loss I

LPHREE Background Paper Series

Document No. PHREE/91/33

Vocational Training in a Changing Economy:The Case of Thailand

ByJohn Middleton

Nipon PoapongsakornOmporn Regel

Chantavit Sujatanond

Education and Employment DivisionPopulation and Human Resources Department

The World Bank

January 1991

Tzis publication series serves as an oudet for background products from the ongoing work progam of policy researc.h and analysis of thcEducation and Employment Division in the Population and Human Resources Department of the World Banzk. 7hc iewsc.,,csscd are those

of rhc autltor(s), and should not be ati mbuted to the World Bank

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VOCATIONAL TRAINING IN A CHANGING ECONOMY:

THE CASE OF THAILAND

John Middleton, World BankNipon Poapongsakorn, Thammasat University

Ompom Regel World BankChantavit Sujatanond, National Education Commisson

Education and Employment DivisionPopulation and Human Resources Department

World Bank

In cooperation with:

National Education Commission, BangkokGerman Agency for Technical Assistance, Frankfurt

Pteface

This study has been a collaborative effort between the National EducationCommission of Thailand, the World Bank, and the German Agency for Technical Assistance(GTZ). It has been undertaken as a background study for World Ban" and GTZ policyresearch in the area of vocational education and training, and as e contribution tohuman resource policy review in Thailand.

A great number of people have cont~.ibuted to the research. The members of theThailand study committee provided the documentary evidence on which the study is based,and developed and managed surveys of Thai vocational education and training agencies.Their contributions have been essential:

Dr. Panom Pongpaibool Secretary General, National Education Commission

Mr. Sanong Sansanayuth Deputy Secretary General, National EducationCommission

Mrs. Tipawan Boonchuay National Education Commission

Dr. Kla Somtrakool Director, Nonformal Education DevelopmentDivision, Department of Nonformal Education,Ministry of Education

Mr. Pan Kimpee Department of Nonformal Education,Ministry of Education

Dr. Siripan Choomnoom Planning Division, Department of VocationalEducation, Ministry of Education

Mr. Wattanachai Pimsamarn Institute of Technology and VocationalEducatiLon, Ministry of Education

Mr. Samer Roenganan Faculty of Technical Education, King MongkutInstitute of Technology, North Bangkok Campus

Miss Voravaun Thanaphibul Director, Nakhon Sawan Institute for SkillDevelopment Center, Department of Labor,Ministry of Interior

The staff of the NEC, especially Ms. Sasitorn Leksuksri, provided invaluableassistance with data processing and analysis.

Dr. Klaus Ruuters and Dr. Dietrit... xtschke, consultants to the GTZ, played majorroles in the study of vocational education and training institutions, bringing theirextensive experience to bear in the analysis of institutional strengths andweaknesses.

Special acknowledgement is due to Mrs. Suchila Burns for excellent support inpreparing the report.

The authors acknowledge with thanks the contributions of these individuals,without whom the study would not have been possible. As always, any errors or omissionsremain their sole responsibility.

VOCATIONAL TRAINING IN A CHANGING ECONOMY:THE CASE OF THAILAND

Table of Contents

Executive Summary ..... . . . . . . . . . . . . . . . . . . . . . . . . i

I. INTRODUCTION .... . . . . . . . . . . . . . . . . . . . . . . . 1Concepts and Issues .... . . . . . . . . . . . . . . . . . . . . 3Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Structure of the Analysis ... . . . . . . . . . . . . . . . . . . 6

II. THE ECONOMIC CONTEXT OF VOCATIONAL EDUCATIONAND TRAINING .... . . . . . . . . . . . . . . . . . . . . . . . 7Patterns of Economic Development ... . . . . . . . . . . . . . . 7

Adjustment and Export-led Growth in the 1980s ....... . 8Constraints on Future Growth ... . . . . . . . . . . . . . . 10

Medium Term Development Strategy ... . . . . . . . . . . . . . . 11Employment .... . . . . . . . . . . . . . . . . . . . . . . . . 13

Labor Force Growth .... . . . . . . . . . . . . . . . . . . 14Characteristics of the Work Force . . . . . . . . . . . . . . 19Educational Attainment . . . . . . . . . . . . . . . . . . . . 22Characteristics of the Labor Market . . . . . . . . . . . . . 23

Summary .... . . . . . . . . . . . . . . . . . . . . . . . . . . 38

III. EMPLOYMENT AND TRAINING IN ENTERPRISES . . . . . . . . . . . . . . 41Enterprise Training Circa 1980 ... . . . . . . . . . . . . . . . 41Current Employment and Training Practice . . . . . . . . . . . . . 43

The Firms and Their Markets ... . . . . . . . . . . . . . . 44Human Resource Management Practice . . . . . . . . . . . . . . 49

Summary .... . . . . . . . . . . . . . . . . . . . . . . . . . . 62

IV. STRUCTURE, EVOLUTION AND EFFICIENCY OF THE VOCATIONAL TRAININGSYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Overview of the Training System ... . . . . . . . . . . . . . . . 65

The Formal System .... . . . . . . . . . . . . . . . . . . 65The Non-Formal System .... . . . . . . . . . . . . . . . . 69Geographical Coverage .... . . . . . . . . . . . . . . . . 71

History of System Development ... . . . . . . . . . . . . . . . . 72First Plan (1961-66) .................... . 74Second, Third and Fourth Plans (1967-81) .......... . 74The Fifth Plan (1982-86) .................. . 77The Sixth Plan (1987-91) .................. . 79

System Efficiency and Quality ... . . . . . . . . . . . . . . . . 80Internal Efficiency .... . . . . . . . . . . . . . . . . . 80Factors in Quality .... . . . . . . . . . . . . . . . . . . 80System Configlration and Management. . . . . . . . ...... .89

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Table of Contents (Cont'd)

V. EVIDENCE ON EXTERNAL EFFICIENCY . . . . . . . . . . . . . . . . . . 101Economic Measures ........ .. .......... ... . . 101

Economic Evaluations of Training: 1970, 1980 . . . . . . . . . 102Wage Distortions and Unemployment in the 1980s . . . . . . . . 103The Costs of Vocational Training . . . . . . . . . . . . . . . 110

Social Measures . . . . . . . . . . . . i . . . . . . . . . . . . . 119Social Demand for Vocational Education . . . . . . . . . . . . 120Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120Supply and Demand for Secondary Education . . . . . . . . . . 123

Summary ............ . ................. 129

VI. ALTERNATIVES FOR POLICY CHANGE ..... . ....... . . . . . 131International Experience . . ..... . ..... . . . . . . . 131The Economic Context of Human Resource Policy . . . . . . . . . . . 135Constraints on Education and Training . . . . . . . . . . . . . . . 137Alternative Policy Strategies: A Framework for Discussion . .. . 139

Strategies to Expand Secondary Education . . . . . . . . . . 140Strategies to Adjust Vocational Education and Training . . . . 145

Issues for Further Consideration ..... . . ..... . . . . . . 151

ANNEX I: STUDY METHODOLOGIESANNEX II: DATA TABLESANNEX III: ORGANIZATION CHARTS

Tables and Figures

Table 2.1: CDP and Employment Shares By Sector . . . . . . . . . . . . 8Table 2.2: Export Reliance of Growth . . . . . . . . . . . . . . . . . 9Table 2.3: Export Commodity Diversification Indicators . . . . . . . . 10Table 2.4: Population of Working Age, Labor Fc'~ce and

Employment,1971-86, Peak Employment Season (August) . . . . . . . . . . 14

Table 2.5: Sectoral Distribution of Employed Labor Force . . . . . . . 15Table 2.6: Projected Labor Force Participation Rates,

By Age and Sex. .......... 17Table 2.7: Projections of Labor Supply and Demand . . . . . . . . . . . 18Table 2.8: Scenarios for Rural and Urban Populz._'on Growth,

1980-2005 .. . . . . 20Table 2.9: Age Composition of the Labor Force: 1985-2005 . .. . . . . 21Table 2.10: Average Workers per Household, Household Size, and

Persons per Worker: 1985-2005 . . . . . . . . . . . . . . . 21Table 2.11: Education Attainment of the Labor Force . . . . . . . . . . 22Table 2.12: Real Value-Added Per Worker, 1979-84 . . . . . . . . . . . . 23Table 2.13: Real Wage Rate, 1977-8 .. 24Table 2.14: Seasonal Employment Patterns, 1977-85 . . . . . . . . . . . 25Table 2.15: Dry Season Unemployment Rates By Region, 1977-85 . . . . . . 27Table 2.16: Employment By Work Status, 1977-84 . . . . . . . . . . . . . 29Table 2.17: Employment By Work Status z.:d Education Level, 1984 . . . . 30T&.ble 2.18: Growth in Overall and Governnent Employment

by Level of Education, 1977-84 . . . . . . . . . . . . . . . 30Table 2.19: Relative Wages by Level of Education, 1978-84 . . . . . . . 31Table 2.20: Comparative Structure of Manufacturing by Firm Size . . . . 32Table 2.21: Percent Distribution of Employment By Level of

Education,in Firms of Different Size, 1984. . . . . . . . . . . . . . 33

Table 2.22: Average Monthly Wage By Firm Size and Level ofEducation, 1984 .... . . . . ...... . . . . . . . . 34

Table 2.23: Open Unemployment, 1977-84 ... . . . ..... . . . . . . 35Table 2.24: Rates of Open Unemployment, 1977-84 . . . . . . . . . . . . 35Table 2.25: Formal and Informal Sector Employment,

By Level of Education, Municipal Areas, 1984. 000s. .38

Table 3.1: Educational Level and Average Number of Days of Job-RelatedTraining, By Occupation, 1979. . . . . . . . . . . . . . . . 42

Table 3.2: Impact of Nonformal and Job-Related Training onEarnings, As Deviation From Mean Sample Wage, 1979 . . . . . 44

Table 3.3: Characteristics of Firms Studied, By Industry . . . . . . . 45Table 3.4: Percentage Distribution of Workers By Firm Size and

Industry .... . . . . . . . . . . . . . . . . . . . . . . 46Table 3.5: Turnover Rates, By Education, Firm Size and

Industry, 1988 . . . . . . . . . . . . . . . . . . . . . . . 47Table 3.6: Distribution of Firms With Internal Labor Markets,

By Industry .... . . . . . . . . . . . . . . . . . . . . 50Table 3.7: Distribution of Firms With Internal Labor Markets . . . . . 51Table 3.8: Recruitment Methods Used by Employers, By Type of

Worker .... . . . . . . . . . . . . . . . . . . . . . . . 53

Tables and Figures (Cont'd)

Table 3.9: Method of Filling Management Positions . . . . . . . . . . . 53Table 3.10: Average Salary by Position and Firm Size . . . . . . . . . . 54Table 3.11: Percentage Distribution of Manager and Supervisors,

By Level of Education . . . . . . . . . . . . . . . . . . . 55Table 3.12: Employers' Attitude Toward Workers . . . . . . . . . . . . . 57Table 3.13: Training for New Workers, By Firm Size . . . . . . . . . . . 58Table 3.14: Type, Frequency and Duration of Enterprise T ining,

Per Worker .... . . . . . . . . . . . . . . . . . 59Table 3.15: Average Number of Training Events and Days of Training

Per Worker, By Employee Education Level. . . . . . . . . . . 60Table 3.16: Type of In-service Training Provided,

By Firm Size and Occupation ... . . .. l... . . . . . . 61Table 3.17: Recruitment and Training Cost Estimates . . . . . . . . . . 62

Table 4.1: Number of Vocational/Technical Institutions by Leveland Field of Study,1988 . . . . . . . . . . . . . . . . . . 67

Table 4.2: Enrollments in Formal Vocational Education, 1986 . . . . . . 68Table 4.3: Enrollments in Nonformal Vocational Training 1986 . . . . . 71Table 4.4: Number of Vocational/Technical Institutions by

Region 1988 . . . . . . . . . . . . . I . . . . . . . . . 72Table 4.5: Expansion of Vocational Teacher Supply, 1968-71 . . . . . . 74Table 4.6: Enrollment Targets and Growth, 1977-81 . . . . . . . . . . . 76Table 4.7: ITVE: Enrollments and Application: Admission Ratios,

1977-88. By Field of Study, Certificate andDiploma .... . . . . . . . . . . . . . . . . . . . . . . 79

Table 4.8: Indicators of Internal Efficiency . . . . . . . . . . . . . 81Table 4.9: Percent Distribution of Teacher Qualifications,

1978-86 .... . . . . . . . . . . . . . . . . . . . . . . 82Table 4.10: Vocational Teacher Qualifications . . . . . . . . . . . . . 83Table 4.11: Years of Teaching Experience, By Type of

Institution, 1988 .... . . . . . . . . . . . . . . . . . 84Table 4.12: Teacher: Student Ratios and Workloads . . . . . . . . . . . 86Table 4.13: Credit Structure of the DOVE Curriculum . . . . . . . . . . 87Table 4.14: Distribution of Teaching Periods, DOVE Industry

Curriculum .... . . . . . . . . . . . . . . . . . . . . . 88Table 4.15: Expenditure on Vocational Education and Training

as a Share of GDP, National Budget, and Education Budget . 94Table 4.16: Strength of Local Linkages Between Schools and

Employers . . . . . . . . . . . . . . . . . . . . . . . . . 97

Table 5.1: Relationships Between Level/Type of Formal Educationand Earnings, 1980, As Deviation From Mean S&.iple Wage . . . 103

Tab-.e 5.2: Post-graduation Outcomes, DOVE and IVTE, 1983-87 . . . . . . 105Table 5.3: Status of Graduates of Public Vocational Schools . . . . . . 106Table 5.4: Waiting Periods for Employment, Industrial Trades

Graduates, 1982-87 . . . . . . . . . . . . . . . . . . . . . 109Table 5.5: Demand and Supply for Agriculture Graduates,

1983-87 . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Tables and Figures (Con''d)

Page

Tal'..e 5.6: Comparative Annual Recurrent Cost Per Student,by Level and Type of Institution . . . . . . . . . . . . . . 112

Ta#&e 5.7: School Size and Unit Costs, Formal VET, 1988. . . . . . . . 113Table 5.8: Institution Size and Unit Cost, Nonformal Education,

1988 .... . . . . . . . . . . . . . . . . . . . . . . . . 113Table 5.9: Relative Unit Recurrent Costs of Academic and

Vocational Graduates .... . . . . . . . . . . . . . . . . 114Table 5.10: DOVE: Number and Index of Annual Budgets by

Groups of Expenditures (1982-1986) . . . . . . . . . . . . . 115Table 5.11: Source and Pattern of Distribution of Revenues,

Formal VET, By Type of Institution, 1988 . . . . . . . . . . 116Table 5.12: Source and Pattern of Distribution of Revenues,

Formal VET, By Field of Study, 1988 (DOVE and ITVECombined) .... . . . . . . . . . . . . . . . . . . . . . 117

Table 5.13: Source and Pattern of Distribution of Revenues,Nonformal VET, By Type of Institution, 1988 . . . . . . . . 118

Table 5.14: Parent's Occupation, General and VocationalSecondary Enrollments, 1976-79 . . . . . . . . . . . . . . . 121

Table 5.15: Vocational Certificate and Diploma Graduates,By Sex and Field of Study, 1987 . . . . . . . . . . . . . . 122

Table 5.16: Sectoral Distribution of the Workforceand Secondary Attainment, Selected Countries . . . . . . . . 124

Table 5.17: Gross Enrollment Ratios, Secondary Education,Selected Asian Countries, 1975-1985 . . . . . . . . . . . . 124

Table 5.18: Academic and Vocational Upper Secondary Enrollments,1981-86 . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Table 6.1: Alternative Policy Strategies . . . . . . . . . . . . . . . 152

FiauresPFge

Figure 2.1: Total Cultivated Areas of Major Crops. .......... 26

Abbreviations

ADB Asian Development Bank

AVC Area Vocational Center

DCID Department of Curriculum and Instruction Development

DIP Department of Industrial Promotion

DNFE Department of Non-Formal Education

DOVE Department of Vocational Education

GTZ Deutsche Gesellscbaft fur Technische Zusammenarbeit

ILO International Labor Organization

ISI Industrial Service Institute

ITVE Institute of Technology and Vocational Education

JPCC Joint Public/Private Committee

KMIT King Mongkut's Institute of Technology

MOE Ministry of Education

MOI Ministry of Interior

NEC National Education Commission

NICs Newly Industrialized Countries

MISD National Institute for Skill Development

RISD Regional Institute of Skill Development

SEATO South East Asian Treaty Organization

TDRI Thailand Development Research Institute

UNDP United Nations Development Program

UNICEF United Nations International Children's Emergency Fund

USAID United States Agency for International Development

VET Vocational Education and Training

Exaeutive_Su%Mary

1. Vocational education and training (VET) is a major part ofThailand's education system. It is primarily delivered through public andprivate vocational schools and colleges, which provide almost as many placesfor lower secondary graduates as do public and private general (academic)secondary schools, and through extensive nonformal skills training systems. Inrecent years public training systems have enrolled 650,000 students annually,and nonformal training programs an additional 200,000. Public VET hasconsumed seven to eight percent of the annual national education budget. Thisstudy seeks to assess the current system in the context of recent and rapideconomic change, and to identify ways in which both policies and institutionsmight be reformed to meet rapidly changing needs.

2. The first chapter introduces the study and its methodologies. Thesecond provides an overview of the Thai economy, with a focus on the workforceand employment, and on implications for education and training. The thirdassesses enterprise employment and training practice. The VET system isdescribed in the fourth chapter, together with a history of its developmentand an assessment of its efficiency and quality. The fifth chapter summarizesevidence on the external efficiency. The concluding chapter examinesinternational experience for relevant lessons, and outlines for a range ofalternatives for policy change.

3. Data for the analysis were drawn from previous studies, backgroundpapers prepared by cooperating Thai VET agencies, surveys of education andtraining institutions, and a study of enterprises of different sizes in bothdomestic and export markets.

The Economic Conitext of VET

4. After two decades of steady agriculture-led growth marked byexpansion of land under cultivation, and absorption of labor in agricultureand in rapidly expanding government employment, the economy of Thailand hasbegun to change. Export-led manufacturing is growing rapidly, supported byoutwardly-oriented government policy and incentives. Careful macro-economicmanagement has made significant contributions to the strength of the economy.Government policy emphasizes continuing expansion of the role of the privatesector, fiscal austerity, and continued attention to equitable sharing of thebenefits of development through the decentralization of industries andintegrated ural development programs.

5, Economic change brings with it a number of important challenges.One is the need for inivestr .t in physical infrastructure to support economicdevelopment, and to encourage decentralization of industries. Another is tostrengthen the flexibility of enterprises in competing in rapidly changinginternational markets. At some point before the end of the century, theKingdom will begin to experience labor shortages, rising wages and loss of thepresent comparative advantage provided by low-cost labor in labor-intensiveindustries. The capital and technological intensity of manufacturing willincrease in order to maintain international competitiveness. The productivity

of labor, little chaniged ir more tt-n a decade, will have to rise. Of someimportance will be increasing the oductivity of women in modern sectoremployment.

6. Increased mechanization and use of other modern farming practices,already underway in the Central region, will begin to sprecad as the supply ofagricultural labor declines with smalier family sizes and the pull of wageemployment in an expanding modern sector. This process will be facilitated bythe high levels of literacy and rising levels of general education of therural workforce established through successful education policy andinvestments over the past twenty ypars. But productivity in agriculture has,like that in manufacturing, remained unchanged for more than a decade, andwill also need to be improved.

7. While recent patterns of c 'mic change suggest that the Kingdomhas embarked on the same general path LAen arlier by other industrializingAsian countries, there are impurtant diffe_ences. One is the importance ofmaintaining a strong and increasingly diversified agricultural sector, notonly for employment, but because of the demonstrated potential for exportearnings. Second, more than any other Asian cour ry at a similar stage ofdevelopment, manufacturing in Thailand is dominated by small enterprises.With government employment growth restricted by macro-economic policy, mostnew jobs will come in the private sector, and most of these will be in smalland medium-size firms, in the informal sector of very small firms, or in self-employment.

8. Larger firms, those manufacturing for export, and those withinternational partners have made considerable progress in developing effectivehuman resource management and training capacity. For more than a decade,these enterprises have been providing a significant amount of training afteremployment. General secondary education plus training after employment hasbeen a viable route to employment in most skilled occupations. Most of thistraining is provided on entry; with the exception of a few induFtries(electronics, automobiles) in-service training and upgrading of the workforceis still relatively undeveloped. Smaller firms and those producing fordomestic consumption, however, have much less developed training capacity, andcannot be expected to develop further without focused assistance, given theirsize and management resources.

9. Both the evidence and government policy suggest that expansion ofmanufacturing will come through the development of flexible production systemsthat link small supporting industries to final assembly operations throughsubcotcract arrangements. The prevalent practice of subcontracting to laborteams in a number of industries provides a base of equivalent practice thatshould support the expansion and formalization of subcontracting arrangements.High quality production to specifications is required under such arrangements,and this will require further'development of the capabilities of smallmanufacturers. International experience and tb- limited data available forThailand suggest, moreover, that manufacturing Al small firms will be moreskill intensive than in larger firms able to achieve economies of scale andlabor use through automated production.

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10. Flnally, with the Kingdom increasingly integra,ed into the worldeconomy, the pace and direction of industrial growth cannot be predicted withmuch precision. Continued growth will come through effective and rapidresponse to changes in markets &nd products determined by extarnal factors.ThLi is clearly recognized in government policies that emphasize and supportprivate sector initiative, with increasingly open markets and very littleregulation.

TZhe Wrkforce

11. The quality of the workforcrd has been important to economic growth.and will be even more crucial in the future. Investments in human resourceshave led to high levels of literacy, and rising levels of educationalattainment. The trainability of the iqorkforce has been an asset in attractingoverseas investment in manufacturlng. Labor mobility is high, an importantposltive factor in enabling workers to move toward higher productivityemployment.

12. Unemployment has been very low in comparison with many othercountries (3-4%), with the exception of vocational graduates (10-13%). Laborforce participation rates are very high by world standards, especially thoseof women. While seasonal unemployment remains a problem in the North andNortheast Provinces, there is evidence that labor markets in other parts ofthe country are adjusting effectively as year-round non-farm employmentopportunities and mechanization of farming increase. There is evidence thatlabor market information, which flows primarily through personal networks, isinadequate in the northern provinces.

13. There is also evidence that the dominant position of the governmentin the employment of indlviduals with secondary and higher levels of education(including vocational education) has in the past led to labor marketdistortions. Government wages for vocational graduates have been higher thanthose in the private sector. While large firms have been able to pay thesewages, smaller firms have not. As a result, vocational graduates have oftenchosen to wait for a higher paying job in the government or in large privatefirms, contributing to high unemployment rates. There is some evidence thatlabor markets are adjusting as the private sector expands, with improved wagepossibilities for vocational graduates. However, projections of wage ratesindicate that this will be a slow and uneven process. The principalconsequence is that small firms find it difficult to attract individuals withvocational skills. Unable to offer substantial training after employment, theability of these firms to improve labor productivity is thus constrained.

14. Secondly, unemployment among vocational graduates is persistentlyhigh in comparison with graduates of other forms of education, and a verylarge proportion of certificate graduates are continuing to additional post-secondary technical education rather than enter the labor market. Thesetrends clearly indicate that, as presently configured, vocational educationand training is not well adjusted to the needs of the economy or ofindividuals. The problem appears especial'y acute for agriculture graduatesbecause of constrained government hiring. Unemployment in some fields,however, coexists with rapid employment and shortages in other occupations.

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The quality and relevance of vocational education, from the point of view ofenterprise managers, is weak with respect to the continued trainability ofemployees.

Education and Training

15. The Kingdom has made exceptional progress in building an educationand training system. Strong commitment to equity goals has led to universalaccess to ,rimary education, with high completion rates, as well as toeffective aonformal programs to increase adult literacy. Lower secondaryeducation has been expanded to provide places for about half of the primaryschool graduates, and In principle there is an upper secondary place for eachgraduate of lower secondary education, half of which are in vocational schoolsand colleges. About sixty percent of vocational secondary graduates continueon to post-secondary technical education in the same field, entering the labormarket with five years of pre-employment vocational preparation. Privatevocational, and to a -esser extent, academic schools have provided a largeshare of secondary places. Places in universities are available to about onein four graduate of academic secondary schools, with a total enrollment ofabout 100,000; the open university enrolls about 600,000 more. Tertiaryscience and engineering programs are found in the "closed" universities.

16. Mhe study focuses on the main systems for delivering VET. There arefour parallel systems for the provision of formal vocational and technicaleducation. at the secondary and post-secondary level, and three systems forproviding vocational training outside of schools. Secondary (certificate) andpost-secondary (diploma) vocational education is provided in technical,commercial and agricultural occupations by the King Mongkut's Institute ofTechnology (KMIT) ur.der the Ministry of University Affairs, and by theInstitute of Technology and Vocational Education (ITVE) and the Department ofVocational Education (DOVE) under the Ministry of Educatior. Privatevocational schools provide both diploma and certificate programs. DOVE alsoprovides nonformal vocational training through Area Vocational Centers (AVCs)and Polytechnicq. Nonformal skills training, principally in rural areas, isalso provided by the Department of Nonformal Education (DNFE). The NationalInstitute of Skill Development (NISD) provides both short technical and non-technical training courses for pre-employment and in-service, mostly inmunicipal and low income areas, in support of small and medium sizedenterprises. In addition to these systems, VET is provided by variousgovernment ministries and by private nonformal training institutions.

17. The system is large, and planning and coordination is weak. Indeed,the size of the present formal system is in part due to lack of controls overenrollments, which exceeded targets substantially in the 1970s and early1980s. There is evidence of considerable duplication of services. Formalsystems are highly centralized: there is little flexibility at theinstitutional level. Linkages between training and employment have only begunto be developed, with marginal success so far. Efforts to establish nationallevel coordination have largely failed.

18. The large and fragmented nature of the system, and currentoperational policies, make it comparatively rigid in the face of change. Weak

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labor market information, centralized curriculum development, rulesrestricting the ability of individual institutions to adjust to new trainingneeds, and poorly developed linkages with employment make it difficult forschools to adapt to the needs of the economy and of students. Whileincreasingly well-educated, teachers have almost no industrial experience.They are in short-supply in technical colleges, and carry heavy workloads,leaving little time to establish linkages with enterprises, develop newcourses or implement the policy for cooperation with enterprises inestablishing student apprenticeship opportunities. There is evidence ofincreasing difficulty in recruiting and retaining teachers in the face ofcompetition from expanding industry. There is reason to be concerned aboutthe quality of the occupational training provided in the DOVE colleges, andperhaps in the ITVE, by curricula that diffuse student time across generalcourses, vocational theory courses and a range of vocational electives.Budget constraints have made investment in new equipment difficult for adecade.

19. Declining demand for vocational education over the past five yearsindicates that parents and students are making rational decisions on the costsand employment benefits of formal vocational education, selecting otheroptions. The decline has been most rapid in private vocational colleges, buthas also begun in public colleges. Evidence suggests that much of this isrepresented by falling demand for places in agricultural colleges, though amore detailed assessment of enrollments by field would be required to confirmthis trend.

20. Tuition policies are likely to be affecting both demand and supplyin vocational education. Tuition ceilings in private vocational schoolsrestrict quality, and thus competitiveness with subsidized public vocationalcolleges. Larger, better-established schools appear to be able to generatesufficient resources from endowments and more profitable education programs tooffset tuition constraints. And indeed, a number of these schools (inBangkok) have succeeded in establishing strong linkages with employers an.. indeveloping high quality programs, with excellent employment outcomes. Butmany smaller schools have either gone out of business or faced enrollmentdeclines, which further reduce income and quality.

21. Testing and certification systems, while in place vnder NISDauspices, are provided to the general public in different fields ofspecialization. However, requirements that changes in trades standards andtests must be approved by the Cabinet introduce unnecessary rigidity in thesystem, constraining changes in either curricula or standards to meet evolvingskill needs.

22. Finally, expectations that vocational schooling would provide anavenue to employment for economically disadvantaged youth have not been met.The evidence indicates that vocational schools disproportionately serve thechildren of parents employed in the modern sector, not the children of farmersand laborers. Women have not yet gained access to higher-productivityoccupations (and thus to higher wages).

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23. The current system also has many strengths, including a high levelof commitment and professionalism among administrators, teachers and staff.And it served the nation and the economy well until the early 1980s, when neweconomic policies and opportunities led to the current pattern of rapideconomic change.

24. The capacity of the education system to produce the higher levelscience, engineering and technical skills needed for the development ofscience and technology, and for the increasing capital and technologicalcontent of the expanding manufacturing sector, is severely constrained, Skillshortages in these areas are found in increased inter-firm competition forskills, and in projections of future needs.

25. Completion of upper secondary education, with broad preparation inscience, mathematics and languages, is important to workforce trainability andflexibility in rapidly changing economies, and is an area for priorityattention in Thailand. The overall level of secondary attainment is low atabout 12% for lower secondary; 02% for upper secondary. In Korea andMalaysia, figures are 42% and 23%, and 39% and 16% respectively. Enrollmentsin vocational secondary education fell 16% from 1981-86, led by a 34% declinein private vocational schools. Enrollments in public secondary academiceducation appear to have reached a plateau in 1985-86; private academicsecondary enrollments declined 34% from 1981-86. There is evidence to suggestthat declining demand stems from high private costs and, in the case ofvocational secondary education, low perceived benefits.

26. Formal vocational education is very expensive, and externalefficiency is comparatively low. Annual unit recurrent costs run from 125%(commerce courses) to 200% (technical, agricultural) those of generalsecondary education. The majority of students take the full five-year diplomacourse to prepare for the labor market; the costs of this vocational streamare more than three times as great as general secondary education. Six monthsafter graduation, more than a quarter of diploma graduates are unemployed.The lack of fit between skill supply and demand is particularly acute foragriculture, consistent with the changing patterns of employment. Externalefficiency is higher in occupations more in demand in the expandingmanufacturing sector.

Directions for Policy Change

27. The analysis indicates that three broad issues in human resourcespolicy need to be addressed: expansion of higher level science and engineeringeducation, expansion of secondary education, and adjustment of vocationaleducation and training to changing patterns of employment demand.While this study focuses primarily on issues in vocational education andtraining, these cannot be addressed effectively 1.n isolation from the broaderpolicy questions. In particular, the implications of policy changes for theallocation of scarce public resources will need to be considered.

28. Secondary Education. The study recommends that priority be given toexpansion of general secondary education through changes in tuition policy toaddress demand issues for both puolic and private schooling. It is

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recommended that tuition charges be reduced, and public subsidies increased,for public schools, -ad a per pupil subsidy for private schools beestablished. It ms be possible to convert excess capacity in vocationalsecondary schools to academic curricula. Stronger science and technologyprograms should be encouraged to improve trainability.

29. Adiustment of the VET System. The directions of the economyindicate the presence of offsetting trends in the demand for skilled workersand technicians. Exposure to competition and growing labor shortages willlead to increased capital investment and automation, tending to reduce demandfor skilled labor. Expansion of industry, growth in skill-intensive SMEs andthe possible expansion of infrastruccure investment will increase demand. Theefficiency of VET systems will be determined by their ability to identify andreact quickly to these changes in the profile of skill demands. Adjustment ofthe vocational education system is thus needed to improve quality andflexibility in responding to changing employment demand.

30. Consistent with the conclusions of earlier analyses, the studyrecommends the establishment of a national training agency with key functionsin planning, monitoring of labor markets and training outcomes, and provisionof incentives to guide system development. The skills testing andcertification system of the NISD would be transferred to this agency, and madeavailable for all vocational and technical education graduates, improving thecapacity to monitor system quality. Consideration should be given todiversifying financing for VET through the introduction of a payroll tax onenterprises.

31. The currently diffuse set of VET systems would be consolidated andtargeted on key economic policy objectives. Three broad strategies aresuggested, each focused on a key area for manpower development.

32. (i) Higher Technical Skills Strategy. Publicly financed post-secondary technical and commercial education (diploma level) would become thesole responsibility of the King Mongkut's Institute of Technology and theInstitute of Technology and Vocational Education. Secondary-level(certificate) programs in these institutions would be phased out, as . ouldagricultural vocational education. Thus restructured, these institutionscould concentrate on quality improvement for a less complex set of programs,mostly in municipal areas. They would also play the major role in providingtraining and consultancy services to larger enterprises.

33. The curriculum would be strengthened and designed for graduates ofacademic secondary schools, thus reducing total public and private costs ofpost-secondary vocational preparation substantially. It is recommended that,as tertiary education expands, technical diploma holders be allowed to enteruniversity engineering and technology programs. Lower costs, and perhaps thepossibility of entrance to university programs, should increase demandsufficient to permit tuition charges to remain at current levels. Privateprovision of post-secondary technical education would be encouraged by raisingtuition ceilings; quality would be maintained by restricting enrollments andthe entry of new schools.

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34. (ii) Rural Skills StratQSy. The development of vocational skillsin rural areas would become the principal focus of the Department ofVocational Education (DOVE). DOVE would assume responsibility for allcertificate and diploma level agricultural education, as well as for relatedtechnical and commercial courses at the certificate level.

35. The autonomy and capacity of individual DOVE colleges would beincreased substantially to enable them to develop and market a range oftraining services to meet local needs. They should be able to retain earningsto use flexibly in improving school quality. Decentralization of professionalsupport capacity to regions or provinces would support more flexible schools;block grant financing to regions or provinces would move budget decisionscloser to local needs. Central DOVE offices would play crucially importantroles in technical support and quality control.

36. There is evidence of excess supply of agricultural places. Phasingout agricultural education in the ITVE will begin to bring supply into balancewith (falling) demand. As an additional measure, individual DOVE agriculturalcolleges could be given enrollment targets; if these were not met over a threeto five year period, the colleges would be converted to academic curriculawhere feasible), or perhaps sold to private entrepreneurs.

37. Further streamlining would be accomplished by transferring the AreaVocational Centers, which are now under-utilized and have very high unitcosts, to the National Institute for Skill Development (NISD) to strengthenNISD capacity to provide a range of training and development services to smalland medium sized enterprises. DOVE could continue to operate the Polytechnicsunder the same decentralization policies that are recommended for theagricultural colleges.

38. The nonformal programs of the DNFE are making importantcontributions to non-farm family income in rural areas, and are highlyflexible. These should be continued as presently organized.

39. (iii) SME Strategy. Improved productivity in small and mediumsized industries will be important to job creation and growth inmanufacturing. The analysis indicates that these need support from a range oftraining and development services. The NISD has developed an important levelof expertise and experience in this area. It is recommended that the work ofthe NISD be sharply focused on SMEs, and capacity expanded by transferring theDOVE area vocational centers to the NISD as additional skill developmentcenters.

Eguitv Considerations

40. A concern for the educational and employment opportunities foreconomically and academically disadvantaged youth has been a primary rationalefor VET in Thailand, as in other countries. The evidence indicates that thisobjective is only partially being reached for the poor, that most VET studentscould be successful in academic secondary education, and that women have notyet benefitted substantially from training in non-traditional occupations.The strategies recommended would have important positive effects on equity

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goals. First, access to academic secondary education would provide a lower-cost alternative to VET and equip graduates for a broader range of furthereducation, training and employment choices. Secondly, an effectivescholarship program is certainly within the administrative capacities of Thaiinstitutions, and would have important positive effects on access for thedisadvantaged.

Policy Discussion and Implementation

41. The recommendations provide an extensive policy agenda. They implya significant degree of change, and would thus require considerable debate anddiscussion. Clearly, a wide range of interested parties would have a stake inany or all of the recommendations, and would need to be included in the policydialogue. These include parents and students, teachers and administrators,and employers, as well as senior policy officials.

42. Implementation of any combination or subset of these alternativeswould require careful planming, and a long-term perspective on change.Evidence form other countries indicates that a decade or more may be required.

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I. Introduction

1.1 Vocational education and training (VET) is a major part ofThailand's education system. It is primarily delivered through public andprivate vocational colleges, and provides almost as many places for lowersecondary graduates as do pubic and private general (academic) secondaryschools. In recent years it has consumed 7-8% of the national educationbudget. This study seeks to assess the current system in the context ofrecent and rapid economic change, and to identify ways in which both policiesand institutions might be reformed to meet rapidly changing needs.

1.2 For more than a decade there have been serious questions as to thecost-effectiveness of vocational education and training in Thailand, asreflected in a large number of studies conducted by the government. I/Unemployment among vocational graduates has, despite steady economic growth,remained high. Well over half of graduates of the three-year vocationalcertificate course have continued their studies in the same occupational fieldfor an additional two years, obtaining a diploma. Six months aftergraduation, more than a quarter of diploma graduates remain unemployed,despite five years of costly technical preparation.

1.3 In the last five years Thailand has experienced extremely rapidgrowth in the manufacturing sector. Government employment, long the mainoption for all persons with secondary or higher education, has been sharplyconstrained as part of successful economic adjustment policies. The movementof labor out of agriculture into modern sector commercial and industrialemployment is accelerating.

1.4 The next decade poses some significant challenges to the economy,and the VET system. Current manufacturing growth rests on the comparativeadvantage of low-cost labor. This advantage is not likely to lastindefinitely; indeed, a labor shortage is projected to arrive sometime beforethe end of the century. International competitive pressures are likely tohasten the adoption of new manufacturing technologies. This may reduceaggregate employment demand, while raising the demand for specialized, highlevel skills. Historic growth in agricultural output due to expansion ofland under cultivation has largely ceased; maintenance of current output, notto speak of further growth, will require increased farm productivity.

1.5 Universal primary education has nearly been achieved, withincreasingly high completion rates. Secondary education has been expanded toprovide places fo; about 30% of the age cohort. Open universities haveaccommodated huge growth in tertiary enrollments. At the same time, "closed"university enrollments have remained closely controlled, at somewhat less than100,000 places. Shortages of higher level scientific and technologicalmanpower are emerging.

IJ See, for example, Buripakdi (1988); Chaivej (1988); NEC (1982), (1985),(1987); Settaminit (1984); TDRI (1987), (1988); Tunsiri (1987).

1.6 In short, rapid change in the nature and structure of the Thaieconomy brings with it the need for further evolution and development ofvocational education and training. The Kingdom has entered a new phase ofdevelopment, and human resource development policies need to be reconsidered.In this respect, the Thai experience is broadly similar to world wide patternsof development of vocational education and training.

1.7 In the early stages of development, vocational education andtraining was seen primarily as means to prepare individuals to enter the labormarket as craftsmen, skilled workers and technicians in agriculture, commerceand industry. A supply of technically skilled workers was thought to be anecessary pre-condition for modern sector development. The principalinstitutional forms of delivery were the vocational high school, the labortraining center and the post-secondary technical education institution. Theseinstitutions were financed and managed by public agencies, most often theministries of education and labor.

1.8 In expanding economies marked by rapid growth in modern sectormanufacturing employment (such as Korea and Taiwan), the output of theseinstitutions was readily employed, and vocational education considered to bereasonably efficient, despite high costs. As these economies developedfurther, however, international competition and changing patterns ofcomparative advantage have begun to change the patterns of demand for skills.The pace of change in the technology of products and production sharplyincreased the need for continuous upgrading of the existing workforce. Thedemand for higher technical and engineering skills has been growing sharply.Employers have become more concerned with the trainability of theirworkforces, and at the same time better able and more willing to invest intraining.

1.9 In such circumstances public training institutions have faced theneed to change what they do, and how they do it. The high costs of constantreinvestment in equipment and facilities to keep pace with changingtechnologies has become a significant issue in public financing. As employerneeds change, the size and skill focus of the public VET system must bechanged as well, often on a very short-term basis. The difficulties of payingsalaries adequate to attract and hold skilled instructors in the face ofcompetition from industry, a feature of VET systems from their earliestbeginnings, have become more acute as the increasing sophistication of skillsis matched by even more demand in the private sector.

1.10 Training systems administered by government ministries often havehad difficulty in adjusting rapidly to such changes. In an era when skillsdemand was derived from medium term manpower forecasts, institutions could becreated to meet assumed stable patterns of demand. Change could come slowly,in keeping with the curriculum development and management processes thatworked well with general education. A variety of marginal incentives (staffhousing, bonuses, overtime) could be used to help address the need to payinstructors higher salaries.

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1.11 These mechanisms, however, have generally not been adequate inrapidly changing and growing economies. Hence a number of countries(Singapore, Mauritius, Nigeria) have begun to re-consider training policiesand systems. In one way or another, these countries have drawn on the longexperience of Latin American countries, where national training agencies,financed by payroll taxes, have been efficiently providing training forskilled workers and technicians, on a short-term, nonformal basisfor several decades. The roles of such agencies in providing training andconsultancy support for small and medium-size industries have been seen asimportant, and worth emulating. The high costs of training, combined withhigh private benefits where there is a reasonable match between supply anddemand, have led to increased consideration of both cost-recovery measures andde-regulation, and sometimes provision of incentives, for private traininginstitutions.

1.12 The exact nature of economic change in Thailand in the medium termcannot be predicted with certainty. It is clear from the experience of othercountries, however, that the VET system will need to be able to respondquickly to changing employment demand. Moreover, the balance amongvocationally-specific pre-employment training, general secondary education,and in-service training will need to be reviewed. A broad review of humanresource development policies and institutions will be required if thechallenges and benefits of rapid economic growth are to be realized, andmanaged within the strong traditions of regional equity and development of thequality of rural life that continue to guide development in the Kingdom.

CONCEPTS AND ISSUES

1.13 The study rests on six basic concepts, drawn primarily from WorldBank analyses of international experience with VET (Middleton and Demsky,1988; Dougherty, 1989).

(a) Vocational education and training must be managed strategicallyto respond to a changing macro-economic environment.

(b) Strategic management requires the development of informationsystems that signal short-term changes in employment demand.

(c) Strong institutional linkages between training employment arecentral to improved information flow.

(d) Institutional arrangements must facilitate relatively rapidmarginal adjustments in the size and nature of vocationaltraining.

(e) The quality of vocational training should have high priority.

(f) Financing of vocational training should increasingly bediversified, with increasing contributions from thebeneficiaries of training -- individuals and enterprises.

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1.14 The degree to which these concepts are applisd in any givencircumstance depend on the nature of the economy, and of existing policy andinstitutional structures. In all cases the emphasis should be on reform andimprovement of current systems, not on radical re-structuring in search of the"perfect" policy and institutional frameworks. In particular, internationalexperience suggests that, with appropriate policies and institutionalarrangements, any mode of training delivery (schools, training centers) can beefficient. At the same time, as economies develop, there is also evidencethat enterprises can assume more responsibility for specific skills training,while publicly financed and administered training institutions focus more onthe broader preparation that provides a foundation for continuous training andretraining.

1.15 The study addresses the following issues:

Economic Context

(a) How has the pattern of economic development over the pasttwenty years shaped the demand for skilled manpower? What arethe implications of current macro-economic policies anddevelopment for the configuration of vocational education andtraining policy and systems?

(b) How do current lab( market mechanisms, including labor marketinformation systems, wage differentials, labor union activity,and government policies and guidelines, affect demand for andprovision of training?

(c) What is current enterprise human resource practice (hiring,payment, training, promotion, career development) in firms ofdifferent size and in different sectors? How do thesepractices affect the employment and payment of graduates ofvocational education and training institutions?

(d) What are government policies and incentives to encourageprovision of training by enterprises? Are these effective?Why or why not?

System Configuration

(e) What is the current configuration and capacity of the system?How is it managed and financed? How has it developed overtime?

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Internal ifficiencv. Institutional Ouality

(f) How efficiently do institutions use resources, as measured bystudent flows?

(g) Are the institutions flexible in adjusting curricula and thenumbers of students in occupational fields to changingemployment demands? Why or why not?

(h) Are the educational and experience characteristics of teachersappropriate for training objectives?

(i) Is there unnecessary duplication and overlap of kinds oftraining?

(j) Is the planning and management of the system effective? Howcould it be improved? Should there be more decentralization;if so, of what and to what level? Do planners get goodfeedback on system efficiency and effectiveness?

(k) Are linkages with employment effective? Why or why not? Howcould they be improved?

External Efficiency

(1) Are vocational education and training institutions providingthe type and level of skills that are appropriate for thesectors of the current economy they are intended to serve(agriculture, industr:y, commerce)? For the future economy??

(m) Is there a reasonable level of balance between supply anddemand for trained persons? Is there evidence of educated andtrained unemployment?

(n) What are the costs to produce graduates for different kinds ofinstitutions? How do they compare with general secondary anduniversity education unit costs?

(o) Is the financing for the institutions adequate? Shouldalternatives to government financing be developed?

(p) To what extent are vocational institutions serving as analternative form of general education in response to socialdemand? Is there evidence that graduates of vocationaleducation and training institutions, especially vocationalschools and colleges, are not using their training inemployment but continuing with higher education?

(q) To what extent is vocational education and training servingeconomically disadvantaged students?

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METHODOLOGY

1.16 The study relies heavily on secondary analysis of existing data andreports. Analysis of the economic context draws heavily on a World Bankcountry economic study completed in 1988, and on the recent work by Thaipolicy researchers. Y These studies have been supplemented by fourinvestigations designed to provide current insight into specific issues:

Background Papers: Each agency providing vocational education ortraining prepared a background paper summarizing agency history,policy, institutional profile, costs, and issues.

Enterprise Study: A study of was conducted in enterprises ofvarying sizes to document employment and training practice.

Survey of VET Institutions: A survey of 56 formal and nonformal VETinstitutions was undertaken to assess cost, finance andinstitutional issues.

Reconnaissance: An expert team visited 28 formal and nonformal VETinstitutions, and conducted interviews with administrators, teachersand students to identify issues and problems in institutionaleffectiveness.

1.17 The study has been written by a team of Thai and World Bankresearchers, with review of early drafts in Thailand and in the Bank.

STRUCTURE OF THE ANALYSIS

1.18 The analysis is presented in six subsequent chapters. Chapter IIanalyzes the current and future economic context of vocational education andtraining, with particular attention to employment issues. Enterpriseemployment and training practice are assessed in Chapter III. In Chapter IVthe current VET system is described, together with a history of itsdevelopment, and the internal efficiency and quality of the system assessed.External efficiency is addressed in Chapter V. Chapter VI draws on thepreceding analyses, and on international experience, to develop options forpolicy and institutional reform.

I/ The studies used may be found in the Bibliography. The designs of theeuterprise study and the institutional survey are discussed in Annex I.

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II. The Economic Context of Vocational Educationand Training

2.1 Economic policy, and the structure and dynamics of the economy,shape the nature of employiient demand, and thus play important roles indetermining the external and internal efficiency of vocational education andtraining. The combination of sound macro-economic policies and favorableexternal circumstances has led to rapid changes in the economy of Thailand,with significant implications for future employment and for education andtraining policy.

2.2 This chapter reviews the patterns of economic development inThailand, the medium term development strategy and likely future directions.Particular attention is given to employment and labor market issues. Theanalysis indicates that rapid growth in export-led manufacturing willaccelerate the shift of workers out of agriculture into the modern sector, andthat labor shortages may appear as early as the mid-1990s, leading to wageincreases. As low-cost labor advantages erode, all sectors will need toincrease the intensity of capital and technology in production, leading toincreasingly rapid changes in the profile of demand for vocational andtechnical skills.

PATTERNS OF ECONOMIC DEVELOPMENT

2.3 Economic policy and development in the 1960s and 1970s was marked byemphasis on agricultural development and import substitution in industry. GDPgrew at an average rate of 5.6% from 1971-75, and 7.9% from 1976-1980. Theprincipal export during most of this period was rice, and agriculture was notreplaced by manufacturing as the leading economic sector until 1981. Theagricultural sector absorbed 44% of the increase in the labor force in the1973-83 period, services (including government employment) 18.2% and industry12.7%.V

2.4 Macro-economic policy adjustments in response to external shocksduring the 1970s, notably oil price increases, were incomplete. As a result,Thailand entered the 1980s burdened with significant economic problems:persistent fiscal deficits, rising external deficits, rapid accumulation ofexternal debt, some overvaluation of the baht, and artificially low domesticenergy prices.i/

2I Poapongsakorn (1984, p. 13) cited in Bauer, Ogawa and Poapongsakorn.Forecasts of Labor Force and Wages for Thailand. Honolulu: East-WestPopulation Institute, 1988.

1/ World Bank. Thailand Country Economic Memorandum. November 7, 1988.The discussion of macroeconomic trends and policies draws heavily on thisanalysis.

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Adiustment and Extort-led Growth in the l980s

2.5 These problems were successfully addressed through adjustmentpolicies that emphasized fiscal restraint and deficit reduction, controls onexternal borrowing and devaluation of the baht.

2.6 The second devaluation, in 1984, combined with improving terms oZtrade, led to a sharp rise in manufactured exports. This growth was furtherstimulated by the changing comparative advantage of other Asian NICs, notablyTaiwan, Korea and Japan. Rising labor costs in these countries have led tomoveinent of manufacturing activities to Thailand, as well as to increasedinvestment in manufacturing by Thai entrepreneurs.

2.7 The net effect of these changes has been rapid transformation of thestructure of the economy, and sustained growth in the mid- and late 1980s. Asshown in Table 2.1, the share of GDP generated by industry has increased,while th&a- of agriculture has declined, with concomitant changes in thesectoral structure of employment.

Table 2.1: GDP and Employment Shares By Sector

Agriculture Industry Services

1971:Share in CDP 23.9% 27.0% 49.1%Share in employment 78.9% 5.7% 15.4%

1980:Share in GDP 23.2% 30.8% 45.9%Share in employment 70.9% 10.5% 18.7%

1986:Share in GDP 16.8% 33.8% 49.4%Share in employment 67.1% 10.5% 22.4%

Source: World Bank (1988).

2.8 Structural change has accompanied sustained export-led GDP growth atrates that are comparable to Asian NICs (Table 2.2). The share of GDPdirectly generated by exports reached an historic high in the 1986-87 period.While not at the current level of Taiwan (China) or of Korea, the exportreliance ratio art absolute level of export contribution to GDP growth in

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1986-87 is similar to that of Korea in the early 1970s. Outwardly orientedgovernmert economic policy, which supports private sector initiative throughvarious export promition and incentive structures, has had significantpositive effects.

Table 2.2: Export Reliance of Growth(period averages, percent)

1971-75 1976-80 1981-85 1986-87

Thailand:GDP Growth 5.6 7.9 5.6 5.9Export value added growth /a 0.5 1.4 1.0 1.7Export reliance ratio L!j 9 18 18 29

Taiwan. China:GDP Growth 8.8 10.5 6.7 naExport value added growth /a 3.4 4.4 4.4 naExport reliance ratio /b 38 42 66 na

Korea:GNP Growth 8.7 7.3 8.3 naExport value added growth /a 2.5 2.7 3.0 naExport reliance ratio Lb 29 38 36 na

La The domestic value added in the incremental exports as percentage ofGDP or GNP.

/ The ratio of "Export value added growth" and "GDP or GNP) growth."

Source: World Bank (1988).

2.9 GDP growth has accelerated in the last two years. It was 7.1% in1987. Preliminary estimates for 1988 indicate growth in the 10-11% range, inpart because of a strong rise in agricultural output in response to commodityprice increases.

2.10 Export growth has been led by an increasingly diversified set ofmanufactured products. In the 1970s, ten products, including seven primarycommodities, ae:counted for 70% of exports. By 1987 the share of the sevenmain primary exports had falien to 30% as the share of manufactured exportsrose substantially (Table 2.3), led by expansion in textiles, integratedcircuits and jewelry; since 1985 higher growth rates have been achieved intextiles, footware, furniture, canned goods, toys and jewelry.v

1 World Bank (1988), pp 30-31.

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2.11 Manufacturing has been stimulated by significant increases inforeign direct investment (FDI) encouraged by sound macroeconomic managementand political stability 3ince 1980. Annual FDI averaged US $95 million in1976-80, rising to ar average of US $277 million in 1981-85, with Japanreplacing the US as the principal source of investment. With support fromsuch investment, Thailand is poised to move into higher technology industries.

2.12 Growth and structural change have been accomplished with animpressive level of price stability, given devaluation of the baht. Inflationat the consuixer level averaged 2.4% per year in the 1982-87 period.

Table 2.3: Export Commodity Diversification Indicators(percent)

1975 1980 1981 1982 1983 1984 1985 1986 1987

Share in TotalMerchandise ExportsTen principal exports 70 67 69 68 66 64 58 56 53Three main manufac-tures exports 6.9 14.3 15.2 15.4 18.0 18.6 19.7 22.4 25.1

Share in TotalManufactures ExportsTextile products 10.5 23.0 23.6 22.7 25.2 27.4 28.4 28.2 31.4Integrated circuits 2.0 14.7 11.6 9.6 10.2 10.5 9.9 11.6 9.8

Source: World Bank (1988).

Constraints on Future Growth

2.13 Bias in Trade and Industrial Policy: Sustained economic expansionwill require deepening of the industrial structure, most importantly in theproduction of heavy intermediate and capital goods to maintain manufacturinggrowth in the face of increasing competition for labor intensive industriesfrom China and Indonesia. The current tariff structure provides greaterprotection to consumer goods than to heavy and capital products, hampering thedevelopment of heavier industry, and protecting lighter industry from thestimulus of competition. The economic environment for small and medium-sizedenterprises, which will be pivotal In strategies to deepen the industrial baseand to develop rural industry, is not favorable. Export promotion, investmentincentives and financing facilities all favor large firms. There are biasesagainst the sub-contracting which is important to growth of heavy industry.

2.14 Infrastructure: The fiscal austerity that undergirded successfulmacroeconomic adjustment required significant reductions in public investment.

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As a result, infrastructure development has lagged, and the country facespotential bottlenecks in roads, ports, and energy and water supply. Sustainedgrowth will require expansion of public infrastructure investment.

2.15 Domestic Savings: A wide gap between savings and investment in the1970s arose from high levels of fixed investment; in the 1980s, as investmentfell, private savings declined. While per capita income nearly doubledbetween 1970 and 1986, the gross savings rate has not increased. Investmentneeds, particularly in infrastructure, will require increased savings.

2.16 Human Resources: Although the quality and trainability of Thaiworkers have been important to economic growth, continued development ofindustry will be constrained by shortages of the higher level scientific andengineering manpower needed both for production and research and development.

MEDIUM TERM DEVELOPMENT STRATEGY

2.17 The rapid transformation of the Thai economy in recent yearsindicates that the country may have started along the path to economic growthtaken fifteen years ago by Korea and other Asian NICs. The main features ofthis course of development are rapid growth of manufacturing, with a shifttowards heavy intermediate and capital goods; increasing levels of technology;and a major shift of the workforce out of relatively low-productivityagriculture into higher productivity employment in modern sector commerce,industry and services. There is considerable debate in the Kingdom, however,as to whether or not this course of development is desirable, even ifpossible.

2.18 Thai development strategies have always placed considerable emphasison agriculture and equitable distribution of the bonefits of developmentacross urban and rural populations. Thailand has the highest per capitaavailability of arable land of any East or South Asian country (0.355hectare)y, and a large share of employment s.ill in agriculture (67% in1986). Thus a number of planners and analysts are ambivalent about a futuretied to industrial growth. There is concern that industrial growth on aproportionally small base will not provide adequate employment growth or, thatif it does, will cause massive migration from rural areas to the urban centers(especially Bangkok) where modern sector enterprises are concentrated. Thereis also concern that more disadvantaged regions -- particularly the Northeast-- will be by-passed by this pattern of economic development.

2.19 The open nature of the Thai economy, and the government's relianceon the private sector, indicate that given favorable external conditions, thepattern of industrial expansion is likely to continue despite thesereservations. The government's general role in the development process will

' World Bank (1988), p. 139.

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be to set the framework of incentives in such a way as to support growth whileaddressing the important issues of rural development and equity.

2.20 These concerns, as well as many of the constraints on growth, areaddressed in the government's development strategy for the Sixth Plan (1987-91), which continues the pattern of fiscal restraint that has been central toeffective adjustment. The main features of the strategy, as summarized by theWorld Bank, are:2Y

(a) Job creation through GDP growth of at least 5%.

(b) Rural development through both integrated programs andindustrial incentives to encourage location of new firms inpriority areas.

(c) Improvement of industrial policy, including reform of tariffs,business taxes, investment incentives, export incentives andthe financial system. Particular emphasis will be placed onpromoting "supporting industries," small and medium scaleenterprises, and rural industries.

(d) Strengthening the government's financial position bymaintaining conservative expenditure control and reforming thetax system.

(e) Improvement of the efficiency of state enterprises so that theywill increase public sector savings and provide betterinfrastructure services.

(f) Redefinition of the roles of the government and private sector.Government intervention will be reduced where the market systemcan produce desirable results and the private sector will beencouraged to expand its role beyond its traditional realm inThailand.

2.21 In favorably reviewing this strategy, the World Bank has emphasizedthe importance of trade and industrial policy reform in deepening theindustrial structure. Increased investment in industrial infrastructure isneeded. The level of technology should be raised through increasedexpenditure on research and development, and expansion of the supply ofscience and engineering graduates.

2.22 Both government plan targets and World Bank growth projectionsindicate continued growth in export-led manufacturing under conditions offiscal stability. The projections are provided in four alternative scenariosrepresenting different combinations of domestic and external factors(favorable, neutral or unfavorable). The base case, neutral in both respects,

V World Bank (1988), p. 134.

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projects rapid growth of GDP and exports in 1988-89 (8.4% and 15.9%,respectively), with more moderate growth thereafter, with GDP growing in thesix percent range. The lower cases, which assume either weak domesticpolicies or sharp reductions in external demand, still envisage GDP growthexceeding the 5% target set by the government for employment creation exceptin the 1994-2001 period under deteriorating domestic circumstances; under suchconditions GDP growth in this outer period is projected at 4.6%.

EMPLOYMENT

2.23 Employment in Thailand has historically been concentrated inagriculture. In the late 1980s, several factors combine to suggest that thestructure of employment will begin to change relatively quickly. First,population growth rates are declining rapidly, falling from 3.0% in the 1960sto 1.7% in 1986. The Government projects further declines, to 1.3% in 1991and 1.1% in 2005 as a result of economic development, urbanization, increasinglevels of education Pe .! an effective family planning program. Even withprojected increases i.. labor force participation rates, these demographicchanges will lead to slower growth, and progressive aging, of the labor force.Secondly, while agriculture has in the past been able to absorb a large shareof new entrants to the work force, this capacity is decreasing rapidly as thesupply of arable land has largely been exhausted. Third, the industrial andservice sectors of the economy are growing much more rapidly than agriculture.

2.24 Thus over the balance of the century Thailand will begin toexperience accelerated movement of labor out of agriculture into modern sectorindustrial and service employment. Under all but the most conservativeprojections of GDP growth over the same period, the demand for labor will atsome point exceed supply, with consequences for wage rates and the structureof employment.

2.25 While various studies and projections agree generally on the broadchanges, there is considerable debate as to when they are likely to takeplace. The varying views are based on different analyses of the currentstructure of the workforce. The Government holds generally that therecontinues to be a surplus of labor in rural areas, driven by the seasonalnature of agriculture. There is concern that prospects for increasedagricultural employment are bleak, and that industrial growth will not createemployment rapidly enough to absorb a growing workforce. The World Bank,using a somewhat different analytical framework, and assuming that the currentofficial figure of agriculture's share of employment (68%) is inflated,anticipates a labor shortage in the medium term, strengthening its view of theimportance of rapidly increasing the technological content of manufacturing inorder to move away from labor-intensive industries. A range of scenarios are

I/ John Bauer, Naohiro Ogawa, and Nipon Poapongsakorn. Forecasts of LaborForce and Wages in Thailand. Honolulu: East-West Population Institute, June,1988. This study will be referred to hereafter as (Bauer, 1988).

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provided under different assumptions regarding economic growth and the initialemployment share of agriculture. An independent study (Bauer, 1988), broadlyagrees with the future as projected by the World Bank, and offers additionalscenarios, not only of labor supply, but also of demand and projected effectson wage rates.

2.26 These issues are central to analysis of human resources policies,including those for vocational education and training, and will be addressedin some detail in this section.

Labor Force Growth

2.27 The base figures for historical growth of the labor force are shownin Table 2.4. The working age population grew more rapidly than the laborforce in the 1971-77 period; thereafter, driven by increasing labor forceparticipation of women and demographic change, the relationship between laborforce and population growth has reversed. Low rates of open unemploymentthroughout the period reflect the high absorptive capacity in an expandingagricultural sector in the early period, and growth in industry and servicesafter 1980.

Table 2.4: Population of Working Age, Labor Force and Employment,1971-86, Peak Employment Season (August)

(persons aged 11 and over)

1971 1977 1984 1986 1971-77 1977-84 1985-86------ million ---------- ---- annual growth -----

Population (11+) 22.98 29.02 36.31 38.12 3.97 3.25 2.14Labor Force 16.65 20.48 26.27 27.66 3.50 3.62 3.25Employed 16.62 20.31 25.66 26.68 3.40 3.40 3.21Unemployed 0.04 0.17 0.61 0.98 27.27 20.02 4.25

Participation Rates ------ percent-Male 79 77 77 naFemale 66 64 69 na

Total 73 71 72 73

Open UnemploymentRates I/ na 1.26 0.96 1.26

1/ Bauer (1988), p. 3. Source: National Statistics Office.

Source: The National Statistical Office - Labor Force Survey (1971, 1977,1984); World Bank (1988).

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2.28 Changes in the sectoral composition of employment are shown in Table2.5. The increasing share of industry and commerce, and the decreasing shareof agriculture are apparent. World Bank analyses suggest that the 1986agricultural employment figure of 65.7% may be too high. The ratio of GDPshare to employment share in agriculture was 0.25; in industry the ratio was3.2, almost 16 time as high. For most middle income countries the industryratio is only 3-5 times as high as the agriculture one. The comparable Asianfigures in 1985 or 1986 were 1.91 for Malaysia, 3.72 for Indonesia, and 2.41for Korea (World Bank, 1988). It is argued that since the Thai industrialsector is not highly capital intensive, part of the disparity in productivitycan be explained by the employment in industry of some portion of the 65.7% ofthe work force counted in agriculture. Collateral evidence showing that theproportion of income earned by farm families from non-farm activities hasrisen from 43.9% in 1976 to 58.5% in 1987 supports this analysis.2

Table 2.5: Sectoral Distribution of Employed Labor Force(Percentage)

Sector 1960 1970 1983 1986 j/

Agriculture 82.0 78.3 68.8 65.7Mining 0.2 0.5 0.2 0.3Manufacturing 3.4 4.1 7.4 8.0Construction 0.5 1.1 2.1 2.4Utilities 0.1 0.2 0.4 0.4Transport 5.6 5.2 2.1 2.4Commerce 1.2 1.6 8.7 10.1Services 4.7 7.0 10.1 10.7other 1.8 0.9 - -

Total 100.0 100.0 100.0 100.0

,./ The 1986 figures are for persons aged 15 to 59. Figures for other yearsinclude persons over age 11.

Source: 1960, 1970 from the National Statistics Office, Population Census;1983, Labor Force Survey, 1983 and 1986. 1986, World Bank (1988).

Projected Labor SuDPly and Demand

2.29 A principal issue for industrial and human resources policy is thepotential for future labor shortages. The pace at which Thailand moves fromlabor intensive to capital and technology-intensive manufacturing will be

2/ Pawakaranond, (1988) cited in World Bank, (1988), p. 195.

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influenced by labor supply, and human resources policy will need to adjust tothe changing skill requirements posed by technological transformation ofproduction. There are two aspects to the issue. One is the rate at whichgrowth in the industrial sector will attract labor out of agriculture. Thesecond is the overall balance between labor demand and supply.

2.30 There are a number of practical and conceptual problems in dealingwith Thailand's labor statistics, which make reliable estimation of thesectoral composition of the workforce difficult. Moreover, the variousprojections (Government of Thailand, World Bank, Bauer, 1988) use differenttime periods and methodologies. Nevertheless, the issue of the share of thework force currently in agriculture is significant in projecting future growthand composition of employment, and the overall balance of supply and demand.

2.31 Using scenarios based on projections of labor force growth, andassumptions regarding the 1986 share of employment itn agriculture and the rateof GDP growth, the World Bank (1988) has projected the structural compositionof the workforce to the year 2001 (Annex II, Table 1).

2.32 Using the official figure of 67.1% of employment in agriculture,absolute employment in that sector will begin to fall around the year 2000under both the base and optimistic cases. If the initial share is assumed tobe 60%, the absolute level of agricultural employment begins to fall in thefirst half of the 1990s.

2.33 Thus the transition from agricultural to industr..al employment willaccelerate. If the World Bank analyses regarding the current share of theworkforce in agriculture are correct, tl.s will happen relatively quickly.Demand for labor in the industrial and service sectors will pull workers intomodern sector employment. And productivity in agriculture will have toincrease if the current level of output is to be maintained.

2.34 Bauer et.al. (1988) have projected growth in labor force supply anddemand using a model that takes into account a number of factors which impingeon the labor force participation rates of men and women. The August, 1984Labor Force Survey is used as a base. A liberal definition of the workforceis used, counting as participants anyone eleven years of age or over who isemployed or looking for work.12'

1/ The labor force growth projections separate out students, using projectedenrollment rates. Labor force participation rates for men and women areestimated from a model that takes into account age, education, and urban orrural residence. The model also incorporates household composition in termsof the projected number of family members of different age. These lattervariables have the important effect of reflecting the declining number ofchildren in families and hence the availability of women to work. A profitmodel is used to estimate the effect of these variables on labor forceparticipation rates.

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2.35 The analysis indicates that male participation rates are relativelystable. A strong positive effect is found for higher education; maleparticipation in urban areas is lower than rural.

2.36 Increased participation of women in the work force will be importantto meeting labor demand in future years. The analysis indicates strongpositive effects on female participation of higher education. The presence ofchildren less than six years of age inhibits participation, while presence ofolder children and adults over 60 years of age encourage it. The analysisindicates that the changing nature of dependency ratios in Thailand, withfewer children and an increasing number of persons over 60, will act toencourage female participation.

2.37 Both male and female participation rates are expected to grow, withrates in the prime woriing age for men ranging from .96 to .99, and for womenfrom .86 to .89 in 1995 (Table 2.6). The effects of expandin schoolenrollments can be seen in the projected decline in participation rates forthe 11-24 age cohort.

Table 2.6: Projected Labor Force Participation Rates,Ey Age and Sex

Males Females1985 1995 2005 1985 1995 2005

Total 0.79 0.81 0.82 0.71 0.72 0.73

Age:

11-24 0.58 0.57 0.56 0.57 0.56 0.5525-34 0.99 0.99 0.99 0.87 0.89 0.8935-44 0.98 0.98 0.98 0.90 0.91 0.9145-59 0.96 0.96 0.96 0.85 0.86 0.8760+ 0.58 0.58 0.57 0.33 0.36 0.35

Source: Bauer (1988), p. 23.

2.38 These are very high participation rates, indicating that there willbe increasingly less slack in labor markets. The effect on labor supply anddemand can be seen in Table 2.7. The projections use somewhat more

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conservative estimates of GDP growth than used by the World Bank, but higherprojected rates of growth for the labor force.W

Table 2.7: Projections of Labor Supply and Demand(thousands)

4% GDP Growth (1991-2015) 6% GDP Growth (1991-2005)Demand Supply Demand

Excess ExcessNumber N' mber Supply (+) Number Supply (+)

1985 26,841 25,853 988 25,853 9881990 30,503 29,965 538 29,965 5381995 34,367 33,684 683 35,695 -13282000 38,058 37,865 193 42,522 -44642005 41,384 42,565 -1181 50,654 -9270

Source: Bauer (1988).

2.39 These projections use an estimate of employment elasticity (based ondata for the 1981-83 period) of 0.584; thus employment under the assumption of4 percent GDP growth would increase by 2.34%, and by 3.50 percent under theassumption of six percent annual GDP growth. These figures are roughlyconsistent with World Bank estimates.

2.40 Wage growth was also modeled in the study, again using assumed GDPgrowth rates of 4% and 6%, and wage elasticity of labor demand figures of .1and .3. Under all assumptions, real wages remain stagnant until 1995. Theywould begin to grow rapidly after 1995 at the higher rate of GDP growth, andafter 2005 at the lower rate. These projections assume that labor marketswill operate efficiently.

2.41 These various estimates and projections indicate that the labor andemployment situation in Thailand will begin to change radically in the mediumterm, assuming the higher projected levels of GDP growth. The transition fromagricultural to industrial employment is underway and will accelerate, mostlikely in the early 1990s. Bauer's projections of supply and demand show the

IV The World Bank estimates labor force growth as follows: 2.6% for 1987-1991; 2.0% for 1992-1996; and 1.8% for 1997-2001. The Bauer studies uses thefollowing rates: 2.8% for 1985-1990, 2.4% for 1990-95; 2.0% for 1995-2000; and1.7% for 2000-20005. The Bank uses age 15-59; Bauer et. al. use thegovernment's broader definition of anyone 11 or over working or looking forwork.

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emergence of very tight labor markets during the same period, even using avery broad definition of the labor force. If the World Bank's more restricteddefinition is used (ages 15-59), labor shortages could emerge even earlier.

2.42 On the other hand, growth may be constrained by the gap betweensavings and investment needs, and infrastructure and human resourcebottlenecks. External trade conditions may change. In January, 1988, forexample, the United States removed Thailand from the Generalized System ofPreferences for several export items, including artificial flowers andfurniture, as part of a dispute over intellectual property rights. It isestimated that the decision will cost Thailand more than 100 million dollarsin export revenues annually.L2!

2.43 The dynamism of the Thai private sector, and the likelihood offavorable external conditions in the medium term, indicate that growth islikely to be higher rather than lower, and that emerging labor shortages willaccelerate the need to increase work force productivity through investment intechnology and in the quality of human resources.

Characteristics of the Work Force

2.44 The Thai work force has been notably responsive to economicincentives. Farmers have been able to rapidly increase and change the patternof cropping in response to price changes. Labor mobility in response to wagedifferentials has been high (though variable), with younger males more likelyto move than females.1W

2.45 The population remains primarily rural, with 26% in municipal areasof more than 5,000. TDRI has developed scenarios of future of rural and urbanpopulation change (Table 2.8). The first "base case" assumes current growthtrends, and wage and unemployment rates. The second case assumes lowagricultural prices and reduced rural wages. The third assumes highunemployment in Bangkok, and the fourth assumes narrowing wage differentialsbetween Bangkok and all other regions as decentralization of industry succeed.

2.46 While overall differences are not great, the variation in theBangkok population between the low agricultural wages and narrowing wagedifferentials cases illustrate one basis for the government's concern todecentralize industry: the desire to lessen population growth in the alreadycongested Bangkok area.

ia Bangkok Post, January 20, 1989.

W TDRI, op. cit., p. 2. The migration rate doubled from 3.8% in 1960 to7.8% in 1970, then dropped to 4.5% in the 1975-80 period.

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Table 2.8: Scenarios for Rural and Urban Population Growth, 1O80-2005.

Low Agricul- High Bangkok Narrowing WageBase Case tural Wages Unemployment Differentials

Growth of Rural 38% 34% 42% 39%Population

Growth of Urban 96% 119% 100% 107%Population

Growth of Bangkok 76% 86% 72% 65%Population

Population of 8579 9046 8383 8037Bangkok, 2005(000)

Source: TDRI (1987).

Age and Household ComRosition

2.47 Demographic trends are having significant effects on the agecomposition of the labor force and on the composition of households. As shownin Table 2.9, the workforce will age rapidly, with the proportion of newentrants falling sharply.

2.48 Household size and the number of persons supported by each workerwill fall (Table 2.10). As noted earlier, falling dependency ratios willcontribute to the willingness and ability of women to enter the labor force.

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Table 2.9: Age Composition of the Labor Force: 1985-2005(Percentages)

1985 1995 2005

11-24 31,1 25.4 20.425-34 28.2 29.7 27.235-44 18.2 21.7 24.545-59 17.8 17.8 22.160+ 4.7 5.4 6.0

Source: Bauer (1988).

Table 2.10: Average Workers per Household, Household Size, andPersons per Worker: 1985-2005

Workers/ Household Persons/Household Size Worker*

1985 2.62 5.00 1.91199% 2.56 4.64 1.811995 2.48 4.28 1.732000 2.39 3.97 1.662005 2.30 3.72 1.62

* Average household size divided by average number of workers perhousehold.

Source: Bauer (1988).

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Educational Attainment

2.49 The educational attainment of the work force has been growingsteadily (Table 2.11). The rapid increase in completion of vocationaleducation is notable, exceeding the rate of growth in general secondaryattainment. About two-thirds of vocational attainment has been at the uppersecondary level, and one-third at the post-secondary level. The overall levelof secondary education (both academic and vocational), however, is lower thanwas the case in Asi. NICs at a similar stage of industrialization. In 1969,secondary attainment in Korea was 13.4%.

Table 2.11: Education Attainment of the Labor Force

Existing New EntrantsHighest Level of Labor Force a/ to the Labor Force l/Education

Attainment 1971 1984 1983 1987 1991

Elementary or less 93.2 87.0 72.6 61.9 52.9Lower/Upper Secondary 3.4 7.1 12.2 19.7 23.7Vocational 0.4 2.5 10.4 12.7 15.6Teacher Training 1.7 1.7 1.7 1.4 1.3University 0.9 1.4 3.1 4.2 6.4Other 0.4 0.3 n.a n.a n.a

Total 100.0 100.O 100.O 100.O 100.0

a/ Bauer (1988), reporting data from the N.S.O. Labor Force Survey: 1971,Round 2; 1984, Round 3.

k/ National Education Commission.

2.50 Education levels are highest in Bangkok and other urban areas, andamong the youngest age groups (Annex II, Table 2). The effects of increaseddemand for schooling, expansion of primary education and compulsory attendancelaws are seen in the differences between the age cohorts. For the Kingdom asa whole, 53.9% aged 15-19 had completed primary education in 1986; only 20.7%left primary school without completion. The same figures for those aged 20-24 were 18.8% and 53.8%. For the next older cohort, they were 8.6% and 67.7%.The expansion of secondary education (including vocational secondary) over thelast fifteen years is seen clearly in the differential attainment rates aswell.

2.51 Lower secondary completion rates in Bangkok and other urban areasare similar at 25-28%, much higher than in rural areas (8.1%). In the 20-24age cohort, upper secondary completion in Bangkok (23.4%) is twice that of

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other urban areas, and nearly five times that of rural areas. These higherlevels are in part attributable to rural to urban migration on completion ofprimary education (World Bank, 1988, p. 125).

Productivity

2.52 Despite rising levels of educational attainment, there was no growthin real value added per worker in agriculture or industry and only a smallincrease in services in the 1979-84 period (Table 2.12). As labor marketsgrow increasingly tight, with corresponding increases in the capital andtechnology content of both agriculture and industry, productivity will have toincrease if growth is to be maintained.

Table 2.12: Real Value-Added Per Worker, 1979-84(1972 Prices, 000 Baht) '

1979 1980 1981 1982 1983 - 1984

Agriculture 4,988 4,676 4,702 4,864 4,875 4,867Industry 33,448 34,938 37,661 34,263 35,811 35,288Services 29,214 29,949 31,561 29,345 30,640 33,844

All 12,721 12,524 12,798 13,050 13,420 13,793

Source: TDRI (1987), p. 79.

2.53 In sum, the trends indicate a mobile, older and increasinglyurbanized work force, with lower dependency ratios and higher levels ofeducation, and with considerable potential for much needed increases in laborproductivity. These characteristics are broadly supportive of the movement oflabor out of agriculture into industrial and commercial sector employment.

Characteristics of the Labor Market

2.54 Labor markets in Thailand are generally thought to operateefficiently. Employment growth has nearly matched the growth of labor supply,and real wages ha re remained constant as the labor market absorbed the growingwork force at constant productivity levels (Table 2.13). Open unemploymenthas remained relatively low, although there have been problems of educatedemploymwent, especially among vocational graduates. There is little governmentintervention in labor markets; while there is a minimum wage, compliance isestimated at only 30%, with small firms being especially able to avoidcompliance (Bauer 1988).

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Table 2.13: Real Wage Rate, 1977-85

Year Monthly Wage

1977 1,1541978 1,0341979 1,1161980 1,1231981 1,0851982 1,2081983 1,2321984 1,2121985 1,157

Source: Bauer et. al. (1988), from N.S.O. Data.

2.55 The market operates primarily through informal mechan'.sms.Enterprises hire unskilled workers at the factory gate, and through thepersonal networks of current employees. Newspaper adve.rtisements are heavilyused for recruitment at higher levels. Many vocational schools are active inproviding placement services for graduates.

2.56 A number of features of the labor market merit review. One is themarket for agricultural labor, including the nature of seasonal employment andmigration as a labor market mechanism. The second is the structure of non-agricultural employment, where the Government and small firms predominate.The third is the issue of educated unemployment, particularly among vocationalgraduates, and the related effects of labor market segmentation.

Agricultural Emplovment

2.57 The rural labor market in Thailand shows the marked seasonalitytypical of monsoon agriculture. Employment peaks in the July-September wetperiod, and declines by five to six million in the dry January to Marchseason. This has been partially offset by seasonal increases of about onemillion in industry and services employment (Table 2.14).

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Table 2.14: Seasonal Employment Patterns, 1977-85.(0008)

Dry Season Wet Season

Year Agriculture Industry Services Agriculture Industry Services

1977 9,841 2,428 3,832 15,013 1,761 3,627

1979 9,797 2,896 4,242 15,162 2,228 3,988

1981 9,421 3,019 5,103 17,810 2,346 4,556

1983 11,529 3,458 5,653 17,401 2,512 5,270

1985 13,383 3,368 5,851 na na na

Source: TDRI (1987).

2.58 Expansion of land under cultivation was the major factor in growthof agricultural employment in the 1970s. By the early 1980s, the potentialfor further increases in land under crop began to diminish (Figure 2.1).Agricultural employment projections through 1991 that take into accountcropping patterns, labor use for different crops and mildly pessimisticprojections of commodity prices indicate that annual employment growth in thewat season will be slow (0.5%). Dry season employment will grow more quickly(2.4%), but given the large number of seasonally unemployed will notcontribute substantially to reduction of seasonal unemployment in a work forcethat will be growing in the 2.0% range in the near term. (TDRI, 1989).

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Figure 2.1: Total Cultivated Areas of Major Crops

AAREA

95 l

90

U: 85 -

80 -/

75 I ts

65 /

72 73 74 75 76 77 78 79 80 81 32 83 3.4

Y E A Rource: Office of Agricultural Economics

Ministry of Agriculture & Co-operatives

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2.59 Seasonal unemployment rates are higher in the Northeast and North;lower in the Central and Southern regions; and declining in the North andCentral regions (Table 2.15). World Bank analysis of the seasonal differencesin levels of employment and of mean wages across regions and sectors suggeststhat the Southern and Central regions, where considerable crop diversificationand mechanization have taken place, are in the late stages of transition to alabor market dominated by non-seasonal industry. This process is much lessadvanced in the two northern regions.

Table 2.15: Dry Season Unemployment Rates By Region, 1977-85(percent)

Year North Northeast South Central Total

1977 24.5 30.3 2.3 13.8 21.8

1979 21.6 36.2 5.4 10.9 23.3

1981* 30.0 39.5 3.0 16.5 28.4

1983 20.5 35.9 2.9 13.0 22.4

1985 17.4 31.5 4.3 7.2 19.1

* The sharp increases in this year are probably due to the restructuring ofthe education system, which led to graduation of two years of students at onetime.

Source: TDRI (1987).

2.60 The government has promoted counter-seasonal industries to offsetrural unemployment, especially in the North and Northeast. An estimated 15%of unemployed workers do find off season employment in their locality. Themajor labor market adjustment mechanism, however, has been seasonal migration.

2.61 There has been some debate over the extent to which seasonalunemployment represents voluntary withdrawal from the labor market. Someargue that labor markets operate efficiently through migration, and that ifworkers wished to remain in the labor market wages would fall to accommodatethem (World Bank, 1983; Betrand and Squire, 1980). World Bank analyses thatshow that rural dry season wages are higher in construction in every regionbut the North, in manufacturing for every region but the Central, and incommerce for every region but the North and Northeast support this view.

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2.62 However, a recent study indicates that the migration mechanism maybe less efficient than assumed (TDRI, 1987). An additional set of questionson dry season work patterns in the 1984 Labor Force Survey were used toevaluate the effectiveness of the migration mechanism. Overall results areshown in Annex II, Table 3.

2.63 The data suggest that the seasonally unemployed are quite active insearching for work. Overall, 36% of potential migrants moved or looked forwork locally; the rate was 44% for males and 25% for females. An additional22% of the potential movers did not know how to find a job, 21% of the malesand 24% of the females. While it cannot be assumed that all of those who gavelack of knowledge as a reason for not looking for work would have done so, itis reasonable to believe that some would. If it is assumed that half wouldhave looked, about half of the seasonally unemployed would have been active inthe labor market. The remainder could be assumed to have voluntarilywithdrawn from the labor market.

2.64 Better labor market information could improve the efficiency of therural labor market, which seems to operate primarily through personalnetworks. The study found that, overall, 65% of migrants had a job waitingfor them when they moved. Moreover, individuals were more likely to move whenthey resided in villages with established high levels of migration. Theimportance of these personal networks in employment practice, and theconsequent flow of employment information, is evident. More formalinstitutionalized labor market information systems have apparently notdeveloped efficiently.

2.65 The study also found that the proportion of potential migrants(seasonally unemployed) is higher in the Northeast (21%) and North (15%) thanthe South (07%) and Central (14.5%) regions. The percentages of those who didnot know how to find a job were also much higher in the Northeast (42%) andthe North (28%) than in the South (0.3%) and Central (13%) regions.

2.66 About 50% of the migrants work in the agricultural sector, and withthe exception of the South, about 70% of the flow is intra-regional. In theSouth, most move abroad, most probably to Malaysia or Singapore (TDRI, 1987,pp. 102-103).

2.67 The data generally confirm that labor markets in the South andCentral regions are operating relatively efficiently, lending added strengthto the conclusion that the transition to markets dominated by non-seasonalemployment is well advanced. The North and Northeast are much less so, withweak labor market information systems contributing to continuing high levelsof seasonal unemployment.

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Non-agricultural Emnlovment

2.68 Government employnt. The government has historically dominatednon-agricultural employment in general, and has absorbed by far the largestshare of individuals with secondary or higher levels of education.H/ In 1984,the government employed 75% of industrial and service workers, and 42% ofthose with higher levels of education (Tables 2.16 and 2.17).

Table 2.16: Employment By Work Status, 1977-84(000s)

OwnYear Private % Government % Account* Totals %

1977 944 05 3,075 15 16,381 80 20,400 1001978 1,021 05 3,573 16 17,214 79 21,808 1001979 1,133 05 3,835 18 16,411 77 21,377 1001980 1,190 05 4,008 18 17,483 77 22,681 1001981 1,390 06 4,300 17 19,022 77 24,712 1001982 1,598 06 5,044 20 18,727 74 25,369 1001983 1,781 07 4,724 19 18,678 74 25,183 1001984 1,677 07 5,036 19 19,286 74 25,999 100

* Includes unpaid family workers.

Source: TDRI (1987), p. 133.

2.69 During the 1977-84 period, government employment grew at an averageannual rate of 9.5%, private employment at 3.6%. With the exception ofsecondary graduates, the first employment expectation for educated Thais wasgovernment service (Table 2.18). However, a two percent ceiling on governmentemployment growth was established in the early 1980s as part of the economicadjustment policy package. The result has been signifirantly reduced publicemployment opportunities for more highly educated Thais. The ceilings havehad noticeable effect on the employment of vocational and universitygraduates.

IV This discussion, and the data, are drawn primarily from TDRI (1987).

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Table 2.17: Employment By Work Status and Education Level, 1984(000s)

Below SecondaryWork Status Secondary and Over %

Private 4,216 18 821 28

Government 441 02 1,236 42

Own-Account* 18,380 80 906

TOTALS 23,037 100 2,963 100

* Includes unpaid family workers.

Source: TDRI (1987), p. 131.

Table 2.18: Growth in Overall and Government Employmentby Level of Education, 1977-84

(percent)

Level of Education All Employment Government

Primary and below 2.7 4.6Secondary 8.8 5.8Vocational 13.8 13.0Teacher 12.6 13.3University 15.8 17.0

Total 3.6 9.5

Source: TDRI, 1987.

2.70 Wages. Given the dominant role of the government in employing themore highly educated, government wage policy has fundamentally influenced, andmay well have distorted, relative wages for different levels and types ofeducation. The government has paid higher wages than the private sector atall levels of education save university, and has paid vocational graduatesmore than general secondary graduates. The impact on relative wages may beseen in Talle 2.19.

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Table 2.19: Relative Wages by Level of Education, 1978-84(Primary - 100)

PrimaryYear or Less Secondary Vocational Teacher University

1978 100 151 171 176 2811979 100 152 188 176 2951980 100 150 183 184 3071981 100 148 174 163 2881982 100 148 187 191 2801983 100 145 176 188 2911984 100 136 172 172 269

Source: TDRI (1987), p.134.

2.71 TDRI analysis of these data concludes that government wage policyhas kept the relationship between wage levels relatively stable. At the sametime, by paying higher rates than the public sector it may also have distortedthe returns to education. It is useful to note in this context that allsecondary, vocational and teacher wages began to fall relative to primaryeducation in 1983, with university wages falling a year later. As thiscoincides with the government ceiling on lhiring, and the beginning of morerapid growth in private sector employment, the market may have begun toadjust. Further analysis of more recent data, of course, is required to testthis hypothesis.

2.72 Private EmDloyment. Private employment in Thailand is concentratedin small firms. In manufacturing, a greater percentage of firms have fewerthan 50 full time employees than was the case in Taiwan or Korea during earlystages of industrialization (Table 2.20).

2.73 The distribution of manufacturing firms across industries can beseen in Annex II, Table 4. The World Bank analysis notes:

"The proportion of cottage and small-scale firms is higherin industries that use bulky and dispersed raw materialsor produce primarily for local markets, such as foodprocessing, ceramics and leather products, as well as inmetal and machinery industries that involve simpleassembly operations that are separable and involve noscale economies. This pattern is consistent with that inTaiwan and Korea in the 1960s and early 1970s. ... Medium-scale firms, on the other hand, are distributed moreevenly across industry groups with relatively high

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proportions in beverages, textiles and apparel, petroleumand its products, basic metals and electrical machinery."

That a smaller than average share of medium-scale industries can be found inthe fabricated metal and general machinery industries is seen to be evidencethat sub-contracting for larger manufacturers has so far been slow to develop.

Table 2.20: Comparative Structure of Manufacturing by Firm Size

Percent of Establishments Percent of EmploymentFirm Thailand Taiwan Korea Thailand Taiwan KoreaSize (1984) (1971) (1975) (1984) (1971) (1975)

< 50 93.1 86.8 81.4 38.6 25.5 17.450 - 99 3.5 5.9 7.7 11.2 9.4 8.7100-499 1.8 6.0 8.8 10.5 20.6 30.3> 499 n.a 1.3 2.1 n.a. 36.5 43.6

Source: World Bank (1988).

2.74 Thailand seems better prepared for the development of "flexible"production systems, based on several tiers of sub-contracting to small andmedium sized firms, than for mass production based on vertical integration.The flexible production system been used effectively in Japan and Taiwan, andboth countries are heavily involved in investment and technology transfer toThailand. Korea, on the other hand, has given more emphasis to verticalintegration and large firms. The proportion of small firms in the Thaieconomy more closely approximates that of Taiwan at early stages ofindustrialization than Korea. Moreover, there are inherent efficiencyadvantages to flexible production in relatively small domestic markets andunder rapidly changing external trade conditions (World Bank, 1988). Flexibleproduction systems tend to be more skill intensive; vertically integrated massproduction systems less so through their increased size and division of labor.

2.75 Patterns of employment across firms of different size by level andtype of education are shown in Table 2.21. The higher the level of education,the more likely it is for a worker to be employed in a larger firm. Thehighest proportion of vocational graduates worked in firms with more than 50employees. A higher proportion of secondary than vocational graduates workedin firms with less than ten employees. As would be expected, universitygraduates were concentrated in larger firms. It is also interesting to notethat all individuals reporting completion of short vocational training courses(conducted by the National Institute for Skill Development or various Ministryof Education programs) were found to work in firms with less than fiveemployees. It is likely, of course, that additional workers that completed

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these courses reported themselves under other, formal education categories.The data do indicate that the aim of these courses to reach economicallydisadvantaged workers without other forms of education is being at leastpartially attained.A

Table 2.21: Percent Distribution of Employment By Level of Education,in Firms of Different Size, 1984.

Private Employees -- Municipal Areas

Level of Firm SizeEducation 1-5 6-1 11-20 21-50 >50 All

Less than 41 23 16 08 12 100Primary

Primary 34 18 15 13 20 100

Secondary 17 17 20 14 32 100

Short Course 100 -- -- -- -- 100Vocational

Vocational 09 10 20 19 42 100

,eacher -- 16 19 28 37 100

University 08 06 21 26 39 100

All 27 17 16 15 25 100

Source: TDRI (1987), p. 145.

2.76 Wages generally have followed both education level and firm size,with a few interesting differences (Table 2.22). The highest average monthlywage was found for university graduates in the smallest firms, reflecting thepresence of small firms in certain professional categories (i.e., physiciansand lawyers). Secondly, vocational graduates in firms with 11-20 employeeswere paid substantially more than those in either the next smaller or largercategory, and essentially the same as those in the largest firms. Third,individuals with less than a primary education earned more in firms in the21-50 range than they did in the largest firms, and more than primarygraduates or secondary graduates. These latter two variations in the generalpattern may be explained by concentration of industries with particular skilldemand profiles in these size ranges, or perhaps by sampling error. In the

IV/ Sample estimates place somewhat less than 2000 workers in this category.

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case of vocational education graduates, it is worth noting that the proportionemployed in the higher paying firms was also larger, indicating that there maybe some concentration of technical skills demand in firms with 11-20employees.

Table 2.22: Average Monthly Wage By Firm Size and Level of Education - 1984Private Employees, Municipal Areas

Level of Firm SizeEducation 1-5 6-10 11-20 21-50 >50 All

Less than 1454 1733 1729 2979 2177 1750Primary

Primary 1403 1945 2084 2097 2479 1905

Secondary 2043 2716 2703 2932 3156 2755

Short 1643 -- -- -- -- 1643Course

Vocational 2282 2989 4198 3282 4187 3747

Teacher -- 2322 2698 2851 4262 3274

University 9805 3717 4107 4649 8465 6376

All 1686 2158 2625 2705 3585 2536

Source: TDRI (1987), p. 147.

Unemployment

2.77 Overall levels of open unemployment in Thailand have been low.However, unemployment among vocational graduates has been relatively high(Tables 2.23 and 2.24).L6/

2/ Prior to 1983, open unemployment was defined as those who did not work inthe survey week, looked for work or would have looked for work if they werenot ill or thought work was available. In 1983, the definition was broadenedto include those who did not look for work, but reported that they wereavailable. The effect of the changed definition has been to increase thenumber listed as unemployed by 35% in municipal areas and by more than 200% innon-municipal areas (1984). In the discussion we use time series data basedon the earlier definition; these figures thus understate the actual level ofunemployment (TDRI, 1987, p. 124).

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Table 2.23: Open Unemployment, 1977-84(OOOs)

PrimaryYear or Less Secondary Vocational Teacher University Total

1977 63 31 17 13 6 1301978 53 37 18 15 7 1301979 74 44 26 16 6 1661980 90 38 28 12 7 1751981 94 41 34 9 15 1931982 182 51 57 12 14 3161983 142 41 47 12 15 2571984 98 48 80 17 12 255

Source: TDRI (1987).

Table 2.24: Rates of Open Unemployment, 1977-84(percent)

Level of EducationPrimary

Year or Less Secondary Vocational Teacher University Total

1977 .33 3.72 7.11 5.14 3.81 .631978 .26 3.86 7.02 5.07 3.69 .591979 .38 4.48 8.67 4.77 2.50 .771980 .43 3.57 8.74 3.43 2.65 .771981 .42 3.31 8.44 2.10 4.94 .781982 .79 3.70 11.91 2.31 3.92 1.231983 .64 2.88 8.81 2.11 2.99 1.011984 .43 3.19 12.65 3.19 2.78 .97

Source: TDRI (1987).

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2.78 Unemployment rates are generally higher in municipal areas than non-municipal areas. In 1984, the overall municipal rate was 3.10%; in non-municipal areas the rate was .65%. Vocational education graduates are theexception, with higher unemployment in non-municipal areas than municipalareas (15% and 11% in 1984).

2.79 There is evidence that vocational graduates are waiting longest tofind employment. In 1982 the average wait for vocational graduates during the

dry season, more than half of whom were in the 15-24 age group, was thirtyweeks. Comparable figures for primary graduates were 8 weeks, secondarygraduates 23 weeks and university graduates 20 weeks. In Thailand, thosesearching for employment stay with families, easing both the financial andsocial costs of unemployment. (Toemtrisna, 1985).

2.80 The dominant position vf the government in employment of more highlyeducated workers in the past has undoubtedly contributed to unemployment amongvocational graduates. Government wage scales that give a 34% premium tovocational secondary graduates in comparison with general secondary, and an

additional 26% to holders of the two-year post-secondary degree.iLY Witthexpectations of government employment at high wages, vocational graduatesappear to be waiting for a job at a higher wage. Secondary graduates, on theother hand, appear to be more willing to work at lower market wages. Theyhave been more willing to work in smaller firms, and their relative wages fellmore rapidly during the 1983-84 period in relation to those of vocationalgraduates (Tables 2.21 and 2.19).

2.81 Labor Market Segmentation. When wages in some part of the economydo not respond fully to market forces, labor markets can div-.de into formaland informal sectors. In the informal sector, wages adjust to market forces,establishing a clearing rate which keeps unemployment relatively low. In theformal sector, wages are higher and less responsive to market forces.Employment growth is thus constrained, and entry into formal sector employmentbecomes more difficult. Because of the higher salaries, however, individualsare willing to wait for employment in order to gain the economic rent thataccrues with higher wages. Typically, these are the more highly educatedindividuals.

2.82 Analysis of the 1984 Labor Force Survey data, which includedquestions regarding place of work and characteristics of employment, providesevidence of such labor market segmentation in Thailand (TDRI, 1987). In thisstudy, the formal sector was defined to include employment in the governmentor in large private sector firms which have greater likelihood of unionizationor the use of formalized employment contracts. Also included were workers insmaller firms who are in a union, have formal employmen- contracts or work in

occupations (such as the professions) where presence in small firms isconsistent with formalized employment. The informal sector included workersin small firms (less than ten emplo-ees) and those working on daily wageemployment, regardless of firm size.

17/ The 1989 government entry level monthly wages are: secondary - 1,545;vocational secondary - 1,950; vocational post-secondary - 2,485.

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2.83 The pattern of formal and informal employment in municipal areas isshown in Table 2.25. Forty percent of the municipal workforce in 1984 wasemployed in the private informal sector. The formal private sector employed587,00 people, just slightly less than total government employment. However,the formal private sector employed lower proportions of the more highlyeducated workers than the government. Very low proportions of the more highlyeducated workers worked in the private informal sector.

2.84 Forty-five percent of vocational graduates were employed by thegovernment, 37% in the private formal sector, and 18% in the informal sector.Government employment growth is restricted, and unemployment of vocationalgraduates is already high. Vocational graduates have in the past beenreluctant to work in the informal sector where wages are lower. Unless theseexpectations change, most new employment for vocational graduates will have tocome from the private formal sector. And while this sector of the economy isgrowing rapidly, it is doing so from a relatively small base (28% of totalmunicipal employment).

2.85 The study confirmed that wages are indeed lower in the informalsector. Moreover, level of education was not found to be significantlycorrelated with informal sector wages, while age and experience are positivelyassociated with higher wages. In the formal sector, there are clear and largereturns to education (TDRI, 1987, pp.151-152).

2.86 Projections of municipal employment that take this labor marketsegmentation into account indicate that unemployment among vocationalgraduates will continue to grow, reaching 14.5% in 1996 assuming thatemployment in industry grows at 4% per year and in services at 5.2% per year.Higher growth rate assumptions reduce this only to 13.0%.

2.87 Further evidence regarding the possible oversupply of vocationalgraduates comes from a recent projection of science and technology manpowern3eds (TDRI, 1988). As acknowledged in the study, the data base for demandprojections is weak, as are the assumptions regarding linear expansion ofmanpower supply. Nevertheless, the analysis is useful for order of magnitudecomparisons. It indicates significant excess supply of vocational graduatesin all fields except basic sciences, where supply is very low and projecteddemand very high. Projected excess supply is especially large in the areas ofbiotechnology (agriculture, food science, and health professions), electronictechnology and machine and material technology. Conversely, the demand forpost-graduate and graduate manpower will greatly exceed supply in all areassave biotechnology.

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Table 2.25: Formal and Informal Sector Employment,By Level of Education, Municipal Areas, 1984. 000s.

Level of EducationPrimaryor Less Secondary Vocational Teacher University Total

Covernment 135 168 113 94 156 666

Private 243 138 86 23 97 587

Formal

Private 702 94 32 3 13 844Informal

ColumnShares(%Government 09 49 45 76 56 32

Private 17 40 37 19 35 28Formal

Private 74 11 18 05 09 40Informal

RowShares (%)Government 20 25 17 14 24 100

Private 41 23 15 04 17 100Formal

Private 83 11 04 0.3 02 100

Informal

Source: TDRI.

SUMMARY

2.88 Recent export-led industrial growth and diversification, supportedby private sector dynamism and appropriate government policies, have enabledThailand to move further along the path towards sustained high levels ofeconomic grcwth. The transition of the workforce from agriculture toindustrial and service employment is very likely to accelerate in the nearterm. While agriculture will maintain a higher share in GDP and employmentthan has been the cade in other East Asian economies, the fastest rates ofgrowth and largest shares of new employment will come in the industrial andcommercial sectors. Given restraints on government employment, most new jobswill come in the private sector.

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2.89 While there may be some increase in open unemployment during thetransition period, over the next decade labor markets will grow increasinglytight if growth continues as projected. Already, there are informalindications of skill shortages in some technical occupations, particularly athigher levels, in the form of poaching and rapid salary increases. Thaipolicy makers are well aware of the consequent need to begin to improveproductivity in all sectors through increased capital investment andtechnology development. Low-cost skilled labor as a factor in production willneed to give way to more capital intensive manufacturing to maintain theKingdom's competitive position.

2.90 Policies designed to facilitate the growth of small and medium-sized industries, with a focus on decentralization to expand employment andincome in least developed areas and to slow urban congestion in Bangkok, arebeing implemented. These policies bring with them the implication thatindustrial growth will emphasize flexible production systems, linking smallfirms to large, final assembly operations through subcontracting.

2.91 Despite optimistic projections, considerable uncertainty remains asto the pace at which change will occur. Commodity prices will continue tohave an important effect on trade earnings. The external trade environment isunstable, and can require rapid changes in products and markets in growth isto be sustained. Infrastructure bottlenecks -- transportation, power -- mayslow growth if increased private and public savings and investment do notpermit a vigorous program of improvement.

2.92 The work force is fundamental to continued growth. Labor mobilityis high. Educational attainment is rising, though labor productivity did notincrease in any sector during the first half of the 1980s. Primary educationhas become nearly universal, and completion rates are respectably high.Secondary and vocational attainment is rising, though secondary attainmentlags considerably behind other Asian economies. The work force will beincreasingly urbanized and older, and be supporting fewer dependents, as theeffects of rapidly reduced population growth rates begin to be felt. Theselatter factors will encourage labor force participation of women. However,existing participation rates for both men and women are high, leavingrelatively little room for growth in labor supply over the balance of thecentury.

2.93 The go.ernment has been the principal employer of educated manpower,including vocational graduates. Ps a result, rigid civil service wage scaleshave contributed to labor market segmentation. There is a comparativelysmall, though growing, formal sector comprised of government employment andemployment in large private firms. Formal sector wages are higher, heavilyinfluenced by government wage policy. Entrance into this sector is determinedby educational attainment, and higher levels of education confer distinctearnings eivantages. The bulk of urban employment, however, is in the privateinformal sector, where small firms predominate, and where wages are lower andless influenced by educational attainment. Vocational graduates have beenless willing than general secondary graduates to accept informal sectoremployment, preferring to wait for higher paying government jobs. This hascontributed to persistent high rates of unemployment among vocationalgraduates.

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2.94 Indeed, by the mid-1980s, the Kingdom confronted both high rates ofvocational unemployment and evidence of the emergence of near-term shortagesin scientific and technical occupations that are expanding as technologydeepens. The education and training system, as is often the case, was slow inadjusting to rapid economic and employment change. The pace of change iscontinuing to accelerate, and the economy will require a work force capable ofcontinuing adjustment to new jobs and new skills. Workers will need to havethe higher levels of cognitive skill that facilitate continual learning andskill development during employment.

2.95 The uncertain nature of the pace of industrial expansion, and thechanging nature of products, processes and technologies will require a highlyflexible vocational education and training system to provide the number andtype of skills required for the middle levels of an evolving workforce. Theneed for flexibility is underscored by the rapid diversification of both theindustrial sector and agricultural sectors, wbere increased workerproductivity will be required.

2.96 Quality will be as important as flexibility. Small firms operatingin a flexible production system through sub-contracting links are likely to bemore skill-intensive than large, vertically integrated firms. Skilled workersand technicians must be broadly trained conceptually, and increasingly will berequired to be competent in more than one skill area, and in skill areas thatwill appear as technologies change.

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III. Emiloymgnt and Training ia EnteoriMses

3.1 The productivity of the workforce is strongly influenced by theeffectiveness of enterprises is using and developing skilled labor.Enterprise human resource management and training policies and practicesfundamentally shape the demand for skills, and thus the returns to investmentsin pre-employment training. Where enterprise personnel and training practicesare efficient, the need for job and occupationally-specific training prior toemployment is decreased, if new entrants to employment have the basiceducation and skills that facilitate continued training.

3.2 This chapter explores the employment and training practices of Thaienterprises. Of principle interest are differences between firms of differentsize, and between those producing for export or domestic markets. Two sourcesof data are used. The first is a study conducted in 1980 from structuredinterviews with 2000 employees in private firms employing at least 100 workers(Bovonsiri and Fry, 1980). The second is an intensive analysis of 21 firmscarried out by Thammasat University as a background study for this report(Poapongsakorn and Naivithit, 1989).

ENTERPRISE TRAINING CIRCA 1980

3.3 In their study, Bovonsiri and Fry found that Thai employers providedconsiderable job-related training for employees with and without formalvocational preparation. There were many routes to employment in variousoccupations, with formal vocational education and training being only one.And training after employment, whether provided through public nonformaltraining institutions or directly by the employer, had substantial positiveimpact on the wages of primary completers and individuals with pre-employmentvocational training.

3.4 Vocational graduates received, on average, somewhat more job-related training than individuals with other forms of pre-employment education(Table 3.1). The study speculated that this may have been due to employerselection of better qualified employees for training; path analysis indicatesthat number of days of job-related training is significantly correlated withachieving a higher payiig position as foreman or supervisor. This explanationis plausible for the construction industry, where more than half of employeeshave only primary education; many of these are hired as laborers for specificprojects, while vocationally trained workers are more likely to be retainedpermanently, and offered training (as confirmed by the much higher averagenumber of days of training received).

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Table 3.1: Educational Level and Average Number of Days of Job-RelatedTraining, By Occupation, 1979.

Average Number ofFormal Education (W) Training Days

General Vocational Vocational Voca- Non-Occupation Primary Secondary Certificate Diploma Tertiary tional Vocational

Construction 56 08 12 14 10 96 42Technician

Electrician 28 23 23 13 13 47 52

Draftsman 05 12 34 35 14 31 46

Machinist 45 18 14 12 11 36 38

Electronics 08 18 30 26 18 56 68Technician

Mechanic 53 16 17 10 04 22 22

Salesman 36 38 08 03 15 10 18

Bookkeeper 01 11 47 11 30 35 33& Finance

Secretary 0 18 34 10 38 37 33

Clerk 02 34 35 07 22 23 37

Overall Average 39 34

Source: Bovonsiri and Fry (1980).

3.5 The data suggest that general education plus employer providedtraining was a viable path to skilled employment, even in more technicalindustrial trades. For draftsmen and electronics technicians, more than halfof employees held vocational certificates or tertiary credentials (83% and 74%respectively), and the percentages of workers with only primary education wassmall. In both cases vocational graduates received less training, on average,than individuals with general qualifications. The average number of days oftraining provided to electronics technicians without vocational qualificationsis the highest in the sample. The case of electricians is similar, with morethan half of employees in this category holding primary or general secondary

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credentials. Individuals with academic secondary education were mostfrequently represented in the clerk and sr.esman occupations; again, moretraining was provided for individuals without vocational qualifications.

3.6 Construction aside, VET credential holders received more employertraining in only two occupations: bookkeeper and secretary. Both occupationswere dominated by individuals with vocational and tertiary credentials. Thestudy found that academic secondary graduates earned substantially more inoffice professions than either vocational certificates or diplomas, suggestingthat in these occupations the additional training received by those with VETqualifications was to some degree compensatory and not, as in construction, acorrelate of promotion and higher earnings (See Chapter V, paragraphs 5.9 -5.10).

3.7 These data, and their interpretation, are far from conclusive. Wedo not know, for example, what proportion of employees with vocationalqualifications were employed in the field for which they were trained. To theextent that they were employed outside their field of training, needs fortraining after employment would be higher. Nevertheleb., the data do providesome confidence in the viability of general education plus employer trainingas a path to skilled work in the modern sector. And they confirm theexistence, again in the modern sector, of significant employer investment intraining. The data, of course, shed no light on government employment, or onemployment in small firms and in the informal sector.

3.8 Post-employment Training and Earnings: Nonformal training afteremployment had substantial impact on earnings for primary school completersand those with vocational qualifications, but not for academic secondarygraduates (Table 3.2). Employers used the current set of nonformal vocationaltraining programs (NISD, DNFE or DOVE Polytechnics) and, as discussed,provided job-related training directly in the firm.

CURRENT EMPLOYMENT AND TRAINING PRACTICE

3.9 To gain insight into current enterprise employment and trainingpractice, an intensive study of 21 firms was undertaken in late 1988. Apurposive sample was chosen to include firms of different size producing bothfor export and for domestic consumption. Fourteen of the firms are located inBangkok, four in neighboring provinces, and three in the newly developingEastern Seaboard industrial area. Data were gathered from managers andemployees through intensive interviews using a structured questionnaire..8Because of the small size and non-random nature of the sample, the data andtheir interpretations can only be taken as suggestiN, of patterns for theKingdom as a whole.

i8 Details on the methodology of the study may be found in Annex I.

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Table 3.2: Impact of Nonformal and Job-Related Training on Earnings,As Deviation From Mean Sample Wage, 1979(QXean sample wage - 2616 Baht/Month)

Post-employment TrainingEducation Nonformal &Type/Level None Nonformal Job-Related Job-related

Complete Primary -807 -514* -269* -368

Academic -252 -388 -455 -479Secondary

Vocational -224 -279 +95 +563*Certificate

Higher Vocational +323 +80 +939 -3*

Certificate

* Sample size too small for inference.

Source: Bovonsiri and Fry, 1980.

The Firms and Their Markets

3.10 Firms in eight industries were studied. They span a wide range ofmarkets and products, and differed significantly in level of technology anduse of labor (Table 3.3). With the exception of automobile assembly andanimal feeds, all industries are relatively highly labor intensive. Extensiveuse of sub-contracting to labor teams is made in the shoe and constructionindustries in order to maintain flexibility in workforce size in uncertainmarkets. Small batch production in shoes reflects rapidly changing stylepreferences; transformers are made to order in a relatively small market.

3.11 Technical and skilled workers are concentrated in industries withrelatively high technology products (auto assembly and service, electronics,transformer manufacture) or automated production equipment (animal feed). Inthe former case, technical skills are likely to be used in design, productionand maintenance; in the latter case maintenance of automated equipment islikely to be the most frequent task for skilled workers. As shown inTable 3.4, the proportion of skilled and technical workers in these firmsranges, on average, from 13% to nearly 30%. Technically skilled workersformed the highest proportion of the workforce, on average, in medium sizefirms, and the lowest in large firms (Table 3.4).

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Table 3.3: Characteristics of Firms Studied, By Industry

Markets and Production LaborProducts Technology Utilization

EXPORT INDUSTRIESShoes Fashion shoes Labor intensive Flexibility by

for export. Low tech, small subcontracting to(4 firms) Rapid style batch produc- labor teams; piece

change tion work;

Electronics Integrated Labor intensive, Low-cost labor forcircuits, disk High tech, rapid assembly; high

(3 firms) drives. All tech change use techniciansproduct and engineers;exported good working

conditions

Canned Fish Highly price Labor intensive, Low skill, poorcompetitive; low tech. Little working

(3 firms) produce for potential for conditionsoverseas automationsuppliers

DOMESTIC INDUSTRIESTransformers Local market Labor intensive, Relatively high

medium tech, use of technical(2 firms) custom production skill

Animal feed Vertically- Simple, large- Low-skill labor,integrated agro- scale, auto- poor working

(4 firms) business; one mated conditionsdominant firm

Construction Many small firms, Labor intensive, Flexibility bylarge mgt. firms medium tech subcontracting;

(2 firms) 50% market public labor teams,construction; small specialistcompetition from firms; vocationalforeign firms grad as foremen

Auto Assembly Foreign partners, High tech, High use skilledhighly protected mass assembly workers. Good

(2 firms) wages, fringes,work conditions

Auto Service High end market, Labor intensive, High use skilledforeign partner; high tech workers

(1 firm) (Low end many smallfirms)

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Table 3.4 Percentage Distribution of Workers By Firm Size and Industry

AverageNumber Average Percent Distributionof Factory TechnicianWorkers Workers Male Managers Engineers & Skilled (#)

Firm Size

Large 1953 94 na 01 01 03 ( 54)Medium 365 71 44 03 05 21 ( 77)Small 132 81 65 07 02 12 ( 15)

Industry

Shoes 1105 96 22 01 0.03 01 (110)Electronics 958 82 19 02 02 13 (124)Canned Fish 663 98 06 01 0.01 0.05 ( 3)Transformer 195 72 68 09 04 15 ( 29)Car Assembly 165 61 60 05 13 22 ( 36)Animal Feeds 688 70 64 03 03 25 (172)Construction 176 71 60 08 04 07 ( 12)Car Service 404 65 na 03 03 29 (117)

Source: Employer Survey.

3.12 The dominant position of unskilled factory workers in the shoe,canned fish and to a lesser extent electronics industries is apparent.Extensive use of low-cost unskilled labor is the basis for the Kingdom'scurrent comparative advantage in these industries, all of which compete in theexport market. In comparison, the use of unskilled labor is lowest, and useof engineers and technicians highest, in the highly protected automobileassembly firms and the automobile servicing firm that is associated with oneof the assembly companies. Equally apparent is the heavy reliance in theseindustries on female workers. Interviews indicate that these are lowersecondary graduates or dropouts. The data suggest that firms in internationalmarkets are seeking to minimize labor costs by conserving on the use ofskilled workers.

3.13 Turnover rates also vary by firm size and industry, reflectingdifferent production requirements and human resource management practices(Table 3.5). Overall turnover rates decrease markedly as firm sizeincreases. At the same time, there is much greater mobility among more highlyskilled workers in medium-sized and large firms than in small firms. Amongindustries, overall turnover rates are highest on the canned fish, animalfeed, construction and shoe industries. Conversely, turnover among more

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highly skilled employees is highest in the electronics, car assembly and carservice industries.

Table 3.5: Turnover Rates, By Education, Firm Size and Industry, 1988

Assets/Worker('000) Turnover Rates

Firm/Industry Baht) Overall Engineer Vocational College

FIRM SIZE

Small 640 47.1 01 01 -Medium 520 35.1 02 11.9 4.7Large 340 10.3 5.6 12.7 11.6

All 30.9 3.3 10.7 7.3

INDUSTRY

Shoes 260 26.5 2.7 7.7 9.0Electronic 410 18.3 7.0 27.0 13.5Canned Fish 200 56.1 1.0 3.0 3.5

Transformer 510 26.3 1.0 7.0 1.0Animal Feed 560 45.7 1.0 3.7 4.0Car Assembly 210 8.8 5.0 23.5 -

Const-uction 2,050 45.0 1.0 1.5 5.0Car Service 740 18.1 4.0 7.0 17.0

Source: Employer Survey.

3.14 Shoe factories cope with rapidly shifting style changes and demandby maintaining a highly flexible workforce. Unskilled workers, mostly female,are employed on a piece-work basis. A team leader is engaged to produce to aquota, and is responsible for hiring and supervising workers. Productiontargets and quality standards are high, and individuals are laid off ifstandards are not met, leading to high turnover. The low level of skillsrequired under this horizontal production system keep recruitment and trainingcosts low. The larger firms report a shortage of skilled workers andtechnicians able to design and lay out a production process. This hasresulted in poaching of entire work teams from other enterprises. A largemulti-national firm is often spoken of as the training school for new entrantsto the market. While wage data are not available, comparatively low turnover

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rates for engineers and vocationally trained workers in this industry indicatethat efforts are being made to retain individuals with these skills.

3.15 Similar conditions appear in the canned fish industry. Turnover ofunskilled workers is very high, due to poor working conditions: in one firm itis reported to be 90% in two years. There is little potential for automationof production. Again, recruitment and training costs are very low, and firmshave little incentive to reduce turnover where labor supply is adequate andprice competition maintains downward pressure on labor costs. Poaching ofskilled manpower is also reported in this industry.

3.16 The animal feed industry offers a variation on this theme.Unskilled workers are mostly male, and again turnover is high. However, thenature of the product permits relatively high levels of automation to replaceworkers, and the large-scale, vertically integrated nature of the agro-industries of which these firms are a part encourages capital investment.This is reflected in the level of assets per worker of the industry, which aretwice as high as those for shoe and canned fish producers.

3.17 The construction industry is also organized for horizontalproduction through sub-contracting. A relatively few construction managementfirms carry out projects through a large number of smaller and specializedconstruction firms that hire and manage their own workers. Managementcompanies employ skilled vocational graduates and engineers to monitor andsupervise the work of sub-contractors. Unskilled workers are hired throughthe familiar team leader process. There is evidence of seasonality in theconstruction business, with higher levels of activity in the dry season whenrural labor is available, and lower levels during the rainy season whenconstruction is more difficult. These patterns are seen in the high level ofassets per worker in the management firms in the sample, high overallturnover, and low levels of turnover among engineers and skilled workers.

3.18 Electronics manufacturers in Thailand operate under joint venturearrangements with multi-national companies, and export all of their product.Seven large and medium sized enterprises dominate the industry; two of theseproduce components for disk drives, all produce integrated circuits. Theindustry is characterized by rapid technological change. Requirements fortraining after employment are high (several months), and firms seek tominimize hiring and training cost, and lost production due to turnover.Employees must have at least a lower secondary credential, be able to readEnglish, and pass aptitude and dexterity tests. Wages are increased above theminimum wage after training and probation. Working conditions are good in airconditioned factories. Rapid expansion in the industry has led to shortagesof highly trained technicians and engineers. Poaching and labor turnoveramong more highly skilled workers is therefore high.

3.19 Producers of industrial transformers hire low skilled, usuallyfemale, workers for simple tasks; males are hired and trained for welding,machining and machine operation. Transformers are produced to order; noinventory is maintained. Turnover of unskilled labor in the smaller of ourtwo sample firms is high; the other (larger) firm pays above-market wages toreduce hiring and training costs.

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3.20 Wit'-. import of automobiles under 2000cc of engine displacementprohibited, the two auto assembly firms in the sample are highly protected.Both un-skilled and skilled workers are hired. Turnover rates are the lowestin this industry because of good wages, fringe benefits and workingconditions. However, turnover is high among employees with vocationalgraduates. While no direct evidence is available, it is reasonable to assumethat some of these employees leave after training and experience to establishtheir own automobile repair businesses.

3.21 The automobile service industry consists of thousands of smallindependent firms employing 2-30 workers, and larger enterprises attached tothe ten automobile assembly companies, one ;f which is in our sample. Most ofthe workers in the small companies are unskilled migrants from rural areas.They are provided with low wages (500-800 Baht/month), accommodations andmeals. Training comes through observation and practice on customer vehicles.This practice, and the high price of automobiles, provides the well-to-doclientele for the larger service firms. These hire more highly skilledmechanics, including vocational graduates. The firm in the sample is aJapanese company which follows the lifetime employment practice, and turnoveris therefore comparatively low.

Human Resource Management Practice

3.22 Modern firms establish internal labor markets as a structure fordeveloping and rewarding employee productivity. Well-developed internal labormarkets provide structured career ladders, pay for performance, and traininglinked to the production needs of the firm. Small, family-owned firmsgenerally do not exhibit these characteristics. As they expand, however, theneeds for increased product quality and production efficiency lead firms tobegin to modernize their personnel practice. In countries such as Thailand,where small firms dominate the manufacturing sector, the pace and quality withwhich this transition is managed can be of considerable importance.

3.23 There is evidence in our sample of firms that such a transition isunder way. Overall firm personnel management practice was judged as fallinginto one of three categories: using internal labor markets; operating asfamily firms with little evidence of modern personnel management; and intransition from family to modern practice. The results of this classificationcan be seen in Tables 3.6 and 3.7.

3.24 Firms competing in export markets are more likely to haveestablished or be in transition to modern personnel management practice, thanthose operating in domestic markets, where family firms predominate(Table 3.6). As would be expected, the degree of capitalization of the firmis a contributing factor: only one of the family firms had assets of more than150 million Baht: this is a small firm in terms of numbers of employees thatoperates in the capital intensive animal feed industry (Chanapun). Thepresence of a foreign partner company is also a factor: all such firms haveestablished internal labor markets or are in transition toward them. Only onefirm without a foreign partner has fully established internal markets. Thisis CP, a large Thai multinational agro-business with operations in nine othercountries. The evidence suggests strongly that participation in internationalmarkets creates both the need for improved management and the technologytransfer mechanisms that help make it possible.

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Table 3.6: Distribution of Firms With Internal Labor Markets, By Industry

Personnel Management Style

Firm InternalIndustry/ Assets Number of Age Labor Transi- Foreignfirm (mil. B) Employees (yrs) Market tional Family Partner

EXPORT

ShoesPan Asia 1,000 2,350 10 X Hong KongLoxley 100 1.808 9 XR.M 50 :89 30 XKun Shin 17 76 50 X

ElectronicsSignatics 1,000 2,178 15 X USAGSS 127 454 4 X USAKCE 60 242 7 X

Canned FishSaecol 300 1,100 16 X AustraliaNimit 100 560 6 XSinheng 4 330 29 X

DOMESTIC

TransformersEkarat 150 300 8 XCharoenchai 50 90 22 X

Animal FeedCP 1,100 2,549 20 XChanapun 350 34 10 XThai Feed n.a. n.a. n.a.Srithai 100 170 13 X

SERVICES

ConstructionLand&House 728 220 19 XNambenjaphol 5 132 15 X

Auto ServiceIsuzu Serv. 302 404 15 X Japan

,IMPORT SUBS,Isuzu Assem. 210 831 26 X JapanBenz 120 750 29 X

Sources: Employer Survey, Interviews

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Table 3.7: Distribution of Firms With internal Labor Markets,By Number of Employees

Personnel Management StyleFirm Internal

Industry/ Assets Number of Age Labor Transi- Foreignfirm (mil. B) Employees (yrs) Market tional Family Partner

LARGE >750

CP 1,100 2,549 20 XPan Asia 1,000 2,350 10 X Hong KongSignatics 1,000 2,178 15 X USALoxley 100 1.808 9 XSaecol 300 1,100 16 X AustraliaIsuzu Assem. 210 831 26 X JapanLand & House* 728 220 19 X

MEDIUM 151-750

Benz 120 750 29 XNimit 100 560 6 XGSS 127 454 4 X USAIsuzu Serv. 302 404 15 X JapanEkarat 150 300 8 XKCE 60 242 7 XR.M 50 189 30 XSrithai 100 170 13 XThai Feed n.a. n.a. n.a.

SMALL <150

Sinheng** 4 330 29 XNambenjaphol 5 132 15 XCharoenchai 50 90 22 XKun Shin 17 76 50 XChanapun 350 34 10 X

Sources: Employer Surveys, Interviews.

* Ranked "large" because of extensive use of subcontractors for construction.

** Ranked "small" because of assets and very recent expansion of employment.

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3.25 Larger firms (in assets and employment) are much more likely to haveinternal labor markets (Table 3.7). The data also provide some insight intothe effect of firm age. Of the six transitional firms, five are less than tenyears old. The exception, Sinheng, is a small fish canning factory that hasrecently begun to expand. Interestingly, only one of the family managed firmsis less than ten years old. The other, older firms are small in terms ofemployment with the exception of the Benz auto assembly firm, which operatesin protected markets.

3.26 The data suggest that the need for modern human resource managementpractice will expand as that as export-orientation, capital intensity, firmsize and joint ventures increase.

3.27 Recruitment and Promotion Practice. Unskilled workers are primarilyrecruited through notices at the factory gate and referrals. In cont ast,vocational and university graduates are recruited through newspaperadvertisements and relationships between employers and educationalinstitutions (Table 3.8). In the industrial areas where the sample firms arelocated, these data indicate that more than half of the firm recruit throughlinkages with schools.

3.28 Job search methods employed by potential employees fit well with therecruitment methods used by enterprises, indicating a generally good sharedunderstanding of how the labor market works. Eighty percent of workers withprimary and secondary education report referrals by friends and relatives,factory gate notices, and joint application with friends as the main method ofjob search. These percentages fall to 67% and 50% for vocational certificateand diploma holders, who rely more heavily on school placement and otherformal search methods. For the employees in the sample, public employmentagencies figured almost not at all in 'ob search.

3.29 Firms with internal labor markets are more likely to fill managementpositions from within, reflecting better established career ladders.Conversely, small and medium size firms, and those with less-well developedcareer structures are more likely to recruit their managers from other firms(Table 3.9).

3.30 Pay differentials further substantiate ;he differences in personnelpractice between firms of different size. It will be recalled that internallabor markets or transitional personnel management systems are found in six ofthe seven firms classified as large in the sample and in six of the ninemedium size firms. Four of the five small firms are family owned; the otherhas a transitional personnel system. Thus modern personnel practice is morelikely to be found in the pay structures of large and medium size firms, andthis expectation is confirmed by the data (Table 3.10)

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Table 3.8: Recruitment Methods Used by Employers, By Type of Worker(No. of firms)

Type of EmploveesRecruitment Vocational University

Worker Graduates GraduatesNo. % No. % No. %

1. Factory-gate 3 14 --posting

2. Employment 1 5 4 19 -

Agency3. Employment 3 14 1 5 3 14

Referral4. (1)+(2) 2 10 - -

5. (1)+(3) 8 38 - - - -

6. (2)+(3) 1 5 -

7. Newspaper - - 2 10 5 248. Education - - 3 14 5 24

institution9. (7)+(8) - - 8 38 7 3310. (3)+(7)+(8) - - 1 5 -

11. Unknown 3 14 2 10 1 9

Total 21 100 21 100 21 100

Source: Employers Survey.

Table 3.9: Method of Filling Management Positions*

(Percent of Resoonders)Promoting Scouting from Both

Firms employees other firms methods Unknown

1. Firm Size

Small 47.1 17.6 11.8 23.5Medium 54.0 14.0 14.0 18.0Large 70.3 8.1 13.5 8.1

2. Internal Labor Market

Firm with internal 71.0 9.7 16.1 3.2labor market

Other firms 53.4 13.7 12.3 20.5

Note: * Management positions include section managers or higher positions.

Source: Employee Survey.

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Table 3.10: Average Salary by Position and Firm Size

Position Small Medium Large All Size

Managing Director 70,999 71,777 72,499 71,722

Assistant MD - 43,750 40,000 43,000General Mauiager 29,333 49,166 51,710 44,844

Assistant GM 20,000 24,333 36,500 27,666

Division Manager 20,000 23,505 28,966 24,936

Section Manager 6,750 10,497 15,140 11,421

Supervisor 10,000 6,642 12,875 9,000

Foreman 3,920 5,675 5,850 5,136

Leader 4,100 4,138 3,676 3,954

Percent Differentials Between Levels

Managing Director* 142 45 40 60Assistant MD - - - -

General Manager 46 89 42 62

Assistant GM 0 03 26 11

Division Manager 196 240 91 118

Section Manager - 58 17 27

Supervisor 255 17 220 75Foreman - 37 59 46

Leader

Source: Employer Survey.

A Assistant MDs not considered: the differential is calculated

between Managing Director and General Manager.

3.31 The salary progressions between levels are considerably smoother for

large and medium size firms. In fact, the salary structures of the small

firms in the sample are, on average, quite chaotic. In the medium sized

firms, promotion to division manager, the lowest level where responsibility

for profits is likely to be found, results in substantial pay increases,

averaging 240 percent. In the larger firms, there are two major salary

increases, between foreman and supervisor and a lesser -- though still

substantial -- increase between section manager and division manager. These

transitions mark major steps in worker careers.

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3.32 There is comparatively little salary differentiation at the lowerthree management grades in medium size firms, undoubtedly reflecting thesimpler management structure needed in smaller companies. Managing directorsalaries are the same in firms of all sizes, but in the small family-ownedfirms this salary is much higher than that of lower-level managers. Inte-rviews indicate that the job ladders in these firms are short. It is alsoworth noting that the position of Assistant Managing Director is clearly astaff job, with salaries lower than that of general managers. Highly paidstaff functions are characteristic of modern en.arprises, and not surprisinglyare not found in small firms.

3.33 In our sample, the career ladders of vocational graduates endeffectively at the level of section manager; only a few were found at thelevel of Division manager, and none higher (Table 3.11). Vocational diplomaholders have a clear advantage in promotion to higher levels of middlemanagement. College graduates enter the firms at supervisory and higherlevels, and progress more readily to higher level positions. Primary andsecondary graduates have fewer career opportunities. However, the presence ofa small number in top positions indicates that individuals can overcomeeducational barriers in advancing their careers. One of these individuals,forced by poverty to leave school at the primary level, mastered technical andproduction skills through a variety of unskilled and skilled jobs, eventuallyfounding his own successful transformer manufacturing company.

Table 3.11: Percentage Distribution of Manager and Supervisors,By Level of Education

Primary & 3-year 5-year B.A. Degree M.A.Position Secondary Vocational Vocational Eng+Sci Soc. Sci.

Managing Director 0.4 - - 3.2 5.9 90.0& Assistant

General Manager 0.8 - - 5.9 5.9 10.0& Assistant

Dept. Manager 1.1 7.5 5.3 22.9 17.5 -Section Manager 8.4 22.5 39.2 63.3 23.8 -Supervisor 17.9 18.3 20.1 4.7 31.6 -Foreman 11.3 27.5 25.4 - 15.3 -Leader 60.1 24.2 10.0 - - -

Source: Employer Survey.

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3.34 In addition to promoting more from within, and establishingeffective career ladders, large and medium firms are more likely to have abroad employee rotation policy, enabling workers to gain experience in anumber of differen;: operations of the firm. This includes rotation tosubsidiary firms o} the same company.

3.35 Promotion prospects for vocational graduates rest in part onemployer perceptions of their qualifications and abilities relative toindividuals with other qualifications. The opinions of the employers in oursample as to the relative characteristics of vocational and college graduatesare instructive in this regard (Table 3.12). Employers clearly see vocationalgraduates as docile workers, with low levels of responsibility andtrainability.

3.36 Training. The extensive provision of training by enterprises foundten years ago is confirimed by data on the firms in our sample. All firmsprovided either on-the-job training and/or organized training programs foremployees. Large firms were more likely to provide organized programs thanthose of medium size, and training in small firms was restricted to that givenon-the-job (Table 3.13).

3.37 Organized training programs are provided in the firm, away from thefirm in training institutions, and abroad. Large firms, and those in theexport sector, tend to have fewer training events of longer duration thanmedium size firms and those producing for domestic markets. They also tend toprovide more training abroad, in suppliers and partner firms (Table 3.14).

3.38 Workers in export-oriented firms received an average of 63 days ofentry-level training in 2.2 programs in 1988; the same figures for domesticfirms were 54 days and 7.2 events. If the automobile assembly and servicecompanies, with their foreign partners, are removed from the group of domesticfirms, the differences are even more striking, with the average length ofentry-level training falling by half.

3.39 The automobile companies provided the largest number of trainingprograms for the longest periods. Especially notable is the frequency oftraining in the automobile service company, implying alternance betweentraining and work on entry. In the assembly enterprises, by contrast, thereappears to be one entry level program of approximately five months durationafter employment.

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Table 3.i2: Employers' Attitude Toward Workers

Vocational CollegeCharacteristics Graduates Graduates

(% of firms) (% of firms)

1. Strength:- Clever & initiative - 30.0- Docile & modest 19.0 -- Determined - 5.0- Confidence 4.8 10.0- Competent in workshop 9.5 -- Capable at using tool & 19.0

fast leaner- Not haggle & low turnover 23.8- Loyal & accountable- Development potential & 25.0

fast learner- Good knowledge & strong - 10.0

theory, Unknown 19.0 20.0

2. Weakness:- Lack of responsibility 20.0- Weak knowledge 25.0- Slow development 10.0- Boastful 5.0- Lack of confidence 5.0- Little endurance & 36.8

over confidence- Weak in English 10.0 -- Shrinking and bad relation 5.0 15.8- Lack of experience - 10.5- Over-confidence & lack of - 5.3

experience- Job choosy & high turnover - 5.3- Negligent & bad English - 5.3- Unknown 20.0 21.1

Source: Employer Survey.

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Table 3.13: Training for New Workers, By Firm SizeNumber of Firms (%)

Type of TrainingSector OJT Program Both None

LARGE (n-6)

Managers 3 (50) 2 (33) 1 (17) -

Engineers 1 (17) 3 (50) 2 (33)Craftsmen 2 (33) 3 (50) 1 (17) -

average 2 (33) 2.7 (45) 1.3 (22)

MEDIUM (n-10)

Managers 7 (70) 2 (20) 1 (10) -Engineers 4 (40) 4 (40) 1 (10) 1Craftsmen 5 (50) 4 (40) 1 (10) -

average 5.3 (53) 3.3 (33) 1 (10) 0.3 (03)

S-.MALL (n-5)

Managers 2 (40) - - 3Engineers 3 (60) - - 2Craftsmen 5 (100) - - -

average 3.3 (66) - - 1.7 (34)

Source: Employer Survey.

3.40 In-service training by comparison appears to relatively poorlydeveloped. Workers in electronic firms, where technological change is mostfrequent, received the highest number of days of in-service training. And theaverage of 4.3 days per year received by workers in the automobile servicecompany is consistent with an overall high level of training. Most in-service training consists of short seminars lasting one week or less.

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Table 3.14: Type, Frequency and Duration of Enterprise Training, Per Worker,By Industry and Firm Size

Average Number of Average Total DaysTraining Events of TrainingIn-house Off-firm Abroad Entry In-service Off-firm

EXPQRT (w) 2.2 0.6 .15 63 2.8 3.7

Shoes 2.3 0.6 .17 132 1.9 4.0Electronics 3.4 0.6 .21 - 6.1 2.4Canned Fish 0.8 0.6 .12 57 1.1 4.7

DOMESTIC (w) 7.2 0.6 .13 54 1.4 2.6

Transformer 1.5 0.7 .15 27 1.2 2.2Animal Feed 12.5 0.7 - 21 0.9 5.5Construction 1.8 0.6 .12 18 1.9 2.5

average (w) 6.3 0.7 .08 22 1.1 3.3

Car Service 26.0 0.5 .50 75 4.3 1.8Car Assemb. 0.9 0.3 .44 159 0.9 0.4

average (w) 9.9 0.6 .25 132 2.0 .9

FIRM SIZE

Large 4.8 0.8 .29 93 2.2 5.6Medium 5.4 0.5 .12 54 2.3 2.2Small 1.1 0.6 .17 24 1.4 2.1

Source: Worker Survey.

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3.41 The number of days of entry-level training provided varies rela-tively little by the educational background of employees (Table 3.15). Workerswith a primary education receive the least training (42 days on average), andholders of the vocational certificate in commercial occupations the most (87days). Interestingly, commercial diploma holders were trained more often, forfewer days, than those with the 3 year certificate, and also received moredays of in-service training. It is likely that diploma holders were receivingtraining in a variety of advanced skills, while certificate holders receivedlonger training in more basic skills. In technical fields, diploma graduatesreceived more training than certificate graduates. While direct evidence isnot available, the stronger upward mobility of diplomates through managementranks (paragraph 3.33) is probably being supported by more training inmanagement skills.

Table 3.15: Average Number of Training Events and Days of TrainingPer Worker, By Employee Education Level

Average Number of Average Total DaysTraining Events of Training

Education In-house Off-firm Abroad Entry In-service Off-firm

Primary 0.8 0.31 0.19 42 0.5 0.2Secondary 2.9 0.55 0.27 63 3.5 -

Commerce 10.2 0.55 - 87 2.8 2.5(3 year)Commerce 19.7 0.83 - 45 5.4 1.5(5 year)

Technical 1.7 0.60 0.13 69 1.2 2.6(3 year)Technical 1.6 0.66 0.09 81 2.1 3.8(5 year)

B.Sc 8.9 0.85 0.50 66 3.2 9.2BA 2.1 0.80 0.20 60 1.9 2.8

Source: Employee Survey.

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3.42 Management training, especially in quality control, dominated in-service training provision in both large and medium-size firms (Table 3.16).All of the large firms, and half of the medium size companies, providedqiality control training to executives. Firms of both size also providedmanagement training for engineers and skilled workers. However, only mediumsize firms provided much technical training to employees; most of this wastargeted on engineers, technicians and skilled workers. This is more easilyunderstood when it is rocalled that of the six large firms, three are in theshoe and canned fish industries, where technology and in-service trainingneeds are correspondirgly low. One is a large automated animal feedproduction enterprise, also with low technical skill needs and low levels ofin-service training provision. Much of the in-service training in large firmscomes in the remaining two: electronics and automobile assembly.

Table 3.16: Type of In-service Training Provided,By Firm Size and Occupation -- Number of Firms (%)

QualityControl Other All NoManagement Technical Management* Three Training

LARGE n-6Executives 4 (66) - - 2 (33) -Engineers 2 (33) 1 (17) - - 3 (50)Technicians 3 (50) - 1 (17) - 2 (33)Salespersons 1 (17) - 1 (17) - 4 (66)Skilled Workers 4 (66) - 1 (17) - 1 (17)Unskilled Workers 2 (33) 1 (17) - 3 (50)

average 2.67(44) .17(03) .67 (11) .33 (06) 2.16(36)

MEDIUM n-10Executives 5 (50) 1 (10) - - 4 (40)Engineers 4 (40) 3 (30) - - 3 (30)Technicians 3 (30) 4 (40) - - 3 (30)Salespersons 4 (40) - 3 (30) - 3 (30)Skilled Workers 2 (20) 3 (30) - - 5 (50)Unskilled Workers 3 (30) - - - 7 (70)

average 3.5 (35) 1.83(18) .50 (05) 4.2 (42)

SMALL- NONE PROVIDED -

Source: Employer Survey.

* Primarily training in interpersonal relations and communication skills.

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3.43 Training outside the firm is provided by a wide range of institu-tions. Included are trade and management associations, private trainingcompanies, government training schools and institutions and universities.Cooperation among training providers is evident. Programs jointly sponsored

by associations, universities and the government are most frequent.

3.44 As would be expe;cted, large and medium-size firms spend more ontraining than do small enterprises. While firms in the sample had difficulty

in identifying the full costs of training, the estimates of managers aresummarized in Table 3.17 below. In larger firms the total amount spent on

training can be large absolutely, but in no case did a firm spend more than 1%

of its sales on training. This is in part due to the relatively low cost of

training seminars outside the firm, which range in price from a few hundred to

a few thous&nd Baht per participant. An exception is the MIBA trainingprograms utilized by firms for top managers: these cost 35,000 - 170,000 Bahtper person.

Table 3.17: Recruitment and Training Cost Estimates, By Firm Size, 1988('000 Baht)

Firm SizeLevel of _-

Expense Larye Medium Small

More than 2,000 1 -

1,000 - 2,000 1 3

600 - 999 1 -

100 - 599 2 4

60 - 99 110 - 59 - 2 -

Less than 10 1 2

No expense - 2

Unknown 1

Source: Employer Survey.

SUMMARY

3.45 As the 1980s began, and Thai industry began to expand, enterpriseswere already providing a great deal of training after employment. Thistraining enabled individuals without pre-employment vocational training to

acquire the skills needed for some technical occupations. In others, notably

electronics and drafting, the proportion of vocational graduates employed was

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quite high, indicating that employers found pre-employment training in thesefields of value. And in-service training had a positive impact on theearnings of primary and vocational graduates. There was evidence to suggestchat training after employment for vocational graduates in construction wasleading to supervisory positions.

3.46 Ten years later, Thai enterprises continue to provide a great dealof training after employment. Large firms competing in the export sector relyon low-cost, low-skilled workers for comparative advantage. High turnoverrates pose few problems where labor is abundant and recruitment and trainingcosts low. Medium size firms in protected domestic industries use a higherproportion of skilled workers, and invest more through training and wagepolicy in reducing labor turnover. This is especially true in the electronicsand automobile industries.

3.47 At the same time, large export firms report shortages of highlyskilled workers able to design production systems. Turnover rates arecomparatively high among vocational graduates in the electronic and automobileindustries, and in both large and medium size firms. Shortages in keyengineering and technical areas are leading to inter-fii-m competition forskilled workers (poaching). Firms appear to be responding to this with wageand fringe benefit policy.

3.48 The data indicate that so long as low-cost un-skilled labor remainsavailable, present patterns of expansion in export industries can bemaintained. However, when overall labor supply begins to contract, labor-intensive industries will be less viable. This will lead to an increase incapital investment and production technology to lower labor costs. If theexperience of the capital intensive animal feed industry is a guide, this mayresult in the lower overall labor demand needed to adjust to tight labormarkets. The size of demand for skilled workers and technicians, however, islikely to be determined by offsetting trends. In some firms, such as feedsand electronics, the demand may increase if lower labor and production costslead to sufficient expansion to increase absolutely the number of technicallyskilled person needed. On the other hand, progressive relaxation of protec-tion on domestic industries such as automobile assembly may put downwardpressure on labor costs, leading to increased automation to replace skilledworkers. Clearly, the ability to monitor these trends will be of greatimportance to the government and to enterprises.

3.49 In any case, increased poaching and direct testimony from enterpris-es indicate that certain technical skills are in short supply, notably attechnician and engineering levels. Employer attitudes toward vocationalgraduates indicate currently low levels of confidence in the ability of theseindividuals to acquire higher level skills through in-service training.

3.50 The ability of enterprises to address skill development andutilization needs through human resource management practice is thus ofconsiderable interest. The data indicate that large, export-oriented firmswith foreign partners have established a high level of modern personnel

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practice, with well-developed internal labor markets. Many medium-size firmsare in transition to better practice. Both types of firms are behavingrationally with respect to training needs, as evidenced by a greater provisionof technical training in high technology firms, and attention to qualitycontrol management in most large and medium sized firms. There is ev'dence ofcooperation between associations, universities and the government in meetingthe need for external in-service training.

3.51 There are, however, significant problems. Personnel practice insmall, family-owned firms is weak, and little training other than coaching on-the-job is provided. Continued industrial expansion will depend on growth andexpansion of small firms, and effective human resource management will play animportant part in this process. The data indicate that the currently mostviable mechanism for human resource management development in a joint venturewith a foreign firm. This option will be open to relatively few small firms.Thus targeted efforts to strengthen personnel management practice in growingsmall firms will be required. The pattern of current support through seminarsof short duration is not likely to be adequate to the task.

3.52 In sum, the data give reason for confidence in the ability of Thaienterprises to provide significant amounts of skills training. Nevertheless,shortages of key higher level technical skills, and low levels of employerconfidence in the trainability of vocational graduates, point to the need foradjustments in the pre-employment vocational/technical training system.Additional support in the form of consultancy and management training forsmall firms expanding in the export market, or in an increasingly opendomestic market, will be needed.

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IV. Structure. Evolution and Efficiency of the Vocational Training System

4.1 The current system of vocational and technical education:1 inThailand is both large and complex. This chapter begins with an overviewdescription of the training system and its financing, circa 1988. This isfollowed by an historical analysis of system development, and an assessment ofthe internal efficiency and quality of the system as currently configured.

4.2 Data for the chapter are drawn from previous studies, agencybackground papers, interviews with senior officials, the NEC/World Bank surveyand the reports of interviews with admit.istrators, teachers And studentsconducted as part of the reconnaissance visits to schools and trainingcenters.

OVERVIEW OF THE TRAINING SYSTEM

4.3 Vocational education and training in Thailand is provided throughboth formal and nonformal institutional arrangements.P/ In 1986,approximately 900,000 students received training in the system, of whom some500,000 were enrolled in formal programs at secondary and post-secondarylevels. For every six students in academic secondary schools, there were fourin vocational high schools and two in post secondary vocational programs.

The Formal System

4.4 Formal vocational education and training is conducted at threelevels: secondary, leading to a certificate equivalent to that giveln graduatesof general secondary schools;W' post-secondcry (generally for t-wo years),leading to a diploma; and university level, leading to a degree. Entranceinto secondary vocational education requires completion of lower secondaryschool. Entry to successive levels of the vocational system requirescompletion of the next lower course. Admission at all levels is throughcompetitive entrance examinations developed and administered by eachindividual institution.

W9' The system of vocational education and training will be referred to in thebalance of the paper as the "training system" for purposes of simplicity.

2W See organizational charts in Annex III.

W Prior to 1981 Thai education was organized on a 4-3-3-3 basis: lower andupper primary levels of four and three years, followed by two three yearlevels of secondary education. At that time vocational secondary completionrequired ten years of education; academic seconda.y' 13. The 1981 reform putvocational education on a par with secondary education, permitting vocationalgraduates to sit for university entrance examinations.

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4.5 A majority of the formal institutions, both public and private,offer programs at more than one level; for example, for both the certificateand the diploma, or in the case of some of the campuses of the Institute ofTechnology and Vocational Education (ITVE), at the certificate, diploma anddegree levels.

4.6 The system is administered by several ministries, some of whichoffer both formal and nonformal training (Table 4.1). The Department ofVocational Education (DOVE) under the Ministry of Education is the largest.DOVE administers secondary (certificate) and post-secondary (diploma) levelprograms in three kinds of technical vocational training colleges: technical(industrial trades); vocational (commerce, business administration, homeeconomics and arts and crafts); and agricultural (general agriculture). Theseinstitutions enroll for about half of the total number of students enrolled invocational schools at the secondary level.

4.7 The Institute of Technology and Vocational Education operates as aDepartment of the Ministry of Education. It administers eight faculties indifferent disciplines, which in turn offer bachelor degree courses atdifferent campuses located throughout the Kingdom. A separate teaching forceoffers certificate and diploma courses in varying combinations on the samecampuses. In addition, the ITVE trains teachers for certificate and diplomaprograms at one of the 29 campuses. The four-year, bachelor degree programshave been developed at six campuses as well since 1981 in response to needsfor higher-level technical manpower. This program is equivalent to auniversity degree; however, credits earned in ITVE or DOVE diploma programsare not accepted in universities, restricting vocational students to thedegree programs of the ITVE and the King Mongkut's Lnstitute of Technology, orto the Open University, which accepts diploma credits in some programs.

4.. ITVE and DOVE use different (though similar) curricula to preparestudents for the same certificate and diploma. DOVE and ITVE respectivelyoffer a two-year and a three-year post-secondary technical diploma forgraduates of academic secondary schools.

4.9 The King Mongkut's Institute of Technology provides a thirdinstitutional stream at the North Bangkok campus for certificate, diploma anddegree study, although only in industrial technology. The other twoindependent KMIT campu3es offer diploma and degree programs only. Longassisted by the German Government, KMIT operates through thsee ind9pendentcampuses, and is considered to be the "flagship" vocational nd technicaleducation institution.

4.10 Both ITVE and KNIT offer technical teacher training programs. Theseinclude one year pedagogical courses after the technical diploma, and foua.year courses leading to a bachelor's degree in industrial education. KMITalso offers a two-year M.S. in technical education to prepare administrators.

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Table 4.1: Number of Vocational/Technical Institutions by Leveland Field of Study, 1988

Teaching HigherInstitution ./ Certificate Diploma Certificate Degree Total

Formal Vocational SystemDOVE Technical 163 163 163Colleges

Agriculture 45 45Vocational 41 41Technical 77 77

Institute of 18 23 2 5 27 2Technology andVocationalEducation

Agriculture 4 9Commerce 5 5 - 1Industry 9 9 2 4

King Mongkut 1 7 3 3 3Institute ofTechnology

Private Technical 379 (243) 379Schools and Colleges

TOTALS 563 434 12 11 574

Nonformal SvstemDOVEPolytechnic Schools 28Area Vocational 13Centers

Mobile Training Units (attached to Agricultural colleges) 45

Institute for 7Skill Development l/

Department of 6264 i/Nonformal Education

J/ Unduplicated total number of individual institutions or campuses.2/ Except Thawes Campus and Bangphra Agricultural Campus..i. One additional Regional Institute is under construction.

No. of organized training groups, each enrolling a maximum of 15 people.

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4.11 Both DOVE and KMIT are conducting pilot experiments with the "dual"training system. While the approaches vary in detail, they have in common acombination of on-the-job training of employed workers with one- or two-dayblock release periods per week for theoretical classroom training. The KMITpilot is being done in collaboration with a large auto assembler; the DOVEprojects serve a number of employers in a provincial industrial area.

4.12 Private vocational schools and colleges provide an important flow ofgraduates at both diploma and certificate levels in agriculture, commerce andindustrial occupations. Private schools must register with the government,which sets limits on the amount of tuition they can charge (currently 7,000Baht/year). Tuition ceilings have tended to make it difficult for privateschools to offer industrial subjects, although some do so -- undoubtedlycross-subsidizing from other more profitable fields of study. Private schoolsmay follow either the DOVE or ITVE curriculum.

4.13 In 1986, more than 500,000 students were enrolled in formal programsat the certificate and diploma level (Table 4.2). Private schools enrolled43% of the students at the certificate level, and 45% at the diploma level.

Table 4.2: Enrollments in Formal Vocational Education, 1986

Certificate Diploma

DOVE 176,262 64,772

ITVE 20,699 26,046

KMIT £ 038 1,400

Total Public 197,999 92,218

Private Schools 151,340 56,532

TOTALS 349,399 166,694

Private asPercent of the Total 43% 45%

Source: Background Papers, DOVE Statistics.

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The Non-Formal System

4.14 Nonformal training is offered by the Ministry of Education throughDOVE and the Department of Non-formal Education, and by the Department ofLabor of the Ministry of Interior through the National Institute of SkillDevelopment and its six regional institutes. Training is generally targetedat more disadvantaged workers, and lasts anywhere from 10 hours to 15 months.

DOVE Nonformal Training

4.15 DOVE provides nonformal courses of varying duration (one year,three months, shorter) in polytechnic schools and area vocational centers(AVCs). Training is given in industrial trades, graphic arts, crafts andbusiness skills. Polytechnics are mostly located in urban areas. The AVCsalso provide workshop-based practical courses for students in comprehensivesecondary schools. Mobile training units are attached to each agriculturalcollege to provide extension services to rural communities.

Department of Nonformal EducatiQn

4.16 DNFE is responsible for providing educational services andopportunities to people aged fourteen and above who are not in school and alsoto those with primary education. It plays an important role in ruraldevelopment by offering many kinds of literacy and skill development programsboth classroom and non-classroom.

4.17 With a focus on rural learners, the DNFE operates network of fiveregional centers, 73 provincial centers and 1 Border Area center. Vocationalcourses of 100-300 hours are organized by the staff of these centers inindustrial arts, home economics, business skills, and agriculture. Thefacilities of existing schools are utilized. Similar courses are deliveredthrough mobile training units. Courses are initiated on the basis of trainingneeds surveys, or in response to requests from a minimum of fifteen people.Full time staff are augmented by temporary instructors hired locally.Additional short courses, called "interest groups," are offered in a widerange of skill areas in response to requests.

National Institute of Skill DeveloDment

4.18 With the technical assistance from UNDP/ILO, the Department of Laborunder the Ministry of Interior has been promoting and developing vocationaltraining since 1968. The National Institute for Skill Development (NISD) wasestablished to formulate and implement policies, plans, standards, and skillstesting for youth enter'Lng the labor force as well as to upgrade skills ofthose who are already employed. Six Regional Institutes for Skill Development(RISDs) have been established in various regions throughout the country: twoeach in the Northeast and the North, one each in the West, the East and theSouth. The main objective is to support the development of decentralizedindustries in the provinces. The National Institute supports the industrialsector in the greater Bangkok metropolitan area.

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4.19 Aside from differences among the institutions in the design of theirtraining programs to suit local needs, the overall training activities ofthese institutes follow the same guidelines and have the same objectives.Training programs provided are:

Pre-employment Training for unemployed out-of schoolyouths with at least four years of primary schooling.Skill training courses are provided in short durationranging from three to eleven months followed by two tofour months of on-the-job training. Interchangeablemodular units are used: (1) to allow trainees who have orwish to drop-out upon completion of each employable unitand; (2) to accept an increased number of trainees so thatthe available equipment is fully utilized.

Upgrading Training for skilled workers who need trainingto keep up with the continual technological changes and tohave increased mobility in the labor market. Currently,there are about 30 upgrading courses with an averagelength of 60 hours. Some courses have been designed to betheoretically oriented to provide the background knowledgeto those workers who have obtained skills throughpractice.

Non-Technical Training courses are offered by internaland experienced external instructors. The institutesconduct courses in entrepreneurship and for suchoccupations as secretary, receptionist, salesman, andwaiters or waitress, and they seem to attract more femalethan male trainees. The program has been designed to beflexible, and new courses are offered as new occupationalneeds develop. In addition, NISD offers foreman training,instructor training, officer training, and promotes in-plant training.

4.20 Pre-employment courses are offered in basic industrial trades(construction, mechanics, metal work, furniture making).

4.21 Total enrollments in these three publicly finar '4 and providedelements of the nonformal training system were 375,360 in _986 (Table 4.3).

4.22 There are additional elements of the nonformal training system thatare not addressed in this study. One is private, nonformal vocationaltraining, which enrolled 144,618 students in 1986 (Office of the PrivateEducation Commission, 1988).

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Table 4.3: Enrollments in Nonformal Vocational Training 1986

DOVE Polytechnics 72,791and AVCS

One year courses 835Short courses 71,956

DNFE 275i371

Vocational Courses 116,318Interest groups 159,053

NISD 1/ 27,198

Pre-employment 3,787Non-technical 11,703Up-grading 6,390Mobile 5,318

TOTAL 375,360

1/ 1987 enrollments; 1986 not available.

Additional Nonformal Training

4.23 The government's promotion and development of small-scale industriesis coordinated through Department of Industrial Promotion (DIP) which isresponsible for providing assistance ranging from light engineering trainingto loans to small-scale industries. Training programs are offered through theIndustrial Service Institutes (ISI) in Bangkok and Chieng Mai. Numbers arenot known.

4.24 In addition to the training programs under the MOE and MOI, severalgovernment agencies and ministries also organize and conduct their own coursesfor their employees, as well as for the public, free of charge.

Geographical Coverage

4.25 Equity in the distribution of resources and opportunities has beenan important policy goal in education generally, as well as in vocationaleducation and training. It has been policy to have at least one technicalcollege in each of the 72 provinces, and the DNFE program is directed througha multi-level regional structure. The result has been a balanced distributionof institutions across regions (Table 4.4).

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Table 4.4: Number of Vocational/Technical Institutions by Region1988

Bangkok North Northeast Central East West South Total

Formal SystemDOVE 13 33 35 20 29 32 162ITVE 12 5 4 4 2 2 29KKIT 3 - - - 3Private t/ 120 41 77 49 26 66 379

NonformalDOVE 4 6 11 8 3 9 41NISD 1 2 2 - 1 1 1 8DNFE 45 1924 1684 1199 446 966 6264Institutional 2/Training Groups

1/ Office of Private Education Commission.2/ Included in the Central Region Figures.

Source: Institutional Background Papers and DOVE, "Thailand Vocationaland Technical Education.

HISTORY OF SYSTEM DEVELOPM- _

4.26 The widespread system of vocational education and training has along history, beginning with the establishment of the Ministry of Education in1892 to educate individuals for jobs in rapidly a rapidly expandinggovernment. From its earliest origins, education was seen as preparation forgovernment service. At the time, occupational training in fields such asgoldsmithing, traditional medicine, sculpture and silversmithing was carriedout by families in different parts of Bangkok. Many of these retain theirtrade names today: Ban Bat (bowl making village), Ban Dokmai (flower arrangingvillage), Ban Ti Thong (gold leaf making village). (NEC, 1987).

4.27 By 1909, formal schooling was carried out in two streams, generaland vocational. The first student arts and crafts fair was held in 1912 topromote interest in manual arts. The first two commercial schools wereestablished in 1910, an arts and craft school in 1913, and the firstagricultural teacher training school in 1917.

4.28 Vocational educationi became a formal part of the Thai educationsystem in 1932, when it was known as "special education," and was deliveredthrough trade schools for agriculture, construction and aecretarial

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occupations. Vocational training began in the last two years of a four yearprimary curriculum, and was also offered in the last four years of an eightyear secondary curriculum. The Department of General Education wasresponsible for all levels and types of education.

4.29 Vocational education was eliminated from the primary curriculum andconcentrated at the secondary level in the period 1936-41. Sequential lower,intermediate and advanced programs were offered A separate TechnicalEducation Department was established within the Department of GeneralEducation in 1937. Two years later, TED became the Department of VocationalEducation (DOVE), marking the separation of general and vocational educationthat continues today.

4.30 During this period schools specialized in only one trade. Offeredwere welding, mechanics, carpentry, leather work, textile weaving,agriculture, commerce and agricultural teacher training. The number ofschools was expanded each year. In 1938, a large in-serNice training programwas carried out to prepare 600 primary schools teachers for the vocationalschools. Various trade schools in Bangkok and workshop facilities at theBangkwuang Prison and at army facilities were used to conduct classes andpractical exercises.

4.31 The main change in the system over the next decade was torestructure both general and vocational education. General education was puton a 4-3-3-2 basis, comprising seven years of primary and five years ofsecondary education. Vocational education was mapped against this structure.The first three years corresponded to upper primary, the second three to lowersecondary. Post-secondary vocational courses were considered equivalent tothe last two years of general secondary education.

4.32 Fields of specialization were grouped into five main areas: trade,industry, agriculture, commerce and technical subjects. The leading technicaland agricultural schools became technical colleges, offering post-secondaryvocational education programs (completion of which required thirteen years ofeducation, the same number required for the general secondary diploma). In1951 Bangkok Technical College was established as the first vocational teachertraining institution; it provided separate training for male and femaleteachers. An agricultural teacher training program was initiated in 1953 atCI.- ngmai and Surin Agricultural Schools.

4.33 External assistarce began to play an important role in hedevelopment of the system during the 1950s. U.S. Government assistanceenabled a number of technical schools to be upgraded into colleges providingpost-secondary vocational training. Grants from SEATO followed in 1958 toassist in the improvement of curricula, instructional materials and equipment.In 1959, L.' German government provided assistance for the establishment ofthe North Bangkok Technical School, now known as King Mongkut's Institute ofTechnology - North Bangkok Campus. At the time, post-secondary education wasoffered in only a few colleges.

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First Plan (1961-66)

4.34 During the first economic development plan the Kingdom emphasizedagriculture and rural development. At the same time, manpower development tosupport industrial growth was an objective. The plan called for emphasis onthe " ... production of middle level manpower in both quantity and quality torespond to the manpower needs of the country."

4.35 Planning and policies for vocational education were based onprojected manpower needs. Surveys showed further that students wereinterested more in vocational training at the upper secondary than at thelower secondax.- level. Technical colleges grew in numbers. All trade schoolswere upgraded to become higher vocational training institutions offeringprograms at upper and post-secondary levels. A number of specializations wereconsolidated into schools at this time, and the number of vocational schoolsand colleges continued to grow. Although most attention during this periodwas given to the improvement of technical and agricultural schools, tradeschools were further developed as well. UNICEF provided funds in 1965 toimprove 35 trade schools in one province.

Second. Third and Fourth Plans (1967-81)

4.36 The Second Plan emphasized the improvement of upper secondary..ocational education, reduced emphasis at the lower secondary level, improvedstatus for vocational teachers, and attention to improving the quality ofshort-term vocational training courses. The Third Plan gave priority to theexpansion of vocational education to meet middle level manpower tLeeds. Thisten year period saw extraordinary expansion of the vocational training system.

4.37 Teacher training was expanded to support a growing system(Table 4.5). Teachers were trained in a 2-year program at the upper-secondarylcvel and in four different post-secondary programs lasting from one to threeyears. A third agricultural teacher training site was established at Bar.npraAgricultural College.

Table 4.5: Expansion of Vocational Teacher Supply, 1968-71

1968 1969 1970 1971

Teachers in Training 1,205 1,202 1,053 2,053

Teachers in Service 5,478 5,469 5,924 6,116

Source: NEC.

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4.38 At the beginning of the Second Plan, the Government took a loan fromthe World Bank to fund the First Education Project which included a componentto upgrade 25 technical and agricultural schools. Loan funds were usedprimarily to purchase equipment, and to support upgrading of the teachingstaff.

4.39 Teacher qualifications increased substantially during this period.In 1966 40-45% of vocational teachers were considered unqualified, holdingless than the higher vocational diploma. By 1970, 31% held the bachelor'sdegree, 48% the higher diploma or equivalent, and 21% were unqualified. Atthe same time, efforts to recruit individuals for training as teachers who hadindustrial experience faltered because of low civil service teacher salaries(World Bank, 1984).

4.40 During the Second Plan period two patterns fundamental to theevolution of the vocational training system were established. One was thevery rapid expansion of enrollments, accompanied by an increasing tendency ofcertificate graduates to go on to diploma level studies. The second wasincreasing institutional complexity. These patterns dominated the decade ofthe 1970s. By the time of the Fourth Plan, problems of excess supply turnedgovernment policy from expansion to quality improvement, with limited furtherexpansion, mostly in the provinces.

Pai,id Expansion and Continuation to Higher Levels

4.41 During this period, vocational enrollments grew rapidly, greatlyexceeding targets (Table 4.6). OvL..rall enrollments in 1981 exceeded plantargets by 174,000 students, or 56%, while enrollments were 43% below targetsfor academic secondary education. Enrollments in primary education also fellshort of targets in the 1977-81 period: by 1981, they were 24% belowestablished goals (NEC, 1985).

4.42 Vocational enrollments increased in both technical and agriculturalschools. Manpower estimates developed by the World Bank for the First projectanticipated an annual demand for certificate graduates in construction, metaltrades and mechanics, and electricity and electronics of about 2,600 andinstitutional size and enrollment capacity was designed accordingly. Targetswere substantially exceeded. Enrollments in the 25 project technical schoolsgrew 66% between 1964 and 1972, fifteen per cent above projections. By 1980-81, enrollments in project technical schools increased 135%, sixty-threepercent above projected need (World Bank, 1984).

4.43 Similar expansion beyond targets took place in agriculture, with thegreatest expansion coming at the dL,ploma level, contrary to projections.Enrollments in DOVE and ITVE agricultural schools grew from 2,000 in 1963 tomore than 28,000 in 1981. Between 1977 and 1981, DOVE agriculturalenrollments grew 145%, and those of ITVE 33% (World Bank, 1984). Totalenrollment in public vocational schools at ti diploma level grew 79% from1977-81.

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Table 4.6: Enrollment Targets and Growth, 1977-81('000)

AcademicSecondary Vocational

Percent PercentYear Target Actual Difference Target Actual Difference

1977 1,268 1,110 (12.5) 208 227 9.3

1978 2,000 1,476 (26.2) 241 258 7.1

1979 2,294 1,568 (31.6) 264 301 14.1

1980 2,612 1,606 (38.5) 288 346 20.3

1981 2,757 1,565 (43.2) 310 484 56.1

Source: NEC, 1985.

4.44 This rapid expansion beyond targets contributed to a substantialoversupply of graduates. In 1979, two years before the end of the Fourth Planperiod, the total output of DOVE and ITVE technical colleges was more than22,000 graduates, 600% higher than the demand predicted twelve years earlierduring preparation of the World Bank loan. Supply was estimated to exceeddemand by about 100%. A similar analysis for agriculture graduates indicateda better balance between supply and demand because of high levels ofgovernment hiring. The government employed about 40,000 of the estimatedstock of 43,000 certificate, diploma and degree level agriculture graduates,90% of which had been trained in the previous decade. The balance werethought to be employed in the private sector or unemployed. Noting thatthe government had 1500 agriculture vacancies in 1982, the report wasoptimistic about employment prospects for agriculture graduates. A governmentceiling on new hiring immediately thereafter, of course, made this prospectnot so positive.

4.45 Nonformal education and training also expanded during this period.Established originally to nombat aduit illiteracy, the DNFE began to offershort vocational training courses in rural areas. These were supported byUSAID assistance that provided 45 training units and associated stafftraining. While called "mobile," these units were essentially fixed trainingcenters operating courses in provincial polytechnic schools and local primaryschools. The courses were aimed at poorer out-of-school youth and adults andwere concentrated in the North and Northeast regions.

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4.46 Evaluations indicated that the program was successful in training80,000 persons in five years, 56,000 of whom competed the course. The courseswere effective in helping farmers increase non-farm earnings (USAID, 1981). Alater study of the impact of these courses confirmed the impact on non-farmearnings, but found no effects in terms of increased agricultural productivity(NEC, 1982).

4.47 Nonformal ed-ucation development was also supported by the World Bankthrough the Fourth Edutntion Project (1977-83), 'nich financed the developmentof four regional and 24 provincial nonformal education centers, as well asstaff training and development.

Increasing Institutional Complexity

4.48 The 1970s opened with two public vocational training agencies, DOVEand DNFE; they closed with four, offering (in various combinations inindividual institutions) the same range of certificate and diploma levelcourses.

4.49 The general rise in the level of vocational training was accompaniedby institutional changes designed to strengthen post-secondary and university-level vocational training. In the last year of the Second Plan, KingMongkut's Institute of Technology was created as an independent institution byunifying the North Bangkok Technical College, Thonburi Technical College, theTele-communication College and the Construction College. These were, at thetime, the best colleges in the DOVE system. In 1974, KMIT was moved under thecontrol of the Ministry of University Affairs and expanded to provide full4-year undergraduate programs in addition to certificate and diploma levelcourses.

4.50 The same pattern was followed during the Third Plan. In 1975, theInstitute of Technology and Vocational Education was created and in 1977,twenty eight of the best DOVE colleges came under ITVE's administration. ITVEwas given independent Department status within the Ministry of Education.Most of ITVE campuses offer certificate, diploma level programs, and trainedvo^ational teachers. It was intended that ITVE would gradually emphasizediploma and degree level courses, with DOVE gradually concentrating oncertificate level courses.

The Fifth Plan (1982-86)

4.51 By the time of the preparation of the Fifth Development Plan, theproblems of oversupply of vocational graduates were recognized. Vocationaleducation and training policy gave priority to short-term agriculturaltraining, collaboration between the training system and the private sector,encouragement of enterprises to provide on-the-job training, and encouragementof private vocational training.

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4.52 Private vocational schools enrolled more than 150,000 students in1980 at the certificate level, more than half of all formal vocationalenrollments. These numbers increased to 225,000 by 1983. Public vocationaltraining continued to expand even more quickly, however, and the proportion ofcertificate enrollments in private schools feel to just 50% in that year.Private schools began offering diploma courses in 1981, with enrolImentsgrowing rapidly, reaching 75,000 in 1984, or 47% of total diploma enrollments(Annex II, Table 5).

4.53 However, total enrollments in vocational secondary schools leveledoff in 1983 and began to fall the following year. Certificate levelenrollments in private schools began to fall after 1982, declining to their1980 level by 1986. At the diploma level, enrollments fell sharply in 1986.Public vocational enrollments at the certificate level began to decline in1983, but fell more slowly. At the certificate level, public enrollmentscontinued to increase until 1985. In 1986 they declined slightly, almostentirely in DOVE institutions.

4.54 Academic secondary enrollments, which grew at nine percent in 1982,began to grow more slowly and showed signs of declining by 1986. As with thevc-ational schools, enrollment declined sharply in private schools.W1

4.55 The data indicate that private vocational education, operating inthe (regulated) marketplace, responded more quickly to the oversupply ofvocational graduates. The public system began to respond as well, though moreslowly. ITVE data, however, suggest that parents and students are respondingto the high rates of unemployment among vocational graduates. Enrollments andapplication to admission ratios for agriculture have fallcn steadily since1984 (Table 4.7).

4.56 Institutional complexity increased further during the Fifth plan.With support from the World Bank, a project to diversify the general secondarycurriculum was carried out. Students in "comprehensive" high schools were totake 6-10 periods a week of vocational shop courses. These were providedthrough twelve area vocational centers (AVCs), which served the students atnearby schools. The AVCs were placed under DOVE administration. Over time,the vocational content of the comprehensive schools was weakened in responseto student and parental pressure for more academic courses in preparation foruniversity entrance examinations. As the utilization of the AVCs for highschool students fell, DOVE initiated a variety of one year and short-termtraining programs for out-of-school adults and youth.

W The possible causes and implications of these enrollment declines are morefully discussed in Chapter V.

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Table 4.7: ITVE: Enrollments and Application: Admission Ratios, 1977-88By Field of Study, Certificate and Diploma

1977 1978 1980 1981 1982 1983

IndustryEnrollments 16,697 16,591 15,465 17,050 18,697 19,189app/adm 5:1 3:1 3:1

CommerceEnrollments 13,366 15,080 14,040 15,246 16,024 16,546app/adm 5:1 4:1 4:1

AgricultureEnrollments 3,496 3,940 5,079 6,681 7,741 8,137app/adm 3:1 4:1 3:1

1984 1985 1986 1987

IndustryEnrollments 19,847 20,204 22,033 21,128app/adm 5:1 4:1 3:1 4:1

CommerceEnrollments 17,486 18,367 18,571 18,414app/adm 4:1 4:1 3:1 3:1

AgricultureEnrollments 7,086 6,568 5,921 5,632app/adm 3:1 2:1 2:1 1:1

Source: Background Papers.

The Sixth Plan '1987-91)

4.57 The oversupply of vocational manpower was fully recognized in theSixth Plan, which called for reduction in fields of excess supply, andexpansion in areas of high demand. Quality improvement was stressed. ThePlan calls for the development of labor market information systems atinstitutional, provincial, regional and national levels. Monitoring of theemployment outcomes of vocational training, begun with a post-card returnsystem in 1983, is to be further strengthened. Tuition fees should be"adjusted" to increase cost recovery, and scholarships should be provided forthe needy. The curricula of formal and nonformal programs should be linked toimprove transferabil.ty.

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SYSTEM EFFICIENCY AND QUALITY

4.58 The effectiveness of a vocational education and training systemrests on the efficiency with which system resources are used, and the qualityof training. These dimensions of are, of course, intar-related. Good qualityoften implies higher costs, and weak financing poor quality. There are anumber of factors in system design and operation which affect the quality oftraining and the efficiency of resource use. These are: teachers, curricula,testing and certification, linkages between training and employment, and bothsystem and institutional management. Taken together, these factors alsodetermine the capacity of the system for flerible adjustment to changingtraining needs.

Internal Efficiency

4.59 The internal efficiency of vocational colleges and training centers,as measured by student flows through the system, is very high by internationalstandards (Table 4.8). Somewhat more than 80% of DOVE students complete theircourse; the rates are highest for industry (87%); lowest for commerce (77%).DOVE repetition rates are also respectable, with industry highest at 18% andCommerce lowest at 12%. ITVE completion rates are comparable, and quite goodfor diploma-level studies. The certificate completion rate at KNIT is thehighest (92%); the diploma completion rate is 72%. The completion rate of 82%in Polytechnic schools is remarkable for a nonformal, short-course trainingoperation.

4.60 High completion rates are partially due to the structure of Thaieducation, which screens students for academic ability prior to lowersecondary 6chool. The roughly 50% of primary students who continue to lowersecondary (and hence have the chance for upper secondary academic orvocational places) have already been selected, however imprecisely, forability. Other things being equal (such as economic circumstances), goodstudents will complete a course of study. In addition, course completionrequires passing grades on teacher developed examinations in each institution.Absent externally developed and implemented standards, it is likely thatalthough actual learning achievement varies substantially, most schools havelittle incentive to fail students (NEC, 1985).

Factors in Ouality

4.61 The value of a completed course to society in terms of productivity,and to the individual in terms of employment and earnings, depends on what islearned, and how well. This is the quality dimension of vocational educationand training. It depends on the quality of the inputs to learning: teachers,curriculum, and facilities and equipment. And it depends on the way theseinputs are used, and thus on the way the training system is configured andoperated as a whole, and on school management, testing and certification, andlinkages between training and employment.

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Table 4.8: Indicators of Internal Efficiency

Completion Rates (%) Repetition Rates (%)

DOVE (1987)

industry 87 18Agriculture 79 13Commerce 77 12

Certificate 17Diploma 07Higher Diploma* 19

Polytechnic Schools 83 na

ITVE (1988)

CertificateIndustry 66 naAgriculture 72 naCommerce 85 na

DiRlomaIndustry 69 naAgriculture 83 naCommerce 84 na

KMII (1987)North Bangkok Campus

Certificate 91 na

Diploma 72 na

* Two years after completion of academic secondary school.

Source: Background Papers.

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InDuts to Ouality

4.62 Teachers. The educational qualifications of vocational educationand training ceachers have improved steadily as a result of continuinggovernment commitment to VET and an effective teacher training system(Table 4.9). Ten years ago about half of the DOVE and ITVE instructors had a

BA, and about a third held the diploma or other lower-level qualification. By1987 nearly three-quarters of staff held the BA. While a quarter of DOVEinstructors continued to hold only the diploma, this had dropped to 11% inITVE colleges, with a small increase in the .,roportion of staff with HAs. The

higher proportion of ITVE staff with the MA in part reflects the Bachelordegree courses offered on ITVE campuses.

4.63 In ITVE institutions these gains have been relatively equally spread

across indus-ry, agriculture and commerce, with agriculture trailing to someextent (Table 4.10). Comparable data are not available for DOVE. However a

recent study of vocational teachers in Thailand indicates that DOVE continuesto rely heavily on diploma graduates in its technical colleges, with 54% oftechnical teachers holding this credential in 1984 (Buripakdi, 1988). Teacher

qualifications in private vocational colleges are, on average, very low. Thequalifications of the KMIT teaching staff are very high, with more than 90%holding the BA or MA; DNFE teachers are very well qualified, with two thirdsholding the BA or a higher degree.

Table 4.9: Percent Distribution of Teacher Qualifications, 1978-86

1978 1982 1984 1986

ITVEf

Ph.D * 11 * *

MA, MS 14 1 14 16BA, BS 53 71 70 73Diploma/Other 33 18 16 11

DOVE

Ph.D * * *

MA 02 02 02BA 58 65 72Diploma/Other 40 33 26

* Less than 01%.

Source: Background Papers, DOVE Statistics (1986).

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Table 4.10: Vocational Teacher Qualifications

Diploma/Ph.D MA BA Other Total

ITVE (1987) 1

All Fields 10 ( w) 510 (17) 2128 (74) 297 (10) 2945 (100)

Industry 4 ( *) 252 k14) 1355 (74) 217 (12) 1828 (100)Commerce - 83 (l8) 344 (75) 33 (73) 460 (100)Agriculture 6 (01) 175 (27) 429 (65) 47 (07) 657 (100)

DOVE

All Fields 2/ 2 (*) 245 (02) 10516 (72) 3909 (27) 14672 (100)

TechnicalColleges ./ 1 (*) 38 (01) 3230 (45) 3850 (54) 7119 (100)

Private Colleges

All Fields A/ 2 (*) 38 (02) 405 (19) 1732 (79) 2177 (100)

KMIT (1988)

North Bangkok 3 (02) 25 (19) 101 (75) 5 (04) 134 (100)Campus

DNFE (1986) 26 (01) 271 (08) 1928 (59) 1019 (32) 3249 (100)

/ Source: Background Papers2.! 1986 data. Source: DOVE Statistics (1986)2] 1984 data. Source: Buripakdi (1988)i/! 1985 data. Source: Buripakdi (1988)

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4.64 Survey data indicates that teachers in ITVE and DOVE institutionsare relatively experienced: about 75% have six or more years of experience.In contrast, private school teachers are much less experienced. Less than athird have taught for more than six years; more than a third for less thanthree (Table 4.11). Agriculture teachers in both DOVE and ITVE have lessexperience than their counterparts in commerce and industry.

Table 4.11: Years of Teaching Experience, By Type of Institution, 1988

Percent Distribution of Teachers ByNumber of Years of Teaching Experience

More LessThan 10 6-10 3-5 Than 3

DOVE (n-1,538) 40 36 18 06

Industry 43 37 15 05Agriculture 19 44 32 05Cortmerce 40 36 18 06

ITVE (n-2,394) 53 22 17 08

Industry 64 14 14 08Agriculture 36 35 19 10Commerce 53 22 17 08

Private (n-241) 01 29 34 36

Industry 02 16 31 51Agriculture* 0 0 60 40Commerce 0 47 32 09

* Only 10 teachers in the category.

Source: NEC/World Bank Survey.

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4.65 Educational qualifications and levels of teaching experience inpublic vocational colleges are, on average, quite high. The relatively lowproportion of industry teachers with the BA or better in DOVE schools,however, may indicate the loss to higher paying jobs in industry of teacherswith engineering qualifications. If so, this suggests that a commonphenomenon in vocational training is at work in Thailand: when skills demandis high and supply constrained in certain occupations, it becomes verydifficult to retain teachers with these skills (Herschbach, 1989). And yetthese are the teachers that are most needed if changing skill demands are tobe met.

4.66 Why this should affect )OVE more than ITVE is not entirely clear.However, the proportion of industry teachers with more than ten years ofexperience is fifty percent higher in ITVE than DOVE. Older teachers withmore experience are probably less willing to change jobs, especially if itinvolves moving to a new location. Given the high proportion of technicalteachers with a BA or MA in ITVE, one would thus expect the impact of privatesector recruitment to be found among younger teachers -- and indeed theproportion of ITVE teachers with 3-10 years of teaching experience is muchlower than that of DOVE schools. This may signal a future teacherrecruitment problem for ITVE as older teachers retire.

4.67 Average qualifications and levels of teaching experience in theprivate schools are much lower than in public colleges. This suggests that,on average, quality is lower, even though there are a numbe.- of privateschools that are reported to have very high quality instruc:ion. At least oneof these (St. John's College) has an extensive program of iticentives beyondsalaries to attract and retain good teachers, including domestic andinternational travel awards for longevity. With current income constraints,however, most private schools, while offering salaries commensurate with thosein public colleges, cannot provide the additional benefits (housing, tuitionfor children's education, hospitalization) that civil service positions enjoy.Combined with the greater security of public employment, and the traditionalprestige of working for the government, these benefits make the publiccolleges more competitive in attracting the most qualified and experiencedteachers.

4.68 Very few industrial teachers in either public or private collegeshave had experience in enterprises. In 1984, only six percent of teachers inDOVE technical colleges had experience in industrial enterprises (Buripakdi,1988). International experience suggests that, without such experience,teachers are handicapped in relating instruction to the world of work, and inguiding student career choice (Herschbach, 1989).

4.69 Teacher:student ratios for industry and commerce programs fall withacceptable standards, and reflect appropriately the different ratios requiredfor such courses (Table 4.12). The ratio in agriculture colleges is low,reflecting in part declining enrollments as double shifting is phased out inresponse to reduced demand. Some senior officials in DOVE view this as anopportunity for the agricultural colleges to operate as designed, improving

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quality. This may be the case, but it does imply continuing high unit costsunder conditions of low employability of graduates.

Table 4.12: Teacher: Student Ratios and Workloads

Percent Distribution of TeachersTeacher:Student By Average Teaching Hours/WeekRatios (1986) <15 15-25 >25

DOVE

Industry 1:19 n.a.Agriculture 1:10Commerce 1:30

ITVE

Industry 1:16 =2 44 04Agriculture 1:9 af 13 01Commerce 1:29 82 18 -

Source: Baikground Papers.

4.70 Most teachers have additional, non-teaching duties, includingstudent advising and administrative work. Agriculture teachers haveadditional responsibilities in the management of school farms, some of whichare quite large. The data available on ITVE teaching loads suggest that theseadditional duties may be taken into account for agriculture teachers. Theshortage of industry teachers, however, is reflected in a the high proportionwith more than 15 teaching hours per week. These teaching loads, combinedwith additional duties, leave such teachers with very little time forprofessional development, curriculum work, or liaison with employers.

4.71 Curriculu. The structure of the DOVE curriculum at the certificatelevel suggests that training for a specific occupation may receive relativelylittle emphasis in comparison with the combination of general education and arange of vocational electives.

4.72 General education and classroom-based theory courses have a majorplace in the DOVE certificate curriculum. Moreover, the balance betweenrequired courses in the vocational major, and elective vocational courses,indicates that many students may receive broad training in a range of subjectswith comparatively little intensive training for a particular occupation. At

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the diploma level, it is possible for a student to complete the program of 86course credits with only 12 credits in technical subjects.

4.73 The DGVE certificate curriculum for all subjects (agriculture,commerce, and industry) requires a total of 4800 fifty-minute periods, andcompletion of 85-90 course credits. The credit structure of the overallcertificate curriculum, in comparison with the academic upper secondarycurriculum, is shown in Table 4.13; the distribution of teaching periods forthe industrial trades curriculum is shown in Table 4.14.

Table 4.13: Credit Structure of the DOVE Curriculuaz

Academic VocationalSubject Secondary Certificate 1/

Total for 94 85-90Graduation

General Subiects 82 32

Languages 25 10Mathematics 12 05Science 30 05Social Science 09 09Physical Educ. 06 05

Vocational Subjents 12 53-58

Theory - 24-27Practice 12 29-32

.1/ DOVE quarter credits converted to semester equivalents.

Source: Chaivej, 1988.

4.74 Half of the vocational subjects are theory courses, the balancepractical courses in workshops. However, practical credits require 2-3 timesas many teaching periods as theory courses. A reasonable estimate of thetotal number of hours of practical training in the industrial curriculum isabout 2000 hours, with about 1000 spent in classrooms. Thus the overall ratioof hours of classroom instruction hours to workshop hours for the course as awhole is approximately 55:45. Moreover, as many vocational hours areallocated to electives, which may or may not be relevant to the coreoccupation training, as to core subjects. To the extent that students elect

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vocational subjects outside thei. ;ain field, the training received is lesslikely to cumulate in high skill levels.

Table 4.14: Distribution of Teaching Periods, DOVE Industry Curriculum

Number ofTeaching Periods Subtotals

Total 4800

Required General 1,120Required General Electives 320Extra-curricular subjects 220 1,660

Vocational Core Subject 1,160Apprenticeship 400 1,560

Vocational Electives 1,580 1,580

_olrce: Chaivej, 1988.

4./i Considerable variation exists across fields of study in the balancebetween general and vocational courses in the DOVE diploma curriculum.Graduation requires completion of between 81 and 90 course credits. Theagriculture course requires that a minimum of 46 of these be taken intechnical subjects or electives; commerce requires 54, and home economics aminimum of 45. The industry diploma, however, only requires a minimum of 12technical subjects or electives, allowing students to complete as many as 74credits in general and related subjects.

4.76 The diploma in industrial trades may, for many students, thusrepresent more of a general post-secondary course with some vocationalconcentration rather than a true post-secondary vocational training program.

4.77 The objectives and content of the DOVE and ITVE curricula are quitesimilar. DOVE certificate holders are reported to have no particulardifficulty in passing entrance examinations for ITVE diploma courses. Privateschools may use either the DOVE or ITVE curricula. Survey data indicates thatITVE curriculum is more prevalent.

4.78 Both DOVE and ITVE curriculd are centrally developed. DOVEcurricula are developed by committees of teachers, subject matter experts andcurriculum specialists. The process is the same as that used to developgeneral education curricula, emphasizing consultation and consensus. As aconsequence, the process is quite slow, taking several years if substantial

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new development is undertaken. ITVE curricula are developed by theappropriate faculty of the institution, with a similar process.

4.79 Occupation and job analysis is not a part of the curriculumdevelopment procsss in the technical colleges. This approach is used by theNISD in developing its training courses. The Department of Non-formalEducation has developed basic curricula in a range of skill areas; these arereportedly heavily adapted at local levels to meet the training needs ofspecific learning groups.

4.80 In theory, DOVE colleges have the right to develop courses locallywithin the framework of electives. These have to be approved by DOVE. It isreported that most DOVE institutions prefer to use the central curriculumbecause of limited time and technical expertise for curriculum development(DOVE, 1988, p. 19). And approvals from DOVE can be very slow, taking sixmonths to two years. There is some indication that the richer private schoolsdo engage in considerable course development within the framework of theofficial curricula.

4.81 Facilities and Eguipment: Comprehensive data on the status offacilities and equipment are not available. Visits to schools indicate thatfacilities and equipment are generally well maintained, although other studiesreport less favorably on the condition of workshop equipment, noting that theeffectiveness of workshop instruction is constrained by inadequate equipment.To the extent that equipment is inadequate, the quality of the vocationalcomponent of the curriculum is likely to be further weakened.

4.82 There has been no substantial capital investment in the DOVEcolleges for a decade. Recurrent budget support for equipment has beenconstrained in recent years. As a result, the equipment base has aged, and inthe view of many teachers is inadequate. Regulations also prevent schoolsfrom selling old but serviceable equipment in order to help financereplacements. This policy considerably reduces the flexibility of schools forself-renewal.

4.83 In two of the private schools visited, administrators and teachersreport that owners are unwilling to invest in facilities and equipment undercurrent revenue constraints.

System Configuration and Management

4.84 There is no unified vocational education and training system in theKingdom. There are five parallel systems offering training at the skilledworker level (DOVE, ITVE, Private Schools, NISD and DNFE); four at thetechnician level (KMIT, DOVE, ITVE and Private Schools); and two at the degreelevel (ITVE and KHIT). A degree of coordination exists: all systems draw onthe teacher training programs of KMIT, ITVE and the universities for staff;and all use similar curricula. There are no formal mechanisms for jointplanning and coordination, although informal cooperation takes place withinthe Ministry of Education. As noted earlier, the Joint Public Private

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Committee established to cuordinate vocational education and training policyhas not fun-tioned.

4.85 As G result, equivalent training is offered by different agencies inthe same location. And certain professional support functions -- such ascurriculum development, and in-service teacher training -- are duplicated atsome cost to the public.

4.86 With the exception u,2 DNFE and KMIT, the individual systems arequite centralized. Although institutions have considerable autonomy withrespect to enrollments, staff hiring and assignment and curriculumdevelopr!nt are all administered centrally. Planning consists of submissionof budget requests from institutions, and authorizations and transfer of fundsfrom Bangkok.

4.87 The authority structure of the ITVE follows the university model.The Rector is elected by an Institute Council, chaired by the Deputy Ministerof Education, and including as members some ITVE faculty and a number of ITVECampus Directors. The latter have considerable autonomy in managing theircampuses. KMIT consists of three independent campuses administered under theMinistry of University affairs, all located in the Bangkok metropolitan areas.These operate under university regulations and procedures, which includeelection of rectors by tha full staff. Each campus operates throughfaculties, which have responsibility for academic affairs.

4.88 DOVE nonformal institutions (polytechnics and Area VocationalCenters) are administered through the DOVE structure. The DNFE program isadministered through five regional and 73 provincial nonformal educationcenters, one in each province. Curriculum development and approval isdecentralized to the regional centers, which also provide in-service trainingand supervise programs implemented by the provincial centers.

4.89 The National Institute for Skill Development is equivalent to aDivision of the Labor Department within the Ministry of Interior. It is thuslocated together with various labor functions, including employment services,which are present in Labor Offices located in each province. The NISD isresponsible for setting trades standards and tests and providing vocationaltraining. Trades standards are developed under the oversight of The NationalTrades Standard ar. Testing Committee, and must be approved by the Cabinet.Curriculum devel.,saent is done centrally at the NISD. Regional institutesoffer courses chosen from the overall curriculum to meet local needs.

4.90 Centrally managed, indept..dent systems have made it difficult forcoordination to take place at local levels. A recent initiative by DOVE toestablish provincial level coordination and specialization of task with ITVEand NISD has not met wyith much success. An agreement of several yearsstanding between ITVE and DOVE that ITVE would gradually phase out certificatecourses has also failed to yield results. ITVE institutions prefer to providecertificate courses to assure enrollments at the diploma level.

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Ichool Management

4.9'. The individual technical colleges and nonformal traininginstitutions visited were, on the wnole, well administered. Communicationbetween administrators and teachers was good: a consensus approach todecision-making was evident. Lines of authority were clear, as wereexpectations at the school level regarding the relationship with centralauthorities. A high level of professionalism was evident.

4.92 Concern for student behavior was frequently encountered.Administrators and teachers consider the development of individual characterand discipline to be an important function of -he school in preparingindividuals for employment. In most of t: 'hools isited, teachers feltthat they had a special mission in enabling puore- students to gain access toemployment.

4.93 A notable feature of school management is the responsibility ofheadmasters to develop scholarship funds through donat' ns from the community,enterprises and alumni. No precise data on the total value of the scholarshipprograms are available, but as many as 100 and as few as fifteen annualscholarships were reported to be administered by individual schools.

4.94 Administrators and teachers in most schools saw significantpotential for generating revenues through productive activity in school shops.One commercial school is reported to have established a very profitableoperation in making artificial flowers for export. However, the ability ofschools to establish productive enterprise is sharply constrained by MOEregulations which require all revenues to be returned to the central fund.Recent modifications to these regulations that ostensibly allow schools to usesome funds to pay students and teachers in fact leave the amount at thediscretion of the Ministry, and have not improved the situation.

4.95 Turning schools into factories is, of course, neither desirable northe objective of Thai educators. And in most cases the potential for revenuegeneration, while not insignificant, is modest. But tight regulations on suchactivities are reported to block one dvenue for the establishment of linkagesbetween schools and enterprises (especially small ones) that would like tosubcontract small production tasks.

4.96 Under the leadership of the Ministry of Education, many schools haveundertaken - ular follow-up of graduates through return post-card system.Most schools report visiting enterprises to discuss the quality of graduatesand to leani more about local employment opportunities. With limitedcurriculum development authority and capacity, however, only marginal changeswithin courses can be made in response to new information.

4.97 In sum, schools are well managed within tig7. guidelines. There aresigns that administrators and teachers are doing what they can to improvetheir schools and to increase revenues. This augurs well for any systemreforms that might be undertaken.

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planning

4.98 The National Economic and Social Development Board (NESDB), theNational Education Commission (NEC), and the ministries operating vocationaleducation and training systems are involved in the planning process. TheNESDB is responsible for mncro projections of manpower demand for a fewoccupations (doctors, nurses, teachers and vocatienal graduates), and has alimited role in labor market analyses. The NEC coordinates the development ofthe national education plan. Individual miristries have planning units thatprepare annual budget and staffing plans, largely based on submissions fromindividual institutions.

4.99 A recent evaluation of the planning process (NEC,1985) found thatplanning is poorly coordinated. Linkages bek.!',--en the planning activities ofthe various agencies are weak. Institutions are highly autonomous indetermining enrollments, and no administrative or budgetary levers areavailable to guide or control the decision of institutions. Efforts toestablish institution-based tracer studies have encountered difficulties dueto lack of expertise at the institutional level.

4.100 The current situation has evolved as formal manpower requirementsforecasting was gradually abandoned. The dominant planning model in the firstand second Plan periods, manpower forecasting was found to be inaccurate, andconfidence in projections declined. While there is recognition that ar~ oader, more flexible planning approach based on labor market analysis,nkages between training and employment and monitoring of employment outcomes

is needed, the diffuse nature of the system, combined with a decade ofemphasis on manpower forecasting, has made it difficult to establish aneffective planning system.

Financing

4.101 The vocational training system is largely financed by publicrevenues. Eighty percent of the costs of vocational schooling are providedfrom government budgets. Enterprises contribute only in specificcircumstances, such as in payment of trainee fees under the KMIT dual trainingscheme.

4.102 The formal public vocational education system is supported in partby tuition and fees paid by students, and by contributions from parents.At the certificate level tuition fees were 3000 Baht per semester in 1988; atthe diploma level 4000 Baht per semester. The fees are the same regardless offield of study, and thus represent varying portions of total unit cost fordifferent courses. In addition to official tuition, students and parents arcoften required to make additional "unofficial" contributions to schools, oft:enas a condition of enrollment. These contributions are not reported inofficial statistics, but can add twenty percent or more to individual directcosts at the secondary level (TDRI, 1987, p. 173). Limited scholarships areavailable to needy students. Scholarship funds are raised by headmasters

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through donations from local businesses. Vocational tuition is more expensivethan academic secondary.

4.103 Teacher salaries are paid centrally. Non-salary costs are allocatedto institutions through standardized unit "materials" costs, reported as 1800Baht for certificate students and 2200 Baht for diploma students in 1984(NEC, 1985). This method of budget allocation does not recognize the widelyvarying costs for different courses (i.e., welding versus drafting). Moreimportantly, :.t does not rrovide any incentives to institutions to controlenrollments.

4.104 The nonformal training system is largely subsidized by thegoverrment. DNFE training groups charge participants in technical courses1 Baht per hour of training received (the rate is .75 Baht for Home economics,and .50 Baht for commerce courses). A typical 200 hour course for 15 studentscosts 12,500 Baht (about US $500 at current exchange rates). The governmentprovides a staff instructor at a cost of 8000 Baht, and 1,500 Baht formaterials. Total participant fees of 3000 Baht are used for materi&ls orguest instructors.

4.105 Ann?xal national expenditures for vocational education and traininghave averaged 7-8 percent of education spending, and about 1.3% of thenational budget during the Fifth Plan period (1982-86) (Table 4.15).Toward the end of this period the share of the MOZ budget going to vocationaleducation declined. Within this share, ITVE and DNFE resources grew, whilethose of DOVE declined.

Testing and Certificat!on

4.106 The NISD operates a skills testing and certification system,developed with the assistance of the ILO. Skills standards have been set anddivided into three levels of difficulties. The test standards agreed by theNational Committee on Skills Standard Setting will be presented to the Cabinetfor approval.

4.107 By law, skill testing is available only to graduates of NISD andother nonformal skills training courses. But testing is now open to thegeneral public as well. In Korea, until recently skills tests were requiredfor graduates of technical high schools and colleges, and those who coirpletedtraining in labor training centers. Outcomes were comparable for graduates ofthree year vocational secondary programs and one year labor training courses,even on the theory portions of the test. While theory courses were not partof the one-year training programs, students managed to learn enough on theirown to get high scores.

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Table 4.15: Expenditure on Vocational Education and Trainingas a Share of GDP, National Budget, and Education Budget

(Constant 1986 Baht)

Budget

Fiscal National TotalYear GDP Budget MOE DOVE ITVE DNFE 1/ VET

(1) (2) (3) (4) (5) (6) (4,5,6)

1982 785,642 149,489 23,071 1,552 292 47 1,891

1983 887,852 170,029 29,885 1,722 453 56 2,232

1984 951,587 184,261 31,463 2,041 447 54 2,542

1985 1,012,139 205,797 33,221 2,066 445 58 2,569

1986 1,197,934 214,000 34,469 2,025 454 63 2,542

Total VET as a % of: As % of MOE Budget:

Fiscal National MOEYear GDP Budget Budget DOVE ITVE DNFE

1982 0.24 1.27 7.54 6.19 1.16 0.19

1983 0.25 1.31 7.46 5.76 1.52 0.19

1984 0.27 1.38 8.08 6.49 1.42 0.17

1985 0.25 1.25 7.73 6.22 1.34 0.17

1986 0.21 1.19 7.37 5.87 1.32 0.18

.1/ Estimated as 10% of total annual DNFE Budget (DNFE, 1988).

Source: Background Papers.

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4.108 Admiss:_on to technical colleges at certificate and diploma levels isby written examination. Students are tested and graded in each course, andstudent grade point averages are maintained. In hiring graduates of technicalcolleges, employers thus rely on the reputation of the college and studentgrade point averages.

Linkages With Employment

4.109 At the national level, a joint public/private committee (JPPC) onvocational education was established by the cabinet in 1985. Theresponsibilities of the committee are (DOVE, 1988):

(a) "To examine problems and obstacles encountered in vocationaleducation as well as to develop ways and means to lessen oreliminate such barriers.

(b) "To determine the policy and measures on neutralizing supplyfrom vocational institutions and demand of labor market.

(c) "To enhance the roles and participation of [the] private sectorin vocational education.

The committee is chaired by the Prime Minister, and includes in its membershiphigh ranking ministry officials and representatives of the Thai BankingAssociation, the Thai Chamber of Commerce and the Thai Industrial Association(Tunsiri, 1987).

4.110 The high level of committee members is reported to make operation ofthe JPPC very slow. It has had little impact on the operations of thetraining system (DOVE, 1988).

4.111 At the institutional level, DOVE encourages the development of localadvisory committees, but these have yet to function effectively because oflack of "mutual understanding or willingness to take part..." (DOVE, 1988,p. 23). KMIT has established linkages with industries through provision ofon-the-job training and evening courses, and is conducting a pilot project toimplement a "dual" training system comprised of 36 months of supervised OJTwith one day of block release for theory classes each week. ITVE has nopolicy regarding linkages.

4.112 All three agencies have established job information and placementservices for their students. Under an informal understanding at high levels,Department of Labor regulations that forbid placement activities byorganizations other than the Labor Department are not applied.

4.113 The programs of the Department of Nonformal Education are designedto meet individual needs and interests, in keeping with the ruralcharacteristics of most of their clientele. Rather than establish linkageswith private and public sector institutions, the DNFE establishes links with

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individuals through trai ag needs surveys and response to group requests fortraining at provincial and regional levels.

4.114 The NISD has no formalized arrangements for linkages, but hasestablished cooperative relationships with enterprises in the course ofproviding up-grading and on-the job training.

4.115 Teachers and administrators are well aware of the importance ofestablishing linkages with employers. Both DOVE and ITVE policies encouragethe formation of local school advisory committees. And curricula require thatstudents complete an on-the-job internship during vacation periods in theirfinal year of training.

4.116 Reports by school administrators through the NEC/World Bank surveyindicate that, on balance, DOVE schools have had somewhat more success thanITVE and private schools in establishing local linkages (Table 4.16). Andadministrators in commerce schools gave more positive ratings to theserelationships than industry or agriculture.

4.117 The strongest ratings were given to providing students with on-the-job internships, reflecting the curriculum policy of DOVE and ITVE. It isimportant to note, however, that the principal responsibility for findinginternships rests with students. School personnel get involved only if astudent is unable to find an internship place. Thus this means of linkage isas yet relatively poorly developed.

4.118 The next strongest relationships are in seeking employment forgraduates and providing students with employment information. This resultsfrom relatively strong placement activities by schools. Job fairs, in whichemployers come to the school to explain job opportunities, are frequentlyorganized by headmasters and teachers. At the same time, public technicalcolleges do not have full time guidance and placement staff; these duties areassigned to teachers. Again, the linkage, while strong relative to others, isso far comparatively undeveloped.

4.119 Teachers and administrators note the difficulty of securinginternship placements in small firms. Indeed, the problems of establishinglinkages of any kind with small firms are persistent. This may be a factor inexplaining the relatively low levels of enterprise participation in teachingan curriculum development. In the latter case, of course, there is littleschool-level curriculum development to which employers might contribute.

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Table 4.16: Strength of Local Linkages Between Schools and Employers*

TyRe of School Field of StudyType of Linkage Private DOVE ITVE Agriculture Industry Commerce

Seek employment 1.6 1.6 2.5 1.2 2.0 2.1for graduates

Provide students 1.2 1.5 1.9 1.4 2.1 2.1employmentinformation

Enterprises 0.6 1.3 1.3 1.1 1.3 1.6participate inteaching andcurriculumdevelopment

Send teachers 0.8 1.2 1.6 1.2 1.5 1.5for in-planttrairnng

Provide students 1.8 2.5 2.6 2.5 2.3 2.8with OJTinternships

Joint special 1.2 1.2 1.5 1.1 1.3 1.7cooperativeprograms

Overall Average 1.2 1.6 1.9 1.4 1.7 2.0

Number of schools 5 21 19 14 15 11

* Rating scale: 1 - weak, 2 - medium, 3 - strong

Source: NEC/World Bank Survey.

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4.120 School level advisory committees have been difficult to establish,and have not been very effective in DOVE schools. These appear to functionbetter for urban schools (both public and private) near large enterprises.Generally, there are few incentives to enterprises or schools to invest muchtime or energy in linkage development (DOVE, 1988).

4.121 In sum, linkages between training and employment are developing, butare not yet strong. Schools do not have the staff to engage in full timeplacement activities. It is difficult to establish relationships with myriadsof small firms. Given limited autonomy with respect to curricula and programconfigurations, schools are not in a position to respond strongly to advicefrom employers.

SUMMARY

4.122 The currently large training system has its origins in the rapidexpansion the 1970s. With university enrollments strictly controlled duringthis period, higher vocational education became the goal of a large number ofstudents and parents, and enrollment targets for vocational schooling andtraining were greatly exceed as institutions responded to social demand. Asthe system grew, it split into several parts. A complex system of public andprivate provision of vocational schooling emerged, matched by an equallycomplex set of largely public nonformal training systems. Teacher trainingwas expanded rapidly to meet the needs of a growing number of schools.Policies designed to promote equitable access led to the dispersion of publicvocational schools and colleges in all provinces.

4.123 But by the early 1980s, total secondary enrollments leveled off andbegan to fall. Rapid expansion had contributed to a substantial oversupply ofgraduates. Unemployment among vocational graduates rose as governmentemployment growth was constrained. Vocational enrollments declined mostsharply, led by private schools. There are indications that a largeproportion of the decline came in agricultural courses. Clearly, theperceptions of parents and students regarding the value of vocationaleducation were beginning to change.

4.124 The complexity of current institutional arrangements developedbecause while institutions and programs were added, nothing was dropped.The result is a system which is marked by duplication of programs. In asystem responsive to market forces, this is not necessarily a negativesituation. Consumers can be expected to choose among institutions atdifferent prices, institutions to therefore compete, and over time lesseffective institutions to disappear.

4.125 Only part of the Thai training system is in the market place. Ithas responded reasonably quickly. The heavily subsidized public system isresponding to problems of excess supply more slowly. Training agencies (DOVE,ITVE) find it difficult to relinquish programs.

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4.126 The internal efficiency of public technical colleges and traininginstitutions is high, in part because of able students, in part because of thenature of the examination system, and in part because of good administration.The schools and centers are well run, and implement national developedprograms well within tight central control. Teachers are on balance well-educated and have considerable teaching experience. These factors augur wellfor the quality of vocational education and training.

4.127 At the same time, there is reason to be concerned about both thequality of training as the changes in the economy bring new training needs.Teachers have very little industrial work experience. There is evidenLe of ashortage of teachers in key industrial occupations. Investment in facilitiesand equipment has been constrained. Testing and certification is severelyconstrained, and of little use in monitoring quality compared to itspotential.

4.128 Importantly, there is evidence that the vocational content of theDOVE curricula at the certificate and, most especially, the diploma level maybe weak. This may be in part a response to equipment constraints, as well asto the rigidly centralized nature of curriculum development and the lack ofindustrial experience on the part of teachers.

4.129 There is also reason to be concerned about the quality of muchprivate vocational education and training. The revenue constraints imposed bytuition ceilings have mele it difficult for such schools to achieve the samelevel of teacher quality that characterizes public vocational colleges.Capital investment is weak for the same reasons.

4.130 The parallel, uncoordinated nature of the training system has led toduplication of training services under conditions of excess supply. Thetechnical college systems are very centralized. Curriculum change takes along time. Training institutions have very little effective curriculumautonomy, and thus have relatively little incentive to establish two-wayrelationships with employers, a particularly difficult task where many smallenterprises form the market for graduates. These factors make the systemrelatively inflexible in the face of rapidly changing employment needs.

4.131 Planning for the system is highly fragmented and poorly coordinated.While manpower requirements forecasting has (appropriately) been abandoned asa model, no effective mechanism has emerged for guiding the size andobjectives of a complex system. Manpower planning within national economicand social development planning has never been linked through budgetary oradministrative mechanisms to the various systems and their instructions, asthe runaway expansion of the system in the 1970s illustrates.

4.132 The public system is largely financed from public budget, although arespectable level of cost sharing (about 20%) has been achieved throughtuition and fees. Budget allocation procedures are weak in establishingincentives for enrollment management. The private system provides a large

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flow of graduates at no cost to the public budget, although rapidly decliningenrollments raise issues regarding the future of the private sector.

4.133 Nor have training systems established the linkages with employersthat facilitate the flow of labor market information which informs enrollmentand curriculum planning. The national coordinating committee established in1985 has not been effective. While DOVE in particular has taken steps toencourage linkage development, success has been hampered by the prevalence ofsmall firms and by the inability of individual institutions to adjust theircurricula to changing employment and training needs. Nor has DOVE been ableto use budgets as a way to guide training provision through incentives.

4.134 The development of the vocational education and training system inThialand in the course of two decades has been a remarkable achievement. Andthere are many strong features of the system, notably well-educated teachers,well-managed schools, and important levels of cost recovery. The largeprivate sector is an important and potentially efficient resource for skillsdevelopment.

4.135 At the same time, there is cause to be concerned regarding theoverall size of the system, and its ability -- as currently configured -- torespond flexibly and efficiently to the needs of a changing economy. Reformsare clearly needed.

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V. Evidence on External Efficiency

5.1 Decisions on both public and private investments in education andtraining are ideally guided by the concept of efficiency. Fundamental to theconcept of efficiency is the relationship between costs and outcomes. Giventwo possible investments, the one which yields the most benefits for a givencost, or which minimizes cost for a given benefit, is most desirable. Twokirds of efficiency measures are commonly used in education and training. Oneis external efficiency. Here the economic value of education or training tothe individual and to society is measured against its cost. The other isinternal efficiency in which cost is measured against the amount and qualityof education provided. More broadly, these concepts are used together toassess whether investments are yielding desired outcomes at a reasonable costin comparison with alternatives.

5.2 This section of the study will review available evidence on theexternal efficiency of vocational education and training in Thailand. Inassessing external efficiency, both economic and social criteria will be used.The former will address conventional economic indicators of efficiency andcosts; the latter will look more broadly at the social function played byvocational education in Thailand over the course of twenty years ofdevelopment. The chapter concludes with an identification of the key humanresources policy issues and directions that emerge from the analysis.

5.3 Data are drawn from three sources: existing studies, nationalstatistics, and a survey of formal and nonformal training institutionsundertaken by the National Education Commission in cooperation with the WorldBank and GTZ in October and November, 1988.Wy

ECONOMIC MEASURES

5.4 Several training outcomes can be measured in relation to costs.Most desirable, but least often achieved, is evaluation of the relationshipbetween economic costs and benefits. This involves, fundamentally, estimationof the social and private rates of return to vocational training, using thewages of graduates as an indicator of post-training productivity. Theapproach assumes that the sole purpose of vocational training is improvedproductivity in employment in specified occupations and jobs, that thisassumption clearly separates vocational training from general education, andthat wages are determined in a free labor market and are therefore a reliableindicator of productivity.

5.5 Other outcome measures can be used. These include wages andemployment rates, educational outcomes and employer and student satisfaction.

W/ The methodology of the survey, which combined a mailed questionnaire withstructured interviews, may be found in Annex I.

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Such indicators give less precise guidance on the value of investments invocational training, but do help policy makers reach judgments on theefficiency of the vocational training system in matching output withemployment.

Economic Evaluations of Training: 1970. 1980

5.6 -wo economic evaluations of training give some indication of thecost-effectiveness of vocational training at the beginning and end of thedecade of the 1970s. The first (Blaug, 1971), found that the social andprivate rates of return to vocational education in the late 1960s were lowerthan those for academic secondary education. At a time when primary educationwas only beginning to be expanded, the highest rates of return were to primaryeducation in comparison with secondary, vocational and higher education.These returns, of course, incorporate measures of cost. At the time costswere the lowest for primary school and highest at the university level. Theunit social costs of vocational education (which include the opportunity costof students) were three times higher than those of academic secondary school.

5.7 A second study of the relationships between education and wages wasundertaken nearly ten years later (Bovonsiri and Fry, 1980). The analysis wasbased on a structured interviews of a iple of nearly 2000 employees inprivate sector firms employing at leas .00 persons; the findings are thusrestricted to large scale, private modern-sector employment. Multipleclassification and path analyses were used to assess the relationships betweenearnings and formal general and vocational education, nonformal short coursetraining and training provided by employers. The study controlled for anumber of additional variables, including work experience, socio-economicstatus (SES), years of education, sex and location of work.

5.8 The study was conducted prior to the structural reform of Thaieducation. Academic secondary education comprised twelve years. TheVocational Certificate required thirteen years of study; the higher vocationalcertificate an additional two. The relationships between types and levels ofeducation and earnings, expressed as variation from an sample average meanwage of 2616 Baht/month, are shown in Table 5.1. The data are reportedseparately for individuals in technical and office jobs.

5.9 Overall, graduates of twelve years of academic secondary schoolsearned more than vocational certificate holders. This advantage cameprimarily in office positions. Vocational certificate holders earned aboutten percent (240 Baht per month) more than academic graduates in technicalpositions. They earned about twenty-five percent less in office positions.While cost-benefit ratios were not calculated, technical vocational unitrecurrent costs eight years later (1988) are two to four times higher thanacademic secondary; commerce recurrent costs are about 25% higher. Unitsocial costs for vocational schooling in 1971 were three times those ofacademic secondary education. It is reasonable to assume that similar costratios prevailed in 1979. And the vocational certificate required anadditional year of full time education. The cost-effectiveness of certificate

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level vocational training ten years ago, especially in commerce, was thusundoubtedly low.

Table 5.1: Relationships Between Level/Type of Formal Educationand Earnings, 1980, As Deviation From Mean Sample Wage

(Mean Sample Wage - 2616 Baht/Month)

Technical OfficeType of Education Position Position

Complete Primary -811 -583

Grade 10, Academic -497 -663

Grade 12, Academic -160 +389

Vocational Certificate +80 -226

Higher Vocational +693 +142Certificate

Bachelor's Degree +1673 +1394

Source: Bovonsiri and Fry, 1980.

5.10 The higher vocational certificate gave a 35% earnings advantage toindividuals in technical positions over academic secondary degrees. But inoffice positions academic secondary graduates earned nine percent more thanthose with the higher vocational certificate. The cost-benefit implicationsare obvious. The study notes that selective streaming to academic andvocational schools based on academic tests undoubtedly led to some level ofacademic aptitude advantage for general secondary students, and that theacademic curriculu- enabled students to better develop skills (such as Englishlanguage) in demand in many office positions.

5.11 The much higher earnings associated with the higher vocationalcertificate undoubtedly contributed to observed high continuation rates fromvocational certificate courses to higher level studies (between 50% and 80%,depending on field of study).

Wage Distortions and Unem2loyment in the 1980s

5.12 Analysis of wage rates (see Chapter II) indicates that governmentwage policies, which have paid a premium to vocational graduates for more than

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a decade, have had a distortionary effect on the relative wages for vocationaland academic secondary graduates. Vocational graduates earn higher wages thansecondary graduates in the formal sector of the economy when governmentemployment is included. In this sector the government employs half of allworkers with secondary education or higher, and the formal private sectoremploys an additional third. Bovonsiri and Fry's analysis indicating thatvocational graduates earned less, on average, than general secondary graduatesin large private sector firms suggests that government wages indeed have adistortionary effect. The little data available indicates no relationshipbetween wages and education in the (private) informal sector, where about 40%of municipal employees (including comparably few vocational graduates) work.Thus while it is evident that vocational graduates earn more than secondaryacademic graduates, it is unlikely that current wages reflect the relativeproductivity of workers, but rather distortions in the labor market.

5.13 The issue is further complicated by the fact that available laborand wage statistics do not differentiate between vocational certificateholders and those with the post-secondary diploma. Given the high proportionof diploma graduates within the total of vocational graduates, the relativewage differentials reported are undoubtedly distorted by the simple presenceof a high proportion of diploma holders, with correspondingly highergovernment wages. And it is likely that the earnings impact of the vocationaldiploma reported by Bovonsiri and Fry in the modern private sector is stillpresent.

5.14 There is clear historical evidence of persistently high unemploymentamong vocational graduates in comparison with those secondary academicgraduates who enter the labor market (12.65% versus 3.19% in 1984). And thewaiting period before the first job is substantially longer. The reasons forthis are clear. Secondary graduates are more willing to work in private firmswith 10 or fewer employees than are vocational graduates (34% versus 19% in1984); and the vocational graduates are more likely to work in firms with 21or more employees (61% versus 36%). Sixty-four percent of Thai private firmsemploy less than 10 workers, and they employed 44 percent of the workforce in1984 (Chapter II). Unwilling to accept the lower wages of informal sector andsmall firm employment, and supported by their families, vocational graduatesare much less likely than secondary graduates to accept available jobs,preferring to wait for a government or formal sector position.

5.15 More recent labor force survey data are not available. The effectson vocational employment of recent rapid economic growth in the privatesector, and constrained government hiring, however, can be judged from threerecent surveys. The first source is a study conducted by the Ministry ofEducation in 1987 of the employment record of DOVE and IVTE graduates enteringthe labor market from. 1982 to 1986 (Table 5.2). These data indicate that theunemployment problem among vocational graduates persisted in 1985 and 1986,and was particularly high among IVTE diploma holders. Data on employment arenot available from KMIT, but the reported transition rates from certificate todiploma are 100%, and from diploma to degree 70-80%. It is said that in

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recent years most diploma graduates entering the labor market find jobs, andcontinue their education part-time (KNIT, 1988).

Table 5.2: Post-graduation Outcomes, DOVE and IVTE, 1983-87.(percentages)

ITVE DOVECertificate Diploma All Levels

1983 Further Education 78 32 49To Labor Market 22 68 51Unemployed* 30 27 23

1984 Further Education 85 34 54To Labor Market 15 66 46Unemployed* 35 41 24

1985 Further Education 86 29 ATo Labor Market 14 71 49Unemployed* 32 42 27

1986 Further Education 88 35 45To Labor Market 12 65 55Unemployed* 27 36 29

1987 Further Education n.a. n.a. 44To Labor Market 56Unemployed* 25

* Percentage of those entering labor market who were unemployed.

Source: Background Papers.

5.16 Collateral evidence comes from a survey of April 1986 graduatesconducted by the Ministry of Education from October, 1986 to January, 1987.As analyzed by TDRI (April, 1988), these report post-graduation experience byfield of study (Table 5.3). The analysis assigns ITVE, DOVE and privateschool curriculum fields to the following categories of scientific manpower:

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B. Biotechnology - agriculture, food science, bioscience,pharmacy and health occupations

E. Electronics - computer science; electrical, electronicEngineering and communications

M. Haterials mechanical engineering, metallurgyTechnology

T. Related - other engineering, including civil,Technology sanitary survey, agricultural and others;

chemical engineering; industrialengineering;

42,891 students, or 62.3% of the April, 1986 graduates responded.

Table 5.3: Status of Graduates of Public Vocational Schools

Relevance of Training for EmoloyedArea No. of Further Not Yet Not No TotalCode Replies Studies Employed Other Related Related Reply Employed

Certificate of Vocational Education (P-V-CH)

B 3,645 77.81% 14.32% 0.38% 3.79% 3.16% 0.55% 7.49%E 4,523 59.98% 21.64% 1.39% 10.10% 5.06% 1.81% 16.98%M 5,583 54.58% 25.34% 1.40% 10.23% 6.30% 2.15% 18.68%T 2,958 63.05% 18.59% 0.98% 9.13% 6.19% 2.06% 17.38%Other 11,338 59.86% 21.90% 0.68% 11.62% 4.22% 1.72% 17.56%

Higher Certificate of Vocational Education (P-V-S)

B 2,158 20.16% 50.28% 4.03% 12.33% 8.11% 5.10% 25.53%E 989 11.83% 43.48% 3.64% 28.51% 9.71% 2.83% 41.05%M 1,233 10.71% 40.96% 3.57% 25.95% 14.11% 4.70% 44.77%T 4,332 11.20% 45.34% 2.22% 25.60% 9.76% 5.89% 41.25%Other 2,729 16.20% 35.91% 0.95% 33.79% 8.54% 4.62% 46.94%

Advanced Certificate of Higher Education (P-V-T)

B 716 20.16% 50.28% 4.03% 12.33% 8.11% 5.10% 25.53%E 443 11.83% 43.48% 3.64% 28.51% 9.71% 2.83% 41.05%M 46 10.71% 40.96% 3.57% 25.95% 14.11% 4.70% 44.77%T 488 11.20% 45.34% 2.22% 25.60% 9.76% 5.89% 41.25%Other 1,710 16.55% 50.53% 2.22% 18.83% 7.72% 4.15% 30.70%

Note: The survey collected data from October, 1986 to January, 1987 for about42,891 or 62.3% of the students that graduated in April, 1986.

Source: Ministry of Education (1987).

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5.17 The results confirm the overall high rates of unemployment &ftergraduation. Importantly, they give some indication of where mismatches betweenskills and salary expectations, and jobs and wages, may be most severe. Amongthose graduating at the certificate level in the area of bio-technology, whichincludes primarily home economics and agriculture graduates, 77.81% continuedstudy, 14.32% were unemployed, and 7.49% were employed. Thus two out of threeentrants to the labor market remained unemployed after six months. Moreover, therate of continuation to diploma studies was the highest (77.81%) of all fields.The same case prevails with bio-technology at the higher and advanced certificatelevel.2 Two of three graduates in the labor market were unemployed, and thecontinuation rates are the highest of all occupational categories. In all casesonly slightly more of those employed felt their training was relevant to the jobsthey obtained (3.79%) than did not (3.16%). Ratios for other occupations rangedfrom 1.5:1 to 3:1 for electronic technology at the higher level.

5.18 The unemployment rates indicate that agriculture and home economicsprograms are indeed providing an oversupply of graduates, and the continuationrates indicate that students -- and their advisors -- recognize this. The lowstudent ratings for the relevance of training would not in themselves benecessarily valid measures of skill match. But since they are consistent with theother ratios, they can be taken as indicators, at least, that training does notmatch job requirements, or that students in this category have had to take jobsoutside their field of specialization due to low employment demand.

5.19 The ratios are best for the Materials Technology category at thehigher levels, which includes a variety of enginc_ering technician programs,including auto mechanics. Here more graduates were employed than unemployed,and continuation rates were lowest. While the absolute unemployment rates arevery large, the data do indicate somewhat better match between supply anddemand. Training relevance ratios were about 1.8:1.

5.20 In the Related Technology occupations at all levels, and theElectronic Technology occupations at the higher levels, graduates had about anequal chance of being employed or unemployed, and continuation rates weresomewhat higher than for Materials Technology occupations. Again, the patternis consistent: the less likely employment is, the more likely students are tocontinue their education. Training relevance ratios at the two higher levelsare 2.5:1.

5.21 Students who got a job in Electronics Technology gave the highestrelevance ratings to their training, with approval ratios of 2:1 at the lowerlevel and 3:1 at the higher levels. Higher levels of curriculum relevance (asjudged by graduates) may indicate that curricula for this relatively newoccupation may be more closely aligned with skill needs than those of moretraditional crafts, such as those in the matorials technology occupations.

J The "Advanced Certificate of Higher Education" is the two-year post-secondary technical course for graduates of academic secondary schools.

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5.22 The overall patterns indicate some other plausible conclusions.First, approximately three out of four higher level graduates found theirtraining related to their job; only about two in three agreed at the lowercertificate level. This is some indication that the "quality" of training, atleast in graduate perception of job-relevance, is somewhat better at higherlevels. The relevance ratio even improves between lower and higher levels foragriculture.

5.23 Second, the almost identical profile across occupations for the twohigher certificate levels, one of which has five years of vocational trainingand the other three years of leneral secondary plus two years of vocationaltraining, indicates that empi.yers are making no distinctions in hiring -- andthat students from the two programs found training equally relevant.

5.24 A third survey of graduates of agricultural and industrial colleges,and of employers, confirms the differential employment outcomes across tradesof certificate and diploma graduates of industrial colleges. The study alsoprovides important evidence confirming the oversupply of agriculturalgraduates (Settaminit, 1987 ).Zy

5.25 Overall, graduates at certificate levels experienced longer waitsfor employment than diploma graduates. At both levels, graduates inmechanical drawing experienced the shortest wait for employment aftergraduation. Certificate graduates had longer waiting periods in electronics,building construction, welding, auto-mechanics and furniture construction;diploma graduates in electricity (Table 5.4).

5.26 There are signals that recent rapid growth of export-ledmanufacturing is the pattern of skills demand. Higher level skills are inmore demand, as indicated by the shorter waiting periods before employment fordiploma graduates. The exceptions to this pattern are in two traditionalcrafts: machine shop and electrician. In the latter case, at least, the factthat diploma level graduates wait as much as a year to get their first jobindicates that post-secondary vocational skills in this trade, at the exiectedhigher wage, are not much in demand in the labor market.

5.27 The data are consistent with the MOE survey in most respects. Theshort waiting time for diploma level graduates in automechanics, welding andelectronics matches well with the MOE data (paragraphs 5.17, 5.18). The shortwaiting time for diploma graduates in the construction industry fits well withthe demand for such graduates as supervisors (Chapter II).

W/ The data on employment outcomes for graduates of industrial andagricultural colleges was developed from a sample of 1319 1982-87 graduates;data on agricultural employment demand from a survey of 340 government andprivate employers.

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Table 5.4: Waiting Periooda for Employment, Industrial Trades Graduates,1982-87

Waiting Period (Months)Occupation Certificate Diploma

Mechanical Drawing 0.5 1.7

Machine Shop 5.5 5.9

Electronics 6.1 4.8

Building Construction 8.0 2.5

Electrician 8.3 12.6

Welding 9.2 4.6

Auto Mechanics 10.0 4.3

Furniture Construction 16.3 4.0

Source: Settaminit, 1988.

5.28 Waiting times for certificate level graduates in furnitureconstruction, auto mechanics, and welding are relatively long, indicating thatdemand in this area is primarily at the higher skill level. Conversely, asmeasured by waiting times, demand for electricians is higher at thecertificate level, indicating that lower level skills are ir demand: this isconsistent with the relatively high proportion cE individuals in this trade in1980 with only a primary or general secondary education (Chapter III). Thesedifferential skill demands signal the areas of industrial training wheresupply may be short of demand (mechanical drawing), or in excess (certificatelevel welding, auto-mechanics and furniture construction).

5.29 Public and private employers of agricultural graduates were surveyedto determine both employment needs and actual hiring capacity over a five yearperiod. When compared with system output at both certificate and diplomalevels, the data further confirm the existence of an oversupply of agriculturegraduates (Table 5.5).

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Table 5.5: Demand and Supply for Agriculture Graduates, 1983-87

1983 1984 1985 1986 1987

Certificate

Need 3,395 3,075 2,998 3,084 3,022Actual Hiring 1,385 1,210 1,165 1,222 1,131Supply 25,670 28,880 32,170 32,980 34,890

DiRnloma

Need 4,749 4,870 4,045 360 3,240Actual Hiring 1,676 1,774 1,559 1,587 1,266Supply 8,740 9,190 9,880 10,080 10,330

Source: Settaminit, 1988.

5.30 The employers surveyed do not represent the universe of employers,nor do they reflect the po:sibilities for self-employment. Nevertheless, thegap between effective demand and supply is very large. It is also worthnoting that employers would, under ideal conditions, like to hire more thanthey eventually do, but still far fewer than available supply. If nothingelse, this illustrates the need for careful phrasing of questions regardingemployment plans in enterprise surveys.

The Costs of Vocational Training

5.31 As elsewhere in the world, vocational training in Thailand isexpensive. As calculated at the national level, unit costs in formal piogramsare two to four times higher than academic secondary education, depending onthe field of study and the institution (Table 5.6). The highest unit costsare in agricultural colleges, where large fixed costs (lands and equipment)are supporting fewer students. With enrollment declines, agriculturalcolleges are operating on one shift, while other colleges operate two.

5.32 NISD pre-employment training costs Baht 533 per person. Sincenonformal training is completed in one year, the cost of completing anonformal course would be about one-third that of a certificate graduate.NISD skill training is not directly comparable to a three-year vocationalcourse, providing only practical training. No data are available on thecomparative skill levels of certificate holders and NISD graduates. There issome indication, however, that NISD graduates tend to work in the informalsector, at much lower wages than vocational graduates (Tables 2.21, 2.19). AnAsian Development Bank review in 1981 assessed NISD completers as being at the"semi-skilled' level in comparison with graduates of vocational schools

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(ADB, 1981). Given that NISD requires six years of primary education or lowersecondary level depending upon fields of specialization for admission to pre-employment training, the level of general education -- and hence trainability-- of completers is much lower than that of vocational certificate holders.NISD skill training comprises of 80% practical skills and 20% theoriticalstudies.

5.33 Data from the NEC/World Bank Survey indicate that average unit costsfor school vocational education in 1988 were somewhat higher than thosereported in 1986 (Table 5.7). The average unit cost in DOVE and ITVEinstitutions fell at the upper end of the range for the institutions surveyed.However, these costs are comparable to earlier figures, and indicate that thesample is reasonably representative in terms of expenditure per student.

5.34 Agricultural courses are significantly more expensive on a unit costbasis than industry or commerce. Indeed, the higher costs of the DOVEagricultural colleges pull the overall average of DOVE schools above ITVE.The lower average expenditures per pupil in the Central region are explainedby the disproportionate representation of lower cost commercial schools (sixof the total of ten in the sample).

5.35 Unit costs for nonformal vocational training are, as expected,marked by considerable variation due to different types and lengths of courses(Table 5.8). Nevertheless, unit costs of students (of all kinds, includingthose on block release from comprehensive high schools) are extremely high forthe AVCs in the sample. Economies of scale are clearly at work here. TheAVCs have had an increasingly uncertain role as comprehensive high schoolshave placed less emphasis on practical skills training, with consequent lowerutilization rates. They are reported to be aggressively seeking new trainingclients. But current unit cost figures, even if adjusted significantlydownward, raise important questions as to their efficiency as currentlyconfigured.

5.36 The recurrent cost implications of vocational schooling aresignificant, especially given the high rates of continuation to post-secondaryvocational courses. As shown in Table 5.9, the average unit cost of aagriculture or industry vocational diploma graduate entering the labor forcein the late 1980s is somewhat more than three times the cost of an academicsecondary graduate; certificate holders are about twice as expensive. / Sincesixty percent or more of vocational certificate holders continue to thediploma level, the average cost for a vocationally trained entrant to the workforce is about two-and-a half times that of a general secondary graduate.

2W The analysis uses the more conservative official average cost per student(Table 5.8). If more recent survey data costs were use the ratio ofvocational to general costs would be much higher, especially for agriculture.Internal efficiency (ie, drop out and repetition rates) are assumed to beequivalent for vocational and general courses. Government data indicate thatcompletion rates exceed 90% in both cases.

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Table 5.6: Comparative Annual Recurrent Cost Per Student,by Level and Type of Institution (Baht)

Government OtherTotal Funding Sources

AcademicSecondary Education 3,668-4,351 3,298 370-1,053

DOVE* (1986) 7,244-13,763 6,104-10,411 1,140-3,352

Agricultural 8,614 6,499 2,115Technical 7,887 6,704 1,183Commercial 5,051 4,401 650

Polytechnic School 1,370 1,220 150

tTVE* (1987)

Industrial Technology 11,613 10,461 1,152Commerce 5,077 4,241 836Agriculture 17,281 16,085 1,196

KMIT*1983 8,747 8,747 n.a.1985 9,455 9,455 n.a.1987 10,021 10,021 n.a.

NISD (1984)

Pre-employment 703/monthUpgrading training 686/courseIn-plant training 110/monthIn-plant training promotion 365/monthSpecial training 488/course

Teacher Training 3,701-12,727 3,205-10,840 496-1,887(1986)University 26,925-28,490 25,940 985-2,550(1986)

* Certificate and Diploma Courses.

Source: Background Papers.

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Table 5.7: School Size and Unit Costs, Formal VET, 1988

Number of Average Total Average UnitSchools Enrollments Cost (Baht)

Type of InstitutionITVE 16 2,199 1 156DOVE 18 1,395 11,519Private 4 1,010 9,293

Field of Studv*Agriculture 9 452 20,670Industry 14 2,715 12,292Commerce 11 2,165 6,888

RegionEastern Seaboard 8 1,450 12,705North/Northeast 12 1,662 13,236Central 12 1.777 8,397

* DOVE and ITVE only.Source: NEC/World Bank Survey.

Table 5.8: Institution Size and Unit Cost, Nonformal Education, 1988

Number of Average Total Average UnitInstitutions Enrollments Cost (Baht)

DOVEArea Vocational 4 196 24,971CentersPolytechnic Schools 4 2,713 1,954

DNFEProvincial Offices 8 1,544 3,330

NISDRegional Centers 8 5,250 1j 1,288

J/ 1987 Enrollments; 1988 not available.

Source: NEC/World Bank Survey.

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Table 5.9: Relative Unit Recurrent Costs of Academic andVocational Graduates

Average Number of Annual Unit Total CostYears of Education Recurrent Cost To Produceto Produce a Graduate (Baht) A Graduate

Academic 3 4,000 12,000

Vocational Certificate

Agriculture 3 8,600 25,800Industry 3 7,900 23,700Commerce 3 5,000 15,000

Vocational DiDloma

Agriculture 5 8,600 43,000Industry 5 7,900 39,500Commerce 5 5,000 25,000

Source and Distribution of Revenues

5.37 The pressure of budget constraints on patterns of recurrentexpenditures can be seen in historical data on DOVE budgets (Table 5.10).In real terms, DOVE budgets have increased 30%, while personnel costs haveincreased between sixty and eighty percent since 1982. DOVE has managed tomaintain a budget for supplies and materials of between 17 and 20 percent ofthe total; the pressure of budget constraints are seen in reduced proportionsof expenditure going to capital items (equipment and buildings). Fundsavailable for "general" expenditures have declined sharply, greatly reducingthe expenditure flexibility of schools. These data portray a system holdingto its instructional program without being able to invest in upgradingphysical and equipment capacity, and with reduced flexibility.

5.38 Cost recovery from tuition and fees provides an important source ofrevenue for public vocational schools, covering a substantial share of non-salary operating costs (Tables 5.11, 5.12 and 5.13). Survey data indicatethat cost recovery is highest as a proportion of institutional revenues inDOVE schools (27%); ITVE schools averaged less than half this, at 11%. Costrecovery in DOVE nonformal institutions is roughly equivalent to ITVE at 09%for AVCs and 12% for Polytechnics. For the nonformal NFE and NISD trainingprograms aimed at disadvantaged clients free of charge, given the goals ofthese organizations and the resources of their clients. Commercial schoolsgenerate the highest proportion of revenues through tuition and fees because

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while their marginal cost per student is the lowest of the three fields ofstudy, their tuition ceilings are the same.

Table 5.10: DOVE: Number and Index of Annual Budgets byGroups of Expenditures (1982-1986)

Unit: Million Baht, Constant 1986.

Item 1982 1983 1984 1985 1986

Salaries 442.3 588.2 663.7 700.8 759.5

Permanent Staff Wages 58.0 78.0 90.1 95.6 105.2

Temporary Staff Wages 6.0 6.7 5.9 1.4 -

Cash Remuneration 155.2 168.2 291.1 282.3 270.3

General Expenses 23.0 24.3 35.3 37.3 39.3

Supplies and Materials 271.6 310.8 383.5 363.7 348.6

Public Utilities 38.4 45.5 48.9 50.2 48.4

Equipment 161.4 167.6 162.6 143.2 131.6

Land and Building 365.6 321.3 346.7 380.5 311.3

Subsidies 4.9 6.4 8.1 8.9 8.9

Others 26.0 5.2 5.1 1.7 1.7

Total 1,552.6 1,722.3 2,041.0 2,065.5 2,024.8

Index 1982 1983 1984 1985 1986

Salaries 100 133 150 158 172Permanent Staff Wages 100 134 155 165 181Temporary Staff Wages 100 111 97 22Cash Remuneration 100 108 188 182 174General Expenses 100 106 153 162 171Supplies and Materials 100 114 141 134 128Public Utilities 100 119 127 131 126Equipment 100 104 101 89 82Land and Buildings 100 88 95 104 85Subsidies 100 131 164 181 181Others 100 20 20 7 7

Total 100 111 132 133 130

Source: Background Papers, DOVE Statistics.

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Table 5.11: Source and Pattern of Distribution of Revenues, Formal VET,By Type of Institution, 1988

Average DistributionExpenditure By Source (%) Distribution

Purpose of Number of Per Pupil By Purpose

Expenditure Schools (Baht) Government Other (S)

LugETotal 16 1C,t56 89 11 100

Personnel 6,880 94 06 67Materials 2,186 79 21 22Utilities 360 71 29 04Other 730 74 26 07

MOENTotal 18 11,519 73 27 100

Personnel 6,944 87 13 60Materials 3,113 60 40 27Utilities 710 32 68 06Other 752 43 57 07

PRIVATETotal 4 9,293 -- 100 100

Personnel 4,620 -- 50

Materials 4,135 44Utilities 457 05Other 82 01

Source: NEC/World Bank Survey.

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Table 5.12: Source and Pattern of Distribution of Revenues, Formal VET,By Field of Study, 1988 (DOVE and ITVE Combined)

Average DistributionExpenditure By Source (%) Distribution

Purpose of Number of Per Pupil By PurposeExpenditure Schools (Baht) Government Other (%)

Agriculture

Total 9 20,670 82 18 100

Personnel 13,402 90 10 65Materials 5,769 64 36 28Utilities 427 58 42 02Other 1,052 92 08 05

Industry

Total 14 12,292 85 15 100

Personnel 7,631 92 08 62Materials 3,296 78 22 27Utilities 544 50 50 04Other 821 69 31 07

Commerce

Total 11 6,888 74 26 100Personnel 4,807 90 10 70Materials 1,040 37 63 15Utilities 467 44 56 07Other 574 34 66 08

Source: NEC/World Bank Survey.

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Table 5.13: Source and Pattern of Distribution of Revenues, Nonformal VET,By Type of Institution, 1988

Average DistributionTotal By Source (%) Distribution

Purpose of Number of Revenue By PurposeExpenditure Institutions ('000 Baht) Government Other (%)

DOVEZAVCTotal 4 4,888 91 09 100

Personnel 2,782 94 06 57Materials 1,844 87 13 38Utilities 213 88 12 04Other 50 98 02 01

DO'lE/PolytechnicTotal 4 5,302 88 12 100

Personnel 3,381 94 06 64Materials 1,580 79 21 30Utilities 294 78 22 05Other 47 89 11 01

Total 8 5,142 100 * 100

Personnel 5,036 100 * 98Materials 89 89 11 02Utilities 12 99 01 *Otbsr 5 93 07 *

NMSTotal 7 8,286 98 02 100Personnel 5,842 98 02 71Materials 1,775 99 01 21Utilities 596 100 -- 07Other 72 100 - 01

Source: NEC/World Bank Survey.

1/ Vocational training expenditures estimated as 10% of total iMFE budgets.

* Less than 01 percent.

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5.39 Private schools spend proportionally less on teachers than do publicschools. Student:teacher ratios in the public and private schools in thesurvey were identical (17:1), and the average total personnel cost per teacherin private schools was two-thirds of taat for public schools. But privatescL.ools spend substantially more on materials, nearly twice that of ITVE anc.half again as much as DOVE. For the few schools in the sample, at least, thisindicates the possibility of higher quality of instruction. This isconsistent with a national study of randomly chosen public and private lowersecondary schools in the Kingdom, wbichl found higher student achievement andlower unit costs in private schools (J$ienez, Lockheed and Wattanawaha, 1988).

5.40 In sum, formal vocational education in Thailand is costly incomparison with secondary academic education, and analysis of DOVE budgetsindicates that budget constraints may have begun to negatively affect quality.Costs are very much higher for agriculture than for industry and commercecourses, reflecting high overhead costs and declining enrollments. Costrecovery policies have led to important private investment in publiclysubsidized and provided vocational training, with notable impact on-salaryrecurrent costs -- especially for DOVE. Nonformal training at the NISDproduces graduates at about a third of the cost of formal education, withapparently somewhat lower practical skills. The curricula of course are notdirectly comparable, and practical skill outcomes are unlikely to be the same.Finally, costs for nonformal training provided by DOVE Area Vocational Centersare extremely high.

SOCIAL MEASURES

5.41 Over the first four Five-Year Plans, Thailand built a large formalvocational education system at the secondary level. A large proportion ofthis system is privately owned, though regulated by the government. Nearly asmany students are enrolled in the vocational track as are enrolled in academicsecondary education. Thus secondary (and post-secondary) vocational educationhave met a large part of social demand for post-primary education. Moreover,the system has been evenly distributed geographically, providing access tovocational education and training opportunities throughout the country.

5.42 The stated goals of the formal system are both social and economic.DOVE, in particular, has as part of its formal goal statement the provision ofequal opportunity for those interested in a technical or vocational career.The economic goals, of DOVE and of the IVTE, are to meet the nation's manpowerneeds.

5.43 There are problems with the economic efficiency of the system as itis currently configured. Is the system providing opportunities forindividuals with vocational/technical career interests? Is it serving theeconomically disadvantaged, or those unable to meet the admission andfinancial requirements of academic secondary education?

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5.44 Finally, is the overall size and cor.!iguration of secondaryeducation (both academic and vocational) appropriate for the rapidly changingeconomy? What are the implications of the recent decline in enrollments inboth vocational and academic secondary schools?

Social Demand for Vocational Education

5.45 The other side of the unemployment issue, of course, is the factthat more than 85% of ind. iduals holding a vocational certificate or diplomaare at work. In 1981, vocational graduates comprised two percent of the totallabor force, of which about 70% was employed in agriculture. An additional4.8% had completed lower or upper secondary education. Thus just under sevenpercent of the labor force had completed some form or level of secondaryeducation.

5.46 Vocational graduates form a much larger share of the municipalworkforce, where modern sector employment is concentrated. In 1984, elevenpercent of the municipal workforce had completed a vocational course at thecertificate or diploma level; nineteen percent had completed generalsecondary education. About thirteen percent of new entrants to the workforcein 1987 had completed a vocational course. In 1984, there were approximately230,000 vocational graduates employed in municipal areas.

5.47 Thus while analysis of graduate unemployment highlights labor marketdistortions and unrealistic wage expectations of vocational graduates(especially so given constraints on public employment), vocational educationhas been a path to modern sector employment for a significant number of youngpeople.

Eauity

5.48 Thai education policy is generally oriented toward equity concerns,and secondary vocational education is -- given the sorting mechanism ofacademic examinations for secondary entrance -- an explicit option foracademically disadvantaged youth. Discussions with policy makers and schoolpersonnel also indicate that vocational education is thought to servedisproportionately socially and economically disadvantaged youth as well.While no recent studies bearing directly on these issues have been found, datafrom Bovonsiri and Fry (1980) on vocational students, and from the 1976 laborforce survey provide some indications of the distribution of access tovocational education by parent's occupation ten years ago (Table 5.14).

5.49 Although the two studies use different categories for father'soccupation, there is enough similarity to permit rough comparisons. Farmer'schildren were clearly under-represented in both academic and vocationalschools. And they were more likely to enroll in academic secondary schools.This may have been caused by relative effective prices of schooling, or bydifferent patterns of parent and student career aspirations. The data do nottell us which. Children of parents employed in the modern sector weresignificantly over-represented in both academic and vocational tracks.

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Table 5.14: Parent's Occupation, General and Vocational SecondaryEnrollments, 1976-79

Distribution of Students Occupations ofLabor By Father's Occupation VocationalForce Student's

Occupation DistributionLJ Academicl/ VocationalZ/ Father

Businessman/ 01 06 35 ProprietorIndustrialist 05 State Enterprise

OfficialMerchant/ 06 18Entrepreneur

Clerical/ 05 23 23 Civil ServiceSupport-level OfficialCivil Servant 20 Employee

Farmer 81 46 15 Agriculturist

Laborer 07 07 02 Unpaid FamilyMember

1/ 1976 Labor Force Survey. Source: NEC.XJ 1979 data. Source: Bovonsiri and Fry, 1980.

5.50 There is evidence that, in the past at least, nonformal training andemployer provided job training have enhanced equity (Chapter III). Bothnonformal and employer provided training was found to have a positive effecton earnings for primary school graduates, but not for individuals withsecondary academic certificates. Job related training had a positive impactfor vocational certificate holders, but not for diploma graduates Thus theseforms of training have benefited individuals with lower levels of formaleducation. The same study also found that socio-economic status was fivetimes as likely to predict entry to formal vocational education than toemployer related training; the latter has thus been made available or a moreequitable basis.

Female Access to Education and Training

5.51 In Thailand, as in most countries, female participation invocational education is overwhelmingly concentrated in commercial fields and,to a much lesser extent, home economics within agriculture. Whilecomprehensive and recent national-level statistics are not available, datafrom the NEC/World Bank survey indicate the pattern (Table 5.15).

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Table 5.15: Vocational Certificate and Diploma Graduates,By Sex and Field of Study, 1987 (percent)

GraduatesField of Certificate DiplomaStudy ------ ----- ---- -- - - -- - - -- - -

Male Female Male Female

Agriculture 574 (69) 253 1,218 (68) 567

Industry 4,170 (93) 226 9,774 (96) 369

Commerce 819 (15) 4,474 1,622 (17) 7,695

Totals 5,563 (53) 4,953 12,614 (59) 8,631

Note: The sample over-represents schools with diploma programs.

Source: NEC/World Bank Survey.

5.52 Social perceptions regarding appropriate careers for women clearlyinfluence distribution of female enrollments in different occupational fields.While relatively low female interest in certain industrial occupations, suchas mechanic, may be based on some assessment of the physical demands of thework, there are many occupations where physical strength is irrelevant. Amongthese are relatively highly paid occupations such as draftsman and electronictechnician.7

5.53 Low female participation in fields outside of commerce has importantimplications for work force productivity. Female labor force participationrates in Thailand are among the highest in the world. As labor moves fromagriculture to modern sector employment, the overall productivity of theworkforce will be greatly influenced by female skills and earnings.Increased female access to training for higher paying technical occupationswill increase workforce productivity, and may be an important labor supplyfactor if, as predicted, labor shortages emerge in the medium term.

WZ Women can, of course, do as well in men in all technical fields. In thisdiscussion we merely acknowledge the likelihood of differential perceptionsamong women, at this time, in Thailand.

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SUDPlY and Demand for Secondary Education

5.54 Significant and rapid increase in the proportion of the workforcewith secondary education, and especially upper secondary education, isimportant to improving the trainability and flexibility needed in changingeconomies. Available data indicates that Thailand lags significantly behindother Asian countries in this respect. In 1986, only 2.8% of the workforcehad completed upper secondary education. Comparable figures six years earlierwere: Korea (23.4%), Malaysia (16.1%), and the Philippines (12.7%)(Table 5.16).

5.55 As the decade began in Thailand the share of the workforce withsecondary education was low, but agricultural employment was relatively high.Expansion of secondary general and vocational education in the late 1970s andearly 1980s has begun to establish the capacity for significant increases insecondary attainment. The National Education Commission has estimated that by1987 32.4% of new entrants would have completed lower or upper secondaryeducation, of which 12.7% would have completed a vocational course(Table 2.11). By 1991 this would rise to about 50%, of which vocationalgraduates would comprise 15.6%.

5.56 However, the projections appear to be based on an assumption of afour percent annual expansion of (academic) upper secondary enrollments, and asomewhat slower rate of expansion at the lower secondary level (TDRI, 1987,p.195). These rates approximate the projected rates of growth in the agecohort, and will not lead to significant expansion of access. There are noplans to expand vocational secondary places or enrollments.

5.57 Even if these projections are achieved (and recent enrollment trendssuggest that this may be difficult), Thailand will continue to lagsignificantly behind other Asian countries in the provision of secondaryeducation. With about thirty percent of the age cohort enrolled in secondaryeducation of any kind, the Kingdom will not, under current policies, evenbegin to approach the levels attained by other countries in the region withwhich it competes (Table 5.17). This is consistent with the objectives of theSixth Plan, which emphasizes quality improvement: expansion of access tosecondary education is not included. But international experience suggeststhat expansion of secondary education in needed to develop the trainability ofthe workforce for modern sector industrial and commercial employment.

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Table 5.16: Sectoral Distribution of the Workforceand Secondary Attainment, Selected Countries

Workforce Distribution Secondary Attainment(percent) a/ in the Workforce (%)

Agriculture Industry Services Lower Upper Total

Thailand (1973) 77 07 16 na na 4.4 (1971) _/Thailand (1986) 71 10 19 11.8 2.8 14.6 (1986) k'

Korea (1965) 55 15 30 7.3 6.1 13.4 (1969) S/(1980) 36 27 37 18.5 23.4 41.8 (1980) Q/

Malaysia (1965) 59 13 28 9.2 4.6 13.8 (1967) _/(1980) 42 19 39 22.9 16.1 39.0 (1980) g/

Philippines (1980) 52 16 32 15.1 12.7 27.8 gX

a/ Source: World Development Report; Social Indicators of Development (WorldBank).

1/ Source: Bauer (1988).-,/ Source: Psacharopoulos and Arriagada (1986).

Table 5.17: Gross Enrollment Ratios, Secondary Education,Selected Asian Countries, 1975-1985.

1975 1980 1985

Thailand 26 29 30Korea 56 76 94Philippines 54 65 65Malaysia 44 48 53

Source: UNESCO.

5.58 There is concern among Thai education policy makers that overalldemand for secondary education may be falling. As noted in Chapter IV, thereis evidence that total enrollments have at least reached a plateau, and may befalling (Table 5.18). In 1982 total secondary enrollments increased sevenpercent, well ahead of cohort growth of approximately four percent. Over thenext four years the enrollment growth declined and turned negative.

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Table 5.18: Academic and Vocational Upper Secondary Enrollments,1981-86*

NetChange

1981 1/ 1982 1983 1984 1985 1986 1981-86

Vocational

Total 413,516 427,177 429,309 382,363 368,101 349,399% change 29 04 - (12) (04) (05) (16)

Public 183,839 201,204 213,215 204,324 205,106 197,999% change 25 08 06 (04) - (04) 08

Private 229,677 225,973 216,094 178,039 162,995 151,340% change 32 (02) (05) (21) (10) (07) (34)

Academic

Total 468,461 516,201 532,888 557,019 560,005 550,475s change 43 09 03 04 - (02) 18

Public 407,033 456,194 474,132 501,817 508,911 505,644 24% change 44 11 04 06 02 (01)

Private 61,428 60,007 58,756 55,202 51,094 44,832% change 38 (02) (02) (06) (08) (14) (27)

TOTAL 881,977 943,378 962,197 939,382 928,106 899,814% change 36 07 02 (02) (01) (03)

* Vocational diploma enrollments.

1/ The large rise in enrollments in 1981 resulted from the restructuring ofthe education system, in which primary grade 7 was added to lower secondaryschooling, and the thirteenth year of schooling dropped.

Source: Annex II, Table 5.

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5.59 All of the decline came in vocational schools and in the privatesector. Between 1983 and 1986, vocational enrollments dropped by about 80,000students, of whom 65,000 were in the private sector. Enrollments in privateacademic schools also fell over the same period bv about 14,000. The totaldecline of 94,000 was partially offset by an increase of about 32,000 inpublic academic secondary schools, leaving a net decline of approximately62,000 students.

5.60 The absolute overall decline is small, and may represent either ananomaly in statistical reporting or a short-term change in demand.Absent data on 1987 and 1988, it is difficult to tell whether or not a trendhas become established. However, the overall patterns raise at least twoissues. First, demand was clearly slowing during the mid-1980s. If thetrends have continued, even the modest goal of a 4% expansion in uppersecondary enrollment may be difficult to reach. Secondly, private sectorprovision of education is declining at a very rapid pace. As the privatesector provides about twenty percent of secondary places at minimal cost topublic finances, the financial implications of the decline are significant ifthe losses are to be offset by increases in public enrollments.

5.61 No direct evidence on the causes for falling enrollments is available.However, there is enough information to suggest a range of partial

hypotheses. First, the vocational education system may not be sufficientlyflexible to meet changing employment demands in different occupations.Falling application ratios and enrollments in ITVE agriculture courses signalthat parents and students may recognize diminishing job opportunities; similarcalculations of probable returns to vocational secondary education may bebeing made in other occupational areas with poor employment prospects. To theextent that the vocational schools are unable to offer more places in highdemand occupations, total enrollments would fall as students seek otheropportunities. Some of these may be in academic secondary education, othersmay be in the labor market.

5.62 The opportunity cost of schooling combined with declining familysize may also have an effect, especially for private schools. In rural areas,parents may have to balance the need for labor against the opportunity anddirect costs of secondary education in households with fewer children. Ifthis is the case, one would expect to find that demand in rural areas would befalling more rapidly than in urban areas. Alternatively, or in addition,students may increasingly be attracted to employment in the rapidly expandingmodern sector of the economy as an alternative to education. In this case, wewould expect to see higher drop outs and falling application rates for urbanprivate schools.

5.63 Finally, recent studies have speculated on the possible impact oflack of opportunities to enter universities on demand for secondary education.(Chiswick, 1989). With only 25,000 places for new entrants, the closeduniiversities can provide places for about one out of five academic secondarygraduates. High continuation rates of vocational diploma holders tocertificate programs, and the rapid expansion of open university enrollments

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both testify to high levels of demand for post-secondary education. It ispossible, at least, that perceived lack of opportunity for advancement to theclosed universities dampens demand for secondary places to some extent. Thereis some confirmation of this from a recent study of students in private andpublic lower secondary schools that concludes that, on the whole, the public(academic) schools attract the academically more gifted students (Jimenez,Lockheed and Wattanawaha, 1988). If this pattern continues in upper secondaryschools,2 one would expect to find that the impact of constrainedaspirations would be felt most strongly in private schools, consistent withthe observed patterns of enrollment decline.

5.64 In sum, a number of factors may be affecting overall demand. Thesewould operate through changing family perceptions of (a) the returns tovocational schooling (at least in agricultural occupations), (b) the returnsto academic edu:ation (opportunities for higher education), and possibly (c)the opportunity costs represented by loss of family farm labor or employmentin the expanding modern sector. No data are available to fully and directljtest these hypotheses, and studies on these issues would be of considerableimportance to policy development.

5.65 The direct costs of education are also likely to enter into thecost-benefit considerations of families and students. While heavilysubsidized (officially about 80-90%), public schools are authorized to chargetuition up to a ceiling of 3,000 Baht per year. Private school income isderived solely from tuition, for which the government sets an officialceiling, currently 7,000 Baht per year. However, schools in both categoriesrequire additional payments or donations from parents, often called "teamoney." It is reported that such fees can amount to ten times officialtuition fees. They are often the price of entry into a particular school.And the price rises with perceived school quality: there is a strongcorrelation between fees, extra donations, and school expenditure per student.Finally, expenditure per student correlates positively with student GPA (TDRI,1987, pp. 174-175). In short, quality rises with expenditure, and the costbarriers suggest that, despite competitive admission by examination, poorerstudents do not have equal access to the best quality education.

5.66 These effects of official and unofficial prices for secondaryeducation are consistent with experience in other developing countries (James,1987). First, parents are willing to pay high prices to get their childreninto schools with the "best" peer group; these are the schools that are morelikely to provide access to higher education. Second, when demand exceedssupply of places, when prices are set by the market, and when there arebarriers to enrollment expansion or the entry of new schools, excess demandwill enable schools to raise their price. Additional income to the schools

W It is reasonable to suppose, in fact, that the difference in academicability bet-.cen public and private lower school students would increase at theupper secondary level, as the more successful private lower school studentsgained admission to more prestigious public schools.

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will be used for quality improvement as schools compete for the "best"students on the basis of quality of their inputs and, consequently, outcomesin terms of employment or access to higher education.

5.67 These same conditions, however, operate to reduce the supply ofplaces that would be made available if controls on enrollments were relaxed,and/or entry of new (private) schools was encouraged. And they reduce accessfor poorer students to the best quality education. If the barriers toexpansion are reduced or eliminated, price competition between new or expandedschools will tend to drive down the price of education over time, leading tomore places but reduced quality. Equity of access will improve as pricesfall.

5.68 In Thailand, ceilings are set on the amounts of tuition that bothpublic and private vocational schools may charge. These ceilings are intendedto keep the price of schooling within range of poorer families. The fact thatschools are able to ask for and receive additional payments indicates that theceilings are below market prices. If the ceilings were effective, one effectwould be to reduce the quality of education and training provided, as measuredby expenditures per student. Schools would have to reduce expenditures tomeet ceilings. Moreover. as the marginal income of additional places fell,their would be less incentive for schools to expand or for new schools toenter the market. Thus the quantity of places provided would fall as well.

5.69 Evasion of tuition ceilings under conditions of controls onenrollments and entry of new schools is consistent with excess demand and thewillingness and ability of parents to pay for quality. At the same time,these policies reduce the number of places provided and the quality ofeducation and training in new schools, or in existing schools unable tocommand high prices because of poor reputations. This latter circumstance, ofcourse, leads to a continuing downward spiral in quality in these schools,making them less attractive to parents, even at low cost.

5.70 Policies on tuition clearly need review. Indeed, there may well bedifferent goals for academic and vocational secondary education. Expansion ofacademic education, at relatively low cost to the public, would require a setof policies intended to increase the quantity of places provided, providing arange of quality and price choices, combined with positive and targetedprograms to aid poorer students.

5.? L Given the oversupply of graduates, and evidence both of skillmismatch and accurate consumer parception of changing labor markets, tuitionand fee policies for vocational education and training would be different,emphasizing decreased supply of places and increased quality -- the latterincluding linkages with the labor market. These issues will be addressed insome detail in the concluding chapter.

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SUMMARY

5.72 The economic efficiency of formal vocational schooling hashistorically been low in comparison with general secondary education.Relatively high levels of unemployment persisted during the late 1970s and1980s. Unrealistic wage expectations based on government wage policy,combined with the social feasibility of a long wait for employment,contributed to high unemployment. Parent and student perceptions of labormarket realities have, in turn, led to high rates of continuation to post-secondary vocational preparation. By 1986-87, the rate was above 60%. Thelargest share of vocational graduates entering the labor market have had fiveyears of vocational education in preparation for their first job.

5.73 This preparation has been costly in comparison with generalsecondary education. Annual recurrent costs alone have been at least twicethat of general secondary education for industry and agriculture students, andtwenty-five percent higher for commerce students. Higher unit equipment andfacilities costs for vocational schooling would add to this differential.1/On a recurrent cost basis, and assuming 60% of vocational students completedfive years of study, each agriculture and industry vocational graduateentering the labor market has cost well over twice as much as a generalsecondary graduate.

5.74 The inefficiencies resulting from high unemployment and highcomparative unit costs could perhaps be justified during the two decadesduring which the vocational education system was being established, andexperience being gained. The large majority of vocational graduates wereeventually employed; long waits for employment caused no social disruption;and diversion of students to vocational tracks was consistent with governmentpolicy to restrain enrollments in higher education. With rapid growth ingovernment employment, and slow modern sector industrial employment expansion,a reasonable match between skill demand and supply appears to have beenachieved. And though social equity effects were less than intended,vocational schooling did provide an opportunity for secondary and post-secondary education for a large number of young people.

5.75 But by the mid-1980s the economic context of employment, and thusof vocational training, began to change. As government hiring rates sloweddramatically, and export-led industrial growth accelerated, evidence of skillmis-matches began to emerge. The recent surveys, and declining applicationand admission rates, indicate quite clearly that there is a significantoversupply of agriculture graduates. As early as 1980 data on wages indicatedthat vocational graduates in certain technical fields (drafting, engineeringtechnician, electronics) were rapidly employed, with significant earningsadvantages over secondary academic graduates. But for office jobs, generalsecondary education was much more cost-effective than vocational schooling.

92/ Data on capital costs were not available for this study, but are alwayshigher for vocational places.

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Various levels of general education, in combination with training provided byemployers, was a significant -- and lower cost -- alternative path toemployment in a number of occupations (Chapter III).

5.76 Change is not restricted to the manufacturing and service sectors.Agriculture is increasingly diversified and capital intensive in some regions.The pull of modern sector employment, combined with smaller family size, willaccelerate agricultural labor constraints, and more highly capitalized andtechnology-intensive agricultural practice will spread.

5.77 There is also some evidence to suggest that demand for higher level(diploma) skills in certain occupations is increasing, while for otheroccupations lower levels of training (and wage expectations) are findingbetter opportunities in the labor market. That recent surveys suggestequivalent labor market outcomes for the vocational diploma and for the highercertificate (general secondary plus two years of post-secondary vocationaleducation) suggests that employers give equal value to the two streams. It ispossible to speculate that this reflects an attractive combination oftrainability due to complete academic secondary education and occupation-specific post-secondary education.

5.78 Available evidence suggests that the non-formal skills trainingprograms are reaching the intended audience, and are in fact helpingindividuals gain employment in the informal sector. With the exception ofshort-term training in the AVCs, these courses have relatively low unit costs.Data from 1980 further indicate that taking these courses after employment hadpositive impact on the earnings of both primary and vocational graduates.

5.79 As is the case in most countries, women are much more likely topursue commercial courses than those in industrial trades. These programshave undoubtedly enabled a large number of women to obtain modern sectoremployment. However, the data suggest that the cost-effectiveness ofcommercial vocational courses, in comparison with academic secondaryschooling, is low for at least some commercial positions. Moreover, thepotential for labor shortages in the medium term (Chapter III) suggests theopportunity, at least, for an increasing number of women to enter higherproductivity employment in technical and engineering fields.

5.80 Finally, evidence from other industrializing Asian countriessuggests that significant expansion of secondary education will be needed toincrease the supply of flexible and trainable graduates. With only a third ofthe age cohort in any form of secondary education, the Kingdom faces asignificant challenge in seeking to raise the level of secondary education tomeet the challenge of increasing levels of technology, and rapid change, inall sectors of the economy. The evidence points clearly towards areassessment of the policies and institutional structures that determine therelative allocation of resources to vocational and academic secondaryeducation, and the efficiency of vocational schooling. In short, a newconceptualization of secondary (and post-secondary) education is needed toadjust the education and training system to a changing economy.

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VI. Alternatives for Policy Change

6.1 World-wide experience indicates that as economies change and grow,vocational education and training systems need to change as well if manpowerneeds and goals for social equity are to be met efficiently. The economy ofThailand is indeed changing, and there is clear evidence that human resourceand training policies established for an earlier era need to be reassessed.

6.2 The growing need for policy and institutional change has beenrecognized by Thai policy makers in recent studies. A review by the NEC(1985), for example, proposed significant reorganization of vocationaleducation and training to improve planning and adjustment to changing labormarkets. This study echoed recommendations made as early as 1980 (Bovonsiriand Fry, 1980). The current Sixth Plan calls for improved quality andflexibility, and adjustment of the system to meet evolving skill needs in achanging economy.

6.3 This chapter first examines international experience for lessonsthat provide perspective on possible directions for human resources andtraining policy in the Kingdom. The characteristics of the economic contextare then reviewed to identify the main implications for broad human resourcepolicies. Constraints on the ability of the current education and trainingsystem in meeting the challenges of economic change are identified. Finally,options for human resources and training policies are presented and discussed.

INTEr.NATIONAL EXPERIENCE

6.4 The patterns of change discussed below are drawn primarily from tworecent studies of world-wide experience with VET. The first is acomprehensive review of more than two hundred studies in developing anddeveloped countries (Dougherty, 1989). The second is an analysis of 76 WorldBank project investments in vocational education and training for industrialemployment in 34 countries (Middleton and Demsky, 1988).

6.5 A fundamental conclusion emerging from these studies is thatvocational education and training systems do evolve over time to meet changingeconomic and employment needs. Systems appropriate for an economy at onestage of development may not be so as the economy, and the nature of jobs,skills, and training needs change. Relative to general education, VET systemsface a greater need for change and adjustment. The principal causes anddimensions of system evolution are summarized below.

6.6 Evolution in the need for pre-employment training. There has been apervasive tendency to over-estimate the need for pre-employment training atthe skilled worker level. The skills required for most entry-level positionscan be learned quickly and efficiently after employment, provided new workershave good basic skills and that employers have the needed management andtraining expertise. The importance of training after employment grows

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significantly as economies develop and become more complex, and changes inmarkets, products and technologies lead to rapid change in the skillrequirements of jobs.

6.7 In low income cotntries in early stages of development, of course,these conditions cannot always be met, and more training before employment isneeded. As economies change and grow, and enterprises become stronger, agreater share of the training responsibility can be assumed by enterprises,and the role of public training institutions can be shifted more towardpreparation in basic skills and to support for enterprise management andtraining capability.) An example of this evolution is found in Brazil, wherepre-employment training in the national training agency (SENAI) has declinedfrom 70% to 17% of participants, while in-service training and provision ofmanagement and training development services to enterprises has increasedsubstantially. American vocational schools have evolved in the samedirection.

6.8 At higher technical and engineering skill levels, the needs forlonger courses and for economies of scale in utilization of expensiveequipment and instructors support provision of occupationally-specificeducation and training in institutional settings. Even at this level, basicpreparation will be extended through training after employment.

6.9 Increasing responsiveness to demand. When preparation foremployment is the central purpose of VET, systems are most effective, andefficient, when they are able to respond in the short-term to the needs of theeconomy. When economic change is rapid, the response from training systemsmust come equally rapidly. Earlier expectations that a supply ofvocationally-trained individuals would stimulate economic growth, and expandemployment, have not been met. Employment generation depends much more onmacro-economic policy and conditions. Attempts to forecast manpower demand indetail have been inaccurate, often leading to over-investment in training.Policies that facilitate short-term adjustment through labor marketinformation, linkages between training institutions and employers, andincentives to guide the size and occupational content of training have beenmore effective.

6.10 Evolution of training modes. The evidence indicates that any modeof vocational training -- schools, colleges, training centers -- can becomecost-effective. Effectiveness comes through policies and institutionalpractices that encourage flexibility and quality, such as good labor marketinformation, linkages between training and employment, institutional autonomyand capacity to respond to the needs of employers, and the ability to hire and

NJ An analysis of vocational curricula and teaching quality has concludedthat efficiency can be increased by restricting pre-employment training tobasic and generally useful skills, noting that specific occupational skillsmust always be developed after employment in the context of the technology andproduction practices of the employer (Herschbach, 1989).

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retain high quality instructors with appropriate occupational experience.Technical and vocational schools have been able to meet these criteria(Jordan, Korea, Turkey), as have vocational training centers operated byMinistries of Labor or autonomous training agencies (Korea, Jordan, Brazil,Malawi, USA). At the same time, both publicly financed and administeredschools and centers have often been unable to do so, and have been ineffectiveand very costly. Thus the choice of "mode" of training rests more on thepotential to meet these requirements than on any intrinsic advantage.Moreover, there is evidence in many countries that effective institutions,regardless of mode, develop a broad array of training and developmentservices.

6.11 Increasing cooReration between employers and training institutions.Joint sponsorship of training by employers and training institutions marks animportant stage in the evolution of training systems. In some countries,notably Germany, this "dual" system is the principal way in which occupationalskills are developed. The advantages of co perative training are many.Theory and basic skills courses are efficiently taught in schools and trainingcenters; advanced technical and practical skills are learned in the firm. Inearly stages, most training is institution-based, with relatively shortapprenticeship placements with employers. As the system develops, the balanceshifts. Most training takes place in enterprises, supported by relativelyshort pre-employment training emphasizing theory and basic skills, withperiodic block-release for additional classroom training.

6.12 These systems have emerged in all developing regions. They requiregood enterprise training capacity, and strong supervision from traininginstitutions. Generally, legislation that regulates the apprenticeshipportion of training is needed to ensure that apprentices receive adequatetraining and to avoid exploitation.

6.13 Cooperative training arrangements increase employer participation inthe design and delivery of institution-based training, improving curriculumrelevance and strengthening the linkeges between training and employment.Government provision of financial incintives targeted on particular industriesor occupations can effectively stimulate and guide the provision of training.

6.14 Increasing diversification of financing. In early stages ofdevelopment, governments have had to take the major responsibility forfinancing and providing vocational education and training. And publicfinancing remains an important source of support for training in manydeveloped countries. The evolution of effective systems is generallyaccompanied by measures that shift an increasing share of training costs tothe principal beneficiaries of training: enterprises and individuals.

6.15 A range of mechanisms have been used (Whalley and Ziderman, 1989).In a number of countries, especially in Latin America, training agencies havebeen financed by earmarked payroll caxes. Generally 1-2% of the payroll, theincidence of these taxes falls mostly on workers, not enterprises, but theyhave the beneficial effect of providing adequate and stable financing for

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ti, iing. In some countries (i.e., Malawi), taxes on enterprises are used tofinance the salaries of apprentices in cooperative training arrangements.Both rebate schemes and tax incentives have been used, with varying degrees ofsuccess, to stimulate enterprise provision of training.

6.16 Private training institutions provide a significant portion of pre-employment vocational training in many countries. In such cases, individualspay all or part of the costs of training, depending on the extent to which thegovernment provides subsidies to training organizations. Scholarship fundshave been established to enable economically disadvantaged students to gainaccess to these institutions.

6.17 In a number of countries governments have established training fundsto provide grant or loan Incentives to training institutions, employers orpartnerships to encourage specific training activities. Often these requirematching contributions from employers. They are targeted on specific skillshortages, or on re-training needs caused by structural changes in industries.They are also used to provide start-up training as an incentive to attractinvestment in new enterprises, and to provide scholarships for needy students.The funds are financed with both government and enterprise contributions, thelatter often collected through a payroll tax.

6.18 The rise of national training agencies. Provision of vocationaltraining becomes more complex as economies grow and change. Changing patternsof training before and after employment, the need for rapid response tochanging skill demands, changing and expanding roles for traininginstitutions, increased levels of cooperation between governments andenterprises, and increasingly diverse sources of financing create the need forvery strong system management. More than thirty countries in all regions haveresponded to this need by establishing a national training agency to developand implement training policy. These agencies provide a focal point forcooperation between the government and the private sector, fo; monitoringlabor markets and training institutions, and for policy development andplanning. They give training policy a stronger place in economic and socialdevelopment planning.

6.19 In many cases national training agencies operate traininginstitutions directly; in others they concentrate more on policy developmentand the use of incentives to guide the system. Depending on nationalpolitical traditions, they are attached to ministries of labor or establishedas quasi-autonomous agencies governed by joint public/private boards. Inlarger countries, they often operate on a highly decentralized basis to enablelocal training institutions to provide effective support for local trainingneeds.

6.20 In forming these agencies, countries explicitly recognize thebenefit of separating vocationally-specific education and training frombroader forms of general education. This separation facilitates thedevelopment and concentration of specialized training expertise inorganizations designed for rapid change, while freeing education ministries

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for the centrally important task of managing the improvement of generaleducation. While many countries continue to operate parallel VET systems, oneof which remains in the education sector, the emphasis in vocational trainingclearly shifts to institutions that operate outside of the credit and degreerequirements of education, facilitating shorter, more intensive and less-costly training; partnership with enterprises; faster institutional responseto changing employment demand; and evolution of a broad range of trainingservices to industry.

6.21 The grocess of systems change. The record indicates that rapid andradical change of training systems is not likely to be effective. Effectivechange can take a decade or more. The strengths of existing training systemsand institutions form the basis for successful change efforts. And reforms ofvocational education and training are more successful when they are based onbroad trends in the economy, and conceived in the context of broader humanresource development policies.

THE ECONOMIC CONTEXT OF HUMAN RESOURCE POLICY

6.22 Eight key economic issues and policies will set the context forhuman resources and training policies in Thailand over the balance of thecentury:

(i) Constrained government hiring: Most new jobs will come inthe private sector.

(ii) Decrearing Rrotection of industries: Exposure of a largershare of Thai industry to competition will increase pressure forproduct quality through automation and for reduction in labor costs;these trends will have downward pressures on demand for skilledworkers and technicians.

(iii) Ranid exDansion of exRort and domestic manufacturing:Expansion of industry will create more jobs, increasing the need fortechnical and engineering skills.

(iv) Growing labor shortages: As the supply of labor becomesconstrained, wages will rise, and the capital and technologyintensity of manufacturing and agriculture will increase; theproductivity of labor in both sectors will have to increase as well.

(v) Growth in small and medium size industries: Expansion ofmanufacturing will come in part through continued overseasinvestment, but SMEs will play a major role in flexible productionsystems, and are likely to be relatively skill intensive.

(vi) Expanded investment in infrastructure: Investment inindustrial infrastructure will generate jobs; to the extent that

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Thai firms are successful in competition for business, demand forskilled workers and technicians in construction will increase.

(vii) Encouragement of rural industries: Expanding employmentopportunities in rural areas is a major policy goal. Infrastructureinvestments will help, but the availability of skilled labor may bea constraint.

(viii) Self-employment in the informal sector: A large share ofemployment will, over the medium term, continue to come in verysmall firms and in self-employment.

6.23 The implications for human resources and training poli-les aresignificant, indicating the need for reconsideration of relative emphasis ondifferent types and levels of education, and on the way in which vocationaleducation and training at all is now organized:

(i) The suDDlv of higher level scientific. technical andengineering manDower will-need to be increased to establish thecapacity to adapt, apply and develop technology.

(ii) Overall workforce trainability will need to be increasedalong with enterRrise training capacitv to facilitate labor mobilityand workforce adjustment and training for productivity duringemployment. In-service training in larger firms will need to bestrengthened.

(iii) SMEs will reguire considerable support in developing humanresource management practice and in productivity improvement; thissupport may extend to very small firms in the informal sector.

(iv) The ability to monitor and react to raRidly changing labormarkets will be crucial to the efficiency of VET. The directions ofthe economy indicate the presence of offsetting trends in the demandfor skilled workers, technicians and engineers. Exposure tocompetition and growing labor shortages will lead to increasedcapital investment and automation, tending to reduce demand forskilled labor. Expansion of industry, grovth in skill-intensiveSMEs and the possible expansion of infrastructure investment willincrease demand. The efficiency of VET systems will be determinedby their ability to identify and react quickly to these changes inthe profile of skill demands.

(v) Increasing productivity in agriculture may reguire new rolesfor agricultural education and training. Rising levels of generaleducation generally improve agricultural productivity, and there isevidence that nonformal skills training is increasing family income.The role of agricultural colleges in supporting improved farmproductivity may need to be reconsidered.

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CONSTRAINTS ON EDUCATION AND TRAINING

6.24 The current education and training system has many strengths,including a high level of commitment and professionalism among administrators,teachers and staff. And it served the nation and the economy well until theearly 1980s, when new economic policies and opportunities led to the currentpattern of rapid economic change. There are now signs that the system isconstrained in addressing the implications of economic change.

6.25 Ex8ansion of higher scientific and engineering education. There isgrowing consensus in the Kingdom on the need to expand higher education inscientific and technical fields. Similar expansion has made importantcontributions to industrialization in other Asian countries. A number ofinitiatives are underway or under consideration, including the expansion offacilities in provincial universities and crash training programs forengineers. Needed expansion will pose important resource allocation questionseven if, as has been recommended, cost-recovery from students is increased.

6.26 ExDansion of secondary education. Experience in other economiessuggests that the current level of provision of secondary education will beincreasingly inadequate to meet the needs of the economy for a trainable andflexible workforce. The issue is complicated by evidence suggesting thatdemand for secondary education, at current levels of quality and price, may bedeclining. Tuition ceilings and constraints on entry are constraining theprovision of private places. Unofficial tuition charges in public schoolsappear to be raising the price of the best quality secondary education tounaffordable levels for many famiiies, while the quality of the less expensiveschools, given sharp competition for the restricted number of universityplaces, may not appear to be worth the price given alternative employmentpossibilities for youth. Expansion is therefore not likely to be merely anissue of school construction and teacher training, but will involve carefulassessment of the costs of secondary education to parents and students, and ofthe quality and relevance of the education provided.

6.27 Adjustment of vocational education and training. The formalvocational education system is too large, too rigid and, given competingneeds, too costly. C, figured for an agriculture-led economy, and to meetexpanding government hiring, the system is increasingly inefficient. Thereare too many agriculture graduates, not enough graduates in other technicalfields. Vocational education is costly (both to students and to society),especially for the majority of students who complete five years ofpreparation. Mechanisms for effective planning and direction of a complex setof parallel formal and nonformal training systems are weak.

6.28 Uncoordinated development of the system has led to overlapping rolesand significant duplication of services. The pattern of system growth hasfeatured the establishment of new systems from the base of DOVE colleges, andthe initiation c,f a variety of new kinds of institutions (polytechnics, areavocational centers). As the system evolved, nothing was abandoned. Inconsequence, agricultural colleges are struggling to maintain enrollments (and

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budgets) in the face of declining demand. The area vocational centers havelost their original role in support of diversified secondary schools, and arelikewise searching for new clients while operating at very high unit costs,potentially -- if not actually -- in competition with DOVE polytechnics,regional institutes of skill development, and the training programs of DNFE.

6.29 The large and fragmented nature of the system, and currentoperational policies, make it comparatively rigid in the face of change. Weaklabor market information, centralized curriculum development, rulesrestricting the ability of individual institutions to adjust to new trainingneeds, and poorly developed linkages with employment make it difficult forschools to adapt to the needs of the economy and of students. Whileincreasingly well-educated, teachers have almost no industrial experience.They are in short-supply in technical colleges, an carry heavy workloads,leaving little time to establish linkages with enterprises, develop newcourses or implement the policy for cooperation with enterprises inestablishing student apprenticeship opportunities. There is evidence ofincreasing difficulty in recruiting and retaining teachers in the face ofcompetition from expanding industry. There is reason to be concerned aboutthe quality of the occupational training provided in the DOVE colleges, andperhaps in the ITVE, by curricula that diffuse student time across generalcourses, vocational theory courses and a range of vocational electives.Budget constraints have made investment in new equipment difficult for adecade.

6.30 Declining demand for vocational education over the past five yearsindicates that parents and students are making rational decisions on the costsand employment benefits of formal vocational education, selecting otheroptions. The decline has been most rapid in private vocational colleges, buthas also begun in public colleges. Evider.-e suggests that much of this isrepresented by falling demand for places in agricultural colleges, though amore detailed assessment of enrollments by field would be required to confirmthis trend.

6.31 Tuition policies are also likely to be affecting both demand andsupply in vocational education. Tuition ceilings in private vocationalschools restrict quality, and thus competitiveress with subsidized publicvocational colleges. Larger, better-established schools appear to be able togenerate sufficient resources from endowments and more profitable educationprograms to offset tuition constraints. And indeed, a number of these schools(in Bangkok) have succeeded in establishing strong linkages with employers andin developing high quality programs, with excellent employment outcomes. Butmany smaller schools have either gone out of business or faced enrollmentdeclines, which further reduce income and quality.

6.32 Testing and certification systems, while in place under NISDauspices, are of little use in monitoring the quality of the VET system as awhole because they are not available to vocational college graduates.Moreover, requirements that changes in trades standards and tests must beapproved by the Cabinet introduce unnecessary rigidity in the system,

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constraining changes in either curricula or standards to meet evolving skillneeds.

6.33 Finally, expectations that vocational schooling would provide anavenue to employment for economically disadvantaged youth have not been met.The evidence indicates that vocational schools disproportionately serve thechildren of parents employed in the modern sector, not the children of farmersand laborers. Women have not yet gained access to higher-productivityoccupations (and thus to higher wages).

6.34 At the same time, there are notable strengths. The nonformalsystems have been effective in providing skills training for educationally andeconomically disadvantaged individuals, improving earnings in the formalsector and serving small enterprises in the informal sector. While continuingto operate at comparatively low skill levels relative to the technicalcolleges, the NISD has established programs of training support forenterprises, although broader and more intensive support for enterprisedevelopment has not yet been possible. Nonformal training provided by theDNFE has contributed to improved family income in rural areas.

6.35 In the formal system, KMIT is effective in providing higher leveltechnical skills. ITVE reports good employment outcomes for graduates.Individual DOVE colleges are well managed under resource constraints. Allthree technical college systems have sought to strengthen linkages withemployment and are experimenting in a variety of cooperative trainingarrangements with enterprises. A significant private sector presence invocational training is an important asset. And, finally, enterprises havedemonstrated the capacity to provide significant levels of training, althoughin-service training needs to be strengthened and the training capacity of thesmall firms that provide most jobs is not well developed.

6.36 In sum, the policy issues in vocational education are complex. Andthey are not restricted to questions of finding a better match between supplyand demand. More fundamental issues of how the system is configured, managedand financed need to be addressed against the needs of a changing economy, andin the context of competing claims on public resources for education.

ALTERNATIVE POLICY STRATEGIES: A FRAMEWORK FOR DISCUSSION

6.37 Patterns of economic change in Thailand are unique among middleincome countries in many ways, among them the continuing importance ofagriculture and the very large role played by formal education in providingvocational education and training. At the same time, there are manysimilarities with other experiences: export-led manufacturing growth, shift oflabor out of agriculture into modern sector employment, a large share ofemployment in the informal sector, and the importance of private schooling atthe secondary level.

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6.38 The development of strategies for adjusting human resource policy tomatch changes in the economy will require considerable analysis and anextensive dialogue among key agencies, employers, parents and students. Ifdecisions for change are taken, these will be based on careful considerationof local political and financial realities. International experience,however, suggests a range of policy strategies that seem applicable to thecurrent situation in Thailand. These are advanced not as prescriptions, butrather as a framework to support further analysis and discussion.

6.39 Of the three goals for policy action, this study only addressesthose for expansion of secondary education and adjustment of the vocationaleducation and training system. The need for expansion of university levelscience and engineering education is closely related to these two goals. Forexample, expansion of tertiary technical education should be accompanied byappropriate curriculum and enrollment changes in lower levels of technicaleducation. And changing demands for skilled and technical workers also affectuniversity education. The focus on this study, however, is on the preparationof skilled workers and technicians, and the policy alternatives presented willlargely be restricted to this issue.

6.40 Alternative policy strategies for expansion of secondary educationand adjustment of the VET system are summarized in Table 6.1. The objectivesfor each set of policy alternatives are specified, with attention to impact onthe workforce and the economy, and on the efficiency and quality of systemoperations. The strategies have been developed with overall resourceconstraints in mind, although comprehensive cost analysis is beyond the scopeof the present study.

Strategies to Expand Secondary Education

6.41 Expanding academic secondary education is an important way toimprove the trainability and flexibility of the workforce at relatively lowcost. The evidence shows that secondary education combined with trainingafter employment has been a viable route to skilled employment in Thailand formore than a decade. Supported by programs to stimulate and improve enterprisetraining (see paragraph 6.64 below), expanded secondary education can makeimportant contributions not only to manpower needs, but also to more equitableaccess to employment and earnings for a larger portion of the population.Importantly, the lower capital and recurrent costs of secondary education meanthat more students can be enrolled for a given level of investment.

6.42 Expansion of general education would be accompanied by overallreduction in the number of vocational secondary places. Students that wouldhave entered vocational streams under current configuration would completeacademic secondary education instead. There is little doubt that many, if notall, of these students can be successful in an academic stream. Under currenttransition arrangements, they are drawn from the top half of primarycompleters. And more than half of them continue on to complete post-secondarycourses.

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Table 6.1: Alternative Policy Stategies

Policy Goals Policy Alternatives

ExDand Secondary Education Private School Strateav

Increase workforce Encourage private provision by removal of constraintstrainability on the establishment of new schools and the provision

of per student subsidies.Improve equity

Establish scholarship program for disadvantaged studentsat both public and private schools.

Public School Strategv

Reduce tuition, increase per student subsidy to encouragedemand. As demand grows, convert selected DOVE agriculturaliPI colleges to general secondary curricula.

Science and Technoloav Strateav

Strengthen science and technology curricula in all secondaryschools; establish specialized Technology High Schools.

Adiust VET System

1. Planning and Management National Trainina Auenc'

Improve efficiency Integrate training planning with economic and socialdevelopment planning, monitor labor markets and trainingoutcomes, manage skill testing and certification, establishtraining fund to provide incentives to guide the system,administer apprenticeship and scholarship programs.Consider possibility of enterprise payroll tax for partialfinancing of training.

Table 6.1: Alternative Policy Strategies (page 2)

Policy Objectives Policy Strategies

2. System ConsolidationHigher Skills Strategy Targets: Larger Manufacturing andImprove efficiency Commercial Enterprises

Raise skill levelsImprove quality Consolidate post-secondary technical education in KNIT and

ITVE; add selected DOVE technical colleges to ITVE. Requiregeneral secondary certificate for entry. Align curriculumto allow students to enter university science andengineering programs. Increase tuition and fees to permitincrease in quality while maintaining the current level ofpublic subsidy.

Encourage similar diploma programs in private technicalcolleges owned and operated by non-profit organizations.Raise tuition ceilings, control enrollments, restrict entryof new schools.

Rural Skills Strategy: Targets: Farmers, small agriculturalenterprises

Shift certificate and diploma agricultural education toDOVE. Decentralize to regional/provincial and institutionallevels; improve institutional capacity for curriculumdevelopment and staff training. Maintain tuition andsubsidies at current levels; provide subsidies on blockgrant basis to provinces. Encourage schools to increaserevenues from sale of services, permit them to keepearnings. Set mimimum enrollment targets for schools; if notmet after 5 years, convert to general secondary schools.Transfer AVCs to NISD. Continue DNFE programs as currentlyconfigured.

Table 6.1: Alternative Policy Strategies (page 3)

Policy Objectives Policy Strategies

2. System Consolidation SHE SuRport Strateav: Targets: SMEs in urban(continued) and decentralization of

industry areas

Expand role of NISD and RISD to provide a broader range ofenterprise development services, including technical andmanagerial training, marketing, technology information.Increase institutional autonomy, ability to charge fees forservices and use earnings to improve quality. Transfer AVCsto become RISDs. Transfer skills testing to nationaltraining agency.

6.43 Recent declines in enrollments suggest that the first step inexpanding secondary education is to remove constraints on demand. In 1982,private secondary education enrolled 15,000 more students than it does today,and public secondary enrollments in 1986 were some 3000 students below theprevious year. This suggests that immediate enrollment increase can beach4eved through demand stimulation. Further expansion will require increasein the number of places. Three alternative strategies are suggested tostimulate demand, increase the supply of places, improve equity and increasequality.

6.44 Private school strategv. Provision of per student subsidies toprivate schools can lower the cost of education to students and parents,increasing demand. As demand rises and enrollments increase, new schools willenter the market if constraints on entry are minimized. Subsidies can be paiddirectly to schools for all students, or provided specifically for low incomestudents. And they can be provided in the form of student loans. The choiceof type of subsidy is usually made on administrative grounds, with directpayments to the school easiest to control (James, 1988).

6.45 Determining the amount of the subsidy would require careful analysisand, undoubtedly, some experimentation. The relationship between tuitionlevels and subsidies is central to the analysis. In private schools withoutother sources of income (such as the low cost teachers found in many religiousschools), tuition charges are set at the level needed to cover costs in non-profit schools, or costs and profits in profit-making schools. The evidencesuggests that in Thailand, official tuition ceilings are set below the realcost of education, and that this is contributing to a reduction in theavailability of private places. Schools that survive do so by chargingunofficial tuition and fees, increasing the price and reducing opportunitiesfor poorer students. Hence analysis of subsidy and tuition policy should seekto establish the range of actual costs of education as a baseline figure.Tuition ceilings should be raised to approximate this amount, and subsidiesestablished to reduce the cost to students below current levels, thusencouraging demand.

6.46 This strategy has been shown to lead to increased demand andexpansion of places. At the same time, profit-making schools may seek toincrease profits by reducing inputs, and thus the quality of education.Analysis suggests that this can be addressed in part by stronger inspectionand accreditation standards and programs, and part by restricting privateschool ownership to non-profit organizations.2V

6.47 Access for disadvantag;ed students unable to meet lower prices can befurther stimulated by targeted scholarship programs. Private and publicschools in Thailand currently establish such funds. These could be augmented

W/ Some of these, however, may seek to take profits in hidden ways, such asthrough high salaries and benefits.

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by matching government contributions with attached requirements for reportingand auditing to ensure appropriate use.

6.48 The cost advantage of this strategy comes with the demonstratedability of private schools in Thailand to provide good quality education at acost below that of public schools (Jimenez, Lockheed and Wattanawaha, 1988),and in attracting private capital investment to education.

6.49 Public School Strategv. A similar strategy could be followed forpublic schools by reducing tuition and increasing the per student subsidy. Asdemand began to exceed supply, it would be possible to convert excess DOVEtechnical college capacity to general education. The costs of conversionwould be substantial, including teacher retraining, but could be recoveredreasonably quickly through the much lower recurrent cost of general secondaryeducation. The alternative of construction of additional schools would becostly, but might be necessary when demand significantly exceeded the expandedsupply of places provided by conversion.

6.50 Science and Technology Strategy. The contributions of secondaryeducation to workforce trainability could be further strengthened byaccompanying either the private or public school strategy, or both, byinvestment in the development of science and technology teaching. Secondaryeducation in Thailand has had a technological focus, although the technicalcontent of the diversified secondary curriculum has been reduced over time.Curriculum development and in-service training, accompanied by modestinvestment in laboratory equipment, could improve the quality of science andtechnology teaching. It might be desirable to consider the establishment ofspecial "science and technology high schools" for demonstration purposes, andto raise the level of achievement of students entering an expanded tertiaryscience and technology education system or an adjusted post-secondarytechnical education stream (see paragraph 6.66 below). Again, such schoolsmight be placld in converted and upgraded technical college facilities.

6.51 The past difficulty of estabiishing this kind of curriculum in thediversified high schools is worrying, but that experiment emphasizedworkshop/vocational preparation under conditions of constrained entrance touniversity, well before the establishment of the Open University. Anacademically-oriented approach, combined with (presumably) greater access topost-secondary and university education, might increase parent and studentsupport for such a curriculum.

Strategies to Adiust Vocational Education and Training

6.52 It would be possible to ach.eve some improvements in the VET systemby marginal changes designed to improve linkages between vocational andtechnical colleges and employers, upgrade teacher quality, and strength thetraining capacity of nonformal agencies (especially the NISD). Rehabilitationand re-equipment of the large number of colleges to meet higher levels oftechnology in manufacturing, however, would be very costly. However, theanalysis indicates that it would be worthwhile to consider more significant

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changes, and policy alternatives are suggested as a framework for suchdiscussions.

6.53 Two themes underlay the alternatives. One is improved efficiencyand quality, to be achieved through the establishment of stronger planning.management and incentive structure, and consolidation of the system. Thesecond is to strengthen training and productivity support for key economicpolicy objectives. This would be accomplished by consolidation of the systemto give each VET agency a clear functional mission and client group, thusreducing duplication of services and enabling each agency to focus on thedevelopment of a particular type of training capacity.

Planning and Management

6.54 The establishment of a national policy, planning and coordinatingagency has often been recommended. While the exact organizational structureand location of such an agency would require careful study, both internationalexperience and current Thai experience suggest the functions that such anagency would have. Because training systems and institutions are welldeveloped in Thailand, this agency would probably not take responsibility formanaging the direct provision of training, but would seek to manage the systemthrough planning, incentives and monitoring functions.

6.55 A high degree of autonomy is central to the effectiveness of suchorganizations. To be flexible and creative, they need to be relatively freeof the constraints typical of centralized bureaucracies (such as civil servicesalary scales). If they are reasonably independent and give employers asignificant voice in their governance, national training agencies can be veryeffective in establishing high level linkages with employers, facilitatingnational policy dialogue on training.

6.56 Planning. Establishing planning for vocational education andtraining as an integral part of economic development planning would have highpriority. This does not mean manpower requirements forecasting (although thismight be appropriate for some occupations), but rather the development and useof labor market information as the basis for broad decisions on trainingpriorities and resource allocations for the medium term.

6.57 Mechanisms would need to be established to translate these prioritydecisions into actions at the institutional level. One would be coordinationwith planning in different agencies to establish enrollment targets indifferent occupations, and to tie these to annual budget allocations. Thiswould begin to establish some discipline in enrollment practice.

6.58 Incentives. Positive incentives are likely to be as important.Training funds have served this purpose well in other contexts. These fundsare used to provide grant and/or loan support to encourage expansion ofenrollments in key occupations and to develop new courses and programs. Theycan be used to stimulate employer participation in training by funding,perhaps on a matching basis, cooperative training activities such as "dual"

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systems, or specific training programs targeted to a particular need. InThailand, this mechanism could provide an important and needed stimulus forin-service training. Funds can be used for quality improvement activities,such as teacher in-service training or internships in enterprises. They canbe used to support both public and private institutions (in Korea, loans weremade available to private junior colleges for equipment and staffdevelopment). Such funds are generally most effective when they supportproposals for specific activities from institutions, rathe.- than as "blockgrant" support for a training system as a whole. Scholarship programs canalso be administered by training agencies.

6.59 Training agencies can play a very useful role in establishing andadministering apprenticeship schemes. They provide a natural home formonitoring the effects of legislation, and for ensuring employer compliancewith standards. In some countries, training agencies reimburse employers forthe costs of apprentice wages, encouraging demand for apprentices andestablishing a basis for administrative oversight. This can be especiallyimportant in encouraging small and medium size firms to provide apprenticeshiptraining.

6.60 In many countries, notably in Latin America, training agencies arefinanced by earmarked payroll taxes. These have the advantage of encouragingemployer interest in training if accompanied by significant participation inestablishing training policy. They can also provide the stable funding neededfor institutional development. At the same time, if not carefully monitored,such funds can lead to excess accumulation of revenue, particularly whereenabling legislation is inflexible. Training agencies, and training funds,can also be jointly funded by payroll taxes and the government budget, givingthe government a stronger voice in policy and operations.

6.61 Monitoring. Monitoring labor markets would be an important planningfunction. To this should be added monitoring of training outcomes and costs.Thus the agency should manage the skills testing and certification system.The authority to establish and change standards should be delegated to theBoard of the agency, and the test should be open to graduates of both formaland non-formal vocational and technical education and training programs.Results should be aggregated by institution and occupation to enable theagency to provide feedback on training effectiveness.

6.62 Finally, the agency should monitor employment outcomes for differentkinds of training. This will require regular tracer studies of graduates on asample basis, and reporting of results to both employers and trainers.

System Consolidation

6.63 Consolidation should enable different elements of the system tofocus on specific training needs and clients. These would be (a) highertechnical skills for larger manufacturing and commercial enterprises;(b) vocational skills for farmers and small agricultural enterprises; and

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(c) small and medium sized manufacturing enterprises, including those targetedin industrial decentralization strategies.

6.64 Higher Skills Strategy. The rapidly growing modern manufacturingand commercial sectors will provide a significant number of new jobs, withmost of the larger firms located in or near urban areas. Establishedenterprise capacity for training, often in cooperation with externalinstitutions, needs to be strengthened to take advantage of an expanding poolof secondary graduates with good basic skills and knowledge in science andtechnology. In addition, there is evidence that higher level technical skillswill be in increasing demand in key occupations. 2 Cooperation with largerenterprises in training development, and pre-employment technical education atthe post-secondary level, are complementary roles that could efficiently beplayed by the KMIT and the ITVE, the latter expanded somewhat through theaddition of selected DOVE technical colleges. Only diploma level courses intechnical and commercial occupations would be offered.

6.65 The study suggests that the total costs of post-secondary technicaleducation can and should be reduced. It now takes five years for moststudents to complete the technical diploma program. Annual recurrent costsfor vocational education are two to three times those of general education,which lasts three years. Hence the cost of educating a vocational diplomaholder for the labor market is three to five times the cost of a generaleducation graduate, and one and one-and-a-half to two times that of a highschool graduate with two years of technical education (Paw Waw Taw). Thereare indications that the vocational skills content of both the certificate anddiploma curricula may be comparatively weak, and there is overlap in thecourses taught at the two levels.

6.66 The technical education curriculum could be strengthened and requirecompletion of academic secondary school for entrance. By eliminatingcertificate programs, diploma level enrollments in these institutions could beincreased. A smaller, more focused post-secondary system would be better ableto expand on current patterns of cooperation with enterprises, and to attractand retain the best teachers. With a stronger base of general education,students would be able to progress more quickly through the curriculum, andwould be more trainable after entering the workforce.

6.67 These institutions could assume the major burden of working withlarger enterprises to improve the timount and quality of in-service technicaland managerial training provided to the current workforce. Their willingnessto do so would be increased if they were able to enter into contracts forservices provided, and retain the earnings to use as incentives for

2 Employers prefer diploma level graduates for their maturity and advancedskills, and appear to give equal value to five-years of vocational/technicaleducation and three years of general education plus two additional years oftechnical education (Paw Waw Taw). Shortages of advanced technical skills arepredicted to constrain advancements in science and technology.

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instrvctors, and to invest in the quality of education. Such cooperativearrangements would serve, in turn, to help keep both curricula and instructorsup-to-daue on developments in industry.

6.68 Simplification of function and efficiency could be further increasedif the ITVE gave up responsibility for agricultural vocational education,concentrating instead on technical and commercial occupations.

6.69 Demand for post-secondary education would be increased if completionof the two-year program enabled students to sit for examinations for admissionas second-year students in (expanded) university science and engineeringprograms. Increased demand would enable tuition to be raised in order toimprove the quality of instruction. Similar programs could be encouraged inprivate technical colleges by raising tuition ceilings. Quality would beprotected by controlling enrollmerts and restricting entry, reducing the pricecompetition between institutions that would drive down tuition and quality.

6.70 This strategy is oriented towards supply of higher level skills tomeet manpower demand, and to support for in-service training. With risingcosts to students, equity considerations would need to be addressed throughscholarship schemes. It will particularly important to use scholarships toencourage women to enter training for non-traditional occupations.

6.71 Rural Skills Strategy. The rural sector will continue to needsignificant levels of training support to increase farm productivity and non-farm income. The issue is complex if only because of the variation inagricultural development scrategies followed in different regions. While adetailed assessment of agricultural development issues is beyond the scope ofthe present analysis, falling demand for places and high continuation rates inagricultural colleges suggest that the current formal VET system may not bewell aligned with training needs. At the same time, the nonformal programs ofthe DNFE appear to be contributing to improved family income, although not tofarm productivity.

6.72 Farmers and small agricultural enterprises form an important clientgroup for training services. International experience indicates clearly thatstrong agricultural research and extension services are the primary meansthrough which farm productivity is enhanced. If responsive to emerging needs,agricultural vocational education and training can also play a part,especially if well integrated with extension programs. This, in turn,requires a VET system that is highly flexible and able to meet a wide range ofneeds for both formal and nonformal short courses. There is evidence thatDOVE agricultural colleges and polytechnics have been struggling to establishsuch roles as a way to maintain enrollments, but are hampered by the multiplegoals of the DOVE system and the high degree of centralization -- which makesadaptatior. to local agricultural conditions and needs difficult.

6.73 A possible strategic response would be to focus DOVE on the trainingneeds of farmers and supporting agricultural entrepreneurs at both thecertificate and diploma levels. As ITVE phased out agricultural education,

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DOVE would become the only provider. Significant decentralization of authorityto the institutional level, accompanied by development of institutionalcapacity for curriculum and staff development would be needed to meet localtraining needs. Strong intermediate support at the regional level would berequired to assist individual institutions. The role of central DOVE officeswould move towards monitoring, quality control and technical support.Institutions would be actively encouraged to develop and market trainingservices and enter into production arrangements, and be allowed to retainrevenues to support the school.

6.74 To support decentralization, DOVE could provide block grantfinancing to regions or provinces, which would in turn be responsible forallocations to individual institutions based on programs and budgets. Theamount of the block grant would be determined in initial years fromenrollments. As the system developed, allocations could be made on the basisof program submissions and budgets, increasing local flexibility and allowingnational resources to flow to areas of greatest need and opportunity.

6.75 The curricula of individual schools should be highly flexible, andnot restricted to traditional "agricultural" subjects. As is currently thecase, commercial agriculture skills (accounting, bookkeeping, marketing)should be included, with the pattern of courses and enrollment targetsdetermined locally.

6.76 The current excess supply of places could be addressed in severalways. One would be to set minimum enrollment targets for each school.Schools unable to meet these, or to compensate for falling enrollments withincreased earnings in other activities, over a three to five yeardevelopmental period could be converted to academic secondary schools, orperhaps sold to private entrepreneurs. In some cases, it may be clear thatsome schools should be converted immediately.

6.77 Depending on needs, some DOVE technical colleges may need to betransferred to the ITVE to ensure adequate supply of post-secondary places andappropriate regional distribution. To further streamlinie operations, andreduce costs, it may be desirable to transfer the AVCs zo the NISD tostrengthen support for small manufacturing enterprises (see paragraph 6.79below). The role of the DOVE Polytechnics needs further examination. As theyevolve, the curricula and operational styles of agricultural colleges may takeon some aspects of the polytechnics. If so, polytechnics might be given thesame status. Or they could be operated as currently configured, and givenequivalent autonomy and responsibility for meeting enrollment targets andbroadening the range of services provided. If authority is decentralized toregions or provinces, these decision could be taken at these levels.

6.78 The programs of the DNFE appear to be making contributions to familyincome by enabling individuals to learn the skills needed for non-farmoccupations. T1L. system is well-linked to individual needs and flexible inresponse. This program could be continued as it is.

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6.79 SME Skills Strategy. Small and medium size manufacturing andcommercial enterprises have both techninal and managerial skill developmontneeds. To small to have developed significant human resource management andtraining capacity, these firms need a high level of support in the form ofpre-service vocational training, in-service training and productivityservices, management consultancy, at' access to information and support inimproving the technology of production. The small size and large number ofsuch enterprises pose particular problems in establishing linkages withtraining organizations. Providing training support for SHEs thus requireshighly specialized expertise, and a high degree of institutional flexibility.

6.80 The NISD has developed a useful level of experience in providingpre-employment and in-service training for small enterprises, including thosein areas targeted for decentralized industrial development.

6.81 Improvement in the extent and depth of NISD training support couldmake important contributions to SME development. Services could be expandedby transferring the AVCs to the NISD to expand the network of RegionalInstitutes of Skill Development (RISDs). Capital investment in facilities andequipment rehabilitation might be needed, and recurrent budgets wouldcertainly be higher. However, the costs could be justified in terms ofemployment creation through the expansion of SHEs, and in providing directsupport for the higher levels of managerial and production efficiency thatcurrent industrial strategy calls for.

6.82 As with the rural skills strategy, institutional effectiveness couldbe improved through decentralization policies that enabled RISDs to developprograms to meet the needs of SMEs in their service areas, and to generaterevenues through sale of services.

ISSUES FOR FURTHER CONSIDERATION

6.83 Taken together, the policy alternatives presented outline a veryambitious program of human resource policy change. While the analysis of thisstudy supports these directions, a number of important issues will need to beaddressed if any of these directions are to be followed.

6.84 First is a thorough evaluation of the alternatives through policydiscussions. Additional analysis is needed in key areas: (a) the impact ofcurrent tuition policies on demand for secondary and vocational education, andon quality; (b) the role of agricultural VET in relation to agriculturaldevelopment strategies in different regions and to the extension service;(c) the potential relationships between an expanded NISD role with SMEs andthe work of the Department of Industrial Promotion; and (d) the level ofinterest and commitment to collaboration In training that is present in theprivate sector.

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6.85 Second, alternative patterns of financing for elements of the systemwould need to be explored. A central issue is the desirability andfeasibility of a tax on enterprises to support the national training effort.

6.86 Third, the broad outline of strategies to achieve systemconsolidation leave a number of questions unanswered. Should DOVE vocationalcertificate holders be able to sit for examinations for post-secondarytechnical education? If so, will their curriculum have to be adjusted topermit them to compete with academic secondary certificate graduates? Couldevening and extension courses be offered to certificate holders who wanted toprepare for examinations? What are the trade offs between the simplicity andcost savings that come with consolidating higher technical education on theone hand, and (perhaps) reduced opportunities of further education forcertificate holders?

6.87 Fourth, implementation of all or a significant portion of thealternatives would require significant changes in the current structure ofeducation and training. The issue alone of a national training agency raisesdifficult organizational and, possibly, legal questions. Such changes haveimportant political implications, most of which can not be addressed in thisstudy. Political commitment at highest levels would be critically importantto any program of reform.

6.88 Finally, international experience indicates that reforms of themagnitude recommended take as much as a decade of incremental implementationwhich permits adjustment and improvement of strategies over time. It alsosuggests that actions should be carefully phased: it is unlikely that all ofthe changes discussed could be attempted at the same time.

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Bibliography

Asian Development Bank. (1981). Proiect Completion ReRort of the yocationalEducation Proiect in Thailand. Manila.

AID. (1981). Thailand: Rural Nonformal Education: The Mobile Trade TrainingSchool. AID Project Impact Evaluation Report No. 25. Washington,D.C.: U.S> Agency for International Development.

Bauer, John, Naohiro Ogawa and Nipon Poapongsakorn. (1988). Forecasts of LaborForce and Wages for Thailand. Honolulu: East-West PopulationInstitute.

Buripakdi, Chalio. (1988). Models for Development of Technical Teachers inThailand. Report of Research and Development of the World Bank LoanProject for Educational Development in the Sixth Plan. Bangkok:Institute of Technology and Vocational Education, Ministry ofEducation.

Chaivej, Somchop. (1988). Modification of the Vocational Certificate LevelCurriculum to Pre-engineering Curriculum. Mimeo.

Chiswick, C. (1988). Human Resources and Employment ProsRects in Thailand.World Bank. Mimeo.

Dougherty, Chris. (1989). Cost-Effectiveness of National Training Systems inDeveloninL .. _j _. Policy, Planning and Research Working Paperseries No. WPS 171. Washington, D.C., World Bank.

DOVE. (1987). Selected Statistics. FY 1986. Bangkok: Department ofVocational Education, Ministry of Education.

Herschbach, Dennis. (1989). Imoroving Training Ouality in DevelopingCountries: Toward Instructional Efficiency. PHREE Background PapersNo. 89/09. Population and Human Resources Department, World Bank.

James, Estelle. (1987). Public Policies Toward Private Education. Educationand Training Discussion Paper No. EDT84. Education and TrainingDepartment, World Bank.

Jimenez, E., M. Lockheed and N. Wattanawaha. (1988). "The RelativeEfficiency of Private and Public Schools: The Case of Thailand,'The World Bank Economic Review. Vol. 2, No. 2.

Middleton, John and T. Demsky. (1988). World Bank Investment in VocationalEducation and Training. Policy, Planning and Research Working Paperseries No. WPS24. Washington, D.C., World Bank.

NEC. (1982). The Impact of Education on Agriculturists' OccuRations.Bangkok: National Education Commission.

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NEC. (1985). Thailand Vocational and Technical Education Study. Bangkok:National Education Commission.

NEC. (1987). Vocational and Technical Education In Thailand: The State ofthe Art Review. Bangkok: Office of the National EducationCommission.

Settaman,t, S. (1984). Research Report: Models of Vocational-TechnicalEducation. National Education Commission, Bangkok.

TDRI. (1987). Year End Conference on Human Resource Development. Bangkok:Thailand Development Research Institute

TDRI. (1988). The S&T Manpower Situation in Thailand: An Analysis of SUDOlyand Demand Issues. A Report Prepared for the Office of Science andTechnology Development Board. Bangkok: Thailand DevelopmentResearch Institute.

Toemtrisna, Somchai. (1985). Analyzing the Stock of Unemployment inThailand. M.A. Theses (Economics). Bangkok: Thammasat University.

Tunsiri, Vichai. (1987). Education and Employment: The Case of Thailand.Occasional Paper in Educational Planning, Management and StatisticsNo. 13. Bangkok: UNESCO Principal Regional Office for Asia and thePacific.

Whalley, John and A. Ziderman. (1989). Payroll Taxes for Financing Trainingin Developing Countries. Policy, Planning and Research WorkingPapers Series No. WPS141. Washington, D.C., World Bank.

Background PaRers

Chomnoon, Siripan and Chantavit Sujatanond. (1988). Development ofVocational Education. DeRartment of Vocational Education. Bangkok:National Education Commission. Processed.

Pimsamarn, Watanachai and Porntip Kanjananiyot. (1988). Development ofVocational Education. Institute of Technology and VocationalEducation. Bangkok: National Education Commission. Processed.

Poapongsakorn, Nipon and Wannasiri Naivithit. (1989). Training and Humanresource Management in EnterRrises. Bangkok: Thammasat University.Processed.

Regel, Omporn. (1988). Vocational Education and Training: Thailand CaseStudy. Washington, D.C.: Population and Human Resources Department,World Bank. Processed.

- 154 -

Roenganan, Samer and Kanjanee Jirataprasot. (1988) Vocational Education inKine Mongkut's Institute of Technology North bangkok CamDus: A CaseSrtudy. Bangkok: National Education Commission. Processed.

Rutters, Klaus and Dietrich Nitschke. (1989) Vocational Education andTraining in Thailand: Findings of a Field Studv on VocationalTechnical Colleges and Training Centers. Frankfurt: GTZ.

Somtrakul, Kla and Kanjanee Jiratatprasot. (1988). Department of Non-formalEducation: An Overview of Vocational Training. Jangkok: NationalEducation Commission. Processed.

Thanaphibul, Voravaun and Porntip Kanjananiyot. (1988). DeveloRment ofVocational Education. National Institute for Skill DeveloRment.yBangkok: National Education Commission. Processed.

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ANNEX I: STUDY METHODOLOGIES

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Arnex T: Study Methodologies - Page 1

Institutional Survey and Interview Methodology

1. In order to assess the current status of vocational education andtraining, an institutional survey questionnaire was designed to include keyareas such as internal efficiency, external efficiency, costs, teachers'qualifications, curriculum, and linkages with employers.

2. In November 1988, survey questionnaires were sent to 87 selectedvocational training institutions covering both formal and non-formal training.By one month later, 79% responded. Regional distribution of the 87institutions is shown below:

Central/ Eastern North/ NumberBangkok Seaboard Northeast South Total Responded

DOVE Industry 4 3 3 - 10 7Commerce 2 2 2 - 6 6Agriculture 2 3 2 - 7 6

Area Vocational 1 1 2 - 4 4Center (AVC)

Polytechnic 2 1 2 - 5 4

TOTAL 11 10 11 - 32 27

ITVE 16 2 9 2 29 21PRIVATE 4 3 3 - 10 5NFE 2 3 3 - 8 8NISD 3 3 - 1 7 7KMIT 1 - - - 1 1

TOTAL 37 21 26 3 87 69

3. In addition to the survey questionnaire, field visits to selectedinstitutions were conducted by two research teams with members from the NEC,GTZ, and World Bank in November 1988. The selected institutions were locatedin three geographical areas: Northeast, Eastern Seaboard, and Bangkok. Inorder to obtain a better picture of the dynamics of training provisions for agiven area, the field teams visited a cross-section of different kinds oftraining institutions in the same locality, as seen below:

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Annex I: Study Methodologies - Page 2

Central/ Eastern North/Bangkok Seaboard Northeast Total

DOVE Industry 2 2 1 5Commerce 1 1 1 3Agriculture - 1 1 2Area Vocational - - 1 1Center (AVC)

Polytechnic 1 1 1 3

TOTAL 4 5 5 14

ITVE 2 1 1 4PRIVATE 3 2 2 7NFE 1 1 1 3NISD 1 1 1 3KMIT 1 - - 1

TOTAL 12 10 10 32

4. Interview Techniques: Two interview guidelines were developed, onefor administrators and teachers, and one for students. The guidelines weredesigned primarily to provide consistency among interviewers and to assistinterviewers in addressing areas not fully covered by the survey questionnaire(para 2). In order to cover 32 institutions within the given time frame oftwo an a half weeks, the research team was divided into two groups: 1) Bangkokand the Eastern Seaboard, and 2) the Northeast. Each group consisted of 6members who were assigned to interview groups of administrators, teachers, andstudents separately On average, each interview lasted about two to threehours. Site observations were carried out at the end of each interview toexamine the conditions of machinery, equipment, and classroom arrangements.For all institutions visited, the field teams had opportunities to conductformal and informal interviews with the principals/directors of the traininginstitutions. Teachers and students interviewed were randomly selected fromboth the certificate and diploma levels and from different training programsbeing offered.

5. Data and information obtained during field interviews weretranslated into English. These, together with data from returned surveyquestionnaires, were carefully reviewed, consolidated and entered into twoseparate databases for subsequent retrieval and analysis.

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Annex I: Studv Methodologies - Page 3

Enterprise Survey and Interview Methodology

6. The field visits were conducted in order to gain insight into theextent to which enterprise human resources management practices a) acquirenecessary skills for their work force; b) provide incentives to worlrers andprospective employees to take training; c) provide training and other skillupgrading activities; d) provide the pattern of occupational mobility forworkers with different types of educational background; and e) are linked topublic training institutions.

7. Intensive interviews were carried out for selected firms in Bangkok;three neighboring provinces of Pratoom-Thani, Nakorn Pathom and Samut Sakorn;and the Eastern Seaboard (Chonburi Province), using a structured questionnairewhich was designed to obtain data on the characteristics of firms, compositionof workers and skill mix, labor turnover, training activities, managementpractice, administrative structure, recruitment practice, and wage structure.Twenty-one firms of different sizes from eight industries were selected,representing both export and domestically-oriented.1 The distribution isshown below:

Size of Firm (No. of Em2loyees)Type of Firm > 750 151-750 < 150 Total

Export 4 4 2 10Domestic 2 6 3 11

TOTAL 6 10 > 21

8. Selection of firms was done by the author of the enterprise study,Dr. Nipon Paupongsakorn, who because of his interest and involvement in labormarket research, was knowledgeable about companies in Bangkok and itsneighboring provinces and their behavior to surveys and interviews. In allcases, managing directors/general managers of these firms were personallyacquainted with Dr. Nipon. Although most of the data obtained aro reliable,figures on sales and asL. , value are underreported for a few companies.

9. An intensive fieldwork was conducted by Thammasat Universityresearch team during December 1988 and January 1989. For each firms,researchers separately interviewed owners/managers (or personnel managers forlarger firms) and 2-7 workers with different types of responsibilities to

I The eight industries in the sample include : shoes, electronics, cannedfish, animal feed, transformer, construction, car service, and car assembly.

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Annex I: Study Methodolocies - Page 4

obtain data on key variables such as earnings, duration of job experience,sex, socioeconomic backgrounds. The interviews included a total of 106workers who were carefully selected to ensure a balanced representation ofdifferent educational/training backgrounds, and work assignments. In manycases, the team purposely selected those with long period of service with thecompany and held management positions. This was necessary in order to gainknowledge about skills acquisition which tended to be closely associated withpositions held. Interview sessions averaged two to chree hours, and factorytours wera given either before or after the interviews. At the end of eachvisit, firms were requested to complete and mail the questionnaire whichincluded additional detailed information concerning their employmentstatistics.

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ANNEX I: DATA TABLES

Table A.1: Structure of Employment, 1986-2001

Table A.2: Educational Attainment By Age and Area, 1986

Table A.3: Work Patterns in the Dry Season

Table A.4: Size Distribution of Firms By Industry, 1984

Table A.5: Vocational Enrollments By Level and Year, 1977-1987

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Annex II: Data Tables - Page 1

Table A.l: Structure of Employment, 1986-2001

Initial Share Average Annual Growth Rate Share in Ag. Employment(1986) 1987-1991 1992-1996 1997-2001 2001 Falls Beginning

(Labor Force Growth) 2.6% 2.0% 1.8%

A. BASE CASE

Agriculture 67.1% 2.2% 0.9% 0.5% 58.0% (after 2001)Industry 10.5% 3.5% 3.5% 3.5% 12.8%Services 22.4% 4.0% 4.0% 4.0% 29.2%

Agriculture 60.0% 2.0% 0.5% -0.1% 49.0% 1998Industry 13.0% 3.5% 3.5% 3.5% 15.8%Services 27.0% 4.0% 4.0% 4.0% 35.2%

Agriculture 50.0% 1.6% -0.3% -1.2% 36.3% 1993Industry 17.0% 3.5% 3.5% 3.5% 20.6%Services 33.0% 4.0% 4.0% 4.0% 43.1%

Agriculture 45.0% 1.3% -0.8% -2.1% 30.0% 1992Industry 20.0% 3.5% 3.5% 3.5% 24.3%Services 35.0% 4.0% 4.0% 4.0% 45.7%

B. OPTIMISTIC CASE

Agriculture 67.1% 1.9% 0.6% -0.0% 54.9% 2000Industry 10.5% 4.0% 4.0% 4.0% 13.7%Services 22.4% 4.5% 4.5% 4.5% 31.4%

Agriculture 60.0% 1.6% 0.0% -0.8% 45.2% 1°94Industry 13.0% 4.0% 4.0% 4.0% 17.0%Services 27.0% 4.5% 4.5% 4.58 37.9%

Agriculture 50.0% 1.0% -1.1% -2.6% 31.5% 1992Industry 17.0% 4.0% 4.0% 4.0% 22.2%Services 33.0% 4.5% 4.5% 4.5% 46.3%

Agriculture 45.0% 0.6% -1.9% -4.1% 24.8% 1990Industry 20.0% 4.0% 4.0% 4.0% 26.1%Services 35.0% 4.5% 4.5% 4.5% 49.1%

Source: World Bank (1988). Thailand Country Economic Memorandum.

Note: In the base case, industrial output is projected to grow at 7%, and half ofthis growth is expected to come from increased productivity. Thus industrialemployment is projected to grow at 3.5% annually. Service sector employment issimilarly expected to grow at 4.0%. Under the optimistic case, these rates areraised to 4.0% and 4.5%, respectively. Frictional unemployment is assumed to beconstant at 2.5%. Using these figures, the share of employment in agriculture iscalculated as a residual from different assumptions regarding the initial share ofemployment in agriculture. Finally, the year in which employment in agriculturewill decline in absolute numbers is estimated.

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Annex II: Data Tables - Page 2

Table A.2: Educational Attainment By Age and Area, 1986(percent distribution)

Level of Age CohortEducation /a All (15-59) 15-19 20-24 25-29 30-59

Whole Kingdom 100.0 100.0 100.0 100.0 100.0Primary or less 80.3 74.6 72.6 76.3 86.9(Completed Primary) (17.0) (53.9) (18.8) (8.6) (3.0)Lower Secondary 11.8 22.7 13.6 11.0 6.7Upper Secondary 2.8 * 7.5 3.4 0.9

University 2.7 * * 5.2 2.5

Bangkok 100.0 100.0 100.0 100.0 100.0

Primary or less 52.9 42.5 35.3 42.9 64.2(Compieted Primary) (13.1) (32.4) (14.0) (10.4) (8.5)Lower Secondary 25.3 47.5 29.6 24.7 18.2Upper Secondary 8.6 * 23.4 10.1 3.6

University 10.0 * * 18.8 9.9

Other Urban 100.0 100.0 100.0 100.0 100.0Primary or less 54.2 41.3 40.8 48,8 66.9(Completed Primary) (12.6) (30.1) (12.0) (9.)) (6.2)Lower Secondary 28.0 53.3 32.9 23.8 16.1Upper Secondary 5.0 * 10.1 8.0 2.2University 7.0 * * 12.5 6.8

Rural 100.0 100.0 100.0 100.0 100.0

Primary or less 87.1 81.1 80.8 85.0 93.0(Completed Primary) (18.0) (58.4) (20.1) (8.2) (1.7)Lower Secondary 8.1 17.2 9.6 7.3 3.7

Upper Secondary 1.6 * 5.0 1.8 0.3University 1.1 * * 2.0 0.8

Total Population 30.41 6.21 5.35 4.47 14.38(millions)

/a Highest certificate earned. Thus, persons classified as RCompleted Primary"(6 years) would include persons with 7-8 years of schooling if they did notcomplete the lower-secondary course (9 years).

Note: * indicates an age cohort which would normally include persons enrolled atthis level of schooling.

Source: World Bank (1988). Thailand Country Economic Memorandum.

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Annex II: Data Tables - Page 3

Table A.3: Work Patterns in the Dry Season (0008), 1984

Male (%) Female (1) Total (%)

Available for Work 14,655 100 14,777 100 29,432 100

Employed 9,505 65 8,958 61 18,463 63

Not available for work* 2,751 19 4,086 28 6,837 23

Potential Migrants 2,399 16 1,733 12 4,132 14

Actual Migrants 545 04 200 01 745 03

Non-migrants 1,854 100 1,533 100 3,387 100

Looked for work 508 27 227 15 735 22

(Found work) (232) (46) (127) (56) (359) (49)

Did not find work (276) (54) (100) (44) (376) (51)

Did Not Look for Work 1,346 73 1,306 85 2,652 78

Reasons r.r Not Looking**

Did not want to move 354 26 369 28 723 27

Did not know how 499 37 418 32 917 35to find a job

Others 493 37 519 40 1,012 38

* Doing housework, studying or too old or too young.** Distribution of those who did not look for work.

Source: TDRI (1987), pp 97-98.

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Annex II: Data Tables - Page 4

Table A.4: Size Distribution of Firms By Industry, 1984

Small and Medium Scale Enterprises Large NumberIndustry Cottage SSEs MSEs Scale of

(employees) 1-9 10-49 50-99 100-199 Total 200+ Firms

Consumer Products 59.4 33.5 3.3 1.8 98.1 1.9 13,778

Food 65.3 29.5 2.5 1.4 98.6 1.4 8,076Beverages 40.6 32.3 4.7 12.5 90.1 9.9 192Tobacco 19.3 52.3 10.9 6.6 89.1 10.9 331Apparel 14.4 67.8 9.5 4.6 96.2 3.8 1,458Leather and products 57.9 34.9 2.5 2.2 97.5 2.5 278Footwear 48.6 42.7 2.7 1.8 95.9 4.1 220Furniture 60.4 34.7 3.4 0.8 99.2 0.8 1,151Printing andpublishing 77.4 20.3 1.2 0.6 99.4 0.6 2,072

Intermediate Products 50.8 37.5 6.2 3.0 97.4 2.6 9,793

Textiles 25.2 51.1 8.9 5.9 91.2 8.8 1,355Wood and products 58.1 33.3 6.0 1.9 99.4 0.6 3,053Paper and products 61.7 26.1 5.1 3.5 96.5 3.5 452Chemical andproducts 41.5 43.7 8.4 3.8 97.4 2.6 948

Petroleum andproducts 34.5 31.0 17.2 3.4 86.2 13.8 29

Rubber and proeucts 52.4 32.5 6.5 5.2 96.7 3.3 765Plastic products 64.0 31.8 2.4 1.2 9).4 0.6 1,454Ceramics 24.5 54.4 12.7 4.2 95.8 4.2 237Glass and products 8.9 48.9 20.0 8.9 86.7 13.3 45Non-metal mineral 53.5 38 3 4.8 2.2 98.8 1.2 1,455

CaRital Products 76.3 19.7 2.1 1.0 99.1 0.9 13,497

Basic metal 16.6 53.1 14.9 10.3 94.9 5.1 175Non-ferrous metal 62.2 32.7 2.2 1.6 98.7 1.3 312Metal products 77.4 19.4 1.7 0.8 99.4 0.6 4,716General machinery 83.0 15.3 1.1 0.3 99.8 0.2 5,066Electric machinery 57.9 31.3 5.4 2.9 97.5 2.5 905Transport machinery 73.6 20.7 2.6 1.4 98.3 1.7 2,233Scientific equipment 44.3 40.0 5.7 4.3 94.3 5.7 70Other products 73.9 22.8 2.2 0.7 99.5 0.5 2,578

Total 64.0 29.1 L.5 1A 100.0

Number of firms 25,342 11,532 1,404 707 38,985 641 39,626

Source: A. Kuroda, et.al., "Development Strategies for Small and Medium Industriesin Thailand, (1987).

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T ebt A.S Vocatio5nrt Enroimnt b Leel wd le r, 1917.1967...................................... .....................................................................

......... .............. .... ....... ................................................................................................. .

Certificate Le l Dipt o- tvl.................................. .......................................................... . .... ...................................... ................................................... ........................................1975 11 1919 1960 I9I1 19 1963 1a 1965 1906 19n7 197 1978 1979 I9O 1961 196 1963 16 1965 16 1"or.................................................. .. .......... .............. ..... ...... ... ... ............ .................. .............................................................................................................

.............

am 65,24 90,437 101,56 10,61s 142.0n3 9rs,9O no,6 IU,241 182,24 176,242 n.e. 6,45 0 ,154 1,4 S ".US 23,629 33,60 41,51 59,24 U," or,m n.m31WE 19,1 19,225 1.S552 16,9" 20.913 21.411 n,3 21,105 21,65 20,09 1,9 16,177 17,259 17,455 16,1" 203011 23, 0 24,74 25,479 25.33S 23,6 25,9611T 448 64 8)2 6 653 r 67 9s I,5 1.63 1.031 04 SW9 1.69 1,127 1.101 1.217 1140 1,32 1,353 1.4S 1,3S................ ............................ . .......... ...... ......... . ,................ ., .. ................................... , .... .. ......... ,.. ....................... .. .... ... ,. __Setetsl PmAic OS.216 110,310 122,U60 131.45 163 ,19 31.20M 213,215 20.324 105,104 197,99 n.s. 25,57 19,312 32,W999 3,89 4i,021 s.6M6 O4.59 1,095 91695 M M216 27,5Private 69,46 109,71 137.,25 1156,41 229.877 225,n9s 214,091 116,039 162,95 151,348 n.e. n.s. n.s. n.s. n.. 100,05 25,11 15,191 I5,4" 74.46 56,532 on.

Tetal Vetetlml 194",2 22.0 259.2e0 1 .953 413*,51 27,177 429,30 362,363 34,101 349,339 n.e. 25,4S5 19,312 32U,999 16,.9561 5,65 n 3,t 6 125,533 11.742 111,Sn U1 .156Privtet o 46 SO 53 5S3 S 53 so 47 44 43 1U 36 47 47 44 30I e eO tel

Public 14S5,3 111,15 20,S5 220 487,633 4s6,191 474,132 S01.67 0,1 56s .444Privte 43n 47r,127 43,69 37.905 61,426 40,007 56,756 5f202 51,091 44,632

*etel Aca_I c 169,0 217,161 244,24" 266,860 444.8l S16.201 532,_6 SSt,019 540.005 556.478

Prrt tetal 23 22 Is 14 1s 12 11 10 9 a

Uoan MYTEM ....... ...........

U it n.s. n.e. n.e. n.e. n.e. n.e. n.e. n.e. n.e. 72,191 n.e.

we 21 40,924 *2,567 t 3,2M 112,119 11,5s33 104,320 25S,091 256,414 507,415 215,n31 ..211

nw 31 n.s. n.e. n.e. 10,90 11,S9 13540 14,992 16.093 n.s. n.e. 31,244 I................. ............................ ... ...... ...............................................................................................

..................................................................... ............................11 Icimte pelvNelinic aeote NW war vocetituul canta

21 Incti Interest ruu,. w_ 'Itt Training St Indluge per--oVtwe t trainIng, ontie -jb training, ugradil trelning wd In plent trainlng -d apehl cture.

smece: ismlttitlumt Satgrse Poa ud 656'16 Selected Sta%iatic Ord ob Wntmhaltlanl Veetimul ad ltcOnical Ed tlIn Stun . 0W1Abml Statisaice I Cwt, Offic,k of Private Eeatimn Celele ist

jon Middleton. ottl.: wcttiemi 1dwatian ard training in a Ckariuing Ecar: Tw cot.. of 1heiiud. Ibold Sw* (fortbcoming, 196).

* U,

ANNEX m: ORGANIZATION CHARTS

- 167 -

Formal Vocational and TechnicalEducational System

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