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Sustainable Vocational Training toward Industrial Upgrading and Economic TransformationRural and urban income disparities compound the challenges that PRC faces and create extra complexity foreducation in general. The forum heard that there are three key issues in education:(i)in general basic education, ensuring universal completion and not just universal enrollments, especially forthe children of migrant workers;(ii)improving the quality of education (particularly in rural areas), teaching resources, and facilities; and(iii) addressing the special education needs of migrant workers’ children.While participation at the tertiary level has expanded from 3% to 24%, it is still lower than the global average of30%. Expansion at the higher education level will require public–private partnerships (PPP) and reforms to improvequality and internal efficiency.Another key challenge is the improvement in the quality and labor market relevance through the introduction ofcompetency standards, competency-based training, and the promotion of school and industry-based collaboration.There is a need to further align TVET graduate outcomes to the industry’s demand for higher skill levels. Currently,there is a mismatch between the skills required in industries and the skills of graduates entering the labor market.Having appropriate human resources has been one of the country’s key constraints in recent times. There is a needto adopt new technologies and innovation in moving from manufacturing to an emphasis on services. An inclusiveapproach to skills development should include schools increasing their overall capacity to deliver technology skillsto everyone for an appropriately skilled workforce.ADB fully appreciates the importance of the comprehensive reform plan adopted by the PRC in its quest to becomea prosperous nation by 2020. ADB has been supporting educational reform in the PRC for about 20 years. Since1993, ADB has supported the central and regional governments’ efforts to strengthen institutional capacity andpolicy support. The first loan support in the education sector was in 2013 in Hunan Province.The challenges brought about by the changing labor market create specific demands on TVET, in particular: the need for elderly care due to the rapidly changing demographic profile of an aging population; sustainability, greening of the industry, and green jobs; developing pathways between the TVET sector and higher education sectors; projects and initiatives that promote regional cooperation generally and in TVET; and the sharing and demonstration of good practices for the benefit of the region.ADB expressed its sincere thanks to the Government of the PRC and the Ministry of Finance for hosting thisimportant initiative in establishing a knowledge sharing platform on TVET industrial upgrading and economictransformation for the benefit of all ADB member countries.1.3 Forum ThemesA number of common themes were discussed by the speakers during the forum, including the effects of an agingpopulation on the future workforce, rapidly changing technology, and globally connected economies.A common theme was that it takes decades to develop a multilevel TVET system and governments require a highlevel of commitment to TVET. It is important to identify what each country’s culture can accommodate in the2

Overviewdesign of its TVET system and how a country involves and engages the industry in TVET. Policy integration is animportant area where multiple agencies are involved. There is an oversupply in the overall market but shortages inkey areas, which is a challenge.A number of important questions were raised during this forum. What kind of TVET management structure isneeded to facilitate a closer link to economic development? What kinds of TVET institutional reforms are neededand how do we develop a unified single administrative arrangement for TVET, given there are often multiplegovernment agencies involved in TVET delivery? How do we make sure national TVET policy is implemented asuniformly as possible in regions and states? How can we better align, integrate, and ensure better coordinationamong different government agencies to avoid duplication of effort? How do we increase accountability linkedto incentives and measure the performance level of skills utilization? What needs to be in place to scale up andincrease flexibility between higher education and TVET? There is a need for policy integration—e.g., green jobs andTVET. What are the key features that make the systems responsive?From these common themes, the speakers identified key points relevant to TVET reform. These key points havebeen grouped under the following headings:General There is a mismatch between the demand for high-level skills and the oversupply of low-level skills. Education prepares people for higher levels of learning, but more importantly, it orients learners and workerstoward the world of work. Improving the status of TVET is very important, as going to university is still a family honor. There is a need to raise the status of TVET within the community to attract students from a wide range ofbackgrounds.Policy Competitiveness in the main industry may rely upon the competitiveness of the supply chain industries. Skillsdevelopment—upstream and downstream—is valuable to competitiveness of an industry sector. An investment in increasing skills and knowledge intensity in small and medium firms is required at a policylevel. A central coordinating body overseeing TVET is a similarity shared by country examples presented as goodpractice. Skills development policy integration is an important area where multiple agencies are involved. The three critical intersections of enrolling in postsecondary education, building skills, and finding a jobrequire additional focus. Research from the McKinsey Center for Government found that the three factors of successful educationprograms are:o employers and education providers actively stepping into each other’s worlds;o innovation in delivery of education and training; ando a system design that works.3

Sustainable Vocational Training toward Industrial Upgrading and Economic Transformation Making TVET work at a system level requires new incentives and structures. The initial answer from McKinseyresearch is that there are three pieces to this.o First, there is a need for better data collection and dissemination to youth, providers, and employers. Foryouth, they need to know what programs are available, what jobs they lead to, and what the careerprospects are in those fields. For providers, they need to know the needs of the labor market for bothcurriculum design and capacity planning. And for employers, they need to know how effective differentproviders are in supplying them with the talent they need.o Second, there is a need for more sector-wide collaborations, where large employers come together todevelop solutions.o Finally, there is a major role to be played by system integrators. Less developed countries will need to adjust their education and learning systems to respond to the changingdemands for human resources and to compete in the global economy. Core principles for the reformed TVET system are that it will be performance-based—that is, the instituteswill be accountable for their performance. TVET will be demand-driven by students and economic needs. Theindustry will be led through collaborative development of TVET sectors and there will be clear governance forbetter monitoring of performance.Pathways Strategies to accelerate labor reform and attract and retain top talent while upgrading the existing talent poolare important. Policies to ensure that students entering the TVET sector have the basic skills to undertake ahigher level of skills development are also in place. There should be a rethinking of the scope of TVET delivery and the types of qualifications and pathwaysoffered within the TVET sector. New qualifications and assessment tools should be developed and endorsedor recognized by the industry. TVET activities that can serve multiple but interrelated industries mean that the workforce can move acrossdifferent industries based on demand. There is an increased need for skill updating or up-skilling and access to achieving multiple certificates anddegrees. Up-skilling the existing workforce ensures a quality flow of workers from low-skilled to semi-skilled tohigh-skilled to support economic growth and industry demand. This supports the country’s move toward aknowledge economy where workers across all sectors will need to be able to add value and contribute in ahigher skills environment. Pathways into university are an important step to increasing a positive perception of TVET.Access and Equity The number of domestic migrant workers who remain unskilled is 750 million. A big challenge is reaching outto them and training their children. The implications for TVET include ensuring:o a flexible system to respond to the learning needs for all, and a second, third, and fourth chance ateducation;4

Overviewo new and soft skills to enable people to gain employment and contribute to society; ando multiple roles to increase employability. TVET reform should develop systems that lead to the integration of urban and rural development to reflectthe new expectation of people of all nationalities for better lives. Vocational education should be consistentwith needs of people from different backgrounds while offering cohesion, flexibility, and choices in skillsprovision.Industry, Student, and Technical and Vocational Education and Training Engagement Becoming closer to the industry and establishing an ongoing, effective two-way partnership in many areassuch as labor market information (LMI), curriculum, standards, career orientation, internships, hiring, andequipment can produce additional outcomes for the TVET sector. The three major stakeholders—employers, educational institutions, and students—have limited interactionand appear to being operating in parallel worlds. Three factors are important for maximizing human resources:o building a flexible education system;o developing and updating needed skills; ando enhancing employability.Innovation To simulate innovation, it is important to identify workable solutions suitable to the local context. If aiming tomake a bigger impact, it is important to be strategic in what we test and how we identify solutions to scale up. Innovation is a core requirement for economic growth, and the importance of creative power andentrepreneurship in high skill economies should not be underestimated. These creative and entrepreneurialskills need to be embedded into the formal education curriculum, programs supporting small and mediumsized enterprises (SMEs), and on-the-job training. It is important to foster a TVET paradigm shift toward skills-based TVET and to position TVET teachers and/or trainers as “agents of change.”Public–Private Partnerships and Funding There are a number of benefits and risks that need to be weighed when considering negotiating a PPP.Associated benefits can include improved quality and access to new skills while risks can include inadequateregulatory environments and a lack of competition in some markets. Challenges to implementing PPPs in education and training include: (i) a traditional focus on infrastructure,(ii) government resistance to private sector and/or PPPs, (iii) procurement issues related to contracting,and (iv) the financial viability of the potential projects. Additionally, there is a lack of appropriate policyframeworks to support PPPs and a need for incentives that support innovation. There are many potential PPP models for TVET, and the context is important as to which model is taken.The country’s governance, financial management, and administrative capacity must all be taken into5

Sustainable Vocational Training toward Industrial Upgrading and Economic Transformationconsideration. The size and nature of the nongovernment sector and fiscal situation, among others, all play arole in determining the PPP model for a particular country. Levies have the potential of providing large amounts of funding. However, levies do not on their own guaranteegreater participation in training, and research suggests that levies alone do nothing to improve the quality ofskills development. Combined with other TVET systemic mechanisms, levies can have a magnifying effect onthe quality, relevance, and employer demand for training. The evolution in funding models is also linked to the practice of systems improvement based on evaluationsand research of the TVET system, which affects how funds are targeted. For smaller developing economies, supporting industry involvement in TVET can be difficult. There isdivergence in the research as to whether small employers benefit from levy schemes. Incentives for training providers must be explicitly changed to respond to external labor market demands andimprove system performance, becoming outward rather than inward-looking.Teachers Teacher quality is an important area. While there has been investment in facilities and equipment, teachersrequire more skills. Investing in leadership programs for schools and attracting and developing the best teachers will work toimprove the overall skill levels of future workers entering the labor market. In a diversified industrial society where highly skilled human resources are required, in-house vocationaltraining will play a major role. The challenge is keeping the mutual relationship with the industry going and maintaining qualified teachingstaff and good instructors. It is also a challenge keeping the curriculum of the school up-to-date with industryneeds and maintaining equipment.Curriculum Content6 The curriculum needs to be developed with the industry. It should be considered a “living” curriculum thatchanges as required, with a focus on employment. High value service industries increasingly need highly skilled workers who also have soft skills (e.g., skills forteamwork, communication, problem-solving, and management). One of the important concerns for skills acquisition is ensuring that workers have strong productivity skillsand technology training. Employers have consistently identified the need to increase and improve soft skills (e.g., literacy, numeracy,critical thinking, and digital skills) so employees have more transferable skills. Strong employer partnershipsalso enable colleges to provide students with work placements and internships, which is a key approach toensure graduates are job-ready.

Session 1: Improving VocationalTraining in a Changing World2This session discussed how vocational training can meet the needs of a fast changing world and keep up withchanging economic structures.Moderator: Ayumi Konishi, director general, East Asia Department and cochair, Education Community ofPractice, ADBIndustrial Structure Determines Education StructureJiang Dayuan, executive member of the council, the Chinese Society of Vocational and Technical EducationPriority Issues in Technical and Vocational Education and Training Workforce Skills Development for Asia inthe Global WorldJouko Sarvi, advisor, concurrent practice leader (education), ADBEducation to Employment: Designing a System that WorksTom Isherwood, team leader of education report, McKinsey Center for GovernmentSkills Development in the Fast Changing WorldWang Yidan, senior education specialist, World Bank2.1 Industrial Structure Determines Education StructureJiang Dayuan, executive member of the council, the Chinese Society of Vocational and Technical EducationThe presentation identified that TVET structural change should reflect industrial structural changes. This wasdiscussed within the global context whereby developing countries in the first phase of industrialization are laborand resource intensive, relying predominately on lower level skills. Middle-income countries are characterizedby being technology and capital intensive, while developed countries tend to be knowledge and human resourceintensive. The speech drew on a number of differences between the Chinese approach to TVET and the Germanand American approaches. In particular, the observation was that TVET in Germany is highly regarded by thecommunity.Key point: There is a need to raise the status of TVET within the community to attract students from a wide rangeof backgrounds.7

Sustainable Vocational Training toward Industrial Upgrading and Economic TransformationThe three countries’ approach to TVET was compared, particularly in relation to pathways and soft skills, to identifywhat lessons PRC can extrapolate from the German and American approaches. The presenter proposed that inorder to meet the PRC’s aims, TVET needs to focus on value-added and high-end manufacturing as well as serviceskills and employment. As the migrant workforce continues to grow, issues of social harmony and educationalequity will arise.From a systems level, there is a need to develop long-term planning processes that incorporate new approachessuch as e-learning, self-directed learning, and TVET delivery situated in a range of sites, including online delivery.Key point: Curriculum needs to be developed with the industry and considered as “living”—changing as required,with a focus on employment.The presenter identified that the TVET sector needed to: adapt to changes in priorities in economic development and industrial structural adjustment requirements; reflect the concept of lifelong education; harmonize the development in vocational education at the secondary and tertiary levels; and raise the status of TVET within the industry and general community.2.2 Priority Issues in Technical and Vocational Education and Training WorkforceSkills Development for Asia in the Global WorldJouko Sarvi, advisor, concurrent practice leader (education), ADBAs the global economy fluctuates, relying on exports and currency exchanges is no longer an easy option fordeveloping countries. Good economic policy builds upon the link between skills development and the country’seconomic policy to ensure the use of skills in adding value to products and services. The service sector is a growingsource of jobs, accounting for about 30%–40% of all workers in Asia. These are linked to traditional services such aswholesale, retail trade, and personal services; and suffer from low labor productivity. A central challenge for Asia’sservice sector is to move from traditional, low value-added activities to modern, high value-added activities. Thisincludes knowledge intensive services such as information and communication technology (ICT), finance, legalservices, business services, and management support, which require an increase in the supply of high-level skillsand soft skills. A more productive and dynamic service sector would help sustain the region’s economic growth,make it more inclusive, and contribute to poverty reduction.Key point: High value service industries increasingly need highly skilled workers who also have soft skills (e.g., skillsfor teamwork, communication, problem solving, and management).Interestingly, higher order service sectors complement the manufacturing sector and can lift the productivity ofboth manufacturing and service sectors. Therefore, this has a complementary effect on labor market competence.Key point: This requires rethinking the scope of TVET delivery and the types of qualifications and pathways offeredwithin the TVET sector. New qualifications and assessment tools should be developed and endorsed or recognizedby the industry.Key point: Having TVET activities that can serve multiple but interrelated industries mean that the workforce canmove across different industries based on demand.8

Session 1: Improving Vocational Training in a Changing WorldEconomies can develop full sectoral competitiveness by mapping the skill needs of the entire value chain toincrease the strength of the manufacturing and downstream service sectors.Key point: Competitiveness in the main industry may rely upon the competitiveness of supply chain industries.Skills development—upstream and downstream—is valuable to the competitiveness of an industry sector.Informal labor markets dominate the Asian region, with small and m

4. Session 2 (Part 2): Vocational Training, Industrial Upgrading, and Economic Transformation 17 4.1 Malaysia's Vocational System and Human Resource Development Planning 17 4.2 Japanese Vocational Model and its Applications 19 4.3 Teaching Industries: Good Practices in Polytechnics in Indonesia 20 5.