Jakarta, The PRAKARSA – The research and policy advocacy institute PRAKARSA This was in response to the government's plan to establish a National Productivity Institute (LPN) as a derivative of Presidential Regulation No. 1 of 2023 concerning the National Productivity Institute (LPN). This institution will be staffed by eight ministries/institutions and aims to increase national worker productivity through vocational training and competency certification programs. Minister of Manpower Yassierli confirmed that one of the LPN's programs is the integration of vocational high schools (SMK) and vocational training centers (BLK) to increase workforce absorption.
PRAKARSA We appreciate the government's efforts to highlight the weakening productivity of national workers. A 2023 International Labour Organization (ILO) report stated that Indonesia ranked fifth in ASEAN in terms of productivity, with an average worker productivity contribution to Gross Domestic Product (GDP) of only US$5 per capita per hour. Compare this to Malaysia's US$14 or Singapore's US$26.
Some critical notes
Bintang Aulia Lutfi, economic researcher at The PRAKARSA, provided several notes on the planned formation of the National Land Agency (LPN) to ensure it is productive in carrying out its duties. First, the problem of low productivity is a structural one that cannot be resolved simply by establishing a new institution. "At the macro level, there is a positive correlation between the declining contribution of the manufacturing sector to GDP and weakening worker productivity. This is due to the transition of workers to the service sector with uncertain demand, and the lack of transition of workers from the agricultural sector to more productive sectors."
Bintang added that at the meso level, low sectoral demand due to weakening purchasing power also impacts productivity. "The Sritex bankruptcy case, for example, shows that weak purchasing power impacts productivity, leading to massive layoffs, which impacted national productivity indicators."
In addition, at the micro level, the employment system that non-automated and low meritocracy also impact productivity. "These factors affect both the demand and supply side," he said.
In line with Bintang, Pierre Bernando Ballo, a social policy researcher at The PRAKARSA, argues that increased productivity can be measured through indicators Total Factor Productivity (TFP). Increasing TFP requires investment in skilling, upskilling, and reskilling the workforce. However, optimizing existing institutions will be more effective than establishing new ones, given the challenges of accessibility and the time required to reach the public, especially in high-value-added sectors that require specific skills.
Therefore, Pier suggested that the government focus on paying attention to existing institutions and programs and aim to improve skill workers, such as the Job Training Center (BLK), the Pre-Employment program, and vocational education in general.
Research findings PRAKARSA and INFID (2019) shows that many BLKs are still underutilized and do not receive sufficient funding. Therefore, if the government wants to increase productivity, it needs to allocate at least 2 (two) percent of the national budget for vocational education, develop innovative financing schemes, and strengthen the BLK institution.
The PRAKARSA is an institution think tanks which focuses on social, economic & financial policy issues, and sustainable development. Since 2004, PRAKARSA consistent in providing policy recommendations to the government on issues related to worker productivity, social protection, and so on.