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Cambodia: Addressing the Skills Gap

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Cambodia: Addressing the Skills Gap CAMBODIA ADDRESSING THE SKILLS GAP EMPLOYMENT DIAGNOSTIC STUDY CAMBODIA ADDRESSING THE SKILLS GAP EMPLOYMENT DIAGNOSTIC STUDY Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2015 Asian Development Bank, International Labour Organization 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines 4 route des Morillons, 1211 Geneva 22, Switzerland Tel +632 632 4444; Fax +632 636 2444 Tel +41 (0)22 799 6111; Fax +41 (0) 22 798 8685 www.adb.org; openaccess.adb.org www.ilo.org Some rights reserved. Published in 2015. Printed in the Philippines. ISBN 978-92-9257-159-7 (Print), 978-92-9257-160-3 (e-ISBN) Publication Stock No. RPT157706-2 Cataloguing-in-Publication Data Asian Development Bank Cambodia: Addressing the skills gap. Mandaluyong City, Philippines: Asian Development Bank, 2015. 1. Employment diagnostics 2. Economic development 3. Cambodia I. Asian Development Bank The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent or of the International Labour Organization (ILO). Unless otherwise stated, boxes, figures, and tables without explicit sources were prepared by the authors. ADB and ILO do not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB and ILO in preference to others of a similar nature that are not mentioned. By making any designation of or reference to particular territory or geographic area, or by using the term “country” in this document, ADB and ILO do not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/ licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of said license as well as the Terms of Use of the ADB Open Access Repository at openaccess.adb.org/termsofuse. This CC license does not apply to non-ADB and non-ILO copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB and ILO cannot be held liable for any claims that arise as a result of your use of the material. Attribution—In acknowledging ADB and ILO as the source, please be sure to include all of the following information: Author. Year of publication. Title of the material. © Asian Development Bank (and/or Publisher]. https://openaccess.adb.org. Available under a CC BY 3.0 IGO license. Please contact [email protected] or [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Note: In this publication, “$” refers to US dollars. FOREWORD Cambodia has made great strides toward sustained rapid and inclusive economic growth since its political environment stabilized in 1999. Its 7.8% average annual growth since then has dramatically brought down the poverty level, from 47.8% of the population living below the national poverty line in 2007 to a low 18.9% in 2012. However, 71.0% of Cambodians still live on less than $3 a day, which means that many of them remain vulnerable to falling back into poverty. A lack of decent jobs is at the heart of the problem. The share of self- employed and unpaid family workers, which was at 59.4% in 2013, remains high. Indeed, most of the working population is in the informal economy or engaged in vulnerable forms of employment. Enhancing labor productivity could very well be the biggest challenge Cambodia will face in sustaining a strong and inclusive economic growth. Using a diagnostic approach to assess the dynamics of the labor market, this study jointly undertaken by the Asian Development Bank (ADB) and the International Labour Organization (ILO) has identified this and five other major challenges to generating more productive employment in Cambodia and the possible policy initiatives for addressing them. In 15 years of economic expansion, Cambodia’s growth has been largely driven by four main sectors: garment manufacturing, tourism, construction, and agriculture. However, long-term sustainability of growth will depend on the country’s ability to move beyond these sectors, which in turn will require a wider and different range of skills from its work force. It also calls for the development of more mature relations between employers and employees to provide a more stable foundation for further industrial development and diversification. Cambodia has been experiencing a rapid demographic transition, currently offering a limited window of opportunity to collect the dividends of that transition. However, the country’s youthful labor force is relatively poorly educated, with more than half of those employed having had only primary education. These young workers often do not have the skills to match employers’ needs. It is then likely that skill shortages and the lack of relevant workforce skills would be considerable obstacles to improving the country’s employment outcomes. Concerted effort is therefore needed to resolve this education–skills mismatch. Both the quality of education and access to it need to be improved. More and better-trained teachers are needed. As important, special attention should be given to improving the skills of those already in the workforce. Vocational training can be better coordinated with the main education stream, supported by substantial inputs from private sector employers. Considerable progress has already been made in developing a new qualification framework to ensure consistent national standards for the full range of academic levels, although effective implementation of this framework is yet to be seen. To better address the skills mismatch, there is also a need for improved information flows covering all aspects of the labor market. Three other important issues demand attention: (a) rural residents need better income-earning prospects, (b) most people need greater social protection, and (c) productivity and working conditions in informal sector work need improvement. A systematic program for increasing agricultural productivity will have a critical effect on employment outcomes. Enhancing the security of land tenure and the legal structure for land transactions will help improve land allocation and access to rural credit. Further, policies that promote the growth of micro, small, and medium-sized enterprises (MSMEs) and the economy’s informal sector will have a substantial impact on overall growth and employment. In particular, by providing incentives to MSMEs to join the formal economy, their workers can be extended the benefits and legal protection that labor laws give to formal sector workers; this will have the added benefit of increasing tax revenues by expanding the country’s tax base as well. iii FOREWORD A number of social protection schemes for Cambodia’s working sector are being developed or only recently instituted without sound implementation plans, while the creation of adequate fiscal space is needed for the longer-term expansion of social protections. This study was prepared by a team from the ADB’s Economic Research and Regional Cooperation Department, under the supervision of Cyn-Young Park, director of the Economic Analysis and Operational Support Division, and from the International Labour Organization (ILO), under the supervision of Maurizio Bussi, director of the Decent Work Technical Support Team for East, Southeast Asia and the Pacific. The team consisted of Sakiko Tanaka, Paul Vandenberg, and Lilibeth Poot from ADB; Makiko Matsumoto and Sukti Dasgupta from the ILO; and experts including Ronald Miller, Sewin Chan, Hans Hwang, and Megan Reeve. From ADB, Sophea Mar, Kimie Tanabe, and Madeleine Varkay provided useful inputs and valuable comments in its finalization. From the ILO, John Ritchotte, Carmela Torres, Kazutoshi Chatani, and Miranda Kwong contributed. Jasmin Sibal and Tibor Hanappi provided research assistance. The report was edited by Eric Van Zant and proofreading was done by Teri Temple. Michael Cortes did the layout, cover design, and typesetting. Ricasol Cruz-Calaluan provided excellent administrative and secretarial support. The study benefited from several background studies prepared by a team of experts consisting of Michele Bruni, Alessandra D’Amico, Kang Chandararot, Liv Dannet, Sam Sideth Dy, Somean Kuoch, Likanan Lcuh, Muhammad Muqtada, Gordon Peters, Khleang Rim, Max Tunon, Luyna Ung, and Hendrika Vahl. The study team consulted representatives of key government agencies, academic and research institutions, the private sector, and trade unions about the study framework, approach, and findings. Staff at ADB’s Cambodia Resident Mission led by Eric Sidgwick and Sophea Mar and the ILO Country Office for Thailand, Cambodia, and the Lao PDR led by Maurizio Bussi and Sophorn Tun provided invaluable support and commentary. Feedback greatly benefited the report, and provided important inputs into the formulation of the National Employment Policy. The study team would also like to thank the Government of Cambodia for its support. In particular, we are grateful for excellent collaboration and insights from the Ministry of Labour and Vocational Training, Ministry of Education, Youth and Sports, Ministry of Economy and Finance, National Institute of Statistics, Ministry of Planning, National Employment Agency, Council for the Development of Cambodia, Cambodian Federation of Employers and Business Associations, Cambodia Chamber of Commerce, and workers’ organizations. Shang-Jin Wei Tomoko Nishimoto Chief Economist and Director General Assistant Director-General and Economic Research and Regional Director Regional Cooperation Department International Labour Organization Asian Development Bank iv Contents FOREWORD iii FIGURES AND TABLES vi ABBREVIATIONS vii HIGHLIGHTS viii 1.
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