Huge Educational Reform Needed to boost Indonesia’s Growth
    Category: Column By : Jusuf Wanandi Read : 1782 Date : Friday, February 19, 2016 - 08:01:29

    When President Joko “Jokowi” Widodo announced his growth target of 7% a year, many reacted cautiously. The announcement took place as commodities were in a steep downswing. To end its long-term Sicyphean growth, Indonesia needs an escape velocity. Lessons from East Asia, especially China, show an escape velocity is attainable.

    Considering its proximity to the world’s most vibrant economies, natural resources endowment, rich diversity and political and social accomplishments politically, Indonesia has the opportunity to move from its current low-middle-income status to upper-middle and then high-income by its centennial in 2045.

    High-income status in 30 years will differ greatly from what it is today. It will have to be fairer, more inclusive and greener. This 30-years transition requires a fundamental shuffling of growth sources away from unscalable factors such as coal and unskilled labor to scalable knowledge and skills. Indonesia has been un-Asian in investing less than its neighbors in human capital. Global investors desire Indonesia’s resources more than its knowledge-driven industries.

    Development has no panacea—it requires an accelerated accumulation of literacy, skills, health and entrepreneurship—the key elements of human capital. Other governments are racing tirelessly to build up superior human capital. Indonesia’s challenge is more formidable, given its lower base.

    Indonesia needs revolutionary changes in human capital accumulation, especially in education and training. The first revolution relates to mindset—the belief in human capital accumulation should be universal. Secondly, Indonesia must grow faster—most workers struggle for existence in the informal sector, so high growth is a virtue not a sin. Third, the education budget must be shifted in favor of science, technology, engineering and mathematics (STEM). The ratio of STEM graduates to total graduates must rise from the current 20% to at least 30%, as seen in South Korea and even Malaysia.

    We need a revolution in Vocational Education and Training (VET). The Indonesian government is biased against vocational education. It controls less than one-third of vocational schools and only 37% of annual student intake. Student to teacher ratio is as low as 16 in secondary schools, compared to over 22 in vocational schools. Some 80% of vocational shools focus on ICT and business management. Getting to escape velocity requires manufacturing growth and rapid progress in VET.

    Collaboration is another necessary revolutionary change, with the corporate sector getting involved in VET and tertiary education. Elements of the German “dual system” should be included in university education, and the government has to catalyze corporate investments in VET and dual-system tertiary education.

    Lastly, Indonesia is a maturing democracy, which implies a fairer and more inclusive access to government educational resources. The government spends almost 40% of its tertiary education budget on the 195 government universities with their 32% share of enrollment, while thousands of private universities get little government finance.  A similar situation exists for secondary education. Despite being in the middle-income group, Indonesia still has promise. With human capital reformation it could become East Asia’s next major growth engine.