By Gayatri Suroyo and Fransiska Nangoy
JAKARTA (Reuters) – Adrian graduated from an Indonesian auto mechanic trade school last summer, but since then has only worked a few weeks in one job: serving fruit juice at a kiosk in downtown Jakarta.
The 19-year-old, a first time voter in next week’s Indonesian election, is seeking work with electric vehicle companies he knows are investing in his country but has little confidence in the economic policies of the presidential candidates.
“I hope the factory will open … so there will be plenty of jobs,” said Adrian, who like many Indonesians goes by just one name.
This election, finding jobs and improving the quality of life are among the biggest concerns of millennial and Gen Z voters, who make up more than half of Indonesia’s electorate of 205 million people, a survey by pollster Populix showed.
Creating well-paid jobs for the workforce is essential for Southeast Asia’s largest economy and its young population if it wants to achieve a self-set target of becoming a high income nation by 2045, when it celebrates 100 years of independence.
Contenders in the presidential race are promising upwards of 15 million jobs in the next five years, in a country where about 3 million people enter the job market annually.
Like many, Adrian chose vocational education amid a drive to improve the skill set of young Indonesians by the government of outgoing President Joko “Jokowi” Widodo.
Jokowi’s policy was intended to complement his push to invite investment in industries downstream from the country’s rich natural resources.
Billions of dollars poured into nickel smelting while battery and electric vehicle makers such as China’s CATL and South Korea’s LG and Hyundai struck deals to set up shop locally.
While this helped define Jokowi’s 10-year term as a period of steady economic growth and low inflation, the new investment went more into machinery and technology than headcount.
As a result, job creation has plunged, economists say.
Officially, Indonesia’s unemployment rate is 5.32%, but analysts say this understates the problem, with many people considered employed working just a few hours a week.
Nearly 60% of workers are in the informal sector. Young people aged 15 to 24 made up 55% of the 7.86 million unemployed in 2023, up from 45% in 2020.
“Creating employment should be the key indicator of a government’s success, not investment,” said Bob Azam, senior official with the Indonesia Employers Association (APINDO).
“Investment should not be oriented at growing GDP without any impact to the real sector and employment.”
APINDO said around 1,000 jobs were created for every trillion rupiah of investment in 2022, compared with 4,500 jobs in 2013.
Investment in nickel mining and refining has created a limited number of jobs and still relies heavily on foreign labour, particularly from China, for some skills.
Jokowi’s vocational education policy was modeled on Germany’s, but skills taught by the Indonesian schools often don’t align with private sector needs. The unemployment rate is highest among vocational school graduates.
The current education and industrial policies are heading in different directions, APINDO’s Azam said, arguing the sprawling archipelago still needs labour intensive industries, such as textile and footwear.
“Capital-intensive industries are important for workers with higher education, but it doesn’t mean we abandon the labour-intensive sectors,” Azam said. “For a nation as big as Indonesia, we need both.”
Of the three presidential contenders, only former Jakarta governor Anies Baswedan has pledged to revive labour-intensive sectors.
Focusing his campaign on tackling inequality, Anies has pledged to review Jokowi’s flagship jobs creation law to strengthen labour protection and called for an audit of the nickel industry, though he also wants to maintain the downstreaming policy.
Defence Minister Prabowo Subianto, the favourite in the race, and former Central Java governor Ganjar Pranowo have both pledged to expand Jokowi’s downstreaming policy to other commodities.
MIDDLE INCOME TRAP
The economic benefits of Indonesia young demographics are expected to peak between 2030 to 2040.
After that time, the population gets older, making it harder for the nation to avoid a middle income trap and keep its per capita economic growth from stalling.
Economists say Indonesia needs 7% economic growth annually to churn out enough jobs for its population.
With the next administration governing the country until 2029, the responsibility for the next leg of growth will fall on Jokowi’s successor.
A big challenge for the new president is the increasing use of automation and robots, none of which was addressed in details by candidates, said David Sumual, an economist with major lender BCA.
Central bank governor Perry Warjiyo said policymakers must think about the quality of Indonesia’s economic growth going forward.
“We have to think about how we define what our goal of becoming an advanced economy means,” he told media last weekend, raising concerns about widening income disparity.
(Reporting by Gayatri Suroyo, Fransiska Nangoy. Editing by Sam Holmes)
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