Yayasan’s need to share the load of Indonesia’s development

Yayasan’s need to share the load of Indonesia’s development Will Hickey ;  Associate Professor and Chair of Global Management at Solbridge Int. School of Business in Daejeon, South Korea

JAKARTA POST,  03 Januari 2013

Having spent considerable time in Indonesia and visiting the various Yayasan’s (foundations) sponsored by mining, oil, telecom, and cigarette interests here, I have always spoken with them about the importance of strategic education for Indonesia’s youth development.  The Yayasan’s with these industry would be a good ‘fit’ for strategic education and youth internship’s into there businesses. Not all Yayasan’s are educational (some are for hospitals, religious reasons, or poverty) but a good many are educational and the educational ones may be the most prominently exposed. However, when I speak to Yayasan leaders, presidents, and deans, about them being a natural fit for jobs creation in the industries that sponsored them, the subject is quickly changed. I have found out this has to do with two points of contention. First, Indonesian educational accreditation and second, land donations from sponsoring  industry.  I will not go into details about either of the above complicated political reasons, but some things should be said. Indonesia accreditation must be all about aiding and abetting the strategic development of Indonesia.  Recently it has been in the news that the Educational and Cultural Ministry is placing a new emphasis on learning religion and omitting English.  Simply put, this may be politically well intentioned, but it is economically misguided, and will handicap Indonesia’s endeavors in creating value added capacity.  Indonesia simply cannot afford educational development that is not in tune with the current investment and economic drivers of the country, that being the energy and resource industry. Accreditation must highlight Indonesia’s real economy. As I have pointed out in my previous articles, the fossil fuels industry in Indonesia currently drives the country’s economy. This was made crystal clear by a Yayasan that showed me a pie chart of the various businesses (telecom, land, coal, etc…) that their sponsoring entity was involved in.  Thermal coal, far and away, was the largest revenue generator in their huge portfolio, clearly contributing almost 70 percent of total net revenue.  Yet, while the industry sponsored many student scholarships for their Yayasan, they would not guarantee any job placement for its graduates in their vast industries, not even internships.  Oddly their industry did simultaneously recruit strongly from ITB and IU, two of Indonesia’s premier schools. In fact most of the managers in their subsidiaries (and many of the leaders of the other educational Yayasans themselves) were graduates from ITB, UI or Gadjah Mada.  More succinctly, in the coal industry, the FMC (or Full Maintenance Contract), contracts a plethora of long term, high paying jobs to mining equipment vendors through the maintenance of that equipment.  These are not small numbers, and can be in the hundreds of millions of US dollars. Most of the value added and proprietary maintenance techniques are held tightly by these vendors.  Generally, only lower level skills, such as cleaning, moving, and replacing parts, are transferred to locals. This money needs to be channeled more strategically: Away from turnkey FMC’s and to strategic development initiatives in the educational Yayasans that are sponsored by the industrial patrons. It could be done, again, if proper incentives towards strategic education are aligned correctly.  This presents a significant dis-alignment and a redundancy of objectives under best practice situations. An organization that creates and sponsors an educational entity, but does not use it (in fact generally ignores the possibility of it) becoming a strategic feeder organization for its own human resource development, while at the same time, demonstrating a high reliance on foreign equipment and vendors/ contractors in its coal mining subsidiary.  The connection here then becomes quite obvious for strategic development of Indonesia: Use and incentivize the Yayasan for further industrial education of students (both managerial and vocational) in its sponsored industry, albeit, telecommunications, coal, oil, cigarettes, or property. Incentivization is the key with this.  This gets to point two, land donations. This issue cropped up in most conversations about Yayasans. Not donation of the land per se, but the ‘gray area’ of reclamation or usage by the donating industry of the land at a later date.  Apparently there are issues of tax breaks and donation that are the real incentive behind this, not human development.  Of the various Yayasan’s visited, many sat on prime Jakarta or Bandung property. While these decisions about land may make perfect economic sense, they are working at the expense of Indonesia’s long term educational initiatives and jobs creation.  The daily macets (traffic jams) one is witnessing, skyrocketing property values, and higher food costs, are a direct correlation with Indonesia’s resource related economic boom.  Yet, many people are not engaged in these fossil fuel businesses, supporting infrastructure, construction, or even in eventually creating the transition steps to alternative energy that are fueling it.  These core jobs and the vast ocean of vendors and contractors that indirectly supply them, are held tightly by foreign investors and foreign technology.  Most Indonesian’s are in services, not the production side. But the production side is where the real value-added creation lies, and where the higher incomes lie.  To ensure these value added jobs, dis-alignments and bad incentives need to be removed. This is a tall order, but Yayasans are now needed for Indonesia’s strategic value added, in fact, if the incentives are changed, they are a natural fit for two critical reasons.  First, they are sponsored by Indonesia’s strategic industry (industries that are not making T-shirts, or Foxconn jobs, but controlling telecom, oil, and coal) and second, they are ‘spatially sectored’ that is, they are already attracting students from around Indonesia’s various provinces (not just Jakarta), and they are growing in popularity, and attracting foreign students as well.  One Yayasan in Bandung used to guarantee placement of its students in its sponsoring industry, but has so many students these days, and fewer retirees in its patron, that placement is no longer ensured and most students are left on their own after graduation.  Its seems then that under massification (market demand for higher education) the educational Yayasans in Indonesia are thriving.  They youth of Indonesia are already speaking about their future needs. More strategic education is needed in Indonesia, and it is needed now.  A handful of elite schools cannot be the only provider for empowered education initiatives. Indonesia’s population and economy are growing exponentially, and it will need enlightened manpower to service it and create new ideas.  This would also go a long way to create value added entrepreneurial activity, which the Indonesia government supports.  Without this, the economy could stagnate with any downturn in exports of resources which could cause an economic contraction.  Already the Rupiah is weakening (Rs. 9700/US$), and is projected to be weaker in 2013, which can be an indication that the economic boom dependent on resources may be slipping.  These things may not be readily apparent to most in today’s resource boom, but only strategic education can level out the dips and highs caused by economic activity that is dependent on resource exports over the long term. ●