Cambodia: Skills for Future Economy Sector Development Program (Subprogram 1)

Education / Technical and vocational education and training

Macroeconomic context. Cambodia's economy grew rapidly during 19982019, with an average annual growth rate of 7.7%._Cambodia attained lower middle-income status in 2015 and aspires to reach upper middle-income status by 2030. The recent rapid economic growth was driven by garment exports, construction, and tourism, built on a low-cost and low-skilled labor force model._Cambodia's Human Development Index value increased from 0.368 in 1990 to 0.594 in 2019_and the percentage of people living below the national income poverty line declined from 47.8% in 2007 to 17.8% in 2020._Although good progress has been made in social and human development, these gains remain fragile as many people are still vulnerable to poverty and gender-related disparities.

The coronavirus disease (COVID-19) pandemic since 2000 has disrupted gains made in terms of economic growth and poverty reduction, with growth projections for 2021 revised down to 1.9% from 4.0%._The pandemic has adversely impacted the main Cambodian growth areas of tourism, garment, and construction industries. Travel restrictions have effectively closed the tourism and hospitality sector. Construction growth from foreign investment has slowed to a halt, and garment exports have declined significantly because of global supply chain disruptions. This has severely affected employment in the garment industry, which provides jobs to more than 800,000 people, 80% of whom are women. While the economy is expected to recover with the reopening of the country for business, the garment industry requires transformation to move up the global value chain to high value-added products to become more competitive in the global market.

Labor force and demographic dividend. Cambodia has a population of 16.7 million, 65% of whom are younger than 30 years old. An estimated 9.3 million people are active in the labor market, and women account for 49% of the total labor force aged 1564. School completion rates in secondary education remain low, with only 7.4% of the labor force having completed some form of post-secondary education. The share of persons engaged in medium- and higher-level technical occupations constitutes only 10.7% of the total labor force in Cambodia (footnote 4). Many industries in Cambodia rely on foreign experts to fill the medium- and higher-level positions because of a skills shortage. The labor productivity in Cambodia ($3.6 per hour worked) is lower than that of competing countries in the Southeast Asian region, such as Viet Nam ($7.3) and Indonesia ($13.1). This highlights the need to develop workforce skills and adopt technologies for higher-value production in the Fourth Industrial Revolution (4IR)._The demographic dividend presents an opportunity to improve the skills of new entrants to the labor market while also upgrading the skills of the existing workforce to match future industry demand. However, the technical and vocational education and training (TVET) system faces several policy and institutional constraints and investment gaps and is unable to meet industry demand to upgrade workforce skills and respond to the country's aspiration for economic diversification.

Fragmented skills development ecosystem. The TVET ecosystem of Cambodia lack coherent leadership and coordination. More than 200 TVET institutions are registered across 13 different government ministries, and coordination among the ministries and agencies providing TVET is limited._The private sector's involvement in skills development is still low. The National Training Board (NTB), represented by the 13 ministries and several nonpublic stakeholders, is responsible for policy direction and coordination of the TVET system. However, the NTB has not convened since 2017, except for several subcommittees that convene occasionally._As a result, a number of ministries and agencies provide supply-driven and overlapping training programs without quality assurance or industry involvement.

Low quality assurance and standards. TVET institutions lack the capacity to design and deliver demand-driven programs. Consequently, graduates lack the skills relevant to employability in the workplace or matched to industry needs in the 4IR labor market. Few of the Ministry of Labour and Vocational Training (MLVT) and higher education institutions under the Ministry of Education, Youth and Sport programs are aligned with the Cambodia Qualifications Framework, resulting in a lack of quality and nonadherence to standards in TVET delivery. Further, rigid training curriculum and modules do not integrate flexible pathways for new entrants and the existing workforce to acquire technical skills and develop soft skills (e.g., problem solving, teamwork, and communication skills). Competency-based modular trainings designed jointly with industries have been introduced mostly for certificate levels and for some selected occupations. The Asian Development Bank (ADB)-financed Skills for Competitiveness Project has been supporting the government to upgrade the diploma-level program to introduce competency-based modular trainings for four prioritized sectors._However, these are still few, and more systematic industry engagement in the development and delivery of training is required to strengthen industry's relevance to future needs for the adoption of 4IR technologies. Because TVET trainers lack industry experience, they continue to deliver training using outdated training curricula. Although the MLVT has introduced the Return to Industry Scheme for TVET trainers to gain industry experience, it needs systematic expansion and an incentive mechanism for trainers to participate in the scheme.

Lack of autonomy and industry linkages. TVET institutions are centrally managed by the relevant government ministries and lack academic and financial autonomy. They also lack rigorous institutional accountability mechanism, and transforming TVET institutions into public administrative institutions will enable them to generate income and decide on course offerings aligned with market demand with greater agility._The MLVT conducts skills gap analysis only every 23 years, which does not match with the real-time demands of industries. There is no national skills portal that can strengthen links between TVET institutions and industry to fill the skills gap and skills shortage. Industries demand more technicians for industry engineering and machining skilled in automation._Few TVET institutions have introduced programs responding to the digital technologies and skills for a green economy such as eco-design and energy efficiency. Current facilities and training equipment levels at TVET institutions are not conducive to achieving technical competencies, nor do they reflect industry requirements for 4IR and green economy skills to improve employment prospects. Negative perceptions and low value attributed to TVET among school graduates and the public need to be counteracted by positive branding and marketing strategies targeting school leavers and parents and involving industry partners.

Limited industry-led skills development. Despite the substantial productivity gains 4IR technologies can bring about, employer-led training efforts in Cambodia remain limited. The National Employment Agency's employer survey undertaken in 2017 found that only 16% of firms in the country provided some form of training for their employees._Employee training rates were also low: in the garment industry, the rate was 10%, and in the tourism industry, the rate ranged from 5% for food and beverage services companies to 19% for hotels._Some industry associations have industry-led training institutions, such as the Cambodian Garment Training Institute, which was set up by the Garment Manufacturers Association in Cambodia. However, their training capacity is limited and unable to respond to a wide range of needs, including workplace literacy and numeracy, 'lean thinking_, and the 5S methodology,_and advanced technology adoption. There are also limited digital learning resources and e-learning platforms. A substantial part of the workforce may lose their jobs if they fail to adapt and acquire new skills required in the 4IR. Women will need the skills that enable them to move into alternative and growing sectors, including services and nontraditional sectors. Stipends are needed to provide lower-paid workers and students from low-income backgrounds with access to skills programs.

Inadequate financing for skills development. The current level of public TVET financing is insufficient. In 2021, the MLVT budget was around 9% of the total national budget for education and training. Opportunities for private sector partnerships should be explored to address lack of financing to TVET. This includes expanding the Skills Development Fund (SDF), financed on a pilot basis by the Ministry of Economy and Finance (MEF) with support from ADB._The SDF is a demand-based funding mechanism to which firms and training providers submit joint training proposals to address persistent skills gaps and shortages, and to respond to emerging skills needs in the 4IR and the green economy. A sustainable governance and financing mechanism for the SDF needs to be established. Private sector investment in the upgrading and modernization of industry infrastructure needs to incorporate publicprivate partnership support for skills development.

Government's reform agenda in skills development. As the country aspires to transform its economy to a technology-driven and knowledge-based economy to promote resilient, sustainable, and inclusive economic growth, the government recognizes the need for a fundamental reform of the TVET system to address the skills gap and to increase employment prospects of job seekers, including those in lower income groups and women. The government is finalizing the skills development road map, 20222035 to support effective implementation of the relevant policies (e.g., National TVET Policy, Lifelong Learning Policy, and Cambodia Digital Economy and Society Policy Framework)._The Industrial Development Policy, 20152025_and the Law on Investment, 2021_promote diversified industry development in an investment environment more conducive for the private sector. A key strategy cutting across government policies is to strengthen human capital.

Cambodia's industry is modernized and transformed from labor intensive to skills driven (Industrial Development Policy 2015-2025)

Employability of current and future labor force (both women and men) improved

Skills development ecosystem strengthened

Industry-led inclusive skills training delivered

Skills Development Fund enhanced