Technical and vocational training key to improving employment rates in Indonesia

Although priorities vary when it comes to economic development, the increasing need for skilled labour is both a cause of and a requirement for accelerated growth that spans markets and continents. This demand for technical specialists from Mexico to Indonesia is often most concentrated in the sectors that are vital to economic advancement, including infrastructure, oil and gas exploration and extraction, and value-add processes for agricultural commodities. Efforts to expand this expertise locally, rather than relying solely on international organisations or expatriate leadership, have come to the fore in recent years, both as part of individual country schemes and multinational efforts. As a result, markets around the world are using a range of strategies to overcome common challenges and align legal frameworks, policies, and education and training systems with industry needs.

Skills Mismatch

On average, global unemployment remains an ongoing challenge, particularly in developing economies. According to the “World Employment and Social Outlook: Trends 2018” report by the International Labour Organisation, the number of unemployed people around the world was expected to have fallen by 400,000 in 2018 to just over 192m, compared to a 2.6m increase in 2017. The report credits the stabilisation of unemployment to growth in developed markets where numbers will dip to pre-crisis levels. Developing countries, on the other hand, will continue to see unemployment rise. Provision of employment opportunities is acknowledged as a global need by international entities like UNESCO, which estimates that at least 475m new jobs need to be created over the next decade to absorb the 73m currently unemployed youth population, as well as the influx of 40m new entrants to the labour market per year.

It is not the case that high unemployment rates result from a lack of jobs, but rather from the mismatch of market needs and skills that people bring to industries. A 2014 World Bank report on Ghana’s demand and supply of labour, for example, estimated that over 1m jobs could become available in the country’s booming construction sector between 2015 and 2020. However, this demand remains unmatched by the local supply of available skills, resulting in an estimated deficit of 60,000-70,000 skilled workers.

This is also an issue across Latin America. According to data collected between 2010 and 2017 by the World Bank Enterprise Surveys, 31.6% of responding firms highlighted finding a qualified workforce as a key challenge, compared to 17.3% among firms in high-income OECD countries. The situation in Panama is particularly acute: the US International Trade Administration highlighted that the unemployment rate for skilled employees is actually negative due to the severe shortage of workers in technical fields, including IT and construction, with Panamanian employers citing the lack of skilled labour as a hindrance to growth.

Furthermore, required skill sets are constantly shifting as industries change more rapidly. The World Economic Forum reports that the top-10 skills required by companies will change between 2015 and 2020.

Negative Perception Challenge

While technical and vocational education and training (TVET) programmes can, in theory, provide jobseekers with the specific tools they need to be attractive to an employer, combatting the perception of vocational training is a fundamental challenge. Indeed, a 2016 report from UNICEF found negative attitudes towards TVET, which is “often associated with academic failure, rather than being an alternative path to productive and decent work”. In the Middle East, per a World Bank study, the general perception of TVET is that it is an inferior option compared to university. A 2015 OECD study found that in Egypt, TVET programmes are considered to lack prestige and are seen as the “low-status” option for those who did not do well on the country’s standardised thanaweya amma ( general secondary) exam, while throughout the Gulf, the vocational training path is also considered lower-class and sees a general lack of interest. Only 3% of post-secondary graduates pursue vocational training in Abu Dhabi. Similarly, according to UNESCO, TVET enrolment across Africa is less than 5% due in part to negative attitudes. Reversing these perceptions will require ongoing efforts, including making sure that offerings are market-driven and lead to real opportunity, as well as align with student preferences.

Practical Training

In order to directly link TVET programmes to employment, markets are increasingly focused on apprentice-style training to best prepare students for the work they will eventually be doing. This has been championed as the right way forward by numerous international organisations. According to a report by the OECD, both general education and TVET programmes should expand links with the region’s productive sector. As noted in the 2017 Inter-American Development Bank report, “On-the-job training helps develop specific skills that can boost workers’ productivity. Thus, while preparedness is important, the intensity and quality of the training received in the workplace is crucial. This is even more true in a fast-changing world, where updating skills is the key to workers’ relevance and longevity.”

Markets Nigeria have started working on improving the links between education and employment with the 2015 establishment of Vocational Enterprise Institutions (VEIs) and Innovation Enterprise Institutions (IEIs). These schools, 82 approved VEIs and 154 IEIs as of April 2018, according to the National Board of Technical Education, are directly partnered with various businesses to provide tailored technical training. Another high point when it comes to linking training with industry is the Moroccan Aerospace Institute (Institut des Métiers de l’Aéronautique, IMA), a training centre established in 2011 as a partnership between the Moroccan Aerospace Industries Group, the Moroccan government, the French Union of Metal Industries, and the French Development Agency to develop the local capacity to support the kingdom’s growing aerospace sector. Hamid Benbrahim El Andaloussi, founder of the IMA, told OBG that the institute had trained 5000 students by the end of 2017 and had doubled its capacity that year to meet growing demand.

As oil- and gas-producing states in the Gulf continue efforts to build local operating capacity, there has also been an increased focus on education that prepares students for specific roles within the energy industry. Mike Bowman, who served as the chair of the Petroleum Engineering Programme at Texas A&M University at Qatar from 2015 to 2017, described efforts to realign the curriculum to make it more Middle East-facing and tailored to respond more directly to local needs. “As Qatar thinks strategically about education as a tool for its future development and growth, this programme is making sure we help the students not only understand the technical aspects of engineering, but how it affects the country and its future,” he told OBG. Reshaping the programme this way involved increased collaboration with industry players, such as Qatar Petroleum, which now hosts students on site visits and provides mentorship. “If you don’t see this work in action 20 miles away, you don’t understand what it feels like,” Bowman added. “We need to make sure that in addition to learning the theory, students see the practice.”

Regulatory Environments

In addition to training, international knowledge transfer on technical subjects can be highly valuable, but can be made difficult by local content regulations that set quotas for the use of local staff and resources. According to a 2016 paper from the OECD, local content regulations can cause notable losses and inefficiencies. For example, when Ghana discovered offshore oil fields in 2007, there was a definite skill gap in the local market as Ghanaians were newcomers to the highly technical industry, making it difficult to adhere to regulations to locally staff many jobs.

Similarly, in the GCC, policies that prioritise granting the bulk of jobs to citizens as opposed to foreigners, are common. This is intended to increase local employment in countries such as Saudi Arabia, the UAE and Oman, but these policies can result in high costs for private firms, as local salaries are almost always higher than what might be paid to an expatriate, and often training is required for specific positions.

Some industry players are cautiously optimistic that a thoughtful revision of such policies can help achieve both objectives of increasing local employment while maintaining global competitiveness. Shahswar Al Balushi, CEO of the Oman Society of Contractors, argues that there needs to be a balance between benefitting from the advantages of foreign experience and growing local capacity. “We need to work towards employing the number of expatriates that meet our requirements, not exceed them; this excess distorts the labour market, which in turn affects the global competitiveness of Oman,” he told OBG. Al Balushi explained that this could be addressed in part by revising local content policies to include more realistic targets. “Obtaining a 30% Omanisation rate in a sector like construction that employs over 750,000 people means we would need to employ 225,000 Omanis in the sector alone, when the entire Omani workforce in the private sector is 230,000,” he told OBG. “The current reality is we stand below 8%, around 55,000, in the sector, so it would make more sense to establish a target of 10%, gradually going up to 15% by 2020.” Al Balushi also highlighted that to entice more Omanis to fill these roles, training must be designed around jobs they are more likely to pursue. “If you provide training in areas like masonry, piping or carpentry, Omanis will participate, but once they find out what the job actually entails, they leave because they do not like the work environment or level of pay,” he told OBG. “However, there are many other areas that require staffing in a sector like construction, ranging from health, safety, and environment, to document control, field surveys, quantity surveys and administrative functions. This type of field could be more attractive for Omanis.”

International knowledge transfer can also come from local employees who worked overseas and have returned to their home countries. For example, Mirna Arif, regional sales director in Cairo for Baker Hughes, a global oil field services company, explained that with Egypt’s recent oil and gas discoveries, Egyptian engineers who have gained highly technical expertise in the Gulf are returning to Egypt for work. “We have a huge labour pool and now we also have a lot of mid-career hires who bring exposure and experience from abroad to support the Egyptian industry,” she told OBG.

Lastly, another way to build globally competitive skill sets is via university. “At the moment Qatar still relies on international consultants for deep technical expertise that is a core part of the oil and gas business,” Bowman told OBG. “A next step could be using these international campuses as vehicles to create that technical expertise by establishing PhD programmes that will make Qatar less dependent on the external world.”

Government-led Efforts

Another positive – and necessary – trend in recent years has been for governments to incorporate TVET programmes into their national education and economic strategies, though the cross-cutting challenge of streamlining this public involvement remains. When too many departments or ministries become engaged, the OECD points out that this can “confuse students and employers, involve some duplication of tasks such as curriculum design, and complicate transitions”. In Egypt, for example, the government’s engagement in TVET has historically involved more than 20 ministries and institutions, leading the European Commission to cite “inappropriate mechanisms for an effective and efficient governance and financing of the TVET system” as one of the key barriers to a successful programme. Efforts to consolidate this public involvement in Egypt continue, with support from the EU, among others.

Similarly, until recently in Ghana, aspects of TVET programming were overseen by up to 18 different ministries, negatively affecting coordination. However, reporting to local press in August 2017, Ghana’s minister of education announced a plan to align all TVET provision solely under the Ministry of Education. Indeed, there are various success stories with regard to government reform that can serve as blueprints.

In South Africa, for example, the 2009 establishment of the Department of Higher Education and Training (DHET) was a key step in integrating and consolidating vocational education and training policy, according to the OECD. Rather than dividing responsibilities between the Department of Education and the Department of Labour, the DHET now bears responsibility for an integrated “post-school” system consisting of universities and colleges, the Sector Education and Training Authority, the National Skills Fund, as well as the regulatory bodies that oversee quality.

Another government step has been increased public investment in TVET programming. In Jordan, for example, one goal of the kingdom’s 2014-20 Employment-TVET strategy is to increase public spending from 0.3% to 1% of GDP. Further east, the Asian Development Bank notes that some of the most economically successful countries in the region, including Singapore and South Korea, have invested public funds in skills development as a growth strategy, and other countries in the region have begun to follow suit. In Indonesia, for example, vocational training is increasingly seen as a way to tackle the skills shortage, particularly in manufacturing. Airlangga Hartarto, the minister of industry of Indonesia, told OBG, “Our main goal is to improve workers’ capabilities by developing technical skills through vocational training. The Ministry of Industry is pushing for linkages between the needs of industrial development and the availability of education. Therefore, technical training and vocational schools are at the centre of our policy to develop our people’s capabilities, as well as push for new entrepreneurship. The ministry operates nine vocational schools, nine polytechnics and a community college.”

Rosan Roeslani, chairman of the Indonesian Chamber of Industry and Commerce (KADIN), has also observed this governmental push. “There is a huge gap between the needs of industry and the available labour force,” he told OBG. “The government has acknowledged this and made one of its primary targets to boost vocational training education. If you look at the structure of Indonesian labour, out of 122m people, slightly more than 50% have an elementary school education, 21% have completed junior high school and about 19% have senior high school qualifications. Only 10-12% have a university background. Therefore, vocational training is important to improve workforce skills and increase the country’s competitiveness.”

Public-Private Partnerships

As highlighted by the World Economic Forum, the World Bank and markets with long-standing successful vocational training programmes, when these government strategies align with and support the on-the-job training provided by private companies, economies have the most to gain. This model of cooperation is becoming more articulated across markets, including by the Shared Value Initiative, a programme operated by US-headquartered consulting firm FSG that promotes education collaboration strategies among companies and governments.

Economies around the world are increasingly seeing the importance of this type of cooperation. “Vocational training is the key to enacting the Thailand 4.0 reform agenda in the short term,” Virachai Techavijit, the chairman and founder of the private Regent’s International School in Thailand, told OBG. “Both public and private institutions must collaborate, as the private sector alone should not be pushing reforms. The private sector should be responsible under the law for telling the government what work skills they require, similar to the annual consultations provided by the Sector Skills Councils in the UK.”

Efforts to reduce this supply-demand gap are under way. Governments, in conjunction with private companies, are working on improving education in the classroom as well as in vocational training to equip graduates with the necessary skills to bring to the workplace. Promoting this kind of cooperation and commitment will produce a stronger pool of talent to help economies grow throughout the 21st century.