Step 1. Identify the indicators to be used for each HDI component:
Health

Life Expectancy

Education

Functional Literacy Rate
Combined Primary, Secondary and Tertiary Enrollment Rate

Income

Real Income Per Capita

Step 2. Set the appropriate maximum value and the minimum value of each of the above indicators:
  Maximum Minimum
life expectancy 85 yrs. 25 yrs.
functional literacy rate 100% 0%
enrolment rate 100% 0%
income per capita I* highest in a given year lowest in a given year
income per capita II** $40,000
purchasing power parity		 $100
purchasing power parity

* used in the intracountry comparison of provinces

**used to compare provinces with other countries

Step 3. Compute the index for each indicator as follows:
actual value x – minimum value x

maximum valuex – minimum value x
Step 4. Average the functional literacy and enrollment indices to generate the education index:
Education index = (1/2) (functional literacy index + enrollment index)
Step 5. To arrive at income index I:
province’s real per capita income – minimum income level

maximum income level – minimum income level
Step 6. To arrive at income index II:
Convert a province’s per capita income into purchasing power parity as follows:

PPP$ per capita income (1997) = (peso per capita income/ P30*) x 3.06**

then, compute income index II using the following:

income index II =
log y – log 100
log 40,000 – log 100

* average 1997 peso-dollar exchange rate

** implicit ratio of one PPP$ to one current US$ in the 1999 HDR

Step 7. Assign weights to the various components to get the HDI:

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

HDI (II) � (1/3) life expectancy index + (1/3) education index + (1/3) income index (II)
Source: 2000 Philippine Human Development Report