Human Development in ASEAN Countries: A Comparative Semilogarithmic Analysis Between Countries

This research uses the method of Ordinary Least Square (OLS) to identify the comparative influence of economic growth, population, government expenditure, trade openness, and foreign direct investment on human development in each ASEAN country. The comparative semilogarithmic equations [12] used are as follows:

$\begin{gathered}\mathrm{HDE}=\alpha+\beta_1 \ln \mathrm{GDP}+\beta_2 \ln \mathrm{POP}+\beta_3 \ln \mathrm{GEX}+ \beta_4 \mathrm{TOP}+\beta_5 \mathrm{FDI}+\mu\end{gathered}$         (1)

where, HDE is human development, measured using the HDI; GDP is gross domestic product (GDP), measured in U.S. dollar (USD); POP is population, measured in individuals; GEX is government expenditure, measured in USD; TOP is trade openness, measured in percent (the ratio of total exports and imports to GDP); FDI is foreign direct investment, measured in percent (the ratio of foreign direct investment to GDP); α is a constant; β_i represents each parameter to be estimated; µ is the random error term; and ln is the natural logarithm.

This study focuses exclusively on correlation to ensure consistency in the discussion, specifically examining the determinants of human development in ASEAN countries. For example, when analyzing the correlation between economic growth and human development, accounting for the reverse effect would shift the primary focus of the study to economic growth. These, in turn, would disrupt the coherence of the research by broadening its scope to include the determinants of economic growth, rather than maintaining its intended focus on the determinants of human development.

Semilogarithmic analysis is critical in studying human development policies in ASEAN countries because it allows for a nuanced understanding of the relationships between variables, especially when dealing with diverse socioeconomic contexts. Unlike models that assume homogeneity such as fixed-effects panel regression, semilogarithmic analysis accommodates variations in data by capturing the proportional effects of independent variables on the dependent variable. This is especially useful in examining human development indicators, where small changes in policy variables can have varying impacts across countries with differing levels of development, infrastructure, and social systems. By taking the natural logarithm of specific variables, this approach transforms nonlinear relationships into linear ones, simplifying the interpretation of elasticity and growth effects. This ensures that the analysis reflects the unique characteristics of each ASEAN country, providing tailored insights into the effectiveness of human resource development policies rather than relying on generalized assumptions.

The HDI data for Indonesia, Malaysia, Philippines, Thailand, Vietnam, Brunei, Cambodia, and Singapore were sourced from the United Nations Development Programme. Supplementary data for other variables were acquired from the World Bank. Myanmar, East Timor, and Laos were omitted from the analysis due to data insufficiencies in the period 2001–2020. Although this study generally discusses ASEAN countries, the regression analysis focuses on examining the determinants of human development separately for each country. Therefore, the exclusion of Myanmar, East Timor, and Laos due to data insufficiencies does not interfere with the regression results for the included ASEAN countries. Each country's analysis remains independent, ensuring that the findings accurately reflect the specific determinants of human development without being affected by the absence of certain nations.

This study is designed so that if the β₁, β₃, β₄, and β₅ coefficients are significant and positive across all ASEAN countries, then to achieve better human development, sustained increases in economic growth, government expenditure, trade openness, and foreign direct investment are necessary in each nation. Conversely, if the β₂ coefficient is significant and negative across all countries, population growth should be controlled in each nation. However, if any of the coefficients in one or more countries are either significant in the opposite direction or not statistically significant at the 5% level, ASEAN member states should re-evaluate what drives human development within their borders.

This section begins by examining the varying impacts of economic growth on human development across ASEAN countries. While Indonesia, Malaysia, the Philippines, Vietnam, Brunei Darussalam, and Singapore have successfully leveraged economic growth to enhance human development, Thailand and Cambodia present a different scenario. In these two countries, economic growth has not shown a significant correlation with improvements in human development.

While Thailand has experienced relatively stable economic growth, significant social inequality and income disparities have resulted in an uneven distribution of the benefits of economic growth across different segments of society [13]. Cambodia faces a similar situation, where sectoral disparities have increasingly mitigated the positive impacts of economic growth on human development [14]. Despite continued economic growth, Cambodia’s heavy reliance on the manufacturing and tourism sectors renders its economy highly susceptible to global economic fluctuations.

These findings align with the initial hypothesis suggesting that the quality of economic growth in each country can significantly influence the effectiveness of economic growth in enhancing human development [4, 15]. The implication is that Thailand and Cambodia should intensify policies focused on creating inclusive employment and providing equitable access to education to narrow disparities and ensure more sustainable and equitable economic growth. For policymakers in Cambodia, the urgency to reduce reliance on specific sectors is undeniable. Efforts to promote investment in other sectors such as high-tech agriculture, diversified manufacturing, and technology-based industries should be intensified.

One form of ASEAN regional cooperation that can be undertaken to address the issues in Thailand and Cambodia is through enhancing labor policy harmonization. Initiatives such as the ASEAN Qualifications Reference Framework (AQRF) can facilitate labor mobility and improve access to decent work in both countries. Educational cooperation, such as through the ASEAN University Network (AUN), can also expand access to education in remote areas of Thailand and Cambodia. To reduce Cambodia’s dependence on specific sectors, cooperation in research and innovation can accelerate the adoption of new technologies, thereby effectively promoting diversification [16].

A study on the relationship between population and human development in ASEAN countries has revealed interesting disparities. While Indonesia and Vietnam experienced negative correlations, other nations, particularly those with younger populations such as Malaysia, the Philippines, Brunei, and Cambodia, demonstrated a more stable human capital quality. The negative effect of the population on human development in Indonesia and Vietnam can be explained by mediating factors such as urbanization and workforce participation rates. Rapid urbanization in these countries has led to overcrowded cities, strained public services, and disparities in access to education and healthcare. Additionally, lower workforce participation rates, particularly among certain demographic groups, may limit the potential benefits of a growing population on human development.

These results also suggest that a younger demographic can serve as a buffer against negative population effects. Singapore, on the other hand, provides a contrasting case. Despite a less youthful population, its sustained focus on education, research, and technological advancement has yielded a highly skilled workforce, underscoring the importance of quality over quantity in human capital development.

From a natural resource perspective, Brunei Darussalam’s abundant oil and gas reserves have made the country heavily reliant on this sector. However, the government has demonstrated an awareness of the importance of economic diversification and sustainability. Efforts include developing human capital in environmental and renewable energy technologies to manage the impacts of resource exploitation and prepare for the future economy. Interestingly, resource constraints have driven Thailand and Singapore to become increasingly innovative in environmental management and sustainable technology development [16].

These findings align with our initial hypothesis that population growth can have varying impacts on human development across nations [6]. Singapore serves as a compelling case study, demonstrating how sustained investments in education, research, and technology can help maintain a high-quality human capital base, even in the face of an aging population. Similar policies should be implemented in countries with large youth populations, such as Indonesia and Vietnam, to ensure that their young people not only possess numerical strength, but also possess the skills relevant to future industries.

As demonstrated by Brunei Darussalam, an overreliance on natural resources cannot sustain a long-term economy. Brunei has since embarked on economic diversification and invested in renewable energy expertise. Indonesia, similarly endowed with abundant natural resources, should adopt a similar diversification strategy to mitigate the impact of commodity price fluctuations. Furthermore, both Indonesia and Vietnam must address emerging challenges posed by pressures on infrastructure, healthcare, and education systems. Improved quality of life can be achieved through policies focused on population management, such as effective family planning programs and enhanced public health initiatives. Indonesia and Vietnam can learn from the experiences of Thailand and Singapore by developing innovative and environmentally friendly environmental management policies.

The ASEAN can enhance regional cooperation by developing cross-border education and training programs to improve human capital, particularly in technology, research, and entrepreneurship. Additionally, it can foster collaboration in economic diversification through sharing best practices in innovation and sustainable natural resource management, as well as strengthening cooperation in addressing environmental challenges through joint projects that support green development, water management, and climate change mitigation.

Furthermore, the impact of government expenditure on human development varies across ASEAN countries, reflecting differences in public sector efficiency. Vietnam is the only nation that has successfully enhanced human development through increased government spending, aligning with its long history of prioritizing investments in social sectors such as education and health [17]. This suggests that Vietnam demonstrates high efficiency in effectively allocating government spending into social development. On the other hand, Indonesia and the Philippines, with their large populations, still face challenges in ensuring the equitable distribution of public services. Consequently, government spending in these countries is primarily directed towards addressing complex social inequalities [18, 19], which may limit its overall impact on human development and reflect lower public sector efficiency compared to Vietnam.

Meanwhile, Malaysia, Thailand, Brunei Darussalam, and Singapore have established relatively sound healthcare and education systems. Therefore, their focus has shifted towards improving service quality and innovation. The limited fiscal capacity poses a significant challenge for Cambodia in allocating its budgetary resources to health and education [20].

These findings align with the notion that the impact of government spending on human development can vary across countries [8]. In this context, Cambodia should prioritize efficient and strategic spending, focusing on programs that directly impact human development. Furthermore, other ASEAN member states can share knowledge on fiscal management, tax collection, and public expenditure efficiency. ASEAN countries can also collaborate with regional financial institutions such as the Asian Development Bank (ADB) and the ASEAN Infrastructure Fund to provide financing for strategic infrastructure projects and social programs in Cambodia.

In terms of the determinants of human development from external factors, we also find differences in the influence of free trade policies on human development. While Indonesia and Malaysia have experienced negative impacts, other nations show insignificant effects. This disparity is affected by several factors particularly domestic absorptive capacity and institutional quality.

In Indonesia, particularly in remote areas, underdeveloped infrastructure limits the full utilization of free trade benefits, reflecting low absorptive capacity. The Philippines faces similar constraints. Malaysia and Thailand, despite better infrastructure, remain vulnerable to global price fluctuations due to their reliance on specific commodity exports. Vietnam still faces institutional challenges, such as the quality of governance, especially in rural areas. Meanwhile, Brunei Darussalam and Singapore have similarities in that neither relies heavily on free trade to develop their people. Free trade is aimed more toward maintaining economic stability in these countries.

These findings also align with our initial hypothesis. Policy implications include infrastructure improvements in Indonesia and the Philippines and increased economic diversification, particularly in export commodities, for Malaysia, Thailand, and Cambodia. Vietnam needs to improve its governance, especially in rural areas. To mitigate the negative impacts of free trade on human development in Indonesia and Malaysia, the ASEAN can strengthen social safety nets, enhance education and workforce skills in both countries, and collaborate on fair labor standards and balanced trade policies to protect local industries. Additionally, the ASEAN can enhance cooperation in technology, innovation, and social infrastructure to ensure the sustainable benefits of trade for people.

Finally, regarding other external factors such as foreign direct investment, none of the ASEAN countries in this study demonstrated a significant relationship between foreign investment and human development [11]. This is because the sectoral composition of foreign direct investment plays a crucial role in determining its impact. Not all types of foreign investment directly contribute to human development. Investment concentrated in labor-intensive manufacturing, mining, or energy sectors will not significantly enhance education, health, or social welfare. In many ASEAN countries, substantial investments are allocated to these sectors, limiting their broader impact on the well-being of the general population.

The implication is that a diversification of investment sectors is needed. ASEAN countries should attract foreign investment that focuses on the sectors supporting human development, such as education, information technology, health, and social infrastructure. Moreover, governments must develop complementary policies such as vocational education, skill enhancement for the workforce, and social programs that enable the public to take advantage of opportunities from foreign investment. Without these complementary policies, large investments in certain sectors may only benefit a select few without having a broad impact on overall human development.

To this end, ASEAN member states should strengthen regional cooperation to attract investments in education, technology, health, and social infrastructure that support human development. This can be achieved through a sustainable investment framework, skills enhancement and labor mobility programs, and the development of digital infrastructure. Furthermore, inclusive social programs and regional policy forums are essential to ensure that the benefits of investments are widely distributed across ASEAN societies.