WORKFORCE NEEDS TO STEP UP GAME AS INTEREST IN AUTOMATION GROWS

One of the biggest concerns with industry 4.0 is the distruption it has on the job market.
McKinney predicted that 800 billion jobs would be gone by 2030 due to automation.
Indonesia's automation pace has the potencial to contribute Rp. 5 quadrillion to the nation's
GDP over 11 years, Australia- based advisory firm Alpha Beta and the Australia - Indonesia
partnership for Economic Development prospera projected in a July.

WRK As the government pushes ways to equip jobseekers with the necessary skills for employment, the
need for automation in industries is growing amid a slow workforce growth rate, a new study has found.

Indonesia’s automation pace has the potential to contribute Rp 5 quadrillion to the nation’s gross
domestic product (GDP) over 11 years, Australia-based advisory firm Alpha Beta and the Australia-
Indonesia Partnership for Economic Development Prospera projected in a July report. Currently the pace
is estimated to stand at Rp 3.2 quadrillion between 2019 and 2030.

In 2015, 28 percent of Indonesian manufacturing companies reported that they were automating
manual processes, lower than Vietnam, Cambodia and Malaysia, which had about 35 percent of their
companies invested in automation within the same year, according to a World Bank study.

“Indonesia’s labor force growth rate is slowing, which means that it will need to rely more heavily on
productivity gains like those that automation provides,” the Alpha Beta-Prospera researchers wrote.
Statistics Indonesia data show that Indonesia’s workforce growth has stagnated at less than 1 percent
annually since 2011.

The study had only estimated gains from automation's labor productivity, while factors like education
and skills investments would likely lead to stronger productivity growth.

lndonesia has a low to moderate rate of automation relative to regional peers

lndonesia has a low to moderate rate of automation relative to regional peers (JP/File)
University of Indonesia (UI) labor law expert Aloysius Uwiyono saw problems in attempting to propel the
country’s automation growth, as technologizing tasks would force more workers to lose their jobs as
they don’t possess the required skills.

Nearly 75,000 workers were laid off between 2015 and 2018, according to the Manpower Ministry’s
data, albeit gradually decreasing in number year by year. The data clashes with that of Labor Institute
Indonesia, which calculated that at least 100,000 workers in 2018 alone were fired due to increasing
digitalization in various sectors.

Aloysius urged the government to compel businesses to provide skill training schemes after laying off
their workers. Among other ways, lawmakers could include such a provision in a revision of the 2003 law
on manpower.

“Digital economic developments leave no choice for businesses to shift to automation,” Aloysius said.
“But those who are laid off should be educated so that they can get a better job than the one they had
before.”

Indonesia had earmarked a relatively low budget for education compared to its peers, the Alpha study
noted. Even with a similar relatively low budget proportion to Vietnam and Malaysia, the country has
fared worse educational outcomes in core subjects like math, based on the World Bank and the
Organization for Economic Co-operation and Development (OECD) report in 2015.

Industry stakeholders continue to report mismatches between the breadth and quality of skills they need
and the skills taught in vocational and other educational institutions, a section of the Alpha Beta study
states.

“There is a sense among stakeholders that the government has focused on controlling the skills supply
rather than preparing a skills system that can respond quickly to demand,” the researchers wrote. “This
creates structural inflexibility, which generates graduates who are not suited for the positions available.”

Alpha Beta said decision-makers could partner with businesses to develop technical and vocational
training needed for automation. The efforts should then be accompanied by opening doors for foreign
education and training investments while simplifying coordination between ministries.
The government has recently applied both recommendations, as President Joko “Jokowi” Widodo
introduced major tax deductions earlier this month for enterprises that invest in skills training as well as
research and development.

The ministries have also joined heads with the world’s technology behemoths to roll out digital training
programs in Indonesia as the country’s digital economy is projected to be the largest in Southeast Asia
with a value of $100 billion by 2025, according to a study by Google and Singaporean holding company
Temasek.

As part of the President’s campaign, the government will disburse Rp 10.3 trillion (US$725,217) for pre-
employment training to equip jobseekers with skills necessary for work. The funds are expected to be
disbursed through cards for 1 million jobseekers, with 1 million more to be allocated for those looking for
work in the digital sector.