Today, countries across the world are facing challenges such as demographic change and ageing, poverty, inclusiveness, the globalisation of production, shifts in knowledge and technology, and climate change and the development of the green economy. In addition, the global financial crisis has increased unemployment levels in many countries, resulting in a wide range of socio-economic consequences. These challenges require strategic solutions and long-term sustainable development pathways that are well articulated for implementation. To respond to these challenges, countries are developing their knowledge bases as a key element of growth in a world where innovation is nurtured by cooperation and information exchange that mostly occurs in urban settings.

To develop a knowledge-based economy, countries need workers with education and skills so they can pursue inclusive and sustainable development and ensure that growth reaches all parts of the society. Addressing skills development for all is a challenge for all OECD countries and Asian economies are not lagging behind; in fact, they are working to develop their own integrated pathways of skills and employment. Indeed, OECD (2012) argues that Asian countries will not necessarily duplicate the approaches we can observe in other OECD countries. That is, a different model is emerging, one with a greater focus on developing a skills infrastructure that is integrated with the physical infrastructure and can therefore take greater advantage of the synergies of capital investment and industry growth for the large infrastructure projects that the majority of these countries are undertaking.

In this paper we first discuss issues of skill development in OECD countries, taking the example of small and medium enterprises (SMEs), a key sector for expanding the knowledge economy. We then reflect on extracts from the OECD (2012) report Skills Development Pathways in Asia, and discuss the challenges for Asian economies. Finally, we extract some key conclusions from that report and apply them to skills development pathways in Asia.

Skills development approaches in SMEs in OECD countries

A firm’s size often determines how much it participates in workforce development, specifically in training employees and improving their skills. Data across OECD countries consistently show that SMEs participate in only half as much training as large firms. Smaller firms do not have the critical mass to afford formal training, in the form of either financial costs or the opportunity cost of employees’ time, and they find it harder to access opportunities. Instead SMEs are more inclined to participate in knowledge-intensive activities to learn new techniques or new ways to operate. They may interact with consultants, suppliers, or clients, or they may attend conferences, meetings, or internal firm activities such as meetings on quality control. These activities, however, do not involve formal qualifications or standard training certificates, and they tend to benefit managers, business owners, and the more highly educated members of staff.

According to a recent report by the European Centre for the Development of Vocational Training (CEDEFOP 2010), by 2020 Europe will generate around 7 million jobs net (job creation minus job losses). Most of these new jobs (over 8.5 million) will be in knowledge- and skills-intensive occupations, so the demand and need for skills (including formal training and qualifications) will continue to rise. In contrast to this recognition of the growing demand for skills is the fact that enterprises with under 50 employees provide significantly less employee training than larger firms (OECD 2008, 2010). This is even true for countries known for their strong training cultures, such as Denmark, the Netherlands, Norway, and Sweden (OECD 2010).

Box 1 offers definitions of VET (vocational education and training). Continuing VET can be further refined into categories on the basis of how the training is funded: by individuals, by public authorities, or by enterprises. In this article we focus on training provided in the context of the work environment, therefore on this third category of continuing VET, where the training is partly or wholly financed by the enterprise, and/or conducted by employees as part of their paid employment. Apprenticeships, which fall into the initial VET category, are also an important source of training that is funded and conducted by employers, especially for SMEs, so we also discuss them.

Box 1 Defining vocational education and training
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A major source of data on continuing VET within enterprises including SMEs in Europe is the Continuing Vocational Training Survey (CVTS). It has been conducted every five years, starting in 1995. It first collected data on initial VET in 2005, and our analysis is taken from the 2005 survey. CVTS 3 was conducted in 2006 for the reference period of 2005. Its design is somewhat different from the two earlier versions of the survey, making longitudinal analysis difficult. Still, since data is rarely collected on the activities of SMEs, this data is a valuable basis for analysing their training behavior.

The 27 other OECD countries collect data on the training activities of firms within their country. While these data sources are not directly comparable they provide evidence that firm size has an effect on the likelihood that firms will participate in, and provide vocational training to, their staff. In this article we present data collected through CVTS and other OECD sources.

Figure 1 shows the percentage rate of European firms participating in CVET, by firm size. (Note that our figures relate primarily to the EU 27 region unless we state otherwise.) Across all the countries, small firms, defined as those with 10 to 49 employees, have the lowest rates of participation in CVET. Large firms (those with over 250 employees) have the highest rates. Countries do, however, differ significantly in their participation rates by firm size.

Fig. 1
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Participation rates of enterprises in Europe by size, 1999 and 2005

Sources: Eurostat (2005, 2009)

Note: These Eurostat reports cover the CVET survey years 1999 and 2005 respectively.

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Figure 1 also shows the CVET participation rate for the 1999 CVTS2, and reveals little change in SMEs’ overall rate of participation in the EU region. Overall, the figures do show a small percentage decrease in CVET participation among large firms with 250 to 500 employees and the latter two categories of large firms. The results of the next CVTS survey, conducted in 2011 on 2010 data, are not yet available but will indicate how this trend evolved and the impact that the financial crisis has had on participation rates.

Figure 2 shows data from the CVTS3. In the small-firm category Greece had the lowest level of CVET participation: only 16%. Other countries whose small firms had low CVET participation rates include Bulgaria (24%), Poland (27%), Italy (29%), and Latvia (31%). At the other end of the scale the United Kingdom had the highest level at 89%. Norway (86%), Denmark (83%), Finland (73%), and Sweden (74%) also had high levels of participation.

Fig. 2
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Firm participation in vocational training by firm size, in Europe, 2005

Source: Eurostat (2009) (for CVET survey year 2005)

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Medium-sized firms participated in CVET at higher levels. Greece again had the lowest rate: only 39% of such firms said they participated in CVET. All the other countries surveyed had rates above 50%, except for Bulgaria with 44%. Medium-sized firms in the United Kingdom also participated at a high rate (92%), but France had the highest rate at 98%, and the Czech Republic (93%), Denmark (96%), and Sweden (95%) also had rates above 90%.

This analysis provides two main possibilities. First, the rate of CVET participation in small firms may be strongly influenced by country-specific variables, such as policy mechanisms. Second, the participation rate of medium-sized firms highlights the additional impact of both increasing firm size and country-specific variables. That is, once firms grow to a certain size (over 50 employees), that growth may trigger increased participation.

The CVTS does not survey so-called micro firms, those with under 10 employees. This means that, in OECD countries, no standardized source of data is available to assess their participation in training. The latest National Employer Skills Survey for England (UKCES 2009), conducted in 2009, did survey 79,000 employers on their training activities. Its sample included micro firms, defined as those with two or more employees.

The NESS survey does not use the same categories of business size as the CVTS. Also, it collects information on training through the place where the training is provided (i.e., on or off the job). Still, the results are clear for the micro firms: almost half of firms with 2 to 4 employees (45%) participated in no training during 2009, and a further 16% only conducted on-the-job training (UKCES 2009). Importantly, these smallest firms also have the highest levels of off-the-job training across all the firm size categories.

Effect of public policy measures

In this section we look at the influence of public policy measures on firms’ training activities. The CVTS asked firms about the positive impact that certain public policy measures had on their training activities.

For SMEs across the EU27 region, two public policy actions had the most powerful positive impact: providing recognized standards and frameworks for qualifications and certificates, and offering financial subsidies to cover the costs of training. These were also the most influential factors for large businesses, but at much higher percentage levels. Among large firms, 32% replied that providing recognized standards and frameworks had a positive impact on training activities, compared with 23% of medium-sized firms, and 18% of small firms.

The factor with the least influence, across all firm size categories, was publicly funded advisory services aimed at identifying training needs and/or developing training plans. Only 12% of large firms, 10% of medium-sized firms, and 8% of small firms listed this as an important factor influencing the scope of their training activity. Looking back on previous CVTS surveys we can see that different reasons may account for this small impact across the different sizes of firms. As most large firms had training plans and regularly and formally assessed their training needs, they likely had little need for this public measure. The story would be different, however, for SMEs, which use more ad hoc and occasional skills assessments. They likely were little influenced by this public measure because they did not know about it, or had no access to it.

Public policy makers are also interested in how policy can be targeted towards specific groups of people that may be disadvantaged in the labour market. Figure 3 shows how firms in the EU27 region targeted CVET to specific employee groups such as ethnic minorities, employees with disabilities, and employees on fixed-term contracts or at risk of losing their job. As would be expected, large firms provided more specifically targeted CVET in all but one case. Medium-size firms targeted more training to ethnic minorities than did large firms (34% vs. 32%).

Fig. 3
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Enterprises providing training by group/firm size (EU27), 2005

Source: Eurostat (2009) (for CVET survey year 2005)

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Over 40% of large firms provide specifically targeted CVET to employees without formal qualifications and employees at risk of losing their jobs. A third of large firms also provide targeted training to part-time, fixed-term, and ethnic minority employees. SMEs had lower levels of targeted training; they directed more activity towards employees with no formal qualifications and those on fixed-term contracts. National differences also exist; they suggest that different countries place different regulatory requirements for such training on firms of different sizes.

It is also interesting to note that the SMEs provided the most responses about employees without formal qualifications; this suggests that employers may provide targeted training to give employees formal qualifications. Our theory when we began this study was that SMEs were less likely to participate in CVET and that when they did, the training was more likely to favour managers and higher-skilled employees with formal qualifications. These data provide a positive reason why low-skilled workers would participate in training to gain formal qualifications.

Some policy implications

These analyses provide clear evidence that workforce size is an important determinant of how firms participate in training and skills development. The 2005 Continuous Vocational Training Survey (CVTS3), conducted by the European Commission, showed that only 50% of small firms participated in formal CVET, compared with 90% of large firms. These figures are unchanged from the previous survey in 1999. We found significant national differences in CVET participation across the EU: only 16% of Greek small firms participated in CVET, compared to 90% of those in the United Kingdom. Still, we found that in all countries SMEs had lower levels of CVET activity than larger firms.

OECD (2013) researchers named three factors that SMEs take into account when making decisions on staff training.

First, SMES do not participate much in internal training programs such as learning circles, job rotation, and exchanges or secondments, probably because they lack critical mass. The OECD researchers suggest that these firms could benefit from a network approach that would use members of their skills ecosystem to generate economies of scale for training activities similar to those available to larger firms. For example, several SMEs could join together to organize learning circles or exchange personnel within an industry cluster or value chain.

Second, recruitment is the main way that firms introduce and update their employees’ skills. This is an important barrier to innovation and competitiveness if the firm is in a sector that is evolving rapidly and needs to adjust its knowledge base. Most employment growth over the next 10 to 15 years will be in knowledge- and skills-intensive occupations and the labour market for skilled employees will be strong. In the future SMEs will be less able to recruit new employees to meet their needs for skills. Therefore they will have to develop the skills in their existing workforces.

Third, SMEs seem to be more casual about assessing both current and future skills, compared to large firms where such assessments are routine and frequent. This is especially critical for SMEs: if they fail to assess their skills needs consistently and systematically, they may be less competitive in the face of industry evolution and changing patterns of knowledge. This could put them into a weaker, more vulnerable position as they face new market challenges. These findings show how critical it is to assess SMEs’ current plans for and approaches to skills development, as they may differ from traditional ways of participating in formal training.

Skills development in Asian economies

Having identified the important contribution that SMEs make to the knowledge economy, and how they differ from large firms in their needs for skills development and training, we now examine skills development in Asian economies, reflecting on and extracting lessons from the OECD (2012) report.

Challenges for skills development

The challenges that Asian countries face are as diverse as their pathways of economic development, particularly among emerging economies. The OECD (2012) report highlights four challenges.

The first is building up a system for training or creating a training market. Many countries have outdated systems and inadequate facilities, equipment, or instructors. They are building up their training systems in several ways: creating additional training academies, imposing skill levies, and using apprenticeship models. A common element is increasing involvement by the private sector.

The second is reducing skills mismatches and increasing the links between training and industry needs. As industry demands higher skill levels, economies face a widening gap between skill supply and demand. Here they are using several approaches. One is the “train the trainers” model. If the private sector does not take the initiative to supply training in new skills, the public sector can supply instructors in new skills, as a public good. The government bears the cost, or sometimes charges it to companies. A second approach is to give subsidies to a leading technology company to train workers from other small to medium-sized companies, or the unemployed, along with their own workers. For example, Mongolia subsidises on-the-job training of the unemployed with its Employment Promotion Fund. The Philippine government seeks to strengthen industry education and training linkages with an enterprise-based training system. Thailand provides companies with incentives, including income tax breaks granted by the Skill Development Promotion Act of 2002; its National Vocational Training Co-ordination Committee works with the private sector.

Third, countries need to improve their skills training systems and their outcomes. They need to insure that high-quality skills training is available, to create vocational pathways for high school leavers. Cambodia, Indonesia, the Lao People’s Democratic Republic (LPDR), Mongolia, the Philippines, and Vietnam all have high unemployment rates among college graduates, but few of their people see vocational training as a viable alternative. As a result, high school graduates value academic studies and target white-collar jobs that are unrelated to industry’s demands. To improve the status of vocational training and attract young people to areas where demand is strong, these countries need high quality and competency-based training. They need to construct a National Qualification System. Also, developing countries often lack quality assurance programmes, industry ownership of training, and strong cooperation between authorities. Pakistan plans to respond to this problem by streamlining its currently fragmented training system with a focus on centres of excellence. China is setting up a national system of honours and rewards for those who master certain skills, in an effort to improve the public’s perception of skill training.

Finally, industry must participate more and take some ownership of training efforts. A major weakness in developing Asian countries is industry’s relationship to training. The vast majority of firms are SMEs and they hesitate to invest in workers’ skills as they lack resources and workers turn over quickly. On the other hand public training provision can be fragmented and supply-oriented, and not well linked with industry’s demands. But examples of private sector leadership do exist. Indonesia’s Malang Migrant Workers Training Centre is a privately-owned training centre for female migrants, specialising in domestic work for households in Hong Kong, China, and Singapore. The company that runs the centre has branches nationwide and also offers training for prospective migrants (mostly men) to the electronics sector in neighbouring Malaysia. Nationwide, it sends 250 female workers into these occupations abroad every month. Here, training is an integral part of the company’s service provision.

These challenges are interrelated and cannot be addressed in isolation. In practice, this leads to the further challenge of integrating skills strategies, which requires a dedicated dialogue among various ministries and departments to create cohesive and co-ordinated policy.

Supporting private-sector skills development

Private-sector approaches to skills development can add significant value to public administration efforts to equip the workforce with the modern skills that can lead to quality and inclusive jobs. However, very little is known about the approaches that firms in Asian countries, particularly SMEs, are using to fill the vacuum of skills development frameworks, especially in new economic areas such as green growth. In this section we explore this issue, taking the example of green skills development.

SMEs play significant roles in economies, from offering employment to reducing poverty and improving inclusion—and especially in achieving sustainable development. However, as Usui and Martinez-Fernandez (2011) point out, SMEs face significant challenges in developing the skills workers need for green production. Moreover, the linkage between SMEs’ growth and the diffusion of low-carbon technologies is less recognized in developing countries, which often face such problems as finding capital and developing technical capacity. One potential solution is funding, generally financial, from international donors, especially to infrastructure projects. For example, in 2009, 45% of Japan’s climate-targeted official development assistance was in three large-scale loans to mass rapid transport projects in India, Thailand, and Indonesia. However, significantly less finance went to support SMEs (see Figure 4), and such aid is not applied to general skills development or to raising awareness.

Fig. 4
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Activities supported by climate-related aid worldwide, 2007–2009

Source: Usui and Martinez-Fernandez (2011)

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Usui and Martinez-Fernandez (2011, p. 17) conclude that support for SMEs in developing countries that are making the transition to a green economy “cannot rely exclusively on infrastructure because the management and skills development aspects are as important for firm development as the ‘hardware’ support”. Further, they say, “international donors should strengthen their support to develop skills and raise awareness among SMEs to harness economic opportunities”.

Pathways for the knowledge economy: Addressing skills demand by occupation

Examining the skills demand by occupation, as laid out in the OECD (2012) report, we found that in general, the more developed a country is, the more highly skilled occupations are available, compared to developing countries which seem to rely on lower-skilled occupations. The higher-skilled occupations—such as professionals, technicians, associate professionals, and clerical workers—are significantly advanced in such developed countries as Australia, Hong Kong, China, New Zealand, and Singapore. Meanwhile, Cambodia, Pakistan, and Vietnam are struggling to supply these types of skills, as Figure 5 shows. It illustrates the supply of workers in craft/related trades, occupations that could be called medium-skilled, along with plant/machine operators and assemblers. Operators and assemblers generally work in the manufacturing sector and industrialised countries have more of these jobs. Both high- and low-skilled workers can be found in the crafts and trades category, with a high share not only in Australia but also in low-skilled countries like Pakistan and Vietnam. Figure 4 also shows the share of low-skilled agricultural and basic occupations available. As the categories of occupations are not always similar across countries, OECD (2012) reports the shares as the sum of the two occupations. Several countries in the region are in a state of low-skill equilibrium, with a high share of low-skilled workers; among them are Cambodia, Mongolia, Pakistan, the Philippines, and Vietnam.

Fig. 5
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Shares of high-, medium- and low-skilled occupations in total employment

Source: Based on ILO (2011)

Notes: Countries are abbreviated as follows: Australia (AU); Brunei Darussalam (BN); China (CH); Cambodia (KH); Hong Kong, China (HK); Indonesia (ID); Korea (KR); Lao People’s Democratic Republic (LA); Malaysia (MY); Mongolia (MN); Nepal (NP); New Zealand (NZ); Pakistan (PK); Philippines (PH); Singapore (SG); Thailand (TH); and Vietnam (VN).

Japan is not included because its use of the ISCO 68 categories is not compatible with those of the ILO study.

ISCO (International Standard Classification of Occupations) 68 and 88 are two slightly different standards to measure occupation classifications.

Data on BN and NP is for 2001, on CH for 2005, on LA for 1995, on MY for 2009, and on VN for 2004. ISCO 88 uses these categories: higher skilled (legislators, senior officials and managers, professionals, technicians and associate professionals); medium skilled (clerks, craft and related trade workers, plant and machine operators and assemblers); low skilled (skilled agricultural and fishery workers, elementary occupations, service workers, and shop and market sales workers).

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Occupational structures reveal a country’s level of skills. The demand for skills training is derived from the need to align the supply of and demand for skills. The change in shares of occupations shows the direction and the magnitude of the shifts in skills demand. Figure 6 shows the changes in shares of occupations over the last decade for countries for which data are available. In Pakistan and Vietnam the demand for craft/trade and production workers is growing—and that for agricultural workers and elementary occupations has declined. This shift in demand means that these countries need to train unskilled workers from rural areas to become production workers. The demand for workers in production occupations has also increased in other countries—Cambodia, Indonesia, Nepal, and Thailand—but the patterns vary. For example, in Thailand demand has grown more quickly in the services occupations than in production occupations, but Vietnam has seen weak growth in the demand for service workers. All of the countries shown in Figure 6 have experienced a reduction in agricultural employment.

Fig. 6
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Change in shares of occupations between 2000 and 2010

Source: Extracted from ILO (2011)

Notes: SCO-88 occupation categories are as follows: 1. legislators, senior officials and managers; 2. professionals; 3. technicians and associate professionals; 4. clerks; 5. service workers and shop and market sales workers; 6. skilled agricultural and fishery workers; 7. craft and related trades workers; 8. plant and machine operators and assemblers; and 9. elementary occupations.

Data for Indonesia and Japan are in the following ISCO-68 occupation categories: 0/1. professional, technical and related workers; 2. administrative and managerial workers; 3. clerical and related workers; 4. sales workers; 5. service workers; 6. agricultural, forestry, fishermen; 7/8/9. production and related workers.

2000 data availability varied between 1999 and 2001. 2010 data availability varied between 2004 (Vietnam), 2007, and 2009.

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In the more industrialised parts of Asia, including Australia, Japan, Hong Kong, China, Korea, Malaysia, and Singapore, the shares of medium-skilled occupations (craft/trades and operator/assembler workers) have declined by large margins. The share of skilled agricultural employment has also declined, although the decrease is modest or insignificant in Korea and Malaysia, which already had low shares. In these countries, the shares of more highly skilled jobs such as professionals and associate professionals have increased, especially in Hong Kong, China, Korea, Malaysia, and Singapore, albeit to varying degrees. However, the increase in these highly skilled jobs does not account for the entire decline in production jobs. In all countries, the shares of the least skilled, elementary occupations have increased. We see varying patterns among service, sales, and clerical workers, which show that the skills training demands for these countries are quite different from those in less developed countries.

During the last decade, the numbers of both agricultural and production jobs have dropped in Mongolia and the Philippines. Instead, more jobs are in the elementary occupations. These countries are facing demands for skills training for a wide range of unskilled workers.

The OECD’s (2012) analysis of skills demand by occupation and skills supply indicates diverse development patterns with a dual development pathway. While some countries (China, Hong Kong, Malaysia, Myanmar, and Singapore) already have quite well-developed service economies, in other countries (Cambodia, LPDR, Nepal, and Vietnam) large amounts of the workforce are still in agriculture. Skills serve as a good mirror of sector development; those countries with large agricultural sectors lack the more skilled workforces and represent large pools of unskilled workers in need of training. At the same time, the supply of skills in those fields more related to innovation processes (science, technology, and engineering) is clearly insufficient to promote sustainable and inclusive growth.

Approaches to skills development in Asia

As Figure 7 shows, Asian countries are utilising four different strategic approaches to skills development. They are strengthening technical and vocational education and training (TVET) systems; fostering knowledge intensity through workplace training; developing local skills ecosystems; and integrating skills for green growth.

Fig. 7
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Skills development approaches in Asian countries Source: OECD (2012)

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To strengthen their TVET and secondary education systems countries must shift from curricula-based approaches to competency-based training, and must create a demand-driven training system that is responsive to industry needs. Three types of corrective measures are needed. Countries must streamline policy making and reorganise the current procedural overlaps among institutions, set up sector-specific centres of excellence located near relevant industries, and institutionalise industry’s role in policy making.

Few Asian countries have well-developed infrastructures for workplace training at the institutional level. Therefore, a quicker and more sustainable pathway to improving skill levels and knowledge intensity is developing firms’ capacity as training partners or training organisations. SMEs are struggling the most to develop skills and address skills gaps. Ultimately, as firms become more knowledge-intense, they also raise their levels of innovation and productivity, and move toward innovation and commercialisation; this pushes workforce skills development internally and is directly related to their production pathway (Martinez-Fernandez, Miles, and Weyman 2011).

Local skills and training ecosystems can provide a network mechanism for coordinating vocational training through three actions: involving industry more in training, placing more trainees in firms, and providing improved incentives for training that better respond to the market by satisfying employers’ changing demands. The impact of developing local skills ecosystems and fostering local skills initiatives is less known in Asian countries but integrated strategies driven by national authorities have succeeded, like the Shanghai finance skills strategy (OECD 2012).

Green growth has become an opportunity for many Asian countries to integrate their skills strategies and connect into global development networks for developing new technologies and green sectors. Not all countries can invest at the same level. For some countries, simply raising awareness among their training systems and firms is the most feasible strategy; others can invest deeply in their science and technology systems and skills and training systems, linked to job creation and sustainable development.

Concluding remarks: Does Asia need a unique skills development model?

Asian economies have distinctive pathways and cannot base their development on models developed elsewhere. While lessons from abroad can provide useful information and examples, targeted strategies need to match the conditions in each country, which are not uniform across Asian economies.

Asia does, however, need to develop more integrated approaches. We see four levels at which policy can be used to focus on more integrated approaches to skills development. The first level is skills infrastructure and governance. The second level is the composition of the skills and jobs as they relate to current employment. The third level is the intensity of knowledge in the workplace, and the fourth is strategies to integrate skills at the local level.

Increasing investment in skills infrastructure and governance

Asian countries face at least five challenges also shared by OECD countries. They need to reduce skills mismatches, improve links between training and industry needs, upgrade outdated training systems, increase industry participation, and build up their skills infrastructure to create a training market with quality suppliers.

Agriculture is still a significant part of many Asian economies but services greatly overshadow industry, which is the least intense sector. Five countries have large agricultural sectors, which account for over 50% of employment: Cambodia, India, Myanmar, Nepal, and Vietnam. In China, Mongolia, Thailand, and Vietnam, the proportions of the populations in services employment have grown significantly during the last decade.

If public training systems are outdated and the elements of a training market are weak, that will slow down the process of transitioning to the knowledge economy and adding value to the dominant sectors. It is also harder to include those in the non-formal sector if the governance of the skills system is not clear or well articulated in partnership with the private sector.

Addressing the composition of skills and jobs

Little attention has been devoted to developing knowledge workers in Asia. The more highly-skilled occupations, such as professionals, technicians, and clerical workers, are significantly advanced in the developed countries of Australia, Hong Kong, China, New Zealand, and Singapore; meanwhile Cambodia, Pakistan, and Vietnam are struggling to supply these types of skills. Several countries in the region are in a state of low-skill equilibrium, particularly Cambodia, Mongolia, Pakistan, the Philippines, and Vietnam. These countries face demands for upskilling. The shares of people in more highly skilled professions have increased in most countries, but the shares are larger in Korea, Hong Kong, China, Malaysia, and Singapore.

The countries with the largest percentages of secondary-educated workers include Australia, Hong Kong, China, Korea, Malaysia, and New Zealand. In two countries—Indonesia and Pakistan—the highest percentage of the labour force has only a primary education. These countries clearly require a more educated labour force, but more people are completing secondary school (OECD 2012). Indonesia has the lowest share of workers with a third-level degree in science, technology, engineering, and mathematics (STEM), while Australia, Japan, Korea, and New Zealand have the highest percentage of workers with a tertiary education, indicating a highly skilled workforce. In Australia, Korea, Malaysia, Mongolia, and New Zealand, the STEM percentage is around 0.4% of the total labour force. But in Cambodia, the LPDR, Nepal, and Vietnam, not enough of these types of knowledge is flowing into the labour force, as their colleges and universities are not producing enough graduates in these fields (OECD 2012). For the knowledge economy to advance, they will need more knowledge workers, and therefore must pay more attention to skills development programmes that can train them.

Increasing knowledge intensity in the workplace

Private sector development, in both the formal and non-formal sectors, strongly depends on raising the skills of the large share of unskilled and semi-skilled workers. To move towards higher-value production and a sustained growth path will require more and better workplace training, especially because industry is not investing in workplace training. Less is known about how to increase knowledge intensity in the workplace as a way to address the needs of skilled professionals, firms, and clusters in high-growth enterprises and industries. This is an urgent need in many Asian countries, whether they are in a high-skill equilibrium or a low-skill equilibrium. What they all need is to support those firms and sectors that are already embedded in global value chains and technological innovation networks.

Particularly notable is the need of the SME sector to secure capital, especially working capital, in a tight market. SMEs tend to lack reliable documents for financing purposes, along with detailed business plans and future projections. In this context, SMEs need to learn about sophisticated financing, a topic that should be integrated into firm training in different ways. Various OECD countries are using alternative approaches to skills development and knowledge-intensive service activities (OECD 2013) but no one has yet investigated how they might apply to developing countries.

Integrating skills strategies

Asian countries are developing skills plans as national statements and frameworks. Few specify how the plans will be implemented at the local level where they need to reach the workers, firms, and organisations. Some countries are now recognising the advantages of developing local skills ecosystems and therefore integrating the local implementation into policies and programmes—but this focus is more often stated in the most advanced countries.

Developing the skills to transition to a green growth economy presents a useful example because these strategies for local skill development can be separated from the higher dimensions of national level policy. On a national level, the focus is on setting the right prices and guiding the direction of investment (OECD 2009), but on the local level it is on training and job placement in a changing environment (Martinez-Fernandez, Hinojosa, and Miranda 2010). It is crucial to establish national strategic policy related to sustainable development and climate change. Without such strategic direction and investment, and without the need to adjust to the most appropriate prices, small and medium-sized enterprises tend to hold back on greening activity, reporting that they do not know what to do or how to proceed (OECD 2012). Any initiative to provide skills for green jobs will involve multiple stakeholders in establishing plans for industry development and skills development—which are essential to ensure that the demand for and supply of new green skills are balanced and strategically timed. Skills are wasted if people are trained before industry is ready to employ them—a situation that could lead them to migrate elsewhere.

At the level of local training, collaboration and flexibility are critical. As in other skills development, green skill development must add meaningful value to the workforce’s capacity, and it seems to work best in a regional/cluster approach that fosters collaboration amongst multiple stakeholders. Investment is less effective when skills are provided in an isolated policy silo; facilitating skills and training ecosystems at the local level provides an invisible skills infrastructure that largely reaches stakeholders in connected activities to build capacities in human capital.

To create strategies for skills development, it is vital to manage the policy silos at two levels: horizontal coordination between policy departments; and vertical integration across the supra-national, national, and sub-regional levels. The case discussed in this article, of donors providing for climate-related aid, clearly shows that provision for skills development is still lagging significantly behind more traditional ways to promote growth and development in Asia. Strategies need to encourage networks and partnerships in creating healthy skill ecosystems.

Overall, cooperative skills development is required where networks or partnerships are voluntary, for example the FormaPlus in Montreal, a voluntary regional grouping of SMEs that share management and skills development services and provide customised activities to support their business strategy: needs assessment regarding skills development and brokerage services to select the most appropriate resources within the regional ecosystem, along with training and follow-up.

The importance of skills ecosystems cannot be underestimated where regionally-based networks and partnerships are established and cultivated around the principle of workforce development. These networks can have a long-lasting effect in encouraging the regional and industry-specific actors who bring together public and private training providers, employers, industry representatives, local and regional government agencies, and community representatives. Governments play a critical role in acting as catalysts, providing appropriate policy contexts and support in the form of resources, infrastructure, and institutional frameworks to establish and operate these networks.