New World Bank research highlights the importance of investing in human capital to improve economic productivity
BALI, Indonesia, October 11, 2018—The Indonesian Government’s strong public policy action to invest in its people and improve children’s health and learning will transform the nation and ensure economic growth and productivity, as confirmed by findings from new World Bank research released today.
The Human Capital Index released at the WB-IMF Annual Meetings in Bali measures the amount of human capital that a child born today can expect to attain by age 18, given the quality and coverage of the health and education in the country she lives.
Indonesia receives a score of 0.53 and ranks 87 out of the 157 countries included in the index. Indonesia performs significantly better than the average of its lower middle-income country peers (average score of 0.48), but is below the average for East Asia and Pacific (0.62). The score reflects that while Indonesia has made significant progress in recent years, the human capital deficit accumulated through decades of underinvestment still exists.
The Government of Indonesia is taking strong action to reverse the country’s longstanding human capital gap, and is implementing an ambitious program of investments in its people to improve health, nutrition, and education outcomes, which the index shows will be key for developing human capital and a productive labor force.
Important policy reforms are also being implemented. The Government has launched and is implementing an ambitious program to reduce stunting, which will make a significant contribution to improving the country’s human capital and HCI ranking. The US$14.6 billion National Strategy to Accelerate Stunting Prevention, launched by the President of Indonesia in August 2017, will benefit 48 million pregnant mothers and children under 2 in the next four years. This investment is already improving Indonesian families’ access to a package of quality key services, from health and nutrition to education and sanitation, and is part of a large national movement to reduce Indonesia’s high stunting rates.
“I applaud the Government’s strong leadership and action on the human capital agenda and for taking this challenge so seriously”, said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste. “The Government’s investments in human capital are key for Indonesia’s growth and productivity. The country is doing the right thing by implementing strong and targeted reforms to reduce stunting, increase the coverage of social assistance programs such as the PKH, and investing in improving the health and education of its children. The investments made today will provide immediate benefits, but importantly also have impacts long into the future and ensure that Indonesia’s children of today will grow up to be healthy, prosperous and productive adults”.
Indonesia’s score of 0.53 means that a child born in Indonesia today will be 53 percent as productive when she grows up as she could be if she had complete education and full health. Singapore, which is ranked number one on the Index, has a score of 0.88. Given the changing nature of work due to technology and the need for increasingly high-skilled jobs in the future, it is critical for governments to have a long term plan and commitment to invest in human capital.
“Indonesia is implementing an ambitious plan of action to strengthen and accelerate its investments in human capital. These investments are crucial to fill the human capital gap and ensure that Indonesia’s people, its most important resource, reach their full potential so they can take full advantage of the many opportunities in the labor market. The Government’s program is part of a long term plan to continue investing in its people, and it is crucial that this commitment and leadership is sustained in the years to come”, said Camilla Holmemo, World Bank Program Leader for Indonesia and Timor-Leste.
The Human Capital Index is part of the World Bank Group’s Human Capital Project, which recognizes human capital as a key driver of inclusive growth. The Index is made up of five indicators: the probability of survival to age 5, a child’s expected years of schooling, harmonized test scores as a measure of quality of learning, adult survival rate, and the proportion of children who are not stunted. In addition to the Index, the Human Capital Project includes a program to strengthen research and measurement on human capital, as well as support to countries to accelerate progress in human capital outcomes.