Honorable Secretary Arsenio Balisacan of NEDA;
Honorable Secretary Renato Solidum, Jr. of the Department of Science and Technology;
Other Government officials; The panelists of this forum; Leaders of academia, civil society, the private sector; Development partners;
Esteemed guests, colleagues, and friends.
Good morning!
The Philippines is on track to enter upper middle-income status in the next couple of years. This is because income per capita has increased at a healthy rate over the past 14 years, putting the Philippines in a new higher income category in the WB classification. Credit to good macroeconomic management, continuity in structural reforms and infrastructure development and steadfast financial support of Filipinos working overseas to their families back home.
But merely reaching Upper MIC status is a low bar for the Philippines. The aim should be to catch up with Upper MIC not just in income, but also in the population’s access to quality education, good quality and affordable health care services, quality jobs and effective social protection, all of which are critical to maximizing productivity and all of which are highlighted in the PDP.
While the Philippines has been making progress on some of these dimensions, it is still lagging regional peers. Indeed, the Philippines’ Human Capital Index (HCI) is estimated at 0.52, which means that a child born in 2020 can achieve only about half of their productive potential by the age 18. This human capital index is well below those of neighboring upper-middle income countries, such as Malaysia whose HCI is 0.62 and Thailand whose HCI is 0.61. It is also lower than lower middle-income peers, Indonesia and Vietnam.
Investing in human capital is therefore urgent and important for the Philippines. Not only the country needs to catch up with regional peers, but also the long-term payoff for the Philippines is immense. The Philippines is one of the very few countries in East Asia that can potentially become rich before getting old. While China, Vietnam, Thailand and Malaysia are aging fast, the proportion of working age population in the total population of the Philippines is projected to continue increasing for another generation.
But for this vast reservoir of labor to drive growth and technological progress, the country needs to invest more and better in its children and youth. It needs to equip them with the skills to meet the demands of industries and innovators. It needs to invest more in STEM areas.
More broadly, the long-term future of growth and whether the Philippines will become a high income economy in a generation or so depends on the quality of the country’s talent management. This has two dimensions. First investing in the human capital of children in the first decade and investing in the human capital of the youth. The second dimension is to better utilize the country’s large reservoir of talents, including Filipinos working abroad in various industries such as healthcare, hospitality, maritime and others. My home country Senegal has recently started producing oil and gas offshore. Guess where some of the competent people working on the platform are from? Right here. The Philippines should not just invest in human capital, it should maximize the utilization of its talents, both in the country and abroad.
In brief, the wealth of this country is its people, and its prosperity is generated by people.Prosperity is maximized when people reach their maximum productivity levels. For that, they need to be in good health, well-educated and well protected from shocks. That is achieved by investing in human capital. Prosperity is also maximized when the talent of every Filipino whether at home or abroad is harnessed.
The report provides some details on the important question of « How ». Let me emphasize three recommendations.
First. Don’t miss the first 10 years. That’s when the social, emotional and cognitive skills are shaped and when children's potential to learn, earn, innovate, and compete is formed. That’s when the return on human capital investment is the highest. Good nutrition in early years as well as positive early experiences affect the quality of the brain’s architecture, laying the foundation for future learning, health and development.
Second. Avoid a single sector lens. Investments in the nutrition, primary health care, basic education and social protection are synergetic and complementary. They need to be coordinated for maximum results. For instance, if children are not well-nourished, they may not do well at school. Without social protection, poor families may pull children out of school when they face shocks.
Third. The role of LGUs is essential in the Philippines context. That’s where multisectoral interventions and programs come together and are implemented. But a large number of LGUs lack the capacity and resources to invest adequately in early years. Effective partnership with the central government, the private sector, CSOs, development banks is important to improve the situation.
The Work Bank remains committed to play its part, by supporting the government as it channels resources where they are needed the most. The most recent world bank-supported projects in nutrition, health care, education and water emphasize the importance of multi-sectoral interventions and they spatially target the LGUs that display the largest gaps and needs. We hope that these would modestly contribute to the objectives of the PDP.
