Cross-Cultural Management

Posted on April 29, 2014 ยท

In 2015, we will enter the ASEAN Economic Community (AEC). Between now and then, there will be economic integration transforming ASEAN countries into a single market and production base. The economic integration goals will include the elimination of tariffs, free professional and capital movement, as well as faster customs clearance procedures.

Recently I attended a gathering where the Minister of Industry, MS Hidayat, was the keynote speaker together with Djoko Santoso, the University of Indonesia’s rector and the country’s Director General of Higher Education.

In addition to sharing encouraging stories from Indonesia’s 6.2% economic growth – second only to China’s 7.5% – they pointed out that even though our natural resources per capita rate actually exceeds that of China and India, the human capital capability doesn’t reflect the same correlation to sustain growth.

It’s really a shocking fact that the majority of our population, 71% of 243 million people, has been educated only up to the high school level. Although the biggest contribution to the economy still comes from the industrial sector, as Indonesia’s economy progresses we cannot just rely on heavy industry and natural resource exploration alone. We need to work hard to create value-added products and services for the domestic market and the world.

On a recent visit to Jakarta, Jeffrey Immelt, CEO of General Electric, suggested that besides building infrastructures as a key for growth and improving the necessary regulations, Indonesia needs to focus on building its human capital. Naturally, globalization has shifted the mindset of investors from looking for cheap labor to searching for market share expansion.

The government has done a good job in promoting the country’s potential, and we are on global investor’s radars. Suddenly we are realizing that infrastructure and human capital are not catching up and will need to be built quickly. While infrastructure can be developed immediately, building human capital is more complex and requires long-term invesment.