The Industrial Revolution 4.0: Has the Indonesian Hype Gone too Far? (II)
- Gerry Christopher
- Jan 17, 2019
- 7 min read
The Reality
Conditions are looking rosy and optimism are constantly beaming from the policymakers. However, as the reality is uncovered, the answer for the readiness question does not share the same positivity.
Education
When the World Bank’s Human Capital Index was first revealed in October 2018’s Annual Meetings of the International Monetary Fund and the World Bank Group, Indonesia – the host of the meetings – was “slapped”. The index aggregates the three important components that enable an individual to realise his/her full potential: survival before starting education (concretely measured as under-5 mortality rate), expected years of learning-adjusted school (i.e. the duration of high-quality education received by children), and health. The final value ranges from 0 to 1, with 1 representing the highest possible future productivity of a child born today. The score of 1 is only possible if the country has achieved “both full health (no stunting and 100% adult survival rate) and full-education potential (14 years of high-quality school by age 18)” (World Bank 2018).
The inaugural result ranks Indonesia in the 87th position out of 157 countries assessed. With an aggregate score of 0.53 – lower than the worldwide average of 0.57 and the 50th percentile score of 0.56, Indonesia’s human capital quality does not even break into the ASEAN top 5: it performs worse than the Philippines (84th), Thailand (65th), Malaysia (55th), Vietnam (48th), and Singapore (1st). The index score implies that the future productivity of a child born today is almost 50% below of what could have been achieved with a complete education and full health.
Delving into the components’ individual scores reveals Indonesia’s alarming education quality. Indonesia’s 2003 education law that requires a nine-year compulsory education – in recent years, the policy shifts to a twelve-year mandatory education – has ensured modest expected years of school (12.3 years in 2018). However, after being adjusted to the education quality, the years of school drop to 7.9 – lower than its Southeast Asian peers with a similar unadjusted school duration. Put it simply, Indonesian students on average only receive 7.9 years of high-quality education out of possible 14 ideal studying years.
A comprehensive research by Kurniawati et al (2018) tells a similar story. Since the PISA test [1] was first commissioned in 2003, Indonesia has consistently ranked below the 25th percentile albeit the gap with the 25th percentile has gradually narrowed. A simple extrapolation conducted shows that it would take 28 years for Indonesia to eliminate the gap to the 75th percentile in mathematics performance and 35 years for reading performance. This snail-paced improvement threatens Indonesia’s capability in taking advantages of the demographic dividend. The research warns that if no significant improvements are made, Indonesia will only be globally competitive by 2060. As the 2015 intercensal population survey indicates, the demographic dividend will peak in 2020-2023 and end in 2037 – much earlier than the 2028-2033 peak and 2042 end as predicted by the same survey in 2010.
Worryingly, the improvement trend is far from adequate. Despite having been allocating 20% of the national budget to education as instructed by the 2003 education law, systemic issues remain as big as ever. Misappropriation of funds look like an incurable disease – the recent capture of Cianjur regent during a KPK sting operation highlights the entrenched corruption in the education sector. Numerous reports, such as Indonesia Corruption Watch findings in 2016 [2], earmark education as the most corrupted segment. On the other hand, local governments’ fund allocation has been far from optimal. The education budget allocation in 2017, for instance, represents the continuous mistargeting that has hampered education improvement. Out of Rp 419 trillion spared for education, Rp 261 trillion was transferred directly to local governments. Staggeringly, Rp 247 trillion of the transferred fund was used for teachers’ salary. The total education fund allocated from the local budgets also was less than the national budget, signalling an alarmingly low emphasis on education in regency level.
The teacher’s salary massive budget, however, highlights the core of the systemic issues: Indonesia has failed to address the education’s quality aspect. Despite a huge increment in salary, most teachers are ill-equipped to deliver proper education to their students. The teacher certification has missed its target of certifying all teachers by 2015, with 52% out of Indonesia’s 3.9 million teachers still have not been certified by 2017 [3]. Worse, it turns out that 25% of the teachers have not obtained a bachelor’s degree by 2017. This implicates to the teacher’s poor knowledge: in two administered teacher competency tests, the averages are below the national threshold of 65 (out of 100) – 53.02 in 2015 and 47 in 2012.
Pedagogically, Indonesian teachers still have not figured out the most effective teaching methods (Lie, 2018; Hilmy, 2018). It is a wide-known fact that the teachers often resort to deductive – a top-down – education. This passive knowledge transfer to students – often done in a one-way teaching – discourage critical thinking. On the other hand, Indonesia’s formal curriculum is nowhere near the ideal standards. Similar to PISA, Indonesia’s TIMSS [4] score of 397 in 2015 is much below the 10th percentile mark of 432. and This showcases another seriously worrying trend: with deductive teaching and exam culture already deeply rooted in the education, the curriculum content should have at least provided a respite. Instead, its low-quality exacerbates the wrong teaching issue.
Facing all these realities, an unwelcoming conclusion could be drawn: the ongoing state of Indonesia’s education clearly is not ready to equip the surplus of productive workers. In fact, with such poor quality, questions must be asked whether Indonesia could even benefit from doing simpler tasks such as manufacturing – let alone trying to fully capitalise the much more skill-demanding 4IR. By jumping the focus to digitalisation while leaving its education still in tatters, is Indonesia on the risk of failing in making use of the demographic dividend properly? Unfortunately, it indeed suggests that.
Labour
Indonesia’s current education quality means that blue-collar workers constitute a huge chunk in the labour market. Statistics Indonesia (BPS) noted that in August 2018, 15.76% of the 131-million workforce is temporary workers – a common relationship found in various industries especially manufacturing. Like education, a question must be asked whether this labour segment is ready to embrace the sophisticated innovations brought by the 4IR. As Silaban (2018) argued, the 4IR should not yield the dreaded substitution effect – replacement of manpower by machines. Instead, it should produce the compensation effect – heightened efficiency encouraged by machine will create more industries and ultimately job opportunities.
A research by Manning and Pratomo (2018) sheds light on Indonesia’s current labour market development. To start with, 1/3rd of the entire labour still works within the agricultural industry. The manufacturing employment, in fact, lies far “below Malaysia and Thailand at similar stages of development”; a sign of a less-modern workforce. More concerningly, manufacturing’s productivity has grown very slowly in recent times. Predictably, this stems from the poor education outlined above. Vocational education, which specifically trains practical items that are highly usable in manufacturing, is also riddled with numerous problems, including lack of teacher, inadequate curriculum, and a disconnection with the demands of industries. On the other hand, the private sector is reluctant to invest in training, mainly due to Indonesia’s complicated labour regulations that discourage contracting workers in a long term.
The problems are compounded further with health issues. Indonesia’s poor adult survival rate [5] implies that the workers would be less productive as they are more prone to diseases. More concerningly, as noted by Hemas (2018), Indonesia’s stunting rate is unpleasantly high: 37% of children aged 5 is stunted – the second highest rate in Southeast Asia after Laos (44%). Malnutrition in early ages could significantly hamper the children’s progress in grasping high-quality education or training when they have joined the workforce. Less accessible hospitals/clinics – as of 2017, 20% of regents still have not had a qualified medical centre – and budgeting issues (inefficient spending) certainly do not encourage any quick improvement in the health sector.
Supporting Infrastructure: Physical and Non-Physical
Jokowi administration’s relentless effort in developing new infrastructures must be appreciated: substantial road, railway, port, and airport constructions is a fantastic news for connectivity enhancement. This significant improvement, however, is not accompanied by suitable regulations. As a consequence, while the logistical problems are reduced, the businesses do not have the incentives to increase their output.
One of the major hindrances is the government’s continuous tendency for protectionist measures. Patunru and Rahardja (2015) notes several regulations that discourage businesses to boost their productivity. These include imposing a limit on the use of foreign professionals in Indonesian companies, increasing the local content requirements for some leading industries such as telecommunication equipment and automotive parts, and imposing numerous tariffs that reduce the import content in exports [6]. These measures, more worryingly, are not going to be banished in the foreseeable future. The lingering trauma of the Asian crisis – still blamed as a result of excessive foreign intervention – and the rising sentiment of nationalism in the political arena imply that a strong “domestic first” approach will always be the government’s core philosophy.
The rules present some major implications. A restricted access to items from overseas certainly disincentivise businesses to invest in new technologies – it does not make any sense for them to spend vast amount of resources to boost productivity knowing that their output is less competitive due to still-poor domestic inputs. The tariffs are also counterproductive in encouraging the expansion of new technology adoption. They deter the entrance of foreign companies, implying a lack of competition and introduction of new foreign innovations. More concerningly, the tariffs make it trickier for companies to enter the global production network; with limited access to foreign market, again, it is not strategically sound to implement expensive technological upgrades.
Another stumbling block is often-hostile reception towards changes. The complicated labour policy, often influenced by a very strong workers’ union, means that applying new technologies is not straightforward. Besides the rooted erroneous fear of being replaced by technologies, the workers never cease demanding high increases in minimum wage. Hence, businesses are left in an awry situation: explaining technological changes and their implications to the workers’ union will never be easy, while in the meantime, bigger chunks are allocated every year to pay the wages. The similar case applies to the digital economy: startups’ frequent embroilment in bitter battles against the status quo means that resistances to disruptions will always be a possibility.
Continue reading to part III
[1] PISA, which stands for Programme for International Student Assessment, is a triennial international survey that measures fifteen-year-olds’ literacy in mathematics, readings, and science. It focuses on the students’ capability in applying knowledge they learn to solve real-world problems.
[2] Out of 425 corruption cases between 2005 and 2016, half of them (2014) occurred within education bureaus (Suastha, 17 May 2016)
[3] As stated by Boediarso Teguh Widodo, a high-ranking Ministry of Finance Official (Simorangkir, 2017)
[4] TIMSS, which stands for Trends in International Mathematics and Science Study, measures the quality of theoretical mathematics, mainly in terms of the curriculum
[5] World Bank’s 2018 Human Capital Index calculates a score of 0.83 for Indonesia’s adult survival rate – the share of 15-year-olds expected to survive until age 60. Again, Indonesia ranks below neighbours Thailand (0.85), Vietnam (0.88), Malaysia (0.88), and Singapore (0.95).
[6] Indonesia, in fact, is “among the worst offenders for increasing protection” in Global Trade Alert’s Sixteenth Report.
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