Indonesia can realise its goal of becoming a high-income developed country by 2045, thanks to
favourable demographics. To do so requires a national program capable of effectively harnessing
Indonesia’s human capital and population characteristics, recognising that investments in human
resources constitute an irreplaceable component.

Human capital is a critical national asset. Indonesia has 270 million people, 147.7 million of which are in the workforce. But whoever leads the country after next year’s presidential election must wisely unravel old policies and bravely continue the right programs rather than create new ones with similar objectives.

This will not be easy. Some 8 million individuals are unemployed in Indonesia and the national rate of Indonesians who are not participating in education, employment or training is notably high at 23.22 per cent. Graduates from higher education and secondary school face higher unemployment rates than those with lower educational attainment, leading to widespread idleness. The low female workforce participation rate of just 54.52 per cent further exacerbates the issue, falling far below the male workforce participation rate of 84.26 per cent.

The government must seek strategies to reduce unemployment and inequality through skill development programs. Indonesia’s National Labour Force Survey in February 2019 and 2020 revealed that just under 90 per cent of the workforce have not received any workforce training. Together, these factors drag down Indonesia’s productivity rate, which was only the fifth highest in Southeast Asia in 2020.

The next administration must ensure that it measures the success of any program to resolve these issues with the proper indicators. Public service ideally offers high-quality, easily accessible, effective and targeted reference points to be impactful. Evaluation, through either internal or independent external sources, is critical. A program worthy of continuation must be result-oriented and impact-proven. Ultimately, the program participants should be the primary benefactors of any benefits.

Indonesian President Joko Widodo’s Kartu Prakerja program is a notable example of the right way to advance Indonesia’s economy by harnessing human capital. The program is open to Indonesian citizens over 18 years who are not enrolled in formal education and do not engage with other welfare programs. It aims to enhance the competence, productivity, competitiveness and entrepreneurial development of Indonesia’s workforce.

The Kartu Prakerja program began in 2020 and it operates on a conditional cash transfer scheme. Participants are provided with vouchers to purchase training courses and once they complete the training, they receive a cash incentive. This large-scale skill development initiative successfully reached over 5 million in the first year alone, covering all districts and cities across provinces in Indonesia despite the disruptions caused by the COVID-19 pandemic. A further 17.5 million recipients were reached through online training and provided with digital wallet incentives through fintech companies and conventional banks.

The program achieved rapid success thanks to a multi-stakeholder partnership scheme, where private and government entities collaborated in training provision and activated a training market mechanism that fostered partnerships over mere vendor relationships.

All training courses must meet certain quality thresholds and be relevant to training needs in the industrial and business sectors. Government data captured by the National Labour Force survey shows that the percentage of the workforce receiving training increased from 10.25 per cent in 2019 prior to the Kartu Prakerja program to 19.08 per cent in 2023.

Data from the Abdul Latif Jameel Poverty Action Lab South East Asia, a Jakarta-based research centre, support these findings. The centre found that in 2021, Kartu Prakerja recipients had an income 10 per cent higher than non-recipients, signalling a positive outcome for the program. Subsequent research from the World Bank and the Indonesia-based National Team for the Acceleration of Poverty Reduction is similarly positive. A joint report published in June 2022 found that 96.1 per cent of recipients were satisfied with the training in the program’s ecosystem.

One characteristic of the Kartu Prakerja program undergirding its success is the implementation of Government-to-Person (G2P) distribution payments that expands financial access for recipients. The majority of recipients are first-time users of digital wallets or bank accounts. This embodies the G2P 3.0 principle of facilitating access rather than merely providing it. The United Nations also recognises the program and others in Southeast Asia have visited Indonesia to learn about Kartu Prakerja, including officials from Cambodia and Thailand

While the aspiration to ascend to the ranks of high-income nations remains distant, Indonesia must ensure that existing government programs like Kartu Prakerja can solve problems and are mutually integrated to provide comprehensive solutions for the workforce.

The country has only a limited amount of time to maximise the gains from favourable demographics. Trends point to the year 2030 as the zenith of this demographic bonus, making scale and speed pivotal elements of a robust government program aimed at harnessing a substantial workforce in Indonesia.

Initiating new programs is not without its challenges. It requires time to align the frequency of policies, institutional design and operational frameworks in the field.

Cahyo Prihadi is Director of Monitoring and Evaluation of the Kartu Prakerja Program at the Coordinating Ministry for Economic Affairs of the Republic of Indonesia.