JAKARTA: Indonesia aims to create more than three million new jobs in 2027, amid a sluggish labour market.
Businesses and economists have called the goal ambitious, stressing that achieving it would require reducing the cost of doing business to spur investment and incentivise labour-intensive industries to improve their competitiveness.
In a meeting with the House Budget Committee (Banggar) on Aug 27, Finance Minister Purbaya Yudhi Sadewa revealed a target to create between 2.57 million and 3.49 million jobs next year.
The government has also included the proportion of formal jobs as a development indicator in the State Budget draft for 2027, aiming to increase the share from 37.95% this year to 40.81%.
Purbaya said that economic growth is targeted at 6%, which can be achieved through fiscal and monetary policy, as well as by encouraging state asset fund Danantara to pursue strategic investments.
Manpower Minister Yassierli also said his ministry would support the jobs target through internship programmes and vocational education.
The Indonesian Employers Association (Apindo) called the job creation goal “quite ambitious”, but said it was attainable if economic growth could further spur business expansion and investment in the real sector.
Apindo chairwoman Shinta Kamdani said on Aug 31 that the real challenge was to sustainably create decent jobs, given that around two million to four million people join the workforce each year, while Indonesia’s employment structure is still dominated by the informal sector.
“Boosting industrialisation, including labour-intensive industries, becomes crucial if the government wants to improve both the quantity and the quality of jobs,” she said.
Shinta noted that the government should focus on the manufacturing sector as a key growth driver, citing the sector’s high formal employment rate of 61%.
Businesses are also generating jobs in the services, accommodation and food and beverage sectors, the digital economy, as well as new emerging industries linked to the green transition.
However, she said hurdles remained in ensuring that growth in these sectors could translate into increased productivity, improved workforce skills and the expansion of formal employment.
With this, businesses are grappling with domestic and global challenges, including Indonesia’s long-standing “high-cost economy” covering logistics, energy, financing and compliance costs.
Frequent regulatory changes have also complicated budget planning for both the middle and long-term.
“At the end of the day, these factors will affect companies’ decisions to increase investment and recruit new talent in both the short and long-term,” Shinta said.
The association urged the government to pursue “parallel reforms”, including improving regulatory certainty and consistency through measures such as a Manpower Law that promotes industrial competitiveness and job creation.
Additionally, the government needs to address structural issues that contribute to the high-cost economy, simplify business licensing and adopt more supportive policies for labour-intensive industries, which have higher capacity to absorb workers and are sensitive to rising production costs.
Researcher Yusuf Rendy Manilet from the Centre of Reform on Economics (CORE) said on Sept 1 that the the lower end of the three million jobs target was “relatively realistic”, but the upper target was “ambitious”.
He cited data showing that Indonesia added only 1.9 million workers from February 2025 to February 2026, meaning that even the lower-end target of 2.57 million jobs would represent a significant jump.
Yusuf also pointed out that Indonesia’s employment elasticity of economic growth, at around 0.25, was relatively low.
It means that 6% growth could only generate 2.2 million additional jobs.
To reach the 3.49 million target, Indonesia would need higher economic growth and employment elasticity in a range between 0.36 and 0.4.
“Economic growth has increasingly been driven by capital-intensive sectors, such as mineral downstreaming and commodities.
“Their investment value is huge, but the employment absorption is relatively limited,” he said.
Yusuf argued that the government should revive labour-intensive industries and improve the business ecosystem, by reducing energy and logistics costs, stepping up industry protection against unfair and illegal imports, and streamlining access to working capital for companies within the supply chain.
Overhauling the design of fiscal incentives to be assessed not only based on investment value but also on job creation could also help ensure that large investments generate both additional capital and employment.
Head of the University of Indonesia’s Demographic Institute, I Dewa Gede Karma Wisana, also raised doubts over the quality of jobs created under the government target.
“Given the current pressures faced by businesses, it seems difficult to ensure that half of the new jobs are decent and can guarantee sustainable working conditions,” he said.
Dewa said that the greater challenge was in creating demand for labour.
Without new large-scale enterprises or labour-intensive businesses that can utilise the available skills in the workforce, opportunities for quality jobs would remain limited.
“The government needs to ensure legal certainty for business operations and encourage businesses and industries to expand so they can significantly absorb the existing workforce,” he concluded. — The Jakarta Post/ANN
