Youth unemployment in Indonesia is five times higher than average, presenting a clear challenge to the government, according to the World Bank.
“In every country, the youth unemployment rate is usually two or three times as high as the average population. In Indonesia, however, it is five times higher,” said Tamar Manuelyan Atinc, vice president for human development at the World Bank.
Atinc spoke to the Jakarta Globe at the East Asia Conference on Skills Development for Productivity, which took place at the Shangri-La hotel in Jakarta from Wednesday to Friday.
Indonesia, which averages between 7 and 8 percent unemployment, has more than 30 percent of its population between 19 and 24 years old.
“[Indonesia] has wealth in terms of this very young population,” Atinc said. “If it uses it wisely, invests in them so they become productive individuals, it will bring tremendous impact. If not, it could be a drag,” she said.
She added that high unemployment could eventually create social tension, especially among young people who graduate from school without the experience employers demand of new hires.
In her presentation on the first day of the conference, Atinc said skills are one of the main factors in developing a country’s economy, in addition to good macroeconomic policies and a positive investment environment.
“Ensuring there is a skilled workforce that can deliver and be productive is just as important,” she said, referring to a chart that showed countries with good access to quality secondary and tertiary education do better in terms of global competitiveness.
Fasli Jalal, the deputy education minister, told the Globe the government had started a scheme called Program Wirausaha Mahasiswa, or Entrepreneurship Program for University Students, in which the government prepares around $10 million each year to allow university students in their sixth semester to bid for reimbursement to fund their business proposal.
“We have an independent panel that determines if a proposal is good enough. Once it is agreed by the panel, they can set up a start-up business,” Fasli said.
The program, launched last year, gives students two years to pass entrepreneurship courses in their universities.
“We have about Rp 100 trillion [$11.5 billion] in funds for the new businesses, but they are required to have at least two years of experience, so it would be difficult for fresh grads,” he said. The program has received more than 35,000 proposals this year, Fasli said.
Increasing the number of entrepreneurs in Indonesia has been a goal of the government for some time. Possible reasons for a lack of entrepreneurial spirit include educated youth aspiring to be salaried employees, difficulty in accessing financing, a lack of business skill and confusing regulations, Atinc said.
“An image of a good job is probably sitting in an office and doing work, as opposed to doing entrepreneurial work,” she said.
Fasli agreed that Indonesians still have that mind-set. He said people in Indonesia historically were trained to be servants of colonial powers, and later to be civil servants of their government.
“Their environment will also appreciate them more if they work as civil servants,” he said. Parents who still had that mentality would keep pushing their kids in that direction. “We don’t want to trap our students in that mentality.”
Placing more emphasis on “creativity, innovation and taking risks” in the education system could help change that mentality, Atinc said. Entrepreneurship carries higher risks as chances exist for greater success and failure.
“[Young entrepreneurs] need to know if there is a safety net so they can afford to take some risk,” she said.
In the same conference, the Ministry of Manpower and Transmigration announced a collaboration with the Ministry of Education and the National Development Planning Board (Bappenas) to revitalize 313 vocational training centers (BLK) across Indonesia.
Muhaimin Iskandar, the manpower and transmigration minister, said the plan would play a strategic role in increasing the competency of future workers. “However, BLK revitalization will need a big amount of funds, which cannot be accomplished merely by depending on the state budget for manpower functions,” he said.
The program requires coordination with several ministries and government institutions to succeed, he said, as well as support from industry players and international institutions. “In the future, we hope there will be many more companies or industries that accept BLK graduates as their employees.”
Ministry of Manpower and Transmigration data from this year show there are 237 BLK belonging to provincial governments currently in operation. They comprise 195 vocational training centers focusing on industry, 18 focusing on manpower and 24 focusing on productivity development.
The ministry itself is running 18 BLK, while 58 centers have yet to start operations because of a lack of equipment.