INDONESIA RISING. Policy Priorities for 2010 and Beyond

Key MessagesIndonesia has made great strides in providing access to basic education, including to its poorest citizens. To make a successful transition to a competitive middle-income country its citizens must have the education and technical skills to accelerate economic growth, reduce poverty and strengthen Indonesia’s role in the global economy. With these goals in mind new initiatives are required.

1. Eff ective reform to improve nine-year basic education will require that schools and districts be held publicly accountable for the delivery of quality education services. Ensuring accountability will require:

♦ Mandatory use of assessment instruments to continuously monitor the individual student’s progress. ♦ Mandatory use of Report Cards by districts and schools to increase public awareness of service delivery. ♦ Th at power and budget be given to schools to hire and fi re contractual teachers. ♦ Regular assessments of teacher performance in the classroom by head teachers and school inspectors, and

use of “classroom eff ectiveness clinics” to improve the quality of teaching.

Th e central government needs to provide schools and districts the tools to assess and provide feedback about student and teacher performance, reform the school-level staffi ng formula, fi nance teachers through block grants that are proportional to the enrollment or school-age population; promote multi-grade teaching and allow teachers to be certifi ed in multiple subjects.

2. Invest in the creation of a high quality senior secondary and tertiary level education system capable of graduating a skilled workforce, including teachers.

♦ Division of general and vocational streams should be postponed to the second or third year of senior secondary school to allow all students to build a solid cognitive foundation.

♦ Th e use of school vouchers to off set the cost of education can increase senior secondary participation in impoverished areas, foster competition between schools, and stimulate private schools to grow.

♦ Public funding for tertiary education must increase in a manner that addresses the extremely low enrollment of Indonesia’s poorest children. Direct fi nancial aid to poorer, high performing students is more equitable, encourages competition between institutions, and particularly provides incentives to private institutions to improve quality.

♦ Public funding sources for research at tertiary institutions can be diversifi ed to include the ministries of health, science and technology, and others with a stake in the system.

♦ Higher education teacher training programs and curricula must be comprehensively improved in order to identify, retain and prepare high-caliber university graduates to serve as the next generation of educators.

Climbing the Education LadderPub

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2 | INDONESIA RISING

Where Indonesia Stands NowTh e Government of Indonesia (GoI) has demonstrated its commitment to improving access to and the quality and governance of its education system in recent years, dedicating signifi cant fi nancial resources to the sector. Progress has been made on all fronts but many challenges remain, particularly as Indonesia transitions into the more competitive position of a middle-income country.

Attainment and AccessTh e education system has been not produced a highly productive labor force and sizable middle class. Only seven percent of Indonesians between the ages of 25 and 64 have some level of post-secondary education, and just one-in-fi ve received an upper secondary school education. Th ese rates are lower than most countries with similar income levels. Th e rising enrollment rate for senior secondary education is a promising sign but tertiary education has been growing at slower pace than required for an emerging middle-income country.

Indonesia has made great strides expanding access and is expected to achieve universal nine-year basic education in coming years. Th e government’s drive to expand education coverage led to an increase in the primary school gross enrollment rate from below 70 percent in 1975 to near universal coverage by 1995. Indonesia is on track to providing universal nine-year basic education, with gross enrollment rates at the junior secondary level reaching over 80 percent in 20071. Th e nationwide school grant program (BOS) to primary and junior secondary schools, which started in 2005 and funds schools on a per-pupil basis demonstrates GoI’s commitment to reaching that key education milestone.

Beyond basic education, Indonesia is still lagging behind neighboring middle-income countries. Although the senior secondary enrollment rate has expanded steadily, by 2007 it had only reached 56 percent and a gap emerged relative to other middle-income countries. Th e gap widens when considering the tertiary gross enrollment rate which has remained around 20 percent in recent years. Both the demand and supply side constraints must be addressed in order to accelerate enrollment. Key constraints to enrollment in senior- and tertiary level education include high costs, particularly for the poor, the perceived low quality of schooling and lack of benefi t from attaining higher degrees. A lack of schools, particularly in secondary system, also remains a major problem.

1 2007 National Socioeconomic Survey (SUSENAS) data.

-100

-53

-5

43

90

Korea

Sin

gapore

Japan

Ch

inese T

aipei

Australia

Malaysia

Intern

ational

Med

ian

Thailan

d

Ind

onesia

Syria

Morocco

Colom

bia

Ghana

Under Low <400

Low 400-474

Intermediate 475-549

High 550-624

Advanced >625

Source: TIMSS 2007 test results

Country Comparison of TIMSS Standardized Math Test Results

Japan

Russia

US

Canada

Korea

New Zealand

EU19 average

OECD average

Australia

Malaysia

Chile

Thailand

Brazil

Indonesia

Mexico

0% 25% 50% 75% 100%

below upper secondary upper secondary post-upper secondary /tertiary

Education attainment of adult population age 25-64

Sources: OECD education at a glance 2008 (2006 data); Indonesian data from 2008 Sakernas;Malaysia 2002 from ILO; Thailand 2003/04 from ILO.

Primary

Junior Secondary

Senior Secondary

Tertiary

0 37.5 75.0 112.5 150.0

China

Mongolia

Philippines

Cambodia

Thailand

Malaysia

Vietnam

Lao PDR

Indonesia

Cross-country comparison of gross enrollment ratesfor select East Asia Countries

Source: EDSTATS database, 2006

Gross Enrollment Rate (2006)

Policy Priorities for 2010 and Beyond | 3

QualityEducation quality remains a challenge, particularly for basic education. Although access to basic education has improved the same cannot be said for the quality of education: Indonesia still ranks low in international standardized tests. For example, in both the 2006 Program for International Student Assessment (PISA) and the 2007 Trends in International Mathematics and Science Study (TIMSS), the math skills of over half of the Indonesian students tested were below what was defi ned to be the basic profi ciency level. Th e student outcomes in Indonesia were lower than those in other countries even after adjusting for family socioeconomic status, suggesting defi ciencies in the school system rather than household economics were the principal contributors to lower performance.

Th ere is clear evidence that teachers are the most important factor in education quality. In recent years Indonesia has undertaken massive reform in the area of teacher quality improvement. At the primary and junior secondary levels, only 18 percent and 67 percent of the teachers respectively have the four-year degree qualifi cation. Most primary school teachers only graduated from senior secondary school or are Diploma II graduates. With the passage of the Teacher Law (UU 19/2005), Indonesia embarked on one of the largest and most ambitious teacher reform eff orts in the world, with nearly 3 million teachers that will be aff ected by the Law. Th e law requires teachers to have at least a four-year college degree, and mandates the creation of a teacher certifi cation system. As an added incentive, certifi ed teachers are eligible for a “professional allowance” equal to the teacher’s base salary, and there is evidence that higher caliber candidates are now being attracted to a teaching career. Th e legislation has also prompted improvements in the pre-service teacher training, and many initiatives are now being implemented to equip teachers with the skills they need to meet the new, higher standard.

Governance and fi nance

Th e Government has been allocating an increasing percentage of its budget towards education, but issues such as insuffi cient and inequitable public spending, particularly at the tertiary level, remain. Historically low public spending on education increased, relative to GDP, from 2.8 percent in 2001, to 3.1 percent in 2006 and 3.3 percent in 2008, placing Indonesia on par with or ahead of most middle-income countries. While the investment in basic education services has increased, public spending on tertiary education remains low (roughly 0.3 percent of GDP), and is disproportionately concentrated on public

0

75,000

150,000

225,000

300,000

2001 2002 2003 2004 2005 2006 2007 2008* 2009**

0

6

13

19

25

% of education to total expenditure

Total education spending nominalTotal education spending (2006=100)

Source: World Bank Staff estimates based on APBN and APBD projections;**2009 based on budget projections

Trend of National Spending 2001-2009

percentBillion rupiah

Malaysia

Tunisia

OECD avearage

Jamaica

India

Thailand

Japan

Paraguay

Argentina

Korea

Uruguay

Chile

Peru

Indonesia

0 1.25 2.50 3.75 5.00

0.9

0.4

2.7

0.0

3.4

0.7

0.8

1.0

0.4

0.2

1.6

0.4

0.0

0.0

0.3

0.3

0.5

0.6

0.6

0.7

0.7

0.7

0.9

1.0

1.1

1.3

1.8

2.1

PublicPrivate

Source: UNESCO: World Education Indicators (WEI, 2007).Figures estimates for 2004-2005. Indonesian

Public and Private Spending on Tertiary Educationas a percentage of total GDP

percentage

tertiary institutions that account for just one-third of the all tertiary enrollments. Th is leads to a highly inequitable fi nancing system for higher education. Th e richest 20 percent benefi t from the 60 percent of the public spending that is directed to tertiary education. Seventy-fi ve percent of total fi nancing at the tertiary level relies on households paying fees, resulting in large disparities between the rich and poor: less than 2 percent of the children from the poorest families are enrolled in tertiary education, compared with 60 percent from the richest families.

Relevant assessment and performance measurement systems are essential to support effi cient and eff ective use of the increased funds. More money will not automatically lead to an improved education system and, if left unchecked, encourages wastage. Th e funds must be properly targeted and key stakeholders who improve the system should be recognized and rewarded. Indonesia’s

4 | INDONESIA RISING

move towards performance-based budgeting is an essential step and provides a foundation for the development of measurement and accountability systems. Critical focus areas include public fi nancial management and service delivery assessments, performance contracts and quality assurance benchmarking. Many of the performance measurement systems will need to focus at the district- and school levels.

With decentralization, many of the education management responsibilities have passed to the local level, making strong district- and school management essential to the quality and effi ciency of the education system. Minimum service standards for education will only be realized through strong management at the district level accompanied by a system that measures and rewards good service delivery. While strengthening local capacity is an oft-cited need, the districts must also be empowered through tools that will assist in service delivery, including tools to measure service delivery performance. Performance and accountability go hand-in-hand. Communities currently do not know whether their local government and schools are meeting minimum standards or providing high quality service, information that must be made publicly accessible. Increased community participation in school-based management, which can be an eff ective means of ensuring fi scal transparency, must be encouraged.

Th e large oversupply and uneven distribution of teachers is an unaddressed issue. Teacher salaries make up over half of all education expenditures, so ineffi ciencies in staffi ng are extremely costly. Indonesia has some of the lowest student-teacher ratios (STRs) in the world, an estimated 21 percent oversupply of teachers costing over 10 percent of the total education budget. Th e new “professional

allowance” for certifi ed teachers is exacerbating the situation. Disparities also emerge through uneven teacher distribution where too many teachers being assigned to some schools and too few to others. Th is is particularly evident when looking at the supply of teachers in urban, rural, and remote areas. Sixty-eight percent of urban schools and 52 percent of rural schools have too many teachers, while two-thirds of schools in remote areas have too few. Distribution issues must be resolved at the district level. Forty-seven percent of Indonesia’s primary schools having fewer than 150 students, so allowing multi-grade teaching is an ideal way to address effi ciency and quality issues in many areas. Similarly, at the secondary level, training teachers to deliver more than one subject will create greater fl exibility and effi ciency.

How Indonesia Can Move Ahead

A window of opportunity exists for Indonesia to shape its education system in a way that will support its rise as a middle-income country. Th e following are key areas upon which to focus.

Improving the quality and service delivery of the nine-year basic education in terms of student learning is vital, and will be driven at the district- and school level. Meeting minimum service standards for education will only be realized through strong management at the district level. A system that holds schools and districts accountable to the public for the delivery of quality education services is a core driver of reform. Th e following key components should be built into the district education offi ce and school management agenda:

1. Mandatory use by schools of assessment instruments to continuously monitor each individual student’s learning progress and adoption of remedial measures to support low-performing students. A detailed implementation plan should be included as a mandatory component of the “school annual plan and budget” (APBS) and the Memorandum of Understanding (MoU) between the schools and districts.

2. Schools should be given power and budget to hire and fi re contractual teachers. Th e contractual teachers should be guided by teachers with established track record in teaching excellence. Th e contract renewal or termination should be based on performance assessment.

Philippines

India

Cambodia

Lao PDR

World

Low & middle income

Vietnam

Thailand

Mongolia

Lower middle income

Korea, Rep.

Singapore

China

Malaysia

United Kingdom

United States

High income

Indonesia

Japan

0 17.5 35.0 52.5 70.0

SecondaryPrimary

Source: EDSTATS database 2006 data

Cross-country Comparison of Student Teacher Ratios

Policy Priorities for 2010 and Beyond | 5

3. A Report Card system should be used by districts and schools to increase public awareness of service delivery. Such report cards should focus on reporting student assessment scores and teacher classroom performance, in order to increase public awareness and participation in the education system and identify areas for improvement.

4. Teacher performance assessments should be carried out regularly by inspectors and the results discussed with teachers. Remedial measures such as participating in “classroom eff ectiveness clinics” should be considered.

5. Reform the staffi ng, and provide local governments incentives to manage teacher deployments more effi ciently. Among key reforms:

♦ Revise the formula of the General Allocation Fund (DAU) to remove the implicit principle of “the more one hires, the more budget allocation one gets”. Th e teacher salary component of DAU should be given to districts as “block grant” proportional to school-age population. Remote and disadvantaged districts can be allocated more as incentives.

♦ School staffi ng formulas should be based on accurate enrollment fi gures rather than the number of classrooms, with weighting for smaller schools to ensure they are not understaff ed.

♦ Multi-grade teaching should be supported in smaller schools.

♦ Increase fl exibility at the secondary school level by removing the single-subject teaching requirement and allow teachers to become accredited in more than one subject.

6. Th e central government should play a key role in supporting service delivery by (i) developing instruments for schools and districts to assess student and teacher performance, (ii) reformulating staffi ng norms to ensure effi cient and equitable teacher deployment, (iii) providing timely feedback through the monitoring and evaluation of districts and schools.

Building a solid senior secondary and tertiary education system is essential to providing a highly educated, skilled labor force, and top-quality teachers. To achieve this, policy reforms need to be prioritized:

1. Reforming senior secondary education with a focus on strengthening the curriculum, improving the quality of teaching, meeting increasing demands for expansion, and ensuring equity. Senior secondary education is the crucial link between basic- and tertiary level education. Splitting between the general

and vocational streams should be postponed until the second or third year of senior secondary school. Th is will allow all students to build a solid cognitive foundation that will improve the fl exibility and adaptability of the workforce to adjust to a rapidly changing labor market. In the meantime, to meet the rising demand, private schools will have to continue playing an important role, but will need to change perceptions that they are “second choice” providers. Looking ahead, the government should explore innovative ways to support private education such as increasing demand-side fi nancing using school vouchers. Not only can the voucher subsidize poor students to go to senior secondary schools, but it can also be an eff ective way to foster competition between schools, forcing them to improve the quality of their teaching in order to attract students.

2. Reforming tertiary education. Public funding to tertiary education needs to be increased, but in an equitable manner to address the extremely low enrollment levels of Indonesia’s poorest citizens. Direct fi nancial aid to poor, high-performing students, off ers the double benefi t of improving equity as well as providing incentives for institutions – both public and private – to compete. Th e number of funding sources for tertiary institutions is currently very limited and there is a need to diversify funding sources from diff erent government agencies such as health, science and technology. To speed up the expansion of tertiary education expansion, additional bottlenecks need to be identifi ed in terms of labor market institutional issues and the eff ect of informality.

3. Improving teacher quality that goes beyond certifi cation, through deepening pre-service reform. Triggered by the Teacher Law (2005), signifi cant eff ort and resources have been put into upgrading incumbent teachers. Whether or not the law is successful will largely be determined by its impact on the characteristics of the new teachers coming into the profession. In this sense, Indonesia is now at a critical point in reforming its teacher training programs. Improved compensation has attracted more, better quality candidates into teacher training programs. Many new programs (such as S1 for SD teachers, and post-S1 training programs) are emerging, providing opportunities for signifi cant improvements in curriculum design and delivery. Th e fi nancial burden to government can also be alleviated by a “leaner but higher quality” education work force if these programs are well planned. A good pre-service training program will help select and retain high-caliber university graduates as teachers.

6 | INDONESIA RISING

How The World Bank Can Help

Th e World Bank supports early childhood-, basic and tertiary education programs. Th e current engagement has mostly focused on the nine-year basic education initiative, improving the preparedness of students entering school, learning through targeted early childhood development programs, improving teacher qualifi cations, and strengthening school-based management. Th e World Bank has also supported building the research and teaching capacities of tertiary institutions.

Th e World Bank’s future assistance will build upon existing eff orts in support of the government’s education reform agenda focusing on the following areas:

1. Better accountability for improved basic education quality. Th e World Bank can assist GoI in strengthening the technical design and improving the implementation of district and school reforms programs aimed at making these accountable to the public for quality education, including through assistance in design of appropriate assessment and reporting instruments and remedial measures for both students and teachers; and dissemination of international best practices.

2. Pre-service teacher education. Th e World Bank’s international expertise can be brought to provide technical assistance and implementation support to the process of reforming the selection and training of candidates for teacher training. It can also support the development of the new training programs, provide advice about pre-service training capacity needs, and introduce specifi c international practices that can be applicable to Indonesia’s teacher training colleges.

3. Senior secondary education reform. Technical assistance can be given to design and implement a phased restructuring of the education system that will postpone the split between the general and vocational streams to the second or third year of senior secondary school. Th e World Bank can also provide models of well-designed/targeted and eff ectively implemented and monitored voucher system.

4. Tertiary education access and quality. Th e World Bank can conduct diagnostic work on tertiary education fi nancing to improve equitable access and quality, identify key bottlenecks that constrain the expansion of tertiary education, assist the design and implementation of direct fi nancial aid programs for poor students, and off er advisory services on the diversifi cation of research funding for tertiary education institutions.

Th e World Bank Offi ce JakartaIndonesia Stock Exchange Building Tower 2, 12th fl oorJl. Jenderal Sudirman Kav. 52-53, Jakarta 12190, Indonesiaph. + 62 21 5299 3000 | fax. + 62 21 5299 3111http://www.worldbank.org/id

for more information, please contact:Ms. Mae Chu ChangLead Education Specialistmchang@worldbank.org

Investing in Indonesia's Institutiondfor Inclusive and Sustainable Development