Bridging the skills gap: Fuelling careers and the economy in the Philippines
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
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Bridging the skills gap: Fuelling careers and the economy in Indonesia
Economist Impact, supported by Google, conducted a survey of 1,375 employees across Asia-Pacific (APAC), including 100 employees from Indonesia, between November 2022 and January 2023. It also interviewed employers and industry experts across the region to understand their perspectives on skills gaps, as well as reskilling and upskilling aspirations.
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article—one in a series of 12 market reports—examines these issues in Indonesia. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key findings
Indonesian employees consider digital skills (60%) the top focus area for upskilling. Among these, basic digital skills are foundational for 88.3% of Indonesian workers. As digitalisation spreads across the archipelago, the country will increasingly demand more advanced skills. Employees consider capabilities with data analysis and visualisation (56.7%), IT support (51.7%), and digital marketing and e-commerce (48.3%) as the most important advanced tech skills to have. Workers have the highest expectations for their employers, believing they should support their development by providing information on skills (57%), through financial incentives (54%), recognition (43%) and supporting their mental well-being (35%).Indonesia is one of Southeast Asia’s fastest-growing internet economy. Between 2015 and 2019, its technology sector grew at an average rate of 49% a year, alongside rapid e-commerce adoption by both large and small businesses.1 The economy’s digitalisation has enabled many in the workforce, especially the young, to participate as freelancers, particularly in the transportation and delivery sectors.2
However, many have been left out due to uneven internet connectivity and low literacy rates. For instance, most internet users tend to be concentrated in urban centres and are young—only 21% are over 50 years old.3 The issues are not just limited to the older population, as almost a quarter of young people (22.5%) in Indonesia are not in education, employment or training4 and the World Bank estimates that only 19% of 25-34 year olds had a tertiary qualification in 2021, much lower than the global average of 47%.5
The future of Indonesia’s economy is digital
Most Indonesian employees (60%) consider digital skills the most important to acquire. This is in sync with the digitalisation underway in the economy — Indonesia’s digitally skilled workers are forecast to contribute US$303.4bn to its GDP by 2030, accounting for 16% of GDP.6
Government analysis shows that the expanding technology sector could create 20m-45m new jobs in Indonesia.7 Between 2019 and 2030, non-tech sectors such as professional services, manufacturing and construction — are expected to see the highest growth in GDP contributions from digitally skilled workers, as these sectors increasingly adopt technology to improve their productivity.8
Figure 1: Digital skills are a top priority for Indonesian employees
Which skill categories do you think are the most important for the workforce in your sector to acquire today? (%)
Source: Economist Impact, 2023
Within the broad category of digital skills, employees in our survey consider advanced digital skills such as data analysis and visualisation (56.7%), IT support (51.7%), and digital marketing and e-commerce (48.3%) as must-have skills. Employees also said the same for coding and programming (26.7%) and artificial intelligence (AI) and machine learning (25%). The importance given to these advanced skills possibly reflects a skills gap, as data from 2020 suggest that less than 1% of the workforce in the country possessed advanced digital skills.9
Advanced digital skills are becoming more important for various sectors too. For instance, big data analytics skills are increasingly used in the banking sector to understand customers’ spending patterns and preferences, to cross-sell products and for fraud management.10 Similarly, AI is expected to improve care delivery and hospital operations.11 Meanwhile, farmers are benefitting in myriad ways from real-time monitoring and prediction systems with Internet of Things-enabled tools.12
Cybersecurity is another must-have advanced digital skill for 36.7% of employees, reflecting Indonesia’s struggles with digital risks. The country was ranked the most vulnerable in Southeast Asia for cyber risks, and faced more than 11m attacks in the first quarter of 2022 alone.13
Although green skills such as sustainability reporting, sustainable business management and supply chain management are considered less important at present(15%), these skills would gain importance due to the country's rising sustainability concerns. Indonesia is ranked among the top countries exposed to climate risks with high vulnerability to all types of flooding and extreme heat. 14
Figure 2: Advanced digital skills such as data analysis and visualisation, and IT support are must-haves
Indicate which specific types of digital skills are must-have, good to have or not needed for the workforce in your sector today (%)
Source: Economist Impact, 2023
Infrastructure and high costs complicate access to skilling
Employees in Indonesia are strongly motivated to acquire new skills. Nearly half (49%) of the employees agree that upskilling or reskilling has had a high impact in improving performance in their current roles, and 54% report a high impact in exploring new roles and areas of interest. Despite these motivations, more than one in four (27%) employees cite poor internet access as a barrier in acquiring new digital skills. Nila Marita, director and head of external affairs at GoTo—the holding company of two major Indonesian startups, Gojek and Tokopedia—agrees that internet connectivity is “crucial to increase access to important learning opportunities in Indonesia and bridging this gap will enable more Indonesians to acquire digital skills.” Addressing access is important, as employees utilise online courses for learning. Indeed, 54% of employees say they obtain digital skills outside of the workplace via online courses.
High costs (42%) are also a major hurdle in Indonesians’ ability to digitally upskill, and companies are not investing enough to provide workers with on-the-job training.15 Additionally, Indonesia has a large, informal sector made up of low-income workers, creating challenges for employees to afford skilling programmes and for the government to reach them.16 17
Figure 3: Key skilling obstacles for employees across skills types
What are the top three significant obstacles that you face while learning new skills?
Source: Economist Impact, 2023
Another challenge that employees cite across most skill sets is a lack of time in learning new courses. Indonesian workers have reported experiencing higher workload after the Covid-19 pandemic.18 This also aligns with the higher importance that employees in our survey assign to self-management skills like time management, resilience and stress tolerance (49%).
High expectations from employers
According to our survey respondents, employers are the most responsible for supporting their development across every category apart from providing access to diversified skilling programmes. In particular, they see their employers as a key source of providing information on skills (57%), financial incentives (54%), recognition (43%) and support for their mental well-being (35%).
Employers could address many of the obstacles that employees face such as high costs and time restrictions by subsidising access to training programmes and integrating more workplace training sessions. “Both the government and private sector in Indonesia have been scaling up efforts to develop the country’s talent pool in recent years,” says Ms Marita from GoTo. For instance, organisations and the government are increasingly collaborating with universities to prepare university students with in-demand skills. Private sector companies are also training the trainers and working together with them to design the curriculum based on companies’ skills needs.
Figure 4: Employers are considered the most responsible for upskilling Indonesians
In your opinion who is responsible for supporting employees regarding the following issues? (%)
Source: Economist Impact, 2023
Seventy-seven percent of employees, substantially higher than the regional average (66.5%), believe that employers now lean towards skills-based hiring over paper qualifications. In this context, efforts by government, educational institutions and companies to communicate what skills are in-demand will help the workforce prioritise which ones to learn. While most workers rely on social media and advertisements (73%) for information on valuable skills, government awareness programmes are also an important source for 50% of employees.
Multi-stakeholder collaboration key to closing skills gaps
Overcoming access and infrastructure gaps is integral to realising Indonesia’s digital economic potential. The government has made efforts to counteract these issues through various programmes such as Kartu Prakerja, an online upskilling programme targeted at retraining one million unemployed and low-income adults who are 18-64 years old.19 20 The programme takes an end-to-end approach, providing access to upskilling and reskilling subsidies, courses and job vacancies. Subsidies can also be useful in driving the uptake of green skills, which acts as the biggest motivation to acquire these skills for one in three surveyed employees. Another programme provided by Indonesia’s Ministry of Communications and Information is the Digital Talent Scholarship (DTS). It aims to develop the skills and competitiveness of the country’s workforce in the information and communication technology sector.21
For Indonesia to fully unlock the economic potential of digital skilling, it must extend this kind of opportunity to workers at micro, small and medium enterprises which employ 97% of the country’s workforce.22
Another government programme is Making Indonesia 4.0, a roadmap launched in 2018 to accelerate digitalisation.23 Elements of this roadmap are geared towards training and reskilling workers as technology becomes more ingrained in industrial processes. Additionally, attempts to broaden equitable access to digital skilling opportunities could close the skills gaps.
References
1 https://digitalcfoasia.com/2023/01/10/addressing-the-critical-skill-gaps-in-indonesia/
2 https://fair.work/wp-content/uploads/sites/17/2021/12/Fairwork-Report-Indonesia-2021-accessible.pdf
3 https://smeru.or.id/en/publication/diagnostic-report-digital-skills-landscape-indonesia
4 https://data.worldbank.org/indicator/SL.UEM.NEET.ZS?locations=ID
5 https://gpseducation.oecd.org/CountryProfile?primaryCountry=IDN&treshold=5&topic=EO
6 https://accesspartnership.com/wp-content/uploads/2023/03/skills-for-the-future-executive-summary-in-english.pdf
7 https://opengovasia.com/creating-million-new-jobs-through-digital-technology-in-indonesia/
8 https://accesspartnership.com/wp-content/uploads/2023/03/skills-for-the-future-executive-summary-in-english.pdf
9 https://pathwayscommission.bsg.ox.ac.uk/sites/default/files/2022-03/FINAL_Diagnostic%20Report_Accessible.pdf
10 https://www.sciencedirect.com/science/article/pii/S1877050915005992
11 https://www.usa.philips.com/healthcare/nobounds/phoenix-childrens-benefits-of-ai-in-healthcare#_continue-reading
12 https://www.xcubelabs.com/blog/benefits-of-iot-in-agriculture-and-smart-farming/
13 https://en.antaranews.com/news/227061/indonesia-faces-11-mln-cyber-attacks-in-2022-first-quarter
14 https://www.adb.org/sites/default/files/publication/700411/climate-risk-country-profile-indonesia.pdf
15 https://www.weforum.org/agenda/2022/11/indonesia-edtech-financial-inclusion/
16 An informal economy broadly refers to any part of the economy that is unregistered, meaning that they are not covered or are insufficiently covered by formal employment arrangements. In most of these cases, companies remain largely unaccountable to any regulation as workers are not officially classed as employees, limiting their access to government services, including welfare, labour rights protections and public programmes. In Indonesia, 60% of the workforce is employed by the informal sector and accounts for 22.7% of national GDP (US$776 billion).
17 https://www.ilo.org/jakarta/areasofwork/informal-economy/lang--en/index.htm
18 https://en.prnasia.com/releases/apac/68-of-indonesia-s-employees-willing-to-forgo-higher-salaries-or-job-promotions-for-work-life-balance-michael-page-366002.shtml
19 https://www.prakerja.go.id/
20 https://money.kompas.com/read/2023/01/06/123000126/kartu-prakerja-2023-target-anggaran-dan-pelaksanaan-pelatihannya-
21 https://digitalent.kominfo.go.id/program
22 https://www.weforum.org/agenda/2022/05/digitalization-growth-indonesia-msmes/
23 https://kemenperin.go.id/artikel/23388/Kemenperin:-Revolusi-Industri-4.0-Optimalkan-Potensi--Indonesia-di-Sektor-Manufaktur

Bridging the skills gap: Fuelling careers and the economy in Pakistan
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article—one in a series of 12 market reports—examines these issues in Pakistan. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key findings
Digital skills (57.3%) are a top priority for employees in Pakistan owing to a booming IT sector and the country’s rapidly growing freelancer market, which is the third fastest growing market globally#_ftn1" name="_ftnref1" title="">[1]. Recent acceleration of digitalisation has resulted in higher demand for basic digital skills (72.1%).#_ftn2" name="_ftnref2" title="">[2] #_ftn3" name="_ftnref3" title="">[3] Employees in Pakistan are motivated to acquire digital skills to improve career progression and promotion opportunities (29.3%), as well as to secure better pay and bargaining power (23%). Both the government and employers have important yet distinct roles to play in upskilling Pakistan: while employees expect the government to provide financial incentives, they point to employers as being responsible for providing access to diversified skilling programmes and information on the skills needed for different roles.Despite rising digital penetration in Pakistan in recent years, 46% of the population still lacks internet access.#_ftn4" name="_ftnref4" title="">[4] While 80% of adults live in areas served by mobile broadband, many still do not access the internet.#_ftn5" name="_ftnref5" title="">[5] Out of a total of 182 m mobile subscriptions, only 38 m belong to women.#_ftn6" name="_ftnref6" title="">[6] This could be a result of the low female literacy rate (48%),#_ftn7" name="_ftnref7" title="">[7] which is far below the overall literacy rate of around 60%.#_ftn8" name="_ftnref8" title="">[8] Moreover, the female labour force participation rate is among the lowest globally (25%) and women are mostly employed in the informal sector.#_ftn9" name="_ftnref9" title="">[9] On the other hand, the country struggles with youth unemployment. Almost a third (31%) of the educated youth with professional degrees was unemployed in 2022.#_ftn10" name="_ftnref10" title="">[10]
Amid this backdrop, the government is prioritising digitalisation and implementing initiatives to close the existing skills gap. For instance, Pakistan introduced its “Digital Pakistan” roadmap in 2018, which set out a number of policies and initiatives to help the economy to realise US$59.7 bn (PKR9.7 trn) in annual value by 2030.#_ftn11" name="_ftnref11" title="">[11] The policy targets the upskilling and reskilling of young graduates and the existing workforce to support the country’s growing digital economy and help spur freelance IT sector exports. On this front, it hopes to reach US$3 billion by 2024, up from US$2.12 billion in 2021.#_ftn12" name="_ftnref12" title="">[12]
Infrastructure obstacles—such as inequitable internet access across the country and a lack of sufficient digital skills training—have lowered the pace of digitalisation at workplaces, says Saad Gilani, a senior programme officer at the International Labour Organization (ILO).
Pakistan’s growing freelance economy boosts digital upskilling
More than half of employees (57.3%) in Economist Impact’s survey consider digital skills the most important to acquire. Within this broad category, most employees consider basic digital skills (72.1%) as the most important to have, a trend that reflects the country's struggles with basic digitalisation. Advanced digital skills are also considered must-haves by employees in Pakistan such as data analysis and visualisation (49.2%), digital marketing and e-commerce (47.7%), and IT support (40%).
Apart from the pandemic, which motivated many employees (34.7%) in the country to upskill, free online courses (33.3%) have enabled people to acquire new digital skills. One such initiative, the government's e-rozgaar platform, provides online training to budding freelancers.#_ftn13" name="_ftnref13" title="">[13] #_ftn14" name="_ftnref14" title="">[14] Additionally, Pakistan’s digital freelance market surged by 69% annually in 2020, which registered especially strong gains for women, who often struggle to achieve equity in traditional education and labour force participation.#_ftn15" name="_ftnref15" title="">[15]
For Mr Gilani, the success of the freelance market falls in line with his observations that young employees in Pakistan are highly self-motivated to upskill to remain relevant in the job market. “There are not many employer-led initiatives, so employees are learning by themselves,” he says.
Apart from digital skills, employees in Pakistan point to the importance of self-management (53.3%) and soft skills (46.7%). For example, 71.4% consider adaptability and flexibility a high priority, compared with the regional average of 65.5%. Similarly, 81.5% report communication skills as a “must-have”, higher than the regional average of 70.9%. Mr Gilani suggests these findings reflect the fact that soft skills are applicable across diverse job roles and industries. Soft skills attainment also appears to be linked to digital capabilities—around 81% of employees in Pakistan agree that digital skills have helped them gain confidence and improve in other areas like communication, analysis and critical thinking.
Although green skills (10.7%) are not considered a key priority for employees in Pakistan, Mr Gilani says this is an area for concern given the climate change risks impacting the country.#_ftn16" name="_ftnref16" title="">[16] This vulnerability heightened in 2022, when intense rainfall resulted in devastating flood waters, causing 1,100 deaths and affecting 33m individuals.#_ftn17" name="_ftnref17" title="">[17]
Barriers to upskilling Pakistan
Employees in our survey point to a lack of time (37.3%) and poor workplace culture of learning (32%) as barriers to acquiring new skills. These findings are relevant as most employees report workplace training (54.7%) as a key source of learning new digital skills, emphasising the need for more skilling opportunities in offices.
Another key issue, Mr Gilani says, is the mismatch between university course offerings and industry demand. “There is a high tendency for unemployment among the highly educated youth, stemming from problems in our education system—we don’t see universities inviting companies to tell students what they are looking for and employers aren’t sharing information with educational institutes”. In addition to focusing on university degrees, employers could also consider employees’ skillsets as an important signal for hiring new talent. Nearly 67% of surveyed employees believe that employers in Pakistan are hiring based on skills-based qualifications rather than full-time degrees.
Distinct expectations from government and employers
Faced with the high costs of reskilling and upskilling, more than half (52%) of employees consider the government responsible for providing financial incentives for upskilling. For instance, 29.3% cite government subsidies as a major motivator for acquiring specific skills such as green skills. Providing funding for green skills can bolster Pakistan’s capacity to adapt to a changing climate, says Mr Gilani. He suggests that greater investments in green skills and industries could improve the country’s access to renewable energy sources, reduce its climate resilience and create jobs.
Across all skill types, employers also have an instrumental role in upskilling and reskilling employees. More than four in ten survey respondents say employers have a role to play in providing access to diversified skilling programmes (42.7%) and information on the skills needed for different roles (41.3%). Over a third of employees also consider the government responsible for providing information on skills needed for different roles.
Leaving no one behind
Pakistan is undergoing a pivotal shift in its economy as digital transformation gains momentum. A large part of its success will hinge on leaving no one behind and giving an equal opportunity to everyone including women, young graduates and freelancers, which will boost the country's workforce significantly. Mr Gilani highlights the importance of government’s leadership and direction in providing an overall direction to this skills ecosystem, “If there is consistent leadership, digital skilling policy and an ecosystem, then things can be done.” And while digital skills will continue to be important as the country grows and digitalises in the next few years, analytical and soft skills will be equally important.
#_ftnref1" name="_ftn1" title="">[1]https://dailytimes.com.pk/818869/pakistan-becomes-the-4th-fastest-growin... #_ftnref2" name="_ftn2" title="">[2] Basic digital skills are defined in the survey as the ability to operate basic office software, i.e. Microsoft Office, and/or set up Internet and digital communication tools. #_ftnref3" name="_ftn3" title="">[3] Pakistan is the third-fastest growing freelancer market globally. [Source: http://onlinelabourobservatory.org/oli-supply/] #_ftnref4" name="_ftn4" title="">[4]https://www.pta.gov.pk/en/telecom-indicators #_ftnref5" name="_ftn5" title="">[5] https://www.gsma.com/asia-pacific/wp-content/uploads/2022/11/Making-Digi... #_ftnref6" name="_ftn6" title="">[6] https://onlinelibrary.wiley.com/doi/epdf/10.1111/rode.12994 #_ftnref7" name="_ftn7" title="">[7]#Female_Literacy_Rate_In_Pakistan_2022">https://ilm.com.pk/pakistan/pakistan-information/male-and-female-literac... #_ftnref8" name="_ftn8" title="">[8] https://tribune.com.pk/story/2322073/literacy-and-pakistan #_ftnref9" name="_ftn9" title="">[9] 2021 World Bank estimates, https://www.worldbank.org/en/results/2022/07/07/supporting-legal-reforms... #_ftnref10" name="_ftn10" title="">[10] https://tribune.com.pk/story/2342344/over-31-of-educated-youth-unemployed-reveals-pide #_ftnref11" name="_ftn11" title="">[11] https://accesspartnership.com/pakistans-pkr97-trillion-digital-potential/ #_ftnref12" name="_ftn12" title="">[12] https://www.thenews.com.pk/print/887910-govt-eyes-3bln-from-freelancing-it-exports-by-2024 #_ftnref13" name="_ftn13" title="">[13] https://erozgar.pitb.gov.pk/ #_ftnref14" name="_ftn14" title="">[14] https://pubs.payoneer.com/docs/2020-gig-economy-index.pdf #_ftnref15" name="_ftn15" title="">[15] https://pubs.payoneer.com/docs/2020-gig-economy-index.pdf #_ftnref16" name="_ftn16" title="">[16] https://edition.cnn.com/2022/08/30/asia/pakistan-climate-crisis-floods-justice-intl/index.html #_ftnref17" name="_ftn17" title="">[17] https://www.weforum.org/agenda/2022/09/pakistan-floods-what-role-did-climate-change-play/
Bridging the skills gap: fuelling careers and the economy in Hong Kong
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article —one in a series of 12 market reports—examines these issues in Hong Kong. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key takeaways:
Almost half (47%) of employees in Hong Kong report a poor understanding of what skills are needed in the market. Although analytical (66%) and self-management (65%) skills are top priorities for employees due to their wide application, advanced digital skills will be key to supporting Hong Kong’s digital economy aspirations. Hong Kong employees view cybersecurity (64.9%) and data analysis and visualisation (54.1%) as must-have advanced digital capabilities. Over half (51%) of employees in Hong Kong report that their employers are shifting their hiring processes to refocus on skills-based qualifications rather than full-time degrees, placing more importance on the role of employers and the government to provide support and clarity into what skills are needed in the market.Despite being a major global business hub, the city’s intensifying talent crunch#_ftn1" name="_ftnref1" title="">[1] is severely impacting its companies’ access to workers with a specific set of skills. Without action, the economy could lose out on US$220bn in unrealised value due to lack of talent by 2030.#_ftn2" name="_ftnref2" title="">[2]
The government has acknowledged the decline in the city’s workforce in the past couple of years and developed policies aimed at attracting high-skilled talent.
The future of the city’s workforce is further complicated by a rapidly ageing population.#_ftn3" name="_ftnref3" title="">[3] By 2050 roughly 40% of citizens will be aged 65 years or above.#_ftn4" name="_ftnref4" title="">[4] With longer life expectancies keeping people in the workforce for longer, sustaining Hong Kong’s economy will require a focus on empowering older workers and bolstering their skills with re-education where required.
Hong Kong employees consider analytical and self-management skills as most important
Similar to their counterparts in Australia, the Philippines and Taiwan, Hong Kong employees consider analytical (66%) and self-management (65%) skills as priority areas. This is likely due to their high degree of transferability and cross-role application (Figure 1). Apart from these skills, more than half of employees in Hong Kong consider advanced digital skills like cybersecurity (64.9%) and data analysis and visualisation (54.1%) as “must haves” (Figure 2). Hong Kong is especially vulnerable to cyber-attacks as a result of low awareness among businesses to monitor these threats. This, along with the rising cost of breaches, is driving more demand for cybersecurity skills.#_ftn5" name="_ftnref5" title="">[5]
Employees are unsure of in-demand skills
Motivations to pursue skills vary. Career progression and promotion opportunities are major drivers for workers to acquire analytical and digital skills, demonstrating their widespread application to different occupations (Figure 2). In comparison, 33% report that their pursuit of soft skills is motivated by personal development and lifelong learning. When asked about the benefits of upskilling and reskilling for their jobs, employees report significant boosts to their salaries and bargaining power (63%) and high improvements in their performance in their current role (55%).
Despite these net positives, many workers in Hong Kong report insufficient time to pursue upskilling and reskilling due to long working hours and other commitments - a trend common across all skill sets. Nearly half (47%) of surveyed employees have a poor understanding of what skills are needed in the market. Mr Jim So, regional development manager of Asia at Skills Consulting Group, shares that even when employees are offered upskilling opportunities, many choose not to pursue them because they “don’t necessarily see the direct benefits”. This might explain why only 18% of Hong Kong employees prioritise green skills, as the applications are still nascent.
The workplace’s key role in upskilling
Employers can play a central role in filling these gaps, as workplace training remains an important source for workers to acquire digital (44%), analytical (37%) and soft (32%) skills. Online courses offer another recourse to employees’ lack of time, offering flexibility and affordability. More than half (52%) of workers in our survey believe that employers now value online certificates. Experts agree. Over half (51%) of employees in Hong Kong report that their employers are shifting their hiring processes to refocus on skills-based qualifications rather than full-time degrees. In addition, recruiters are increasingly prioritising “experience, attitude and skills over paper”, according to Mr So.
Employees also expect their employers to provide information on emerging skills (65%) and offer financial incentives (62%) to reskill and support their mental well-being (44%). To remain competitive, firms could build working environments that appeal to employees’ changing needs—for instance, understanding employees’ needs and providing them with flexibility for working and learning. Furthermore, creating the right policies to enable further learning and embedding incentives would help encourage the upskilling they need to plug labour gaps. For instance, employers should look to align remuneration with skills, especially as the higher skills-based pay is a motivator for digital (25%) and analytical (30%) upskilling.
Government support can reshape Hong Kong upskilling
While employers play a crucial role in supporting the upskilling of their workforces, the government could pivot the macro-environment to incentivise and enable upskilling. One way they can do this is with financial incentives and subsidies. Several initiatives such as the Continuing Education Fund grants HK$25,000 (US$3185) to eligible adults to upskill or reskill. Recently, Hong Kong’s Innovation and Technology Commission established a programme#_ftn6" name="_ftnref6" title="">[6] that will subsidise local firms’ efforts to upskill their employees in advanced technologies.
One key role for the government is to raise awareness of in-demand skills. At present, only a quarter of Hong Kong employees receive information about future skills from government awareness programmes compared with the regional average of 42.5%. Almost a quarter of employees (27%) also identify lack of information as a significant obstacle to learning. To overcome the communication gap, the government could provide clarity on valuable future skills by publishing reports that identify in-demand skills. Working with firms and industry associations, the government could better promote specific reskilling courses that are on offer. Doing so would also support the government’s efforts to bolster its digital economy and solve its tech talent crunch.#_ftn7" name="_ftnref7" title="">[7]
There is room for improvement around developing green skills. While most employees in Hong Kong are aware of sustainability issues, says Mr So, companies could do much more to prioritise green skills and increase awareness of the commercial as well as environmental benefits they can bring. The city’s scramble for talent has accelerated with the requirement of Hong Kong-listed firms to disclose sustainability reports. However, the shortfall in talent is a significant break on the city’s aspiration to become a sustainability hub.#_ftn8" name="_ftnref8" title="">[8] In addition, most green upskilling is currently motivated by personal interest (25%). Mr So remarks that there is an opportunity for the government to step into this gap and provide “investment and support” for learners “to be able to anticipate and adapt” to a changing marketplace and environment.
#_ftnref1" name="_ftn1" title="">[1]https://focus.kornferry.com/leadership-and-talent/hong-kong-must-use-its-competitive-advantages-to-close-the-skills-gap/ #_ftnref2" name="_ftn2" title="">[2] Ibid. #_ftnref3" name="_ftn3" title="">[3] https://www.reuters.com/breakingviews/brain-drain-solution-is-staring-hong-kong-face-2022-10-19/ #_ftnref4" name="_ftn4" title="">[4] https://www.weforum.org/agenda/2023/02/world-oldest-populations-asia-health/ #_ftnref5" name="_ftn5" title="">[5] https://www.scmp.com/tech/tech-trends/article/3188979/hong-kong-organisations-are-easy-targets-hackers-more-cyberattacks #_ftnref6" name="_ftn6" title="">[6] https://www.itf.gov.hk/en/funding-programmes/nurturing-talent/rttp/ #_ftnref7" name="_ftn7" title="">[7]https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3201238/where-are-all-tech-experts-hong-kongs-got-plenty-jobs-not-enough-talent-and-employers-are-fed #_ftnref8" name="_ftn8" title="">[8] https://asia.nikkei.com/Business/Business-trends/Hong-Kong-races-to-hire-ESG-talent-amid-green-hub-pushBridging the skills gap: Fuelling careers and the economy in Malaysia
Economist Impact, supported by Google, conducted a survey of 1,375 employees across Asia-Pacific (APAC), including 100 employees from Malaysia, between November 2022 and January 2023. It also interviewed employers and industry experts across the region to understand their perspectives on skills gaps, as well as reskilling and upskilling aspirations.
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all work in a diverse mix of industries.
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Bridging the skills gap: Fuelling careers and the economy in Singapore
Economist Impact, supported by Google, conducted a survey of 1,375 employees across Asia-Pacific (APAC), including 100 employees from Singapore, between November 2022 and January 2023. It also interviewed employers and industry experts across the region to understand their perspectives on skills gaps, as well as reskilling and upskilling aspirations.
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article—one in a series of 12 market reports—examines these issues in Singapore. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key findings
Digital skills are a priority for 69% of employees in Singapore, more than any of the other surveyed APAC markets. Employees in Singapore also prioritise other skills categories such as analytical skills (53%) and soft skills (51%). Nearly half (49%) of employees have a poor understanding of what skills are needed in the market. 61% of employees in Singapore rely on government awareness programmes for information about which skills will be valuable in the future.The pandemic disrupted life in Singapore, and the ensuing, ongoing economic uncertainty has created further difficulties in the job market. But through all of this, the potential of digital technologies in reshaping the economy’s future-readiness has shone through. Compared with most of its neighbours, Singapore is already far along its digitalisation journey, with major policies like the “Smart Nation” initiative1 and the national Green Plan 20302 charting roadmaps towards a highly digital, green economy.
These ambitious plans are creating new pressures and opportunities for the city-state’s workforce. And emerging skill sets will be vital to navigating its changing needs.
Advancing digital skills
Digital skills are a priority for 69% of employees in Singapore, the highest out of the 14 surveyed APAC markets. More than 90% of firms in Singapore have already adopted some type of digital technology, and there is strong demand in the city-state for tech talent.3 Our survey shows that advanced digital skills such as artificial intelligence (AI) and machine learning, cloud computing, and the Internet of Things are becoming pivotal. Importantly, these skill sets are increasingly in demand across pretty much every industry imaginable—from healthcare to manufacturing.
Given the shortage of tech talent in Singapore, workers possessing advanced digital skills are also likely to have more bargaining power in the job market.4 Individuals applying these advanced digital skills at work can boost their salaries by more than 120%.5 This is seen in the Economist Impact survey, which shows that one in four employees in Singapore say higher pay and bargaining power best describe their motivation to acquire new digital skills.
One such area of importance is cybersecurity. According to Soon Joo Gog, chief skills officer at SkillsFuture,Singapore, cybersecurity skills are becoming increasingly important to any company engaging with digital services. These skills are considered key to ensuring business continuity, particularly given the spate of major security breaches that have taken place within the past year.6 Among the Economist Impact survey respondents, cybersecurity is considered a “must have” by 24.6% and a “good to have” by 68.1%.
Basic digital skills remain critical too. Given the advanced state of Singapore’s digital transformation, the intensive pace of digital adoption across all economic sectors has made digital skills foundational to many, if not most, careers. The Economist Impact survey shows that basic digital skills are considered a “must have” by the vast majority of respondents (75.4%), in line with the regional average of 73.9%.
Employees in Singapore also place greater importance on other skills categories such as analytical skills (53%) and soft skills (51%). Analytical skills like project management and critical thinking are increasingly becoming foundational skills that enable professional and personal progress, highlight 29% of the employees in our survey. These skills are highly transferable across different roles and are “critical core skills” that facilitate career mobility as well as make it easier to grasp other more technical skills.7 With remote and hybrid setups likely to be a permanent feature for six out of ten companies going forward, soft skills like adaptability, communication and resilience will be increasingly important.8
On the other hand, green skills are considered relatively less valuable by employees at the moment, ranked first by only 12% of employees—compared with 17.7% in APAC. Ms Gog says that while digital skills are pervasive across industries and job roles because of enabling technologies that augment human activities, the momentum of green activities across industries are picking up, eventually all jobs will require green skills, albeit it’s nascent state.
However, as Singapore strengthens its focus on the green economy, and as developments such as COP27 bring sustainability and green issues to the mainstream globally, more companies will focus on the green economy and new roles will emerge in this space, making it important for workers to acquire these skills. In 2020 the Singapore government estimated that the city-state would create 55,000 jobs in the coming decade because of the growing focus on sustainable development. Demand is expected to come from sectors including finance, agriculture, food, urban solutions such as sanitation and waste management, carbon services, and climate science.9
At the moment, however, most green upskilling is driven by employees’ personal interest in the topic (26%), a trend that is expected to change as Singapore prioritises environmental goals and sustainability.
Lack of time is a major barrier to learning new skills
Upskilling and reskilling has a high impact when it comes to improving current employees’ performance, as reported by 38% of workers in Singapore. While employees benefit from upskilling, they face multiple challenges. One of the primary concerns for employees in Singapore is the lack of time to learn new skills (42%). Long working hours and caregiving responsibilities leave little time for learning. Moreover, 49% of respondents say they don’t have a grasp of which skills are in demand in the job market. Due to this lack of clarity, they struggle to decide how best to allocate their already limited time and resources in learning new skills.
Small and medium-sized enterprises (SMEs)—which comprise 99% of all Singaporean companies and 71% of the workforce10—are particularly vulnerable to this problem, due to their limited resources and training capabilities. This results in significant information asymmetry.
Firms in Singapore can engage with resources from the government like the National Centre of Excellence’s Workplace Learning programme, which aims to promote SME reskilling by connecting firms to a pool of mentors and consultancy services.11
While access to resources is a necessary step, it's not sufficient on its own, cautions Ms Gog. Businesses need a fresh approach to make continuous learning a workplace activity and incorporate lifelong learning opportunities into their daily operations.
Some employers are being proactive: respondents report that workplace training and online learning are major sources of skills attainment. Online certificates are also recognised by employers, 56% of survey respondents say.
However, Ms Gog warns that while online learning is a useful mode of learning, it alone is not enough to promote deep learning, especially for technology skills. She talks about the importance of putting into practice what one has learnt from online courses in the workplace, and the role of mentoring, in developing deeper expertise.
Collaboration between employers and government is essential
According to our survey, government awareness programmes (61%) are a main source of skills information for employees in Singapore, ahead of social media and advertisements (45%) and news articles (44%), and substantially higher than the regional average (42.5%).
The Singapore government is driving a number of skilling initiatives through various programmes, subsidies and incentives such as school teacher credits, enterprise credits, and access to online and offline advisory services. More can be done, however, with Ms Gog suggesting that Singapore has been leveraging on “tripartisan approach”—one that engages the efforts of employees, the government and employers to enable a competitive and inclusive economy. Companies may also explore collaborations with universities or polytechnics to develop training opportunities for their employees, she adds.
Employers also have a key role to play in determining how their own skilling needs are met. Our survey reveals that workers in Singapore primarily expect employers to provide information on different skills (64%), support their mental well-being (51%), and provide notable recognition through certification and additional perks (48%). Employers should also look towards training specific skill sets for specific goals—for example, achieving cybersecurity resilience. Employers can focus on developing dedicated cybersecurity talent12 and working with government agencies to explore the requisite upskilling needs.
Moreover, to support employees in managing time, companies could make upskilling a workplace activity, ensuring that learning and working happen in tandem. Employers could also regularly monitor the skills they need and clearly communicate the same to employees. Government through its awareness programmes could continue to keep the workforce updated especially groups and organisations that lack clarity such as SMEs.
Collaboration is, and will continue to be, a crucial ingredient for Singapore’s skilling efforts. Despite the progress that the city-state has made, employers and employees must also be aware that emerging job roles are still being shaped, and that continuous learning will be the fundamental differentiator for change.
1 https://networkreadinessindex.org/reviewing-the-state-of-southeast-asias-digital-transformation-and-opportunities-for-the-region-moving-forward/
2 https://www.greenplan.gov.sg/
3 https://www.mci.gov.sg/pressroom/news-and-stories/pressroom/2023/2/speech-by-mrs-josephine-teo-minister-of-communications-and-information-at-the-ministry-of-communications-and-information-committee-of-supply-debate-on-28-february-2023
4 https://www.skillsfuture.gov.sg/skillsreport
5 https://www.frontier-enterprise.com/advanced-digital-skills-beef-up-singapore-gdp-by-s62-4-billion/#:~:text=Advanced%20digital%20skills%20include%20cloud,a%20boost%20in%20their%20income
6 https://www.zdnet.com/article/singapore-wants-all-critical-infrastructures-to-be-ready-for-cyber-threats/
7 https://www.skillsfuture.gov.sg/skills-framework/criticalcoreskills
8 https://www.todayonline.com/singapore/most-firms-hybrid-work-employees-well-being-drop-plans-1882486
9 https://www.channelnewsasia.com/singapore/new-jobs-environment-sustainability-grace-fu-mse-633886
10 https://www.singstat.gov.sg/modules/infographics/-/media/Files/visualising_data/infographics/Economy/singapore-economy21032022.pdf
11 https://www.skillsfuture.gov.sg/nace
12 https://govinsider.asia/intl-en/article/cyber-challenges-of-a-digitalised-world-amit-roy-choudhury

Bridging the skills gap: fuelling careers and the economy in Hong Kong
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article —one in a series of 12 market reports—examines these issues in Hong Kong. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key takeaways:
Almost half (47%) of employees in Hong Kong report a poor understanding of what skills are needed in the market. Although analytical (66%) and self-management (65%) skills are top priorities for employees due to their wide application, advanced digital skills will be key to supporting Hong Kong’s digital economy aspirations. Hong Kong employees view cybersecurity (64.9%) and data analysis and visualisation (54.1%) as must-have advanced digital capabilities. Over half (51%) of employees in Hong Kong report that their employers are shifting their hiring processes to refocus on skills-based qualifications rather than full-time degrees, placing more importance on the role of employers and the government to provide support and clarity into what skills are needed in the market.Despite being a major global business hub, the city’s intensifying talent crunch#_ftn1" name="_ftnref1" title="">[1] is severely impacting its companies’ access to workers with a specific set of skills. Without action, the economy could lose out on US$220bn in unrealised value due to lack of talent by 2030.#_ftn2" name="_ftnref2" title="">[2]
The government has acknowledged the decline in the city’s workforce in the past couple of years and developed policies aimed at attracting high-skilled talent.
The future of the city’s workforce is further complicated by a rapidly ageing population.#_ftn3" name="_ftnref3" title="">[3] By 2050 roughly 40% of citizens will be aged 65 years or above.#_ftn4" name="_ftnref4" title="">[4] With longer life expectancies keeping people in the workforce for longer, sustaining Hong Kong’s economy will require a focus on empowering older workers and bolstering their skills with re-education where required.
Hong Kong employees consider analytical and self-management skills as most important
Similar to their counterparts in Australia, the Philippines and Taiwan, Hong Kong employees consider analytical (66%) and self-management (65%) skills as priority areas. This is likely due to their high degree of transferability and cross-role application (Figure 1). Apart from these skills, more than half of employees in Hong Kong consider advanced digital skills like cybersecurity (64.9%) and data analysis and visualisation (54.1%) as “must haves” (Figure 2). Hong Kong is especially vulnerable to cyber-attacks as a result of low awareness among businesses to monitor these threats. This, along with the rising cost of breaches, is driving more demand for cybersecurity skills.#_ftn5" name="_ftnref5" title="">[5]
Employees are unsure of in-demand skills
Motivations to pursue skills vary. Career progression and promotion opportunities are major drivers for workers to acquire analytical and digital skills, demonstrating their widespread application to different occupations (Figure 2). In comparison, 33% report that their pursuit of soft skills is motivated by personal development and lifelong learning. When asked about the benefits of upskilling and reskilling for their jobs, employees report significant boosts to their salaries and bargaining power (63%) and high improvements in their performance in their current role (55%).
Despite these net positives, many workers in Hong Kong report insufficient time to pursue upskilling and reskilling due to long working hours and other commitments - a trend common across all skill sets. Nearly half (47%) of surveyed employees have a poor understanding of what skills are needed in the market. Mr Jim So, regional development manager of Asia at Skills Consulting Group, shares that even when employees are offered upskilling opportunities, many choose not to pursue them because they “don’t necessarily see the direct benefits”. This might explain why only 18% of Hong Kong employees prioritise green skills, as the applications are still nascent.
The workplace’s key role in upskilling
Employers can play a central role in filling these gaps, as workplace training remains an important source for workers to acquire digital (44%), analytical (37%) and soft (32%) skills. Online courses offer another recourse to employees’ lack of time, offering flexibility and affordability. More than half (52%) of workers in our survey believe that employers now value online certificates. Experts agree. Over half (51%) of employees in Hong Kong report that their employers are shifting their hiring processes to refocus on skills-based qualifications rather than full-time degrees. In addition, recruiters are increasingly prioritising “experience, attitude and skills over paper”, according to Mr So.
Employees also expect their employers to provide information on emerging skills (65%) and offer financial incentives (62%) to reskill and support their mental well-being (44%). To remain competitive, firms could build working environments that appeal to employees’ changing needs—for instance, understanding employees’ needs and providing them with flexibility for working and learning. Furthermore, creating the right policies to enable further learning and embedding incentives would help encourage the upskilling they need to plug labour gaps. For instance, employers should look to align remuneration with skills, especially as the higher skills-based pay is a motivator for digital (25%) and analytical (30%) upskilling.
Government support can reshape Hong Kong upskilling
While employers play a crucial role in supporting the upskilling of their workforces, the government could pivot the macro-environment to incentivise and enable upskilling. One way they can do this is with financial incentives and subsidies. Several initiatives such as the Continuing Education Fund grants HK$25,000 (US$3185) to eligible adults to upskill or reskill. Recently, Hong Kong’s Innovation and Technology Commission established a programme#_ftn6" name="_ftnref6" title="">[6] that will subsidise local firms’ efforts to upskill their employees in advanced technologies.
One key role for the government is to raise awareness of in-demand skills. At present, only a quarter of Hong Kong employees receive information about future skills from government awareness programmes compared with the regional average of 42.5%. Almost a quarter of employees (27%) also identify lack of information as a significant obstacle to learning. To overcome the communication gap, the government could provide clarity on valuable future skills by publishing reports that identify in-demand skills. Working with firms and industry associations, the government could better promote specific reskilling courses that are on offer. Doing so would also support the government’s efforts to bolster its digital economy and solve its tech talent crunch.#_ftn7" name="_ftnref7" title="">[7]
There is room for improvement around developing green skills. While most employees in Hong Kong are aware of sustainability issues, says Mr So, companies could do much more to prioritise green skills and increase awareness of the commercial as well as environmental benefits they can bring. The city’s scramble for talent has accelerated with the requirement of Hong Kong-listed firms to disclose sustainability reports. However, the shortfall in talent is a significant break on the city’s aspiration to become a sustainability hub.#_ftn8" name="_ftnref8" title="">[8] In addition, most green upskilling is currently motivated by personal interest (25%). Mr So remarks that there is an opportunity for the government to step into this gap and provide “investment and support” for learners “to be able to anticipate and adapt” to a changing marketplace and environment.
#_ftnref1" name="_ftn1" title="">[1]https://focus.kornferry.com/leadership-and-talent/hong-kong-must-use-its-competitive-advantages-to-close-the-skills-gap/ #_ftnref2" name="_ftn2" title="">[2] Ibid. #_ftnref3" name="_ftn3" title="">[3] https://www.reuters.com/breakingviews/brain-drain-solution-is-staring-hong-kong-face-2022-10-19/ #_ftnref4" name="_ftn4" title="">[4] https://www.weforum.org/agenda/2023/02/world-oldest-populations-asia-health/ #_ftnref5" name="_ftn5" title="">[5] https://www.scmp.com/tech/tech-trends/article/3188979/hong-kong-organisations-are-easy-targets-hackers-more-cyberattacks #_ftnref6" name="_ftn6" title="">[6] https://www.itf.gov.hk/en/funding-programmes/nurturing-talent/rttp/ #_ftnref7" name="_ftn7" title="">[7]https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3201238/where-are-all-tech-experts-hong-kongs-got-plenty-jobs-not-enough-talent-and-employers-are-fed #_ftnref8" name="_ftn8" title="">[8] https://asia.nikkei.com/Business/Business-trends/Hong-Kong-races-to-hire-ESG-talent-amid-green-hub-push
Bridging the skills gap: Fuelling careers and the economy in Pakistan
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article—one in a series of 12 market reports—examines these issues in Pakistan. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key findings
Digital skills (57.3%) are a top priority for employees in Pakistan owing to a booming IT sector and the country’s rapidly growing freelancer market, which is the third fastest growing market globally#_ftn1" name="_ftnref1" title="">[1]. Recent acceleration of digitalisation has resulted in higher demand for basic digital skills (72.1%).#_ftn2" name="_ftnref2" title="">[2] #_ftn3" name="_ftnref3" title="">[3] Employees in Pakistan are motivated to acquire digital skills to improve career progression and promotion opportunities (29.3%), as well as to secure better pay and bargaining power (23%). Both the government and employers have important yet distinct roles to play in upskilling Pakistan: while employees expect the government to provide financial incentives, they point to employers as being responsible for providing access to diversified skilling programmes and information on the skills needed for different roles.Despite rising digital penetration in Pakistan in recent years, 46% of the population still lacks internet access.#_ftn4" name="_ftnref4" title="">[4] While 80% of adults live in areas served by mobile broadband, many still do not access the internet.#_ftn5" name="_ftnref5" title="">[5] Out of a total of 182 m mobile subscriptions, only 38 m belong to women.#_ftn6" name="_ftnref6" title="">[6] This could be a result of the low female literacy rate (48%),#_ftn7" name="_ftnref7" title="">[7] which is far below the overall literacy rate of around 60%.#_ftn8" name="_ftnref8" title="">[8] Moreover, the female labour force participation rate is among the lowest globally (25%) and women are mostly employed in the informal sector.#_ftn9" name="_ftnref9" title="">[9] On the other hand, the country struggles with youth unemployment. Almost a third (31%) of the educated youth with professional degrees was unemployed in 2022.#_ftn10" name="_ftnref10" title="">[10]
Amid this backdrop, the government is prioritising digitalisation and implementing initiatives to close the existing skills gap. For instance, Pakistan introduced its “Digital Pakistan” roadmap in 2018, which set out a number of policies and initiatives to help the economy to realise US$59.7 bn (PKR9.7 trn) in annual value by 2030.#_ftn11" name="_ftnref11" title="">[11] The policy targets the upskilling and reskilling of young graduates and the existing workforce to support the country’s growing digital economy and help spur freelance IT sector exports. On this front, it hopes to reach US$3 billion by 2024, up from US$2.12 billion in 2021.#_ftn12" name="_ftnref12" title="">[12]
Infrastructure obstacles—such as inequitable internet access across the country and a lack of sufficient digital skills training—have lowered the pace of digitalisation at workplaces, says Saad Gilani, a senior programme officer at the International Labour Organization (ILO).
Pakistan’s growing freelance economy boosts digital upskilling
More than half of employees (57.3%) in Economist Impact’s survey consider digital skills the most important to acquire. Within this broad category, most employees consider basic digital skills (72.1%) as the most important to have, a trend that reflects the country's struggles with basic digitalisation. Advanced digital skills are also considered must-haves by employees in Pakistan such as data analysis and visualisation (49.2%), digital marketing and e-commerce (47.7%), and IT support (40%).
Apart from the pandemic, which motivated many employees (34.7%) in the country to upskill, free online courses (33.3%) have enabled people to acquire new digital skills. One such initiative, the government's e-rozgaar platform, provides online training to budding freelancers.#_ftn13" name="_ftnref13" title="">[13] #_ftn14" name="_ftnref14" title="">[14] Additionally, Pakistan’s digital freelance market surged by 69% annually in 2020, which registered especially strong gains for women, who often struggle to achieve equity in traditional education and labour force participation.#_ftn15" name="_ftnref15" title="">[15]
For Mr Gilani, the success of the freelance market falls in line with his observations that young employees in Pakistan are highly self-motivated to upskill to remain relevant in the job market. “There are not many employer-led initiatives, so employees are learning by themselves,” he says.
Apart from digital skills, employees in Pakistan point to the importance of self-management (53.3%) and soft skills (46.7%). For example, 71.4% consider adaptability and flexibility a high priority, compared with the regional average of 65.5%. Similarly, 81.5% report communication skills as a “must-have”, higher than the regional average of 70.9%. Mr Gilani suggests these findings reflect the fact that soft skills are applicable across diverse job roles and industries. Soft skills attainment also appears to be linked to digital capabilities—around 81% of employees in Pakistan agree that digital skills have helped them gain confidence and improve in other areas like communication, analysis and critical thinking.
Although green skills (10.7%) are not considered a key priority for employees in Pakistan, Mr Gilani says this is an area for concern given the climate change risks impacting the country.#_ftn16" name="_ftnref16" title="">[16] This vulnerability heightened in 2022, when intense rainfall resulted in devastating flood waters, causing 1,100 deaths and affecting 33m individuals.#_ftn17" name="_ftnref17" title="">[17]
Barriers to upskilling Pakistan
Employees in our survey point to a lack of time (37.3%) and poor workplace culture of learning (32%) as barriers to acquiring new skills. These findings are relevant as most employees report workplace training (54.7%) as a key source of learning new digital skills, emphasising the need for more skilling opportunities in offices.
Another key issue, Mr Gilani says, is the mismatch between university course offerings and industry demand. “There is a high tendency for unemployment among the highly educated youth, stemming from problems in our education system—we don’t see universities inviting companies to tell students what they are looking for and employers aren’t sharing information with educational institutes”. In addition to focusing on university degrees, employers could also consider employees’ skillsets as an important signal for hiring new talent. Nearly 67% of surveyed employees believe that employers in Pakistan are hiring based on skills-based qualifications rather than full-time degrees.
Distinct expectations from government and employers
Faced with the high costs of reskilling and upskilling, more than half (52%) of employees consider the government responsible for providing financial incentives for upskilling. For instance, 29.3% cite government subsidies as a major motivator for acquiring specific skills such as green skills. Providing funding for green skills can bolster Pakistan’s capacity to adapt to a changing climate, says Mr Gilani. He suggests that greater investments in green skills and industries could improve the country’s access to renewable energy sources, reduce its climate resilience and create jobs.
Across all skill types, employers also have an instrumental role in upskilling and reskilling employees. More than four in ten survey respondents say employers have a role to play in providing access to diversified skilling programmes (42.7%) and information on the skills needed for different roles (41.3%). Over a third of employees also consider the government responsible for providing information on skills needed for different roles.
Leaving no one behind
Pakistan is undergoing a pivotal shift in its economy as digital transformation gains momentum. A large part of its success will hinge on leaving no one behind and giving an equal opportunity to everyone including women, young graduates and freelancers, which will boost the country's workforce significantly. Mr Gilani highlights the importance of government’s leadership and direction in providing an overall direction to this skills ecosystem, “If there is consistent leadership, digital skilling policy and an ecosystem, then things can be done.” And while digital skills will continue to be important as the country grows and digitalises in the next few years, analytical and soft skills will be equally important.
#_ftnref1" name="_ftn1" title="">[1]https://dailytimes.com.pk/818869/pakistan-becomes-the-4th-fastest-growin... #_ftnref2" name="_ftn2" title="">[2] Basic digital skills are defined in the survey as the ability to operate basic office software, i.e. Microsoft Office, and/or set up Internet and digital communication tools. #_ftnref3" name="_ftn3" title="">[3] Pakistan is the third-fastest growing freelancer market globally. [Source: http://onlinelabourobservatory.org/oli-supply/] #_ftnref4" name="_ftn4" title="">[4]https://www.pta.gov.pk/en/telecom-indicators #_ftnref5" name="_ftn5" title="">[5] https://www.gsma.com/asia-pacific/wp-content/uploads/2022/11/Making-Digi... #_ftnref6" name="_ftn6" title="">[6] https://onlinelibrary.wiley.com/doi/epdf/10.1111/rode.12994 #_ftnref7" name="_ftn7" title="">[7]#Female_Literacy_Rate_In_Pakistan_2022">https://ilm.com.pk/pakistan/pakistan-information/male-and-female-literac... #_ftnref8" name="_ftn8" title="">[8] https://tribune.com.pk/story/2322073/literacy-and-pakistan #_ftnref9" name="_ftn9" title="">[9] 2021 World Bank estimates, https://www.worldbank.org/en/results/2022/07/07/supporting-legal-reforms... #_ftnref10" name="_ftn10" title="">[10] https://tribune.com.pk/story/2342344/over-31-of-educated-youth-unemployed-reveals-pide #_ftnref11" name="_ftn11" title="">[11] https://accesspartnership.com/pakistans-pkr97-trillion-digital-potential/ #_ftnref12" name="_ftn12" title="">[12] https://www.thenews.com.pk/print/887910-govt-eyes-3bln-from-freelancing-it-exports-by-2024 #_ftnref13" name="_ftn13" title="">[13] https://erozgar.pitb.gov.pk/ #_ftnref14" name="_ftn14" title="">[14] https://pubs.payoneer.com/docs/2020-gig-economy-index.pdf #_ftnref15" name="_ftn15" title="">[15] https://pubs.payoneer.com/docs/2020-gig-economy-index.pdf #_ftnref16" name="_ftn16" title="">[16] https://edition.cnn.com/2022/08/30/asia/pakistan-climate-crisis-floods-justice-intl/index.html #_ftnref17" name="_ftn17" title="">[17] https://www.weforum.org/agenda/2022/09/pakistan-floods-what-role-did-climate-change-play/Bridging the skills gap: Fuelling careers and the economy in Australia
Economist Impact, supported by Google, conducted a survey of 1,375 employees across Asia-Pacific (APAC), including 100 employees from Australia, between November 2022 and January 2023. It also interviewed employers and industry experts across the region to understand their perspectives on skills gaps, as well as reskilling and upskilling aspirations.
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
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Bridging the skills gap: Fuelling careers and the economy in Pakistan
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article—one in a series of 12 market reports—examines these issues in Pakistan. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key findings
Digital skills (57.3%) are a top priority for employees in Pakistan owing to a booming IT sector and the country’s rapidly growing freelancer market, which is the third fastest growing market globally#_ftn1" name="_ftnref1" title="">[1]. Recent acceleration of digitalisation has resulted in higher demand for basic digital skills (72.1%).#_ftn2" name="_ftnref2" title="">[2] #_ftn3" name="_ftnref3" title="">[3] Employees in Pakistan are motivated to acquire digital skills to improve career progression and promotion opportunities (29.3%), as well as to secure better pay and bargaining power (23%). Both the government and employers have important yet distinct roles to play in upskilling Pakistan: while employees expect the government to provide financial incentives, they point to employers as being responsible for providing access to diversified skilling programmes and information on the skills needed for different roles.Despite rising digital penetration in Pakistan in recent years, 46% of the population still lacks internet access.#_ftn4" name="_ftnref4" title="">[4] While 80% of adults live in areas served by mobile broadband, many still do not access the internet.#_ftn5" name="_ftnref5" title="">[5] Out of a total of 182 m mobile subscriptions, only 38 m belong to women.#_ftn6" name="_ftnref6" title="">[6] This could be a result of the low female literacy rate (48%),#_ftn7" name="_ftnref7" title="">[7] which is far below the overall literacy rate of around 60%.#_ftn8" name="_ftnref8" title="">[8] Moreover, the female labour force participation rate is among the lowest globally (25%) and women are mostly employed in the informal sector.#_ftn9" name="_ftnref9" title="">[9] On the other hand, the country struggles with youth unemployment. Almost a third (31%) of the educated youth with professional degrees was unemployed in 2022.#_ftn10" name="_ftnref10" title="">[10]
Amid this backdrop, the government is prioritising digitalisation and implementing initiatives to close the existing skills gap. For instance, Pakistan introduced its “Digital Pakistan” roadmap in 2018, which set out a number of policies and initiatives to help the economy to realise US$59.7 bn (PKR9.7 trn) in annual value by 2030.#_ftn11" name="_ftnref11" title="">[11] The policy targets the upskilling and reskilling of young graduates and the existing workforce to support the country’s growing digital economy and help spur freelance IT sector exports. On this front, it hopes to reach US$3 billion by 2024, up from US$2.12 billion in 2021.#_ftn12" name="_ftnref12" title="">[12]
Infrastructure obstacles—such as inequitable internet access across the country and a lack of sufficient digital skills training—have lowered the pace of digitalisation at workplaces, says Saad Gilani, a senior programme officer at the International Labour Organization (ILO).
Pakistan’s growing freelance economy boosts digital upskilling
More than half of employees (57.3%) in Economist Impact’s survey consider digital skills the most important to acquire. Within this broad category, most employees consider basic digital skills (72.1%) as the most important to have, a trend that reflects the country's struggles with basic digitalisation. Advanced digital skills are also considered must-haves by employees in Pakistan such as data analysis and visualisation (49.2%), digital marketing and e-commerce (47.7%), and IT support (40%).
Apart from the pandemic, which motivated many employees (34.7%) in the country to upskill, free online courses (33.3%) have enabled people to acquire new digital skills. One such initiative, the government's e-rozgaar platform, provides online training to budding freelancers.#_ftn13" name="_ftnref13" title="">[13] #_ftn14" name="_ftnref14" title="">[14] Additionally, Pakistan’s digital freelance market surged by 69% annually in 2020, which registered especially strong gains for women, who often struggle to achieve equity in traditional education and labour force participation.#_ftn15" name="_ftnref15" title="">[15]
For Mr Gilani, the success of the freelance market falls in line with his observations that young employees in Pakistan are highly self-motivated to upskill to remain relevant in the job market. “There are not many employer-led initiatives, so employees are learning by themselves,” he says.
Apart from digital skills, employees in Pakistan point to the importance of self-management (53.3%) and soft skills (46.7%). For example, 71.4% consider adaptability and flexibility a high priority, compared with the regional average of 65.5%. Similarly, 81.5% report communication skills as a “must-have”, higher than the regional average of 70.9%. Mr Gilani suggests these findings reflect the fact that soft skills are applicable across diverse job roles and industries. Soft skills attainment also appears to be linked to digital capabilities—around 81% of employees in Pakistan agree that digital skills have helped them gain confidence and improve in other areas like communication, analysis and critical thinking.
Although green skills (10.7%) are not considered a key priority for employees in Pakistan, Mr Gilani says this is an area for concern given the climate change risks impacting the country.#_ftn16" name="_ftnref16" title="">[16] This vulnerability heightened in 2022, when intense rainfall resulted in devastating flood waters, causing 1,100 deaths and affecting 33m individuals.#_ftn17" name="_ftnref17" title="">[17]
Barriers to upskilling Pakistan
Employees in our survey point to a lack of time (37.3%) and poor workplace culture of learning (32%) as barriers to acquiring new skills. These findings are relevant as most employees report workplace training (54.7%) as a key source of learning new digital skills, emphasising the need for more skilling opportunities in offices.
Another key issue, Mr Gilani says, is the mismatch between university course offerings and industry demand. “There is a high tendency for unemployment among the highly educated youth, stemming from problems in our education system—we don’t see universities inviting companies to tell students what they are looking for and employers aren’t sharing information with educational institutes”. In addition to focusing on university degrees, employers could also consider employees’ skillsets as an important signal for hiring new talent. Nearly 67% of surveyed employees believe that employers in Pakistan are hiring based on skills-based qualifications rather than full-time degrees.
Distinct expectations from government and employers
Faced with the high costs of reskilling and upskilling, more than half (52%) of employees consider the government responsible for providing financial incentives for upskilling. For instance, 29.3% cite government subsidies as a major motivator for acquiring specific skills such as green skills. Providing funding for green skills can bolster Pakistan’s capacity to adapt to a changing climate, says Mr Gilani. He suggests that greater investments in green skills and industries could improve the country’s access to renewable energy sources, reduce its climate resilience and create jobs.
Across all skill types, employers also have an instrumental role in upskilling and reskilling employees. More than four in ten survey respondents say employers have a role to play in providing access to diversified skilling programmes (42.7%) and information on the skills needed for different roles (41.3%). Over a third of employees also consider the government responsible for providing information on skills needed for different roles.
Leaving no one behind
Pakistan is undergoing a pivotal shift in its economy as digital transformation gains momentum. A large part of its success will hinge on leaving no one behind and giving an equal opportunity to everyone including women, young graduates and freelancers, which will boost the country's workforce significantly. Mr Gilani highlights the importance of government’s leadership and direction in providing an overall direction to this skills ecosystem, “If there is consistent leadership, digital skilling policy and an ecosystem, then things can be done.” And while digital skills will continue to be important as the country grows and digitalises in the next few years, analytical and soft skills will be equally important.
#_ftnref1" name="_ftn1" title="">[1]https://dailytimes.com.pk/818869/pakistan-becomes-the-4th-fastest-growin... #_ftnref2" name="_ftn2" title="">[2] Basic digital skills are defined in the survey as the ability to operate basic office software, i.e. Microsoft Office, and/or set up Internet and digital communication tools. #_ftnref3" name="_ftn3" title="">[3] Pakistan is the third-fastest growing freelancer market globally. [Source: http://onlinelabourobservatory.org/oli-supply/] #_ftnref4" name="_ftn4" title="">[4]https://www.pta.gov.pk/en/telecom-indicators #_ftnref5" name="_ftn5" title="">[5] https://www.gsma.com/asia-pacific/wp-content/uploads/2022/11/Making-Digi... #_ftnref6" name="_ftn6" title="">[6] https://onlinelibrary.wiley.com/doi/epdf/10.1111/rode.12994 #_ftnref7" name="_ftn7" title="">[7]#Female_Literacy_Rate_In_Pakistan_2022">https://ilm.com.pk/pakistan/pakistan-information/male-and-female-literac... #_ftnref8" name="_ftn8" title="">[8] https://tribune.com.pk/story/2322073/literacy-and-pakistan #_ftnref9" name="_ftn9" title="">[9] 2021 World Bank estimates, https://www.worldbank.org/en/results/2022/07/07/supporting-legal-reforms... #_ftnref10" name="_ftn10" title="">[10] https://tribune.com.pk/story/2342344/over-31-of-educated-youth-unemployed-reveals-pide #_ftnref11" name="_ftn11" title="">[11] https://accesspartnership.com/pakistans-pkr97-trillion-digital-potential/ #_ftnref12" name="_ftn12" title="">[12] https://www.thenews.com.pk/print/887910-govt-eyes-3bln-from-freelancing-it-exports-by-2024 #_ftnref13" name="_ftn13" title="">[13] https://erozgar.pitb.gov.pk/ #_ftnref14" name="_ftn14" title="">[14] https://pubs.payoneer.com/docs/2020-gig-economy-index.pdf #_ftnref15" name="_ftn15" title="">[15] https://pubs.payoneer.com/docs/2020-gig-economy-index.pdf #_ftnref16" name="_ftn16" title="">[16] https://edition.cnn.com/2022/08/30/asia/pakistan-climate-crisis-floods-justice-intl/index.html #_ftnref17" name="_ftn17" title="">[17] https://www.weforum.org/agenda/2022/09/pakistan-floods-what-role-did-climate-change-play/
Bridging the skills gap: Fuelling careers and the economy in Indonesia
Economist Impact, supported by Google, conducted a survey of 1,375 employees across Asia-Pacific (APAC), including 100 employees from Indonesia, between November 2022 and January 2023. It also interviewed employers and industry experts across the region to understand their perspectives on skills gaps, as well as reskilling and upskilling aspirations.
The survey respondents were drawn from across 14 markets in the region, out of which 11.8% were Gen Z (born in 1997-2012), 63.2% were Millennials (1981-96) and 25% were Gen X (1965-80). They all worked in a diverse mix of industries.
The research shows that across the region, common understanding is lacking between employers and employees about future skills and the best way to develop them. In some instances, there is also an expectation mismatch between what employers want and what employees see as being important. Understanding these gaps will be instrumental in creating a workforce that is prepared for the economy of the future.
This article—one in a series of 12 market reports—examines these issues in Indonesia. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.
Key findings
Indonesian employees consider digital skills (60%) the top focus area for upskilling. Among these, basic digital skills are foundational for 88.3% of Indonesian workers. As digitalisation spreads across the archipelago, the country will increasingly demand more advanced skills. Employees consider capabilities with data analysis and visualisation (56.7%), IT support (51.7%), and digital marketing and e-commerce (48.3%) as the most important advanced tech skills to have. Workers have the highest expectations for their employers, believing they should support their development by providing information on skills (57%), through financial incentives (54%), recognition (43%) and supporting their mental well-being (35%).Indonesia is one of Southeast Asia’s fastest-growing internet economy. Between 2015 and 2019, its technology sector grew at an average rate of 49% a year, alongside rapid e-commerce adoption by both large and small businesses.1 The economy’s digitalisation has enabled many in the workforce, especially the young, to participate as freelancers, particularly in the transportation and delivery sectors.2
However, many have been left out due to uneven internet connectivity and low literacy rates. For instance, most internet users tend to be concentrated in urban centres and are young—only 21% are over 50 years old.3 The issues are not just limited to the older population, as almost a quarter of young people (22.5%) in Indonesia are not in education, employment or training4 and the World Bank estimates that only 19% of 25-34 year olds had a tertiary qualification in 2021, much lower than the global average of 47%.5
The future of Indonesia’s economy is digital
Most Indonesian employees (60%) consider digital skills the most important to acquire. This is in sync with the digitalisation underway in the economy — Indonesia’s digitally skilled workers are forecast to contribute US$303.4bn to its GDP by 2030, accounting for 16% of GDP.6
Government analysis shows that the expanding technology sector could create 20m-45m new jobs in Indonesia.7 Between 2019 and 2030, non-tech sectors such as professional services, manufacturing and construction — are expected to see the highest growth in GDP contributions from digitally skilled workers, as these sectors increasingly adopt technology to improve their productivity.8
Figure 1: Digital skills are a top priority for Indonesian employees
Which skill categories do you think are the most important for the workforce in your sector to acquire today? (%)
Source: Economist Impact, 2023
Within the broad category of digital skills, employees in our survey consider advanced digital skills such as data analysis and visualisation (56.7%), IT support (51.7%), and digital marketing and e-commerce (48.3%) as must-have skills. Employees also said the same for coding and programming (26.7%) and artificial intelligence (AI) and machine learning (25%). The importance given to these advanced skills possibly reflects a skills gap, as data from 2020 suggest that less than 1% of the workforce in the country possessed advanced digital skills.9
Advanced digital skills are becoming more important for various sectors too. For instance, big data analytics skills are increasingly used in the banking sector to understand customers’ spending patterns and preferences, to cross-sell products and for fraud management.10 Similarly, AI is expected to improve care delivery and hospital operations.11 Meanwhile, farmers are benefitting in myriad ways from real-time monitoring and prediction systems with Internet of Things-enabled tools.12
Cybersecurity is another must-have advanced digital skill for 36.7% of employees, reflecting Indonesia’s struggles with digital risks. The country was ranked the most vulnerable in Southeast Asia for cyber risks, and faced more than 11m attacks in the first quarter of 2022 alone.13
Although green skills such as sustainability reporting, sustainable business management and supply chain management are considered less important at present(15%), these skills would gain importance due to the country's rising sustainability concerns. Indonesia is ranked among the top countries exposed to climate risks with high vulnerability to all types of flooding and extreme heat. 14
Figure 2: Advanced digital skills such as data analysis and visualisation, and IT support are must-haves
Indicate which specific types of digital skills are must-have, good to have or not needed for the workforce in your sector today (%)
Source: Economist Impact, 2023
Infrastructure and high costs complicate access to skilling
Employees in Indonesia are strongly motivated to acquire new skills. Nearly half (49%) of the employees agree that upskilling or reskilling has had a high impact in improving performance in their current roles, and 54% report a high impact in exploring new roles and areas of interest. Despite these motivations, more than one in four (27%) employees cite poor internet access as a barrier in acquiring new digital skills. Nila Marita, director and head of external affairs at GoTo—the holding company of two major Indonesian startups, Gojek and Tokopedia—agrees that internet connectivity is “crucial to increase access to important learning opportunities in Indonesia and bridging this gap will enable more Indonesians to acquire digital skills.” Addressing access is important, as employees utilise online courses for learning. Indeed, 54% of employees say they obtain digital skills outside of the workplace via online courses.
High costs (42%) are also a major hurdle in Indonesians’ ability to digitally upskill, and companies are not investing enough to provide workers with on-the-job training.15 Additionally, Indonesia has a large, informal sector made up of low-income workers, creating challenges for employees to afford skilling programmes and for the government to reach them.16 17
Figure 3: Key skilling obstacles for employees across skills types
What are the top three significant obstacles that you face while learning new skills?
Source: Economist Impact, 2023
Another challenge that employees cite across most skill sets is a lack of time in learning new courses. Indonesian workers have reported experiencing higher workload after the Covid-19 pandemic.18 This also aligns with the higher importance that employees in our survey assign to self-management skills like time management, resilience and stress tolerance (49%).
High expectations from employers
According to our survey respondents, employers are the most responsible for supporting their development across every category apart from providing access to diversified skilling programmes. In particular, they see their employers as a key source of providing information on skills (57%), financial incentives (54%), recognition (43%) and support for their mental well-being (35%).
Employers could address many of the obstacles that employees face such as high costs and time restrictions by subsidising access to training programmes and integrating more workplace training sessions. “Both the government and private sector in Indonesia have been scaling up efforts to develop the country’s talent pool in recent years,” says Ms Marita from GoTo. For instance, organisations and the government are increasingly collaborating with universities to prepare university students with in-demand skills. Private sector companies are also training the trainers and working together with them to design the curriculum based on companies’ skills needs.
Figure 4: Employers are considered the most responsible for upskilling Indonesians
In your opinion who is responsible for supporting employees regarding the following issues? (%)
Source: Economist Impact, 2023
Seventy-seven percent of employees, substantially higher than the regional average (66.5%), believe that employers now lean towards skills-based hiring over paper qualifications. In this context, efforts by government, educational institutions and companies to communicate what skills are in-demand will help the workforce prioritise which ones to learn. While most workers rely on social media and advertisements (73%) for information on valuable skills, government awareness programmes are also an important source for 50% of employees.
Multi-stakeholder collaboration key to closing skills gaps
Overcoming access and infrastructure gaps is integral to realising Indonesia’s digital economic potential. The government has made efforts to counteract these issues through various programmes such as Kartu Prakerja, an online upskilling programme targeted at retraining one million unemployed and low-income adults who are 18-64 years old.19 20 The programme takes an end-to-end approach, providing access to upskilling and reskilling subsidies, courses and job vacancies. Subsidies can also be useful in driving the uptake of green skills, which acts as the biggest motivation to acquire these skills for one in three surveyed employees. Another programme provided by Indonesia’s Ministry of Communications and Information is the Digital Talent Scholarship (DTS). It aims to develop the skills and competitiveness of the country’s workforce in the information and communication technology sector.21
For Indonesia to fully unlock the economic potential of digital skilling, it must extend this kind of opportunity to workers at micro, small and medium enterprises which employ 97% of the country’s workforce.22
Another government programme is Making Indonesia 4.0, a roadmap launched in 2018 to accelerate digitalisation.23 Elements of this roadmap are geared towards training and reskilling workers as technology becomes more ingrained in industrial processes. Additionally, attempts to broaden equitable access to digital skilling opportunities could close the skills gaps.
References
1 https://digitalcfoasia.com/2023/01/10/addressing-the-critical-skill-gaps-in-indonesia/
2 https://fair.work/wp-content/uploads/sites/17/2021/12/Fairwork-Report-Indonesia-2021-accessible.pdf
3 https://smeru.or.id/en/publication/diagnostic-report-digital-skills-landscape-indonesia
4 https://data.worldbank.org/indicator/SL.UEM.NEET.ZS?locations=ID
5 https://gpseducation.oecd.org/CountryProfile?primaryCountry=IDN&treshold=5&topic=EO
6 https://accesspartnership.com/wp-content/uploads/2023/03/skills-for-the-future-executive-summary-in-english.pdf
7 https://opengovasia.com/creating-million-new-jobs-through-digital-technology-in-indonesia/
8 https://accesspartnership.com/wp-content/uploads/2023/03/skills-for-the-future-executive-summary-in-english.pdf
9 https://pathwayscommission.bsg.ox.ac.uk/sites/default/files/2022-03/FINAL_Diagnostic%20Report_Accessible.pdf
10 https://www.sciencedirect.com/science/article/pii/S1877050915005992
11 https://www.usa.philips.com/healthcare/nobounds/phoenix-childrens-benefits-of-ai-in-healthcare#_continue-reading
12 https://www.xcubelabs.com/blog/benefits-of-iot-in-agriculture-and-smart-farming/
13 https://en.antaranews.com/news/227061/indonesia-faces-11-mln-cyber-attacks-in-2022-first-quarter
14 https://www.adb.org/sites/default/files/publication/700411/climate-risk-country-profile-indonesia.pdf
15 https://www.weforum.org/agenda/2022/11/indonesia-edtech-financial-inclusion/
16 An informal economy broadly refers to any part of the economy that is unregistered, meaning that they are not covered or are insufficiently covered by formal employment arrangements. In most of these cases, companies remain largely unaccountable to any regulation as workers are not officially classed as employees, limiting their access to government services, including welfare, labour rights protections and public programmes. In Indonesia, 60% of the workforce is employed by the informal sector and accounts for 22.7% of national GDP (US$776 billion).
17 https://www.ilo.org/jakarta/areasofwork/informal-economy/lang--en/index.htm
18 https://en.prnasia.com/releases/apac/68-of-indonesia-s-employees-willing-to-forgo-higher-salaries-or-job-promotions-for-work-life-balance-michael-page-366002.shtml
19 https://www.prakerja.go.id/
20 https://money.kompas.com/read/2023/01/06/123000126/kartu-prakerja-2023-target-anggaran-dan-pelaksanaan-pelatihannya-
21 https://digitalent.kominfo.go.id/program
22 https://www.weforum.org/agenda/2022/05/digitalization-growth-indonesia-msmes/
23 https://kemenperin.go.id/artikel/23388/Kemenperin:-Revolusi-Industri-4.0-Optimalkan-Potensi--Indonesia-di-Sektor-Manufaktur

Menjembatani kesenjangan keterampilan: Menumbuhkan karier dan ekonomi di In...
Menjembatani kesenjangan keterampilan: Menumbuhkan karier dan ekonomi di Indonesia
Economist Impact, yang didukung oleh Google, melaksanakan survei yang melibatkan 1,375 karyawan di Asia Pasifik (APAC), termasuk 100 karyawan dari Indonesia antara November 2022 dan Januari 2023. Lembaga tersebut juga mewawancarai perusahaan dan pakar industri di wilayah tersebut untuk memahami pandangan mereka tentang kesenjangan keterampilan, serta keinginan untuk melaksanakan reskilling (pelatihan bagi karyawan untuk memperoleh kemampuan baru) dan upskilling (pelatihan bagi karyawan untuk meningkatkan kemampuan yang sudah ada).
Para responden survei diambil dari 14 negara di Asia Pasifik, yang terdiri atas 11.8% Gen Z (lahir pada tahun 1997-2012), 63.2% Milenial (1981-96), dan 25% Gen X (1965-80). Mereka bekerja di berbagai industri.
Penelitian tersebut menunjukkan bahwa di seluruh wilayah di Asia Pasifik, perusahaan dan karyawan sama-sama kurang memahami keterampilan di masa depan dan cara terbaik untuk mengembangkannya. Pada sebagian kasus, juga terdapat perbedaan ekspektasi antara apa yang diinginkan oleh perusahaan dan apa yang dipandang oleh karyawan sebagai hal yang penting. Memahami kesenjangan ini sangat penting dalam mewujudkan tenaga kerja yang siap untuk ekonomi di masa mendatang.
Artikel ini—salah satu dari seri 12 laporan negara—membedah berbagai masalah ini di Indonesia. Seri ini melengkapi makalah penelitian yang membahas tentang reskilling dan upskilling yang sangat penting di wilayah APAC.
Temuan utama
Karyawan Indonesia menganggap keterampilan digital (60%) merupakan area fokus utama untuk upskilling. Di antara semua ini, beberapa keterampilan digital dasar adalah hal utama bagi 88.3% pekerja Indonesia. Seiring pemerataan digitalisasi, keterampilan yang lebih tinggi akan semakin dibutuhkan di setiap negara. Karyawan menganggap kemampuan analisis dan visualisasi data (56.7%), IT support(51.7%), serta pemasaran digital dan e-commerce (48.3%) adalah keterampilan teknologi tinggi yang sangat penting untuk dimiliki. Para pekerja memiliki ekspektasi yangtinggi dari perusahaan mereka dan yakin bahwa perusahaan harus mendukung perkembangan mereka dengan menyediakan informasi tentang keterampilan (57%), melalui insentif finansial (54%), penghargaan (43%), dan mendukung kesehatan mental mereka (35%).Indonesia adalah salah satu negara dengan pertumbuhan ekonomi internet tercepat di Asia Tenggara. Antara 2015 dan 2019, laju pertumbuhan rata-rata sektor teknologi di negara tersebut adalah 49% per tahun, di samping adopsi e-commerce oleh perusahaan besar dan kecil.1 Digitalisasi ekonomi ini telah memungkinkan tenaga kerja, terutama yang lebih muda, untuk berpartisipasi sebagai pekerja lepas, terutama di sektor transportasi dan pengantaran barang.2
Namun demikian, banyak yang tertinggal karena konektivitas internet yang tidak merata dan tingkat literasi yang rendah. Misalnya, sebagian besar pengguna internet terkonsentrasi di daerah pusat perkotaan dan berusia muda—hanya 21% yang berusia di atas 50 tahun.3 Berbagai masalah ini tidak hanya terjadi pada populasi yang berusia lebih tua, karena hampir seperempat anak-anak muda (22.5%) di Indonesia tidak mengenyam pendidikan, memiliki pekerjaan, atau mendapatkan pelatihan4. Selain itu, Bank Dunia memperkirakan bahwa hanya 19% orang-orang yang berusia 25-34 tahun lulus dari pendidikan tinggi pada 2021, jauh lebih rendah dari rata-rata global sebesar 47%.5
Masa depan ekonomi Indonesia adalah digital
Sebagian besar karyawan di Indonesia (60%) menganggap keterampilan digital adalah yang terpenting. Ini selaras dengan digitalisasi yang berlangsung di bidang ekonomi. Pekerja yang memiliki keterampilan digital di Indonesia diperkirakan memberikan kontribusi sebesar 303.4 miliar dolar AS terhadap PDB negara tersebut pada 2030, atau 16% dari PDB.6
Analisis pemerintah menunjukkan bahwa sektor teknologi yang berkembang dapat menciptakan 20 juta hingga 45 juta pekerjaan baru di Indonesia.7 Antara 2019 dan 2030, sektor non teknologi, seperti layanan profesional, manufaktur dan konstruksi, diperkirakan mengalami pertumbuhan tertinggi dalam hal kontribusi dari pekerja yang memiliki keterampilan digital, karena semua sektor ini semakin mengadopsi teknologi untuk meningkatkan produktivitas.8
Gambar 1: Keterampilan digital adalah prioritas utama bagi karyawan Indonesia
Kategori keterampilan mana yang menurut Anda paling penting bagi tenaga kerja di sektor Anda saat ini? (%)
Sumber: Economist Impact, 2023
Dalam kategori keterampilan digital yang luas, karyawan dalam survei kami memandang keterampilan digital tingkat tinggi, seperti analisis dan visualisasi data (56.7%), dukungan TI (51.7%), serta pemasaran digital dan e-commerce (48.3%) adalah keterampilan yang wajib dimiliki. Mereka juga memiliki pandangan yang sama untuk coding dan pemrograman (26.7%), serta kecerdasan buatan (artificial intelligence/AI) dan pembelajaran mesin (25%). Karena keterampilan tingkat tinggi ini dianggap penting, hal ini mungkin mencerminkan kesenjangan keterampilan, karena data yang diperoleh pada tahun 2020 menunjukkan bahwa kurang dari 1% tenaga kerja di Indonesiamemiliki keterampilan digital tingkat tinggi.9
Keterampilan digital tingkat tinggijuga menjadi semakin penting bagi beragam sektor. Misalnya, keterampilan analitik mahadata (big data) semakin banyak digunakan di sektor perbankan untuk memahami pola dan preferensi pengeluaran pelanggan, untuk melakukan penjualan silang produk, dan untuk mengatasi kecurangan.10 Demikian pula, AI diharapkan meningkatkan perawatan dan operasional di rumah sakit.11 Sementara itu, para petani mendapatkan manfaat dari berbagai cara, mulai dari sistem pemantauan waktu nyata dan prediksi dengan alat yang didukung oleh Internet of Things (Internet untuk Segala).12
Keamanan siber adalah keterampilan digital tingkat tinggi yang harus dimiliki bagi 36,7% karyawan, yang menunjukkan bahwa Indonesia menghadapi tantangan dalam hal risiko digital. Indonesiamenduduki peringkat tertinggi di Asia Tenggara dalam hal risiko siber dan menghadapi lebih dari 11 juta serangan pada kuartal pertama di tahun 2022.13
Walaupun keterampilan pelestarian lingkungan, seperti pelaporan keberlanjutan, manajemen bisnis berkelanjutan, dan manajemen rantai pasokan tidak dianggap lebih penting (15%), keterampilan ini akan semakin penting karena meningkatnya kekhawatiran terkait keberlanjutan di negara tersebut. Indonesia adalah salah satu negara yang paling terpapar oleh risiko iklim, dengan tingkat kerentanan yang tinggi terhadap semua jenis banjir dan panas ekstrem. 14
Gambar 2: Keterampilan digital tingkat tinggi, seperti analisis dan visualisasi data, serta dukungan TI wajib dimiliki
Sebutkan jenis keterampilan digital yang wajib dimiliki, sebaiknya dimiliki, atau tidak diperlukan bagi tenaga kerja di sektor Anda saat ini (%)
Sumber: Economist Impact, 2023
Infrastruktur dan biaya yang tinggi menghambat akses ke peningkatan keterampilan
Karyawan di Indonesia sangat termotivasi untuk memperoleh keterampilan baru. Hampir separuh (49%) karyawan setuju bahwa upskilling atau reskilling berdampak tinggi terhadap peningkatan kinerja dalam pekerjaan mereka saat ini, dan 54% menyatakan bahwa hal tersebut berdampak tinggi dalam mengeksplorasi peran baru dan bidang minat mereka. Lebih dari satu dalam empat (27%) karyawan mengatakan bahwa akses internet yang buruk merupakan hambatan dalam memperoleh keterampilan digital yang baru. Nila Marita, direktur dan kepala urusan eksternal di GoTo—perusahaan induk dari dua perusahaan rintisan di Indonesia, Gojek and Tokopedia—setuju bahwa konektivitas internet “sangat penting untuk memperluas akses ke kesempatan belajar dan menjembatani kesenjangan ini agar lebih banyak penduduk Indonesia yang memperoleh keterampilan digital.” Mengatasi masalah akses adalah hal yang penting, karena karyawan memanfaatkan pelatihan online untuk belajar. Malahan, 54% karyawan mengatakan bahwa mereka memperoleh keterampilan digital di luar tempat kerja melalui pelatihan online.
Biaya yang tinggi (42%) juga merupakan hambatan utama bagi penduduk Indonesia untuk memperoleh keterampilan digital, dan perusahaan tidak cukup berinvestasi dalam menyediakan pelatihan bagi para pekerja.15 Selain itu, Indonesia memiliki sektor informal yang besar, yang menjadi mata pencaharian pekerja berpendapatan rendah, sehingga menimbulkan tantangan bagi karyawan untuk mengikuti program peningkatan keterampilan dan bagi pemerintah untuk menjangkau mereka.16 17
Gambar 3: Hambatan utama peningkatan keterampilan bagi karyawan di seluruh jenis keterampilan
Apa saja tiga hambatan utama yang Anda hadapi dalam mempelajari keterampilan baru? (%)
Sumber: Economist Impact, 2023
Tantangan lain yang disebutkan karyawan di sebagian besar keterampilan adalah tidak adanya waktu untuk mengikuti pelatihan baru. Para pekerja Indonesia menyatakan bahwa mereka memiliki beban kerja yang lebih tinggi setelah pandemi covid-19.18 Hal ini juga menunjukkan bahwa semakin pentingnya keterampilan manajemen mandiri, seperti manajemen waktu, resiliensi, dan toleransi terhadap stres (49%) bagi karyawan yang dilibatkan dalam survei kami.
Ekspektasi tinggi dari perusahaan
Menurut karyawan, perusahaan wajib mendukung perkembangan mereka di setiap kategori, selain menyediakan akses ke program peningkatan keterampilan yang beragam. Secara khusus, karyawan memandang perusahaan sebagai sumber utama informasi tentang keterampilan (57%), insentif finansial (54%), penghargaan (43%), dan dukungan bagi kesejahteraan mereka (35%).
Perusahaan dapat mengatasi berbagai hambatan yang dihadapi karyawan, seperti biaya yang tinggi dan keterbatasan waktu dengan menyubsidi akses ke program pelatihan dan mengintegrasikan lebih banyak sesi pelatihan di tempat kerja. “Baik pemerintah maupun sektor swasta di Indonesia telah meningkatkan upaya untuk mengembangkan kumpulan talenta beberapa tahun belakangan ini,” kata Marita dari GoTo. Misalnya, organisasi dan pemerintah meningkatkan kolaborasi dengan universitas untuk membekali mahasiswa dengan keterampilan yang diperlukan. Perusahaan swasta juga berupaya meningkatkan kemampuan instruktur dan bekerja sama dengan mereka untuk merancang kurikulum berdasarkan kebutuhan keterampilan perusahaan.
Gambar 4: Perusahaan dianggap paling bertanggung jawab untuk melaksanakan upskilling bagi penduduk Indonesia
Menurut Anda, siapa yang bertanggung jawab dalam mendukung karyawan terkait masalah-masalah berikut? (%)
Sumber: Economist Impact, 2023
Tujuh puluh tujuh persen, atau lebih tinggi dari rata-rata regional (66.5%), meyakini bahwa perusahaan saat ini lebih condong ke perekrutan berbasis keterampilan dibandingkan kualifikasi di atas kertas. Dalam konteks ini, upaya yang dilakukan pemerintah, lembaga pendidikan, dan perusahaan untuk mengomunikasikan keterampilan yang diperlukan, akan membantu tenaga kerja memprioritaskan keterampilan yang akan dipelajari. Sementara sebagian besar pekerja mengandalkan media sosial dan iklan (73%) untuk memperoleh informasi tentang keterampilan yang penting, program kesadaran pemerintah juga merupakan sumber penting bagi 50% karyawan.
Kolaborasi antarpemangku kepentingan adalah kunci untuk mengatasi kesenjangan keterampilan
Mengatasi kesenjangan akses dan infrastruktur adalah bagian yang tidak terpisahkan dalam mewujudkan potensi ekonomi digital Indonesia. Pemerintah telah melakukan upaya untuk mengatasi sejumlah masalah ini melalui berbagai program, seperti Kartu Prakerja, program upskilling online yang bertujuan memberikan pelatihan bagi satu juta orang dewasa menganggur dan berpendapatan rendah berusia 18-64 tahun.19 20 Program tersebut diselenggarakan dengan pendekatan menyeluruh, memberikan akses ke subsidi upskilling dan reskilling, pelatihan, dan lapangan kerja. Subsidi juga dapat bermanfaat dalam mendorong penyerapan keterampilan pelestarian lingkungan, yang menjadi motivasi terbesar untuk memperoleh keterampilan ini bagi satu dari tiga karyawan yang mengikuti survei. Program lain yang dilaksanakan oleh Kemeterian Komunikasi dan Informatika adalah Beasiswa Talenta Digital (Digital Talent Scholarship/DTS). Program tersebut bertujuan mengembangkan keterampilan dan meningkatkan daya saing tenaga kerja di Indonesia di sektor teknologi informasi dan komunikasi.21
Agar Indonesia dapat memaksimalkan potensi pemerolehan keterampilan digital, negara tersebut harus memperluas kesempatan ini bagi pekerja di usaha mikro, kecil, dan menengah (UMKM) yang menaungi 97% tenaga kerja di negara tersebut.22
Program pemerintah lain adalah Making Indonesia 4.0, sebuah peta jalan yang diluncurkan pada 2018 untuk mengakselerasi digitalisasi.23 Sejumlah elemen peta jalan ini disiapkan untuk membekali karyawan dengan pelatihan dan reskilling, karena teknologi semakin menjadi bagian yang tidak terpisahkan dalam proses industri. Selain itu, harus ada upaya untuk memperluas pemerataan akses ke peluang pengembangan keterampilan digital guna mengatasi kesenjangan keterampilan.
References
1 https://digitalcfoasia.com/2023/01/10/addressing-the-critical-skill-gaps-in-indonesia/
2 https://fair.work/wp-content/uploads/sites/17/2021/12/Fairwork-Report-Indonesia-2021-accessible.pdf
3 https://smeru.or.id/en/publication/diagnostic-report-digital-skills-landscape-indonesia
4 https://data.worldbank.org/indicator/SL.UEM.NEET.ZS?locations=ID
5 https://gpseducation.oecd.org/CountryProfile?primaryCountry=IDN&treshold=5&topic=EO
6 https://accesspartnership.com/wp-content/uploads/2023/03/skills-for-the-future-executive-summary-in-english.pdf
7 https://opengovasia.com/creating-million-new-jobs-through-digital-technology-in-indonesia/
8 https://accesspartnership.com/wp-content/uploads/2023/03/skills-for-the-future-executive-summary-in-english.pdf
9 https://pathwayscommission.bsg.ox.ac.uk/sites/default/files/2022-03/FINAL_Diagnostic%20Report_Accessible.pdf
10 https://www.sciencedirect.com/science/article/pii/S1877050915005992
11 https://www.usa.philips.com/healthcare/nobounds/phoenix-childrens-benefits-of-ai-in-healthcare#_continue-reading
12 https://www.xcubelabs.com/blog/benefits-of-iot-in-agriculture-and-smart-farming/
13 https://en.antaranews.com/news/227061/indonesia-faces-11-mln-cyber-attacks-in-2022-first-quarter
14 https://www.adb.org/sites/default/files/publication/700411/climate-risk-country-profile-indonesia.pdf
15 https://www.weforum.org/agenda/2022/11/indonesia-edtech-financial-inclusion/
16 Secara umum, ekonomi informal merujuk pada ekonomi yang tidak terdaftar, yang berarti bahwa mereka tidak mendapatkan atau tidak cukup mendapatkan tunjangan kerja formal. Perusahaan pada umumnya tidak mematuhi peraturan, karena para pekerja tersebut tidak digolongkan secara resmi sebagai karyawan, sehingga membatasi akses mereka ke layanan pemerintah, termasuk kesejahteraan, perlindungan hak pekerja, dan program publik. Di Indonesia, 60% karyawan dipekerjakan oleh sektor informal dan memberikan kontribusi sebesar 22,7% terhadap PDB nasional (776 miliar dolar AS).
17 https://www.ilo.org/jakarta/areasofwork/informal-economy/lang--en/index.htm
18 https://en.prnasia.com/releases/apac/68-of-indonesia-s-employees-willing-to-forgo-higher-salaries-or-job-promotions-for-work-life-balance-michael-page-366002.shtml
19 https://www.prakerja.go.id/
20 https://money.kompas.com/read/2023/01/06/123000126/kartu-prakerja-2023-target-anggaran-dan-pelaksanaan-pelatihannya-
21 https://digitalent.kominfo.go.id/program
22 https://www.weforum.org/agenda/2022/05/digitalization-growth-indonesia-msmes/
23 https://kemenperin.go.id/artikel/23388/Kemenperin:-Revolusi-Industri-4.0-Optimalkan-Potensi--Indonesia-di-Sektor-Manufaktur
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Either way, when asked about the biggest challenges they face in executing their day-to-day activities, change is a recurring theme, according to a new survey of 800 CFOs and senior finance executives, conducted by The Economist Intelligence Unit. Managing unexpected changes to financial forecasts and adapting finance processes to rapidly evolving business models are top of mind.
Managing unexpected changes to financial forecasts and adapting finance processes to rapidly evolving business models are top challenges finance executives face in executing their day to-day activities.
Finance executives are also concerned with identifying how to align strategic, financial and operational plans towards common objectives and meaningfully analysing data across business units and regions. “All functions are working to meet these challenges and, as a finance head, we have to have visibility across all functions, how they are progressing [towards meeting goals] and ensuring that their direction is in line with overall strategic goals,” says Lalit Malik, CFO of Dabur, an Indian consumer goods manufacturer. It is incumbent upon CFOs therefore to be prepared not only to help their own function navigate uncharted territory, but the rest of the business too. That means breaking down the silos that commonly exist in organisations, in order to collaborate closely across functions, sharing information and data in the pursuit of common objectives.
All functions are working to meet these challenges and, as a finance head, we have to have visibility across all functions, how they are progressing [towards meeting goals] and ensuring that their direction is in line with overall strategic goals - Lalit Malik, CFO of Dabur, an Indian consumer goods manufacturer.
The clear custodian of collaboration
There are a number of reasons why the role of leading cross-company collaboration around steering should fall to the CFO and their team. First, through the activities of budgeting, the finance function is the custodian of the clear, quantitative expression of management expectations and determines how resources such as cash and people will be allocated in order to achieve them. In our survey, 90% of respondents say that finance should facilitate collaborative enterprise planning to ensure that operational plans are aligned with financial and strategic plans.
Second, through performance management, the finance function is the gatekeeper for critical data that illustrate how well—or otherwise—the company is rising to the challenge of change. That includes data relating to sales, supply chain and delivery, which need to be reported back to the business in ways that help drive improved decisionmaking. Our survey reveals that companies in which finance executives feel empowered to drive strategic decisions across business functions are more likely to report a higher financial performance in fiscal year 2016/17 and 2017/18 and anticipate higher growth rates for 2019/20.
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Rethinking professional services in an age of disruption
How PWC innovates through acquisitions
James Fillingham, head of transaction services, on the role that acquisition plays in the global advisory firm's innovation strategy:
“We take what they [acquired employees] are good at, we put them in a place with people who think in a like-minded way, and then we put in place a framework to help us industrialise and commercialise that more effectively.”
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Culture clash - the challenge of innovation through acquisition
Despite political turbulence and currency volatility, UK companies are ready to do deals—especially if merger and acquisition (M&A) activity allows them to get their hands on valuable innovations. In uncertain times acquisitions offer routes to innovation that internal resources alone cannot provide.
In a recent survey of 200 business leaders in the UK, conducted by The Economist Intelligence Unit (EIU) and sponsored by Rackspace, two-thirds of respondents agree that acquisition is a good strategy for enhancing innovation, while the same proportion believes that the acquisition of innovative start-ups is a critical success factor in their industry.
Those beliefs translate into action: 59% of respondents say their company has acquired at least one smaller, innovative firm during the past five years, and just over half (51%) are now actively searching for new acquisitions. A further 40% say that their company will consider an acquisition over the next three years, should the right opportunity present itself.
Indeed, M&A activity is increasingly driven by a thirst for innovation, according to a recent report from professional services firm Deloitte. Globally, companies spent US$300bn on “disruptive, innovation-related” M&A deals in 2016, four times more than in 2012, its study found. For large companies with deep pockets acquisition offers the opportunity to find winning ideas and amplify them to corporate scale. According to our survey, over half of UK respondents (57%) believe that the resources of a large company, together with the agility of a smaller firm, “create a strong combination”.
But acquisitions are difficult to get right. According to a study by US management consultancy AT Kearney, as many as 60% of M&A deals fail to deliver value.2 Acquiring for innovation may be especially challenging, as the ability to innovate is a facet of an organisation’s culture that can all too easily be snuffed out. Business leaders who wish to innovate successfully through acquisition must be adept at integrating organisational cultures and keeping talented staff on side.
Integrating culturesThere are many attributes companies look for in an acquisition, including access to a wider market of customers and innovative technology. For 22% of UK respondents, a corporate culture similar to their own is a key trait in a potential target.
“There have been examples of companies where we think the technology’s good,” Mr MacLeod explains, “but there’s a lack of cultural ‘fit’, and that’s as important to us as having a technology fit. If y you don’t have the culture aspects, then the integration will almost certainly fail.”
Company culture, Mr McLeod points out, defines how people work together to achieve business goals. This has particular relevance when it comes to innovation: it can be hard to launch a new product, for example, or arrive at a new scientific breakthrough against a backdrop of misunderstanding or even mistrust. A poor cultural fit can be highly disruptive, throwing projects off the track and delaying crucial decisions.
Successfully integrating a company post-merger is a critical success factor for any deal. Handled badly, it can undermine the value that the acquired company brings to its new owner. With innovative firms the challenge is especially complex: how can the buyer integrate the acquired firm without snuffing out its innovative spark?
There is little agreement among survey respondents: 30% believe the acquired companies should operate as a separate entity, with the exception of common functions such as finance; 28% believe it should do so only until it reaches a certain level of maturity and should then be gradually integrated; and 27% believe that once that maturity is reached, it should be quickly integrated.
Johnson Matthey sees value in closely integrating acquisitions into the main firm. “That’s how you create the necessary synergies,” says Mr MacLeod. “Products can maintain their own brand identity under a new owner, but with people and processes we need unity, so that both internally and externally there’s an understanding of what our opportunity is and what we bring to the market.”
The challenge of integrating two companies while preserving the culture that makes the acquired firm valuable calls for considered and deliberate management. The authors of the 2017 M&A Integration Survey Report by professional services company PwC say that change, or at least compromise, is necessary. Managers, they argue, must define their desired behaviours, highlight internal role models who demonstrate those behaviours, and provide meaningful incentives for employees to make the necessary changes.
The ability to manage cultural integration explicitly is often undermined by a shallow understanding of what organisational culture really is, a report from strategy firm McKinsey & Company argues. “Culture is much deeper than a good first impression, a sense that you share the same values or the more trivial practices, say, of wearing (or not wearing) jeans on Fridays.” But too often, the authors say, managers focus on the wrong things, “addressing the most visible expressions of culture, rather than the underlying management practices and working norms”.
As an example of how things should be done, the authors point to the integration of two European industrial companies, where managers from both sides identified ten potential cultural goals as joint areas for improvement, joint areas of strength, or areas of difference. “Quickly achieving the benefits of their similarities created the momentum and trust required for addressing many of the thornier issues the managers faced,” they write.
Talent mattersThe co-operation of senior executives at the acquired firm can make or break an acquisition. In our survey, 27% of respondents say that the willingness of senior executives from the acquired firm to stay at the company had a significant bearing on the success of their acquisitions.
Hikma Pharmaceuticals, a UK-headquartered drug manufacturer, has acquired a number of firms to access innovative technologies and international markets. According to Bassam Kanaan, the company’s chief strategy and corporate development officer, securing the commitment of the executives at the company being acquired is just as important. “If you get that right and you have their consensus and commitment, then by the time the acquisition is finalised, they will do much of the work of driving the integration on the business’s behalf.”
But for innovation to continue, talented employees at all levels—especially those responsible for advancing products, process or strategy—must see the value the acquisition offers them personally.
“We put a great deal of effort into communicating to acquired employees about the new opportunities we can offer them,” says Mr McLeod. “We explain that we bought their company because of their technology, but now we want to do more. We want to invest in their technology, we want to add to it. It’s important they see how their technology benefits from being part of [us]. It’s their chance to take their science and ideas even further and do even more with it.”
James Fillingham, head of transaction services at PwC, describes how the firm handles its own integrations: “We take what they [acquired employees] are good at, we put them in a place with people who think in a like-minded way, and then we put in place a framework to help us industrialise and commercialise that more effectively.”
“We love to hit the revenue targets, but actually, retaining those people and retaining what made them special is more important, because if you do that well, it enables them to continue to grow, to continue to develop the next idea, and then to take it to the next level. If we can make that work, on a big, PwC-sized playing field, at that point we’ve developed real value.”
UK business leaders clearly see acquisition as a valid innovation strategy. To make it work, they must position their company as a platform for good ideas and an amplifier for the ambitions of talented employees.