Asiaweek.com | Skill Deficit

DECEMBER 1 , 2000 VOL. 26 NO. 47 | SEARCH ASIAWEEK

Yvan Cohen for Asiaweek.
Thai workers are criticized for lacking essential skills, but schools like the Tai-German Institute are trying to change that.

Skill Deficit
Thailand's poorly trained workforce costs the country business
By JULIAN GEARING Bangkok

Nattuwat Thiewthanom graduated from Chulalongkorn University with an engineering degree and an ambition to satisfy his country's growing need for advanced telecommunications equipment. That was before reality hit. His country does not have the educated workforce necessary to execute his dream. So six months ago he founded Pan-Asia Communications to import from Singapore, Germany and the United States the fiber-optic modems and other high-tech gear his country needs. Thailand should be able to produce this equipment domestically, but, says Nattuwat, "Thailand is an assembler not a manufacturer. [The nation] doesn't have its own technology skills, let alone high-tech skills."

Pan-Asia Communications is one of the rare companies in Thailand that has found a way to profit from the nation's skills deficit. Politicians may talk excitedly about the prospects of multi-billion-dollar electronics plants and software parks. But they aren't quite so enthusiastic about addressing the kinds of systemic problems that hinder Thailand's education system and block the creation of a skilled pool of workers. The current reality of the manufacturing sector, which makes up 33% of Thailand's GDP, much of that in low-tech, near-sweatshop operations, is more mundane. "The so-called high-tech manufacturing and electronics sector in Thailand today is really the mid-tech sector," says Nitin Afzulpurkar, in charge of high-tech training programs at the Asian Institute of Technology in Bangkok. "The designs, components and processes were usually developed abroad and imported."

That's understandable. But it is not what politicians want to hear. Thai manufacturers made their name pumping out cheap T-shirts, textiles, shoes and agricultural products. Now, seldom a week goes by without a politician waxing lyrical on how Thailand, too, could have a "Silicon Valley" or, at least, a massive computer-wafer plant. But with wages relatively high and skills relatively low, compared with many of its neighbors, foreign competition is growing. Industrial giants China and India, and cheap labor markets like Vietnam, are muscling in. A government study last year admitted that "the skills gap is recognized as a nationwide problem and is a key issue affecting future development."

Not just the future. Thailand has trumpeted its success in attracting global auto makers. Ford and Toyota opened new assembly plants in 1998. BMW and General Motors inaugurated state-of-the-art factories this year. But the benefit to the economy from this foreign investment could have been far greater if workers were better skilled. Initially the government insisted that these plants assemble autos with 54% of their value manufactured locally. But early this year, in the wake of a regional economic shock that made everyone more willing to make concessions to attract foreign direct investment, Thailand scrapped the local-content requirement. Consequently, General Motors' $650 million Rayong facility, which is currently turning out Zafira minivans for Asian, European and South American markets, uses only 30% locally made parts, according to Jon Bonnell, an analyst at Automotive Resources Asia in Bangkok. "To varying degrees, Thailand is an assembler rather than a manufacturer," he says.

GM says it is satisfied with the quality of its Thai workers, and it puts the actual proportion of local content in the cars it assembles at 38%. But even if the higher number is right, it has not been achieved without great effort. Since January 1998, the company has provided an average of about 120 hours of training for each member of its workforce of 700 to 800. And the situation could get worse before it improves. Assuming regional trade barriers fall as scheduled by 2003, some analysts think companies like GM may actually increase their purchases from offshore.

Thailand may find it increasingly difficult to attract major multinational investments like the GM plant. The country's position in the global competitiveness ranking of Switzerland-based World Economic Forum has slipped from 14 in 1996 to 31 this year. (Malaysia dropped from 10 to 25.) Thailand's creaky banking system has been a key reason for the fall, but the Forum also cites a weak educational system, and a lack of scientific and technological sophistication. "Politicians think we can eventually compete with Hong Kong and Taiwan," says Sitthichai Pookaiyaudom, president of Mahanakon University of Technology in Bangkok, one of the most innovative schools in the country. "This is nonsense."

The woeful state of Thailand's education system may be the most intractable problem of all. Primary school spending and enrollment figures aren't bad compared with other parts of Asia, according to a report by the Southeast Asia Ministers of Education Organization. But secondary education is a disaster. Only 48% of high school-age children in Thailand continue their education. That's even less than impoverished Vietnam, a potential future competitor for foreign manufacturing investment.

The educational system is a mess from top to bottom. More than half the education budget is spent on administration, which obviously leaves less for teachers. Low salaries make it difficult to retain qualified educators. Students are encouraged to learn and recite facts, not to solve problems, say reformers, who think the entire system needs an overhaul. Peter Brimble, president of the Brooker Group, a consultancy that has worked closely with the government and private companies in developing training programs, says the country needs an education system that will "stimulate creativity and provide better basics in terms of English, math and computer skills."

Thailand universities do churn out a surplus of engineers, with about 10,000 new graduates coming onto the job market every year. But many are not up to scratch, says Sitthichai, the Mahanakon University president. Graduates trained in both information technology and English are scarce. Most schools concentrate on theory at the expense of practical experience. "Engineering graduates don't know how to make nuts and bolts," says Sitthichai. But at his school, engineering courses are considered innovative because they give students a chance to get their hands dirty. "To be a good engineer you have to be good at the practical level first," he says. "And if you don't have good engineers you can never [make] this country developed."

The government's failure to focus on the country's skills crisis has opened the way for outsiders to lend a hand. On the Amata Nakorn industrial estate, halfway down the highway from Bangkok to Thailand's new industrial heartland development on the eastern seaboard, Walter Kretschmar, the German director of the Thai-German Institute, is trying to make Thai workers as good as any in the world. But like the professors at Mahanakon University of Technology, he says skills must be learned and honed in the shop room, not the classroom. Kretschmar's "teaching factory" has trained 4,000 people in the last three years, giving them hands-on experience in processes such as automation technology, milling, and high-precision tool and die technology. Small firms and even giants like GM pay for their staff to take courses that last anywhere from three days to six months learning and practicing to upgrade their skills to international standards.

But training cannot be left to the private sector alone, and the Thai government has been slow to recognize and address the problem. There have been some initiatives, such as a program involving foreign firms and the government to train workers in the disk-drive industry. Critics say the efforts have largely been ill-coordinated with the needs of industry and inadequate at that. Meanwhile, Thailand falls behind. "There is pressure from countries and regions such as China, the Philippines, Vietnam and South Asia where the wages are much lower," says Nitin. "They are offering better tax incentives than Thailand. Other things being equal, firms will move to areas with a strong technical base and policy environment." Sitthichai is more direct: "Big countries like China and India have a lot of clever people and lot of people willing to work hard. We can't compete."

That won't change quickly — not when the crux of the problem is an education system that seems to break down just as students need to transition from basic education to useful, lifelong skills. Perhaps Thai officials are too caught up with vacant Silicon Valley dreams to see reality. If they don't spend more time and money on training, workers could find themselves trapped on an assembly line making shoes and low-tech trinkets for generations to come.

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