TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Analysis: RI migrant workers bring skills, cash to their home country

As one of the most populated countries in the world, Indonesia is expected to have a large, young and productive workforce and therefore enjoy a demographic bonus

Andjarsari Paramaditha (The Jakarta Post)
Jakarta
Wed, July 25, 2018

Share This Article

Change Size

Analysis: RI migrant workers bring skills, cash to their home country

As one of the most populated countries in the world, Indonesia is expected to have a large, young and productive workforce and therefore enjoy a demographic bonus. In 2030, around 70 percent of the Indonesian population is projected to be of working age. With such a prospect, our talent and human capital is essential for economic development. One way to respond to this situation is to tap the potential of Indonesian migrant workers.

Among the 10 ASEAN countries, Indonesia has the largest population and the second-highest number of migrant workers. However, in terms of remittances sent to the homeland, it only ranks third in the region, below the Philippines and Vietnam. Underlying problems are the low level of education and background skills, the high proportion of undocumented workers and the high cost of remittance transfers to the homeland.

Graphic 1. Remittance inflows to ASEAN countries in 2017 (in billion US dollars) and ASEAN migrant worker deployment in 2015. Source: World Bank and International Labour Migration Statistics Database in ASEAN (ILMS).

Although the Philippines and Vietnam have smaller populations than Indonesia, the migrant workers they send out are better skilled and educated and often fluent in English. Most migrant workers from the Philippines work in the health or the hospitality industry, while Vietnamese workers abroad are usually employed in information technology, infrastructure or telecommunication.

A look at the educational background of Indonesian workers shows that only 22 percent of them have a high school diploma or higher education. Hence, most of the exported Indonesian workers work in informal sectors or as blue-collar workers.

However, migrant workers tend to pick up new skills and experience while working abroad; and if they return to their homeland, they usually find higher-paid work or become entrepreneurs or small business owners. They also become more aware of the importance of education, savings and insurance for their future and their family.

This kind of trickledown effect, in the long run, is crucial for improving their welfare and that of their families.

As migrant workers also improve the wellbeing of their kin, they become examples of success, and many would want to follow their path in finding work abroad. However, many low-skilled workers are willing to do that at the cost of their safety. According to a 2017 World Bank report, around 48 percent of Indonesian migrant workers are undocumented.

The actual number of Indonesians working overseas is estimated to be significantly higher, as most of them migrate illegally. Most of these workers have a low educational background and become illegal workers in Malaysia. They are also vulnerable to abuse, have low wages or even work unpaid and are prone to human trafficking.

It is very important to ensure that the migrant workers are documented, so that the authorities can track them and protect their rights. In doing so, it is also useful for the government to measure the economic value and assess the future growth as well as monitor the workers’ development and wellbeing.

Graphic 2. Characteristics and destination countries of Indonesian migrant workers. Source: World Bank and Agency for the Placement and Protection of Indonesian Migrant Workers (BNP2TKI).

Looking into the characteristics of Indonesian migrant workers, it is important for them not just to have better skills at the current job and industry, but also to know what kind of job will be in high demand in the future.

One of the biggest problems of the Indonesian workforce is a mismatch of skills. The education system and skill-set building should be tailored to future needs, as current skills might be obsolete in many years ahead. For example, coding skills nowadays are not only relevant to the IT field but are needed across sectors, given the higher demand for automation and the use of robotics in various industries. This also applies to the international job market and is already proven to be true as more and more Indonesians abroad are hired as game developers, film animators or financial technology (fintech) business developers. By raising the standards of education and skills, Indonesian migrant workers will find better jobs abroad and be able to send more money to their homeland.

Indonesian migrant workers already contribute significantly to remittance inflows. Bank Indonesia recorded US$835 billion sent by these foreign workers as of June this year. The remittances surged during Ramadan as the seasonal increase can reach 20 percent to 25 percent compared to other months.

However, the cost of sending money to Indonesia is still high with service fees of approximately 8 percent to 10 percent, which compares to worldwide average fees of 6.4 percent.

The high remittance fees encourage Indonesian migrant workers to resort to unofficial channels for sending funds back home, at the risk of the funds being lost in the process and the intended recipients receiving nothing. However, with the rise of banking and finance technology, there are now safer and cheaper options to send money home by using electronic cash or mobile remittance, for instance.

Last but not least, it is also important to acknowledge the Indonesian diaspora and raise awareness among expatriate Indonesians about various investment opportunities in their homeland. Many in the Indonesian diaspora are educated migrants, so they play an important role not only as the Indonesian voice in the world but also in supporting government programs.

A case in point is the recent tax amnesty, which succeeded in repatriating substantial amounts of money from abroad. However, currently there are not enough incentives to make it easy for the Indonesian diaspora. A good example to follow is India’s policy for non-resident Indians (NRI), which allows them to remit money easily and invest it in government bonds even though they live abroad.

__________________

The writer is a public policy, finance and banking researcher at Mandiri Institute.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.