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Human development: Are we spending enough?

Published: Tuesday, May 19, 2015

FE-PRI EAU Special

Posted : 19 May, 2015 00:00:00


Human development: Are we spending enough?

Zarif Rasul

Human development: Are we spending enough?

Human capital is broadly defined as the education, skills, training, health and other related  factors of the population that determine their overall productivity and capacity to seize opportunities created by economic progress.

Formation of human capital is paramount for sustaining economic growth and poverty alleviation. The role of human capital as a crucial determinant of growth is well documented by empirical evidence for a broad group of countries, underscoring the need for commensurate investment in human development.

Promoting human development entails imparting quality education and training, improving and sustaining health and nutrition, and planning population.

Broadly speaking, education and health are thus the key components of human development, which are tied to economic growth. Instilling education at all levels and ensuring proper access is a crucial input for empowering people and for providing them the opportunity for productive employment in the future.

Proper education not only enhances efficiency but also augments the overall quality of life. A healthy population is also an engine for economic growth. Improvements in factors like calorie intake and life expectancy have been shown to be significantly correlated to economic growth.

Countries with a well-educated, healthy population, equipped with the right values and competencies, are therefore in a better position to prosper.

Recognizing this link between human development and economic growth, development plans with education have been established as a high priority. This spending priority has served Bangladesh well as reflected by the progress made in the education sector.

The country’s primary net enrolment is close to 100, while enrolment in secondary and tertiary education continues to improve. There have been substantial gains in primary school completion rate.  Gender disparity in primary and secondary education has already been eliminated.

In the health sector, health outcomes continue to improve as measured by progress towards attaining the Millennium Development Goals (MDGs). There has been a marked decline in maternal and child mortalities. The country’s progress in declining fertility rates, which, at an aggregate level, is now nearing replacement level, has also been another success story.  

Despite the spending priority, Bangladesh’s position in the lower echelon of the Human Development Index naturally raises the question: Are we spending enough? Public spending on human development as a share of the country’s gross domestic product (GDP) has fallen from 2.8% in the fiscal year (FY) 2009-10 to 2.4% in FY 2013-14. Spending on education has fallen from 2.0% of GDP to 1.7%, while health spending remains below 1.0% of GDP.

This downward trend in human development spending is of great concern, and counter-productive to the goal of inclusive and shared economic growth and poverty alleviation.  

A quick comparison with other Asian countries reveals a rather alarming picture regarding Bangladesh’s performance. India, Indonesia and the Philippines spend around 5.0% of their GDP on human development, while more advanced economies like Malaysia and Vietnam spend over 8.0%.

One of the main reasons for the rapid growth of Vietnam in particular is equitable initial and continued investment in human development. Just two decades ago in 1990, Vietnam’s per capita GDP stood at a mere $98 (in current dollars), while that of Bangladesh was $280. Thirteen years later, per capita GDP in Vietnam rose to $1910, and $957 in Bangladesh. This phenomenal improvement in Vietnam is mainly attributed to advancements in human development along with pragmatic leadership and strong institutions.

Bangladesh’s aspiration to reach the status of a middle-income country through accelerated growth by 2021 will thereby require continued higher spending in human development.  

The progress in human development in Bangladesh is marred by a number of issues. Issues of quality and inequality in education impede further development, while service delivery and governance in the health sector are serious challenges. Below-par physical infrastructure of educational institutions further detract overall performance. High dropout and repetition rates raise concerns about the low level of learning.

Disparity between the poor and non-poor, in terms of educational attainment and performance, stands out, with the problem being particularly acute in urban slums. Despite the achievement of gender parity in primary and secondary education, females continue to lag behind in higher secondary and tertiary completion rates.

Low enrolment in vocational and technical education, coupled with quality and employability issues, illustrates the need for reform in that sector.   

In the health sector, severe malnutrition among children and women continue to undermine progress. Service delivery, especially in the hard-to-reach areas, and capacity of the health workforce need further improvement.

In order to efficiently respond to the above-mentioned challenges and shortcomings, public spending in human development, leading to capacity building of teachers, health personnel, and effective operation of institutions, among other modes of action, needs to be raised.

As Bangladesh strives to break out of the mould of 6.0% growth, structural changes such as the manufacturing sector turning more capital and skill intensive, will require an advanced level of human capital. However, deficiencies in the skill level of workers have been identified as a major constraint to economic growth.

The labour force of Bangladesh predominantly consists of workers with little or no education. Of the 56.7 million workers, some 40.8 per cent have, no education, while 23 per cent have up to a primary education.

The greatest deficiency in educational attainment is illustrated by the extremely low share of 0.2% of workers with vocational education.

The low attainment of education among the workforce translates to low productivity and deficient human capital.

To bring about accelerated growth, it is imperative to ensure that the skill level of the workforce are aligned with the pattern of growth. With advanced human capital armed with technical skills — a prerequisite for further growth, greater focus on secondary and tertiary education  as well as vocational and technical education is required. This calls for more spending in human development to adequately prepare the human capital base to such an extent so that they are able to respond to the anticipated needs generated by a growing and changing economy.

Increased spending on human development should therefore be the highest priority for the upcoming budget. Adequate investments in human capital development will allow Bangladesh to tap into the enormous potential a burgeoning population brings about to facilitate sustained growth and poverty alleviation.

(The writer is Zarif Rasul,  Economist at PRI. FE-PRI Economic Analysis Unit)