Indonesia is currently undergoing a transition phase as it develops to become a knowledge based economy focused on increased competitiveness, growth and employment performance. Skills are seen as significant obstacles in this respect, and the country’s government is investing more in the development of the nation’s education and training system in order to close these gaps and to transform the Indonesian TVET (Technical and Vocational Education and Training) system into one that provides demand-driven and practice-oriented programmes, aimed at improving employability and participation in lifelong learning.
Although there has been significant emphasis on the quality of vocational secondary schools alongside a determination to raise the standards of higher education (See Higher Education: Indonesian Academia Must Open Up), corporate training is becoming more of a pressing concern with the development of the ASEAN economic community. With the way things currently stand, it is perceived to fall short of industry demand (See Indonesia's Transforming Economy: Business Education in High Demand).
Motivated by a desire to reduce unemployment, the Ministry of National Education that administers formal TVET has increased its investment scope and made TVET expansion a priority. The Ministry has also set a goal to shift the ratio of students enrolled in general senior secondary education to those in vocational senior education school to 40:60 by this year (2016).
Indonesia has also started to do more to boost the competence and competitiveness of graduates of vocational school (SMK) students. The government has prepared as much as 700 million IDR ($54,000 USD) for every SMK to help improve the quality of learning, with the priority given to vocational schools in the fields of marine and fisheries; a key component of President Jokowi’s vision for the country.
The Ministry of Education also announced that starting from 2015, students who graduate from SMK will receive a professional certification to mark their expertise in their respective fields. Issuing such certificates of expertise, according to the Ministry, is part of the commitment made by AEC members, and will therefore be valid and accepted in all Association of Southeast Asian Nations (ASEAN) countries as part of the free movement of labour.
The main challenges currently facing TVET in Indonesia come down to a lack of sufficient correspondence between the practical training and skills taught in TVET institutions and the demands of the labour market. This is underpinned by an uneven balance between teachers with academic and practitioner background in TVET institutions, where the latter are underrepresented.
The skill profile of the Indonesian workforce does not appear to have evolved in line with the demands of the labour market. As the Indonesian economy reaches higher growth rates, it will be of crucial importance to revamp vocational education, so as to address potential skill mismatches, not only to boost job creation but also to support higher productivity, competitiveness and growth. Indonesia has some 60 million skilled workers. According to estimates in the Master Plan for the Acceleration and Expansion of Economic Development in Indonesia (MP3EI), it will need 113 million skilled workers by 2030 (some additional 3.8 million per year on average for next 14 years) which is an enormous challenge for the education and training sector.
If the goals of the MP3EI are to be achieved, then a new range of skills will need to be available to develop the targeted industry sectors. In line with the MP3EI, there are several key sectors lacking sufficiently skilled workers to be able to meet the goals of the masterplan (Economist Intelligence Unit):
Agriculture: the Indonesian government has identified two key concerns in the development of agriculture: food security and cash crops. As more workers leave this sector to find better paying careers in industry and services, moves can be made to intensify agricultural production, with rising demand for engineers, engineering geologists, planners and managers specialising in these fields.
Industry and manufacturing: the MP3EI aims to diversify and deepen the linkages within the sector to reduce its sensitivity to internal and external shocks, improve industry performance and efficiency, enhance sector competitiveness, and encourage more environmentally sound processes. Addressing these changes will require the development of a range of higher level skills associated with leadership, technical expertise, problem solving, management and sustainability.
Shipbuilding: will require more professionals in the field of marine engineering. An increase in traffic might also call for more skilled merchant mariners and port coordinators (See High Stakes for Indonesia's New Infrastructure Push).
Textiles: while most labour required in the textiles industry is low skilled, an increase in production will raise demand for well-trained factory managers and traders. As Indonesia also plans to move further up the value chain to effectively compete with its ASEAN neighbours in this highly labour intensive industry, it will require more skilled workers within garment design and creation to become a key player in the global fashion industry.
Food and beverage: this sector will continue to rely on professionals with adequate managerial and business development skills. Less export-oriented, the industry has a lower but growing requirement for English-speaking managers. Potential advances in the field might require the skills of organic chemists and other such food scientists (See Thirst Quenching: Indonesia’s Food & Beverage Industry).
Steel: as the steel industry grows, the most obvious result will be a rise in demand for technicians and engineers in smelting and refining capacities.
Mining: as Indonesia plans on boosting overall mining output, there will be a demand for professionals in the geological sciences: mine managers, geologists, prospectors and engineers.
Transportation equipment/automotive: the requirement for skilled labour will probably continue to focus on technical skills rather than research and design expertise.
Services: the government is placing a heavy emphasis on the nation’s information and communication technology (ICT) and finance industries to jumpstart the entire economy.
Information and communication technology (ICT): the Indonesian government has identified four aspects of the domestic ICT industry it wishes to invigorate; device manufacturing, professional and consulting services, content and applications development and ecosystems innovation. If the government plans go ahead, demand is set to increase for graduates with a computer science background, who are still relatively rare at present.
According to UK Trade & Investment, education and training opportunities have been identified across the following industry verticals: engineering, in particular automotive and oil and gas training; financial and professional training; fisheries; hospitality and tourism. Therefore potential opportunities in Indonesia include the development of regional and national TVET programmes including supporting institutional refurbishment, “train-the-trainer” programmes and curriculum design. The Indonesian market also presents a number of generic education and training opportunities for English and Mandarin language training for students ranging from kindergarteners to executive professionals.
The Indonesian Ministry of Education has acknowledged that an increase in the number of vocational high school graduates ready for work would be impossible without increased involvement from the private sector. The Ministry has expressed that the vocational education system must be competency-based with standards pertaining to industries, it has to be demand-driven, it must have a public-private partnership and it also must have an incentive system to coax corporations to pay attention to these schools so as to enhance the standing of their graduates. It has also stated that the government plans to build more vocational schools to cater to the growing labour market for skilled workers, particularly in the agriculture, fisheries and animal husbandry industries, and calls for the private sector to come in and participate in the development of vocational schools across Indonesia.
Currently, Indonesia’s vocational or non-formal education sector is open to foreign investment of up to 49%. Foreign investors are required to set up a PMA and obtain a license for the field in which they plan to offer vocational training. Investors in the field should seek out partners with an extended network in the field of training as a company engaged in the sector and requiring the training of a large volume of workers or with consultants who already have a grounding in providing training on a non-permanent basis.
Global Business Guide Indonesia - 2016
Number of Tertiary Education Institutions: 4,384 (2015)
Type: 91.5% Private, 8.5% Public
Students in Higher Education: 6,959,622 (2015)
Net Enrolment Rate in Tertiary Education: 20.18% (2014)
Relevant Law: Higher Education Law No. 12 of 2012 provides universities with the autonomy to set their own tuition fees and authorising the set up of foreign universities in partnership with Indonesian institutions.