Prospect Of Doubtful Algorithm Hill, Expert: HR Should Be Considered

Silicon Valley. (Photo: By courtesy)

YOGYAKARTA - Over the next few years, a number of companies are planning to work on the 'Algorithm Hill' project in Sukabumi, West Java.

From the statement of the National Council for Special Economic Zones (KEK), this project was first put forward by PT Bintang Raya Lokalestari in 2018, with their land area of 888 hectares. The project was undertaken by PT Kiniku Bintang Raya, led by Budiman Sudjatmiko, a PDIP politician.

The company is the result of an operational collaboration between PT Kiniku Nusa Kreasi and PT Bintang Raya Lokalestari. The Algorithm Hill project is expected to match the Silicon Valley of the United States, which was built majestically as a center for global technology companies.

It's just that some doubts arise after witnessing the track record of the world of research and innovation in Indonesia, which is less visible. The indicator used in this statement is Indonesia's minimal research expenditure in the last 20 years.

During 2000-2013, the Indonesian Knowledge Sector Institute (KSI) noted that spending for research and development purposes was only equivalent to 0.07 percent of GDP. The figure is very low for the Asian region. The trend didn't even change much until 2018.

From data from the UNESCO Institute for Statistics (UIS), the share of Indonesian research spending is 0.22 percent of GDP. This value is much lower than India, which has an allocation of 0.65 percent of GDP, Thailand 1 percent, Malaysia 1.04 percent, and Vietnam 0.52 percent. This value is also far below the United States, whose research spending reached 2.7 percent of GDP in 2013 and 2.83 percent in 2018.

Indef Nailul Huda, Head of the Center of Innovation and Digital Economy, said that the trend of R&D spending has proven the stagnation of the development of innovation-research in Indonesia. From the lack of R&D spending, Huda considered the plan to repeat the success of the US Silicon Valley as an exaggerated target.

Indonesia's R&D performance is still far from good

According to him, the project to be built is a wrong step if it does not heed various data on Indonesia's R&D performance which is still far from good value.

Regarding research spending, Nailul added that the majority of industries in Indonesia still do not produce high-tech goods. According to the World Bank's records, Indonesia's high-tech goods exports as of 2018 only amounted to 8 percent of total manufactured exports. In comparison, Thailand reached 23.3 percent, Vietnam 41.4 percent, and even Malaysia was able to reach 52.8 percent.

If standards were relaxed to include exports of intermediate technology goods, Indonesia's position would be equally bad. In 2017, the portion was only 28.1 percent of total manufactured exports, below Thailand's 63.8 percent, Malaysia 63.4 percent, and Vietnam at 51.3 percent. In terms of Human Resources (HR), Indonesia also still has a lot of homework to do.

The UIS data shows that the number of Indonesian researchers compared to 1 million people is also one of the lowest. As of 2017-2018, the number is only 244 per 1 million population. Compare that with Pakistan 487, India 408, China 3,068, Singapore 7,976, Malaysia 2,656, Thailand 2,003, and Vietnam 895.

If Indonesia only focuses on developing the region without considering human resource preparation, there will be concerns that there will be gaps for anyone who can enjoy this progress.

Seeing how far Indonesia's capacity is from Silicon Valley, Nailul appealed not to this project just as a place to get incentives without really paying attention to R&D progress. KEK will indeed get a lot of tax incentives based on Government Regulation (PP) No. 12/2020 and Regulation of the Minister of Finance (PMK) No. 237/2020.

One of them is cutting corporate income tax rates for 10-20 years depending on the promised investment value. Former Deputy II of the Presidential Chief of Staff Yanuar Nugroho also has a number of doubts regarding the project. According to him, the road map and the project ecosystem are unclear.

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