Economic Update

Indonesia: Increased spending, international focus

Asia | 16 Aug 2011

Increasing government spending and a renewed focus on international partnerships are paving the way for Indonesia’s education sector to open up to foreign universities with more public funding allocated to improving learning services.

Indonesia’s revised 2011 budget, which was under parliamentary discussion in July, would see education expenditure reach Rp262trn ($30.99bn), up around Rp14.5trn ($1.71bn) from the initial suggested allocation. These figures do not include an additional Rp2trn ($236.5m) for the National Education Development Fund.

Investment is much needed as Indonesia looks to strengthen its basic education system while building a higher education segment that can compete on an international level. Access to elementary schooling is one of the biggest challenges facing the country. While provision is generally adequate, in some areas the official policy of nine years of free compulsory basic education for all is some way from becoming a reality.

In July, Anwar Alsaid, the head of the UNESCO education unit in Jakarta, noted that Indonesia needed to continue investing in building schools and ensure that schooling was free to meet its UN commitments.

Indonesia is a signatory of the UN’s Education for All (EFA) initiative, launched in 1990, which laid down six targets for participating countries, including providing free and compulsory primary education for all school-aged children. There are concerns, however, that Indonesia might not meet its EFA targets by 2015 if it does not tackle school shortages, fees and additional costs charged by some institutions. Reports suggest that the international economic crisis has made it more difficult for some parents to afford to send their children to school, particularly if they are obliged to pay for equipment, books and uniforms.

“More money should be provided by the government to build more schools so no student is deprived of a primary education,” Anwar said. “And we must ensure no extra fees are levied on parents.”

The government is taking heed: on July 27, the local press reported that the Ministry of National Education had dedicated Rp762.2bn ($90.15m) to fund scholarships for 2.04m students from low-income families. The scholarships, which are worth Rp360,000 ($42.57) per pupil, will go to elementary school students in the first to fifth grades.

The funds are intended to help poor parents purchase school necessities such as uniforms and supplies for their children. Economic and geographical conditions will determine which municipalities receive the money, and municipal and regency governments will be responsible for allocating funding to schools and monitoring its delivery to families.

But efforts to increase capacity and improve access and standards will also involve international cooperation and the participation of overseas agencies and institutions, an essential part of Indonesia’s education system and an important driver in its development. Demand for higher education, for example, is on the rise in Indonesia, due to a combination of interlinked factors: population growth, rising incomes, a growing aspirational middle class and increasing opportunities for those with advanced schooling.

While the country looks set to benefit from a substantial demographic dividend as the share of working-age people in the population expands, it will need to make sure that the education system is prepared to deal with the growing number of students entering the classroom. Anies Baswedan, rector of Universitas Paramadina, a university in Jakarta, told OBG, “The demographic dividend will only pay off is this group is educated and trained properly. Without adequate education and training, it is meaningless.”

According to the World Bank’s June 2011 “Indonesia Economic Quarterly”, making the right policy choices will be crucial to maximising the demographic dividend, particularly in regard to job creation and improving educational outcomes. “To support growth that is job-creating, the government can enhance entrepreneurial training and access to quality education and provide better services to match employers and job seekers, and accelerate the creation of entry-level jobs for youth by improving the flexibility of current labor regulations,” the report stated.

According to Anies, while around 4.6m students enter the school system every year, only 600,000 are graduating from the university level, meaning many drop out along the way, with only 1.7m-1.8m completing high school. Addressing this situation will require improved access to facilities. “If there is a serious effort to provide more educational facilities and provide easier access, there will be an immediate improvement. It won’t be a complete solution but it will be a good first start,” Anies told OBG.

At present, however, demand for education, especially at the university level, is not always met by the existing domestic supply, leading many Indonesians, particularly the well-off, to go abroad for higher education. This creates both challenges and opportunities for Indonesian institutions, which must increasingly compete on a global market, and has led them to seek to build international ties.

US Secretary of State Hillary Clinton’s visit to Indonesia at the end of July, for example, saw the second meeting of the US-Indonesia Joint Commission under the bilateral Comprehensive Partnership signed in September 2010. The Joint Commission, established to strengthen ties between the world’s third- and fourth-most populous countries, includes a working group on education.

The working group reported that “significant progress” had been made in increasing the exchange of students and academics between the US and Indonesia, including through the Fulbright Programme, a US scheme that provides grants for students, scholars, scientists, artists, and others involved in education and culture.

The working group also praised progress made building university partnerships, particularly in the areas of science and technology, which are seen as key to boosting value-added sectors in Indonesia’s economy and strengthening its international competitiveness.

Indeed, there is a growing focus on providing an international education. “There are over 100,000 Indonesians currently studying at universities overseas,” according to Jonathan Parapak, the president and rector of Universitas Pelita Harapan (UPH), a private Indonesian university. “Those who can afford it prefer that their children have an international education. So as a private Indonesian university looking to attract the country’s top students, our mandate is to become more international. To do this we are partnering with top international universities that have specialist reputations and are increasing English-language instruction and curriculum.”

Parapak told OBG that he expects restrictions on the establishment of Indonesian campuses of foreign universities to be lifted by 2015. This would encourage foreign involvement in the higher education sector and could see big-name international institutions set up branches in Indonesia, increasing competition in the market and potentially driving up standards, as well as building value and retaining skills by encouraging Indonesians to complete their studies at home.

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