Education and Training for Development in East Asia: The Political Economy of Skill Formation in Newly Industrialised Economies (Esrc Pacific Asia Programme (Series).)

Education and Training for Development in East Asia

The East Asian miracle, or its putative demise, is always news. The Four Tiger economies of Hong Kong, Singapore, Taiwan and South Korea have experienced some of the fastest rates of economic growth ever achieved. Until now, there has never been a satisfactory explanation of how—and why—education and training have played a major part in their growth. This book provides a detailed analysis of the development of education and training systems in Asia, and the relationship with the process of economic growth. The authors focus on how these systems facilitated their transition from labour intensive to capital intensive forms of production and explores the crucial role of the state. The hallmark of policy making in these economies is that governments have been able to gear the output of their education and training systems to the requirements of any particular stage of growth, often by anticipating future skill demands. However, the book also considers to what extent this model of skill formation is being undermined by processes of economic liberalisation and democratisation. Education and Training for Development in East Asia provides policy makers with a new model of the skill formation process. It has important practical implications for all those concerned with facilitating the process of economic development: from policy makers or sociologists to those involved in comparative education, labour market studies and development economics. David Ashton is Professor of Sociology and Director of the Centre for Labour Market Studies at the University of Leicester. Francis Green is Professor of Economics at the University of Kent at Canterbury. David Ashton and Francis Green are authors of Education, Training and the Global Economy. Donna James is Research Manager at Wakefield Training and Enterprise Council. Johnny Sung is Senior Research Fellow and Deputy Director of the Centre for Labour Market Studies at the University of Leicester.

ESRC Pacific Asia Programme

Europe and the Asia Pacific Edited by Hanns Maull, Gerald Segal and Jusuf Wanandi The East Asian Welfare Model Welfare Orientalism and the State Edited by Roger Goodman, Gordon White and Huck-ju Kwon Education and Training for Development in East Asia The Political Economy of Skill Formation in East Asian Newly Industrialised Economies David Ashton, Francis Green, Donna James and Johnny Sung

Education and Training for Development in East Asia The political economy of skill formation in East Asian newly industrialised economies

David Ashton, Francis Green, Donna James and Johnny Sung

London and New York

First published 1999 by Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 © 1999 David Ashton, Francis Green, Donna James and Johnny Sung All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data David Ashton, Francis Green, Donna James and Johnny Sung. Education and Training for Development in East Asia: The Political Economy of Skill Formation in East Asian Newly Industrialised Economies Includes bibliographical references and index 1. Education—Economic aspects—Asia. 2. Vocational education—Asia 3. Occupational training—Asia. 4. Economic development—effect of education on. I. Ashton, David et al. II. ESRC Pacific Asia Programme. LC67.2.A78E38 1999 98–30930 370. 11’3’095–dc21 CIP ISBN 0-203-98028-X Master e-book ISBN

ISBN 0-415-18126-7 (Print Edition)

Contents

List of tables

vi

Acknowledgements

vii

1

Introduction and overview

1

2

The developmental state and the education and training system

7

3

Singapore

27

4

South Korea

55

5

Taiwan

81

6

Hong Kong

106

7

Is there a ‘Four Tigers’ model of skill formation?

128

8

On the diffusion of the model

152

Appendix: List of authorities consulted

162

Glossary of acronyms and abbreviations

166

Notes

169

Bibliography

175

Name index

188

Subject index

191

Tables

1.1 School enrolment at first level, relative to estimated populationaged five 2 to fourteen: selected developing countries, 1960 1.2 Average years of schooling attained by the population over fifteenyears 2 old 3.1 Employed persons in Singapore, by occupation, 1984–1996 39 4.1 Industrial sectors’ share of GDP, South Korea 62 4.2 Expansion of education 1945–1960, South Korea 69 4.3 Enrolment rates by school level, South Korea 69 4.4 Distribution of academic senior high school students and ofvocational 70 senior high school students, South Korea: 1965–1994 4.5 Training of craftsmen by training authority, South Korea 72 4.6 Outputs of training by type of training centre, South Korea 73 5.1 Government education spending in Taiwan 84 5.2 Sectoral distribution of labour in Taiwan 86 5.3 Alien workers by sector in Taiwan, end May 1996 90 5.4 Distribution of senior high school students in Taiwan 92 6.1 The composition of workforce employment, Hong Kong1961–1994 110

Acknowledgements

This book results from research funded by the UK’s Economic and Social Research Council, grant number L32425 3015. That research project is part of a wider programme of ESRC funded research on Pacific Asia. We are very grateful to all those persons who afforded us their time and thoughts in the course of our research, not least those many respondents in South Korea, Singapore, Taiwan, Hong Kong and Malaysia who kindly agreed to be interviewed and to respond to our enquiries. In Singapore we received helpful suggestions and advice from Linda Lo. In the case of South Korea, we should particularly like to thank Dr W.D.Cho, who facilitated a number of interviews during the course of our research and gave us the benefit of his own extensive knowledge of the education and training reform plans in Korea. Thanks are also due to Aidan Foster-Carter for his expert and insightful advice about Korea in the early stages of the research, and to the helpful thoughts and comments of Stephen Creigh-Tyte about education in Korea. For Taiwan, we owe particular thanks to David Liu of the British-Taiwan Cultural Office, who arranged a number of government interviews for us, and to Ray Chang who was unfailingly generous in providing contacts, interviews, help and hospitality throughout. We also very much appreciated the discussions with and assistance from Tim Down of the UK Department for Education and Employment with whom we pooled some of our primary research efforts in Taiwan. The standard disclaimer is more than usually important here. While we have gleaned and weighed a great deal of information from interviews, the responsibility for the arguments and interpretations of events that we put forward in this book lies with us.

1 Introduction and overview

The remarkable historical episode, in which four impoverished agrarian economies—Hong Kong, Singapore, South Korea and Taiwan—were transformed in the space of little more than a generation into industrialised, comparatively affluent enclaves, has provided a spectacle of wonder and evoked enormous intellectual interest. The significance of the East Asian tigers’ performance is not just that they were able to achieve high rates of growth of per capita income, around 6–7 per cent a year, but also that these rates of growth were sustained for something like four decades. Much has been written by way of explanation of this success. Emphasis has been given to the early adoption of an export-oriented strategy for industrialisation, to high savings and investment rates and to a stable macroeconomic environment. Many writers have noted the prominence of state intervention in three of the economies—whether by outright nationalisation of key sectors, or by strongly dirigiste methods of pushing private capital in certain directions. Reference is frequently also made, however, to the topic of this book, namely the role played by human capital in the growth process. The success in terms of economic growth is paralleled by a substantial growth in skill formation. The Four Tigers already had high levels of school enrolments in 1960, given their relatively low income levels at the time. Participation in first-level schooling, as a proportion of five to fourteen year olds, ranged from 57 per cent to 67 per cent in the Four Tigers (Table 1.1). Other low income countries had much lower participation rates—for example, Pakistan at 22 per cent and Uganda at 32 per cent. On the basis of the high participation in primary and secondary education the stock of human capital in the tiger economies increased notably in subsequent years. By 1990, the mean years of schooling attained by the adult population exceeded nine years in both Hong Kong and South Korea, putting these two economies on a par with the industrialised countries of the OECD (see Table 1.2). Taiwan was not far behind. In Singapore, human capital measured as schooling attainment also grew, but here less fast. Nevertheless, schooling and higher education in Singapore have rapidly expanded in recent years, to the point where the skills profile of younger workers is similar to that in Northern European countries (Green and Steedman 1997); moreover a very wide

2 INTRODUCTION AND OVERVIEW

expansion of training courses in the 1980s and 1990s was aimed at filling the needs of older workers with less schooling. In other developing countries outside what was the Soviet bloc, while the stock of human capital has increased over the years, it began at a lower level and failed to catch up on the educational lead of the Four Tigers. This book will assess the question: how are these two growths, that of human capital and that of the economy, articulated? While most commentators have taken the view that the growth of human resources has been instrumental, even vital, for the growth of the economy, there is little understanding of how any causal impact is brought about. The high growth of incomes has itself been an important factor in facilitating increased educational participation. Whether education is viewed as an investment or merely something to be consumed, families with a greater surplus can afford more of it. One can conceive of the two-way chain of causation—education growth to and from economic growth— as constituting a virtuous circle, and see that it was the tigers’ fortune to be Table 1.1 School enrolment at first level, relative to estimated population aged five to fourteen: selected developing countries, 1960 (unadjusted estimated percentages) Tiger economies

Other developing economies

Hong Kong Singapore South Korea Taiwan

57 66 60 67

Brazil Chile Ethiopia Indonesia Kenya Pakistan Uganda

45 69 5 40 49 22 32

Source: UNESCO, Statistical Yearbook 1963. Table 1.2 Average years of schooling attained by the population over fifteen years old

Latin America and the Caribbean Mid-East and North Africa Sub-Saharan Africa South Asia OECD Hong Kong Singapore South Korea

1960

1970

1980

1990

3.26

3.82

4.46

5.24

1.22

2.05

3.26

4.47

1.73

2.06

2.34

2.93

1.51 7.05 5.17 4.33 4.25

2.03 7.58 6.31 5.09 4.91

2.97 8.76 7.95 5.53 7.91

3.85 9.02 9.15 5.89 9.94

INTRODUCTION AND OVERVIEW 3

Taiwan

1960

1970

1980

1990

3.87

5.31

7.61

7.98

Sources: Barro and Lee (1996) and the Barro-Lee human capital dataset at http:// www.worldbank.org/html/prdmg/grthweb/growth_t.htm.

placed in that circle, rather than in a stagnant equilibrium of low incomes and little education. A factor commonly recognised as helping to place the tigers in the virtuous circle is their relatively equal societies: this allowed a surplus above basic needs for even the poorest households to devote to education. Yet a danger in viewing the link between economy and skills in terms of virtuous circles is that the processes of growth can appear automatic, and neglect to account for the role of key agents in bringing about change. In the case of the Four Tigers, the central agent for change has been the state. The importance of the state is partially recognised in those analyses based on conventional neoclassical economics. Because skill formation is subject to substantial externalities, whereby one person’s education benefits others as well, or because the skill formation requires financing in an imperfect capital market to which the poor have restricted access, the state intervenes to rectify such ‘market failures’. The governments of the Four Tigers have been praised for their wise choice of intervention channels, especially their concentration in primary education (World Bank 1993). It is our contention, however, that the state’s part in linking the economy with skill formation extends well beyond the domain of market-failure redemptions, and must be conceived in a new way. That new way is drawn from a combination of the insights of political science, economics and sociology. The general argument is as follows. A notable body of scholars has attributed the success of the overall developmental catch-up of the tiger economies to the agency of particular forms of developmental state that developed after the Second World War due to specific strategic, political and economic exigencies during the process of state formation.1 These states, through a certain amount of domestic relative autonomy from their respective societies, have to varying extents been able to mediate between the domestic and international economy. They have facilitated movement from the periphery to the semi-periphery of the international economic order by manipulating and creating comparative advantage, using processes such as economic planning and relative control over, or alliances with, industry. While the various mechanisms used to influence the direction and growth of industry and trade have been thoroughly explored, there has been a paucity of investigation of the measures these developmental states have taken to influence skill formation. Our aim is to fill this important gap in knowledge. In an economy that is being rapidly transformed, a close matching of skills supply to skills demand is hard to conceive in purely market terms. Skills supply is an industry with a very long lead time, with consequent uncertain market

4 INTRODUCTION AND OVERVIEW

signals and sluggish or non-existent responses to market shocks, whether by individuals or firms. A market-led adjustment process is likely to be less efficient than a political adjustment process, if the political leadership has the objective of ensuring skills supply meets the demands of the economy. We hypothesise that an important characteristic of the developmental states has been their ability to link skill formation policy closely to specific stages of economic development. In brief, developmental states control both the supply of skilled labour to the marketplace, and the demand for skills (to varying degrees) through their industrial and trade policies. They also coordinate the supply and demand at the highest level to fit with the expected trajectory of economic development. Thus, the appropriate mix of skilled labour will be trained for a particular stage of economic growth that has to some extent been predetermined. This model of ‘developmental skill formation’ contrasts with other successful systems of skill formation such as those in Germany and Japan, where the state is not the only dominant agent for change. The result of the state’s coordination in the Four Tigers is that the rapid economic transformation is matched by an equally remarkable transformation in the stock of skills. These states, however, present different forms of developmental state on a continuum from Hong Kong, which shows minimal intervention in the economy, to Singapore where the state is strongly dirigiste. The institutions, mechanisms, linkages and the actors involved in skill formation policy will therefore differ amongst the four. One might expect to see a less successful match between skills formation and stages of economic growth in Hong Kong than in Singapore. In addition, the developmental state itself is subject to domestic and international economic and political vagaries which will either strengthen or weaken its relative autonomy from society. There are reasons to expect that relative autonomy to be undermined by the very success of economic growth as it brings demands for liberalisation and democratisation of economic and political processes. Therefore, one would expect to see variations in the success of implementation of skill formation policy within one case over time as well as between the cases. In all four cases, however, the pre-eminence of skill formation as an economic tool of the state will result in a better sequencing and linkage between skills supplied to the economy and the skill requirements of industry than that commonly observed in other countries, developed or not. There is a simple layout to this book. In the next chapter we go through existing theories about the part played by education and training in the growth of the East Asian newly industrialised economies. We argue for a political economy approach and set out the basics of a model of ‘developmental skill formation’, and then describe the methodology we deploy. The four chapters following provide detailed accounts of the development of education and training policy and institutions in the tigers, taking the reader from the period of post-war revival through to the late 1990s. In each case the development of policy is set against the backdrop of the changing economy. Our focus is on the institutional mechanisms that deliver system responsiveness and on the sequencing of

INTRODUCTION AND OVERVIEW 5

policies. These accounts, based on our own new researches, reveal the extent to which it is possible to use the model of developmental skill formation as a way of understanding the agency of the state. In this light we are able to arrive also at an interpretation of current changes and future prospects. We bring many of the arguments together in Chapter 7 in asking whether indeed there is a ‘Four Tigers’ model of skill formation. We suggest that on the whole the Four Tigers do conform to the framework of a developmental skills formation model. In the cases of Singapore, South Korea and Taiwan, governments have had major influences on the demands for skills at various stages of the economic transformation. We also identify those explicit governmental institutions which were used to construct and sustain the linkages between skill formation policies and economic policies. We examine how these mechanisms were used to assume strong central control over skill supplying institutions, and how that control was utilised to serve the economic objectives. And we show how these mechanisms have resulted in relatively close linkages between the growth stages of economies and the skill formation systems. In the case of Hong Kong, the colonial state had much less influence on the direction of the economy, and the movement into higher value-added industries was marketdriven, rather than state-led as in the case of the other three countries. Nonetheless, one can identify important political mechanisms in Hong Kong, starting in the late 1970s, through which the government ensured an increasingly rapid adjustment of skill formation institutions to suit the demands of the changing economy. The upshot of our detailed argument is that the policy-making and policyeffecting processes central to the model played an important role in sustaining the economic ‘miracles’ of the Four Tigers. This conclusion begs more questions, only some of which can be addressed in this one volume. First is the question as to whether the developmental skill formation model is still relevant at the end of the 1990s. We identify a number of tensions and contradictions that have arisen in the skill formation system, as these economies have matured. Not least, the economies have become more complex and the state less powerful. Nevertheless, many of the mechanisms and institutions for linking skill formation to the economy remain in place and are likely to retain an important role even though the economies are operating much closer to global technological frontiers. These processes will continue to constitute a comparative advantage in the global economy into the twenty-first century. Yet it remains true that an adequate skill formation system is no more than a necessary condition for high levels of economic growth. It is not in itself sufficient, and future growth will depend on a successful resolution of other deepseated problems of maturity, not least the financial crises deriving from the illregulated credit systems. All economies in the region were affected in late 1997 by the loss of market confidence in the financial systems, even though the structural problems underlying the financial crisis differed from country to country. Among the Four Tigers it was primarily in South Korea that major

6 INTRODUCTION AND OVERVIEW

home-grown problems can be identified, in the shape of the increasingly uncontrolled but still protected chaebol. The typical drama of financial crises— secret trips by important officials, personal fortunes wiped out and so on— formed the background to ill-supported proclamations of economic doom or even, absurdly in the case of the Four Tigers, claims that somehow the economic growth of recent decades had been a sham. Nevertheless, if the collective irrationality of financial markets holds up economic growth in the region, this will not be the first time in the world’s economic history. A second question concerns how far the developmental skill formation model (or part of it) might be applicable in other nation states—whether developed or developing. For most of this book we focus only on the famous Four Tigers. Our arguments directly concern the states in these countries, not East Asia as a whole. However, we conclude in Chapter 8 with a brief coda to the main theme of the book, by examining certain developments relevant to the specific question: can the model of developmental skill formation, evident in varying degrees in the Four Tigers, be applied elsewhere to other developing countries? Two ways of tackling this question are explored. First, we look at some explicit mechanisms through which Singapore’s education and training policy-making framework has been diffused to other countries. Second, we take a brief look at the case of Malaysia, a country of interest because, at least prior to the financial crisis, it had secured high rates of economic growth based on low cost industrialisation, but had yet to make a switch to primarily high value-added industries and services.

2 The developmental state and the education and training system

Introduction: education, training and economic growth In this chapter we are concerned with identifying the current state of knowledge on the nature of the relationship between education, training and economic growth, with special reference to the economic development and transformation over recent decades of the Asian newly industrialised economies. There are a number of different theoretical approaches to economic development. While we are not concerned to rehearse the debates about the fundamental correctness of any one theoretical position, we do aim to review how some schools conceptualise the role of education and training. We then set out the basics of a model of the systemic relationship between skill formation and economic development in the context of ‘developmental states’. This model forms the framework for the political-economic analyses elaborated in subsequent chapters. Education and work-related training are the two principal, though not the only, means whereby an economy’s workforce acquires human capital. For most of this chapter we focus on the question: how do and should states intervene in education and training to produce more human capital? However, in order to set that discussion in context, consider first the question: how does human capital affect economic growth? While most commentators appear to assume that there is a positive relationship between human capital and economic development, what is the evidence? In recent years there has been real progress in the understanding of how human capital affects economic growth. Traditionally, human capital has been seen mainly as a factor input into the production process, alongside physical capital and land. This framework naturally led economists to attempt to estimate the separate contribution of human capital to national output and, equivalently, the contribution of the growth of human capital to the growth of output—the socalled ‘growth accounting’ approach.1 Using this approach, however, it has been found that human capital’s role in economic growth is not large, and in some cases insignificantly different from zero (Benhabib and Spiegel 1994). In some growth accounting studies, education is assumed to contribute to growth by

8 DEVELOPMENTAL STATE: EDUCATION AND TRAINING

augmenting the effective size of the labour force. When applied to Singapore, Hong Kong, Taiwan and Korea, this method comes up with the estimate that growth in education contributed around one percentage point to the annual growth of the effective labour force (Young 1995) and hence, around 0.5 to 0.8 points to economic growth—that is, not much. If one were to accept the conclusions of the growth accounting approach at face value, there would hardly be any need for this book. We would also have to conclude that widespread concern with education as an economic (as opposed to a social) policy was misplaced. Instead, it is now increasingly recognised that human capital has dynamic effects, in that the level of the human capital stock in an economy can affect the economy’s growth rate. The source of this dynamic effect is partly found in the theory of technological progress. It is argued that both advancement of knowledge and innovation, and the diffusion of new methods of production, are aided by higher levels of education. There is now substantive evidence, derived from data on large numbers of developing countries, to support the proposition that human capital has this dynamic role (Benhabib and Spiegel 1994; Lee, J.W. 1996). Much of the evidence emphasises in particular the impact of primary school and secondary school enrolments (Wolff and Gittleman 1993). Those countries with above average enrolments in the 1950s and 1960s had greater subsequent economic success than their counterparts at the same initial level of development but with lower enrolments. Moreover the picture that is emerging also suggests that human capital interacts with the degree of technological backwardness of a country. Both historians and economists have argued that where countries lag far behind the leading technology nation (mainly the US), where hence they have a long way to catch up, their speed of catch-up depends on their ‘social capability’ (Abramowitz 1986; Amsden 1989). The latter is thought to be strongly affected by education attainment levels. The evidence of Benhabib and Spiegel suggests that this interaction is most noticeable for poorer developing countries. For more affluent countries, human capital has a direct dynamic effect, which is argued to be linked to a country’s ability to generate its own technological progress rather than to import technology from more advanced nations. However, the role of human capital in advancing economic growth is not limited to technical change. Human capital is also found to be a significant determinant of the amount of physical capital investment in an economy. A higher level of human capital enables machinery and plant to be used more efficiently, raising the rate of return to investments. In addition, investment is affected by economic stability which may also be linked with human capital. As a result investment, whether by foreign or indigenous capital, is likely to be greater where most of the labour force has a basic education and substantial proportions a high educational attainment. The empirical evidence for this proposition appears robust (e.g. Amable 1993; Wolff and Gittleman 1993; Benhabib and Spiegel 1994).

DEVELOPMENTAL STATE: EDUCATION AND TRAINING 9

If human capital has these various effects on the economic growth of developing countries, how does the state raise human capital levels through education and training? What should governments do in this field? Since the World Bank is the prime international organisation responsible for advising and subsidising education and training schemes in developing countries, it is useful first to examine how World Bank analysts conceive of the role of education and training in the East Asian growth performance. Their view is largely driven by the neoclassical approach, with which we begin. The neoclassical approach Alongside the empirical findings about the dynamic roles of human capital, there has also been some progress in the theoretical modelling of growth by neoclassical economists. Two features of the new modelling are the assumed importance of ‘externalities’ in the production of knowledge and the possibility of cumulative causation processes leading to diverging economic growth paths. Since the world’s economies appeared not to be converging very fast, if at all, the notion of diverging growth has had an appeal to many writers. It is not intended to review these new theoretical models here. Rather, the main conclusion we wish to note is that there can be a divergence between the private and social returns to skill formation. To take one example, Lucas (1988) proposed a model wherein workers’ productivity depended not only on their own individual human capital, but also on the average level of human capital in the economy. Left to their own devices, workers would acquire a less than socially optimal amount of human capital. They take into account the benefits they receive from their own education (and invest accordingly) but not the benefits received by other people. The presence of externalities in education or training—whereby individuals or firms benefit from the education or training that other private individuals have invested in—is not new. That one educated individual prefers to live in a society of more educated fellow citizens has been an underlying justification for education, at least since the writings of Adam Smith, more than two centuries ago. As with all other commodities, the neoclassical approach to education and training sees the market as the most efficient basic framework for education and training. It is proposed that the value of human capital reflects the preferences of consumers who purchase the goods services produced by skilled workers. If this value of human capital is high, individual agents have a high incentive to undergo and fund their own education or training. The World Bank approach The neoclassical approach, which sees the case for state intervention as being to correct for market failure, has characterised the World Bank’s perspective on the role of education and training in East Asia.

10 DEVELOPMENTAL STATE: EDUCATION AND TRAINING

In The East Asian Miracle (World Bank 1993), the World Bank group sees investment in education as an important explanation for the rapid growth of the High Performing Asian Economies (HPAEs). All these were seen to have made a substantial investment in education, especially primary and secondary education during the early stages of their industrialisation. The core of their explanation of economic growth was that the various states (governments) had adopted ‘market friendly’ policies. They explain education growth in the HPAEs as the result of a beneficial combination of determining factors and well-judged state intervention. They propose that there are three enabling factors which contribute toward the growth of education. The first factor is high income growth, which makes more resources available for education over time. High macroeconomic growth also entails new jobs, thereby raising the rate of return on education and increasing the demand for it. Second, the early demographic transitions, which characterised the tiger economies, meant there was a rapid decline in the rate of growth of the school-age population enabling more resources to be devoted to each individual pupil, enhancing the quality of teaching. Third, the tiger economies were all characterised by a relatively egalitarian distribution of income which translated into a higher demand for education. Poor households do not have the surplus resources to enable them to take advantage of educational provision, even when returns are high. Empirical analysis among developing countries revealed that the more equal a country’s distribution of income is, the higher primary and secondary enrolments tend to be. As regards state intervention in education, the World Bank group identifies two areas where a gap between private and social returns can occur and where government action is therefore needed. These concern failures in the capital market and in the information available to parents. The absence of information on the benefit of education means that parents do not wish to invest in the education of their children, while the absence of capital reduces their ability to invest. Under these circumstances the government intervenes to make information more widely available and to reduce the direct costs by making education free. In addition, educational investments have externalities which means that households that invest are not the sole beneficiaries. For example, a person’s education may increase their household’s income but it also has a spillover impact on the income of other households in the locality who may benefit from the presence of an educated person in the community. Also, education may have social benefits such as helping reduce the spread of contagious diseases. These are seen as coordination problems and therefore governments may act on society’s behalf by choosing a higher level of education than families acting alone. A central part of their argument is their assertion that the difference between private and social returns is higher for primary and secondary level education than for university or tertiary level education. Vocational education may also have high social returns, especially if it is given after primary and secondary

DEVELOPMENTAL STATE: EDUCATION AND TRAINING 11

education. At the university level, they claim that the returns are ‘almost fully captured by the higher incomes of university graduates’ (World Bank 1993:198). They conclude that governments should provide schooling free and available to all at primary and secondary levels. Assessing the performance of governments in the HPAEs, the World Bank group find that public expenditure on education has not been higher among the HPAEs than among the developing countries. Where there is a difference is that the HPAEs allocated less of their budgets to higher education and more to primary and secondary education. This is seen as the crucial point because the investment in primary and secondary education stimulated the demand for higher education, but the governments left it to the private sector to provide a large part of it. Thus the answer to the question ‘Why did the East Asian educational policies work so well?’ is that their investments in education were ‘better’: they responded more appropriately to failures in the market for education. Emphasis on universal, high quality primary education had important pay-offs for economic efficiency and equity. Excess demand created by primary education for secondary and tertiary education was met by a combination of expansion of public secondary education with meritocratic entry requirements and a self-financed private system of higher education. This contrasts with many other developing countries which emphasised public subsidies to universities and failed to internalise fully the external benefits of primary education. The result of all these favourable factors affecting education was, according to the World Bank group, that ‘manufactured export orientation and high labour force skills interact to facilitate the acquisition and mastery of technology with attendant spillovers’ (World Bank 1993:324). Higher levels of education raise the contribution of manufactured export concentration to Total Factor Productivity growth.2 The HPAEs required a highly educated/skilled labour force to make productive use of foreign knowledge and imported capital—conversely they see foreign knowledge as undoubtedly contributing to the growth in Total Factor Productivity.3 The work of Campos and Root (1996) takes the World Bank position on the role of education further. Although they are primarily concerned to defend the World Bank explanation of how a ‘market friendly’ state operates, in the process they touch on the relationship between the investment in education by the HPAEs and economic growth. The empirical findings of Birdsall and Sabot (1995) that primary and secondary school enrolments had substantial effects on economic growth in the early 1980s were influential in this analysis. Campos and Root also maintain that, since primary education has the greatest spillover effects, it has the greatest impact on economic growth; and since the social rate of return exceeds the private rate of return, the government should intervene. They argue that basic education increases the supply of skilled workers. When they are in short supply they earn more than unskilled workers, a scarcity premium, but this scarcity will act as a brake on industrial and economic growth. An increase in the number of skilled/educated workers reduces bottlenecks in the labour market and lowers the

12 DEVELOPMENTAL STATE: EDUCATION AND TRAINING

scarcity premium and thereby decreases income inequality. Campos and Root suggest that this is what happened in South Korea: the heavy investment in primary education meant that when the labour intensive industries expanded under Park Chung Hee’s export-oriented industrialisation there was a plentiful supply of (semi) skilled labour to fuel its expansion. The World Bank group have also been very positive about the benefits to be gained from training. The East Asian Miracle cites some limited evidence in support of the proposition that, within developing countries, training raises a company’s productivity.4 However, when it comes to government attempts to promote training, they point out that in some instances governments have gone badly wrong. Interestingly, one highlighted exception is Singapore’s use of training to promote the information technology sector. Singapore achieved world leadership in information-related services through a concerted programme that involved educational institutions (specialising in business and engineering software training), training subsidies to schools and office workers, computerisation of the civil service and the establishment of an international information network. The conclusion drawn is that this success ‘illustrates the importance of a government’s ability to foresee a major trend and coordinate complementary private investments’ (World Bank 1993:202). However, nowhere in the report are the implications of such attempts by governments to coordinate private investments and government sponsored training examined. The main thrust of the argument is that governments should leave the delivery of training provision to the market. The approach of World Bank analysts is elaborated well in the work of Middleton et al. (1993). The latter adopt a wide-ranging view of education as (i) improving an individual’s skills and abilities and therefore productivity in the workplace; (ii) affecting the rate at which workers are absorbed into the economy; (iii) increasing the rate of job mobility into the higher productivity sectors of the economy; (iv) increasing entrepreneurial activity; and (v) increasing workers’ ability to adapt to technological innovation. However, they argue that it is far more difficult to identify the contribution of skills training to economic growth than it is for general education because of the heterogeneous groups involved and the diverse forms in which such training is delivered. Thus vocational education, technical education and training can be delivered to groups of varying ages and educational achievement and to very different occupational segments of the labour market. When it comes to rates of return these are ‘nearly always acceptably high’ (World Bank 1993:46) provided that suitable employment opportunities are present. Yet, when it comes to the different modes of training, the empirical evidence suggests that enterprise training and skills centre training are more cost effective than vocational schooling. The analysis of the role of government in training is determined by the requirements of neoclassical theory and the ‘market-failure’ argument. But Middleton et al. also argue a strong case for government intervention in the case

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of labour market imperfections, for example, when unions or minimum wage legislation raise wages above their market level, thus distorting the returns to training. This argument is an application of the theory of ‘second-best’ policy options. Whilst an ‘ideal’ labour market might be best, one distortion of that market can be mitigated by an appropriate social intervention. In this case, the private returns may fall short of the social returns and the government may need to subsidise trainees. Similarly, in the case of imperfections in the capital market, when training costs are so high that workers cannot carry them, there is a case for intervention. Finally, when there is weak enterprise training capacity and firms cannot perform their role, then the government should intervene and provide subsidies to employers. In summary, externalities justify the use of subsidies but not the government provision of training. When it comes to questions of equity, for example, using training programmes to reduce poverty, Middleton et al. argue that the record of achieving such objectives is not good and therefore governments should avoid using training programmes for these purposes. Nevertheless they do identify a series of policy objectives for vocational and technical education and training. Employer-based training is usually seen as more cost-effective than pre-employment training. Pre-employment training, where it is given, should be specialised to prepare people for the different labour market segments and should be oriented to employment rather than social goals. Finally, because of rapid change in the labour market, public provision of training, where it is unavoidable, should be flexible. The authors are not against the establishment of national training authorities, because these are seen as providing a framework for dialogue between firms, employers and training institutions. In this way they improve the operation of the market by facilitating the flow of information. The other way in which governments can help the market is through introducing ‘labour market signalling’ which, through establishing clear signals in the form of wage trends, employment trends and information on the cost of education and training, enables more rational decisions to be made concerning the allocation of resources. Thus ‘By monitoring the operation of labor markets and training incentives and by providing information on labor trends to individuals, enterprises, and managers of training institutions, manpower planning can improve the efficiency of training and the performance of labor markets’ (World Bank 1993:157). While the most effective form of government intervention is to raise general education levels, the complexity of delivering training suggests that the institutions responsible should be separated from those providing general public education. This enables training provision to be far more responsive to the needs of the market. Thus, while there is a role for the government to play in the provision of training, the main thrust of the analysis is that the market is the most efficient provider and therefore the role of government should be minimised. In the words of Middleton et al., ‘Throughout the world a consensus is growing on the need to focus training on efficient responses to economic change and to strengthen the role

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played by employers and private training organisations, objectives that most existing training policies and institutions do not address’ (World Bank 1993: 253). The challenge for developing countries is to move away from the social objectives of government programmes towards programmes that respond to market forces. Evaluation of the World Bank approach In evaluating the World Bank approach of the relationship between education, training and economic growth, we are not aiming to question the premise that investment in human capital has been an important factor in explaining economic growth in the developing world. However, there remain a number of problems with regard to the World Bank account as outlined in The East Asian Miracle. First, it only explains the linkages between investment in education and economic growth for the first stage of economic growth, during the period when the tiger economies were producing low value-added goods and services. As Campos and Root argue, investment in primary education helps reduce shortages of (semi) skilled labour in the early phases of industrialisation, but does this also hold for the later phases? The World Bank approach does not address the possibility that the nature of the relationship may change over time. For example, there is some evidence that investment in primary education is particularly effective in enhancing economic growth in the early phases of industrialisation, but it is possible that in later phases investment in tertiary education or skills deepening are more effective. The World Bank’s assertion that tertiary education has few external benefits carries but the flimsiest of supportive evidence. It therefore has little to say about how the investment in education and training facilitated growth during the later phase when these economies were moving into the production of higher value-added goods and services. A second problem with the World Bank’s approach is that it ignores the issue of how the state may be able to link the changes in its investment in education and training to changes in the demand for skills. As well as changing the supply of skills, the state influences the demand for skills, for example, when it pushes the economy into investment in heavy and chemical industries, as it did in South Korea. A further issue is the possibility that state intervention can transform the character of the labour market itself. This point is made by Verma et al. (1995) in their studies of the Asian economies. They argue that through their success in creating a literate and disciplined labour force and attracting sufficient investment in the production of low value-added goods to create full employment, the governments of the tiger economies faced a dilemma. If the economies continue to compete in the markets for low value-added goods and services the government would have to introduce strict controls of unions and collective bargaining which the workers could otherwise use to increase their wages and thereby undermine the competitive strategy of employers. An alternative government strategy is to accept the need for unions and higher standards of

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living and move the economy into forms of higher value-added production, upskilling the labour force in the process. Either way the government is changing the structure of the labour market through its actions. In short, it is a distortion of the realities we observe to conceptualise the government as standing outside the economy as though the two spheres of social activity were completely independent. This leads to the final and most trenchant criticism of the World Bank approach, namely that their use of neoclassical theory leads them to a form of selective perception of the realities of government activities in the area of education and training. The assumption that the market is the most efficient mechanism for the delivery of training automatically directs the attention of the researchers to identify ways of improving the operation of the market and to view the actions of governments as either hindering or facilitating the operation of markets. Yet, to suppose that the substantial transformations in the supply and demand for skills that occur in a rapidly industrialising economy could be delivered by a state limited to rectifying market externalities is difficult to justify. Education and training may generate skills with long and varied time lags, and individuals’ investment decisions are correspondingly slow to adapt. Many of the activities of governments in coordinating education and training to ensure that the demands of employers are met, not just for existing skills but also for the skills of new industries, are ignored by the World Bank approach, or given only an exceptional role.5 The activities of the Council for Professional and Technical Education in Singapore and the Council for Economic Planning and Development in Taiwan, which function to coordinate investments in education and training with the skill requirements of new and existing business, never receive a mention. Because their prior assumption is that governments should only concern themselves with activities which improve the functioning of markets, these broader institutional mechanisms established to coordinate capital investment decisions, which determine the demand for skills with the decisions concerning the supply of the appropriately skilled labour, are never examined. The only government mechanisms discussed are those which can be seen to be improving the operation of education and training markets. Statist approaches Some of the problems associated with the World Bank approach lie in the neutral view of the nature of states. To start to answer the questions left unanswered by the World Bank analysis and take a more detached approach to the activities of governments in the arena of skill formation, we need to look to different theoretical approaches. In particular, we turn to those theories which do not make a priori assumptions about ‘the market’ as the best or only form of coordinating the factors of production, and which take seriously the analysis of the political

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complexion of the state. One such approach can be found in the work of the statists. A group from a variety of disciplines, including economics, political science and sociology, statists have repudiated the benign view of the international economic order in which neoclassical scholars believed states and economies could develop. New statist perspectives have also overturned a more longstanding critique of neoclassical orthodoxy, namely the proposition that undeveloped nations were stuck on a periphery in a dependent position in the hierarchical global economic order (e.g. Evans 1979; Cardoso 1973). The new perspectives have rejected the notion that the state is ‘epiphenomenal’ (Clark and Chan 1994:332). In the East Asian context, in particular, there have emerged a number of ‘developmental states’ which have played an important role initiating and steering the process of industrialisation. Gold (1986), for example, used the case of Taiwan to show development from the ‘periphery’ to the ‘semi-periphery’, challenging traditional dependency theories. Taiwan’s growth is described as displaying ‘dynamic dependency’ allowing upward mobility in the international economic system (ibid.: 133). This process of dependent development took place in a favourable geostrategic and economic environment. In so far as economic growth has been more sustained in East Asia than in Latin America,6 the statist approach has been to examine the historical and political underpinnings to the East Asian states and the strategies they adopted (e.g. Cumings 1987). The statists argued that economic and industrial policies were effective in producing industries able to compete internationally and in promoting comparative advantage and engineering shifts to higher value added production.7 A major tenet of the statist claim is that rapid economic growth can be achieved through coherent economic policies. The concept of the developmental state addressed the problem of how the relatively autonomous states in East Asia promoted development. How did they achieve this policy coherence? There are four political prerequisites (Johnson 1982; Amsden 1989; Wade 1990a). First, the developmental state that initiates and implements such policies is characterised by having a strong executive and relatively weak legislative arm. Second, the state must possess an efficient bureaucracy (also called a ‘technocracy’). Third, it is important to secure the insulation of economic policy making from political and social forces. Finally, developmental states use a diverse range of policy instruments to implement economic policy making. In his seminal work on Japan, Johnson (1982) proposes that a developmental state has economic development as its first priority before, for example, welfare provision. While the state may not always be effective in achieving this priority, the consistency and continuity of the priority fosters a learning process that enhances effectiveness in the long run. Industrial strategy is not so much about picking winners or the displacement of the market, as about ‘a long term strategy aimed at learning to win’ (Johnson 1995:64), in which the goals are increasing

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market share, not short-term profit. While economic policies are market-oriented and long-term, they are not focused on the individual. These themes are taken up by Castells (1992) who summarises the developmental state system succinctly. Castells identifies five commonalties in the experience of the East Asian newly-industrialised economies: the existence of an emergency situation in the society during the early stages of industrialisation; an outward orientation of the economy; the absence of a rural land-owning class; an ability to reskill the society during the process of industrial upgrading and to keep labour under control; and, finally, the ability to adapt rapidly to changes in the international economy. Within the context of external threats to their political sovereignty, the state promoted the process of industrial development, not as an end itself, but as a means of establishing and sustaining the legitimacy of the state and its political independence. Thus for Castells, ‘A state is developmental when it establishes as its principle of legitimacy its ability to promote and sustain development, understanding by development the combination of steady high rates of economic growth and structural change in the productive system, both domestically and in its relationship to the international economy’ (ibid.: 56). Castells’ approach directs attention to the role of the state in actively promoting the process of economic growth. The state is active in engendering a high-quality, well-controlled labour force, in giving strategic guidance to economic agents, and in managing periods of transition and the process of technological diffusion. From the point of view of the relationship between education, training and economic growth, this school of thought sees the state involved in reskilling the labour force during the process of industrial development. However, like the other theories we have examined, the actual manner in which the state achieved these objectives is left unanswered. Indeed, in Castells’ (1992) paper, the emphasis in his discussion of labour is primarily on explaining how the state succeeded in controlling labour; he has relatively little to say about the process of reskilling. Another institutionalist exponent of state-led East Asian development provides more clues. Wade’s ‘guided market approach’ builds on Johnson’s institutionalist capitalist developmental state ‘theory’. He ponders whether the Taiwanese government has shifted policy in support of market trends or whether the policies led the market (Wade 1990a, 1990b). This question is important in terms of skill formation. If state intervention follows existing trends then demand for skills would emanate primarily from business and the state’s task is to match the demand. If, however, the state’s economic interventions lead the market then in effect the state is partly driving the demand for skills. Wade (1990a) concludes that both the Taiwanese and the South Korean governments have led specific industries some of the time, refuting the suggestion that government intervention is unimportant in East Asian industrialisation. He also refutes the charge that these governments have done no more than just help private industry do what it would have done anyway. Instead, it has guided or governed the

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market in what he calls ‘GM (Guided Market) theory’. In another blow to the prevailing conventional wisdom, he points out that neoclassical explanations of high growth in Taiwan downplay what he calls existing ‘enabling conditions’ for growth, including the existence of an educated population, good infrastructure and industrial investment by the Japanese among other factors (Wade 1982:36). Wade’s analysis throws up a number of points that are relevant to our own analysis below. First, he notes that state intervention on the industry specific level will change as the needs of the economy change. Not only will government leadership wax and wane in certain industries but the type of government intervention will alter too from ‘big leadership’ (push) to control (regulation). Second, the periods of government leadership are not limited to those periods of industrialisation usually associated with state intervention, namely importsubstitution industrialisation. Government interventions have persisted throughout the period of export-orientation—the stage in which neoclassical scholars suggest that market forces had the upper hand in industrialisation. Third, the leadership mechanisms differ in different countries. Whereas the South Korean government has directed private industry, the Taiwanese government has used public industries to lead industrialisation. Fourth, while indepth analysis is limited to Taiwan and Korea, Hong Kong is not automatically excluded from the developmental club. The Hong Kong government also seems to have converted to ‘making winners’8. Finally, Wade (1990a) briefly examines manpower policy in Taiwan, concentrating on the way the government steered investment in education, often against public demand. He summarises the expansion of formal education and briefly lists some of the controls the government has over the supply of manpower including manpower planning. A brief foray into the political system shows controls on academics and students to be a feature of the system. Although his analysis of how skill formation has contributed to economic growth is limited to education providing a well-trained labour force through a high ratio of vocational and engineering students, Wade’s analysis is important in showing how the state leads development—in this way demand for skills is affected directly by the state. Although Wade touches only briefly on skills supply, he offers a picture of the demand side and the institutions that effect that demand. More usefully, in this approach Wade provides a detailed account of how industrial policy is made and outlines the effectiveness of a ‘pilot agency’ in economic planning whereby a central agency with a small staff directs the formulation and application of policy (Wade 1990:371). Economic policy making in Taiwan is dominated by a group of little more than a dozen people (ibid.: 217). Amsden (1989), who provided one of the early statist accounts of Taiwanese development (see Amsden 1979), examines the case of the Korean developmental state as an exemplar of ‘late industrialisation’, in which the process of learning plays a crucial part. She builds on Gerschenkron’s hypothesis of late industrialising states requiring more state direction of the economy for

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successful development. The hypothesis concerns the advantages to the late industrialiser should the state become a chief agent in capital accumulation. A significant advantage is the facility to adopt the latest technology and methods of industrial policy-making (Gerschenkron 1962:14–16). Amsden merges this perspective with that of the developmental state and examines the process of ‘catching up’ as a process of learning how to compete (Amsden 1989:3). Late industrialisers develop through the adoption of borrowed technology. This key observation provides the best clue to the importance placed on skill formation at the hub of economic development plans and to the importance of a certain set of institutions. An interventionist state, large diversified business groups, abundant competent salaried managers, and abundant well-educated labour all play their role.9 While writers such as Castells, Wade and Amsden have usefully developed the statist perspective, it may be noted that this perspective has been subject to certain criticisms (Moon and Prasad 1994; Haggard and Moon 1990; Moon 1989), some of which have a significant bearing on our analysis of skill formation. It has been suggested that statists are wrong to over-emphasise the extent to which the state can be an internally cohesive unitary actor and can sustain its autonomy from civil society. One way forward suggested by ‘post-statists’ is to consider the mechanisms through which both states and markets are embedded in the larger societies and cultures (Clark and Chan 1994). To this end they examine firm size and competitive strategy, the nature of financial systems and statesociety linkages as important variables. They argue for the importance of ‘bringing society back’ into the analysis by accepting that political and economic institutions work differently in different cultural contexts. They treat culture not as an exclusive determinant but as a provider of a set of options for action. They also suggest that attention should be paid to institutions, how they emerge, whether they become ‘sticky’ after their operation becomes counter-productive and how congruent they are with cultural norms. This approach represents an important advance in that it moves away from deterministic positions and enables us to treat the process of state formation and economic development as relatively autonomous yet interdependent processes. In many respects the emphasis placed by the post-statists on the ways in which both states and markets are embedded in larger societies makes their analysis very similar to that of the business systems school (Whitley 1992). As we have pointed out elsewhere (Ashton and Green 1996), one of the risks with this school is that the analysis runs into problems of relativism: each system is seen as unique and there is difficulty in explaining why some business systems or economies are more successful than others. The advantages are that it does direct attention to the mechanisms which link the state and the economy and the fact that such mechanisms may play an important role in explaining the process of economic growth. It also highlights the possibility that such mechanisms will take a different form in each society precisely because they are a product of specific historical, political and cultural conditions.

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The industrial relations approach The statist and post-statist approaches draw attention to the links between policies in different areas. An interesting recent attempt to explore the links between economic growth and policies in the area of human resources is to be found in the work of scholars who have focused on the industrial relations and employment systems of the Asia-Pacific economies (Verma et al. 1995). This group have developed a two-stage model to explain the links between human resource management policies and economic growth. During the first stage, a less developed country begins by creating some initial conditions conducive to investment. This may take the form of low wages and low unionisation levels which attracts initial investment. As investments increase, the initial labour market conditions change, full employment is achieved and pressure is put on wages to rise. Full employment and higher education levels also result in a growing demand for unionisation and collective bargaining. The ‘secondary’ conditions of the labour market culminate in the economy losing its initial advantages which attracted the investment in the first place. At this critical juncture, the state can in principle respond in two ways, although in practice political elites use a combination of the two. First, the state can try and maintain the initial conditions, for example, through wage controls and the suppression of unions and collective bargaining.10 Such a strategy was adopted in Malaysia and Thailand. The alternative strategy is for the government to adapt to the secondary conditions. This can be done by linking wages to productivity and upgrading skills by investing in education and training. This strategy can create a virtuous cycle: businesses upgrade skills to increase value-added production which makes them more profitable and hence they pay higher wages to their workers. This means that at the firm level there is a greater training effort, performance-based pay is introduced, flexible forms of work organisation are adopted and there is greater employee involvement for higher value-added production. At the state level this means the government creating incentives for in-firm training, establishing a training fund at state or sector level and introducing productivity-driven wage policies. The state may also want to provide a greater voice for labour by co-opting unions, as in Singapore, or provide greater freedom from periods of suppression, as in Korea and Taiwan. These adaptations create the conditions for a period of further growth. Verma et al. are more explicit than other theorists about the part played by human resource development in this process. They argue that public and private sector investments in skills should complement each other. Without public investment in educational provision business will not invest. Education on its own will not guarantee the upgrading of investment to higher value-added production. Firms must also invest in a variety of on-the-job skills such as problem-solving, interpersonal skills and functional skills. Thus the state has not only to invest in public infrastructure but also ensure that the private sector makes

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a commensurate investment in training. However, just how this is done is not addressed. One of the main contributions made by these scholars lies in reminding us that the response of both business and public policy to conditions in the labour market can influence the future trajectory of the society. This approach also suggests that while the state is relatively autonomous in relation to the economy and labour markets, the political choices made by the leaders can have a profound effect on the structure of the labour market which then conditions the choices available to future politicians. In this way, political and economic processes have a degree of independence in relation to each other, but nevertheless can influence each other. They also suggest that successful adaptation requires changes in both business policy and public policy: neither the state nor business can do it alone. Yet, while the work of Verma et al. provides an accurate summary of the links between education, training, economic growth and the wider labour-market policy issues, nowhere does it seek to establish the mechanisms through which these links were accomplished—that remains the task of this research. They are an advance on the World Bank in that they show how changing conditions in the labour market alter the conditions facing governments and call for changes in political and economic strategy. In this respect, there is much more to ensuring the move into higher value-added production than just investing in secondary education. The government has to change its policies, and those policies then become instrumental in generating new labour conditions and policy issues. Yet, like all the other approaches we have discussed, Verma et al. fail to identify how the state has been able to coordinate the supply of skilled labour to meet the changing demands of employees as they move into new markets and higher value-added forms of production. A political economy approach to skill formation All the theoretical approaches we have discussed attempt to provide an explanation of the rapid economic growth of the newly industrialised economies. All of them attribute an important role to education and training. Some explanations are offered as to why investments in education and training are important in contributing to economic growth, and the theories also throw up some cogent reasons why human capital growth has been relatively high in the newly industrialised economies. In this book, we are able to draw on these approaches in our analyses of Singapore, South Korea, Taiwan and Hong Kong. Yet, while the central importance of reskilling and enhancing employers’ investments in human resources has been noted, the means by which societies have been able to do this has remained essentially a ‘black box’. For all these scholars from very different theoretical perspectives, the process by which decisions are made to invest in the development of human resources, and the translation of these decisions into action and eventually enhanced levels of skill formation, are unproblematic. This crucial assumption needs to be challenged.

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We hypothesise that, despite the diversity of the peoples and governments of the four Asian tiger economies, there is an underlying political-economic model of skill formation common to all. We refer to this as the ‘developmental skill formation’ model, because it builds on and is intrinsically linked to the concept of the developmental state. At the risk of over-simplification, we set out the bare bones of the model here in order to rationalise the particular emphases that we make in our case studies of each of the Four Tigers. The developmental skill-formation model comprises several elements. First, the state has a palpable influence on employers’ demand for skills through the conduct of its trade and industrial policies. In determining, for example, the direction of economic growth strategies into heavy industry (as in Korea) or, more widely, into higher value-added industries such as electronics, the rulers of the tiger economies were also determining what skills were going to be required in the workforce. Ideally the state is conscious of the effects of its industrial policies on skills demands and able to plan for this, but this ideal will not always be the reality. Second, the state deploys a range of mechanisms for ensuring an appropriate supply of skills. A typical characteristic here is the flexibility displayed in policy development, including a propensity to learn from mistakes. This flexibility derives in part from a concentration of purpose on the precise ends of skill formation policy in the interests of economic growth and political legitimacy. Thus, a third element in the model is the fact that education and training policies are linked at the highest and most strategic level with the formation of economic policies. Correspondingly, institutions and mechanisms have been developed (and changed over time) to implement detailed links between the economy and skill formation and to deliver the required education and training courses. The result is a large degree of centralisation of control. Typically, the extent to which the central authority governs the practice of schools, universities, training centres (and even sometimes in-plant training) far exceeds the extent to which these institutions are centrally funded. Finally, and as a consequence of the above, there is in the developmental skillformation model a connection between the stage of economic growth and the development of the education and training systems. We would expect, therefore, to observe that the sequencing of skill-formation policy and institutional development would broadly parallel that of the economy. Through this model, it is possible to conceive how these economies were able to undergo a quite extraordinary transition, from agrarian economy to advanced industrial economy in the course of a generation and, at the same time, engineer a sea change in their institutions for skill formation. Put in this way, it is possible to conceptualise the potential superiority of intervention from a developmental state over market adjustment processes. Suppose the formation of skills were merely seen as, in principle, a market like any other. Imagine that due to some exogenous shock a certain type of skill, call it skill ‘X’, is in short supply. A conventional market adjustment would see a rise

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in the wages paid to workers with skill X. Individuals would respond by investing in the necessary education or training to acquire skill X and, hence, eventually the shortage is alleviated. However, skill formation is a long process, open to substantial risk for the individuals or employers who may fund it. Both parties are subject to bounded rationality, having limits to the extent that they can take into account all possibilities for the future. Opportunism attenuates the possibilities for cooperation in skill formation for individuals in companies. The weakness and potential consequent instabilities of a slow or non-existent adjustment process are enhanced when the economy itself is changing rapidly. Indeed, it follows that a sustained, long-term, high economic growth (over decades), requiring, as a necessary ingredient, a rapid transformation of workforce skills, is impossible with a market-driven skill-formation system. By contrast, imagine instead a state-led adjustment process, where the political elite’s objective is to match skills supply to skills demand. Especially in so-called ‘miracle’ economies or in circumstances where selective industries and technologies are being developed, a political adjustment process is likely to be superior to a market adjustment process. The state is better able to anticipate future demands, in part because through economies of scale and well-educated civil servants it can better read market trends, and in part because the state itself is strongly influencing the skill demands. At the same time, the developmental state has the power to require the needed rapid change in the skill-supplying institutions. While governments are demonstrably not always better at resource allocation than private agents, and may as a general rule be slower than private agents to respond to market signals, the case of most quasi-autonomous organisations involved in skills supply is one instance where state-led adjustments may be more flexible and rapid, as long as political legitimisation is closely linked to economic development. A further characteristic of the developmental states in East Asia, which will contribute to our account, is the underlying high levels of public commitment to education. Such commitment is a necessary, though far from sufficient, ingredient of a successful skill-formation system. The origins of the high desire for education are often attributed to Confucianism or ‘Asian values’. Nevertheless, as already noted, the relatively egalitarian mode of development has enabled even the poorest to deploy surplus resources for education. In addition, the removal of strong land-owning classes opened out these societies at a comparatively early stage. Education, therefore, became a major channel for economic and, hence, social advancement. While not discounting the influence of Confucianism, it is likely that the combination of open access to, and high returns from, education were the major factors underpinning public commitment. Inevitably, any brief statement of our approach to what is an extremely complex story may attract the criticism that this is an over-simplification that may distort the real experiences of these economies. Of this danger we are aware. As will be shown in the case studies, the processes involved in making human resource decisions and in delivering the outcomes are far from being

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unproblematic. They involve political struggles, conflicts of varying degrees of intensity, attempts to establish mechanisms through which the demand for skills from employers can be linked to the supply from the education and training system, and other mechanisms for ensuring that employers participate in the process of upgrading skills. Not all our four societies have been equally successful in making these decisions and in delivering the appropriate skills. Mistakes have been made in determining the level of investment required in education. Some societies have been more successful than others in regulating the flow of appropriately educated labour into the labour market, and attempts to establish institutional mechanisms for linking the supply of and demand for labour have not all been equally successful. However, all of these societies have attempted to establish a close linkage between the outputs from the education and training system and the changing demands for skills. In this respect they are different from the societies of the West. We leave our evaluation and an overview of the differences and contrasts to Chapter 7. Our approach to these issues draws also on the traditions of modern political economy. In this view, while the material relationships of the economic system are central to the analysis of the society, the state acquires a certain ‘relative autonomy’ from the economy and also from civil society. The state is, in part, a locus of conflict between classes within the country and between nations. This approach will allow us not only to see how the education and training system can be moulded closely to the economic system, but also to frame the contradictions that can arise between the different systems and the ways that they may or may not be resolved. In particular, by analysing our societies in a holistic manner we aim to locate the functioning of their institutions in a political, economic and cultural context, while identifying the mechanisms at play at the systems level. Hitherto, the World Bank’s analysis has ignored these mechanisms because its theory assumes that the connections between the state and the economy are not problematic (that is, they are two autonomous spheres) and therefore only investigates those mechanisms which can be seen to help the functioning of markets. Other political mechanisms which coordinate capital and labour are ignored. The approach adopted by the World Bank group leads them to neglect the impact of the wider cultural and institutional context, and therefore to ignore the mechanisms governments use to coordinate the supply of skilled labour with the demands of the economy. A political economy approach also calls for a historical analysis that seeks to examine the outcome of political and economic processes as relatively autonomous spheres of action or behaviour but which at the same time are interdependent. Changes in the political sphere, such as the decisions to move into higher value-added production, can have a major impact on the structure of the labour market and the management of human resources. By the same token, employers, through their adherence to low value-added forms of production, might limit the choices available to politicians. Because of this theoretical

DEVELOPMENTAL STATE: EDUCATION AND TRAINING 25

position, it is crucial that the research focuses on the changes through time in the ways in which the governments in our societies manage the relationship between the supply of skilled labour and the skill demands of the economy. Our concern is to examine a range of issues: how successful each society has been in integrating their industrial strategy with the skill supply; the mistakes that have been made and how these condition the problems faced at a later stage of economic development; the institutional mechanisms that have succeeded in making the linkages at different stages in the process of economic growth and those that have failed; and finally, the resistance employers, workers and citizens have made to such policies. Using this approach, we are in a better position to identify the mechanisms through which the education and training system is linked to the economy and how these change through time. This provides the context in which we can evaluate whether these policies form an integrated whole which is specific to one particular cultural and institutional context, or whether parts of the policies can be transferred to other societies. Our method To pursue this approach we have adopted a dual method. On the one hand, we have sifted through large numbers of reports, documents and statistics on the developing education and training systems in our four countries, and on the changing economy. There is no shortage of modern and historical accounts of economic development in the Four Tigers, but the education and training story has often remained buried in unpublished reports. Moreover, such reports have typically been written with particular agenda in mind, and it has been necessary for us to interpret them in the context of our own theoretical approach. The published literature on education and training in these economies is relatively small and typically focuses on detailed policy issues rather than wider political economy themes. To our knowledge, there are no accounts hitherto which examine the links between education, training and economic growth over the four countries examined in this book. On the other hand, we have explored both contemporary and historical issues through a series of semi-structured interviews with key actors in each of our four countries. The rapid transformation of these economies has meant, serendipitously, that there are a good many people in each country who can remember the circumstances of the comparatively recent earlier stages of their development. Unsurprisingly, we found few who could speak to us authoritatively of events in the 1950s—which was either the beginning or the lead up to the start of industrialisation. For this period and before, we have relied on our interpretation of published historical accounts. For subsequent stages, and mainly so with respect to current issues of reform of the skill-formation system for the next century’s economy, we have been able to solicit the accounts of both participants and observers of the policy process. Participants include both

26 DEVELOPMENTAL STATE: EDUCATION AND TRAINING

politicians and civil servants engaged in the formation and execution of the policies. We have also consulted with academics (who are in some cases also involved in direct policy advice), with trade union officials where they have had a part to play (mainly Singapore) and with businesses and business representatives (i.e. chambers of commerce). While ensuring by means of directed questions that all our issues were addressed, we gave our respondents considerable flexibility to describe the formation of education and training policies and their links to the economy as they saw it. It is of course possible that a number of our respondents would not agree with the interpretations we have placed upon the findings of these interviews. The accounts which follow synthesise the findings from our secondary analysis of documents and our direct interviews. Finally, let us add a word about why we have focused on the Four Tigers. We have done so because, in the annals of economic development, they form a distinct and important episode in the history of the industrialisation of the world. The four economies lagged well behind Japan, but they succeeded in breaking decisively from both the mass of impoverished Third World countries and from the small pack of ‘newly industrialising’ countries that included the Latin American successes of the 1960s and early 1970s. The role played by the East Asian tigers’ education and training systems in this process has been, to the average Western observer, a source of wonder, envy and, above all, mystery. Our intention is no more than to provide some clues and offer some solutions to the mystery.

3 Singapore

Introduction There are at least two distinctive features in Singapore’s industrialisation experience. The most important is the particular form of political leadership and its chosen ideology. Since independence, the People’s Action Party (PAP) leadership has developed an ideology of ‘survival’ which insisted upon the inseparability of economic and political survival and the subservience of all other considerations to these goals. This characteristic of government has led to a unique form of industrialisation strategy with a high degree of government intervention and a systematic integration of social and economic institutions. The other feature is the unusually high degree of reliance on inward investment from multinational corporations (MNCs). This chapter will argue that, for the Singapore government, human resources are seen as the most fundamental element in the nation-building process, and as such, education and training are at the heart of the nation’s wider economic plans. Initially, such plans were more reactive to external and internal circumstances than strategic. The capital and many of the skills necessary for economic growth were acquired through attracting foreign MNCs. However, as the economy began to develop, a ‘learning’ effect emerged which gradually led to education and training, among other government activities, being used in a more strategic manner. In particular, later education and training reforms were designed to bring about specific economic objectives which ultimately shaped Singapore’s comparative advantage. In this respect, we shall demonstrate how, over time, the link between human resource management and Singapore’s industrial growth has become more elaborate and strategic in character. Although Singapore is a small country, the emergence of a coherent strategy for economic growth involved the creation of a strong national consensus. In many respects the process of consensus building with its collectivist emphasis resembled the ethos of a learning organisation. It has involved an emphasis on constant learning and upgrading as the basis for the economy’s competitive advantage. This theme will become evident as we examine major stages of

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economic development in Singapore and how these have impacted upon the education and training system. The distinctive features of industrialisation in Singapore Industrialisation through a managed economy The debates on the political leadership and the role of the Singapore state in the process of industrialisation have been subject to a series of recent studies across a number of disciplines (Rodan 1989; Tan 1994; Sandhu and Wheatley 1989; Ashton and Sung 1994, 1997; Schein 1996; Drysdale 1996; World Bank 1993; Lall 1996; Campos and Root 1996). Surprisingly, with such a high level of interest, there is no consensus on the effects of state intervention even though it is widely accepted that state intervention in Singapore is exceptionally extensive and that intervention goes well beyond the economic sphere (Hill and Lian 1995; Huff 1995). We shall argue that the People’s Action Party (PAP) government has managed to achieve effective control over most of the resources needed for industrialisation. State intervention in Singapore went well beyond the ‘market friendly’ prescription advocated by the World Bank (1993): the government used its control over strategic domestic markets and institutions to help the economy respond to opportunities in the world markets in order to meet their political objectives of creating jobs, absorbing surplus labour and achieving rapid economic growth. In this process, the government has shaped labour and, to a lesser extent, capital in facilitating the establishment of Singapore’s comparative advantage in world markets. These are hallmarks of the developmental state. Huff (1995) has identified six main features of government intervention in Singapore: labour market regulation, direct foreign investment, government forced savings, stateowned enterprises, macroeconomic stability and international financial services development. Here we are only concerned with those aspects of government intervention which impinge on the education and training system. The nation-building and consensus formation processes On achieving independence from the UK, the initial PAP strategy was to merge with Malaya as a means of ensuring the survival of Singapore. However, differences in the paths of political development between Malaya and Singapore forced the union to end abruptly in 1965. The sudden advent of full political sovereignty seemed like a daunting prospect to all Singaporeans. The threat of national instability provided the impetus for the establishment of a strong state apparatus staffed by technically competent officials (Castells 1992; World Bank 1993). Through the control of this apparatus, the political elite believed that Singapore might just survive, although achieving this survival might be at the

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expense of alienating some sections of society such as employers or trade unions. At this point in the process of political development national consensus was weak. In the face of these problems the government adopted a two-pronged strategy. On the political front the education system was charged with the task of creating a strong sense of national identity. On the economic front Singaporean independence was to be secured through the creation of a strong, export-led industrial base (Low et al. 1993; Tan, G. 1995). With a poorly educated immigrant labour force and unemployment rates in excess of 14 per cent, the political elite had to rely initially on low-cost, disciplined labour and a strong and stable political system to attract MNCs. As these labour-intensive industries required relatively uneducated labour, the fact that education was limited to provision at primary level was not a problem. It was more important that the government should provide an attractive industrial environment to encourage inward investment. Indeed, during this first stage of economic development, the role of education and training was limited. What was seen as more important was the provision of a disciplined labour force. The provision of a disciplined workforce was a difficult process and only achieved through the containment of worsening industrial disputes (Deyo 1987).1 This involved the PAP suppressing the Communist Party and, crucially, persuading workers that a confrontational atmosphere would not be appropriate for workers’ welfare in a country where inward investment was critical for economic survival. Between 1959 and 1968, a series of legal reforms in the fields of industrial relations legislation, together with institutional reforms, brought about drastic changes in the way trade unions functioned in Singapore. The first change took place immediately after the PAP took power in 1959. The Trade Unions (Amendment) Bill outlawed a union if it did not comply with three specific requirements: (a) having at least 250 members; (b) coming under one of the nineteen specified categories of trades; and (c) was a member of the newly established National Trade Union Congress (NTUC), which was, and still is, under the control of PAP. The major effect of this legislation was to regulate trade union activities so that they would be compatible with PAP policies. The cooperation of the trade unions was considered so important that a policy document was published by the Finance Minister, Dr Goh Keng Swee, in 1960, detailing the necessary industrial conditions for economic expansion. Fearing that worsening industrial disputes would push overseas investors to invest in Hong Kong, Malaysia or elsewhere, Goh warned: The consequences of failure to industrialise our economy must be realised by every leader of the labour movement. Unemployment will mount as the years go on. The political effect would be to discredit not only the present government but also the democratic system. But more to the point, increasing unemployment must weaken the trade union movement. (Goh 1960)

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Dominated by pro-PAP members, the NTUC was actively in favour of pursuing industrial peace and agreed with Goh’s view that wages should be clearly linked to the employer’s ability to pay. Independence in 1965, and the subsequent announcement of the British withdrawal in 1968, added more urgency to the government’s belief that the role of the trade unions ought to fall within the framework of a disciplined workforce. The Criminal Law (Temporary Provisions) (Amendment) Bill in 1967 stipulated that no strike or lock-out could take place in essential services unless a notice was given at least fourteen days before. Two more Bills were to follow—the Employment Bill and Industrial Relations (Amendment) Bill. The former Act linked wages directly to productivity whilst the latter gave management the sole right to decide on matters relating to all personnel functions —for example, promotion, hiring and firing, allocation of tasks, and so on. These changes established a new framework, radically different from that practised in the West. The new framework emphasised the paramount importance of national economic growth. The effects of these new laws had farreaching consequences in the later periods of industrialisation. Many of the initial measures were essentially imposed on the unions. However, it is noticeable that later attempts to consolidate the relationship between the PAP government and NTUC were more subtle, with the aim of establishing a fundamental long-term consensus. The first of such changes involved the cultivation of a close working relationship between the PAP party leadership and the NTUC under C.V.Devan Nair, a leading trade unionist who also had a senior position within the PAP party. Such a relationship was crucial in persuading the NTUC to abandon its combative stance. At a historic seminar held by the NTUC in 1969 under the theme of ‘Modernisation of the Labour Movement’, a key directive was made in which a consensus-based tripartism was laid down as the foundation of all industrial relations decisions. At a seminar a decade later in support of the ‘Second Industrial Revolution’, the manifesto which outlined this change was further cemented into an institutional arrangement, known as the ‘symbiotic’ relationship. Tripartism, under ‘symbiotism’, meant that ‘social responsibility’ was the bedrock on which all decisions were made: no matter how people were grouped together—whether as labour or management—ultimately all were co-owners of Singapore, and therefore co-determinants of its welfare and destiny. (Vasil 1992) In order to institutionalise the consensus process, the ‘symbiotic’ relationship was later formalised in the form of ‘role-rotation’. This involved the NTUC officials, employers and PAP politicians moving between different positions within the tripartite system at different stages in their careers. This practice has instilled a particular form of industrial consensus whereby industrial relations become matters of national/common concern, and the participants are charged

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with the responsibility of ‘harmonising’ the final effects on all those who are involved.2 The way in which this operates can be seen in the careers of leading officials. After holding the position of Secretary-General of the NTUC, Devan Nair later became the President of Singapore. Lim Chee Onn, who took over the secretarygeneralship, also took up a cabinet position as Minister without Portfolio. Lim was replaced in the NTUC by Ong Teng Cheong, the Minister of Labour. Ong, who was an architect by profession, later returned to the government as Deputy Prime Minister. Lim Boon Heng, the 1997 NTUC Secretary General and Chairman of the Productivity and Standards Board (PSB, formerly the National Productivity Board), was previously Minister for the all powerful Ministry of Trade and Industry. Lim had a business background in shipping. Although it is doubtful that ‘role-rotation’ was a well-defined strategy in Singapore’s early stages of industrialisation, it is now regarded as fundamental to the national consensus building process.3 Indeed, the consensus building process has also taken place in other spheres of the Singaporean society—for example, in the business community, in the Civil Service and among the grass-roots voters. We have highlighted the nature and effects of such consensus building and we shall not dwell on the subject any further. More detailed and excellent accounts on this topic can be found elsewhere (see Rodan (1989); Vasil (1992); Sandhu and Wheatley (1990); Hill and Lian (1995); Bello and Rosenfeld (1990); Deyo (1987)). Reliance on MNCs The second distinctive feature of Singapore’s industrialisation is its heavy reliance on the participation of MNCs. As we discuss in Chapter Four, South Korea has adopted an approach similar to that of the Japanese, in which industrial and financial conglomerates (the ‘chaebols’) have been deliberately fostered by the government. Whilst both the Hong Kong and Taiwan economies are dominated by small- and medium-size enterprises which tend to specialise in particular industries, Korean conglomerates have grown to enormous proportions which have enabled subsequent horizontal and vertical diversification. One further consequence of Korea’s approach is the establishment of a larger proportion of capital-intensive industries. By contrast, Singapore had a very different set of economic and political constraints upon achieving independence from the British. Other than a small entrepôt trade infrastructure, there was little industry to speak of. In fact, after independence, as international trade began to intensify, many primary product producers, such as Indonesia and Malaysia, started to trade directly with Western importers, thereby threatening Singapore’s one and only comparative advantage (Goh 1995). The Singaporean government decided that in order to tackle the socioeconomic problems at the time of independence, it would need to industrialise. In consultation with a UN commission, the government was

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advised that an industrial promotion body should be set up in order to induce manufacturers to establish bases in Singapore. As we shall see later in this chapter, the outcome was the establishment of the Economic Development Board (EDB) and the influx of MNCs, both of which became important factors in shaping Singapore’s subsequent economic development. The work of the EDB was fundamental in establishing the presence of MNCs in Singapore. The MNCs not only helped launch Singapore into a massive export-oriented industrial strategy, they also influenced the subsequent stages of the PAP government’s effort to upgrade the skill and technology content of the economy. To this day, MNCs are still one of the most important considerations in the decision-making process of Singapore. By the mid-1980s, MNCs grew to represent 70 per cent of gross manufacturing output and 50 per cent of manufacturing employment (Bello and Rosenfeld 1990), and by 1992 they represented 74.2 per cent of output and 84.5 per cent of direct exports (Singapore Government 1992). The fact that Singapore had no ‘natural’ advantages apart from its human resources led the government to emphasise three important features of their education and training system. First, the system was one means whereby the government could reduce ‘wastage’ and ensure the maximisation of human resources. With only a small population of three million, it could not afford to waste any of its human resources. Second, education and training had to be continually modified if the output from the system was to keep pace with the demand from employers for ever higher level skills. This has produced two major reforms in the last twenty-five years. These reforms have reflected changes in industrial policies and expected future developments. In this process of change the new measures are becoming increasingly strategic in nature. Third, there is a close link between international trade and the skill output of the education and training system. Trade development patterns, as interpreted by the EDB, form one of the most important considerations for setting education targets. The rationale can be seen in the following speech by Goh Keng Swee: NICs started as everybody else did—in poverty. In the early phase, the emphasis was placed on what was perceived as essential—mainly infrastructure in transportation and communications as well as energy supply. Once NICs began to move from purely low-cost labour-intensive processes, the development of skills over a wide range had to be undertaken and the education system overhauled. It should be noted that growth provided both the demand for skill development as well as the supply of resources to mount the effort. Rapidly increasing GNP boosted government revenues and enabled finance ministers to release more funds for education. Thus, there developed a symbiotic relationship between economic development and human resource development. (Goh 1985)

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The development of the education and training system in Singapore Stage 1: Establishing a manufacturing base and full employment The industrial base and the demand for skills The initial economic development of Singapore was closely influenced by the political situation in the region at the time. The process of de-colonisation after the Second World War led to self-government in Singapore in 1959 and subsequent independence in 1965. The PAP government inherited a narrowly based economic structure which depended mainly on the entrepôt trade. This rather shaky beginning was also accompanied by social, political and racial unrest. At the same time, the population rose sharply as a result of a massive influx of refugees from communist China and the unstable situation for the Chinese in neighbouring Malaysia. The level of unemployment increased, industrial strikes were frequent and race riots broke out. These conditions posed obvious and immediate threats to the PAP (Vasil 1992). The initial PAP economic and political strategies were based on the merger with Malaya. This took place in 1963, but within two years Tunku Abdul Rahman of the Malaysian Federation became suspicious of the PAP leadership’s wider political ambition in Malaya and decided to reject the original plan for merger (Drysdale 1996). In 1965, Singapore was forced out of the union. The sudden onset of independence meant that the original economic plan had collapsed. In the original plan, Singapore’s economic strategy followed advice from the World Bank that it should adopt an import-substitution strategy. It was also anticipated that once Singapore’s industrial base was established, the Malaysian Federation would become the wider ‘common market’ for Singapore’s products (Rodan 1989). The collapse of the merger therefore created a crisis situation and public acceptance of the need to embark upon urgent and drastic policies which were to be backed by technically competent officials and a strong state apparatus (Ashton and Sung 1997). The collapse of the original economic strategy also meant that the previous import-substitution policy was no longer relevant. Singapore could no longer rely on the availability of a large internal market. At this point, large corporations in industrialised countries were beginning to move into the Asia region to take advantage of low-cost labour. Both Hong Kong and Taiwan had started to benefit from such development. A swift change of Singapore’s economic strategy towards ‘export-oriented industrialisation’ (EOI) took place in 1965 with very generous incentive schemes introduced for MNCs two years later. All of a sudden, industrialisation through export-oriented manufacturing became the

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main thrust of policy around which the entire state apparatus (including the education and training system) was to evolve. On the political front, the education system was charged with the task of creating a strong sense of national identity which was thought to be vital for industrialisation (Goh 1995). On the economic front, EOI policy meant that inward investment from multinational corporations (MNCs) had to be brought to Singapore in order to establish a strong manufacturing base (Low et al. 1993; Tan G. 1995). The latter development led to a fundamental shift in the functioning of the Economic Development Board (EDB). The EDB was originally created to carry out the import substitution policy in 1961. Its main task then was to collate and analyse information on those industries necessary to implement the import substitution programme. The new mission of the EDB, which it performed extremely successfully, was to increase national output through manufactured exports.4 Between 1965 and 1979, manufacturing output as a proportion of real Gross Domestic Product rose continuously from 19.8 per cent to 28.8 per cent. Such spectacular growth could be attributed to two causes. First, Singapore’s traditional manufacturing sector such as the petroleum refineries and related products benefited greatly from the Vietnam War and the general economic boom in the region (Rodan 1989). Second, MNCs, especially electronic and electrical manufacturers from the US, began to move to South East Asia, and many of these chose Singapore in preference to Hong Kong and Taiwan because of political uncertainties surrounding the ‘Cultural Revolution’ in China (Goh 1995). Throughout this phase of growth the main demand from employers was for semi-skilled labour. By the early 1970s, unemployment had virtually disappeared. The tight labour market then led to two consequences: labour was imported to maintain industrial output while there was a new readiness to direct investment by MNCs toward higher value-added products. However, these two developments presented a difficult dilemma for the government. On the one hand, the importation of foreign workers who were mainly unskilled was perpetuating Singapore’s lowcost competitiveness, although labour costs were rising. In 1973, one in eight workers came from outside Singapore, mostly from Malaysia (Deyo 1981). On the other hand, if the PAP government was to push the MNCs into higher valueadded forms of production it might encounter resistance and thereby put at risk its objective of full employment. Moreover, the move into higher value-added forms of production would create new skill demands on the economy. In addition, it was believed that the impending British military withdrawal would create massive unemployment problems.5 In these circumstances pushing MNCs too hard was not an option available to the government. In the event, the British military did leave in the early 1970s, but the new jobs created as a result of MNCs coming into Singapore avoided mass unemployment. Tentative efforts to upgrade the economy did take place through the reduction of preferential terms for those MNCs which brought in low skill jobs. However, the skill-upgrading process was postponed until 1979, owing to the oil crisis in

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1973 and the subsequent worldwide recession which caused a loss of jobs in Singapore. In 1974 and 1975, over 20,000 redundancies took place in the primarily low-skilled, electronic and electrical assembly sectors, although many of the lost jobs were those of migrant workers from Malaysia (Rodan 1989). The official unemployment rate reached 4.6 per cent in 1975, even though the unskilled foreign workers provided a buffer for the Singaporeans in times of crisis (Bello and Rosenfeld 1990). After the end of the recession in 1976, the government immediately embarked upon an economic recovery strategy which had two specific features. First, the low-cost production strategy was to continue with the aim of retaining competitiveness vis-à-vis the other three Asian Tigers. Wage restraint continued to be effective because of the close liaison between the employers, the National Trade Union Congress (NTUC) and the government.6 The second feature was to encourage the expansion of local enterprises. After years of continuous growth of MNCs in Singapore, it was becoming clear that there was a gross imbalance between MNCs and local enterprises. This imbalance was apparent irrespective of whether the measurement was output, investment rates, market competitiveness, employment or wages. Some of the more visible consequences were quite alarming. For example, business failure rates were exceptionally high, one estimate suggesting that of all local enterprises established in 1960, 38 per cent had gone under by 1978 (Lim et al. 1988). Another consequence was the increasing polarisation between the local and MNC enterprises. Local businesses suffered significant disadvantages in terms of market power, access to know-how (technology and management), access to funding and legislative protection. Over time, most talents were attracted to MNCs because the salaries and employment packages were better. Hence, instead of having MNCs as a catalyst for local growth, local businesses were ‘crowded out’ (Bello and Rosenfeld 1990). The government’s response was to argue that there was a lack of entrepreneurial spirit and know-how among local enterprises. However, it is debatable whether or not this was the case. After all, Chinese enterprises abroad and the local businesses established before the arrival of the MNCs had been successful. While the government was aware of the problems of local enterprises, in the face of this dilemma, it took a pragmatic view that Singapore needed MNCs and the solution had to be sought within that framework. The first attempt to address the imbalance was the introduction of the Small Industries Finance Scheme (SIFS) in 1976. This provided preferential interest rates on loans which were intended to establish new businesses, the diversification of existing ones and the better integration with MNCs. Despite the introduction of a second scheme, the Product Development Assistance Scheme (PDAS) two years later, the situation remained more or less as before. Even by the mid-1980s, the integration of local enterprises into the economy was still a problem. MNCs were still sourcing less than 25 per cent of their supplies from local enterprises (Lim et al. 1988).

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The response from the education and training system During this initial phase the most significant problem facing the government with regard to the education system was its role in fuelling racial tension and community discord. Education prior to independence had been dominated by a communitybased system in which schools and syllabi had been sharply divided along race, language and habitat lines. Education was therefore a major source of social unrest. In 1959, as soon as the PAP came to power, the community-based system was replaced by a state system (Gopinathan 1974). Lee Kwan Yew, the prime minister, summed up the problem at the time: Our community lacks in-built flexes—loyalty, patriotism, history or tradition …our society and its education system was never designed to produce a people capable of cohesive action, identifying their collective interests and then acting in furtherance of them. (Lee Kwan Yew l966) In this respect education was a crucial tool in the nation-building process. However, it soon became an important economic tool as the EDB started to recruit MNCs from overseas. Education was required to help produce a literate and disciplined labour force for the MNCs. In this respect the government’s education policy was closely linked to its industrial relations policy. The other part of the package they would deliver to the MNCs was a strong and stable political system. Meanwhile the MNCs could be relied upon to bring in the managerial and technical expertise for the new industries. The Singaporeans’ historic task was to learn from them (Lee 1980). The government did move to upgrade basic literacy levels and provide training in maths and science. It soon became evident that skills beyond basic literacy would be required, and the government responded in 1968 when the Ministry of Education set up a Technical Education Department to initiate technical education. From 1969 onwards, all male lower secondary students had to undertake some technical subjects. Thus, at this early stage of industrialisation, basic education was still of paramount importance, and technical education was in its infancy. The speed of Singapore’s economic growth had meant that many of those who left the education system in the colonial era and in the early stages of Singapore’s independence still had literacy and numeracy deficiencies. Even as late as the 1980s, 61 per cent of Singapore’s non-student population had an educational level of primary six or less (Ministry of Trade and Industry 1991). This was to create a serious ‘training problem’ in later years. Nevertheless, there were clear signs at this stage that a closer link between education and the economy was being forged.

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Stage 2: The ‘Second Industrial Revolution’—creating a skill upgrading strategy The industrial base and the demand for skills After the ‘oil shock’ in 1973, most industrialised countries suffered very high levels of unemployment. One of the consequences was increased protectionism. Singapore was anxious to maintain her exports within the General System of Preferences (GSP) by ensuring a high level of local content. However, because the integration of local enterprises and MNCs did not improve dramatically, Singapore’s case to stay with the GSP was weak. In 1976, the European Union (EU) (then the European Economic Community) began to impose duties on electronics imported from Singapore. This development rekindled the issue of economic upgrading. Unlike the first attempt in the early 1970s, the government now became closely focused on this strategy. By upgrading, Singapore could by-pass the problem of rising protectionism which was mostly centred around low-skill production. The strategy was also prompted by the emergence of competition from ASEAN countries and the problems caused by the continuing importation of labour on a large scale (Rodan 1989). In the late 1970s, the growing availability of equally attractive low-cost labour in other parts of the region meant that Singapore was losing some of its competitive advantage. The shift in policy emphasis coincided with similar moves in Taiwan, Korea and Hong Kong in the late 1970s and early 1980s. The close timing of events suggests that all four Asian Tigers were subject to similar external constraints. The ‘second industrial revolution’ was launched in Singapore in 1979. New companies producing higher value-added goods were to be attracted, while existing companies producing low value-added goods on the basis of low cost labour were to be persuaded to upgrade to high value-added production. One of the ways by which the government hoped to bring about this transformation was through its influence in the field of industrial relations. It attempted to force up wages through a ‘wage correction’ policy and by investment in education and industrial training (Peebles and Wilson 1996). In 1979, the National Wage Council recommended a wage rise of $32 across the board, plus a 7 per cent increase; a 4 per cent increase in the national pension scheme (Central Provident Fund) was added. Similar increases were to follow in 1980 and 1981. The rationale behind these ‘wage corrections’ was to bring the level of wages in Singapore up to a more realistic level after years of continuous wage restraint. In order to achieve these political goals, the government had to act independently of the immediate interests of capital. It had already established a history of such action through its encouragement of MNCs, which had meant that the local business elite were largely excluded from the decision-making

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process (Huff 1995). In this second stage, it had to entice new companies which could introduce higher value-added production to Singapore. At the same time, it cajoled and coerced companies already established in Singapore to move away from low value-added production. Towards this end, the PAP government adopted a number of new policies aimed at increasing the cost of labour and thereby discouraging further investment in low value-added production. Employers in low value-added production were encouraged to relocate through the persuasion of activists from the PAP. Meanwhile, the unions were actively encouraged to push for large increases in wages. The PAP government also imposed a levy on low-paid labour to discourage companies from continuing to embark on low value-added production (Wong 1993). This levy created the Skills Development Fund (SDF), which was then used to finance a series of programmes aimed at improving workers’ skills and employers’ ability to train. Once wages were forced up, more capital-intensive production would have been expected. However, the Singapore government was determined to hasten the process. Therefore, the PAP also intervened directly into a number of areas which might bring about a higher level of skill more rapidly. One example was the establishment of technological institutes. These included inter-governmental collaboration which resulted in the German-Singapore Institute of Production Technology, the Japan-Singapore Institute of Software Technology and the French-Singapore Institute of Electro Technology. In another area, the government set up the Government of Singapore Investment Corporation (GSIC). The idea was to make use of some of the country’s massive foreign reserves to invest in high-tech companies abroad which might later be brought back to Singapore. In short, the two-pronged attack was designed to hasten industrial restructuring. The ‘corrective wage’ policy turned out to be one of the government’s failures. The expected technological upgrade was slow to materialise. Instead, new investment for the period was down by 40 per cent, and some MNCs even moved to Malaysia and Thailand. There was little evidence that MNCs were bringing their research and development (R & D) operations into Singapore during the period (Bello and Rosenfeld 1990). The three years of wage increases also brought about a situation where real wage increases for the period of 1982–4 were twice as high as productivity growth (Tan, G. 1995). There followed a recession in 1985 in which gross domestic product fell by 2 per cent. The other problem encountered by the government during this period was that of ‘job-hopping’. With the advent of full employment, employees at all levels of the labour market were starting to move between jobs to maximise their income. This worried some employers and the government, which subsequently tried to influence the behaviour of employees, encouraging them to adopt Japanese practices of loyalty to the company and attempting to introduce administrative measures to reduce the practice. In the event, this policy backfired as the perception gained ground that the Singapore workforce had undesirable characteristics—a perception which might discourage the MNCs from investing

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in Singapore, the very converse of what the policy was meant to achieve. In view of this, the government sought to extricate itself from the policy. These episodes highlight some of the limits to government’s ability to influence enterprises and, in particular, the delicate and difficult relationship of government with MNCs. Nevertheless, the PAP has generally been pragmatic and flexible in pursuit of its vision and has used its considerable power to encourage new industries and relocate old ones if necessary. The result, in terms of upskilling, can be roughly gauged by a look at the changes in occupational structure going on in this period (see Table 3.1). The late 1980s witnessed an increase in the proportions of technicians and associate professional workers and just the beginnings of an upward shift in managerial personnel. A prominent illustration of the government’s strategy to move into industries Table 3.1 Employed persons in Singapore, by occupation, 1984–1996 (per cent)

Professionals and managers Technicians and associate professionals Clerical workers Service and sales workers Production craftsmen, operators, cleaners and labourers Others

1984

1988

1993

1996

12.2

12.5

16.6

19.7

9.6

11.5

14.1

17.6

14.8

14.0

14.7

15.1

15.4

15.1

13.4

13.2

42.9

41.6

37.1

31.0

5.1

5.3

4.1

3.5

Source: Singapore Department of Statistics, Yearbook of Statistics, 1993 for years 1984– 88 and http://www.gov.sg/mol/rsd/statem.html for years 1993–96. Based on the Singapore Standard Occupational Classification 1990.

producing higher value-added services is the growth of the financial sector. Throughout this period the government had been targeting financial services as one sector where Singapore had a competitive advantage. After 1979, financial and business services replaced manufacturing as the engine of growth (Huff 1995), and between 1979 and 1992 these grew at an annual average rate of 9.9 per cent. In 1968 the government had, in consultation with international banks, established an Asian Dollar Market, backed by tax and other fiscal incentives, stealing a march on Hong Kong where the government lacked such an ‘interventionist’ commitment. Government investment in new telecommunications equipment and systems enabled this expansion to continue

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and in the 1980s Singapore became the centre for merchant banking and fund management. By 1993 Singapore was the world’s fourth largest foreign exchange market. The response from the education and training system If the government was to be effective in attracting the MNCs necessary to establish higher value-added forms of production, it had to ensure that the requisite skills were in place. Levels of educational achievement had to be increased and more sophisticated forms of technical education introduced to create the appropriate intermediate level skills. The government started the task of upgrading education through the Goh report (1979). This report focused on five main areas: high education wastage, low literacy, ineffective bilingualism, variation in school performance and low teacher morale. The drop-out or attrition rates were high when compared with the UK, France, Japan and Taiwan, while only 40 per cent of each cohort were able to reach minimum competency levels in two languages. It was argued that the rigid curriculum and common examination system which favoured high achievers contributed to these problems, while students were overburdened with work in a context where even the objectives of bilingualism were not clear (Low et al. 1993). The Goh report recommended the introduction of streaming into primary and secondary education and that a greater emphasis should be placed on language acquisition. As a way of tackling the ‘drop-out problem’ and the difficulties encountered by those students who were not ‘academically inclined’, it was decided that the less ‘academically-able’ students would now have a vocational route within the education system. Central control of the curriculum was maintained, but a common curriculum was only retained for the first two years of secondary education. This period also saw the establishment of the Singapore Technical Institute (Yip and Sim 1994). Higher education was also expanded, but only at the modest rate of 3.7 per cent per annum (Huff 1995). While the educational system was reformed it was also clear that the skills of the labour force would have to be upgraded. There were a number of strands to this policy thrust. The first was to integrate initial training with efforts to upgrade the skills of the adult workforce. Training had been oriented more to the demands of the workplace, but this was primarily concerned with initial vocational education. The upgrading of those in work had been organised separately under the Adult Education Board. However, by the 1980s there was an urgent need to upgrade the skills of the non-student population if the drive to a high technology economy was to be successful. Consequently, the activities of the Adult Education Board were brought together with those of the old Industry Training Board and consolidated under the control of a new organisation, the Vocational and Industrial Training Board (VITB), established in 1970. The VITB provided a single national training authority for regulating the provision of vocational and industrial training at sub-professional level. It

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therefore became a central component of the education system with VITB institutes providing education and training for those young people who did not continue through the academic route. However, in addition to these responsibilities for all apprenticeship training and other training including skills certification, the VITB was given the responsibility for upgrading basic worker skills. Facing a situation of labour shortage the government launched a series of programmes which would upgrade the skills of those mature workers who had received only primary education or less in the 1950s but who were still in employment. The programmes, delivered in modular form through institutes and employers, provided a platform for such workers either for continuing their education to secondary school level or for the enhancement of their work-based skills. The programmes were funded by the SDF and managed by the National Productivity Board (NPB, now the Productivity and Standards Board). Some of the most significant training schemes were: from 1983, Basic Education for Skill Training (BEST); from 1986, Modular Skills Training (MOST); from 1987, Worker Improvement through Secondary Education (WISE); and from 1987, the Core Skills for Effectiveness and Change (COSEC). These schemes are very much part of the continuing upskilling and reskilling effort required by the Singaporean industrial strategy. For example, BEST was set up in 1983 to cater for a large proportion of the Singapore immigrant workforce who had not completed primary education. The main objective of the programme was to ensure that basic education was firmly embedded in the workforce. In the late 1980s, the three other schemes were introduced to enhance the skill-building process. WISE was established to enable those workers who had only primary level general education to continue their education to secondary school level (i.e. O level). MOST was put in place to enhance the skills of semi-skilled workers in manufacturing; COSEC targeted the skill needs of service sector workers. By 1990, illiteracy rates had been reduced to 10 per cent of the total population and 1.4 per cent of the 20–24 age group (Singapore Government 1990). The emergence of these training schemes was therefore by no means incidental but strategic. They were an integral part of the attempt to enhance and diversify the industrial base of the economy and to ensure that the move in the direction of higher value-added forms of production was not held back by inadequacies in the education and training of the workforce. There have not been any systematic evaluations of these programmes in the public domain. Official figures do suggest that the schemes were extensive in their coverage. In the case of BEST, by 1992, 78 per cent of the targeted workers (225, 000) had participated in the programme. However, as these are modular programmes not all participants will have undertaken all modules, and of the 75 per cent of the target group who had participated in BEST by 1991, only 42,000 had completed all four modules. By 1992, WISE had covered 42 per cent of the targeted 122,000 workers (ITE 1993). At the workplace, Hing Ai Yun (1995) reports the case of one factory where the introduction of a twelve-hour shift

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system resulted in the cancellation of BEST and WISE classes which took place outside working hours, whereas Huam and Jewson (1995) report the case of the taxi company NTUC Comfort where high levels of participation were achieved in these programmes among taxi drivers who attended classes in their own time, and many of whom progressed to further education. Throughout this period the government was struggling to put in place a skill formation strategy which would ensure that its attempt to attract higher value-added forms of production would not be frustrated by the lack of appropriate skills among the labour force. However, in spite of its undoubted successes there still remains a large group of adults whose basic skills do not equip them for the demands of employment in higher value-added industries. Finally the NPB also sought throughout the period to increase the awareness among employers and employees about the need to increase productivity through spearheading a campaign to introduce quality control circles (QCC). These were introduced in private companies and government organisations and training for them was subsidised by the SDF. Stage 3: Singapore International Incorporated—consolidating a skill formation strategy The industrial base and the demand for skills Towards the end of the 1980s there was a further shift in the political leaders’ vision of the future of Singapore. To stay ahead of their competitors in the region, the government set out to match the economic performance of the best industrial economies—a form of ‘national bench-marking’. The 1990s ‘vision’ is set out in the document ‘The Next Lap’ (Government of Singapore 1991). The implications of this vision for the economic development of the country were detailed in the Strategic Economic Plan (Ministry of Trade and Industry 1991). This established that the Singaporean people were to achieve the same standard of living as the Swiss by 2020 or 2030. To achieve this objective, the economy was to continue to attract companies planning to invest in the production of high value-added goods and services. Thirteen industrial clusters were identified as areas where Singapore could sustain a competitive advantage in world markets and these were to be the priority areas for development. However, in order to sustain economic growth it was felt necessary for Singaporean companies to move out of Singapore into the Asia Pacific region and form a ‘second ring’ (i.e. regionalisation). This would enable them not only to take advantage of cheaper labour outside Singapore but also to place Singapore in the centre of the region’s drive for economic growth. Singapore would move from ‘Singapore Incorporated’ to ‘Singapore International Incorporated’ (Low et al. 1993). This symbolised a further shift in

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the government’s strategy. Previously, the PAP government was preoccupied with the strategy for cajoling the MNCs into skill upgrading. If that was not possible, it would try attracting the ‘right’ type of MNCs. Now, the government actively engaged itself in the upgrading process, be it at home or abroad. The ‘regionalisation’ programme has its origin in the early EDB-MNCs cooperation which culminated with the ‘Growth Triangle’ initiative in the late 1980s. The Growth Triangle consists of Singapore, Johor in Malaysia and Batam (and now the rest of the Riau Islands) in Indonesia. The project was not intended to be a customs union like the European Union. Instead, it is an economic initiative which takes advantage of the different stages of economic development and relative resource endowments of the cooperative partners (Low et al. 1993). Using the comparative advantages at different points of the Triangle, the economic region so constructed constitutes in effect a package of diversified industrial development opportunities. As well as direct investment by MNCs in the Triangle, many of whom have connections with existing plants in Singapore, a larger system of small and medium enterprises has been created to service both MNCs in Singapore and those in Johor and Riau. The development has a complementary effect to Singapore’s own SME Master Plan (Economic Development Board 1990). In human resource terms, the Growth Triangle project had some important consequences. First, for the first time, Singapore found herself in a position of investing in developing countries—a position previously the domain of developed countries only. In this situation, the relevant skills were deemed to be those in the areas of financial services, communication, logistics and project management. The opening up of higher education in those disciplines has therefore been regarded as an urgent priority. Also, there was a need for Singapore to invest in training in neighbouring Johor and Riau to ensure the requisite technology and skills transfer. This was achieved by the establishment of the Johor Skill Training Institute, similar in many respects to the early facilities given by Japan, Germany and France to Singapore. The government also resolved to extend its external economy strategy beyond the Growth Triangle. Two years after the announcement of the ‘Next Lap’, a special Committee to Promote Enterprise Overseas was set up. The Committee was to identify obstacles to regionalisation and to return with recommendations. Using Switzerland as a benchmark, the committee identified the target that Singapore had to achieve. Compared to the Swiss, Singapore’s external economy was very small—only 6.3 per cent of Singaporean companies had invested overseas while direct investment overseas occupied only 8 per cent of GNP, and income derived from overseas investment was only 0.5 per cent. It was estimated that it would take Singapore at least 10–12 years to catch up (Tan, C.H. 1995).

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The response from the education and training system The recent goals of the government’s industrial strategy are ambitious, to say the least. In order to catch up with major industrialised countries and to succeed in the aim of regional expansion, the Singapore government had to ensure that the education system was upgraded to bring it in line with the most advanced systems in the older industrial countries. In addition, training policy had to be refocused to concentrate on enhancing intermediate work-based skills, and, crucially, on improving the use of the workplace as a source of learning. This was essential if employers were to have access to the same level of skills as were available in other industrial societies. In this latest phase, the upgrading of the educational system has focused on three areas: the identification of the basic skills required for effective participation in an advanced industrial society; the production of intermediate level technical skills; and the expansion of higher education. To identify the basic skills, the government studied education practices in Germany and Japan, which it considered to be the most advanced. It found that teaching of the working language and mathematics amounted to 50 per cent of curriculum time in primary schools (Ministry of Education 1991). However, in Singapore the problems posed by bilingualism (English and the mother tongue) meant that if children in primary schools were to have the same exposure then there would be less time left for other subjects. The solution, introduced through the 1990 reforms, was to introduce a preparatory programme for all five year olds in order to compensate for heavier demands made by the bilingual requirement. In order to ensure that school-leavers had mastered these basic skills necessary to enable them to develop further at work, it was decided that all young people should have ten years’ minimum general education. Intermediate technical skills were to be produced through an upgrading of vocational education. The VITB, renamed the Institute of Technical Education (ITE) in 1992, now only takes on young people for technical training after they have completed this basic education. The intention was to enhance the recognition of technical education. The ITE now offers much higher skill content courses, which enables those following the vocational route to proceed to further education in the polytechnics and universities. For those already in the labour force, the lowest level of National Trade Certificate (renamed National Technical Certificate in 1992 and roughly equivalent to the UK NVQ level 1), disappeared in 1995. The lowest level is now equivalent to the standard of the competent craftsman. The aim of these reforms was to ensure that all those entering the labour market had the requisite base on which today’s skills and those of tomorrow can be built. In line with this objective, the types of skills transmitted in the educational system are starting to shift from the ‘harder’ technical skills to the ‘softer’ office and business skills (Felstead et al. 1994). Building on the high participation rates in education (with over 90 per cent of 15–19 year olds in education), tertiary education was expanded. During the

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1980s, the rate of expansion of higher education had increased and by the early 1990s was accounting for 26 per cent of 20–24 year olds (Felstead et al. 1994). Recent targets for the educational system are, by the year 2000, to have 25 per cent of that age group either in junior colleges or universities, 40 per cent in polytechnics, 25 per cent in Institute for Technical Education programmes with a drop-out rate of 10 per cent. However, the drop-outs are not regarded as lost to the system for, once they have had some work experience, they are targeted through government programmes aimed at enhancing their work-based skills. By the early 1990s, the education system was producing levels of educational attainment comparable with those of the much older education systems in Europe and the United States (Felstead et al. 1994; DfEE and Cabinet Office 1996). In the field of higher education, the government decided to continue with an elitist system and to maintain the distinction between polytechnics and universities in order to maintain their distinctive focus. This was done in the belief that this division better serves the demands of the economy. The feedback to the government from employers was that their main demand was for high- and intermediate-level technical skills and that the polytechnics were best placed to provide these. The belief among officials was that there was less demand for the more academic products of the universities7 and that any unwarranted expansion of universities would result in a fall in standards. This is not to suggest that the system of higher education is without problems. The focus in the past on the application of knowledge has meant that pure research has been accorded lower priority. However, if Singapore is to achieve status as a centre of excellence in the field of scientific research it has to change this orientation. Thus, as part of this attempt to generate more creativity in the higher education system, links have been formed between the National University of Singapore (NUS) and Nanyang University and the Massachusetts Institute of Technology (MIT) and Harvard in the United States, with the aim of making the two Singaporean universities the centre of excellence for the region. The intention is to develop leading-edge research schools which will help drive research and development and maintain Singapore’s lead in the region.8 In the field of training, the attempt to prepare for the next phase of economic growth led to the merger, in 1996, of the National Productivity Board with the Singapore Standards and Industrial Research Board to create the Singapore Productivity and Standards Board. This was done in the belief that in the next stage of economic growth productivity gains would come, not from increases in the use of capital and labour, but from increased efficiency and innovations in their use. The merger would facilitate this by enabling the government to combine the ‘softer’ aspects of productivity (that is, training) with the ‘harder’ aspects of quality standards and industrial research (National Productivity Board 1996). This third phase also saw a continuance of the two-pronged approach. The programmes the government had established to enhance the skills of those who missed out on their primary and secondary education (BEST and MOST) have

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been run down as the target pool declines in size. The emphasis has moved towards enhancing the process of work-based learning. It became evident in the late 1980s that while improvement in the quantity of training undertaken by employers was important, the new growth industries of the 1990s demand not just competence in technical skills but also in the ability of workers to achieve greater flexibility and develop the skills to tackle unforeseen problems. In these new circumstances, learning at work took on greater importance. Studies of the German dual system and the Japanese and Australian systems of on-the-job training were used to identify ways in which this might be achieved. One of the lessons learnt from the German dual system was the need to integrate on-the-job and off-the-job elements in training. The significance of this policy shift is underlined by the findings from a number of studies which suggest that some of the skills necessary for companies to compete in the markets for high value-added goods and services can only be acquired through a combination of workplace and classroom learning (Streeck 1989; Koike and Inoki 1990). Improvements were made to the apprenticeship system by the introduction of the New Apprenticeship Scheme (NAS) in 1990. Modelled closely on the BadenWurttemberg version of the ‘Dual System’, it was targeted at employers with the ability to train their own workers. Like the German dual system it required pedagogically qualified trainers (Meisters) and both on-the-job and off-the-job training. Concurrent with the launch of the NAS in 1991, the ITE introduced the Industry Trainer Programme to help companies develop pedagogically qualified trainers to support their apprenticeship courses. By 1994 the ITE had trained some 1,900 industry trainers in some 600 companies participating in the apprenticeship scheme. The same idea of integrating on- and off-the-job training has been used to inform the new ‘Hybrid’ apprenticeship system. This was launched in 1992, aimed at the small and medium-sized enterprises (SMEs) which have traditionally avoided apprenticeship training. The same objective of enhancing both the on-the-job and off-the-job training of mature workers (aged 20–40 years with below O-level qualifications), was tackled by the ITE’s Adult Co-operative Training Scheme introduced in 1992. This is based on the new apprenticeship model and so workers have to be sponsored by their employers, but they then receive on-the-job and off-the-job training in the company’s time (ITE 1993). While the apprenticeship model was the preferred form of providing education and training, not all employers would adopt it. Therefore other forms of intervention had to be found if the labour force as a whole was to have its skills enhanced. The Skills Development Fund9 had experience of funding company— based training through the skills programmes introduced during the second phase of economic development, with the number of training places supported by the fund increasing more than twelve times from 32,600 in 1981 to 407,900 in 1991 (NPB 1993:44). This has been further enhanced in two ways: first, employers were provided with a series of programmes which offered help and assistance for them in learning how to organise and implement their own training; second, after

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studying other countries, ways were found to help firms enhance the quality of their on-the-job training. The task of helping employers to learn how to organise and implement training was done through the Training Grants Scheme, under the auspices of the National Productivity Board (NPB) and funded by the Skills Development Fund (SDF). This comprises a series of schemes focused on helping employers improve particular aspects of training. The Training Grant Scheme provides grants to employers of between 30–90 per cent of the cost of (re)training workers through in-plant programmes to upgrade their skills. The largest of the schemes, the Worker Training Plan, encourages companies to undertake systematic training through an annual plan. This scheme was responsible for 61 per cent of the total training places supported by the SDF in 1991 and accounted for 88 per cent of the total SDF spend (SDF 1992:12). The trainee recipients of all these schemes tend to be workers with average or below average educational levels; 72 per cent of training places were filled by workers with O levels or less (ibid.: 38). Other schemes have been established to help companies ease cash flow problems when investing in staff training, to enable them to embark on systematic training based on the results of a company-wide training needs analysis, and to make the services of good quality training providers available to small companies who do not have the resources to develop their own training programmes. In addition, other schemes are in place to enhance the training infrastructure, for example, by helping managers improve their ability to train and providing training in delivery of quality in the service sector (Ashton and Sung 1994). Other programmes under development include a National Skills Recognition System which will provide competence-based forms of certification for lowerskilled workers. The aim is to identify competences for the present and looking ahead to the next five years. This will enable the skills of immigrant workers to be identified in an efficient and reliable manner. In addition the PSB are also introducing a Workforce Quality Standard, modelled in part on the UK Investors in People standard, which will provide a kitemark for companies reaching specified standards in their HRD practices and thereby enhancing the skills of the Singaporean labour force. Another way to improve the quality of training identified by the NPB was the more widespread use of structured, on-the-job training (OJT) as this was seen as the most cost effective form of training. Research by the NPB in 1986 revealed that 90 per cent of companies in Singapore engaged in some form of OJT but this was not necessarily structured. As a result it was found that ‘more often than not, OJT meant that workers were left to chance to acquire skills during the course of their work’ (NPB 1992:9). A task force was therefore set up with the Economic Development Board and the Institute of Technical Education to identify the core skills needed to be developed through OJT schemes. Following this, the NPB introduced a programme aimed at identifying industry-based blueprints or model

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OJT schemes. This programme commenced in 1993 with schemes being developed with leading companies in a variety of industries. These are then used as a base model for other companies to emulate. The long-term plan was to get 100,000 through OJT by the end of the decade. By May 1995, 36,000 workers had successfully completed OJT programmes, and by 1997 it was expected that the original target of 100,000 would be achieved.10 In addition, steps have been taken to develop OJT instructors. This will complement the off-the-job training undertaken by the ITE and will be available for firms in service as well as manufacturing industries.11 The introduction of OJT has not been without problems. The initial attempt to borrow the idea from the Japanese encountered problems when it was found that the workers were not as highly educated as the Japanese and had difficulty in following the basic instructions, while many managers were reluctant to share the requisite information with subordinates. These difficulties were overcome through further training of managers and developing more explicit instructions for workers.12 Good quality OJT, while providing workers with the skills required for today’s companies, will not necessarily equip workers with the skills required to cope with the demands of the new markets and industrial restructuring associated with them. In line with the vision of where Singapore hopes to be by the year 2020, the focus of the government’s concern with on-the-job training has shifted from the provision of flexible multi-skilled workers to the task of skills deepening. The result is a skills-deepening programme. Swiss workers are seen as extremely well trained in technical skills and ‘equipped with the foundation for drastic retraining should industrial restructuring take place’ (NPB 1993:51). Following a study mission to Switzerland in 1992, the NPB worked with other government departments to identify the leading-edge companies with potential for skills deepening. These are seen as the industries experiencing rapid growth and having the potential to compete in regional and international markets. The NPB worked with such companies to develop and design training programmes to deepen core job skills, using OJT techniques discussed above. The aim is to train workers in these companies, not just in the technical skills but also in the deeper intellectual skills necessary to cope with the drastic retraining they will have to undergo to enable them to handle industrial change and restructuring. Core areas of the economy such as precision engineering have been targeted for the implementation of a programme of skills deepening. In addition to borrowing training policies and practices from the older industrial countries, the government is also active in transferring the latest knowledge and techniques directly to the indigenous labour force. In the second phase, it did this through the establishment of Joint Industrial Training Centres with MNCs and three foreign governments, Germany, France and Japan. In the mid-1980s, the EDB decided that knowledge- and technology-intensive industries would require resources in excess of those that single partners involved in the

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Joint Industrial Training Centres could provide. It needed to access expertise on a global, rather than single, country basis. To achieve this it sought agreements from the three governments to incorporate other MNCs into the institutes. The successful introduction of this strategy led to the adoption of a transnational approach by the EDB. By securing the cooperation of governments and several MNCs, it proved possible to provide the necessary ‘hardware, software and teachware’ required for the establishment and development of knowledge- and technology-intensive industries (Wong 1993). Throughout this period the government also sought to continue with its policy of attracting foreign talent. The Economic Planning Committee (1991:8) noted that the country could expect to recruit overseas professional and technical talent at the rate of about 0.4 per cent of population per annum for the foreseeable future. Similarly, the National Technology Plan (1991) estimated that foreign recruitment would be required to supplement home-grown talent if Singapore was to succeed in establishing itself as a regional R & D centre (Cheah 1997). The result of all these integrated policies was an accelerated shift towards more knowledge-based sectors and occupations. A slow decline in the lower skill occupations in the 1980s turned into a rapid one in the 1990s, while conversely the proportions of managers and technical and professional personnel rose rapidly (see Table 3.1). Following the growth in the educational qualifications of the indigenous labour force, almost all junior- and middle-level supervisory positions, and increasingly also the senior positions, are now filled by locals (Cheah 1997). Over the period 1983–96 there has been a virtual doubling of the proportion in the labour force with post-secondary diplomas, from 10.6 to 18.9 per cent, and an increase in the proportion with tertiary (degree) qualifications from 4.5 to 11.6 per cent. In terms of the shift from low value-added to high value-added goods, over the period 1970 to 1993, technology-intensive exports, the most sophisticated export product category, increased its share of total exports from 6.2 per cent to 43.2 per cent (Cheah 1997). By the middle of the 1990s, Singapore’s per capita GDP placed it among the top rank of industrial countries. Mechanisms for linking the education and training system with the demand for skills During the first phase of growth the Singapore government held no long term strategic view of the economic role of education and training. During the second phase of growth, however, it increasingly took the view that if economic growth was to be sustained, the government had to take action to create the requisite human resources. As the government became more focused on upgrading the economy towards higher value-added industry, so the need to reform the education system was more urgent, leading it to introduce a stronger form of technical education and to upskill the older workers already in the labour market. The question arises, how was this done? The answer lay in the establishment of a

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number of mechanisms which ensured that the education and training system responded directly to changes in the government’s trade and industry policy. For these mechanisms to be effective, the government had first to identify the skills required for economic growth and ensure that these were in place as and when the appropriate form of capital was established in the economy. Unlike the UK and US governments, which have always sought to leave the market to determine the direction taken by economic development, the Singaporean government has always taken this upon itself, as shown in the three stages of economic development. As the government developed a strategic industrial policy, this in turn defined the skills which had to be in place. In this respect, the government was able to learn from the older industrial economies the type of skills required for the next stage. As we have also seen, the government was able to learn from these countries the appropriate principles on which its own programmes should be built. Thus, all three components of the education and training system, basic education, initial training and continuing education/ training contained selective elements of other countries’ practices. The first mechanism used to link the supply with the demand for skill formation was the organisation of government departments. Once having identified the next stage of economic growth through its ‘vision’, this goal provides the targets which inform the work of the Ministry of Trade and Industry and the Investment Board. The Ministry of Trade and Industry is a powerful ministry responsible for ensuring that the economy is geared to the demands of the international market, and is therefore in a position to achieve the government’s vision. Other ministries such as Education and Labour are subordinate to the Ministry of Trade and Industry. This ensures that the requirements of industry are always taken into account when decisions about the allocation of resources for human resource development are made. The second mechanism concerns the channels of communication which have been put in place to facilitate the coordination of human resource development with the requirements of industry. To identify the future human resource needs of the country, the government relies on agencies such as the Investment Board, which sells the benefits of investing in Singapore. Through negotiating with foreign capital, the Investment Board is in a position to identify future demands on the country’s human resources which that investment is likely to make. The Ministry of Trade and Industry collates such information, which is then mapped against projections from academics about the likely state of labour (human resource) supply. The results provide the basis for the identification of the country’s skill needs. The Economic Development Board translates this information about the country’s skill requirements into targets for the Council for Professional and Technical Education (CPTE). This is the third and perhaps most significant of these mechanisms. First established in 1979, this is a national body, chaired by the minister responsible for Trade and Industry, which sets targets for education and training at all levels. This Council institutionalises the link between trade and

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industry policy and the education and training system (Selvaratnam 1989) and thereby ensures that the human capital demands of new industries inform the targets. The Council disaggregates the overall target into specific targets for the universities, polytechnics and schools and the Institute of Technical Education and ascertains whether these targets can be met or whether new institutions or policy initiatives will be necessary to meet them. For this exercise, they require feedback from the education and training agencies. In order to achieve their objectives the officials of the CPTE liaise with the universities, polytechnics, ITE and schools to devise the strategy.13 (If the government cannot meet the targets from indigenous institutions then they look to import the requisite skills.) The quotas for numbers and targets for performance are then implemented by the education and training agencies in their own plans. The performance of the respective institutions are systematically evaluated against the targets. Within the ITE training, plans are formulated on a five-year basis but these are rolled over every two years. When any revision occurs, the Trade and Industry ministry has a significant input. This ensures that the future demands of the economy are constantly fed back and inform any revision of targets. In this way, the education and training system as a whole responds rapidly to the future human resource development needs of the economy. The fourth set of mechanisms are the other government departments and agencies which are involved in ensuring that the human resources required to achieve the government’s vision are in place. Thus, while the Productivity and Standards Board (PSB, previously the NPB) has a different focus, being concerned with employer-based training, it too has its targets. Moreover, as the importance of work-based skills has grown, so too has the training delivered through the PSB. One of the NPB’s ‘vision goals’ was for organisations to double their training investment from 2 per cent to 4 per cent of payroll by 1995, the amount which it is believed the world’s better corporations spend on training (NPB 1993). This target was achieved.14 The trade union movement has also been increasingly involved in the process of upskilling (Goh and Green 1997). On one hand, union leaders have been a significant channel for propagating the PAP’s ideology among union members. Both the NTUC and specific unions have then acted as agents (and, sometimes, providers) for the government’s various training initiatives. Perhaps most importantly, they have propagandised on the shopfloor among older workers, stressing the necessity to enrol for skill upgrading courses in order to maintain job security. On the other hand, unions have also joined in on the government’s side in helping to persuade employers to provide training. In 1993, unions began to put pressure on reluctant employers to include a training clause in collective agreements. By 1997, 41 per cent of collective agreements did include a training statement. While in many cases these were imprecise statements of intent, this rapid take-up is impressive in comparison with similar union efforts elsewhere. As noted at the start of this chapter, trade unions are an integral part of the

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consensus-forming process in Singapore: they are closely integrated with the state itself. This integration is achieved in part through the rotation of union leaders into leadership positions within the government. In Singapore the prime driving force behind the technical education and training system is neither the demands of individuals, nor those of employers, but the perceived needs of the economy as a whole. There is an emphasis through government programmes on encouraging individuals to participate in training, while employers play a crucial role in their delivery. However, the programmes are targeted just as clearly at enhancing the employers’ skills to organise and deliver training as they are at the individual’s ability to learn. Finally, in addition to enhancing the amount and quality of training undertaken by individuals and employers, the state also plays an important part in ensuring that skills and technical knowledge are transferred from the more advanced and larger companies to the indigenous population and the smaller companies. In short, the state adopts and implements a human resource development policy for the society as a whole. Conclusions In this chapter we have emphasised the way in which education and training practices, as they developed in Singapore, were shaped by the over-arching nation-building process of which they were a part. This involved the government using all the levers of power available to it, including control of the media and education and the incorporation of the unions, in order to create a nation capable of fully utilising its only asset, namely human resources, as the basis of its main competitive advantage in world markets. In developing this strategy through time, the government has undergone its own learning process in discovering how to link education and training to the needs of the economy. As we have seen, in the first phase the linkage was loose. It became tighter as the political elite became aware of the shift in the skills required in order to make its trade and industry policy effective. Indeed, as the skills required for high value-added forms of production become more complex, so too does the task of manipulating the components of the education and training system to ensure an appropriate supply. In coordinating the supply of trained personnel to meet the needs of the economy at each stage in its development, but especially in this later phase, Singapore has two distinct advantages when compared with other countries. The first is its relatively small size. This facilitates the flow of information between the various departments and official bodies. It enables officials and politicians to become acquainted and utilise personal contacts to ‘get things done’. However, while the small size makes it easier, it does not explain the cohesion evident in the actions of politicians and civil servants. As we have seen, this is not left to chance. There are in fact a whole series of mechanisms in place to ensure that officials share the same goals, that information flows rapidly through the system,

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and that the same priorities are adhered to throughout the system. Other small countries have not developed the same linkages that we observe in Singapore. The second advantage Singapore has in coordinating the supply of labour to meet the requirements of the economy is one created by the government— namely, the relatively high level of autonomy the government has achieved in relation to the dominant interest groups. As we have seen, the government has incorporated the labour movement which ensures that labour remains in support of the broad thrust of government policies. With regard to capital, the task is more difficult; however, the government has demonstrated an ability to attract MNCs but not to be dominated by them. It has succeeded in acting against the short-term interests of individual MNCs in moving the economy from low to high value-added forms of production. It has utilised the MNCs to bring in new skills and to deliver high levels of training, but has not permitted capital, in the form of the MNCs, to dictate the government’s policies. In this respect capital, in the form of the MNCs, remains fragmented in Singapore, especially when compared to the massive concentrations of power exercised by the chaebol in South Korea. This autonomy has allowed the state to pursue its own interests over time, independently of the immediate interests of the MNCs. As a result, there can be no doubt that the state-driven continuous ‘reengineering’ of the skill formation system in Singapore has far outperformed any adjustment processes that could have occurred from a market-driven system. Moreover, insofar as the mechanisms we have described are able to continue functioning in the interests of the Singaporean vision of growth, this superior adjustment facility would seem to constitute a continuing source of comparative advantage for the Singapore economy. There are of course a number of contradictions which the Singaporean system has to handle. One of these is the problem of introducing the skills necessary for the next phase of growth, especially those of creativity and innovation, into an educational system which has been based in part on the Confucian principles of respect for authority and the use of rote learning. These have served Singapore well in the early stages of economic growth, resulting in high levels of educational achievement and a disciplined labour force. Both of these are attributes highly valued by employers utilising Fordist production systems, some of which continue to operate in Singapore. However, organisations at the cutting edge of world markets utilising post-Fordist systems of production require different skills, such as the ability to solve relatively complex problems and to exercise initiative and responsibility in the workplace. In addition to these requirements for people involved in the everyday process of production, there are the skills required for research and development and marketing. Here employers are looking for people who are expected to exercise originality and creativity in developing and introducing new products and services. These are all skills which it is felt the existing education system has not been effective in developing. To tackle this problem, the government has introduced independent schools and provided others with greater autonomy in order that experiments can be

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conducted with curriculum innovations (Tan 1997). Meanwhile, parents through their commitment to additional private (crammer) education, continue to push their children to perform even better within the context of the traditional system of education and to acquire the qualifications associated with it. Just how far the reforms can succeed against these and other pressures to sustain the traditional system of education must remain an open question. A second issue we would raise is the question of just how far the Singapore government can go in anticipating the skills required for the next generation of industries. As long as the country was catching up with older industrial countries it could readily identify the skills required for the next phase from the experience of the older countries. However, now it has caught up, it no longer has role models from which to learn. The problem is to forecast and develop the skills which will enable Singapore to sustain itself as a leader in world markets and provide a role model for other countries to follow. These contradictory tendencies find their parallels in the other three tiger economies, to which we turn in the next and subsequent chapters. In that light we return to these themes in Chapter 7, in an attempt to construct an informed speculation concerning the durability of the model of developmental skill formation.

4 South Korea

Introduction It is well known that the Republic of Korea experienced an economic transformation in recent decades whereby per capita growth rates of around 7 per cent a year from the early 1960s through to the 1990s transformed the country from a state of extensive poverty into one of comparative wealth. It is also well known that Korea’s education system has boomed over this period. As we saw in Chapter 1, the average education attainment (as captured by years of schooling) in the workforce now even exceeds that in many Western industrialised countries. These two facts are often packaged as a simple explanation of the ‘miracle’, namely, that the growth was stoked by human capital. Closer inspection, however, reveals that the simple argument drawn from the observed correlation does not hold. Not only can causation go the other way, from economic growth to education boom, there are many other factors contributing to Korea’s growth, not least the substantial increase in physical capital stock linked to high savings ratios. In a desire to say just how important human capital has been to South Korea, one approach has used growth accounting methods to estimate the various contributions of the factors of production and of technological progress in promoting growth. The findings of such studies have produced a seeming puzzle in that in South Korea the contribution of human capital is rated as no more than around 7 per cent of the total growth from 1963 to 1982, or 10 per cent of the growth from 1960 to 1990 (Kim and Park 1985). The rest of the growth is attributed to the growth of other factors (mainly physical capital) and to a residual of technological progress. This discovery parallels the findings of a rather small role for human capital using the growth accounting method in respect of other economies (Young 1995; Benhabib and Spiegel 1994). Nevertheless, as indicated in Chapter 2, we are inclined to attribute little significance to such estimates. Growth accounting studies do not capture the ways in which human capital contributes to the expansion of physical capital, and to the achievement of technical progress—for both of which there is substantive empirical support (e.g. Benhabib and Spiegel 1994; Lee, Jong-wha

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1996; Wolff and Gittleman 1993). Some of the evidence emphasises in particular the impact of primary school and secondary school enrolments in the early stages of industrialisation, and this is now accepted by the World Bank as of major importance (World Bank 1993). Interactions between the various factors contributing to growth are crucial, but hard to estimate precisely. Hence, the proposition that education and training have played a major role in South Korea’s economic miracle is empirically substantiated, not by reference to specific econometric studies of South Korea itself, but by inference from the findings of studies looking at large numbers of countries. Even so, the econometric methodologies have not hitherto revealed the complexities of the dynamic relationship between human capital and economic growth. The key explanatory variable appears to be the level of educational enrolments at the start of the industrialisation period, or else some measure of the human capital stock at one point in time; but we cannot glean from these studies the importance of matching the level and type of human capital to the economy at various stages in the growth period. Nor, crucially, have they resolved the issue as to why and how the large expansion of human capital came about. This chapter aims to contribute to understanding of the origins of the human capital boom in South Korea, using the model of developmental skill formation. In so doing, we aim to throw some indirect light on the dynamics of how human capital affects growth. While South Korea and Singapore share important characteristics, such as post-colonialism and the need to survive amid external threats, South Korea offers an example of a much larger country on which to examine how, if at all, the model works. Moreover, South Korea in the 1950s was a very poor country: even by 1960 per capita incomes were only one third of those in Singapore. Severely undeveloped countries have not only to face the internal structural constraints to industrial take-off but must also transcend the economic and social constraints inherent in their linkages to the international capitalist economy. Exponents of the dependency schools maintained that those economies on the periphery would remain there, although the dependent development school (Gold 1986) allowed for some upward mobility. Japan and the East Asian Newly Industrialised Economies defied the dependencies and spawned new paradigms in development theory such as the rise of the statists. In the 1960s Gerschenkron had detailed the advantages for the late industrialiser should the state become a chief agent of capital accumulation, including the adoption of the latest technology and copycat methods of industrial policy (Gerschenkron 1962:14– 16). In her highly influential analysis, Alice Amsden (1989) builds on the Geschenkronian hypothesis using the case of Korean catch-up industrialisation. It is this approach that can provide the most clues to the development of skill formation institutions and concomitantly the importance placed on skill formation at the hub of economic development plans. Amsden’s argument centres on the fact that late industrialisers have developed through the adoption of borrowed technology, a process that is broadly described as ‘learning’. The state is a key player for the management of markets and discipline of business and

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capitalists. Another key feature in the matrix is a core of salaried engineers who become the gatekeepers of foreign technology and the availability of an abundant supply of low cost, well-educated labour. Though noting the ambiguous qualities in the Korean education system, she acknowledges its central contribution. There is a considerable literature on the education system in South Korea, largely dominated by the contributions of educationalists. Of these only a few address the questions posed by our hypothesis. One of the seminal works on Korean education remains that of McGinn et al. (1980) who outline the construction and consolidation of the system until the Park regime. In addition, the work tackles two areas that are of concern to us: that of the contribution of education to economic development and the uniqueness of the Korean experience. With regard to the first point, the authors maintain that ‘any contribution of education to modernisation in Korea cannot be claimed as a result of careful analysis and planning’ (ibid.: 230), a view with which Mason et al. (1980) appear to concur. This conclusion stems partly from including the nondevelopmental Rhee regime of the 1950s in the analysis and a focus on the needs of the individual rather than the future economy. McGinn et al. argue that the Korean education system was motivated more by the need to nation-build than by economic demands—an entirely plausible view for the duration of the Rhee regime. We argue below that the post-1960 experiences imply a different conclusion about the agency and efficacy of the state. McGinn et al. also proclaim the uniqueness of the system, shown in terms of high demand for education, growth in educational enrolment despite low national income and the existence of possible links with socio-economic development. We argue that these features, while present in South Korea, are common to the other cases in our developmental skill formation model. In a more recent study, Ihm (1995) briefly outlines the links between education policy and human resource development, although the details of this link remain in the ‘black box’ of policy making and the essential role of the developmental state and its institutions are left unexplored. Finally, Adams and Gottlieb (1993) provide an excellent comprehensive look at education in South Korea since the Second World War. Yet, while the authors outline the education policy-making institutions and sequential policy formation, it is hard to discern a theoretical framework connecting education growth to the analysis of economic growth or to the policy-making process. While their study approaches certain economic concerns, its focus is on the social changes resulting from expansion of education, rather than skill formation and its links to the Korean economy. In South Korea there has, for the most part, been no shortage of takers for education. The demand for schooling has been driven both by the Confucianinspired status of the scholar and the high economic returns. A central role of the Korean developmental state has been to channel this demand in the service of economic development.

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The key institution involved in the economic transformation from the 1960s onwards was the Economic Planning Board. Through its over-riding influence on other ministries, not least through the direct auspices of the President’s office, the Board was able to ensure a relatively rapid transformation of the education and training system in line with the planned changes in the economy. Through close control over schools and universities’ policies by means of direct regulations, quotas and funding, and through the expansion of a public and private vocational training system, the state has sought to match the supply of skilled workers to the changing demands of the chaebol and the smaller enterprises in the economy. At the same time, the state was determining the character of these demands through its control over industry. This linkage enabled South Korea’s education and training system to make a major contribution, not just to economic take-off but to progression through various stages. However, we also argue that this linkage has been problematic, and that it is becoming weaker in the current Perceived problems in recent years include the failure to stimulate in-plant training, a continued over-emphasis on academic education via rote learning methods and excess education competition. The current reforms of the education and training system aim to address these problems and to mould a new system for the future Korean economy. These reforms, which are by no means certain to succeed, reflect a basic contradiction in Korean development. While development has occurred on the basis of a mass education system which gave rise to the above problems, future growth may require a transformation which democratisation makes it harder to achieve by direct control. After describing some of the special characteristics of the Korean economic and skill formation systems, the chapter proceeds by setting out the key institutions linking skill formation to economic development, and showing the sequence in the development of skills. This paves the way to a consideration of the significance of, and the tensions involved in, the current education and training reforms. Distinctive features of the Korean system The social preference for education Before considering how the state supplied and controlled education services over the years, it is worth noting the culture of high demand for academic education. A distinctive feature of Korean society, this demand has conditioned the interactions between the state, education and economic growth. What are the origins of this demand? First, the Korean search for national sovereignty during the first half of the century cannot be ignored. During the years of Japanese colonisation, education

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for Koreans was severely limited. Although soon after the annexation the Japanese authorities pledged to expand education, the intention was to ‘inculcate the quality and character becoming a loyal subject of the Empire’ (Government General of Chosen 1913:10). Education was to be practical and short in length— Korean education giving ‘complicated courses in high sounding branches of knowledge requiring a long course of study’ (ibid.: 13) was to be rooted out —‘the aim of the Chosen educational ordinance is to remove such evil’ (ibid.). So, although the numbers of primary school children receiving education expanded, they were taught in Japanese (Hangul being completely outlawed by 1938) and the chances of progression were extremely limited. Only 5 per cent of Korean students went beyond the primary grades. Very few Koreans were able to go on to higher education and then engineering was discouraged. Japanese teachers were paid more and put into higher positions than their Korean counterparts which left a dearth of experienced teachers upon liberation (UNESCO 1954). The educational limitations on Koreans during the colonial period contributed to the huge demand for education after liberation. Although there was great poverty, efforts were made to revive Korean education after liberation and after the ravages of the Korean War after which ‘the greater part of the expenses of construction and repair of school buildings and of teachers’ salaries comes from the parents’ pockets directly and many go without food in order to see that their children go to school’ (ibid.). Access to education may have been equated with nationalism and freedom. High demand for education is common across several East Asian countries with a Chinese heritage. The conventional story attributes the demand to a common Confucian background which holds the educated person in high respect.1 While this is no doubt a relevant factor—indeed the expression of freedom from foreign occupation in access to education may be a manifestation of this philosophy—other social and economic explanations seem as pertinent. During the Japanese occupation and the Korean War, the old Korean class system was largely destroyed resulting in further homogeneity of the populace. By default, education became a viable route for social and economic advancement for just about everybody, provided that they could succeed at school and their parents afford the cost. A relatively egalitarian mode of economic growth thus provides the incentives to accumulate human capital, and education thereby becomes a major source of stratification. At the same time, egalitarianism spreads the rewards and so conveys the means for the majority to find surplus funds available for extra education expenses (Lee, J-W. 1996). It is difficult to be sure how much the underlying social desire for education has been independently responsible for educational growth, because the social demand is intimately linked with economic incentives. To become a college graduate is a considerable mark of social prestige but it also conveys financial security. Yet the demand for college graduates by business is also a product of the same system, which has attributed a skewed high valuation to academic

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qualifications. For most of the last thirty years, fast-track promotion prospects in the chaebol have been exclusively linked to formal college education. Three consequences of the distinctive social demand for education may be noted. First, there is a high degree of private funding of education. Thus, while in 1995 the government spent 3.7 per cent of GNP on schools and universities, parents added another 2.1 per cent in tuition and fees, and another 6.0 per cent on private tuition.2 In earlier years the government managed to spend even less on education. High private funding of education may well have been stimulated by insufficient public spending according to the Ministry of Education (MOE [SK]) and the Korean Educational Development Institute (KEDI) (1996). Although the MOE[SK] now states that there is ‘excessive privatisation’ of education, in the past the state found the willingness of the private sector and parents to fund education useful earlier in the developmental process. The state will have been able to divert resources to other national priorities, e.g. economic development or defence, without an adverse effect on education. Meanwhile, children also pay, in devoting more of their youth to education through long school hours and through home study way in excess of typical Western levels. Second, one of the most positive outcomes of this high demand for education is that, in order to engender enrolments in the education programmes of its strategic choice (typically favouring the applied sciences), it has often only had to manipulate the demand, by restricting it or channelling it into its chosen sectors. Channelling an existing demand at times must have been easier than motivating an unenthusiastic population in the first place. There are, however, other less desirable features of the Korean education system that are linked to high social demand, including: credentialism, old boy networks, and a pattern of rote learning in large classrooms and cramming stimulated by competitive examinations. Such factors are among the reasons why education is currently the object of a major reform strategy (see below). South Korea’s stages of economic growth South Korea has developed from being one of the world’s poorest nations in 1950, when its per capita GNP was less than that of Nigeria or Egypt, to becoming a member of the OECD with a per capita GNP of more than 40 per cent of the OECD average in 1995. Between 1964 and 1994, per capita GNP grew at an annual rate of 7 per cent. Underlying this period of almost uninterrupted quantitative growth, the economy has passed through stages with distinct characteristics. In order to place the development of skill formation policies and institutions into perspective, we present first a brief overview of these stages.

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(i) Post-colonial beginnings Korea was under Japanese colonial control from formal annexation in 1910 to liberation in 1945. Initially Korea had been used as a source of agricultural and primary products for Japan and as a market for manufactured goods produced in Japan. In the thirties, however, some heavy and chemical industries and some light industries were transferred to the Korean peninsula. The former were located mainly in the north and the latter in the south. After partition of the peninsula, the South was left with some light industry most of which had been owned by the Japanese. In addition, South Korea had few natural resources and not much skilled manpower. Post-colonial reconstruction was halted by the Korean war (1950–3), which destroyed about two-thirds of productive capacity. Nevertheless, the economy made a strong recovery immediately after the war. The cold war ensured that South Korea would be a recipient of foreign aid, mostly from the United States but also from the United Nations. Such inflows of capital were able to defray some of the joint costs of defence and development. This was a period in which the primary focus of investment was on import substitution supported by an overvalued exchange rate and highly protectionist measures on non-vital imports. During this period the influence of the US and international agencies was highly important, while the state was relatively compromised internally and externally. For example, a stabilisation programme was implemented in 1957 under the joint implementation of the Korean government and the US aid mission in South Korea. It was also the age of land reform. After the Second World War the US military government distributed Japanese-owned land to the former tenant farmers. Then, in 1949, the Korean government initiated another reform, distributing land taken from large Korean firms and landlords (Lee, C.H. 1995). Subsequent land reform was promulgated by the North when it overran the South at the beginning of the Korean War (Cumings 1987). All these land reforms were important for later development in that they promoted a higher equity of income distribution and freed up landlords to become industrial capitalists. (ii) From import substitution (IS) to export-oriented industrialisation (EOI) Import substitution was relatively short-lived and did not represent a strategic choice by the government (Koo and Kim 1992). By the time the Chang regime was overthrown, the approach was running into problems. Not only was US aid being cut on an annual basis (Lee, C.H. 1995), by 1961 the economy was stagnating. The new military regime, headed by Park Chung-Hee, was committed to economic growth as the second of its legitimising bases, the first being the fight against

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communism. It is at this stage that we may see the emergence of the developmental state in South Korea. The regime embarked upon a strategy of export-oriented industrialisation. In 1962 the first five-year plan for economic development was launched. Export-led growth was endorsed, instead of import substitution which had hit the dual problem of lack of natural resources and a small domestic market. Exportoriented industrialisation was launched in a favourable world economic climate and additional help was forthcoming from the US opening its market to imports from its strategic allies. While primary industries had been diminishing steadily in importance in the 1950s, their decline proceeded rapidly from the middle of the 1960s (see Table 4.1). Another feature of the Korean growth performance is that, especially during the 1960s, the government relied relatively more on borrowing than on foreign direct investment to bring in capital, compared with the other East Asian NIEs (Haggard and Cheng 1987). Foreign investment was tightly controlled and restricted to selected sectors because the government feared foreign domination of the economy and surmised (no doubt correctly) that multinational firms would be more difficult to control than locally-owned firms. The use of borrowing resulted in debt servicing difficulties until the early 1980s when use of foreign borrowing was deliberately reduced. Table 4.1 Industrial sectors’ share of GDP, South Korea Year

Primary

Secondary

Tertiary

1966 1971 1976 1981 1986 1989 1992

34.8 26.8 23.5 15.6 11.5 10.2 7.4

20.5 23.2 28.4 31.3 32.6 31.9 28.1

44.7 51.0 48.1 53.1 55.9 57.9 64.5

Source: Bank of Korea (cited in Korean Overseas Information Service 1990).

A key source of dynamism in this new stage of South Korea’s economic miracle, as also in subsequent stages, was the newly created Economic Planning Board (EPB), which was able to initiate, coordinate and implement economic plans. The transition to export-oriented industrialisation was accomplished through a mixture of direct subsidies for certain exports while preferential loans were allocated to all export industries (Lee, C.H. 1995). Sectoral export targets and other export promotion measures were introduced and progress was monitored. The government also promoted exports by the devaluation of the won by nearly 100 per cent and by replacing the multiple exchange rate system with a unified one (KOIS 1990). Control over the allocation of foreign funds and other credit

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made the state the major player in investment decisions and therefore in the direction of the economy. In the second five-year plan, manufacturing exports were identified as the most successful sector and the sector was targeted for future investment (Mitchell 1988). Subsidised loans favoured the chaebol, the large conglomerates. Between 1961 and 1971, Korean exports increased by more than 36 per cent per year (KOIS 1990), a remarkable transformation by any standard. Yet, even in this period, some import substitution measures persisted. Imports were concentrated on capital goods, mostly on a turnkey basis.3 (iii) The Heavy Chemical and Industrialisation Plan (HCIP) The Heavy Chemical and Industrialisation Plan (HCIP) was launched just after the establishment of President Park’s oppressive Yushin regime with its repression of political and labour freedoms. The third five-year plan (1972–6) already had an emphasis on heavy industry and the HCIP was launched in 1973 targeting six industries: steel, electronics, petrochemicals, shipbuilding, machinery and non-ferrous metals (Koo and Kim 1992). The scheme was financed through a specially developed National Investment Fund created to mobilise public employee pension funds and a large proportion of private savings (KOIS 1990). The target of HCI products accounting for 50 per cent of manufactured commodity exports by 1980 was not reached until 1983 but debate continues about the success of the plan (Sakong 1993). The HCIP period spanned the first oil shock, which itself led to modifications in the export-oriented strategy. There was a restructuring of the composition of commodity exports in favour of higher value-added products, and simultaneously a diversification of trading partners and a stimulus provided for domestic agricultural production. During this period state intervention became even more pervasive. Incentives were not only industry-specific but sometimes enterprise-specific. President Park created a coalition with the chaebol and funnelled both domestic and foreign capital to them at cheap rates along with other incentives. Some policy loans were handed out at negative interest rates (Sakong 1993). Arguably the Korean developmental state was at its strongest in the late 1970s (Koo and Kim 1992). (iv) Liberalisation and democratisation Despite successes in breaking into world markets, HCIP created instabilities in the economy. The economy became skewed in favour of heavy industries. Light industries (mostly comprising small and medium-sized enterprises) became squeezed out as government channelled financial resources into the chaebol: by 1978 some 80 per cent of investment was going into heavy and chemical industries. There was excess demand for bank loans and the debt-equity ratios of

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the chaebol grew higher (Sakong 1993). Indeed the very successes of the stateled Korean growth miracle were bringing increased pressures from the global economic community. Not least, there was to be the growing fear that newly industrialised countries such as South Korea could get squeezed between emerging very low-wage countries elsewhere in the Asia Pacific rim, including China, and the still more advanced and skill-based Western economies—the socalled ‘sandwich’ problem. At this time, protectionism in the US was also posing a potential threat to imports from East Asia following trade tensions between the US and Japan. Supplementing this pressure was the tight labour market and the growing militancy of the working class as reflected in increasing union membership. Marked by a sharp if temporary downturn in 1980, the period since may be characterised as featuring a steady liberalisation of the economy. Beginning in 1981, foreign investment was opened up in certain sectors. Inward investment multiplied sevenfold in just seven years, and outward investment followed. By the mid-1990s much of the economy had been opened up. Nevertheless, the direction of investment was still subject to a strong steer from the government. Following the fifth and sixth five-year plans, a shift into technology-intensive goods in exports was prioritised, and the industrial base shifted and broadened towards these sectors, including micro-electronics. Meanwhile import tariff reductions were accelerated in the mid-1980s, there were reforms to taxation, some state enterprises were sold, and some attempts were made to regulate the chaebol, in particular by curbing their monopoly power and reducing their spread of control. Not all of these policies were successful, however. Owing to the increased power of the immensely wealthy chaebol, they were able to resist or evade a good many of the restrictions (Koo and Kim 1992). The process of liberalisation came to a head when South Korea was caught in the financial crash of 1997. In the previous few years the chaebol had outstretched themselves, with debt-equity ratios averaging as high as four in 1994/95, and an over-concentration in certain industries, for example computer chips, that were susceptible to market fluctuations. Lack of adequate financial controls, combined with an apparent mystical belief in the Korean miracle by foreign lenders, lay at the heart of the structural problem.4 Despite the strength of the conventional macroeconomic fundamental indicators, South Korea proved to almost everyone’s surprise to be vulnerable to the region-wide loss of financial confidence. The International Monetary Fund (IMF) bail-out that ensued, while safeguarding the interests of international lenders who had trusted in the chaebol (and, incidentally, in the IMF as lender of last resort), compelled the Korean government to accelerate sharply the shedding of its powers to protect and regulate industry and to relax legal constraints on foreign ownership.5 Concurrently, there has been a move towards democratisation of political life in South Korea which has served to undermine the power of the developmental state. President Park was assassinated in 1979. The process leading to free presidential elections was begun in 1987 under Roh Tae Woo. There were also to

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be increased powers for the legislature relative to the executive branch of the state. More broadly, the status of unions was recognised by the legal recognition of the Korean Federation of Trade Unions in 1987. The remarkable economic transformation of South Korea in the post-colonial period has occurred, therefore, through successive stages, each bringing with it a changing and broadening industrial base and considerable prosperity in comparison with earlier great poverty. The liberalisation stage is ongoing, and it is accompanied by changes in economic and political institutions. It is against this background of substantive growth and structural change that the evolution and role of the education and training system has to be considered. The East Asian skill formation model in South Korea: linkages between education, training and economic development Institutions While in most countries, particularly the first and second wave industrialisers, the education and training system has evolved with a degree of relative autonomy from economic development, the characteristic feature of the skill formation model found in the East Asian Newly Industrialised Economies is the closeness of the links between the two systems. The institutional configuration is dominated by a state economic planning agency that coordinates policies to fit into the economic plan. Skill formation policy, like other policy areas, has been directed by a small political and bureaucratic elite. The aim of this section is to identify the key institutions in South Korea that ensured the two systems were enmeshed. An important aspect of education and training systems is the degree of centralisation of control. In Korea, it was the original intention of the occupying US forces to move towards a decentralised system of education driven by liberal democratic values. But even by the start of the First Republic in 1948, education control was relocated with central government. In the 1960s, the Park ChungHee government strengthened its authoritarian control over educational policy making while establishing the developmental regime. Control over both general and vocational education has been vested in the Ministry of Education (MOE [SK]), while the Ministry of Labour (MOL[SK]) has had jurisdiction over vocational training. Centralised control embraces private as well as public schools and colleges through the Private School Law, and it extends to admission procedures, student quotas, tuition fees and tight regulations over curriculum, textbook publishing, and revenue and expenditures. Centralisation was maintained as a means of implementing an overall manpower policy, but how were development policies able to inform education and training policy? How explicit was the manpower policy and how was it

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implemented and coordinated? The answer lies in the institutional configuration of the developmental state. The Economic Planning Board (EPB) was established in 1961 as the core of the developmental state mechanism, and has remained the central institution in the Korean developmental state since that time. Various functions from different ministries were amalgamated under the new board. It took planning responsibilities from the Ministry of Reconstruction, budgeting in the form of the Bureau of the Budget from the Ministry of Finance, and the Bureau of Statistics from the Ministry of Home Affairs (Johnson 1987). The EPB had three major roles: planning and formulation of economic policy programmes; coordination of economic and other policies by ministries; evaluation of policy programmes implemented by ministries. Called a ‘board’ to set it apart from the ministries, it played the major role in setting the agenda for South Korea, including the skill formation agenda.6 More specifically, the EPB formulated five-year economic plans. Skill formation plans were formed in the light of, and alongside, economic development plans. This was achievable through the specific institutional arrangements where the EPB was planner, coordinator and evaluator of other ministries and because of the unassailable position of economic development (with national defence) as the primary goal of government. In skill formation, the following central governmental institutions are linked in policy development: the Economic Planning Board (EPB); the Korean Development Institute (KDI); Korean Educational Development Institute (KEDI) and the Korea Advanced Institute of Science and Technology (KAIST) (KDI/World Bank/UNECA 1996). KDI and KEDI are involved in strategic planning and research, the former in support of the EPB and the latter in support of the MOE[SK]. The KDI was established by President Park Chung-Hee to provide theoretical backup to his policies.7 The manpower plan was a core part of the economic planning process within the EPB. The EPB has a manpower agency which will consult with the MOE[SK], the MOL[SK] and the Ministry of Science and Technology on the nature of manpower planning. Manpower planning was based on trends analysis but there are doubts over whether manpower forecasts were always followed by the MOE[SK] (Adams and Gottlieb 1993). The coordinating role of the EPB was vital in that vocational education and training were split between the ministries of Education and Labour respectively. Within the Ministry of Labour, jurisdiction for the national technical qualifications was passed to the Korea Technical Qualification Testing Agency, and the Korea Vocational Training Management Agency was founded for the integration of vocational training, skills Olympics and national training qualification testing in 1977 (Creigh-Tyte 1996). In addition to these executive bureaux, advisory councils located in the Blue House have from time to time further strengthened the executive input. Typically these bodies have also highlighted the concept of linking educational policy

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making to economic planning (Adams and Gottlieb 1993). One of these bodies, the Presidential Commission on Education Reform (PCER) has been especially influential in recent years. Even though this institutional structure has remained in place for more than three decades, there have been changes, not least with the onset of political democratisation and economic modernisation. In the 1990s, the EPB has less power than previously, although its waning power may not be as dramatic as the Korean government may want the WTO and other OECD members to believe. The ‘normalisation’ of the functions of the EPB were highlighted when it was merged in 1994 with the Ministry of Finance into the Ministry of Finance and Economy (MOFE). Disagreements between ministries can now emerge, which might previously have been suppressed by a more powerful ‘superministry’. Yet the MOFE still has substantial authority over other ministries. For example, with regard to the recent education reforms proposed by the MOE[SK], it was reported to us that the MOFE ‘strongly urged people in the Ministry of Education to take these actions’, and it was clear that they broadly expected compliance.8 The linkages between economic and educational planning have been in place to prepare for future manpower requirements. These linkages can only be successful if there are tools to implement required changes. In the case of South Korea, the high demand for education has made the job a case of limiting and directing this demand through the use of quotas based on predictions made from manpower plans and made possible through the MOE[SK]’s centralised control over private and public education mentioned above. Implementation of the quotas has been through the school and college admission and examination systems. Selective funding is also used to promote certain fields of study. For example, information technology is now being emphasised so funds are being increased in this area while funds are being withheld from other fields.9 The use of entrance quotas for level and field of study is widespread. The quotas are set through requests from certain ministries who work from their own manpower predictions. Thus the Ministry of Science and Technology (MOST) approaches the Ministry of Education (MOE[SK]) for changes in the science quotas while the Ministry of Industry and Commerce will demand changes in the quotas of particular industrial areas. The MOE[SK] considers these requests in the light of overall strategy.10 Thus, for most of the post-Korean war era, the Korean state has had in place the institutions, the power and the policy tools with which to forge links between the supply of educated and skilled workers and the changing demands of the economy. The state’s role has been not just to intervene in a particular instance of market failure, but to attempt to construct a match between supply and demand by means of strategic control over both sides of the market. Has this coordination been effectively implemented? We turn next to the sequencing of economic and manpower policy making.

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The sequencing of economic development and skill formation The post-colonial stage: reconstruction and nation-building Even though educational planning was begun in 1948, the policy at this stage had no institutional or formal links with economic development. Rather, its aims were to achieve general primary education for children and literacy for adults. Not least among the objectives was the important function of building the new nation after liberation from the Japanese and then the civil war. The first middlerange educational plan focused on educational expansion of compulsory elementary education, while civic schools were established to counter adult illiteracy; this massive expansion of primary education provided the educated workforce requisite for the years of reconstruction and import substitution industrialisation. There were problems of enrolment caused by general poverty—providing clothing and lunch for children to attend school, and the lack of school facilities leaving some children too far from the nearest school. Although the goal was for compulsory primary education, it was actually on a ‘pay as you enter basis’ (UNESCO 1954:125). It was the social demand for education that ensured a reasonably high take-up, with sometimes as many as a hundred pupils in some classes. Free compulsory primary education was put off for the duration of the Korean War and was taken up for implementation in 1959 (MOE[SK] 1996a). Meanwhile, to tackle adult illiteracy the Minister of Education in 1951/2 ‘invited’ college students to return to their home communities to give literacy classes (UNESCO 1954). The result of these efforts was that the numbers in elementary school rose to more than 3.6 million by 1960 (Table 4.2), and the enrolment rate for those in the 5–14 age bracket was up to 60 per cent. Though not high by the standards of later years, this rate of participation in primary schooling was substantially above that in other large low-income countries of the time, such as Pakistan (22 percent), Indonesia (40 percent) or Uganda (32 per cent), and also greater than in many middle-income countries, such as Turkey (42 per cent) or Portugal (53 per cent).11 Export-oriented industrialisation and economic take-off The slogans for the 1960s were ‘education for economic development’ and ‘nation-building through education’ (Adams and Gottlieb 1993:26). The latter was to consolidate the new developmental regime while the former aimed to support the economic growth needed for legitimacy of the regime. Since 1962 educational sectoral plans have been drawn up by the Ministry of Education in co-operation with the Economic Planning Board. The new institutional arrangements introduced under President Park enabled the linkages between economic policy and education and training policy to be consolidated. The

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Education Reconstruction Plan (1962–6) was the first five-year plan to have been developed alongside the Five-Year Economic Development Plan. The state encouraged quantitative expansion of education during the 1960s, with the result that middle-school enrolments increased substantially at a time of growing population (Table 4.3). The quantity of teachers and facilities expanded alongside students. Steps were taken to invest in technical and vocational education soon after universal primary education was attained (Gill and Ihm 1996). Within the 1962–6 period, limits were put on higher education with a reduction in the number of four-year institutions and a concomitant decrease in student quotas while two-year junior colleges were increased (Adams and Gottlieb 1993). Vocational high schools were established in the 1960s to provide craftsmen for labour-intensive light industries that were the backbone of the early export-oriented push. An important consequence of the close institutional links between the economy and the skill formation systems is that a virtuous circle of mutually reinforcing supply and demand for skills is more easily supported. The demand for skilled labour increased, along with the rapid export-oriented growth of the economy, if only because of the exacting standards of global competition compared to local monopoly. In turn, the improved prospects for educated labour raised the demand for education (Lee, J-W. 1996), so that there was no shortage of takers for the state’s planned expansion. Table 4.2 Expansion of education 1945–1960, South Korea

1945 students 1960 students

schools 1,366,685 schools 3,622,685

Elementary

Middle

High*

Tertiary

2,834 80,828 4,496 528,593

166 40,271 1,053 273,434

307 7,819 640 101,041

19 85

Source: MOE [SK] 1996a Note: *Figures for high schools are for 1951 and 1960. Table 4.3 Enrolment rates by school level, South Korea

1966 1970 1975 1980 1985 1990 1995

Kindergarten

Elementary

Middle

High

Tertiary

1.1 1.3 1.7 4.2 18.9 31.5 42.0

98.1 100.7 105.0 102.9 100.4 101.4 98.7

41.4 50.9 71.6 95.0 100.0 97.8 100.6

26.4 27.9 40.8 63.3 79.5 87.6 89.9

9.5 9.5 16.0 35.6 38.1 54.6

Source: MOE [SK] (1995) Statistical Yearbook of Education in KEDI (1996).

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Again, in the second five-year educational plan 1967–71, the expansion of science and technical education was a priority (Adams and Gottlieb 1993). During this period, the expansion of less popular vocational education was higher than that of academic education, signalling successful implementation of the strategy (see Table 4.4). In addition to the promotion of vocational education, during the second five-year plan, the government anticipated the advent of skill shortages with industrialisation by starting up a public training system, primarily to provide skilled craftsmen and operatives. The government took the lead, since enterprises were unwilling to provide or did not accept the need for training (MOE[SK]/KEDI 1996). Well-equipped public vocational training institutes were founded and, with financial support from the World Bank and the International Labour Organisation, the Central Vocational Training Institute was established. In addition, some in-plant training was directly subsidised by government in a scheme that ran from 1968 to 1971. One consequence of the expanding numbers of primary school students was increasing competition for places in the better middle schools, thereby generating substantial social tensions. Following the so-called ‘Turnip Scandal’,12 Which exposed the intensity of public feeling about the competition, the ‘noexamination middle school entrance policy’ was passed in 1968 (MOE[SK] 1996). Under this policy, which was eventually applied nationwide in 1971 (Chang Suk-Min 1995), students were assigned to middle schools by means of a lottery. Like the 1968 ‘Equalisation Policy’, which was designed to harmonise the quality of schools around the country, the no-examinations policy contributed towards the goal of maintaining a relatively equal distribution of wealth. This egalitarianism, in turn, will in the long run have helped to fuel the demand for education. Table 4.4 Distribution of academic senior high school students and of vocational senior high school students, South Korea: 1965–1994

Academic Vocational

1965 %

1970 %

1975 %

1980 %

1990 %

1994 %

60 40

53 47

58 42

55 45

65 35

59 41

Source: KEDI (1994).

Skills for the HCIP stage In the 1970s during the launch of the HCIP, the most significant policies were the promotion of vocational education and training to provide the new industries with the semi-skilled and skilled labour required. This need was met by an increase in the numbers in vocational education, an expansion that was supervised, to the smallest detail, by the Blue House itself.13 President Park was convinced that the very success of the HCIP was reliant on the right manpower

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mix, and tried to persuade private business to support it. Thus, the vocational education and training plans were introduced at the same time as the HCIP. It was a ‘kind of package’ with the aim of producing graduates to go straight into the factories.14 The expansion of vocational high schools was accepted by the public insofar as it fulfilled the pent-up demand for education, but it was still not as popular as academic education. The government produced propaganda to promote vocational education and training, stressing the relatively high economic returns.15 The entrance examination for vocational high schools was set earlier than for the academic high schools. The intention was that more students would accept places in vocational schools rather than have potentially to take a year out if they failed in academic high school examinations (Gill and Ihm 1996). The declared goal was to have two-thirds of high school students in vocational high schools. The out-turn, however, was not as favourable as had been hoped and the goal was never reached (see Table 4.4 above). The problem of bottlenecks in the school system persisted, even after the abolition of the entrance examination to middle school, in the now stiff competition to enter academic high school; students in the latter multiplied even faster than those in the vocational schools. Nevertheless, the government’s power was still sufficient to ensure very substantial numbers of vocationally educated graduates from the school system. To some extent, the need for more technicians to support the engineers and professionals was also to be met by the junior colleges (Lee, K-W. 1983). The number of these colleges increased during the period of the fourth plan (1976–81), and throughout the 1970s they churned out ever increasing numbers of applied science graduates. By 1980, more than one in three junior college students were studying engineering or the natural sciences.16 In this period, the strong tide of demand for education reached the tertiary level with considerable force. The government curbed this demand by the addition of the nationwide Preliminary Examination for College Entrance (PECE) to the individual entrance examinations held by universities from 1969 to 1979 (Gill and Ihm 1996). Private tutoring was prohibited, more as a response to the social problem caused by excessive competition for tertiary places and the inequities that this caused in the system. But supply was raised partly by the opening of new air and correspondence universities. Other education measures were also linked to economic goals in this stage. As part of its commitment to a relatively egalitarian mode of economic growth, national unity and rural development were essential to the development state. The third Five-Year Economic Plan specifically called for a balance in urban rural development. In the early 1970s, the Saemaul Undong (New Community Movement) became a socio-economic movement which had an educational counterpart in the Saemaul Gyoyuk (New Community Education). In addition, the concern with equality led in 1973 to improvements in the high school entrance system, designed to equalise the quality of high schools, to promote vocational and technical education and to upgrade schools in the provinces (Chang Suk-Min 1995).

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During the HCIP period, training came in for greater emphasis. In 1972, the Ministry of Science and Technology predicted that there would be a shortage of skilled labour in their science and technical manpower forecast. It was felt that the manpower needs of the HCIP would not be met by public training centres alone (Lee, J-H. 1996). The government enacted the Special Measures Law for Vocational Training in 1974, under which companies of over 500 employees were required to train 15 per cent of the workforce. The penalty for noncompliance was a fine. From 1976 the coverage was expanded by lowering the threshold to 300 employees, while at the same time the penalty was referred to as a levy. The first effects of the levy were judged very favourable. It raised awareness of training needs and the numbers receiving training increased substantially: for example, the numbers of craftsmen coming out of in-plant training centres rose by some 90 per cent in the five years following the law’s enactment (Table 4.5). The period of liberalisation It is possible to detect, from the start of the 1980s, increasing signs of strain in the Korean skill formation system. As the process of industrialisation was being broadened to include more high technology sectors, and as the economy was starting to be opened to more direct global influence, there was increasing recognition of the need for change. This was reflected in the founding of the Presidential Commission for Education Reform in 1985. For the most part, however, the system remained unchanged until the mid-1990s. The government preferred to attempt to create the needed skills using the existing institutions, rather than commit the funding to extensive reforms (MOE[SK] 1996a). In the fourth five-year plan (1977–81), forecasts for technical manpower by KDI had again revealed that there would be a shortage of skilled manpower. At Table 4.5 Training of craftsmen by training authority, South Korea (numbers of individuals)

Government training In-plant training Authorised training Total

1972–1976

1977–1981

1982–1986

81,294 177,388 54,092 312,736

120,117 337,388 38,234 495,739

121,044 114,773 37,334 273,151

Source: Lee (1990:96).

the same time, the beginning of pressure from trading partners for liberalisation, as well as the pressure from the second-tier NIEs, required increased internationalisation and a move into higher value-added technological products. Yet the main response was through the enlargement of public training institutes (Kim 1993). The fate of the training levy scheme is striking. Training levy

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schemes like South Korea’s have been utilised in a number of countries, or particular sectors of countries, but usually have had a relatively short lifespan owing to opposition from employers. The distinguishing feature of the Korean system is that it remained in situ for two decades and is being replaced only by an enlarged system on similar principles (see below). This longevity is no doubt attributable in part to the power of the Korean developmental state to resist opposition from sections of employers. Nevertheless, the scheme increasingly failed in its objective of stimulating good quality private sector training. The numbers receiving in-plant training fell by two-thirds in the mid-1980s (Table 4.5). By lowering the size threshold in 1990 to 150 employees the scheme was broadened to include more employers, but by 1992 only 16 per cent of establishments covered by the scheme actually did any training, and only 8 per cent did enough to be exempted entirely from the levy. Despite an increase in the levy to 0.6 per cent of the wage bill, the rest chose to pay up and draw skilled or semi-skilled workers as necessary from the public training centres. Diagnoses of this failure primarily emphasise the excessive and rigid bureaucratic control of training, rather than the still comparatively low size of the levy. In addition, the underlying demand for formal training was limited where, as in the majority of Korean enterprises, a well-educated labour force was engaged in mass production processes using comparatively low-skill methods.17 This concentration on Fordist production methods may also help to explain too the other main feature of the levy system, namely that the training it did support was at a low level. Even by 1991, some 95 per cent of private training was for assistant craftsmen, which is the lowest skill level (see Table 4.6).18 Attempts to introduce an apprenticeship scheme along the lines of the German dual system, and to train a cadre of ‘Meister’ who can provide in-house training have also not worked well (Jeong 1995). Primarily, this was because they did not have the same institutional infrastructure as in Germany, argued to be an important adjunct of the dual system (Streeck 1991); another factor was an overly rigid bureaucratic control of the scheme. Table 4.6 Outputs of training by type of training centre, South Korea (per cent of training graduates) 1979 Craftsman I Craftsman II Assistant craftsman

Public – 38 62

1991 Private – 2 98

Public 24 46 30

Private – 5 95

Source: Lee, J-H. (1996).

Educational policy continued to be linked to economic imperatives. Secondary education was consolidated, so that all children were participating at least until

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middle school (Table 4.3). The government also persevered with its policy of stimulating vocational education. As Table 4.4 shows, the proportions following vocational education fell throughout the 1980s. Even though employment rates for vocational high school graduates are higher than for their academic counterparts, the social cachet of academic education and the lure of tertiary education, with its social prestige and superior wage and promotion prospects (albeit higher unemployment rate), conspired to keep demand for academic high school higher than for vocational school. One of the major policy decisions in the 1987–91 plan was to stress vocational education yet again. In the early 1990s, general high schools started offering vocational courses (23 per cent in 1993), and there was a decision to try to increase the ratio of vocational to academic high school enrolment from 32:68 to 50:50 (Chang 1995; Gill and Ihm 1996). By 1995 the ratio had risen to 39:61 (Gill and Ihm 1996). Though less than the target the state was evidently still able partially to mould the social demand for education towards the state’s own ends. As far as higher education was concerned, the policy was to stimulate an increased supply of graduates by the simple expedient of a partial lifting of the floodgates to enrolment in existing universities and by setting up some new technical universities (polytechnic colleges). Tertiary enrolments grew at an annual rate of 18.3 per cent from 1980 to 1985 (Jung 1996). Even though limits were placed on the numbers graduating, and even though enrolments were slowed to a growth of only 2 per cent in the late 1980s, the early 1980s cohort of graduates was released on to the labour market only to find—not surprisingly— that not all of them were wanted. Graduate employment rates fell sharply and, a few years on in the late 1980s, the wage premia for graduates and the implied expost marginal rate of return also dropped (Jung 1996; Ryoo et al. 1993). The returns to higher education nevertheless remained relatively high and were still estimated to exceed the returns to other levels of education. In the 1990s tertiary enrolments again picked up (Table 4.3) with the numbers rising at more than 5 per cent a year. Reform of the skill formation system Across the world, from a distance, the Korean education system is commonly held in high regard. Chief reasons for this include the high levels of participation in education even in the early stages of industrialisation, the subsequent economic growth performance, the subsequent growth also of education enrolments and the high performance of Koreans in international tests of maths and science skills. Less well known are the ways in which the system of education and training provision has changed with the economic transformation. Our analysis has focused on the agency of the developmental state in bringing about the educational transformations. In examining some of the ways in which skilled manpower has been created and located within the economy in its various phases of development, we

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have also implicitly suggested a potentially substantive dynamic role for the state in generating human resource-led growth. This role goes beyond simply ensuring that educational enrolments are high at the early stage of industrialisation. Without the institutional and policy links, it is hard to see how the economic system could have undergone such a sustained period of growth and transformation without the emergence of critical bottlenecks, inflation and stagnation. Despite the problems with the Korean skill formation system, there is little doubt that it has been an integral part of the economic miracle. Yet the current period is witnessing some major changes. The Presidential Commission on Education Reform was relaunched in 1994. Underlying this reform is the recognition that, while the system had served relatively well through the stages of industrialisation, it may be far less well suited to the future economy. As noted above, attempts in the 1980s to change the education and training system were piecemeal and far from successful. The two chief problems that intensified through the 1990s, and which underlie most of the detailed initiatives concern the limitations of a public training system and the quality of education. The problem with the public training system was one that is common to industrialised countries, namely that the state cannot easily meet the detailed and changing training needs of enterprises (Ashton and Green 1996). Some way has to be found to stimulate sufficient training by employers. The main perceived problem with the quality of education concerns the large amount of rote learning necessary for individuals to achieve educational success. From this stems the problem of ‘excessive’ private tutoring, and the continued stress of the ‘examination hell’ in which teenagers do vast amounts of homework in order to compete in the educational game. The product appears to be students who are highly competent in rigidly controlled exams.19 In this ‘edumania’, it is reported that one in four high school students experience a mental illness of some sort (Lee, J-H. and Woo 1997), but there are widespread complaints that a less conformist mode of thinking is appropriate for the information age.20 Korean economic strategists now argue that ‘badly wanting for Korean students [are] the abilities to think creatively and critically, and to actively learn what they want to learn on their own—the abilities that will count more and more in the unfolding era of [the] information society or knowledge-based economy’ (ibid.: 20). Whether or not one agrees with the verdict that the system ‘is close to bankrupt’,21 the inadequacies of the current educational system are becoming more apparent to the public, particularly those who have worked or been through tertiary or postgraduate education overseas. Bemused reports of middle-school students answering multiple choice questions on the correct way of making cucumber sandwiches exemplify the reality and tedium of rote learning and its inadequacies in producing the innovative thinkers needed in the future.22 Changes under way constitute the most wide-sweeping education, labour and training reforms seen in South Korea. Indeed in the words of a MOE[SK] official ‘it is a revolution not a reform’.23 For the Presidential Commission

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on Educational Reform, ‘Korean education…will no longer be appropriate in the era of information technology and globalization. It will not be able to produce persons who possess high levels of creativity and moral sensitivity, which are required to sharpen the nation’s competitive edge in the coming era’ (PCER 1996:11). The PCER’s sentiments were echoed by the Ministry of Education, which held that ‘school should no longer aim at imparting knowledge and facts, but rather at the understanding of concepts and relations’ (MOE[SK] 1996b:7). In practice, the reforms follow from those in the Five-Year Plan for the New Economy announced in 1993. The plan called for the revision of the education and training system to make it focus ‘on the demand for industrial manpower’ and to ‘alleviate qualitative and quantitative imbalances of industrial employment’ (KCCI 1996:13).24 The economic buzzwords ‘age of information and globalisation’ encompass the following economic imperatives: the need for increased R & D to break through technological dependency; increased flexibility to compete in world markets on the basis of higher value-added and high technological products and processes; increased liberalisation to accord with WTO and US demands. These economic needs require a creative, flexible, multi-skilled workforce as well as researchers producing cutting-edge technology. Economic planners are sure that the current system will continue to produce a workforce that is well honed in core academic skills, but are concerned that workers will be excessively accustomed to rote learning, and lacking in practical skills and in creativity.25 South Korea no longer needs ‘good students’ but ‘clever students’.26 It needs to generate an ‘edutopia’ for the twenty-first century. The chief means for achieving these aims, in line with the liberalising of the economy, are, first, to foster diversification and, second, to rely less on state control and more on complementing the market. Diversification, it is hoped, is the way to counteract the rigidities of the education and training system and, in particular, to inculcate more creative skills. First, it is planned to introduce much more diversity in higher education. Through the funding mechanism universities will be induced to be more varied, innovative and flexible in the courses they provide. Tertiary institutions will also be able to set their own entrance criteria, a process which will also encourage diversity. This in turn will require a change in the demand structure for education, which will be encouraged by opening up the route from vocational schools to tertiary education, and by increasing enrolment in vocational high schools to 50 per cent of the cohort. In addition, a credit bank system will be set up to produce more flexibility for students to move educational institution and transfer credits. The credit bank will be the linchpin of the promotion of lifelong learning. It is hoped that linking vocational education and training with the economy more closely will reduce job and skill mismatch. Increased funding of the vocational track, through the proposal to raise government investment in education to over 5 per cent of GNP and targeting vocational education and

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training (Gill and Ihm 1996), will enable an increased emphasis on qualitative as well as quantitative expansion.27 Second, vocational training will be integrated more with vocational education, in order to prevent vocational education being directed towards purely academic study. Moreover, it is hoped to increase in-plant training, as government retreats from its prior training functions. The government states that private enterprises are more able to deliver the specialist skills required by the advanced economy. Therefore, the old and failing levy system is being phased out in favour of the Employment Insurance System (EIS). EIS covers three aspects of human resource management in South Korea—unemployment benefits, employment security and job ability development. Contributions to the compulsory scheme vary according to the size of the enterprise, although employees also contribute to the unemployment benefits scheme (Ministry of Labour 1996). Training will be encouraged as enterprises will have paid a job ability development contribution to the Ministry of Labour (MOL[SK]), which will give financial reimbursements to those enterprises that submit and carry out appropriate training programmes. Not only will the enterprise have an added incentive to carry out training, but the MOL[SK] will be able to monitor and impose quality checks on such programmes. Nevertheless the kinds of training allowed under the new system will be more diverse and less strictly bureaucratically controlled than before. Thus, rather than abandoning the principles underlying the old levy system, the Employment Insurance System is set to re-introduce what is, in effect, a new and improved system of training tax and subsidy.28 In short, state-run training centres were appropriate for the 1970s and into the 1980s, as the public training programme gave workers basic skills. Now companies need ‘new knowledge’,29 and it is recognised that much of this knowledge must be acquired within enterprises. In accordance with the promotion of flexibility, the licensing and certification system is going to be decentralised and private and individual needs prioritised. Flexibility and individual choice will be promoted in the provision of vocational training, where the locus will transfer from government institutes to private enterprise and individuals will be able to apply for paid leave to undergo training (MOL[SK] 1996). At the same time, there will be development of a range of different schools to promote specialisation alongside flexibility, and of a marketled college entrance system. The final element in the regenerated system is a strategic development of Research and Development capacity in the Korean economy. Industrialising as it did on the basis of adapting foreign technology the Korean economy possessed little R & D capacity even by the end of the HCIP stage. A strong impetus for the investment in R & D comes from the Ministry of Trade and Commerce within the remit of the overall economic plan (for example the sixth Five-Year Plan, which prioritised the development of basic research and which called for an increase in R & D spending, see Kuznets 1994). Currently high-tech industries such as information and communication industries, new material sciences and

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biochemical industries are being promoted. R & D within companies is supported through tax exemptions and training subsidies designed for industries in designated sectors but not specifically excluding companies in nondesignated sectors which may apply for the subsidies. The Ministry of Trade Industry and Energy (MTIE) is trying to rectify an imbalance of R & D manpower that is biased towards academia while over 60 per cent of research is undertaken in industry. The MTIE is promoting cooperative research between private industry and academia amongst other more long term initiatives designed to increase levels of R & D to support industry. These initiatives include setting up ‘education centres’ within universities and increasing the amount of research undertaken in universities in general so that students have more R & D experience. Contradictions and conclusions In its central aspects, the Republic of Korea has, since freedom from colonial rule, possessed in varying degrees a developmental skill formation system. Most obviously in the 1960s and 1970s under the Park Chung Hee regime, but also at other times the state has sought to enable and channel the supply of skills to match the demands that it was generating via its control over the economy. Institutional links to connect the education and training system with economic imperatives are apparent. In this key respect, the Korean model is similar to that of Singapore. Similar, too, is the perception that skill formation has been crucial to progressing the economy through its stages. Nevertheless, South Korea is a larger and more complex society than Singapore. Though it has an ethnically homogeneous population, its economy is broader and its population is fifteen times as high. An important difference is that Korean trade unions, legalised only comparatively recently, are a force quite outside the state. Whereas in Singapore the state has utilised the union movement to push forward its training programmes for workers, in South Korea, while there may be union interest in training in the future, the unions are not available as yet to perform any function of stimulating and regulating in-plant training. The classic problem of stimulating enterprise-based training— especially continuous training—remains unresolved, at least prior to the latest reforms. Hitherto this has not proved a major hurdle because of the strength of South Korea’s mass education system. There has been no major problem of skill formation for older workers who had missed out on education—a key issue for Singapore. The expectation has been that it will be possible to produce an adequately skilled workforce by means of a sufficiently high-level education system and enhanced public training facilities for young work entrants. If there were to be a social problem among older workers displaced by changing technology, this has hitherto been resolved by the possibilities of retreat into protected service sectors, in small businesses or family production.

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Another feature of the developmental state is the ability to adjust institutions and policies relatively rapidly in the service of the needs of the state. Koreans have a reputation for ‘adaptability’ as a nation—this characteristic is said to underlie the success in importing foreign technology. There is, too, strong evidence of willingness to adapt on the part of the architects of South Korea’s education and training system. The question for the future, however, is whether this willingness to adapt can be made effective. At present, South Korea is in the unlikely position of basking in the world’s limelight as a paragon of a successful skill formation system and, at the same time, about to embark on fundamental reforms owing to what is perceived by some insiders to be a deepseated crisis. The answer to this paradox may lie in two contradictory tendencies governing the political economy of skill formation in South Korea. On one hand, the state was able to use the Confucian heritage to mould the demand for academic education to produce a mass-educated labour force for a primarily Fordist economy. In such an economy, the low-level skills of the mass of workers are complemented by a great respect for hierarchy, which is also a Confucian characteristic. Yet, this same culture may be judged less appropriate for a new era in which thinking skills and creativity come to acquire a premium over those broad areas of knowledge supported by mass rote learning. Overcoming this contradiction would appear to be at the heart of what is being attempted with current reforms. On the other hand, a second irony is that the state, which has taken a strategic view of future skills needs, is partly losing its power to impose its direction over the increasingly complex economy it has spawned. At the same time as a new emphasis on the importance of human resources is evident, the state is withdrawing from the predominant position it used to guide skill formation in South Korea in favour of a more market-led approach. The education and training reforms have arisen from a combination of the pressures of both democratisation and economic liberalisation. The process of economic liberalisation itself received a severe jolt in 1997 from the financial crisis that swept across Asia. South Korea’s exposure was partly home-grown in that the increased monopoly power of the chaebol underpinned the overexpansion of their short-term debt. In effect, the chaebol had broken partly free from the chains of state control but still relied on the state to bail them out. The outcome of the education and training reforms will be that the state will have relinquished some power over the direction of skill formation, just as its power to influence the direction of the economy is also diminished. Thus, in attempting to stimulate creativity in the workforce via diversification and decentralisation, the state may be making a virtue out of necessity. The difficulties should not be underestimated. Reforms of the university entrance exam, and earlier abolitions of the middle and high school entrance exams, have failed to stem the competition for academic ranking. The need for open, objective tests has so far defeated any previous intentions to reward alternative, less measurable, kinds of

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talent, and is likely to prove a serious barrier to reform even if universities are given more autonomy. Nevertheless, coherence in policy making across ministries, a sign of a functioning developmental strategy, continues. Underlying this strategy there is a link between the controversial labour reforms introduced on Boxing Day 1996, and the education and training reforms.30 The labour reforms are intended to increase the flexibility of the Korean workforce by enabling employers to fire employees more easily. In such circumstances the training reforms, with their emphasis on continuing training, seem apposite as a means of reducing the incentive for companies to dispense with workers and also of equipping workers for moves to jobs in growing sectors. Such a link between job security and skill upgrading, while explicit in Singapore, remains for now implicit in South Korea. Yet the continuation of coherent policy making with a common goal for the future is also apparent. Whether this policy agenda can be fulfilled will depend on how far the state is able to resolve the contradictions of the Korean trend towards democratisation within the global economy. The government’s ability to coordinate skills supply and demand would be further sorely tested in the event of a reunification of the two Koreas.

5 Taiwan

Introduction Taiwan has been a notable member of the East Asian tigers by virtue of consistently high growth rates since the early 1950s’ transformation from an agrarian to a developed economy and features such as low inflation and high savings and relative equity in distribution of income. There has also been an expansion in education opportunities for the Taiwan population giving rise to high scores on international education tests and conspicuous success in international skills competitions. Yet, as we discussed in Chapter 2, the causal relationship between the development of skills and the development of the economy is a problematic one. The aim of this chapter is to examine how far the twin development of skills and the economy in Taiwan conforms to the model of developmental skill formation. While Taiwan’s economy resembles Hong Kong’s in terms of the mass of Small and Medium Enterprises (SMEs) that propel the economy, its developmental trajectory bears great similarities with that of South Korea. Its rapid economic development has spawned a wide literature trying to assess the contributory factors to this growth.1 Some commentators mistakenly attributed the success of Taiwan and other East Asian NIEs to the adoption of free-market policies (Friedman and Friedman 1980) while for others the state-led nature of this development in Taiwan has been readily apparent.2 Along with the other NIEs, Taiwan confounded dependency theory, but the ‘economic miracle’ in Taiwan was singled out for further attention because of the relative equity of distribution that accompanied that development (Fei et al. 1979). In post-colonial Taiwan, the state has been able to capitalise on its geostrategic position and its historical position in the world economy. The state was able to take advantage of the US containment policy by enjoying access to the US market without economic reciprocity at a time of world economic growth while domestically it fostered its relations with the rest of society in ways that enabled it to impose the costs of restructuring on the population. In Taiwan, as in Korea, the legitimacy of the authoritarian developmental state was premised on an external military threat which for Taiwan came from the People’s Republic of

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China (PRC). The legitimacy was to be sustained by the prospect and deliverance of economic development under the auspices of the Stalinist partystate system of the Kuomintang (KMT). In the last decade, however, Taiwan has undergone massive political transformation. The formal democratisation process began in the late 1980s, most significantly by the lifting of martial law in 1987, although the ‘hardness’ of the authoritarian regime3 began to wane in the late 1970s and early 1980s through schemes such as the ‘Taiwanisation’ programme. In 1996 Taiwan held its first fully democratic presidential elections, the last of the major political institutions to undergo democratisation during the decade. Throughout most of the post-war years, though obviously pulled by public opinion and increasing pluralism, the KMT has managed to preserve the impression of ‘top-down’ reforms by allowing political change along with inevitable political-economic realities but without institutionalising democratic channels through which public opinion could be channelled. Although Taiwan is now ostensibly a fully democratised state, certain features of the developmental state may still be observed. While the balance between the executive and the legislature has shifted towards the latter, power is still weighted heavily with the executive. Various authors have questioned the nature of the emerging democracies in East Asia (Bell et al. 1995; Berry and Kiely 1993). There remains some degree of relative autonomy for policy makers, and there are other institutional factors whereby the policy-making bureaucracy is shielded from political exigencies, allowing the formulation of coherent and consistent policy across various policy areas. The KMT remains enmeshed in many state organs and is itself an immensely wealthy organisation. And, as we shall see below, the Council for Economic Planning and Development, the ‘superministry’ which directed the Taiwan development process, retains considerable powers. Other debates surround the nature of the developmental state. While the developmental state has been able to implement consistent and coherent policy, it would be wrong to assume that the state is a unitary entity. Within the Taiwanese state, certain departments wax and wane in power as much as in any Western polity. Education and training policy, for example, will continue to be affected by tensions in policy-making circles between those who favour the free market and those who want increased government intervention. This chapter will explore how the developmental state in Taiwan, needing to retain legitimacy through economic growth, used a particular institutional configuration to subsume education and training policy to the needs of the economy. After considering some important background features, we present a short summary of Taiwan’s economic transformation. In that light, we analyse the evolution of manpower policy, and examine the institutions and the policymaking process. In the concluding sections we consider the changes under way at the present conjuncture of Taiwan’s skill formation system, and question whether the developmental skill formation model will be robust enough to withstand growing tensions.

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Distinctive features of Taiwan’s system Policy makers in Taiwan affirm that manpower development has been a vital component of Taiwan’s extremely successful economic development, even though it is problematic to attribute a direct causal relationship. The fact that manpower planning has been located in the powerful central economic planning body since its inception not only attests to its importance but also to the integrated approach to planning (see below for institutional arrangements). As Taiwan emerges as a newly industrialised country, manpower development remains at the heart of economic policy making. Even as social restructuring and welfare objectives gain increasing predominance in the island’s policy-making agenda, education and training remain firmly harnessed to the service of economic development. Much has been written on Taiwan’s education system.4 However, although there is a small literature analysing the ties between manpower policy to the economic programmes of the state and also the linkage between education and economic growth in Taiwan (Yang 1996; Chang 1996; Li 1996; Chiang 1988; Yang 1991), there is no body of work linking education and training policy making and economic programmes within the institutional context in which this is accomplished. Some debates, however, are evident. Lucas (1982) argues that in the 1960s and 1970s, the education system of the ROC was not synchronised with the needs of the economy, resulting in an oversupply of arts graduates and unskilled entrants to the labour force. Others maintain that it was at the higher levels of education where mismatch was evident (Kai 1989). On the other hand, Li (1996) and others maintain that the development of vocational education has been made in concert with the needs of the economy. Others point to large class sizes, mediocre delivery of educational materials and rote learning (OFSTED 1996). The latter ignores the fact that a broad education without pushing innovation matched Taiwan’s economic needs at least until recently. The evidence below seems to point to the state not only being able to formulate education and training policy within the context of economic development but also being able to impose state goals on to the population. There are certain general characteristics of the Taiwanese skill formation system that are generally held to be true whatever the debate. First, the most striking feature of the system is the extremely high demand for academic education—rather similar to that of South Korea. One explanation is the ubiquitous reference to Confucian respect for the educated person. As with South Korea, we are dubious as to how far such a cultural catch-all will do as an adequate explanation. A pertinent point is that the widespread post-war public demand for education is likely to have been a post-colonial reaction to the inequities of the pre-war system imposed by the Japanese. Moreover, following successful land reform, Taiwan had established a mode of growth based upon comparatively equal income distribution, confounding Kuznet’s Law in the process. A greater dispersion of the economic surplus allows households to

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devote some of that surplus to education, which provides the route to advancement. Estimates show that there are substantial (social and private) returns to education in Taiwan (Chang, C-C. 1992, 1992a). Whatever the reasons for it, high demand for academic education tends to produce other notable features: intense competition for entrance to good schools and universities, academic credentialism and a proliferation of private cramming schools and related services. Second, government commitment to education is reflected in relatively high expenditure on education, and an increasing share of education in overall public expenditure (see Table 5.1). Currently there is a minimum required expenditure on education, science and culture of 15 per cent of public expenditure laid down in the constitution. By 1995 government expenditure on education had reached 19.4 per cent of public spending. There are also minimum expenditure requirements on the provincial and municipal levels of 15 per cent and 25 per cent respectively. From these expenditures, in FY 1993–4 the education budget was allocated as follows: 81.1 per cent was allocated to the public sector with the remainder spent as subsidies to the private sector. Private spending on education is difficult to measure although we believe that it is significant. Most parents pay for their offspring to attend cramming schools (bushihban) in an effort to ensure their success in competitive examinations. They also provide support for their offspring to take foreign degrees.5 A third distinctive feature of the skill formation system has been the existence of a comprehensive public training system and a lack of in-plant training in most private firms. Thus, the state takes some responsibility for a certain amount of training in lieu of private enterprise, much like Hong Kong which also has a large number of SMEs. In 1995, 21,038 people finished training through a public training institute in Taiwan (Council of Labour Affairs 1996). As in South Korea, skills testing is prevalent and the widespread use of skills certificates is being encouraged by the state. Table 5.1 Government education spending in Taiwan Fiscal year Public spending on education % of GNP % of total government spending 1951 1956 1961 1966 1971 1976 1981 1986 1991 1992

1.73 2.27 2.22 2.76 3.69 3.26 3.69 4.21 5.34 5.58

9.93 12.74 13.32 14.58 16.51 12.00 14.72 16.45 17.77 17.86

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Fiscal year Public spending on education % of GNP % of total government spending 1993 1994

5.82 5.80

18.43 19.11

Source: MOE (T) (1995).

Economic development The post-war economic development of Taiwan has been widely covered in the literature.6 Here we will give a brief overview of the major features of Taiwan’s economic development as the essential backdrop to the analysis of skill formation policy. Taiwan is a resource-poor island that had a per capita income of US$ 186 in 1952, which grew at around 4.5 per cent per annum in the 1950s and then, from 1960, at 6.4 per cent per annum to reach $12,435 in 1995 (CEPD 1995a; CEPD, Taiwan Statistical Data Book 1995). Life expectancy on Taiwan has risen from seventy years in 1966 to seventy-eight years in 1994 (DGBAS 1994b). In 1966 there were 31 newspapers and 953 magazines published on the island, while in 1994 there were 300 and 5,096 respectively (ibid.). The population at the end of 1994 stood at 21 million, having more than doubled since the early 1950s. Background to economic take-off The Japanese colonisation of Taiwan had an arguably positive impact on the agricultural and industrial development of the island, mostly upon the food processing industry. Upon the Japanese withdrawal, Taiwan was left with a certain amount of modern infrastructure, basic industry (from offshore relocation from Japan) and personnel.7 There had also been widespread education, albeit in the Japanese medium, in Taiwan. As San and Chan (1988) note, the rapid expansion of primary education before 1940 had a positive impact on the development of agriculture. With the influx of mainlanders, who retreated with Chiang Kai-shek, came a valuable source of technical personnel and entrepreneurs and, of course, capital. The KMT, having lost the mainland, in part because of its failure to resolve the land problem and inflation inter alia, had good cause to impose a tight monetary policy on the island (a constant feature of Taiwan’s economic development) and to press forward with land reform from 1949 (CIECD 1967). Land reform brought subsequent economic benefits in the form of pulling resources out of agriculture into industry. Politically, it was even more successful; the vested interests of landlords were swept away which enabled the KMT to press on with developing industry. US aid was a key factor in the post-war reconstruction of Taiwan. It enabled Taiwan to implement reforms and deal with the pressing inflation and production problems. The geopolitical positioning of the island in the context of the

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containment policy in the US was a vital factor in Taiwan’s early development. Not only did American involvement provide cash but US advisors were also a significant source of policy ideas. The first-stage import substitution industrialisation By 1952 agricultural and industrial production had reached pre-war levels (CIECD 1967) and in the following year the government launched the first economic plan (1953–6). Policy in the 1950s concentrated on Import Substitution Industrialisation (ISI) implemented with the use of quotas, tariffs and strict foreign exchange controls. Agriculture, however, continued to be the most important sector and employer (see Table 5.2) while US aid contributed around 40 per cent of capital formation between 1952 and 1960 (Haggard 1990: 196). Foreign investment during this stage was minimal. While the state took a dirigiste role through ISI and beyond, it also intervened directly in the form of setting up state enterprises (having already appropriated the Japanese enterprises on the island). In the 1950s, these state enterprises became the industrial base of Taiwan. The state retained control of certain strategic sectors (including steel, public utilities and energy) well after private business became dominant on the island. It used state enterprises to lead the way in certain fields, e.g. petrochemical industries through the China Petroleum Corporation, shipbuilding, and so on. Not only were these enterprises used to branch into high-risk areas, the state was able to use them as interventionist tools through the supply of inputs to downstream industries in the private sector, and as a means of signalling policy (Wade 1988, 1990a). If the state did not run new industries as public enterprises, it handed them over to private entrepreneurs. Agriculture was used to subsidise industrial development during this period. During the 1950s, textiles and consumer electronics are but two examples of successful industries promoted by the state. By the second and third economic plans, diversification of the industrial base and the promotion of exports were anticipated (CIECD 1967). Export-oriented industrialisation In the early 1960s there was a shift to light industrial labour-intensive Export Oriented Industrialisation (EOI). The tariff arrangements were modified to encourage exports as were tax incentives. These measures were augmented by Table 5.2 Sectoral distribution of labour in Taiwan (per cent) Year

Agriculture

Industry

Services

1952 1962 1972

56.1 49.7 33.0

16.9 21.0 31.8

27.0 29.3 35.2

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Year

Agriculture

Industry

Services

1982 1990 1991 1992 1993 1994

18.9 12.8 13.0 12.3 11.5 10.9

41.3 40.8 39.9 36.6 39.1 39.2

39.8 46.3 47.1 48.1 49.4 49.9

Source: CEPD, Manpower Indicators (various years).

increased female and rural participation in the industrial labour force. The shift to EOI was partly in response to US policy advice but also in response to the realities of Taiwan’s market. Foreign exchange earnings were needed to fund increased importation of capital goods (CIECD 1967) and, fundamentally, Taiwan did not have a large enough domestic market to pursue first-stage ISI further. In order to attract foreign investment, the Taiwan government set up the first Export Processing Zone (EPZ) in Kaohsiung. The state offered incentives to foreign multinationals (MNCs), but it could also limit access to MNCs and monitor operations (Huang 1989). Although EPZs had a positive effect on Taiwan’s development, the scale of these operations should not be exaggerated; EPZs at their height employed only just over 3 per cent of manufacturing personnel (Wilkinson 1994:121). Still the contribution of the EPZs and of inward foreign direct investment in general was important. The state encouraged foreign direct investment into export-oriented sectors and especially into sectors with high technology transfer potential. In return Taiwan could offer cheap but highly disciplined labour owing to the state’s suppression and co-opting of the labour movement. As early as the beginning of the 1960s, economic planners were beginning to see the need to promote heavy industries and capital goods (Wade 1990b). Thus, even during the export-oriented stage, second-stage ISI continued. The state expanded some of the heavy and chemical industries that it had already established, such as metal manufacturing, electrical and non-electrical machinery and precision engineering tools (Wade 1988). There was a gradual shift to heavy industries and self-sufficiency in basic technology (CEPD 1995). The former was partly in reaction to the first oil crisis and the PRC’s entrance (thus Taiwan’s withdrawal) from the United Nations (Pang 1992). The first oil crisis precipitated the announcement of the Ten Major Construction Projects carried out between 1973 and 1978 (Li 1988b) which afforded the infrastructural basis for Taiwan’s continued development. Sixty per cent of the programme was financed by domestic savings (Li 1988b). Such projects enabled Taiwan to navigate successfully through the economically and politically challenging decade.

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The second oil crisis and the loss of diplomatic recognition from the United States prompted the economic policy makers to focus on higher technology, increased use of domestically produced raw materials, higher value-added and the promotion of industries with high intersectoral linkages (Pang 1992). Thus, in the 1980s the priorities changed to the pursuit of higher value-added markets. By the mid-1980s internal and external pressures on the economy8 led to additional goals for the late 1980s—liberalisation and the encouragement of imports. Privatisation of the public enterprises was also added to the agenda. In the 1980s, Taiwan also faced severe competition from the ‘second-tier NICs’ in its traditional export areas.9 However, as Wade (1988, 1990a) shows, the state had already anticipated these pressures and was already promoting higher technological and higher value-added industries. Taiwan’s industrialists started to move labour-intensive operations to second-tier NICs. In both the promotion of ISI and EOI constituencies were made to suffer the economic consequences of restructuring, agriculture in the first instance and those engaged in ISI in the second. Without the degree of insulation that the state enjoyed from these vested interests, such steps would not have been successful.10 The present economic conjuncture The Six-Year Development Plan launched in 1990 incorporated the promotion of ten major emerging industries and eight key technologies. The plan also included raising GNP to $14,000 in 1996. The basis of the plan was to increase the R & D basis of the economy (Ferdinand 1996). In addition, the Taiwan government launched a drive to become an Asia Pacific Regional Operations Centre (APROC). There has been concern, not least from the ROC government itself, that R & D in Taiwan was insufficient to carry Taiwan forward into the twenty-first century. While expenditure on R & D as a proportion of GNP rose steadily in the 1980s from 0.93 per cent of GNP in 1981 to 1.79 per cent in 1992, the amount spent on basic research seems to be stabilising (DGBAS 1994a). In 1992, 12.5 per cent of research monies were spent on basic research while 36.4 per cent went into applied research and 51.1 per cent was channelled into technological development. Unlike Hong Kong, where there have been concerns about the flight of capital per se, the Taiwanese administration has been more worried about the specific location of Taiwanese off-shore industry fearing an over-concentration of capital on the mainland. While some arms of government ostensibly welcome the transfer of labour-intensive manufacturing industries to South East Asia and mainland China11, it is more a case of going along with the inevitable. Through the late 1980s, many companies set up manufacturing concerns in the PRC using Hong Kong as a conduit. Now such moves are legalised, the ROC and PRC are reaching agreements on regulations and safeguards for such industries.

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Meanwhile, other locations are being promoted as potential investment sites to avoid over-concentration in the mainland. Taiwan’s largest companies are also moving operations westwards, in order to place themselves competitively in the European and North American markets. The government relaxed foreign exchange controls in 1987 and further relaxed screening of outward investment plans in 1989 (MOEA 1995). Unlike the investment in South East Asia which tends to be labour-intensive, the investment in the West is capital intensive. Meanwhile, at home unemployment has become a political issue. While economic take-off progressed, Taiwan suffered labour shortages in certain areas (particularly construction) and imported workers. Recently official unemployment has risen, standing at 2.24 per cent (about 200, 000 people) in mid-March 1996. There is likely to be a great deal more hidden unemployment or under-employment. Such is the comment aroused in the press and the general public, that a special committee has been set up in the Council of Labour Affairs (CLA) to produce proposals to reduce unemployment.12 Another aspect of the current labour market has given rise to widespread concern—the recent phenomenon of imported labour, concentrated in manufacturing jobs (see Table 5.3). Within the CLA, there was a stated intention that imported labour should be a short-term measure. However, it seems that the deficit of domestic labour in certain ‘dirty, dangerous’ sectors will ensure that Taiwan will rely on foreign labour for some time. The major economic goal outlined by the Ministry of Economic Affairs (MOEA) is for Taiwan to become a fully developed country by the year 2000 (MOEA 1995).13 Meanwhile, Taiwan is still a major export economy dominated by SMEs trying to upgrade technologically. Present economic policy is centred on the promotion of the ten fledgling industries, the upgrading of traditional industries, the creating of Taiwan as a regional operations centre, privatisation of state industries and the further internationalisation and liberalisation of the Taiwanese economy. Policy debates concerning the future role of the state in the economy, however, have still not been settled. The past role of the state is nevertheless clear. The economic development of Taiwan has been guided by a strong state which uses an explicit industrial policy. The state ‘makes’ winners (Wade 1990a) and provides incentives for industry to conform to the state’s policies. The success of this development in the past has relied heavily on the state’s marketing of cheap labour, the entrepreneurial spirit in society, the high savings rate, and a stable macroeconomic environment. The state has also intervened directly by owning industries in strategic sectors and keeping them or passing them to private ownership once viable. The provision of manpower to fuel the continuous process of upgrading has also been facilitated by the state. It is to this issue that we now turn.

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Table 5.3 Alien workers by sector in Taiwan, end May 1996 (in thousands) Total Agriculture

Manufacturing

Construction

Social services

Other

220

152.5

45

21

negligible

1.6

Source: Council of Labour Affairs (1996).

Evolution of manpower policy The post-colonial period As we have already noted, upon retrocession of Taiwan to China and the KMT withdrawal to Taiwan, the educational situation was already relatively advanced compared to other Asian countries. The Japanese had established a public school system to replace the private, traditional schools that had predominated at the beginning of the occupation (Ch’ang 1994). By 1945 the enrolment rate was 81 per cent for boys and 61 per cent for girls (Liu 1992). However, the system consisted of three layers—elementary schools (predominately for Japanese), public schools (for Taiwanese) and schools for aboriginals (Ch’ang 1994). As in Korea, not only were there qualitative differences in elementary schooling under Japanese occupation, the Taiwanese were restricted in their entry to higher education especially in certain fields.14 The Japanese also set up vocational and technical schools and colleges, although again at the higher levels Taiwanese students were a minority with Japanese students receiving most provision (ibid.). While primary education was widespread and Taiwan already had a university (Taihoku University was established by the Japanese for Japanese on Taiwan, although it admitted a minority of Taiwanese) the immediate concern for the KMT was the huge population increase that had accompanied the party’s retreat.15 During the 1950s and the primary import substitution phase, education development treated the provision of primary education as the priority—six years’ free compulsory education for 6–11 year olds. There are a number of alternative explanations for the focus on primary education. We were informed that President Chiang Kai-Shek took a personal interest in ‘upgrading the quality of the people’.16 Whatever the origins of such a commitment by Chiang and the KMT, it is unclear exactly what the perceived objective was. While economic growth might, in hindsight, be seen as the objective of the policy, a more likely interpretation sees primary education in this era as contributing to the process of nation-building. On the demand side, the public’s thirst for education has already been noted—linked to egalitarianism, to the Japanese legacy and to Confucianism. However, the state was able to resist demands for increased expenditure on secondary and tertiary education. Whatever the factors behind the education policy, the Japanese elementary school system and the focus on primary education in post-war Taiwan resulted in a pool of literate workers for reconstruction. In 1952, notwithstanding the influx of mainlanders, over 50 per

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cent of the total population over the age of six had at least primary education (CEPD, Taiwan Statistical Data Book 1995). During the post-colonial period the emphasis of manpower policy was on population control. Until the mid-1960s there was no overall statutory vocational training policy. There was only a piecemeal policy covering apprenticeship and handicraft training (Li 1988a). Much of this training was carried out and promoted under the International Labour Organisation and the US government.17 Some small amount of training was also conducted by individual firms but there was no organised programme apart from the China Productivity Center (CPC) and National Chengchi University (San and Chen 1988) both of which organised some managerial training. The Metal Industry Development Centre also ran a skill training programme. By about 1966 it was considered that an overall national training policy was essential. The era of manpower planning Education planning started in 1964 through the ‘Preliminary Draft of the Long Range Education Plan 1964–1982’ which was drafted by the Ministry of Education aided by the UN (Law 1994). The first manpower plan which was integrated with economic plans followed shortly in 1966, by which time the transition to EOI had been completed.18 Since that time, manpower planning has been, as the Director of Manpower Planning put it, an integral part of economic development planning (Chang 1996) and has changed in harmony with economic development needs. The rationale behind the integrated manpower plan is explained in the Third Manpower Development Plan: Since the basic targets for manpower development have been recognised as comparable to the economic development targets, various manpower development programs have been carried out over the last two years parallel to the economic development projects. However, with a large population, limited natural resources and production mostly dependent on the international market, Taiwan should aim at more comprehensive manpower planning. (CEPD 1971:1) The plans from the beginning made projections of growth by industrial sector, projections of the manpower requirements at various educational levels, employment (and unemployment levels) and distributions of enrolment (later quotas) in educational institutions (Woo 1991). To a great extent, this policy of locating manpower and education decision-making within the context of economic planning has remained unchanged. The first integrated manpower plan showed that there was a shortage of skilled workers that would become increasingly acute. In addition, Taiwan’s higher education system was skewed towards the arts and humanities during the 1950s

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and 1960s. The first manpower plan and the education plan (entitled ‘A Preliminary Draft of the Long-range Educational Plan 1964–1982’) both emphasised the development of science and technological education to accord with the development of the economy (Law 1994) and covered other points of concern. The plan also covered the following fields: education, training, recruitment, the motivation and distribution of students, and research and planning. In particular, the plan promoted vocational education rather than academic high schools.19 In 1960 only 40 per cent of high schools pupils were in vocational schools, which was considered too low to meet expected skills needs.20 To change the provision, limits were put on the expansion of general schools while vocational schools were opened. As Table 5.4 shows, by 1970 the proportion of pupils in vocational education had already risen to 57 per cent. This emphasis on vocational schooling was high by most standards and was later to become even more pronounced. Notable about this shift is that it is attributable to the state rather than public Table 5.4 Distribution of senior high school students in Taiwan 1960 General high 60 40 Vocational high Source: Chang (1996) (appendices).

1970

1990

1995

2000

43 57

28 72

30 70

40 60

demand. The demand for general (academic) schooling was high but the state was able to insulate itself against public pressure and limit access to academic education. The state initially opted not to lengthen the period of compulsory education beyond six years and to devote its resources to the provision of vocational education. ‘Six years of compulsory education proved to be enough to meet the needs of society… Effective manpower planning had become necessary to orient the strength of education-pursuers to the best use of development’ (Chang 1996:4). In 1968 it did, however, go for an increase in the compulsory period to nine years, but it kept to its resolve to raise the proportion of vocational schooling. In addition to the state’s remarkable success in imposing a high proportion of vocational education the third manpower plan provides further evidence of the role of the state in restricting access to education for the sake of the needs of the economy. Even at the level of junior high school students public demand was not the important issue: Taking financial resources into consideration, the enrolment rate of junior high school graduates should be based on the manpower needs of socioeconomic development and the developmental ratio among senior high schools, vocational schools and 5-year institutes.

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(MPD 1971:40) Thus, although certain commentators maintain that the satisfaction of public demand was a high priority in the expansion of secondary education in Taiwan (see Morris 1995, 1996) this is hard to substantiate. Rather, adapting educational provision to satisfy the future demands of the labour market seems to have provided the impetus. Certainly the government has wanted to portray its policies as responding to public demand even where it was not the case. Indeed, in the 1970s the policy makers were claiming that ‘mothers and fathers like vocational education’, citing the evidence that more than half of high school students attended vocational high schools; yet the truth was that the manipulation of the ratio between academic and vocational high school numbers was entirely in the hands of the Ministry of Education (Ch’ang 1994:411). The deliberate ‘narrow gate’ policy of the state resulted in 70 per cent of the candidates in the late 1970s failing secondary high entrance examination and therefore having to resit or go to vocational schools despite what was sometimes perceived as the social cost (Lucas 1982). The Confucian/Chinese respect for education in the early stages of post-war development could have resulted in high spending on more academic secondary and tertiary education, while the vocational skills demanded by industry may have been neglected. Not only was public demand for education concentrated on academic education, but, while capital was still in short supply, it would have been cheaper to provide additional academic schools rather than vocational schools.21 It was the state’s manipulation of this high value placed on education which resulted in the ‘correct’ supply of labour from schools to industry. It cannot be said that the manpower planning resulted in a perfect match. Both Lucas (1982) and San and Chen (1988) refer to the problem of unemployment, especially among the highly educated. Moreover, graduates often have to accept employment in which their duties, status and salaries are incompatible with their educational background. This phenomenon may be associated with the popular ‘working one’s way up’, age hierarchies, and gender issues where female graduates are involved. However, various officials we spoke to were not greatly concerned that there was a slight mismatch at these levels. Complementing the stress on vocational education, the manpower plans also turned to the question of training. Rapid EOI in the 1960s was transforming the demand for unskilled labour to increased demand for skilled labour. The abundant labour supply was also drying up. Several measures were taken to pursue the goal of a training policy, including signing a mutual agreement with the United Nations, implementing a new form of apprenticeship training, introducing skills tests and skills competitions, and proposing the establishment of nine public and private training institutes (San and Chen 1988). During the period of the second plan (the late 1960s), an in-plant planning programme was carried out in state-owned enterprises in which training and recruitment needs were predicted from forecasts of business development. The

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state was concerned that training would be needed to realise fully the benefits of the expansion in compulsory education. By the third plan (1971), the state intended not only to continue to use the state-owned enterprises to forge new industrial development but also to guide private industry in successful training. The plan explicitly states that the in-plant planning programme was to be used in state-owned enterprises to demonstrate its value to the private sector (MPD 1971: 50). Other attempts were made in the early 1970s to increase the commitment and financial contribution to training of private industry. In 1972 the Vocational Training Fund Statute (VTFS) was promulgated. The idea behind the statute was based on research conducted into the use of levies in other developing and developed countries (principally Britain). The statute required that all public and private enterprises with over forty employees should contribute to a Vocational Training Fund through a levy of at least 1.5 per cent of the payroll. Enterprises which conducted in-service training would be reimbursed (up to 80 per cent) by the fund. There were doubts about the implementation of the statute while it ran, and by 1974, during the difficulties caused by the first oil crisis, criticism of the levy by industry rose to such a level that it was repealed. Both political and economic problems contributed to the state giving in to business pressure over the levy issue. The cost of the administration of the levy has also been cited for its unpopularity. Even though the levy was withdrawn, an increase in in-plant training during and after the levy period is reported (San and Chen 1988). However, public training had to be continued and financed by the government,22 which took the view that in-plant training remained insufficient. The levy was reinstated in principle by the Vocational Training Act of 1983.23 However, this levy was neither promoted nor implemented. Infighting amongst certain ministries and departments resulted in this state of affairs.24 While the CLA had included a levy in the Act, the Manpower Planning Department (MPD) within the Council for Economic Planning and Development did not want to implement it. Rather, the MPD preferred to encourage training through incentives. So the state concentrated on the provision of training at public training centres, which were coordinated by Employment and Vocational Training Administration. Following the state-initiated moves into heavy industry during the late 1960s, which intensified after 1973 during the period of the ten major construction projects, vocational education was expanded to tertiary level with the establishment of the National Taiwan Institute of Technology. This completed the full system of vocational education—vocational school, junior college and the institute of technology. Further institutes of technology were also established. Not only would the institutes provide technologists to meet the increasing demands of industrialisation (the development of heavy industry), but they would also promote the image of vocational education by offering opportunities (and a bachelor’s degree) at the tertiary level. As EOI progressed,

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more labour was needed and the third manpower plan promoted the full utilisation of women workers, and their education and training. There were also proposals to increase the amount of private investment in education, and to expand engineering and natural science departments at the university and college levels (MPD 1971:37). The structure of higher education was changed to produce more scientists and engineers and the percentage of students enrolled in science and technology rose from the late 1960s to the present (Law 1994). In 1979, the Science and Technology Development Programme addressed manpower at the tertiary levels in response to the increasing capital-intensive— and skill-intensive—industrialisation occurring in the wake of the oil-shocks. ‘University education and post-graduate education were heavily emphasised, along with key technologies which would be needed by industry’ (Li 1988a:90). By 1986, the ratio of first-year students in science and technical subjects over all students at various levels was as follows: doctorate students, 74.4 per cent; master’s students, 70.1 per cent; and bachelor students, 46.6 per cent (CEPD, T’aiwan Chingchi Ch’ingshih 1986:103). To summarise the development of skill formation practices and policies since the 1960s, a manpower policy and system was adopted and placed under the control of the CEPD. The needs of the developing economy were assessed by the CEPD and passed on to the MPD. Vocational education was expanded at the expense of the popular academic education. Technical Institutes provided more incentives for people to follow the vocational route and provided technician training. Tertiary and secondary education was restricted in the early years while semi-skilled labour was in demand. Later more focus and resources were also given to science and technology. Vocational training was increasingly emphasised through public training centres; however, the state was unable to shift much responsibility for training to the private sector. State-led skill formation in Taiwan Institutions Above, we have explored the development of education and training policy and how it has followed the needs of economic development on Taiwan. How has this been accomplished? What institutional configuration has enabled education and training policy making to be harnessed to the economic development agenda? Without question, the most influential body in manpower development in Taiwan’s post-war history is the central economic policy-making body.25 This body serves as the advisory council to the cabinet and has steered the course of Taiwan’s economic development along with the Industrial Development Bureau (IDB) in the MOEA. While the IDB has been responsible for industrial policy, the CEPD and its former incarnations has been broker and final arbiter over

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other ministries and departments. Although the relative power of ministries and the CEPD is partly dependent upon the personalities at their head, the CEPD has remained the ‘superministry’. Rau (1996) argues that the CEPD’s role has been changing over the past decade and a half; from predominance until the early 1980s to a partner with other ministries, including the MOE, in the decade from 1980–1990. However, although the CEPD may not be at the commanding heights, our interview evidence suggests that it is still more powerful than the MOE and other ministries and councils. What has changed is that the power of the executive has waned relative to the legislature. The democratisation of Taiwan has resulted in wider consultation prior to policy making by ministries. As the process of pluralisation and decentralisation is as yet incomplete, it is difficult to predict the final balance of power between certain societal groups and state institutions and the degree of withdrawal of the KMT from state institutions. However, where the manpower planning process is concerned, the supremacy of the central economic planning body has not been seriously challenged in the post-war years. In this role the CEPD has been able to merge education and training policy to fit the economic development agenda. This dominance has allowed manpower policy since the mid-1960s to ‘have been tailored to meet manpower needs at different stages of socio-economic development’ (Chang 1996:1). The Manpower Planning Department (MPD) being situated within the economic planning body both makes manpower the servant of economic policy making and facilitates its input into some economic policy making (for example on policies concerning automation). The MPD as part of the CEPD revises policy relating to manpower and considers it in the larger context. The MPD covers the following areas: population; wages; education and training; manpower forecasting; industrial relations; youth problems; and now social welfare (old age pensions) and cultural development. In the early days the manpower planning process was ‘a one-man show’.26 Now, although the MPD only has twenty-six permanent staff, it uses academic consultants and other departments to carry out manpower surveys and other necessary research. The MPD, as part of the CEPD, ‘gets all the necessary co-operation from the MOE’.27 Thus, the preeminence of the CEPD over other ministries seems to hold even though it may not be fashionable for this power to be explicit. The CEPD still has ‘strong suggestions’ and ‘influence power’ (sic).28 Under the influence of the CEPD, the MOE itself has extensive centralised controls over both the public and the private education system. It closely controls the curriculum and the hiring of teachers, and it has had a monopoly in the provision of textbooks. It has been the chief instrument for determining the mix of academic and vocational education in schools and for manipulating a ‘narrow gate’ to higher education. Finally, the MOE has exercised centralised control over provincial and local education authorities. Another important body in the supply of skills to the Taiwanese economy is the Council for Labour Affairs (CLA) which, at this time of writing, is intended soon

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to become a fully-fledged ministry after current constitutional reforms have concluded.29 Prior to 1987, the CLA was in the Ministry of the Interior. The restructuring came about as a result of democratisation and the need for greater industrial harmony30—that is, labour relations were no longer considered part of national security. CLA is responsible for government vocational training through the Employment and Vocational Training Administration (EVTA). The latter was established in 1981/2 under the CLA after being proposed in 1977 as part of a five-year plan for promoting in-service training. EVTA had been functioning under the Ministry of the Interior from 1970. According to the present Director of EVTA, the move to the CLA was purely functional rather than political.31 The Ministry of Economic Affairs (MOEA) is another body with an influence on skill formation. On the supply side it has had direct control over some of the public training centres. The MOEA established the North and South Training Centres in 1970. These were later transferred to EVTA’s control. In addition, K.T.Li, as Minister of Economic Affairs—and seen by many as one of the main architects of Taiwan’s ‘economic miracle’-influenced two state enterprises to set up vocational training centres to train welders, machinists and skilled tradesmen in the mid-1960s. At the same time a UN development programme was used to fund the establishment of institutions to train vocational instructors (Li 1988a). More significantly, on the demand side, the MOEA housed the Industrial Development Board, which was responsible for effecting the state’s industrial policies with their immense influence on skills demand. Both high technology research and the highest level of skilled manpower is directly supported by the state. The Industrial Technical Research Institute (ITRI) was set up in 1973 to develop those new technologies that private industry could not afford to develop and, although a state organ, seems to be used to train elite scientists with the expectation that many researchers will leave to start their own businesses. The Second Department of the National Youth Commission (NYC) is another body with influence over and responsibility for employment guidance and vocational training. Over a period of ten years, 10,000 people have gone through NYC training. The NYC trains those with senior high school education, or higher, in contrast to those trained through EVTA. The Third Department of the NYC supervises overseas students and encourages overseas students and scholars to return to Taiwan. Students of master’s standard and above studying overseas are kept informed of employment opportunities in Taiwan. In 1994 there were 6,510 returners, up from only 640 in 1980 (CEPD Manpower Indicators 1995). This constitutes a substantial influx of highly qualified manpower. The NYC has a system for developing and monitoring highly qualified manpower that has existed for about thirty years. Readers might be comforted to learn that, for these purposes, youth is defined in terms of educational achievement—the minimum age is twenty-three, while the maximum is forty for those with a master’s degree and fifty for those with a PhD. The state, through the NYC, uses financial incentives to entice highly educated scholars

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and professionals useful for future economic development to return to Taiwan. The NYC also coordinates elite examinations, open to high school and college graduates, for the top employing institutions in Taiwan, such as the government, banks and trust companies. The overall success rate in the examinations is only 5 to 6 per cent. Thus the NYC is the state organ that supervises the manpower supply for state and private institutions at the elite level. The China External Trade Development Council (CETRA) has two main functions: to develop closer ties between government and business, and to develop closer ties with Taiwan’s trading partners. Other functions include gathering trade information, promoting Taiwanese products and training business people. In addition, CETRA runs the International Trade Institute (ITI), an elite international business school providing top-level trade executives to manage overseas offices for Taiwanese multinationals and government offices. The courses run by ITI were requested by the government and traders pressed the Ministry of Economic Affairs to set up some kind of training. The board of supervisors for the course comprise several groups: government officials from the MOEA, the central bank, the Council for Economic Planning and Development, the Ministry of Finance, those with foreign trade interests, and the chambers of commerce and industry. To summarise the institutional configuration supporting skill formation in Taiwan, the supply of manpower has been controlled by the centralised Ministry of Education and the Council for Labour Affairs and various other organs. The tools that the state uses to implement policy can be summarised as follows: participation at certain levels of education is restricted; the provision of education is monitored and changed according to the economy’s requirements (e.g. ratio of vocational and general education); the curriculum is centrally controlled; and highly subsidised public training is provided to offset the lack of training provided by private business (particularly SMEs). The Taiwanese state has also been able to influence the demand for skills through the industrial policy of the Industrial Development Board of the Ministry of Economic Affairs ‘making winners’ and promoting certain industries above others. Above all, the key institutional feature relevant to the model of developmental skill formation is that the demand and the supply side are coordinated at the highest level within the Manpower Planning Department in the Council for Economic Planning and Development. The coherence of policy across policy areas, attributable to the position of the CEPD and the predominance of the economy in the national agenda, as well as the stability of institutional arrangements, has led to a situation of ‘stability with flexibility’ in education policy along with economic policy. In the economic arena this has translated into a stable macroeconomic environment which has fostered a dynamic private enterprise sector guided at the broadest level by state objectives. In terms of education, the system of education and its administration has remained stable, but the state has rendered it flexible enough to respond to the changing needs of the maturing economy. Thus, it is the evolution of policy through a particular and

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fairly constant configuration of policy-making institutions that has been the defining feature of Taiwanese education and training development. Policy making Given this hierarchy of institutions, the process of manpower policy making in Taiwan has been and still is a top-down affair. The ministries concerned send policy initiatives up to the CEPD where they are considered in light of overall policy objectives. There is little formal business or industrial input into policy although influential business people with government connections do attend various elite policy-making forums. As the Commissioner for Education for the Taipei Municipal Government put it, referring to the business input, ‘it is chance, not a system’.32 Taipei Municipal Government, which has some increasing degree of autonomy, is trying to set up more solid links with business and industry, but these connections are as yet embryonic. Unions have also largely been excluded from the policy-making process. The union movement in Taiwan until the mid-1980s was subsumed into the wider state apparatus, while conventional union activities were greatly circumscribed under martial law. In the 1970s, the KMT encouraged employers to form enterprise unions which resulted in propping up company paternalism (Deyo 1989). The greatest barrier to trade union strength even now lies in structural impediments restricting the development of federations. The legal federation, the Chinese Federation of Labour (CFL), has attracted increasing union membership, although unofficial union representatives maintain that union membership was a prerequisite for certain perks including ‘laopao’—labour insurance including health insurance. According to Union Law, workers should receive eight hours of labour education, but this concentrates on worker safety and entitlements. For the most part, formal training is a minor issue for unions. The Chinese Federation of Labour (CFL) president, a KMT legislator, launched a ‘factory at home and school’ movement in the early 1980s which focused on labour-management relations and positive participation of workers in solving industrial problems (Wilkinson 1994; Deyo 1987). The only type of training that draws the attention of the government union movement and the CFL is essentially heath and safety training in enterprises.33 Meanwhile, the non-official union federation is preoccupied with its own legal status, with health and safety and with workers’ rights training.34 Unsurprisingly, the unions are not playing a role in upgrading skills or in retraining those affected by relocation. The close ties of the official unions to the government (the present secretary general is a former KMT National Assembly Representative), the relatively recent democratisation and previous long suppression of union rights have meant that the union movement has concentrated on traditional workers’ issues. By contrast, academics are well integrated into the policy-making system. Many government posts are filled by seconded academics who may fulfil this

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kind of role for up to three years. This practice is not only an indication of the value placed on academics and education in general, but in the past may have been used to co-opt some academics critical of government policy. The system has similarities to Hong Kong’s consultation process in that influential figures may be co-opted. Illustrating the state’s power over other societal forces, the Taiwanese education system was incorporated into the state apparatus. The Ministry of Education tightly controlled educational institutions and used them to diffuse the economic, political and cultural goals of the state to the populace. The state used a combination of incorporation and suppression of potentially powerful societal groups, such as academics and students, in the name of state security. Thus, university academics did not have the freedom of expression enjoyed in the West (Law 1994).35 Universities were accountable to the state and the KMT. The depoliticisation of the universities in the 1990s is symbolic of the partial with-drawal of the KMT from certain institutions and the partial decentralisation of state power. However, the extent to which state power is compromised is still highly debatable. For example, although the power to select presidents has been devolved to public higher education institutions, the MOE still has the final decision-making power. Control in the education system has not been limited to curriculum. The language of instruction has been Mandarin, through which the specific cultural values of the KMT have been transmitted in all subjects. The skill formation system into the twenty-first century Over the past fifteen years Taiwan has undergone significant political and economic change. As Taiwan converges towards Western levels of productivity, the prospects for growth by absorption of foreign technology become circumscribed. International pressure (mostly from the United States) has forced Taiwan to open up the domestic market to a wide range of imports, and there are pressures on the nascent service sector industries to open up to international competition. Taiwanese industries themselves have invested overseas and the political changes on the island have been profound. All these factors have influenced the skill formation system, not only by way of response to new challenges, but also in terms of a fundamental shift in the state’s role in skill formation in the future. Yet economic plans continue to inform manpower policies. In recent years policies in the Economic Stimulation Plan aimed to guide industry to upgrade into higher value-added and high technology development and investment (Yang 1996) continue. The drive to enter the World Trade Organisation (WTO) has given added impetus to market liberalisation and internationalisation. Finally, making Taiwan into an Asia Pacific Regional Operations Centre (APROC) is the major economic policy goal for the Taiwanese government.36 APROC was singled out for mention in President Lee’s 1996 inaugural address alongside internationalisation, liberalisation and a drive to increase competitiveness.

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Alongside and concomitant to these ambitious economic aims are complex economic and political problems both new and old. Unemployment, although not high compared with developed countries, has become a political issue. The relocation of manufacturing abroad is contributing to the problem, while continued reliance on imported labour increases the potential of political fallout at the same time as indicating a structural imbalance in the labour supply. Meanwhile, relatively high unemployment and underemployment among the highly educated poses a future political threat.37 Taiwan’s political position in relation to mainland China has yet to be resolved and with the return of Hong Kong this will have a new urgency. Finally, the constitutional and democratic reforms on the island have yet to be consolidated. It would not have been surprising if the Taiwanese government had instituted a major set of reforms to the education and training systems to support the new economic environment, similar to the South Korean reforms. No such grand transforming vision has been announced in Taiwan, but a series of changes to individual policies is taking place, ostensibly in response to the new economic goals. These changes may have long-term consequences for the developmental skill formation system. The plan drawn up in 1997, entitled the ‘Manpower Development Plan for Crossing the Millennium’, is part of the ‘National Plan for Crossing the Millennium’ and linked to APROC and the plan to improve competitiveness. The Manpower Development Plan is comprehensive, including employment targets, forecasts of manpower needs for each part of APROC and predictions of education enrolments and outputs (CEPD 1997). It aims to keep unemployment below 2.5 per cent by the year 2000 and to strengthen manpower training in keeping with national requirements (CEPD 1997). Priorities include the promotion of public training, enterprise training, refresher training and lifelong learning, as well as employment guidance and many other areas. The millennium manpower plan is an elaboration and synthesis of many of the ideas that have been put forward in government circles over the last few years. Yang (1996) has identified some more specific manpower implications following from the Economic Stimulation Plan. A skilled workforce is needed for ‘the operation and maintenance of automatic systems, with the ability to assist in R & D, quality control and environmental protection’ (ibid.). To complement the APROC plan, Yang notes that there will be an increase in trained personnel in the following specialisations: foreign languages, finance, transportation, telecommunications, tourism, hotel management, information and media (ibid.: 6). According to the Director General of EVTA, to match Taiwan’s future economic development from labour intensive production to a high technology and service-dominated economy, the government is promoting the following vocational training strategy: ‘Strengthen and relaunch re-training programmes for workers; provide job transfer and second-expertise training; strengthen training in the areas of computerisation, industrial automation, CNC and mechatronics; carry out more skills testing and improve certificate system [sic];

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provide training for manpower in the service industry; encourage industry to carry out training programmes’ (Lin 1996:16). Plans for technical and vocational education have been put forward alongside the general development of the economy, including increased preparation for the service industries. Opportunity was given for students in vocational schools to take an additional year in school to learn further vocational skills. Meanwhile the ratio of vocational to academic schools is due to be shifted back towards academic schools with the goal of 40: 60 (academic: vocational) by the year 2000 (Chang 1996). The government would also like to devolve some responsibility for training to the private sector, but it is unclear what measures are going to be taken to increase in-plant training. There are absolutely no plans for the implementation of a training levy. The Manpower Planning Department (MPD) supports the expansion of higher education, but only in the private sector. There will be no expansion of places in public universities, which may accentuate the high status these institutions and their students enjoy. There are also private concerns within the MPD that the rapid expansion of higher education may hinder the qualitative improvements that form the basis of present education policy.38 While it is likely that many of the education reforms will take place, even the government appears dubious about completing the reforms owing to the potential expense (GIS 1997). Insufficient finance may in particular reinforce the deep-seated difficulties that may be involved in reforming an educational culture of rote learning. Reforming training policies may also prove impossible to implement. So far the goal of increasing in-plant training has eluded the state. In 1986, some 9 per cent of firms reported any expenditure on formal training (the same proportion which reported spending on R & D) (Tan and Batra 1995). Our interview discussions confirmed that, typically, SME employers do not allow their employees time off for training, and that training—as with R & D—is left to the larger companies, an impression also supported by a more recent survey (CPC 1994).39 Small family firms tend to leave individuals to ‘learn by doing’. However, individuals are willing to invest in their own training in terms of both time and financial resources, and this training is directed towards the external market rather than internal promotion since there is often minimal upward mobility in the small family firm. SMEs make up about 85–90 per cent of Taiwan’s trade sector in which CETRA has been trying to encourage training. As small companies have refused to pay for training CETRA is now targeting the 1, 500 medium-sized trading companies with a turnover exceeding NT$10 million.40 For the majority of firms in Taiwan (SMEs), it seems that informal on-thejob learning is the normal method, if one exists, of acquiring skills. Large corporations use more formal training, as seen from the surveys discussed above. Other methods of training in large and medium firms include job rotation and product familiarisation.41 A large company such as Rexon may spend NT$1.5 million on outside training. However, most of this is spent on CPC’s management

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training and Rexon is atypical in the value it places on training.42 Large companies such as Acer are well known for their provision of training. Whether the failure to promote in-plant training more generally is a serious problem for the Taiwanese economy is an issue we address below. Meanwhile, we note that the renewed government stress on increasing in-plant training is an implicit admission that, especially with the problems of outdated equipment and of variable teaching quality in public training centres, the provision in public training centres may not be able to meet the demands of the wide spectrum of modern companies.43 Ideas for education reform have arisen not only from the Ministry of Education, but also from new social movements such as the 10 April Education Reformers League, and from semi-official fora such as the Education Reform Committee chaired by Li Yuan-Tseh, President of the Academia Sinica. Public opinion has also entered the arena as a potential influence on events: galvanised by a letter sent to a national newspaper from a vocational student setting out the frustration felt by many of these students, the Minister of Education himself responded publicly to the problem. Areas that are being targeted for reform include the examination system, allocation of resources and the curriculum. However, adult education, retraining for the high-tech economy and revised teacher training are also being considered. As in Korea, it is the examination system, notably the Joint University Entrance Examination, which is under attack, not only for the stress it causes students but also for producing a reliance on rote learning throughout the school system. Measures to introduce ‘new paths of advancement’ are being used on an experimental basis to reduce this ‘inordinate emphasis on examinations’.44 Other reforms are underway. In 1993 the MOE embarked on a policy to reduce class sizes for all schools to less than 40 students per class by 1998 (subject to the proviso that enough resources are made available to build schools and provide teaching staff). Changes to school textbooks are in progress while alterations to the content of examinations and curriculum are being considered (GIS 1997). There is also more recognition of the need to respond to student and parental choice. How flexible this will be for individuals is still open to question, however. Taiwan already has mass higher education (Sung 1990), but the Ministry of Education estimates that the number of tertiary students will increase by 60 per cent over the next ten years (China News, 13 July 1997).45 As now, the majority of university students may choose arts, humanities or social sciences, but public higher education will be dominated by science and technology graduates because provision in institutes of technology and junior colleges is biased towards those areas. Yet, it is doubtful whether the planned expansion is purely a response to economic needs. Rather, it may be, in the face of increased pluralism and democratisation, a response to popular demand for increased higher education provision.

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Conclusions This chapter has shown in detail that for much of recent decades there has been a system of developmental skill formation in Taiwan. The key element in this system has been the institutional structure in which the CEPD, at the centre of decision-making for the developmental state, has coordinated skill formation policies alongside its economic policies. The CEPD has had the power to resist interest groups and the pressure of public opinion. The main element where the developmental state has not been successful is in requiring firms to participate in training. One might hypothesise that, for this reason, the developmental state has been less pure than, say, in South Korea or Singapore; however, it should be remembered that SMEs have substantial disincentives to spend on training when labour turnover is likely to nullify their investment in only a few years. We have also indicated that, with the onset of democratisation, liberalisation and the opening up of Taiwan to international pressures, and with the convergence to Western living standards, the developmental properties of the state are being watered down, though they nevertheless remain. Education planning is still linked to economic development plans, but the connection is getting looser. The state’s educational plans are no longer certain to come about, and they reflect the impact of wider forces in society. Whatever happens to the education system in the next decade, a key question will be whether the state is able to engender sufficient skill formation within enterprises. While it has had some success in stimulating R & D through science parks and other policies, it has so far met a brick wall on the issue of lifelong learning and training in SMEs. Does this matter? One sanguine response to this question indicates that a training deficiency is less of a problem for Taiwan than it might be for other countries.46 Taiwan can continue to solve the problem by its traditional stress on vocational education, by continuing to recruit highly qualified manpower from amongst overseas returners, and, lastly, by the public training centres. However, the counter to these arguments is telling. With an increasingly older population, and in an era where learning is said to be at a premium, the ability to foster skills at work for the large majority of the workforce becomes important. If public demand has more say, the proportions of pupils in vocational schools will drop (this is already in the MOE’s plans), and there remain the complaints about public training centres. In these circumstances, an influx of degree and PhD holders training in the US may be beneficial, but may not serve to staunch a decline in the relatively egalitarian mode of growth hitherto followed in Taiwan. The proximity, both geographic and cultural, of Taiwan to mainland China and other low-income countries, provides an escape from the ‘sandwich problem’ for Taiwanese businesses—they can with relative ease (and the government appears powerless or has no will to prevent this) relocate and exercise their comparative advantage of managing low-cost labour, a skill honed over previous decades of Taiwanese growth. Both the recent problem of unemployment, and evidence of

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rising income inequality,47 may, if this diagnosis is correct, be signals for future contradictions and tensions within Taiwan’s polity.

6 Hong Kong

Distinctive features: industrialisation via market forces The most distinctive feature of Hong Kong is that, unlike the other three economies we have discussed, its colonial government came to be regarded as an archetype of laissez-faire regimes, where the state restricts its activities to a minimum, leaving the market to allocate resources (Rabushka 1979; Friedman and Friedman 1980). Yet it was also able to achieve comparable growth rates, sustained over several decades. Hong Kong’s real GDP growth rates in the postwar period have averaged over 8 per cent per annum (Sit and Wong 1989) and by 1993 it had matched the per capita GDP of the United Kingdom. Like the other economies, it has established a limited range of export-oriented manufacturing industries and achieved high savings rates. It is similar to Taiwan in that it has a predominance of SMEs, but differs from both South Korea and Taiwan in that it has always allowed the free movement of capital. Internationally, Hong Kong is ranked as the eighth largest trading entity (HK Government 1995a: 64). If all this has been achieved through the operation of market forces, it would tend to contradict the lessons we have drawn from the other three societies’ experience about the importance of the state coordinating the demand for skill and its supply through the activities of the various branches of government. We argue that the answer to this conundrum is to be found through the analysis of two distinct phases in the development of Hong Kong society. At the start of the first phase there was relatively little intervention by the state. Through an unusual combination of events in the early 1950s, the government was able to preside over a period of rapid industrialisation and still maintain its ‘hands off’ approach to the management of the economy. In the 1970s (the start of the second phase) circumstances changed and a series of external and internal pressures resulted in the government beginning to have some influence on technical change and, crucially, having to find ways of rapidly adjusting the supply of appropriately skilled labour. Something of the laissez-faire stance was maintained in that, unlike the governments of the other three societies, the Hong Kong government never sought to introduce substantial welfare or egalitarian policies. In these circumstances, it was still possible to maintain the image of

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the government as non-interventionist, even up to the handover of political power to the Chinese authorities in 1997. Stages of economic growth The first phase The official government preference for minimal intervention in the economy had a long pedigree and was intimately associated with the origins of Hong Kong as a British colony. The establishment of the colony was the direct result of the Opium War, through the Treaty of Nanking which ceded Hong Kong to Britain. British foreign policy at that time was to secure overseas bases in the Far East in order to expand Britain’s trade with China. The urgency of this task derived from a substantial imbalance in trade between the two countries: Britain had nothing to export in return for the silk, tea and china it had been importing. The export of opium provided the answer. Thus, from its origin, the government of Hong Kong’s purpose was to be an efficient administrative entity to support the movement of goods between the two countries, and this was reflected in the attitude of government officials and in the system of public finance. It was never part of the colonial remit to build up the economy at the British tax payers’ expense. In this respect, Hong Kong was an excellent example of Adam Smith’s principle of laissez-faire. What the administration did deliver over the years was a sound infrastructure of commercial law, economic services and banking, which were in place prior to industrialisation (Redding 1994). Not long after the Second World War, circumstances changed radically and the government of Hong Kong was faced with problems it had never previously encountered. In 1949 the Communist Party took over China, and in 1950 the Korean War led to an embargo on trade with China. The latter event almost stopped Hong Kong’s lifeblood virtually overnight. There was also a massive influx of immigrants from China (over half a million in one year alone) which, together with the effects of the embargo, resulted in high levels of unemployment. Here, then, was a government with few financial resources, which could not call on help from London, and with little chance of raising additional resources through fiscal measures such as borrowing or taxation. Its only option was to use the market to create jobs, which, in the circumstances, meant that it had to help initiate a market-driven process of industrialisation. In this process it was aided by the availability of low-cost labour in the form of the poorly educated immigrants, some British trading companies and, crucially, a minority of entrepreneurs from Shanghai who had succeeded in bringing some of their capital with them. This Shanghainese capitalist class also brought technical and marketing know-how of the textile and garment industry to the colony. The group established textile firms which, because of the small domestic market, had no option but to export. Thus the initial stage of industrialisation was one of

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export-oriented manufacturing, not because of any grand government plan, but because there was no other option for the new capitalist class. The Shanghainese manufacturers initially established fairly large-scale enterprises, bringing with them skilled labour from China and setting up their own internal training systems for the new workers. This process created a pool of skilled labour from which new entrepreneurs were drawn for the textile industry. During the 1960s, the textile industry was joined by the electronics industry which started to emerge as a significant source of employment and exports. Much of the initial capital for electronics came from foreign investment. There then followed the rapid growth of the manufacturing sector, with some of the establishments created by Foreign Direct Investment (FDI) employing thousands of workers (Levin and Ng 1995). Nevertheless, wholly owned local firms have become overwhelmingly dominant in Hong Kong industry; in 1986 they accounted for 98.4 per cent of establishments, 88.7 per cent of employment, 83.3 per cent of output and 83.6 per cent of value-added (Ngaw 1991:195). Between 1961 and 1977 the proportion of small firms had continued to increase (Sit, Wong and Kiang 1979, quoted in Levin and Ng 1995)—these were a group who had made their way up from being labourers, apprentices, technicians, foremen or junior white-collar workers without any specialised training. Many were operating as subcontractors enabling the Hong Kong economy to achieve high levels of responsiveness to the world markets on which it was so dependent (Redding 1994). By the 1970s employment was less geared to internal labour markets and more market oriented (Levin and Ng 1995). The economy had become dominated by relatively small Chinese family businesses. Many of the new smaller employers were Cantonese, especially in the clothing, plastics and electronics industries. Economic policy making, largely dominated by financial secretaries with similar economic opinions, was very stable in the 1960s and 1970s (Youngson 1982). Yet, while the state was not directing the process of economic growth, it was not entirely passive. Although the Hong Kong government, unlike some of the other NIEs, did not implement policies to attract foreign direct investment (FDI) specifically, the financial secretaries during the 1960s and 1970s kept taxes low to encourage investment—including foreign investment. The state was also active in facilitating the growth of industry in other ways. Through its monopoly over land and its substantial control over rents it was able to contribute to the maintenance of low wages. It did this by using the proceeds of land sales to finance social welfare without incurring a substantial public debt, and also by controlling housing costs and so minimising the upward pressure on wages (Castells et al. 1990). The state was also active in controlling labour. The early post-war period was characterised by relatively high levels of industrial conflict (Levin and Ng 1995). The response of the state was not to increase labour repression as in some of the other NIEs, but to impose controls on unions (and employers organisations). An official requirement to register enabled the

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government to control their objectives and internal administration, while employers were not legally obliged to recognise or negotiate with them (ibid.). In addition, the particular political rivalries of the Hong Kong unions kept labour weak relative to the state and to capital (Haggard and Cheng 1987:107), with the Hong Kong Federation of Trades Unions (FTU) being pro-China and the Hong Kong and Kowloon Trades Union Council (TUC) being pro-Taiwan. This division together with the political controls imposed by the state restricted the influence of organised labour. Like the other three economies, Hong Kong had succeeded in achieving full employment and rapid economic growth on the basis of low cost labour and export-oriented industries. However, unlike the other three economies, the process of industrialisation was ‘kick-started’ by the private sector, and in this sense the approach was ‘bottom up’ with the state facilitating the process rather than setting the pace in a ‘top-down’ manner, as was the case with the other three. The second phase The second phase of growth, starting in the 1970s, was associated with a radical change in the composition of the economy. It also witnessed the start of a more active role for government in the shaping of the economy. Redding (1994) refers to this period, especially from the 1980s onwards, as the internationalisation of the Hong Kong economy. Moving away from its early reliance on manufacturing, Hong Kong now earns its living through the provision of logistical services, through export-processing operations, through trade, finance and information, and through managing dispersed manufacturing. By the years 1993–5 it had become the world’s fourth leading source of foreign direct investment (Enright, Scott and Dodwell 1997) and the fifth largest banking centre in the world (Tung Chee Hwa 1997). This section examines these changes in a little detail, since they have notable implications for skill requirements. The radical change in the composition of the economy is reflected in the employment figures. Although absolute numbers employed in the manufacturing sector continued to rise in the 1970s (Ng 1987:14), the share of manufacturing in total employment had reached its peak (see Table 6.1). The manufacturing share fell rapidly in the 1980s, and by 1994 had dropped to 17.1 per cent, and in absolute terms was less than half what it had been ten years earlier. The growth in employment was in two broad areas: finance, insurance, real estate and business services, up from 1.6 per cent in 1971 to 14.4 per cent in 1994, and wholesale, retail, import/export trades, restaurants and hotels, up from 11.5 per cent in 1971 to 41 per cent in 1994. In 1994, the service sector accounted for 83. 4 per cent of GDP. In general terms this can be characterised as a shift from low value-added production in manufacturing to higher value-added production of goods and especially knowledge intensive services. Yet this general characterisation masks important changes within these broad categories.

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Within manufacturing a large proportion of the low value-added forms of labour-intensive production used in the electronics industry moved to the mainland. The achievement of full employment and rapid economic growth had pushed up wages in Hong Kong. The average daily money wage in manufacturing more than doubled from HK$73 in 1982 to HK$184 in 1990, while in mainland China the national average daily wage only moved from HK $10 to Table 6.1 The composition of employment, Hong Kong 1961–1994; thousands of workers (percentage of workforce in parentheses) Sector

1961

1971

1984

1994

Wholesale, retail and import/export trades, restaurants and hotels Manufacturing

131 (11.0) 476 (40.0)

182 (11.5) 677 (42.8) 26 (1.6) 312 (19.7) 115 (7.3) 270 (17.1) 1,583 (100)

556 (25.6) 905 (41.7) 168 (7.7) 198 (9.1) 94 (4.3) 251 (11.6) 2,171 (100)

1,051 (41.0) 438 (17.1) 361 (14.4) 292 (11.4) 166 (6.5) 253 (9.9) 2,561 (100)

Finance, insurance, real estate and business services Community, social and personal services Transport, storage and communication Others Total

265 (22.3) 87 (7.3) 232 (19.5) 1,191 (100)

Source: Hong Kong Government Industry Department (1995:23).

HK$11.6 (Redding 1994). The response was the relocation of capital for the routine production of electronics, plastics and footwear to the mainland and to other low labour cost regions of the Pacific Rim. However, this did not happen to the same extent in the garment industry. There, the manufacturers adjusted their business and marketing strategy so as to produce short runs of high-quality fashion clothing for international branded fashion houses. In his analysis of this response Redding (ibid.: 77) suggests that, ‘The overwhelming impression is that the garment industry adopted a strategy of reliance on the transaction cost efficiency of the dense and highly developed subcontracting network, plus the attraction to buyers of a very high speed response to changes in demand.’ This response was influenced by two factors. One was advances in information technology which increased the value of manufacturers who could deliver variations in styles, colours and sizes in small batches over a wide range of garments at short notice. The other was the government’s policy and policing of country-of-origin rules which prevented the simple relabelling of goods made in China, requiring that the made-in-Hong Kong label reflects processing there. However, even in this industry some manufactures were also relocating some of

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their manufacturing capacity to the mainland. Enright, Scott and Dodwell (1997) report that 55 per cent of Hong Kong’s clothing manufacturers had manufacturing capabilities on the mainland in 1995, although Chui, Ho and Lui (1997) report that in their survey of garment manufacturers only 30.4 per cent had offshore production. In the electronics industry, which was less reliant on subcontracting and more reliant on longer production runs of manually assembled components, there was a more significant relocation of manufacturing capacity to the mainland, although companies often retained head offices in Hong Kong. By 1995 the major manufacturing sectors for Hong Kong, in terms of export value, were clothing and electronics, which together accounted for 59.6 per cent, followed by textiles, watches and clocks, and chemicals which made up a further 18.5 per cent (Hong Kong Government Information Services 1996:95). However, while much of the manufacturing capacity which remained in Hong Kong was traditional in character, many companies were managing dispersed networks of design, testing, production and service personnel (Enright, Scott and Dodwell 1997); that is, they were providing the value-added to the manufacturing operations often located outside Hong Kong. In effect, Hong Kong had become the home of an unusual community of transnational manufacturing companies. The growth of the service sector during this second phase also masked important differences in performance and growth of the various industries which composed this sector, and saw a radical shift in the skill requirements of these industries. By the end of the 1970s, Hong Kong already had a well-developed service sector. In part, this was a consequence of the rapid growth of the manufacturing sector but, in addition, Hong Kong was becoming a source of business services for the region as a whole, facilitated by its geographical location, the efficiency of its services, its status as a free port and the absence of exchange controls. In spite of the embargo on trade with China, the shipping industry continued to develop and investment in state-of-the-art port facilities was helping Hong Kong establish itself as one of the leading centres of trade in the region. This expertise was reflected in the growth of banking, finance and business services. Invisible earnings from banking were already making a significant contribution to the economy during the 1970s (Report of the Advisory Committee on Diversification 1979). These trends were intensified during the 1980s and 1990s, aided by the opening up of the Chinese market, especially after the ‘open door’ policy took effect. Following the Joint Declaration in 1984, industrialists started to see the Hong Kong and Chinese economies as joined and, as more and more manufacturing was transferred to the mainland, Hong Kong increasingly took on the role as provider of business, trading and financial services (Redding 1994). Hong Kong and Hong Kong companies now handle half the exports from mainland China (Enright, Scott and Dodwell 1997). An increasing number (from 174 in 1980 to 602 in 1991) of multinationals chose Hong Kong as their regional HQ (Redding 1994). By the end of the 1980s there were large investment flows

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from Hong Kong into China, and a smaller but substantial flow of investment from China into Hong Kong, making it the region’s leading foreign investor (Enright, Scott and Dodwell 1997). Finally, this period also saw the start of the expansion of the hotel, restaurant and leisure industries, in part a consequence of the increase in disposable income in the domestic economy, but also because of Hong Kong’s position as an emerging commercial and tourist centre for the region. By 1995 the service sector accounted for 83.4 per cent of GDP. It was during this second phase that the state started to play a more active role in influencing the direction in which the economy was moving. In the 1970s its monopoly over the supply of land enabled it to influence the type of (higher value-added) industry to be established (Report of the Advisory Committee on Diversification 1979:179). During this period pressure was building up from business interests for the government to create a more coherent industrial policy. Although there had been calls for diversification for nearly two decades (Youngson 1982), pressures on labour-intensive manufacturing had been mounting in the form of increasing wages and competition from the second-tier NIEs in South East Asia and China. The result was the 1979 Report of the Advisory Committee on Diversification, a landmark document which signified increasing awareness among government policy makers of the importance of Hong Kong developing policies, which, while ostensibly maintaining the principles of laissez-faire, nevertheless enabled the government to broaden the base of the economy and influence the direction in which economic development was moving. The upgrading of the economy was facilitated by the establishment of several government agencies. The work of the Hong Kong Productivity Council (HKPC), established in 1967, was extended to encourage and facilitate technological upgrading in the territory, particularly within SMEs which often lacked the scale to engage in R & D and training. In addition, the government established the Industrial Estates Corporation (1977), to provide subsidised industrial estate land to high-tech companies which cannot function in high rise blocks, and the Industrial Development Board, which later became the Industry Development Board. Such types of support have intensified recently. The government initiated several upgrading policies including the Industrial Support Fund, which was set up in 1994 and included manufacturing in 1995, and other schemes to support R & D.1 While the Industry Department maintains the government’s policy of nonintervention in the economy, the government ‘does have an active role’.2 Technological target areas (computers, multimedia, telecommunications and microelectronics) qualify for special support in the Technology Centre which is described as a vertical science park to ‘incubate’ new high tech firms for three years until ‘graduation’.3 The Technology Centre is operated by the Hong Kong Industrial Technology Centre Corporation, which ‘is tasked to facilitate the promotion of technological innovation and application of new technologies in Hong Kong industry’ (HK Industry Dept 1995). Other organisations, many of

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them non-profit, have been set up with initial funding from the government (or the Royal Hong Kong Jockey Club) to provide R & D in other areas, including the Hong Kong Plastics Technology Centre and the Hong Kong Institute of Biotechnology. The Hong Kong Productivity Council (HKPC), in addition to providing managerial level training, provides R & D help to industry in industrial moulding.4 The HKPC is also involved in facilitating links with mainland research institutes. During the 1990s the government also introduced modest financial incentives in the form of the Technology Loan Fund (1989–90), the Applied Technology Matching Grant (1992) and the New Technology Training Scheme (1992 onwards). Nevertheless, government expenditure on R & D remains the lowest of all the four tiger economies (Wong 1996). The government has also been active in the financial sector. During the infla tionary 1970s Hong Kong’s particular monetary system (floating exchange rates5 and no central bank) alongside internal inflationary pressures resulted in overheating in the late 1970s and speculation in real estate (Sung 1986). In the early 1980s, an influx of hot money and bank collapses further fuelled economic instability in the territory. The government’s move in taking over failing banks and imposing more stringent regulations on the banking sector marked a new level of intervention for the Hong Kong government. The other area where the government sought radically to expand its powers of intervention and direction was in the field of education and training; these we discuss below. The evolution of education and training policy Phase 1: Using the market to deliver education and training As in its management of the economy, so in the development of the education and training system it is useful to distinguish two main phases. In the first, the state held back from strategic intervention and made no attempt to forge a skill formation system suitable for the economy. Special conditions led to a successful expansion of the schooling system, but the industrial training system, left to market forces, was largely a failure. In the second phase, the government was obliged through force of circumstances to intervene. It adopted a system similar to that observed in the other NIEs in which close links were formed between the direction of industrial development and the reform and implementation of a centralised education and training system. In the 1950s the government was not even in a position to estimate how many people needed primary education because of the inflow of refugees from the People’s Republic of China (Sweeting 1993). The demand for the introduction of free compulsory education came from external sources: the pressure on the colonial government to appear enlightened (the pressure was applied by the UNESCO Conference on Free and Compulsory Education), and the need for the

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government to counter the perception by threatened British industries that competition from Hong Kong was unfair because it was based on the exploitation of child labour. The eventual result was the introduction in the 1960s of a system of universal primary education and selective secondary education. Thus, just as in the other East Asian NIEs, the Hong Kong government did accept responsibility for developing the education system, with an initial emphasis on the primary sector. The difference was that in Hong Kong the development of education was initiated not by an industrialisation strategy but by the external pressures. In Hong Kong the primary system developed after the labour intensive industries had established themselves in the mid-1950s. By 1960 the enrolment rate in primary education had risen only to 57 per cent (see Table 1.1)—a level which, while above that of other poorer undeveloped countries, was nevertheless below South Korea’s enrolment rate despite having three times the level of per capita national income. As for training, the skill demands of the main industries—clothing, textiles, electronics and plastics—were not substantial. As late as the 1970s, almost 80 per cent of employees in electronics and clothing were semi-skilled operatives, while textiles and plastics had higher proportions of unskilled workers. Only the machine and metal-working industries employed a significant proportion (31 per cent) of employees as craft workers (Report of the Advisory Committee on Diversification 1979:62). Because they were utilising low cost, unskilled and semiskilled labour, employers were undertaking little in the way of formalised training. Skills were learnt on the job and employers tended to regard training expenditures as ‘unjustifiable’ (England and Rear 1975:39). Where superior skills were necessary, Chinese family businesses relied on informal systems of knowledge acquisition confined primarily to family members (Tricker 1996). Because of the fear that trained workers would be poached by other establishments, only a small minority of employers were offering training.6 The larger employers—in the gas, electricity, communications and transport industries—facing the possibility of poaching, tended to utilise their internal markets as the means of developing the skills of their core staff, while committing them to the organisation through incremental pay scales, permanent status and the provision of accommodation (England and Rear 1981:74). Consequently, during this first phase there was little in the way of a strong market-led demand for training, although business interests were starting to express concern about the need for a higher level of skills among the labour force if the economy was to remain competitive. The government’s attitude towards training during the 1950s and 1960s was quite different from its attitude toward education. While it came to accept responsibility for general and technical education, in accordance with the ideology of laissez-faire industrial and commercial training was seen as the responsibility of employers. Nevertheless, in response to skill shortages, the government did respond by appointing the Industrial Training Advisory Committee (ITAC 1965–72) to identify training and related problems and make

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recommendations. This replaced the Standing Committee on Technical Education and Vocational Training. The ITAC’s recommendations expressed the line taken by the government. With regard to practical training they were: Industry must accept the full cost of providing this element of training, whether it be in industrial premises or in training centres built and equipped for the purpose. Where such centres are established, industry must be responsible for both the capital and the recurrent costs. With regard to technical training the recommendations were: Government is responsible for providing the institutional training necessary for the organised teaching of theoretical knowledge at all levels and such practical training as is necessary to illustrate the theory. Into this category would fall such educational establishments as polytechnics, technical colleges, technical institutes and pre-vocational schools. (ITAC 1971, para 3.15:12) Our interviews with senior personnel in the VTC indicate that this division of responsibility has always been seen as an ‘ideal’ solution to human resource development in the territory, and throughout the 1960s and 1970s this was indeed the official line. In reality, pressures were building up within the economy for more direct government action. The fabled division of responsibility was not effective in the 1960s because of the employers’ lack of demand for skilled workers and because of their strategic fear of poaching. Some training problems were detailed in the First Interim Report of ITAC (1966). The idea emerged that the government might provide the establishments for training while the employers paid for them. This new policy turn was a consequence of two factors. First, there was the influence which the British experience with Industrial Training Boards had on the Hong Kong government’s thinking. British experience in this respect was to have a significant influence on the training structures which were subsequently established in the 1980s. Second, the shortage of land in Hong Kong and the small size of the typical firm meant that there was no space for separate training provision within establishments. The ITAC identified a number of problems in the delivery of intermediate and operative level skills. Among these were the following: the lack of reliable information on future manpower demands; the lack of accepted standards or criteria for measuring the skills required for the principal jobs in all industries; unwillingness on the part of employers to undertake training; and the need for effective coordination of the training effort (Knight 1987). The first tentative steps to address these problems were taken with the establishment of the Hong Kong Training Council in 1973. These also involved the setting up of new technical institutes and the regulation of the apprenticeship system through the 1976 Apprenticeship Ordinance. This required employers to enter into a contract

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of apprenticeship when engaging a person aged 14–18 in a designated trade and replaced the original voluntary system (Ashton, Maguire and Sung 1991). On a practical level, the ITAC established a system of manpower surveys which were used to establish training needs within particular industries and a series of industry committees to advise on policy. When the ITAC was transformed into the Hong Kong Training Council, it took on responsibility for the training of technologists and the training needs of the commercial and service sectors in addition to the manufacturing sector. However, it was hampered in any attempt to implement a coherent training policy by a lack of resources. By the end of its existence, it had set up sixteen industrial training boards, including six for the commercial and service sectors, together with six general committees and two ad hoc committees comprising representatives from industry and commerce. These were important developments which laid the basis for the establishment of a centralised system closely linked to the needs of employers in the second phase. Thus, in spite of its declared aims, the government was obliged to set up institutional structures for the delivery of training. Yet, throughout the 1970s, while both ITAC and HKTC made progress in meeting the calls for increased middle-level technician training, there remained glaring deficiencies in the numbers and quality of trained personnel that the system was producing. There were still calls on the government to cease its over-reliance on industry and the individual to solve the skills shortages apparent in the economy (Youngson 1992:82). By the late 1970s, this was still largely the situation apart from the piecemeal efforts of establishing a few more training institutes. The Advisory Committee on Diversification (HK) report (1979) detailed existing government policy on education and training and reiterated the divide between training and technical education outlined in the ITAC Final Report. In restrained language, the Diversification Report was sparing in praise for the existing arrangements in the context of an overall policy of providing education and training to aid diversification of industry and to meet the future needs of industry in Hong Kong: we find there is considerable scope for improving the existing arrangements for industrial training. As we have noted, few commercial or industrial concerns in Hong Kong have either the space or expertise to provide the training required by their staff. Thus, individual industries and firms have not generally accepted the responsibility for training assigned to them by Government policy. There are, as yet, only two industrial training centres. We consider that this lack of industrial training facilities will hamper industry’s ability to remain competitive in world markets in the 1980s. (Advisory Committee on Diversification (HK) 1979:239, para 397)

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Phase 2: Expanding the government delivery of education and training Both the growth of service industries and the recomposition of manufacturing, as low cost functions were relocated in China, led to a demand for new skills. In manufacturing, employees needed to adopt and work with new technologies. Meanwhile, many of the new jobs in financial and business services required a relatively high level of general education as a basis for further training within the organisation rather than the mastery of specific skills. The 1980s’ boom in the hotel and restaurant industries also created new demands for customer care and management skills. In view of the increasing demand for educated labour, it is not surprising that the second phase was initiated by an expansion of secondary education and the imposition of nine years of compulsory education in 1981 (Fung 1986). The Diversification Report highlighted the shortage of intermediate level skills facing employers. In addition the government was under further pressure to eradicate the image of Hong Kong as a source of cheap labour. In an attempt to rationalise educational provision, the government also initiated the Llewellyn Report, which was charged to consider, inter alia, the definition of overall educational objectives, the formulation of education policy, and the coordinating and monitoring of education services. It recommended that these functions, which had previously been performed by the Board of Education, the UPGC and the VTC, were taken over by a new advisory board to be called the Education Commission. From 1984, the Education Commission formed the major policy formulation body for general education. The creation of this body was a move to replace ‘occasional ad hoc policy formulation exercises resulting in White Papers’.7 Its establishment provided the government with strong centralised control over the education system. While the education system was producing predominantly academic outputs, the transformation of the economy during this period into one dominated by higher value-added service industries was intensifying the demand for intermediate level skills. The Hong Kong Polytechnic, established in 1972 to provide intermediate and technology skills, was not able to meet the demand. The result was a rapid expansion of sub-degree level courses made available for those already working through the expansion of part-time and evening classes, which meant that students could upgrade their skills while remaining at work. Furthermore, to meet the burgeoning demand for intermediate and higher level skills the government introduced a number of changes in the tertiary sector. The Baptist College and Hong Kong Polytechnic were given the right to award degrees. A second polytechnic was also opened in 1984. By the 1990s, value-added per employee was much higher in all the service sector industries than in manufacturing (Hong Kong Government Industry Department 1995). The rapid increase in the demand for highly educated

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personnel had outstripped potential supply. This was reflected in the fact that throughout the 1980s the rate of return for university education had increased relative to those from other forms of education and that more young people from Hong Kong were going abroad to universities than were entering universities in Hong Kong. The shortage of highly educated personnel was made worse in the latter part of the 1980s and early 1990s by the emigration of professional Hong Kong residents to other countries as a result of the uncertainties over the handover in 1997. The Education Commission responded in 1988 by recommending the rapid expansion of the tertiary sector (Education Commission (HK) 1988). The commission was concerned by the failure of the existing system to meet demand, by projections of a rapid increase in the proportion of professional, managerial, technical and administrative jobs into the foreseeable future, and by the fact that Hong Kong was falling behind its competitors in the Pacific Rim in the provision of scientific and technical expertise. For the government, there was also a political motivation to expand tertiary education. As an observer notes, ‘In a time of political uncertainty, Hong Kong needed to boost its own image…there are 7 universities in 300 square miles. It shows that Hong Kong is doing well and it increases confidence in the territory.’8 The heavy investment in higher education would not only replace emigrating professionals, but also demonstrate a continuing commitment on the part of the colonial government to Hong Kong’s prosperity. The result has been a rapid expansion of tertiary provision. In 1991, a third university, Hong Kong University of Science and Technology, was opened and a Research Grant Council established to encourage basic and applied scientific research. The focus of expansion was on the education of tech nologists, scientists and engineers rather than on the expansion of traditional academic education. In 1993, polytechnics and colleges were given their own degree awarding powers, and in 1994 the polytechnics and colleges were renamed universities. Sub-degree post-secondary education was offered at the seven VTC-run technical institutes and the two technical colleges and postsecondary colleges. At the beginning of the 1980s, there were only two degree-granting institutions offering university places to about 2 per cent of the cohort (Schive 1991). By the mid-1990s, the number of tertiary institutions had risen to seven, providing places for 18 per cent of the student population, and at the same time there was an increase in post-secondary sector and open and distance learning opportunities. A distinctive feature of the Hong Kong workforce is the large, if declining, proportion of immigrants from the People’s Republic of China. The proportion of the population born in China was 50 per cent in 1961, and was still as much as 26 per cent in 1991 (Lui 1994). Many immigrant workers will not have received any education in Hong Kong institutions; while most will have received primary and even secondary education in China, there is evidence that their education will have been of lower quality than that received by pupils in Hong Kong

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(ibid.). If for no other reason, then, the later acquisition of work skills through industrial training would have been an indispensable part of any strategy to upgrade the Hong Kong workforce. Indeed, in the field of training, a radical transformation took place during this second phase of Hong Kong’s development. Several changes were foreshadowed in the 1979 Report on Diversification, a milestone measure which called on the colonial government to adopt a new attitude to the provision and funding of industrial training. In particular, the report called for more centralised provision of training. The HKTC had requested a general levy on all employers to pay for such a system, but this was opposed by the Chinese Manufacturers Association on the grounds that companies were too small in size to carry the costs and would not be able to afford to send employees on centrally provided courses. The Report on Diversification supported the call for the central financing of training, but argued that it should come from general revenues, not from a levy on employers. The Report also supported the call from the HKTC that it should be transformed into a statutory body. The result was the formation of the Vocational Training Council (VTC) in 1982. In addition, the technical institutes were brought from under the control of the Education Branch to merge with industrial education under the auspices of the Technical Education and Industrial Training Department (TEITD), which operated as an executive arm of the VTC. The aim was to improve coordination and the implementation of a more sophisticated form of manpower planning. This provided the VTC with the ability to implement a more coherent range of strategies than either of its two predecessor organisations, with the finances coming from central government revenues. This provided the legal and financial basis for the system which was to support the diversification of industry and the move into the production of higher valueadded goods and services. In the 1990s the VTC has operated seven technical institutes and two technical colleges. The technical institutes offer craft level and technician courses. This setup extends the separation of technical from more general academic education, which is a feature of the Hong Kong system even though, as an exception, graduates of certain technician courses can now progress to some of the universities. There are twenty-four training centres under the VTC, not counting the Management Training Centre which was established in 1984. The centres are run by the respective industrial or general committees, which usually consist of prominent employers, together with representatives of workers, educationalists and government officials. These committees are informed in their deliberations on the size of the training operation and its content by the outcomes of the biannual manpower surveys, together with a strong input from employers and from the permanent staff of the committee. They cater for operative, craft and technician level training, although some run courses for university graduates in the area of information technology and banking. The aim is to provide a form of training which is highly responsive to the needs of employers in each particular

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industry or occupational area. Full-time trainees do not pay fees, while trainees on operative courses are given a subsistence allowance. The two technical colleges were set up in 1993 as part of the tertiary expansion programme to provide some of the courses dropped by the polytechnics during their upgrading to university status. Here again, courses are designed with a significant input from industrialists. The VTC also runs the Engineering Graduate Training Scheme, which aims to give Hong Kong graduates practical experience as required by the professional institute, and the New Technology Training Scheme to help people acquire skills in new technologies. Apart from these initiatives, the training of technologists and professionals is generally left to the universities. In addition to the VTC committees, the construction industry and the clothing industry each run their own training centres, financed by a levy on employers and operated independently of the VTC. The establishment of the VTC, therefore, marks a significant departure from the ideology of laissez-faire: the state now accepts responsibility for the financing and delivery of practical training. It now has an executive agency whose remit is to coordinate training provision and link it to the needs of a developing economy. Its function is to transmit the operative, craft and intermediate level skills required for the upgrading of existing industries and the new skills required by developing industries. Although initially focused on the needs of young people entering the labour market, the task of upskilling those in employment has become increasingly important. In 1994/5 only 34 per cent of trainees were school leavers. Upgrading and other training for those already in jobs was provided for 64,000 people, which represented over 60 per cent of all VTC trainees (Segal Quince Wicksteed Ltd 1996). Some of these were attending fulltime courses, but the majority were attending part-time courses provided by the technical institutes and colleges. Thus, the main thrust of government provision is delivered through part-time courses provided by the VTC, rather than government-sponsored programmes delivered through the workplace, as in Singapore. While the VTC was a major mechanism for delivering a responsive training system, it has had to cope in an era of marked changes in the demand for skills as Hong Kong has rapidly switched from manufacturing to knowledge-based service economy. Management of this process of change has created strains within the VTC itself which are likely to transform its operations (Segal Quince Wicksteed Ltd 1996). The VTC was originally established on civil service lines as an administrative agency and this led to rigidities in its internal bureaucratic operations. The VTC encountered difficulties in adjusting to the demand from employers and individuals for the new skills in the service sector. It had a poor image among young people and some of its qualifications were not valued. The institutional framework of the VTC remained largely geared to servicing the older industries. For example, courses tended to focus on inducting young people to specific manufacturing occupations rather than offering them a range of career

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options. There was, too, a gender imbalance among trainees, the majority being male. The needs for trainees to develop language competences, especially in English and Putonghua, was ignored, as was the need to develop generic IT skills and to inculcate a service culture. Thus, in the late 1990s, the VTC was planning to address these problems by re-engineering its organisation, upgrading the qualifications, enhancing its labour market intelligence and specifically improving its responsiveness to service sector businesses. The results should be an organisation which is very closely geared to delivering the skills required of the new higher value-added industries in Hong Kong. In some respects, the Hong Kong government’s strategy has similarities to that of the Singaporean government. It has sought to upgrade the skills of labour flowing into the labour market to support the shift in the economic base of the territory. However, unlike the Singaporean system, the Hong Kong system is geared to deliver the skills after the industries have been established. The use of employers and the manpower surveys to define the training needs means that these needs only become apparent after the industries are established and the demand for skills from the employers has been created. To a limited extent the biannual surveys can indicate something of the future demand, but this can only be for existing industries. The system is largely reactive. This contrasts sharply with the Singaporean system where an attempt is made to identify the skills required of industries which the government wishes to attract and to develop the appropriate skills among the labour force to ensure that companies will be attracted to invest in Singapore. The Hong Kong system of training has not been without its critics. Ng (1987b) has argued that there is a danger that the theoretical training by the technical institutes is biased toward Western practices and is providing a general training in occupational skills geared to the needs of the public service and large-scale monopolies, rather than the small businesses which make up the majority of employers. Nevertheless, the system did prove responsive to the main changes which have taken place in the structure of industry as the VTC has extended the range of training provision offered to cover the following areas: banking; accountancy; hotel, catering and tourism; insurance; wholesale, retail and import/ export sectors, as well as the general committees which now cover information technology, and technology, together with the more traditional areas such as management and technical education. Moreover, if the latest restructuring is successful in its aims, the link between training provision and the demands of the new economy will be even closer. Until recently it could have been argued that one of the failings of the system was that it did not address the problem of older workers displaced from the declining industries, who, because of their low level of education, were ill prepared for the demands of the new industries. This is the group to which the Singaporeans had directed much attention in their attempts to upgrade the skills of the labour force. In Hong Kong, the problems facing older displaced workers have now been addressed through the introduction of the Employees Retraining

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Scheme. The emergence of this problem was associated with the concern expressed by the Trades Unions about the rise in unemployment to a ten-year high of 3.5 per cent in 1994 and a concern with the over-supply of unskilled labour. The scheme is an attempt to focus on the training needs of those people over thirty who have worked in the same industry, or with the same employers for over two years, and who have lost or will lose their jobs, and those over thirty who have worked in the same industry for more than two years and then become housewives. They are offered three main types of training: job seeking skills, basic skills in languages and computing, and job specific skills. The scheme is administered by the Employees Retraining Board (ERB) and not through the VTC, although the Executive Director of the VTC sits on the Board of the ERB. The scheme is financed by a levy on imported labour, and 137,668 places had been provided by June 1996 (Segal Quince Wicksteed Ltd 1996). In its first phase, the focus was on providing new skills to displaced and unemployed workers. However, these were found to be somewhat ineffective and costly (Yung 1996). This led to the second phase in which the focus shifted to building on existing skills to make workers more productive and thereby reduce their risk of becoming unemployed—for example, training draughtsmen in computer-aided design. The board also has responsibilities for retraining disadvantaged and elderly workers. The programmes are delivered by voluntary organisations and private sector organisations. It is questionable, however, whether the Employees Retraining Scheme has been successful in relation to its aims, at least up until 1996. Problems have included a shortage of finance which has led to the length of courses being reduced. A lack of employer involvement has meant that the Board has been guessing at what retraining has been required (Yung 1994). Research by the Hong Kong Federation of Trades Unions has revealed that many of those leaving the scheme have failed to find employment (South China Morning Post International Weekly, 9 March 1996:2), while the Productivity Council (1994) has called for the setting up of job-specific courses with the support of employers or trade associations and training organisations. Let us summarise what has transpired in the last two decades. In this second phase of development there has been a sustained attempt on the part of Hong Kong’s government to increase the skills-base of the population in an effort to support the shift in the industrial and commercial base of the economy. This has been shown most clearly in the development of a responsive industrial training system, largely financed and provided by government, but strongly influenced by industrial interests. Although the VTC became bureaucratic in its operations, it did provide a means of delivery of intermediate level skills. In the period following the handover of power, the VTC was re-engineered to enhance its responsiveness to the needs of employers. There has also been, for both economic and political motives, a rapid expansion and transformation of the tertiary education system following the earlier extension of the schooling system.

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Thus, in respect of the attempt to upgrade the skills of the labour force and to establish a centralised system of education and training, the changes in this second phase of Hong Kong’s development are similar to those that occurred in Singapore. As the economy moved into the production of higher value-added goods and services, the infrastructure necessary to provide the human skills to support such a move were put in place, albeit in a more reactive manner. Linking mechanisms To deliver this new responsiveness of education and training provision, there has evolved a set of key linking mechanisms, some of which have already been noted. We now review those linkages as they existed around the time of the handover of political power. The linkages centre around the working of the Education and Manpower Branch (EMB), which is responsible for education, training policies and employment matters. Subordinate to the EMB is the aforementioned Education Commission which, though only an advisory body, is very influential. Members of the commission are mainly educationalists, but there are ex-officio representatives from the Education and Manpower Branch, VTC and Education Board. The commission is responsible for defining overall educational objectives and for coordinating and monitoring the planning and development of all secondary level education and below. It initiates educational research and coordinates the work of the Board of Education and the VTC without directing it (Education Commission (HK) 1995). The commission was set up with the coordination of the other bodies as a primary focus. Although it was previously in a position to advise on higher education, the setting up of the University Grants Commission has given the universities greater autonomy. The EMB is headed by the Secretary for Education and Manpower, whose responsibilities include formulating policy, securing and allocating resources for these policies and monitoring the implementation of programmes from the executive agencies (EMB 1994). In 1994 the other three divisions were School Education, Higher Education, and Employment and Technical Education Division. The VTC is an executive agency charged with advising the Governor on training and manpower needs. As proposals from the VTC have hitherto rarely been opposed by the Governor or the Exco, it has become a de facto policy-making institution. However, it is possible that this role might be weakened as consultants have recently suggested that the EMB should play a larger role in the formulation of vocational education and training strategy (Segal Quince Wicksteed Ltd 1996). These institutions make for a highly centralised system of control over the education and training system. Developments in education and training institutions should therefore be understood as part of a concerted programme of broader institutional development. Moreover, there are formal and informal links between skill formation institutions and other institutions. The VTC, for example, has an input, not only into the Employees

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Retraining Board, but also into the Hong Kong Productivity Council at the highest level. Relationships between the component parts of the system are lubricated by personal networks. Such networks consist of a relatively small body of decision makers, and other influential personages, who meet on a variety of different consultative bodies. There is a wide range of formal and informal linkages between different policy-making bodies, ensuring a level of coherency in government policy making across the full gamut of policy issues. In terms of education and training, the committee system results in linkages between government officials, practitioners, business interests and educationalists in a number of forums. However, as several commentators have noted, the government remains in control of the consultative process (Cheng 1984; Hung 1994). This form of consultation is also used by the government to alleviate its legitimacy problems while maintaining control. In this way, the Hong Kong government created strategic centralised institutions to deal with general and vocational education on the one hand, and training and technical education on the other. These institutions have incorporated a broad range of relevant groups that have advisory capacities but no outright control over policy. The state has retained firm control over the provision of education and training thereby ensuring that the government can rapidly adapt education and training provision to the demands of employers and to shifts in the economy. There is something of a consensus among the policy makers and their advisors, many of whom have shared similar educational and political experiences about the need for Hong Kong’s economy to diversify and move into higher value-added forms of production as more and more of the labour intensive forms of production move outside Hong Kong. This is not a formal commitment to an explicit trade and industry policy, however, such as exists in Singapore. In the absence of explicit trade and industry policy and institutions, such as the EDB in Singapore, the EPB (now MOFE) in South Korea and the CEPD in Taiwan, which coordinate the supply of educated and skilled labour with existing and future demands, the system in Hong Kong remains largely reactive. Instead, it is the needs of employers which are used to identify the territory’s training needs. Nevertheless, the system has succeeded in enabling the economy to continue growing rapidly without being held back unduly by shortages of educated and trained personnel. Conclusions The changing role of government What our analysis has revealed is that in the first phase of industrialisation and skill formation, the state operated largely in accordance with the precepts of the laissez-faire philosophy which it espoused. Education and training were

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primarily delivered through the market with the government restricting its activities, in accordance with its remit from London, to the provision of a legal framework, efficient administration and the basic infrastructure required for commercial operations and initial industrial growth. Where it did intervene, namely in the provision of primary education, this was in response to external pressures. However, even in this age of supposed laissez-faire, the government also intervened to varying extents in other important areas. In the field of training, it did establish an advisory committee and help the construction and clothing industries set up their own training systems, financed by a levy on their members. The government also used the sale of land to finance some welfare expenditure; they subsidised public housing, and used their powers to influence external commercial relations when it was in the interest of Hong Kong business. In short, while the government always attempted to adhere to its laissez-faire philosophy, when this clashed with what was perceived as the Hong Kong interest, it was not averse to adopting forms of intervention (see the Report of the Advisory Committee on Diversification 1979:300). During the second phase, there were more and more occasions when the government’s actions in response to events were dictated by pragmatic considerations. This was nowhere more evident than in its response to the problems of skill shortages and the task of upgrading the skills of the labour force. If the interests of Hong Kong’s future lay in diversifying the economy and moving into higher value-added forms of production, then it was clear that only the government was in a position to move swiftly enough to develop an appropriate skills infrastructure. Ideally, the government might have liked industry to finance and run the training of workers, but, in practice, after having tried and failed to persuade industry to do so in the first phase, the government recognised that it had to take the responsibility in the second. Moreover, while there was never any explicit industrial policy or strategy, there was at least a consensus about the direction in which the economy needed to go, as illustrated by the assumptions of the highly influential 1979 Report of the Advisory Committee on Diversification. Problems and policy directions at the time of handover As in the other Asian NIEs we have examined, the education and training system in Hong Kong faces continuing problems in need of resolution. Common to the other countries are those issues linked to their Confucian heritage, the problems linked to excessive centralised control in a complex modern economy, and the evident fact of convergence towards a global technological frontier that thereby no longer permits rapid growth through adaptation of foreign technology. Thus, one of the main problems facing the Hong Kong education and training system is the need for the education system to move the learning process beyond its current reliance on rote learning and develop the creativity

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and critical thinking required to enable Hong Kong to become a centre of R & D for the region, and for Hong Kong companies to maintain their competitive edge in world markets. In an attempt to develop this, the government has provided the universities with more autonomy and encouraged more basic research through the creation of a funding council. A further problem is that of making vocational education more attractive for the less academically inclined students and establishing its role as a bridge to higher education. This is especially difficult in Hong Kong because of its traditional reliance on an academic curriculum. Of even greater importance for the future is the issue of bilingualism. Here, there is a continuing tension between the requirements of political integration and those of the international business community within which Hong Kong has become a leading player. The new government of the Special Administrative Region has pledged to press forward with mother tongue teaching, but it expects all secondary school graduates to be proficient in writing English and Chinese and to be able to communicate confidently in Cantonese, English and Putonghua (Tung Chee Hwa 1997). There are some aspects of the Hong Kong VET system which remain unique. It remains the only one of the tiger economies to have developed an independent administrative agency with responsibility for all of technical education, vocational education and training for adults. In many respects the VTC is more like the Vocational Training Institutes (VTIs) of Latin America than the systems of vocational training in the other three tiger economies. However, unlike the VTIs, the VTC has had to help stimulate, and adjust to, the shift of the economy from low value-added to high value-added forms of production. In addition, it has had to shift from a concern with developing the vocational skills of school leavers to upgrading the workplace skills of adult workers. This has imposed its own strains which the recent restructuring has attempted to tackle. What is also distinctive about the Hong Kong system is its use of substantial public finance to fund training provision and the delivery of training, much of it to trainees on a part-time basis, in the form of college-based off-the-job training. By contrast, the recent emphasis in Singapore is on delivering training through programmes aimed at enhancing the use of the workplace as a source of learning. Such an emphasis might be impossible to sustain in Hong Kong, if only because two-thirds of the labour force are employed in small businesses where the space and resources for training are very limited. Another, perhaps even more important difference between Hong Kong and the other tigers is that in Hong Kong the education and training system is more reactive in its operation. In Hong Kong the government has created a centralised system of skill formation which attempts to respond rapidly to the changing needs of industry and commerce. This speed of response is achieved through a variety of mechanisms, such as the work of the Education Commission and a system of overlapping memberships on the various governmental bodies dealing with industry and education. The system is geared to providing the appropriate skills once the demand on the part of employers has been established. It is the employers

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who define the economy’s skill requirements, not the government. By contrast, the governments of the other countries have been proactive in defining the country’s skills needs in order to ensure that the requisite skills are in place to attract or facilitate the establishment of specific industries. However, the initial policy statements of the new government suggest that, if anything, the Hong Kong VET system may become more proactive. In its first major policy statement, the administration of Tung Chee Hwa committed itself to substantial additional investment in education. It promised to extend the provision for primary and secondary education, and to encourage greater innovation and flexibility in provision, to enhance the status of the teaching profession, and to provide state of the art facilities for tertiary education to enable it to establish international centres of excellence. As in Singapore, the Hong Kong government is now examining best practice in the field of education in other countries. However, what is clear from the government’s policy statement is that this is not education for education’s sake: The SAR Government encourages enterprises to develop into higher valueadded activities. Hong Kong’s ability to reach this goal depends mainly on the number of citizens who have the ability to enter these fields. We must, therefore, provide every citizen with the opportunity to receive quality education so that they can master the skills needed to participate in the new economy, to create wealth for themselves and Hong Kong. (Tung Chee Hwa l997) While such sentiments are to be found widely in policy statements in many industrialised countries, the new Hong Kong government can at least boast the requisite mechanisms and a recent history on the part of the old government of actually delivering a substantively responsive system. The commitment to moving the economy further into high value-added industries is clearly affirmed in the policy statement of October 1997, and in the decision to set up a commission on strategic development, with Tung Chee Hwa as chairman, to examine ways in which Hong Kong can be made an innovation centre for South China and the region. An Industry Support Fund and Applied Research Fund has already been set up to stimulate new technology industries, while new institutional arrangements are to be established to stimulate technological developments and drive forward innovation in the economy, especially in the field of information technology, where Hong Kong aims to become a leading player. In early 1998, the government announced that it was setting up a committee of fourteen leading people to develop a long-term economic and social strategy for Hong Kong. Developments such as these suggest the possibility that the new government will become more proactive in economic development, taking policy and practice in Hong Kong closer to that observed in the other tiger economies.

7 Is there a ‘Four Tigers’ model of skill formation?

Introduction Having looked in some detail at all four leading newly industrialised Asian economies, we are now in a position to consider whether our case studies embody a distinctive ‘Four Tigers’ model of skill formation. Before beginning this assessment, it is worth considering the utility and nature of any model of skill formation. In our case, we are aiming to investigate a model of the political economy of skill formation. This intention takes us into broader territory than just, for instance, the institutional architecture of schools and colleges, or the questions of funding and achievement levels. Rather, it involves a conception of how political, economic and social imperatives may or may not combine to form a regime where workers’ skills are being enhanced. As we have discussed in detail elsewhere (Ashton and Green 1996), a model of successful skill formation involves the commitment of the ruling political classes, as well as that of employers and employees. The origins of such commitment may differ across countries, depending on historical circumstances. Also important is the presence of some general mode of regulation of individual employers. Two major models of skill formation have hitherto dominated the way writers have thought about these issues. In the corporatist model, exemplified in Germany, there is, on the one hand, a historical commitment to education and, on the other hand, a rich matrix of corporatist institutions—the ‘social partners’— which through a process of negotiation imposes the regulatory and normative framework in which employers act (Streeck 1989, 1991). The ‘dual’ system of apprenticeships is widely seen as effective. A contrasting model, exemplified in Japan, is built on the foundations of internal labour markets and, again, a historically-determined high commitment to education. Employers, through a long-term approach to career planning, are said to provide the internal regulation of the processes of skill formation, and efficiently to supplement on-the-job training and other learning devices with occasional off-the-job training (Koike and Inoke 1990). Employees, too (at least the men), have incentives to participate in learning and to pass on their skills to others.

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These two models have been much analysed and generally lauded. Other models—for example that in the United Kingdom—have been thought to pose limitations on skill formation (Finegold and Soskice 1988), but it should not be thought that the corporatist and internal labour markets models have exhausted the range. While other countries’ approaches are not all equally successful, there are always advantages as well as disadvantages. Of some interest is the model of skill formation in France, which is influenced by the étatiste tradition and which has two features in common with the Four Tigers. As in the tiger economies, so in France is there a highly centralised education system. Also, imposed by law upon employers in France is the obligation to spend a minimum percentage of their payroll on training activities. Such an imposition is rare in Western industrialised countries but, as we have seen, there are a number of ways in which the governments of Singapore, South Korea and Taiwan have attempted, sometimes successfully, to influence employers in the interests of skill formation. The issue, then, is whether our case studies amount to a model of skill formation, common to the four countries but also distinct from the paradigms of the German and the Japanese examples. There have been some previous partial attempts to undertake a similar task. Of most interest is the study by Cummings (1995), who argues that it is possible to identify a distinctive East and South East Asian approach to education ‘radiating’ from the example of Japan. From our perspective, his approach is useful in that it identifies some of the features of Asian education systems which distinguish them from those typically found in the West. Thus, Cummings highlights the strong central control over educational goals and the curriculum, the emphasis on providing a good foundation in science, medicine and technology, the emphasis on primary education and the crucial importance of transmitting core Eastern values, all being distinguishing features of the Asian model. There is also a suggestion in his work that a distinctive Asian approach to human development extends beyond the field of education, in that the ‘educational streams were tightly linked to projected manpower requirements’ (ibid.: 70). He notes that the state coordinates education and research with an emphasis on transmitting indigenous values and the mastery of foreign technology, and that the state also involves itself in manpower planning, job placement and the coordination of science and technology.1 This type of perspective is useful in that it raises the question of whether there is a single Asian (tiger) model of human resource development at the national level, but beyond that there are a number of problems with it. One of the most important of these is the lack of a clearly articulated theoretical position. In the absence of theory one is left with a shopping list of the characteristics which makes the Asian approach different from the Western approach. There is no clear discussion of why the state should become more involved in providing a central framework for education in the East rather than the West or whether that central framework and the other distinctive features are characteristic of all Asian societies at all stages of their development, or just some societies at some stages

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in their development. There is an acknowledgement that education is linked to the economy, but there is little or no consideration of how this is achieved, the mechanisms involved or how this linkage is different from that observed in the West. All this approach can hope to achieve is to sensitise us to the fact that the education system may be different from that found in the West and that there may be different linkages between the education system and the economy. The theoretical approaches discussed in Chapter 2 provide a more useful starting point in this respect. The World Bank analysis did suggest why the investment in education by the ‘High-Performing Asian Economies’ contributed to economic growth and how they had correctly concentrated their investment in education in primary and secondary, rather than tertiary, education. However, because of their insistence that the state refrained from intervening in these economies and adopted ‘market friendly’ policies, they failed to examine the ways in which education policies were linked to the governments’ trade and industry strategies. Even in the field of training, the governments’ actions were seen as being restricted to ensuring that the market was the central mechanism for delivering skills. The developmental state theorists were more helpful in suggesting that the state had played a different role in the process of economic growth in some of these economies. These states had done this by adopting an interventionist strategy to growth and by leading the drive for export-oriented industrialisation and later the move into the production of higher value-added goods and services. In addition, they had, through investment in education and training development, ensured that the appropriate human resources were in place. However, there was no attempt to explain how this had been achieved. The significance of the theory for our analysis was that it sensitised the research to the possibility that the state and its agencies may have played a different role in the process of skill formation in these societies to that which characterised it in the West. Our objective now is to use these theoretical insights to identify the part played by the state in the process of skill formation in these societies. In order to establish the distinctive characteristics of the skill formation process in these societies we must first make a brief detour to identify the ways in which the process operates in the West. There, education systems developed with a high degree of autonomy in relation to the demands of the economy. In the USA, Britain and Germany the education system developed to meet the needs of various status and community groups and professions (Green 1990). In some instances, such as Britain and Germany, the central government was important in determining the development of the education system as a whole, whereas in the USA it was more the local community groups who controlled education. With the exception of Germany, the needs of industry and the economy were not considered when decisions were made about the organisation of the education system and the content of the curriculum. At certain times, and specifically with regard to the institutions of higher education in the USA, the needs of industry and commerce were given greater prominence, but in general

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they were but one among a variety of interests competing for influence over the development of national education systems. When it came to training, industry and commerce have had a greater say. Indeed, in the UK and the USA, for the greater part of their history, industry and commerce have been left alone to provide whatever training they deemed was necessary (Ashton and Green 1996). In this sense, the market has provided training. In Germany, the government was instrumental in developing technical education and, following the Second World War, together with the employers and unions played a more direct role in the development of the apprenticeship system. Apart from the German system, the education and training institutions have generally developed as autonomous systems with little coordination between them and, in the case of education, with little reference to the demands of the economy. In all these countries the state made little if any attempt to direct the development of the economy. Both Britain and the USA developed as industrial nations using the market to determine the direction in which the economy moved. In Germany the state did play a more important role in initiating the process and helping German industries break into world markets already dominated by British and American companies, but even there the market was left to determine the direction in which industrial development moved and the types of markets they competed in. When we contrast this with the results of our case study analysis, the distinctive features of the Asian tiger model become apparent. First, the government plays an important part in influencing the markets in which companies compete and the overall direction in which the economy moves through time. This was demonstrated more recently in their move into higher value-added product markets. Through its influence on the direction in which the economy moves, government policy also has an important influence on the demand for skills. This we refer to as the government’s politico-economic strategy. Second, there are clear mechanisms which ensure that the human resource requirements of existing industries, and those the government wishes companies to move into, are used to guide the development of the education and training system. Third, the government has strong central control over the education and training systems which ensures a fast response to changes in the skill demands of industries. Fourth, and largely as a consequence of the above, changes in the education and training system are closely linked to changes in the economy, although such linkages are always problematic. In the following, we argue that all the constituent elements of this model are evident in Singapore, Taiwan and South Korea and in this sense confirm that we have identified a separate model. However, for reasons that will become apparent, Hong Kong, while approximating the model in some respects, does not exhibit all the characteristics. Below, we discuss each of these features in turn and then move on to a consideration of the case of Hong Kong.

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With these central features, distinction may also be drawn between the Asian tigers and Japan. Although Japan has had its impact, both through its colonial legacy in South Korea and Taiwan and through a more recent imperial influence via its multinational businesses and through government links, its impact should not be overstated. Policy makers have, it is true, learned from some Japanese practices but they have also been prepared to borrow policies from Europe and adapt them to local requirements—sometimes with success, occasionally without. Moreover, although the government in Japan has undoubtedly been influential in altering the direction of economic growth through its industrial and trade policies, there is little evidence of any central mechanism in Japan to coordinate its skill formation policy in line with its economic policy. The government raised education levels in Japan largely in responsive mode and, while contributing a system of certification, it has, to a considerable degree, left the strategy for vocational skills formation in the hands of powerful employers. Only in South Korea are there anything roughly like the large Japanese conglomerate businesses, and there the chaebol have not hitherto provided an equivalent pivotal focus for skill formation. It would be incorrect, therefore, to think of the skill formation systems of the Four Tigers as the followers of the Japanese model, in the manner of the somewhat strained metaphor of ‘flying geese’. Politico-economic strategy Developmental state theorists have frequently pointed to the importance of the political elite’s trade and industry strategy in influencing the development of the tiger economies (e.g. Castells 1992). A great deal has been written about the move from import substitution to export-oriented industrialisation. Rather less has been written about the subsequent move into higher value-added production which was a characteristic of all four of these economies. In the case of Singapore, political strategy has always been evident, but in the later phases of its development this has been more clearly articulated in the form of a ‘vision’. Entitled the ‘Next Lap’, this vision currently establishes where the country intends to be over the next two decades. It aims to achieve the standard of living of the Swiss by the year 2020. What is also of crucial importance is that the vision also indicates the type of industries required to sustain that standard of living. It is then the responsibility of the Ministry of Trade and Industry, aided by the Economic Development Board, to ensure that those industries are in place. As we have seen, the Economic Development Board plays a crucial role in attracting the type of industries and capital required to meet the objectives of the plan and has experienced considerable success in this respect (Schein 1996). It is also instrumental in ensuring that when such companies establish themselves, they also transfer skills and technological know-how to the local labour force. In these ways the state, through its policies and the operation of its agencies, has a

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powerful influence in determining the type of skills demanded in the labour market. In Taiwan we see a similar approach, albeit under different circumstances. While there was some attempt to attract MNCs, their role was not the dominant one that was evident in Singapore and in Hong Kong. Nevertheless, the politicians’ strategies, aided by capital from the US, were just as important in ensuring the establishment of a strong demand for unskilled and semi-skilled labour. During the early stages of industrialisation when the labour intensive industries were being developed, the state set up its own enterprises before passing some of them over to the private sector once they were up and running. In this way the state acted directly in creating a demand for skills which was then taken up by private employers. As the country moved in the direction of higher value-added industries, the state played an active role in encouraging the inward investment necessary to establish the industries with a high potential for technology transfer, thereby creating a demand for more highly skilled labour. Similarly, the government was instrumental in moving the economy towards greater self-sufficiency in high technology industries while also encouraging the relocation of the sunset industries. Like the Singapore government, the Taiwanese government became actively involved in reducing the demand for unskilled labour. In more recent years the 1990 plan has called for ten major industries and eight key technologies to be developed in order that Taiwan should become the Asia Pacific Regional Operation Centre. The government is once again actively involved in restructuring the economy towards higher technology and higher value-added production. By establishing companies, identifying new industries and technologies, and using its resources to encourage the establishment of those industries, the state acts as the driver behind the process of economic growth. In South Korea the political strategy was less consistent, being a product of different regimes. Moreover, the possibility of merger with a collapsed North Korea must make any vision of South Korea’s politico-economic future harder than usual to construct. Nevertheless, there is an enduring pattern of the political elite setting the direction of economic development. Park Chung-Hee was committed to economic growth through export-oriented industrialisation, aided by the US opening up its market and financed largely by internal borrowing. Government intervention was intensified with the Heavy Chemical and Industrialisation Plan, targeting six industries. In the 1980s, fear of over-reliance on the heavy and chemical industries, together with international pressures on the Koreans to open up their markets, led to the diversification of the industrial base and the move into higher value-added forms of production. Because of their success in helping establish the chaebol and their domination of the economy it is arguable that the political elite in South Korea has, during the 1970s and 1980s, had a more direct influence in steering the economy and in determining the types of skills demanded by it than in the other two countries. However, the very strength of these conglomerates may now constitute a structural

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disadvantage. Since the 1980s they have begun to threaten the autonomy of the state which was responsible for their creation. The partial loss of economic sovereignty attending the terms imposed by the IMF in 1997 is an expression of that threat. In all three countries the political elite have in different ways exerted a powerful influence over the direction in which the economy moved. The countries have adopted different strategies to secure the capital required and have chosen to compete in somewhat different markets. Nevertheless, the success of these political strategies over time has meant that the government has exerted a significant influence over the types of skills demanded by employers in the labour market. Mechanisms to link trade and industry policy to education and training provision In order for the skill requirements of industries, both existing and planned, to be used to inform the organisation and output of the education and training system, it requires certain mechanisms to be put in place. The function of these mechanisms is to convey relevant information and to ensure that the needs of the economy are accorded a high priority by decision-makers. These mechanisms are clearly visible in Singapore, South Korea and Taiwan, although they take on varying forms. In Singapore, the channels of communication are through the Ministry of Trade and Industry, the Economic Development Board and the Council for Professional and Technical Education. As the most important ministry, the Ministry of Trade and Industry’s agenda tends to dominate that of the other ministries. Its representatives sit on the various boards and councils to ensure that the process of internal communication is effective. It is the task of the Economic Development Board to ensure that the inward investment is forthcoming to provide the capital for the new industries. In performing this function the Economic Development Board is also cognisant of the human resource requirements for those industries. The skill requirements of those industries, together with those of existing employers, then shape the national skill requirements. Other inputs into the formulation of national skill needs derive from the politicians’ objectives concerning the type of industries the country wishes to attract in the future. For example, the government currently wishes to increase the number of companies operating in the field of research and development.2 For this to happen it will need an increase in the output of scientists and engineers. This requirement is then fed into the equation. On the supply side, the education and training institutions produce data on their existing and projected outputs. Academics provide an analysis of national data and this, together with the other inputs, is used to identify national skill requirements. On the basis of this data, judgements are then made about the future level of output from the education and training institutions and whether it

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will be necessary to fill any gaps by recruiting appropriately skilled labour from outside the country. This information is then used by the Council for Professional and Technical Education to establish specific targets for the various components of the education and training system, i.e. the universities, polytechnics, schools and the Institute for Technical Education. On the training front, targets for on-the-job and work-based training and for the level of investment in training by employers are set by the Singapore Productivity and Standards Board. It is the responsibility of that board to ensure that the skills of the labour force are upgraded to meet the demands of existing and new industries and that the supply of labour is sufficient to meet existing and anticipated demand. When taken together, the work of the Council for Professional and Technical Education and the Singapore Productivity and Standards Board provide sophisticated mechanisms to ensure that when the country defines its future skill needs, these are translated into specific targets. These targets are then used to determine the output from the education system, from the technical education system, and, as far as possible, from employers’ own training activities. These mechanisms function efficiently because both politicians and civil servants share the same objectives while the technocrats operate through a corporate culture which facilitates rapid decision-making while minimising bureaucratic procedures. In Taiwan the mechanism for coordinating the supply of educated and trained personnel in order to meet the current and future demands of industry is even more apparent in the form of the Council for Economic Planning and Development (CEPD). This works with the government in generating the industrial strategy and ensures that other ministries fall in line to meet the objectives of the economic plans. There are strong similarities with Singapore’s Ministry of Trade and Industry and its Economic Development Board. Taiwan’s CEPD has the responsibility for ensuring that the education and training system deliver appropriately trained personnel to meet the requirements of the economy, as defined by the Industrial Development Board. For example, in 1966 the CEPD planned for the increase in vocational and industrial education to meet the requirements of the economic plan. Indeed, the changes in the ratio of vocational to academic students, as manifest in the Manpower Development Plans, was an outcome of the activities of the CEPD. In the latest plan, the Council still has an important part to play in making Taiwan into the Asia Pacific Regional Operation Centre by ensuring that there is an emphasis on enhancing continuing education, innovation and the quality of education, to provide the skilled labour force and professions necessary for national reconstruction. While the CEPD provides the overall strategy, the Manpower Planning Department, which is subsumed within the CEPD, carries out the more detailed planning and direction of policy. This set-up ensures that the broad direction of policy with regard to the supply of appropriately skilled personnel is delivered in practice.

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As we mentioned in Chapter 5, there are recent claims that the role of the CEPD is diminishing in importance as the government seeks to rely more on the market. However, it still has a role in ensuring the coherence of government actions across all policy areas and, while its influence may be receding in significance, it remains a powerful force in overseeing the direction of policy and ensuring the education and training system delivers the appropriate skills required to sustain economic development. There are, in addition, other mechanisms in Taiwan which assist in the same function. One important institution is the National Youth Commission, which monitors the flow of highly qualified manpower on to the labour market, influencing its education and training. One of its current activities is to entice back some of the more highly trained Taiwanese scientists and engineers resident in the United States. In Korea, the Economic Planning Board has performed the function of the main linking mechanism. As we have seen, it has had three major functions: planning and formulating economic policy programmes, coordination of econo mic and other policies by ministries and evaluation of policy programmes. For the last thirty years, it has been the major influence on the formulation of educational and industrial policies. Like the other countries, the priority accorded to industrial and economic development by successive governments has meant that deliberations of the Economic Planning Board took precedence over other issues on the agenda of different ministries. In its planning role, the Economic Planning Board has had the support of the Korean Development Institute and works with the Ministry of Education, the Ministry of Labour and the Ministry of Science and Technology through its manpower agency. In this way the education and training implications of the economic development strategy are conveyed to the ministries responsible for implementation. Where necessary this has been reinforced through the work of advisory councils, such as the Presidential Commission on Education Reform, located in the Blue House. As was the case with Taiwan’s Council for Economic Planning and Development, there have been pressures in Korea to reduce the power of the Economic Planning Board, leading to its merger in 1994 with the Ministry of Finance to create the Ministry of Finance and Economy. At the moment it is still unclear as to how far this has reduced its role in coordinating the other ministries. Meanwhile, the power of several ministries is relatively diminished by the rising might of the chaebol. Centralised control and rapid responses The third component of the model is a strong centralised control over the education and training system. No policy in this field can be effective if the tools for implementing it are not in place. In this respect, it is essential that the government has direct control over the education system and where possible the training system, if the requirements of its industrial policy are to be fulfilled. In Singapore, the government took over the system of community schools and

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implemented a new national system of education, using English as the official language, although it permitted the use of the other major languages. The main curriculum was academic in nature, but streaming was introduced which functioned to steer the less academically inclined into vocational education and later technical education. The curriculum has been strictly controlled from the centre and reforms have been introduced to ensure that the basics, in the form of language, mathematics, science and technology, are fully covered. At the tertiary level, the distinction between polytechnics, with their emphasis on technical and technological skills, and universities, covering the more academic subjects, has been retained. Universities have also been subject to strong central direction with quotas established for different disciplines. In the field of training, the Skills Development Board, originally part of the EDB, was integrated into the Singapore Productivity and Standards Board, which remains firmly in the control of the administration of the finance for training and of the programmes through which it is delivered. In Taiwan, the island had an established primary education system in operation which it inherited from the Japanese. Control of this system was transferred to the KMT state, allowing it to make rapid changes in the output from the system in later years. Unlike the situation in Singapore, where the mechanism for making changes in the system has been periodic reviews associated with upgrading academic education and introducing vocational and later technical education, in Taiwan the main mechanism has been to alter the ratio of vocational to academic education while expanding the educational system as a whole. By changing the ratio between vocational and general academic education, the government has been able to regulate the output from the education system in accordance with the changing demands of the economy. In the 1960s the Taiwanese government introduced vocational high schools to provide the basic education necessary for the labour-intensive industries in the first phase of Taiwanese industrialisation. As Taiwan started to move towards higher value-added production in the 1980s, with its increased demand for technical skills, the government changed the ratio and increased the proportion of vocational students in relation to academic students. In the 1980s there were seven vocational students to every three academic students. During the third and most recent phase in the 1990s, as Taiwan moved towards its goal of becoming a regional centre, the government has once again sought to change the balance. This time it aims to reduce the proportion of vocational students and increase the output from the academic schools in order to meet the demand for the more intellectual skills associated with the new industries—the aim is to have six vocational high schools to four academic schools by the year 2000. The state’s policy emphasis on vocational education is unusually strong, but it has not necessarily been popular because of the tremendous demand for academic education. However, it has provided control over the supply of labour. With controls over academic education, industry has been provided with a supply of vocationally trained young people from the education system.

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At the tertiary level, institutes of technology were created and universities expanded. Changes were introduced into the universities to ensure that more scientists and engineers were produced. For most of recent history the government maintained its control over universities via the national entrance exam, the funding mechanism, its ability to vet senior appointments and, at the student level, through KMT infiltration. With regard to training, the 1960s saw the start of a government policy which has had mixed success. Publicly funded training institutes were created for the small and medium enterprises. In the 1970s, the state attempted to impose a training levy system for firms employing over forty workers, but was forced to abandon it after criticisms from employers in the context of the oil crisis. Unlike both South Korea and Singapore, Taiwan’s economy is dominated by small and medium-sized enterprises. The government has been forced to rely on its public training centres to provide the necessary training for lesser skilled workers. It has to date resolved the workplace skills supply problem by its policy emphasis on vocational education in schools and by relying on informal learning processes within enterprises. In Korea, control over general and vocational education is firmly in the hands of the Ministry of Education, while the Ministry of Labour controls vocational training. Although privately funded education is permitted, the Private School Law extends state control over the private sector’s admission policies, finance and curriculum for both schools and colleges. In the initial stages of development, investment was made in technical and vocational education and restrictions were placed on higher education. In order to provide the skilled labour necessary for the manufacturing industry, the unpopular vocational schools were expanded. Access to tertiary education was limited by the introduction of the Preliminary Examination for College Entrance. Later this was relaxed as new technical universities were opened to provide the skilled labour for higher value-added forms of production, although limits were placed on the numbers graduating, while quotas and funding were also used to control access to different fields of study. In the field of training, the government created public vocational training institutes, enlarging them in the 1980s, and introduced a system of training levies in the 1970s. The training levy was more successful in South Korea than in Taiwan, where it was abandoned after only a brief experiment. Yet, after its early successes in the 1970s, the levy system in South Korea also fell into disrepute; most companies simply paid the levy rather than conform to an extensive bureaucracy if they wanted to claim a subsidy for whatever training they did. However, the government has remained flexible. In its desire still to influence inplant training, the new Employment Insurance System provides clear incentives to companies to train, but subjects them to less rigid control. Meanwhile, the government continues to fund and control an excellent system of public training institutes. Thus, in all three countries the governments have retained firm control over the education systems and the public training systems, and a mixed degree of

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influence over enterprise-level training. This control has enabled them to make important changes at all levels: in the balance of the curriculum, in the proportion of students who obtain vocational education, in the flow of students into the tertiary sector and the type of subjects they study there, and in the quantity and quality of vocational training provision outside the workplace. Within the workplace, governments have had some influence in Singapore and in Korea, though less in Taiwan. Taken together, the exercise of firm control has enabled a relatively rapid response on the part of the education and training system to the changing requirements of the economy. Similarly, in the field of training, a mixture of techniques has been used including publicly funded institutes and training levies in an effort to ensure that the appropriate skills are in place. Maintaining linkages through time Given the institutional mechanisms which link education and training policy formation to the changing skills needs of the economic development strategy, and given the extent of control obtained by the state, the result has been a relatively close link between the economic and the skill formation systems. While this link was never perfect, and while its strength may have varied, it has been closer than in any other successful model of skill formation found elsewhere in the world. The particular contribution of the developmental state is to have managed a process of continuous adjustment in the skill formation system necessary for the persistence of an economic ‘miracle’ into the stage of an advanced economy. Thus, the most important feature of the model is the ability of the governments to sustain the linkages between the education and training system and the demands of a rapidly changing economy through time. It is here that the insights derived from the developmental state theorists have been so important. Their crucial assumption states that the state is relatively autonomous from certain economic interest groups during the process of economic development. It is this relative independence of the political elite which has enabled them to formulate, prioritise and implement a policy of rapid economic growth, and to impose the costs of structural changes on certain economic constituencies independently of the immediate interests of either capital or labour. As theorists (e.g. Castells 1992) have pointed out, this relative independence of the political elites was bolstered by external threats. South Korea was threatened from the north, Taiwan from the mainland, while Singapore found itself in the midst of a politically turbulent environment. Economic growth was essential if these countries were to maintain their political independence and, as that growth materialised, then it became important in legitimating the rule of the elites. In order to sustain their political independence, the state in all three societies played a substantial part in creating the industrial base, either by attracting foreign capital as in Singapore or through facilitating the internal generation of capital as in South Korea. In all instances, however, the state retained a degree of

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independence from the representatives of private capital. Similarly, all three acted independently of the interests of labour. In South Korea and Taiwan, the state suppressed organised labour in order to sustain capital accumulation. In Singapore, a different strategy was adopted in that labour was itself reorganised and brought into the policy-making process. Although all three economies were reliant on labour-intensive industries, such as textiles and electronics, they were characterised by different forms of industrial organisation, from the Chinese family business in Taiwan to the chaebols in South Korea and the multinationals in Singapore. In the later phase of growth there arose different types of industries, but what the three states did have in common was the determination to move away from reliance on those earlier industries into higher value-added forms of production. Here again, it was the independence from the immediate interests of capital which enabled them to move from a situation of reliance on low value-added production to compete in world markets for higher value-added goods and services. In Singapore and Taiwan, companies which relied on low-cost labour had to be relocated and replaced by those producing higher value-added goods and services; while in South Korea the chaebols had to be persuaded to relocate labour-intensive production overseas and develop the new industries. In both Singapore and Taiwan, such strategies put the political elite in conflict with the interests of large sections of capital which had to be carefully managed if a successful outcome was to be achieved. This move from low value-added to high value-added forms of production was itself an important component in ensuring the maintenance of high rates of economic growth as labour was moved into new, more productive forms of employment. Yet such a move was by no means inevitable. It was, in fact, fraught with difficulties and had to be managed by the political elite. In that process mistakes were made, some policies failed and had to be abandoned and replaced, while others had to be adapted; in short, the political elite had to undergo a steep learning curve. In Singapore, the initial attempt to move into higher value-added forms of production was not the result of some ideal strategy. Rather, it was a rational response to serious political instability in the region. The response of the politicians was to argue that the solution to the political threat was for the country to reduce tensions by helping its neighbours improve their standard of living. It could do this by relocating the labour-intensive forms of production to them and move its own economy in the direction of higher valueadded production. While such a strategy was logical, the second part was difficult to implement. The attempt to put pressure on the multinational corporations to move into higher value-added forms of production did not work well. The government and unions pushed large wage rises through and, in the face of this and pressure from the government, a few companies decided they would leave the country rather than move into higher value-added forms of production. Perhaps of greater significance, the flow of inward investment started to dry up. Learning from this experience, the government shifted its

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strategy and focused on developing new industries, such as business and financial services and telecommunications, as a means of creating higher value-added forms of production. In Taiwan, we observe a similar process. The move from reliance on agriculture to a strategy of Import Substitution Industrialisation (ISI) meant that agricultural interests had to suffer, and similarly when the government switched to Export-Oriented Industrialisation those industries created under the ISI policy suffered. As Verma et al. (1995) suggest, if the governments had been content to create full employment and contain labour costs, then they could have remained competitive in existing markets. Instead, they chose to move out of labourintensive industries into other markets which would generate a higher standard of living for their people. As the economy changed direction, there was a corresponding change in the education and training system. Indeed, a notable aspect of this model of skill formation is the constancy of change. In Singapore, there has been a series of reforms ranging from the radical reshaping of the system after the Goh report to the more recent expansion of tertiary education. Vocational education has been constantly updated to keep pace with the changes taking place in the economy. In Taiwan, there have been numerous adjustments to the ratio of vocational schools to academic schools, as well as a guided expansion of higher education. In both Taiwan and South Korea, the public demand for academic education had to be curtailed if national skill needs were to be met, as did the excessive demand for higher education. If the decisions about the type of education to be given to each new generation had been left to the market, in the form of parents’ wishes, the education systems of both these two societies would have moved in quite different directions. In the later phase of economic growth with the focus on higher value-added forms of production, the process of adjusting the education system was more complex. Knowledge of new technologies was to be acquired either directly from multinational corporations or through collaborative arrangements between governments or, most recently, from the beginnings of an indigenous R & D capacity. It needed an expansion of tertiary education with an emphasis on scientific and technical knowledge. Vocational and technical education had to be upgraded. Once again, the demand for more academic education had to be managed and controls maintained over increasingly diversified forms of provision if the output from the system was to meet the requirements of the new industries. Moreover, this is not a process which has been accomplished and has now stopped; all the societies are still struggling with the problems involved. In the field of training, the situation is more problematic. Attempts have been made by the state to enhance the level of training in a number of ways, not all of which have been successful. In South Korea, the attempt to introduce a variant of the German ‘dual system’ has encountered problems, while a modified version of it has taken hold in Singapore. The introduction of a levy system in Taiwan failed, while it has had to date only a temporary success in South Korea.

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However, in none of the countries has the experience of a failed training initiative resulted in the state pulling back; rather the tendency has been to find alternative ways of enhancing the skills of the labour force. In Singapore, the use of a series of publicly financed programmes is partly a response to their need to upskill an ageing labour force with weak primary education. The use of the Skills Development Fund in recent times has been directed, in large measure, at deepening the skills of those workers in industries in which the government believes Singapore will have a competitive edge in present and future world markets. The onus is on working with the multinational corporations and targeting efforts on smaller and medium-sized employers. In Taiwan the problem is that of motivating the small and medium-sized enterprises to train their workers as the economy as a whole is upgraded. This is an almost universal problem, but, given the predominance of small and medium-sized enterprises in the economy, it may be that the only effective way for training to be delivered is for the government to fund it through public provision. In Korea, the dominance of the chaebols presents a different problem. There, the government has sought to explore ways of working with them, but not always with great success. To summarise, part of the distinctiveness of the Asian newly industrialised economies is not just the level and type of investment in human resource development, but their achievements in linking that investment to the requirements of the economy at different stages of economic growth. This has enabled them to sustain growth by moving from low value-added to high valueadded production without that change being hindered by a lack of skilled personnel. However, this process has been neither inevitable nor unproblematic. It may well be that for change at this speed to be effective it requires a government that is insulated in a variety of ways from immediate interests, be they those of capital or labour, or of the national culture demanding more academic education. Once the authority of the state is compromised, for whatever reason, then the ability of the state to influence the skill formation process is constrained. The case of Hong Kong When we turn to the case of Hong Kong, our model would appear to run into problems. As we have seen, the colony developed with an explicit policy of nonintervention by the government. As far as we are aware there has never been an attempt by the Hong Kong government to establish a political strategy of the type epitomised by Singapore’s ‘Next Lap’. In the early phase of industrialisation, economic growth was fuelled by market forces as immigrant businessmen from Shanghai took advantage of their new situation. In fact, the rapid economic growth of the early years can be explained in large part by the combination of external pressures and an efficient and lean administrative system. Initially, the government did support industrial development based on low-cost labour, as in Taiwan and Singapore, because this provided a solution to the acute

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problems of immigration and unemployment in the 1950s. However, apart from the provision of a basic infrastructure and, in particular, the subsidy it provided in making provision for low-cost public housing, the state did not play the same role as it did in the other tiger economies in establishing industries and shaping the economy. During the second phase of industrialisation, the state played a more active role in the process of economic growth. While there was no explicit political strategy to develop specific industries and thereby influence the demand for skills, there was a period in Hong Kong’s development when the state did show signs of a move in that direction. This was evident in the 1979 Report on Diversification which, in response to Hong Kong business interests, advocated a more proactive stance by the government in certain areas of policy. However, this proactive stance was never fully taken up by the government and only applied in a pragmatic manner with regard to specific issues—for example, the negotiation of Hong Kong’s rights under international trade agreements and the setting up of an effective public training system. On the second of our characteristic features, namely, the provision of mechanisms to coordinate the supply and demand for labour, Hong Kong approximates the experience of the other three somewhat more closely. Given the absence of a clearly articulated trade and industry policy, there was no need for a super-ministry of the type found in Korea or Taiwan because the market was expected to provide the signals about the direction of economic growth. This meant that the system which emerged in Hong Kong was more loosely coordinated in its operation, and therefore a greater onus lay with each of the constituent mechanisms to ensure that it was operating effectively in the light of the overall needs of the economy. These mechanisms consisted of three main bodies: the Education Commission, the Education and Manpower Branch and the Vocational Training Council. The Education Commission and the Education and Manpower Branch, through which the education system was controlled, were powerful bodies within the government. The Education Commission consisted of government and business representatives, and while it only had advisory powers was nevertheless a significant influence on the formulation of public policy in this area. In the field of training, the Vocational Training Council, although informed by employers in terms of its day-to-day operation, in organisational terms it is highly centralised and controlled by a small elite closely linked to the inner circles of government. This has meant that, with regard to both education and training, when changes have been required they can be implemented quickly. While there was no formal policy-making institution to ensure that the needs of the economy dominated in the decision-making process in these three groupings, there were close formal and informal linkages between the membership of the various councils, commissions and government departments which enabled a consensus to be sustained. Thus, while the government of Hong Kong has not sought to influence the demand for skills, it has developed sophisticated

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mechanisms to ensure that it can respond rapidly to changes in the skills required by the economy. The existence of these mechanisms, although they only emerged at a later stage in the process of economic growth, has provided the Hong Kong government with almost the same degree of control over the education and training system as that observed in the other three economies. In the initial phase of growth, as we have seen, the provision of education was, in a large part, left to the market until external pressures forced the government to act. Similarly, in the field of training, the government left provision to the market until internal pressures from the business community obliged it to intervene. Yet, when the government did intervene in education it controlled the curriculum and expanded the provision of secondary education. In the field of education, the Education Commission and the Education and Manpower Branch provided the government with some degree of control over both the curriculum and the growth of educational provision at the secondary and tertiary levels. Provision of vocational education was weak, perhaps because there was no strong demand for skilled manual labour as Hong Kong’s move into higher value-added production was through the knowledge-intensive service sector industries. Technical education was introduced, but under the control of the Vocational Training Council. In the field of tertiary education, again the government maintained firm control, both over the provision of technological institutes and universities and over the type of subjects taught at university. Provision here was expanded in order to meet the requirements of the knowledge-intensive industries of the 1980s and 1990s. In the field of training, early attempts to encourage employers to play a more active role through the Industrial Training Advisory Committee and the Hong Kong Training Council eventually gave way to the Vocational Training Council. This provided a highly centralised system of government-funded technical education and training which linked both technical education and training provision closely to the demands of the economy. Throughout the 1980s and 1990s, the activities of the Vocational Training Council on both fronts delivered a fairly comprehensive public system of skill formation up to intermediate level. Moreover, within the Vocational Training Council, mechanisms were introduced to ensure that provision responded rapidly to demands in the market. For example, the professional and industry committees, composed largely of employers and representatives of the Vocational Training Council were, through their biannual survey and other inputs, able to respond rapidly to any changes in the skill requirements of employers. Further improvements in the responsiveness of the VTC were later introduced as a consequence of the 1996 Strategic Review, which also tightened the control of employers over the provision of training. Meanwhile, higher level skills were provided through the polytechnics and universities. When we look at the fourth characteristic, the maintenance of linkages between the demands of the economy and the output of the education and

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training system over time, important similarities and differences emerge. Like the other three, Hong Kong has been able to adjust the output from its education and training system to meet the demands of economic growth. However, unlike the other three, there has been some slippage, especially in the provision of education. If the model we have proposed is correct, it would lead us to suggest that the main reason for the slippage in the delivery of appropriate education provision has been the absence of a clear political strategy. In the first phase of economic growth the inadequacy of primary school provision in the face of large-scale immigration led to demands for state action. The sources of this pressure on the colonial administration were UNESCO, which objected to the exploitation of child labour, and British manufacturers, who worried about competition from child labour in Hong Kong. The government responded to these pressures in the 1960s and instituted a system of primary education. Thus, rather than being proactive in providing an educated population to meet the needs of labour intensive industries, as was the case in the other three economies, the government appeared reluctant to accept responsibility for the provision of even basic education. When the move to higher value-added production took place (mainly from the 1980s onwards), it did so because of the contraction of the labour-intensive industries, as they moved to the mainland, and through the rapid growth of the service sector, which was fuelled by the explosive growth of the Chinese economy and the region as a whole. In this sense, it was the market, via a combination of circumstances—the lifting of the UN embargo, the change in the policy of the People’s Republic of China and the growth of the Asia Pacific region—that created the impetus to move the economy into high value-added services. Unlike the other three societies, government strategy was not a significant factor. As the economy changed, considerable internal pressures built up from both the general population and employers for improvements in the provision of secondary education. However, it was not until the economy had already made significant moves in the direction of higher value-added forms of production, and it was becoming clear that Hong Kong was falling behind the other three tigers, that these pressures led to action and the establishment of an efficient system of secondary education. Similarly, when it came to tertiary education, although the government responded to pressures from business and established the polytechnics, there was a considerable build up of demand for higher education, with many young people leaving for higher education in the West before action was taken to expand provision in the 1990s (Lau 1997). While pressure for entry to the university sector was a feature of all the tiger economies, the reasons for the delay in Hong Kong’s provision are unclear. Nevertheless, once it became obvious that the economy was heavily dependent upon knowledge-intensive industries, the requisite adjustments were made to the system. This can be characterised as a reactive strategy by the government.

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In the provision of technical education and training, the situation was somewhat different. In the early phase, the government relied on the market and was reluctant to act. However, once the internal pressures established themselves, it did respond in a pragmatic manner by establishing the Vocational Training Council. Initially, Hong Kong also experimented with selective levies, but a universal levy was opposed. Instead, a system which provided considerable amounts of training at public expense was inaugurated. Moreover, given the way in which the Vocational Training Council was established, it could respond very rapidly to new skill demands generated by changes in the economy. There may well have been deficiencies in the system in that it did not respond adequately to the needs of the small Chinese family businesses, but the provision of statefinanced training was a step forward in helping smaller enterprises with the costs of training (Ng 1987a). Moreover, new committees were set up to cover the emerging industries, while the organisation of the committees and the techniques for acquiring labour-market information developed by the Vocational Training Council kept it in close contact with the business community. The result was a system which, while still largely reactive in nature, was efficient in responding to the needs of the economy for semi-skilled, craft and intermediate-level skills. Unlike the governments of Singapore and Taiwan, the Hong Kong government was never placed in a position whereby it had to act against the interests of a section of capital, to push the economy into higher value-added production. The absence of clear political strategy and the government’s reactive stance merely allowed this outcome, while external changes provided the impetus for economic growth in the same direction as the other three. All the government had to do was manage the consequences. Thus, although the government of the 1980s and 1990s had many of the mechanisms available to the other three, it never used them to steer the economy as the governments of the other developmental states did. What it did was to use them to ensure that, as the economy grew at speed, the appropriate human resources would follow. In summary, the case of Hong Kong provides interesting insights into the operation of the developmental model of skill formation. Of the four dimensions that we have identified as operating in the other three economies—the politicoeconomic strategy, the mechanisms to link trade and industry policy to ET policy, the centralised control over the ET system and the ability to maintain the links through time—Hong Kong approximates the model on three of these: institutions such as the VTC do ensure a fairly rapid response of the ET system to changes in the economy; the government has established and exercised centralised control; and it has maintained the links through time. The main point at which Hong Kong deviates from the model of developmental skill formation is in the absence of what we have termed a politico-economic strategy. There are some signs that the government of the Special Administrative Region is moving in the direction of establishing its own version of such a strategy. However, for the major part of the second phase of growth there has only been a commitment by the government to support the

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moves of the market in the direction of higher value-added goods and especially services. It was, instead, the proximity of mainland China and Hong Kong’s function as an entrepôt and a source of business and financial services which stimulated moves in the direction of higher value-added forms of production. However, in the absence of a politico-economic strategy, the linking mechanisms were weaker than in the other three economies with the result that at times the ET system lagged a little in its response to changes in the demand for skills. Conclusion There is a widespread view that investment in human resource development by the Four Tigers has been an important factor in explaining their high rates of economic growth. However, the only explanation as to why that investment should be so important is contained in the work of Birdsall and Sabot (1993) and Campos and Root (1996), who argue that the heavy investment in primary and secondary education, with the subsequent spillover effects, explains the contribution of education in sustaining the high level of growth experienced by these economies. Our research into the experience of the tiger economies suggests that there were other factors involved in this process. First and foremost was the commitment on the part of the ruling elites to develop the economy in a specific direction. This commitment may have meant taking actions which conflict with the immediate interests of either capital or labour. A normal basic precondition for such actions is the establishment of a strong, relatively insulated state. Second, the political leadership established mechanisms to ensure that the requirements of the economy played a central part in determining the output of the education and training systems. Third, so that governments could deliver the appropriate skills to the workplace, they had to establish strong controls over the institutions responsible for education and training. Fourth, governments had constantly to steer the system by adjusting the outputs from the education and training system to meet the existing and future demands. While these processes were never unproblematic, their successful management underpinned the high performance of these economies. The ability and the will to orchestrate changes in the skill formation system through a period of sustained rapid economic growth has constituted a fundamental source of dynamic comparative advantage. Yet, as the experience of Hong Kong illustrates, not all these four features are essential to ensure the contribution of education and training to economic growth in a developing economy. Providing that there are strong controls over the education and training system, and mechanisms to ensure that it responds rapidly to the changing skill needs of the economy through time, sufficient skills can be delivered in a reactive manner to support rapid growth. Nevertheless, in the absence of a clear political strategy, any society runs the risk of merely responding to the immediate needs of interest groups and using its education and training system to reproduce existing skills. If the interests of capital are closely allied to labour-intensive forms of production, then the society

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becomes stuck in what has been referred to as a low-skills equilibrium (Finegold and Soskice 1988). Not all societies can be as fortunate as Hong Kong in having external forces push the economy in the direction of high skills, high wage forms of production. The other three tiger economies did not have that particular combination of external events. They had not only to establish an efficient education and training system, they also had to create the conditions for growth through their own actions—that is, through the management of capital and labour. It was here that their political strategy concerning the direction of economic growth was so important. Had their political elite been closely allied to the interests of capital, it is highly probable that they would not have moved the economy into more productive forms of employment. What factors led these societies to arrive at a developmental model of skill formation? As Castells (1992) and others have already pointed out, all three societies faced external threats to their political independence which focused the minds of the political leaders on the importance of maintaining a healthy economic base to sustain their political independence. All established specialised niches in world markets as a result of their export-orientation strategies, and the political leaders were therefore very sensitive to the narrow and somewhat precarious position of their economies which were vulnerable to changes in patterns of international trade. After these societies had embarked on their first stages of industrialisation, all political elites were faced with a situation of full employment created by their very success in manufacturing low value-added products. This produced pressure on wages which rose, as did the living standards of the labour force. At the same time as this was happening, all these economies faced increasing competition in world markets. Although they specialised in different products, the fact that these were all low value-added products meant that they faced increasing competition in the 1970s from the second tier of NICs, many of whom were in close geographical proximity. The economies were therefore subject to a pincer movement with both internal pressures and external pressures threatening to make them uncompetitive in their existing markets. In the case of Hong Kong and Singapore, these external pressures were reinforced by rising protectionism in the West, in particular the content of the Multifibre Agreements which reduced the quotas available for the export of low value-added goods. In the case of Taiwan, there were additional pressures to move into higher value-added product markets which stemmed from the loss of diplomatic recognition by the US. That the political elites responded in similar fashion, by establishing and reinforcing mechanisms in their society to advance towards higher value-added production, may owe something to the example of Japan’s post-war regeneration and to the legacy of its earlier colonial influence. Nevertheless, it was equally in the nature of the developmental states, under continuing external threats, to respond to the common pressures in similar ways. Singapore, Taiwan and South Korea, independently, developed similar institutional links between the ET

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system and the economy without explicitly learning from each other or from any pre-existing model. For some time, living standards in the four tiger economies have been catching up on those experienced in the West. The citizens of Hong Kong and Singapore already enjoy comparable incomes to most Western nations, while the Taiwanese are not far behind. South Korea, which began as an extremely poor nation in the late 1950s, remained considerably less well-off in terms of per capita income, even before the effects of the 1997 financial crisis were felt. Nevertheless, its leading industrial sectors were already on a par with most competitors worldwide, and South Korea is now a member of the OECD. Thus, although both South Korea and Taiwan retain substantial inefficient service sectors which absorb many workers, there arises the question of the prospects for future growth. Playing catch-up as a mode of development is inherently self-limiting, as an earlier generation of post-war industrialisers found out when they converged on the US at the end of the ‘golden age’ of growth in the late 1960s (Armstrong et al. 1991). Recent slowdowns in growth in East Asia, and the financial crisis emanating from Thailand, have already been taken as symptoms of maturity, and signals that the Four Tigers are likely to settle down to something closer to more conventional growth rates in the coming decades.3 Whatever the validity of any such long-term forecasts, what is clear is that learning technology from others can only be carried on while others have the superior technology. In that light, it is relevant to consider the implications of the model of developmental skill formation for the future competitiveness of the tiger economies. Simple extrapolation sees these economies as continuing to perform well, but that assumption ignores some of the previously mentioned contradictions in the model which, if unresolved, could be the source of a serious economic crisis or slowdown. In focusing on the institutional arrangements, which is what our model does, we would not wish to negate the impact of culture. In all the societies we have examined, Confucian culture has left a strong imprint on the educational system in the form of an emphasis on rote learning. While this may have facilitated high levels of achievement in the basics—mathematics, science and language—which, in turn, has prepared young people well for further training in craft and intermediate level skills, this approach is now being seriously challenged. With the emphasis in the knowledge-intensive industries on creativity there is a real fear, expressed in current policy debates, about the adequacy of an educational system which so far has served these societies well. The persistence of rote learning as the normal pedagogy is deep-seated, hard to challenge, and could, it is argued, have potentially damaging effects on economic growth. In all four societies there is concern that unless their education systems, at the highest level, can introduce a more creative, research-based tradition, they will lose out in the field of industrial research and development. The latter is widely credited as the source of new ideas and products for the next generation of industries. Unless the tiger economies can match the West in this area, they

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face the danger that, in spite of their unprecedented growth, they may yet fail to maintain the impetus behind their economic success. A further contradiction concerns the impact which the tigers’ economic success has had on the mechanisms for linking the education and training systems to their trade and industry policies, especially in the two larger economies, Taiwan and South Korea. The threats to the continuance of these mechanisms come from two sources. One is the international community, especially the major Western powers. As the tigers have become important players on the world stage, they have come under increasing pressure from international institutions to open up their markets and deregulate. In South Korea there has been some reduction in the power of the Economic Planning Board, and the monopolistic dominance of the chaebol has sharply constrained the government’s privatisation policy. The external pressure was brought to a head in late 1997 by the need to borrow urgently from the IMF to try to shore up confidence in Korea’s weak financial system. Moreover, given the increasing regional integration of economies in East Asia, other countries with less pressing internal structural problems cannot avoid region-wide financial crises. It is likely that in the future governments will have somewhat less ability than hitherto to determine the industrial direction of the economy. Further external pressure comes from the integration of the People’s Republic of China and other low income countries into the world economy. The proximity of the mainland and the cultural closeness may prove an especially difficult problem for the Taiwanese authorities whatever the political future holds: as governments hold less power over indigenous capital, the hand of the more internationally-oriented fractions of capital is strengthened by the alternative strategy of exploiting abroad its ability to manage very low-cost, low-skilled, labour. The ‘sandwich problem’— being pressed between the older industrial countries and the very low-wage countries—is thus a real concern for the governments of the tiger economies. The other threat to the linking mechanisms comes from within countries. Internal pressures for democratising of society may lead to a looser control over employers and the various skill formation institutions. These institutions are likely to come under increasing pressures from other sources—such as unions and professional bodies—and increasingly agencies may resist the impositions of central government control. Government itself might need to accede to popular pressures—in South Korea, for example, participation in higher education continues a seemingly inexorable upward trend in response to social demand. Any weakening of the links between the skill formation system and the economy could be both a problem and a blessing given the need for more creative forms of learning. Among the respondents we questioned on this issue, the typical view was that there was a need for more creative and imaginative workforces if companies are to maintain their edge in world markets. To provide workers with yet higher levels of skill and creativity, it is argued that the education and training institutions require more autonomy to respond in appropriate ways to the requirements of employers. The current direction of

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government policy is to accept this diagnosis and reduce central regulation, thereby providing greater local autonomy. In South Korea, the authorities are in this way attempting to make a virtue out of necessity. Yet, by decentralising and providing this autonomy the state runs the risk of losing its control over education and training, and hence over the supply of skills which has been so important a part of their policies hitherto. Whether this is the right diagnosis remains open to question, for it may well be possible for other forms of control to be introduced which would ensure greater responsiveness at the local level, but which would maintain central control over the flow of trained people into the labour market. The case of Singapore is instructive in this respect because it suggests that where there is a strong national consensus, which is inclusive of the labour institutions, the government can use this to ensure some adherence at the local level to national targets. Under these circumstances, the decentralisation of authority does not pose such a threat to the action and policies of the central government. The incorporation of the unions into the national decision-making process means that they can act as another form of control at the local level because the unions form an important mechanism whereby the national consensus can be maintained. However, where, as in Taiwan and South Korea, the labour organisations have remained outside the policy-making process, the decentralisation of authority may pose a serious threat to the continuance of the system. These, then, are some of the problems which the political elites face in their attempts to sustain high economic growth into the twenty-first century. On the positive side, however, there remains in these economies (with the possible exception of Hong Kong) a legacy of concern with the long-term strategic direction of the economy. To assume that, once catch-up is complete, future growth will proceed along a global trajectory that is determined outside national boundaries is an ahistorical abstraction. The contradictions associated with catchup are real; nevertheless, there has always been a large dose of historical common sense in the method of simple extrapolation from the past. The trick of future forecasting is to recognise the contradictions of the existing mode of economic growth, as well as the continuity of politico-economic processes which hitherto have proved successful in their own terms. The motivation of policy makers to use the education and training system as a lever for economic growth, and the mechanisms for doing so, remain much stronger in the tiger economies than even now in the West.

8 On the diffusion of the model

Introduction The model we have identified in the last chapter is essentially dynamic in character. It focuses on the ways in which governments have linked changes in the demand for the skills created either by inward investment or indigenous growth with the supply of suitably qualified personnel. We have suggested that, despite the weakening of these links following increases in democracy and in economic liberalisation, the tigers are likely to retain, at least for a while, their comparative advantage in managing skill formation. Our conclusion begs the question as to how far the model—or elements of it—could be taken up elsewhere. Such a question splits into two: first, can the model be applied in other as yet undeveloped economies and, second, are any elements of it relevant for advanced industrial nations. With regard to the latter, the apparent success of the model suggests that taking a strategic approach to a developed country’s skill formation system is likely to have substantive economic benefits. Nevertheless, the extensive controls over individuals’ and firms’ skill formation decisions, characteristic of the tigers’ history, may not be possible in complex advanced industrial societies.1 In this concluding chapter, we focus on the former question, the exportability and relevance of the model to other developing societies. In the poorest societies, the implications of the model are straightforward: the experience of the tiger economies exemplifies a general rule that the development of widespread basic education is necessary, though not sufficient, for sustaining growth through its first phase of industrialisation based on low-cost labour. This implication is shared with other theoretical approaches, not least that of the World Bank with its emphasis on the external benefits of primary education. After the initial phase of development, however, there arises sooner or later the stage when the reserve army of rural labour begins to dry up and wages start to grow. When this stage looms, for any society the key issue highlighted by the model is whether there are the institutions and the political will to organise a process of transformation sufficiently rapid and well-focused to meet the needs of the quickly changing economy. Answers to that question can, of course, only be provided by in-depth analyses of the political economy of skill formation in each

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country, and how that country’s politico-economic regime is articulated with the global economy. As a kind of coda to the central theme of the book, we examine the issue of the exportability of an approach to education and training policy by reporting developments in two areas. First, we consider the wider influence that Singapore has had directly on skill formation policies and practices, especially in other parts of the Asia Pacific region. Second, we take a brief look at Singapore’s neighbour, Malaysia, which, while also caught in the financial maelstrom of 1997, was already at that time well-advanced in the first stage of industrialisation, hoping to proceed to higher value-added stages, following the four leading tiger economies and absorbing some lessons from them. Direct influence The main direct way in which Singapore has influenced the development of skills in other economies in the Asia Pacific area is through its regionalisation policy. As we saw in Chapter 3, the term refers to localised forms of economic cooperation in which the more advanced economies seek to exploit the economic complementarity among Asian countries at different stages of economic development. Often this involves the Four Tigers promoting investment in labour-intensive production in countries where labour costs are significantly lower than their own (Myo et al. 1994).2 In the case of Singapore, this process started not by any sudden revelation on the part of the authorities that regionalisation was a rational way forward. Rather the initial impetus came from immediate economic problems encountered in 1985, when Singapore unexpectedly sank into a serious recession. The crisis came as a sudden shock to policy makers and political leaders in terms of its severity. The economy went into negative growth (−1.6 per cent) for the first time in its post-colonial history. An Advisory Economic Committee, set up to respond to the events, argued that a substantive reason for the recession was the prolonged escalation of labour costs as a result of the ‘wage correction’ policy implemented in the early 1980s. The prolonged increase was simultaneously accompanied by a steady appreciation of the Singapore dollar. These events were thought to have led to a substantial loss of external competitiveness. There followed a major change in policy with the government deciding to reduce its vulnerability through diversifying to overseas regions. To accomplish this objective, there had to be an alteration in the work of the Economic Development Board (EDB). Now, as well as bringing MNCs to Singapore, the EDB would also persuade MNCs to be part of Singapore’s effort to diversify into overseas ventures (Low et al. 1993). The result was Singapore’s first wave of overseas economic involvement. This included the ‘Growth Triangle project’ and the effort to persuade MNCs to use Singapore as regional headquarters for their global production systems. The Triangle, which consisted of Singapore, Johor of Malaysia and Batam plus the rest of the Riau Islands of Indonesia, would provide

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MNCs with two major advantages: access to low-cost factors of production on a regional basis and the use of Singapore’s well-developed economic infrastructure. In addition, the EDB began to run ‘global strategy workshops’ for MNCs in Singapore and for Singapore’s planning personnel. In this way, the EDB was increasingly seeking to integrate its plans and actions with those of the MNCs which were active in expanding in the region. The success of this approach gave the Singapore government the experience and confidence to move to the next stage and create an external economy, known as the policy of regionalisation. This strategy was formally embodied in the government’s vision of the future for Singapore in which the concept of the ‘external economy’ was firmly established.3 The policy was far more than a mere encouragement for Singaporean companies to invest overseas. Although the policy was initiated through the use of financial incentives for companies to invest overseas, what was of much greater significance was the decision that the government should actively participate in overseas ventures to ‘market’ its (and that of EDB’s) expertise to the private sector. The express intention was to facilitate the formation of consortia and joint ventures, and to lead large-scale infrastructure projects (Ministry of Finance (S), 1993a). In other words, the expertise which Singapore had acquired in bringing together capital, land and labour, in coordinating the process of production at the national/regional level and in the delivery of appropriate human resources, should be marketed abroad. Within Singapore itself the system of higher education was adapted in order to develop the appropriate entrepreneurial skills. In particular, language and business courses received more encouragement and support from the government. A new credit system was introduced to enable flexibility—for example, combining technical subjects with business and languages. In addition, more support was given to persons and families affected by overseas ventures. Among other facilities, the Singapore International Foundation was set up, providing information and assistance to Singaporeans working abroad. Substantial effort and resources have been devoted to the regionalisation policy. In particular, the EDB’s involvement has been extensive. For example, in 1993 alone the EDB was involved in the following activities: • major investment projects in China, India and elsewhere in South East Asia which involved ten countries in round-table discussions with businessmen from Western Europe and Asia; • overseas missions to explore investment opportunities involving 600 Singaporean companies; • approving twenty-eight projects under the Local Enterprise Finance Scheme (overseas) and thirty-six companies for training under the Regionalisation Training Scheme; • the establishment of a Strategic Business Unit (the Consulting Group) to provide free consultation to local enterprises and overseas host countries.

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Since 1993, Singapore has made significant inroads through this policy into India, China, Vietnam and Myanmar (formerly Burma). The pattern is familiar: a substantial initiative is made to attract the capital while at the same time efforts are made to ensure that the infrastructure (including the human resources) are put in place. We can illustrate this by reference to the activities of Singapore in China, where it may have had a direct, if small-scale, impact. Unlike joint ventures with other countries, China has invited Singapore to export her experience in creating and managing industrial estates. The project is not based on the development of piecemeal industrial projects. Instead, it is to develop ‘industrial townships’ which will mirror Singapore’s style of economic management (Tan, C.H. 1995). The original idea had been discussed between Singapore’s senior minister, Lee Kuan Yew, and China’s senior leader, Deng Xiaoping, in the mid-1980s—a period in which China was increasingly looking for ideas through which it could develop its market policy and at the same time retain central control of the economy. The approval by the State Council (the equivalence of parliament) was followed by the selection of Suzhou for the experiment. The project exemplifies the Singaporean approach. First, the concept of ‘industrial township development’ is established, underpinned by the EDB philosophy. Thus, the economic development strategy is built upon the investments of MNCs and ‘managed’ by a quasi-governmental body in the form of a development board. The board’s objective is to ensure a balanced approach between indigenous development (e.g. SME suppliers and secondary industries) in the host country and profitability for the investors—a formula that fostered the growth of MNCs in Singapore. Second, the business strategy is supported by preferential incentives (fiscal and other) and the removal of bureaucratic red tape. This second feature was the same ‘one-stop’ strategy that the EDB so successfully employed during Singapore’s post-import substitution era (Schein 1996). Modelled on the EDB, the Singapore-Suzhou Township Development Company (a consortium of nineteen Singaporean companies) acts as a ‘one-stop’ institution to provide links with the host government at all levels, reducing the need for investors to establish their own connections. And just as in Singapore, should there be worker and skill needs of any sort, the consortium is there to ensure that the local administration will adjust its manpower system to anticipate such needs. Third, unskilled and semi-skilled workers would be recruited locally, but all key personnel involved would be sent to Singapore to be trained in subjects such as economic public enterprise management or EDB organisational culture and its strategic ethos for success. Four months after the setting up of the Singapore-Suzhou Township Development Company in 1994, fourteen companies (including some well-known MNCs) signed up for the township with industries ranging from brewery, precision tools, food processing and healthcare products to semiconductors.4

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The Suzhou project is not the only venture in China. There are quite a few other projects taking place concurrently although they may have different arrangements. For example, the project in Shandong Province is in many ways as significant as that of Suzhou. Since its inception in November 1995, cumulative investment in Shandong had reached US$780 million a year later. Officials from the Singapore-Shangdong Business Council are now part of the EDB investment mission to different parts of the world. Apart from Shandong, projects in Wuxi (the Wuxi-Singapore Industrial Park), Qingdao, Henan, Sichuan, Ningbo (Ningbo 2000 Project) and Shanghai are generating new economic developments. It is likely that any project such as the Suzhou project may encounter problems, not least from opposing interests within the other country and from potential competition. No independent evaluation is currently available on the progress of joint ventures conducted in China. What is clear at this stage is that Singapore is actively involved in attempting to transmit its skills in the management of the process of economic development, including the management of the skill formation process, to other parts of the region. Regionalisation activities in India, Vietnam and Myanmar attest that the EDB is now extensively involved in overseas ventures (Tan, C.H. 1995). In these other countries, however, Singapore’s involvement in economic development and skill formation has been more limited. In India, Vietnam and Myanmar, opportunities to create joint ventures were only possible because of political reforms in these countries in the last ten years. However, because it does not have the same political connections with these three countries as it does with China, Singapore’s participation in these countries was, by and large, confined to the role of business architect and industrial parks’ developer. As such, Singapore’s influence on human resource systems in these countries has been mainly at the enterprise level. For example, Singapore’s experience with its welltried system of industrial estate management was used as the basis to establish a high profile consortium to develop an Industrial Technology Park in Bangalore. Prior to the formation of consortium, other Western computer software companies, such as 3M, Hewlett-Packard, IBM and Motorola, had already established themselves to take advantage of low-cost labour and the workforce’s ability to speak English. Singapore’s participation was to help tap on to existing resources and further develop Bangalore’s software development capability. Because of substantial investment made by Singaporean government-linked companies (40 per cent of the venture), skills training and the system of development were the responsibilities of Singapore. Singapore’s economic presence in Vietnam and Myanmar is considerably smaller. Apart from transferring its skills in managing the process of economic growth and skill formation, the Singaporean government has also been active in transferring aspects of its experience in developing skills. These have taken three forms: Third Country Training Programmes (TCTPs), bilateral agreements at

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government level and the transfer of expertise in productivity and skills-training policy. Singapore has a history of providing technical assistance and human resource development training for developing countries and evolved a variety of programmes. In 1992, the Singapore Cooperation Programme (SCP) was formally established under the Ministry of Foreign Affairs. It aimed to bring about a better focus to the diverse programmes and to strengthen Singapore’s technical assistance by increasing training courses offered to developed countries. By 1995, 20,000 participants from eighty countries had been engaged in courses and visits under the various technical assistance schemes (Ministry of Foreign Affairs (S) 1997). Most of this training provision comes under the TCTPs. These are training programmes set up jointly by the Singapore government and other governments or international agencies, such as the Commonwealth Secretariat, the United Nations (UNDP), the World Bank and the Asian Development Bank. The number of participants in the TCTPs has been rising rapidly from 200 in 1992 to 900 in 1995. Many of the TCTPs provide trainees from the Asia Pacific region with the opportunity to learn specific skills. For example, the German-Singapore TCTP started in 1993 and concentrates on training in computer-aided production technology, including computer-aided design, CAD/CAM and technical institute management. These partnerships are not confined to developed nations. The Korea (South)-Singapore TCTP trains Asians from developing countries both in Korea and Singapore in management subjects, including environmental management and trade promotion strategies. However, there has been no evaluation on the impact of TCTPs. The bilateral arrangements at the government level provide training on approaches to government policies and the running of government infrastructure. For example, in 1992, a fund of US$10 million was set up to facilitate the reconstruction of the Indochina economies, with Singapore providing technical training and consultancy for economic restructuring. Two years later, a Technical Assistance Fund of US$3 million was set up to assist the design and development of a more focused human resource development policy for the tourist and agribusiness sectors. All training was provided by Singaporean officials. Singapore is more well known in the field of productivity and skill training policy. Up to 1996, the Productivity and Standards Board (formerly the National Productivity Board) had trained 180 government officials from twelve developing countries in advanced management consultancy courses. This training is augmented by that carried out by the Institute of Public Administration Management (the former Civil Service Training Institute). By adopting the Japanese system of quality control circles in the 1980s, the institute developed the concept of Work Improvement Teams (WITs) for public sector output quality and productivity. The response to WITs has been very positive. It

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has been so successful that over 300 senior commonwealth civil servants have attended the training course in the last three years. The Productivity and Standards Board (PSB) has been especially influential in Botswana. In 1991, Botswana sent a fact-finding mission to South East Asia to learn how South Asians achieved productivity and growth. The mission singled out WITs and the PSB structure as the most successful model to be followed. The result was that both the PSB and the Institute of Public Administration Management were to become instrumental in setting up the Botswana National Productivity Centre (BNPC) in 1993. Several Singaporean government officials were seconded to the BNPC to provide advice and hands-on training in productivity programmes. In turn, forty-eight BNPC staff received training in productivity management in Singapore. WITs were also adopted by the Botswana Civil Service. Thus, through its regionalisation policy, its Third World training schemes and its policy advice, one can observe a process of diffusion of at least some key elements of the developmental skill formation model to other societies. How far that model becomes embedded within the policy of other nations remains to be seen and awaits further analysis. Indirect influence An indirect way in which Singapore and the other leading tigers may be influencing the development of the rest of the East Asian region is via the adoption in the other countries of similar institutions and policy mechanisms. These similar institutions might, but need not, be adopted as part of an explicit tactic of copying from abroad what appears to be a successful approach. One country of interest in this respect is Malaysia, which has been using some of the elements of skill formation found in neighbouring Singapore. Nevertheless, Malaysia, we argue, has not established the same degree of coherence in policy making, and hence the results may turn out to be rather different. Our purpose here is merely to propose an outline interpretation and an indication of what to look for in coming years. A fuller analysis awaits further researches. Malaysia is one of the second generation Asian tiger economies with high rates of economic growth over the last two decades (averaging approximately 7 per cent) fuelled by inward investment, which has created full employment on the basis of low value-added forms of production. In terms of skill formation, during the initial phase of economic growth, the emphasis was placed on expanding primary education, which was made freely available to all. By 1990, the Malaysian population over fifteen years of age had attained an average six years of education.5 As with the leading Four Tigers, the government has a strong central control over the curriculum. During this phase of growth vocational education has been developed at the upper secondary level and public training institutes have been established. Access to tertiary education has been restricted.

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Like Singapore, Taiwan and South Korea, the Malaysian political elite, incorporating a relatively robust civil service, has made a commitment to move into higher value-added forms of production. This commitment is proclaimed in ‘Vision 2020’ which sees Malaysia as a fully developed, broadly egalitarian nation by the year 2020 (Ahmad Sarji Abdul Hamid 1993). As part of this effort, the government has identified a series of industry clusters which it aims to develop, part of which is the Multimedia Super Corridor which aims to develop Malaysia as one of the leaders in information technology. Here is a clear trade and industry policy. However, unlike the other tiger economies we have discussed, Malaysia remains, at the end of the 1990s, heavily reliant on labour-intensive, low valueadded forms of production, still with more than half of its population living in rural areas, its industrialisation schemes rocked by the crisis in the financial system. Whether Malaysia succeeds in breaking away from a low-cost production economy will depend on a range of policies and events which we shall not examine here. A necessary condition, however, will be the securing of an adequate skills supply. In terms of skill formation, it has adopted similar policies to the other tigers, but these are still in the early stages of development. The government has upgraded the vocational schools into technical schools and begun to expand the tertiary education system, encouraging the private sector to establish universities. In the field of training, it has introduced measures to improve the quality and effectiveness of training, including procedures to make the public training institutions more responsive to market demand and efforts to improve the quality and quantity of training in the private sector. Central to this latter objective was the introduction of the Human Resource Development Fund in 1992. In some respects, this fund was similar to the Singapore Development Fund (SDF) in that it was fuelled by a levy (a 1 per cent payroll tax) and sought to increase in-house training and retraining. It differed from the SDF in that it was a levy on all employees, initially those in the manufacturing sector, but later extended to the service sector. The fund pays for training delivered by employers and approved training institutions (Young and Ng 1996). As the aim of the fund is to encourage employers to move into higher value-added forms of production, the emphasis when determining the allocation of these funds is on training which is said to improve productivity, especially technical training which includes a theoretical content. Such training receives a higher reimbursement rate than that for the softer skills.6 The fund is overseen by the Human Resources Development Council, half of whose members are from the private sector, reflecting the belief that the private sector should drive the programme. Even in its early days the fund has encountered some of the problems often associated with the use of levy-based systems, including burdensome regulation deriving from the bureaucratic nature of the administration of the fund (Chee 1997). Another problem that has had to be faced is that of employers in a tight

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labour market who find it difficult to release their employees for training. However, given the objectives of the programme, it is still somewhat premature to evaluate its overall impact. All these measures are in keeping with the model of skill formation we have identified in the region. In this respect, Malaysia appears to be following in the footsteps of the other three tigers, Singapore, Taiwan and Korea. However, where the situation may be different is at the government level, and especially with regard to the nature of the linking mechanisms. While both the Education and Human Resource Development ministries report to the Economic Planning Unit, the main source of authority lies with the cabinet. The system provides for central control over the education and training system, but does not enable the coordinating role which was evident in the mechanisms in place in the other three societies between the trade and industry policy and the determination of education and training provision. The lack of clear linking mechanisms between the demand for skills and the control of institutions responsible for their supply might explain why there have been persistent skill shortages that have fuelled an increase in wages; this has resulted in the loss of competitiveness with lower cost countries in the region, especially China, during the mid-1990s. An influx of foreign labour has helped to sustain low value-added forms of production, but may also have served to delay any transition to higher value-added forms of production. The devaluation which occurred following the financial crisis of 1997 may have restored Malaysia’s ability to compete in these markets. Like China and the other developing countries with which Singapore has been involved, Malaysia has been growing rapidly for some time. Although it has developed further, it is still in the early stages of moving into higher value-added forms of production. Whether it is successful in transforming itself and sustaining high economic growth must remain an open question. Conclusion In this concluding chapter, we have thus identified certain elements of a developmental skill formation model that have been exported, either directly or indirectly, to other countries within and outside the South East Asian region. We judge the main carrier of this influence to be the explicit regionalisation policy that the Singapore government has adopted, though other direct mechanisms have also been instrumental in providing forms of assistance to other governments. In the main, what we can observe are individual elements of the model being taken up in other countries, rather than the totality of the model itself. Possibly the nearest attempt to diffuse the whole model has been the experience in Suzhou, but this has been attempted at the sub-state level, and it is too early to evaluate the success of this venture in terms of the development of skill formation in Suzhou. The experience of Malaysia has also been of interest, but

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the issue we have identified, namely the lack of institutional mechanisms for linking the different elements of the development strategy, may mean that the future of skill formation policies may not be immune to instabilities associated with recent financial crises. Nevertheless, we have also seen earlier in this book that, as in the experience of Hong Kong, the presence of some of the elements of the model can have a notable impact on the adaptability of skill formation to rapid economic transformation. Thus, the export of certain elements in the model can still be of value in facilitating the process of economic development.

Appendix List of authorities consulted (by area in chronological order)

The interviews that formed a large part of the data-gathering for this book were semi-structured and lasted from half an hour to three hours. Most took place in 1996 and 1997. Hong Kong Dr Danial Han and Dr David Levin, Department of Sociology, University of Hong Kong, 29 January 1996; Mr Ernest Yung, Trainer, Caritas Training Centre, 29 January 1996; Mr David H.Hodgkinson, Head of Human Resources, Hong Kong and Shanghai Banking Corporation Ltd, 30 January 1996; Mr Graham Cheng OBE, JP, Executive Committee Member, Chinese Manufacturers Association; Chairman, Dowda Enterprises Co. Ltd., 30 January 1996; Dr Agnes Lam, Department of Professional and Continuing Education, Hong Kong University, 2 February 1996; Mr Horace Knight, ISO, MBE, Executive Director and Mr P.F.Mak, Assistant Executive Director (Industrial Training), Vocational Training Council, 5 February 1996; Dr Ng Sek Hong, Centre for East Asian Studies, Hong Kong University, 5 February 1996; Dr W. O.Lee, Department of Comparative Education, Hong Kong University, 6 February 1996; Mr A.M.Reynalds, Principal Assistant Secretary for Education and Manpower and Mr Dominic Cheung, Senior Statistician, Government Secretariat, Education and Manpower Branch, 30 May 1996; Mr Stanley Ng, Senior Labour Officer, Department of Labour, 30 May 1996; Prof. Lee Ngok, JP, Executive Director, Vocational Training Council, 23 July 1997; Dr W.C.Keung, Branch Director, Training and Information Branch, Mr Wilfred C.Leung, Principal Consultant, Training Division, Hong Kong Productivity Council, 25 July 1997; Ms Agnes T.Y.Wong, Assistant Director General of Industry Infrastructure Support, Industry Department, Government of the Hong Kong SAR, 25 July 1997. Singapore Officials at the National Productivity Board, 15 January 1996; officials of the Ministry of Trade and Industry and the Council for Professional and Technical Education, 17 January 1996; officials at the Singapore Institute of

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Labour Studies, 28 January 1996; officials at the Productivity and Standards Board, 29 January 1996; officials at the Ministry of Labour, 18 March 1996. Over the period 1993–6, interviews were conducted with officials from the Singapore Institute of Management, Institute of Technical Education (21 January 1994), Skills Development Fund, National Productivity Board (annual interviews). The following non-governmental personnel have been consulted during the course of the research: Huam Chak Khoon, Executive Director, Comfort Driving Centre Pte Ltd; Edwin Netto, Human Resource Manager, Comfort Transportation Pte Ltd; Dr Tan Eng Thye Jason, School of Education, Nanyang Technological University; Dr J.M.Putti, School of Management, NUS; Jimmy Toh, Regional Personnel and Admin. Manager, Image Jet Printing Pte Ltd; Vincent Lim, AVO Electrical and Trading Co. Pte Ltd; Dr Linda Low, Senior Lecturer, Department of Business Policy, National University of Singapore; Leong Siew Loong, Senior Principal Consultant, Service Quality Centre; Stephen Krempl, Regional Manager, Motorola. Korea Mr Kang Sa-Min, Education Director, Embassy of the Republic of Korea, London; Dr Cho Won-Dong, Assistant Secretary to the President for Policy Development, Mr Kioh Jeoung, Education Secretariat Administrator, Dr Kim Gwang Jo, Office of the President, Republic of Korea (Blue House), 5 December 1996; Prof. Lee Jong-Wha, Korea University, 5 December 1996; Mr Jang Kiwon, Lifelong Education Management Division, Lifelong Education Bureau, Ministry of Education, 6 December 1996; Dr Lee Ju-Ho and Dr Park Jin, Research Fellows, Korea Development Institute, 6 December 1996; Dr Chang Suk-Min, Director General Vocational-Technical Education Research Center, Dr Shin Ikyun, Ghang Jonghoon, Korea Educational Development Institute, 9 December 1996; Dr Insoo Jeoung, Korea Labour Institute, 9 December 1996; Mr Kim Woo-Dong and Mr Lee Tae-Hee, Deputy Directors, Vocational Ability Development Division, Ministry of Labour, 10 December 1996 (in Korean through an interpreter); Dr Kim Tae-Gi, Presidential Commission on Industrial Relations Reform, 10 December 1996; Mr Baik Joong-Ki, Deputy Director, Economic Research Section, Research Department, Korean Chamber of Commerce and Industry, 11 December 1996; Mr Lee Jung-Woo, Director, International Cooperation Division, Korea Manpower Agency, 11 December 1996; Mr Jung Dong-Hee and Mr Kwon Yong-Won, Deputy Directors, Industrial Technology Planning Division, Ministry of Trade, Industry and Energy (in Korean through an interpreter); Mr Geo Chi Jeon, Manager, Planning Team, Management Support Office, Samsung Advanced Technology Centre, Samsung Electronics Group, 12 December 1996 (in Korean through an interpreter).

164 APPENDIX: LIST OF AUTHORITIES CONSULTED

Taiwan Mr Heinz L.T.Chien, Director, Promotion Division and Ms Hui-Chuan Connie Chang, Specialist, Industrial Development and Investment Center, Ministry of Economic Affairs, 15 May 1996; Prof. David Chou, President, Chinese Industrial-Vocational Education Association, Professor of Graduate Institute of Industrial Education, National Taiwan Normal University and Mr Wallace JuiChing Chen, Project Secretary, APEC-HRD-HURDIT Network Project, 15 May 1996; Dr Wu Yin-Chang, Director, Bureau of Education, Taipei City Government, 16 May 1996; Mr Tony Hsu, Dean, International Trade Institute, China External Trade Development Council, 17 May 1996; Mr Y.L. Lin, Head of Human Resources, Mr Spencer C.Lin, Marketing Manager, Rexon Industrial Corporation Ltd, 20 May 1996; Mr Joseph Hsu, Chief Executive Officer, Taiwan Harlin Enterprises Co. Ltd, 20 May 1996; Dr Chan Hou-Sheng, Vice Chairman, Council of Labour Affairs, Executive Yuan, 22 May 1996; Ms Ku Yu-Ling, Committee for Action for Labour Legislation; Information Centre for Labour Education in Taiwan, 22 May 1996; Dr Chang Pei-Chi, Director, Manpower Planning Department, Council for Economic Planning and Development, Executive Yuan, 23 May 1996; Mr Lee Jan-Yao, Senior Specialist, Technological and Vocational Education Dept, Ministry of Education, 23 May 1996; Dr Lin Tsong-Ming, Director General, Employment and Vocational Training Administration, Council of Labour Affairs, Executive Yuan, 24 May 1996; Mr Chen Tzong-Hsien, Director, Second Department, National You Commission, Executive Yuan, 24 May 1996 (in English and Chinese); Mr Ben Wan, Vice President, China Productivity Centre, 27 May 1996; Dr Jason (Chinhsin) Liu, Congressman, Legislative Yuan, 14 July 1997; Mr Chang Hsu-Chung, President, Mr Chuan Ping-Tang, General Secretary, Mr Chang Yun-Sheng, Director, Mr Lo Tsong-Ming, Managing Director, Mr William Y.S.Lee, Section Head, International Affairs, Chinese Telecommunications Workers’ Union, 14 July 1997 (in English and Chinese); General Secretary Chiu Ching Hwei, Chinese Federation of Labour, 15 July 1997 (in Chinese); Mr Sheu Been Jyou, Secretary General, Research and Development Institute of Vocational Training, Chinese National Federation of Industry, 15 July 1997; Dr K.C.Chuang, Chairman Far East Machinery Co. Ltd, Chairman Chinese Association for Industrial Technology Advancement, Exec. Director, Industrial Technology Research Institute, Elizabeth Chuang, Supervisor of the Board, Far East Machinery Co. Ltd, 16 July 1997; Prof. C.Y. Cheng, Institute for Labour Research, National Chengchi University, 16 July 1997; Mr Hsu Kuo-Kan, Journalist (Labour Affairs), National News Centre, United Daily News, 17 July 1997 (in Chinese); Dr Anita Liu, Director, Dr David Dah-June Lin, Deputy Director, Manpower Planning Department, Council for Economic Planning and Development, Executive Yuan, Mr K.T.Chou, Senior Specialist, CEPD, Executive Yuan, 17 July 1997; official at ACER plant, Hsinzhu Science Park.

APPENDIX: LIST OF AUTHORITIES CONSULTED 165

Malaysia Dr Loganathan Markandoo, Ministry of Human Resources (Planning and Policy Research Division), January 1996.

Glossary of acronyms and abbreviations

APROC ASEAN BEST BNPC CEPD CETRA CFL CLA COSEC CPC CPTE EDB EIS EMB EO(I) EPB EPZ ERB ET EU EVTA FDI GDP GNP GSIC GSP HCI(P)

Asia Pacific Regional Operations Centre [T] Association of South East Asian Nations Basic Education for Skill Training [S] Botswana National Productivity Centre Council for Economic Planning and Development [T] China External Trade Development Council [T] Chinese Federation of Labour [T] Council for Labour Affairs [T] Core Skills for Effectiveness and Change [S] China Productivity Center [T] Council for Professional and Technical Education [S] Economic Development Board [S] Employment Insurance System [SK] Education and Manpower Board [HK] Export Oriented (Industrialisation) Economic Planning Board [SK] Export Processing Zone Employees Retraining Board [HK] Education and Training European Union Employment and Vocational Training Agency [T] Foreign Direct Investment Gross Domestic Product Gross National Product Government of Singapore Investment Corporation [S] General Scheme of Preferences Heavy and Chemical Industrialisation (Plan) [SK]

GLOSSARY OF ACRONYMS AND ABBREVIATIONS

HKALE HKCEE HKPC HKTC IDIC ISI ITAC ITE ITI KDI KEDI KMT MNCs MOE MOEA MOFE MOL MOST MPD MTIE NAS NIC NIE NPB NTUC NVQs NYC OECD OJT PAP PDAS PRC PSB QCC R&D ROC SAR

Hong Kong Advanced Level Examination [HK] Hong Kong Certificate of Education Examination [HK] Hong Kong Productivity Council [HK] Hong Kong Training Council [HK] Industrial Development and Investment Centre [T] Import Substitution Industrialisation Industrial Training Advisory Committee [HK] Institute of Technical Education International Trade Institute (under CETRA) [T] Korean Development Institute [SK] Korean Educational Development Institute [SK] Kuomintang (Nationalist Party) [T] Multinational Corporations Ministry of Education Ministry of Economic Affairs [T] Ministry of Finance and Economy [SK] Ministry of Labour Modular Skills Training [S] Manpower Planning Department [T] Ministry of Trade, Industry and Energy [SK] New Apprenticeship Scheme [S] Newly Industrialising Country Newly Industrialised Economy National Productivity Board [S] National Trade Union Congress [S] National Vocational Qualifications National Youth Commission [T] Organisation for Economic Cooperation and Development On-the-Job Training People’s Action Party [S] Product Development Assistance Scheme [S] People’s Republic of China Productivity and Standards Board [S] Quality Control Circles Research and Development Republic of China Special Administrative Region

167

168 GLOSSARY OF ACRONYMS AND ABBREVIATIONS

SCP SDF SIFS SME TCTP UGC UNDP UNESCO VET VITB VTC VTI WISE WIT WTO

Singapore Cooperation Programme Skill Development Fund [S] Small Industries Finance Scheme [S] Small and Medium-sized Enterprises Third Country Training Programme University Grants Committee [HK] United Nations Development Programmes United Nations Educational, Scientific and Cultural Organisation Vocational Education and Training Vocational and Industrial Training Board [S] Vocational Training Council [HK] Vocational Training Institutes Worker Improvement through Secondary Education [S] Work Improvement Team World Trade Organisation

Notes

1 Introduction and overview 1 See, for example, Castells (1993); Cumings (1987); Mason et al. (1980); Wade (1990).

2 The developmental state and the education and training system 1 For a critique, see Pencavel (1991). 2 Total Factor Productivity growth is the rate of growth that is estimated to be left after ‘accounting’ for the growth of labour, capital and land, using a growth accounting model. Its calculation depends on assumptions about the weights attributed to each factor, which in turn depend on contested assumptions about the nature of labour and product markets. 3 All this is consistent with the statistical findings about the role of human capital in affecting growth, which we noted above. 4 For other evidence, see, for example, Tan and Batra (1995). 5 Lall (1996) points out that, with limited resources and a need to be efficient in a certain cluster of markets as determined by industrial policies, it is necessary for the state also to be selective in the investments it makes in skill formation. 6 Comparisons were often made between the East Asian ‘little dragons’ and Latin American NICs—Brazil, Argentina, Mexico. The Latin American NICs experienced problems with foreign exchange crises, debt crises and unequal distribution of income (Wade 1988). 7 In the neoclassical view, by contrast, growth can only be made higher in one country rather than another if the interventions are less biased. 8 Wade contends that the term ‘picking winners’ does not describe the process of promoting certain industries in the developmental states as it implies the promotion of industries that are already viable. ‘Making winners’, the term he prefers, conveys more accurately the state’s involvement in promoting an industry from nothing—for example, Korean shipbuilding (Wade 1990). 9 The work of the statists has informed other analyses such as that of Rodrick (1995) who argues against the neoclassical orthodoxy by refuting that the economic

170 NOTES

growth of Taiwan and Korea was primarily caused by export-led growth. Instead, he proposes that effective government interventions after the late 1950s stimulated private returns to investment and removed a ‘co-ordination failure’ that had been stymieing economic growth. 10 See Deyo (1989) for an explanation of growth that focuses on labour suppression.

3 Singapore 1 Of all work days lost due to industrial disputes in the 1960s, 85 per cent came from the first four years before independence (Leggett 1993). 2 Interview, Ministry of Labour, 1997. 3 Interview, Ministry of Labour, 1997. 4 For a study of the organisational culture which has made the EDB so successful, see Schein (1996). 5 The withdrawal was expected to lead to 100,000 job losses, Annual Budget Statement 28, 2 December 1968. 6 Industrial relations represent one of the numerous national consensus frameworks within which close teamwork is necessary to carry out the wider objectives as set out by the government. See Vasil (1992), Hill and Lian (1995) and Rodan (1989). 7 Interview, MTI, 1996. 8 Interview, PSB, 1997; see also the public discussion of this strategy in the Straits Times during January 1997. 9 The SDF was first levied on employers who paid their staff less than $750 per month at a rate of 2 per cent of the workers’ monthly income. This was increased to 4 per cent in July 1980, reduced to 2 per cent in April 1985 and to 1 per cent in 1986. In April 1995 it stood at 1 per cent of labour costs for workers earning less than $ 1,000 per month. The fund created by the levy is used to enhance workrelated learning. 10 Interview, PSB, 1997. 11 Interview, NPB, 1994. 12 Interview, NPB, 1996. 13 Interview, MTI, 1996. 14 Interview, NPB, 1996.

4 South Korea 1 This was the standard answer given by some, but not all, of the Koreans we interviewed. 2 See MOE[SK]/KEDI (1996), pp. 14–15. As a research fellow at KDI put it, the advancement rate into high school is ‘compulsory by the parents not by the government’ (KDI, Lee Ju-Ho 1996). 3 Interview, Korea Labour Institute, 1996. 4 It is possible that the ensuing substantial currency devaluation may have reconstructed the conditions for sustained export-led growth. 5 Financial Times, 15 January 1998, p. 6.

NOTES 171

6 As was reported to a visiting World Bank delegation in 1996, ‘the EPB has been for the past 30 years the major influence in formulating economic and social policies including educational policies’ (KDI/World Bank/UNECA, 1996). 7 Interview, Korea Development Institute, 1996. 8 Interview, Blue House, 1996. 9 Interview, Lifelong Education Division, Ministry of Education, 1996. 10 Interview, Blue House, 1996. 11 Figures are for ‘unadjusted’ school enrolment, taken from UNESCO Statistical Yearbook 1963. 12 The ‘Turnip Scandal’ arose when parents disagreed with the answer to a question concerning ‘the digestive qualities of radish’ posed in a middle school entrance examination (Chang 1995) 13 Interview, Blue House, 1996. 14 Interview, Korea Development Institute, 1996. 15 Interview, Korea Development Institute, 1996. 16 Korea Educational Development Institute (1994), Tables 2–13. 17 Interview, Korea Development Institute, 1996. 18 There are four levels of skill: Master Craftsman; Class 1 Craftsman; Class 2 Craftsman; Assistant Craftsman (Lee, J-H. 1996). 19 Korean students regularly come top of international league tables of mathematical tests. 20 At Samsung, one of the most advanced firms in Korea, the ability to think is seen as perhaps the most important criteria in personnel selection (interview notes). 21 Interview with Dr Kim Tae-Gi, Dan Kook University and Presidential Commission on Industrial Relations. 22 Interview, Korea Chamber of Commerce and Industry, 1996. 23 Interview, Lifelong Education Division, Ministry of Education, 1996. 24 There exists also a strategic economic plan, recently compiled by the KDI for the MOFE, called ‘Plan for the Year 2020’, which had not been released at the time of our visit due to forthcoming elections (KDI 1996). 25 Interview, Blue House, 1996. Also see MOE[SK] (1996). 26 Interview, Korea Chamber of Commerce and Industry, 1996. 27 At the time of writing, it is not known how far this spending target will be compromised by IMF-imposed overall budgetary restrictions. 28 However, the pace of introduction of training reforms is limited: by 1997 the EIS provisions pertained to smaller enterprises but the large ones remained under the laws associated with the old training levy. 29 Interview, Korea Chamber of Commerce and Industry, 1996. 30 Interview with Dr Kim Tae-gi, Dan Kook University and Presidential Commission on Industrial Relations.

5 Taiwan 1 For example, Chan, S. and Clark, C. (1992) Flexibility, Foresight and Fortuna in Taiwan’s Development: Navigating between Scylla and Charybdis, London/New York: Routledge; Hofheinz, R. and Calder K.E. (1982).

172 NOTES

2 See Amsden, Alice H. (1985) ‘The state and Taiwan’s economic development’ in Evans et al. (ed.) Bringing the State Back In, Cambridge University Press; Johnson, Chalmers (1987); Gold, Thomas B. (1986); Kim Suk-joon (1988) The State, Public Policy and NIC Development, Seoul: Dae Young Moonwhasa; Pang (1992); Wade (1990). 3 It became common to refer to Taiwan as a ‘soft’ authoritarian regime in the early 1980s. 4 See Law (1994); Smith (1991); Woo (1991). For vocational education, see OFSTED (1996). 5 Official data (MOE [T] 1995) record private spending at just 1.3 per cent of GNP in 1994, but we cannot be sure exactly what this figure includes. 6 See Amsden, Alice H. (1979) ‘Taiwan’s economic history: a case of etatisme and a challenge to dependency theory’, Modern China, vol. 5 no. 3, pp. 341–73; Tuan et al. (1992); Wade (1990). For economic development under Japanese colonisation and beyond, see Ho, Samuel P.S. (1978) Economic Development of Taiwan 1860– 1970, New Haven, Connecticut: Yale University Press. 7 Some argue, however, that much of this infrastructure and industry was damaged upon the Japanese retreat (Li 1988). 8 The trade surplus with the US became a major issue in the late 1980s resulting in US pressure for the appreciation of the NT dollar. The problem of ‘hot money’, excess liquidity and how to reduce the trade deficit vied with domestic pressures to improve infrastructure and to reduce environmental pollution. 9 These were, principally: PR China, Malaysia, Thailand and Vietnam. 10 See the literature comparing East Asian and Latin American states, e.g. Gereffi, Gary and Wyman, Donald L. (eds) (1990) Manufacturing Miracles: Paths of Industrialisation in Latin America and East Asia, Princeton, New Jersey: Princeton University Press. 11 Interview, IDIC, MOEA, 1996. 12 Interview, CLA, 1996. 13 The ‘final goal’ includes the following elements: 1. GNP of US $440billion; 2. Manufacturing production value of US$300 billion; 3. Total import-export value of over US$ 300 billion; 4. Per capita income over US$20,000; 5. Development of Taiwan into a transhipment centre and technology base for the Western Pacific Region (Chiang, P.K. (1995) ‘The General Situation of Economic Progress: Problems and Countermeasures of the Republic of China’ quoted in IDIC, MOEA (1995)). 14 For example, in 1928 there were 6 Taiwanese compared to 49 Japanese students at the University (by 1944 this was 85:268) while at Tainan Industrial College there were 36 Taiwanese and 36 Japanese in 1931 (by 1944 this was 109 Taiwanese to 643 Japanese) (Ch’ang Ch’ing-hsi 1994:408). 15 Interview, Manpower Planning Department, CEPD, 1996. 16 Interview, Manpower Planning Department, CEPD, 1997. 17 Interview, Manpower Planning Department, CEPD, 1997. 18 This first plan was produced with the cooperation of the International Labour Organisation (ILO) and the US Department of Labour (Woo 1991). 19 The first plans also set targets for unemployment and for shifting employment from the agricultural sector to the industrial sector.

NOTES 173

20 Half of the vocational schools were business schools (interview, Manpower Planning Department, CEPD, 1996). 21 Interview, Manpower Planning Department, CEPD, 1996. 22 Interview, CLA, 1996. 23 Interview, Manpower Planning Department, CEPD, 1997. 24 Interview, Manpower Planning Department, CEPD, 1997. 25 This body has gone through several reincarnations: in 1948 it was set up as the Council on United States Aid (CUSA); it became the Council for International Economic Co-operation and Development (CIECD) in 1963; it was reorganised into the Economic Planning Council (EPC) in 1973; and finally in 1978 it was reorganised into the Council for Economic Planning and Development (CEPD) (Wade 1990). 26 Interview, Manpower Planning Department, CEPD 1996. 27 Interview, Manpower Planning Department, CEPD 1996. 28 Interview, Manpower Planning Department, CEPD 1996. 29 Interview, United Daily News, 1997. 30 Interview, CLA, 1996. 31 Interview, EVTA 1996. 32 Interview, Bureau of Education, Taipei Municipal Government, 1996. 33 Interview, CFL, 1997; training schedule of CFL. 34 Interview, CALL, Information Centre for Labour Education in Taiwan, 1996. 35 The MOE assessed academic publications. Other controls included the ideological courses (Thoughts of Sun Yat-sen), military training, campus-based party (KMT) organisations (Law 1994). 36 The development of Taiwan into a Regional Operations Centre has been broken down into seven major components: macroeconomic adjustments; manufacturing centre; sea transportation centre; air transportation centre; financial centre; telecommunications centre; media centre. 37 In 1993, unemployment was 50 per cent greater among university-level college graduates than among junior high school graduates (DGBAS 1994). 38 Interview, Manpower Planning Department, CEPD, 1997. 39 Interview, International Trade Institute, CETRA 1996. As pointed out by the vicechairman of the CPC, among others, small companies do not see training as a priority. Those small companies that do survive and expand to become mediumsized and large enterprises are used to surviving and taking risks, and are more likely to invest in training (interview, CPC, 1996). 40 Interview, International Trade Institute, CETRA, 1996. 41 Interview, Rexon Industrial Corporation, Taichung, 1996. 42 Interview, Rexon Industrial Corporation, Taichung, 1996. 43 Interview, United Daily News, 1997. 44 GIS, 1997:304; interview, CEPD, 1997. 45 The CEPD predicts that the percentage of 18 year olds with the opportunity of attending university will rise from 18.7 per cent in 1995 to 31.7 per cent in 2006 (CEPD 1997a). 46 Interview with industrialist, 1997. 47 The ratio of the highest to the lowest quintile of household income was 4.36 in 1983; by 1993 it had risen to 5.42 (CEPD 1995).

174 NOTES

6 Hong Kong 1 2 3 4 5

Interview, Industry Department, 1997. Interview, Industry Department, 1997. Interview, Industry Department, 1997. Interview, HKPC, 1997. Floating exchange rates were used between 1974–83. From 1935–72 the Hong Kong dollar was pegged to stirling; from 1983 onwards the Hong Kong dollar has been linked to the US dollar. For detailed accounts of the monetary system of Hong Kong, see Luk Yim-fai (1986). 6 Interview with H.Knight, 1996. 7 EMB (1994). 8 Interview, Department of Comparative Education, Hong Kong University, 1996.

7 Is there a ‘Four Tigers’ model of skill formation? 1 Morris (1996) also notes some commonalities in the experiences of the Asian Tigers, in particular, the emphasis on primary schooling. However, unlike Cummings, Morris concludes that there is no common model, because there are major differences between the countries, in particular concerning the role of the state as a provider or funder of education and in the nature of the school curriculum. We suggest that Morris’s conclusion may derive from taking a narrower perspective on the state and its role than the one we have adopted in this book. 2 Interview, CPTE, January 1996. 3 See, for example, The Economist, 1 March 1997, pp. 18–25.

8 On the diffusion of the model 1 See Ashton and Green (1996) for a discussion of the policy framework. 2 These include the Southern China ‘Special Economic Zones’, the Singapore-JohorBatam Triangle, the Tumen River Area Development Programme in North-east Asia, the Yellow Sea Growth Triangle and the Kyushu-Ryukyu Growth Triangle. See Myo et al. (1994) for recent developments. 3 See Ministry of Trade and Industry (1991:59–61). 4 Business Times, 15 September l994. 5 Taken from the Barro-Lee data set; see notes to Table 1.2. 6 Interview, Ministry of Human Resources, January 1996.

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Name index

Abramowitz, M. 8 Adams, D. and Gottlieb, E.E. 55, 64, 66, 67 Ahmad, S.A.H. 153 Amable, B. 8 Amsden, A.H. 8, 18, 54, 164 Armstrong, P. et al. 143 Ashton, D. and Green, F. 19, 72, 123, 126, 166 Ashton, D., Maguire, M. and Sung, J. 111 Ashton, D. and Sung, J. 27, 32, 33, 45

Creigh-Tyte, S. 64 Cumings, B. 16, 59, 162 Cummings, W.K. 124 Deng Xiaoping 150 Devan Nair, C.V 29 Deyo, F.C. 28, 30, 32, 33, 95, 162 Drysdale, J. 27 England, J. and Rear, J. 110 Enright, M.J. et al. 105, 106, 107 Evans, P. 15

Barro, R J. 2 Bell, D.A. et al. 79 Bello, W. and Rosenfeld, S. 30, 31, 34 Benhabib, J. and Spiegel, M.M. 7, 8, 53 Berry, S. and Kiely, R. 79 Birdsall, N. and Sabot, R. 11, 141

Fei, J.C.H. et al. 78 Felstead, A. et al. 42, 43 Ferdinand, P. 85 Finegold D. and Soskice, D. 124, 142 Friedman, M. and Friedman, R. 78, 102 Fung, Y.W. 112

Campos, J.E. and Root, H.J. 11, 14, 141 Cardoso, F.H. 15 Castells, M. 16, 17, 18, 27, 127, 134, 142, 162 Castells, M. et al. 104 Chan, S. and Clark, C. 164 Chang, C.C. 80–1 Ch’ang, C.H. 86, 89, 165 Chang, P.C. 80, 88, 89, 92, 98 Chang, S.M. 67, 69, 71, 163 Cheah, H.B. 47 Chee, K. 154 Cheng, K.I. 119 Chiang, F.F. 80 Chiang, Kai-Shek 82, 87 Chui, S.W.K. et al. 106 Clark, C. and Chan, S. 15, 18

Gereffi, G. and Wyman, D.L. 164 Gershenkron, A. 18, 54 Gill, I.S. and Ihm, C.S. 66, 68, 71, 73 Goh, E. and Green, F. 49 Goh, K.S. 28, 30, 31, 32, 33 Goh, K.S. et al. 38 Gold, T.B. 15, 54, 164 Gopinathan, S. 34 Green, A. 125 Green, A. and Steedman H. 1 Haggard, S. 83 Haggard, S. and Cheng, T.J. 59, 104 Haggard, S. and Moon, C.I. 18 Hill, M. and Lian, K.F. 27, 30, 163 188

NAME INDEX 189

Hing, A.Y. 40 Ho, S.P.S. 164 Hofheinz, R. and Calder, K.E. 164 Huam, C.K. and Jewson, N. 40 Huang, C. 84 Huff, W.G., 27, 38 Hung, H.H. 119

Mason, E.S. et al. 55, 162 McGinn N.F. et al. 55 Middleton, J. et al. 12, 13 Mitchell, T. 60 Moon, C.I. 18 Moon, C.I. and Prasad, R. 18 Morris, P. 89, 166 Myo, T. et al. 148, 166

Ihm, C.S. 55 Jeong, J. 70 Johnson, C. 16, 17, 63 Jung, J.H. 71 Kai, C.S. 80 Kim, J.W. 70 Kim, K.S. and Park, J.K. 53 Kim, S.J. 164 Knight, H.R. 111 Koike, K. and Inoki, T. 44, 123 Koo, H. and Kim, E.M. 59, 60, 62 Kuznets, P.W. 74 Lall, S. 27, 162 Lau, S.K.J. 140 Law, W.W. 87, 88, 91, 96, 164, 165 Lee, C.H. 59, 60 Lee, J.H 69, 70, 163 Lee, J.H and Woo, C. 72 Lee, J.W. 8, 53, 57, 66 Lee, K.W. 68 Lee, K.Y. 34 Lee Kwan Yew 34, 150 Lee, M.K. 69 Lee Teng Hui 97 Leggett, C. 162 Levin, D.A. and Ng, S-H. 104 Li, J.Y. 80 Li, K.T. 84, 87, 91, 93, 164 Li, Yuan-Tseh 99 Lim, C.Y. et al. 33, 34 Lin, T.M. 98 Liu, P.K.C. 86 Low, L. et al. 28, 32, 38, 41, 148 Lucas, C.J. 80, 89 Lucas, R.E.J. 9 Lui, H.K 114

Ng, S.H. 116, 140 Ngaw, M.K. 104 Ong Teng Cheong 29–30 Pang, C.K. 84, 164 Park Chung Hee 11, 59, 61, 62, 63, 66, 128 Peebles, G. and Wilson, P. 36 Pencavel, J. 162 Rabushka, A. 102 Rahman Tunku Abdul 32 Rau, D.C. 92 Redding, S.G. 103, 104, 105, 106, 107 Rodan, G. 27, 30, 32, 33, 35, 163 Rodrick, D. 162 Roh Tae Woo 62 Ryoo, J.K. et al. 71 SaKong, I. 61 San, G. and Chen, C.N. 82, 87, 89, 90 Sandhu, K.S. and Wheatley, P. 27, 30 Schein, H. 27, 127, 150, 163 Schive, G. 114 Selvaratnam, V. 48 Sit, V.F. and Wong, S.L. 102, 104 Smith, Adam 9, 103 Smith, D. 164 Streek, W. 44, 70, 123 Sung, M.S. 99 Sung, Y.W. 109 Sweeting, A 109 Tan, C.H. 41, 151 Tan, G. 28, 32, 37 Tan, H.W. and Batra, G. 98, 162 Tan, J. 51 Tan, K.Y. 27

190 NAME INDEX

Tricker, R.I. 110 Tuan, C.P. et al. 164 Tung, C.H. 105, 121, 122 Tung Chee Hwa 122 Vasil, R. 29, 30, 32, 163 Verma, A. et al. 14, 19, 20, 135 Wade, R. 16, 17, 18, 83, 162, 164, 165 Whitley, R. 19 Wilkinson, B. 84, 95 Wolff, E.N. and Gittleman M., 8, 53 Wong, S.T. 36, 46 Wong, T.Y.C. 108 Woo, J.H. 88, 164, 165 Yang, C.S. 80, 97 Yang Y.J. 80 Yip, J.S.K. and Sim, W.K. 38 Young, A- 8, 53 Young, M. and Ng, S.K. 154 Youngson, A.J. 104, 108, 112 Yung, E. 117

Subject index

apprenticeship 44, 87, 90, 111, 123, 126; New Apprenticeship Scheme 44 Argentina 162 ASEAN 35 Australia(n): 44 autonomy: relative autonomy of the state 3, 4, 20, 23, 50, 51, 79, 85, 89, 128, 134, 136, 141; from employers 70

Japanese 56, 82; period 57; post- 54, 58–9 65–6, 80, 86–7; state 3 comparative advantage 5, 16, 26, 30, 41, 51, 142, 147; creation of 3 competitive advantage 38, 40, 100–1; human resources as 50; losing 36 Communist Party: China 103; Singapore 28 Confucian(ism) 23, 51, 55, 57, 76, 80, 87, 89, 120, 144 consensus 49; building 26, 30; PAP-NTUC 29; national 26, 145, 163 containment policy 78, 82 corporatist 123 Council for Economic Planning and Development [T] 15, 79, 92–3, 100, 119, 130, 131 crammers 51, 81 creative 73; thinking 72, 121 creativity 43, 51, 73, 76, 121, 144 credentialism 58, 81

Botswana 152 Brazil 2, 162 Britain see United Kingdom British 103, 109, 111, 136 capital 1, 10, 11, 15, 23, 26, 27, 43, 47, 48, 50–1, 58–9, 61, 82, 84, 85, 89, 127, 128, 129, 134, 135, 136, 140, 142, 144, 149– 50; accumulation 18; intensive 30, 36, 91; interests of 36, 131, 140, 141, 142; flight 85; goods 60, 84; stock 53 chaebol 5, 30, 51, 56, 57, 60, 61–2, 76, 127, 128, 131, 134, 136; coalition with Park Regime 61 Chile 2 Chinese Federation of Labour 95 see also unions colonial: era 35; government 109, 113, 114;

de-colonisation 31 democratisation 4, 56, 61–2, 64, 76, 77, 79, 92, 93, 96, 100, 144, 147 dependency: theories 15, 78;

191

192 SUBJECT INDEX

schools 54 developmental skill formation 4, 100; model 4–6, 21–3, 52, 54, 55, 75, 94, 123–146, 153, 155 developmental state 3, 4, 7, 15, 16, 18, 20, 22, 141, 143; in South Korea 55, 59, 61, 61, 63, 68, 70, 71, 75; in Taiwan 79, 100; theorists 125, 127, 134 dirigiste 1, 4, 83 Economic Development Board [S] 30, 31, 32, 35, 45, 46, 47, 48, 119, 127, 129, 131, 148, 149, 150 Economic Planning Board [SK] 55, 60, 63– 4, 66, 130–1, 144; see also Ministry of Finance and Economy Egypt 58 Employment Insurance System 74 enrolment(s) 58, 72, 109, 163; growth in 55, 71; middle school 66, 89; primary school 8, 53, 65, 66, 109 (link with early stage of industrialisation 53, 54); rates 67; secondary school 8, 53, 66; tertiary 66, 71, 91 Ethiopia 2 Europe(an) 43; Economic Community 35; Union 35, 41 examination(s) 38, 58, 64, 68, 72, 81, 89, 94, 132, 163; abolition of 76; for College Entrance, Preliminary (PECE) 68; ‘hell’ 72; Joint University Entrance 99; and rote learning 99; see also no-examination middle school entrance policy Export Processing Zones 84 financial:

crash 62; crisis 5, 6, 76, 143, 144, 155 France 38, 41, 46, 124 foreign talent: attracting 47 foreign workers see immigrant workers Germany 4, 41, 42, 46, 123, 125, 126; German dual system 44, 70, 123, 136 growth accounting approach 7–8, 53 guided market approach 17 HCIP 60–1, 68–9, 74, 128 higher education 42, 43, 57, 67, 68, 71, 73, 121, 122, 125, 131, 132, 140, 145, 149, 153, 154; expansion of 42, 43, 98, 99–100, 113, 115, 118, 135–6, 154, 166; qualifications 47 illiteracy 39, 65 ILO see International Labour Organisation IMF see International Monetary Fund immigrant workers 39, 45, 85–6, 97, 114, 117, 155 income: distribution 10, 59, 67, 78, 80, 100, 166; high growth of 2; per capita 1, 54, 58, 109, 143, 165 India 149, 151 Indonesia 2, 30, 41, 66, 148 industrial relations approach 19–20 industrialisation: catch-up 143; export-led 11, 30, 32; export-oriented 11, 59–60, 61, 66–7, 83–5, 87, 90, 125, 127, 135; import-substitution 32, 59–60, 65, 82– 3, 84, 87, 127, 135; late 18, 54 information: society 72; technology 12, 64, 73, 106, 116–17, 122, 153 International Labour Organisation (ILO) 67, 87, 165

SUBJECT INDEX 193

International Monetary Fund (IMF) 62, 128, 144, 164 intervention: case for 12; government 12, 13, 26, 128, 162; non- 137; state 1, 4, 9, 10, 14, 17, 27, 61, 79, 120, 125 ‘interventionist’ commitment 38; tools 83 investment 8, 37, 41, 61, 74, 97, 107, 135, 148, 149, 150–1; attracting 14, 19, 26, 48; in education and training 9, 10–11, 14, 15, 20, 23, 49, 57, 58, 66, 73, 81, 87, 90, 98, 100, 113, 122, 125, 133, 141; foreign direct 27, 33, 41, 59, 61, 84, 104; inward 28, 32, 61, 129, 147; physical capital 8; research and development 74 (see also research and development); targeted 60 Investors in People Standard 45 Japan 4, 38, 41, 42, 46, 58, 61, 123, 126, 127; Japanese 46, 58, 65, 80, 86, 87, 126, 132, 143, 164 Kenya 2 Kuomintang (Nationalist Party) (KMT) 79, 82, 86, 87, 92, 95, 96, 132, Kuznet’s law 80 Latin America 16, 121, 164 legitimacy 21, 119; economic development and 16, 22, 59, 66, 79; external threat and 78; sustaining 16 levy: on imported labour 117; on low paid labour 36, 163; training 69, 70, 74, 90–1, 98, 114, 120, 124, 132, 133, 136, 140, 154, 164

liberalisation 4, 61–2, 69–71, 73, 76, 84, 86, 97, 100, 147 lifelong learning 73, 97, 100 literacy 35, 65; deficiencies in 35; low 38 see also illiteracy Malaya 27, 32 Malaysia 6, 28, 30, 32, 33, 41, 148, 153–5, 164; Malaysian Federation 32 manpower: forecast 69; planning 13, 18, 64, 80, 87–90, 92, 114, 124; plans 64, 87, 88, 89, 90, 97, 130; surveys 92, 111, 115, 116; targets 88, 129–30 market failure 10, 11, 65; argument 12 mathematics 42, 144; international tests in 71, 164 see also numeracy Mexico 162 Ministry of Finance and Economy (S.K.) 64, 119, 131 multinational corporations (MNC(s)) 26, 28, 32, 33–4, 35, 36, 37, 38, 41, 46, 50– 1, 59, 84, 107, 126, 127, 134, 135, 136, 148, 149, 150; reliance on 30–1 ‘narrow gate’ policy 89, 93 National Trade Union Congress [S] 28, 29, 30, 33, 49; see also unions neoclassical: approach 9; orthodoxy 15; theory 12–14; view 162 Nigeria 58 no-examination middle school entrance policy 67, 68 numeracy: deficiencies 35;

194 SUBJECT INDEX

see also mathematics OECD 1, 2, 58, 143 Opium War 103 Pakistan 1, 2, 66 PAP see People’s Action Party Park regime 55, 60, 68, 76; see also Park Chung Hee (name index) People’s Action Party (PAP) 26, 27, 28, 29, 32, 34, 36, 37, 49 People’s Republic of China (PRC) 32, 33, 61, 78, 84, 85, 86, 97, 100, 103, 105, 107, 108, 109, 112, 114, 140, 141, 144, 149, 150, 155, 164 primary education 35, 38, 39, 43, 65, 82, 86, 109, 120, 122, 131–2, 136, 139, 141, 147; concentration in 3, 28, 87, 109, 124, 125, 153, 166 political economy approach 21–4 Portugal 66 post-statists 18–19 PRC see People’s Republic of China quota(s) 49, 56, 63, 64–5, 66, 88; entrance 64; import 83, 143 ratio of vocational to academic students see secondary education rate(s) of return 10, 11, 12, 55, 71, 81, 113; vocational education and training 68; see also returns reform(s) 42, 47, 51, 76, 79; constitutional 93, 97; education and training 26, 47, 56, 58, 69, 72, 75, 76, 97–8, 99, 109, 131, 164; labour 72, 76; land 59, 80, 82; Presidential Commission on Educational 64, 69, 72–3 research and development 37, 43, 51, 73, 74, 85, 97, 98, 100, 108, 113, 121, 129, 136, 144; manpower 75; regional centre 47

returning overseas scholars 94, 100, 130 returns to skill formation: private and social 9, 10,11,12 reunification: Hong Kong 103; Korean 77, 128 Rhee regime 55 role rotation 29–30, 49 rote learning 51, 56, 58, 72, 73, 76, 80, 98, 99, 121 SAR see Special Administrative Region science 35, 67, 68, 91, 124, 131, 144; graduates 68, 99; international tests in 71; labour, shortage of 69 secondary education 39, 43, 109, 112, 118, 121, 122, 138, 140, 141, 153, 163; students, ratio of vocational to academic 67, 68, 89, 73, 93, 88–9, 94, 98, 130, 132, 135 Shanghainese 103, 104 Special Administrative Region (SAR) 121, 122, 141 state-owned enterprises 83, 84, 90, 93 statist(s) 15, 16, 54, 162; approach 15–19; see also post-statists Switzerland 41, 46; Swiss 40, 46, 127 target(s): economic development 88; education 31, 43, 48–9; export 60; sectors 60, 108, 165; vocational education and training 73; workers 40 technology 12, 34, 75, 84, 91, 93, 97, 98, 108, 112, 115, 117, 122, 124, 128, 131, 136, 143; acquisition 11; adapting 18, 54, 74, 75, 96, 108, 120– 1, 124, 127, 136; diffusion 17; frontiers 4, 120; high 39, 69, 73, 74;

SUBJECT INDEX 195

intensive 46, 47, 6; Plan, National Technology 47 tests: international 78 tertiary education; see higher education Thailand 37, 164 total factor productivity 11, 162 tripartite system 29 Turkey 66 Uganda l, 2, 66 UNESCO 109, 139 unions 12, 14, 19, 20, 27, 28, 49, 61, 62, 75, 95–6, 104–5, 117, 126, 145; co-opting of 20, 50, 95, 134; Hong Kong Federation of Trades Unions 117; Korean Federation of Trade Unions 62; suppression of 84, 95–6; see also Chinese Federation of Labour United Kingdom 45, 47, 90, 102, 103, 123, 135, 126 United Nations (UN) 58, 84, 90, 93, 139, 152; commission 30 United States 8, 43, 47, 58, 59, 61, 73, 78, 84, 87, 125, 126, 127, 128, 130, 143, 164; aid 59; 82, 83; advisors 82; forces 63 Vietnam 149, 151, 164; war 33 wage(s) 19, 20, 36, 37, 71, 92, 155; controls 19; minimum 12; restraint 33, 36; ‘wage correction’ policy 36, 37, 148 welfare 16, 80, 92, 102, 104, 120; provision 16 World Bank 3, 8, 20, 23–4, 27, 54, 67, 147; approach 9–15; analysis 125

World Trade Organisation (WTO) 64, 73, 97