208
MORE AND BETTER JOBS IN SOUTH ASIA
industries such as chemicals, pharmaceuticals, machine tools, electrical white goods, electronic products, and software more likely to do so. In-house programs (offered by 23 percent of all fi rms) tend to be more common than external programs (offered by 14 percent of fi rms). This evidence is consistent with the notion that workforce training can complement general skills of workers, with training tailored to the production and technological requirements of individual enterprises (Riboud, Savchenko, and Tan 2007). The low incidence of formal training does not necessarily imply the need for public intervention. For many firms in developing countries, investment in on-the-job training may not be necessary, given technological choices, the skills components of most of their jobs, or their reliance on informal training. Other firms, however, may face severe informational constraints in, for example, identifying relevant training programs, recruiting training experts, or fi nancing programs. Market failures associated with the risk of other firms
BOX 5.7
poaching trained employees could also lead to suboptimal investments. Policies should be designed to address the primary source of market failure. International evidence suggests three main reasons why employers do not train workers. Responses of managers in enterprise surveys suggest that in the majority of fi rms, formal training may not be needed (informal training is considered sufficient or the technology does not require training) (Almeida, Behrman, and Robalino 2011; Batra and Stone 2004). High worker turnover or fear of poaching (or the ability to hire workers from elsewhere), lack of financing, and information barriers also appear to be factors. Improving the investment climate should improve incentives for employers to invest in both physical and human capital. Policies that improve access to new technologies and funding for investments in technology and skills upgrading would also increase firms’ demand for training. PPPs and collective industry action can strengthen the in-house training capabilities of firms. Firms, industry associations, buyers
Industry-government cooperation: The Penang Skills Development Centre
The Penang Skills Development Centre (PSDC) is a joint corporate training center established with government support. It has evolved to become a full private continuing education institution providing certificate and diploma-level training. The Malaysian government invests in the center and uses it to conduct public training programs. With more than 100 member companies, the PSDC runs both standardized and customized programs. It charges at cost and is largely self-fi nancing. Companies can recoup their expenditure from the Human Resource Development Fund, a training fund fi nanced by a 1 percent levy on payrolls. The initiative for the PSDC came from the Penang state government, which provided the land and buildings. The founding members included large multinational companies with training traditions of their own. Members donate equipment, laboratories, training modules, and trainers. They have access to
shared training facilities without having to duplicate their in-house capability. Small and medium-size enterprises enjoy technology transfer from and can benchmark their standards against multinationals. Multinationals, in turn, receive better support services. Vendors donate equipment to familiarize workers with their products and promote sales. Although still a joint training center, the PSDC has taken on institutional functions to provide training for school-leavers, thus moving toward becoming a professional training entity in its own right. The PSDC is not easily replicated. Eleven of Malaysia’s 16 states and federal territories have launched similar centers, with varying degrees of success. The success of this sort of enterprise depends on a number of circumstances, most important among them the people initiating and managing the process. Centers like PSDC cannot be imposed; they need to grow in already fertile ground.