank to contribute to the understanding of the emerging shortages of skilled labor facing Thailand’s employers, underlying causes, and possible responses as part of the 11th National Economic and Social Development Plan. The summary of the findings is presented in this report. The report’s early findings have been discussed in numerous meetings and at seminars organized by the Thailand Development Research Institute (TDRI) and NESDB in July and September 2011, respectively. The discussions involved representatives of multiple ministries and government agencies, private sector employers, skills providers and other stakeholders. These discussions highlighted the importance of adopting a comprehensive approach to skills development – as outlined in the Skills Toward Employment and Productivity framework presented in this report – recognizing that a critical foundation for skills is established in early childhood and as part of quality basic education and continues throughout the life cycle, including in the workplace. From the employers’ perspective, the discussions stressed the need to link Thailand’s training centers and higher education institutions with employers. This report provides valuable insight for Thailand to develop the skills necessary to boost ideas-led growth and equity. The report draws on findings from employer surveys, analyses Thailand’s skills development performance from the lifecycle perspective, and outlines possible strategies to meet the emerging challenges in matching labor force skills with Thailand’s development objectives. In particular, the report highlights possible approaches for consideration while implementing the skills agenda outlined in the 11th National Economic and Social Development Plan. It is our hope that this report will contribute to a constructive discussion and informed decisions that will help the equitable and sustained growth of Thailand’s economy. Arkhom Termpittayapaisith Annette Dixon Secretary General Country Director, Thailand National Economic and Social Development Board East Asia and Pacific Region The World Bank ACKNOWLEDGMENTS This report was prepared by a World Bank team led by Hana Brixi in cooperation with experts and officials of the National Economic and Social Development Board (NESDB). Arvil Van Adams, Direk Patmasiriwat, Piriya Pholphirul, and Sutayut Osornprasop contributed background analyses. The team consulted with, and received valuable feedback from government officials of various government ministries and agencies, including the Ministry of Education, the Ministry of Labor, and other government and partner institutions. Many senior officials and experts provided comments and suggestions at seminars held at the Thailand Development Research Institute (TDRI) and NESDB in July and September 2011, respectively. The team would like to recognize the invaluable guidance provided by Khun Arkhom Termpittayapaisith (Secretary General of NESDB) and Khun Suwanee Khamman (Deputy Secretary General of NESDB). The team would also like to express a very special thanks to the following officials and experts for sharing views and suggestions: Dr. Sasithara Pichaichannarong (Permanent Secretary of the Ministry of Education); Dr. Sumate Yamnoon (former Secretary General of Office of Higher Education Commission), Dr. Piniti Ratananukul (Deputy Secretary General of Office of Higher Education Commission), Assoc. Prof. Kamjorn Tatiyakavee (Deputy Secretary General of Office of the Higher Education Commission); Prof. Chanrarong Pornrungroj (Director of Office for National Education Standards and Quality Assessment); Dr. Sampan Panpruk (Director of National Institute of Educational Testing Service (NIETS)); Dr. Benjalug Namfa (Deputy Secretary General, Office of Basic Education Commission), Dr. Wanna Chongdarakul (Bureau of Educational Innovation Development of Office of the Basic Education Commission); Dr. Sakarindr Bhumiratana (President of King Mongkut’s University of Technology Thonburi), Dr. Krissanapong Kirtikara (Advisor to the University, King Mongkut’s University of Technology Thonburi); Khun Chirapun Gullaprawit (Director of Social Development Strategy and Planning Office, NESDB); Dr. Phanit Laosirirat (Executive Director of Thailand Productivity Institute); Khun Jiraporn Kesronsutjarit (former Director General of Department of Skill Development), Khun Praphan Montakarntiwong (Director General of Department of Skill Development), M.L. Puntrik Smiti (Deputy Director General of Department of Skill Development); Dr. Nipon Poapongsakorn (President of TDRI), Dr. Dilaka Lathapipat (TDRI), Dr. Srawooth Paitoonpong (TDRI), and Dr. Yongyuth Chalamwong (TDRI); Prof. Dr. Vicharn Panich (Chairman, Knowledge Management Institute); Dr. Sauwakon Ratanawijitrasin (Director of SEAMEO RIHED), Dr. Chantavit Sujatanond (Adviser to SEAMEO RIHED); Dr. Narongchai Akraseranee (Chairman of the Board of the Office of Knowledge Management and Development (OKMD)); Khun Chatpong Wongsuk (President of Personnel Management Association of Thailand); Mr. Simon Matthews (Country Manager of Manpower). Furthermore, the team appreciates the contribution of partners that provided helpful insights and information: Tomoo Hozumi (Representative, UNICEF Thailand Country Office), Sachiko Yamamoto (Regional Director, ILO Regional Office), Thetis Mangahas (Deputy Regional Director, Policy and Programmes, ILO Regional Office), Phu Huynh (Labor Economist, Regional Economic and Social Analysis Unit, ILO Regional Office) and Barbara Orlandini (Chief, Office of the UN Resident Coordinator). Many World Bank staff, including Emanuela Di Gropello, Frederico Gil Sander, Kevin Macdonald, Kirida Bhaopichitr, Harry Patrinos, Ian Walker, Magnus Lindelow, Mathew Verghis, Omporn Regel, Pamornrat Tansanguanwong, Prateek Tandon, Shabih Ali Mohib, Suhas Parandekar and Sofia Busch, contributed useful comments and inputs. Finally, the team would like to express sincere thanks for the strategic guidance of Annette Dixon (Country Director Thailand), Xiaoqing Yu (Human Development Sector Director for East Asia and Pacific Region), Emmanuel Jimenez (former Human Development Sector Director for East Asia and Pacific Region), Luis Benveniste (Sector Manager for Education Sector Unit), and Eduardo Velez Bustillo (former Sector Manager for Education Sector Unit). CONTENTS EXECUTIVE SUMMARY 1 1. THAILAND’S QUEST FOR COMPETITIVENESS AND EQUITY DEMANDS SKILLS 4 1.1. Skills are in demand for a knowledge-based and creative economy 4 1.2. Skills can help improve equity, social mobility and self-insurance against risks 8 2. WHAT ARE THE CONSTRAINTS IN SKILLS DEVELOPMENT AND UTILIZATION? 10 2.1. What skills gaps and mismatches do employers face? 10 2.2. What are the weaknesses in providing and matching skills with employment? 12 2.3. What are the causes of the skills gaps and mismatches in Thailand? 28 3. IMPLEMENTING THE NESDP’S SKILLS AGENDA TOWARD IDEAS-LED GROWTH WITH EQUITY: APPROACHES FOR DISCUSSION 30 3.1 Enforcing salt iodization 31 3.2 Supporting children according to their needs and investing in teachers 32 3.3 Overcoming institutional fragmentation, adopting performance-oriented financing and strengthening accountability 34 3.4 Linking higher education institutions and training centers with industry 39 3.5 Providing quality assurance 40 3.6 Way forward 41 REFERENCES 42 ANNEX 45 ACRONYMS ECD Early Child Development ESA Educational Service Area GCI Global Competitiveness Index GDP Gross Domestic Product IDD Iodine Deficiency Disorders ISCED International Standard Classification of Education KEI Knowledge Economy Index MICS Multiple Indicator Cluster Survey MOE Ministry of Education NEA National Education Act NESDB National Economic and Social Development Board NESDP National Economic and Social Development Plan NIETS National Institute of Educational Testing Service NQF National Qualification Framework OBEC Office of Basic Education Commission OECD Organisation for Economic Co-operation and Development ONESQA Office of the National Education Standards and Quality Assessment PBB Performance-based Budgeting PICS Productivity and Investment Climate Survey PISA Program for International Student Assessment R&D Research and Development SENAI National Industrial Training Service SETAs Sector Education and Training Authorities STEM Science, Technology, Math and Engineering StEP Skills toward Employment and Productivity TIMSS Trends in International Math and Science Studies TVET Technical and Vocational Education and Training UNCTAD United Nations Conference on Trade and Development UNESCO United Nations Educational, Scientific and Cultural Organization UNICEF United Nations Children’s Fund 1 EXECUTIVE SUMMARY This note reflects on the economic and policy Priorities context of skills development in Thailand, the human resource base, and the possible Step 1: Starting right. In building the foundation strategies that can be drawn from international for skills development in early childhood, experience to meet the emerging challenges Thailand is comparatively advanced, not only for achieving ideas-led growth with equity. It in reducing malnutrition but also in promoting summarizes not only the skills gaps but also maternal and child health and pre-primary the mismatches facing Thailand. This note also education. A uniquely serious problem in employs the StEP framework (Skills toward Thailand is iodine deficiency, which erodes the Employment and Productivity) to assess the root intellectual capacity of children and negatively causes and possible solutions to both these affects their learning and productivity later in skills gaps and these mismatches. In particular, life. This problem stems from the government’s the note highlights possible approaches for limited capacity to enforce salt iodization and to consideration while implementing the skills implement the national plan for iodine deficiency agenda outlined in the 11th NESDP. disorders control. Enhancing workforce skills and increasing Step 2: Ensuring that all students gain basic innovation is part of Thailand’s strategy to skills. Thailand has achieved nearly universal move to a more knowledge-intensive, creative coverage in basic education. Ensuring that economy and employment – producing higher children attain a quality basic education, however, incomes and reducing poverty. The Royal Thai remains a challenge illustrated by relatively weak Government is rightly placing human capital student test performance. This challenge may at the center of the country’s growth strategy reflect governance weaknesses and capacity and competitiveness. The ability of labor to constraints in student support programs and acquire and utilize skills will influence both the possibly teachers’ training constraints. competitiveness of the economy and the equity amid society. This raises the bar for Thailand’s Step 3: Building job-relevant skills. The education and training systems. coverage of formal education at the upper- secondary and tertiary level is wide and it is This analysis recognizes the strong human complemented by an extensive training system. resource base and policy framework on which But structural imbalances exist, including low Thailand can build, and it draws attention to the enrollment in science and technology. These main remaining weaknesses in both providing imbalances may emerge from the existing labor skills and matching skills with employment. market’s information constraints and from 2 Executive summary incentive distortions and capacity constraints in to attain proper skills development that will the education and training systems. Moreover, lead to employment and productivity. As a tertiary enrollments – influenced by the contribution to the ongoing policy discussion, uneven quality in earlier education and by the Table 1 highlights specific priorities and possible concentration of higher education institutions in approaches to support implementation under the Bangkok – seem to exacerbate income inequality. 11th NESDP, building on the existing policies and ongoing initiatives. Step 4: Encouraging entrepreneurship and innovation. Initiatives to connect teaching Possible Approaches for Discussion and research and to bring higher education institutions closer to employers, training centers, 1. Enforcing salt iodization. International research and development, and earlier levels of experience suggests that an appropriate legal education have been underway, but disconnects and regulatory framework, enforcement, and a persist. Key disconnects may arise from low public awareness campaign are necessary to information in higher education institutions control iodine deficiency disorders. about the research needs and entrepreneurship opportunities in the market, academic faculty 2. Supporting children and investing in constraints, and weak incentives and capacity in teachers. The pedagogy, curriculum, and firms to invest in research and innovation. special support programs may need to be strengthened; at the same time, it also may Step 5: Facilitating labor mobility and job need to reflect the diversity of students and matching. Market institutions for quality their needs. In addition, the teachers training assurance, licensing, regulation, accreditation, system may need strengthening by first employment services, and coordination among focusing on teaching key subjects (math, skills providers and users are emerging in science, English, and IT). Thailand. Their weaknesses may include insufficient information on study and career 3. Overcoming institutional fragmentation, choices, varying levels of competency, poor adopting performance-oriented financing, mechanisms for job searches, and varying quality and strengthening accountability. The of skills and skills providers. These weaknesses education system’s administration may may also be caused by limited incentives and require a detailed review and simplification. the limited capacity of skills providers to share In the training system, the diverse skills information and coordinate the provision of skills. provider community may require stronger There also seems to be inadequate capacity coordination. Thailand may further pilot and for quality assurance, licensing enforcement, evaluate financing mechanisms toward better regulation, and accreditation. performance, such as performance-based budgeting, vouchers, and training funds. Future investment in strengthening human To strengthen accountability relationships resources requires both quality and equity toward quality and relevance of skills provided Table 1 Skills development toward ideas-led growth with equity in Thailand Key Elements Priorities Possible Approaches for Discussion Strategy: Strengthen human resource base toward developing a creative knowledge economy and promoting an ideas-led growth with equity Equity and coverage in Step 1: Starting right: IDD control 1. Enforcing salt iodization skills development to Step 2: Ensuring that all students obtain basic 2. Supporting children and investing in expand Thailand’s talent skills: Basic education quality teachers pool and skills base Step 3: Building job-relevant skills: Skills 3. Overcoming institutional fragmentation, Quality, relevance, and relevance and equity in higher education adopting performance-oriented financing, effective utilization of and strengthening accountability Step 4: Encouraging entrepreneurship and skills to strengthen innovation: Education-training-R&D- 4. Linking higher education institutions and Thailand’s creative industry links training centers with industry knowledge economy Step 5: Facilitating labor mobility and job 5. Providing quality assurance matching: Market institutions Executive summary 3 throughout the education and training and training centers can appoint industrial systems, quality assessments may need to practitioners as their staff. play a stronger role to create opportunities for performance improvements. 5. Providing quality assurance. National qualification frameworks in Thailand can 4. Linking higher education institutions further build on the existing testing and and training centers with industry. certification systems, and connect to a Higher education institutions can provide regional framework to promote labor mobility. for both short-term training of workers These national qualification frameworks and entrepreneurship training. They can can coordinate stakeholders and define support incubators, extension and product qualifications, set competency standards, development services, technology licensing test individuals, and certify skills. A stronger offices and spin-offs to commercialize accreditation system can help reduce varying research and transfer knowledge and quality among skills providers. technology. Also, higher education institutions 4 1 THAILAND’S QUEST FOR COMPETITIVENESS AND EQUITY DEMANDS SKILLS Enhancing workforce skills and increasing innovation is part of Thailand’s strategy to move to a more knowledge-intensive, creative economy and employment – producing higher incomes and reducing poverty.1 Evidence shows that skills are correlated with innovation, productivity, and growth.2 Moreover, skills are becoming a leading factor influencing income distribution and social mobility in not only Thailand but also the majority of East Asia countries.3 1.1 Skills are in demand for a knowledge-based and creative economy The Royal Thai Government is rightly placing The NESDP’s emphasis on strengthening human capital at the center of the country’s the human resource base and improving growth strategy. Thailand’s growth over the productivity is a key to the nation’s past 25 years has been driven primarily by an competitiveness. Thailand’s competitive expansion of employment in the industrial sector strategy has been shifting from a race toward and capital investment. Gains from productivity lower wages to the pursuit of higher productivity. have been relatively low, with total factor By raising productivity, the unit cost of goods productivity accounting for only one-sixth of and services can be kept low and competitive the annual growth rate from 1985 to 2005. Less while raising wages and earnings. The pursuit than one-tenth of the growth can be attributed of higher productivity through innovation and to human resource improvements. (NESDB investment in workforce skills can enhance and World Bank, 2008) With the advantage competitiveness and provide for employment of the emerging decline in labor cost and the and more inclusive growth. Only by adopting gradual appreciation of the Thai Baht, the this approach can Thailand expect to raise the nation’s success in sustaining high growth in the incomes of its workforce and join the ranks of future will depend on its ability to improve the other high income countries. (Adams 2009) productivity of its workforce. This has been the path followed by other economies in the region Thailand’s quest for global competitiveness that have moved to higher income levels over raises the bar for its education and training time, for example, Korea, Taiwan, and Singapore. systems. Global supply chains offering opportunities for Thailand’s development demand 1 For discussion on developing knowledge economy and creative economy in Thailand, see NESDB (2010a and 2010b) and NESDB and World Bank (2008). 2 The term “skills development” is used as a broad concept to capture the many different institutions and approaches that facilitate early learning, building job-relevant skills, entrepreneurship and innovation, and labor mobility and job matching during the working lives of individuals. “Skills” comprise cognitive, non-cognitive, and technical skills. Cognitive (i.e. academic and general thinking) skills are directly related to productivity and growth; cognitive ability and non-cognitive skills (intended mostly as behavioral skills) are related to labor market outcomes; management skills are positively correlated with innovation and productivity, as are high level science, technology, math and engineering (STEM) academic and technical skills. World Bank (2011b). 3 World Bank (2011a). Thailand’s quest for competitiveness and equity demands skills 5 quality in the production of goods and services. (including completely-built units, especially They place demands on skills and capacity for passenger vehicles) in manufacturing is the continued learning of employees, and thus spearheading technological change in Thailand’s on the national education and training systems. economy.5 Such technological change is Countries that only offer their multinational positively correlated with demand for educated partners a cheap, disciplined, dexterous workers, as shown in Thailand as well as China, workforce are likely to become increasingly Indonesia, and the Philippines. (Almeida 2009b) outperformed by counties that provide better educated and trained workers. Drawing lessons Thailand’s competitiveness and growth from the 9th and 10th NESDPs, which already may already suffer owing to its workforce sought to improve Thailand’s competitiveness, the limitations. According to the Global 11th NESDP emphasizes quality and continuity Competitiveness Index (GCI), Thailand’s rank of skills development throughout the life of has fallen in recent years. An inadequately individuals – with effective skills utilization. educated workforce and poor work ethic were cited among the top ten most problematic An export-led development strategy is helping factors for doing business. (World Economic move Thailand’s economy up the value chain. Forum, 2010) Among the competitiveness Learning by exporting, Thai firms have adopted indicators, Thailand scored particularly poorly new technologies (often by acquiring them from in the areas of “primary education and health” a parent company), introduced new production (ranked 80 out of 139 countries) and “higher processes and developed new product lines. education and training” (ranked 59), including According to the Ministry of Commerce, the overall quality of the educational system Thailand’s share of high-tech exports rose (ranked 66), along with “technological readiness” from 47 percent in 1995 to 71 percent in 2010. (ranked 68). Thailand’s GCI rank (38 out of The automobile and computer industries have 139 countries in 2010) places Thailand at an become top exporters, replacing textiles. efficiency-driven stage of development. The Although Thai firms mainly assemble products as findings suggest that workforce improvements a large part of their added value, the increasing are necessary to move Thailand to the innovation share of high-tech products in Thailand’s exports driven stage of global competitiveness.6 indicates that production has been gradually moving from labor-intensive to more technology- Workforce skills may be hindering Thailand’s intensive goods and services. Moreover, the transformation into a knowledge economy. creative economy (including functional design, Thailand’s rank in the Knowledge Economy Index media, traditional and cultural expression, (KEI) weakened in the last decade – from 54 of and art) is expected to become a new source 132 countries (in 2000) to 63 out of 132 countries of growth for service exports. According to (in 2009). This is largely due to the weaknesses UNCTAD, Thailand is ranked 17th as a global in its economic incentive regime (ranked 66), exporter of creative goods. Royalties and license education (ranked 64), and information and fees have sharply increased in recent years, communication technology (ranked 64). The KEI partly driven by exports of software products reported a slightly better score for Thailand’s and television programs. innovation system (ranked 59).7 As in the case of the Global Competitiveness Index, these scores Industries with high numbers of skilled imply a considerable need for improvement in workers have expanded their role in the workforce development. economy, contributing to the demand for skills.4 In spite of the global economic slowdown, Enterprise managers perceive shortages of Thailand’s automobile sector grew 65 percent skilled labor as Thailand’s top constraint to in 2010, stimulated by a strong demand in growth. The 2011 Doing Business data ranked both domestic and international markets. The Thailand 19 out of 183 economies in the ease increasing share of the automobile industry of doing business. The 2007 Productivity and 4 According to the Thailand Productivity and Investment Climate Survey (PICS) in 2007, industries with the largest share of workers with higher education (more than 12 grades) include the electronic components industry (31 percent of workers with higher education), electrical appliances and machinery/equipment (28 percent of workers with higher education), and automobile industry (27 percent of workers with higher education). Over two thirds of the workforce in these industries had secondary education (6-12 grades). Workforce with primary education accounted for 3 percent in electronic components, electrical appliances and auto parts, and for 8 percent in machinery and equipment industry. For discussion see World Bank (2008). 5 For discussion see World Bank (2011c). 6 For details see World Economic Forum (2010). 7 For KEI, please see World Bank KEI database. KEI includes 14 indicators. KEI assess the innovation system according to royalty and license fees payments and receipts, patent applications granted by the US Patent and Trademark Office, and scientific and technical journal articles. Education is assessed according to adult literacy rate and secondary and tertiary enrollments. For details see World Bank (2009a). 6 Thailand’s quest for competitiveness and equity demands skills Figure 1 Firms in Thailand perceive skills shortages and engage in training provision 90 80 70 Years of experience of the 60 top manager in the firm's sector 50 % of firms identifying labor skills 40 as a major constraint 30 % of firms offering formal training 20 % of employees offered formal training 10 0 % of unskilled workers ia D d a s o le a a ey a l ia zi ne an si ic tin di si N es hi d a rk us ex ay bo In LA Br C pi en l on Po Tu R M al lip am AI g d M Ar i In TH Ph C Source: World Bank’s Enterprise Surveys, 2006-09. Investment Climate Survey (PICS) indicated that in the amount of time needed to fill a vacancy Thailand is well placed in terms of infrastructure, for skilled production workers, exceeding the regulation, and other objective investment international average of 3.8 weeks by more than climate measures; however, its traditional labor a third. This considerable amount of time to find cost advantage is being eroded by fast growing workers makes job vacancies costly for firms. In countries and skill shortages that have become fact, about 20 percent of firms in the garment, Thailand’s biggest obstacle to doing business. machinery, and equipment industries cite lengthy In 2007, firms perceived skills and education of job vacancies as the main cause of capacity the available workforce as the 4th most serious underutilization. (World Bank, 2008) obstacle to doing business in Thailand; the three preceding obstacles were macroeconomic Shortages and mismatches of skilled labor instability, economic policy uncertainty, and have limited the ability of Thai firms to raise corruption. About 40 percent of firms reported productivity. In Thailand’s enterprise survey in skilled labor shortage as one of their top three 2007, 43 percent of firms reported a lack of constraints to doing business (which is more knowledgeable and trained personnel as the than in comparator countries, including China, main obstacle to innovative activities and to India, Indonesia, Korea, Malaysia, the Philippines, investment in research and development (R&D).9 Poland, and Turkey, but lower than, for instance, This is worrisome given Thailand’s overall low Brazil and Russia, as shown in Figure 1).8 To spending on R&D. Internationally, enterprise compensate for these shortages, three-quarters surveys suggest that the education of workers, of firms provide training to their workers. along with knowledge spill-over, is the most important determinant of firm-level innovation.10 Firms need an increasing amount of time to Educated workers are able to absorb and retain fill vacancies requiring high skills. The 2007 knowledge, and to generate, transmit, and PICS showed that firms spent an average of 7.4 implement new ideas and technologies. As weeks to find a professional worker (up from 6.4 technology may become more skill-biased and weeks in 2004), ranging from 6.0 weeks in central competitive pressures intensify, entrepreneurs Thailand to 15.5 weeks in the northeast. Export and managers need more education and a larger industries needed an average of 7.9 weeks to number of skilled workers. Research shows that find professional workers. For skilled production firms with the combination of not only substantial workers, firms spent an average of 5.2 weeks to technology but also managers with more than fill a vacancy (from 3.6 weeks in north Thailand a secondary education are more likely to hire to 7.0 weeks in the east). Out of 64 countries skilled workers. (Almeida 2009a) with comparable data, Thailand ranked 53rd 8 A comparison with the 2004 PICS findings suggests that in relative terms skills became a somewhat less serious obstacle to doing business in Thailand during 2004-07 (in 2004, workforce skills ranked as the second biggest obstacle to doing business, reported among their top three constraints by nearly 50 percent by firms). But although macroeconomic instability, economic policy uncertainty and corruption became more troubling, workforce skills clearly remained employers’ major concern. 9 Lack of lack of knowledgeable and trained personnel was reported as one of the top two constraints, along with high cost of innovative activities and R&D (reported as main constraint by 44 percent of firms). For details, see World Bank (2008) 10 World Bank 2011a. Less significant factors include the general investment climate, the regulatory system, crime rates, restrictiveness of labor laws, and access to financing (especially for smaller firms). Thailand’s quest for competitiveness and equity demands skills 7 Figure 2 Wage premiums are relatively high in Thailand’s industries a. Cambodia b. China 100 70 Skill premium and proportion Skill premium and proportion 90 60 of skilled workforce (%) of skilled workforce (%) 80 70 50 60 40 50 40 30 30 20 20 10 10 0 0 1997 2003-04 2007 1999 2005 Skill workers with at least lower-secondary education Skill workers with at least upper-secondary education Skill workers with at least upper-secondary education Skill workers with at least tertiary education Skill workers with at least tertiary education Skill premium for upper-secondary education Skill premium for lower-secondary education Skill premium for tertiary education Skill premium for upper-secondary education Skill premium for tertiary education c. Indonesia d. Philippines 100 80 Skill premium and proportion Skill premium and proportion 90 70 of skilled workforce (%) of skilled workforce (%) 80 60 70 50 60 50 40 40 30 30 20 20 10 10 0 0 1994 1999 2001 2003 2005 2007 1988 1991 1994 1997 2001 2004 2006 e. Thailand f. Vietnam 70 60 Skill premium and proportion Skill premium and proportion 50 60 of skilled workforce (%) of skilled workforce (%) 40 50 30 40 20 30 10 20 0 10 -10 0 -20 1990 1994 2000 2004 1992 1998 2004 2006 Skill workers with at least upper-secondary education Skill workers with at least tertiary education Skill premium for upper-secondary education Skill premium for tertiary education Source: Di Gropello and Sakellariou (2010). 8 Thailand’s quest for competitiveness and equity demands skills 1.2 Skills can help improve equity, social mobility, and self-insurance against risks Thailand’s policymakers are concerned about education over secondary education was income inequality and social mobility. At 40 about 120 percent in the early part of the last percent, Thailand’s gini coefficient is higher decade (although declining somewhat with the than that of most countries in Europe or Asia global recession during 2008-10). This is the (although lower than China’s or the Philippines’). highest level among the surveyed countries in The richest quintile of the population outspends East Asia Region, as illustrated in Figure 2.11 In the poorest quintile by seven times. (World particular, skill premiums have remained strong Bank 2011a) Such large disparities in wealth in manufacturing and trade, while declining in and spending, especially when that wealth agriculture and mining (Figure 3). Labor force and is perceived to be generated in ways lacking household surveys suggest that demand for skills legitimacy, have the potential to weaken social is becoming increasingly sector-specific, with cohesion and fuel social strife. energy, finance, communications, and healthcare offering the highest remuneration. Moreover, Thailand has expanded access to basic industry premiums have been increasingly social services, but many are still deprived of contributing to wage differentiation in Thailand, adequate skills development opportunities. suggesting that labor markets may be suffering There is a good effort to ensure universal access from segmentation.12 to essential health care and basic (compulsory 9-year) education. Primary education is free; The ability of labor to move freely will however, location, school quality, household influence inequality in the future. With rapid income, and parental education largely determine technological progress and continually changing young people’s readiness to proceed to upper- composition of growth, the ability of people secondary education and beyond. Consequently, to shift across regions and industries – taking as discussed in Section 2.2, post-secondary advantage of these emerging sources of growth enrollment in Thailand is highly unequal. – will determine their income and wealth. This will largely depend on how smoothly labor Inadequate skills limit income opportunities and other market factors function to provide amid the poor. Nearly 90 percent of Thailand’s necessary information, signals, and incentives population is in the lowest income quintile to all parts of the population. Segmentation and and dependent on agriculture as its main roadblocks in the labor market – and hence occupation. The gap between those dependent weaknesses in labor market policies – are likely on agriculture and those with other employment to have increasing consequences for inequality. opportunities is an important contributor to income inequality. By raising both productivity Skills will also influence inequality. The ability in agriculture and employment, a wider access of people to find productive employment in the to skills development opportunities can promote changing economic environment will increasingly equitable income opportunities and increase the depend on their skills. General skills make country’s competitiveness. workers employable in a wide and changing range of jobs. Their skills protect them against Higher wages confirm the demand for skills labor market risks – even when conventional even as the supply of skilled labor has grown. unemployment insurance cannot. From the The share of workers with tertiary education in household perspective, skills provide a means the larger industries has nearly doubled over the to self-insure against economic disruptions. past two decades, reflecting rapid expansion of Moreover, further technological progress is likely tertiary enrollment. (Di Gropello and Sakellariou, to make all spheres of economic activity, including 2010) Nonetheless, skill premiums have been the agricultural sector, more skill-intensive. Hence on the rise for upper-secondary and tertiary access to skills is likely to continually affect education, with a significant differentiation income disparity. across sectors. The wage premium for tertiary 11 Lathapipat (2010) and World Bank (2011a and 2011b). 12 Patmasiriwat (2011) and Di Gropello and Sakellariou (2010). The latter analysis of labor and household surveys over the past decade suggests the following main trends: a) increasing proportions of skilled workers across the region; b) increasing demand for skills in the region; c) increasing industry premiums in three countries of the region, namely Cambodia, the Philippines, and Thailand. Surveyed countries included Cambodia, China, Indonesia, Mongolia, the Philippines, Thailand, and Vietnam. The study defined skilled workers as workers with upper secondary and above levels of education. Thailand’s quest for competitiveness and equity demands skills 9 Figure 3 Share of workers with tertiary education rose … and returns to tertiary education in manufacturing and in manufacturing and trade/services … trade/services remain strong 25 300% 20 250% 15 200% 10 150% 5 100% 0 1990 1994 2000 2004 50% Agriculture/Mining Trade/Services Manufacturing 0% 1990 1994 2000 2004 Agriculture/Mining Trade/Services Source: Thailand labor and household surveys. Manufacturing Source: Thailand labor and household surveys. 10 2 WHAT ARE THE CONSTRAINTS IN SKILLS DEVELOPMENT AND UTILIZATION? This section presents available evidence on skills gaps and mismatches in Thailand from the perspective of both the employers and the providers of skills. It identifies a number of important skills imbalances facing the economy. Finally, it reveals the underlying causes of these gaps and mismatches as market failures and points to possible actions in response. 2.1 What skills gaps and mismatches do employers face? Manufacturers in Thailand face difficulties in applicants. The shortage of skills seems to arise filling job vacancies. In Thailand’s enterprise largely from skills mismatches in the labor market. survey (PICS 2007), an average of 30 percent of Less than only 4 percent of surveyed firms firms reported a shortage of skilled production responded that universities are not producing workers, including nearly 50 percent of auto enough graduates. Skills shortages have also parts firms, 34 percent of firms in machinery and contributed to the observed high turnover of equipment, and 32 percent of firms in electronics new recruits because they generate an intense and electrical appliances (Figure 4). Furthermore, competition among firms for qualified labor. 20 percent of firms reported shortages of professional workers and 48 percent of firms Weaknesses in information technology, lacked unskilled production workers. Although English, creative thinking, and behavioral job vacancies of skilled workers are relatively skills are pervasive. Nearly all firms and about fewer than those of unskilled workers, they take a quarter of skilled workers rank skills in English about three times longer to fill. (World Bank 2008) and IT as the most serious skill gaps (Figure 6). Other basic academic skills, namely numerical A lack of basic and technical skills – rather skills, come next, as perceived by both firms and than a shortage of university graduates – help skilled workers. Skilled workers also point out explain the prevalence of job vacancies. As weaknesses in technical skills. Both firms and Figure 5 illustrates, firms in Thailand complain skilled workers indicate, however, that gaps in about high turnover of new recruits and the lack generic skills are the most pervasive.13 Creative of required basic and technical skills among thinking and problem solving rank high among Generic (or life) skills refer to a broader set of skills transferable across jobs and from education to employment. They include 13 thinking (critical and creative thinking, and problem solving), behavioral (communication, organization, teamwork, time management, the ability to negotiate conflict and manage risks, and leadership skills) and computing skills. Academic skills are directly measured and are associated with subject areas (such as English, math and literacy). Technical skills are a mix of specific knowledge and skills to perform specific jobs. What are the constraints in skills development and utilization? 11 Figure 4 Manufacturing firms in Thailand report major shortages in both skilled and unskilled workers Skilled labor Unskilled labor Percentage of firms reporting vacancies of 56 56 50 50 48 47 47 44 39 skilled and unskilled labor 34 33 32 28 23 23 22 Auto parts Machinery Garment Electronics Furniture Rubber and Textiles Food and and and wood plastics processing equipment electrical products appliances Source: Thailand PICS 2007. Figure 5 Firms report lack of required basic and technical skills among the main reasons of job vacancies Percentage of firms reporting a given problem as the main cause of vacancies Higher turnover of new recruits 31.6 Applicants lack required basic skills 23.4 Applicants lack required technical skills 19.4 No applicants for unskilled workers position 13.1 Applicants demand very high wage 8.6 Universities not producing enough graduates 3.9 Source: Thailand PICS 2007. generic thinking skills. Among generic behavioral Despite the high turnover, many employers skills, the widest skill gaps appear in leadership, are active trainers. Thailand’s 2007 PICS communication, time management, social skills, indicated that over 75 percent of firms provide adaptability, and teamwork. Most academic, formal training and 46 percent of employees generic, and technical skills can be acquired in benefit from such training (Figure 1). Across institutional settings like schools and training industries, nearly all automobile, auto parts, and centers. Other generic skills, such as creativity and electronic components firms provided training. adaptability, are best originated in early childhood. On the other hand, only one-half of garment and Recent literature emphasizes the importance of furniture firms offered any training. generic skills, both in the process of human capital development and as a determinant of schooling and employment outcomes.14 14 For discussion, see for instance World Bank 2011b. 12 What are the constraints in skills development and utilization? Enterprise size, capital and skill intensity, managers, full-time internal trainers, and and technological change are positively experienced workers conducted nearly two- associated with employer training. thirds of in-house training. Government and non- Econometric analysis using the Thailand 2007 government institutions and training consultants PICS data suggests that larger firms, firms with accounted for 19 and 12 percent of in-house capital-intensive production, firms with a higher training, respectively. In contrast, government share of educated and technical workforce, and non-government institutions and private and firms investing in R&D are more likely to training schools served as providers of 53 and provide both in-house and outside training to 31 percent of outside training, respectively. their workers. Among firms, 93 percent of large Active providers of outside training include firms (with more than 200 employees) and 72 the Department of Skill Development of the percent of medium-sized firms offered in-house Ministry of Labor, Thailand Productivity Institute, training compared to 29 percent of small firms the Federation of Thai Industries, Thailand (with fewer than 50 employees). Similarly, 88 Management Association, and Technology percent of large, 70 percent of medium-sized, Promotion Association. As Figure 7 illustrates, and 37 percent of small firms offered outside outside training focused on quality and safety training.15 On average, only about one-third management, and production technologies. of small firms train, which stands out against the relatively strong returns to such training.16 Thailand’s labor market provides incentives In particular, analysis of the employee panel for households to invest in skills development. data in Thai manufacturing industries showed Economic rates of return to education for the significant returns to both on-the-job and outside worker are estimated from 14 percent to 16 training, including robust returns for informal on- percent. (Warunsiri and McNown 2009) As the-job training.17 This analysis also shows that Figure 8 shows, hourly wages of graduates technological change is positively correlated with with a master’s degree exceed those of upper- provided training and increased returns for on- secondary graduates by a factor of four.18 the-job training. Higher earnings are an incentive to those who invest in additional years of schooling. At the Firms largely use their own staff to conduct level of tertiary education, wage premiums are in-house training and non-academic highest in the fields of health science, physics, government institutions for outside and engineering. (Patmasiriwat, 2011) The next training. In-house training mainly covers section explores whether these signals are unskilled workers, while the majority of outside sufficient not only to attract students but also to training benefits skilled production workers, generate skills in such crucial disciplines. professionals, and managers. Supervisors, 2.2 What are the weaknesses in providing and matching skills with employment? The StEP framework (Skills toward gain basic skills at school age; (3) building Employment and Productivity) helps organize job-relevant skills at the pre-employment the analysis of skills development issues stage (when individuals are acquiring higher and policies. As shown in Figure 9, skills education and vocational and technical skills in development occurs in different settings.19 apprenticeships, schools, and training centers) Namely, the StEP framework includes five steps: and the employment stage (when workers are (1) starting the foundation for skills development upgrading skills and re-skilling for employment in early childhood; (2) ensuring that all students in a changing market); (4) encouraging 15 Thailand Development Research Institute (2008). 16 Yamauchi et al 2009. 17 Pholphirul 2011 and Yamauchi et al 2009. Yamauchi et al (2009) used in first-difference fixed effect estimation of wage equations, controlling for technical changes which differentially influence training investments and the returns. 18 The wage gap between tertiary and secondary education graduates expanded during the last two decades. The pace of the relative demand shift favoring tertiary graduates appears to have accelerated after the 1997 financial crisis and may have slowed down more recently, during the global recession. (Lathapipat 2010 and Di Gropello and Sakellariou 2010) 19 Formal schools equip youth with the skills needed by a modern market economy providing a foundation of basic education on which to build higher level skills, including technical and vocational education. Non-formal training offered by public and private training centers help develop the skills required for initial employment and for later upgrading in response to the needs of a changing economy. Skills are further augmented by the investment of employers in their workforce through apprenticeships, on-the-job training, and other enterprise-based learning. Policies that encourage equitable access to and efficient utilization of skills throughout the life cycle are essential for meeting the goal of ideas-led growth with equity. What are the constraints in skills development and utilization? 13 Figure 6 Nearly all firms in Thailand rate labor skills in English and IT as poor or very poor; similarly, skilled workers rank English and IT skills as most needed Percentage of firms that rate certain skills as poor or very poor English language IT Numerical Creativity/innovation Leadership Communication Time management Problem solving Social PICS 2004 PICS 2007 Adaptability Team work Technical/professional 0 20 40 60 80 100 Percent Source: Thailand PICS 2004 and 2007. Percentage of skilled workers rating a given skill among the top three most needed English IT Technical/professional Numerical Problem solving Leadership Creativity Time management Communication Team work Social Adapatability 0 5 10 15 20 25 30 Source: ICS workers’ modules 2004. 14 What are the constraints in skills development and utilization? Figure 7 Firms provide training focusing on safety, quality and production technologies 40 In-house training Outside training 35 Percentage of firms providing 30 training in a given area 25 20 15 10 5 0 es g t rty s r IT ge en e ie tin th ur pe ua og em ke O ed ro ng ol ar ag oc lp n La M ch an pr ua te m ty ct n fe le y tio lit l Sa te ua uc In Q od Pr Source: Thailand PICS 2007. entrepreneurship and innovation; and (5) Empirical evidence shows effective early facilitating labor mobility and job matching. childhood development programs have a The StEP framework recognizes that social very high payoff. Evidence has proven that investment in services from early childhood interventions in the form of mother’s health interventions to active labor market policies not and knowledge, child nutrition (including only promote productivity but also extend the nutrient supplementation and salt iodization), working life and contribute to equity. Importantly, and activities to promote cognitive and socio- the framework helps assess institutions and emotional development of young children (such policy that offer the highest returns in generating as positive caring practices, rich language, skills and transforming them into productivity and exploration opportunities) have a positive and equity gains. impact on school preparedness and learning performance throughout a person’s lifespan Step 1. Starting right: The damaging effect of with strong social and private returns on such iodine deficiency investments.21 Conversely, international evidence shows that the handicaps built early in life are Internationally, there is a growing difficult, costly, and sometimes impossible to recognition that early child development remedy later. (ECD) establishes the foundation for skills development for a person’s entire life. Nobel Thailand is quite advanced in reducing Laureate James Heckman and others have malnutrition and in promoting maternal and demonstrated that ECD is the most cost- child health and in pre-primary education. The effective form of human capital investment 2006 Multiple Indicator Cluster Survey (MICS)22 compared with any other subsequent indicates that among children aged 0-4 years schooling.20 Three types of outcomes in early in Thailand, about 9 percent are underweight, childhood are critical for future development 12 percent are stunted, and 4 percent are in life: (a) physical growth and well-being; (b) wasted (acutely malnourished). Although there cognitive development; and (c) socio-emotional is still capacity for improvement, these results development. ECD policies and programs can are relatively good by regional standards. directly affect these outcomes and therefore Households have universal access to essential benefit both individuals and societies. health care for children and benefit from special programs such as Healthy Child Development 20 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. 21 For details, see for instance Alderman 2011, Nores and Barnett 2010, and Barnett 2008. 22 National Statistical Office (Ministry of Information and Communication Technology). Year 2006 is the most recent available. What are the constraints in skills development and utilization? 15 Figure 8 Hourly wage by education and occupation (baht) 300 250 200 150 100 50 0 Primary Lower secondary Upper secondary Vocational Bachelor degree Master degree Manager Printing-Related and Handicraft Workers Professional in Health Science Sales Officers Other Professionals Operation Transport and Mobility Workers Technicians in Material Science and Engineering Agricultural and Fishery Workers (Market Skills) Professionals in Teaching Related Agricultural and Fishery Workers (Sufficient-Living Skills) Professionals in Physics, Engineer, and Mathematics Basic Works of Sales and General Services Office Clericals Mechanical-Related Skilled Workers Technicians in Health Science Operation Factory Workers Technicians in Teaching Related Workers in Mining, Construction, and Transport General Service Clericals Workers in Farm and Fishery Operation Factory Workers Weighted Average Source: Thailand labor force survey, 2008. 16 What are the constraints in skills development and utilization? Figure 9 Developing skills toward employment and productivity in the life cycle Productivity and Economic Growth Step 5: Facilitating labor Step 4: Encouraging mobility and job matching entrepreneurship and Services and opportunities Step 3: Building innovation for youth: apprenticeship; job-relevant skills skill certification; job/career Inquiry, creativity and Basic vocational and entrepreneurship skills counseling; job search behavioral skills at at school age assistance; and targeted school age services for excluded Opportunities for youth and groups Specialized skills for youth: working age: partnerships Step 2: Ensuring that all Enabling environment for higher education; vocational between universities students gain basic skills working age: intermediation; and technical education and and firms/ industries; Step 1: Starting right labor regulations; and social Cognitive, social and training; and apprenticeship innovation clusters; Nutrition & health behavioral skills at knowledge incubation; and protection portability Workplace skills for school age entrepreneurship training Public information systems Cognitive, psychological youth and working age: and support and behavioral stimulation Second chance education firm-provided training; at preschool age for youth recertification; and reskilling Public information systems Source: Adapted from World Bank (2010b). Corner, Nutrition Dental Development Corner, percent of live births in Thailand in 2007-2008) parenting education, and a special curriculum found 20 percent of new-borns in Thailand were for stimulating early child development. About iodine deficient and at risk of brain damage and two-thirds of children 3-4 years of age attend IQ loss. Internationally, the average IQ of an pre-school or kindergarten23 with a curriculum iodine deficient population is estimated to be developed by the Ministry of Education and 10 to 15 points lower than that of a population supervised by the Educational Service Area with adequate iodine. To illustrate this finding, (ESA) offices across regions. Earlier survey Picture 1 demonstrates a much higher growth analyses showed that participation in pre-primary of interconnections among brain cells in iodine- education in Thailand has been associated with sufficient people compared to people with an better performance in primary education.24 iodine-deficient brain. A uniquely serious ECD problem in Thailand The Thai government has not effectively is iodine deficiency, which erodes intellectual addressed iodine deficiency disorders (IDD). capacity and negatively affects learning and The primary source of iodine in the human diet productivity of children later in life. A survey in Thailand (as well as most other countries) conducted by the Ministry of Public Health is iodized salt. The 2006 MICS data shows, in 2009 showed that the average IQ score however, that about only one-half of households among Thai children is 91 – low by international in Thailand use iodized salt. The use of iodized standards.25 Among children in poor areas, salt in Thailand is much lower than in other such as Thailand’s north and northeast regions, countries, including countries at lower stages of children’s average IQ scores are about 85.26 economic development (Figure 10). The failure Recent studies indicate these low IQ scores to use iodized salt is especially pervasive in the may be associated with iodine deficiency.27 northeast, where only one-quarter of households For instance, the neonatal thyroid stimulating use iodized salt, and among the lowest income hormones screening program (which covered 94 quintile households of which less than one-third 23 The Child and Youth Survey 2008, National Statistical Office (Ministry of Information and Communication Technology). 24 See for instance, Raudenbush, Kidchanapanish and Kang (1991). 25 In 2004, a similar survey in Thailand found child IQ scores even lower than in 2009. Internationally, the average child IQ score is 90-110 (104 in developed countries), correlated with economic development and disease prevention among others. 26 In 2004, Ramathibodi Hospital conducted nationwide survey involving randomized sampling of 9,488 children aged one to 18 years, using the “Test of Non-Verbal Intelligence, 3rd Edition” methodology. 27 See, for instance ICCIDD (2009) and UNICEF (2010). Iodine is essential for the development of thyroid hormones, which are needed for optimal mental and physical development and regulation of the body’s metabolism. From conception, an infant’s brain requires iodine to develop the dense network of interconnections among brain cells. Without enough iodine, this connective network is less dense, potentially compromising the child’s mental capacity for life. Internationally, iodine deficiency disorders are the leading cause of preventable intellectual disability, brain damage, and impaired psychomotor development in young children. What are the constraints in skills development and utilization? 17 use iodized salt. In 2006, the Thailand National improvement in student performance contrasts IDD Control Board confirmed the importance with Thailand’s public expenditure on education, of IDD control for IQ development of the Thai which increased by 50 percent from 2000 to population and launched a five-year master 2009, reaching 4 percent of GDP.30 However, plan for IDD control (2006-2011). But the legal, as Figure 12 illustrates, Thailand is not alone regulatory, and policy implementation framework in experiencing the difficulty of translating – particularly with respect to the production and resources into results. use of iodized salt – have been relatively weak.28 Weaknesses in student performance may Step 2. Ensuring that all students gain basic have negative implications for economic skills: Basic education quality concern growth. International evidence suggests that the quality of education is more closely associated Thailand has achieved a nearly universal with economic growth than the amount of years coverage in basic education. In accordance of education. (Hanushek and Wößmann, 2007) with the National Education Act (NEA), nine Among students, the share of top performers years of basic education is compulsory and appears low in Thailand (for instance, 5 percent generally accessible to all children regardless compared to the OECD average of 9 percent of of income, location, gender, and residence students in science, as illustrated by the PISA status. According to the Ministry of Education 2009 data in Annex 1). The low share of top (MOE), gross enrollment rates have exceeded performers graduating from secondary schools 100 percent for primary education since the is likely to impede Thailand’s performance in 1990s. In the last decade, the rates for lower- higher education, research, and innovation. secondary education have increased from 83 More broadly, as the World Bank (2012) report to 95 percent. School dropouts have averaged summarized, students’ academic performance about 1.1 percent per year at the primary level today will determine the roles they will play in and 2.4 percent per year at the lower-secondary tomorrow’s world. Furthermore, it will determine level. Non-formal basic education programs, the competitiveness of Thailand’s economy in supervised by the MOE, aim at providing out- the future. Low academic achievement can have of-school young people and adults with basic negative consequences for the students’ future literacy, numerical, problem solving, and IT skills work and income prospects and for their ability to at the primary and secondary level.29 participate fully in both the economy and society. Ensuring that children learn in schools The uneven quality in secondary education remains a challenge. The 2011 O-NET tests, in Thailand restricts upward social mobility. administered by the National Institute of Thailand has a high proportion of students Educational Testing Service (NIETS), reported performing at the lowest proficiency level (43 pass rates for grade 6 (Prathom 6) students of percent compared to the OECD average of 18 31 percent and 35 percent in Thai language and percent of students, for instance, in science), mathematics, respectively, which is short of which limits their life-time skills development and the 40 percent target set by the Office of Basic income potential. Student achievement appears Education Commission. Similarly, the Program correlated with household socioeconomic for International Student Assessment (PISA) characteristics, school characteristics (such as results indicate a somewhat disappointing governance structure), and the local economic performance by the Thai 15-year old students conditions (weaker in rural areas).31 Figure 13 during the past decade, barely meeting the and Figure 14 show the disparity of O-NET average level in OECD countries (as shown in language scores across provinces and across Figure 11) and comparator countries, such as schools in regions of the country. The region with Korea and Singapore. The Trends in International the lowest school-level O-NET scores (namely Math and Science Studies (TIMSS) exams the northeast as shown in Figure 14) also had the given to fourth and eighth grade students lowest scores on all PISA tests.32 The northeast show a similar pattern: for eighth graders, also has the highest poverty rate, the quickest math scores on the TIMSS fell in Thailand from rise in inequality, the lowest use of iodized salt, 467 in 1999 to 441 in 2007. Similarly, science and the lowest public expenditure per capita on scores fell from 482 to 471. The absence of education in Thailand. (World Bank, 2011f) 28 UNICEF (2010). 29 The term “non-formal” training refers to the fact that those completing this training receive a skill qualification, but this generally does not open pathways to further formal education. 30 Household education expenditure accounts for additional 1 percent of GDP. For discussion of Thailand’s education expenditure, see World Bank (2011f and 2012) and Parandekar (2011) provide detailed analysis of Thailand’s learning outcomes and lessons from international assessments. 31 See for instance World Bank (2012), Parandekar (2011), Patmasiriwat (2011), and World Bank (2009c). 32 World Bank (2012). 18 What are the constraints in skills development and utilization? Picture 1 Iodine-deficient brain fails to develop adequate interconnections among brain cells Source: UNICEF 2010. Figure 10 Thailand’s use of iodized salt is among the lowest in the region Percentage of households using iodized salt Thailand Papua New Guinea Cambodia Indonesia Mongolia Myanmar Lao PDR Philippines China Vietnam 0 20 40 60 80 100 Source: UNICEF 2010 and MICS 2006 (National Statistical Office, Ministry of Information and Communication Technology). What are the constraints in skills development and utilization? 19 The government is continuing to strengthen from 57 to 68 percent from 2000 to 2008, with measures to ensure that students gain dropout rates at about 2.2 percent per year. basic skills. The National Education Plan The share of 15-19 year old young people who (2002-2016) promotes a balance between completed secondary education increased educational development toward economic from 16 percent in 1990, to 31 percent in 2000, competitiveness and cultural self-reliance. The and further to 41 percent in 2010.33 According government aims at ensuring minimum quality to the Ministry of Education( MOE), higher standards for basic education for all; it has education enrolled over 60 percent of the also established a fast track for high-achieving tertiary age group in 2008 (45 percent according students. New pilots, such as One District One to EdStats, which excludes some distance Lab School, English Program Schools, and the learning in “open admissions universities”). Information and Communication Technology Tertiary enrollment exceeds the expected level Schools, aspire to develop centers of educational for Thailand’s per capita income (Figure 15) and quality countrywide. The Office for National compares favorably with countries like Brazil, Education Standards and Quality Assessment China, and India.34 The share of 20-24 year old (ONESQA), established under the NEA, is young people who completed tertiary education gradually strengthening its capacity to monitor increased from 5 percent in 1990, to 10 percent school quality assessments, to raise community in 2000, and further to 29 percent 2010. Formal awareness on school quality and management, technical and vocational education offered by and to propose actions for non-performing the MOE accounts for about one quarter of schools. In addition, the Office of Basic Education upper-secondary enrollment and one-fifth of Commission seeks to offer greater school tertiary enrollment. At the upper-secondary level, autonomy, while empowering and motivating technical and vocational enrollment thus falls schools to set their own measures to improve the short of the government’s target of 60 percent educational performance of students. for total enrollment. This partly reflects the poor image and perceived quality problems of Step 3. Building job relevant skills: The technical and vocational education in Thailand. relevance and equity challenge in However, it contrasts with the evidence of higher education favorable economic rates of return to upper- secondary vocational education compared to general education at the same level. (Moenjak Several channels of the education and and Worswick 2003) training system contribute to developing employable skills. At the pre-employment stage, these channels include formal upper- Non-formal training for job relevant skills is secondary education, second-chance education, especially suitable for those who have left the apprenticeships, technical and vocational formal school system. Training centers under education and training (TVET), and tertiary the Ministry of Labor provide pre-employment education. At the work and re-skilling stage, other training, programs to upgrade skills of the providers outside schools and formal education employed, and retraining for those seeking job help workers not only to upgrade their skills but changes. This part of the non-formal training also to acquire new skills for a changing labor system, however, has a limited capacity. market. Beyond the Ministry of Education (MOE), Moreover, it provides training of uneven quality there is a diverse community of skill providers: as influenced by the disparity in its facilities, they include non-formal training of employable equipment, and instructors’ qualifications. skills offered by other government bodies such Furthermore, it does not evaluate its labor as the Ministry of Labor; in addition, employers market outcomes. Similarly, the performance and non-government providers also provide such of private providers that form a large part of the skills – both for profit and non-profit. non-formal training system is uneven and subject to little evaluation. Larger and more capital- intensive employers, as shown in the preceding The coverage of formal education in PICS data, are active trainers. Enterprise-based developing employable skills is relatively training is, however, not readily available to those wide. At the upper-secondary education level in small firms or with limited education. (general and vocational), enrollment increased EdStats database. 33 At the beginning of the 1990s, with the exception of Cambodia, Thailand had the lowest educational attainment of the working 34 population, as reflected in the average years of schooling as well as the proportion of workers with secondary or higher qualifications. Between 1990 and 2004 educational attainment in Thailand increased dramatically at all levels, especially at the upper secondary and tertiary levels with the proportion of workers with upper secondary and tertiary qualifications doubling during the same period. (Di Gropello and Sakellariou, 2010) 20 What are the constraints in skills development and utilization? Figure 11 Thailand’s basic education performance falls short of OECD standards Average OECD and Thailand’s PISA scores and their difference 510 0 Reading Difference 500 -10 Mathematics Difference 490 -20 Science Difference 480 -30 Reading OECD-Average 470 -40 460 Reading TH -50 450 Mathematics OECD -60 Average 440 -70 Mathematics TH 430 420 -80 Science OECD Average 410 -90 Science TH 2000 2003 2006 2009 Note: Left axis: PISA scores, Right axis: Difference in PISA scores. Source: PISA 2000-2009 Results (OECD database). Figure 12 Increasing education expenditure does not automatically improve results 10 Philippines Increase in TIMSS score Increase in TIMSS score Decrease in per pupil spending 5 Increase in per pupil spending Korea 0 -50 -25 0 Japan 25 50 Hong Kong Thailand Malaysia -5 Decrease in TIMSS score Decrease in TIMSS score Decrease in per pupil spending Increase in per pupil spending -10 Note: Y-axis: Change in grade 8 mathematics score, 1999-2007, X-axis: Change in primary spending per student, 1999-2007. Source: Macdonald 2010. What are the constraints in skills development and utilization? 21 Higher education enrollments seem driven a) uneven school quality at the secondary level more by social demand than economic with student performance significantly lower demand. Although returns to disciplines that outside the Bangkok area (as illustrated in are critically important for innovation and Figure 14); productivity, such as science, engineering, and b) concentration of tertiary education health science are high (as illustrated in Figure institutions in the Bangkok area with those 8), enrollments in these fields are low (Figure living in outlying regions having lower 16). The total enrollment share in science and participation rates (five times lower in the engineering in Thailand is 20 percent compared northeast compared to Bangkok);37 to about 40 percent in Singapore, Korea, and c) household income (with households in the Malaysia, according to UNESCO statistics. On top income quintile accounting for one-half of the other hand, social science, business, and tertiary students);38 law account for nearly 60 percent of all tertiary d) parental education;39 and enrollment in Thailand, compared to 20-30 e) ethnicity (the majority of ethnic Thais are percent in Singapore, Korea, and Malaysia. twice as likely to enroll and three times more Similarly, a World Bank study (2009c) of higher likely to complete tertiary education than Thai education revealed a mismatch of the skills ethnic minorities).40 produced by higher education institutions with those sought by industry. This implies that some talented and capable youth may be left out, with a possible The mismatch of skills sought and supplied opportunity cost for technological progress and at the tertiary level partly explains the societal equity. existing job matching problems. While firms face difficulties in filling professional vacancies The government has tried to promote greater (discussed in Section 1.1), unemployment is equity in access to employable skills. The concentrated in high-skill groups. Individuals ‘One Province One University’ project, for with a higher education (above upper-secondary) instance, aims at establishing at least one account for 90 percent of those searching for university in each province. This project provides longer than three months. (World Bank 2011c) easier access to higher learning, creates a local Recent graduates indicate that their main academic environment with community links, problem in finding a job is a lack of practical and develops academic services for provincial experience, qualifications, and information about development. Sub-district learning centers potential jobs and how to find one.35 Moreover, promote non-formal education to improve the labor force surveys of the National Statistical quality of life among grass-root communities Office indicate that the percentage of university with greater access to internet services and graduates aged 20-25, that are employed as learning activities for community development. professionals, has dropped from 40 percent in Creative academies provide training programs 2001 to 28 percent in 2009. Correspondingly the through local universities in fields relevant for the share of those doing clerical and service jobs creative economy, identified by the government has increased. as arts and handicrafts, architecture, traditional medicine, cultural tourism, agro-industry, and Inequality in access to higher education limits software development. The government has the pool of talent and exacerbates income also launched a variety of student-oriented inequality. Children from rural areas and low programs (such as one-district-one-scholarship, income households, regardless of their talent, scholarships for low-income students, Thai are less likely to attain a college education. Government scholarships, a student loan (Lathapipat 2010) Thailand’s socioeconomic program, and the Thailand income contingent survey indicates that its higher education and allowance loan) complementing the King enrollment is even less equal than household scholarship and the Anandamahidol scholarship consumption expenditures.36 The skewed access established by HM King Bhumibol Adulyadej.41 to tertiary education appears to be associated with several factors other than student ability: 35 National Statistics Office job seekers survey. 36 World Bank (2011a) These calculations may, however, somewhat exaggerate the extent of inequality in higher education enrollment since the Thailand Socio-Economic Survey undercounts youth older than 15 not living at home, including students coming to study in Bangkok from outside areas. 37 World Bank (2009c). 38 Thailand Socio-Economic Survey 2009 and World Bank (2009c) indicate that tertiary education represents a burden for poor and low-income households due to the high cost of attendance and opportunity cost of lost earnings. 39 Thailand Socio-Economic Survey 2009 and World Bank (2009c). 40 World Bank (2011b). 41 For discussion see World Bank (2009c). 22 What are the constraints in skills development and utilization? Figure 13 O-NET scores appear correlated with income per capita by province O-Net Score 49 47 45 43 41 39 37 35 30,000 300,000 Source: Office of Basic Education Commission database, in Parandekar 2011. Figure 14 School level O-NET scores vary by regions Density 0.030 0.025 0.020 0.015 0.010 Northeast North 0.005 South Central Bangkok 0 0 10 20 30 40 50 60 70 80 90 100 Student level score Source: Office of Basic Education Commission database, in Parandekar 2011. What are the constraints in skills development and utilization? 23 Figure 15 Thailand’s tertiary enrollment is higher than expected at its GDP per capita 100 Korea Finland School enrollment, tertiary (% gross) United States 80 New Zealand Australia Spain Denmark Iceland OECD Italy Sweden Belgium Japan Netherlands 60 United Kingdom Ireland Europe and Central Asia Hong Kong Austria Mongolia France Thailand Switzerland Upper middle income 40 Philippines Middle East and North Africa Middle income China 20 Indonesia Lao PDR Cambodia Sub-Saharan Africa Low income 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 GDP per capita (current US$) Source: EdStats 2010 (2008 data for most countries) in World Bank 2011b. Figure 16 Tertiary enrollment by field may be driven by social demand 70% Female Male 60% 50% 40% 30% 20% 10% 0% ts s g e n re es re w rin nc io Ar tu fa ic La at ie tu ul el rv d uc Sc ac ric W an nd Se Ed uf Ag ,a d es an an ss iti M lth an ne d ea um si an Bu H H g in e, er nc ne ie Sc gi En al ci So Note: Student enrollment in 2007 collected from 139 institutions of tertiary education. Source: Office of Higher Education Commission. 24 What are the constraints in skills development and utilization? Figure 17 Quality of higher education is associated with competitiveness 6.5 2010-11 Higher education and training score Finland 6.0 Taiwan Singapore United States 5.5 Korea United Kingdom Japan 5.0 Hong Kong Russian Federation Italy Malaysia 4.5 Brazil Thailand China 4.0 Philippines Indonesia India Mongolia Vietnam 3.5 3.5 4.0 4.5 5.0 5.5 6.0 2010-11 Global competitiveness score Source: World Economic Forum (2010). Figure 18 Student–faculty ratio in tertiary education is unusually high in Thailand 40 35 30 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 Cambodia Lao PDR Vietnam Mongolia Philippines Indonesia China Thailand Malaysia Korea Japan Note: Most recent data as available. Source: UNESCO and World Bank (2011b). What are the constraints in skills development and utilization? 25 Step 4. Encouraging entrepreneurship and to entrepreneurship and innovation. The innovation: System disconnects framework presented in a World Bank study (2011b) helps identify five such disconnects. Effective education and training systems These are between the following: not only provide workers with the skills for innovation and technological mastery but a) Higher education institutions and skill also enable workers, entrepreneurs, and users. Pedagogy, curriculum, and degrees managers to perform well. Among skills for that may not suit the labor market as innovation, employers demand creativity and indicated by employer surveys in Thailand; entrepreneurship skills, curiosity, a ‘big picture’ b) Higher education institutions and firms mindset, the ability to ‘think outside the box’, in the research and technology field. and leadership skills. But the teaching of these Innovation surveys in Thailand point to limited skills is limited throughout the Thai education cooperation of higher education institutions system. Hence, as discussed in Section 2.1 and with industries overall, specifically for shown in Figure 6, employers cite such skills as research and development activities; a major weakness. Also, based on international c) Teaching and research. Higher education evidence, Thailand does not innovate as institutions account for about only 30 percent much as its tertiary enrollment and per capita of total research expenditure and only 20 income suggests – with per capita patents percent of Thai academics conduct below the average for its income group and far research continually;46 below Korea during the beginning of its rapid d) Higher education and tertiary level non- growth.42 (World Bank 2011a) Likewise, quality formal or enterprise-based skills providers of higher education, as measured by the Global and higher education institutions. A lack Competitiveness Report, appears somewhat of formal links among various skills providers lower than expected for Thailand’s level of encumber student mobility across institutions competitiveness (Figure 17). in Thailand;47 and e) Higher and earlier levels of education. Higher education institutions fall short Both misaligned curricula and primary and of assisting firms in assimilating and secondary school quality problems (as upgrading technology. Higher education illustrated by the O-NET, PISA, and TIMSS institutions in many countries provide basic scores) limit the quality and equity in tertiary and applied research, consulting services, education in Thailand. incubation facilities, and technology transfer. In Thailand, only 2 percent of firms covered These disconnects are associated with in PICS in 2007 mentioned higher education weaknesses in information, capacity, and institutions and public research institutions incentives (Section 2.3). as a source of technological innovation (compared to 27 percent in the UK and over The government is trying to address some 10 percent in Singapore).43 The contribution of these disconnects and especially to of higher education institutions to research is promote collaboration between universities circumscribed by the low share of students at and industries. For example, the University the post-graduate level (with only 0.3 percent of Business Incubator Project aims at developing tertiary students enrolled in ISCED 6 programs graduate students with entrepreneurial skills and in Thailand, compared to 5 percent in Western providing them with the funds to start innovative, Europe and North America)44 and the high new businesses. But research-intensive and student-faculty ratio (37:1) in tertiary education – interactive forms of university-industry linkages the highest in the East Asia region45 (Figure 18). are few. This is in a sharp contrast to the widely developed linkages observed in China, Brazil, The education system suffers from and the United States (Section 3.4). disconnects, which restrict its contribution 42 See World Bank (2010a). 43 Main sources of technological innovation mentioned by firms in Thailand include: a) clients and suppliers, b) machinery, and c) within firms or from parent companies. 44 The International Standard Classification of Education Level 6 (ISCED 6) programs prepare graduates for faculty and research posts (equivalent to a doctoral degree). For discussions, see World Bank 2011b. 45 UNESCO Global Education Digest 2009. 46 Yilmaz (2010). 47 World Bank (2009b). 26 What are the constraints in skills development and utilization? Step 5. Facilitating labor mobility and job providers. Care has to be given, however, to matching: Emerging market institutions see that onerous regulations do not create barriers to entry and competition. Putting skills to productive use in the labor e) Accreditation. This must be done to provide market and matching individuals with jobs information on the quality of education and cannot occur without well-functioning market training offered by schools and training institutions. The market interaction of supply centers. Licensing provides minimal entry and demand for skills is expected to function standards while accreditation offers a higher more efficiently where information is readily standard of quality as a guide for consumers. available to providers, firms, and individuals. Such information comprises not only the benefits Such market institutions are largely public and costs of skills but also their availability and goods and thus unlikely to fully arise in the quality. Specifically, market institutions involve private sector. Government can fill this gap and five key functions to connect the supply and play a lead role in monitoring the performance of demand of skills: labor markets and developing appropriate policies and public information systems. Furthermore, a) Coordination. This brings both sides of government plays a leading role in enabling labor the labor market together: in Thailand, the mobility through appropriate labor regulations and Department of Employment in the Ministry portability of social protection benefits. of Labor and the Employer Federation try to link job seekers and industries through the Thailand’s skills market suffers from Ministry’s website: www.ejobs/doe.go.th. weaknesses common in developing countries. b) Employment services. This involves Tertiary graduate unemployment and the career counseling, job search assistance, mismatch in the distribution of disciplines in apprenticeships, and targeted services for higher education and the demand for skills excluded groups to find job vacancies. It (described in Sections 1.1 and 2.1) indicate that also includes the associated skills demand higher education institutions are not closely and provision: formal channels for career aligned with the labor market. Higher education counseling and job search assistance institutions are especially weak in tracking job are very limited in Thailand. But, in some demand, providing counseling, engaging in joint fields, students are encouraged (or initiatives with local businesses, and seeking required) to participate in university credit feedback on job placements.48 Information apprenticeships and internships. sharing and coordination appear difficult because c) Quality assurance. This is necessary to many actors are involved in higher education, set, test, and certify skill standards. Under including several government ministries and its Manpower Development Strategy agencies providing higher education services (2009-2018) and the National Education along with private institutions – all operating Act (NEA), Thailand is launching the under the control of the Ministry of Education. National Qualification Framework (NQF) for vocational and higher education. This will Young people have inadequate information set competency standards and establish the about the labor market. Young people lack Thai Vocational Qualifications Institute to reliable information on study and career certify vocational competencies. A number opportunities. According to the job seekers of stakeholders share this responsibility survey,49 they may not have a good understanding (including the Ministry of Education, the of the skills demanded by employers. Weak Ministry of Labor, the Ministry of Science access to reliable information and formal support, and Technology, the Ministry of Industry, the along with a reliance on informal networks in National Research Council of Thailand, the making study and career choices are a common Federation of Thai Industries, and the Thai problem in developing countries with a proven Chamber of Commerce). adverse effect on the labor market.50 d) Licensing and regulation. This is required to set minimum standards for private skills Labor mobility for skilled workers is limited. providers and to create opportunities for The wide disparity in the length of time required consumer protection. In Thailand, the to fill professional vacancies across regions Ministry of Education regulates private skills (Section 1.1) and the near absence of the 48 For more information on Thailand and the East Asia region, see World Bank (2011b). 49 For discussion of the National Statistics Office job seekers survey, see World Bank (2009c). 50 World Bank Youth Employment Inventory at http://www.youth-employment-inventory.org/ What are the constraints in skills development and utilization? 27 Figure 19 Possible roots of skills gaps and mismatches relate to information, capacity and incentive problems Information • Skills providers on skills demand, R&D and technology needs and entrepreneurship opportunities • Employers on engaging with higher education institutions Information • Youth and adults on study and career choices, and on job search • Households and communities on the causes and negative impact of iodine deficiency Incentives • Firms toward innovation, R&D, and collaboration with the education and training system • Skills providers toward quality, relevance and results, Step 5: including the provision of skills in demand, effective Step 4: Facilitating pedagogy and student support, information sharing, Step 3: Encouraging labor mobility coordination of skills provision, research and collaboration Step 2: Building entrepreneur- and job Step 1: Ensuring job-relevant ship and matching Incentives with employers and career counseling services Starting that all skills innovation • Students toward developing science and right students technology skills gain basic • Salt producers toward salt iodization skills Capacity • Firms to signal demand for specific skills and influence skills development policies and education/ training content • Schools, training centers and teachers to provide skills in demand, teach science and technology, engage in R&D, ensure quality, and support Capacity disadvantaged students • Government in policy implementation, including quality assurance and enforcement • Students to acquire skills due to poverty and disadvantages Source: Authors. immigration of skilled workers to Thailand51 compensation in Thailand than other ASEAN suggest the existence of significant barriers countries (such as Malaysia or Singapore). to labor mobility not only in ASEAN but also And this may result in greater mobility, which in Thailand. To facilitate the mobility of skilled in turn, may result in a shortage of professional workers within and across their borders, ASEAN workers in Thailand. Language barriers (which countries are developing mutual recognition are significant among skilled Thai workers, as of professional accreditation and concluding discussed in Section 2.1) and the remaining mutual recognition agreements. Occupations national regulations may dampen the immediate (such as accounting) are offering much lower effect of ASEAN labor market liberalization.52 World Bank 2011e. 51 For discussion see for instance Economic Intelligence Center (2011). 52 28 What are the constraints in skills development and utilization? 2.3 What are the causes of the skills gaps and mismatches in Thailand? The overview of Thailand’s human resource including skills in high demand (English, IT, base refers not only to the strengths on and general skills) and those needed for a which Thailand has to build but also to the knowledge economy (math and science); and weaknesses in the supply and utilization c) limited capacity and incentives in the of skills for employment and productivity. education system not only to promote equal Thailand’s higher education is of particular opportunity for quality basic education concern because of the evidence of the across locations, socioeconomic groups, and structural mismatch between offered and ethnic groups, but also to provide special needed skills. Evidence from other countries has support across communities to ensure that all shown that this must be remedied to move to children acquire basic skills. a knowledge economy. Why are more students not pursuing the math, science, and engineering Step 3. The limited relevance and equity in studies needed by a knowledge economy? developing employable skills may stem from Responding to this question and revealing the following: the roots of the existing weaknesses in skills development, utilization, and matching involves a) insufficient information on skills demand and all steps of the StEP framework described in gaps in the labor market, and insufficient Section 2.2 (Figure 9). information on the relevance of the provided skills for the workplace; For each step in the life cycle, the possible b) weak incentives and capacity in the roots of the existing skills gaps and mismatches education and training systems to produce may be divided into three types: information, skills relevant to employers, to ensure quality capacity, and incentives.53 They are summarized across upper-secondary schools, higher in Figure 19. education institutions, and training centers, and to maintain continuity across education Step 1. The low use of iodized salt eroding levels; and the foundation for skills development among c) weak incentives of students to commit to young children may relate to the following: science and technology. a) limited capacity of government to enforce Step 4. The disconnects in the effort to salt iodization and to implement the national encourage entrepreneurship and innovation plan for IDD control; may relate to the following: b) failure of producers to iodize salt, which adds to production costs (albeit only slightly); and a) insufficient information in higher education c) absence of information in communities institutions about the research, technology, about the negative irreversible impact of and problem-solving needs of firms, about iodine deficiency on brain development and entrepreneurship opportunities in the market, the future skills development and income and about how to develop effective university prospects of children. and industry links; b) weak incentives and capacity in firms to Step 2. The uneven and generally lower than invest in R&D to improve products or to expected quality of basic education may be introduce process innovations (partly related associated with the following:54 to the insufficient supply of science and technology workers as a share of higher a) insufficient capacity of teachers and the education graduates and deficiencies in their teachers’ training and support systems; training55), and insufficient information on b) limited resources and incentives to achieve how to engage with higher education and good performance in providing basic skills, research institutions; and 53 Understanding the causes of skills gaps and mismatches requires looking at potential market and governance failures that move the demand and supply 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 household 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. 54 See for instance, Parandekar (2011) and World Bank (2006). 55 World Bank and NESDB (2008). What are the constraints in skills development and utilization? 29 c) insufficient size and capacity of the academic Problems of information, incentives, and faculty to both teach and engage in research. capacities often arise from weaknesses in service delivery, financing, and governance, Step 5. The weaknesses in market institutions which may undermine policy implementation. for labor mobility and job matching may Such problems are common when financing include the following: for education and training are detached from performance (such as test scores and a) insufficient information among young the numbers of graduates in key fields) and people on study and career choices; among accountability for results is weak. Weaknesses graduates and workers on job searching; and of this nature may prevent the alignment of among employers – as well as students – on resources and incentives with policy priorities the quality of skills and skill providers, as well and thus undermine the implementation of even as their competencies; strong strategic frameworks and plans, including b) limited incentives and capacity of skills the NESDP. Building on the above analysis, providers to share information and to the next section highlights approaches for coordinate the provision of skills among consideration during the implementation of the themselves and with employers, and to skills agenda outlined in the 11th NESDP. provide employment services; and c) inadequate capacity of the public and private sector to provide quality assurance and to enforce licensing, regulation, and accreditation. 30 3 IMPLEMENTING THE NESDP’S SKILLS AGENDA TOWARD IDEAS-LED GROWTH WITH EQUITY: APPROACHES FOR DISCUSSION NESDP’s emphasis on strengthening human Future investment needs to promote both resources implies further investment to quality and coverage in skills development achieve the goal of ideas-led growth with toward employment and productivity. This equity. This note has highlighted areas where note suggests that improving quality, relevance, progress has been made in strengthening human and effective utilization of skills would help resources and other areas where challenges promote not only innovation but also the remain. It emphasizes that skills development development of a creative knowledge economy. is a broad concept that includes not only what It can also help to develop stronger equity happens in the education system but also what and coverage in skills development that would happens on the outside. Beyond schools, it has expand the country’s talent pool and skills base. drawn attention to early childhood development In the StEP framework, the emphasis on quality, representing the foundation for later learning relevance, and effective utilization of skills and skills development, to training centers and emerges mainly under Steps 3, 4, and 5. The the workplace as the sources of skills, and to emphasis on coverage and equity mainly relates the role of markets in intermediating supply and to Steps 1, 2, and partly 3. Table 2 highlights demand for skills. The StEP framework provides specific priorities and possible approaches for a guide for the timing of these investments consideration to support their implementation. and assurances that the approach taken will The text below elaborates on the selected be comprehensive. How other countries have implementation approaches for discussion. addressed skills development issues facing Further analysis can help outline practical Thailand can contribute information to these recommendations in areas of interest to the needed investments. Royal Thai Government and provide details in important areas on which limited information has been available so far, such as TVET.56 For TVET, for instance, employing the Workforce Development domain of the System Assessment and Benchmarking for Education 56 Results (SABER) developed by the World Bank would help assess the strategic framework (direction, planning, and coordination), system oversight (standards and quality assurance, programs and resources), and service delivery (content, incentives, and outcomes). Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 31 Table 2 Skills development toward ideas-led growth with equity in Thailand Key Elements Priorities Possible Approaches for Discussion Strategy: Strengthen human resource base toward developing a creative knowledge economy and promoting an ideas-led growth with equity Equity and coverage in Step 1: Starting right: IDD control 1. Enforcing salt iodization skills development to Step 2: Ensuring that all students obtain basic 2. Supporting children and investing in expand Thailand’s talent skills: Basic education quality teachers pool and skills base Step 3: Building job-relevant skills: Skills 3. Overcoming institutional fragmentation, Quality, relevance, and relevance and equity in higher education adopting performance-oriented financing, effective utilization of and strengthening accountability Step 4: Encouraging entrepreneurship and skills to strengthen innovation: Education-training-R&D- 4. Linking higher education institutions and Thailand’s creative industry links training centers with industry knowledge economy Step 5: Facilitating labor mobility and job 5. Providing quality assurance matching: Market institutions 3.1 Enforcing salt iodization What happens in the household – well before (such as scores on standardized tests) and the an individual enters school – has a major and preparedness of youth for higher education and lasting effect on the ability of young people skills development throughout their working life. to acquire the knowledge and skills needed This investment can generate very high returns for entry into productive employment later for Thailand in its effort to improve the outcomes in life. International literature confirms this and of education and skills development. emphasizes the importance assigned to early childhood development strategies. Empirical International experience suggests evidence shows that an investment in these that government intervention will be strategies has very high payoffs. Among these necessary in order to realize IDD control; investments, Thailand is quite advanced in such interventions can come in the form reducing malnutrition, promoting maternal and of appropriate laws and regulations, child health, and in pre-primary education. This enforcement of those laws and regulations, is a positive base on which Thailand can build and a public awareness campaign. Experience with further investment. But Thailand is slow to of other countries (including Cambodia, address iodine deficiencies. Mongolia, and the Philippines over the past 10 years) suggests that making salt iodization A simple, low cost investment requiring the legally compulsory with proper quality assurance iodization of salt can create quick returns and enforcement mechanisms, and with an in the potential for children to learn and appropriate public awareness campaign to acquire the foundation needed for later explain the cause and irreversible brain damage skills development. This investment can lead of iodine deficiency – can deliver fast results. to the improved readiness of children to learn (UNICEF 2010) As the StEP framework suggests, upon entering school. With the addition of this investment must come with continued efforts early schooling investments, this can improve to sustain the gains already made in overall early the foundation for later skills development. childhood development, access to pre-primary The benefits of addressing iodine deficiencies and basic education, and improvements in will emerge in improved indicators of learning education quality. 32 Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 3.2 Supporting children according to their needs and investing in teachers Ensuring that all children attain good quality basic education may require a concerted Box 1 Learning support at the core of the action not only to support students who fall success of the Finnish schools behind, but also to nurture top performers, and possibly to improve the capacity of teachers Finnish 15-year olds regularly outperform their peers in other countries in the PISA test and schools. To improve student learning of reading, mathematics, problem solving, outcomes, school systems commonly employ and scientific knowledge. The influence of broad range strategies. These strategies include the parents’ social and economic status on teacher training, curriculum reform, providing the test performance of children is smaller in textbooks, school lunches, libraries, infrastructure, Finland than anywhere else, explaining only and mechanisms to support teachers, students, about 5-7 percent of the outcome. and their communities. As recent evidence A significant part of the Finnish success indicates, these tend to be effective – particularly in primary and secondary schooling rests if complemented by governance reforms (Section in special education. About 30 percent of 3.3). (Bruns et al. 2011) Finnish comprehensive school students receive special education services (a much a) Supporting students according to higher fraction of the school population than in other countries). More than two-thirds of their needs these students receive short-term special needs instruction in standard classroom The pedagogy and curriculum need to reflect settings, with the aim to address particular the diversity of students. Similar to other learning problems and continue with the countries that rapidly expanded enrollment normal course of study. in basic education, Thailand may consider adjusting the pedagogy and the curriculum. This Others who receive these services have deeper and more pervasive cognitive or expanded curriculum should account for children behavioral problems. They are diagnosed who are first generation learners, whose parents by a school psychologist and grouped for can neither follow what is happening in school instruction in specialized classrooms. Special nor react if their child falls behind. In recent education teachers provide both kinds of years China has been moving in the direction of services. These certified teachers must quantity to quality learning in school curriculums. compete for the opportunity to complete rigorous courses on responding to a wide Improving the curriculum must come with range of learning disorders. improvements in pedagogy. Introducing a pedagogy that is learner-centered rather than Recently, the Philippines has adopted teacher-centered can help create a more a similar approach in response to the flexible, innovative workforce. Teacher-centered country’s earlier poor performance in the instruction involves the teacher as a lecturer TIMSS. Special catch-up programs targeted low-performing students. Subsequently, controlling the transmission of knowledge to the share of students performing at the students, whereas a learner-centered instruction lowest proficiency level in the Philippines model uses the teacher as a facilitator of has declined and the disparity in student learning, providing students with the tools to performance has thus narrowed, raising the acquire new knowledge. This type of instruction average scores. enables students to solve problems associated with technological change on their own. can consider developing specific programs Furthermore, children in poor and targeting the bottom 40 percent of students disadvantaged communities and households who perform at the lowest proficiency level may need special support programs. as measured by the PISA tests. Such special International experience suggests that improving programs could serve children with learning students’ average test performance involves, problems, children affected by iodine deficiency, to some extent, increasing the numbers of high children who are the first generation of learners performers and, to a larger extent, improving the and may not have sufficient learning support, and performance of children at the lowest proficiency children with other disadvantages. Building on level. The above discussed improvements in the its existing initiatives, the Ministry of Education capacity of teachers and in the curriculum are may consider establishing skills development likely to contribute to both. Separately, as in the support networks to offer catch-up programs for case of Finland (the top performing country in children and young people, particularly in math, international student tests see Box 1), Thailand science, English, IT, and general thinking and Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 33 behavioral skills. In addition, publicity campaigns and to modernize teaching methods as well as and community-level investments may be to offer individual approaches to students of effective in promoting reading, which generates special talents or needs. The good performance a broader positive impact on student learning, as of Singaporean students in math and science Korea’s and Hong Kong SAR’s (China) experience is often credited to the ability of teachers to suggests. promote conceptual thinking and understanding of mathematical concepts from the beginning of In addition, support networks can indirectly basic education. enhance the performance of both students and schools through parents. International To strengthen pre-service teachers’ training, experience shows that the ability of parents the NESDP may consider reallocating to assist their children in homework enhances public resources in higher education children’s overall learning performance. from oversubscribed disciplines such as Moreover, equipping parents with information social science, business, and law toward enables them not only to monitor and promote pedagogy and other key technical areas child learning performance in school but also to for teachers’ training. The public sector increase their voice in the education system – should complement and further encourage particularly at the local level.57 the existing private higher education capacity in this area. Scholarships may help raise the Equitable improvements in the quality of volume of student applications. Moreover, public primary and secondary education can become awareness campaigns to enhance the image of a strong force toward greater equity in access the teaching profession and career counseling to higher education. Equity challenges facing services should accompany the investment. The higher education in Thailand currently reflect objective would be to attract top performers the uneven quality of primary and secondary among students to the teaching profession – as schools and the uneven opportunities of children has been the practice and cornerstone of quality to develop their potential. Investments in education systems such as in Korea. teachers, disadvantaged schools, communities, and children would not only enhance the On the job, teachers can benefit from overall students’ performance but also responsive support and appropriate teaching expand Thailand’s pool of strong performers resources. As part of innovative approaches to and establish a wider and more equitable address the specific needs of teachers and to pool of candidates for higher education. create opportunities for their knowledge sharing Complementing the programs already in place, and training in service, ESAs could strengthen such as scholarships, student loans, and the the existing mobile support teams, strengthen establishment of universities in the outlying master teacher networks, and strengthen local provinces, these investments can strengthen the learning resource centers. This would contribute pool of university applicants from outside the to the availability of advice, mentoring, and Bangkok area. adequate instructional resources and teaching aids to the teachers within their jurisdiction. The b) Investing in teachers disparity in students’ testing performance across schools suggests that initiatives – within, as well Complementing the possible adjustments as across ESAs – could assist teachers in low- in pedagogy and curriculum, the capacity of performing schools. To guide and complement teachers and schools may need to improve ESA’s engagement, the Ministry of Education can – particularly in teaching key subjects, such build on the many pilots under implementation. as math, science, English, and IT. Teacher In particular, following their rigorous evaluation, quality is a crucial factor contributing to student it can scale up those pilots that have enhanced achievement among both the top and the bottom quality of educational services. If effective, the performing students. Toward this objective, the Ministry of Education could expand distance Office of the Teacher Civil Service Commission learning and computer assisted instruction may need to further strengthen its effort to to teachers to support their formal in-service enhance teacher quality particularly in teaching training. Such initiatives can serve ESA staff and math, science, English, IT, entrepreneurship, and teachers nation-wide. Separately, the central- general thinking and behavioral skills. Improved local allocation of public resources needs teacher skills would allow primary and secondary to enable schools in poor localities to offer schools to shift emphasis to priority disciplines acceptable learning environments and tools. Bruns et al (2011) provide evidence on the value of information for accountability. 57 34 Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 3.3 Overcoming institutional fragmentation, adopting performance- oriented financing, and strengthening accountability The effort to ensure that students attain good functions: (1) the Office of the Basic Education quality basic education and job-relevant skills Commission; (2) the Office of the Higher requires attention to governance. Governance Education Commission; (3) the Office of the (including administration, financing mechanisms, Vocational Education Commission; (4) the and accountability relationships) influences the Office of the Education Council; and (5) the effectiveness of resource use in the education Office of the Permanent Secretary – each and training systems and thus shapes their relatively powerful with its own governing outcomes. In this respect, Thailand has recently structure. Moreover, outside the MOE, nine achieved an improvement through administrative additional independent agencies participate in decentralization, shifting power and resources to administration. Overlaps and fragmentation in the ESAs. In addition, Thailand needs to define planning, financing, monitoring, evaluation, and the roles of the public and private sectors, to other functions appear to generate functional review and revise the central level administration incoherence and inefficiency. (Parandekar 2011) of the education and training systems, to adopt These, in turn, undermine the implementation of financing mechanisms for better performance, policies and plans, such as the NEA and NESDP. and to strengthen accountability relationships (including those involving the ESAs) toward In the training system, the diverse provider quality and relevance of skills produced in the community for skills development may education and require stronger coordination. The MOE is training system. joined by the Ministry of Labor (with 76 training centers providing non-formal job relevant skills), In most countries, the private sector and other technical ministries, and a large number employers play an important role in skills of private and not-for-profit training providers, development – mainly through financing as well as employers as trainers. Apart from a and delivery of skills, but also through clear policy framework to guide the functioning their participation in administration and of the diverse providers of skills, some coordination mechanisms. This includes for- countries have also successfully established profit and non-profit private providers of skills, strong coordination bodies. This has been the as well as enterprises. Defining the roles of the experience of Singapore, Australia, South Africa, public and private sectors in the NESDP can add and Chile. Such governance frameworks include clarity to implementation and minimize gaps in national and regional training authorities run by coverage and overlaps in responsibilities. There governing boards that include representatives is a tendency in many countries for the public from the public and private sectors with roles sector to take the lead in the provision and and responsibilities defined in legislation and financing of skills. This may be true, particularly decrees. The duties and powers of these in the foundation building stage, but it is not authorities vary, but all have the overarching necessarily the case in later stages – particularly objective of creating a more coherent policy during the work stage when employers are and operations framework for providers and expected to play a larger role in the provision consumers of education and training whose and financing of skills development. purpose is helping a workforce prepare for employment. The option exists for Thailand to a) Overcoming institutional fragmentation establish its own coordination body and give it oversight and advisory responsibilities and In the formal education system, a detailed possibly implementation responsibilities for some review and subsequent simplification of the activities. The powers accorded these bodies administration appears necessary to support in other countries vary. In some countries, they the drive toward the quality of education provide advice to policy makers, as in the case and the relevance of skills. Currently, the of the National Skills Authority in South Africa administration is excessively complex, as serving the Minister of Labor. But some countries the Ministry of Education (MOE) includes have actual authority for the implementation five independent offices with overlapping of policies and delivery of training services, as Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 35 in the case of the National Industrial Training public and private providers to deliver education Service (SENAI) in Brazil.58 and training of good quality that is responsive to market demand. For private providers of Training authorities can serve as an umbrella education and training, such incentives are for other market institutions that improve already in place because consumers who pay for the operation of training markets. Training services are not expected to continue enrolling in authorities are established with a board of programs that do not produce results. The same governors. Their membership varies in number type of incentives can be put in place for public with members representing government, providers by financing them in ways that hold employers, and community and worker them accountable for good performance. organizations. The board of governors meets on a regular basis to set strategic direction for skills (i) Performance-based budgeting development and to monitor and guide activities. It is supported by a permanent staff and a Shifting to performance-based budgeting director carrying out the designated functions (PBB) that holds public schools and training of the authority. The functions performed vary centers accountable for results would and may include such activities as: developing change the incentives for their performance. training strategies; reviewing and coordinating Performance-based Budgeting has been used in government budget allocations for skills many countries (India, Indonesia, and the United development among ministries; monitoring labor States) to shift the focus of service delivery market developments and trends; maintaining a away from budgeting for inputs to budgeting quality assurance framework covering standards for outcomes. The objective of PBB is to make setting, accreditation, and certification systems; the budget process more policy-oriented by operating training funds; regulating private and presenting information on the intended policy non-government provision; and monitoring and objectives, methods, and their cost.59 Rather evaluation. than combining inputs and their cost in a budget, PBB first calls for agreement on the results to b) Adopting financing mechanisms toward be achieved. For example, the share of students better performance who can pass national certification exams for the program, the share of students who can find work In addition to better coordination, changing using their skills in a given period of time, or even how skills are financed is a powerful tool to targets such as raising the percentage of program get better results from public expenditure. completers. The budgeting process focuses on While mobilizing more financing for education defining strategies and the resources needed and training is a concern of governments, to achieve results and the activities to produce how money is spent can be even more those results. As part of budget evaluation, important to meeting Thailand’s objectives for agencies and institutions are held accountable skills development. Spending in many cases for spending resources effectively to and for the focuses on inputs, starting with the number agreed results. Indonesia, for instance, has used of classrooms built or refurbished, equipment the placement rate of trainees in jobs as one of bought, instructors hired, and classes offered. the results indicators in its PBB to hold public Budgets are created based on plans for these training institutions accountable for performance inputs to education and training. But buying (for meeting placement targets). The key to the these inputs does not guarantee the provision success of this approach is in the incentives of good quality education or marketable skills. created for linking supply with demand and the Incentives have to be put in place to encourage accountability associated with failure. 58 The placement in government of coordination bodies varies. In South Africa and Jordan, for instance, they are placed under the direction of the Minister of Labor. In other cases they may be under the direction of a MOE or function as parastatals independent of a ministry, such as found in many Latin American countries. Where more than one ministry is engaged in education and training, coordination is often made difficult when one of the ministries is chosen for placement of the coordination body. In Jordan, for example, three ministries are involved in training activities and the ability of the Ministry of Labor to coordinate the other ministries, including a MOE, has proven difficult. In such cases, the parasternal arrangement has proven more effective in coordination. Leadership of these bodies is also important. Chairing of the body by a senior minister, even a Prime Minister, can enhance the convening power of the body. Rotation with employers in this role can also enhance the commitment of the private sector. 59 PBB represents a general approach to public management and is not specific to skills development, but can be readily adapted to public delivery of education and skills. Internationally, budget reforms have taken place gradually, shaped by the capacity of agencies. For background analysis of Thailand’s public finance management see World Bank (2011f). 36 Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion The key to PBB is holding those who deliver providers is essential to promote good choices. public services accountable for results. This is Spending may be restricted to certain providers what “changing the incentives” for performance and classes of services, and targeted to those means. It is no longer sufficient to purchase meeting criteria such as young people, displaced the inputs and deliver the education or training workers, rural migrants, or households in poverty. program. Success is judged by whether the key Some countries using vouchers for education performance outcomes are achieved. And if and training services are Australia, Canada, Chile, they are not, sanctions hold those responsible Denmark, France, Germany, the United Kingdom, accountable. Sanctions require merit-based and the United States.62 China has its own personnel systems. Namely, managers are version of vouchers providing rural migrants with rewarded for meeting agreed performance goals support for training and personal expenses. or sanctioned for a failure to do so. Sanctions come in the form of lower salary increases, Vouchers have been used to encourage fewer promotions, and even reassignments further education for both young people and where failures persist. At the same time, school young adults. In the United Kingdom, 16-18 administrators, teachers, and instructors must year olds who have left or who are about to be given the tools with which to succeed. leave compulsory schooling can apply through This includes adequate training and operating the Learning and Skills Council for an Education resources to accomplish the agreed task and to Maintenance Allowance of up to US$45 each achieve the key performance indicators. Some week to cover books, tuition, travel, or anything countries with PBB experience include the useful to continue learning. For those 19 years United Kingdom, the United States, Australia, old and over who are studying for their first full France, Chile, Columbia, and Russia.60 Chile has level 2 or level 3 qualifications, Adult Learning been on the cutting edge of performance-based Grants are available for a similar amount. budgeting for many years after introducing These voucher programs have increased the performance indicators in 1993 and a system of numbers of young people engaged in learning. program evaluation in 1997.61 In Australia, Work Skills Vouchers worth US$2000 are available from the Department Strengthening capacity for program of Education, Employment, and Workplace evaluation is essential to make PBB work. Relations to those 25 years of age and over who Evaluations can be kept simple with desk studies lack a year 12 or equivalent qualification. The and reviews of program logical frameworks. voucher may be used at accredited institutions Monitoring systems need to be established for the cost of basic education, vocational with performance indicators that initially focus courses, and accredited literacy and numeracy on processes before moving to outputs and courses. Similarly, vouchers for US$330 per outcomes. year are available for the first two years of an apprenticeship program in an area of high (ii) Vouchers demand. Critics of these vouchers in Australia argue the shift to demand-side financing has Using public finance and competition can failed to offset the concurrent reduction in also promote better outcomes for skills financing for training institutions. This is because development. Rather than finance schools and these institutions have suffered a net loss training institutes for services delivered, Thailand of revenues. Balancing the scale of voucher can elect to provide financing to the end user, financing and the reduction of budgetary usually in the form of a voucher, and allow the allowances is important to making user to shop for services. The rationale is that competition work. the user is better equipped to make decisions on the choice of providers and services needed by There are pre-conditions that enable vouchers the market. By placing purchasing power in the to meet their objectives. First, the approach user’s hands, competition by service providers is based on the assumption that the user has is expected to offer the user more choices at a adequate information about the service to be lower cost. Information on the quality of different bought: for example, the differences among 60 For a review of PBB and lessons from experience of governments around the world explaining what works under what circumstances, see Robinson (2007). 61 In Chile today, every program identifies its clients, outputs, performance indicators and goals with evaluations conducted linked to the budget cycle. Recently, a representative of the Ministry of Finance offered lessons from Chile’s experience with PBB. See “Performance management – the Chilean experience”, posted by Theo Thomas to the International Monetary Fund’s Public Financial Management Blog at http://blog-pfm.imf.org/pfmblog/2008/12/performance-man.html#more 62 See, for example, Bruttel (2005); Gasskov (2000); West, et al (2000); Finkelstein, Neal, Grubb (2000). Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 37 providers in cost and quality. This may be administered by a governing board that includes difficult to satisfy in the case of training where government and employer representatives – thus the service is heterogeneous and quality is linking decisions on spending to the demand difficult for the individual user to ascertain. side of the market and improving the relevance Quality assurance frameworks are important of training purchased. Training funds and their for providing this information. Second, there technical staff are often in a better position than has to be an adequate number of providers to individuals to assess training by virtue of seeing promote competition. Where government is the providers and their services on a frequent basis. only provider, this condition is unlikely to be met. The scale of a training fund’s activities also Certain markets, for example rural areas, may places it in a better competitive position than not be attractive to sustain enough providers individuals to purchase training services and to to promote competition. Collusion among hold the provider accountable for quality and providers on services offered and prices cannot relevance. A fund could be useful in Thailand to be allowed. Governments can mitigate these focus government training initiatives for young risks by providing information to consumers, people, women, low-income households, and pre-qualifying providers as meeting a standard migrants. Where financed by payroll taxes, the of service, and using bidding competitions to fund ensures a more equitable distribution of establish market prices for services. The potential training costs among enterprises, avoiding the scale of the market created by the purchasing “free-rider” problem by all eligible firms paying power of the vouchers may attract new entrants their share of training costs. Training funds are and providers and enhance competition. more often used for in-service training rather than pre-service training; but they can support (iii) Training funds both. In the training system, training funds provide Recent innovative approaches include the an intermediate step to vouchers using use of training funds and government funding financing and competition to promote better to procure training for target groups of outcomes for skills development. Training funds individuals from public and private providers. are a popular financing tool used by countries In Indonesia, the Ministry of Education (MOE) world-wide to encourage more enterprises not is financing non-formal training by private only to train but also to buy training services training providers. To qualify for this financing, competitively on the open market from public private providers must be accredited by the and other providers for target groups.63 Singapore MOE, meeting a specified level of quality in their and Malaysia are two countries that offer delivery. Proposals for financing also require that examples of well-run training funds. Financing there must be jobs waiting with employers for for training funds often comes from a tax on the training offered. This has the advantage of employer payrolls of 1 - 2 percent, but also compelling training institutions to consult with from government funds provided by general employers about their skills needs and adapt the taxation and, in some countries, from donors training offered to meet these needs. It creates and financing agencies like the World Bank. In a competitive market for employers of training turn, the training fund buys training services for organizations willing to supply skilled workers target groups like rural migrants and low-income and it ensures that the public expenditure on households using competitive procedures or training will actually lead to employment. The levy-grant arrangements where it disburses funds program at this stage has not been rigorously to enterprises to carry out approved training evaluated, but it shows considerable potential. programs. In Brazil, employer tax proceeds flow directly to a national training service administered c) Strengthening accountability relationships by employers (SENAI). In South Africa, 27 Sector toward quality and relevance of skills Education and Training Authorities (SETAs) administer a levy-grant scheme providing Several possible strategies to strengthen employers with financing for training. accountability in education and training exist. A growing body of evidence shows Training funds offer a convenient vehicle that accountability reforms have an impact on for consolidating government spending on student learning.64 In addition to decentralization training and administering these resources in already adopted by Thailand, such reforms a strategic manner. Training funds tend to be emphasize performance-oriented financing 63 Dar et al (2003). 64 Bruns et al (2011) summarize recent available evidence on the impact of selected accountability reform strategies. 38 Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion (such as Performance-based Budgeting), administrative and behavioral changes and competition (through vouchers), and information stimulate the introduction of needed services for accountability. Generating and disseminating such as learning support and career counseling. information about quality and outcomes as In addition, the MOE can further promote the well as inputs, outputs, and responsibilities of ESA’s authority over curricula, personnel, and schools and training centers have been found finance; enhance citizen participation in the effective in increasing choice, participation, and management of ESAs; and strengthen school voices of both students and their parents. In boards and administrations. Rigorous evaluation Thailand, available information about education can help in discerning the contribution of the results (such as testing scores) is not easily different initiatives to enhancing accountability connected to individual schools and training and thus incentives of ESA staff, as well as centers, which represents an acute constraint in teachers, toward education quality and the the effort to promote the quality and relevance responsiveness of service delivery to local of education and training. As a guide to future needs. System-wide, evaluation of policy reforms reforms, Thailand’s schools and training centers is essential. However, the NESDP, as well as need to develop a learning culture that monitors policies in the education and training systems, performance and learns from past reforms. should recognize that evaluation needs to be built into the implementation of reforms rather In the education system, internal and external than afterward.65 school quality assessments need to be used more effectively to create opportunities In the training system, training centers can for improvements in school performance. adjust according to the performance of their Although the Thai Ministry of Education (MOE) graduates in the labor market. For example, has created good initiatives across the country, following graduates into the market to assess institutionalizing internal assessment of how many are able to find employment in a schools and improving the viability of external reasonable period of time can help identify assessment (conducted by ONESQA and trades for which there is a growing demand NIETS) remains a challenge. In this context, and others for which there is excess supply. the ESA support network can assist schools in Engaging with employers to learn whether conducting self-assessment, in responding to graduates have the requisite skills can help ONESQA’s and NIETS’ feedback, and in school inform the curriculum and instruction. development planning. Furthermore, the MOE and other ministries responsible for schools need Skills providers and their administrators (such to have channels for following on ONESQA’s and as the Ministry of Education and Ministry of NIETS’ feedback at the ESA and school level. As Labor) need information on the operation of the starting point, it would be useful to introduce markets and the useful tools for assessing school identification codes and to match and improving school performance. Curricula facilities with the evaluation results, as done as need to be updated along with instructional part of the World Bank (2011f) analysis. materials to reflect competencies sought by industry. Instructor skills need to be upgraded ESAs’ results in addressing quality problems to use the curricula. Workshops and equipment in low-performing schools may improve with also need to be upgraded consistently with stronger accountability relationships. ESAs technologies used in the workplace. While it have the official mandate to direct resources to is important to develop policies for financing resolve quality problems within their jurisdiction. that encourage the efficient use of public To motivate and empower ESA staff in this expenditure; promote non-governmental direction, the MOE could provide systematic provision to expand the base of resources performance rewards for quality improvements. available for skills development; ensure equitable Similarly, the MOE could reward ESAs and access to education and training for all; and schools outside Bangkok for increasing develop effective training markets, it is ultimately the numbers of their graduates enrolling in important that schools themselves engage in TVET and in math, science, and engineering reforms that lead to improvements in their quality fields at the tertiary level. Such performance- and relevance. oriented incentives could support appropriate In 2010, Germany wanted to evaluate its dual training pilot in Egypt, but found that it had not developed a baseline for comparison, 65 nor had it identified a control group against which to compare graduates of the program. Korea is an example of a country that over time has carefully evaluated its various policy initiatives in skills development and has been willing to change course when the results have proven unfavorable. Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 39 In this respect, curriculum reforms can also Korea, Singapore, Australia, Sweden, and the offer greater accountability. The introduction United Kingdom have had positive experience of a modular competency-based training (CBT) with CBT curricula. curriculum, already found in Thailand, shifts attention away from training inputs to outcomes Finally, in higher education, addressing the and promotes greater accountability by schools existing structural imbalances may require and training centers. Outcomes are defined in more time, as well as extensive governance terms of competencies established with advice reforms. Raising the output in science, technology, from industry. Schools and training centers are and research will require the expansion of measured by their success in helping students qualified faculties and improvement in the quality attain these competencies. The modularity of of instruction in primary and secondary schools the curriculum provides a more flexible training preparing young people to pursue advanced system, contributing to lifelong learning by studies. It will also require the revision of how providing easy entry to, and exit from, the priorities are set in allocating resources in higher training once competencies have been achieved. education and in accountability for performance, The curriculum accommodates new entrants including graduate placements. Like other to the labor market and workers seeking to countries, Thailand will need time and more upgrade their skills. It provides just-in-time extensive governance reforms to address such training, allowing workers the flexibility to enter constraints. Meanwhile, the Ministry of Education and acquire skills required by the introduction can continue to support stronger links in both of new technologies and changing labor market teaching and research in collaboration with local requirements. A number of countries such as communities and industries, discussed below. 3.4 Linking higher education institutions and training centers with industry Stronger linkages between higher education Singapore, offer successful entrepreneurship institutions and industry can encourage training. China, Brazil, the United States and relevance of curriculum and focus research other countries have set up university incubators on industry needs for innovation and to help budding entrepreneurs commercialize competitiveness. Actions in this direction can ideas that are produced in higher education also link higher education more closely with institutions. In the United States, a majority national development planning, with employment of incubators are run as government or generation, and with labor market demand. university-supported non-profit entities. They Collaboration with employers should cover operate under a business model that generates curriculum development to better balance the additional revenue from rental income and provision of skills with their demand. Specifically, consulting services. In the few cases where higher education institutions may consider university-industry linkages have been closely appointing industrial practitioners on their studied, the evidence suggests the following: staff, establishing consultation mechanisms the university’s contributions to firms’ activities with industry, prioritizing student internships to in incubators usually takes the form of providing encourage on-the-job learning, and including information that complements the technological firm representatives on the boards of higher endeavors of the firm, rather than creating education institutions. The activities of the innovations that are ready for market.66 In yet Tertiary Education Commission in New Zealand another initiative, Hong Kong SAR (China) and offer successful examples. mainland China have established technology licensing offices and spin-offs to commercialize Collaboration can take different forms. For research and to transfer technology and instance, higher education institutions can knowledge. Furthermore, developing extension provide short-term training to upgrade workers and product development services can reinforce and to benefit firms, students, and curricula. This research and education policies; in addition, it has been the experience of the University of the provides students with opportunities to acquire Philippines partnering with the Department of practical experience. Examples to consider Science and Technology. Other higher education include the Fraunhofer Institutes in Germany, the institutions, including the National University of Technology Transfer from Research Institutes Marques et al (2010). 66 40 Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion to Small and Medium enterprises program in Similarly, Thailand may consider enhancing Sweden, the Advanced Technology Program in the linkages between industry and training the United States, and the Technology Transfer centers. Training institutions can establish Initiative in Ireland. (World Bank 2011b) advisory bodies of employers to guide their training activities, or they can include employer Thailand’s Commission on Higher Education representatives in their governing bodies to has already launched a number of initiatives both advise and approve budgets for training with similar objectives, including the higher – with an awareness of linking the training to education development network and the employer needs. Enabling training instructors to cooperative research network project. In this spend time in factories and workplaces helps respect, it may be appropriate to consider a build a connection between the training offered stronger engagement of appropriate intermediaries and employers. Japanese schools are often (such as the local TAMA Association in Japan, or closely connected with groups of enterprises a knowledge-integrating community supported and teachers. This helps employers identify by the Cambridge-MIT Institute as a model of qualified students for employment. School government-industry-university collaboration) counselors can advise students on where to look to bridge the information gaps between higher for jobs and what skills are needed for those education institutions and industry. In addition, job – additional emphasis on such counselors in the areas of strategic priority, Thailand needs may improve supply and demand. Industry may to consider the possible use of matching funds also become involved through partnerships to support research-intensive and interactive to help set occupational standards, validate university-industry linkages and collaboration in testing and certification instruments, and share adapting or developing technology. Gradually, technology and expectations for skilled workers. these initiatives can help generate local “centers of These information sharing and quality assurance excellence” and mainstream programs supporting activities are discussed next. industry-specific skills across Thailand. 3.5 Providing quality assurance Access to information and quality assurance this framework with other countries in the are needed for a skills market to work region to provide a regional framework similar efficiently. This includes the production of to those found in SADC countries and in labor market information, the regulation of labor the European Union can help promote labor markets and protection of consumers, and mobility. In countries that have successfully the instruments for quality assurance training. introduced NQF (Scotland, Ireland, and New Markets may be found where the private Zealand), NQF authorities play a role in defining sector offers job placement services, develops qualifications, setting competency standards, accreditation systems for groups of trainers, and and testing individuals and certifying skills. promotes industry standards for training such With governments providing these services, as done in the IT sector by Microsoft, Cisco, employers are able to identify workers with and so forth. But in many cases, the private relevant skills, variances in wages for specific sector is unable to capture sufficient private skills can be reduced, and individuals can make benefits to justify delivery of these services. better choices among education and training Public investments in labor market information institutions. These choices are facilitated about job vacancies, wages, skill requirements, according to their performance in helping and sources of training, and in its dissemination students meet certification requirements. to training providers, counselors, parents, and Authorities of NQF also play a role in assessing trainees is needed to improve the link between past learning and qualifications – enabling skills and employment to job matching. Both individuals to qualify for further education public and private employment services may need regardless of the source of their skills. This to be encouraged to play a role in providing this improves articulation and mobility between information. Beyond access to information, quality education and training while supporting lifelong assurance is of particular concern in Thailand. learning. While the benefits of qualification authorities are potentially large, countries like To improve quality assurance, Thailand is South Africa have encountered considerable considering the introduction of the NQFs for difficulty and expense in implementing such higher and vocational education. Connecting a system. A recent study by the ILO of the Implementing the nesdp’s skills agenda toward ideas-led growth with equity: approaches for discussion 41 experiences with NQF in 16 countries has further small share of trainees seek certification because highlighted these difficulties; although the study of the cost. Malaysia offers an alternative: itself has been subjected to criticism by the certification can be left in the hands of the European Union on methodological grounds. training institutions whose procedures are (Allais 2010) Areas where there are agreements subject to periodic audits. on the benefits of these frameworks are in the success of the NQF institutions in bringing The variance in quality among public and together the diverse stakeholders in education private training providers can be reduced and training, which leads to the reform of by other instruments, such as accreditation. these systems. They are also considered to be Information on accreditation can help consumers successful in promoting lifelong learning. sort between good and bad training – both public and private. Unlike licensing, that establishes NQFs are in part an extension of testing and a minimum set of standards for providers, certification systems that already exist in accreditation establishes a higher standard for Thailand. Simply by making improvements in quality and relevance that is met voluntarily by these existing systems, Thailand can achieve providers. Both public and private providers gains and provide better information to can become accredited. Consumers can use consumers about the quality of training offered. information on accredited training organizations It can also offer better information to employers to identify good training. Public financing and for hiring and wage setting. Engaging employers support for training, like that offered by a voucher in setting occupational standards can improve program or a training fund, can be restricted to the relevance of the skills developed. Standards accredited providers; therefore, it becomes an set by training providers alone may not connect incentive for providers to meet accreditation with what employers expect. By engaging standards. By being accredited, this information the demand side of the market in setting helps open markets to private education and training standards, the relevance of training training. Accreditation can be done by the can be improved. These standards are used in government, by international bodies, by industry developing curricula, which in turn, guide the groups, and by voluntary associations of choice of equipment used in workshops and the providers. The United Kingdom offers an example training of instructors. Testing and certification is of an international accreditation body in APMG- often centralized and removed from the purview Australasia, which has offices in Australia. A of training institutions to preserve impartiality regional accreditation body, the New South Wales of the system. But this can be costly and can Vocational Education and Training Accreditation discourage trainees from seeking certification. Board also provides its services in Australia. An example of this is found in Indonesia – only a 3.6 Way forward This note aims at contributing to the discussion Further discussion will help prioritize the on the NSDP’s skills policy agenda toward issues and the policy options for Thailand’s ideas-led growth with equity. It provides a skills development agenda. In priority areas, brief summary analysis of skills development immediate follow-up work can develop practical issues and outlines possible approaches recommendations. 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Yilmaz, Yesim. 2010. “Higher Education Institutions in Thailand and Malaysia: Can They Deliver?” World Bank, Washington, D.C. 45 ANNEX Thailand has relatively few high performers in basic education Reading (PISA 2009) Science (PISA 2009) Mathematics (PISA 2009) Shanghai-China (556) Shanghai-China (575) Shanghai-China (600) New Zealand (521) Singapore (542) Singapore (562) Singapore (526) Finland (554) Hong Kong-China (555) Finland (536) New Zealand (532) Chinese Taipei (543) Japan (520) Japan (539) Korea (546) Korea (539) Hong Kong-China (549) Switzerland (534) Australia (515) Australia (527) Finland (541) Canada (524) Germany (520) Japan (529) Hong Kong-China (533) Netherlands (522) Belgium (515) Belgium (506) Canada (529) Korea (538) Netherlands (526) United States (500) United Kingdom (514) New Zealand (519) Netherlands (508) Switzerland (517) Canada (527) France (496) Estonia (528) Liechtenstein (536) Sweden (497) Belgium (507) Germany (513) Iceland (500) Slovenia (512) Macao-China (525) Norway (503) Liechtenstein (520) Australia (514) Switzerland (501) United States (502) Slovenia (501) United Kingdom (494) Chinese Taipei (520) France (497) OECD average (492) Ireland (508) Iceland (507) Germany (497) OECD average (501) Austria (496) Israel (474) Czech Republic (500) OECD average (496) Poland (500) France (498) Ireland (496) Slovak Republic (497) Sweden (495) Hungary (494) Estonia (512) Austria (495) Estonia (501) Czech Republic (493) Poland (508) Italy (486) Denmark (503) Iceland (496) Luxembourg (472) Sweden (494) Denmark (499) Greece (483) Luxembourg (484) Luxembourg (489) Dubai (UAE) (459) Norway (500) Poland (495) Chinese Taipei (495) Slovak Republic (490) Norway (498) Czech Republic (478) Italy (489) Hungary (490) Austria (470) Dubai (UAE) (466) United States (487) Portugal (489) Hungary (503) United Kingdom (492) Denmark (495) Macao-China (511) Portugal (487) Liechtenstein (499) Lithuania (491) Italy (483) Slovenia (483) Russian Federation (478) Spain (483) Slovak Republic (477) Portugal (493) Lithuania (477) Spain (481) Spain (488) Ireland (487) Croatia (476) Israel (455) Dubai (UAE) (453) Russian Federation (459) Croatia (486) Latvia (484) Israel (447) Latvia (494) Lithuania (468) Greece (466) Greece (470) Macao-China (487) Bulgaria (439) Latvia (482) Bulgaria (429) Trinidad and Tobago (410) Turkey (445) Trinidad and Tobago (416) Uruguay (427) Russian Federation (468) Turkey (464) Qatar (379) Croatia (460) Uruguay (426) Turkey (454) Bulgaria (428) Qatar (372) Chile (447) Serbia (442) Brazil (412) Serbia (443) Trinidad and Tobago (414) Chile (449) Argentina (401) Uruguay (427) Argentina (398) Thailand (425) Qatar (368) Serbia (442) Brazil (405) Chile (421) Romania (424) Jordan (415) Thailand (419) Montenegro (408) Romania (428) Romania (427) Colombia (413) Kazakhstan (400) Kazakhstan (405) Panama (371) Montenegro (401) Azerbaijan (431) Peru (370) Panama (376) Peru (369) Montenegro (403) Mexico (425) Mexico (416) Argentina (388) Kazakhstan (390) Tunisia (401) Brazil (386) Thailand (421) Colombia (402) Mexico (419) Jordan (405) Albania (391) Peru (365) Tunisia (404) Kyrgyzstan (330) Albania (377) Albania (385) Azerbaijan (373) Panama (360) Kyrgyzstan (314) Indonesia (383) Jordan (387) Indonesia (402) Azerbaijan (362) 0 5 10 15 20 25 30 35 Tunisia (371) % Colombia (381) 0 5 10 15 20 25 30 35 Indonesia (371) Source: OECD. % Kyrgyzstan (331) 0 5 10 15 20 25 30 35 % THE WORLD BANK 30th Floor, Siam Tower 989 Rama 1 Road, Pathumwan Bangkok 10330 Tel: (66) 0-2686-8300 Fax: (66) 0-2686-8301 E-mail: thailand@worldbank.org www.worldbank.org/th