Business

Mutebile: Infrastructure Investment at Cost of Skills Development Won’t Spur Uganda’s Economic Transformation

Bank of Uganda Governor Emmanuel Tumusiime Mutebile has warned against prioritizing investment in infrastructure development while neglecting skills development, Chimp Corps report.

“… for infrastructure to result in economic transformation, this must be combined with a skilled labour force,” said Mutebile on Friday.

He said “public investment in infrastructure at the cost of human capital development will not support Uganda’s economic transformation,” adding, “Uganda’s prosperity in the years ahead will largely depend on its skilled human capital, which is useful for innovating and has a stronger effect on economic growth.”

Mutebile spoke at a conference in Kampala on “Infrastructure and Human Capital Investment for Growth and Development in Uganda”.

The Governor’s comments come in the wake of a World Bank report recommending an increase in government spending on education to improve enrollment and the quality of learning in Ugandan schools with the view of raising the human capital necessary to sustain productivity and economic growth.

The report, “Economic Development and Human Capital in Uganda: A Case for Investing More in Education,” shows Uganda’s current budget expenditure on education is among lowest in the region.

During last five years, education expenditure as a share of the national budget was declining in Uganda reaching 10% in 2017/18 while average for Sub-Saharan Africa is 16% and has been steadily increasing over the same period.

By under-investing in education, the World Bank report warns that Uganda risks not reaping the full benefits of developing its human capital, which is essential for countries to increase productivity to grow their economies and improve the well-being of their citizens.

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Development

Mutebile agreed that Uganda still faced infrastructure gaps, and there was no doubt that infrastructure bottlenecks hampered economic development.

“Public investments provide a near-term boost to economic growth and there is an enormous amount of economic evidence demonstrating that public investment is a significant long-run driver of productivity growth, and hence, growth in average living standards. In addition, well-executed high-yielding public investment programs can substantially raise output and consumption and be self-financing in the long run,” said Mutebile.

He, however, observed that public investments in higher education and skills “may be more growth-enhancing and strengthen the case for additional public expenditures on education. Expanding public investment in human capital and skills raises the question of funding sources such as taxes or changes in the composition of public spending.”

He said this pointed to the need for the right mix of public infrastructure investment and social spending.

A World Bank study found that in Africa, each year of schooling raises average earnings by 11.3% for males and 14.5% for females.

Attending pre-school for one year also enhances cognitive skills during early childhood, improves academic skills during elementary school, and increases earnings by 5%.

Uganda is falling behind on this, the World Bank report notes.

While primary school enrollment has increased following introduction of Universal Primary Education, enrollment remains low in pre-primary and secondary schools.

A big percentage dropout or fail to meet the minimum proficiency in reading and mathematics by the time they are completing basic education. Children from poor families and those in underserved areas are less likely to learn.

According to the World Bank’s Human Capital Index (HCI), a tool that measures the contribution of education and health towards the productivity of a country’s next generation of workers, Uganda is ranked among the countries in the lowest quartile of the HCI distribution, with an index slightly lower than the average for Sub-Saharan Africa region and below what would be predicted by its income level.

Uganda’s low ranking in the HCI is mainly due to the country’s low education outcomes.

A child born in Uganda today will be only 38% as productive when she grows up as she could be if she enjoyed complete education and full health.

A child in Uganda completes seven years of education by age 18, compared to 8.1 for their regional counterparts. However, actual years of learning are only 4.5, with 2.5 years considered ‘wasted’ due to poor quality of education.

Mutebile said Uganda is confronted with extensive demand for public spending.

“Therefore, it is necessary to examine the trade-offs of our public expenditure choices as well as the sustainability of the outcomes at this point so that we can undertake the necessary pivoting away from suboptimal policy options, or indeed, to consolidate the progressive initiatives for equitable development as we go forward,” he advised.

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