Economic Update

Published 28 Feb 2017

Efforts are gaining pace to give Indonesia’s private sector a larger role in bringing the curricula of the country’s vocational and technical schools closer in line with market demands.

A memorandum of understanding (MoU) signed by five ministers in November outlines plans to enlist the help of industry players in developing the educational programmes of technical and vocational training (TVET) institutions.

The signatories represented the Ministry of Industry, the Ministry of Research, Technology and Higher Education, the Ministry of Education and Culture (MoEC), the Ministry of State-Owned Enterprises and the Ministry of Manpower.

The MoU paves the way for business leaders to be recruited as instructors at TVETs, while also allowing for the creation of internships and on-site training programmes for students and teachers.  

Bringing in businesses

President Joko Widodo told local press in September that it was essential for private sector requirements to be reflected in the teaching at Indonesia’s vocational educational institutions, which number around 13,000, according to the MoEC.

“We have to involve the business world and industries because they have a better understanding of the needs of the workforce,” he said.

As a pilot initiative under the agreement, three private sector companies are developing specialised programmes in partnership with 20 vocational high schools (sekolah menengah kejuruan, SMKs) nationwide.

Fertiliser producer Petrokimia Gresik will collaborate with seven SMKs in East Java, while automobile giant Astra Honda Motor will team up with nine schools in Banten and South Sulawesi. The third firm, polypropylene producer Polytama Propindo, is set to enter into a partnership with four SMKs in West Java.

“If industry players provided [the government] with a labour requirement forecast, like how many auto mechanics or hotel employees they would need in the next five years, then we could adjust the SMK curriculum to meet such needs,” Muhadjir Effendy, the minister of culture and education, said in November.

In another move to enhance the employability of graduates, programmes leading to the award of skills certificates will also be offered at SMKs.

Darmin Nasution, the coordinating minister for economic affairs, said in November that students will be able to take the training courses in addition to their graduation diploma. The new certification process, he said, would enable employers to identify potential recruits with the necessary skill sets at an earlier stage, and speed up hiring processes for both firms and candidates.

The initiative should also allow students that drop out of diploma programmes early to have some level of certification that prospective employers recognise.

Bridging the gap

These moves form part of a broader set of reforms aimed at addressing skills gaps across Indonesia’s economy and, in turn, boosting the country’s competitiveness and growth prospects.

A report issued by McKinsey Global Institute (MGI) in 2012 found that Indonesia could become the world’s seventh-largest economy by 2030, “but only if it can further boost productivity to meet growth targets ”.

Data released by Statistics Indonesia (BPS) in November found that 11.1% of graduates who qualified at vocational high school were unemployed as of August, the highest rate among all of Indonesia’s graduates. This compares to a nationwide unemployment rate of around 5.6% at the time, according to BPS figures.

This underemployment comes despite accelerating labour market demand. Indonesia needs to bring 3.8m new skilled workers into the economy annually through to 2030 to close the skills gap and realise the country’s potential, Hanif Dhakiri, minister of manpower, told media.

“There is a shortage of 56m skilled workers, and that has to be filled in 14 years,” he said at the signing the MoU in November.

The following month, the MoEC directed SMKs to focus on six priority sectors and fields with high potential for growth and a demand for skilled workers, namely tourism, maritime programmes, food security, creative industries, construction and energy.

A special focus was placed on the renewables segment in early February, when the Directorate of Vocational Education and Training of the MoEC pledged to roll out 100 renewable energy tuition programmes at different SMKs and train 500 instructors to teach them.