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Upskilling is the key to a prosperous future and can boost Indonesia’s GDP by 2030

Indonesia

Southeast Asia is at an inflection point. As the world’s fifth largest economy, its annual growth rate has outpaced global averages. It is also home to a wealth of diversity, and a large share of the world’s workers under the age of 30. However, the region also faces the risk of leaving this potential untapped if it fails to create quality employment opportunities. It is critical that the region’s workforce is equipped with skills needed to shift to higher-value added jobs.

With enhanced technologies creating demand for a continually-improved workforce, the region – if upskilled – will be able to keep up with the changing digital landscape. Despite the upfront cost of digital upskilling, based on PwC’s Annual Global CEO, 71% of CEOs in Asia Pacific have invested in automation, reflecting the importance of digital upskilling to meet the rising importance of digitalisation and automation. Upskilling not only mitigates the structural unemployment resulting from skills mismatches but also bridges socio-economic gaps in knowledge and skills.

Furthermore, as the region is developing its carbon neutrality strategy and transitioning to a net zero economy, a key component is to upskill workers for green jobs. The Asian Development Bank estimates that the transition to a green economy will add 30 million new jobs in Southeast Asia by 2030.

This is the time for transformational change and for Southeast Asia will lose the chance to leapfrog in preparing a resilient workforce amidst emerging digital disruptions and sustainability trends. Upskilling is needed to equip people with the right skills for jobs that will evolve as the country and the region digitalise and green its economy.

From the launching of the “Upskilling for Shared Prosperity in Southeast Asia: Fostering Sustainable Growth”, shows that wide-scale investment in upskilling has the potential to boost Southeast Asia’s GDP by 4% or US$250 billion, thereby creating up to 676,000 new jobs by 2030. The highest GDP uplift was registered in the region with the largest productivity gaps; Indonesia and Vietnam. Indonesia could unlock 50% of the potential regional additional employment in 2030 due to upskilling. The pace of change will vary between countries depending on economic maturity, existing skill levels, and chosen approach. 

Marina R. Tusin, PwC Consulting Indonesia Leader, said, “As Indonesia propels towards digitalisation and net zero, and transitions away from labor-intensive economic activities, upskilling is key to sustain the country’s workforce development and thus maintain the economic competitive advantage.”

Parul Munshi, PwC Southeast Asia Consulting and Sustainability Leader, stated, “There is an opportunity for Indonesia to target upskilling investment in priority sectors such as manufacturing, agriculture, energy, and utilities as well as Financial Services. Cumulatively, the potential GDP uplift from these four sectors for Indonesia could be more than US$ 70B. To achieve this, upskilling strategies and approaches need to be sector-specific and targeted to the affected workforce with a focus on vulnerable groups and informal sectors.” 

A sector-by-sector breakdown of upskilling’s impacts

The economic benefits of upskilling will be especially felt in four key sectors, which are manufacturing, agriculture, energy and utilities, and financial services. These account for more than half of the region’s overall potential benefits. 

The potential GDP uplift due to upskilling in the manufacturing sector for Southeast Asia is US$64 billion with Indonesia’s potential GDP uplift at US$36.8 billion. In agriculture, Southeast Asia could benefit GDP uplift as much as US$44 billion from upskilling and Indonesia could unlock US$24 billion potential GDP uplift. In the energy and utilities sector, Southeast Asia’s potential GDP boost is US$15 billion where Indonesia’s potential benefit is at US$4.2 billion. Lastly, for the financial services sector, upskilling in this industry could generate as much as US$13.3 billion GDP uplift for Southeast Asia and US$6 billion specifically for Indonesia.

Prof. Bambang Brodjonegoro, Ph.D., Senior Economist, stated, “In each of these key four sectors, Indonesia could potentially gain the highest GDP uplift across the region. Upskilling also has the potential to transition workers in the informal labour sectors into more formal, long-term positions.”

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