Bangladesh has made considerable progress in its economic development. Among other fundamental factors, recent high average economic growth rate of over 5 percent has been accompanied by labor force and employment growth, which has risen about 4. 5 percent per year between 2000 and 2003. Bangladesh’s National Strategy for Accelarated Poverty Reduction (NSPR) appropriately identifies the strategic goal of promoting vocational training and skill development to accelerate this growth process, which will help Bangladesh reduce poverty and vulnerability.
The contemporary labor market of Bangladesh is characterized by an increasing rate of female labor force participation, increases in underemployment – especially for women and those in the agriculture sector – and real wages. In addition to indigenous private sector developments, there has been massive growth in foreign direct investment that has generated higher employment prospects in the industrial sector. In rural areas, non-farm employment has also increased along with public workfare programs.
Bangladesh will need to create at least two and one-quarter million jobs per year to accommodate a near doubling of the labor force from its present size of 55 million to 100 million in 2020. Given a saturated agriculture sector, industry must create 16 million jobs by 2020 – a 5. 5 percent annual increase. The largest portion of the new jobs needed over the next two decades will have to come from the service sectors including trade, construction, transportation and communication. Globalization and shifting opportunities for trade are also having an impact on the labor market.
The general direction of employment is moving away from traditional activities. Despite the widening of the trade deficit, a large number of women work in export-oriented industries that collectively provide more then two-thirds of the country’s foreign exchange. Consequently, the dynamics of a modernizing economy warrant that particular attention should be paid to skill development to ensure that Bangladesh can continue to tap into sources of growth in a global economy. The main challenge for the skill development system is to overcome its inadequate orientation to the labor market.
Formal providers of technical and vocational education and training do not have strong linkages with the private sector employers that drive the changing patterns of labor demand, nor do they have proper incentives to build those connections, which would ensure that skill development courses are relevant and useful to both graduates and employers. Appropriate policies and programs for the labor market are important drivers of economic growth and a more equitable income distribution. It is appropriate that the NSPR has given priority to vocational and technical training as a major focus of educational reforms in the medium term.
To further this NSPR agenda it is imperative to align skill development with the dynamics of the labor market. This report is an attempt to understand the labor market context and the technical and vocational training and education system of Bangladesh, and to propose policy options that improve labor market outcomes and drive future economic growth. EXECUTIVE SUMMARY 1. This report was prepared in response to a request by the Ministry of Education (MoE) to analyze the Bangladeshi vocational education and training (VET) system and propose recommendations to improve the relevance and cost-effectiveness of the system.
The report has benefited from extensive dialogue and consultations with officials of MoE, Department of Technical Education (DTE), Bangladesh Technical Education Board (BTEB), employers, academics and other stakeholders involved in the system. The preliminary findings of this report were discussed at a regional workshop in New Delhi in September 2006, attended by participants from Afghanistan, Bangladesh, India, Pakistan and Sri Lanka. This summary presents a synopsis of the different sections of the report and highlights key challenges faced by the VET system as well as the potential options to address some of these constraints.
2. Realizing that it is not feasible to implement all these recommendations immediately, the last section of the summary aims to provide a possible timeline for sequencing reforms in the short and medium-term. I. Economy and Labor Market Context 3. Along with economic growth, Bangladesh’s labor force has also been growing fairly rapidly. Bangladesh has had relatively strong economic performance in the past decade, with GDP growth averaging more than 5 percent a year during the 1990s and real GDP growing by nearly 52 percent over the same period.
The working age population (15-64) has grown by about 18 million since the mid 1990s, to 77 million, and the labor force has also grown by about 10 million over the same time period to over 46 million. A lot of this growth has come about due to increasing participation of women. While women’s participation rates are still very low (Figure 1), over five million women have joined the labor force since 1996 (thus doubling the number of women in the labor force during this time period). This is creating more pressure on the economy to employ these individuals in good quality jobs. Figure 1: Labor Force Participation (LFP) Rates.
120 100 LP FR 80 60 Urban Male Rural Male Urban Female Rural Female 40 6+ 5 6- 4 06 5- 9 55 5- 4 05 4- 9 54 4- 4 04 3- 9 53 3- 4 03 2- 9 52 2- 4 02 0 1- 9 51 20 Age 4. In terms of employment, most workers still work in the informal sector, with agriculture as the major sector of employment. The informal sector accounts for 80 percent of the 44 million people employed in the total economy; and 76 percent of workers employed outside agriculture, forestry and fisheries. Despite accounting for just 21 percent of GDP, the agriculture sector accounts for 52 percent of the labor force, up from 49 percent in 1996.
5. Overseas employment has also become a significant source of employment. Every year, about 250,000 Bangladeshis migrate abroad and about three million people of Bangladeshi origin are living and working abroad presently. The skill composition of workers overseas has become skewed towards semi-skilled and unskilled workers over time. This may be due to employers in foreign countries feeling that Bangladeshi workers lack appropriate skills. 6. Unemployment rates are low, but underemployment is high and rising.
The unemployment rate is only about four percent – which is consistent with rates in other developing economies worldwide – with a slightly higher unemployment rate for youth. The underemployment rate is high and rising – from 17 percent in 2000 to 38 percent in 2003. However, these numbers should be treated with caution owing to lack of comparability across surveys and the fact that the measure of underemployment does not account for the willingness to work for more hours, as this question is not asked in the surveys. 7. The reasons underlying these high rates of underemployment are unclear.
High and rising rates of underemployment – especially if the 2003 figures are factored in – may be related to increasing participation of women – who may not wish to work full time, lack of availability of productive work, surplus labor or high reservation wages of workers. Another reason for underemployment may be shortages of skills – while employers are hiring a small pool of skilled workers full-time (as can be seen the average hours of work are quite high), they are not satisfied with the skill levels of the rest of the workforce, and are reluctant to hire them full time.
However, adequate information to identify the exact causes is not available. 8. While real wages are increasing, the wage gap between skilled and unskilled workers has not risen perceptibly. Real wages seem to have increased annually by over three percent per annum. However the ratio of wages of skilled workers as compared to those for Figure 2: Ratio of Skilled to Unskilled Wages 140. 00 130. 00 120. 00 110. 00 100. 00 90. 00 80. 00 1995-96 1997-98 1999-00 2001-02 Year Cotton Textile Mustard Oil Engineering (Fitters).
unskilled workers have not increased perceptibly for most manufacturing industries though it has increased for some (Figure 2). 9. People with vocational/technical skills are in short supply. There are few people in the labor market with technical/vocational qualifications; the 2002-03 Labor Force Survey estimated only 53,000 such men and 5,000 such women. For every single person in the labor ii force with a technical/vocational qualification there are more than 104 others who have completed Secondary School Certificate (SSC) or Higher Secondary School Certificate (HSC); and even 34 others who have gone onto a university degree or higher.
However, while the relative supply of skilled to unskilled workers has increased (number of individuals with secondary and higher degrees as compared to those with lower qualifications), relative wages have stayed fairly flat. Hence there may be some ambiguity as to whether there has been a rise in demand for skilled workers. 10. There is evidence that there is a skills mismatch. This ambiguity is removed on examining employers demands. Employers perceive that the graduates coming out of the vocational system are not meeting their needs.
They feel that the system is continuing to produce graduates for old and marginal trades (e.g. typists), which have no market demand, while newer trades (e. g. computer operators) with substantial needs for skilled labor have been left unmet. 11. Is there any justification for investing in the vocational system? The short answer to this question is yes.
There are several reasons for this: (a) as noted above, there is evidence that there is a skills mismatch; (b) increasing overseas employment, While the economy and and the possible market for skilled Bangladeshi workers abroad labor force are also offer some justification for investing in the system; and (c) as growing, there is a seen below, there is an urgent need to increase the levels of inmismatch between the service training, and a well designed VET system can also help in demand and supply of addressing this shortcoming.
Finally, it should be understood that skills. investing in the system does not necessarily entail increasing public financing of the system, but putting in place reforms and interventions to improve effectiveness and relevance of the system. 12. Given this, improving the market relevance of education, and specifically vocational education and training, will require significant reforms.
As this report shows, there are substantive issues related to the management, quality and relevance of the vocational education and training which will need to be addressed to make it pertinent to employer needs. This report discusses these issues and attempts to provide some possible avenues of reform based both on international experience and innovations underway in Bangladesh. II. The Vocational Education and Training (VET) System (a) The Pre-employment VET System 13. The education system in Bangladesh is split into different levels. Students enter into the system at the primary level which ends at Grade V.
Following this, they enter secondary education which can go on from Grade VI-XII. At either Grade VIII or X, students can choose to go into vocational streams (usually vocational education), or can stay on and complete the general education stream. The choice of moving to the vocational education stream is voluntary. At the post-secondary level, an individual can go to a tertiary education institution to get an advanced degree or a training institution to obtain a diploma. There are about 18 million students at the primary level and about eight million in secondary education. 14.
Primary responsibility for overseeing the pre-employment vocational system rests with two agencies: the Directorate of Technical Education (DTE) and the Bangladesh Technical Education Board (BTEB).
DTE is responsible for setting the overall policy framework of the entire vocational education and training system. \BTEB, a statutory agency, is iii responsible for maintaining the qualifications framework for VET: setting training standards (and relevance to the labor market), student assessment, certification of results, and accreditation of institutions. BTEB covers all accredited institutions, both government and non-government institutions.
15. The VET system is comprised of three levels. The first level, basic skills, is a two year course focusing on manual skills. It is offered both inside and outside of schools. Prospective students must have completed grade VIII. At the certificate level, the two-year Secondary School Certificate, SSC (Voc), The pre-employment covers a similar set of skills and also requires grade VIII system is still small, completion. Students may proceed beyond the SSC (Voc) to increasingly dominated by the Higher Secondary Certificate, HSC (Voc), requiring an the private sector, and is additional two years of secondary schooling after grade 10.
At substantially subsidized by the post-secondary level, there are four-year diploma-level government. courses, which are offered through polytechnic and monotechnic institutions (such as the Textile Institutes). While such nomenclature is not commonly used in Bangladesh – the basic skills and certificate level courses can be classified as vocational education, the diploma level courses are equivalent to vocational (post-secondary) training. 16. While enrollment in the system is quite small it has doubled since 1998, mainly fueled by growth in the private sector. Training capacity in the VET system has doubled to 145,000 since 1998.
However, this is less than two percent of enrollments at the secondary level. Most of this increase has been fueled by a growth in the private provision of training – both in terms of institutions as well as training capacity (Figure 3). Much of this growth in the private provision of training has been driven by public financing, especially of vocational education. Private providers, especially those that are not subsidized by the government, tend to focus on training in less expensive areas such as computer and language courses. Girls still make up less than a third of total enrollments in the system. 17.
Non-government agencies also provide non-accredited training, though there are no estimates of the size and scope of their operations nationwide. Several NGOs and private providers provide basic skills and training to target groups such as youth, the under privileged, and the rural population. However, while there are a few prominent organizations of this type providing training, most are very small in terms of enrolment and facilities and usually provide short-term training (ranging from 4 to 6 months duration) in income generating activities such as tailoring/sewing, embroidery for women and electrical, radio/TV, and carpentry for men.
Figure 3: Share of Private Sector in Training 100 90 80 70 % 60 50 40 30 20 10 0 1998 2003 Share of Inst. iv Share of students (b) Training within Industry 18. The incidence of training among firms is low, especially as compared to other countries – particularly in East Asia. While data from Bangladesh show that training has a positive impact on productivity and worker wages, only 25 percent of manufacturing establishments in Bangladesh provide their employees with in-service formal training.
This is significantly lower as compared to individual East Asian countries, such as Malaysia (training levels are twice as high) and China (three times higher). Furthermore, conditional on providing training, Bangladeshi employers extend in-service training to only a marginal fraction of its workforce – around two percent. 19. Training ‘in-house’ and in vocational schools are the predominant sources of training. About 18 percent of enterprises report having in-house programs and 13 percent report external training.
Firms tend to report vocational schools (31 percent) and private sector partner firms (26 percent) as the most important sources of external training. 20. While the incidence of training remains low, some interesting initiatives have emerged. The Bangladesh Garments Manufacturers Export Association (BGMEA) has established a fully self-financed training institute of its own, the BGMEA Institute of Fashion and Technology (BIFT) to meet the requirements of its industry, including the need to “increase the efficiency, productivity and product value of the industry.
” (c) Financing of Vocational Education and Training 21. The Government is the major financier of vocational education and training. Government funds are used to finance public sector institutions and to provide subsidies to private providers at the vocational education level. Students also contribute to VET financing by paying tuition and examination fees. However, students fees in public institutions are usually not substantial sources of institutional funding and are largely offset by the fact that students receive stipends and scholarships.
Though all private vocational training institutions are completely selffunded through fees, most private vocational education institutions rely heavily on the government subventions that finance 90 percent of teacher salaries, as happens in the general secondary school system. 22. The largest recipient of VET funding is the Ministry of Education (MoE). MoE receives a budget to operate public sector VET institutions managed by DTE, as well as a budget for subventions to meet salary costs of private vocational education schools. MoE accrues roughly 70 percent of total government budget allocated on VET – about $20 million.
In comparison, the government spends about $400 million annually on secondary education. 23. Government subventions constitute the majority of income for private vocational education institutions. Close to 55 percent of income is through government grants while tuition fees constitute less than 17 percent of total income. On the other hand, private vocational training institutions raise most of their revenues from fees. Close to 80 percent of revenue of private vocational training institutions are generated through fees, as compared to 20 percent in the case of public institutions.
However, none of these institutions raise a significant share of resources from sale of goods and services or providing training to the private sector. This is a discouraging sign – particularly since the private sector is expected to be more attuned to the needs of the market. v III. Outcomes of the VET System 24. The quality of the system seems low as evidenced by low capacity utilization and low pass rates. In both vocational education and vocational training institutions, close to half the student capacity remains unutilized.
At the same time, pass rates in standardized examinations have also dropped significantly over the past few years – from about 62 percent in 2000 to slightly over 50 percent in 2004. 25. From the labor demand perspective, employers expressed concern about the quality of graduates. They perceived that the system is continuing to produce graduates for old and marginal trades, which have no market demand, while newer trades with substantial skilled labor needs are left unmet. Employers were also not content with available VET training facilities including machinery, equipment and trainers.
They suggested that the government be more proactive in involving them in the management of the system to ensure that VET was responsive to their needs. They also felt that students lacked general business and management skills as a result of which most graduates fail to get promoted. This has a ripple effect in terms of discouraging better students from entering the VET system. 26. A tracer study on the labor market outcomes of graduates supports the assessment of employers. The study interviewed over 2300 graduates of vocational institutions.
While there are differences across streams, overall less than 10 percent of individuals who graduated in 2003 from VET institutions were employed two years later (Figure 4). Close to 50 percent said that Figure 4: Outcomes for Graduates of VET Institutions 60 50 % 40 30 20 10 0 Employed Unemployed Male Female Higher Education Total they were unemployed and another 45 percent were enrolled in higher education institutions (half of whom were actively looking for work). There does not seem to be any significant difference in the employment probability of graduates from public and private institutions.
Employment probabilities of graduates are very low, 27. The time taken to find a job after graduation is also partly because of poor significant. Close to half of the employed graduates took at labor market linkages least a year to find a job (Figure 5). There are again reflected in a lack of differences across streams – with vocational training graduates employer participation in finding jobs quicker than individuals coming from the managing the system. vocational education stream. Women are also likely to find jobs quicker than men – possibly because they have lower reservation wages.
vi 28. Students point to the lack of linkages to the labor market as a key reason for these poor outcomes. Students perceive that the VET institutions are not responding to the needs of employers – very similar to the feeling expressed by employers. Students feel that if employers were more involved in the design of training, they would find it easier to find jobs. Figure 5: Cumulative Probability of Finding Employment 100 90 % 80 70 60 50 40 2 years Time Gov. Pvt. 29. In addition, rates of return for graduates seem to be below those for graduates from the general education system.
Vocational training graduates earn more than graduates of the vocational education system. However, both types of graduates do not earn significantly more that the average wages for workers in the manufacturing sector who are significantly less educated – just above five years of education on average. Given this, the returns to vocational education and vocational training seem to be lower than general education. IV. Key Challenges Facing the System (a) System Management 30. Concerns exist about the management of the system both at the policy level and institutional level.
At the policy level, there is confusion regarding the roles and responsibilities of DTE and BTEB. Inadequate coordination between these two agencies leads to overlap of activities, and burdens both agencies with a workload for which they do not have sufficient resources. The National Council for Skill Development and Training (NCSDT), formed in 1979 to coordinate training policies and programs, is defunct – not having met in over 20 years. Moreover, there is a lack of clarity regarding delegation of authority between MoE, DTE, BTEB, and institutions which receive financing from the government.
Accreditation of institutions is often not undertaken properly – often due to a lack of appropriate resources. 31. A glaring lacuna is the lack of information on the supply and quality of VET. There is virtually no way for a students, employers, training providers or other organizations to get consolidated and reliable information The Government regarding VET. Students should have access to information to decide has neglected its which course will be most appropriate for them. Education providers role as a provider need to be aware of recent developments and trends in the local and of information of
international labor market so that they can update their courses the provision and accordingly. Above all, adequate and systematic data are the prime quality of training. elements by which a policymakers design successful models of service provision. However, such data is not available. vii (b) Institutional Issues and Linkages to Market Needs 32. At the institutional level, there are insufficient links between VET institutions and employers, which results in slow and inadequate responses to labor market developments. Employers have no scope for participating in policy development, developing curriculum or providing trainers.
DTE/BTEB do not consult employers in setting policy, curriculum design or vetting accreditation procedures. Courses are not offered on the basis of labor demand or in consultation with employers. It is doubtful that demand is predicated on knowledge of the labor market given the lack of labor market information generally available. 33. In addition, institutions do not have adequate resources to provide education of proper quality. They suffers from under-utilization of resources, lack of equipment, unavailability of qualified instructors, shortages of teachers’ training facilities, and dated and obsolete curriculum.
34. It is difficult to address this situation given that institutions have few incentives to improve their performance. The main problem is the way institutions are governed. Principals of public sector institutions and those provided subsidies by the government have little autonomy to replace training courses with new ones, ensure that students receive quality training, change curricula, and involve the private sector in decision making at the institutional level. At the same time institutions are not held accountable for performance. 35. Furthermore, too little attention is paid to local labor market needs.
This is evidenced by the fact that there is little training available for the informal sector. While 80 percent of employment continues to be in the informal sector, 80 percent of employment little thought has been given to enhancing the skills of people is in the informal sector – working in the sector. Most employment will also continue to yet there are few programs be in the rural sector, although a decline in the rural share of geared to the needs of this the labor force will be noticeable. The economy is also sector. crowded with micro- and small businesses.
The formal training system is not designed to offer skills to those in the rural non-farm sector. But neither are there other providers to fill the gap. Most workers in this sector continue to learn trades on the job through informal apprenticeships at their place of work from other low-skilled craft people. 36. Little thought is given to skills needs for migrants. While an increasing number of Bangladeshis are working abroad, an effective system is not in place to provide training (and other supporting service) to these workers so that they can respond better to the labor market needs of countries to which they migrate. (c) In-service Training 37.
Firms are under investing in worker skills. If in-service training is critical to the effective use of new technologies and to productivity growth, as the literature suggests, than Bangladesh’s under-investment in the skills of its workforce places it at a competitive disadvantage relative to other countries. 38. A reason may be that employers appear more preoccupied with other constraints than with the skills of their workers. Employers rank four other constraints as more important than viii “skills and education of available workers”. The top three constraints are “tax rates”, “policy uncertainty”, and “access to finance”.
39. International experience suggests there are three main reasons for employers not training workers. They are: (a) firms use “mature” technology that does not require workers to be trained; (b) firms cannot afford to train; and (c) skilled workers can be easily hired from elsewhere. These reasons apply generally but are specifically cited by firms in the region and Bangladesh. (d) Financing of VET 40. While financing of institutions will be done on a more transparent basis, institutions have until recently been funded in an ad hoc, supply-driven manner.
VET was financed mainly through incremental public funding, i. e. with lump sum allocations assigned in an incremental manner based on previous allotments, with upward adjustments for annual inflation, and perhaps on the basis of ad hoc, including political, considerations. The change in policy toward a more transparent system through which school administrators request funds in line with institutional needs, if adequately implemented and monitored, should assist in ensuring funds are allocated more effectively, particularly if school administrators are given incentives to maximize school performance.
41. Supervisory control over the VET expenditure is relatively weak and subject to infrequent and/or inadequate auditing. Government financed institutions are supposed to be audited regularly. However, this does not happen systematically. Because of inadequate or nonexistent disbursement records, compounded by human resource constraints, there is serious scope for abusing the system and a possibility that public resources intended for salaries and allowances could be usurped for other purposes.
This improper record-keeping makes rigorous financial audits of VET institutions extremely difficult. 42. While wages for graduates are not higher than individuals in general education, VET is very expensive compared to other education sub-sectors. The evidence on wages has been presented above. Calculations, based on data provided by DTE, show that the annual unit cost of vocational education is approximately 16,000 Taka – this is nearly three times the cost of general government secondary schools. Similarly, the unit costs in public vocational training institutions are Tk 13,530 a year.
This figure is also about three times the per capita cost of general higher education. 43. These high costs can be attributed to a number of factors. These include the low student to teacher ratios, the large fixed and recurrent costs of machinery, the constant need for consumables, and a stipend/scholarship scheme provided to the large majority of students – about 65 percent.
Driven by low student-teacher ratios, expenditure in institutions is heavily skewed towards salaries, which consistently account for over 50 percent of recurrent costs. A consequence of prioritizing salaries to such an extent is that there have been inadequate funds for sufficient instructors, equipment, in-service training, and consumables for supplies, maintenance/repair of machinery, and other critical infrastructure. Unit costs of training are high – a key contributing element being the low student/teacher ratios. V. Indicative Policy Options ix 44.
The government has outlined an ambitious reform agenda in the NSPR that should be supported. Key elements of this agenda include: improving the responsiveness of the system to job market needs; improving the quality and efficiency of public training; encouraging publicprivate-NGO collaboration in the management of the system; enhancing the flexibility of the system in terms of duration, time-table and curriculum.
The NSPR has laid 45. To its credit, the Government is implementing reforms out an ambitious along the lines laid out in the NSPR. Recent attempts by the reform roadmap and government to link financing to some input measures, facilitate GoB is taking steps to private provision of in-service training, and tighten financial controls implement this agenda. on expenditures are encouraging. 46. At present, the focus should be on improving the efficiency of the system and not on expanding it.
Despite poor outcomes, policymakers remain keen to expand vocational education. The NSPR has proposed increasing enrollments in the system substantially. Even though enrolments in the system are small when judged by international comparisons, expanding the numbers or re-targeting the program would not be justified unless a model is found that would substantially improve outcomes. Recommendations along this line include: (a) Importance of General Education 47. General schooling is still the best option for students, even in labor market terms.
International experience shows that vocationalization (enhancing access to vocational education at the expense of general secondary education) may not be necessarily appropriate. Vocationalization is costly and hard to implement well and this is certainly true in the Bangladeshi context. Employers want their workers to be willing and adaptable, qualities that do not depend on their Employers seek workers who having done any particular type of vocational schooling. An have general skills and are immediate priority, thus, should be to improve the quality of adaptable – qualities tha.