Hu­man cap­i­tal

The Pak Banker - - 4EDITORIAL -

IN a fast mod­ern­iz­ing world it has come to be in­creas­ingly rec­og­nized that hu­man cap­i­tal plays a more im­por­tant role than ma­te­rial re­sources in the progress of a na­tion. Ja­pan and Korea are prime ex­am­ples of this phe­nom­e­non. In the last five decades, on the ba­sis of bet­ter ed­u­ca­tion and train­ing they have gone ahead of other na­tions which com­mand far more nat­u­ral en­dow­ments. It is the con­sen­sus of opin­ion among ex­perts that tal­ent, not cap­i­tal, will be the key fac­tor link­ing in­no­va­tion, com­pet­i­tive­ness and growth in the 21st cen­tury. They de­scribe the process as the ' global tal­ent value chain' which is mon­i­tored by the World Eco­nomic Fo­rum. WEF pub­lishes an an­nual re­port ti­tled Hu­man Cap­i­tal In­dex which makes a com­par­a­tive study of how var­i­ous na­tions de­velop and lever­age their hu­man cap­i­tal re­sources.

The Hu­man Cap­i­tal In­dex ranks 124 coun­tries on how well they are de­vel­op­ing and de­ploy­ing their hu­man cap­i­tal, fo­cus­ing on ed­u­ca­tion, skills and em­ploy­ment. This In­dex also pro­vides com­pre­hen­sive in­for­ma­tion on the tal­ent base in each coun­try, in­clud­ing in­for­ma­tion on ed­u­ca­tion lev­els of the em­ployed, un­em­ployed and the in­ac­tive mem­bers of the pop­u­la­tion as well as the spe­cific qual­i­fi­ca­tions of the latest en­trants to the work­force. The Hu­man Cap­i­tal In­dex presents coun­try rank­ings that al­low for ef­fec­tive com­par­isons across re­gions and in­come groups.

Fin­land tops the rank­ings of the Hu­man Cap­i­tal In­dex in 2015, scor­ing 86% out of a pos­si­ble 100. Nor­way (2), Switzer­land (3), Canada (4) and Ja­pan (5) make up the rest of the top five. They are among a group of only 14 na­tions that have crossed the 80% thresh­old. Among other ad­vanced economies, France is in 14th po­si­tion, while the United States is in 17th po­si­tion, scor­ing just un­der 80%. The United King­dom holds the 19th spot and Ger­many 22nd. Among the BRICS, the Rus­sian Fed­er­a­tion (26) scores high­est with a score of 78%, with China next at 64. The re­sults for Asia and Pa­cific, the world's most pop­u­lous re­gion, lie mostly in the mid-range of the Hu­man Cap­i­tal In­dex 2015. In­dia at the 100th rank is among other poor per­form­ers such as Nepal and Myan­mar. Best per­form­ing coun­tries in Asia and the Pa­cific re­gion are Ja­pan rank 5, New Zealand at 9, and Aus­tralia at 13. China and In­done­sia come in the mid­dle range of the in­dex rank­ing 64 and 69, re­spec­tively.

Pak­istan ranks at 113 out of 124 coun­tries in the Hu­man Cap­i­tal In­dex. It scores low­est in Asia and Pa­cific and among the low­est in mid­dle in­come coun­tries. Pak­istan ranks at the bot­tom of the re­gion as a re­sult of its poor per­for­mance on ed­u­ca­tional out­comes. Pak­istan slipped one spot on the Hu­man Cap­i­tal Re­port 2014-15 to 113, and stays just out of the 10 worst coun­tries in the 124- coun­try sur­vey. The ma­jor weak­nesses in the case of Pak­istan in­clude the lack of so­cial safety nets, and in­for­mal em­ploy­ment. With only two per­cent spend­ing on the ed­u­ca­tion sys­tem, Pak­istan has mis­er­ably failed to de­velop its hu­man cap­i­tal.

The Hu­man Cap­i­tal In­dex seeks to serve as a tool for cap­tur­ing the com­plex­ity of ed­u­ca­tion and work­force dy­nam­ics so that var­i­ous stake­hold­ers are able to take bet­ter-in­formed de­ci­sions. Be­cause hu­man cap­i­tal is crit­i­cal not only to the pro­duc­tiv­ity of so­ci­ety but also the func­tion­ing of its po­lit­i­cal, so­cial and civic in­sti­tu­tions, un­der­stand­ing its cur­rent state and ca­pac­ity is valu­able to a wide va­ri­ety of stake­hold­ers. In point­ing to the ed­u­ca­tion and em­ploy­ment out­come gaps, de­mo­graphic trends and un­tapped tal­ent pools, the Re­port's au­thors hope that they can help gov­ern­ments, busi­nesses, ed­u­ca­tion providers and civil so­ci­ety in­sti­tu­tions iden­tify key ar­eas for fo­cus and in­vest­ment. We in Pak­istan spe­cially need to draw the right lessons from the Re­port and take nec­es­sary steps to de­velop and groom our unuti­lized hu­man cap­i­tal.

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