Given COVID-19, Egypt’s investments in human capital are increasingly crucial

Just as financial capital measures accumulated wealth, human capital measures the accumulation of knowledge, skills and health. The World Bank’s Human Capital Index (HCI) is designed to capture the average amount of human capital a child born today in any one country can expect to accrue by the age of 18. It is made up of five indicators:

• the probability of a child’s survival to age five;
• the proportion of children who are not stunted;
• the adult survival rate;
• the number of years of schooling someone can expect;
• and academic test scores, harmonized as a measure of the quality of learning.

This index is particularly important now that COVID-19 has disrupted the health and education systems essential for nurturing human capital because the policymakers considering how to protect human capital from the pandemic’s adverse effects need good data on its impact.

The HCI 2020 — an update to the 2018 HCI — provides a useful benchmark to track post-pandemic changes in human capital. However, it will take time for the impact of reforms to be captured in the index.

A decade of losses and gains

Egypt was an early adopter of the Human Capital Project, joining in October 2018, and projections show it has made slight gains in human capital over the past decade. A child born in Egypt in 2010 was 48% as productive when they grew up as they could have been if they enjoyed complete education and full health. A child born in Egypt in 2020 will be 49% as productive. 

Egypt’s overall improvement is largely due to gains in health. Children born in 2020 are more likely to survive to the age of 5 than children born in 2010, less likely to be stunted, and more likely to live to the age of 60. In education, the number of years of schooling they can expect to be given has increased, indicating improved access. However, test score results have dropped, suggesting a decline in the quality of learning.

COVID-19: A threat to human capital gains

COVID-19 poses a great risk to human capital in Egypt. School closures are likely to generate a loss — for the current generation of students — of more than half a school year, when adjusted for learning. Disruptions to maternal and child health services, combined with the financial blow the pandemic has dealt to family incomes, are already affecting young children’s nutrition and development. All this threatens the tenuous gains Egypt has made.

In June 2020, US$400 million was approved to support Egypt’s transformational Universal Health Insurance System (UHIS) as the country’s pathway toward achieving universal health coverage and improving the health outcomes of its citizens. The project will support the Government of Egypt to put in place the building blocks of the Universal Health Insurance System, pilot the system, and offer temporary financial protection to the most vulnerable to protect them from high out-of-pocket health expenditures resulting from the COVID-19 outbreak.

This health project builds on the work of the US$530 million Transforming Egypt’s Healthcare System Project, which seeks to improve services at 600 primary health care facilities and 27 hospitals throughout the country. The project also supports the country’s family planning efforts, the scale-up of a community health workers program to promote better health and nutrition, and annual blood screenings for various pathogens. The project has also conducted the world’s largest screening campaign for hepatitis C, non-communicable diseases, and other risk factors.

Additional human capital reforms already in place

In September 2019, Egypt introduced major education reforms. Within them, a US$500 million World Bank-funded project helps increase families’ access to quality early childhood education and enhance the capacity of teachers, school leaders and supervisors. It also catalyzes the use of digital resources for teaching and learning and has introduced a new computer-based examination system to regulate secondary (high) school graduation and admission to universities.

The expansion of technology and digital learning has been central to these education reforms and has allowed the Ministry of Education and Technical Education to shift more quickly to distance learning. This infrastructure comprises the building blocks for re-opening schools in 2020/2021 and the foundations for the new normal — post-pandemic.

Other initiatives, also in place already, support the growth of human capital, too. Egypt’s national cash transfer program, Takaful and Karama — the largest in the World Bank’s Middle East & North Africa region — has reached 3.1 million households (about 11 million individuals) to date. Over 67% of the cash is directed to poor and vulnerable families and individuals in Upper Egypt; 74% of its cardholders are women. The program supports the accumulation of human capital by requiring that families enrolled in the program take their children for regular health check-ups and send them to school.

The Egyptian government is expanding this kind of support in eight governorates by piloting a new program, Forsa (which means "Opportunity" in Arabic), designed to promote livelihoods and economic inclusion.

Economic growth and development depend on investments in physical and human capital, with human capital increasingly taking center stage in Egypt’s plans.  The crisis created by the pandemic has made Egypt’s investments in human capital more crucial than ever — both to protect its fragile gains and spur its future generations onto greater productivity.