Vol. 4 Num 217 Sat. January 03, 2004  

Low growth to prosperity: Do we have any human resource development strategy?

The condition of endogenous growth may have a strong link with basic foundation of human capital. This human capital may be defined by different grades that enter the production function differently and affect, in turn, the rates of return to physical capital. Thus the development of human capital may be defined in two ways, one with basic education and the other with the knowledge, skills, competence and other attributes embodied in individuals that are complementary according to the structural condition of the country. Accordingly, human capital may also be viewed as a factor of production just like -- but distinct from -- physical capital and labour. The physical capital may provide a necessary, but not sufficient condition for the production of goods and services. Developing economies suffer not only from a shortage of physical capital but also from a severe shortage of human capital, although they might simultaneously have an abundance of labour with basic education. This is also borne out by studies reporting higher rates of return on investments in human capital in developing economies than in developed ones.

Development of human capital in the form of basic education may be considered as a primary requirement for achieving economic development. Economists' stress the importance of human development for societies to prosper economically and also for sustainable development. It is often argued that human capital in the form of basic education can make economic transactions more efficient by providing economic participants with access to more information, thus enabling them to coordinate activities for mutual benefit.

Many experts point to a number of possible benefits of knowledge, human skill development for developing countries. It is often argued that incentives that are built into the institutional framework for skill development and accordingly play a decisive role in shaping the kinds of skills and knowledge are more effective. In the East Asian context, for example, it is the egalitarian education policies, which have played a pivotal role in their economic growth. It is further argued that the increased equality has led to enhanced political and social stability, thereby creating a better investment environment. The lack of complementary factors such as non-availability of skilled labour further added to the problem of capital flow to the capital-poor countries such as Caribbean economies with all features of successful intervention in the basic education.

There is a strong relationship between investments in human capital and economic growth. The need to improve the quality of human resources is particularly important for developing nations, given its importance in the attraction of foreign direct investment. Although the developing world accounts for a steadily increasing share of world manufacturing (partly driven by lower wages and costs), competitive advantage based on low wages is inherently a transitory phenomenon: sooner or later, developing countries will face the need to improve their skill as other lower cost producers emerge. This has led the researchers to understand the structure of human capital development of a country. This is particularly true in the context of Bangladesh where the country failed to exploit her vast population into human capital. Needless to mention that primary education generates the highest rates of return, secondary level has lower returns while tertiary level has higher returns than the secondary level.

Many have argued that the level of education is below the performance required to integrate entrants to the labour force. They emphasised the need for a well-educated work force as the key determinant of development in the developing economies with particular reference to Bangladesh. According to them part of the low productivity levels is partly explained by ineffective education. A significant number of population has been at the highest risk of low academic achievement. The group in addition to rural children is vulnerable to the inequities in the structure of some education systems. The fact that the poor have low levels of education in all countries highlights the need to address educational issues.

It is true that there is a strong connection between the key achievements of human development in the form of basic education and the importance of the investments made in this respect in developing economies. Of late, the quality of service is declining. The studies (for example World Bank 1996) find that real expenditures on education and health have fallen in many countries over the past decade. As a consequence, physical structures have deteriorated, equipment is lacking, and teaching aids are non-existent in most schools.

The skill development programme of Singapore may have accelerated growth for many developing economies. Key aspects of Singapore's context (small size, export orientation, the need to attract foreign direct investment) also exist in other developing economies including Caribbean economies. The countries may not however have all the institutional preconditions that prevailed in Singapore.

There are many different types of public and private training programmes in Bangladesh in order to address issues such as low skill levels and high rate of unemployment rates among youth. In some economies, ineffective training schemes impede an effective labour market for growth. This is due to limited labor market information systems and weak dialogue between public educational institutions and employers. Government programmes in particular have found it difficult to respond to the changing needs of the labour market, and to provide up-to-date equipment because of bureaucratic and fiscal pressures. A recent example of call centre (BPOs) may be cited in this respect. In recent time millions of jobs are being transferred to India and China from developed economies. Unfortunately, Bangladesh so far has failed to exploit the changing scenario in this respect. Because there are very few computer literate English speaking finance graduates in the country. Here lies the famous argument: government failure leads to market failure.

It is useful to cite the example of Singapore in this context due to the fact that Singapore's growth has largely been driven by larger inputs of capital and labour rather than productivity growth. It is often argued that Singapore's acclaimed skills development system may be considered as an example of a concerted national and integrated effort, given its multilevel focus and private sector collaboration. It is successful because it is linked to other national policies (e.g., economic development, technology transfer), and various institutions appear to work together. One can examine several key actors and institutions in this respect. The Ministry of Trade and Industry (MTI) played a key role for broad economic development policies. A range of semi-autonomous agencies played an active role. For example the Economic Development Board (EDB) has the primary function of attracting foreign direct investment and foreign investor's demands for the required skilled personnel.

Likewise the Productivity and Standards Board (PSB), are there the Institute of Technical Education (ITE), and other industry-specific bodies such as the Precision Engineering Institute (PEI), to meet the skills demands of foreign investors. The National Manpower Council (NMC) of Singapore as a second key institution consults MTI and Ministry of Education( MoE), Polytechnics and Universities in order to prepare the intake and output targets of ITE. The council for Professional and Technical Education (CPTE) has over all responsibility for matching the demand and supply for skills in the economy. Based on existing levels and estimated future needs, this body works together with different parts of the education system (Universities, polytechnics and schools) and skills development institutions (ITE, and other industry specific training institutes) to ensure the supply of sufficient numbers of workers with the desired level of skills for industry requirements. A third key actor is the MoE, which has direct jurisdiction over schools, polytechnics, universities and the ITE.

The above may be considered as powerful ingredient of development. The education and the skill development strategy of the country needs to be reexamined. The institutional aspect of Singapore model may have strong relevance in this context. The system may play an important role in enhancing long- term growth. Unfortunately, our existing structure is too weak to transform. Such transformation should be the only way to move our economy from low growth to prosperity.

Dr Arindam Banik teaches economics at the Department of Economics, University of the West Indies, Cave Hill Campus, Barbados.