Higher Education Funding in Indonesia

The Jakarta Post reported that the Indonesian Director General for Higher Education, Satryo Soemantri Brodjonegoro would increase the subsidies for universities. The government would disburse a Rp 13.5 trillion (US$1.5 billion) fund next year to subsidize costs at state-run and private universities. Good news for Indonesian higher education? Of course, every extra dollar or rupiah is welcome. But…

He admitted that the increase would not cover education costs for university students. “The amount is too small to meet the demands of poor families who want to have access to higher education,” he said. In recent years the government has decreased its subsidies for state-run universities and encouraged them to find their own funding sources. As a result, some state-run universities began offering courses for exorbitant fees.

Starting from 2000, Indonesia’s leading four institutions have – in financial terms – basically been privatised. Institut Teknologi Bandung, Institut Pertanian Bogor, Universitas Indonesia and Universitas Gadjah Mada received the so-called BHMN status (Badan Hukum Milik Negara or ‘state owned legal entities’). The other public universities in Indonesia are meant to follow this path in the future. Universitas Sumatera Utara (USU) received the status in 2003, followed by the Universitas Pendidikan Indonesia (UPI) in early 2004. BHMN meant greater autonomy and autonomy was necessary because the universities, under the Suharto regime, suffered from a serious lack of academic freedom. But autonomy did not just mean academic autonomy, it also meant financial autonomy. And this basically translated into budget cuts. These cuts were so severe that some of the universities now only receive about a quarter of their financial means from the government, where it used to be nearly 100%!

The chronic underfunding of Indonesian education was acknowledged by the Megawati regime. At that time the pledge to allocate 20% of the government budget on education was even incorporated in the constitution. But what is going on in reality? As we see below, Indonesia’s spending on education as % of GDP has slowly decreased in the early years of this century. While in 2003, Indonesia spent only 0.9% of its GDP on education, Malaysia spent nearly 8 %!

For all graphs: Red = Indonesia; Blue = Malaysia

So is the 20% objective unreasonable? For sure, the 20% objective is far from achieved in Indonesia. Malaysia however spent even more than 20%, while Indonesia did not even reach 10% (no data for 2000 & 2003). However, there has been some improvement after 2002. For 2006, the expenditure on education is 11.8 % of the budget. Some improvement, but still far from the promised 20%.

For higher education, the situation becomes even more sever if you see that Indonesia spends relatively less of its education money on higher education, compared again with Malaysia. For Malaysia, between 30 and 35% of its education budget went to higher education between 2000 and 2003. For Indonesia that is less than 25%.

What is also interesting to see in this respect is where the money is spent. Below you can see that the majority of Indonesian spending is current expenditure. For Indonesia that is over 80%, of which nearly 100% goes to salaries. For Malaysia current expenditure is around 50% and much less of this goes to salaries. Capital expenditure for Indonesia thus is very low, pointing to a serious underinvestment in Indonesia’s universities.

What has been the result of all this? Basically two things. For Indonesia it has led to rigorous inequality for higher education. In the past decades the government has done a good job in eliminating inequality in elementary education. But if we look at data from Triaswati and Roeslan (2003), presented by Nizam in a recent UNESCO report on Higher Education in Southeast Asia (PDF; 4.6 MB), we can see that inequality increases with the level of education. While 30.9% of the richest quintile receives higher education, of the poorest quintile, only 3.3% is that lucky.

The second result is that the autonomous BHMN universities are becoming ever more entrepreneurial. This in itself is not a problem and it is seen in nearly all countries. The Indonesian BHMN universities have undergone such a drastic change in just a few years but have coped with it relatively well. But they are seriously underfunded, especially if we consider that the demand upon them has grown. Increasingly they are expected to deliver high quality research and, much more than their Malaysian counterparts, rely heavily on the market and the private sector to acquire research funding. Somewhere along the line you will have to ask whether the political domination has been replaced by the domination of the market.

In this light the increase of subsidies can be seen as too little too late. Maybe it is never too late to invest in education, but an increase from 12.9 trillion to 13.5 trillion Rupiahs is definitely too little!

(data for the first four graphs are from the UNESCO education database)

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