The first section explains why investing in skills matters not only in stimulating economic growth, but also in helping developing countries enter higher segments of the value chain. The second focuses on the phenomenon of skills mismatches and analyses the different reasons why they occur in developing countries. It shows how both skills shortages and surpluses have a negative impact on the economies of developing countries. The third section highlights how co-ordination failures affect the skills market and provides a series of policy recommendations to help developing countries address the skills challenge.