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Asia’s education success story

Much of emerging Asia is typically seen for its potential as a manufacturing hub due to its young and sizeable population. Human capital is a crucial element for all emerging economies. 

Considering the rapidly changing needs of production around the world companies are continuously on the lookout for a trainable’ work force. 

"It is clear Asia’s push to provide basic education has been a success.” 

Using data from the World Bank, we’ve look at the educational attainment of the region’s labour force by assessing literacy, government inputs on basic education and outcomes such as completion rates. We then looked at the quality of education based on the standardised PISA test results.

Considering more than two-thirds of the world’s out-of-school children in the 1970s came from Asia, progress in the region’s education has been significant. It is clear Asia’s push to provide basic education has been a success.

Emerging Asia adult literacy rate

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Source: Haver, World Bank-WDI, ANZ Research

While average literacy rate in the region is now above 92 per cent, India is still lagging far behind with its wide gender gap exacerbating the situation.

Output

According to the Asian Development Bank, countries which provide one additional year of schooling can raise their economic output by 3 per cent to 6 per cent over time.

Countries which invest heavily in education gain economically, according to data showing public spending on education as a share of total public spending.

Indonesia, at 20.5 per cent of public spending, allocates the most to education, while South Korea is at the bottom, setting aside 10 per cent for schooling.

These outcomes largely reflect differences in the demographic structure – the median age in Korea and Singapore is comparatively higher than in other countries, implying government spending on schooling does not have to be particularly large.

Although it is difficult to assess what level of government spending on education may be considered sufficient, the UNESCO suggests a benchmark rate of 5 per cent of GDP. In this regard, only Vietnam and Malaysia make the cut at 5.7 per cent of GDP and 5.0 per cent of GDP respectively.

Public spending on education

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Source: Haver, World Bank- WDI, ANZ Research

While average literacy rate in the region is now 92 per cent, India is still lagging far behind. Governments in the region recognise the merits of investing in basic education by imposing a minimum duration of compulsory education and raising spending allocations.

Assessing the quality of basic education of economies which participated in the PISA survey, we find the East Asian ‘tiger’ economies have generally outperformed their OECD counterparts.

The high ranking of Vietnam in science and mathematics points to the success of its government’s focus on basic education.

Quality

Assessing the quality of education in the region, we look at the relative performance of the countries which participated in the OECD-sponsored survey of 15-year old students known as the Programme for International Students Assessment (PISA). PISA focussed on core school subjects of science, mathematics and reading.

Data shows 15-year olds in the East Asian Tiger economies have been regularly outperforming their OECD counterparts, with Singapore consistently topping the PISA survey for a number of years.

Yet it is the relatively high rank of Vietnam in science and Mathematics which is remarkable, considering its level of development.

In 2015, Vietnam ranked eighth in science, higher than Hong Kong, China, South Korea, the UK, and Germany. Clearly, the Vietnamese government’s focus on basic education has contributed to these impressive results.

PISA Mean Scores

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China covers only the areas of Beijing, Shanghai, Jiangsu, and Guangdong. Source: OECD-PISA 2015, ANZ Research

Going beyond basic education, we look at the returns of completing higher studies. As a share of the unemployed, the Philippines and Indonesia report the highest unemployment for persons with any level of education.

This mismatch could be due to other factors such as the absence of an enabling environment for large-scale corporate investment such as the right labour laws, physical infrastructure or the regulatory environment.

Meanwhile, unemployment broadly declines for people with advanced education, except in Vietnam and Thailand.

Educational Attainment (% of total unemployed)

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Source: Haver, World Bank-WDI, ANZ Research

Anecdotal evidence suggests there is a mismatch of skills for higher educated people in Vietnam and Thailand suggesting the public university curricula have not evolved with the changing demands of industry.

A population with basic education can fuel a production platform but companies cannot be managed by graduates who do not have the right skillsets.  

While Emerging Asia has so far succeeded in raising its standards for basic education, the challenge now is to raise the bar in higher education to cater to the needs of a rapidly changing labour market.

Eugenia F. Victorino is economist, Asia Pacific at ANZ 

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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