Education in Southeast Asia: Investments, Achievements, and Returns

Education and economic growth are highly complementary, especially in middle-income economies. In this chapter we review the performance and prospects for education in developing Southeast Asian countries. The prior Northeast Asian experience underlines the importance of investing in human capital ahead of growth in demand. Other than in Singapore, Southeast Asia's record is much less bright in this regard. In most of the region, shortages of qualified skilled workers threaten to impede transitions through middle income. The one exception is the Philippines, a remittance-oriented economy where growth in the supply of skills has long exceeded expansion of domestic demand. We begin with a brief summary of basic data on educational achievement, public funding and access. We then present more detailed discussions on two contemporary issues: the influence of rapidly changing economic conditions on returns to educational investments, especially as the region's economy becomes more closely integrated in Asian and global production systems; and the potential impediments to human capital accumulation posed by limited demand for education. Demand is constrained by opportunity cost, and in some cases by distortions in the market for capital, a factor complementary with skills. We conclude with a brief assessment of the regional outlook for human capital growth and implications for economic development and policy.