By Sonia Adriaty – Industrial Park
Seizing Indonesia’s Demographic Bonus for Economic Growth
Indonesia is currently experiencing a demographic bonus, a period where the working-age population (15–64 years old) significantly outnumbers dependents. According to Statistics Indonesia (BPS), as of 2024, Indonesia’s population has reached 281.6 million, with 197.1 million (70% of the population) people falling within the productive workforce category. This demographic advantage presents a golden opportunity to accelerate economic growth—provided the country can harness the full potential of its workforce.
However, this window of opportunity will not last indefinitely. Projections from National Development Planning Agency (Bappenas) 2023 indicate that by 2045, Indonesia’s elderly population (aged 65 and above) will rise to 16%, signaling the gradual closure of this demographic advantage. This means that the next two decades will be critical for Indonesia to strengthen its industrial capacity, enhance workforce skills, and drive sustainable economic development.
Recognizing this urgency, the government under President Prabowo Subianto has set an ambitious target: achieving 8% economic growth by 2029. To realize this vision, Indonesia must prioritize key sectors that can deliver large-scale employment and economic transformation—with manufacturing at the forefront.
Industrial Parks as Growth Engines for Manufacturing
Manufacturing remains the backbone of Indonesia’s industrial economy, serving as a primary driver of employment and GDP contribution. As of August 2024, the sector contributed 19.02% to Indonesia’s GDP, employing approximately 20 million workers, or 13.83% of the total workforce (144.64 million people).
A critical factor in manufacturing growth is the development of industrial parks, which serve as designated areas where companies can operate with shared infrastructure, streamlined regulations, and proximity to supply chains. The Indonesian Industrial Estate Association (HKI-Himpunan Kawasan Industri) reports that Indonesia currently has 118 industrial parks spread across 142,000 hectares in 24 provinces. These parks house over 11,040 companies and employ approximately 4 million workers.
Industrial parks not only boost productivity and attract foreign investment but also help decentralize economic growth by encouraging industrial development outside Java, fostering regional economic balance.
The Skills Challenge: Are We Ready for Industrial Expansion?
Indonesia’s demographic bonus presents a once-in-a-lifetime opportunity to drive economic transformation. According to Bappenas (2023), this window will peak in 2030, when 70% of the population will be of working age. As of 2024, Indonesia’s population stands at 281.6 million, with 197.1 million people (70%) in the productive age group.
However, a strong workforce is not just about numbers—it’s about skills and readiness. Despite the large workforce, 7.47 million Indonesians (4.91% of the labor force) remain unemployed. More critically, 53.42% of the workforce (77.2 million people) have an education level equivalent to junior high school or lower.
Proportion of Employed Population in Indonesia by Latest Education Level (August 2024)
This misalignment between workforce capabilities and industry needs is one of the biggest hurdles to Indonesia’s industrial development. Employers operating in industrial parks frequently cite difficulty in finding workers with the necessary technical expertise and education levels to meet their operational requirements. The demand for specialized skills in machinery, automation, and information technology continues to rise, yet many local workers only possess basic skills that do not align with modern industrial standards.
Without proactive strategies for education and workforce development, Indonesia’s demographic bonus could turn into an economic burden—leading to higher unemployment, lower productivity, and slower industrial growth.
Based on these challenges, there are four critical issues that must be addressed to enhance workforce quality in Indonesia’s industrial parks:
- Limited Education and Training Infrastructure
One of the most pressing challenges is the lack of adequate vocational education and training facilities. As industrial parks expand, they require a steady pipeline of skilled workers—yet educational infrastructure has not kept pace with industrial growth.
While some industrial parks have started developing Vocational High Schools (SMK- Sekolah Menengah Kejuruan) with industry-aligned curricula, these initiatives are still not widespread or systematically integrated across all regions. A more aggressive approach is needed to ensure that education and training centers are established in close proximity to industrial parks, with direct input from manufacturers and investors to align training with real industry demands.
- Rapid Technological Advancements and Industry 4.0 Adaptation
The Industrial 4.0 revolution is reshaping manufacturing, requiring expertise in automation, robotics, AI, and digital transformation. However, many workers in industrial areas lack the necessary digital and technical skills to thrive in this new environment.
A McKinsey & Company report warns that 60% of Indonesia’s workforce is at risk of being replaced by automation by 2030 if they are not equipped with digital competencies. This challenge extends beyond workers—it also affects vocational school instructors, who must continuously upgrade their skills to keep up with technological advancements and evolving teaching methodologies.
To stay competitive, Indonesia must:
- Accelerate workforce upskilling programs with a focus on digital literacy, automation, and industrial innovation.
- Encourage continuous learning among both workers and educators through certifications, reskilling courses, and industry partnerships.
- Low Awareness of the Importance of Lifelong Learning
A key obstacle in workforce development is the mindset of local communities. Many workers—particularly those living near industrial zones—believe their current skills are sufficient and do not see the need for further education or training.
This lack of awareness limits their ability to adapt to changing industry demands and restricts their potential for career advancement. If left unaddressed, it will widen the gap between industry requirements and workforce capabilities.
To shift this mindset, government and private sector collaboration is crucial. Employers, policymakers, and educational institutions must:
- Launch awareness campaigns highlighting the benefits of vocational education and lifelong learning.
- Offer incentives for workers to participate in upskilling programs, such as career progression opportunities, salary increases, or industry-recognized certifications.
- Encourage mentorship programs where experienced professionals can guide and inspire younger workers.
- Fragmented and Ineffective Government Policies
Despite numerous workforce development programs, Indonesia’s policies remain fragmented and inconsistent. Many training initiatives are sporadic and not fully aligned with the evolving demands of industrial parks.
For Indonesia to fully capitalize on its demographic bonus, the government must implement a more holistic, industry-driven strategy for human capital development, including:
- A national workforce development roadmap that integrates education, industry, and policy frameworks.
- Stronger public-private partnerships to align training programs with real-world industry needs.
- Incentives for industrial parks that actively contribute to workforce upskilling programs.
Vocational Education: Strengthening the Availability of Skilled Workforce
In 2018, the Indonesian government launched the Making Indonesia 4.0 roadmap, projecting real GDP growth of 1-2% per year. This means the annual GDP growth rate is expected to rise from a baseline of 5% to around 6-7%. A key driver of this growth is the manufacturing sector, which is targeted to contribute approximately 21% of GDP by 2030. Beyond productivity gains, Making Indonesia 4.0 is also expected to create 7-19 million new jobs, particularly in manufacturing, due to increasing export demand.
Since the roadmap’s launch, Indonesia’s manufacturing sector has continued to be a major engine of economic growth. In Q2 of 2024, the country’s GDP grew by 5.05%, outpacing several G20 nations, including China, Russia, and Brazil.
With such optimistic projections and the potential for massive job creation, the question is: How prepared is Indonesia’s workforce to meet the evolving needs of the industry? Ensuring a skilled and job-ready workforce requires serious investment in practical, industry-relevant training programs—and vocational education plays a crucial role in achieving this. Below, we explore how different countries have successfully developed vocational education programs through multi-stakeholder collaboration, based on data gathered from various sources.
Global Best Practices in Vocational Education
Countries like Germany, Switzerland, and South Korea have successfully developed vocational education systems that produce highly skilled workers aligned with industry needs. From these examples, it is clear that:
- Significant investment in vocational education is required.
- Incentive policies should encourage companies to hire vocational graduates.
- Technology integration in learning is essential.
Given Indonesia’s large population and rapid industrial growth, the country faces unique challenges in ensuring its workforce is well-equipped with relevant skills. Therefore, Indonesia must develop a vocational education model tailored to its specific needs and challenges. With the right strategies, vocational education can become a pillar of industrial growth and maximize the benefits of the country’s demographic dividend.
Current Landscape of Vocational Education in Indonesia
Vocational education in Indonesia is expanding rapidly, with:
- 14,445 vocational high schools (SMK)
- Over 5 million students
- 325,000 educators
- 257,256 applicants to state vocational universities (PTN Vokasi) in 2024, with 28,415 accepted
This growing interest highlights the increasing awareness of the importance of practical skills in today’s job market. To further strengthen vocational education, several key initiatives have been launched by the government, industries, and educational institutions.
Key Vocational Education Initiatives in Indonesia
- SMK Centers of Excellence
This program aims to enhance the quality and competitiveness of vocational high schools (SMK) through:
- Industry-aligned curricula
- Improved teacher competency
- Upgraded technology-based infrastructure
Key stakeholders include:
- Ministry of Education, Culture, Research, and Technology (program initiator)
- Industry players (curriculum development, internships, recruitment)
- Local governments (support and funding)
Since its launch in 2021, the program has engaged 1,851 SMKs, benefiting 1.78 million students and attracting IDR 643.17 billion in industry investment through the Matching Fund scheme.
- Astra Polytechnic
Founded by PT Astra International Tbk, Politeknik Astra focuses on technical and manufacturing education, offering a unique blend of theory and hands-on industrial training. Students participate in internships and real-world projects, ensuring they graduate job-ready. Many graduates are directly recruited by Astra Group companies and other industries.
- Vocational Education in Kendal Industrial Park
Kendal Industrial Park, one of Central Java’s largest industrial zones, collaborates with local vocational high schools (SMK) and polytechnics to provide industry-driven education. Key programs include:
- Dual System Education (DSE): Students split their time between classroom learning and hands-on training in partner companies.
- Industrial Internship Program: Students spend months interning at companies to gain exposure to production processes, management, and technology.
- SMK Mitra Industri MM2100 in MM2100 Industrial Park
This vocational school is supported by 300+ companies within MM2100 Industrial Park, offering programs in:
- Industrial electronics
- Electrical installation
- Automotive engineering
- Accounting
- Hospitality
- And more
Founded in 2011, the school operates on a 2-hectare campus and collaborates with HR forums and industry associations. Graduates are well-integrated into the MM2100 Industrial Park workforce, with some even securing internships in Japan and Germany.
The Role of Industrial Parks in Vocational Education
Seeing the examples from above, industrial parks play a critical role in expanding vocational education to meet industry demands. HKI (Himpunan Kawasan Industri) has recorded similar successful vocational schools in Greenland International Industrial Center (SMK Ananda Mitra Industri) Karawang International Industrial City (SMK Perguruan Cikini)
Additionally, HKI has partnered with top universities, including Diponegoro University (2022), Institut Teknologi Sains Bandung (2017), and Tarumanagara University (2013), to enhance workforce development.
Next Steps: Strengthening Vocational Education
Despite the progress made, several strategic actions are still required:
1. Strengthening Collaboration Between Government, Industry, and Education Institutions
Stronger collaboration is essential to developing training and education programs that align with industry needs. This partnership should particularly involve Industrial Parks in each region.
Enhancing collaboration can be achieved by optimizing the role of Industrial Parks in supporting vocational programs through two approaches:
a. For Industrial Parks that already have vocational schools – Maximizing collaboration with their tenant companies to prepare highly skilled and competent industrial workers, ensuring the workforce supply meets the industry’s needs and competency standards. Ultimately, this will enhance national industrial competitiveness.
b. For Industrial Parks without vocational schools – Establishing collaboration between tenant companies and nearby Vocational High Schools (SMKs) to develop a skilled and competent workforce. This will help fulfil industrial workforce demands in line with company standards while boosting national industrial competitiveness.
c. Expanding Educational Infrastructure – The government must invest more in building vocational schools and training centers near industrial parks to increase workforce readiness.
2. Enhancing Policy Support for Vocational Education
Policies must ensure a seamless link between workforce development and industry needs. Possible enhancements include expanding tax incentives (such as the super tax deduction) for industries that invest in vocational education or introducing new incentive schemes for vocational institutions within industrial parks.
With an 8% economic growth target and the rapid advancement of Industry 4.0 driving technological progress in the industrial sector, all stakeholders must strengthen collaboration through innovative programs to accelerate improvements in vocational education in Indonesia.
Conclusion: Turning Demographic Advantage into Industrial Strength
Indonesia’s demographic bonus offers a once-in-a-lifetime opportunity to propel the country into a global industrial powerhouse. However, this advantage will only materialize if the country invests in its workforce, particularly through vocational education and skill development.
With industrial parks serving as economic growth hubs, Indonesia must ensure a steady pipeline of skilled workers to support manufacturing expansion, attract investors, and drive sustainable economic development. By prioritizing vocational training and workforce upskilling, Indonesia can maximize its demographic potential—transforming it from a statistical advantage into real economic progress.
Source:
- Skylight Analytics Hub
- David Bloom David Canning Jaypee Sevilla (2003), The Demographic Dividend. McKinsey and Company (2019), Automation and the Future of Work in Indonesia.
- Tomei, (2020). “Skills Mismatch and the Future of Work”. International Labour Organization (ILO).
- Hauge, (2022). “Skills Mismatch and Economic Development in Africa”. Journal of Development Studies.
- Making Indonesia 0 (2018), Kementerian Perindustrian.
- Nasih, (2020). Tantangan dan Strategi Pendidikan Vokasi di Era Industri 4.0. Jakarta: UI Press.
- Badan Pusat Statistik (2024), Berita Resmi Statistik
- World Economic Forum (2025), Future of Jobs Report
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- https://kompas.com/edu/read/2023/10/18/191604371/pendidikan-vokasi-punya-peranan- penting-di-banyak-sektor-industri
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