Guest blog by Fernando Ocampo, LEG ’23
“Development is really about the acquisition of social capabilities and what are the stumbling blocks in the process of acquiring those capabilities, and how we can think of ways to overcome these things. What are the points of entry of mental frameworks that we can have in the back of our mind to see how we can affect change”. – Ricardo Hausman
Costa Rica is a significant net recipient of FDI and continued to receive large FDI flows every year; and strives to attract investment to high value-added sectors that promote the into global value chains; as a vehicle for export promotion, diversification, and transfer of technology and knowledge to other sectors of the economy. Despite being a successful strategy, it is increasingly necessary to align the skills of existing human capital with the new skills that companies require. The workforce needs to improve its abilities to meet the demand of the productive sector to boost the growth of companies and employment.
For example, just 60% of young people aged 18 to 20 have completed secondary education and the results in the PISA test are lower than OECD average. Unfortunately, educational deficiencies are not corrected by the higher education system: only 20% of young people who access this education graduate, and 60% of those who obtain a university degree do so in disciplines associated with the humanities or education and only 10% in engineering or basic sciences, which are the most demanded by dynamic sectors. This contributes to the fact that, despite high unemployment, many companies face difficulties in filling their vacancies.
Currently, most of unemployed people in Costa Rica do not have the skills needed to fill the productive sector demand, specially to those companies trying to connect with global value chains. These skills gaps slow business expansion and hinder the chances of reducing unemployment and generating growth opportunities. The Costa Rica Investment Promotion Agency (CINDE) surveyed FDI companies and identified that these could generate 17,000 additional jobs every year, if the workforce had the skills required.
Throughout course, I had the opportunity to analyze in detail the causes of the problem, analyze strategies that would allow Costa Rica to strengthen an ecosystem where different institutions from the public and private sectors could work together to provide comprehensive solutions. The exchange of ideas and experiences in these 10 weeks allowed me to identify 5 key learnings:
- Problem Identification and Root Cause Analysis: Importance of carefully identifying the problem and understanding its root causes before proposing solutions. This critical step ensures that any strategy focuses on core issues rather than simply addressing symptoms. Through a process of ‘deconstructing’ the problem using a fishbone diagram, it was possible to delve deeper into the causes and define entry points for immediate policy actions, such as the importance of developing a national agreement between different sectors to design and implement rapid training programs focused on employability, that allow the workforce to develop specific skills in periods of time no longer than six months.
- Inclusivity in Growth Strategies: Emphasizing the significance of inclusivity when developing growth strategies. Building an ecosystem that includes decision-makers and individuals directly involved in the field is crucial. This approach ensures a holistic perspective, leveraging diverse insights for more comprehensive and effective strategies. The Government of Costa Rica needs to deepen coordination with the private sector through high-bandwidth organizations such as CINDE and PROCOMER to implement actions that improve productivity, organizational capabilities, resource mobilization, coordination, and legitimacy.
- Address binding constraints: It is not necessary to focus on a long list of reforms but rather on binding constraints. Policies that have worked in one country do not necessarily work in another, nor do they have the same positive result. Furthermore, there are several known cases of countries that have adopted many of the reforms suggested in the list to increase employment, without really achieving a positive impact on their economic development. Focusing on addressing specific binding constraints that affect employability in Costa Rica, is a more direct approach to removing specific obstacles that have been identified. It is important to implement a strategy to increase know-how at the national level that makes it possible to take advantage of the opportunities generated by new technologies to boost the growth of the productive sector.
- Iterative Solutions for Complex Problems: Acknowledging that complex problems demand iterative solutions. The approach involves implementing solutions, learning from the results, and adapting strategies accordingly. This iterative process allows for continuous improvement and the flexibility needed to address the evolving nature of complex challenges. These takeaways collectively underscore the importance of a methodical problem-solving approach, the inclusion of diverse perspectives in strategy development, and the need for adaptability and learning in the face of complexity.
- Leadership for growth + inclusion: Game-changing growth requires ‘multi-agent leadership’, with full participation of institutions such as the Ministries of Foreign Trade and Labor, CINDE, PROCOMER, the National Learning Institute (INA) and the private sector. It is necessary to work on a new post-pandemic social contract, focus on growth and inclusion, where the strategy is expanded to generate employment in general, not only for the external sector. As part of the strategy, innovation resources must be provided to promote the development of small and medium-sized businesses that can create jobs to meet the needs of the local economy. Costa Rica’s experience in the development of the tourism sector based on sustainability can generate important learnings due to its democratizing effect.
All these lessons throughout the course allow us to more precisely outline a strategy to address the problem of how to increase the skills of the workforce in Costa Rica to increase employment. This strategy, built from a detailed analysis of the causes of the problem, was outlined and consolidated as the weeks went by, incorporating key concepts such as iterative solutions, inclusion, and sustainable growth. Therefore, at the end of the program the focus was expanded to address the unemployment problem in general, understanding that it is not possible for all people who are currently unemployed to be linked to the external knowledge-based economy in the near future. A more inclusive approach recognizes the importance of adopting measures that improve productivity in the domestic sector that allow the creation of new jobs.
Therefore, to achieve concrete results, a strategy must be developed that considers two complementary axes. A first axis consists of improving employability in dynamic investment and export sectors, adopting technology-based approaches that improve the skills of workers in dynamic sectors with the potential to generate employment at the national level. A second axis consists of promoting the productive development of the more traditional economic sector through greater links and transfer of technology and innovation between companies; and take advantage of opportunities for greater participation in GVCs.
Some adjacent questions remain on the worktable to continue building on strategy. How to increase the productivity of national companies so that they can expand their operations and generate more employment? What are the causes of this low productivity? What measures should be implemented soon to increase productivity?
These are just some questions that should continue to be explored, recognizing that development problems are never completely resolved, they are managed and attended to in the best way to minimize them, while a new derived problem appears.
This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. 58 Participants successfully completed this 10-week online course in December 2023. These are their learning journey stories.