25 December 2018

To what extent is Indonesia’s Human Resources in

public and private sectors prepared for the growing
implementation of Artificial Intelligence?

Kanya Retno
Executive Summary

•  Indonesia is currently growing in the implementation of AI with its adoption level

ranked 4th in ASEAN
•  However, despite estimations in AI growth, the process of transforming
Indonesia’s human resources remains a challenge due to its data flow
•  Another cause for the plodding progression of HR is the growing recognition that
AI can disrupt labor markets
•  Indonesian firms are also recognizing AI benefits but are struggling to identify
reskilling pathways for employees
•  It is about time for Indonesia to revitalize its manufacturing sector as current data
shows that Indonesia’s HR is struggling to compete internationally
•  Though AI implementation in the public sector is still limited, the government is
currently taking measures to prepare its human resources to face Industrial
Revolution 4.0

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 Indonesia is currently growing in the implementation of AI with
its adoption level ranked 4th in ASEAN

MGI Digitalization Index

AI adoption level

Global AI Index
by sector and

ASEAN Total
country within

Philippines
Singapore

Cambodia
Indonesia

Myanmar
Malaysia

Thailand
ASEAN

Vietnam
•  24.6% of Indonesia’s companies

Brunei
Laos
are already adopting the AI system

•  It is estimated that automation will

account for 21% of all work in
Indonesia within the next three
years

•  Application of AI-based
technologies in Indonesia
-  Kata.ai: First natural language
processing algorithms for Bahasa

-  Ruangguru: Personalised education

services through machine learning

Source: McKinsey Global Institute AI adoption and use survey

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 However, despite estimations in AI growth, the process of
transforming Indonesia’s human resources remains a challenge
due to its data flow
•  Traditional business are struggling to adapt to automation
-  59% of businesses in Indonesia do not plan on applying AI within the next 5 years

•  Southeast Asian countries are highly connected based on traditional measures of

trade and financial flows, but less so for data flows

Southeast Asian global rankings for connectedness and data flows, and GDP per capita

Country Connectedness rank Data flow rank GDP/Capita rank

Singapore 1 6 11

Malaysia 20 43 70

Thailand 22 64 89

Vietnam 37 61 134

Indonesia 51 76 115

Philippines 54 67 126

Source: International Monetary Fund, World Economic Outlook Database

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 Another cause for the plodding progression of HR is the
growing recognition that AI can disrupt labor markets

Automation potential based on demonstrated technology of occupation titles

Example occupations •  Job opportunities are not in

decline, but rather transformed
Sewing machine operators,
graders, and sorters of •  Professions that are most at risk
agricultural products
are those which are on some level
routine, repetitive, and predictable
Stock clerks, travel agents,
watch repairers •  Jobs that involve creativity and
building complex relationships
with people will definitely be in
Chemical technicians,
nursing assistants, Web demand
developers

Fashion designers, chief

executives, statisticians

Psychiatrists, legislators

Source: McKinsey Global Institute analysis

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 Indonesian firms are also recognizing AI benefits but are
struggling to identify reskilling pathways for employees

•  AI usage can increase profits by 38% and job opportunities by 10% in

2022
•  However, there is high anxiety amongst half of the employees of the
Asia Pacific region that technology will alter jobs opportunities or
decrease them due to lack of training
-  Only one third of employers in Asia Pacific have identified reskilling pathways
for workers whose jobs may be replaced by machines
-  1% of employers have fully prepared their organisation for reskilling
-  There is still a huge gap between the ability of employees to utilize AI and the
efforts placed to train them
-  Indonesia is currently still relying heavily on labour on manufacturing

Source: WillisTowersWatson
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 It is about time for Indonesia to revitalize its manufacturing
sector as current data shows that Indonesia’s HR is struggling to
compete internationally
Comment:
Indonesian exports are decreasing Over the years, Indonesia has
declined in its export rates, especially
Net Export Trends (% GDP) in terms of oil and gas products. The
country has then been relying on
10% imports.
+7 15%
% Vietnam
-9.2
% 8% Manufacturing contributions
3%
towards GDP may decrease if
0.80% nothing is to be done
2000 2016 2000 2016 2000 2016
Thailand +7 Manufacturing contribution towards GDP
Indonesia
% (% GDP)
-4%
HR
Comment: 16%
22%
The shift to automation in the Manufacturing 25%
manufacturing sector is required in 12%
order to increase productivity, Construction
otherwise manufacturing rates will
continue to decrease over the years Services

1980 2000 2015 2030

Source: World Bank, A.T. Kearney 7
 Though AI implementation in the public sector is still limited, the
government is currently taking measures to prepare its human
resources to face Industrial Revolution 4.0

•  “Making Indonesia 4.0” Contributing factors to Indonesia’s GDP Growth

is a program by
Contribution to growth
Indonesia’s Ministry of GDP in 2000 1

Industry to meet
Consumer
Indonesia’s aspirations Consumption
4.3 +55%

to be part of the top 10

global economy by Government
0.8 +10%
Consumption
2030 with the following:
-  10% net export Investments 2.8 +36%
contribution to GDP
-  2x productivity-cost ratio Net Exports 0 +0%

-  2% Research and GDP in 2016 8.9

Next GDP Growth
Development spending
Contributor
to GDP

Source: World Bank, A.T. Kearney 8

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