|Project Rationale and Linkage to Country/Regional Strategy
Nepal is among the least developed countries in the world, ranked at 138 out of 162 countries. It had 25% of its population living below the national poverty line. Agriculture has been the mainstay of the economy, providing a livelihood for 75% of the population and accounting for about 30% of gross domestic product, but the share is decreasing. Underemployment and non-wage employment are prevalent. The challenges to Nepal's growth include its landlocked geographic location, protracted socio-political transition, and susceptibility to natural disaster.
Nonetheless, Nepal has made progress in reducing its poverty, improving access to basic education, health and clean water. The government's strategy envisages tangible improvements in the living standards of the poor, disadvantaged and socially excluded sections of the population through: (i) employment-oriented and broad based high economic growth, (ii) improved governance and service delivery systems, (iii) inclusive social development, (iv) inclusive development and targeted programs, and (v) sustainable peace building. There is emphasis on massive development need for skills development and enhancing the capacity and entrepreneurship of the young population of Nepal. Together with continued emphasis on ensuring quality formal education, Nepal will be able to tap on its demographic dividend that it currently enjoys. This will require transforming the education system to focus on quality, relevance and employability so that the labor market can move up the value chain from the current heavy reliance on low level skills.
Nepal has three distinct advantages: (i) it is located between two economic giants (India and China) whose growth can trigger robust growth in Nepal; (ii) natural resources including hydropower and bio-diversity remain an enormous potential amidst huge needs for power and energy in South Asia; and (iii) tourism remains a major economic force that can fuel investments in infrastructure. In addition, Nepal's economy is highly dependent on remittances (over 20% of gross domestic product) from overseas workers which continue to expand. However, much of this labor force has low level skills resulting in lower income. All these areas can thrive only if commensurate human resource development can be systematically developed, retained and expanded.
The number of students completing and/or passing secondary education exam or 10 years of schooling (School Leaving Certificate/SLC) is rising fast. It increased more than 100% from 113,020 in 2005 to 259,916 in 2009. Higher education has also expanded rapidly, particularly through private sector participation in response to the unmet demand. The total enrollment increased 20 fold from a very low base of 17,000 students in 1970 to 351,900 students enrolled in 2009. This is still less than 8% of the corresponding age cohort. The majority of the students enroll in humanities and social sciences (86%) and only 6.4%% enroll in science and 4% in engineering. Overall, female enrollment is only 30% of the total enrollment and is often biased towards certain fields (e.g., education and nursing). In engineering, female enrollment is only around 15% of the total enrollment. The quality of education in general is considered low at the school level and the highest failures are in three subjects, i.e., English, math and science in SLC examination. As a result, a lower percentage of students are able to enroll in science and engineering courses at the university level.
While university education has expanded rapidly in the past three decades, the expansion has been largely in humanities and social sciences and less in science & technology and engineering fields. Quality is again considered low in general except for some technical institutes such as engineering and medicine. Higher education is facing several constraints: (i) students are unable to get jobs; (ii) it is detached from research and development in emerging areas that could support school education, skills development, and skills needs particularly in infrastructure; (iii) enrollment is imbalanced by field and sex; and (iv) governance in general is weak in many public and private institutions to allow innovation and necessary initiatives to respond to emerging market conditions. Despite these constraints there are some public institutions that have demonstrated good achievements and several other institutions are growing rapidly from private initiatives.
Very limited information exists on graduate employment status. According to the 2008 Labor Force Survey, the unemployment rate in Nepal was 2.1%. However, masked in this statistics is a very high underemployment rate which was estimated at 43%. Of the roughly 400,000 new entrants in the labor market every year, two-thirds go abroad for jobs. Demand for graduates will increase to support infrastructure development (municipal services for rapid urbanization, transport, energy to particularly tap Nepal's hydro potential and large construction works), the tourism sector, and the rapidly expanding education system. Similarly, given that Nepal is located between two of the fastest and largest growing countries in the world, more graduates will seek overseas employment that will continue to trigger expansion of higher education in Nepal.
From recent discussions, experts and policymakers have indicated the need to identify priority areas in higher education that should complement development efforts associated with science and technology and the leadership role that higher education can play in enhancing the capacity and expertise in targeted areas to catalyze development and economic growth. High quality science and technology and technical education at higher education is crucial in supplying qualified workforce to support growing public and private investments in transportation, energy, municipal engineering, and tourism. Better skilled workers will be able to garner better wage from overseas employment. This approach is also intended to address the lopsided growth in higher education to develop a more responsive and balanced system in engineering, science and technology areas, although the initial focus will be mainly on engineering education.
During the interaction with the expert group, there was a strong support for enhancing engineering and technical education. Among others, the expert group identified four areas that require further follow-up and clarity, i.e., (i) seeking national consensus on the prioritizing engineering and technical education for high level of support; (ii) improving governance of higher education institution; (iii) financing options (subsidies, incentives or rewarding for results and excellence); and (iv) viable public-private partnership (PPP) models for innovation, relevance and resource mobilization. The CDTA will assist the stakeholders including the government, higher education institutions, students, parents, industry representatives, and experts to address these four areas.
The CDTA is fully aligned with ADB's Country Partnership Strategy for 2010-2012 and the government's priority given education's strategic importance in reducing poverty and social exclusion, enhancing economic opportunities and contributing to economic growth. ADB has supported the government in strengthen school education by improving quality and reducing disparity as well as in skills development to increase employability. ADB also plans to develop follow-up project in technical and vocational education and training. The CDTA complements well ADB's ongoing and planned investments, especially by aiming at higher education and exploring ways to strengthen backward linkage to secondary school education and skills development.