Indonesia is the fourth most populated country in the world with a high proportion of young people making up its demographics. According to Statistics Indonesia (BPS), the total of the school-age population in Indonesia in 2015 was 109.2 million or 42.7% of its total population of 255.5 million people. A study by the United Nations Population Fund (UNFPA) in 2015 revealed that Indonesia is projected to reap a demographic dividend from 2028 to 2035. A demographic dividend occurs when the proportion of the working-age population is larger than the infant and elderly population and presents a unique opportunity for intense economic growth (See Indonesia’s Economic Outlook in 2017: Remain Cautiously Optimistic).
One of the current government’s primary focuses in the education sector in the face of global competition is improving and increasing the number of vocational training institutions and schools in the country
In 2035, Indonesia will have a workforce of 65 million young people and therefore productive citizens. This demographic dividend will provide a golden opportunity for Indonesia to become a developed country if it is able to improve and prepare its human resources.
Based on Law No. 20/2003 on the National Education System, Indonesia’s national education system consists of formal, non-formal, and informal educational systems as well as including several types of education such as general, religious, vocational, professional, and special education. Formal education comprises of several levels, starting from early childhood education, primary school of 6 years, junior secondary schools of 3 years, senior secondary school of 3 years, and higher education.
The country’s higher education system comprises universities, institutes, schools of higher learning, academies, and polytechnics. These institutions offer degree and non-degree programmes (See Second Class: Indonesia’s Higher Education Sector In Need of Reform).
In addition to the government, the private sector, including foreign-owned entities, and the community are allowed to provide education to Indonesian citizens so long as they meet the requirements and comply with the prevailing laws and regulations.
Since 2010, the Indonesian government has excluded the education sector from the negative investment list (See Indonesia’s New Negative Investment List; A Big Bang?) and allows foreign entities to own varying percentage stakes in educational institutions provided that they meet the requirements (See Indonesia’s Education Sector: Promising Investment Despite Need for Reforms). In addition, they are also obliged to partner with local institutions based on Government Regulation No. 17/2010 on the Management and Organisation of Education and the Decree of Ministry of Education and Culture No. 31/2014 on the Partnership between Foreign and Domestic Educational Institutions in the Management and Organisation of Education in Indonesia.
Starting from 31st December 2014, however, the Indonesian government set stricter requirements for foreign entities investing in the education sector. For example, foreign-owned primary and secondary schools are no longer allowed to affix the “international” label in their names. They must either change their name into a national school, a diplomatic school, or a cooperation education unit (SPK) school (See Private Education in Indonesia – International Schools on the Rise).
Private foundations planning to open an SPK school must already have a grade A private national school as a partner. The number of foreign teachers in SPK schools must not exceed 70% and they must be fluent in the Indonesian language. The schools are also obliged to offer compulsory subjects in the Indonesian language and culture, religion, and citizenship. Additionally, all Indonesian students must take a National Examination (UN). Most importantly, SPK schools must provide high-quality facilities to their students.
Education has been one of the primary focuses of the current administration following the implementation of the ASEAN Economic Community (See Indonesia and the ASEAN Economic Community – Ready for Regional Integration?). Under this free trade agreement, foreign workers are allowed to seek employment in Indonesia as long as they meet the requirements. If the Indonesian workforce lack required skills and relevant education (See Labour Pains in Indonesia), the opportunity of the demographic dividend will be lost and foreign nationals will fill the skills gap leading to socio-political tensions and reduced economic mobility.
That is why the Jokowi government has made education one of their priorities and education has a mandated proportion of the state budget set at 20%. For example, the government allocates 414 trillion IDR for education, which is the biggest allocation in the 2016 state budget and provided grants, scholarships, and assistance to help bright and disadvantaged students to finish their education such as providing the Indonesian Smart Card (KIP), and many others.
One of the current government’s primary focuses in the education sector in the face of global competition is improving and increasing the number of vocational training institutions and schools in the country (See Vocational and Non-Formal Education Opportunities in Indonesia). The government plans to allocate 44 trillion IDR over the next four years to develop vocational training and schools including overhauling existing vocational training centres (BLK). In addition, President Joko Widodo has asked his ministers to formulate a policy that will facilitate private sector investment in the education sector, especially in vocational training and vocational schools (See Vocational Education in Indonesia; Crucial to Compete in the ASEAN).
Indonesia’s education system has made incremental improvements over the past decade through extending the age of compulsory education and thus increasing the number of students in primary and secondary education, as well as improving teacher training and minimum qualifications. What the sector requires now is a significant shift in approach away from rote learning and theory-based methods towards independent thinking and analysis by students. Recent reforms have also seen focus turn away from science and mathematics towards citizenship and morality centred teaching in addition to delaying the start of English language learning. Enhancing the moral values of students is a noble endeavour, however, at this crucial time of greater ASEAN integration, increased globalisation and scientific advancement; Indonesian students need to be able to compete effectively in science and mathematics as well as through their soft skills (See Making Research & Development Part of Indonesia’s Vision for Growth).
This means that Indonesian education institutions will need to take a more globally-minded approach in how they educate the future generation. For international investors in the sector, it also presents significant opportunities to establish institutions that cater to the increasing demands of parents eager to ensure that their offspring get off to the best start particularly in sciences, mathematics, and IT (See Higher Education: Indonesian Academia Must Open Up).
Global Business Guide Indonesia - 2017
This section provides an introduction to the education sector in Indonesia which is an integral part of the development of human resources. It offers an overview of the main developments and challenges in primary, secondary and tertiary education.
As the demand for higher education in Indonesia grows, private sector institutions of varying quality are opening up all over the country to fill the gap that state universities cannot meet. This section looks at the measures in place to consolidate the sector.
Indonesia’s universities are not found within the top global institutions worldwide and are seeking to expand partnerships with universities abroad to absorb best practices as well as explore the niche areas in which they can make an impact on the world of academia.
Number of Tertiary Education Institutions: 4,384 (2015)
Type: 91.5% Private, 8.5% Public
Students in Higher Education: 6,959,622 (2015)
Net Enrolment Rate in Tertiary Education: 20.18% (2014)
Relevant Law: Higher Education Law No. 12 of 2012 provides universities with the autonomy to set their own tuition fees and authorising the set up of foreign universities in partnership with Indonesian institutions.