Newsletter 2/2010 - In focus

BUILDING HUMAN CAPITAL, by Valeriu Lazar, Deputy Prime Minister and Minister of Economy of the Republic of Moldova

“Ultimately, the continuous process of human capital accumulation, as well as the stock of human capital, as reflected in the growth of new technological and educational opportunities, sustains economic growth.” - European Competitiveness Report, 2002

The Organisation for Economic Co-operation and Development (OECD) defines human capital as the “knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being”. In other words, human capital represents the entire range of abilities and resources needed to improve competitiveness and development that contribute to a nation’s success.

Governments, foundations, non-governmental and non-profit organizations, and the private sector play an important role in the creation and development of human capital and this objective is emerging on many governmental agendas. All over the world, governments are increasingly concerned with raising levels of human capital, chiefly through education and training, which today are seen as ever more critical to fuelling economic growth.

Successful development of human capital can take many forms and programmes must be efficient, focused and flexible to respond to the local needs, but most of all they must be undertaken with an eye to the longer term. Investing in tools for the development of human capital offers as substantial a return as investing in more traditional physical capital (such as infrastructure development) or development of a nation’s natural resources.

The financial crisis that began in 2008 has made governments more aware that investments in their national human capital are very important. The potential for countries to recover their economies and benefit from the emerging knowledge economy depends largely on their human capital.

For the governments, educating citizens is not just an exercise in philanthropy but a longer term question of survival and success. It is necessary to build the workforce that will build and sustain the competitive advantage and drive national development over the long-term. Healthcare is one of the most important foundations upon which to build other forms of human capital.

The Republic of Moldova is no exception in this sense. We are concerned about our society’s stock of educated, trained and healthy citizens. The Government elaborated a document called “Rethink Moldova”, which presents the reform programme according to the priorities for the medium term development of the country. One of the stated priorities is developing human capital through reform of the education sector, optimization of the school network, rehabilitation of vocational education and consolidation of vocational training institutions, strengthening health system and protection of public health, reorganization of residential care system, hospital sector reform and adjustment to European Union standards, as well as implementation of the targeted social assistance, protection and social inclusion of persons with disabilities, etc.

I am sure that these kinds of priorities are common for all countries and also represent priority areas of activity for many international and regional organizations. And while the countries themselves have the primary responsibility for building their capacities, international financial institutions can play a significant supporting role.

In spite of different mandates of these institutions, there are similarities in the broad types of contribution that they make to capacity building and in the mechanisms through which these contributions are made. These organizations provide financing (loans, but also, in some cases, a significant grant element) to help the country’s authorities attain their objectives, support national authorities’ efforts to design policies to achieve specific economic and social targets, encourage the development, dissemination, and adoption of internationally accepted standards and codes of good practice, provide training on a multitude of topics, collaborate with regional training and research institutions to facilitate knowledge transfer, etc.

In this context, the Regional Cooperation Council (RCC) could play a very important role as a regional organization by gathering its members to look for common objectives, solutions and ties, which are most important for our countries regarding capacity building, including building human capital. Also, with a help of the RCC, the countries from South East Europe can benefit from the extra funding for the initiatives of common interests in this field available through European Union programmes. The Republic of Moldova is highly interested in strengthening the building human capital cooperation with other RCC member states.

Valeriu Lazar was appointed Deputy Prime Minister and Minister of Economy of the Republic of Moldova in 2009. Before this post he had been occupying positions of Executive Director at Business Intelligent Services, Executive Director at Investment House BIS, Minister of Economy and Commerce, and Governor of the Republic of Moldova at European Bank for Reconstruction and Development (EBRD) and Multilateral Investment Guarantee Agency (MIGA).

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Valeriu Lazar, Deputy Prime Minister and Minister of Economy of the Republic of Moldova (Photo www.europalibera.org)

Valeriu Lazar, Deputy Prime Minister and Minister of Economy of the Republic of Moldova (Photo www.europalibera.org)