Saturday, September 25, 2021

Human capital development key to foreign direct investment ÔÇô BIDPA

A fiscal policy paper on the impact of shocks to human capital development among developing countries published by the Botswana Institute of Development Policy Analysis (BIDPA) has identified human capital improvement as key to attainment of the Millennium Development Goals (MDGs), productivity as well as competitiveness.

According to Dr. Grace Tabengwa, acting Senior Research Fellow at BIDPA, human capital development is a key factor that can transform developing countries’ growth prospects through efficiency, competiveness and attracting foreign direct investment inflow where expertise of skills is key.

“The dynamics of our model results reveal that high stocks of public debt, beyond the 30-40 percent debt/GDP threshold, depress the effect of human capital on output growth through limiting government expenditure resources available for developing human capital.” Tabengwa said.

The paper, which has been published on the international Journal of Economics and Behavioural Studies, examines the implications of shocks to public debt and government expenditure on the development of human capital and growth within a model that explicitly recognizes the role of fiscal constraints. Dr Tabengwa reveals that the recent financial and economic crises of 2007/08 and its impact on economic growth and development particularly in developing countries is indicative of how huge public debts and fragile fiscal positions can slow the growth process globally. Tabengwa’s findings come at a time when perceived impediments to doing business in Botswana are being linked to the labour force and the functioning of the labour market.

Available figures show that by 2011 about 126, 349 youths were unemployed while 584, 251 were employed. Most studies show that the primary cause of unemployment is structural unemployment, which has been precipitated by a mismatch between demand in the labour market and their skills. The growing complexity and rapid transformation of the world economy has placed tremendous demands on governments worldwide, higher education institutions and global labour market to prioritise the issue of employability on their development agendas and effective deployment of human resources for the global market.

At the same time, the country has done much in pursuing its own strategies and assembling its own baskets of incentives to attract new investments, however, not much FDI inflow has been realized over the past few years.

Foreign Direct Investment inflows to Botswana dropped 29 percent to P2.5 billion in 2012, resonating with declines to other southern African states as global investment slowed. The balance is however attributable to merger and acquisition activities as well as expansions rather than human capital development.

RELATED STORIES

Read this week's paper