Getting Education Right Is Crucial

The brightest and the best, but will there be enough of them?

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Source of picture: schoolsinnewdelhi.com

 

 

By John Richardson

EDUCATION, education and education are three of the biggest challenges facing developing countries over the next 10-20 years.

This will determine overall growth of economies. Without the right skill sets the rapid rates of growth we have seen over recent years might not be maintained, resulting in social and political pressures.

And at a petrochemical industry level, a shortage of engineers isn’t just a developed-world phenomenon as the blog discovered when it talked to the Singapore Chemical Industry Council (SCIC) earlier this year.

In the Middle East, the challenge is to provide the right kind of education as it seeks to move downstream from oil, gas, refining and petrochemicals. Success is crucial in tackling high youth unemployment.

“The region is riding a wave of demographic changes – high birth rates, declining mortality rates and a young population,” wrote HSBC in a recent report on Middle East petrochemicals.

“Government estimates place more than half of the Middle East’s population under the age of 20, meaning that they will join the workforce over the next decade.”

The problem is at its most acute in Saudi Arabia, where, according to HSBC “over half the population of 18.5m is under 20 years old and only 3m, or 16% of the population, are in the workforce.

“Around 2m Saudis are between the ages of 20 and 24, and in this age range only 0.5m are employed, including expats.

“Of the 1.8m Saudis between the ages of 15 and 19, few have jobs. All this suggests that around 1.7m jobs must be found in the next 10 years – more if women are to play a greater role in the workforce.”

This helps to better-explain the drive to go downstream into manufacturing components of finished goods, and even the finished goods themselves, in the three plastic processing parks being developed in the region – two in Saudi Arabia and one in Abu Dhabi.

On a straight cost-competitiveness basis, it seems to make little to build manufacturing industries Gulf Co-operation Council (GCC) region. Arguments against include low domestic consumption due to low population levels, lack of sufficient local skill sets and therefore expensive labour.

You can perhaps make a stronger argument for Iran because of its much-higher population, notwithstanding the sanctions issue.

But demographic pressures in the GCC make it likely that manufacturing industry will be made to work, even if heavy subsidies are needed.

Local people will still have to be educated to the right levels to work in these industries, though, and so can the biggest of the GCC countries – Saudi Arabia – deal with this issue?

“My colleagues and I were joking a few years ago about Saudi Arabia having a car components business but no longer, as in around four years time we now think they will have one. One day they might even build their own autos,” a petrochemicals industry source told the blog recently.

“It is a huge challenge for the Saudis, but I am convinced they will get there. A patronising view from the West is that they spend all their time sitting on proverbial camels staring into proverbial sunsets.

“But these are extremely bright senior people who have been to INSEAD, Harvard etc and are determined to put the education system right from the bottom-up.

“They are looking at the Singapore system and trying to copy it from the Kindergarten level upwards. I know of one Singaporean guy who is talking about franchising a whole series of Kindergartens in Saudi.

“And at the top end of the education system they are looking to partner top Western universities with their own universities – again following the example of Singapore.”

India faces the risk that if it fails to reform its education system, growth could hit the buffers.

The top universities are excellent, but places at the Institutes of Technology and Institutes of Management are incredibly scarce, said this article from Amy Kazan in the Financial Times.

This same article – and one in The Economist - also argued that below the top universities, education was poor and in need of major reform.

India, like Saudi Arabia, has a highly youthful population. This will only be a competitive advantage over China – where the population is ageing – if the education problems can be solved.

“The (Indian) workforce may be young and growing, but 40% are illiterate and another 40% failed to complete school,” wrote The Economist.

“The Boston Consulting Group sees a shortfall of 200,000 engineers, 400,000 other graduates and 150,000 vocationally trained workers in the coming years. Meanwhile, there are 62m surplus workers in agriculture, most of them barely skilled.”

On our trip to India last week, Reliance Industries Ltd (RIL) expressed its concern over the domestic shortage of chemical engineers.

RIL has to battle hard to find enough of the brightest and the best to run its plants due to fierce competition from the tax-free Middle East.

Like everywhere else in the world, India also faces the problem that chemicals engineers are often lured into information technology or finance.

Chemical companies and industry associations in developing countries are going to have to continue to work hard and smart with governments in an effort to tackle these education challenges.

Over the coming weeks and months the blog will be talking to the industry about initiatives already taking place and those being planned.

Will enough be done? We certainly hope so and if we have any bright, or more likely otherwise, ideas of our own we will let you know.

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