This report comes at a time when policy makers are challenged by the COVID-19 crisis that is generating a profound reflection on economic and social well-being. All 34 Indonesian provinces have been impacted by lockdowns, and the country has the highest number of virus-related deaths among Southeast Asia countries. Key sectors of the economy, such as tourism, have ground to a halt while disadvantaged groups, such as youth and women are bearing the brunt of the crisis. The recovery will require large-scale and well-coordinated policy responses that leverage all levels of government.

Before COVID-19 hit, Indonesia had experienced remarkable economic growth, making substantial progress in poverty reduction and gains in employment. However, there are large differences in outcomes across Indonesian provinces, which often reflect the quality of local infrastructure, services, education, and jobs.

This study sheds light on programmes and policies to promote job creation at the local level in Indonesia. The analysis presented shows the importance of strengthening local institutions managing and delivering employment and skills policies. As part of this review and prior to the COVID-19 outbreak, over 100 stakeholders across national ministries, as well as within the Indonesian cities of Surabaya and Makassar, were consulted to gain insights on the main threats and opportunities facing the labour market, especially as it relates to the differing impacts across people, places, and firms.

This study by the Organisation for Economic Co-operation and Development (OECD) and the Asian Development Bank (ADB) is the result of a joint effort by both institutions, and has benefitted from their respective research and analysis. This report is part of the Programme of Work of the OECD Local Economic and Employment Development (LEED) Programme. Created in 1982, the LEED Programme aims to contribute to the creation of more and better jobs for productive and inclusive economies. It produces guidance to make the implementation of national policies more effective at the local level, while stimulating innovative bottom-up practices. The OECD LEED Directing Committee, which gathers governments of OECD member and non-member countries, oversees the work of the LEED Programme.

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