# **Cost of Inaction**

Improving human capital development in Pakistan by improving ECE attendance and the quality of ECE provided has immediate costs and long-term benefits. In 2022, Pakistan’s Human Capital Review calculated the cost of inaction of failing to invest in ECE (Tomlinson et al., 2023). The cost society pays for failing to implement such an intervention was estimated for three scenarios in Pakistan.<sup>3</sup> Low coverage was estimated by equalizing enrollment rates between households in the highest income quintile and those in the other quintiles to achieve 27.2 percent enrollment across income levels (based on the Pakistan Social and Living Standards Measurement Survey 2019-20 enrollment rates for children in the highest income quintile). Medium coverage was estimated using the enrollment rate of a regional peer, Nepal, at 61.9 percent, and full coverage was estimated as achieving one year of universal ECE enrollment, meeting Pakistan’s commitment to SDG 4.2 and 2009 National Education Policy objectives.

Continuing coverage at present levels and not raising coverage levels would be expensive. The cost of inaction would be 0.34 percent of GDP for the low-coverage scenario (failing to boost enrollment to 27.2 percent of all 3- to 5-year-olds in preprimary school), 1.79 percent of GDP for the medium-coverage scenario (failing to enroll 61.9 percent of 3- to 5-year-olds), and 3.39 percent of GDP for the full-coverage scenario. The cost of inaction on medium coverage is conservatively estimated at US$ 4.7 billion for each cohort that fails to receive medium coverage. The cost of failing to invest in ECE is high. As such, the next step is understanding the upfront costs of investment in ECE.

# **Evidence from Other Countries**

Costing and simulation models are fairly common in education sector planning. However, because of data availability and consolidation challenges, ECE is often not included as its own education level. In most cases, ECE is grouped together with primary education. However, there are examples of countries that have been able to achieve significant milestones through better planning and budgeting. For example, Uzbekistan developed dedicated strategies and costing simulations for preschool education as part of its Education Sector Plan 2019-2023 (Government of Uzbekistan, 2019). The preschool enrollment rates increased from less than 30 percent in 2017 to 69 percent in 2022 (Ministry of Preschool Education, Uzbekistan & UNICEF, 2022). In addition, more than 12,000 non-state family preschools were established between 2018 and 2021 using public-private partnership models.

Given the need to estimate ECE costs, a variety of different ECE costing and simulation modeling tools have been developed and utilized in various periods and contexts. Some well-known tools

> 3 The approach used a benefit–cost ratio from Engle et al. (2011), data on the population aged 3–5-years from the 2020 Pakistan Census, government expenditure per primary student from World Bank (2015), and GDP from World Bank (2020). The benefit-cost ratio was estimated at a conservative 6.4:1 and a discount rate of 6 percent was applied based on a study modeling the impact of increased ECE attendance on school attainment and subsequent wage changes in 73 low- and middle-income countries (LMICs) (Engle et al., 2011).

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