3 ways Malaysia could boost the productivity of its human capital
13 April 2019
Nurturing Human Capital
As Malaysia looks to become a high-income and developed nation—particularly one where development progress is measured in much more than just GDP—ensuring that human capital is effectively nurtured, developed and protected is critical. With the advent of digital and disruptive technologies changing the nature of work, this challenge is becoming increasingly central to Malaysia’s future development progress. This puts an increasing premium on high-order cognitive skills, such as complex problem-solving, socio-behavioral skills, reasoning and self-efficacy. Building these skills effectively will require a transformation in the way Malaysia invests in its human capital
Human capital—comprising the knowledge, skills and health that people accumulate over their lives—has been a key factor contributing to sustained economic growth and poverty reduction rates in many countries over the past five decades, especially in East Asia. Education, health and social protection all play vital and complementary roles in the development of human capital.
The World Bank’s new Human Capital Index is a cross-country metric designed to forecast a country’s human capital by tracking the trajectory, from birth to adulthood, of a child born today. In addition, the World Bank has also initiated the Human Capital Project, a global effort to accelerate more and better investments in people for greater equity and economic growth.
In the latest edition of the Malaysia Economic Monitor, we investigate how Malaysia fares using this method. We found that overall, Malaysia scores 0.62, meaning children in Malaysia will be 62 percent as productive as they could be in adulthood compared to optimal health and education outcomes. Overall, Malaysia ranks 55th out of 157 countries, and while performance is good in certain components of the index, it remains poor in others. Relative to other countries, Malaysia does well in child survival, expected years of schooling and overall health conditions. Notwithstanding, there is significant room for improvement in the areas of child nutrition and learning outcomes.
Provide Universal Access to High-Quality Early Childhood Care and Education
Malaysia’s underperformance in terms of human capital is particularly pronounced in terms of education attainment, with an average learning gap of 3.1 years. This is the difference between the expected number of years of schooling versus the number of learning-adjusted years of schooling. To enhance learning outcomes, a key measure would be to provide universal access to high-quality early childhood care and education to ensure that children are ready for school. International evidence has shown that the quality of early childhood and preschool education programs are directly linked to better development of children’s cognitive and social skills.
Efforts to ensure universal access to early childhood care and education have contributed to the remarkable educational performance of countries like Korea and Japan. Improvements to learning assessment systems could also improve outcomes. Here, too, international evidence shows that the quality of an education system can only be accurately determined by an effective framework for assessment, including classroom-based, national and international comparative assessments. Finland and Singapore provide particularly good examples in this area. When implemented correctly, this type of continuous assessment can have a major impact on student learning outcomes.
Overcome Childhood Stunting
Expand and Reform Social Protection Programs
Protecting human capital from the impact of shocks, such as loss of employment, or family illness and injury through social welfare programs is of key importance. Rigorous evidence from around the world demonstrates the positive role social protection programs can play by providing vulnerable households with the income support to fight poverty for human capital development. Malaysia’s current social protection system could be both expanded and reformed to integrate a mixture of mandates and incentives, thereby helping households better invest in human capital.
Accelerating human capital development will be critical in enabling Malaysia’s successful transition to a high-income and developed nation. With human capital, the country can boost productivity to ensure that it stays well on its development path and that all Malaysians are included in the process of growth.
Author: Richard Record, Lead Economist, Macroeconomics, Trade and Investment Global Practice at World Bank
The article originally appeared on Brink, the digital news service of Marsh & McLennan Insights.