Resilient Human Capital: A Precondition for Structural Transformation

1. Resilient Human Capital: A Precondition for Structural Transformation Adrian Gauci and ChrystelleTsafackTemah EDND, UNECA African Economic Conference, 28 October 2011

2. Outline of the presentation • Research Statement • Why do LDCs need a structural transformation • Methodology • Implications for African LDCs • Areas for future Research

3. Research statement African LDCs structural transformation is dependent also on an adequate education supply. Structural transformation requires cognitive supply of skills not currently produced in African LDCs with the survivalist employment outcomes and continued vulnerability.

4. Need for structural transformation I

5. Need for structural transformation II

6. Need for structural transformation III • Moderate to good economic growth primarily driven by primary commodities • Type and character of growth did not lead to commensurate employment creation • Informal sector absorbs the vast majority of employment • Vulnerability to exogenous shocks persists

7. Need for structural transformation IV • Capital intensive primary sector that creates little employment opportunities • Supply side provision of educational skills is a precursor of industrial policy to exit commodity dependence • Numeracy and literacy skills are insufficient to an industrialization process

8. Methodology: the Human asset index HAI: information regarding the level of development of human capital of a country, criterion for identification of LDCs. Combination of four indicators; two for health and nutrition two for education : the gross secondary school enrolment ratio and the adult literacy rate. Secondary education is African LDCs is inadequate Quantity: focus on primary, in 2005-2009, enrolment rate was 33% for males and 25% for females in African LDCs (UNESCO) Quality: mismatch with labor market, lack of specific skills

9. The Ethiopian case study I Ethiopia: biggest LDC in Africa, successful design and implementation of the Plan for Accelerated and Sustained Development to End Poverty (2005-2009) Tremendous progress in economic , human and social development Sustained GDP growth: over 10% since 2004 Commendable progress on MDG 4: reduce child mortality Primary enrolment increased from 68.5 to 87.9%

10. The Ethiopian case study II However constrained transition towards post-primary education enrolment Gross secondary enrolment ratio: 39 for male and 28 for female Lack of skills: those who did not enrol in secondary education are not readily “employable”. They finally end up in the informal sector, which does not constitute decent employment, hence no reduction in poverty. Survey undertaken on women in the entrepreneurial informal sector: 33 percent of respondents had primary education and 25 percent had no education. 63 percent of respondents dropped out of school primarily to look for a job and/or to support the family.

11. The East Asian Example I The NICs have had spectacular annual growth rate of outputs well in excess of 6 percent. This has been sustained over a 30 year period; Leading to the transformation of these economies since 1960 from agriculturally based to industrial and post-industrial economies: successful example of structural transformation Thus increasing their resilience to exogenous shocks.

12. The East Asian Example II Three sets of factors were critical Policy incentives; Capabilities; Institutions In fact, the value of education in dealing with disequilibria or changes in economic conditions is clear in agricultural contexts. Quick gains in competitiveness, transfer of technology and manufacturing employment opportunities were the criteria for industrial selectivity by the State

13. What African LDCs can & cannot infer from East Asian experience I Education in East Asian countries drove not only economic growth but successful structural transformation Quality of education allowed these countries to move from a stage of economic development to another- from primary to secondary and beyond Primacy of education was contextualized within policy incentives and institutions that reinforced economic and development gains.

14. What African LDCs can & cannot infer from East Asian experience II Investment in education was linked to a demographic dividend of increasing resources per unit produced. Export-led regimes in East Asian countries led to education being geared to enhance firms’competitiveness and transfer of technology. The role of the State that ensured educational investment was linked to the overall vision of structural transformation.

15. What African LDCs can & cannot infer from East Asian experience III Institutions that linked labour markets and educational policies were crucial in addressing mismatch: Workforce development agency in Singapore Productivity councils in Taiwan and South Korea Science and technology were a critical part of educational systems to allow technical catch-up

16. What we can & cannot infer from East Asian experience IV Development of technical and vocational education and training (TVET) outside formal educational system, also financed by the private sector and linked to on-the-job training ; Research and Development institutions were steered by public and private organizations towards product and technology development

17. Areas for Future Research Recent African country studies have shown that secondary education have higher rates of return. A more systemic study needs to be tackled of the quality of education and structural transformation Incremental versus instrumental education needs to be investigated in the African LDCs context Quality of education forms part of the post-2015 MDG agenda- analysis of resource needs and relationship to development requires more investigation. Appropriate African institutions that link educational output to labour markets demands more research.

18. Thank You