Filling the Graduate Gap
    Category: Issues & Ideas By : Siti Aisyah Rachmawati Read : 5626 Date : Friday, November 14, 2014 - 11:07:36

    Ahmad Zamroni / Forbes Indonesia

    Due to the country’s growth, demand for skilled workers in Indonesia will more than double from 55 million now to 113 million in 2030. Unfortunately, with current trends, there will be a shortfall of skilled workers according to a 2012 report from consultancy McKinsey. In order to fill the gap for skilled workers, Indonesia needs to boost the number of advanced degree graduates, says Eko Prasetyo, 44, president director of the Indonesia Endowment Fund for Education (Lembaga Pengelola Dana Pendidikan or LPDP). “Right now, only 143 out of 1 million Indonesians have a doctoral degree. This figure is very low compared to neighboring countries such as Malaysia with 509 doctoral degrees per 1 million people,” says Eko.

    To reduce this huge gap, the then-Finance Minister Sri Mulyani implemented a plan for the Indonesian government to create a fund to provide scholarships in 2010. The LPDP was launched in 2011 and is operated by three ministries—Education, Religious Affairs and Finance. The Finance Ministry oversees the financing and the Ministry of Religious Affairs is involved since it also administers a large sum of the education fund for its religious schools and universities.

    The state budget is the main source for LPDP funding. From 2010 to 2013, the LPDP has gathered Rp 16 trillion. Most of it is invested as an endowment fund from which the investment returns are used to fund the scholarships. Eko says that LPDP will need at least Rp 20 trillion to meet its target to annually fund at least 5,000 students and provide other research grants. Some lawmakers, however, are balking at this large sum, saying that the funds should be spent instead of invested considering the many urgent needs in education and other sectors. 

    Some 60% of LPDP investment funds are in bank deposits and the rest are in fixed-rate government bonds. “As funding needs grow, we will need to get out of our comfort zone and diversify our portfolio to get a bigger yield but still with a manageable risk,” says Eko. To address fluctuating exchange rates, the LPDP also has some multi-currency investments.

    For its funding, Eko hopes the LPDP will not have to continuously burden the state budget and thus is looking for grants from both the public and private sectors. So far the LPDP has secured grants from several Indonesian banks and hopes to secure another grant from the Japanese government.

    LPDP started its scholarship service last year, receiving around 20,000 applications and accepting 1,555 with total scholarships granted of Rp 100 billion. Meanwhile, in the first half of this year, the LPDP granted 520 scholarships and aims to grant another 1,500 by the end of the year. The most popular countries for studying in are Australia, England, Japan, Netherlands and the U.S. The top majors funded are engineering, science and finance. In addition to scholarships, the LPDP also funds some school reconstruction.