World Bank calls for investment in human capital
As the global economy is seen to be entering a temporary recovery, the World Bank has called for governments to invest more in human capital development to ensure long-term economic growth and further reduce inequality.
In order to ensure that governments focus their attention on developing their people, the bank is preparing what it calls the Human Capital Index, which ranks countries on how they are developing their human capital.
The initiative seems similar to the World Bank’s Ease of Doing Business Index, which ranks countries according to the conditions companies encounter when they try to operate there.
The upcoming index provides information about what kind of policies and investment decisions countries can take to improve their standing.
“All countries need to invest more in their people,” said World Bank Group president Jim Yong Kim in his remarks on the sidelines of the 2017 Annual Meetings of the IMF and the World Bank in Washington DC, United States, on Thursday.
Governments are expected to push private sector investment to fund commercially-viable projects, so that their countries can instead make use of scarce state funds for critical investments in health and education — the two most crucial sectors in human capital development.
The bank’s proposed index is called the Human Capital Project, which will show heads of state and finance ministers how longterm investments in their people can help grow economies, and is expected to help create the political space for leaders to make these critical investments.
The World Bank’s Kim said his institution would be working with a wide range of experts in economics, global health and education to develop the project, over the next year leading up to the 2018 Annual Meetings of the IMF and the World Bank in Bali, Indonesia.
He claimed that the project had the potential to be a game changer in the same way that the bank’s Doing Business Report was when it launched 15 years ago.
“This is the latest effort by the World Bank Group to meet rising aspirations all over the world, to truly create equality of opportunity and build new foundations in the project of human solidarity,” he said.
Commenting on the World Bank’s initiative, Finance Minister Sri Mulyani Indrawati said it was a good benchmark to help policymakers all around the world to compare themselves with each other and learn anything new to support their policy-making activities in human capital.
As Indonesia still has many problems with tax collection, the government struggles to balance its spending for infrastructure and social protection, while trying to manage the budget deficit.
In social protection, Indonesia has mandatory spending programs in education and health, which must be allocated at 20 percent and 5 percent of the budget, respectively.
With improvement in tax capacity, governments can address inequality problems that often show amid the scarcity of basic infrastructure and services like health and education, the International Monetary Fund (IMF) said during the Annual Meetings in Washington DC.
In its October edition of the Fiscal Monitor report, the International Monetary Fund (IMF) argues that fiscal policy is powerful in tackling inequality, which has been declining since the late 1980s due to catching up across countries, and in particular, the fast growth of large populous economies like China and India.
However, large countries with large populations — China, India and the US — have recorded increases in inequality, and developing economies have a lower redistribution of taxes and transfers due to lower tax revenues and spending, the IMF says.