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Human capital mismanagement slows Industry 4.0
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Economic Challenges: Unemployed youngsters throng a recent job fair in Jakarta. (The Jakarta Post/Ricky Yudhistira)
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t a discussion themed increasing efficiency in managing state finances in the era 4.0 toward a “golden Indonesia” in June, Deputy Finance Minister Mardiasmo raised the very interesting and provocative issue that accounting standards have not considered human capital as an asset of an organization.
Yet if employees are acknowledged as a vital resource to contribute to a company’s competitive advantage, especially in the era of Industry 4.0, arguably they should be measured and recorded as an intangible asset.
The dynamic movements of Industry 4.0 consistently show that lesser but high value intangible assets can perform better than companies with luxurious physical assets. For instance, large stores, like Giant, have closed several outlets in 2019 because of competition from smaller and online retailers.
Mardiasmo suggested stakeholders start designing accounting standards for evaluating human capital as part of an entity’s assets, not as a liability. His idea is in line with business research findings.
The National Center for Education Statistics in the United States revealed that states with the most educated people also have the highest incomes.
Moreover, Jonathan Knowles, the founder and CEO of Type 2 Consulting revealed that in the 90s, the three largest sectors in the S&P 500 were industrials, consumer discretionary and energy that rely heavily on physical assets. However, currently, the three largest sectors of the S&P 500 are technology, finance and health care, which rely mainly on intellectual property.
Recently, the government made an ambitious plan to accelerate the realization of becoming a developed country, with one of the main focuses being on human capital. Through the Master Plan for Acceleration and Expansion of Indonesia’s Economic Development, the government has a target to produce 4,000 new doctorates each year. Accumulatively by 2025, the national target is expected to achieve 52,000 doctorate holders.
