In its most recent update, the World Bank officially upgraded the status of Indonesia from low- to upper-middle income country. While the upgrade offers a positive impact by building trust and attracting better investments, improving the quality of Indonesia’s human resources through skills development is a critical requirement.
This is in line with the ILO’s Centenary Declaration for the Future of Work in 2019, which calls on governments to create a set of measures addressing the challenges of unprecedented transformational change in the world of work, focusing on the human-centered economic agenda.
The declaration focuses on three areas of action, namely increasing investments in people’s capabilities, the institutions of work and decent and sustainable work. However, this will not be an easy job as the country is facing an unexpected economic downturn because of the COVID-19 outbreak.
In April, the International Monetary Fund (IMF) projected that the Indonesian economy would grow by a mere 0.5 percent in 2020, but this growth rate is only applicable if the pandemic passes and the economy goes back to normal in the second half of the year. Many analysts even foresaw a contraction.
Furthermore, the demographic dividend is seen as a “two-edged sword”. In one hand, having a larger productive population (ages 15 to 65) than a nonproductive one will help the country’s savings and productivity.
In contrary, failing to reap the benefits of the golden window opportunity of the demographic dividend will keep the country stuck in a middle-income trap”. Worse, increasing unemployment in the long term may lead to social tensions and unrest.
Due to the outbreak, many businesses have laid off their employees. According to the Indonesian Chamber of Commerce and Industry (Kadin), 6 million workers have been dismissed. To address the issues, the government has corrected the market’s failure by allocating a stimulus package worth US$17.2 billion for the private sector.
The increasing number of new COVID-19 cases along with the relaxing of partial lockdowns has burdened the government’s efforts to tackle unemployment, particularly among the youth, of whom there are many.
Although the youth unemployment rate has declined in the past decade from 18.87 percent to 17.04 percent, the current figure is still higher than the global average of 13 percent.
It is imperative that the government address youth unemployment. Taking into account the increased unemployment rate of last year, which was 5.3 to 7.5 percent, the impact of the outbreak is a more pressing challenge for the labor market.
From the supply side, labor forces are mostly made up of low-educated and unskilled workers. Moreover, technical vocational education and training (TVET) requires more improvement in line with in industry demand.
From the demand side, a skills gap and mismatches exist as result of the industrial sectors’ lack of involvement in skills development and developing labor market information (LMI) capturing anticipated skills for the mid and long terms (between five and 10 years) that are needed by the industry in the future.
The Sector Skills Council (SSC), which focuses on the industry sector, is vital in developing competency standards for technical and vocational education and training (TVET) and addressing the skills gap and mismatches.
To address those challenges, first and foremost, the government must engage the SSC in formulating robust and coherence strategies integrating health, fiscal, education, investment and employment policies to build a responsive mechanism for skills development during and beyond the pandemic.
This will work if strong coordination is established between relevant ministries, such as the ministries of education, manpower and industry, as well as the National Development Planning Agency (Bappenas), the Investment Coordinating Board (BKPM), KADIN and the SSC representing the industrial sector, including trade union.
In Singapore, the option of merging the ministries of manpower and education is being proposed to establish a stronger “link and match” between TVET and industries.
Further action needed is to accelerate the distribution of the government’s stimulus packages to help the private sector, including by helping micro, small and medium enterprises (MSME) in their recovery and to implement training-based enterprises and apprenticeships. This includes providing a major tax deduction for up to 200 percent of those enterprises that implement enterprise-based training or apprenticeships.
Priority should be given to sectors that are able to employ large numbers of workers, especially youths. This includes manufacturing, agriculture, tourism, creative industry, services and health care, the digital economy (ICT), as well as logistics businesses — which are surviving during the pandemic and will be dominating future of work driven by Industry 4.0 — and other sectors indicated as new investments by the BKPM.
Furthermore, building a public private partnership (PPP) between TVET and the industry sector to sustain school-to-work transition mechanisms through on-job training, internships and apprenticeships is required to institutionalize the engagement of the industrial sector through the SSC to ensure job absorption and program sustainability.
Lessons learned from South of Africa and the Philippines show that the SSC helps in addressing skills gaps and mismatches. The ILO and Grid Network of Kompas Gramedia assessment screened 2,442 young people (Age 18 to 24) in 2019 and suggested that 80 percent of them are confident they will get a decent job after completing tier on-job training or internships.
Lastly, online and offline distance-learning development in Indonesia is crucial and timely to address the issue of geographic obstacles and the urban-rural divide in accessing TVET opportunities and to tackle the pandemic.
It is crucial to engage industries in improving the quality of modular content and learning methodologies, in addition to sharing information on distance learning systems, pedagogical and soft-skills for teaching materials, secured platforms, assessments and certifications for TVET development.
The authors are project manager and project officer, respectively, for industry skills for the Inclusive Growth Phase-2 Project, International Labor Organization (ILO) Jakarta. The opinions expressed are their own.
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.