Road to Industry 4: Policy options for Indonesia in the age of digitalization

Abstraksi

The world is witnessing rapid technological changes affecting the production process and consumption patterns which will determine the future course of economic growth, development, and social welfare. The Fourth Industrial Revolution, a phenomenon that is seeing an interface of technologies will be more disruptive compared to the previous technological developments in the industrial production. In Indonesia the debate on Industry 4 and its impact on future growth and jobs is finally entering the policy discourse. While figures vary, in the race between digitalization and human labour, increasingly low and mid-level skills jobs will be lost . In Indonesia it is estimated that in some sectors more than 60 percent of jobs may be at risk. The paper argues that Indonesia cannot afford to be left behind, and resisting technological change is not the answer. Moving forward the government needs to have clear policy objectives with a single-minded focus on policy execution to turn aspirations into concrete action. Public financing needs to be deployed in a manner that it enables the country to harness technology and laying the foundation for future structural transformation. The paper will draw from a range of resources including literature review and data sets from the national accounts, labour force surveys, and business surveys to understand Indonesia’s challenge to ensure employment gains, its readiness to embrace technology, and then provide a set of policy choices for consideration.