|Project Rationale and Linkage to Country/Regional Strategy
Economy and labor market performance. After over a decade of conflict and political turmoil, Nepal is entering a critical period of sociopolitical transformation. The economic growth has been sluggish with a gross domestic product (GDP) growth of 4.0% in 2010. Agriculture, services and industry contributed 35.0%, 50.0% and 15.1% of the GDP in 2010. The agriculture sector engages 73.9% of the total labor force. Nepal has a very high labor force participation rate of 85.2% (female 80.1%, male 87.5%) and employment rate of 97.7%. Annually around 450,000 people enter the workforce. However, more than 90% of the workforce is engaged in informal sector, and 43% is underemployed. Due to slow job growth in domestic market, around two-thirds of the new workforce entrants seek overseas employment. There are 1.9 million registered overseas workers, and in total 3 million are estimated to work abroad. About 75% of the registered overseas workers are engaged in unskilled low paying jobs. Nepal has high remittances from overseas workers accounting for 23.8% of GDP in 2009.
Low level of human resource development. Nepal has made a significant progress in primary and secondary education. The net enrolment rates at primary, lower secondary and secondary have increased from 57%, 19% and 9% in 1995/96 to 93.7%, 63.2% and 23.9% in 2009/10 respectively. Gender parity has been achieved in primary education. However, adult literacy rate is very low at 55.6% (female 53.1% and male 74.7%), and school education suffers from high dropout rates (34% before grade 5 and 94% before school leaving certificate (SLC)). Consequently, educational attainment of the workforce is poor (48% of the workforce have no formal education). There are not enough skilled workers, especially in the areas of agro-processing, tourism, construction, energy, pharmaceuticals, hospitality, retail, information technology, health and educational services. Demand for semi-skilled and skilled workers within the country has to be met by foreign workers, particularly India. There is significant demand for more skilled workers for overseas jobs. It is imperative to convert the country's human resource potential into a skilled labor force with higher value in both domestic and international markets.
Reforms in TEVT subsector. Despite the notable progress in the last decade, the TEVT subsector remains largely ineffective. The TEVT and Skills Development Policy (2007) focused on (i) expansion of training opportunities; (ii) inclusion of the disadvantaged; (iii) integration of various training modes and providers into one system; (iv) relevance to link training with economic demand; and (v) sustained funding. Recently, a new TEVT policy framework has been waiting for the government's approval. Key elements include a TEVT Funding Board, a National Vocational Qualifications Framework (NVQF), and an autonomous National Vocational Qualification Authority to promote coherence and integration in education and training across all levels. Adequate resources and strong implementation capacity would be required to achieve the intended goals.
Limited access to TEVT. The formal TEVT system consists of 18 technical schools, 4 polytechnics, 2 community development vocational training center, and 30 annex schools under the Council for Technical Education and Vocational Training (CTEVT) and 450 private technical schools and polytechnics affiliated with CTEVT. Since 2006, a number of TEVT projects, including ADB's Skills for Employment Project (SEP), and non-government organizations (NGOs) have substantially increased short-term training opportunities for those who are not eligible for formal TEVT. However, access is far from adequate. In 2009, around 25,000 students were enrolled in the formal TEVT system, and an estimated 60,000 in short-term training. Therefore, less than 20% of the 450,000 new labor market entrants can participate in TVET. In addition, TEVT opportunities are concentrated in urban and periurban areas. With formal education requirement for formal TEVT and other obstacles in participation in short-term trainings, excluded groups would require additional support to access TEVT opportunities.
Poor relevance and quality of TEVT. The main sources of mismatch of demand and supply of skilled workers are the still low level of formal schooling, low relevance and poor quality of TEVT. The training curricula and delivery are supply-driven, determined by the resources available to the training institutions rather than the needs of employers. Labor market information is inadequate to inform TEVT subsector on the current and future demand for each skill category. Qualified teachers with industry experience are limited in number and facilities are often inadequate. NVQF needs to be finalized, and CTEVT should strengthen its capacity in monitoring, quality assurance, and incentives mechanism to improve performance. Sustainable financing solutions need to be developed.
The proposed project will build upon the achievements in TEVT subsector by several interventions including the ongoing SEP. It will be designed through a consultative process with key stakeholders and beneficiaries, including strong participation from the private sector, and will aim to create synergies with ADB's support in the formal education and various infrastructure development initiatives. The SDP's focus is fully aligned with the National Interim Three Year Plan (2010/11-2012/13) as well as ADB's Country Partnership Strategy 2010-2012. This project is included in the Nepal COBP for 2012-2014.