Brief Analysis of Human Resource Development Problems in Developing Country

Abstract:

In general, human resource development constitutes one of the most crucial problems for developing countries, including Indonesia. In each indicator of HDI: education, life expectancy at birth, and GDP; all provinces in Indonesia have experienced similar condition. UNDP (2002) places Indonesia on 110th position of 173 countries for getting 68.4 point, while in the previous year, it shows that of 162 countries observed, Indonesia lies on 102nd position and has only 67.7 point (UNDP, 2001). Although this feature is better than in 1999 (UNDP, 1999) when Indonesia ranked 109 of 174 countries with 64.3 point, but worse than in 1996 (UNDP, 1996) when Indonesia reached the best performance and ranked 99 of 175 countries with 69.0 point. At that time, Indonesia was categorized as medium human development country. However, compare to UNDP standard of HDI for developed countries on 80.0 point or more, Indonesia’s features are far lagging behind.

Introduction

As a developing country, the low of human resource development constitutes one of the most crucial problems in Indonesia. It can be seen from human development index, which is formulated based on social development performances or indicators such as life expectancy at birth, adult literacy rate, GDP per capita, and school gross enrollment ratio. As UNDP reports, Indonesia HDI has tended to worsen since this country fell into severe financial and currency crisis in 1997. Similarly, such situations can easily be found in local / provincial level.

It is clear that until now, economic crisis is the biggest obstacle for Indonesia to accelerate its development programs. Before the crisis occurred, Indonesia has had laudable achievements both in economic and human development aspects for over the past three decades (1960s-1990s). As pointed out by BPS, BAPPENAS, and UNDP (2002: 1), these successes range from reductions in poverty and inequality to increases in life expectancy and literacy. Infant mortality declined substantially following improvements in access declined substantially, following improvements in access to health care and sanitation. At the same time there have been considerable improvements in the status of women: male-female gaps have been narrowing at all levels of education, and women's earnings have been increasing as a proportion of earned family income. Meanwhile disparities between the provinces have also been shrinking.

Unfortunately, the sudden and unexpected crisis of the late 1990s dealt a serious blow to Indonesia's journey to progress. For most people the immediate and sharpest impact of the crisis has been through inflation. Between 1997 and 1998 inflation surged from 6% to 78%, while real wages fell by around one-third. As a result there was a sharp increase in poverty. Between 1996 and 1999 the proportion of people living below the poverty line jumped from 18% to 24%. At the same time, poverty became more severe as the incomes of the poor as a whole fell further below the poverty line. In addition, the crisis seems to have affected women and children more adversely. The overall impact of the crisis was reflected in the deterioration of Indonesia's human development index (HDI) – largely the result of the drop in real incomes (ibid).

In the future, challenges to refurbish the developmental performances are quite complicated, not only due to economic crisis and their stern impacts, but also unstable changes and reforms carried out in creating new and better social and economic systems. Based on such complexity of social problems, this paper tries to examine the difficulties of promoting human development in Indonesia, with particular emphasize on provincial level (West Java Province as the case study). Three aspects of human development will be highlighted, education aspect (literacy rate and school gross enrollment ratio), life expectancy at birth / infant mortality aspect, and income aspect (GDP per capita). Other aspect such as employment will be added to make the study more comprehensive. Brief theoretical note on the role of human capital will precede the empirical analysis.

Role of Human Capital on Development and Determinant Factor of HDI

It is unquestionable that humans play important roles in development. There is general assumption that human capital has positive or direct correlation with economic (and social) development of a country or society. It mans that the higher the quality of human capital, the higher the economic performance that might be achieved. As stated by Zidan (2001), there is general agreement that human capital formation is one of the critical causes of economic development. Some studies summarized below also verify that human capital constitute a determinant factor in generating economic development. Based on those studies, people, organization, and government should pay sufficient attention to human (capital) development and efforts to improve it systematically.

Trying to make connection between human capital and economic development, Hasan (2001) describes that in the traditional neoclassical growth models developed by Robert Solow and Trevor Swan in the 1950s, the output of an economy grows in response to larger inputs of capital and labor (all physical inputs). Non-economic variables such as human capital or human health variables have no function in these models. In economic lexicon, this simply means that the technological progresses are “exogenous” to the systems.

However, in the mid 1980s, a new paradigm was developed in the literature, mostly by Paul Romer (1986), which is now commonly known as “endogenous growth models”. Here, the concept of capital includes human capital. In simple terms, this means that if the firm that invests in capital also employs educated and skilled workers who are also healthy, then not only will the labor be productive but it will also be able to use the capital and technology more efficiently. This will lead to a so-called “Hicks neutral” shift in the production function and thus there can be increasing rather than decreasing returns to investments (ibid).

Similarly, Alcacer (2000) insists that human capital may improve the foreign direct investment (FDI) of a country. A detailed study of FDI trends reveals that most FDI occurs between industrial countries with similarly high wages, while countries with low wages systematically show the lowest levels of FDI. He also emphasizes that training for staffs is extremely essential due to lack of trained personal should be associated with low levels of human capital. In this case, education and training constitutes a vital strategy to provide and promote human capacity in a certain milieu. This supported by the conclusion of the International Conference On Population And Development (1994), which declares that education is a key factor in sustainable development.

Berthélemy’s study on the role of the trade regime (1997) strengthens the assumption that human capital has positive or direct correlation with economic. He avows that human capital has positive impact on growth, but specifically, it is found that this impact depends on the trade openness of the economy. This can be interpreted in a model where human capital is used in technological imitation activities that can be efficient only in an open economy context.

Finally, Engelbrecht (2001) points out that the Nelson-Phelps approach as well as the Lucas approach to the modelling of human capital in growth regressions is supported, when outliers are deleted from the data. For sure, there are lots of researches on the impact of human capital on development, but some studies served here are believed to be comprehensive enough in providing basic conception on the importance of human development.

As mentioned above, human development index is calculated based on three main indicators, they are, education aspect (literacy rate and school gross enrollment ratio), life expectancy at birth / infant mortality aspect, and income aspect (GDP per capita). However, as King reminds us, although the HDI focuses heavily on material aspects, we recognize that there are other important aspects of human development that may not be well measured by the HDI, including 1) a people’s self esteem or sense of worth and self respect, 2) expanded choices or freedom from alienating conditions of life and social servitude, and 3) spirituality. It means that other aspects such as health condition, household income rates, and human capital or capacity also play important roles in building outstanding human development. Therefore, analyzing the low of HDI in a certain country, ideally, should encompass all such determinant factors.

The low of human development index is a complicated problem. There are many variables affected HDI and they are interrelated each other. It just looks like a vicious circle, where the genesis cause of a problem couldn’t be found clearly. For example, the problems of low of HDI are produced not only by four major factors (low of GDP per capita, low of school gross enrollment ratio, low of literacy rate, and low rate of life expectancy at birth), but also other factors such as low quality of health in general, low of human capital (knowledge, skill, attitude), high rate of unemployment, low rate of household income, etc.

At the same time, low of GDP per capita would directly lead to low quality in health and low of school gross enrollment ration. As a result, life expectancy at birth would decrease, while illiteracy rate tends to increase. The next consequence of the last problem is that low of human capital would increase and high rate of unemployment is likely to extend as well. Surely, these conditions potentially construct a problem of low household income, and, in turn, reduce the peoples’ accessibility to social services particularly health and education.

Seeing that the problem of HDI is very intricate, the strategies and policies dealing with this problem should be formulated with multidimensional coverage. In other words, comprehensive policy is needed to counter the complicated problems. In this sense, HDI can only be strengthened through fruitful regulations from education, training and health sector, population control and job opportunity extension, and poverty alleviation as well.

Concluding Remarks

From time to time, problems concerning human capital, human capacity, and human development constitute serious matter for developing countries. In fact, human resources are the key factor for improving economic growth and social welfare. Therefore, systematic policy or programs on human capital development need to be formulated. However, although most of governments in the world – including Indonesia – have pay much attention to develop their human resources, the complexity in building high competence of people is not automatically resolved.

To minimize the problems and their spreading impacts on other sectors, and at the same time to increase the HDI, inter sectoral and multidimensional policies are required. In addition, in the context of human development, a certain country or province needs to have good network with other countries and provinces, and with private / business sectors as well. A fruitful cooperation among them (government, private sector, international agencies, and civil society) will fairly ensure the attainment of developmental goals.

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