Indonesia's call of duty
It is already Southeast Asia’s biggest economy, but it is also one of the region’s fastest-growing, with 5.0% growth recorded over the 12 months to March 31 this year. Still, Indonesia is eyeing further macro-economic improvements, and has embarked on a vigorous transformation of its entire workforce.
While the industrial and manufacturing sectors have been the country’s main growth engines for decades, Indonesia is now also witnessing significant development of its financial and accounting, information technology, fast-moving consumer goods, and services industries.
Steep growth is accompanied by a crucial need for Indonesia to transform itself into a knowledge-based economy, of which a skills-based workforce is an absolute imperative. That’s something President Joko Widodo has targeted since assuming the government’s top post in 2014.
He recently again stressed that developing human capabilities was a matter of national importance, citing that Indonesia was expected to have a “demographic bonus” between 2030 and 2035.
“During that time, 52% of our population will be within ‘productive’ ages (and only 48% will be non-working elderly and children) and this will be our strength. However, if we fail [to develop skills], then this will be a great burden for the country to bear,” Widodo said.
Low proficiency levels
That burden could be a great one.
A 2016 report by the Organisation for Economic Co-operation and Development (OECD) highlighted that adults in Jakarta showed much lower levels of proficiency in literacy and numeracy compared to international benchmarks.
The Survey of Adult Skills study, for example, found that fewer than one percent of adults in Jakarta, Indonesia’s capital, had attained the highest levels of proficiency in literacy, well below the OECD average of 10.6%.
At the same time, only 1.4 % of adults in Jakarta can boast the highest levels of numeracy proficiency, also far behind the OECD average of 11.2%.
The findings are alarming, for the country as a whole, given that Jakarta is Indonesia’s economic and development hub, and rates outside the city are likely lower still.
With the country looking to push into high-growth areas such as science, mathematics, technology and entrepreneurialism, the findings reinforce Indonesia’s pressing need to modernise and upskill its workforce on all fronts.
Pambudi Sunarsihanto, for one, isn’t surprised by the findings. The Vice President of HR at Danone Aqua says working adults do not have a culture of continuous learning.
“Adults in Jakarta and in Indonesia read books at a much lesser rate compared to adults in other countries,” he says.
“It would be much better if they spend more time reading books and also using their technology gadgets to upgrade their knowledge and competencies, instead of only connecting with their friends.”
Audi Lumbantoruan, Human Capital Business Partner at Suntory Garuda Beverage, shares another view for Indonesia’s poor skills outlook.
He says many Indonesian adults have not been afforded adequate learning opportunities, because of the limited number of schools that provide basic elementary education.
“They (instead) have had to survive by getting a job, such as working in factories or in home industries,” says Audi.
Synergy in vocational training
Widodo’s administration is pressing ahead with a root-and-branch reform of Indonesia’s skills landscape, beginning with the robust implementation of vocational training.
This will form the bedrock of skills development for both the present and future workforce, and will be a core part of the country’s education system moving forward.
The public and private sector have been roped in to partner with the federal and regional governments to encourage a strong culture of vocational training throughout their ranks.
In 2016, Research, Technology and Higher Education Minister Muhammad Nasir announced that Indonesia was preparing to set up 10 vocational schools to provide training for employees in several strategic industries, including the maritime, electronics, transport, agriculture, and manufacturing sectors.
Indonesia is looking to mirror Germany’s efforts in the vocational education space, specifically in developing a skilled, future-ready workforce that can work in highly technical and niche high-growth industries.
“Why vocational education?,” Foreign Minister Retno Marsudi asked during a working visit to Germany last year. “Vocational education is obviously very necessary at this time to respond to the needs of today’s market.”
A year on, both countries have now promised to deepen their partnership in the field of technical and vocational education and training.
As part of this cooperation, Germany will help Indonesia build an internship programme, in which students would gain practical work experience and real world skills through placements with private companies.
Reno Rafly, Talent and Organisation Manager at Accenture Indonesia, says vocational training will help to close the talent demand gap sooner, especially for the hospitality, construction, and healthcare industries.
“It will bring a greater advantage to the Indonesian economy in general and speed up the employability process,” she explains.
But Pambudi warns that economic acceleration can be a double-edged sword.
Pointing out that some areas of the economy are growing too quickly, he says providing a workforce that satisfies the needs of this rapidly-growing economy is a challenge.
“It would be too long and costly to expect that we develop everyone using the conventional education programmes,” says Pambudi.
“Vocational training is the answer to this. It is faster, cheaper, and more relevant to meet those workforce needs, particularly in the tourism and manufacturing industries.”
Local talent is key
While Indonesia presses on with its long-term workforce-modernisation efforts, it still has numerous medium-term HR challenges to contend with.
One of these is the country’s steady decline of foreign employees.
A Reuters report last year revealed that foreign employees were departing the country at an increasing rate due to the slump in commodity prices that had forced resource firms to cut jobs. This coincided with the government also introducing tighter regulations on expats.
The number of temporary residential permits issued to foreigners, including renewals, fell to to 171,944 in 2015, down more than 11% from 194,162 in 2013.
Rob Bryson, Director of Robert Walters Indonesia, says barriers to entry for overseas workers remain high, and companies are expected to continue focusing on localising their workforces.
“As a result, the number of working visas currently active in Indonesia is at its lowest for more than a decade,” he shares.
“It is also expensive to hire foreign talent, especially for the oil and gas, and commodities industries, which are not faring too well currently.”
The drop in foreign talent, coupled with the push to advance the local workforce’s skillsets, mean it is crucial for organisations to accelerate their internal talent development processes to groom adaptable and skilled local employees.
This entails offering individuals with opportunities to expose themselves to different functions of the business, as well as sending them abroad for working stints.
Employees in Danone Aqua’s Indonesian headquarters are encouraged to change their jobs every three years, and undertake lateral career moves. This philosophy goes all the way to the board of directors, where it is mandatory for members to have been exposed to at least two different roles or markets.
Pambudi says this can be a difficult culture to encourage, because Indonesians are “very comfortable” in their own backyard.
“We need to send Indonesians overseas,” he says.
“When they’re overseas, they will get out of their comfort zones and will have to struggle and adapt to the changes. They also have to manage the cultural changes. When they come back, they will be much better employees and people.”
The organisation also actively engages in external scouting by identifying local talents within the country, as well as skilled Indonesian citizens who are currently working overseas.
For the last two years, Suntory Garuda Beverage has also crafted its own management traineeship and fast-track programme to prepare its millennial workforce to become future leaders.
Meanwhile, Accenture’s “Return Home” programme saw HR heads visit several campuses in the US to introduce its company to Science, Technology, Engineering, and Mathematics students. It hoped to highlight internships and job opportunities to entice Indonesians to come back home after their study.
Reno says HR in Indonesia needs to expand its network throughout the country to develop wide and deep talents that will meet the increasing demand in coming years.
Learning should also continue beyond that of formal education, in line with developing a “liquid workforce” where talents are ready to learn and adapt to new roles based on changes in business environment, she says.
Pambudi says the HR community in Indonesia can spearhead the nation’s charge to transform its workforce.
“They are great employer champions and change agents,” he adds.