Sri Lanka Guardian, 04/08/2012
| by Chandika Gunasinghe
Lecturer in Economics
Department of Economics, University of Ruhuna
( August 04, 2012, Colombo, Sri Lanka Guardian) Education brings a broad range of benefits not only for the individuals but also for the society as a whole. Public expenditure on education is considered a worthy human capital investment for a country since it brings immense social and economic benefits. Empirical studies consistently demonstrate that future economic development is largely determined by the level of knowledge and skills of a labour force of a country. With the emergence of a new era in the 21st century, the knowledge economy and rapid technological change have given a leading role for human capital as the main driving force of modern economic development. Thus, there is an ever-increasing demand nationally and internationally for highly skilled and adoptable workers in the labour market.
In this context, it is crystal clear that many countries (developed, industrial and developing countries) of the world have given a top priority for the development of human capital in their development agendas. The development of human capital of an individual is mainly determined by both inborn and environmental factors, which can be influenced positively mainly through maintaining a concrete public education policy (on primary, secondary and tertiary education). Other expected economic benefits of public investment in education include both individual and societal economic benefits. Improved employability, improved economic welfare, improved productivity and performance, and reduced inequality and poverty are among the most exceptional economic benefits of public investment in education.
The major social benefits of public investment in education include; the production of enlightened citizens to assure a well-functioning liberal democracy and an increased civic participation; formation of economic equity and social mobility; production of a knowledgeable, skilled and healthy workforce; production of disciplinary citizens for a low-violent cohesive society; and the creation of avenues for higher rates of innovation through research and development. A Nobel price awarded economist, Milton Friedman once noted that “the education of my child contributes to other people’s welfare by promoting a stable and democratic society”.
All these factors sternly emphasize that investing in public education is extremely far more cost-effective (economically and socially) for a nation than paying for the social and economic consequences of an ill-visionary, under-funded and low quality education system.
UNESCO concession regarding public allocation for education states that;
“Member States should allocate at least 6 per cent of the Member States' Gross National Product (GNP) in education and an equitable share of the education budget to adult education”.
(CONFINTEA V, page 9)
However, the Minister of Higher Education emphasized in the Parliament that Sri Lanka is nearing to the UNESCO benchmark when added the expenditure incurred by the parents for private and government education services such as tuition fees for private lessons, transport charges for schooling, exercise books and stationery costs, course fees (higher education), course fees for vocational training, fees for school uniforms, school facility fees, school development fund etc to the government share amounting to 2.2 % of GNP. Given the situation that the government is not prepared to increase budgetary allocation on public education, does this mean that the Minister expects parents to reach the UNESCO benchmark by spending more and more on the items listed above or otherwise sending their children to international colleges and private universities?
There is a well-known premise. It says “education is a public good, a right of everyone, and a duty of the State”. This premise stresses that the provision of a quality education for all is a duty of the State and education is not a negotiable good although it is provided by private entities.
The UNESCO agreement for the allocation 6% of GDP on education emphasizes the leading role of governments to reach the benchmark. These are examples for the above point:
“The Ministers of Education stated that developing country governments will continue to increase the proportion of national budgets allocated to education, seeking to reach 4%-6% of GNP for education.”
(Sixth Meeting of the High Level Group on Education for All (EFA) – Nov. 2006, Cairo)
“Ministers of Education recommended that National and local governments should mobilize sufficient domestic resources in accordance with indicative standards (~6% of GNI / 15-20% of government budget) in allocations to education, with a prioritization of basic education (>3% of GNI / 10% of government budget).”
(Seventh Meeting of the High-Level Group on (EFA) –Dec. 2007, Dakar)
“Ministers of Education urgently call on national governments to allocate adequate domestic resources (4-6% of GNP/15-20% of public expenditure) to education…”
(Eighth meeting of the High-Level Group on EFA - The Oslo Declaration, Dec.2008, Oslo)
“Ministers of Education called upon national governments to reinforce their determination to increase the current level of domestic spending to education to at least 6 percent of GNP and/or 20 percent of public expenditure.”
(Ninth Meeting of the High-Level Group on EFA –Feb. 2010, Addis Ababa)
Did the Minister of Education or any responsible person from the Ministry of Education attend the above meetings? If they attended, they should be very aware of the role of the government in allocation more resources (6% of GDP) on education. If so, the Minister of Higher education could be known what the UNESCO definition of 6% of GDP for education is about.
In this context, this article aims at finding answers for the following two questions.
How far is Sri Lanka from this UNESCO benchmark?
Why should Sri Lanka implement this concession?
The case of Sri Lanka
A critical self evaluation is essential for the government to change its current stand point to the education (including higher education) policy of Sri Lanka. One can observe that there is an enormous contradiction between what is stated in the education policy and what is being implemented. For example, the government has planned to make Sri Lanka “the knowledge hub in Asia” as one frontier of her development strategies in the Mahinda Chinthana Policy. No doubt this is a plausible policy selection on the part of the government.
However, the government itself seems to be quiet unaware of what is in the Mahinda Chinthana Policy. This unawareness has become crystal clear by the irresponsible manner the government has responded to the academic community on their demands to allocate more resources for the education sector so that it is well equipped to develop the stock of human capital of the country. It seems that the government does not possess a workable plan to achieve that invaluable vision in the Mahinda Chinthana Policy. This implies that the government has been unable to find answers to the severe problems faced by the education and university education systems in Sri Lanka. The government needs to allocate more resources and find solutions for the severe problems in the education sector (both school and university education) if it really wants to address the development challenges ahead our nation in the future.
Continuous reductions of the proportions allocated to public education from the government budget have become the root cause of many problems. This reduced budgetary allocation for public education is reflected in a declining trend of public education spending as a percentage of gross domestic products (Table 1). Public education spending as a percentage of gross domestic products (GDP) gives an indication of how a country prioritizes education in relation to its overall allocation of resources. This further implies that how a country assesses its education policy in achieving its development potentials. This includes spending on primary, secondary and tertiary education and other public institutions involved in delivering or supporting educational services. UNESCO definition of this is as following;
“Public expenditure on education consists of current and capital public expenditure on education includes government spending on educational institutions (both public and private), education administration as well as subsidies for private entities (students/households and other privates entities)”.
Table 1: Public education spending and military expenditure as a percentage of GDP from 2005 to 2011 in Sri Lanka
According to Table 1, public education spending as a percentage of GDP has fallen from 2.9 % of GDP in 2005 to 1.86 % of GDP in 2011. According to the Minister of Higher Education, the deterioration of the ratio of public education spending to the GDP was due to the increase of the value of the denominator, GDP, faster than the increase of the value of the numerator, public education spending. Mathematically, there is a rational in this point. However, the reality is completely different from what the Minister has interpreted. As mentioned before this declining trend was mainly due to continuous reduction of the percentage of budgetary allocation for the public education sector especially since 2005 (see Table 2 given below). It further implies that the relative value given for the public education sector in the total government expenditures has gradually been reduced. Hence, as a result, the portion belonging to the public education sector in the government’s proportion of the GDP (this is measured as a ratio of total government spending to GDP of the country) has been declined. Because of this reason, it is obvious why public education spending as a percentage of GDP shows a declining trend since 2005.
During critical time of the war period from 2005 to 2009, many people did not oppose to the government to allocate a high percentage of GDP (about 3.7 % of GDP on average) to defence sector of our country as it was the first and foremost priority at that time. However, after the war, the first and foremost priority has become to develop the country. To achieve this goal, it is imperative to invest in education to develop the human capital of the nation. However, the data in Table 1 show that the government still gives its priority for the defence spending rather than investing in education. The defence expenditures are close to the double of the expenditures on public education even after the war period.
The data in Table 1 very clearly shows that the priority given by the government for education has been not only low but also it has been continuously reduced for other priorities especially since 2005. This ill-treated education policy of the government will make huge social and economic costs to the nation in the long run. This further implies that public spending in education on skills development in Sri Lanka has been losing out to other priorities at an era where the economic and social importance of human capital is growing very rapidly. Every citizen should be aware of this ill-treatment for education and should influence the authorities to take corrective measures without further delay.
The government justifies even these allocation stating that the amount allocated for education has been increased (even doubled) in each year since 2005. It should be noted that an absolute increase of allocation for education this year compared to the previous year does not necessarily indicate that the government gives priority for education. This is because that the nominal (absolute) value of that allocation is inflected with the time due to increase of price levels or inputs employed or both. On the other hand, it is general knowledge that a service which was provided in the last year cannot be provided this year for the same cost due to the increase of the price levels of the inputs attached to the said service. This is true for any kind of economic good or a service. Hence, to take an idea of how the government gives priority for education, it is essential to compare that allocation with the overall value of the GDP as nominal value of all the items included in the GDP too increase over time. When comparing these two figures, it is obvious that public education spending as a percentage of GDP declines over the period concerned. As noted before, this is mainly due to continuous reduction of the proportion allocated from total government spending on education. On the other hand, it further implies a continuous decline of the “real value” of the budgetary allocation as the price effects are canceled out when dividing two nominal variables. Hence, it is very clear that an increase of allocation in absolute terms (such as 20,000 million LKR for last year, 25,000 million LKR for this year and so on) does not provide a meaningful elucidation of how the government has given priority for the education sector. Therefore, it is of paramount importance to take all the efforts at any cost to turn this speedily declining priority given for the public education sector by the present government.
Table 2: Public Education Spending as a Percentage of Total Government Expenditure from 2006 to 2010 in Sri Lanka
The data of Table 1 clearly show that the government has been unable to identify the crucial role that the education could play in achieving country’s future development potentials. That is why the public education spending as a percentage of total government expenditure has been cut dramatically from 10.81% of total government expenditure in 2006 to 8.58% in 2011. Similarly, spending on university education as a percentage of total government expenditure has also been cut dramatically from 1.8 % in 2006 to 1.21 % of total government expenditure in 2011. The most unbelievable fact is that the government has cut this allocation when there are severe unsolved problems in the education system in the country. Only in the higher education system, there are many problems such as recruiting and retaining problems of young academics, high level of brain-drain, insufficient fund allocation for research and development, professional development problems etc. Instead of reducing resources for education, the government could have increased investment in education annually to acquire the skills and competencies needed for modern knowledge economy and technology based economic processes. Low investment in education badly affects the nation’s ability to develop the stock of capital assets and spaces of modern education and the nation’s ability to employ quality processes, which in turn extremely negatively affect the development of human capital of the country. A World Bank report published in 2011 on “Transforming School Education in Sri Lanka from Cut Stones to Polished Jewels” (page 32) stresses that;
“Under-investment in the capital education budget means that the ability of the country to develop a stock of modern education assets and spaces, such as classrooms adapted to the use of technology, IT laboratories, libraries, science laboratories, language laboratories, activity rooms, multi-purpose rooms, IT and science equipment, and teaching-learning material, is severely constrained. In addition, there are about 1,700 schools (around 18 percent of schools) without basic facilities such as drinking water and approximately 1,200 schools (around 12 percent of schools) without sanitation, and the ability of the country to supply adequate basic facilities is restricted. Overall, the ability of the education system to deliver a high quality education experience for school children is tightly constrained by the relatively low level of public investment in education”.
The World Bank report (page 15) further states that;
“In particular, out of 2640 senior secondary schools only about 800 (30 percent) offer the Bilingual Education program, where students can study subjects in the English medium. Only 690 schools (29 percent) offer the GCE A/L science stream. And among these 690 schools, only about 200 schools are able to prepare students for engineering and medical programs at university level. These good quality schools are all located in or near a few large cities and towns”.
These factors reiterate that resource limitations as well as the wider inequality in the distribution of existing resources in education sector can be eliminated only by increasing more public allocation. Without such a strong intervention, the ill-treated schools located in the peripheries cannot be upgraded and as a result children of these areas will lost the right to access for equal opportunities which were expected to assure in the free education policy.
An international comparison on investment in education
The Table 3 shows that the lowest percentage of gross domestic product (GDP) is allocated to education (school and university education) in Sri Lanka as compared to other selected nations in South Asia and Southeast Asia.
According to Table 3, it is very clear that Sri Lanka has been able to achieve a high adult (% persons aged 15 and above) literacy rate (around 91%), thanks to the free education policy introduced by Dr. C.W.W. Kannangara and adopted by every successive governments since 1949. The literacy level is of vital importance for the development of a country. However, having a high literacy rate does not mean that our labour force is well-educated and well-equipped with required skills and competencies needed to the modern knowledge economy and technological based production process. This is mainly because that the adult literacy rate merely measures the percentage of persons who can “read and write” a given statement correctly. Hence, the adult literacy rate does not give an indication that our public investment in education is sufficient for the development of human capital in the country. However, unfortunately, policy planners in the education sector and those who serve as advisers (so called “academics”) to the government have been unable to implement a visionary education policy that aims at developing the stock of human capital to meet future development challenges ahead our nation. Instead, sadly, they are providing wrong directives to “cut public expenditure on skills formation” for other priorities at a time when the economic importance of human capital is growing very rapidly. This wrong directive could be due to either misunderstanding of the simple meaning of the “adult literacy rate” or irresponsibility on the part of the government on its education policy. For example, as the adult literacy rate of Sri Lanka is considerably higher than that of other South Asian countries authorities might have thought that it would be sufficient for Sri Lanka to allocate a low proportion of the GDP to achieve the remaining 9% of adult literacy rate but it would be good for other countries to allocate relatively high percentage of the GDP for education as their literacy rates are comparatively low (Tab1e 3). However, this logic becomes utterly futile when public investment in Maldives and Southeast Asian countries and their adult literacy levels are concerned.
Table 3: Education Expenditure, Government’s Size, and Adult Literacy rates in selected South Asian and Southeast Asian countries as at 2010
Another argument of the authorities is that the current public investment in education is sufficient because the government sector as a percentage of GDP in Sri Lanka is low. It is true that as a result of extremely poor policy decisions taken by all the governments (including this government as well) since 1977, the total government income and expenditure as a percentage of GDP at present are around 14% and 22%, respectively. The financial management of the present government is very poor. The government neither shows a genuine commitment to increase its total income nor does it show a good performance of the effective management of its expenditures. There are ample evidences of poor financial and economic management of the government. However, the objective of this article is not to explore those things.
Many countries in the world (including Sri Lanka) follow a deficit-budgetary policy as the major macroeconomic principle. Therefore, efficient and effective allocation of total government spending is of vital importance to maintain a sustainable budget deficit. However, unfortunately, it seems that the present government is unaware of these macro economic principles. The economic meaning of the total government spending is abut the total expenditure incurred by the government to purchase good and services in the country. The government’s proportion of GDP is called the economic size of the government. This is obtained by dividing total government expenditure from GDP. According to the data in Table 3, as noted before, the economic size of the government of Sri Lanka is around 22% of GDP. The governments which follow a deficit-budgetary policy (including Sri Lanka) allocate resources among priorities based on its total expenditure not on the total income. However, the Minister of Higher Education noted at the Parliament that the government is not in a position to allocate more resources on education from its total income which is currently around 14% of GDP. This is not true because university academics are demanding to increase allocation on education from government’s total expenditure which is at present around 22% of GDP. In what condition does the Minister of Higher Education justify 1.86% allocation for education from 22% of GDP? Furthermore, the economic sizes of governments such as Nepal, Pakistan Bangladesh and Thailand are lower than that of Sri Lanka. However, at the same time these countries have invested (are still investing) more on education than Sri Lanka (Table 3). Hence, the second argument is invalid and irrational.
Before concluding the discussion, it is good to refer to the page 28 of the above World Bank report. It further reveals that the public investment in education in Sri Lanka is comparatively insufficient;
“Education expenditure as a percentage of GDP is 1.9 percent and as a proportion of the government budget is 7.3 percent. This is the smallest share of public investment in education among a cluster of countries that share common features with Sri Lanka. Public investment in education in Sri Lanka falls below the level of East Asian countries and of South Asian nations”.
To sum up, it is very clear that that the government’s perspective on the public education policy of the country cannot be expected to contribute to make a huge leap from the existing situation to a new era where the development of human capital will be the main driving force of economic development. Foundations for the human capital are established at school education. That is the quality school education determines the capabilities of students who enter into; the higher education sector, the vocational and technical training sector, and directly to the labor market at various stages. Therefore productivity of these employees and workers are determined by the quality of school education, which in turn affects the development of the economy.
It is well known that many schools in our country do not have sufficient human and physical resources as clearly identified by the World Bank report to provide a quality education for students to perform well in their studies. If the government is really fair and egalitarian and want to develop the skills and competencies needed for modern knowledge economy and technology based economic processes, it should strengthen the human and physical capacity of schools located specially in the peripheries. To achieve this goal a considerable percentage of government’s budget should be allocated to education. It is true that the government cannot increase 6% of GDP for education in one or two years when compared to its current allocation of 1.86 % GDP. However, the government needs to show its commitment to restore the amount (around 11% of total government expenditure or 2.9% of GDP) allocated for education in 2005 for 2013 and then should increase allocations gradually for the coming years as suggested by academics.
In this context, university academics’ demands are absolutely for a decided journey towards a better future of the nation. As long as the government is incapable of giving high priority for education, it will be a major stumbling block in Sri Lanka’s expectation to become a high income country in the future and as a result our country will definitely be in a low position in the development ladder. This is mainly because that the human capital of a country is the bedrock of its economy that determines skill-intensive and innovation-led growth. On the other hand, there will be many issues in relation to the destruction of the social fabric of our country. Can any one say that the poor attention to the development of a quality school education system does not affect (directly or indirectly) the increasing trend of crimes in the society?
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