Malaysia's Human Development Index (HDI)

• NG ZHEN XIANG

Introduction

Human Development Index (HDI) was created by the Pakistan economist Mahbub ul Haq and the Indian economist Amartya Sen in 1990. This report was published by the United Nations Development Program (UNDP) in its annual series of Human Development Reports (UNDP) .

The Human Development Index (HDI) attempts to rank all the countries on scale of 0 which is lowest human development to 1 which is highest human development.

There are 2 type of Human Development Index which is Human Development Index (HDI) and New Human Development Index (NHDI). The HDI were used from year 1990 until 2009. When year 2010, the UNDP introduced the New Human Development Index (NHDI) or Inequality-adjusted Human Development Index (IHDI) and were used until today.

Aim and objective

By using statistical tool to measure achievement of social and economic dimensions for Malaysia and other country based 4 category which is life expectancy at birth, expected years of schooling, mean years of schooling and Gross National Income (GNI) per capita in $USD. Besides, to determine Malaysia is under which category of human development countries.

Assumption and limitation

Malaysia is a country that place at a good geography environment. This is a country that did not have natural disasters. Population in Malaysia is just about 30 million in the year 2014, with the advantages of the natural resources in the country, Malaysia should in the category in very high human development or high human development category in the report Human Development Reports.

Human Development Index (HDI)

Definition of Human Development Index (HDI) in the Human Development Repost 2013 – The Rice of the South: Human progress in a Diverse World is a composite index measuring average achievement in three basic dimensions of human development – a long and healthy life, knowledge and decent standard of living.

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The original HDI is based on three target of development. First is longevity as measured by life expectancy at birth. Second, standard of living as measured by real per capita gross domestic product for each countries. Last is knowledge. Knowledge measured by two -thirds a weighted average of adult literacy and one-thirds of gross school enrollments.

The HDI rank or category all countries into four groups which is very high human development (0.90 – 1), high human development (0.80 – 0.90), medium human development (0.500 – 0.799), low human development (0 – 0.499).

Formula for HDI

Life expectancy index = life expectancy – 25

85 – 25

Income index = log (GDP) – log (100)

log (40000) – log (100)

Education index = 2/3 (adult literacy index) + 1/3 (gross enrollment index)

Adult literacy index = estimate adult literacy – 0

100 – 0

Gross enrollment index = estimate gross enrollment – 0

100 – 0

HDI = 1/3 (income index) + 1/3 (life expectancy index) + 1/3 (education index)

Life expectancy index is to measured life expectancy at birth. The UNDP stards with ta country’s current life expectancy at birth and subtracts 25 years.the latter is the lower goalpost, the lowest that life expectancy could have been in any country over the previous generation.

Income index is to measured standard of living and it take by the real capita gross domestic product adjusted for the differing perchasing power parity of each country’s currency to reflect cost of living and for the assumption of diminishing marginal utility of income.

Education index is to measured knowledge.It take two -thirds a weihted average of adult literacy and one-thirds of gross school enrollment which is take persentage for one country’s primary, secondary, and tertiary age population are enrolled in school.

New Human Development Index (NHDI)

In 4 November 2010 (and updated on 10 June 2011), the calculation for Human Development Index(HDI) had been change to the New Human Development Index (NHDI) and using new formula but still based on standard of living, education and health.

Formula for NHDI

Income index = ln (GDP) – ln (163)

ln (87478) – ln (163)

Life expectancy index = life expectancy – 20

83.6 – 20

Education index =

0.951

Mean years of schooling index = Mean years of schooling – 0

13.3 – 0

Expected years of schooling index = Expected years of schooling – 0

18.0 – 0

NHDI =

The NHDI still is based on three components to determine the level of human development which is life expectancy at birth, income index and education index .

Life expectancy index is measured by life expectancy at birth. Life expectancy at birth is measured by number of years a newborn infant could expect to live if prevailing patterns of age-specific mortality rates at the same time of birth stay the same throughout the infant’s life.

Education index is measured by mean years of schooling and expected years of schooling. Mean years of schooling measured by average number of years of education received by people ages 25 and older, converted from education attainment levels using official durations of each level.

Expected years of schooling is measured by number of years of schooling that child of school entrance age can expect to receive if prevailing patterns of age-specific enrolment rates persist throughout the child’s life.

Income index is measured by the gross national income (GNI) per capita for each country. Aggregate income of an economy generated by its production, less the income paid for the use of factors of production owned by the rest of the world, converted to international dollars using purchasing power parity (PPP) rates, divided by midyear population.

Human development index category

Human development index can divide to four category which is very high human development, high human development, medium human development and low human development. Each category have different value from aspect such as life expectancy at birth (years), mean years of schooling, and GNI per capita (2005 PPP $). After calculating every country’s NHDI, we can identified the category for each country based on their NHDI value.

Example of Computing the NHDI : The case of Singapore

Income index = ln (52613) – ln (100) = 0.925

ln (87478) – ln (100)

Life expectancy index = 81.2 – 20 = 0.962

83.6 – 20

Education index = = 0.803

0.951

Mean years of schooling index = 10.1 – 0 = 0.759

13.3 – 0

Expected years of schooling index = 14.4- 0 = 0.8

18.0 – 0

NHDI =

= 0.894

For this example, the NHDI for Singapore is 0.894 and is high human development category. The life expectancy at birth in Singapore is 81.2 years which is in very high human development category. Mean years of schooling (years) and expected years of schooling (years)for Singapore is 10.1 years and 14.4 years. Both figure is under high human development category. However the GNI per capita (PPP $USD) is up to $52613 and is under very high human development category.

In the Human Development Report 2013 : The rise of the South : Human progress in a diverse world. Singapore is under the Very high human development category and the rank is 18 in the world.

Malaysia’ HDI trends based on consistent time series data, new component indicators and new methodology

Malaysia’s HDI value for 2012 is 0.769. This index show that Malaysia is in the high human development category. The rank for Malaysia in the Human Development Report 2013 is number 64 out of 187 countries and same rank with Serbia and Libya. The value of HDI for Malaysia show increases from 0.563 (low human development category) to 0.769 ( high human development category) from year 1980 to 2012 which is increase 37% or increase average 1% annually.

The value of HDI for Malaysia was 0.766 and rank 65 out of 187 countries and in the year 2011, Malaysia was rank at 61 out of 187 countries with the value of HDI is 0.763.

Based on the Malaysia’s HDI trends on consistent time series data, life expectancy at birth had increase from 67.4 years to 74.5 years from year 1980 to 2012. Expected years of schooling for year 1980 is 9 years and increase to 12.6 years at year 2005 and remain the same year until 2012. Next, for the mean year of schooling is only 4.4 year at 1980 and had been change to 9.5 years when 2010 until now. For the GNI per capita (2005 PPP$) was only $4692 and increase almost 200% to $13676 at the year 2012.

Malaysia’s HDI indicators for 2012 relative to selected countries and groups

The table of Malaysia’s HDI indicators for 2012 relative to selected countries (Thailand and Philippines) and groups show that Malaysia have the higher index for life expectancy at birth, expected years of schooling, mean years of schooling and GNI per capita (2005 PPP$) compare to Thailand and Philippines. Besides, Malaysia’s HDI is higher then East Asia and the Pacific’ HDI category. However expected years of schooling for Malaysia is lower compare to High HDI category which is only 12.6 years and for High HDI category is 13,9 years. Malaysia also showed all the index were higher compare to the average of the Word from all the aspect.

HDI value for selected countries form year 1980 to 2012

Note* : no data

The graph show that all the HDI value for selected countries are increasing and the highest HDI value for these countries is Singapore and the HDI value is up to 0.895 at year 2012 and there is no data of HDI value for Singapore at the year 1980 and 2007. On the other hand, Indonesia had the lowest HNI value among the selected countries. However, all the selected countries show the upward trend from the year 1980 until 2012.

In the year 2012, Norway got the highest HDI value which is 0.955. The Life expectancy at birth is 81.3 years, the mean of schooling is 12.6 years and expected of schooling is up to 17.5 years. Norway’s Gross national income per capita is $USD 48688.

On the other hand, Mozambique got the lowest HDI value only 0.327 at the year 2012. The Life expectancy at birth is just 50.7 years. The mean of schooling is only 1.2 years and expected of schooling just 9.2 years. Mozambique’s Gross national income per capita was bellow $USD 1000 which only $USD 906.

Conclusion

In conclusion, although Malaysia is not in the category of very high human development, however from all the aspect in the research showed that Malaysia’ data is still batter compare to the average of East Asia and the Pacific and the average of all countries in the world. The government can do some policy to increases the value of HDI so that Malaysia can become the develop country in future soon.

References

1. Malik. K. (2013). Human development report – the rise of the south : human progress in a diverse world. New York: United Nations Development Programme
2. Malik. K. (2013). Technical note: Human development report – the rise of the south : human progress in a diverse world. New York: United Nations Development Programme
3. Malik. K. (2013). Malaysia: Human development report – the rise of the south : human progress in a diverse world. New York: United Nations Development Programme
4. Wikipedia.(n.d.). Human Development Index. Retrieved 20-3-2014, from http://en.wikipedia.org/wiki/Human_Development_Index
5. Todaro,M.C., & Smith, S. C. (2011). Economic Development (11 th ed.). Kendalliville: Addison Wesley
6. The Economic Times. Definition of ‘Human Development Index’. Retrieved 18-3-2014, from http://economictimes.indiatimes.com/definition/human-development-index

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