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Structural Policy Country Notes Chapter 3 Structural policy country notes Domestic structural reforms are needed to maintain robust growth. This chapter discusses the key policy areas for reform in each of the ASEAN member countries, China and India. The structural policy country notes include topics on education, SME development, social safety net, digital trade, start-up eco-system, agriculture, infrastructure, investment and urban transportation. Examples from the OECD and other countries in the region are also included where relevant. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. ECONOMIC OUTLOOK FOR SOUTHEAST ASIA, CHINA AND INDIA 2020: RETHINKING EDUCATION FOR THE DIGITAL ERA © OECD 2019 143 145 ASEAN-5 ECONOMIC OUTLOOK FOR SOUTHEAST ASIA, CHINA AND INDIA 2020: RETHINKING EDUCATION FOR THE DIGITAL ERA © OECD 2019 145 3. Structural PolicY COUNTRY NOTES Indonesia GDP growth rates (percentage change) A. Medium-term economic outlook 2013-17 (average) 2019 2020-24 (average) (forecast, 2020-24 average) 8 7 GDP growth (percentage change): 5.1 6 Current account balance (% of GDP): -2.5 5 Fiscal balance (% of GDP) (central government): -1.7 4 3 2 B. Basic data (in 2018) 1 0 Total population: 264.2 million * Indonesia ASEAN-10 Emerging Asia Population of DKI Jakarta: 10.5 million * average average Nominal GDP (US dollar): 1 022.5 billion ** Source: OECD Development Centre. GDP per capita at PPP: 13 229.5 (current GDP per capita, 2018 International Dollar) ** (PPP, current international dollar) Exchange rate in the first half of 2019 (period average): 14 195.2 (IDR/USD) Indonesia ASEAN-10 average Note: * Population data are year-end government Emerging Asia estimates. average ** IMF estimate. OECD average Sources: OECD Development Centre, national sources, CEIC and IMF. 0 10 000 20 000 30 000 40 000 50 000 Source: IMF. Composition of exports, 2018 Composition of imports, 2018 (percentage of total exports) (percentage of total imports) Others Mineral products Others 17% Machinery/ 26% 31% electrical Plastics/rubber 30% 7% Metals 8% Chemicals & allied industries Textiles 12% 9% Metals Mineral products 21% Machinery/electrical Vegetable products 13% 10% 16% Source: Trademap. Source: Trademap. Structural policy challenges discussed in previous editions of the Outlook Education Widening access to education, in particular for low-income households 2014 Disaster management Strengthening natural-disaster management and protection infrastructure Social security reform Accelerating reform of the pension system to improve transparency and quality Social security reform Improving access to and the quality of health services and expanding the coverage of the newly implemented health insurance scheme 2015 Education Further improving the education system, including through greater accessibility Inequality Adequately addressing rising inequality Infrastructure Improving infrastructure for maritime connectivity 2016 Social security Reforming the national social security system Food security Improving food security Tourism Strengthening investment in tourism 2017 Infrastructure Improving connectivity and infrastructure development Energy access Reducing gaps in energy access between urban and rural areas 2018 Green finance Fostering green finance 2019 Financial inclusion Leveraging financial technology to bring banking services closer to the people 146 ECONOMIC OUTLOOK FOR SOUTHEAST ASIA, CHINA AND INDIA 2020: RETHINKING EDUCATION FOR THE DIGITAL ERA © OECD 2019 147 3. Structural PolicY countrY notes 3. Structural PolicY COUNTRY NOTES POLICY FOCUS Reforming technical and vocational education and training TVET has a key role to play in creating a skilled workforce. In light of this, TVET is an important part of Indonesia’s “Industry 4.0” strategy. Indeed, the low percentage of skilled labour in Indonesia makes it indispensable for the government to improve the country’s human capital. According to 2018 statistics, 40.7% of the workforce had completed lower or primary school education, 18.1% had finished lower secondary school, and 18% and 11% respectively were general and vocational secondary graduates. The numbers fell still further for university graduates (9.4%), and vocational tertiary graduates (2.8%). Taking into account the country’s opportunity for a so-called demographic dividend – the large proportion of the population that is now at or entering working age – the government is eager to foster more skilled and competitive human resources by increasing the number of vocational secondary school, notably in the sector of maritime, tourism, agriculture and creative industry. However, vocational graduates still often find it difficult to integrate into labour market. Indeed, Indonesia’s TVET sector faces an important mismatch between the vocational graduates’ skills, and the demands and needs of industry. According to an OECD report from 2015, vocational secondary school graduates did not meet employers’ expectations, and their skills were often perceived to be low or very low in quality (OECD, 2015). Another major challenge that vocational institutions face is a certain negativity towards and even stigmatisation of their courses, in that many Indonesians still see taking a vocational track in tertiary education as a second-rate option compared to the academic track (Allen, 2016). This negativity also exists among some employers, many of which still perceive graduates from vocational programmes less favourably than those graduating from academic programmes (Kadir, Nirwansyah and Bachrul, 2016). In effect, most graduates of vocational secondary schools go directly into the labour market, with less than 15% of them choosing to go on to higher institutions (OECD, 2015). Box 3.1.1. Indonesia’s education system The education system in Indonesia is divided into four levels: pre-school, basic education, middle education, and higher education. Three different ministries administer the education system. The Ministry of Education and Culture manages the first, second, and third levels of education. Meanwhile, the Ministry of Research, Technology and Higher Education deals with higher education*, and the Ministry of Religious Affairs manages Islamic education institutions operating at all of these levels. ECONOMIC OUTLOOK FOR SOUTHEAST ASIA, CHINA AND INDIA 2020: RETHINKING EDUCATION FOR THE DIGITAL ERA © OECD 2019 147 3. Structural PolicY COUNTRY NOTES Box 3.1.1. Indonesia’s education system (cont.) Figure 3.1.1. Levels of education in Indonesia Islamic S3 S3 Specialist 2 Programme Programme Programme School Higher Islamic S2 S2 Specialist 1 age Programme Programme Education Programme 22 21 Islamic S1 S1 D4 Programme Programme Programme D3 20 Programme 19 D2 Programme D1 Programme 18 Islamic Senior Middle 17 Senior Senior General Vocational Education Secondary Secondary School Secondary 16 School School 15 Islamic Junior 14 Secondary Junior Secondary School 13 School 12 Basic 11 Education 10 Islamic Elementary Elementary School 9 School 8 7 6 Islamic Preschool Kindergarten 5 Preschool Source: UNESCO-IBE (2006), World Data on Education: Indonesia. As of 2016, and as part of its Smart Indonesia Programme, or Program Indonesia Pintar, the government changed the compulsory age of school attendance from nine years to 12, which consist of six years of elementary school, three years of junior secondary school, and three years of senior secondary school. At senior secondary school, the course of study divides into general and vocational tracks. Both tracks allow students to continue to higher education with two options. The first option is an academic programme with three levels: S1 (bachelor’s degree), S2 (master’s degree), and S3 (doctoral programme). The second option is a vocational programme which features four sub-levels (D1-4), and two broader levels – Specialist 1 (equivalent to a master’s degree), and Specialist 2 (equivalent to a doctoral degree). Alongside Indonesia’s formal system, there is also a non-formal system of vocational education. This takes the form of Public Vocational Training Centres, or Balai Latihan Kerja (BLK), which are managed by the Ministry of Manpower. Note: As of August 2019. Within Indonesia’s new cabinet, starting from 23 October 2019, the Ministry of Research, Technology and Higher Education becomes the Ministry of Research and Technology, while the management of higher education falls under the Ministry of Education and Culture. Revitalising vocational institutions to make sure they foster more relevant skills In order to tackle the mismatch between the skills that employers want and the educational outcomes that the TVET system currently produces, the government embarked in 2016 – by way of presidential instruction INPRES No.9/2016 – on a process of revitalising the country’s vocational institutions. This process includes an overhaul of curricula to improve the quality of graduates’ skills and to increase their employability. 148 ECONOMIC OUTLOOK FOR SOUTHEAST ASIA, CHINA AND INDIA 2020: RETHINKING EDUCATION FOR THE DIGITAL ERA © OECD 2019 149 3. Structural PolicY countrY notes 3. Structural PolicY COUNTRY NOTES The policy seeks to shift TVET away from a supply-driven approach towards a demand- driven ethos that focuses more on producing graduates with the skills that industry actually wants. In several
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