Preparing for Digital Disruption
    Category: Column By : Haryanto T. Budiman Read : 431 Date : Thursday, March 01, 2018 - 22:58:48

    Much has been written about how digital disruption will impact Indonesia and there’s little doubt about the economic benefits technology can bring. According to a 2016 McKinsey report, digitization has the potential to add up to $150 billion to the country’s annual GDP by 2025, with improved productivity boosting sectors such as manufacturing, mining and agriculture.

    Yet the so-called fourth industrial revolution is also causing anxiety. The International Labor Organization has warned that 56% of total employment in Cambodia, Indonesia, the Philippines, Thailand and Vietnam is “at high risk of displacement due to technology over the next decade or two.” The World Economic Forum has forecast that innovation will create two million new jobs in major economies including ASEAN countries between2015-2020, while simultaneously seven million jobs will be lost as automation replaces manual labor.

    While concerning, consider one of Indonesia’s greatest assets—its youthful demographic. With 43% of its population under the age of 25, Indonesia has one of the youngest workforces in Asia. According to the Central Bureau of Statistics, it is estimated that by 2030, more than 70% of the population, or 180 million Indonesians, will be of working age, providing a significant demographic dividend.

    This pool of resources can help prepare Indonesia for the digital age. Therefore, the government should keep reforming education, including its outdated ICT modules at tertiary education institutions. While the ICT sector should be a strategic driver of the economy, it still suffers from a severe skills gap. According to a 2016 joint study by J.P. Morgan and the Singapore Management University, while 200,000 ICT graduates entering the workforce annually appear to be sufficient, their skillsets often fall short.

    The study also showed that the school-industry gap is worsened by a weak tertiary infrastructure and under-qualified teachers. The private sector has taken greater responsibility in skills training. Many large corporations, including MNC firms, currently have apprenticeship programs for undergraduates to fill their own talent needs. This public-private partnership can help create job opportunities while developing a ready pool of highly-employable talent.

    NGOs can also focus funding on creating a digital-ready workforce. Global NGO Education Development Center, which has a J.P. Morgan-funded workforce readiness program in Indonesia, expects to place nearly 500 students in IT-relevant jobs by November. The program equips young people with the skillsets to adapt to the evolving technology sector while expanding engagement between employers and the education sector to bridge the ICT skills gap.

    For workers who may lose their jobs to automation, job reskilling is crucial. The WEF warned in January of a global reskilling crisis, and urged governments and corporations to invest in retraining programs. It also launched a free online learning initiative to reskill one million adults over the next three years, covering topics from digital literacy to cyber security. Indonesia could work with the private sector to provide similar training. Considerable resources are already online, including courses from institutions such as MIT, but the government and the schools should work to adapt them to local language.

    Job losses will be inevitable with technological innovation. But with appropriate government policies to reform the education sector, together with private sector support in retraining, Indonesia can better harness its comparative advantage of a youthful workforce to achieve sustainable growth in the digital age.