The Quality of Human Resources in Indonesia is Questioned, What Makes Apple Reluctant to Build a Factory at Home?

Kapanlagi.com - Apple, one of the world's technology giants, is currently in the spotlight due to its plan to invest USD 1 billion in Southeast Asia. Although this amount sounds enticing, many are questioning why Indonesia is not the primary choice for their factory development. Instead, Vietnam is prioritized, even though the Indonesian market offers very promising potential.

There are several reasons why Apple chose to invest outside of Indonesia. One of them is that Vietnam, known as the land of the blue dragon, can meet up to 70% of Apple's component needs. With this data, it is clear that Vietnam has its own appeal for this technology giant.

However, a big question arises: why has Indonesia still not been seen as a safe investment location? Is the quality of human resources one of the factors influencing this decision? Let's take a look at some interesting facts regarding this situation, summarized by Kapanlagi.com from various sources on Wednesday (22/1).

1. Examining the Quality of Human Resources in Indonesia Compared to Neighboring Countries, Suitable for Apple?

The quality of human resources (HR) in Indonesia remains a major focus for global investors, especially amid fierce competition in the technology sector. In the World Talent Ranking (WTR) 2024, Indonesia is stuck at the 46th position, far behind Singapore at 2nd place and Malaysia at 33rd place.

This low ranking raises doubts about the competence and readiness of the local workforce, especially for tech giants like Apple. Meanwhile, Vietnam has surged as a star in the ASEAN region, becoming Apple’s main production base with a 70% contribution to component needs, whereas Indonesia can only supply four out of a total of 250 to 390 components required.

With a global competency index of only 60, Indonesia seems to struggle to compete, especially with Malaysia, which has developed a technology ecosystem similar to a mini "Silicon Valley".

"They know that Indonesian consumers, as human capital, still have a low index," said the Director of Digital Economy CELIOS, Nailul Huda, quoted from merdeka.com.

2. Factors Influencing Apple's Decision, From Low PISA Scores to Less-than-Ideal Negotiation Skills

Apple seems to still hesitate to enter the industry in Indonesia, and there are several interesting reasons behind this decision. First, the low investment index and talent development have come under scrutiny, where the education budget per student in the country still lags behind other ASEAN countries, resulting in disappointing PISA scores in mathematics, science, and literacy.

In addition, uncertainty in investment negotiations also poses a barrier; Minister of Industry Agus Gumiwang Kartasasmita revealed that Apple's investment proposal, amounting to USD 100 million, is still far from expectations.

Finally, the technology ecosystem in Indonesia is also not yet mature enough, unlike Malaysia and Vietnam, which have technology industrial zones ready to attract major investors. With these various challenges, Apple's steps to invest in Indonesia are still hindered.

3. Opportunities and Challenges of Indonesian Human Resources: The Foreign Business Climate Has Actually Started to Improve Since 2023

Despite facing various challenges, Indonesia has a golden opportunity to enhance the competitiveness of its human resources (HR) on the global stage.

According to the WTR 2024 report, Indonesia's ranking in attracting foreign talent has surged from 31st place in 2023 to 17th in 2024, indicating that the business climate in the country is becoming increasingly attractive to international workers.

However, challenges remain, particularly in increasing the number of foreign students choosing to study in Indonesia. Additionally, the PISA scores that still need improvement are key to ensuring that our younger generation excels in literacy, mathematics, and science.

To achieve all this, the government needs to prioritize investment in education per student and design training programs that align with industry needs, in order to create human resources that are ready to compete in the global era.

4. Incentives and Negotiations for Apple

In November 2024, the Indonesian government made an attractive offer to entice Apple to invest in the country, including tax breaks for companies willing to establish factories. Agus Gumiwang, the Minister of Industry, is optimistic that this step will encourage Apple to increase its investment.

However, he emphasized that the incentives must align with improvements in human resource quality and infrastructure. Without these two crucial elements, major investors like Apple may look towards other more promising countries.

In the upcoming negotiations, the government also stressed the importance of fair investment, which not only benefits the company but also creates jobs and has a positive impact on the local economy and state revenue.

"What we will prioritize in the negotiations later is the first scheme, which is for Apple to invest in building a factory," said Minister of Industry Agus Gumiwang Kartasasmita at the time, referring to Liputan6 Bisnis.

5. Learning from Other Countries: Need to Prepare Industry Regulations and Adequate Human Resources

In an effort to attract large investments like those made by Apple, Indonesia should emulate the successes of neighboring countries such as Singapore and Vietnam. Singapore, which ranked second in the WTR 2024, demonstrates the importance of a skilled workforce and an education system that is responsive to technological advancements.

Meanwhile, Vietnam has successfully created a solid supply chain for the technology industry, thereby attracting the attention of global investors with a focus on developing ecosystems and workforce training.

According to Bhima Yudhistira, Director of the Center of Economic and Law Studies (Celios), Indonesia needs to prepare various aspects, ranging from certainty in import regulations to environmentally friendly production processes, as well as strengthening human resources through updates to training materials in vocational schools and improving infrastructure.

"Supporting infrastructure in industrial areas is not yet fully adequate. Logistics costs are also high. Here, the central government's task to collaborate with local governments can be further optimized, especially in revitalizing facilities in existing industrial areas," said Bhima, quoting ANTARA.

6. Why did Apple not choose Indonesia to build a factory?

The low quality of human resources and the technology ecosystem is the main reason Apple is reluctant to build a factory in Indonesia.

7. What does Indonesia need to do to improve the competitiveness of its workforce?

Indonesia needs to increase investment in education, improve PISA scores, and provide relevant workforce training.

8. How do other countries like Vietnam excel in attracting technology investment?

Vietnam excels because it has a solid supply chain, a competent workforce, and a mature technology ecosystem.

9. What is the role of the global competitiveness index in attracting investment?

(kpl/rmt)