Kadin Indonesia: Government Needs to Focus on Employment & Education

For social and economic harmony it is key for any nation to deal with the issues of unemployment, poverty and inequality. In Indonesia - a country that contains a population that numbers 255 million people - the unemployment rate stood at 6.18 percent of the work force, or 7.56 million individuals (August 2015 data). These figures had risen from six months earlier when Indonesia's unemployment rate stood at 5.81 percent, or 7.45 million jobless individuals. Rising unemployment was caused by the continuation of Indonesia's economic slowdown in 2015, a process that should rebound this year as economic growth is expected to accelerate to 5.3 percent (y/y) from the five-year low of 4.8 percent (y/y) in 2015). The central government targets to see the nation's unemployment rate fall to the range of 5.2 - 5.5 percent in 2016.

Meanwhile, Indonesia's poverty rate stood at 11.1 percent of the total population, or 28.59 million people in absolute numbers in September 2015, down from a 11.2 percent poverty rate six months earlier. Contrary to unemployment, the nation's poverty figure declined in that six-month period. The government targets to see the poverty rate fall to the range of 9 - 10 percent this year.

Indonesia's Unemployment Statistics:

	2011	2012	2013	2014	2015
Labor Force	119,399,375	120,320,000	120,170,000	121,870,000	122,380,000
- Working	111,281,744	113,010,000	112,760,000	114,630,000	114,820,000
- Unemployed	8,117,631	7,310,000	7,410,000	7,240,000	7,560,000

 

	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
Unemployment (% of labor force)	10.3	9.1	8.4	7.9	7.1	6.6	6.1	6.2	5.9	6.2

^{Source: Statistics Indonesia (BPS)}

Although Roeslani's complaint about the government's lack of focus on job creation may not hold ground (after all the 11 packages aim at attracting investment as well as boosting industrial development; processes that should automatically lead to declining unemployment in the nation), he does have a point when stating that the development of human resources (through education) is still a matter that needs serious attention and breakthroughs in Indonesia. Higher quality human resources will make the economy stronger on the long term and will make it possible for the people to reap the full benefits of government ongoing efforts to enhance infrastructure development and boost the manufacturing industry. The key word for Roeslani is 'education'.

Indonesia's Poverty Statistics:

	2007	2008	2009	2010	2011	2012	2013	2014	2015
Relative Poverty (% of population)	16.6	15.4	14.2	13.3	12.5	11.7	11.5	11.0	11.1
Absolute Poverty (in millions)	37	35	33	31	30	29	29	27.7	28.5

^{Source: Statistics Indonesia (BPS)}

Kadin Chairman Roeslani also said the government needs to focus on the development of strategic industries (for example the palm oil sector in which Indonesia already is a global leader in terms of the crude palm oil supply) and development of the digital economy. The digital economy, which will be a pillar of the economy in the future, is still underdeveloped in Indonesia. This year turnover in the industry is estimated at USD $24 billion. By the year 2020 turnover in Indonesia's digital economy should exceed USD $130 billion. Also regarding the development of the digital economy Roeslani emphasizes the need for education. By 2020 the central government wants to see more than 1,000 domestic technopreuneurs. This will require teaching the younger generation certain skills.

Economic Stimulus Packages of the Indonesian Government:

Package	Unveiled	Main Points
1st	9 September 2015	• Boost industrial competitiveness through deregulation • Curtail red tape • Enhance law enforcement & business certainty
2nd	30 September 2015	• Interest rate tax cuts for exporters • Speed up investment licensing for investment in industrial estates • Relaxation import taxes on capital goods in industrial estates & aviation
3rd	7 October 2015	• Cut energy tariffs for labor-intensive industries
4th	15 October 2015	• Fixed formula to determine increases in labor wages • Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses
5th	22 October 2015	• Tax incentive for asset revaluation • Scrap double taxation on real estate investment trusts • Deregulation in Islamic banking
6th	5 November 2015	• Tax incentives for investment in special economic zones
7th	4 December 2015	• Waive income tax for workers in the nation's labor-intensive industries • Free leasehold certificates for street vendors operating in 34 state-owned designated areas
8th	21 December 2015	• Scrap income tax for 21 categories of airplane spare parts • Incentives for the development of oil refineries by the private sector • One-map policy to harmonize the utilization of land
9th	27 January 2016	• Single billing system for port services conducted by SOEs • Integrate National Single Window system with 'inaportnet' system • Mandatory use of Indonesian rupiah for payments related to transportation activities • Remove price difference between private commercial and state postal services
10th	11 February 2016	• Removing foreign ownership cap on 35 businesses • Protecting small & medium enterprises as well as cooperatives
11th	29 March 2016	• Lower tax rate on property acquired by local real estate investment trusts • Harmonization of customs checks at ports (to curtail dwell time) • Government subsidizes loans for export-oriented small & medium enterprises • Roadmap for the pharmaceutical industry

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