Indonesia‘s growing service sector creates new professions for young people. Many professions that in the past were often overlooked or questioned have now become popular career paths for young people.
When Reza Adam Ferdian, 36, decided to give up a prestigious engineering job at Indonesia’s largest state-owned energy company to open a small coffee shop, he faced disapproval from his parents.
“I was questioned by my parents: What does this mean? I enjoyed a higher education. A good job. But when I resigned, I opened a coffee shop. My parents only thought of baristas as coffee stirrers,” quipped Reza, now a certified barista examiner who assesses Indonesian baristas for certifications that can be used to work overseas.
Plenty of Indonesian baristas he has assessed now work abroad, mostly at coffee shops in the Middle East and Australia. Meanwhile Reza, who returned to work at the energy company late last year, continues running the coffee shop, KopiSob, with his wife, serving local manual brew coffee from Aceh’s Gayo to Papua’s Amungme.
Reza’s work in the service sector revolves around the promising and burgeoning export sector for Indonesia.
Already accounting for 54 percent of Indonesia’s GDP in 2018, the service sector of Southeast Asia’s largest economy is now US$567 billion in size in terms of economic activity, according to data from Statistics Indonesia (BPS).
With President Joko “Jokowi” Widodo’s focus on human capital development, policymakers are now focusing on upgrading the skills of Indonesians who can improve the country’s services export performance. Such change has come partly due to the trade balance having been severely hit by weak demand against the backdrop of a global economic slowdown, putting pressure on the current account deficit.
Even though Bambang Brodjonegoro, head of the National Development and Planning Agency (Bappenas), champions manufacturing as the current engine for economic growth, he said last month that Bappenas expected the service sector to become the new growth engine by 2045.
“We should not stop with our ability to produce goods but push our service sector, especially the creative and digital economies, which will be our best bet for growth,” he said.
The Finance Ministry has also supported the service sector by expanding subsectors covered in its zero-tax policy.
The ministry in April zeroed in on the services export tax for services in textiles, repair and maintenance, freight forwarding, construction consultation, IT, research and development, trade intermediaries, interconnections, satellites, communications and data, and airplane and ship rentals.
Consultancy services also get the zero-export service tax within business and management, law, architecture and interior design, marketing, accounting, financial auditing and taxation, a 2019 finance ministerial regulation shows.
Economist David Sumual, who works for private lender BCA, added that focusing on the service sector, particularly the health and education industries, was necessary in closing Indonesia’s current account deficit.
“I think we should boost the service sector alongside the products sector. Because, looking forward, products will face tighter competition as capital becomes cheaper. Competition will become tougher. Meanwhile, in terms of labor laws, we’re quite rigid,” he said.
The Office of the Coordinating Economic Minister, for example, pushed forward the idea of coffee vocational schools across Indonesia as a way to develop skills among Indonesians, as the coffee industry is seen as being underexplored in terms of export potential for overseas consumers.
Local demand for other hospitality talents has grown as well, with the overall number of eateries, including fast food chains and full-service restaurants, having grown.
Despite its high growth, food services contributed less than 4 percent to Indonesia’s overall fast-growing services sector in 2018, a reflection of an underexposed yet increasingly important economic sector as dwindling commodity prices and stagnation affect the raw material and manufacturing industries.
More prominent contributors to Indonesia’s services include tourism and transportation services, BPS data show. Overall, the services sector absorbed 55.1 percent of the workforce in 2017 and grew an average 7.1 percent each year between 2010 and 2017, higher than the annual averages for manufacturing (4.4 percent) and agriculture (3.7 percent).
The Trade Ministry’s director general for international trade negotiations, Iman Pambagyo, said boosting service exports was necessary “as Indonesia is keen to implement the fourth industrial revolution, or Industry 4.0”. Indonesia‘s growing service sector creates new professions for young people (Norman Harsono, The Jakarta Post)