World Bank calls for in­vest­ment in hu­man cap­i­tal

The Jakarta Post - - FRONT PAGE - Grace D. Ami­anti

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.

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