Policies to Develop Human Resources

Now that the importance of human capital in attracting FDI is understood, the next question is: what are the past HRD policy experiences of host developing countries that have strived to attract inward FDI? This section focuses on formal education policies to attract FDI. While vocational training policies also help improve human resources of host developing countries, they are likely to be more important after some influx of FDI into the economy.

Policy Experiences to Improve Basic Education Basic education is the starting point of a HRD policy. Without wide access to quality basic education, host countries not only face difficulties in attracting low valueadded MNEs, but also lose opportunities to move-up the value chain by upgrading worker skills. Experiences in host developing countries that have invested in basic education appear to have led to a large influx of FDI. The following evaluates policies that have mobilised such efforts.

Perhaps the most celebrated policy initiative to expand basic schooling is Education for All, a collaborative action by international donors, governments and NGOs to improve education20. This initiative called upon all stakeholders to plan and initiate measures to improve numerous aspects of educational constraints faced by developing countries. They include lack of access to and quality of basic education and high adult literacy. Although many participating countries made large efforts to attain target goals set during the conference21, many of the these goals have not been achieved, with regions such as Central Asia and sub-Saharan Africa still facing low primary school enrolment rates and adult literacy rates. Gender gaps also remain quite large in these regions.

While the above initiative had a strong impact on increasing donors’ official development assistance (ODA) for basic education, it also stimulated developing countries’ own efforts to improve basic schooling. Mexico is a good case example where compulsory education was increased from primary to the end of basic schooling in 1993.

This effort by the government as well as inputs from donors led to a substantial improvement in access and quality of basic schooling, with enrolments increasing 7-fold while total population tripled, and adult illiteracy decreased from 40 to 12 per cent. The government has also implemented a comprehensive reform of the education sector over the last five years with an emphasis on improving literacy and numeracy levels of the population. As a consequence, the average educational attainment among the population aged 15-64 has indeed increased from 5.9 years in 1980 to 7.95 years in 2000 (Cohen and Soto, 2000). Brazil is another country that has mobilised the Education for All initiative to reform the education system. The reform was undertaken in a direct manner via integrating the Education for All initiatives into the government’s education policies. This has led to an improvement in access and quality as well as the management and financing. Net primary enrolment at the 1st-4th grade has increased from 86 (1990) to 97 per cent (1999), while that of 5th-8th grade increased from 40

(1990) to 62 per cent (1999).

A number of countries have made efforts to increase access and quality of basic education before the Education for All initiative. With the collaboration of the World Bank, Indonesia achieved an unprecedented increase in the number of primary schools of 61 000 between 1973 and 1978, which was later shown to have a large impact on school participation and wage gains (Duflo, 2001). The Indonesian government, with substantial financial assistance from donors including the World Bank, later implemented a scholarship scheme under the Back to School Programme, which allowed further improvement in the access to basic education. Several countries have made attempts to increase the quality of basic education as well as the access. They include Singapore, Indonesia, El Salvador, Haiti and Costa Rica. During the import-substitution phase back in the 1960s, Singapore initiated a scheme called Standardized Education System to streamline necessary types of skills in maths, science and English, to be covered in basic schooling. Indonesia, under the Back to School Programme, promoted improved efficiency in learning and service delivery by providing large lump-sum cash subsidies directly to schools and communities. This is a part of the community-participation scheme22 which became a well-known model for developing countries to gain efficiency and quality in basic schooling. Other countries that followed the community-participation scheme include El Salvador, which emphasised the role of school-based management,and Haiti, which involved NGOs and a religious organisation. Recent developments in improving quality in delivering basic education are the use of technology in schools (World Bank, 1999). Costa Rica has been a front runner in the introduction of computers in classrooms to improve learning efficiency and to prepare students for the knowledgeeconomy.

The Educational Computing Programme and Community Computing Programme started in the late 1980s have already supplied over 10 per cent of all public primary schools in Costa Rica. It has been found that these initiatives had an enormous impact in spreading pre-internet digital culture in the communities (Monge and Cespedes, 2002).

In general, most of the above-mentioned policy experiences have indicated positive impact on quantity and quality expansion of basic schooling. However, care must be taken in applying these experiences to other countries each facing a unique set of constraints. For example, programmes to mobilise information and technology in schools are increasingly popular in developing countries. While computers may potentially be an efficient tool to facilitate learning and to equip students with technological skills, many developing countries simply do not have stable infrastructure nor educational budgets to keep up with the recurrent cost of such investment. For these countries, other means to improve quality of schooling may well be more effective.

Policy Experiences to Improve Post-Basic Education There have also been numerous individual country and inter-governmental efforts to expand upper-secondary and tertiary education. Ireland and Korea are among the countries that have achieved increased access through policy change. To increase enrolments at upper-secondary and tertiary education, Ireland changed educational financing policies to reduce the tuition burden of students. The secondary education fee was abolished in 1967, followed by an introduction of free tertiary education. Korea, while already enjoying a relatively high tertiary school enrolment rate, faced problems in allocating students to subject areas that reflect industry demands (UNCTAD, 1994). In particular, it was difficult to expand students in fields of technology. After identifying that lack of qualification and recognition in these fields led to low enrolments of students in these fields, the government decided to redesign a technical qualification system that allowed graduates who studied these subjects to have the same status as other professionals.

Several countries have also tried numerous policy initiatives to improve the quality of tertiary education. They include Singapore, Ireland and Africa.

Singapore’s Investment Promotion Agency (IPA): the Economic Development Board (EDB) has recently made an attempt to shape the Singaporean education system which is highly responsive to industry demands. This effort began in 1997 with the World Class Universities Programme, with an aim to set up ten world educational institutions in Singapore to deliver quality courses on demand-driven subjects. Singapore already has eight American and European schools that have strong links to industries. The amount of education and R&D delivered through these schools is expected to meet the skills needs of the industries.

Ireland’s IPA: the Irish Development Authority (IDA) also has a role in shaping educational policy in synchronisation with industry demands. In 1997, for example, the Experts Group on Future Skills Needs was formed to identify skills needs of sectors and recommend action for HRD. Furthermore, the Irish IPA led a strategy called Education, Skills and Research, which includes research programmes in tertiary education to promote R&D and innovation capacity of the economy.

In spite of the over-mounting problems to expand basic education, a number of countries in Africa, with the assistance of the World Bank, have initiated African Virtual University to overcome supply and quality constraints in tertiary schooling. This initiative, begun in 1997 with 17 African countries participating, has already produced 24 000 graduates in the field of technology, engineering and business. The main idea of this initiative is to provide demand-driven tertiary education of high quality in areas where either infrastructures or the type/quality of courses are non-existent. However, to the extent that many of the graduates of these courses may go outside Africa, the true impact of the African Virtual University, on upgrading skills in Africa is unclear. However, experience in Singapore provides a good example for countries that aim to attract high value-added FDI.

Policy Initiatives in the EU-zone: The Minimum Learning Platform Attempts have been made in a number of EU member countries to set a so called “minimum learning platform” which defines areas of knowledge and competence that are necessary in the forthcoming labour market. They take into account the new skill requirements such as communication skills, understanding ICT, ability to learn independently and further personal and social skills (McIntosh and Steedman, 1999).

Furthermore, the “minimum learning platform” is expected to include not only skills that increase employability, but also skills that relate to all aspects of human conditions, such as personal and social skills (McIntosh and Steedman, 1999). The concept of minimum learning platform contains an important message that the minimal skills necessary to meet the future labour market demand is increasingly moving towards higher technology areas as well as personal developments.

Policy Conclusion Past trends in inward FDI and policy experiences lead to two policy conclusions.

First, HRD policies should at the minimum, address access-to and quality-improvement of basic education. Without a sound basic education policy, the education system will constantly feed under-skilled workers into the labour market, which gives a bad signal for potential MNEs seeking location advantages. While basic education is important in itself to upgrade human capital, it also provides means for further increasing human capital by opening options for tertiary education, which has become increasingly demanded by high-value added MNEs. Even for countries that intend to attract primary and resourcebased manufacturing FDI, basic education is important since it has a long-lasting effect on other key investment climates such as socio-political stability, health and civil liberty.

However, effective ways to rapidly improve basic education is unclear from past host country experiences. It should depend on specific educational constraints faced by each country.

Second, HRD policies must be demand-driven. Past experiences indicate that participation by industries and foreign academic institutions that have close ties with high-technology industries can be effective. Moreover, experiences in Singapore and Ireland show that IPA-driven educational policies allow demand sensitive HRD policy reforms. To the extent that not all IPAs have authorities to have an impact on education policy making, IPAs should collaborate closely with the Ministry of Education.

OECD DEVELOPMENT CENTRE Working Paper No. 211 HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES by Koji Miyamoto To learn more about this author, visit OECD Development Centre's Website.

Like this article? Share it with your friends

E-Mail | Print | More

Related Articles
Human Resources Consulting
	Whether it’s for education, training, or data management, handling legal affairs or drafting policies, human resources consulting can help organize your company so that it is better able to reach the next level of s...
Summary: HUMAN CAPITAL FORMATION AND FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES
	This paper synthesises the existing literature on human capital formation and foreign direct investment (FDI) in developing countries.
Human Resources Software
	We’ve heard it all before: it takes almost three times as much money to recruit and train new employees than it does to retain and train the ones you already have. As such, small business owners are often willing to...
THE VIRTUOUS CIRCLE OF HUMAN CAPITAL FORMATION, INWARD FDI, AND TECHNOLOGY TRANSFERS
	The past two sections described how host developing countries attract MNEs. It is found that while basic education for all adults is the key starting point, a demand driven HRD at a higher level is necessary to at...
Human Resources Outsourcing
	As small business owners, we have all come under the dual crunch of time and money pressures. Often times, when we’re trying to run an entire company, we can barely find the time to look after ourselves. How many of...

---

Related Forum Posts
	New topics
	New Small Business Topic
	Finding Opportunities for Innovation and Growth
	And This is Handy Too!
	Mastermind Article
	Re: Tough decision, would appreciate your input.
	Working with Suppliers
	Business Form Templates