Promote Skills Development in Indonesia to Enable Transition to Industry 4.0 — ADB Study

News Release | 20 January 2021

JAKARTA, INDONESIA (20 January 2021) — Indonesia should consider developing industry transformation maps in key sectors to enable the transition to the fourth industrial revolution (4IR) with adequate investment in skills development for new and repositioned jobs, according to a new study by the Asian Development Bank (ADB).

The finding is one of seven key recommendations emerging from ADB’s study Reaping the Benefits of Industry 4.0 Through Skills Development in Indonesia. It is part of a four-country study of ASEAN nations that also includes Cambodia, the Philippines, and Viet Nam.

In Indonesia, the study focuses on the food and beverage (F&B) and automotive manufacturing industries, both of which are important for growth, employment, international competitiveness, and 4IR. The study finds that 4IR technologies will eliminate jobs in F&B and automotive manufacturing industries, but these would be offset by creating more labor demand, generating net job increases of 41% and 30%, respectively.

However, to access these jobs, investments in skills development are crucial. Both industries could see a decline in routine, physical tasks in line with the growing use of robotics in automotive assembly lines and 4IR technologies in F&B manufacturing, and an increase in demand for evaluation, judgment, and decision-making skills.

While the coronavirus disease pandemic is accelerating digital transformation, the study finds that companies deploying 4IR technologies are likely to recover faster from the disruptions caused by the pandemic and be more resilient in the future.

The study calls for Indonesia to develop dedicated 4IR technical and vocational education and training (TVET) programs, building upon its ongoing efforts to improve linkages between TVET and industry. It also recommends flexible and modular skills certification programs that recognize skills attainment even outside traditional education channels.

With several Indonesian training institutions initiating courses for 4IR, the study recommends revisiting quality assurance mechanisms, particularly to address the quality of “training of trainer” programs and strengthening industry partnerships and flexible certification programs even beyond traditional education and training institutions.

“4IR could be transformative for Indonesia and it is key to improve the quality of industry-relevant education and training to ensure stronger alignment with the skills demanded by employers, particularly in F&B,” said ADB Social Sector Specialist Sameer Khatiwada.

In the automotive sector, the study recommends prioritizing 4IR adoption and related skills development efforts for micro, small and medium-sized enterprises (MSMEs); supporting 4IR knowledge transfer from large multinational companies to MSMEs; and fostering stronger coordination between vocational training centers and individual company-led training institutes.

The study found a mismatch in perceptions between training institutions and employers in the preparedness of graduates to work. While 96% of training institutions reported that graduates were adequately prepared for entry-level positions, only 28% of F&B and 30% of auto manufacturing employers agreed. Only 19% of training institutions reported using online platforms for training and 16% reported using augmented reality and virtual reality tools.

“As 4IR technologies spread rapidly, extensive investments in digital skills will improve the chances of the young and old to access higher-quality jobs and lower the risk of job losses,” said ADB Principal Education Specialist Shanti Jagannathan. “Now is the time to rethink delivery of skills using virtual platforms and mobile technologies, and to develop agile training institutions with courses and credentials that match market needs.”

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.