The ongoing economic integration of the Association of Southeast Asian Nations (ASEAN) block is creating potential opportunities for Indonesia’s workforce, but they may not have the right skills to take advantage of them without better vocational training programmes, economists have warned.

“Qualification mismatch is still a significant issue for young people in Indonesia today,” Emma Allen, Jakarta-based country economist for the Asian Development Bank (ADB), told People Management.

The anticipated growth caused by the 2015 launch of the ASEAN Economic Community (AEC) would change the economy of its largest country, she said. It could “unlock” new opportunities and help Indonesia move to a higher value economy. As a result, the number of higher-skilled jobs is likely to expand while the demand for low-skilled employment may contract, she said.

But with a workforce where almost 60 per cent of workers – especially older employees – did not complete high school education, making the most of these opportunities will be tough. “A reflection of low educational attainment is that half of employed people [in Indonesia] today can be considered underqualified for their jobs,” said Allen, quoting 2017 ADB data. That means improvements to education and training systems are needed to maximise the benefits of the AEC, she said.

Experience suggests regional liberalisation and integration “can also lead to some job losses,” said Owais Parray, an economist for the International Labour Organisation in the Indonesia and Timor-Leste country office. He insisted the key for all ASEAN countries was to “keep moving up the skills ladder to remain competitive”.

Employers need to be incentivised to provide more training opportunities and create a better learning environment for their employees, Parray said.

Soft skills are becoming increasingly important in a workplace environment driven by knowledge and technology, he noted. So “training and learning should not stop in schools, it should continue [beyond school],” because technological changes are making many mid-level jobs obsolete, while new jobs require workers to collaborate with machines and technology.

Overall, he said he remained optimistic about the Indonesian labour force and quoted the latest ILO data to illustrate some of the improvements that had taken place. The proportion of those who have primary school or even lower educational attainment in Indonesia decreased from 65.8 per cent in 1996 to 41 per cent in 2016, for example. This was reflected in the mix of occupations, where more Indonesians are now working as professionals, managers and technicians compared to 1996, said Parray.

Windiastri Arinda, associate director at JAC Recruitment Indonesia, said a lack of English language skills was a key barrier to improved job prospects. If that situation improved, she said she was confident that the Indonesian workforce could “win” when competing for jobs with other ASEAN nationals.

“We have some clients that need an Indonesian to be placed in other ASEAN countries – at director and managerial levels,” said Arinda.

Allen said the Indonesian government was trying to close the skills gap, by improving dialogue between employers and skills providers – notably through the introduction of the Indonesian Qualifications Framework in May 2016. The government’s pilot ‘Link and Match’ programme, which links students in vocational high schools with internship placements throughout their studies, is also a step in the right direction, she said.

“Such initiatives need to continue and be expanded,” said Allen. An example is the high-quality training available in Batam State Polytechnic (Polyteknik Negri Batam) – which is close to Singapore geographically and trains people especially for its labour market, she added.

Media Centre

If you’re a journalist or member of the press looking for more information or to speak to one of our experts, please contact our press team. 

Callout Image

Championing better work and working lives

About the CIPD

At the CIPD, we champion better work and working lives. We help organisations to thrive by focusing on their people, supporting economies and society for the future. We lead debate as the voice for everyone wanting a better world of work.