Intermezzo – Back in Indonesia

Late last year my friend and I gave a presentation to a bank in Singapore regarding the general conditions in Indonesia. The title was “Indonesia: the Sleeping Giant of Southeast Asia”. The premise was simple, Indonesia has a lot to offer but there are many factors hindering its true potentials. Two factors that we highlighted was lack of infrastructure development and corruption.

In the Q&A session, one of the bankers asked, “Why is it that despite being the 4th largest population in the world, we don’t see many Indonesians abroad? Even if there are Indonesian scholars out there, they always go back to Indonesia”

I answered with a joke, “because Indonesians are like trained doves – no matter how far we go we always come back to Indonesia”.

Jokes aside, I tend to believe that usually Indonesian scholars abroad are divided into two: (1) those who are on scholarship and thus are bonded to return to Indonesia and contribute to the country; and (2) those who are fortunate to be able to finance themselves abroad and since their families have everything for them back home, they will return inevitably. Of course, this is a generalized statement and there are exceptions, i.e. what about those who are already rich but they altruistically want to contribute to Indonesia?

I don’t think brain drain on a massive scale is a problem (yet) in Indonesia. Yes, Jakarta is a hell hole of a city to live in, but people still work there and have other places in Indonesia as a retirement plan (i.e. Bali, Jogjakarta). If you read the newspapers, it’s rather depressing because it seems that this country doesn’t seem to run out of problems to report. Yet, there are glimpses of hope and achievement here and there – it’s just that we need to be reminded of the things that happen in Indonesia is not just in Jakarta.

My story? I’ve graduated early this May and I’m back in the country that I was born in and in love with. I managed to travel in Halmahera, North Maluku for a week (and also managed to be stranded on an island, losing contact with the boat), but now back in Jakarta. My scholarship is not bonded and initially I wanted to gain experience abroad before ultimately coming back to Indonesia, but an opportunity came up and I decided that I don’t want to miss a chance working inside the inner circle of the Republic.

Singapore will always be a chapter in my life and how the lessons that I learned while I was living there has shaped my way of thinking, especially regarding public policy. But for now, I’m back home in Indonesia.

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Isolated Academics

University of Indonesia (UI) awarded a honorary doctorate degree to the King of Saudi Arabia for his humanitarian work, at a sensitive time when recently Ruyati, an Indonesian migrant worker, was beheaded on murder charges. Have the management in UI lost their touch with the ground?

University of Indonesia (UI) awarded a honorary doctorate degree to the King of Saudi Arabia for his humanitarian work, at a sensitive time when recently Ruyati, an Indonesian migrant worker, was beheaded on murder charges. Have the management in UI lost their touch with the ground?

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If it makes any difference, UI’s Rector Gumilar Rusliwa Soemantri did apologized for the inappropriate timing of the award. The follow-up after this outcry is the increasing demand to unseat the rector, because the awarding process only added to the list of mismanagement in the university – one of them is the clarity of the status of UI workers – whether they are part of the civil servant, corporate or honorary staff of the university.

One can look at the issue of mismanagement in two ways – whether it lies in the leadership of the current management, or whether it lies in the institution design itself – knowing that UI, along with several other universities is in limbo after the transition between being a state university to a state-owned legal entity (Badan Hukum Milik Negara – BHMN).

I remember when I was still studying in UI, students have doubts whether turning UI into a BHMN would be a good idea. This would mean that the university no longer receive funds from the government, thus they have to find creative ways to generate money to finance the operation of the university.

For years, state-funded universities in Indonesia have benefited from government aid and managed to have low-cost tuition fees which enabled students from low-income families to access higher education in Indonesia. Consequently, the top universities in Indonesia are also the ones considered to become BHMN: UI, Bandung Institute of Technology (ITB), Gadjah Mada University (UGM), and Bogor Agricultural University (IPB).

By becoming a BHMN, these universities gains autonomy but consequently struggle to find ways of generating money outside of setting a higher tuition fee.

When I graduated, I remember how high-school students (and most importantly, their parents) were confused with how complicated and expensive the entrance to these universities are. I also remember how UI manage to come up with different “international programs” – partnering with overseas universities – but I doubt whether their curriculum and results out of these programs match with the high price associated with it.

Coming back to the honorary doctorate degree, despite the list of reasons given by UI’s rector on why King Abdullah of Saudi Arabia is worthy of the cause, there were of course rumors that the degree was given based on how much the King contributed to UI financially, especially since it is rumored that little consultation was done with the honorary degree committee. Thus, the issue of transparency and good governance comes up in the speech given by Emil Salim, a former minister and UI’s economic professor yesterday.

I fear that despite the issues of mismanagement in the university, the idea of unseating the rector is getting way out of hand, because in an institution where meritocracy is supposedly the norm, it is increasingly becoming more politicized.

However, academia politics aside, I would see that as universities in Indonesia behaves more like a corporation, it isolates those who don’t have the financial capacity to access higher education. There is also a heroic assumption that if you behave like a corporation, management becomes more professional but this is apparently not the case.

Since higher education is the training ground for the next generation of presidents, bureaucrats and business leaders it would be a shame to see if universities in Indonesia don’t get their act together. Let UI be an example of how mismanagement in universities should be avoided, and how the state should not stray away from their responsibility for providing education for its people.

Indonesian Public Spending on Education

The Indonesian Constitution stipulated that at least 20% of the government’s expenditure should be allocated to the education budget. How are we doing so far and is this rule feasible to be implemented?

The Indonesian Constitution stipulated that at least 20% of the government’s expenditure should be allocated to the education budget. How are we doing so far and is this rule feasible to be implemented?

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I had a macroeconomic assignment a few months ago whereby I analyzed data from the World Bank’s World Development Indicators on Australia and South Korea (1970-2009) to see whether their labor productivity is indeed affected by capital accumulation, which may include physical capital and human capital.

Based from my economics textbook (Frank and Bernanke – very basic) the key to economic growth – indicated by the rise of living standards – is a continuing increase in average labor productivity. Simply put, as the working population become more productive, equipped with the right skills and knowledge, the higher the economic growth would be.

I used several proxies for physical capital and human capital accumulation and one of the proxies that I used for human capital is public spending on education, measured by the total % of government expenditure.

The definition of public expenditure on education, according to the World Bank, consists of current and capital public expenditure on education which includes government spending on educational institutions (both public and private), education administration as well as subsidies for private entities (students/households and other privates entities).

My assumption is that as the percentage of government spending on education increases, so does the the average labor productivity and hence, an increase in their economic growth.

I did a multiple regression on both Australia and South Korea and then I find out that the relationship was not significant, meaning my assumption is false. I suspect that the lack of data might contribute to this result, but the possible explanation arriving from this result would be, it’s not the percentage that matters because an increase in public spending on education doesn’t necessarily mean that education is improved right away.

If there are inefficiencies in the system, any increased spending would be wasteful, and on the other side, if the system is efficient (i.e. the correct education policies are in place) keeping a sustainable level of public spending on education is enough to keep the ball rolling.

Now look at the graphs on Australia, South Korea and Singapore below.

Public Spending on Education; Total (% of Government Expenditure) - AustraliaPublic Spending on Education; Total (% of Government Expenditure) - South KoreaPublic Spending on Education; Total (% of Government Expenditure) - SingaporeSeveral data are missing, but we can see that Australia never allocated their education budget to reach 20%, while South Korea and Singapore did not maintain a 20% education budget throughout the time but they did invest more than 20% of their government expenditure on education at some points.

Why is my benchmark 20%? Because in Article 31 (4) of the Indonesian Constitution it says:

The state shall give priority to the education budget by allocating at least twenty percent of the state’s as well as of the regional budgets to meet the requirements of implementing national education

This was included in the Constitution after 2002 through its fourth amendment. But how are we doing so far?

Public Spending on Education; Total (% of Government Expenditure) - IndonesiaWell, the 20% rule was never achieved. That’s why people protest (repeatedly almost each year like a broken record) that the government’s budget is unconstitutional.

I would argue, however, rather than focusing on the 20% debate and keep saying the argument that the government’s budget is unconstitutional, Indonesian citizens should demand more transparency in the education budget. Therefore, you monitor how much portion of the education budget is used for building or renovating schools, teacher’s salaries, curriculum improvement, the implementation of national exams, in order to scrutinize how much money is actually being used for education.

It would be naive to think that the education budget is simply the amount of money given to the Ministry of Education, when in fact, there are other ministries involved, such as the Ministry of Religious Affairs (i.e. for madrasah schools, if I’m not mistaken) and 13 other ministries (this I need to research further). That is why transparency on the education budget is important because it goes into so many government pockets – for public spending or their own private spending, we don’t know for sure.

Another important aspect other than the education budget transparency, is the evaluation of the various education programs implemented in Indonesia. How much money is spent for doing evaluation of education programs, we also don’t know for sure, but this is as important of the policy or program itself. Make the findings of the evaluation public, figure out which ones are effective and which are not, and focus on the programs that bring out concrete impact.

My next point is to ask, why is the 20% number was put into the Constitution in the first place? When the government is unable to allocate 20% of its budget for education, by law, the Constitutional Court have the right to say that the budget approved through the legislative bill is not legally binding because it is unconstitutional.

Why would you insist that 20% is compulsory when there’s no telling that the amount of money spent is indeed making progress for the quality of education in Indonesia? This rule in the Constitution, although noble in its intentions, practically screams for a fifth amendment because it is impractical.

It is unfortunate that data on public spending on education in Indonesia prior to 2002 is not available, because it is important to know how much did the government actually spent on education throughout our period of economic development. Apparently as other countries really spent their resources on their human capital through education, Indonesia is left behind.

If the government is really serious in investing on education, let’s try to see whether they intend to make data on the education budget transparent and whether they are able to conduct evaluation of these education programs and make the data available for public in the end.