Education The Gateway For Growth For Indonesia

A recent World Bank report highlighted that Indonesia is currently facing a developmental crossroad. It has now grown to one the world’s 20 largest economies in the world and aims to be the top 10 largest economies globally by 2030; certainly bold and bodacious goals. Looking at growing major trends and developments not only in Indonesia but also the region – particularly a growing middle class, rapid urbanization, strong growth in the region and an opening up of regional markets in Southeast Asia with the Asian Economic Corridor (AEC) – this has resulted in new challenges as well as strong opportunities for Indonesia, especially in the country’s education sector.

Critical to be competitive

Indonesian female students

The World Bank believes that having a skilled labor force would be crucial to leverage on the country’s existing opportunities. The World Bank further adds,

“Without the right skills, opening up to ASEAN may pose a problem more than an opportunity [whereby] without the right skills or urban migrants, urbanization will not bring about the benefits of scale. [If youths don’t possess the right skills,] the growing demand for higher quality products and services may be met by importing them rather than increasing the value added of Indonesian firms.”

It is clear that for Indonesia future’s success, the country will need to have a serious look at improving its state of education – simplifying access to all levels of education and improved parity of graduate skills to its future labor requirements.

While general unemployment rates in Indonesia has been on a downward trend in recent years (ranging from 6-9& over recent years, and 5.9% in 2014), it is increasingly worrying to note that unemployment rate is highest among high school and higher education graduates (aged between 12 – 24 years old). In fact, the unemployment rate for those aged between 15 – 24 is alarmingly far above the national average. Fresh graduates from high schools, colleges and vocational schools are finding it difficult to secure a job in the national workforce.


*Unemployment rates for Indonesians aged 15 to 24, 2006 to 2011. Source: World Bank

A recent survey in 2014 also showed that employers in Indonesia are facing difficulty in recruiting management and professional staff. This shows a large disparity in the country’s education sector on two fronts:

1) The challenge Indonesia’s education system faces to produce graduates with skills the economy requires

2) Indonesia’s uphill battle of keeping up with the country’s hot and growing economy

For example, the country requires as many as 50,000 engineers annually by some estimates; however, the country only produces 30,000 engineers each year. If Indonesia does not seriously look into bridging this 40% gap between supply and demand to expand its graduating class, this will prove to be a big problem as the demand is expected to grow much more over the next decade.

Currently, the demand for higher education in Indonesia reflects its employment pattern:

– Close to 75% of tertiary graduates work in the public sector

– Of this 75%, three-quarters work in the education sector as teachers

– One-third works in the private sector, mainly in the services sector – tourism & finance

The increased interest over the last decade in could be in part due to the government’s effort to increase the ‘attractiveness’ of the teaching profession through the Teacher Law Act in 2005 – whereby certified teachers are given an allowance of up to 100% of the basic monthly salary.

While Indonesia seems to be on the right direction to increase the overall volume of educators in the country, it still has a long way to go to cater to the current and growing need of qualified graduates for its booming economy. If Indonesia wants to be a serious contender to be a competitive global player, it needs to go to the grass root level of its and come up with a focused, longer term and more sustainable blueprint for its education system.


Follow the money trail

classroom indonesia


It is no secret that Indonesia’s education sector has been historically underfunded. Based on the World Economic Forum’s Human Capital Report 2015, – that reflects how each country is developing and using its human capital resource – the country ranks 69th out of 124 in human capital development, below its peers within the ASEAN region: Singapore (24th), Philippines (46th), Malaysia (52nd), Thailand (57th), and Vietnam (59th). Another global talent competitiveness index in 2014 released by Insead shows a more alarming insight with Indonesia ranking 86 out of 94 for the competitiveness of its talent. This signifies a worrying trend indeed for how the country will compete in a more open market especially with the AEC fast coming into realization soon. More importantly, it highlights just how big a problem Indonesia faces as strives to become one of the region’s leading economies.

All hope is not yet lost, however. The Indonesian government has looked at success case studies in Switzerland – which shows a large degree of its programs centered on a dual vocational-educational system, combining both theory and practice – and they believe it may work in Indonesia. The Indonesian Chamber of Commerce & Industry (Kadin) Chairman, Suryo Bambang recently stated that, “Improvement in education and training is urgently needed. We need to build more vocational schools and training centres.” Furthermore, he stressed that the country’s low quality of human capital is the result of a relatively low level of education (mainly elementary schools) of its workforce and the pressing need for the government to encourage children to continue studying, making vocational schools more appealing.

Some efforts the Indonesian government has undertaken are:

1) Rp 700 million for every SMK school to improve its quality of learning, with priority given to vocational schools in the field of marine and fisheries

2) SMK graduates to receive a professional certification as part of its commitment to the AEC and accepted all across ASEAN countries

3) Increase spending in higher education to over Rp. 42 trillion or USD 3.2 billion, overlooked by a new national department, Ministry of Research, Technology & Higher Education

4) Plans to increase the number of students by 5-fold by 2025

5) Establish a community college in every district

6) Increase the pool of entrants to higher education institutions through high school enrollments and more scholarships

There also seems to be some light at the end of the tunnel:

1) Increase in prospective higher education students

2) Growing awareness between education and better employment opportunities

3) More emphasis on vocational education and training

4) Universities participating more in vocational programs

5) Introduction of a national certification scheme for vocational skills

While there are other initiatives the government can still look into to improve the country’s state of education, these factors help to open the door to foreign education providers and education marketers – such as partner institutional programs, recruitment to language and academic programs abroad and foreign providers to offer programs in Indonesia.

New focus & commitment

Indonesian students in the classroom


The setup of the new national department – the Ministry of Research, Technology & Higher Education – created and operationalized via a presidential decree in 2015 is the first big step the Indonesian government has undertaken to take on this daunting vision for its education sector.

It is hoped that this new ministry breathes new focus and commitment by the government to create a focal point for policy development and investments that is sorely lacking to advance its education and research capabilities. The objectives of the ministry is clear and focused:

1) Improve country’s education higher education system

2) Increase employability of its graduates

3) Improve innovation in the country

Given the scale of the challenge and opportunity the country faces, the stakes are high and all eyes are on the government to gather real results in a short time. Only time will tell how this will map out.

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