Global Business Guide Indonesia

Education | Business Education in Indonesia

Indonesia’s future economic growth is reliant on the country’s businesses being able to innovate and create jobs to absorb its huge population. The past dominance of state 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 past two decades with the opening of business faculties within state universities as well as private business schools to cater to the growing demand for qualified professionals and nurture future entrepreneurs.

The development of business schools and the need for dedicated business education has relatively recent beginnings in Indonesia. Business education was previously seen as going hand in hand with pure economics therefore the government and the state 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 first 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 first to offer the MBA course in English. Business education institutions were eventually brought under the National Education System as the government introduced formal business education within state 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 global 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 every year. Indonesia has around 14 accredited business schools made up of private institutions and faculties within state 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 among 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, especially in English’. The lack of Indonesian business leaders outside of the country also 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 as well as 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 population, far lower than countries 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 largest bank in the country by assets, to teach entrepreneurial education modules in 6 universities with the target to progress to 200 universities in the future. 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 population 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 ‘many of our students already 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 Global Social Venture Competition at Haas Business School, Berkeley California, and notably came first ahead of MIT and Columbia in 2010.

In the aftermath of the global 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 after, according to Dr Baswedan ’participants in the program are approached by multinationals for employment for the valuable skills they develop over the course of the program’. Professor Kristamuljana of Prasetiya Mulya Business School acknowledges the need for not only social but also environmental responsibility to be instilled in students; ‘as a school, we very much recognise the global 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 largest 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 countries 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 countries 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.

Now 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 previously one of the largest sources of international students to universities around the world, but as regional business schools continue to gain more 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 global educational landscape. As the largest economy in the ASEAN and facing very real environmental and social challenges, this presents the chance to capitalise on the country’s unique business climate and global relevance. Business schools in the country are eager to assert their position and establish institutional ties in order to build a more 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 also present difficulties when finding a suitable partner according to Professor Prabowo of Binus University ‘we are more focused on China for partnerships as culturally and socially they are more aligned with us for business and entrepreneurship’. In terms of partnerships with Western universities, Indonesian schools have also been continuously overlooked in favour of China when 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 largest 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’. Understanding 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 already been undertaken by companies such as Microsoft, IBM and ABN Ambro to name a few.

Global Business Guide Indonesia - 2012

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Indonesia Education Snapshot

Number of Higher Education institutions: >4000 (DIRJEN DIKTI, 2012) 80% of Universities are private institutions.
Students in higher education: 4,273,000 (DIRJEN DIKTI, 2012)
University lecturers: 303, 557 (DIRJEN DIKTI, 2012)
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.