The nature of jobs and skills requirements are changing rapidly across the Asia-Pacific region (APAC). The fast pace of transformation is forcing business leaders to quickly identify looming skills gaps and prepare their workforces for the future, giving clear direction to employees on how to build the skills they will need to thrive. Getting ahead of these skills gaps will require investment, leadership, and clear communication about the effects of trends like digitisation and automation on future skills needs.

To explore these issues, Economist Impact conducted a research programme consisting of a survey of employees, an extensive literature review, and interviews with employers and industry experts. Focusing on a time frame of three to five years into the future, this research has identified the most important trends driving demand for particular skills, gaps in workforce expertise, and motivations for upskilling and reskilling. This report details these findings and outlines some key steps to address critical  skills gaps in APAC.

This research comes at a critical time, when the world of work is changing faster than ever before. Workers are looking for flexible workplaces and a new sense of purpose in their careers, and businesses will need to rethink their priorities and look for top talent in a highly uncertain economic environment.

We would like to thank the following experts for their participation in the research for this project:

Akiko Sakamoto, skills development and employability specialist, International Labour Organisation (ILO) Emre Demokan, lead product manager, SmartRecruiters Gagan Bhargava, vice president, people insights and data excellence, Schneider Electric Kabir Nath, principal, talent strategy, Mercer, Singapore  Krishna Raghavan, chief people officer, Flipkart, India Muneaki Goto, representative director, Japan Reskilling Initiative Patrick Kidd, chief executive officer, Digital Skills Organisation, Australia Phil Loveder, executive manager, inform and engage, National Centre for Vocational Education Research (NCVER), Australia Saad Gilani, senior programme officer, International Labour Organisation (ILO) Sean Hinton, chief executive officer and founder, SkyHive Simon Walker, managing director, National Centre for Vocational Education Research (NCVER), Australia Soon Joo Gog, chief skills officer, SkillsFuture, Singapore Ved Mani Tiwari, chief executive officer, National Skill Development Corporation (NSDC), India

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

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 the Philippines. This series complements a research paper that looks at the reskilling and upskilling imperative across APAC.

 

Key findings

Self-management skills (68%) such as stress tolerance, resilience and flexibility are the most important for employees, closely followed by digital skills (52%).

Within digital skills, advanced skills such as IT support (65.4%), data analysis and visualisation (55.8%) and cybersecurity (59.6%) would be key to supporting growth in the Philippines, and are selected as “must have” capabilities by the employees. Employees in the Philippines prioritise artificial intelligence (AI) and machine learning (ML) skills at higher rates (42.3%) than the regional average (32.8%).

Online courses are a key source of new digital skills for 57%, higher than the regional average (42%). However, poor internet access (41%), lack of time (40%) and high cost of courses (30%) limits employees’ digital upskilling.

A strong post-covid economic recovery1 sets context for the labour market in the Philippines. The country’s economy is expected to grow by 6% in 2023—and by 6.2% in 2024—on the back of rising domestic demand and a post-covid rebound in the services sectors.2

The country’s tech sector is projected to grow rapidly with the estimated value of the digital economy reaching US$150bn in the next decade3 while the internet economy is expected to more than double between 2020 and 2025.4 This massive growth will require the right capabilities and diverse skill sets in the labour market. According to the IT-BPM Association of the Philippines, by 2028 the tech industry is expected to generate 1.1m new jobs in the country, of which 150,000 are developer roles that would need to be filled in the next six years.5

Despite this momentum, many in the Philippines lack even basic skills to contribute effectively. Almost 90% of the country’s population lacks basic ICT skills such as word-processing, internet and email skills.6 The government is taking action to address these gaps. Most recently, the newly established Inter-Agency Council for Development and Competitiveness of Philippine Digital Workforce announced plans to undertake a skills mapping exercise to identify gaps in the area of digital and ICT capabilities such as engineering, cloud computing, artificial intelligence, web development and management, and e-commerce marketing etc.7

 

Advanced digital skills are rising in importance

According to the Economist Impact survey, 68% of employees in the Philippines pick self-management skills as a top important skill category for workers to acquire, higher than the regional average (53%). These skills encompass aspects such as time management, active learning, resilience, stress tolerance and flexibility. The rising importance of these skills could be an outcome of hybrid working models with demands on managers and teams to work online more adeptly. Doreen Cooper, an independent learning facilitator based in the Philippines, suggests this could also be “due to a deep-rooted culture in the country that could benefit from encouraging self-discipline and a strong work ethic”.

 

Figure 1: Top skills in demand in the Philippines

Which skill categories do you think are the most important for the workforce in your sector to acquire today? (% of respondents)

Source: Economist Impact, 2023

Digital skills emerge as another important skills category. Basic digital skills are considered a must-have by 71.2% of employees. At the same time, they also prioritise advanced digital skills such as IT support, cybersecurity, and data analysis and visualisation, higher than the regional average.  IT skills are essential to the country’s major business process outsourcing (BPO) sector, which contributes nearly US$30 bn to GDP every year to the Filipino economy.8 The Philippines faces a shortage of 200,000 workers with IT skills, as noted by a recent Jobstreet report.9

 

Figure 2: Must-have advanced digital skills for employees in the Philippines vs APAC

Which specific types of advanced digital skills are a must have for the workforce in your sector today? (% of respondents)

Source: Economist Impact, 2023

Compared to their regional peers (32.8%), employees in the country demonstrate a stronger preference for AI and machine learning skills (42.3%). This reflects the rising government focus on AI: In 2021, the country launched an AI roadmap that aims to accelerate the adoption of AI to “advance industrial development, generate better quality entrepreneurship as well as high-paying opportunities for Filipinos”.10

Fast digitalisation and greater internet usage in the economy means that the country also faces higher security risks, reflected in the importance given to cybersecurity skills – three in four Filipino businesses experienced a cyber incident in 2022, as against a regional average of 59%.11 A 2022 report from USAID noted a possible loss of US$23bn in the business process outsourcing industry in absence of cybersecurity capabilities. One reason, the report found, is a lack of clear definitions of job roles and responsibilities in the area.12

On the other hand, green skills had minor importance for Filipino employees—only 13% ranked them as important, somewhat lower than the regional average (17.7%). This is likely to change however as the Philippines is one of the most vulnerable countries to climate change.13 If no action is taken, the Philippines risks losing 6% of its GDP every year by 2100.14

 

Infrastructural barriers to upskilling, despite high employee motivations

Employee motivations to upskill vary. Easy access and availability of free online courses (37%) are employees’ biggest motivator to acquire digital skills, followed by higher pay and bargaining power (33%) and exploring new job opportunities (29%). Ms Cooper explains, “by and large, employees want to learn skills that enable them to perform better in their jobs, and earn more as well as get promoted,” aligning with findings that career progression is a significant motivator for employees in the Philippines.

 

Figure 3: Motivations to acquire different skills

What best describes your motivation to acquire new skills? (% of respondents)

 

 

 

Source: Economist Impact, 2023

Despite high motivations, the biggest barrier to acquiring new digital skills is poor internet access to join online courses (41%). This issue is especially challenging for the country’s upskilling needs as more than half (57%) rely on online courses as a top source of digital upskilling, substantially more than the regional average (42%). Despite having high levels of internet penetration and usage, the Philippines struggles with poor internet performance and high costs. More than 50% of the country’s population could not afford even a basic package of mobile internet, as per a recent study. 15

Another challenge cited by four in ten employees was a lack of time in learning new courses. Employees working in sectors such as media, healthcare, marketing and advertising work report working beyond 40 hours per week.16  Additionally, nearly 50% of the workers from the Philippines in a research said to have experienced workplace stress – the highest percentage in Southeast Asia.17 Besides lack of time and workplace stress, high cost of courses was another challenge highlighted by 30% of employees in our survey in learning new digital skills. The country has one of the most expensive education systems in the Southeast Asian region18, making the cost of courses a big hurdle in upskilling the workforce.

 

Figure 4: Poor internet access, a lack of time and the high cost of courses are key barriers to upskilling

What are some of the most significant obstacles that you face while learning new digital skills? (% of respondents)               

Source: Economist Impact, 2023

 

Public-private partnerships will be a key driver of progress

According to the Economist Impact survey, employers are considered to have greater responsibility for providing notable recognition such as certificates (64%), information on skills needed for different roles (58%) and financial incentives (55%). Government, on the other hand, is considered most responsible for providing access to diversified skilling programmes by 50% of employees. Ms Cooper highlights the government is already playing some part in this area by offering free seminars and workshops that are available to the public. So are employers– six in ten Filipino firms offer training to their workers, higher than the OECD average (less than 40%).19

Employers have an opportunity to leverage employees’ strong motivation to upskill if they can improve access to online training programmes, but more efforts are needed to integrate skilling into workers’ everyday routines. Ms Cooper adds that, “employees are far more likely to attend training if it is mandated by their employers.” Employers should also look to offer more opportunities for workers to learn on the job. This can enable employers to foster a strong culture of learning, while providing employees with career progression opportunities that drive better results. The government and employers could also do more to provide information on what skills are valuable. Currently, 63% of employees get their information about skills from social media, and only around 48% from government awareness programmes or from events in office and through employers.

 

Figure 5: Employers have a key role in supporting employees’ upskilling

In your opinion, are the government, your employer or yourself responsible for supporting employees regarding the following issues? (% of respondents)                      

Source: Economist Impact, 2023

Moving forward, collaboration between the government and private sector could also foster a strong skills ecosystem in the country. For example, the Philippines Skills Framework to upskill and reskill the country’s workforce is built on the partnership of nine government agencies.20 The country is also proactively encouraging public-private partnerships for the growth of specific skill sets. For instance, a 2022 law seeking to develop digital workforce commissions the government to enter into public-private partnerships with stakeholders in the skills ecosystem in order to develop digital careers of the workforce.21

 

1 https://www.eiu.com/n/philippines-economic-recovery-remains-strong/#:~:text=On%20May%2012th%20the%20Philippines,7.7%25%20in%20the%20previous%20quarter

2 https://www.adb.org/news/philippine-economy-post-robust-growth-2023-2024-despite-inflation-pressures-adb

3 https://www.bworldonline.com/technology/2023/01/05/496484/govt-online-shift-may-boost-philippine-digital-economy/

4 https://accesspartnership.com/growing-digital-economy-philippines/

5 https://mb.com.ph/2022/09/27/bridging-the-skills-gaps/

6 https://www.unescap.org/kp/2022/workforce-we-need-social-outlook-asia-and-pacific

7 https://hrmasia.com/upskilling-the-digital-skills-of-workers-in-the-philippines/

8 https://www.nexford.org/insights/the-future-of-bpos-in-the-philippines-and-growth-opportunities

9 https://www.philstar.com/business/2022/02/03/2158115/higher-demand-seen-tech-professionals

10 https://opengovasia.com/the-philippines-launches-national-ai-roadmap/

11 https://www.kroll.com/en/insights/publications/cyber/apac-state-incident-response/philippines

12 https://www.gmanetwork.com/news/money/companies/854521/cybersecurity-gaps-could-jeopardize-75-of-philippines-bpo-market-usaid-report/story/

13 https://reliefweb.int/report/philippines/philippines-country-climate-and-development-report-2022#:~:text=Multiple%20indices%20rank%20the%20Philippines,for%20the%20past%2010%20years

14 https://niccdies.climate.gov.ph/climate-change-impacts 

15 https://www.bworldonline.com/infographics/2022/04/18/442463/philippines-most-internet-poor-in-southeast-asia/

16 https://www.spot.ph/newsfeatures/the-latest-news-features/88589/industries-with-long-work-hours-in-the-philippines-a833-20220211

17 https://www.gallup.com/workplace/349484/state-of-the-global-workplace-2022-report.aspx?thank-you-report-form=1

18 https://www.studocu.com/ph/document/university-of-science-and-technology-of-southern-philippines-claveria/chemistry/the-high-cost-of-education-in-the-philippines-challenges-and-opportunities-article/47434059

19 https://read.oecd-ilibrary.org/education/towards-a-skills-strategy-for-southeast-asia_6db0907f-en#page22

20 https://samarnews.com/news2021/jun/f444.htm

21 https://www.gmanetwork.com/news/topstories/nation/840238/bill-seeking-to-develop-competitive-digital-workforce-lapses-into-law/story/