The productivity of Indonesia's human resources has improved markedly over the past 15 years. This is one of the conclusions mentioned in the latest Economic Insight: South East Asia, released by the Institute of Chartered Accountants in England and Wales (ICAEW). This quarterly report focuses on the economic trends in the largest economies of the ASEAN countries. Vietnam and Indonesia are the top performers in terms of productivity growth (growth of the average output per worker) supported by the ongoing shift from agriculture to more capital-intensive sectors (manufacturing and the service industries).
The shift away from workers in agriculture to, for example, manufacturing and services boosts productivity by increasing the degree to which capital is used alongside labor. Also due to technological developments productivity growth is typically faster in non-agricultural sectors. Not only in Indonesia but basically all ASEAN member nations the contribution of agriculture toward gross domestic product (GDP) has been retreating over the past couple of decades (even though the agricultural sector itself has expanded). Industry, on the contrary, has started to become the dominant sector in terms of economic value.
Other factors that boost productivity in the ASEAN region (with the notable exception of Singapore) include urbanization and the growing group of workers in the age range of 25 - 54 years. Temporary factors that curtail Indonesia's productivity at the moment are low commodity prices and slowing economic growth in several of Indonesia's trading partners.
Mark Billington, Regional Director ICAEW Southeast Asia, said it is key for a nation like Indonesia to remain focused on enhancing workers' skills in order to boost productivity and economic growth further. Given Indonesia has been opening up key industrial sectors to foreign investment, these industries need more, higher and innovative skilled workers.