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Skill Development Strategies for Rapid Growth and Development

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Skill Development Strategies for Rapid Growth and Development
    SS KKIILLLL  DD EEVVEELLOOPPMMEENNTT  SS TTRRAATTEEGGIIEESS FFOORR  RR AAPPIIDD  GG RROOWWTTHH AANNDD  DD EEVVEELLOOPPMMEENNTT ::   TT HHEE  EE AASSTT  AA SSIIAANN  EE CCOONNOOMMIICC  MM IIRRAACCLLEE   MMaarrcchh 22001100 JJoohhnn LLiinnddssaayy MMaarrccuuss PPoowweellll    2 IInnttrroodduuccttiioonn  Over the past three decades the world has witnessed significant growth. Some nations in particular have experienced very rapid growth over relative short periods of time. These nations are known as the ‘ Tiger Economies ’  and have been primarily located in Eastern Europe and East Asia including nations such as Singapore, South Korea, Slovakia, Taiwan, Ireland, Hong Kong SAR and Japan. Particularly strong has been the growth of the East Asian economies with the emergence of the ‘East Asian Economic Miracle’ featuring  high performing Asian economies including Hong Kong SAR, Japan, Malaysia, South Korea, Taiwan, Indonesia, Vietnam and Thailand (though some such as Vietnam have only recently begun their rapid growth and others such as Indonesia have slowed considerably). According to the World Bank the rapid growth of these nations is due to the fact they shared similar characteristics of “ macroeconomic stability, sustained growth in productivity and significant investment in technology, and continued investments in human re source development” . While true, it was not these characteristics alone that led to the Tiger Economies high growth trajectories; other nations had similar macroeconomic characteristics but did not experience the same high rate of growth. In reality each country followed their very own distinct development path, dictated by specific national priorities and policies,  pursuing their own vision of how to achieve a competitive advantage in a global economy. To better understand what led to the ‘ East Asian Mirac le’ it is necessary to look beneath the basic macroeconomic framework, and to understand those specific policies, institutional structures and practices that contributed to significant GDP growth and standard of living increases. Markets if left alone are unable to closely coordinate the processes of education, human resource skills formation and economic sector development. This presents governments with a challenge as each of these factors requires the other if there is going to be sustainable national growth. Governments must find innovative and situation-specific ways to guide these factors and ensure that the demand from employers for skilled workers is met with an appropriate supply from the workforce. This matching is necessary in order to avoid critical shortages of skills that would slow down a country’s economic growth  while at the same time encourage standard of living increases. To achieve sustainable high growth patterns countries need to develop systems to advance national technological, economic and human development. The development progression for the Tiger Economies has  been one of catching-up, moving up the value chain through growth from low to high technology sectors, raising productivity, improving competitiveness, increasing exports, with a particular focus on technological intensive manufacturing and services. The continual development and application of skills in this context is an important policy tool and a necessary ingredient for development. Skill and human resource development is not a simple task, however, nations that ignore it become trapped in a low skill trap where their initial advantage of a low-wage workforce is never built upon through a higher skilled workforce. Not only is it essential to raise current skill levels, it is vital to plan for those skills that are needed in the future, taking into account what skills will be needed by the more advanced sectors that will drive future growth. Singapore, South Korea, Hong Kong SAR and Vietnam have all successfully entered into high-growth  progressions using coordinated sector and skill development strategies. Using these nations as case-studies this paper provides an analytical insight into this complex process and how education and policies for skills development were successfully integrated into these nations’s  overriding framework for economic development.   3 SSiinnggaappoorree  Singapore is a small nation and lacks a natural resource base or large population which they could draw upon. Also due to its small size, Singapore is densely populated with high land and rent costs. Despite this, Singapore’s citizens enjoy one of the highest standards of living in the world. In 1965 Singapore was ranked  just 42 nd  in the world with a Gross Domestic Product (GDP) per capita of US$512, as of 2009, Singapore is now ranked 8 th  in the world with a GDP per capita of US$50,300. A remarkable achievement especially in light of the many unique challenges and constraints Singapore has faced, and continues to face. During this time Singapore has experienced exceptional growth across many economic indicators, especially employment. Policy makers in Singapore have demonstrated remarkable ability to guide the industrial sectors and skills that they have identified as being the most able to move the country up the value chain towards more knowledge and technology intensive sectors. At the time of their independence Singapore faced a very difficult task, one that all developing countries face, they had to break into world markets when the only competitive advantage they had was a supply of unskilled labour. In order to move-up the global value chain, employers require workers with higher skill sets. It would not have been possible to attract inward investments from sectors that utilise higher capacity and technology into Singapore if they did not have people with skills to work in those industries. Insufficient or lack of appropriate skills within the workforce can slow national development. In order to overcome these challenges, the government of Singapore centralized control of three important areas: industrial policy, education, and skill development. Singapore’s action to centralize  guidance of industrial/sectoral policy was deemed necessary to insure that industry grew towards higher-skilled, higher technology and higher value added sectors and did not just take advantage of Singapore’s existing base of low -skilled and low paid labour. Education policy was guided to create a sense of national awareness, collective unity and increase the skills of citizens moving through the education system and into the workforce. Singapore also devised a skills formation mechanism so that the  present and future skill needs of new, developing and growing industries would be reflected into the changing skill sets of the workforce. Singapore had to guide these three areas in a coordinated centralized manner, if the system had been left to market forces it would have taken generations for the skill shortage needs to filter down the education systems and to produce the necessary skills in the workforce. Initially Singapore built on their existing competitive advantage, by focusing on their geographical advantage  by promoting the trading sector and their preponderance of low-skilled labour by promoting the labour intensive manufacturing sectors. However, the government of Singapore did not want to get stuck within this labour intensive manufacturing sector, consequently they developed a clear industrial policy to push Singapore towards higher skilled sectors over time. The government saw Multinational Corporations as a means to bring to Singapore knowledge, capital, managerial experience and technology to assist with their industrial development and facilitate shaping of the training and education systems to up-skill workers. These foreign corporations were a much faster way to introduce new technology and skills that would have been difficult, if not impossible to do so domestically with Singapore ’ s limited resources, technological base and existing skill levels. Singapore initially focused on the electronics and textile industries that were looking for low-cost (low-wage) locations. As a result of the policies and incentives to attract them, foreign direct investment into Singapore rose from 239 million Singaporean dollars in 1966, to 6.4 billion Singaporean dollars in 1979. This attraction of Multinational Corporations allowed Singapore to very quickly develop through the ‘ 60s and ‘ 70s, but it did not naturally allow for further catching-up to more developed countries even though investment was encouraged in higher skilled sectors. To attract those corporations engaged in more technologically advanced   4 sectors Singapore still needed to further upgrade the skills of their workforce through investments in education and training. To address this the Ministry of Trade and Industry (MTI) was established as a type of ‘Super Ministry’ who would coordinate overall economic development that the other ministries are required support. This insures that the MTIs priorities are incorporated in to all Ministerial policies and are in fact the key driving policies. Education and training was a big challenge for Singapore, they had to provide workers with ever increasing skills to match anticipated employer needs. The Multinational Corporations already operating in Singapore could not be relied upon to drive the skill agenda as they would be narrowly focused on what their present needs were, while Singapore wanted to fulfil those but also move up the value chain. To do so Singapore had to focus skill development specifically on those skills deemed necessary for the specifically targeted growth industrial sectors tied to future industrial development. Singapore was further restrained by its relatively small  population base, consequently virtually all workers had to be mobilized and brought in to the system to meet demand. By the late 1960s there was already a shortage of highly skilled labour in Singapore just to meet the existing need, let alone future demand. Consequently, in 1968 Singapore established the Ministry of Science and Technology to develop and coordinate science policy, technology and technical manpower. During the 1970s Singapore focused ever increasingly on economic-upgrading strategies in order move away from low-skilled production. Also, throughout the 1970s more Southeast Asian countries began to compete with Singapore for those low- skilled manufacturing sectors, reducing Singapore’s advantage. Singapore shifted their planning away from labour intensive sectors and towards manufacturing intensive sectors. As this shift was made there was a significant shortage of skilled workers and professionals. Since this was during times of low-unemployment, to address this worker shortage the government took a two-pronged approach. The first short-term solution was to attract skilled foreign workers and Multinational Corporations and the second longer-term solution was to promote science, technology and research and development. The longer-term strategy was not a simple solution, Singapore lacked the necessary existing workforce with the higher level skills to promote science and technology based sectors. The government addressed this by re-designing the education system to directly support the building up of the skills base to feed in to the growth technology sectors. To satisfy the demands from higher technology and manufacturing intensive employers the government needed to ensure the skills in demand, would be supplied by the education and training system. This was addressed by strengthening, broadening and centralizing the education system, and by introducing targeted training to upgrade the skills of those already in the workforce. In the 1990s Singapore again revamped their industrial strategy. Singapore would continue to focus on attracting Multinational Corporations, but would target those growth sectors for the future that focused on higher level skills, especially in the technology sectors. At the same time the education system was also adjusted to focus on students abilities especially in innovation, creativity and entrepreneurship while previously the education system had been focused on standardization. Currently there are several organizations involved in supporting skills development in Singapore including: the Ministry of Trade and Industry, the Ministry of Manpower, the Ministry of Education, the Economic Development Board and various ministerial divisions. The Ministry of Trade and Industry and its operational unit, the Economic Development Board (EDB), have a strong influence on the activities of the others. In Singapore, the priority for economic development determines the process of skills formation, and the mandate of the EDB is to create a sustainable GDP growth for Singapore with good jobs and business opportunities for its people. The Asian financial crisis in the late 1990s and the recent knowledge revolution prompted the Singapore government to change policy into what it is today. The Economic Development Board identified   5 new key sectors and industries to help Singapore become a global leader in the knowledge and technology economy. For each of the sectors, the EDB developed a strategic plan, containing objectives and targets. Skills that are required for supporting sector development are identified through a multi-faceted approach. The Manpower Research and Statistics Division undertakes econometric forecasting in order to identify the country’s skill needs for the medium, 3 to 5 years, and the long, 5 to 10 years, terms. Decisions about which sectors to investigate are guided by the EDB and these forecasts are supported by inputs from the different sector committees. This approach enables the Ministry of Manpower (MoM) to produce a skills map delineating which skills are in demand and the degree to which Singapore is producing the appropriate supply of skills. The importance Singapore attaches to matching skill supply and demand is seen in the fact that every six months a cross- Ministerial committee meets to identify the degree to which the country’s skill needs are being met. Representation on this committee includes the Ministries of Manpower and Education. Skill needs are converted into the supply of skills through the work of the EDB and the WDA. They do so through the use of the following strategies: an expansion of pre-employment training, upgrading the skills of the existing workforce, and attracting foreign manpower from overseas. Singapore has introduced a number of incentives to encourage workers to upgrade their skills, including encouraging further learning for those already in the workforce. A series of grants are offered to people who have completed their post-secondary level education, including a payment of $800 to enable graduates to study for a qualification that has a market demand. A similar grant is provided for polytechnic students to enable them to study for a graduate level qualification. The MoM will also provide 80% of the funds if an education programme leads to a qualification that is in high demand. The Workforce Development Agency (WDA) plays an equally important role in upgrading the skill levels of the workforce through the following three programmes: skills conversion, skill upgrading, and enhanced employability of lower skilled workers. The skill conversion programme is primarily targeted at workers who have been laid-off due to economic restructuring. The programme provides a worker with basic skills training in an area that has a high market demand. The skill upgrading programme is targeted at older people who already have jobs. The purpose of this programme is to help improve productivity within selected growth sectors. The third strategy is targeted at enhancing the competencies of the lower skilled worker through a  programme called Work Redesign. Under this program the WDA attempts to redesign jobs in targeted sectors so that the person becomes more productive. If the MoM or the WDA is unable to develop the skills of local  people in response to identified needs then the final option is to search for skilled foreign workers. The Skills Development Fund (SDF) provides financial incentives for training those people already in the workforce, those preparing to join the workforce, and those re-entering the workforce. The funds are collected from the Skills Development Levy imposed on employers of foreign workers and on employers with workers earning less than $1,500 a month at a current levy rate of 1% of monthly remuneration. All companies registered in Singapore are eligible for support from the SDF. We have seen that Singapore was faced with a tough challenge, how to catch-up to more developed economies when they had no natural resource base and a small low-skilled population. They responded by initiating a decades long plan of state managed interventions in industrial development, education and training. Singapore used industrial policies to manage growth systematically up the value chain by targeting sectors they determined would be vital for future growth. They tied-in their education and training policies to overall economic development to ensure that all three aspects worked together to ensure close to full employment and that employers had the necessary skilled workers available.
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