Asean is striving to enhance its competitiveness on the global stage and readiness for a transition under its Carbon Neutrality Strategy. However, Asean will not be well-positioned to become an important part of the global net-zero economy without a robust human capital development to produce skilled, educated, and healthy individuals to drive the energy transition. Human capital has been a central ingredient in economic development, as evidenced by the bloc's Human Capital Index -- which ranges from 0.5 to 0.8 -- which demonstrates a positive correlation with Gross Domestic Products (GDP) per capita.
Studies suggest that better human capital doesn't only affect overall energy consumption, but it also enhances the energy transition process. This is especially relevant as the region aims for a just and inclusive energy transition under its upcoming regional energy blueprint (Asean Plan of Action for Energy Cooperation: 2026-2030). If these are not convincing enough, there are also other reasons which show investing in human capital development must be considered as we transform the energy system.
Supporting the workforce
Asean is home to more than 670 million people, over half of which are of working age. With most of the population in its most productive age, energy consumption tends to rise significantly. By 2035, the region is projected to account for 25% of the global energy demand, but only a third of the region's energy demand will be met by renewable energy sources. These projections are an incentive for investment, signalling strong market demand and long-term growth potential.
That said, the region is racing against time, as in just a few decades, the number of people who are of a working age will begin to shrink. By 2050, Asean's population is projected to start ageing, thus narrowing the window of productivity. This will have a significant impact on the region's economy, potentially hindering GDP growth. Therefore, it is crucial for Asean to seize this golden opportunity to achieve competitive economic advantages and step out of the middle-income trap toward carbon neutrality.
Keeping up with change
Transitioning towards low-carbon energy sources means leaving the fossil fuel industry behind and remaking the region's entire energy system.
It is projected that mine closures will decrease GDP by 4.5% in Indonesia, 0.2% in the Philippines, and 2.1% in Vietnam. The decrease is caused by a combination of direct layoffs, lower demand for coal, and indirect job losses in sectors related to coal mining.
Moreover, the energy market itself is evolving rapidly -- from coal mining to the extraction of critical minerals, from coal-fired power plants to renewable energy generation, and toward the development of other new emerging technologies, such as hydrogen, nuclear, and carbon capture and storage (CCS).
This transition is reshaping demand for labour and skills for infrastructure development and operations. A successful shift to a low-carbon economy will require a skilled and diverse workforce to meet the demands of evolving trends.
Jobs for the future
Asean's Renewable Energy (RE) industry is showing promising growth. In 2016, the sector created 611,000 jobs, which spiked to 779,000 jobs in 2018.
Malaysia is expected to dominate the share of future RE job creation, particularly with its growing solar industry, which contributed 54,300 jobs in 2019. In Indonesia, the RE sector employed around 581,400 people in 2021, with the majority working in the liquid biofuels industry.
This sector is also expected to expand significantly in the future. Under the most ambitious low-carbon transition scenario outlined in the 8th Asean Energy Outlook, the push towards net-zero will result in 3.4 million job losses by 2050. However, the RE sector is projected to create 14.6 million new jobs over the same period.
The focus now should be on the ability of each country's workforce to keep up with the projected demand, particularly for jobs which are considered to be "hard to fill", such as those relating to manufacturing, installation and operating RE systems.
Indonesia, for instance, only produced eight STEM graduates per 10,000 students in 2019, a number which the government is trying to boost through various initiatives.
According to 2022 figures, Malaysia produces the most STEM graduates in Southeast Asia, with 40.2% of its students graduating with a STEM degree, followed by Brunei (38.4%) and Singapore (35.9%).
Despite the promising numbers, the majority of these graduates can't meet the growing demands of the RE sector, as most of them took up skills which are more relevant to the fossil fuel industry.
Prioritising human capital development is essential to ensure the region's readiness for a sustainable and inclusive energy future. Human capital issues -- particularly those relating to employment and education -- should be integral components in the just and inclusive energy transition planning in Asean.
Investing in human capital will yield returns and accelerate low-carbon economic growth. However, to maximise these benefits and returns, such investments must be carefully planned and effectively implemented.
It's time for Asean to explore synergies within regional bodies to support human capital investment during its energy transition.
It must strengthen cooperation in formal education and promote knowledge transfers in clean and renewable energy technologies. Moreover, increased private investment in human capital, such as enterprise-based training, should be encouraged.
Auliya Febriyanti is a junior research analyst of Energy Modelling and Policy Planning (MPP) Department at the Asean Centre for Energy (ACE). Rhea Oktaqiara is a research assistant at MPP department at ACE, while Zulfikar Yurnaidi is a manager of the MPP Department at ACE.