Education Hampering Indonesia’s Preparations for AEC in 2015

Education Hampering Indonesia’s Preparations for AEC in 2015

By Nadine Sumedi on 08:45 am Jun 24, 2014

Jakarta. The Indonesian government is confident that it can sustain and even increase economic growth following regional economic integration next year that will open up the country’s borders to a freer flow of goods, services and labor from Southeast Asian neighbors, but doubts remain over the ability of the local workforce to compete.

“Indonesia is still growing, and with 240 million people we have more productive people who are economically active than those who are not,” Chairul Tanjung, the coordinating minister for the economy, told the Jakarta Globe recently.

“This will allow us to fund growth which will continue for the next 20 to 30 years,” he added.

He added he was confident that Indonesia, accounting for 40 percent of the economy of the 10-member Association of Southeast Asian Nations, would continue to be the engine of growth for the region even after integration through the Asean Economic Community that begins at the end of 2015.

One of the main goals of the AEC, the Single Market and Production Base, focuses on the free flow of goods, services, investment, capital and skilled labor throughout the region.

The latter point, however, could prove troublesome for Indonesia, analysts say, given the low level of competency of the local workforce when compared to the workforce in countries like Thailand and Malaysia.

Of the 52 million people in the Indonesian workforce who have at least a primary school education, only 17.84 million also have a high school education, and only 7.57 million also have a university degree, according to the Central Statistics Agency (BPS). Nearly half of Indonesia’s workforce, or 47 percent, is categorized as low-skilled labor.

By comparison, the 80 percent of the workforce in more affluent Asean member states such as Singapore and Malaysia have at least a high school education.

Analysts say this gives workers from other Asean countries the advantage in the hunt for better-paying jobs across the region once the AEC goes into force.

Meanwhile, the low quality of education provided by the Indonesian government relegates the Indonesian workforce to the lower end of the free labor market chain. Therefore Indonesians seeking jobs within Indonesia or elsewhere in Asean are unlikely to benefit as other workers with higher education qualifications will be hired over Indonesian workers with their generally lower educational qualifications.

In order to meet the implementation of AEC in 2015, the Indonesian government must prioritize its budget on improving workers’ educational qualifications, including ensuring that a higher proportion of workers have at least a high school education, analysts say.

This upgrade, they argue, will enables Indonesian workers to compete better in the free labor market.

Organizations like the Indonesian Muslim Students Action Union (KAMMI) have proposed the formation of a National Education Guarantee to ensure that funds allocated for education are not embezzled or spent inefficiently.

The government is constitutionally mandated to allocated at least 20 percent of the state budget each year to education, but the bulk of that goes toward paying teachers’ salaries.

Callista Kurniawan, a 12th-grade student at Sekolah Pelita Harapan Kemang Village, said she believed Indonesia’s current educational services were improving in terms of providing young people with a sound footing from which to step into the workforce.

“Although there aren’t major improvements, with international schools here and there people at least have the privilege of obtaining a high standard of education, such as the International Baccalaureate or the International General Certificate of Secondary Education, as well as the A-Level curriculum,” she said.

She added she believed that these high-quality programs enabled Indonesians to think outside the box and acquire further critical thinking skills rather than learning through rote memorization.

Unfortunately, with the majority of the population unable to afford to send their children to international schools, most citizens must rely on the public school system.

“I think the government should keep on making improvements to the curriculum and facilities so that people in poorer regions can have a proper standard of education,” Callista said.

Not only must the education within the country be enhanced, Indonesia must improve its scholarship opportunities for both local and overseas students, observers say. Through these scholarship programs, Indonesian citizens can gain more skills and there may even be an increase in the number of Indonesians graduating from university.

That increase in the number of Indonesian workers with higher educational qualifications can make Indonesia a stronger nation in terms of the regional and global labor market.

Without any improvement in education, however, Indonesian workers will remain unprepared in facing the free labor market of the AEC in 2015.



About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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