Emerging Economic Development With Youth Entrepreneurship
Galih Prasetya Utama School of Pharmacy, Department of Science and Technology Pharmacy, Bandung Institute of Technology 2006
The Fact of Unemployment, Economic Stagnation, and Its Social Impact
First of all, we would like to discuss about our
national vision. Indonesia’s aim to become a welfare
state, to reach the target for prosperity for all, is still
exist in our life spirit. Indonesia’s way of life within
Pancasila ( The Five Basic Principles) wrote the hope
to become a prosperous country.
Secondly, the country enjoyed tremendous economic
growth in the 1980s and much of the 1990s, due to
Indonesia’s abundant natural resources and increases
in the manufacturing and services sectors. As a result,
Indonesia’s middle class grew considerably, but
poverty remained widespread. The agriculture sector
led the Indonesian economy in output until 1991,
when it was overtaken by manufacturing. In 2003
agriculture accounted for 17 percent of the GDP.
Annual output grew by 3 percent per year during the
early and mid-1990s. Indonesia has achieved
remarkable success in economic development in
recent years. During the last decade GDP growth ran
as high as 7.8% per year (in 1996), but since the
economic crisis that hit Indonesia in 1997, as a result
of the crisis that year in Thailand growth has plunged,
falling to just 0.85% in 1999. During the first quarter
of 2002, however, GDP growth has rebounded,
climbing to 3.25%.
The rupiah, which had been in a range around
Rp8,600/$1 since mid-2003, depreciated by about
12% over the first 6 months of the year to around
Rp9,600. Government subsidies insulate consumers
from the direct impact of rising oil prices, but higher
prices for imported food and other items put upward
pressure on consumer prices. Indonesia, traditionally
an exporter of oil and gas, did not get benefit from the
rise in global oil prices over the first half of the year.
The Government’s subsidies on domestic fuel are
projected to cost $2.4 billion this year, constituting a
major drain on the budget.
The total population of Indonesia was estimated to be
213 million as of 2001. At the same time, the size of
the economically active population age 15 and over
was estimated to be 144,033,873. Between 1997 and
2001, the employment rate increased 4.32%, from
87,049,756 to 90,807,417. The largest share of the
workforce is still dominated by workers with only a
primary-school education (50,280,736 workers in
2001). The share of workers with high school and
university degrees, however, has been rising in urban
areas, but less-well educated workers are still a
majority even in cities.
Indonesia's open unemployment rate is high
compared to the other developing Southeast Asian
countries. In 2003, the official rate of 9.5% was
astronomically higher than those of its neighbors,
Malaysia and Thailand, which were just 3.6% and
1.5% respectively. It is only lower than that of the
Philippines, which was 10.2%. Taking the comparison
a bit further, Korea’s unemployment rate in the same
year was only 3.6%. Open unemployment rate jumped
from 4.4% in 1994 to 6.5% in 2004, or there was a
47percent proportional increase. If one looks between
1994 and 1997, just prior to the economic crisis,
unemployment rate was relatively stable. During the
crisis, it skyrocketed to almost 6.5% in 1999 before
starting to descend in the following year and reaching
5.5% in 2001. Afterwards, the rate went on a generally
upward trend up until 2004. More than half of the
unemployed are highly educated, with at least 12 years
of education, and a further quarter having nine years
of education. This is in accordance with the higher
open unemployment rate among the highly educated
found in other studies (BPS, 2003; Irawan, Ahmed, &
Islam, 2000). Young workers dominate the
unemployed in both areas, hovering between 62% and
68% in urban areas and between 71% and 79% in rural
areas. This shows that it was more difficult for new
entrants, who were generally better educated, to get
into the labor market to find jobs in rural areas.
Hence, it is of little surprise that many of the young
and the educated leave rural areas and flock to urban
areas.
Social impacts of the high rate of unemployment are,
the rise of criminal number, the decrease of social
quality of life, lack of trust, and the worst, because of
most of the open unemployment are youth and highly
educated, meaning that, the future of Indonesia is still
in a big question mark! The future of country is the
youth, if there are so many young people live with
unclear future, lack of appreciation, and no guarantee
of good social life, meaning no trust, Indonesia facing
unclear future.
Creating Add Value by Idea and Knowledge
Walt Disney’s famous statement, “ If you can dream it,
you can do it”. We are definitely sure that Indonesia
will be back to the track of prosperity. Indonesia is
abundant of natural resources, the country has
significant deposits of oil and natural gas, most of
which are concentrated along the eastern coast of
Sumatra and in and around Kalimantan. Indonesia
produces more than 80 percent of Southeast Asia’s oil
and more than 35 percent of the world’s liquefied gas.
Large parts of Indonesia, especially in Kalimantan
and Papua, have not been intensively explored for
minerals. The seas surrounding Indonesia yield
abundant saltwater fish, pearls, shells, and agar (a
substance extracted from seaweed). Volcanic ash
creates rich soil that is ideal for growing crops.
Tropical forests cover 55 percent of the land, although
this proportion has been shrinking due to
deforestation Indonesia also rich of cultural resources,
Indonesian modern art is an adaptation of modern art
in other parts of the world, flavored with Indonesian
cultural influences. The country has a long and grand
architectural tradition. Indian influence is evident in
the large Buddhist monument of Borobudur and the
Hindu temple of Prambanan, both in central Java.
Borobudur is Indonesia’s most famous tourist
attraction. Arabic and Chinese Muslims have
influenced the architectural style of mosques
throughout Java.
But still, without any kind of goodwill from the people
to become independent in economic, this is very
difficult to move, or even think to develop the
resource, to add its value, so that it will have high
economical cost, for comparative and even
competitive advantage.
Young people can become a technical entrepreneur.
We are developing ideas to give an add value for
products. Developing new markets and even new
industries are generally the goal of those with
technical orientation. The creation of an enterprise is
merely a means to achieving our goals, not an end in
itself. Indonesia’s natural resources will have more
economical value with our knowledge. Without any
kind of add value in technology, Indonesia becoming
supplier of raw materials, lack of economic value for
the people, and it’ll be defeated in global economic
competition. It needs knowledge based entrepreneur
touch to change the present condition.
We can also become Organization builders. Young
entrepreneurs start their own businesses because they
like to build organizations. These organization
builders have skills in developing people, systems and
structures. Indonesia’s various cultural arts and the
beautiful scenery for many places need the touch of
young spirit with good organizational skill. Indonesia
can become the destination for the people from all
around the world who looking for tropical
environment, cozy place, and surround with various
custom cultural tradition. It needs organizational
based entrepreneur touch to build the identity of
Indonesia’s tourist destination to become prestigious
and exotic place in the world.
Young people using their idea as the builder of the
entrepreneurial framework and knowledge as a tool to
make the dream come true. The add value will give
comparative and competitive advantage for
Indonesian resources. But still, the precious resource
of Indonesia, is the human, the people of Indonesia it
self
Create our Future; the Step for Cultural Movement in Youth Entrepreneur and Policy
How to do that? That’s the logic and rational question,
how to? Because we ought to know how to do that.
The key success of entrepreneurs are, they’ve very
high standard, and long term goals, but still, they
know how to reach their goals, logically, rationally.
Five crucial factors for entrepreneurial engagement
that should be addressed by appropriate programmes
to foster youth entrepreneurship. This includes: Social
and cultural attitude towards youth entrepreneurship;
Entrepreneurship education; Access to finance/Start-
up financing; Administrative and regulatory
framework; and Business assistance and support.
Social and cultural always affected the existence of
entrepreneurial paradigm. Culture is the system of
collective values that distinguishes the member of one
group from another. “Masculinity”3, “power
distance”4 and “individualism”5 are also linked to
entrepreneurial behavior. Different levels of
individualism and power distance (hierarchies) can
partly explain the differences in entrepreneurial
activity among Japan, Europe and the USA.
Social perceptions and perceived legitimacy of
entrepreneurship are also an important factor in
helping of hindering entrepreneurial behavior.
However, for some societies, entrepreneurship
remains undervalued compared to, for example, a
career in medicine, law, with a large corporation or
with government. In these societies, perceptions
remain that family sacrifices made to help young
people gain a high level of education are not repaid if
they become self-employed.
For consideration, the cultural environment in
Indonesia is low in masculinity, high power distance,
and low cultural in invidualism. The communities in
Indonesia are more to be feminism, paternal, and
collectivism.
How should education be generally improved to
become more entrepreneurially orientated?
Entrepreneurship programs should be introduced at a
school level, not only at college. These programs
should be present in other areas of studies and
careers, not only business administration. Besides, the
experiences of local young entrepreneurs should also
be introduced in these programs. Nothing is better
than examples. Only by meeting young entrepreneurs
aware of the problems and difficulties of creating a
business and who experienced successes and failures
of making a business, young students will believe they
can make it as well. This is keyword. Teaching
administration skills is not enough. It is crucial to
teach the spirit, the confidence, the trust, the
leadership, the firmness that only those who chased
the ideal of setting up an enterprise know. This should
be incorporated into study plans, pedagogical
programs, mentorship facilities and enterprise
development programs, which should – in turn – rely
on the help and knowledge of young entrepreneurs,
besides teachers and professors.
Key entrepreneurship educative constraints are :
General lack of introduction and adoption of
enterprise education; Inadequate curricula and study
programs; Wrong learning methods; Negligence of
students’ personal environment (parents and family
members); Lack of trained/educated teachers; Lack of
career information and business possibilities; Lack of
business and education linkages; and Lack of ICT
infrastructure/capability.
Education is a key issue. Schools should send out the
message that being an employee is not the only option
after the completion of studies. The advantages of
being an entrepreneur should be promoted and the
hopes of those young entrepreneurs who face the risks
of starting their own business should be nurtured.
Entrepreneurship promotion programs can be
broadly divided into 5 categories: Curricula and study
programs (e.g. KAB, NFTE, CEFE); Student, Mini
companies (competitions). (e.g. “Junior”, “Achievers
International”); Information resources and material.
(e.g. “Go to school”, Internet portals); School-
entrepreneur/business activities and events (e.g.
“KEIP”, “Students in the boss’s chair”); and
Simulation games (often computer-based)
(e.g.“Primanager”, “Gründungswerkstatt”).
Young entrepreneurs often launch their businesses
without carefully estimating the amount of capital
(start-up and working capital) they will need to
actually get started. Many insist that passion and
enthusiasm will be enough to get them through the
rough periods. Furthermore, young entrepreneurs are
often not aware of all available types of finance,
funding forms and special support programs. They
often do not understand the concept, the benefits, the
possibilities and the drawbacks of the numerous
forms of debt and equity (venture capital) financing.
Key constraints to start-up finance are ;Lack of
personal savings and resources; Lack of securities and
credibility (for debt financing); Lack of business
experience and skills (for debt financing); Strict
credit-scoring methodologies and regulations;
Complex documentation procedures; Long waiting
periods (time needed to decide on an application for
funding); Lack of knowledge, understanding,
awareness of start-up financing possibilities;
Unfavorable firm characteristics and industry; Legal
status/form of enterprise; Lack of (successful) micro
lending/-finance and seed funding.
Promotional efforts can be broadly divided into four
categories: Research into start-up and business
finance; Provision of start-up and business capital;
Improving the regulatory environment for start-up
finance; Information and counseling on access to
finance and funding.
The impact of administrative and regulatory burdens
on youth entrepreneurship and business in general is
also a fairly new area of research. However, these
burdens are among the most important barriers to
start-ups of young people in high-income and
developing countries. Government regulations and
bureaucratic formalities also are seen as one reason
for large informal sectors in many developing
countries, since the costs of formalizing are higher
than the gain in productivity from entering the formal
sector. Key administrative burdens are: Unsupportive
tax regimes (system and tax levels); Business
registration procedures and costs; Bankruptcy laws;
Time and costs involved in insolvency
proceedings;Ineffective competition law; Regulatory
framework changes and lack of transparency;
Property rights, copyright, patent and trademark
regulations.
Minimizing and simplifying regulatory and
administrative procedures, as well as maximizing the
support needed to comply with them, will make it
easier for young people to start-up and run their
business. In the following section, we outline some of
the major strategies, initiatives and policy-
instruments currently used in different countries to
reduce these burdens.
What are corresponding government approaches to
and structures for policymaking? Entrepreneurship
policy has been defined by Stevenson and Lundström
(2001) as:
Policy measures taken to stimulate entrepreneurship;
Aimed at the pre-start-up, start-up and post-start-up
phases of the entrepreneurial process; Designed and
delivered to address the areas of motivation,
opportunity and skills; With the primary objective of
encouraging more people to consider
entrepreneurship, to move into the nascent stage and
proceed into start-up and early phases of a business.
Drawing up on this definition, youth
entrepreneurship policy can be defined as: Policy
measures taken to foster entrepreneurial activity of
young people; Aimed at the pre-start-up133
(including entrepreneurship education), start-up and
post-start-up phases of the entrepreneurial process;
Designed and delivered to address the areas of
motivation, opportunity and skills; with the main
objective of encouraging more young people to start
an entrepreneurial undertaking or venture and at the
same time to improve young peoples’ general
employability.
Entrepreneurship policy in general and youth
entrepreneurship policy in particular, are still fairly
recent and evolving areas. Therefore, it is crucial to
understand where these policies are or should be
situated. Youth entrepreneurship policy is cross-
cutting in nature and therefore necessitates a
collaborative multi-stakeholder approach on the part
of government and society. This means that for
successful policy development in youth
entrepreneurship collaboration between different line
ministries (educations, labour, industry, youth and
finance in particular) is vital.
The short advice for Indonesian government to
emerging youth entrepreneurship are:
1) Develop an individual, tailor-made approach
2) Invest in research, benchmarking and testing
3) Carry out detailed evaluations and impact
assessments
4) Balance speed with scale of impact and cost of
implementation
5) Focus on enterprise education
6) Mobilize, activate and involve all major
stakeholders
7) Close the gap between national policy and grass-
root, regional and local initiatives
I believe that Indonesia is able to reach our dream by
youth empowerment, especially in entrepreneurship.
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