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Reforms in Higher Education Can Boost the Philippines' Growth and Global Competitiveness—World Bank Report

MANILA, OCTOBER 13, 2011—Making the Philippines’ higher educational system more responsive to labor market demands and the economy as a whole will boost the country’s drive for growth and global competitiveness, says a new World Bank East Asia and Pacific Regional Report released today.

Titled “Putting Higher Education to Work: Skills and Research for Growth in East Asia,” the Report says that the Philippines—along with other low- and middle-income countries in the East Asia and the Pacific Region—has started climbing the technology ladder and assimilated important technologies by becoming more open, developing infrastructure and improving its manufacturing industry. Nevertheless, the country needs to further improve its capacity for innovation in order to rise up the income ladder.

The Report sheds light on the functional skills that workers must possess to be employable and to support firms’ competitiveness and productivity. It also examines how higher education systems can produce research that will help apply, adapt, and develop new technologies that will drive growth.

“The Philippines has made impressive gains in expanding access to higher education. Demand for tertiary graduates continues to grow. To sharpen the country’s technological edge and achieve higher productivity, the Philippines will have to address several skills gaps in its workforce,” said Ms. Chiyo Kanda, World Bank Acting Country Director.

Across the East Asia and the Pacific Region including the Philippines, employers expect workers, particularly those with higher education, to possess the technical, behavioral, and thinking skills to increase their productivity and growth, says the Report.

They need skills in science, technology, engineering, and mathematics (STEM). They also need problem solving and creative skills to support a higher value-added manufacturing sector, and the business, thinking, and behavioral skills for a higher productivity service sector.

Many firms face the challenge of hiring higher education graduates who simply do not have the right skills, and these skills mismatches have been widening between firms and employees at all employment levels.

The Report says that skills gaps are particularly large in the service industry, export sector, and technologically intensive sector representing a very serious bottleneck for innovation and productivity in the Philippines. Employers and employees find these gaps to be particularly severe in creativity, leadership, and problem solving skills, the report says.

The Report also highlights the importance of shifting investments towards building the country’s research capacity, particularly in higher education institutions.

“Quality research enables universities to produce ideas for the business community and contribute to technology upgrading in firms, generating knowledge and technological innovation,” said World Bank Lead Economist Emanuela di Gropello, lead author of the Report. “Low spending in research and development (R&D), low number of licenses, and low number of patents all indicates a low capacity for research and innovation.”

Why isn’t higher education fulfilling its potential? The main reason identified by the Report is that higher education institutions have been managed as “disconnected” individual institutions. Governments have a fundamental role in making higher education work as a system where individual institutions are well connected among themselves and to firms, research institutions, and earlier levels of education.

For the Philippines to grow faster and achieve continued technological deepening, two main priorities are evident for higher education:

  • Address skill gaps by maintaining coverage and improving the quality of higher education graduates, and;
  • Increase research relevant to economic needs in a few universities or departments.

Given its challenges and constraints, the policy levers the Philippine Government can use to address these priorities include:

  • Increase education spending in relation to GDP (overall and tertiary spending in education in relation to GDP is among the lowest in the region);
  • Improve the use and allocation of public resources (more focus on STEM and equity; move from historically negotiated budgets to performance-based allocation);
  • Complete the process of granting autonomy to universities (with particular focus on staffing and finance) and strengthen the role and functions of university boards;
  • Improve the quality of private higher education through better regulation and information; and
  • Encourage selected university-industry linkages to improve curriculum relevance, support entrepreneurship, and help with technological upgrading (build on the positive examples of some existing university partnerships with firms in skills delivery).
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