**2. Background to Indonesia**

Indonesia has over 18 thousand islands. The Indonesian economy, politics, population, and education system are concentrated in Java and Sumatra. Over 85 percent of Indonesia's GDP is generated from these locations [10]. As in nearly all emerging economies, there is a national program toward improving living standards, increasing employment opportunities, and developing globally competitive industries. With sustained GDP growth, increased education participation, a shift away from agriculture, and migration to urban areas, the share of those in poverty has declined over the past two decades [11]. There has been an ongoing emigration of Indonesia workers to Asia and the Middle East working in hospitality, domestic work, construction, and plantations [10]. Indonesia has had to deal with natural disasters including earthquakes, tsunamis, fires, floods, and volcanic eruptions. The economy was hit hard by the Asian financial crisis (1997–1998), the global financial crisis (2008–2009), periodic fluctuations in world oil prices, and the COVID-19 pandemic [12].

Indonesia has the largest population and economy in SE Asia. Indonesia's economy has moved from being the world's 27th largest economy in 2000 to the 16th largest in 2018 [11]. There are many ethnic groups, the dominant ones being Javanese and Sundanese. The main religion of Indonesia is Islam, and this plays an important role in Indonesian culture and politics. The structure of the Indonesian economy shifted from dependence on agriculture in the 1950s and 1960s to industrialization and urbanization from the late [13]. Indonesia's GDP composition by sector share is agriculture (0.14), industry (O.41), and services (0.45) [14]. The major exports of Indonesia were processed and unprocessed commodities including palm oil, coal briquettes, petroleum gas, crude petroleum, and rubber [15].

A feature of the economy is the large share of informal or unregulated employment, especially in agriculture. There are high rates of youth unemployment and underemployment throughout the economy, and the female labor force participation rate is well below that of males [15, 16]. Despite the ongoing structural change, per capita income growth is low, and poverty is widespread [17]. Productivity growth has been limited, reflecting low rates of investment, especially in skills, and labor-intensive production, especially in agriculture [15]. While the formal sector has expanded, the informal sector remains large and many jobs in the formal sector are short term and insecure [10, 18]. Contributing to low productivity growth are the limited and dated infrastructure and unreliable electricity supplies [13].

Despite the expansion in secondary and HE education and participation in Indonesia, there has been an ongoing skills gap and graduate employability problem. Pryono and Nankervis [19] reported that key skills gaps across occupations included senior managers and professionals, scientists, and engineers, and major skills shortages across several industry sectors that included agriculture, forestry, hunting and fishing, transport and storage, finance, insurance, real estate, and business services*.* Despite the record enrolments in HE, the skill shortages were persistent, especially in the professions [19].

While Indonesia reported GDP growth of 5 percent over the last decade, employment growth has been one percent or less on average [17]. In part, this reflects the large informal and unregulated employment sector that accounts for about threequarters of the workforce. GDP growth does not translate into formal job growth. In addition, there have traditionally been high rates of youth unemployment and underemployment, and the female labor force participation rate is considerably below that of males [15, 16]. Despite GDP growth, per capita income is low, and poverty is widespread [17, 20]. Productivity growth has stalled because of limited investment in skills and training, labor-intensive production, and the large share of irregular employment in the formal sector that results in limited investment in training [15].

Post-COVID, there has been a strong recovery, though the COVID pandemic had a major negative impact on the economy. The IMF [21] review of the Indonesian economy noted that the economy was expected to recover with real GDP growth forecast to be over 5 percent for 2022 and 6 percent for 2022. Despite the predicted strong growth, the IMF [21] identified several risks to ongoing growth, and these included adverse global conditions (increasing inflation and interest rates) and risks from global climate change with Indonesia at risk given its dependence on hydrocarbons, the extensive de-afforestation occurring throughout the archipelago, its location in an active earthquake/volcanic zone, and the risk of severe storms/typhoons.
