Indonesia Turns To Internships To Quell Youth Unemployment

Indonesia has started a program that subsidizes internships for university graduates, aiming to encourage hiring as youth unemployment runs at about three times the national average.

Young people accepted to receive the aid packed a hall in November, eager to learn about their positions. Coordinating Minister for Economic Affairs Airlangga Hartarto told those gathered in central Jakarta that the program would allow recent university graduates to hone their skills before fully joining the workforce.

The subsidies, which have been rolled out in phases since October, are part of an economic stimulus package launched in mid-September, following street protests by young graduates angry at being unable to find work despite strong economic growth.

The program drew 190,000 applicants in the second phase, with roughly 63,000 people accepted.

Muhammad Farhan, 21, an informatics engineering student from Bandung, chose to intern at a maritime industry startup. "I want to learn about the maritime industry, which is related to the information technology industry," he told Nikkei, adding he would like to pursue a maritime career.

Roughly 24,000 people were accepted in December's third phase. To date, over 100,000 interns have been placed. Another phase is planned for this year.

The government provides interns with a salary equivalent to the minimum wage -- 5.7 million rupiah ($340) per month in Jakarta -- for six months. Interns are accepted by state-owned enterprises, private companies and government organizations, for a total of over 6,000 employers as of the third phase.

Indonesia's youth unemployment rate is hovering at around 17%, far above the overall national average of just under 5%.

Nearly 70% of unemployed people are believed to be from Generation Z, aged 15 to 29, and the number of unemployed university graduates exceeds 1 million.

Indonesia continues to see 5% economic growth, but it lags in manufacturing, which has the potential to absorb a large number of workers. The sector accounts for about 19% of gross domestic product, lower than that of other Southeast Asian countries like Thailand and Vietnam, both around 24%, and Malaysia, around 22%.

About 60% of workers are employed in the informal sector, working as street vendors, running small shops or driving for ride-hailing services. An influx of inexpensive Chinese products has contributed to factory closures and layoffs in the textile and footwear industries, pushing more workers into the informal sector in recent years.

Indonesia has the world's fourth-largest population at about 280 million people, and a low average age of 29. University graduates have increased to over 1 million annually, but they face a job market that increasingly favors employers.

Large-scale anti-government demonstrations spread across the country in late August and early September, driven in part by university students and other young people dissatisfied with their dim job prospects.

To what extent the new internship program solves these problems remains to be seen. While some companies may choose to hire talented participants after their internship period ends, most interns will need to find new jobs.

Haikal Rizki, 22, a student from Serang, Banten, has begun an internship as an e-catalog curator at the Policy Institute for Procurement of Goods/Services, a government agency.

Rizki, who graduated in June, realized that the internship program didn't guarantee easy employment after graduation. He has already begun applying to several companies.

"There are a lot of law school graduates, so finding a job that aligns with what I learned during college isn't easy," he said.

Muhammad Baron, vice president of corporate communication at state-owned oil company Pertamina, said that while internship program does not guarantee future employment with Pertamina, "it is considered valuable capital because it increases one's value as a job seeker."

"Pertamina's recruitment process is conducted through a joint recruitment process with state-owned enterprises," he said. "Students have traditionally used internships at Pertamina as an opportunity to learn and enhance their portfolios before applying for jobs at other companies or participating in state-owned enterprise recruitment."

President Prabowo Subianto has set a target of boosting economic growth to 8% and has been working to expand employment opportunities. As a flagship policy, he launched a free school lunch program that benefits 80 million students.

He also plans to channel roughly $8 billion in dividends from state-owned enterprises into a government-affiliated fund to promote investment in higher-value industries in natural resources and other sectors.

But it is unclear whether these policies will speed up economic growth. Worryingly, foreign direct investment in July-September 2025 fell 9%, the second consecutive quarter of decline.

Source: Asia_Nikkei