Human Resource Landscape in Mainland ASEAN

Human Resource landscape in mainland ASEAN National Library of Thailand Cataloging in Publication Data Sirima Bunnag. Human resource landscape in mainland ASEAN.-- Bangkok : Collaborating Centre for Labour Research Chulalangkorn University, 2020. 244 p. 1. Human capital. 2. Labor. I. Piti Srisangnam, jt.auth. II. Title. 331.11 ISBN 978-616-407-525-2 Copyright © 2020, by the Chulalongkorn Universith Press First Printing 2020 150 Copies and Print on Demand All rights reserved. Except for the quotation of short passages for the purpose of review. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photo copying recording, or otherwise, without prior written permission of the publisher. Editorial Department : Faculty Economics, Chulaongkorn University Proofreader : Sirima Bunnag and Piti Srisangnam Artwork and Cover : Somsak Toomtong Printed by : Chulalongkorn University Printing House Tel. 0-2218-3562-3 www.cupress.chula.ac.th

Contents Page Preface 1 - 23 Acknowledgement 24 - 77 Introduction 78 - 102 Sirima Bunnag 103 - 129 Part I: Human Resource Landscape in Mainland ASEAN 130 - 162 163 - 178 1. Labour Force and Labour Market in Cambodia: Facts, Challenges and Policy Actions 179 - 206 Somean Kuoch and Sovannroeun Samreth 207 - 227 2. Human Resource and Labor Economic Landscape in Lao PDR 228 - 235 Thantavanh Manolom 3. The Dynamic Economic Development of Myanmar: The Role of Private Human Resource Training Lin Kyaw Tun and Kyaw Min Han 4. Human Resource and Labor Economic Landscape in Vietnam Vo Xuan Vinh 5. Human Resources Landscape in Thailand: Development and Policy Actions Sirima Bunnag 6. Labor Movement in Mainland ASEAN: From Agreements to Implementations Piti Srisangnam and Wasutadon Nakaviroj Part II: Quantitative Analysis Approach 7. Impact of Japan’s ODA on CLMV’s Growth and Trade Kitti Limskul and Tran Van Hoa 8. Emigrant’s Remittances, Dutch Disease and Capital Accumulation in Mekong Countries Hiroyuki Taguchi and Ni Lar Part III: 9. Conclusion and Policy Recommendation Piti Srisangnam



Preface There is no doubt that human resource is among the important factors for economic growth and development, especially to countries that are identified as factors- driven economy. In mainland ASEAN, workforce is inevitably the major factor of economic growth of the countries as have been shown in many reports such for example the world competitiveness report. Economic growth of countries in mainland ASEAN (Cambodia, Lao PDR, Myanmar, Thailand, and Vietnam) have been classified as factor- driven economies where factors such as workforce had played major contributions to economic growth. It is widely known that workforce is the part of human resource and population of each individual country and is one of the major factor in production process. The importance of human resource can be seen in the Sustainable Development Goals (SDGs), which basically cover all areas of human development.



Acknowledgment ASEAN Study Center of Chulalongkorn University has granted the budget to support the research project on Human Resource Landscape in Mainland ASEAN and Collaborating Centre for Labour Research, Chulalongkorn University (CU-ColLaR) supports the budget funded by the Ratchadapisek Sompoch Endowment Fund (2020), Chulalongkorn University (763008) for the publication. Contributors of the research project are from Cambodia, Lao PDR, Myanmar, Vietnam, and Thailand as the group to provide facts of information about Human Resource in the area, and contributors from Japan to provide quantitative analysis and set up the database that could be used for further research projects.



1 1 Labour Force and Labour Market in Cambodia: Facts, Challenges and Policy Actions Somean Kuoch1 and Sovannroeun Samreth2 1.
Introduction Since gaining independence from France in 1953, Cambodia has experienced various socioeconomic and political changes. As a newly independent country, it enjoyed peace and socio-economic progress during the 1950s and 1960s. However, after a coup in 1970, Cambodia fell into a civil war that lasted for about three decades. During the Pol Pot regime between 1975 and 1979, the Cambodian population decreased by about one third due to starvation, diseases and genocide. The regime was overthrown in 1979, and Cambodia became a socialist country with a planned economic system that lasted through the 1980s. After the Paris Peace Accord was signed in 1991, Cambodia held its first-ever general election in 1993 under the supervision of the United Nations Transitional Authority in Cambodia (UNTAC). Since then, it has become a constitutional monarchic country with a multi-party democratic and market economic system. Through the 1990s, 2000s and into the 2010s, as an effort to rebuild the country and enhance economic growth and development, the Cambodian government has adopted various socio-economic plans and policies, such as Socio-Economic Rehabilitation Plan in 1991, the Triangular Strategy in 1998, the Rectangular Strategy Phase I in 2004, the Rectangular Strategy Phase II in 2008 and the Rectangular Strategy Phase III in 2013, among others. The birth of the new government in 1993 after the first general election ended economic sanctions that had been placed on Cambodia since 1979 and this end, enhanced by active open economic policies adopted by the government, has led to remarkable inflows of both foreign aid and foreign direct investment (FDI) into Cambodia (Hang, 2009). Notable events during the 1990s for Cambodia include the end of its civil war in 1998 and its accession to Association of Southeast Asian Nations (ASEAN) in 1999. Cambodia’s economic performance during this decade, although it was affected by negative factors such as a violent political conflict and Asian financial crisis in 1997, managed to achieve an average growth rate of GDP per capita around 4.2%, according to World Bank (2017). The growth performance during this time was enhanced by foreign aid and FDI inflows as indicated by Hang (2009). The 2000s was a period of more political stability for Cambodia after the full end of the civil war in 1998. Enhanced by more FDI inflows, the average growth rate of GDP per capita between 2000 and 2009 was around 6.5% (World Bank, 2017). Although Cambodia experienced a negative growth rate in 2009 due to the global financial crisis, its economic performance rapidly recovered, and the average growth rate of GDP per 1 National Employment Agency, Cambodia. 2 Graduate School of Humanities and Social Sciences, Saitama University, Japan and corresponding author (Email:[email protected])

2 capita between 2010 and 2016 was around 5.4%. Figure 1 illustrates the growth rate of GDP per capita and inflation rate in Cambodia between 1994 and 2016. As seen in the figure, both the GDP per capita growth rate and inflation rate fluctuated quite a bit throughout this period. But the period averages of the former and the latter are around 5.5% and 3.5%, respectively. These records generally imply good economic performance with a stable macroeconomic environment. Consequently, in 2015, Cambodia has moved from a low-income status to a lower middle-income status defined by the World Bank. Figure 1: Growth Rate of GDP per Capita and Inflation Rate in Source: World Development Indicators, Word Bank (2017). With this vibrant performance of economic growth, dynamic changes in the economic structure and the labour market landscape in Cambodia were also remarkable. The decrease of agricultural share and the increase of industrial share in the Cambodian economy have been apparent since the 1990s, although the garment sector still accounts for a large share of the industrial sector. Figure 2 presents the value added shares of each economic sector in 1996, 2006 and 2016. From the figure, it can be seen that the share of the industrial sector in the GDP doubled between 1996 and 2016, while the share of the agriculture decreased significantly over the same period. Along with this achievement of economic growth and development, a dynamic change in the labour landscape is also observed. Cambodia experienced a baby boom in the 1980s after the fall of the Khmer Rouge regime. The share of population under the age of 15 was 45% of the total population in the early 1990s. The share of the population between the ages of 15 and 64 in 2016 was around 64% of the total population, based on World Bank (2017). There is no doubt that this abundance in the working age population is playing an important role in supplying the labour force for the Cambodian economy. From the same source of data, the decrease in the share of employment in the agricultural sector in total employment went from about 77% to about 54% between 1997 and 2010, while the share of employment in the industrial sector increased from less than 5% to about 16% over the same period. It is evident that the employment structure in Cambodia has evolved toward a more industry-based pattern with the economic growth and development over the 1990s-2010s.

3 Figure 2: The Value-Added Shares of Agriculture, Industry and Services in Cambodia, 1996, 2006 and 2016 Source: World Development Indicators, Word Bank (2017). As mentioned above, the abundance of a young labour force is one of the factors that have contributed to economic growth and development in Cambodia over recent decades. At the same time, this good economic performance has also played an important role in job creation for a large share of the young population. However, the labour force and labour market in Cambodia are not without challenges and issues, as discussed in various studies. For example, based on the employer skills need survey conducted in Cambodia by the National Employment Agency (NEA), Bruni et al. (2013) and Kuoch (2015) described the issues of skills shortages and skills gaps in the Cambodian labour market. They also discussed the reasons behind those issues. Using a school-to-work transition survey, Kanol et al. (2013) discussed the issues of youth employment in Cambodia and indicated a mismatch between education and skills demand in the labour market, among other issues. NIS and ILO (2013) provided detailed statistics and discussed the child labour issue in Cambodia. Related to this issue, Phann et al. (2014) provided an analysis on the relationship between landholding and child labour in Cambodia. As a contribution to the literature, the current study examines the labour force and labour market in Cambodia over the 1990s-2010s. Specifically, it illustrates the landscape of the labour force and employment and the dynamics of the labour market in Cambodia. The discussion of potential challenges and policy actions on employment and the labour market is also provided. The remaining part of this paper is structured as follows. Section 2 presents the potential labour supply and labour demand in Cambodia. Specifically, the demographic trends, labour force, employment and unemployment are explained and discussed. Section 3 explains the labour migration in Cambodia. In this section, both domestic and international labour migrations are presented and discussed. Section 4 introduces the policy actions and reforms on employment and the labour market adopted by the Cambodian government. Within the availability of data and information, the discussion on the policy outcomes is provided to some extent. Section 5 concludes this paper.

4 2.
Labour Force and Employment 2.1
Demographic Trend Before examining the labour force and employment situation in Cambodia, it is important to understand its demographic trends. Table 1 summarizes the basic statistics of the Cambodian population. During the Khmer Rouge regime between 1975 and 1979, about one third of the Cambodian population died from starvation, diseases and massacre. Consequently, the total population of Cambodia was around 6.7 million in 1980, as indicated in the table. This number is smaller than the population size from the early 1970s.3 However, high population growth rates and high fertility rates (number of births per woman) were observed especially during the 1980s and 1990s. These decades were a baby boom period in Cambodia. Specifically, as illustrated in Table 1, the fertility rates in 1980 and 1990 were 5.87 and 5.60, respectively. The population growth rate in 1990 was 3.2%, and it would take only about two decades for the population to double in size. Since the second half of the 1990s, both the fertility rate and population growth rate started to decrease. However, the population growth rate was still as high as 1.6% in 2016. As a result, the Cambodian population now is approximately 16 million, and about 51% of that are women. Although the share of the rural population has fallen since 1990 due to economic growth and development, it is still high. The rural population share was about 79.1% in 2016. This rural population rate is very high given the fact that the average rate for developing countries as a whole was about 51% in that same year (World Bank, 2017). Table 1: Basic Statistics of the Cambodian Population Year Population, Population, Rural population Population Fertility rate, total (1,000) female (% of total growth total (births (% of total per woman) population) population) (annual %) 5.9 1980 6,692.1 53.0% 90.1% -1.1% 5.6 3.8 1990 8,973.3 51.7% 84.5% 3.2% 2.9 2.6a 2000 12,152.4 51.4% 81.4% 2.2% 2010 14,308.7 51.3% 80.2% 1.5% 2016 15,762.4 51.2% 79.1% 1.6% Note: a data in 2015 Source: World Development Indicators, World Bank (2017). The population pyramids in Figure 3 illustrate the population structure by age and gender in Cambodia in 1990 and 2016. The figure shows that, in 1990, the population under age 10 accounts for a larger share than other age groups in the population structure. Specifically, the share was about 35%. This age group represents those born during the baby boom decade of the 1980s. For the most recent pattern in 2016, the figure indicates that the population under age 35 accounts for the very large share among other age groups in the Cambodian population. Specifically, the share of population under age 35 accounts for about 70% of the total population in 2016. This young and dynamic population can have various socio-economic consequences. It can be a good resource or a burden for Cambodia, depending on how they can be 3 Additionally, many people fled the country after the civil war occurred in 1970.

5 transformed into good human capital for the country’s development. For gender structure, in general, the total female population size is slightly larger than that of the male population. The share of female population was around 51% of the total population in 2016. Figure 3: Population Structure by Age and Gender in Cambodia, 1990 2016 Source: World Development Indicators, Word Bank (2017) 2.2 Labour Force As discussed above, Cambodia has a young population, with the share of the population under age 35 accounting for about 70% of the total population in 2016. This can imply an abundance of available labour force for the economy. It is common to consider a country’s population aged between 15 and 64 as the working age population. Table 2 presents the population size and the population share by age structure. From the table, we can see that the share of working age population (population ages 15-64) increased from 52.8% in 1990 to 64.3% in 2016. This is an increase of more than two times in absolute size from about 4.7 million in 1990 to about 10.1 million in 2016. By gender, females account for more than half of this working age population. In 2016, the female share of the general population was about 51.7%. Compared to the neighboring countries, the total share of working age population in Cambodia is lower than that of Thailand and Vietnam, according to World Bank (2017). But, given the fact that Cambodia has a younger population and a higher total fertility rate, it is reasonable to anticipate that Cambodia will have a higher share of working age population in the future. Actually, the share of population aged between 15 and 64 in Thailand has shown a decreasing trend since 2013. This population group decreased slightly from 72.0% in 2013 to 71.7% in 2016. Vietnam is also experiencing a similar trend.

6 Table 2: Population Size and Population Share by Age Structure in Cambodia Population Size (1,000) 1990 2000 2010 2016 4,768.6 4,948.7 Population ages 0-14 3,973.3 5,055.0 9,006.0 10,142.5 Population ages 15-64 4,739.8 6,723.0 534.1 671.2 2010 2016 Population ages 65 and older 260.3 374.4 33.3% 31.4% 62.9% 64.3% Population Share (% of total) 1990 2000 3.7% 4.3% Share of population ages 0-14 44.3% 41.6% Share of population ages 15-64 52.8% 55.3% Share of population aged 65 and older 2.9% 3.1% Source: World Development Indicators, World Bank (2017). Table 3 presents the labour force statistics for Cambodia. Labour force contains the population aged 15 and older who supply labour for the production of goods and services. It contains not only people who are currently employed, but also those who are unemployed but seeking jobs. First-time job seekers are included in labour force too. Table 3 indicates that the total number of labour force in Cambodia had increased more than two times from about 4 million in 1990 to nearly 9 million in 2016. They represented about 80% of the population aged 15 and older in both years. Although the shares of female labour force in 1990, 2000 and 2010 were slightly higher than 50%, this share dropped to less than 50% in 2016. From the table, it is also worth noting that the labour participation rate of females is fairly lower than that of males. In 2016, the female labour participation rate was 75.6%, while the male participation rate was 86.8%. With a great effort from the government, in general, Cambodian education has improved significantly over the last few decades. However, as pointed out by Kuoch (2015), the lack of infrastructure, quality issues, etc. are still main challenges for Cambodian education. Kuoch (2015) argued that this has impacts on the quality of the labour force which, as a result, is considered to have low education and low skills. This is also obvious from the NIS (2016) data, which indicates that 46% of the population aged between 15 and 64 (working-age population) has no education or experienced primary school but did not complete it in 2015. Moreover, only 5.6% of this age group population attained post-secondary education. This implies that improving education and skills of the labour force is an important issue for Cambodia.

7 Table 3: Basic Statistics of the Labour Force in Cambodia Labour Force 1990 2000 2010 2016 8,754.0 Labour force, total (1,000) 4,009.7 5,762.5 8,102.4 48.7% Labour force, female 51.2% 51.1% 50.4% 81.0% (% of total labour force) 75.6% Labour force participation rate, total 80.2% 81.2% 84.9% (% of total population ages 15+) 86.8% Labour force participation rate, female 77.1% 78.4% 81.6% 87.0% (% of female population ages 15+) 70.7% Labour force participation rate, male 83.7% 84.3% 88.6% (% of male population ages 15+) Ratio of female to male labour force 92.1% 93.0% 92.1% participation rate Labour force participation rate for 71.8% 73.4% 78.6% ages 15-24, total Source: World Development Indicators, World Bank (2017). 2.2
Employment From Tables 2 and 3 in the previous subsections, it can be seen that the working-age population exceeds 10 million, while the number of labour force or labour participation is around 8.7 million in 2016. This indicates a labour participation rate of about 81%. These figures can be regarded as the potential labour supply in Cambodia. To illustrate it from the demand side, Table 4 presents the basic statistics of employment and Table 5 illustrates the employment by sector and gender in Cambodia. In Table 4, it can be seen that the total number of the employed population is around 8.7 million, accounting for about 81% of the population age 15 and above in 2016. In terms of percentage, the gap between female and male employment increased between the years 2000 and 2016, and it was quite large in 2016. Table 5 shows, in general, the significant decrease in the employment share in the agricultural sector and a remarkable increase in the employment shares in both industrial and services sectors. This tendency is obvious for both female and male employment. However, the agricultural sector is still employing the largest share of the Cambodian labour force in 2015. Thus, there is no doubt that the development of the agricultural sector is very important for Cambodia, as it is also seen in socio- economic development policies such as the “Rectangular Strategy” adopted by the government. NIS (2016) also provides data on employment by occupation. In general, it illustrates the concentration of employment in jobs that use relatively low skills. Specifically, the shares of employment in services and sales, skilled agricultural, forestry and fishery and craft and related jobs account for nearly 80% of the total employment, while the shares of employment in managers and professionals account for a very small percentage (NIS, 2016, p. 55).

8 Table 4: Basic Statistics of Employment in Cambodia Employment 2000 2010 2016 8730.9 Employed population, total number (1,000) 5618.4 8074.0 75.4% 86.6% Employment to population ratio, age 15+, female (%) 76.9% 81.4% 80.7% Employment to population ratio, age 15+, male (%) 81.7% 88.2% Employment to population ratio, age 15+, total (%) 79.2% 84.6% Source: World Development Indicator, World Bank (2017). Table 5: Employment by Sector and Gender in Cambodia Employment by Sector 1997 2010 2015 -Employment in agriculture (% of total employment) 77.1% 54.1% 41.5% -Employment in industry (% of total employment) 4.6% 16.2% 25.5% -Employment in services (% of total employment) 16.0% 29.6% 32.9% Female Employment by Sector 1997 2010 2015 -Employment in agriculture (% of female employment) 79.9% 55.4% 43.9% -Employment in industry (% of female employment) 3.8% 15.5% 24.8% -Employment in services (% of female employment) 14.0% 29.1% 31.2% Male Employment by Sector 1997 2010 2015 -Employment in agriculture (% of male employment) 74.0% 52.9% 39.4% -Employment in industry (% of male employment) 5.6% 17.0% 26.1% -Employment in services (% of male employment) 18.4% 30.1% 34.4% Source: World Development Indicators, World Bank (2017) and Cambodia Socio-Economic Survey 2015, NIS (2016), for 2015 data. 2.3
Unemployment The unemployment rate in Cambodia in 2016 was as low as 0.3%, as can be seen in Table 6. This record placed Cambodia as a country with very good performance in terms of low unemployment rate. However, this data, which is based on estimations by the International Labour Organization (ILO), should be interpreted with caution. The ILO’s definition of “employed” is very broad. From ILO (2013), “the employed includes people aged 15 and over who, during the reference week worked for one hour or more for pay, profit, commission or payment in kind, in a job or business or on a farm”. It is also important to note that a developing country like Cambodia has a very large share of people working in informal sectors, where the working conditions may not be very good and various efforts have to be made to improve them.

9 Table 6: Unemployment Rate in Cambodia Overall Unemployment Rate and by Gender 1991 2000 2010 2016 0.3% 0.3% Unemployment, total 0.5% 2.5% 0.3% 0.2% 0.4% 2.0% 0.4% 0.3% (% of total labour force) 0.6% 3.1% 2010 2016 Unemployment, female 0.5% 0.4% 0.4% 0.3% (% of female labour force) 0.7% 0.6% Unemployment, male (% of male labour force) Overall Youth Unemployment Rate and by Gender 1991 2000 Unemployment, youth total 0.7% 3.8% (% of total labour force ages 15-24) 0.5% 2.8% 1.0% 5.0% Unemployment, youth female (% of female labour force ages 15-24) Unemployment, youth male (% of male labour force ages 15-24) Source: World Development Indicators, World Bank (2017). 3.
Labour Migration 3.1
Domestic Migration The landscape of Cambodian domestic migration has emerged and transformed dynamically over the last three decades. Before 1997, a main cause of migration in Cambodia was due to civil wars and political instability (Maltoni, 2007; Chan, 2009). However, poverty and job opportunities became the main driving factors of migration, especially from rural to urban areas, over recent decades (Godfrey et al., 2001; Maltoni, 2007). The trend of migration has accelerated since 1998 due to the increase of economic activities such as construction, infrastructure development, the expansion of the garment sector and other service sectors in urban areas, particularly in Phnom Penh.4 Although the magnitude of domestic migration has been increasing with the vibrant economic growth and development, it is characterized as being at the early stage and a short-term strategy for risk copying that has been adopted by the rural population to face unexpected shocks, as argued by Maltoni (2007). Tables 7 and Table 8 indicate general statistics of the non-migrant and migrant populations by gender and region in 2008 and 2013. These tables show that 28.9% of the total population was migrants in 2013. This number increased by 2.4% points from the census in 2008. There is a small difference between the male and female data. In 2013, about 30% of the male population and about 27.9% of the female population were migrants. The share of migrants among the urban population is 49.4%. This is considerably higher than that of migrants among the rural population, which was only 23.3% in that same year. 4 The Cambodian government adopted various efforts in an attempt to completely end the civil war that had lasted for nearly three decades. As a result, those efforts have brought Cambodia political stability and peace throughout the country since 1998.

10 Table 7: Non-Migrant and Migrant Population in Cambodia by Region Non-Migrants Migrants
Number of % of total Number of % of total people (1,000) population people (1,000) population Cambodia 2008 9,843 73.5% 3,552 26.5% 2013 10,435 71.1% 4,242 28.9% Urban 2008 1,100 42.1% 1,514 57.9% 2013 1,592 50.6% 1,554 49.4% Rural 2008 8,744 81.1% 2,038 18.9% 2013 8,843 76.7% 2,687 23.3% Source: Cambodia Inter-Censal Population Survey 2013, NIS (2013). Table 8: Non-Migrant and Migrant Population in Cambodia by Gender and Region Male Female Non-migrants Migrants Non-migrants Migrants Number % of male Number % of male Number % of Number of % of of people population of people population of people female
(1,000) (1,000) (1,000) population people female (1,000) population Cambodia 2008 4,723 72.5% 1,793 27.5% 5,200 74.4% 1,760 25.6% 2013 4,984 70% 2,137 30% 5,451 72.1% 2,104 27.9% Urban 2008 538 42.8% 718 57.2% 562 41.4% 796 58.6% 2013 784 51.4% 743 48.6% 808 49.9% 811 50.1% Rural 2008 4,186 79.6% 1,075 20.4% 4,558 82.60% 963 17.4% 2013 4,200 75.1% 1,394 24.9% 4,643 78.2% 1,293 21.8% Source: Cambodia Inter-Censal Population Survey 2013, NIS (2013). Table 9 illustrates the destinations of domestic migration in 2008 and 2013. The table shows that, in 2013, 58.4% of all migrants moved from one rural area to another rural area, 24.5% from rural areas to urban areas, 12.0% from one urban area to another urban area and 5.1% from urban areas to rural areas. The scale of the migration from rural to urban areas slightly decreased in 2013 compared to 2008. However, rural to urban migration is still the dynamic phenomenon of domestic migration, which has been observed through the stages of industrialization and urbanization. In order to understand the total impacts of migration, thorough studies are needed, as rural-to-urban migration is thought to potentially contribute to the improvement of various aspects of migrant households. Such improvements include poverty reduction, health and education improvements of the household members, credit constraint relaxation, asset accumulation, investment capacity expansion, etc., particularly through remittances from the migrant workers to their families (CDRI, 2007; Maltoni, 2007; Chan, 2009; Luch, 2012).

11 Table 9: Destinations for Domestic Migration in Cambodia Migration Overall 2008 Female Overall 2013 Female (%) (%) (%) (%) Male Male (%) (%) Rural to rural 50.9% 53.3% 48.5% 58.4% 60.3% 56.5% Rural to urban 27.5% 25.6% 29.5% 24.5% 23.5% 25.5% Urban to rural 6.5% 6.8% 6.2% 5.1% 5.1% 5.1% Urban to urban 15.1% 14.4% 15.9% 12.0% 11.1% 12.9% Total 100% 100% 100% 100% 100% 100% Source: Cambodia Inter-Censal Population Survey 2013, NIS (2013). The factors driving domestic migration can be explained from various views. As explained in standard theories on labour mobilization, the labour surplus in rural areas and wage differences between the traditional sector in rural areas and the modern sector in urban areas can be used as an explanation (Lewis, 1954; Todaro, 1969; Harris and Todaro, 1970). In Cambodia, about 250,000 to 300,000 of the young age population reaches working age every year, as indicated by Tunon and Rim (2013). Most of them live in rural areas where the economic activities concentrate on agriculture. For them, migration is a chance to find better economic opportunities. This is a “push factor” for migration. In addition, the rapid expansion of the manufacturing sector, particularly the garment, textile and footwear industries, can also be considered as a factor drawing people from the traditional sector in rural areas to modern sectors in urban areas. This is called a “pull factor” for migration. According to NIS (2013), the purposes or reasons for domestic migration in Cambodia are very diverse, as shown in Table 10. The table shows that a family moving is the primary reason for migration and accounts for 42.2% of total migration, followed by marriage, which accounts for 21.8%. This can be explained by the shift in family patterns toward nuclear families over recent decades. The third main purpose of migration is the search for employment, which may be explained by the pull and push factors mentioned above. Maltoni (2007) classifies domestic migrants in Cambodia into three different types. The first type is seasonal migrants (i.e., construction workers and moto-taxi drivers) who come to the city during the dry season (off-harvest season). The second is medium-term migrants (i.e., garment factory workers) who migrate to the city based on the joint decision made in their family to earn additional income. They are likely to return home when their savings are sufficient to buy land or when they meet their future spouses. The third type is long-term migrants, such as beer girls or scavengers. Although the detailed information on these three types of migrants cannot be fully captured in the table, it is natural to consider that the purpose for these migrants is searching for job. It is worth noting that the majority of the migrant workers are unskilled or low skilled from poor households in rural areas. It is difficult for them to find a decent job in urban areas. In many cases, they are more likely to find jobs categorized as 3D jobs (i.e., dirty, dangerous and disliked), from which improving living standards and accumulating assets or savings is very difficult, as indicated by Maltoni (2007).

12 Table 10: Purposes/Reasons of Migration in Cambodia Purposes/Reasons Overall 2008 Female Overall 2013 Female (%) (%) (%) (%) Male Male (%) (%) Transfer of work place 9.2% 13.8% 4.5% 5.2% 6.8% 3.5% In search for employment 21.5% 24.2% 18.8% 13.2% 15.4% 10.9% Education 2.7% 3.5% 1.9% 1.4% 1.6% 1.2% Marriage 14.6% 18.6% 10.6% 21.8% 28.7% 14.8% Family moving 37.9% 27.3% 48.7% 42.2% 33.2% 51.3% 1.2% 1.3% 1.1% 1% 0.9% 1.1% Repatriation/return after displacement Natural Calamities 0.1% 0.1% 0.1% 0.2% 0.2% 0.2% Insecurity 1.9% 1.8% 2.1% 2.4% 2.2% 2.7% Orphaned 5.6% 5.2% 6.4% 10.2% 8.5% 11.9% Lost land/home 0.4% 0.4% 0.3% 0.2% 0.2% 0.2% Visiting only 3.7% 2.7% 4.7% 1.2% 1.2% 1.2% Other 1% 1.2% 0.8% 1% 1% 1% Total 100% 100% 100% 100% 100% 100% Number of migrants (1000)* 3,538.1 1,785.5 1,752.6 4,241.7 2,137.2 2,104.5 Note: * Migrants here exclude those whose information on migration purposes is not available. Source: Cambodia Inter-Censal Population Survey 2013, NIS (2013). In general, the inflows of the labour force from rural areas can be good resources for enhancing growth and development in Cambodia. But, there is need to bear in mind that if the labour market cannot create sufficient jobs to accommodate the inflows or if the Cambodian economy continues to be mainly based on a small number of sectors, there may not be sufficient jobs for the migrants and the unemployment issues would lead to various political and socio-economic consequences for Cambodia. 3.2
International Migration In Cambodia, about 250,000 to 300,000 people enter the labour force every year, as indicated by Tunon and Rim (2013). With limited job opportunities within Cambodia and more attractive wages offered abroad, many Cambodians choose to migrate to foreign countries to seek better jobs. As is widely known, this cross-border migration can help improve the living standards of the migrant workers and their families at home, lifting them from poverty. It is estimated that a much higher number of Cambodian migrant workers move across the borders irregularly than regularly. Due to the porous borders and seasonal migration movements, it is difficult to obtain accurate data on the number of migrants. The World Bank estimated that there were 350 thousand Cambodian workers migrating abroad for employment in 2010. 5 However, it is believed that the actual number is likely much higher than that, as in 5 Migration and Remittances Fact Book, the World Bank. Available at: http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934- 1199807908806/Cambodia.pdf (accessed on July 01, 2017).

13 Thailand alone there were approximately 700,000 Cambodian migrants registered with the Thai authorities as undocumented migrants (Ministry of Labour and Vocational Training, MoLVT, 2014).6 Cambodia is considered a latecomer to the phenomenon of international migration, as indicated by Chan (2009) and Hing et al. (2011a). In the past, international migration has taken place along the Thai border in the form of refugees due to civil war and political instability. However, Luch (2012) argued that the trend has shifted to involve voluntary migration to countries along the borders and to other distant countries. Moreover, other factors such as poverty, indebtedness, different wages, increased demand for low-skilled labour in destination countries, natural disasters, limited domestic job opportunities and better communication and infrastructure have also contributed to cross-border migration (Maltoni, 2007; Chan, 2009; Hing et al., 2011a; Luch, 2012). Although the empirical evidence examining the determinant factors of cross-border migration in Cambodia is still limited, Dickson and Koenig (2016) indicated that looking for better jobs/income and the lack of domestic employment can be considered the main reasons for Cambodian workers migrating to Thailand. They also found that financial indebtedness plays an important role leading to cross-border migration.7 Moreover, they highlighted that a key determinant factor for Cambodian workers migrating to Thailand is the wage differences between the two countries. Actually, from a survey of 526 households in six villages in Cambodia, Hing et al. (2011b) showed that the earnings of domestic migrants working in construction and factories are not that different from those working in Thailand. This can imply that the choice of workers to engage in cross-border migration instead of domestic migration may be due to the limited employment information and job opportunities domestically, rather than the wage differences. Furthermore, as discussed in Luch (2012), it is worth noting that, for people living near the borders, cross-border migration is not different from domestic migration because they are more likely to cross borders for work and the cost of migration can be lower. Over recent decades, the economic development and demographic and labour market changes in more developed countries in the region, such as Thailand and Malaysia, have provided various opportunities for, especially, Cambodian unskilled and low-skilled workers to migrate for jobs in those countries. Table 11 presents the number of Cambodian workers migrating to major countries through legal channels. From the table, the total number of migrant workers increased from 3,636 in 2006 to 30,825 in 2016. The major destination for Cambodian migrant workers is Thailand, followed by the Republic of Korea. Cambodian workers in Thailand work in sectors such as construction, manufacturing, agriculture and other service sectors including entertainment, hospitality and domestic work, as indicated in Table 12. The Republic of Korea and Japan have become attractive destinations for Cambodian migrant workers as well over recent years, as can be seen in Table 11. Malaysia was a major destination country for Cambodian migrant workers from 2005 to 2010. But, after a 6 USAID (2016) estimated that there were about 940,000 Cambodian workers in Thailand. 7 In a survey with 919 migrants across the Cambodian provinces Banteay Meanchey, Siem Reap, Kampong Cham, Koh Kong, Phnom Penh, Prey Veng, Kampong Thom, Oddar Meanchey and Svay Rieng, USAID (2016) found that debt was a main factor determining their migration, and the main source of their borrowing is from microfinance institutions.

14 series of reports revealed the abuse and exploitation of migrant workers in Malaysia, the number of workers has dramatically decreased since a temporary restriction on sending domestic workers to Malaysia was imposed by the Cambodian government in 2011. Table 11: Cambodian Migrant Workers by Destination Countries, 2006-2016 Year Total Thailand Malaysia Republic of Japan Singapore 2006 3,636 445 1,690 Korea n.a. n.a. 1,501 2007 9,476 5,670 3,219 584 3 n.a. 2008 7,340 2,116 2,654 2,531 39 n.a. 2009 14,928 3,543 9,682 1,687 16 n.a. 2010 29,783 11,224 16,394 2,116 49 n.a. 2011 26,219 16,837 4,351 4,957 74 n.a. 2012 34,756 26,390 180 8,084 102 n.a. 2013 22,288 13,468 90 8,508 111 111 2014 24,427 15,839 470 7,410 518 190 2015 25,963 16,163 807 7,495 1,399 99 2016 30,825 21,682 123 7,371 1,562 87 2006-2016 229,641 133,377 39,660 52,244 3,873 487 Note: “n.a.” indicates that the option to send migrant workers to that country was not available at that time. Source: Cambodian Department of Employment and Manpower, MoLVT, printed versions. Table 12: Total Number of Returned Migrant Workers Registered by the NationalEmployment Agency (NEA) by Previous Occupation in Thailand Occupation Number of Returned Migrant Workers Percentage Construction 7,312 61.7% Manufacturing 1,656 15.2% Agriculture 978 8.3% Services 599 5.1% Others 1,149 9.7% Total 11,844 100% Source: NEA’s internal report, 2014. Cambodia is still facing various challenges and issues regarding international migration, however. Some of these challenges include the lack of a sound policy framework, regulation and capacity of the public institution, the lack of protection of migrant workers, issues relating to the reintegration of returned workers and more. Following the political changes in Thailand, in June 2014, about 250,000 Cambodian workers in Thailand voluntarily left or were forced to leave Thailand, according to ILO (2014). This imposed pressures on Cambodia and prompted the government to take various actions. Creating a sound policy and management framework for international labour migration is important for Cambodia to enhance its benefits. It is widely known that international labour migration helps reduce domestic unemployment pressure and generates income for countries of origin in the form of remittances. Moreover, the experiences and skills gained by migrant workers in the

15 destination countries can be good resources contributing to economic growth and development of the countries of origin in the form of technology and skills transfer. 4.
Policy Actions 4.1
Overview After the general election in 1993, during its first mandate of 1993-1998, the main priority of the Cambodian government was to restore peace and maintain stability. To enhance economic growth and development, it also focused on market- oriented economic policy. The average annual growth rate of the GDP per capita was about 3.1% over the period of 1994-1998, according to World Bank (2017). Economic growth was especially driven by the garment sector. During its second mandate of 1998-2003, the Cambodian government launched policies such as the “Triangular Strategy” in 1998 and the “Interim Poverty Reduction Strategy Paper” in 2000, aiming to maintain peace and stability and to achieve sustainable economic growth with equity and more poverty reduction. Between 1999 and 2003, Cambodia achieved a good record of economic performance with the average annual growth rate of GDP per capita of 6.6% (World Bank, 2017). The good performance of economic growth was negatively affected by the global financial crisis in 2008-2009. However, Cambodia recovered shortly after that and is now a rapidly growing country. The average annual growth rate of GDP per capita in Cambodia was around 6% between 2004 and 2016. Although a detailed study is needed to identify the factors enhancing economic growth in Cambodia over recent decades, the policies adopted by the government, such as various phases of the “Rectangular Strategy” that focused on growth, employment, equity and efficiency, have contributed to this good growth performance without doubt. The Cambodian government launched the “Industrial Development Policy (IDP) 2015-2025” in 2015, aiming at transforming and modernizing industrial structure from a labour-intensive structure to a skill-based one by 2025. This is to link Cambodian industry and economy with the global value chain and integrate them into regional production networks. The IDP 2015-2025 also aims to strengthen competitiveness and improve the productivity of domestic industries. It also sets a target to transform Cambodian industry into a technology-driven and knowledge-based one. Along with this industrial policy, the government also launched various employment and human development policies. For example, “The National Employment Policy (NEP) 2015-2025” and “The National Technical and Vocational Education and Training (TVET) Policy 2017-2025” were launched in 2015 and 2017, respectively. These policies aim to enhance skills and human resources development to meet the country’s development and market demands. 4.2
Job Creation and Development of the Labour Market As mentioned earlier, Cambodia has a large young population share. This demographic pattern imposes pressure on domestic employment and is one of the policy agenda priorities. In 2013, the Cambodian government adopted the “Rectangular Strategy Phase III”, in which the private sector development and employment were among the central themes. It is obvious that this policy views the private sector as the main engine for economic growth and employment generation. To achieve the goal, the government focused on strengthening the private sector and promoting investment and business through a conducive environment, improving

16 physical infrastructure, promoting industrial diversification, upgrading small and medium enterprises, strengthening the regulatory framework, expanding special economic zones and trade facilitation, expanding access to international markets and strengthening public-private sector partnership arrangements. Moreover, in the “Rectangular Strategy Phase III”, the government remarkably highlighted its commitment to developing the labour market through various policies and action plans. They include linking trade with improvements in labour conditions, the provision of vocational training to meet the market demand, the dissemination of labour market information, the expansion of public employment services, the development of labour’s statistical system and national qualification standards framework, strengthening the labour dispute resolution mechanism and implementation of labour laws. Taking this into account, “The National Strategic Development Plan 2014-2018” was launched in 2014, focusing on key areas such as improving working conditions and industrial relations between workers, employees and employers, the development of employment and the development of a national social security system. 4.3
Education and Skills/Technical Training Through the decades of the 1980s and the early 2000s where the baby boom was happening, the Cambodian school age population increased significantly.8 As a result, education and vocational training system in Cambodia had to face not only a challenge to restore infrastructure and human resources (i.e., educators) destroyed by the Pol Pot regime, but also an increase in potential demand for education. After the end of the Pol Pot regime in 1979, the Cambodian government made various efforts to rebuild the national education system. The provision of pre-school, primary school and non-formal education were among the every first effort. Since the 1980s, the Cambodian education system has been going through various reforms. According to the Law on Education adopted in 2007, the Cambodian education system includes general education and technical and vocational education and training (TVET). General education is classified into pre-school (ages 3 to 5); primary education, which is grades 1 to 6 (ages 6 to 11); lower-secondary education, which is grades 7 to 9 (ages 12 to 14); upper-secondary education, which is grades 10 to 12 (ages 15 to 17); and higher-education (ages 18 to 24). TVET can be in the formal and non-formal/informal forms. Formal one can be started after the compulsory education (after grade 9 of general education) (UNESCO, 2014), and the non-formal one can be started earlier. The vocational education and training program offers people who cannot complete the general education of grades 7 to 9 the opportunity to attend a bridging program. Those who graduate from trade training schools or centers can continue to a three- year TVET program that allows them to obtain three categories of technical and vocational certificates, depending on the number of years they complete: Technical and Vocational Certificate 1 after one year of completion, Technical and Vocational Certificate 2 after two years of completion and Technical and Vocational Certificate 3 after three years of completion. The students who complete grade 9 of the general education can pursue these technical and vocational certificates too. The students from 8 School age population in Cambodia refers to the population, aged between 6 and 24, supposed to be in the education system with age between 6 and 11 for primary education, between 12 and 14 for lower-secondary education, between 15 and 17 for upper-secondary education and between 18 and 24 for higher education.

17 the TVET system can pursue the higher education path parallel to that of the general education system in the same four levels: diploma for a 2-year study, bachelor in engineering for a 4-year study, post-graduate diploma for a 2-year study after the bachelor degree and doctoral degree for a 3-year study after the post-graduate diploma. The students who can pursue this higher-education path are those who obtained the Technical and Vocational Certificate 3 and the students with high school certificates via a bridging program. TVET in Cambodia is offered by public institutions, the private sector and NGOs. Based on the latest data from the Directorate General of TVET, the MoLVT, there were 165 institutions engaged in TVET activities in 2016. Among them, 106 institutions were registered with the MoLVT and 39 public institutions were directly affiliate with the MoLVT. They operated in 25 provinces across the country and offered programs from basic skills training to advanced degrees. Table 13 presents the data provided by the MoLVT. From the table, the total number of graduates from the TVET system was about 662,000 from 2008 to 2016 and 90.7% of them graduated from the short-course program (vocational certificate). The number of graduates from higher diploma and higher education programs (bachelor and master degrees) is still limited. In academic year 2015-2016, the share of students receiving higher diplomas was around 13.1%, and higher education was around 10.3% of the total graduates. Table 13: Number of Graduates from the TVET System in Cambodia Year Total AB C D E Total 2008-2009 Female 109 872 2,199 697 155,955 159,832 Total 24 196 52 86,567 87,433 2009-2010 Female 54 1,230 594 336 43,105 47,560 2,835 17 20,676 21,486 9 278 506 2010-2011 Total 136 1,476 6,192 1,034 80,440 89,278 2011-2012 Female 20 261 1,611 176 41,206 43,274 Total 47 2,111 3,451 116,997 124,486 Female 10 233 1,880 66,749 68,356 738 626 2012-2013 Total 97 2,836 3,619 2,219 69,015 77,786 2013-2014 Female 11 576 649 767 47,661 49,664 2014-2015 Total 48 5,386 77,248 87,509 2015-2016 Female 13 1,580 2,740 2,087 44,686 47,612 Total 31 3,910 718 615 35,160 43,195 Female 5 1,198 20,724 22,893 Total 2,565 1,529 22,640 32,445 Female 1 3,332 471 495 12,287 15,158 - 928 4,261 2,211 1,382 561 2008-2016 Total 523 21,153 27,862 11,993 600,560 662,091 Female 92 5,250 6,669 3,309 340,556 355,876 Note: A: Master of Technology/Business; B: Bachelor of Technology/Engineering/Business; C: Higher Diploma; D: Technical and Vocational Certificate 1, 2, 3; E: Vocational Certificate Source: The MoLVT’s internal reports and MoLVT (2017).

18 The introduction of the Cambodia Qualifications Framework (CQF) by the National Training Board (NTB) in 2012 has laid the foundation for unifying general education and TVET. The CQF structure is illustrated in Table 14. It provides standard information on the equivalency of the degrees and diplomas in TVET, classified into eight levels, and the degrees of higher education in the general education system. Table 14 also indicates that the students who obtained Technical and Vocational Certificate 3 can pursue higher education in the general education system. In addition to the CQF, the introduction of competency standards by the NTB for the fields of construction, mechanics, electronics, business and information and communications technology is another improvement of the Cambodian TVET system. Table 14: Cambodia Qualifications Framework (CQF) Level Technical and Vocational Education and Training Higher Education 8 Doctoral Degree of Technology/Business Education Doctor 7 Master of Technology/Business Education Master 6 Bachelor of Technology/Business Education Bachelor 5 Higher Diploma of Technology/Business Education Associate Degree 4 Technical and Vocational Certificate 3 3 Technical and Vocational Certificate 2 2 Technical and Vocational Certificate 1 1 Vocational Certificate Source: Cambodia Qualifications Framework, NTB (2012). In spite of much progress, the lack of a system linking non-formal/informal training with the formal training is still an important issue. Systems and frameworks that evaluate and recognize prior learning and practical experience do not exist. Proper quality assurance, accreditation and recognition systems have not been introduced. Most of the training curricula and modules are not competency-based and have been developed and designed with very little engagement from the industrial sector; hence, they are not responding to the demands of and not being recognized by employers. Although the Cambodian government has made various efforts to direct and manage the TVET sector, its management and administration are still very complicated. This needs to be improved. Turning to general education, as an attempt to enhance the universal right to basic quality education, the Cambodian government has implemented and reinforced compulsory education for nine years under the “education for all” framework with the launch of the “Education for All National Plan 2003-2015” in 2003. It is to ensure that all children and youth have an equal opportunity to access formal and informal basic education regardless of social status, geography, ethnicity, religion, gender and physical form. The programs, such as conditional cash transfer, fee subsidy and scholarship have also contributed to the improvement of education in Cambodia. According to UNESCO (2015), the primary net enrollment rate in Cambodia increased from 87.0% in 2000 to 94.5% in 2014, and the repetition rate decreased for all primary grades (grades 1 to 6), indicating improvements in the efficiency of primary education. It also indicates improvements in enrollment rates of females and a decrease in pupil-teacher and pupil-class ratio. The improvements may result in better education quality.

19 The Cambodian government also recognizes women as the backbone of Cambodian economy and society, as stated in the “Rectangular Strategy for Growth, Employment, Equity and Efficiency Phase III”. The Ministry of Women’s Affairs was established in 1997 to lead national mechanisms that promote and protect the rights of women and their families. For example, among others, the five-year strategic plan “the Neary Rattanak IV 2014-2018” launched in 2014 aims at ensuring that women are entitled to equal access to primary and reproductive healthcare. It also targets the increase in female enrollment in formal education through increasing scholarships, providing training and skills for women, enhancing access to economic resources and activities and promoting women to decision-making positions at all levels of the government. 4.4
Working Conditions and Industrial Relations The MoLVT reformed the labour inspection mechanism by combining labour inspections from different departments into a joint labour inspection team in order to reduce the number of audits and improve the quality, effectiveness and transparency of labour inspections (MoLVT, 2017). At the same time, the MoLVT has put more effort into on-site labour inspections. It has also improved the working conditions auditing mechanism by extending the Better Factories Cambodia (BFC) program and forming a joint task force to conduct regular audits in an attempt to enhance audit effectiveness. The MoLVT has extended cooperation with national and international development partners, in particular with the ILO, to improve the capacity of labour inspection officers. A labour dispute resolution mechanism has been focused by strengthening the capacity of the Arbitration Council and the Department of Labour Dispute in line with international standards and by improving the labour dispute mechanism, including creating the labour court. As a result, the number of labour inspections increased from 2,219 times in 2013 to 8,197 times in 2016, according to MoLVT (2017) and the MoLVT’s internal reports. The Cambodian government has also considered the minimum wage as a tool to protect workers against unduly low wages as well as a key to improve the industrial relations, particularly in the garment, footwear and textile industries. In line with the Minimum Wage Fixing Recommendation of the ILO, 1970 (No. 135) 9 and Cambodia’s Labour Law adopted in 1997, with a support of the ILO, the MoLVT has revised the criteria and mechanism for minimum wage adjustment. In 2015, seven social and economic criteria adopted as the criteria for minimum wage adjustment in the garment sector include (1) the needs of workers and their families, (2) the cost of living, (3) inflation, (4) labour productivity, (5) enterprises’ revenue and their ability to pay, (6) the impact on the competitiveness of Cambodia compared to other countries in the region, and (7) the impact on the labour market and employment. As a result, the minimum wage (excluding other fringe benefits) in the garment sector has increased from US$80 per month for 2013 to US$153 for 2017, and it will be raised to US$170 for 2018. The Cambodian government has also made various efforts to improve the legal framework related to working conditions, including the review and the adoption of the Labour Law, Social Security Law and the Law on Trade Union.10 9 This recommendation on fixing the minimum wage in developing countries was adopted by the ILO’s general conference in 1970. 10 Cambodia adopted its first Social Security Law in 2002. The Law on Trade Union was adopted

20 4.5
Employment The National Employment Agency (NEA) is the public institution in charge of expanding employment services to job seekers and providing information on job opportunities in the country and abroad to the public. It also provides counseling and support for worker recruitment. The NEA is responsible for developing a sound labour market information system, especially, through strengthening data collection, analysis and dissemination of labour statistics and information on education and technical and vocational training programs. It provides information on wages and on supply and demand of skills. From 2009 to 2016, about 83,000 jobseekers were registered with the NEA and 12,000 of them obtained jobs through the placement services, according to NEA’s internal reports. However, the number of Job Centers (Employment Services Centers) is still limited. Cambodia has only 11 Job Centers across the country’s 25 provinces. Cambodia launched the NEP 2015-2025 aiming at promoting decent work and improving outcomes in the labour market. In this regard, one of the underlying intentions of this policy is to bring together the current policies and institutions that matter to the labour market into a single coherent framework and to continue the development of relevant labour market institutions. The broad goals and objectives of the NEP are (1) to increase decent and productive employment opportunities, (2) to enhance skill and human resource development and (3) to enhance labour market governance. Moreover, various policies, strategies, plans and other important programs have been adopted by the Cambodian government. For example, in 2013 the government adopted the Policy on Labour Migration 2014-2018. This policy focuses on three main areas, which are (1) governance of labour migration, (2) protection and empowerment of migrant workers and (3) harnessing of migration for development. There are also programs initiated by the private sector and development partners, such as the International Organization of Migration (IOM) and the ILO in order to support the integration of returned migrant workers. For instance, the ILO helped the government set up the Migrant Resource Centers located in provinces with high level of migration in order to provide safe migration information, pre-departure orientation, etc. In 2014, the Human Resource Development Service of Korea and Employment Permit System Centre launched a special short-term training program for returned Cambodian workers who successfully completed labour contracts in Korea. The returnees can enroll in a six-week training on leadership, management, the Korean language, the English language and computer skills. Once they have completed the program, they have a chance of being recruited by Korean companies operating in Cambodia. in 2016.

21 4.6
National Social Security System The first national social security system of Cambodia was introduced in 1955 by Royal Decrees No.55 and No.306. Unfortunately, under the Khmer Rouge Regime (1975-79), this system was completely abolished. After the first national election in 1993, the Department of National Social Security was established. This department is in charge of the national social security system of the private sector. In 1997, the Labour Law was promulgated, followed by the Social Security Law in 2002. The Cambodian government issued a Sub Decree in 2007 to establish the National Social Security Fund (NSSF) to replace the function of the Department of National Social Security. In 2008, the NSSF launched the employment injury program which covered the private sector. According to MoLVT (2017) and the MoLVT’s internal reports, the number of enterprises registered for this program in 2009 was 983, covering 387,046 employees, and, by 2016, this number increased to 8,731 enterprises covering 1,136,271 employees. The government additionally introduced a health insurance program in 2016. By December 2016, 603 enterprises, covering around 600,831 employees, registered for this health insurance program. The government is also having a plan to expand the coverage of social protection to the pension program in the near future. 5.
Conclusion After a coup in 1970, Cambodia fell into a nearly three-decade civil war, during which it experienced the horrible Pol Pot regime between 1975 and 1979. The Paris Peace Accord in 1991 brought Cambodia its first general election in 1993 and its long-lasting civil war came to a full end in 1998. Over the 1990-2010s, as an effort to rebuild the country and enhance economic growth and development, the Cambodian government has adopted various socio-economic plans and policies. As a result, Cambodia managed to achieve remarkable economic growth since the 1990s, moving it from low-income status to lower middle-income status in 2015. Over this period, the agricultural share in the economy significantly decreased and the industrial share notably increased. Cambodia is a country with an abundance of a young labour force that has played an important role in the process of its growth and development. However, the labour force and labour market in Cambodia are also facing various challenges and issues, such as skills shortages and skills gaps and mismatches, among others. With a support of international organizations such as the ILO, Cambodia has adopted various policy actions and efforts in an attempt to address the challenges and issues its labour force and labour market are experiencing. Technical and vocational education and training programs provide various levels of skills development. To improve industrial relations and working conditions and to protect workers, legal frameworks such as the Labour Law, the Social Security Law, and the Law on Trade Union have been revised and adopted. The labour market information regarding wages and the supply and demand of skills have been delivered to the public in more effective ways through systems like the Job Centers established across the country. With the cooperation from the private sector and international organizations such as the IOM and the ILO, policy actions and efforts to address international labour migration have been adopted as well. Institutions such as the Migrant Resource Centers have also played an important role in providing safe migration information, pre-departure orientation, etc. for the migrant workers. However, although progress and improvements have been observed, in order to move to an upper level of industrialization and development and to be able to economically compete with other countries in the region, Cambodia needs to put more effort into improving its labour force quality and labour market environment.

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World Bank, 2017. World Development Indicators. World Bank, Washington DC

24 2 Human Resource and Labour Economic Landscape in the Lao PDR Thantavanh Manolom11, Ph.D. 1.
Introduction With a history of war and French rule the new Lao PDR formed in 1975 and proclaimed its independency. The Lao government had the mission to reach a united population that would overcome the different identities of the 49 diverse ethnic groups. In the construction of a socialist state the new government focused on human resources as a solution to social and economic issues ( Pholsena, 2006) . Human development ( HD) is about the real freedom ordinary citizens have to decide who to be, what to do, and how to live (UNDP, 2016). Human development is an integral part of fundamental human rights and the ultimate aim of sustainable and inclusive development. There are three key principles of HD: (1) People (focus on improving the lives people lead rather than assuming that economic growth will lead) ; ( 2) Opportunities ( give people more freedom to live lives they value by developing people’ s abilities and give them a chance to use to live a long, healthy and creative life); and (3) More choice (provide people with opportunities, not insisting that they make use of them) (Kumar et al., 2004; MPI & UNDP, 2017). Human Development Index (HDI) of the United Nations Development Programme (UNDP) show that Lao PDR is one of the least developed countries in the world even though it has slowly improved during the last decade. There has been significant progress made on the HDI, with the country’s HDI value rising from 0.340 in 1980 to 0.586 in 2015 (See Table 1). However, Lao PDR’s relative position in the world has suffered. On the global HDI ladder, Lao PDR ranked 138th of 187 countries in 2015 and 141st in 2014, from 139th in 2013 and 138th in 2012, which implies that other countries are doing better (See Table 2). Lao PDR’s HDI value, when discounted for inequality, falls to 0.427 in 2015, suggesting that there is avoidable inequality (See Table 3). Additionally, according to Table 4 found that among the nine ASEAN developing countries, Lao PDR ranked seventh, Thailand ranked second, and Vietnam ranked four, are among the most important regional trading and investment partners of Lao PDR, and Lao PDR’s global ranking is substantially lower than these two. This is a concern when seen from the perspective of both LDC graduation and full integration into the ASEAN Economic Community (AEC), since close economic partnerships work best only among equals. Lao PDR needs to shift its gear to fast-track progress on the HDI in order to achieve its smooth graduation objective and AEC integration (MPI & UNDP, 2017). 11 Research Fellow, Acting Director of Industry and Handicraft Policy Research Division, Economic Resaerch Institute for Industry and Trade (ERIIT), Ministry of Industry and Commerce, (MOIC), Lao PDR.

25 Table 1: Lao PDR’s HDI Trends based on Consistent Time Series Data (1980-2015) Year Life Expectancy Expected Years Mean Years GNI per HDI Capita Value at Birth of Schooling of Schooling (2011 PPP$) 1,105 0.340 1980 48.7 5.4 2.5 0.397 1990 53.6 6.7 3.1 1,616 0.425 1995 56.2 6.9 3.6 0.463 2000 58.9 8.0 3.9 1,902 0.503 2005 61.8 9.0 4.2 0.542 2010 64.4 9.9 4.6 2,244 0.554 2011 64.9 10.2 4.8 2,887 0.563 2012 65.3 10.4 5.0 0.573 2013 65.7 10.6 5.1 3,725 0.582 2014 66.2 10.8 5.2 0.586 2015 66.6 10.8 5.2 3,930 4,201 4,500 4,798 5,049 Source: MPI (2016); UNDP (2016). Table 2: Lao PDR’s HDI and Component Indicators for 2015 Relative to Selected Countries and Groups Countries HDI HDI Life Expected Mean GNI per Value Rank Expectancy Years of Years of Capita at Birth Schooling Schooling (PPP US$) Lao PDR 0.586 138 66.6 10.8 5.2 5,049 Cambodia 0.563 143 68.8 10.9 4.7 3,095 Papua New 0.516 154 62.8 9.9 4.3 2,712 Guinea East Asia and the 0.720 - 74.2 13.0 7.7 12,125 Pacific Medium HDI 0.631 - 68.6 11.5 6.6 6,281 Source: MPI (2016); UNDP (2016).

26 Table 3: Lao PDR’s IHDI for 2015 Relative to Selected Countries and Groups Countries IHDI Overall Human Inequality in Inequality Inequality Loss Inequality Life in in Income (%) Coefficient Expectancy at Education (%) Lao PDR 0.427 27.1 (%) Birth (%) (%) Cambodia 0.436 22.5 26.9 20.3 0.581 19.3 22.4 26.2 34.1 20.3 East Asia 19.7 27.3 and the 0.469 25.7 19.0 Pacific 11.2 18.3 27.4 25.5 Medium 22.6 33.7 20.1 HDI Source: UNDP (2016). Table 4: HDI of ASEAN Countries (2015) Country HDI (2015) ASEAN ranking Global ranking (2014) Cambodia 0.563 8 143 Indonesia 0.689 3 110 Lao PDR 0.586 7 141 Malaysia 0.783 1 62 Myanmar 0.556 9 148 Philippines 0.682 5 115 Thailand 0.740 2 93 Vietnam 0.683 4 116 Timor-Leste* 0.595 6 133 Note: * Timor-Leste is not a full member of ASEAN. It officially applied for membership on March 2011 and hopes to become a full member in 2017. Source: UNDP (2016); MPI & UNDP (2017). As mentioned, Lao PDR has made impressive progress in HD and poverty reduction. Lao PDR’s HDI value rose from 0.340 in 1980 to 0.586 in 2015. Regarding to the fifth of the Lao Expenditure and Consumption Survey (LECS 5), the poverty rate declined from 46 percent in 1993 to slightly over 23.2 percent in 2013, Lao PDR achieved the Millennium Development Goals (MDGs) target of reducing the poverty rate by half. The progress towards other MDGs targets has also been encouraging. Between 2003 and 2013, the literacy rate rose from about 75 percent to 83 percent. Net enrolment at the primary school level increased from around 84 percent in 2006 to about 98 percent in 2014 (nearly universal). Lao PDR is on track to meet the MDGs target of reducing the under-5 mortality rate, which has fallen from 146 in 2001 to 79 in 2009 and to 70 in 2015. Infant mortality dropped from 116 to 68 during the same

27 period. Maternal mortality has also fallen dramatically, from 796 in 1995 to 357 in 2009 and to 260 in 2015 (MPI, 2013; 2016). However, Lao PDR’s progress in poverty reduction and HD are uneven both across its regions and among its ethnic groups. Poverty and deprivation are concentrated in particular regions (usually remote and rural areas) inhabited by ethnic communities. After a secular decline until 2008, the poverty rate in the Southern region increased in 2013, and is 6 percent points higher than the national rate. The Northern region also has a higher poverty rate. Nearly half the population in Saravane and over 40 percent in Bokeo and Sekong live in poverty, in contrast to just 6 percent in the capital city. Poverty is markedly higher in rural areas, at 28.6 percent, compared with 10 percent in urban areas. This gap increased over the past five years as urban poverty fell at a faster pace. Importantly, the poverty issue is largely concentrated among minority (non-Lao-Tai) ethnic groups, the less educated and those who primarily depend on family farming or are unemployed that are all closed related to the HD of the Lao PDR. As a result, the level of HD is low in some regions and among non-Lao-Tai ethnic groups. The provincial HDI values range from 0.771 (Vientiane Capital) to 0.286 (Khammuane). At the bottom of the list are Phongsaly (North), Saravane (South) and Khammuane (Centre). In relative terms, Champasack’s HDI rank fell from 5 in 2003 to 9 in 2013, while Bokeo, Huaphanh and Khammuane lost more than five ranks during the same period as their progress on the HDI lagged behind others. Non-Lao-Tai minorities constitute two thirds of people without formal education. Net secondary enrolment in Lao PDR as a whole is almost 50 percent, but it is as low as 31 percent in Phongslay and Saravane, and as high as 82 percent in Vientiane Capital. There are also large gender disparities in both poverty and the level of HD. Less than 60 percent of women in poor households can read and write, compared with over 80 percent of males in poor households. Therefore, keeping the Lao PDR economic growth on a sustainable level and to develop human resources with relevant knowledge and abilities will help Lao PDR to reduce the poverty and to reach their future goal of leaving the list of LDC by the year of 2020 (Ministry of Education and Sport - MOES, 2000). The Government of Lao PDR (GOL) has developed a number of policies, plans, strategies and guidelines reports to achieve the goals for a national development. Among those which are related to human resource development in the Lao PDR include the National Education System Reform Strategy, the Education for All: National Plan of Action 2003-2015 and the Education and Sport Development Strategy 2010-2020 (UNESCO, 2005; MOES, 2016), the National Labour Development Strategy 2010-2020 (Ministry of Labour and Social Welfare - MLSW, 2016), the 8th Five-Year National Socio- Economic Development Plan (2016-2020), Human Resources Development Strategic Framework 2016-2025, Human Resources Development Action Plan 2016-2020 and the Laos’ 5th National Human Development Report (MPI, 2016; MPI & UNDP, 2017). In these policies, plans, strategies and guidelines reports have been set up in order to reach the goals for a better education system and labour management. Human resource development is a key aspect to keep the Lao PDR economic growth on a sustainable level and solve all above issues (MOES, 2016).

28 Human Resource Development ( HRD) is a broad concept that includes activities providing vital inputs to a growing economy. Because HRD enhances the productivity of people ( creating human and social capital) , a more equitable distribution of HRD outcomes both between and within countries contributes to poverty reduction, political stability, social cohesion, and national security. HRD also provides opportunities for ethnic groups, women, and other vulnerable segments to better manage negative externalities resulting from increased connectivity and mobility of people and goods. Finally, HRD contributes directly to human welfare and to broader poverty reduction. The main instruments of HRD are ( 1) effective and efficient investments in education, health, labour and migration, and social development that increase the levels and equitable distribution of human and social capital; and ( 2) national, regional, and international policies that promote their efficient and equitable. By assessing the current development of the Lao PDR economy, we find that many important positive trends in economic and social aspects have emerged, including more rapid economic growth, greater poverty reduction, improved education and HRD. Lao PDR has recorded annual average economic growth of 7 percent from 1996 to 2015. Gross National Product (GDP) per capita increased from US$ 319 in 2001 to US$ 1,857 in 2015. The poverty rate also decreased, from 33.5 percent in 2003 to 27.6 percent in 2008 and 23.2 percent in 2013. Life expectancy increased from 49 years in 1980 to 69.4 years in 2015. The adult literacy rate increased from 66 percent in 2010 to 81.3 percent in 2015. These trends clearly demonstrate human capital accumulations, which in turn will stimulate future growth. Otherwise, when looking in details in the Lao Civil Servant Skill Measurement Survey (LCSSMS, 2014) and regional labour market study (ADB, 2015a), the study found that there are many challenges of HRD and labour market in the Lao PDR; for example: women are still under-represented and relatively disadvantaged in the Lao PDR civil service. They are under-represented at all administrative levels, but particularly at the province level, where they account for only 36 percent of civil servants; the district-level civil servants are relatively disadvantaged compared to province-level or central-level civil servants. In addition, the demographic data for the Lao PDR indicate that it still has a rapidly growing labor force, although labor force participation rates have decreased sharply in recent years among the age group 15-24 due to large increases in school enrollment. The labor force data for the Lao PDR show that agriculture still accounts for two-thirds of all main jobs reported; the largest number of foreign skilled workers has traditionally come from Thailand. However, the numbers of Vietnamese and Chinese workers are believed to have increased rapidly in recent years; given the current quality of formal and vocational education and lack of personnel and resources in the education sector, employers indicated their belief that it will take many years before the education system in the Lao PDR can produce graduates that can substitute for foreign skilled workers. Since foreign skilled workers receive more compensation than their local counterparts, the main obstacle to employing more foreign skilled workers is their relatively high cost. Generally, only large firms in the Lao PDR can afford to hire foreign workers. Besides to their high cost, another important obstacle is the cost and time required to obtain the necessary work permit, which employers feel are needlessly high. Thus, the study on human resource and labour in the Lao PDR are still interesting and useful.

29 This study will take note of the importance of economic growth and expansions on trade and investment in the Lao PDR is characterized by their factor- driven economics. The main factor driving force for Laos’ national economies and development is the HRD that includes the supply of labour, represented by the working age population and labour quality improvement (MPI, 2016). Given this background, the study on this paper, author want to identify the current status and situations of the labour supply, labour demand, mismatching between demand and supply, and providing guidelines for the implementation of upcoming policies in relation to HRD and labour quality improvement in the Lao PDR. 2.
Supply Side Analysis: Human Resource Capital and Existing Policy 2.1 Human Resource Capital: Population and Labour 2.1.1 Population Size and Growth The total population of Lao PDR was found to be 6. 49 of which 3. 24 were females and 3.25 males. The annual population growth rate reduced from 2.08 percent ( 1995- 2005) to 1. 45 percent ( 2005- 2015) . The proportion of urban population increased by approximately 6 percentage points during the past 10 years, from 27. 1 percent in 2005 to 32.9 percent in 2015 (See Table 5). The rural population accounted for 67.1 percent of the nation’s overall total, of which 59.2 percent lived in rural areas with road access and 7. 9 percent without road access. Nationwide, the population density was 27 people per square kilometre. The densest part was Vientiane Capital where the population density was 209 people per square kilometre, nearly eight- fold higher than the national figure. Table 5: Proportion of Population by Urban-Rural (2005-2015) 2005 2015 Urban 27.1 32.9 Rural 72.8 67.1 Rural with roads access 51.5 59.2 Rural without roads access 21.3 7.9 Source: PHC (2015); MPI (2016).

30 Figure 1: Population Size in Millions Population Size in millions 7.000 5.622 6.492 6.000 2015 5.000 4.575 4.000 3.000 3.585 2.000 1985 1.000 0.000 1995 2005 Source: PHC (2015); MPI (2016). The 2015 PHC reported that Lao PDR’ s total population amounted to 6. 49 million. As shown in Figure 1, the population has nearly doubled from 3. 58 million in 1985, when the first census was conducted. About one million people have been added to the country’s population every decade (PHC, 2015). Otherwise, at its current population, the country remains one of the smallest in Southeast Asia- slightly bigger than Singapore, but less than half of neighbouring Cambodia. 2.1.2 Structure of Lao PDR’s Population The age pyramid of 2015 reveals the possibility of reaping such a demographic dividend. The bulge in the pyramid that corresponds to the young adult population points to the potential for a larger work force to contribute to robust economic growth. If fertility and mortality trends continue to improve, the relative size of the working population will continue to grow in the next few decades. With the appropriate investment, policies and good governance, the country could benefit from this demographic shift and be on the road to prosperity. As evident from the shape of the age pyramids in Figure 2, Laos has a youthful population that is most likely in the process of ageing, as indicators in Table 6 point out. Half of the population in 2015 was below 23. 5 years old, while the corresponding age in 2005 was 18. 5 years - an increase in median age by five years. The proportion of children aged less than 15 years had declined significantly from 39.44 to 32.04 percent, while the proportion of the elderly population increased, albeit slightly. The age group 15- 64 years experienced a gain in its share of the population from 56.68 percent in 2005 to 63.73 percent in 2015. Dependency ratio is an indicator of the economic burden for the care of dependents and is calculated by taking the ratio of the number of dependents to the number of working-age population. “Dependents” include the young (aged less than 15 years) and the elderly ( 65 years and over) . In 2015, the young dependency ratio was 50, down from 70 in 2005. This means every 100 working age people must provide for the needs of 50 children aged less than 15 years. The reduction in dependency ratio mirrors the prospect of reaping the demographic dividend. This means savings resulting from the reduced burden will pave the way for more investment in economic development. The old- age dependency ratio remained unchanged, seven elderly dependents for every 100 working population. These ratios are only rough indicators of economic burden, as not all working-age people actually work, while some “dependents” are actually in the workforce.

31 Table 6: Indicators of Age Structure (2005-2015) Proportion in age group 2005 2015 32.04 0-14 39.44 63.73 15-64 56.68 4.24 31.9 65 and over 3.87 23.5 10-24 34.3 50 7 Median Age 18.5 57 Economic Dependency Ratios Young-age dependency ratio 70 Old-age dependency ratio 7 Total dependency ratio 77 Source: PHC (2015); MPI (2016).

32 Figure 2: Age Pyramid of the Population (2005-2015) Age Pyramid of the Population 2005 Age Pyramid of the Population 2005 (Persons) (Percent %) Female Male Female Male unknown 489 171 unknown 0.02 0.01 480 100+ 0.03 0.02 100+ 936 982 95-99 0.05 0.04 1,964 90-94 0.10 0.07 95-99 1,393 4,631 85-89 0.20 0.17 10,402 80-84 0.43 0.37 90-94 2,781 17,964 75-79 0.68 0.64 27,652 70-74 1.13 85-89 5,697 65-69 1.46 0.99 38,289 60-64 1.95 1.37 80-84 12,180 50,006 55-59 2.33 1.79 62,691 50-54 3.23 2.24 75-79 19,208 45-49 4.02 86,770 40-44 4.73 3.10 70-74 31,927 113,869 35-39 5.86 4.07 132,335 30-34 6.50 4.73 65-69 41,251 25-29 7.74 5.87 164,415 20-24 9.26 6.30 60-64 55,008 176,515 15-19 11.47 7.54 10-14 13.30 9.07 55-59 65,640 211,279 5-9 13.12 11.56 253,926 0-4 12.38 13.99 50-54 91,210 323,729 13.54 391,78 12.55 45-49 113,298 379,137 351,559 40-44 133,532 35-39 165,362 30-34 183,480 25-29 218,330 20-24 261,371 15-19 323,540 10-14 375,371 5-9 370,071 0-4 349,356 600000 400000 200000 0 200000 400000 6000 20 10 0 10 20 Age Pyramid of the Population 2015 Age Pyramid of the Population 2015 (Persons) (Percent %) 95+ 3,276 1,922 95+ 0.10 0.06 90-94 3,995 3,041 90-94 0.12 0.09 85-89 8,523 6,744 85-89 0.26 0.21 80-84 16,671 13,519 80-84 0.51 0.42 75-79 25,207 21,871 75-79 0.78 0.67 70-74 38,497 32,930 70-74 1.19 65-69 51,338 47,563 65-69 1.59 1.01 60-64 73,073 74,106 60-64 2.26 1.46 55-59 98,992 98,615 55-59 3.06 50-54 140,146 127,272 50-54 4.33 2.28 45-49 146,251 149,656 45-49 4.52 3.03 40-44 173,062 170,808 40-44 5.35 3.91 35-39 207,560 35-39 6.41 4.60 30-34 245,851 212,523 30-34 7.59 5.25 25-29 307,000 250,383 25-29 9.48 6.53 20-24 328,436 308,988 20-24 10.14 7.69 15-19 344,650 325,601 15-19 10.65 9.49 10-14 355,580 354,360 10-14 10.98 10.00 333,829 363,026 10.31 10.8 5-9 335,521 345,380 5-9 10.36 11. 0-4 346,462 0-4 10.6 10.6 400000 200000 0 200000 40000 15 10 5 0 5 10 Female Male Female Male Source: PHC (2015); MPI (2011; 2016).

33 Furthermore, growth of different age groups within the population will vary sharply after 2015. Over the 8th Five-Year NSEDP period 2016-2020 (MPI, 2016), the number of school-aged children (5-14) is projected to decrease by 3.7 percent, while the working- age population is expected to increase by 10. 6 percent and the elderly population by 10. 1 percent. Lao PDR has not yet completed its first demographic transition - the decline of both mortality and fertility rates to low levels, though it has been moving in this direction. The under- 5 mortality rate had fallen to 79 per 1,000 live births in 2011, and should be able to meet its MDGs target of 70, but it is less likely that the infant mortality target will be met. The total fertility rate of 3.2 (2008- 2011) was still more than 50 percent above replacement level. Because the age structure still reflects the high fertility of the past, there are successively large cohorts moving up through the age pyramid. This leads to growth through “ population momentum” - meaning that population will keep increasing long after fertility falls to replacement level. The changing age structure of Lao PDR’s population is leading to what is referred to as the “demographic bonus”, the so-called demographic dividend, is another opportunity for Lao PDR to benefit from human capital development. This change implies that the proportion of the population of working age will increase, which implies that Lao PDR will be able to depend on a higher number of workers than the current level, so that there are fewer dependents for any one worker. Lao PDR’s population is expected to see robust population growth, at a projected rate of between 1.7 percent and 2.0 percent from 2015 to 2050. More precisely, the current official projection shows an increase in Lao PDR’s population from 1.71 million in 2015 to 1.91 million in 2030, and to 10.25-10.72 million in 2050. Over the period of the 8th Five-Year NSEDP, the number of school-aged children (5-14 years old) is projected to decrease by 3.7 percent, whereas the working-age population is expected to increase by 10.6 percent and the elderly population by 10.1 percent. Whereas in 2015 the dependency ratio will be down to 57, by 2030 it will have fallen to 51 and by 2045 even lower to 43. It will start to rise slowly after 2050 (MPI, 2016). For the ageing of the population, is not yet an issue for Lao PDR. The proportion of elderly persons is still very low (3.87 percent), and will only begin to rise rapidly after 2020. Even in 2050, the proportion of elderly people in Lao PDR will be lower than in Thailand today (MPI, 2016). Lao PDR has a low population density (the lowest in ASEAN), but for good reason: much of the land is mountainous and cannot be cultivated. There appears to be roughly 1.1 ha of arable land per household, or about 1.7 ha of cultivable land per rural family; the latter will not decrease very much with population growth, as the population depending on agriculture is expected to remain roughly constant with increasing migration to the towns. 2.1.3 Labour Structure of Lao PDR The labour structure has gradually shifted into manufacturing industry as the economic sector has been developed. Labour in the agriculture sector fell from 71. 3 percent in 2010 to 65. 2 percent in 2015 ( the target by 2015 is to reduce it to 70 percent) . In the industry sector, the employment rate increased from 8. 3 percent in 2010 to 11.4 percent in 2015 (the target is to increase it to 7 percent by 2015). In the service sector, the employment rate increased from 20. 4 percent in 2010 to 23. 4 percent of the total labour force in 2015 ( the target by 2015 is to reach 23 percent of

34 the total labour force) . Otherwise, just over 3,021,212 jobs were created, accounting for 51. 92 percent of the total population in 2010; this is rise to 55. 67 percent of the population in 2015 (MPI, 2016). In overall, jobs targets during the last five-year period (2011-2015) have not yet been achieved because of shortage of clear information on the labour market, resulting in inability to meet labour market demand and development. Allocation of the labour force as defined in the development plan and financial plan has not yet been achieved, and development is still concentrated in urban areas with favourable infrastructure. Yet, the development of industrial processing is still lacking, promotion of Small and Medium-sized Enterprises (SMEs) is not yet prominent, which has caused high rates of labour migration from rural to urban areas. 2.1.4 Education For the education issue, the direct related to the HRD and labour supply. The focus of this part is both the quantity and quality of education in Lao PDR. The Lao PDR has made good progress in some aspects of education, such as primarily enrolment, but still lags far behind, especially in the quality dimension at all levels. A lack of adequate skills, in particular poor ability to comprehend due to deficiencies in the literacy and numeracy of the workforce, has been identified as a major obstacle for business. As reported in the World Bank’s (2014a), nearly half of the firms surveyed in Lao PDR mentioned that they had no or few applicants to an unskilled job, a much higher percentage than in neighbouring countries, indicating a serious structural problem, such as very low levels of literacy and numeracy. For example, in a Reading Assessment Survey, post-secondary graduates in Lao PDR performed at about the same level as people in Vietnam who had only primary schooling (MPI & UNDP, 2017). In 2015, the total number of population was 6.49 million people with an average growth rate of about 2.0 percent per year. When we compare the share of educational attainments to total workforce among four age groups between 2000 and 2013, we can see that the young generation today has better access to basic education than the older generations did (See Figure 3). For the youngest group (15-24 years), those with lower secondary education made up the largest group throughout 2000-2013, whereas the population in the other age groups had the largest share of primary education. For the age groups 15-24 and 25-34 years, the share of those with college and vocational education increased steadily. Based on the current trend of increasing educational attainment, future Lao workers are expected to be much more educated than the current workforce (ERIA, 2016; MPI, 2016).

35
Figure 3: Educational Attainment of Work Force by Age Group



Note: NS = no schooling, PR = primary school; LS = lower secondary school; US = upper secondary school; TVET = Technical and Vocational Education and Training; CO = university/institution. Source: Calculation based on LECS 3, 4, and 5 (ERIA, 2016). The latest assessment for the Human Assets Index (HAI) conducted in 2015 demonstrates that Lao PDR has moved beyond least development country (LDC) status. The HAI indicators include the under-5 mortality ratio, the prevalence of undernourishment in the total population, the adult literacy rate, and the secondary school gross enrolment rate. Lao PDR improved its performance for all the HAI indicators from the previous assessment in 2012. Based on information provided by Child Mortality Estimates, which is the web-based data source used for assessing the under-5 mortality rate in the HAI calculation, the under-5 mortality rate is estimated to have decreased from 71.4 percent in 2013 to 66.7 percent in 2015. The latest data on the prevalence of undernourishment in Lao PDR’s overall population shows a declining trend (FAO, 2015). The adult literacy rate also improved, from 72.7 percent in 2005 to 79.9 percent in 2015 (UNESCO, 2015). Furthermore, according to the latest MDGs assessment in 2015 (GOL & UN, 2015), the secondary school gross enrolment rate also increased from 50.5 percent in 2013 to 64.6 percent in 2015. However, in spite of these improvements in social indicators related to the HAI, Lao PDR did not exceed the HAI reference point stipulated in the 2015 Commission on Population and Development assessment. The HAI of Lao PDR was 60.8 in 2015, which is about 92 percent of the HAI threshold (e.g. the HAI must be higher than 66 to qualify). With respect to the HDI, Lao PDR ranked 139th in 2013 and ranked 138th

36 in 2015 out of 187 countries. The HDI index improved from 141st position in 2010, but the country’s rank remains low. Moreover, there are others significant challenges in achieving some education targets, including the survival rate of primary school students (e.g. the proportion of students who succeed the final test or grade 5), which reached 71.4 percent in 2013 and 78.3 percent in 2015, while the target is to reach 95 percent by 2015. The repetition rate at primary level fell from 15.2 percent in 2010 to 6.9 percent in 2014. Although investment has been put into building more educational infrastructure, the repetition and drop-out rates continue to increase, in particular at primary school 1 and 2. Furthermore, the ratio between girls and boys in school decrease when they grow up, in primary school is 0.95, in secondary school is 0.91, in high school is 0.84, and in vocational education is 0.6 (MPI, 2016). These findings indicate there are many challenges in human capital development that need to be addressed, as also pointed out in the 8th Five-Year NSEDP (2016-2020). Low educational attainment is considered highly correlated with low wages and limited labour market opportunities, which result in lower productivity and higher poverty (World Bank, 2013). Although there has been substantial progress in educational attainment since the beginning of the 21st century, the average primary school completion rate remains below the desired target. According to the above- mentioned latest MDGs review, Lao PDR achieved a net enrolment ratio of 98.5 percent, which meets the MDGs target related to enrolment. Otherwise, as mentioned, the completion rate of grade 5 has remained low, at around 78.3 percent, still far below the 95 percent target for 2015. As the review also pointed out, this low completion rate is caused mainly by the fact that most children drop out in the first school year or do not progress to the next grade level. This implies that children are likely to lack readiness to start school and have limited access to early childhood education services. More precisely, the possible reasons for dropping out could be a lack of well-equipped schools, limited capacity of teachers, direct and opportunity costs of schooling for families, insufficient funding to support investments in improving the quality of education, and others. The completion of primary school is constrained by these factors and, therefore, early-year primary schooling is a key bottleneck in the country’s basic education system. Additional, despite steady progress in increasing the enrolment rate in primary and lower secondary school (See Table 7), there is concern that a large proportion (30 percent) of children did not continue their study to the upper secondary level, which might negatively affect the overall education level of the future population (GOL & UN, 2013; MPI & UNDP, 2017). Table 7: Enrolment Rate in Basic Education (% of Population in Relevant Age Group) 1992 1995 2000 2005 2012 2013 2014 2015 Primary education 58.8 65.2 77.3 84.0 95.2 96.8 98.0 98.6 Lower secondary education 28.9 39.3 53.3 62.7 64.7 69.0 74.4 78.0 Upper secondary education 11.0 17.4 34.6 36.8 34.7 37.3 41.3 45.7 Note: The enrolment rate for primary education is net enrolment. The enrolment rates for lower and upper education are gross enrolment. Source: GOL & UN (2013); GOL & UN (2015); MPI (2016); MPI & UNDP (2017).

37 (a)
Primary Education Net enrolment at the primary school level is near universal. It increased from around 84 percent in 2005 to about 98.6 percent in 2015, a rise of 14.6 percent points in the last decade (See Table 7). The variation in enrolment across provinces is also very small. Enrolment at the aggregate level, thus, does not appear to be an issue. However, there are significant gaps in enrolment rates across income groups, rural and urban areas, and ethnic groups (See Table 8). The drop-out rate follows the same pattern by economic status, location and ethnic group. The problem is more acute in remote and rural areas where various ethnic groups dwell. Some 23 percent of schools are incomplete; these are mainly located in Saravane, Sekong and Phongsaly - all hinterland provinces - where both enrolment and drop-out rates are high. Drop-out and repetition numbers in Lao PDR compare rather unfavourably with the much lower repetition rates in Vietnam and Cambodia (MPI, 2016). On the positive side, there are as many primary schools as the number of villages, or more. Incomplete schools, an important constraint on children attending schools, have also decreased, from about 44.2 percent to 22.8 percent between 2006 and 2014. These factors are likely to have contributed to the increase in overall enrolment (MPI & UNDP, 2017). Table 8: Enrolment in Primary Education Stream (Age 6-10), 2013 Enrolment Drop-out All (poorest-richest) 85.70 1.05 Urban 94.32 1.15 Rural 83.80 0.56 Rural with road access 83.96 1.21 Rural without road access 82.20 0.70 Lao-Tai 91.50 0.92 Mon-Khmer 81.34 1.13 Sino-Tibetan 68.15 1.56 Hmong-Mien 83.00 1.10 Vientiane Capital 98.10 0.40 North 85.70 1.10 Central 87.20 1.00 South 80.76 1.40 Source: LECS 5 (MPI, 2013); MPI & UNDP (2017).

38 Demand-side education issues seem to be a major factor affecting performance. Some of these are including: (1) When they enter schools, children are over-aged owing to late entry and grade repetition, and they find themselves out of place; (2) Unfamiliarity with the educational systems for first-generation learners and those who did not attend early childhood development (ECD) contributes to low enrolment and high drop-out rates; (3) The poor and certain ethnic groups (Sino- Tibetan, Mon-Khmer), dwell in large numbers in hilly and remote areas, where not only are schools more distant from homes but other infrastructure and transport are also scant; (4) Withdrawal of students from schools at harvest time is common. Some teachers also withdraw, worsening the situation further. This happens everywhere, but particularly in areas where paddy is grown as it requires more hands to harvest; and (5) Language is a major barrier for children who (and whose parents) do not speak Phasa Lao as their first language. Although a number of primary school teachers of ethnic origin have been trained and recruited over time, their capacity and quality are still wanting. Supply-side education factors also interact with demand-side issues, such as the low quality of training of teachers, and hence poor teaching is a disincentive. Approximately one quarter of the primary schools operate multi-grade classes because of small student numbers and limited facilities. To make matters worse, a majority of the teachers are not trained in handling multi-grade teaching. Roughly, one in two primary school teachers had never attended college, with more in rural and remote areas than in urban areas. In light of the above problems, only three out of four primary school students completed school in 2014. In relatively poorer districts, less than 50 percent of children completed primary school education (MPI & UNDP, 2017). (b)
Lower and Upper Secondary Education The gross enrolment rate in lower secondary education was 74.4 percent in 2014 and 78.0 in 2015 (an increase from 62.7 percent in 2005), but this was some 20- plus percentage points below that at the primary school level. The gross upper secondary school enrolment rate, 41.3 percent in 2014 and 45.7 in 2015, was some around 30 percent points lower than the rate for lower secondary enrolment. The transition rate from primary to lower secondary education has not improved much over the years, moving from 85 percent in 2008 to 89.4 percent in 2014. The transition from lower secondary level to higher secondary level was about 85 percent in 2014. Of every 100 students who join the primary school in Grade 1, only about 41-42 are able to survive until Grade 10, and this rate is much lower among the poor and ethnic communities, compared with the rich and Lao-Tai. The enrolment rate at the lower secondary school level was 80 percent in the most affluent (quintile) group compared with 45 percent in the poorest, according to LECS-5; similarly, the enrolment rate among the Sino-Tibetan group was 28 percent compared with 72 percent among the Lao-Tai. There is also a large variation in secondary school enrolment across provinces. In 2014, across provinces for lower secondary enrolment was 19 percent, while it was 25 percent for upper secondary school enrolment (LECS-5, 2015; MPI & UNDP, 2017). There is also great unevenness in the quality of schooling across locations in terms of numbers of teachers per school (or students), qualifications of the teachers

39 and teaching materials available. There is a low demand for schooling among poor households, households residing in remote areas and some ethnic groups. (c)
Teacher Training Data on primary teachers’ qualifications are not readily available, but they are for secondary teachers’ qualifications. Teachers should be qualified to teach secondary levels if they are trained up to at least 11+3 years and/or have attended a teacher training course. This is not a norm in Lao PDR; approximately 14 percent of the secondary teachers do not have these standard qualifications. Additionally, a large number of teachers lack continuous professional development. Finally, in terms of teaching methods, rote learning/teaching tends to be the most common approach; teachers are unable to teach using interactive methods due to the lack of teaching/learning materials or, in a few cases, the sheer (large) numbers of students. The postings of teachers across the country have also been found to be inequitable and inefficient. There is an oversupply of teachers in some (urban) locations but a shortage in others (mainly rural). The fact remains that high-quality trained teachers do not wish to go to rural areas. Thus, many secondary schools in remote areas and where ethnic communities dwell have inadequate numbers of teachers per school. There is also an unbalanced distribution of teachers across different teaching subjects. (d)
Non-Formal Education (Adult Literacy) The Government has formulated programmes to reach out to people who have completed primary education but have dropped out of the lower secondary stream in selected provinces. Teachers appointed for this purpose are known as “mobile teachers”, since they work part time and travel to different locations to conduct classes. To eradicate illiteracy, mobile teaching has been piloted to teach children between 6 and 14 years old outside school in the remote areas in three provinces, Savannakhet, Khammouane and Sekong, under the education for all programme to enable the children to study. To date, 148 districts in 10 provinces have announced the completion of primary level. Otherwise, since no evaluation is yet available, some field interviews conducted in Xiengkhuang and Sekong provinces are the basis of the following observations: (1) The mobile teacher programme operates for only six months a year, and classes are only held on weekends. This small exposure does not allow teachers to cover all the important topics necessary for improving the life skills and meaningful learning prospects for the learners; (2) Class attendance is uncertain, depending upon the availability of the participants; and (3) Payment for the (mobile) teachers is insufficient to encourage them to undertake regular visits to conduct classes. In addition, there is a shortage of trained teachers and teaching– learning materials. Many mobile teachers have not developed their teaching notes to meet the requirements of adult literacy classes. Thus, the main challenge in implementing this task is the lack of teaching materials and teachers, as well as limited budget (MPI, 2016). (e)
Vocational Education The number of Technical and Vocational Education and Training (TVET) institutions has increased in the past decade, especially in major cities. There were 37 in 2014 and 42 in 2015 of vocational and technical schools. Only about one third of

40 these institutes provide technical skills courses at the diploma level; the rest still provide certificates (which are lower than diplomas). Many TVET institutions are incomplete in one or another aspect, meaning that their facilities are inadequate and/or the teaching staff are less than fully qualified or are fewer than is required. Many provinces do not have any TVET institution (VELA, 2015). In the area of vocational education, infrastructure for vocational education institutions has been improved in Savannakhet, Sekong and Attapue provinces. In addition, there is also a policy to provide allowances to students from poor families and remote areas. This has contributed to an increased enrolment rate of 42 percent. Less than 7 percent of vocational and higher education students chose vocational education. Only 12 percent choose to study agriculture and the rest study in the area of industry and services. Therefore, these results in a situation where subjects studied do not meet labour market demand as stipulated in the 7th Five-Year Plan (2011-2015). There is a severe shortage of skilled workers in the country. The students enrolled in TVET are largely found pursuing vocations in accounting, management and hospitality rather than in engineering and technical courses where a large skill gap or unmet demand seems to exist. Additionally, while admissions to TVET have risen in recent years, the perception about TVET remains low because of poor quality education and hands-on training owing to shortages of qualified and trained teachers, weak curricula, shortages of teaching and learning materials, and lack of other facilities (MPI & UNDP, 2017). (f)
Public Expenditure on Education The Government has placed significant importance on HRD and has allocated increased budget to education and sports, which covers 17 percent of the total government expenditures to improve and develop education infrastructure and improve teaching and learning at all levels. The focus has been on achieving the MDGs and developing new curriculum for vocational study to respond to demand by the labour market. Many project implementations have been localized, namely the development of quality education project, accelerated education for all, basic education development, dormitory building for students, school lunch and food supplements project implemented in 30 districts in six target provinces contributing to increased attendance rate while reducing drop-out rates, expansion and improvement of technical schools in the three southern provinces, information communication technology project to enhance secondary education by establishing pilot schools in each province to link them to Information and Communications Technology (ICT). In addition, block grants are provided for school administration to all primary schools nationwide, based on a unit cost of 20,000 kip per student in 2012 and increased to 50,000 kip per student since 2013. Kindergartens, secondary schools and high schools receive 20,000 Kip per person per year. This has gradually improved Lao education qualitatively and quantitatively, which is evident in the actual implementation of various targets. The share of public spending on education in total public spending in the Lao PDR has increased from 7.4 percent in 2001 to 12.2 percent in 2014 and 17 percent in 2016. As a share of GDP, it increased from 1.9 percent in 2001 to more than 4 percent since 2014. Although public spending on education has shown a rising trend, it is lower than in some neighbouring countries. For example, Vietnam spent about 6.3 percent of its GDP or 21 percent of total public expenditure on education in 2012

41 and more than 23 in 2015. The Republic of Korea and Malaysia spend even more than 15 percent in 2012 and more than 18 percent in 2015. It is important to raise allocations to this sector and rationalize them to maximize on the outcomes (MPI, 2016). (g)
Useful Pressure from Regional Integration on Education Deepened regional integration makes human capital development even more critical for the development of the Lao PDR. The AEC envisioned by the AEC Blueprint advocates removing not only barriers in trade of goods and services between member states but also barriers in labour mobility, from the end of 2015. This gives rise to opportunities as well as challenges in terms of HRD. Labour mobility will be promoted through memoranda of understanding on mutual recognition between member states of nationally endorsed education and training qualifications. This will put some useful pressure on Lao PDR to build up its human capital, and this mobility will also increase the pool of human capital available for economic development. To supervise and implement HD activities in the Lao PDR, the Government has been preparing of establish the National Commission on Human Resource Development because it established the needed institutional framework for HRD. 3.
Existing Policy on Human Resource Capital 3.1 Establishment of the Human Resource Development National Commission The HRD strategic framework was approved and provided a basis for the HRD action plan. The process began with MOES’ preparation of a draft decree creating the Human Resource Development National Commission (HRDNC), which was signed by the Prime Minister (PM) on November 22, 2013. The PM Decree was a critical step forward because it established the needed institutional framework for HRD. The PM Decree assigns responsibility to the HRDNC “to supervise and implement HRD activities nationwide, consistent with party policy and with the National Socio-Economic Development Plan at each stage” (MPI, 2016; ADB, 2017). The PM Decree also states that the HRDNC’s coordination office and secretariat is being base at MOES, with the Director General of the Department of Planning as Head of the Secretariat.

42 The tasks and authority granted by the PM Decree include: −
To study/develop and revise the “HRD strategy”, “General Policy Framework” and “Action Plan” nationwide; −
To supervise, encourage/support the ministries, agencies equivalent to ministries, local authorities and both public and private organizations in the implementation of the HRD strategy and action plan; −
To monitor, audit, evaluate the implementation of the HRD strategy and action plan in terms of quality and relevance; −
To summarize, draw lessons learned and report on the achievements from implementation of the HRD strategy and action plan; −
To develop and propose to the Government necessary legislation for implementation of the HRD strategy and action plan; −
To mobilize the society to participate in the pursuit of HRD, particularly resources and technical assistance; −
To communicate, coordinate, cooperate, exchange experience and information with all the sectors from central to local authorities as well as external collaboration with international agencies and development partners in accordance with the policy frame of the Party and Government laws and regulations; −
To appoint the human resource development national technical committee at different levels, including setting the roles, tasks, authority and responsibilities of the HRDNC; −
To call meetings and organize workshops on HRD; and −
To perform other duties as assigned by the Party and Government. According to Figure 4, the HRDNC is chaired by a Deputy Prime Minister, with four Vice Chairpersons, including the Minister of Education and Sports (MOES), the Minister of Planning and Investment (MPI), the Deputy Head of Cabinet of the Party Central Committee on Organization and Personnel (CCOP), and the Vice Chairperson of the Cultural and Social Committee of the National Assembly (NA). HRDNC members include Vice Ministers of Education and Sports, Planning and Investment, Finance, Home Affairs, Foreign Affairs, Labour and Social Welfare, Information and Culture, Health, Justice, Agriculture and Forestry, Industry and Commerce, Defense, and Public Security, Vice Rector of the Political and Governance Institute, Vice President of the Lao Women’s Union, and President of the Lao National Chamber of Commerce and Industry. The establishment of the HRDNC was an important step forward because it established the institutional framework needed to support the HRD in the Lao PDR.