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Spending More or Spending Better: Improving Education Financing in Indonesia

March 15, 2013

New report says current spending patterns need to be adjusted to improve quality of education and to send more Indonesian students to senior secondary school and university

Jakarta, March 14, 2013 – A new World Bank report on education financing in Indonesia shows that spending patterns need to be altered to increase quality of education and improve learning outcomes. The Education Public Expenditure Review, released today, reports that despite Indonesia’s move to allocate 20 percent of its total budget to education, the increase in spending over the years has yet to deliver the expected results.

The public expenditure review assesses the progress Indonesia has made in education over the last decade and highlights the major challenges that remain. The report highlights the need for a greater focus on improvements in the effectiveness of spending if the recent increases in public education investment are going to deliver improvements in education quality,” says World Bank Lead Education Specialist for Indonesia, Mae Chu Chang, in a launch event jointly hosted with Paramadina University, the Government of the Kingdom of the Netherlands and the European Union.

In its report, the World Bank revealed that the biggest payoff from Indonesia’s greater education spending has been in terms of access, with impressive increases in enrollment rates over the last decade, especially for the poor. However, these improvements in access have occurred mainly in compulsory basic education, which includes primary school or SD (sekolah dasar) and junior secondary school or SMP (sekolah menengah pertama). Access to senior secondary –SMA (and sekolah menengah atas) – and tertiary education, while improving on average, still remains extremely low for the poor. In addition, Indonesia’s performance in international tests show that quality of education is still low and, most importantly, not improving. All the increases in access will only pay off if students graduate with basic skills.

Indonesia’s mandate to allocate 20 percent of its annual budget to education shows that Indonesia is clearly committed to educating its future generations,” says World Bank Country Director for Indonesia, Stefan Koeberle. “Moving forward, Indonesia needs to rethink and adjust its spending patterns to ensure that students graduate from basic education with better basic skills, and a higher share of them continue to SMA, and university, and thus improve the quality of its large pool of human resources.”

The disappointing results can be partly linked to spending patterns: a large share of Indonesia’s massive increase in resources has been used to pay for teacher salaries and teacher certification allowances. The increase in spending on teacher salaries was driven by a very fast increase in the total number of teachers, which continue to increase despite Indonesia already having one of the lowest student-teacher ratios in the world. While the teacher certification program has improved the livelihoods of teachers, it is yet to show the expected results in terms of student learning. Meanwhile, the share of the budget spent on early childhood education, senior secondary and higher education is still low by international standards. It is, thus, unlikely that these current patterns of spending will translate into improved quality of education and access to post-basic education for the poor.

To improve education financing, the Education Public Expenditure Review highlights the need to focus on increasing efficiency, equity and performance. The report recommends strategic reallocation of resources to higher levels of education and to scholarships for the poor programs (BSM); increased support from districts to schools; and improved budget planning, transparency and accountability.

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