EDUCATION AND SUPPLYING THE SKILLS FOR THE LABOR FORCE

UNCLAS SECTION 01 OF 03 BANGKOK 004896

SIPDIS

SIPDIS

E.O. 12958, AS AMENDED: N/A
TAGS: ELAB ECON ETRD TH
SUBJECT: EDUCATION AND SUPPLYING THE SKILLS FOR THE LABOR FORCE


HOW EDUCATION AFFECTS BUSINESS


1. Summary. Businesses, especially international companies, in
Thailand suffer from a lack of important skills among their
workforce as a result of an antiquated and ineffective education
system. Lack of English proficiency and critical thinking skills,
as well as a lack of career preparation in universities, are leaving
gaps in and inhibiting development of the Thai workforce. However,
changes in human resources management are attempting to address the
management issue by developing a Western administration style. The
labor force is also seeing an increase in the ratio of
college-educated workers, which a Thai think-tank claims is a
positive signal for the economic growth. This is one of two cables
examining the Thai education system and how it affects business
conditions. End Summary.

THAI PEOPLE CAN'T SPEAK AMERICAN


2. A significant obstacle for Thailand's continued economic growth
is the notable lack of English proficiency in the Thai workforce.
Thailand's economy depends on trade (more than 60 percent of GDP)
and Foreign Direct Investment and the lack of English skills is by
far the biggest personnel problem for foreign companies operating
here. The country manager for Capstone Group, a multinational human
resources management company, says that it is very difficult to find
someone with both the necessary skills for the job and sufficient
English aptitude. It is relatively easy, however, to find
applicants that have the right skill set to meet an employer's
needs, but not the language skills.


3. According to an American Chamber of Commerce in Thailand
(AmCham) source, foreign companies are currently forced to promote
English proficient employees to higher positions over non-English
speaking employees that have better qualifications. He believes
that the English problem is the result of an absence of English in
the environment and culture, not only an unsuccessful school system.
English is hardly spoken outside of class and is not
well-integrated in society.

MANAGEMENT PROGRESS


4. The education system's style of teaching-monotonous learning,
lack of creative thinking (see septel),and also a lack of
internship programs are reflected in slow management development.
It takes longer for Thais to develop management skills because they
are not used to thinking "outside the box," and there is a long
adjustment period to "real-life" work. According to the country
manager at Capstone, many Thai employees are reluctant to take a
management position and concomitant responsibilities. They are
"complacent with their position and do not want to think more than
they have to."


5. The Thai management style also reflects the education system and
can hinder the growth of many Thai companies. According to the
Capstone Group country manager, Thai managers dictate instructions
to their employees and leave little room for critical thinking and
employee development, which reflects the teaching-style of local
educators. The employee rarely has a chance to find solutions
independently and this only prolongs the time it takes for employees
to develop management skills.

WORK EXPERIENCE


6. Employees entering the workforce straight out of college
typically have very little work experience and are usually
unprepared for "real-world" work. College programs in Thailand lack
internship and career preparation programs, which is part of the
reason that the Department of Labor enacted a statute that makes it
mandatory for companies to provide in-house training. Thai
companies also have no internship recruitment programs. It takes
significantly longer for new graduates to adjust to the work
environment than they do in Western countries, according to our
sources.

SOME SPECIFIC EXAMPLES: THE SEAGATE ISSUE


7. Recent press articles report a lack of skilled labor that has
investors worrying about Thailand's economy. However, speculation
about Seagate shifting $1 billion worth of new investment from
Thailand to Malaysia because of either a lack of high-skilled labor
or the current political instability is untrue, according to a
Malaysian Seagate representative. Seagate Thailand has remained
very secretive about the issue because of media sensitivity and
speculation. The representative said that decisions made at Seagate
are strictly internal, and did not elaborate on their future course
of action. She did mention that "[Seagate is] not even moving out
of Thailand," noting that Seagate has been in Thailand for over 25
years and would not have been here if there were no supply of
skilled laborers. Comment: Despite Seagate's denials that a shortage
of skilled labor was the cause of their sudden change of investment
plans, they still refuse to tell anyone, including ourselves, what
motivated the change despite all the press speculation. End
Comment.

BANGKOK 00004896 002 OF 003



IT INDUSTRY - IBM THAILAND


8. IBM Thailand told us that finding enough programmers and code
writers to fulfill their needs is not a problem. The needs that are
not found in Thailand are high-level IT specialists, specifically IT
architects, IT consulting, systems and network engineers, and
mainframe specialists. IBM will either train employees themselves
to fulfill these needs, or import the labor from abroad, mostly
India and Singapore. However, only about 10 percent of high-skilled
labor is imported and IBM has several in-house training programs to
develop current employees into positions that are needed.


9. Our source at Capstone Group told us that the lack of IT
consulting skills has to do with the lack of critical thinking. IT
consultants usually do not have the critical thinking ability to
analyze presales and sales causality, although sales in the IT
sector are generally okay.


10. Several hundred fresh college graduates apply to IBM each year,
and only about 5 - 10 percent have the skills necessary to qualify
for a position at IBM. But these numbers are usually enough to meet
the labor demands, according to our IBM source. When they enter
IBM, their skills are good enough to contribute right away, though
IBM still puts them through a training program that is specialized
for entry-level positions.


11. IBM confirmed that English skills were sub-par compared to its
neighboring countries, but only on a speaking level. This is not a
large problem, says an IBM spokesperson, because most communication
in English is done through emails or other written forms. English
speaking skills are only a problem when they have to do
presentations.

OTHER LABOR FORCE DEMANDS


12. Sales and marketing are in constant need by companies. Finance
and business development are also needs in the current economy, says
an AmCham source. While the lack of skilled workers in these areas
is somewhat of a constraint, this source believes that it reflects
more the growth of the economy and the lag time in producing new
graduates than any inherent structural problem.


13. The oil and gas industry is quickly growing in Thailand due to
large foreign investment. But the Thais are not able to supply
enough skilled workers to keep up with the industry demand,
according to our source from Capstone Group. There is demand for
construction engineers, structural engineers, chemical engineers,
and industrial engineers. The industry is expanding faster than the
universities can turn out graduates.


14. The demand for managers in the construction industry is also
not being met. There are many good project managers in Thailand but
there is a limit to their capability for creativity. Thailand's
construction labor force does not have the creativity for advanced
architecture and interior design. According to the Capstone Group
country manager, most interior design companies are made up
primarily of foreigners. Contract management and quality surveyors
are difficult to find.


15. The manufacturing industry lacks the skilled managers that are
needed to push manufacturing into advanced levels. Since there is a
significant manufacturing sector in Thailand, this may limit future
expansion in the long run. The next level of manufacturing consists
of lean manufacturing and six sigma manufacturing, which involves
highly refined products and continuous quality improvement. Usually
only Americans and European manufacturing firms have the necessary
skills and few Thai manufacturers do. The shortage of industrial
engineers explains why Thai manufacturing is currently stuck, says
Capstone Group.

CURRENT TRENDS


16. Corporate human resources traditionally were only in charge of
administrative tasks, but a refocus took place about 3 years ago.
Human resources are starting to focus on the individual employee and
to help them develop. Management style is changing and becoming
more Western, focusing on individual development and freedom to
solve problems, rather than dictating directions. Thai companies
are aware of the downfalls of the traditional style and many
companies are replacing managers that don't adopt Western-style
management.


17. Increased availability of college graduates has altered the
makeup of the employed labor force. The National Economic and
Social Development Board (NESDB) call this a "higher standard of
education in the workforce," because the number of employed college
graduates are consistently increasing, signaling a positive trend in
the overall educational level of the labor force. (Septel looks at
some of the remaining problems of education).


18. An associate Professor of Economics at NIDA University
elaborates on this trend. The increase in the supply of students

BANGKOK 00004896 003 OF 003


causes an increase in the demand for institutions that offer
degrees. Subsequently, several institutions and universities have
opened to offer degrees but many of these institutions are
considered of low quality. The supply of college graduates with
low-quality educations from "no-name" schools has increased greatly.
Many of the graduates have a hard time finding employment because
of the increased number of college graduates and competition, and
the lesser value employers' place on degrees from less prestigious
institutions. The supply of students that attend these schools,
however, are constant because of the difficulty of admission into
top-notch schools and the increasing number of students graduating
secondary school.



19. Comment: The deficiencies in the labor force are heavily
related to the education system. As the education system
continuously fails to produce consistent English and critical
thinking skills needed to be successful and politicians do not act
on education reform promises, we can expect to see these issues
continue. Without a fundamental change in the education system it
will be very difficult to solve these problems. There has been a
consistent decline in students' science and math scores from
standardized tests (see Septel),and it is a possibility that the
education system may not be able to provide the engineers demanded
in the near future, especially for high-level IT and advanced
engineering positions. For Thailand to achieve the next level of
value-added in the global economy, the government must focus on
increasing the skills of the Thai labor force.

Arvizu