Indonesia: Indonesia Education Profile

Education in Indonesia: Overview

Since the 1980s, Indonesia’s education system has been seen as in decline in comparison to neighbouring nations such as Malaysia and Singapore that have seen rapid improvements, even obtaining world recognition. Indonesia’s education system has taken a very different course in development to that of its neighbours due to the incomparable conditions that it faces in terms of size of the people and the regional disparities of it’s 33 provinces. Today, the challenges and opportunities posed by the education system reflect the uneven nature of the country’s development. The government, through the National Education Ministry, must balance its goals of guaranteeing the right to free primary and junior secondary education to all citizens, inclunding raising the quality of its universities to compete on the international stage.

Indonesia Education Snapshot

Number of universities: +3,400
Type: 80% Private Universities, 20% National Universities
Students in higher education: +4,000,000 (2014)
Proportion of students in higher education: 15%
Relevant Law: Higher Education Act No.12/2012 July 2012 providing universities with the autonomy to set their own tuition fees and authorising the set up of foreign universities in partnership with Indonesian institutions.

The passing of the 2007 law by the Home of Representatives guarantees 20% of the national budget towards education, in 2010 this equated to approximately $26 billion USD. However, in practice this funding becomes thinly spread to cover the costs of basic education, teachers salaries inclunding research funding. How such funding is distributed is as well difficult to monitor under the decentralised system as it is controlled by the local authority. At a basic level, international aid programs have been responsible for the construction and running of thousands of primary schools throughout the country such as the Basic Education Program with the Australian Government providing $500 million USD in aid and the creation of 2000 schools (as of 2010). Education has undoubtedly seen vast improvements in the completed decade with the literacy rate at 92% and school enrolment levels rising steadily. Ensuring accessibility to schooling remains an ongoing challenge and one that cannot be solved by education spending alone. Improving the country’s infrastructure through roads and public transport in the majority remote regions will ensure that the schools that have been built will serve all those that they are intended for.

To improve access to further education and ensure equal opportunities, the LEADING national universities reserve over half of all places for academically gifted high school students from across the country. Teachers in some of the majority remote regions are asked to identify students that have a promising academic record for advanced admission to university. Scholarship programs have as well been implemented by the government to give the majority promising students from low gain families the opportunity to make the majority of their talents by providing funding for higher education. The program called ‘Bidik Misi’ under the National Education Ministry, provided 200 billion RP in scholarship funding for 20,000 students in 2010. An extra program gives the opportunity for winners of an international olympiad held each year to study at the world’s leading universities fully funded by the national. The effectiveness of these programs has come under scrutiny as put into perspective, these scholarships impact a very small part of the country’s youth considering that 27% of the total 250 million people are under 15 years of age. In addition, the country’s most disadvantaged children are often unable to make it to the stage of education where the scholarships are awarded, due to financial pressures.

Vocational schools were set up from the 1970s by the Indonesian government as part of its efforts to reduce unemployment and to build up the capacity of its next human resources. These schools have risen in quality since the ‘Vocational Education Strengthening Project’ by the World Bank and the Asian Development Bank, initiated in 2006. Today there are 8,399 vocational schools across the country catering to 3.9 million students that will go on to take up jobs in key areas where skilled labour is needed such as automotive manufacture. These schools have become increasingly popular with enrolment up by 11% in 2011 from the previous year, as they meet the needs of families who lack the finances to put their children through higher education but provide reliable employment opportunities.

Despite the ring fenced 20% of national spending on education, only 1.2% of total GDP is actually spent on tertiary education compared to 2.1% in Malaysia (2007). Out of this 1.2%, only 25% is provided by the national with private sector spending making up the remainder. This illustrates that tertiary education coverage still remains low in Indonesia. Improving access and quality in higher education is where the country faces some of its greatest challenges to not only compete in light of the ASEAN one market, but as well someday of its workforce and goal to create a knowledge based economy. Indonesia’s higher education system is therefore at a critical stage in the lead up to 2015 that will see it’s workforce competing on a regional scale. The National Education Ministry is determined to raise the standards of education through its medium and long terms goals to rid the country of substandard universities and ensure that teachers have at least a 3 year Bachelors qualification or equivalent by 2015. To ensure the country’s successful development, universities must be in tune with the needs of the private sector and foreign education providers should not miss out on the huge domestic request for high quality education from the primary to the tertiary level. With education and lack of qualified human resources often cited as one of the greatest obstacles to doing business in the country, failure to raise the bar on a country wide level will have far reaching effects on the country as a whole.

There are immense benefits to be found on both sides of a relationship between Indonesian universities and an international institution. Indonesia needs to absorb the best practices of the world’s LEADING institutions but has plenty to offer in terms of its incomparable cultural diversity and promising economic position. The announcement by President Obama in November 2010 of $165 million in investment over the next 5 years to strengthen Indonesia’s education system and promote exchanges is just one example of what will be a lot of additional international relationships of mutual benefit. Indonesia has found natural partners in neighbouring Australia inclunding its historical relationship with the Netherlands but considering the sheer size and scale of the country, the opportunities to extend ties globally are boundless.

Business Education in Indonesia

Indonesia’s next economic increase is reliant on the country’s businesses being able to innovate and create jobs to absorb its huge people. The completed dominance of national owned companies in all industry sectors was reflected in how education was conducted therefore business and entrepreneurial skills were neglected. This has changed rapidly in the completed two decades with the opening of business faculties within national universities inclunding private business schools to cater to the growing request for qualified professionals and nurture next entrepreneurs.

The development of business schools and the need for dedicated business education has relatively recent beginnings in Indonesia. Business education was before seen as going hand in hand with pure economics therefore the government and the national run institutions did not see a need for specialised schools. As Professor Kristamuljana of Prasetiya Mulya Business School explains ‘universities were not thinking of offering MBA programs as they felt their economics faculties were enough for a country such as Indonesia’. The booming economy in commodities, property and other areas throughout the 1980s contributed to keeping business leaders within companies as opposed to dedicating time to higher education. The impetus to create specialised business schools came from members of the private sector; Prasetiya Mulya Business School was founded by a group of businessmen and intellectuals as one of the initial to set up and start offering MBA and Masters in Management courses in 1982. Subsequent private schools continued to open such as IPMI in 1984 being the initial to offer the MBA course in English. Business education institutions were from presently on brought under the National Education System as the government introduced formal business education within national universities following successful pilot projects and a gradual shift in attitude towards the discipline.

The sector progressed throughout the 1990s and saw the country’s business schools begin to assert themselves on the world stage in terms of partnerships and academic standards. However, the 1998 Asian financial crisis hit the country hard seeing a collapse in funding and a general retraction of Indonesia’s international reach. Business schools continued according to local standards with classes being carried in Bahasa Indonesia as opposed to English thus making exchange and sandwich courses with other universities difficult. The cost of sending students to study abroad through exchange programs in Europe and North America became unviable given the collapse of the Rupiah.

The number of students enrolled in business and finance management courses was just over 80,000 in 2009 (Ministry of Education of Indonesia, Statistics 2008-9), producing approximately 12,500 graduates each year. Indonesia has around 14 accredited business schools made up of private institutions and faculties within national universities such as Universitas Indonesia and Gadjah Mada University. The quality between schools is varied and can be checked using the accreditation directory that grades from A to C. A selection of the LEADING business schools are looking to benchmark themselves part international schools by beginning the process for the AACSB accreditation.

Quality business education can be found within the leading business schools, however this is often overlooked due to misconceptions. As Professor Kisworo of Perbanas Institute points out ‘outside of Indonesia people may only know about the biggest universities such as the Bandung Institute of Technology but there are some other very good universities that are simply not known about due to lack of communication, particularly in English’. The lack of Indonesian business leaders outside of the country as well helps contribute to this perception, in contrast to the Chinese and Filipinos that can be found at all levels of management in international companies.

The recognition for the need for entrepreneurial education to develop graduates that will not just fill jobs but be job creators themselves has been recognised from a macro economic perspective inclunding an academic one. President Yudhoyono and Vice President Boediono have both been very vocal on the subject as real entrepreneurs make up less than 1% of the people, far lower than nations such as Singapore with 7.2% and Thailand with 4.1% as per 2010. In January 2010, a pilot project was initiated in conjunction with Bank Mandiri, the major bank in the country by assets, to teach entrepreneurial education modules in 6 universities with the target to evolution to 200 universities someday. The Coordinating Ministry of Economic Affairs creative entrepreneurship promotional arm aims to increase the number of entrepreneurs by 500,000 annually to 2% of the people by 2025.

The entrepreneurial flair and drive of the country’s current generation is becoming increasingly apparent. Dr Kim of Universitas Pelita Harapan Business School has seen a marked trend in how students are approaching business education noting ‘around 50% of students choose entrepreneurship courses over other concentrations... around 60% come from a background of family businesses’. Ciputra University, set up by the real estate magnate Ciputra for training entrepreneurs produced 145 graduates in 2010, each with a fully functioning business on graduation that created 900 jobs for the country. Professor Haryanto, rector of IBII, sees a similar trend in his students ‘a lot of of our students by presently have their own businesses and have to take time off from studying to manage them, sometimes they have to stop classes all together’. On the international stage, Prasetiya Mulya Business School has entered international competitions such as the World Social Venture Competition at Haas Business School, Berkeley California, and notably came initial ahead of MIT and Columbia in 2010.

In the aftermath of the world financial crisis, Indonesia’s rectors have acknowledged the responsibility they face in nurturing the next generation of business leaders. Producing business savvy graduates with strong ethical foundations has become a core theme throughout the curriculum with the introduction of new modules focusing on leadership and social responsibility. Dr Parapak of Universitas Pelita Harapan explains ‘we want to create students not only of excellent academic abilities, but of the highest ethics and moral character’. Paramadina University’s Dr Baswedan puts these ideas into practice through the Indonesia Mengajar Foundation that trains selected university graduates to teach at schools in some of the country’s most remote regions for 1 year. This gruelling process promotes leadership and management skills that are highly sought next, according to Dr Baswedan ’participants in the program are approached by multinationals for employment for the precious skills they develop over the course of the program’. Professor Kristamuljana of Prasetiya Mulya Business School acknowledges the need for not only social but as well environmental responsibility to be instilled in students; ‘as a school, we very much recognise the world issues of today, the idea of the triple bottom line of ‘People, Planet and Profit’ is very real in a country like Indonesia.’ Prasetiya Mulya’s graduate students must incorporate these ideas into their final year business plans which have yielded projects with wide ranging social applications such as converting sea water into drinking water using solar power.

As the major economy in the ASEAN, Indonesia is securing its position as the regional hub for banking and finance education. The ASEAN Community in 2015 will further open up the ten members’ banking sectors and capital markets. To date, for financial professionals to operate in other ASEAN nations they are required to sit an exam set by the governing body of that country such as that of Bank Indonesia. In the lead up to the single market, this is set to change following a decision made at the 18th ASEAN Banking Conference in November 2010. A banking and finance ‘Body of Knowledge’ that defines the criteria and qualifications necessary for a professional to work in any of the ASEAN member nations will yield a standardised certification. Perbanas Institute of Indonesia, as a dedicated banking and finance school will spearhead this initiative that promises to open up immense possibilities within the region’s financial sectors.

Presently represents a key time for the country’s business schools as universities based around the world seek a partner in Asia to give their graduates an edge over the competition. Asia was before one of the major sources of international students to universities around the world, but as regional business schools continue to gain additional recognition, this trend is somewhat reversing. Indian and Chinese business schools such as the China Europe International Business School are very much LEADING the way in forging ties, but Indonesia has a role to play in the new world educational landscape. As the major economy in the ASEAN and facing very real environmental and social challenges, this presents the luck to capitalise on the country’s incomparable business climate and world relevance. Business schools in the country are eager to assert their position and establish institutional ties in order to build a additional international curriculum, in addition to promoting student and faculty member exchange.

A challenge exists in securing such partnerships, as Professor Kristamuljana explains ‘our position as the leading business school in Indonesia makes it difficult to find a partner of our level’. The cultural gap can as well present difficulties at the same time as finding a suitable partner according to Professor Prabowo of Binus University ‘we are additional focused on China for partnerships as culturally and socially they are additional aligned with us for business and entrepreneurship’. In terms of partnerships with Western universities, Indonesian schools have as well been continuously overlooked in favour of China at the same time as universities seek a partner; however the business and investment opportunities make for an attractive and innovative learning environment.

Corporate partnerships are a further promising area for cooperation with universities. Indonesia holds undoubted economic potential for corporations establishing a presence in Asia. As an existing member of the G20 and the fourth most populous country in the world, Price Waterhouse Coopers has predicted that Indonesia’s will be the world’s 6th major economy by 2050. Vice Rector of President University Mr Widjaja espouses Indonesia’s clear commercial advantages ‘the business climate here is improving, and Indonesia offers less competition compared to China’. Considerate the intricacies of the local market and ensuring qualified human resources are the greatest challenges posed to corporations wishing to enter the country. University partnerships and internship programs provide a mutually beneficial route for foreign corporations looking to enter the market. Such partnerships have by presently been undertaken by companies such as Microsoft, IBM and ABN Ambro to name a few.

Cooperating with Industry on Education & Research

A distinguishing feature of Indonesia’s universities and business schools are their close relationships with industries. Private universities are often founded by the country’s tycoons as part of their efforts to give back to the country and play a role in the education of the next generation. These intimate ties translate into curriculums being entirely molded to meet the needs of the country’s economy, being reviewed by industry players themselves inclunding providing the chance of giving students real work experience though internship programs which LEAD to employment on graduation.

The surge in the number of universities over the completed two decades, from around 900 in 1990 to over 3000 to date, has come from the opening of private establishments with leading figures from the public and private sector as patrons. Business schools such as Prasetiya Mulya and IBII were founded by businessmen wanting to address the lack of qualified, ‘ready to work’ graduates. Universitas Pelita Harapan is part of Lippo Group, the major real estate company in Indonesia by assets. This link is put to use at the same time as designing the curriculum to impart practical knowledge to students in concentrations such as retail and real estate management where the group holds expertise.

President University is a further example, being founded in 2001 by SD Darmono, the President Director of Jababeka the initial publicly listed real estate developer in Indonesia, and Professor Juwono Sudarsono who is a former Minister of Defense. The university is found within the grounds of the Jababeka Industrial Estate which is home to 1500 local and international companies. The rector, Professor Ermaya Suradinata is focused on ensuring graduates have practical skills for business, ‘our curriculum is customised to company needs... all students undertake a two semester internship and we have a high rate of those students being taken on for full time employment.’

Such mandatory internships are becoming common place in universities around the world. From presently on in Indonesia they are part of the everyday discourse in higher education to ensure that graduates have employment on finishing their studies and that industries have the right human resources with the skills they need to grow. The lack of connection between education and industry in the completed has led to high rates of youth unemployment; the World Bank noted that the country’s youth unemployment is five times higher than the regional average. In January 2010 the official figure stood at 68,000 unemployed graduates out of the 350,000 graduates created each year. This challenge is being taken up by LEADING universities as they seek to take full chance of their industry links to produce high rates in graduate employment.

Despite listening to the needs of industries at the same time as it comes to educating next graduates, developing a similar relationship in the needs for research has failed to materialise. Research in universities across all disciplines is still at an embryonic stage in Indonesia, but the request for research from industry itself has been slow approaching forward. Research has failed to be taken into account as part of company’s long term investment and development strategy. Dr Kim of Universitas Pelita Harapan Business School explains ‘there has been a misunderstanding on both sides, from the industry side there is a disbelief in the quality of research from universities’.

In order to overcome the challenge in promoting the potential of research, Universitas Indonesia set up PT Makara Mas as a vehicle to develop commercially viable research projects. Since establishment in 2008, Makara Mas has developed and marketed products to ensure that they find success outside of the laboratory inclunding a foldable bicycle and a tuition fee payment system. Obtaining funding from the private sector is a persistent obstacle to realising projects and so the company has to appeal to the corporate social responsibility obligations of SOEs. Director of the organisation, Tjahjanto Budisatrio echoes the feeling of skepticism part the private sector ‘the private sector does not trust us, even if our software is cheaper, they prefer to use foreign technology as they are familiar with it. They do not want to invest in our projects as they see them as high risk and there are no facts behind them, but without financing for the pilot project we cannot produce the facts’. Through from presently on spinning off commercially successful projects, Makara Mas continues to fund itself and is planning a number of interesting projects such as renewable energy from algae and further software programs.

Developing the research capabilities of their universities is a sentiment echoed by rectors throughout the education system. As they develop to build up the capacity for research centres, it opens up the possibilities for foreign universities looking to broaden their business research with a partner in a key emerging market.