Indonesia has a market-based economy in which the government plays a significant role. The President, who took office in October 2004 after the country’s first direct presidential election, has implemented a "pro-growth, pro-poor, pro-employment" economic programme to reduce unemployment and poverty significantly. This is set out in the Indonesian Government’s National Medium Term Development Plan 2004 – 2009 (RPJM), which focuses on four broad objectives: creating a safe and peaceful Indonesia, a just and democratic Indonesia, a prosperous Indonesia, and establishing a stable macroeconomic framework for development.
Despite an annual average GDP growth of 5% between 2002 and 2006, Indonesia’s open unemployment rate has risen from 9.1% to 10.4% during the same period and half the population of 220 million continue to live under the US$2 per day poverty line. In February 2006, the Government announced new policy measures to improve the investment climate in Indonesia for both domestic and foreign investors, so as to generate employment. The package consists of policies designed to strengthen investment services, harmonize central and regional regulations, improve customs, excise, and taxation services, create jobs, and support small and medium enterprises.
In addition to unemployment, underemployment also remains prevalent, at 30%, and more than two-thirds of the employed are in the informal economy. Many Indonesians seek better opportunities abroad – there are about four million documented migrant workers from Indonesia and it is estimated that the number of undocumented migrants is 2 to 4 times higher. The skills base and productivity of the labour force is insufficient and there is continued exploitation at work. Socio-economic exclusion of the marginalized and vulnerable in society is a continuing concern, with young women and men and those living in conflict and crisis affected areas most at risk. Youth, as one example, are three times more likely to be unemployed than adults.
The focus in Indonesia is not solely on unemployment, but also on the conditions of work of those who are employed and on effective labour administration. Closer collaboration between key Ministries and between the ILO’s tripartite constituents – through social dialogue – is integral to this effort, and can play an important role in ensuring that economic growth is more employment-intensive and benefits the poor and marginalised through income-generating activities.