This article was written to accompany my presentation on 6th November at the Human Capital Summit for State-Owned Enterprises in Indonesia.
In the current context of development in the great majority of Southeast Asian countries, all would agree that human development and economic growth would be at the top of the list of priorities to get right. In fact, the two are intimately related, especially for State-Owned Enterprises.
Research published as early as 1997 shows how these two priorities interact: developing countries leverage economic growth for human development and they invest in human development to make continuing economic growth sustainable. The model below shows how certain drivers make these links possible.
The article shows that in developing country comparisons, those that fail to invest in human development fall into vicious cycles that undermine sustainable economic growth. On the other hand, countries that invest in human development create virtuous cycles of economic growth over the long term. Both human development and economic growth are priorities in themselves, but the key takeaway from the analysis is that human development constitutes the necessary condition of sustainability for economic growth.
The special case of SOEs
The special case of the State-Owned sector is its mission: these companies were created to make a direct contribution to both economic growth and human development as well as managing a profitable business.
State-owned or State-linked companies in ASEAN have a specific human development challenge: the economic growth of the region will be unsustainable if it is based on cheap labour as the key competitive advantage. The State-Owned Sector must contribute to developing a workforce that doesn’t get stuck in the middle-income trap. An economy finds itself in the middle-income trap when it develops beyond its low-cost competitive advantage but is unable to innovate and develop high value-added products and services needed to compete with advanced economies. For ASEAN developing countries to achieve their economic and social potential, they need to ensure that the State-Owned sector prioritises human development impact beyond their own employees.
Beyond the HR paradigm
Unfortunately, SOEs use a human capital paradigm in managing people that limits their national contribution. In the human capital paradigm people are an economic unit of value measured by productivity only. What SOEs need to contribute measurably to the national mission requires a shift to the human development paradigm. The table below shows the difference between HR and HC on the one hand, and the HD paradigm on the other, in terms of purpose, frame of reference and priorities for measurement.
What gives the Human Development paradigm its strength is its foundation in United Nations research and applications which is different from corporate HR models where people are essentially a means to profit.
In the 1990s two Asian economists created a new economic paradigm for the UN, arguing that GDP is not the only measure of value. Mahbub al Haq of Pakistan created the UN Human Development Index in 1990 adding health and education indicators to income per capita. Taking it a step further, Amartya Sen of India won the Nobel Prize in Economics in 1998 for his research showing that societies should measure their success using human development rather than GDP, which he defined as the freedom and capability of people to lead the kind of lives they value.
The application to the world of work gave the International Labour Organisation a new mission, the human development paradigm.
Work sums up the aspirations of people in their working lives and includes personal development and social integration, freedom to express oneself, participate in the decisions that affect life as well as work and ensures equal opportunity
Human development has become a vast, integrated ecosystem of professionals in academia, law, social services, HR, consulting, associations and government.
Priorities for human development collaboration between governments and the state-owned sector
To deliver on a common national mission of human development, governments and the State-Owned Sector need to define priority areas in the current economic context.
For ASEAN, a common roadmap should include 6 key areas.
- Observatory of HC to HD transformation with new jobs and organisational designs. An observatory tracks new job or role creation and shares new organisational structures.
- Measurement & Sustainability: ESG and sustainability requirements use Key Development Indictors (KDIs). For example, human development is present in 11 of the 17 United Nations Sustainable Development Goals.
- AI – anticipate and embrace human-machine work, AI productivity and decision-making using AI ethics. A research and sharing platform on AI would help awareness and implementation.
- HD for leaders and the HR function: today's business leaders have not been educated in human development and this limits their ability to plan and executive human development strategy for their organisations and their national contribution. The HR function also needs education and leadership exposure to achieve sustainable workforce development for their companies and for stakeholders.
- ASEAN SOE cooperation and research: in ASEAN the state-owned sector faces many of the same challenges. Sharing can be enhanced with cross-border conferences, networking and research.
- Thought leadership: ASEAN as a region has achieved visibility as fast-growing region but now needs to take the next step in assuming leadership in areas such as human development and economic growth. This can be enhanced through an investment in thought leadership and participation in conferences and research.
Taking action on these initiatives will ensure the capability and readiness of State-Owned Enterprises to contribute to ASEAN economic and social development and help the region move beyond the middle-income trap.
