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.