Human development strategies to achieve Golden Indonesia 2045

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Esther Sri Astuti - Dendy Indramawan Esther Sri Astuti is Program Director at the Insitute for Development of Economics and Finance (INDEF) and Lecturer at the Faculty of Economics and Business, Universitas Diponegoro. Dendy Indramawan is a Research Assistant of INDEF.

IO – On many occasions, President Joko “Jokowi” Widodo has declared that Indonesia has an ambitious target to become a developed country by the 100th anniversary of Indonesia’s independence, to be known as “Golden Indonesia 2045”. By this time, Indonesia will become the top five strongest economies in the world with a projected Gross Domestic Product (GDP) of US$ 7 Trillion. This means that per capita income will reach US$ 23 thousand, leading to a poverty rate dropping to zero percent.

It will indeed be a challenge to realize this target, when data from Statistics Indonesia (BPS) shows that Indonesia’s per capita income was US$ 4 thousand in 2019, which indicates that the nation is still trapped as a “lower middle-income” country. The Indonesian government therefore needs to work hard to boost per capita income three times to US$ 12 thousand (upper middle-income country) as a foundation for jumping to developed country status.

It is generally accepted that the development of human capital should be the greatest priority program to realize Golden Indonesia 2045. The demographic bonus that will occur between 2020 and 2035 will benefit the nation if the Indonesian worker productivity rises in that period. The era of 4.0 industry and digital economy could maximize this potential. Automation and exchange of data through cyber-physical systems, the internet of things, and cloud computing and cognitive computing will link up more direct business models in Indonesia, broadening market share, especially for Small & Medium Enterprises (SME).

Research from the  Institute for Development of Economic and Finance (INDEF) and PricewaterhouseCoopers (PwC) in 2019 shows that around 98 percent of internet users have social media accounts and 82 percent of Facebook, Instagram, WhatsApp users claim internet usage has improved their  skills. They use their social media accounts not only for social activities but also for business purposes: research, marketing and consumer retention.

The digital economy will shrink transaction costs and increase economies of scale, and is predicted to raise financial inclusion, which will impact by closing up economic inequality, alleviating poverty, creating jobs and boosting economic growth. According to Oxford Economics, in the digital economy age, new jobs will be created for around 498,000 Indonesians in 2020. As a result, the nation must develop strategies on how to capitalize on technology as a new driver for economic growth, augmenting efficiency and productivity of business transactions. The upskilling and reskilling of Indonesian human resources is a key not only to link and match labor and industry, but also to elevate the capacity of the Indonesian economy.

Improvement of the quality of our education must be a primary concern in facing rapid technological changes, as data from BPS shows half of the total Indonesian workforce consists of junior high and elementary school graduates. Over the past 10 years, the decline of this figure has been insignificant, resulting in sluggish movement of nearly 30 percent of the Indonesian workforce from the agricultural to the manufacturing sector. In fact, while the contribution of the agricultural sector to GDP is just 13.5 percent, it absorbs some 30 percent of the labor force. On the other hand, the manufacturing sector, which contribute 19.6 percent to GDP, absorbs 14.1 percent of the workforce. The 20 percent of APBN allocation for education has not yet yielded any significant impact on improving the quality of human resources in Indonesia.

In addition, the pre-employment card program requires good preparation, especially related to strengthening a database for the determination of pre-employment card recipients needing verification and data confirmation in advance. The government should thus forge a close partnership with business to ensure card holders obtain targeted vocational training. This can expedite the decline of our unemployment rate. Synergy between the ministries of Education and Culture, the Ministry of Research & Technology, and the Ministry of Manpower is also needed to create quality Indonesian workers who will adapt to recent technology.

There are furthermore several useful strategies to improve the quality of Indonesian human resources, to meet 4.0 industry in the digital age. First, the government should improve the quality of teachers, and assign quality teachers to institutions throughout Indonesia. Incentives are needed for outstanding teachers and teachers in remote areas. Second, the government should build adequate research facilities to encourage research, development and innovation. Third, the government should improve the curriculum of vocational school (SMK) and skill training centers (BLK) and build teaching factories to give real experience (known as production-based training) to students, so graduates can meet what industry requires and needs. This is essential, because BPS data shows that the unemployment rate of SMK graduates is high and has actually risen over the last few years. Fourth, soft skills need to be included in a vocational training curriculum, so workers are able to do complex problem solving, critical thinking, respond with creativity, be apt in negotiation and service-oriented. To implement these four strategies, the government needs to work together with private sectors and business associations to ensure there is collaboration and synergy to enhance digital talents and digital literacy for Indonesians.

In conclusion, improvement of the quality of human resources is a must to realise Golden Indonesia 2045, launching the nation upward as one of the top five biggest economies in the world, after one century of independence.