Human Capital Index: Pakistan’s value lower than South Asia’s average: World Bank

ISLAMABAD: Pakistan’s Human Capital Index (HCI) value of 0.41 is lower than the South Asia average of 0.48, and human capital outcomes are more comparable to those in Sub-Saharan Africa, which has an average HCI value of 0.40, says the World Bank.

The World Bank’s report, “Pakistan Human Capital Review (HCR), Building Capabilities Throughout Life”, stated that while the country had reached middle-income status and made significant progress in reducing poverty over the past two decades, low human capital outcomes limit Pakistan’s further progress, capping its growth and development prospects.

Low human capital development could limit the realisation of its ambition to become an upper-middle-income country by 2047. Human capital makes up 61 percent of Pakistan’s wealth, yet its levels of human capital are among the world’s lowest, the bank added.

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The bank recommended that Pakistan needs a healthy, skilled, and resilient population to ensure high economic growth that is both sustainable and inclusive. With the right policies and investments, the growing working-age population can become healthier, more educated, more skilled, and more productive—and can earn more if the economy generates more and better jobs.

The bank underlined the need for Pakistan to significantly increase investments in human capital to address the severe gaps it faces in education and health outcomes particularly.

Pakistan’s HCI value of 0.41 is low in both absolute and relative terms. It is lower than the South Asia average of 0.48, with Bangladesh at 0.46 and Nepal at 0.49. If Pakistan continues on its current trajectory in human capital development, its GDP per capita would grow overall by a mere 18 percent through 2047, the 100th anniversary of its founding.

If Pakistan can boost human capital investments and its HCI value to the level of its peers, per capita GDP could grow by 32 percent. But if Pakistan improves both its human capital and its use of human capital, bringing adults into employment outside farming, GDP per capita could rise by 144 percent, eight times more than under business as usual.

The report noted that early childhood development outcomes in Pakistan are low relative to those in middle-income countries. Only 40–59 percent of young children, depending on the province, are reported by their parents to be developmentally on track, whereas, the average in peer countries is 75 percent. Some 40 percent of children under five are stunted, and 18 percent under five are wasted. And fewer than one in five children get enrolled in early childhood education.

The report noted that an estimated 20.3 million of Pakistan’s school-age children are out of school. In addition, Pakistan’s learning poverty rate—the percentage of children unable to read and understand a short age-appropriate text by age 10—stood at 75 percent before the Covid-19 pandemic and the 2022 floods, more than 19 percentage points above the average for lower-middle-income countries.

After the pandemic and the recent floods are accounted for, learning poverty is estimated to have risen to 79 percent. The main determinants of nutrition are food intake, environmental health, and care for children and women, and very few of Pakistan’s children under two have adequacy on all three.

The proportion of children with multiple adequacies is low in Pakistan: more than 26 percent of children lack adequacy on any of the three determinants, and fewer than two percent of children have adequacy on all three dimensions. The pandemic has likely erased nearly a decade of progress on human capital for both boys and girls.

Simulations accounting for the pandemic show that Pakistan’s HCI value would be reduced from 0.41 to 0.37, lower than its 2012 level. The main culprit is the reduction in the quantity of schooling (due to dropouts) and in quality (due to learning loss), both of which have been confirmed by empirical studies.

Economic gains from human capital can be realised only if people can utilise their skills and ingenuity in productive activities, such as gainful employment in the labour market. After utilisation in the labour market is adjusted for, Pakistan’s HCI value falls from 0.41 to 0.20.

There is an enormous gender inequality in utilisation of human capital: the utilisation adjusted HCI value is 0.31 for men and only 0.08 for women. This underscores the low female labour force participation, at just over 20 percent (and even lower for those age 15–24), in Pakistan. About 60 percent of working-age women are not in employment, education, or training, the report added.

“Strong human capital is essential for sustainable economic growth, to prepare the workforce for the more highly skilled jobs of the future, and to compete effectively in the global economy,” said Mamta Murthi, the World Bank’s Vice President for Human Development.

Copyright Business Recorder, 2023