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Vietnam-Higher Education and Skills for Growth

Vietnam-Higher Education and Skills for Growth. Emanuela di Gropello Malaysia Higher Education Conference, December 3 -5, 2007. Outline. The supply side: A brief characterization of higher education in Vietnam The demand side: Trends in demand for skills Drivers of demand for skills

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Vietnam-Higher Education and Skills for Growth

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  1. Vietnam-Higher Education and Skills for Growth Emanuela di Gropello Malaysia Higher Education Conference, December 3 -5, 2007

  2. Outline • The supply side: A brief characterization of higher education in Vietnam • The demand side: • Trends in demand for skills • Drivers of demand for skills • Skill gaps • Main Messages and Directions for Reform

  3. Methodological Approach • How a demand-side analysis can help complement the more traditional supply-side one to achieve a better understanding of the effectiveness of a higher education system • To do so the study uses a rich dataset gathered from a variety of sources: • Household Surveys, MOET University Surveys, Enterprise Censuses, Investment Climate Survey, etc

  4. Characterization of Higher Education: Coverage • Vietnam has experienced strong growth in higher education (education at college level and more) since 1990, reaching a GER of about 13 percent. • However, the GER is still below that of high performing countries in the region. Evolution of Gross Enrollment Rates, 1990, 2002, 2004 Comparative Gross Enrollment Rates, 2004

  5. Characterization of Higher Education: Equity • Although coverage has increased, lower income quintiles have less access to higher education than richest ones. • Higher education does not provide opportunities to all talented students. Distribution of tertiary enrollment by income quintile, 2004

  6. Characterization of Higher Education: Quality (Staff Quality) • International rankings often look at faculty qualifications to gauge the quality of a particular institution. • Only approximately 14 % of faculty have doctoral degrees and 33 % have masters degrees. • Student-faculty ratios are also high 30:1 compared to others in the region (Indonesia 15:1 & Malaysia 20:1).

  7. Characterization of Higher Education: Quality (Research Capacity) Research activities in universities are seen to lead to improvements in teaching and student learning and drive innovation in a country. In Vietnam, higher education is still not a source of technical innovation as it is in upper or middle-income countries. • Majority of Universities in Vietnam rely solely on State budget to fund their research activities (and only on 1-2% of revenues), with only a few receiving resources from other sources. • Low enrollment of post-graduate students (as % of total enrollment): 4 % • Few academics are engaged in academic research: • Average publication per academic staff: .40, low by international standards

  8. Characterization of Higher Education: Preliminary Measures of Relevance The higher education system lacks in “diversity”: • Low possibilities of postgraduate studies. • Enrollment concentrated in a few disciplines (almost 50% enrolled in economics and education; only 15% in science and technology). • Although growing, the share of enrollment in the non-public sector is still only about 10%. • Lack of “leading” universities. • In spite of two relatively successful cases, such as the cities of Ho Chi Minh and Danang, in Vietnam university-industry linkages have been traditionally weak.

  9. Demand for Higher Education • Analysis of the Supply Side suggests that coverage, quality and relevance are a problem for higher education • But is this evidence confirmed by an analysis of the Demand Side? Three key questions can be addressed: • Is demand for skills increasing in Vietnam? • What are the key drivers of the demand for skills in Vietnam? • Is Vietnam already facing skill shortages? • Addressing these questions allows us to get a better understanding of the skills that matter (quantity and quality)

  10. Demand for Higher Education: Trends in Demand for Skills Demand for skills is increasing in Vietnam as indicated by: • An increasing share of workers with higher education (employment trends and patterns) • Increasing wage skill premium (or rates of return to skills) • Productivity levels of higher education graduates significantly higher than the average

  11. Trends in Demand for Skills: Analysis of Employment Trends and Patterns • Overall employment: • Workers with higher education have increased from 0.82 millions to 2.17 millions between 1998 and 2004, reaching about 5.1 percent of overall workers in 2004 - more than the double of 1998. • Employment by economic sector: • About 75 percent of workers with higher education are employed in education and training, services and public administration. • However, a higher share of workers with higher education has recently been employed in the manufacturing and construction sectors, and to a lower extent, electricity, gas and water. • Skill intensity of employment created in manufacturing tripled from 1998 to 2004 (skill upgrading).

  12. Trends in Demand for Skills: Increasing Share of Higher Education Workers is employed in Manufacturing Relative shares of key sub-sectors in terms of general and highly skilled employment Distribution of workers with higher education

  13. Trends in Demand for Skills: Employment has become more Skill Intensive, with Larger Relative Improvements in FDI and Exporting Sectors Share of higher education workers by ownership Share of higher education workers by export orientation

  14. Trends in Demand for Skills: Rates of Return and Wage Skill Premium • Private rates of return for higher education are high (above 10%) and increasing • Similarly, real wages have increased more for highly educated workers (average salary of a university graduate is 2.5 times higher than that of an unskilled worker) • This trend can be seen across all sectors (with highest relative wage gap in FDI) Rates of return by education level

  15. Trends in Demand for Skills: Impact on Productivity • Regression analysis on firm data shows that firms hiring more higher education graduates are more productive. • Impact is stronger in manufacturing and services and in FDI and import intensive sectors. • Firm data suggest that firms acquiring new technologies are more likely to develop new product lines when they have higher proportions of tertiary graduates.

  16. Trends in Demand for Skills: An Increase in the Ratio of Higher Education Graduates leads to an Increase in Labor Productivity ***: significant at 1%; **: significant at 10%; *: significant at 10%

  17. Trends in Demand for Skills: The Effect of Higher Level Skills increases with the FDI and Import Shares

  18. Demand for Higher education: Drivers of Demand for Skills Three key drivers of the demand for skills: • Inter-industry employment changes • Capital accumulation (high investment rate, reaching 38% of GDP in 2006) • Skill-biased technological change: skill upgrading within sectors due to the use and adaptation of technologies developed through R&D, imports, exports and FDI

  19. Drivers of the Demand for Skills: Employment Changes • In the 20 years since the economic reforms known as doi moi, the Vietnamese economy has experienced impressive growth, elevating it to one of the top performers in the developing world. • Along with growth in GDP, there has also been a significant change in the structure of the labor market in Vietnam: • from agriculture to manufacturing and services • starting transition from low-tech/labor-intensive sectors to medium-technology sectors – or even some high-tech

  20. Drivers of the Demand for Skills: Skill Biased Technical Change (Complementarities between R&D, FDI, Imports and Skills) • Regression analysis confirms that sectors investing more in R&D, and with higher shares of FDI and import (and lesser extent export) intensive enterprises, are likely to hire more highly skilled workers to be able to use and adapt new or imported technology • R&D still low but increasing • FDI in terms of GDP high at regional level and is increasing • Exports and imports have grown at an average rate of 18-20 percent per year since 2000 with industrialized countries as rising destination and source

  21. Demand for Higher Education: Is Vietnam facing Skill Gaps? • This analysis shows that the demand for skills will continue to increase • Need for increasingly diversified tertiary specializations and core general skills, which can position higher education graduates in a variety of sectors, including those open to new technology and international competition • Further analysis confirms that the demand is rising faster than the supply: the skill gap is widening • Skills gaps take the form of overall shortage of tertiary graduates, shortage of some tertiary specializations, lack of skills to perform effectively

  22. Where and What are the Skill Gaps • Skill deficiencies are identified as a serious bottleneck by about 40 percent of the firms interviewed in the ICS. More of an obstacle in the medium export oriented sector, in SOEs, and, within manufacturing, electronics, chemical products and, even, textiles. • According to JETRO survey, more than half of the Japanese firms interviewed in Vietnam mention that they have difficulties in recruiting staff at middle-management level and engineers. Mechanical and electronic engineers are the most needed. • Also in the domestic sector, increasing vacancy rate for managerial and high level occupations (MOLISA-ADB data).

  23. Where and What are the Skill Gaps: Lack of Skills is seen as Bottleneck in Several Manufacturing Sub-Sectors Proportion of firms by sector mentioning lack of skills as at least moderate obstacle

  24. Where and What are the Skill Gaps • Lack of skills to perform effectively illustrated by the fact that: • According to MOLISA-ADB survey: • key reason for not filling positions is candidates not meeting basic requirements • employers judge practical skills and, particularly, core generic skills less satisfactory than theoretical knowledge • almost 20 percent of employees mention their college education as being irrelevant to their job • High rates of youth workers with higher education need further training after employment (in particular in technology and business administration)

  25. Where and What are the Skills Gaps: About 40 percent of College Education Workers perform in a Partially Satisfactory Way

  26. Main Messages • Supply of higher education has increased but is still low by international standards. Quality is insufficient and system is not “diverse” enough. • Demand for higher education is increasing, driven by employment shifts and skill biased technological change, and skill gaps are growing. • The demand and supply diagnostics confirm that the supply of higher education needs to be expanded at higher quality and relevance levels.

  27. The Way Forward: the Higher Education Reform Agenda (HERA) • Vietnam is well aware of the need to address these challenges as indicated by HERA which shapes its vision of the sector for the next 15 years: • HERA envisions a system that is much larger (three to four times current enrollment levels) and includes increased participation from the non-public sector. • It also seeks to strengthen the institutional foundation of the higher education system and to promote a system that is more research-oriented and more aligned with international standards of quality. • However, HERA needs to be further developed and “operationalized”. In particular, key financing and governance constraints need to be addressed.

  28. Directions for Reform • Stage 1: Completing the Foundations of a Competitive Higher Education System • Stage 2: Improving the Framework for Higher Relevance of Academic Decisions • Stage 3: Building a First-Class Higher Education System

  29. Directions for Reform: Improving Relevance • Transfer more decision-making autonomy to higher education institutions in academic policies • to achieve higher diversification and relevance of academic offerings • Further develop the framework for university-industry linkages • Solve credibility gap • Clarify legal framework • Encourage private sector participation on university boards • Provide incentives for enterprise participation in training programs

  30. Directions for Reform: Improving Relevance • Improve information on education sector and labor market • Develop comprehensive strategy with higher education institutions, CSO and Ministry of Labor for better production and use of information on labor market [graduate tracer studies, labor force surveys, etc] • Support functional EMIS and university surveys • Introduce skill modules in firm censuses • Consider labor market observatories

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