GLOBALIZATION is surely one of the keywords of our era. Globalization can be taken to mean that everything in the world affects everything else. In other words, globalization is the integration of society and economies, resulting, amongst other things, in the reduced cost of transportation, faster communication ideas, lowering of trade barriers, and rising capital flows.

The World Bank, in its mainstream strategy, supports all countries in this integration process, paving the way to poverty reduction. Globalization is believed to foster faster economic growth, resulting in a “trickle down” development effect where the poor will benefit.

Several poor nations have succeeded in reducing the numbers of the extreme poor to 120 million in the last decade, and this was put down to the integration of the economies. Vietnam and China fall into this category. However, 2 billion poor in other countries have been left out of the process of globalization (Africa, Former Soviet Union and Latin America). Chile in Latin America, due to prior inequalities in education attainment, the implementation of liberalized trade, to open their domestic market, has further widened wage inequality.

In Chile, the unemployment rate has increased remarkably (from 9.4% in 1974 to 18.6% in 1983) since Chile’s adoption of an open market economy, including labour market flexibility. Similarly, the Indonesian labour force is dominated by a primary school educated workers, resulting in a pool of unskilled labour. The Indonesia Statistics of 2002 indicates that 45% of the rural population, and 68% of the rural poor youth have only a primary education or less.

Indonesia began liberalizing its financial sector in 1983, by liberalizing interest rates and opening capital account. This provided domestic financial companies access to private funds abroad. This policy opened up numerous possibilities for short-term capital flows into Indonesia and has increased offshore borrowing, including speculating in short term flow of funds.

This resulted in private foreign debts and the collapse of the Indonesian monetary system. The same liberalization policy did not help in reducing Indonesia’s burgeoning unemployment rate. 8.6% of workers lost their jobs as a result of the economic crisis that attack Indonesia subsequent to the Thai devaluation in 1997. Recent statistics suggests that the increment in the unemployment indicator rose from 4.9% in 1996 to 8.8% in 2001.

Indonesia, however, is making progress in its attempts to stabilize its macro-economics while maintaining the exchange rate of IDR 8,500 with a modest growth rate of 3.5% to 4%. However, the growth is more the result of government and private consumption rather than investment.

Indonesia needs an integrated policy arrangement that will foster an equitable and pro-poor economic growth, where no one is left behind.

Investments could have created new jobs, thus facilitating a reduction in open-unemployment rates that has now reached almost 10 million. It has been estimated that over 110 million Indonesians live under the poverty line, where 53% have no access to health services, water, education and proper sanitation. This condition is far from the Millennium Development Goals on the Eradication of Extreme Poverty and Hunger in 2015.

Government and financial institution policies that were only focused on market and trade liberalisation to achieve some economic growth, without consideration of the rights and entitlements of its people (pro-poor economic growth), has led to an increase in unemployment. This condition is worsened by the diminished capacities of poor people, due to low or no educational attainment, leading to diminished skills, rendering one incapable of securing a decent job.

Indonesia needs an integrated policy arrangement that will foster an equitable and pro-poor economic growth, where no one is left behind. This can be done by improving education attainment levels and strengthening skills development, so that new workforce entrants and existing workers can compete effectively in finding a decent job and benefit from the integration of economies that offers a free labour market. In addition, the government needs to establish macroeconomic policy goal to balance fiscal and financial variables with employment target, identify sectors with potential, such as agribusiness, and make decentralization work in provision of basic education standards and building local capacity as well as improve the quality of education especially from the point of view of service delivery. This is the underlying ethos of “the ILO decent work agenda.”