Winning the talent wars
    Category: Column By : Paulius Kuncinas Read : 1244 Date : Monday, November 04, 2013 - 08:14:55

    Along with the infrastructure bottlenecks, human resources is now regarded as a top constraint on development, as skilled staff is hard to find in Indonesia. Consequently the cost for skilled staff has been going up every year accompanied by a talent war and low retention rates, especially in the banking sector. Indonesian companies say they regularly sift through at least 100 interviews to identify one or two qualified people which executives argue proves there is a huge competency gap. Companies even search for talent overseas when not readily available in Indonesia.

    While Indonesia produces a reasonable number of graduates in absolute terms there needs to be more of an emphasis of producing qualified graduates who are ready for employment.  In the long run this gap has to be filled by schools and universities. However in the short term Indonesia should take advantage of available talent within the region.

    Looking at the intra ASEAN labor flows it is evident that Indonesia has not taken full advantage of skilled labor in Southeast Asia. As a net labor surplus country exporting two million workers to the rest of the region it has served ASEAN well in helping to meet the growth needs in the past. Countries benefiting from labor inflows, such as Singapore and Malaysia, have adopted relatively flexible rules precisely because it has helped them retain an edge in key manufacturing, palm oil and hospitality sectors.

    Now finding itself at a crossroads of having to taking its economy to a higher knowledge-based level Indonesia should rely on ASEAN's labor market to address its own human resource challenges. In fairness, the movement of skilled labor has long been held up as one of ASEAN's goals in 2015. However in practice the trading block has suffered from hidden barriers to talent flow. It is in Indonesia's interest to push for more flexibility to address short-term needs.

    The truth, executives say, is that ASEAN political elites are not ready to pursue the vision of skilled labor mobility that was the main source of economic growth in the European Union during its successful years in the 1990s and early 2000s. There is a big risk that ASEAN's Economic Community will be launched in 2015 without a clear consensus on how to ease the flow of talent across the borders. 

    The discussion remains erroneously framed as an issue of “brain gain vs brain drain.” Some argue that further liberalization of the labor market might result in net outflows of scarce Indonesian talent. Meanwhile expats arriving to Indonesia could create unfair competition and put pressure on wages. Empirical evidence from other regionalized labor markets suggests this is not the case. Rather than encouraging outflows a more liberalized labor market would help to bring back Indonesians working abroad as it creates an attractive ecosystem for young aspiring professionals.

    The presence of outstanding international talent acts as both a draw for Indonesian professionals but also importantly ensures the transfer of knowledge. This is particularly critical for so called research and innovation sectors that ultimately determine the level of productivity growth in an emerging economy. By 2030 Indonesia will enjoy a substantial demographic advantage with 70% of its population of working age and 60% under 30. To meet their aspirations in terms of income and professional career there needs to be a new approach to human capital development. Lowering the barriers to skilled labor from the region would be a step in the right direction.