Industrial Revolution 4.0 and the Indonesian Economy
Among millennials, the term gaptek (poor in technology) describes an impediment to Industrial Revolution 4.0.
The development of information technology -- which later transformed itself into the use of gadgets and online platforms, such as smartphones, cloud-based information technology, and analytical data -- has hit the public, both individually, in groups and institutionally, hard.
As in previous industrial revolution, there are always new opportunities and threats. At an individual level, the abilities needed to master information technology are logic and language skills. Subjects like mathematics and languages (Indonesian and foreign) teach logical thinking, systematically looking into the realm of ideas, from making programs (coding) to fixing problems through out-of-the-box thinking.
An idea can generate new thoughts and, through the ability to argue and interact with other people/communities, can be realized through physical (gadgets) or non-physical applications (system). Unfortunately, the Program for International Student Assessment (PISA) score for elementary school students worldwide still places Indonesia 62nd out of 70 countries surveyed. As expected, mathematics and reading are the weak points.
Business sophistication
Indonesia is among the largest users of social media in the world (143 million users), but the use of the internet for business competitiveness is still lagging behind. The Global Competitiveness Index places Indonesia 32nd for business sophistication and 80th for technological readiness. One simple example is the use of emails to contact customers, the use of company sites, etc. due to weaknesses in composition (arranging words so that they have strong a argument).
In the business world, especially international relations, information technology plays a very important role. Failure to follow up, coordinate, and keep to the schedule to deliver goods can result in a company being thrown out of or isolated from the international distribution/production network. At present, Indonesia\'s involvement in international production networks has stagnated (Ando and Kimura, 2013).
In the Indonesian manufacturing sector, the export base is now more concentrated on the food sector (palm oil exports) and automotive industry, which is dominated by principals from Japan and South Korea. This narrow export base has made Indonesia vulnerable to the world business cycle and disruption to world trade, as is happening now due to the United States-China trade war.
The trade balance deficit over several months in 2018 also explains the weaknesses of Indonesia\'s human resources in the face of changes in the international production network that is increasingly spreading in various locations/countries. Mastery of information technology is absolutely needed for a production configuration like this. Logistics management capability and the ability to manage people
from different backgrounds (language skills and coordination) are the foundation to improve Indonesia\'s role in international production networks.
Indonesia has to revamp its basic education system through a curriculum that develops logic, languages and creativity. Mathematics must be taught as logic, not merely as a tool for calculating, let alone memorizing, and language should be taught as a medium to conduct critical narrative analysis and arguments. Subjects that encourage creativity -- such as composing essays, conversing and craftsmanship -- need to be intensified.
Even if such a basic skill is improved, there is no guarantee that all work will be maintained. Automation and digitalization will eliminate several types of work, such as cashiers, long-distance marketers, or auditors who have to be turned into analysts.
Consumer behavior
With its demonstration effect, information technology is able to tempt people to explore Maslow\'s (1987) satisfaction hierarchy to a higher level. Growth in service consumption such as hotels and restaurants, have moved beyond simple food, clothing, shoes and household utensil consumption since June 2015. Latest data from Statistics Indonesia (BPS) shows that consumer spending for hotels and restaurants in the third quarter of 2018 grew by 5.6 percent year-on-year (yoy), as well as spending on transportation.
This is the growth in the gross domestic product (GDP), which was recorded at 5.17 percent yoy as well as overall household spending (5.2 percent yoy). This is confirmed by growth on the economic production side, where the hotel and restaurant subsector grew by 5.9 percent yoy, transportation and warehousing by 5.6 percent, as well as the large trade and retail sector by 5.3 percent. Whether Indonesia can take advantage of this growth to create employment opportunities and source foreign exchange is highly dependent on the capabilities of Indonesian human resources in mastering information technology.
Besides the advantages in the human resource field, international online businesses have the opportunity to level the playing field with regards to conventional and online businesses in the country. The domestic retail industry may have to face the transnational supply chain with much lighter regulatory burdens, such as taxation, the environment and business competition.
The increase in the growth of the warehousing sector, for example, may only reflect this phenomenon. Since the rise of online businesses in 2015, there has been a rapid rise in the importation of durable and semi-durable consumer materials. In 2016 and 2017, the average was 20 percent per year, which was uch higher than non-durable consumer goods (11.6 percent), raw and auxiliary materials (6.5 percent), and capital goods (0.91 percent).
The way to see the future and decision-making methods
The development of information technology causes the character of interaction between individuals and stakeholders to no longer be just one-way or two-way traffic, but rather a strategic game with many actors.
This implication on decision makers -- the government, corporations, and other institutions -- will influence short-, medium- and long-term planning in making, assessing and comprehending future prospects in the socioeconomic field, technological development, alliance shifting, geopolitics and changes in people\'s behavior.
Although different from the previous one, which made technological adaptation to the Industrial Revolution 4.0 difficult, its virtual character and the technological development moves quickly, preceding the absorption capability of the institutional decision makers. The most common trend is to use ex-post data collected in the past and not real time.
After the data is filtered, the information that is available is then taken to a focus group discussion (FGD). The latest decision-making method in Industry 4.0 is called headline matching. This approach tries to find human behavior patterns from heads of state and capital owners to consumers from headlines in the world media -- both print and online.
From the various headlines, clouds are starting to gather on the western horizon. The fall in stock prices in the US in December was the worst since the Great Depression of the 1930s. Several parties have predicted that a recession in the US is imminent. Other signs are the increase in interest rates by the US Federal Reserve and the US-China trade war that seems to have no end.
Like the proverb which states that in every narrowness there is always an opportunity, several parties even see it as an opportunity for Asia to rise, especially Southeast Asia. Short- and long-term investors are expected to return to Asia. Oil prices that tend to fall will benefit net importer countries such as Indonesia. Vietnam and Thailand are expected to be the locations for high-tech industries that have been forced to leave China because of the trade war.
The Readiness for Future Production Report (World Economic Forum, 2018) states that Thailand is considered ready to face Industry 4.0 in terms of production structure. Vietnam and Indonesia are still lagging behind because they are categorized as nascent countries in the driver and structure of production, which means that their existence has begun to be seen, has potential, but they needs to work harder.
Nevertheless, Vietnam has the advantage geographically because it is closer to international trade or distribution channels. This is an opportunity for Indonesia is to choose one or two locations in the Malacca Strait as a logistics center, for example Kuala Namu, Batam or Riau Islands. (Ari Kuncoro, Professor and Dean of the Economic and Business School, University of Indonesia)