National Emergency on Skills Development in Pakistan

Investment in skills development of its youth is inextricably linked to Pakistan’s economic aspirations. The case is unambiguously clear, and the political leadership cannot afford any ambivalence about it. Here are a few facts that will help to grapple with the enormity of the problem and dangers of inaction.

About 60% of our population is below 30 years of age. More than half of this is youth population between the ages of 16 and 29 years. In terms of numbers, the size of youth is about 65 million. This is the youth pool available for work as national labor laws allow 16-year old’s to engage in non-hazardous work. Now let’s take a quick look at their ability to contribute to the workforce. Only 35% of the children that finish primary school are getting enrolled in middle school. That means that about 42 million young men and women will have either primary education or below when they reach working age. Similarly, only 23% will either finish or drop out before matric. That’s another 15 million youth. In total, 57 million of our working age youth is matric and below. A large proportion of them are from public schools. Given the below standard learning outcomes of public schools, 45 million of our young men and women that are currently part of the workforce, have very poor literacy and numeracy skills. The problem is compounding every year where 2 million more youth are reaching working age with the same credentials.

The problem doesn’t end here. Most of the 12% youth entering tertiary education is creating another set of problems. With poor learning outcomes in secondary education, these young men and women are getting low value bachelors and master degrees from below-standard public and private colleges; now ubiquitous in large and small cities alike. Ideally, these were candidates for technical and vocational institutes and could have become great technicians and employed across industry. Now they carry bachelors and master degrees, either unemployed or chasing menial government jobs. They fall in the category of unemployable: no skills to contribute to the private companies and too ‘cool’ to be trained in technical and vocational trades.

Let’s turn to our economic aspirations: a thriving knowledge economy creating high value jobs; booming exports of high value-add products and services; and high levels of growth in power, manufacturing, transportation and logistics sectors from the dividends of CPEC. Take the export sector as an example. Businesses have started to automate their manufacturing in order to stay globally competitive, whether it is value added textiles, sports goods and sports gear, surgical or healthcare products. Hundreds of thousands of unskilled workers are losing jobs as unskilled tasks are wiped out by automation: exporters will need trained skilled workers to run machines. The CPEC related investments will primarily flow in two areas: infrastructure including power generation and distribution, and manufacturing across industrial zones in Pakistan. These ventures will either be with Chinese as joint venture partners or Pakistani businesses competing with their Chinese counterparts. Any which way, they will have to be highly efficient operations to make economic sense. Again, hundreds of thousands of skilled Pakistani workers will be needed to run these operations.

Now the dilemma: our supply side is millions of low-educated, unskilled youth. The demand side requires millions of skilled workers that Pakistan needs as fuel to fire its economic aspirations. We are not ready. The emerging scenarios will be i) businesses will be looking for skilled staff but will not find them, ii) hundreds of thousands of unskilled youth will be unemployed with no options for employment, iii) it will be uneconomical for the industry to train millions of unskilled youth at its expense, iv) the existing public-sector run technical and vocational infrastructure is woefully inadequate and antiquated to deliver the skills needed. We need to get out of this conundrum and fast.

Urgent and radical reforms are needed to fix our technical and vocational education and training (TVET) system. It isn’t rocket science. We have plenty of case studies to learn from, starting with the gold standard systems of Germany and Australia to Singapore, China, India, Philippines, Malaysia and many others. Firstly, the private sector must be incentivized to enter the TVET sector and invest in opening skills training institutes across Pakistan. The federal and provincial governments will never have the resources to make the capital investments needed to make TVET institutes pervasive across the country. Secondly, industry should receive fiscal concessions for investing in skills development. This investment can come in the form of establishment of industry specific institutes or funding the training of youth in TVET sector institutes. Industry engagement is vital because industry employs the youth. Its oversight will ensure that trainings are offered for which there are jobs in the market and the content of the training is in line with the industry needs. More than 60 countries impose payroll tax on companies ranging from 0.5-3%. Others make training investments by companies’ tax deductible. Thirdly, government funding of skills development must be linked to results rather than inputs. The current funding model invests in buildings and other fixed costs regardless of the relevance, efficiency and utilization levels of operations. Governments should only pay against key results, including capacity-to-enrollment ratio, enrollment-to-completion ratio and completion-to-income generation ratio. Fourthly, the structure of the TVET sector needs major overhauling and remodeling. Most federal and provincial government agencies overlap and duplicate functions of standards-setting, certification, testing and registration. Their governance, structures, systems and resource capacities are outdated and cannot guide us in our new skills development journey. Lastly, the higher education system needs to be more selective in terms of its standards and criteria. Most of the youth needs to be guided into the TVET system so Pakistan can produce more technicians to keep our economic machine running. TVET system, however, must have pathways to higher education for the more ambitious young people.

We must declare a national emergency on skills development.

The writer is Jawad Khan, Chief Executive Officer of Punjab Skills Development Fund.