Human Capital Report 2015: Indonesia Lags Behind Regional Peers

The world contains a huge pool of talent. However, in order to unlock this pool of talent, governments, business leaders, educational institutions and individuals must comprehend this potential and act on it by putting in place correct policies. The Human Capital Report provides insight into this situation per country. Through its Human Capital Index it “quantifies how countries are developing and deploying their human capital and tracks progress over time”. It evaluates levels of education, skills and employment available to people in the following five age groups: (1) <15, (2) 15-24, (3) 25-54, (4) 55-65, and (5) >65. The report also gives insight into how well a country is positioned to develop human talent in the future.

The index covers 124 countries, or, about 92 percent of the world population, and 98 percent of the globe’s gross domestic product (GDP).

Enhancing the quality of basic education in Indonesia remains a key challenge for the government. However, it is a vital issue as without good quality basic education, Indonesian children will fail to acquire the skills required to lead full and productive lives. This also has major consequences for long-term economic growth of the country. Moreover, given that at the end of 2015 the ASEAN Economic Community (AEC) is set to be launched (which aims to make this region a single market and production base) it is important that Indonesian workers can compete with other ASEAN workers. A few days ago, it was reported that Indonesia ranks in the bottom ten of a school rankings compiled by the Organization for Economic Cooperation and Development, on par with (or slightly above) countries such as Botswana, Peru and Oman.

One of Indonesia’s characteristics is that the unemployment rate is highest for people between the age of 15 and 24 years (far above the country's national average). Freshly graduated students from Indonesian universities, vocational schools and secondary schools encounter difficulties finding their place in the national workforce. A recent World Bank report states that around two million Indonesians enter the country’s labour force each year, indicating the importance of economic growth and government-led job creation in order to absorb this annual group of newcomers.

According to the latest data from Statistics Indonesia (BPS), Indonesia has an unemployment rate of 6.2 percent (February 2015), which translates to 7.2 million unemployed people. The country’s total population size is roughly 250 million people, making Indonesia the world’s fourth-largest country in terms of population sizes (after China, India and the USA). It is often stated that Indonesia has a demographic bonus as its population is relatively young (with about half of the population below the age of 30 years). However, this bonus can turn into a disaster if this young population fails to find jobs and instead fall into poverty. In 2014, Indonesia had a poverty rate of 11 percent of the population, roughly 28 million people.

Human Capital Index 2015: