Human Capital For Emerging Markets

With sustainable, well-balanced and inclusive growth at the top of the global leaders’ agenda, it must be subject to coordinated efforts by the State, Business and Civil Society on all the core directions of social and economic development. In industry, the success of such efforts depends on the efficient synthesis of fixed assets (industrial buildings, machinery and equipment) with financial and human capital. It’s hard to say which of those components is more important; it is without doubt, however that human capital reproduction (and moreover its upgraded reproduction) is the most complicated process. Human capital deficit, measured by quality rather than quantity, at the times of transition to new technological set-up is experienced by many countries, but the emerging market economies suffer from such a deficit more than others. Besides general problems, they are facing additional challenges related to transitional character of their economy and the past times heavy legacy. Long lasting “brain drain” to so-called “mature economies” is among such challenges. Their full spectrum is reflected not only in the partially successful 15 year Millennium Development Goals (MDG) program but also in its updated version: the Sustainable Development Goals (SDG) to run until 2030, most recently approved by the UN. The experience obtained in the chair of B20 Job Creation, Employment and Investment in Human Capital Task Force, whilst Russia held the G20 presidency, and the follow-up activities in the same direction during the Australian and Turkish  presidency, cause a desire to share some conclusions and observations with the colleagues in B20 - G20 process. The work of international business community on the most pressing issues under the Turkish presidency focused on small and medium enterprise (SME) development, has led to the set of 19 B20 policy recommendations “to support the G20 leaders in their ongoing mission to implement structural reforms and to ensure strong, sustainable and balanced growth”. At least 3 of those recommendations are directly related to human capital development and amongst them is one calling to “develop and finance programs aimed at reducing skills mismatches, in particular technical, managerial, and entrepreneurial skills”. This is worth particular attention. The role of human capital for SME development with regards to sustainable and inclusive growth is equally important compared to adequate financing. The September meeting of the G20 Ministers of Labor and Ministers of Finance in Ankara, in parallel with the final B20 conference, has confirmed this. Innovative development, most probably among the priorities for the forthcoming PRC G20 presidency, is also hardly possible without a proper human capital development. Business is unable to secure an adequate supply of human capital for modern industries while acting alone, as well as the State acting separately from the business.  Such problems can only be solved via the synergy of public-private partnership (PPP), when basic education and productive skills form a starting point for the all-inclusive lifetime learning and training system (or retraining when necessary). This goal is of primary economic social importance. When undertaking innovative development, China mustn’t ignore the role of human capital.  According to PRC Prime Minister Li Keqiang, the future economy will be fueled by two “engines”: entrepreneurship and innovation. China is promoting start-ups, stimulating banks and other financial institutions to support SMEs. The Chinese government has allocated around US$57billion, via more than 1000 investment agencies to boost entrepreneurship. An ambitious goal was set to transfer the Chinese economy in 2020 to an innovative development way. The World Economic Forum last year rated China to be 33rd in the global ranking for innovation, although there is little doubt they will reach their goal. Even now, enormous resources are being invested in human capital. China has more than 2,600 universities, and over 30 million school graduates are fighting each year for entrance to them. For the past 5 years, Chinese parents have spent about US$40million per annum to cover the costs of their youngsters studying abroad. A lot of attention is paid to human capital development in Russia. In his address last September to investors at the Eastern Economic Forum on Russkiy Island (where the 2012 APEC Leaders’ Summit was held), President Putin called for the creation of a network of international education centers in the Asia-Pacific region, together with world-class research and industrial cooperation laboratories. The region best-known as the “global workshop”, with its fast growing education system, universities, engineering centers and high-tech manufacturing -what we call “economy of knowledge and intellect” - is building up mighty mega-science research and development (R&D) platforms capable of leading to real breakthroughs. Such a platform is already being developed in the Russian Far East. As has been said: “today, together with colleagues from China, Japan, India and other Asia-Pacific counties, supported by business, fundamental and applied research is actively carried out here”. People are coming to study and work. “The Far East is in need of qualified specialists, scientists, engineers, managers, production process organizers, workers with unique skills and qualifications. And the Agency for Human Capital Development specially created in the Far East would take care searching and attracting such people”. Would educate and train people of the region, thus secure the human capital development. One may suppose that the future belongs to such R&D + Production (RDP) platforms, mega-centers and PPP-based agencies for human capital development with their networks around the world, equally covering emerging and mature market economies. It makes sense to expand the possibilities to form such a network under the auspices of a global hub, similar to that established in Sydney for infrastructure investment as per the G20 Brisbane decisions. There is only one precondition: the Human Capital Development Hub should be established in an emerging market economy country.   About the author: David Iakobachvili is the President of Orion Heritage Ltd, joint proprietor of Petrocas Energy Holding Ltd. and a Deputy Chairman of the Board of Sistema Group. He is Vice President and Executive Board Member of the Russian Union of Industrialists and Entrepreneurs (RSPP), Head of RSPP Committee on Corporate Social Responsibility and Demographic Policy. The article was originally published in the G20 Antalya Summit Edition and republished here with permission.