Economic Growth and Education

Context

Driven by strong economic growth of approximately 5 percent over the past 20 years, Indonesia has made enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999. However, almost 10 percent of Indonesians still live below the national poverty line. Through partnerships to improve economic growth and education throughout Indonesia, U.S. Agency for International Development (USAID) aims to break the chain of poverty and support Indonesia to become more prosperous for all. USAID works with the Government of Indonesia (GOI), civil society organizations, communities, academia, development partners, and others to improve lives and reduce poverty. In 2023, our support resulted in a number of important achievements, including:

• In partnership with Arizona State University and private sector partners – such as Oracle, Cisco, Rockwell Automation, Boeing, and Dow – USAID enabled more than 3,000 university students, faculty, and young professionals to grow their technical skills through the provision of hardware and software, as well as soft skills training.
• USAID worked with GOI scholarship providers to support more than 150 Indonesian students to obtain GOI scholarships worth $4.8 million to attend U.S. universities.
• In partnership with Amazon Web Services, to date USAID has trained more than 6,300 students from 13 universities in cloud technology skills.
• USAID has mobilized $11.6 million of investment to 13 coffee SMEs, enabling them to purchase more coffee from farmers, which improved the incomes and livelihoods of more than 14,000 coffee farmers. 

CURRENT PROGRAMS

INCREASING WORKFORCE PRODUCTIVITY

Indonesian workers face increasing pressure to upskill digitally to take advantage of new opportunities, embrace higher-skilled jobs, bring new innovations to local or global markets, and solve challenges that will help improve the way people live and work. According to the Government of Indonesia, the digital transformation requires nine million more skilled digital workers by 2030, which means an additional 600,000 workers per year. The Acceleration of Indonesia’s Transformation to a Digital Economy by Improving Digital Talent (TALENTA) activity, USAID’s partnership with leading cloud services provider Amazon Web Services (AWS), is accelerating Indonesia’s cloud-based digital transformation through workforce training in Indonesian universities and digital technology support for startups and small- and medium-enterprises (SMEs). TALENTA is also working with entrepreneurs, including supporting 32 early-stage technology start-ups by providing access to AWS’ cloud technology and facilitating access to venture capital.

SUPPORTING VOCATIONAL TRAINING

Despite its high secondary school enrollment rate, Indonesia’s graduates often lack competencies and skills essential for both employment and success in the modern-day workplace. USAID Partnerships for Productivity (PADU) is enhancing critical investment in technical and vocational education and training institutions by assisting the Ministry of Manpower to develop sustainable private sector partnerships between government-run vocational training centers and private businesses. These partnerships will improve the workforce readiness of youth – particularly women – by aligning workforce development with market demand. To date, USAID has brought together 1,500 representatives of the central and regional governments, businesses, and others to join partnerships that resulted in market-oriented training and job placement opportunities.

STRENGTHENING HIGHER EDUCATION

Indonesia’s incredible progress graduating more students from high school is sparking greater demand for high-quality tertiary education. Increasing the quality of universities to meet world-class standards will make them more competitive, prepare students to be productive members of the workforce, and contribute to the country’s economic growth. Through USAID Higher Education Partnership Initiative (HEPI), a partnership with Arizona State University, USAID is strengthening partnerships between U.S. and Indonesian higher education institutions to improve science, technology, engineering, and mathematics in select Indonesian universities. Through a consortium of university, government, and industry partners, USAID aims to improve industry-relevant curricula, meet international accreditation standards, and increase course credit recognition between U.S. and Indonesian universities. To date, USAID HEPI has grown the consortium to five U.S. universities and 30 Indonesian university affiliates across the nation, as well as private sector partners such as Cisco, Oracle, Dow, Boeing, and Rockwell Automation.

INCREASING ACCESS TO QUALITY HIGHER EDUCATION

Indonesia is committed to improving the quality and competitiveness of its workforce. The Indonesia Endowment Fund for Education (Lembaga Pengelola Dana Pendidikan or LPDP) has an endowment of $6.6 billion to support Indonesian students to attend the world’s top universities for scholarship or research opportunities. USAID Technical and Management Support to the Indonesian Endowment Fund for Education (TEMAN LPDP) supports Indonesian scholarship providers to enhance student success, strengthen Indonesia’s workforce, and improve access to quality higher education. In partnership with the Ministry of Education, Culture, Research and Technology and the Ministry of Religious Affairs, USAID is working to improve students’ admission chances and facilitate a smooth transition to studying in the United States. To date, USAID has helped send over 200 Indonesian students annually to study at U.S. universities, contributing $9.56 million to the U.S. economy and supporting 480 U.S. jobs.

IMPROVING GOVERNMENT ECONOMIC PLANNING

Seeking to realize Indonesia’s full growth potential, the USAID Economic Growth Support Activity (EGSA) helps the GOI accelerate economic growth by advising on how to improve public financial management and making it easier for people to start and operate businesses. USAID provides research, demand-driven training, policy-level advisory services, and supporting business forums to strengthen Indonesia’s public financial management, improve the business enabling environment, and support the GOI’s priority programs. USAID EGSA and the Ministry of National Development Planning partnered to launch a dashboard for provincial economic forecasting and introduced an economic modeling tool to forecast the impact of policies and external shocks to the national economy. To support the GOI’s relocation of the national capital, USAID assisted with coordination, planning, and operationalizing development and relocation of the capital from Jakarta to Nusantara State Capital City (IKN).

SUPPORTING SMALL BUSINESSES

Indonesian women SME owners often lack access to financial training, services, and loans from banks to grow their businesses. To bridge that gap, through USAID Financial Inclusion for Women-Led SMEs (FINCLUSION), USAID and Nikel Academy are collaborating to offer a range of financial training and services to help women expand their businesses. USAID FINCLUSION developed an online platform to enable 180,000 Indonesian women entrepreneurs to access business and financial training, with the objective of mobilizing $50 million in loans to 4,000 women SME owners. Through a separate partnership with the U.S. Development Finance Corporation (DFC), Australia's Department of Foreign Affairs and Trade (DFAT), and Impact Credit Solutions (ICS), since early 2023, USAID has supported the disbursement of $11.4 million to women-owned SMEs.

USAID also provides targeted support to Indonesian coffee SMEs. Indonesia is one of the world’s leading coffee producers, but the changing climate threatens the livelihoods of coffee farmers. Through Resilient Coffee, USAID’s partnership with Root Capital and Keurig Dr. Pepper, USAID provides small coffee enterprises with the skills and resources to strengthen their businesses and increase sales. By strengthening the business management of coffee SMEs and cooperatives, Resilient Coffee is also improving the livelihoods of the coffee farmers in their supply chain.