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Skills for

Trade and
Economic
Diversification

Contributes to higher exports, economic diversification


u 
and more and better jobs
u Helps policy makers to ensure that firms find workers
with the right skills and workers acquire the skills
needed to find productive employment.
.
UPDATED VERSION OF 2017

Skills for Trade and


Economic Diversification
STED is a programme that provides sector level The programme aims to develop and strengthen the
technical assistance on identifying and implement- capacity of national partners to institutionalize this
ing skills development strategies required for future analytic and implementation process within their
success in international trade. It is designed to sup- country, either through provision of capacity build-
port growth and decent employment creation in ing training or through working closely with national
sectors that have the potential to increase exports and sector partners on programme implementation.
and to contribute to economic diversification.
The outcomes of STED are concrete recommenda-
STED takes a forward looking perspective, antici- tions at the policy, institutional, and enterprise level.
pating a sector’s development and growth opportu- The process involved in designing those recommen-
nities based on its global competitive position and dations contributes to improvements on the ground
market development. Together with an analysis of by raising awareness and stimulating dialogue on
current skills supply and demand, this provides an skills development among key stakeholders within a
outlook of existing and future skills shortages. sector.

The programme works with national and sector


stakeholders in sectors exposed to international
trade to understand the strategic development of
each target sector, and the contribution that skills This note presents the ILO’s Skills for Trade and
development can make to address those challenges. Economic Diversification (STED) methodology.
STED projects identify strategies to meet the skills STED helps to align skill policies with sectoral
needs identified. Where funding allows, full-cycle strategies that contribute to export growth, eco-
STED continues beyond the analysis to assist stake- nomic diversification, and employment creation.
holders and other partners in implementing these
strategies. The note presents the rationale for this type of
intervention, discusses some practical aspects
Thus, STED supports the formation of skills for of implementation, and explains the analytical
which there is demand in the labour market and process underlying STED. It also provides a brief
helps to avoid skill mismatches that contribute to overview of the experience so far with STED, in
unemployment, in particular among young workers. eleven countries and nineteen sectors.

www.ilo.org/STED
Why Technical Assistance on Skills for Trade ?
SKILLS CONTRIBUTE TO HIGHER AND MORE DIVERSIFIED EXPORTS WITH MORE
JOB CREATION. PROVIDING THE RIGHT SKILLS AT THE RIGHT TIME IS IMPORTANT
AND REQUIRES POLICY COORDINATION.

Skills and Trade Why Technical Assistance? ILO’s experience


The experience of many successful developing and fication. Availability of skilled labour is also a pre- Governments and social partners are aware of the STED builds upon the ILO’s long standing experi-
emerging countries has demonstrated that trade requisite for countries to absorb new technologies importance of skills policies in the context of global- ence in supporting its constituents on skills related
openness can promote GDP growth and employ- through trade openness and FDI. ization. However, implementing these policies well is issues. ILO technical assistance projects around the
ment creation if accompanied by appropriate com- a challenge and requires strategic coordination with world contribute to the improvement of technical
plementary policies. Experience from countries that have benefited from trade, investment, and development policies. and vocational education and training (TVET), skills
globalization suggests that strategic coordination anticipation, labour market information systems, and
A key area in which well designed and pro-active between trade, investment, development, and skill Trade leads to rapid structural changes and to a active labour market policies.
policies are required to complement trade openness policies was an important factor for success. need for new capabilities at the firm level, which
is skills development. Exporters tend to be larger, makes the anticipation of skill demand more com- On the trade side, ILO provides advisory services
more productive, and employ more highly skilled In the current fast changing context of globalization plex for sectors with high trade integration. and capacity building on the relationship between
workers than non-exporters. Enterprise survey data where technology and trading relations evolve rap- trade and employment, integration with global
also shows that many firms around the world rank idly, the responsiveness of skill supply to changes Skills mismatch – a situation where the available value chains, and operations of multinational enter-
finding adequately skilled workers as a major con- in demand plays a central role not only from an skills do not match the demands of the labour mar- prises. Technical assistance in this area also covers
straint to their business (Fig. 1). Thus, in order for efficiency perspective but also from a distributional ket – is a common phenomenon and can have high competitiveness and worker-employer relations in
trade openness to translate into sustainable growth, perspective. The wage premium on skills is rising in social and economic costs, notably when it takes exporting businesses.
investment in skills formation is crucial, especially in many countries due to increasing demand for skilled the form of youth unemployment.
developing countries where skilled labour is scarce. labour. Open economies need workers with higher Due to its tripartite structure, the ILO is uniquely
skills better matched to industry demand. Education, Demographic trends in many developing and positioned to work with governments, unions, and
2 Skills are not only important for the quantity of training and life long learning are decisive factors for middle income countries contribute to the urgency employers to promote social dialogue on skills 3
export growth, but also for its quality. A country’s a worker’s success in today’s labour markets. of addressing these problems. Unprecedented development.
level of skills is a key determinant of export diversi- numbers of young people are expected to enter the
labour market over the next twenty years. Providing
them with the right skills will be crucial for countries
Fig. 1: Firms Ranking Inadequate Education of Workforce as Major Obstacle to benefit from this one time opportunity.
Fig. 2: What is distinctive about STED
Exporter Non-Exporter
Why Sectoral Approach?
Companies working within the same sector usually Skills
30% (Anticipation,
have similar skills needs. In addition, employers’
organizations, faculties or departments of educa- Implementation)
25% tion, research institutions, development agencies
and regulatory bodies often take on a sectoral
20% focus in dealing with industry workforce needs.
This means that there is usually a clear set of stake-
15% holders that can come together at the sector level Trade, Sectoral
to address the sector’s skills requirements. Adopt- Industrial
Strategy
STED Approach
10% ing sectoral approaches helps to focus attention
on shared needs. It also proposes understanding
and analysing the skills required for the successful
5%
development of a specific sector, and taking action
based on the shared analysis.
0% Source:
World Bank Enterprise Stakeholder /
High Upper Lower Low Survey Data Fig. 2 summarizes what is distinctive about STED, Tripartite
Income Middle Middle Income Approach
Income Income
(2006-2016)
in that combines a sectoral approach to skills with
trade and industrial strategy perspective, and social
dialogue.
STED Process
STED WORKS IN COLLABORATION WITH SECTOR AND NATIONAL PARTNERS TO ANALYSE THE CURRENT AND FUTURE SKILLS NEEDS OF TRADABLE SECTORS,
AND TO ENABLE IMPLEMENTATION OF THE RESULTING RECOMMENDATIONS.

A Sectoral Approach
STED is designed for sectors that have potential to The organization of technical work aims to make best thus lays a foundation for social dialogue on skills such as a National Skills Council or a system of
make substantial contributions to export develop- use of expertise available locally, and to develop the and better policy coherence based on a strategic Sector Skills Councils.
ment and diversification, or need to improve com- capacity of partner institutions and experts in the vision for a sector’s future.
petitiveness in the face of foreign competition. They country to do similar work themselves in future. Providing support and backstopping for imple-
can be sectors that are still in their infancy, or estab- mentation by country partners, by other ILO proj-
lished sectors with potential to diversify, for example
Implementation Phase ects or by other development partners.
through better products or new markets.
Local Partners and Ownership and Follow-up
A key factor for the success of STED is to involve The STED analytic process contributes to improve- STED can also be embedded in broader techni-
local partners in both analysis and implementation, ments on the ground by raising awareness and cal assistance projects in the areas of skills,
Methods in Analytic Phase and ensure that stakeholders have ownership of the stimulating dialogue on skills development among trade, sectoral and private sector development,
The analytic phase of STED typically involves a analysis and a desire to implement the findings. stakeholders within a sector. Ideally, a STED appli- and employment promotion. In this case, the
combination of technical work, dialogue with and cation will include an implementation phase with fol- analytical results from STED inform follow-up
among national and sector partners, and building The ILO’s strong relationship with labour ministries, low up activities to support implementation. work through established ILO methodologies in
institutional capacity. Technical work is undertaken unions, and employers’ organizations greatly facili- areas such as Technical Vocational Education and
at country level, backstopped by ILO field specialists tates access to well-positioned partners for STED. These include one or several of the following: Training (TVET) Reform, Dialogue on Trade and
and by trade and skills experts at ILO Headquar- STED initiatives often also partner with trade Employment, Skills Anticipation, Labour Market
ters. It typically includes desk research, a survey of ministries and education ministries, and with line If STED is applied as a stand-alone project, follow- Information Systems and Enterprise Development.
employers, an examination of skills supply for the ministries responsible for target sectors such as up activities can include direct implementation
sector, and interview consultations with experts and those responsible for industry, tourism or agriculture. under the project in collaboration with partners, Finally, the STED methodology can be the basis
key partners. for example in areas such as development and for capacity building and support to existing
4 Partners are systematically involved in the process piloting of competency standards and new curri- institutions for skills anticipation and education 5
Dialogue with and among partners takes place from the beginning, including in the selection of sec- cula or other targeted support for education and planning. In this case, the focus is on developing
through a steering committee organized at national tors. In some cases, tripartite institutions for social training providers. in relevant local institutions the capacity to apply
or sector level, or through stakeholder workshops, dialogue on skills already exist as natural counter- STED independently on an ongoing basis.
or sometimes through a combination of both. parts. In other cases, STED brings the relevant stake- Building and maintaining an institution for continu-
holders in a sector together for the first time, and ous skills dialogue and support to implementation,

Fig. 3: Typical STED Process

STED ANALYTIC PHASE STED IMPLEMENTATION PHASE


Desk Research STED Implementation
Output document(s): Report(s) on desk research Follow up and implementation of recommendations can be supported through:
• Direct implementation under the project in collaboration with partners
Choosing Survey of Employers Analysis and Development • Building and maintaining an institution for continuous skills dialogue
Sectors Output document(s): Report(s) on sector survey Synthesis of Conclusions and and support to implementation
Output document: Output document(s): Recommendations • Providing support and backstopping for implementation by country
Note on Skills Supply Study Report(s) on STED Output document(s):
partners, by other ILO projects or by other development partners Figure 3 shows a model sequence
sector selection Output document(s): Report(s) on supply study analysis Finished STED report(s) • Integration into broader technical assistance projects in the area of skills, of activities for STED applica-
trade, sector development and employment promotion tion. In practice, this will often
Consultation Interviews with Experts & Partners • Capacity building on Skills Anticipation for government and other have to be adjusted to country
stakeholders based on the STED methodology
with national Output document(s): Report(s) on interviews or sector specific needs, or time
constituents - constraints. Provided that suffi-
government, Consultation with sector stakeholders cient resources are available, any
employers, (employers, workers, government, education and training providers, etc.) number of suitable sectors can
workers through stakeholder workshops and/or steering committees be covered in parallel.
Six Stages of STED Analysis
STED’S SIX-STAGE ANALYSIS ANTICIPATES A SECTOR’S FUTURE PERFORMANCE
AND THE RESULTING CHANGES IN LABOUR DEMAND BY SKILL TYPE.
STED RBM and M&E framework
STAGE 1 / • What will a business in the sector have to be able STAGE 5 /
to do better in its operations in order to become
Sector Position and Outlook more competitive on cost, quality and respon-
Skill Supply Gaps
The first stage in a STED analysis is to analyse a siveness? Stage 5 matches the results from the previous stage The STED Results-Based Management (RBM)
sector’s current position and outlook as well as with an assessment of the skills currently provided and M&E system has been designed to provide
external factors that are likely to affect its progress in by the education system, on-job training, migration, a consistent framework for capturing and report-
the future. The results are discussed among sector STAGE 3 / etc. The purpose is to identify gaps between skill ing results and to ensure a coherent approach to
partners in order to develop an ambitious but realis- supply and demand now and in the future. measuring results across the programme. The
tic growth scenario for the medium term, based on
What Type of Skills? purpose of the system is to deliver reliable and
the following questions: Improving business capabilities is not just about The analysis also covers the institutional set-up of timely information so that programme manage-
skills. It is also about technologies, work organiza- the education system and available mechanisms for ment at all levels can transparently assess what is
• Business as usual: What would be a realistic tion, processes, strategies, financing, business skills anticipation in order to identify potential insti- working, what is not and why. Better decisions will
growth trajectory based on existing products and culture and other factors within and outside a firm. tutional causes for skill mismatch. be made and resources will be allocated more
existing markets? However, any capability improvement will also have efficiently through this feedback. The RBM and
• More of the same: How can export growth for significant implications for skill demand. These are M&E system also plays an accountability function
existing products be stepped up, and what would analysed in Stage 3.The results point to the types STAGE 6 / in providing the information needed to demon-
be a realistic target? of skills that will be important to deliver the medium strate the impact of STED-based investments.
• Upgrade: Is there room to develop new products, term growth scenario. In addition, Stage 3 also iden-
Proposed Responses
access new markets, improve quality and brand- tifies existing gaps in skills in all areas of relevance The results of the STED analysis are concrete rec- STED’s theory of
ing, increase value addition, etc.? to firms (Box 2). ommendations at the policy, institutional, and enter- change is about how
prise level. Policy recommendations typically cover skills interventions will
6 the development of specific curricula or training effect changes in skills 7
STAGE 2 / STAGE 4 / programs, labour market policies that improve job development systems
matching, as well as the overall incentive system that can enhance com-
Business Capability Implications How Many Workers by Skill Type? (taxes, subsidies, etc.) for innovation and skill for- petitiveness, exports
The second stage identifies gaps between the busi- Whether this stage is undertaken depends on data mation. Policy recommendations also cover ways and economic diversi-
ness capabilities that firms in the sector have now availability. Companies hire workers, not skill-sets. to enhance coherence between trade, investment, fication of the sector,
and the business capabilities they will need in order In order to develop useful policy recommendations, labour market and skills policies. and ultimately generate
to achieve the outcomes envisaged in the growth anticipated developments in skills requirements are more decent jobs.
scenario from Stage 1. For example: therefore translated into demand for workers based At the institutional level, recommendations may sug-
on the sector’s current occupational structure and gest ways to enhance the relevance of training and
• What capabilities will firms need in order to the expected demand for new skills. The result is educational institutions for the sector’s needs, for The STED RBM and M&E system places empha-
develop new products in line with regulations and a picture of expected demand for workers by each example by improving dialogue with employers. In sis on assessing the sustainability of its interven-
consumer tastes in foreign markets? relevant skill type. addition, the creation or improvement of permanent tions and the degree of systemic change that they
• What will they need to be able to do in areas such institutional arrangements for skills anticipation and achieve. STED defines systemic change in terms
as logistics, sales, marketing and channel man- skills governance might be recommended. of long lasting transformation in both the structure
agement in order to develop new export markets? and dynamics of a sector. STED aims to achieve
At the enterprise level, critical factors for skills devel- transformation in two systems:
opment, such as in-house training, labour turnover,
and mechanisms for social dialogue on training • Change in skills development system, with
BOX 2: Firm Level Analysis needs and delivery are considered and improve- impact measured by “improvement in
ments are recommended where necessary. provision of skills for STED selected sectors”.
Analysis of business capabilities (Stage 2) and types of skills needed (Stage 3) in STED takes account of all areas
of activity within a firm. • Change in productivity and capacity to
Implementation participate in international trade of targeted
Sales & ILO technical assistance projects based on STED sectors.
Inward Outward Customer aim to continue beyond analysis to support and
Operations Customer
Logistics Logistics Service enable implementation.
Relationships

General Product & Marketing Human Finance


Management Procurement Process and Product Resources Accounting
Development Management IT
STAGE 1 / STAGE 2 / STAGE 3 / STAGE 4 / STAGE 5 / STAGE 6 /

Sector Position Business Capability What Type How many Workers Skill Supply Proposed
and Outlook Implications of Skills? by Skill Type? Gap Responses

Internal What business capabilities What skills are needed by How is labour demand likely What are the critical gaps How can existing and future
QUESTIONS

• Sector size are required to support the firms to acquire the priority to develop for workers of between current and future critical skill gaps be closed?
• Growth trend preferred growth scenario capabilities from STAGE 2 ? different skill types (both labour demand and supply
• Structure (firms, value from STAGE 1 ? new and existing)? by skill type? How can existing training/
chains) What are the existing skills education institutions be
• Employment Which capabilities already gaps that should also be To what extent does the improved to match demand?
• Sources of competitive exist, which need to be bridged? existing education and train- What other sources of skill
advantage / disadvantage improved or newly created? ing system produce workers supply can be used?
• Investment Demand for which skills with the required skills?
• Entrepreneurship is likely to newly emerge / How can skill demand be
• Sectoral strategy expand / contract? What other sources of skills better anticipated in the
supply (learning by doing, future?
migration, etc.) are available?
External How can enterprises con-
• Enabling environment tribute to enhanced skills in
• World market growth & their workforce?
structure
8 • Position in world market 9
• Drivers of change
• Competitors
• Prices

Growth scenarios such as: Gaps and priorities in Qualitative information on Quantitative and qualita- Identification of current Recommendations at
RESULTS

• Business as usual business capability types of skills demanded tive outlook on labour and future skill gaps policy, institutional, and
• More of the same development demand by skill type enterprise level to close
• Upgrade the sector critical skill gaps

Food exporting firms Accessing higher end Production line workers will Accessing large high end There is a shortage of Include training on safe food
SIMPLIFIED EXAMPLE

currently serve mainly markets requires regulatory need better skills in safe markets will raise demand production workers trained handling in technical educa-
neighbouring low income approval and compliance food handling. for production workers, and in safe food handling skills. tion curricula.
markets. They see an with quality standards. a need for specialists in a
opportunity to export higher Laboratory skills are range of areas relating to Too few specialists on Provide training in safe
quality products to more required for quality control. quality control, assurance compliance with EU and US food handling to production
developed markets in the and certification. food safety regulations and workers.
future. documentation are available.
Establish partnership with
a leading university on food
science education.
STED Results
THE FIRST STED INITIATIVES AIMING PROGRESS TO ENABLING IMPLEMENTATION
OF STED RECOMMENDATIONS COMMENCED IN 2013.

Example on development STED results Implementation of STED Example on Competency


and provision of specific skills as of early 2017 recommendations Standards Development
development activities in Tunisia in Cambodia
STED has been applied in 19 sectors in 11 countries, Practical implementation work under STED-based
with work in additional countries in early stages. projects varies depending on the skills needs iden-
Agro-food sector Examples of sectors in which STED has been tified and on the national and sector context. The To directly support Cambodia’s skills development
applied include food processing / agro-food, tour- aim is to address some of the highest priority needs initiatives, the STED Programme is collaborating
Strengthening technical skills
ism and hospitality and pharmaceuticals. Reports identified directly in collaboration with partners with DGTVET of Cambodia in the development of
• Organization of three training sessions on
on each country/sector have either been published (either under STED or in collaboration with other competency standards for four priority occupa-
techniques of sensory analysis
or are in preparation for publication. projects), and to mobilize ownership and momentum tions identified in two STED target sectors. The
• Training on compliance with the new European
to implement other recommendations among part- occupations are welding, machining, baking and
standard on food labelling
STED has strengthened dialogue on skills needed ners. Types of implementation undertaken directly fruits & vegetable processing. In partnership with
Mainstreaming of training on quality in vocational for trade between ministries, between govern- include, among others: the National Polytechnic Institute of Cambodia
training programs ment, employers and workers’ representatives, and (NPIC) and the Industrial Technical Institute (ITI),
• Training of trainers on ISO 22000 between industry and providers of education and Development of skills standards, and development DGTVET led the drafting and validation process for
• Training and certification of trainers on IRCA training in each of the countries where it has been and piloting of TVET curricula; the competency profiles, competency standards,
• Development and mainstreaming of a specific deployed, most strongly in the 7 countries targeted competency-based curriculum, and competency
module on quality in vocational training since 2013. Development and provision of courses in HR man- assessment packages for the four occupations. In
10 programs for the agro-food sector for BTS and agement and in marketing for managers at firms in March 2017, the updated materials were presented 11
BTP diplomas The STED Programme has delivered capacity build- target sectors, tailored to those sectors; to an Industry Advisory Group for endorsement to
• Design of a continuing training module on ing training in the STED approach for national and the Sub-Committee on Skills Standards and Test-
quality for companies and workers in the sector sector partners (including ILO constituents) in four Training of trainers in areas including: hospitality ing of the National Training Board. Pilot courses
(target: specialized workers, technicians and countries, with a total of 99 participants. and food service skills; technical aspects of sourc- will be conducted by NPIC and ITI in the second
senior technicians) ing and finishing wood; and careers counselling; quarter of 2017.
• Piloting of the new module on quality with a Recognizing the complexities in meaningfully attrib-
group of trainees at the training center for the uting trade and employment outcomes to a process Development and piloting of programmes to
agro-food industry that focuses on analysis, stimulating dialogue among develop priority technical skills in areas including:
key actors, developing institutional capacity, and greenhouse horticulture; food labelling; and phar-
Metallurgy and metal construction making a limited direct contribution to implementing maceutical production;
recommendations, the STED Programme has devel-
• Two training sessions were conducted on oped a Results-Based Management and Monitoring Development of a platform to support certification
“Training with Qualification in Tube Welding & Evaluation framework based on the Donor Com- and qualifications to international standards in
(Qualification 6 G)” mittee for Enterprise Development (DCED) frame- welding;
• Two training sessions on “Control of Ultrasonic work. This is being piloted in three countries.
Welded Assemblies: Direct Access to Level 2” Mainstreaming of quality and food safety standards
An evaluation of the STED Programme found that in TVET programmes for the agro-food sector;
For both sectors implementers assessed its relevance as high as
• Training sessions on the theme “How to design 85 per cent. According to the evaluation: ”STED Preparation of careers information materials for
an international marketing strategy” responds to the demand of Member States, many in priority occupations.
serious need for economic diversification and trade
…”.
Pilot countries

STED work so far Aid for Trade Initiative for the Arab States
(AfTIAS) project

SIDA-funded “Scaling up STED” project

Ukraine Russian-funded “Applying the G20 Training


Year: 2010 Strategy” project
• Metal Industry
• Tourism

Macedonia
Year: 2011
• Tourism
Kyrgyzstan
• Food Processing
Year: 2012
• Garments

Tunisia
• Metallurgy
• Food Processing Viet Nam
• Tourism
www.ilo.org/STED

Jordan
• Pharmaceuticals
• Food Processing
Cambodia
• Food Processing
Bangladesh • Light Manufacturing)
Year: 2011
• Agro Processing
• Pharmaceuticals Myanmar
• Tourism
• Vegetable & fruits
Egypt
Malawi
• Furniture
• Oilseeds • Food Processing At early stages of STED work in Benin, Ghana,
• Horticulture Guatemala, Morocco and the Philippines

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