Global Business Guide Indonesia

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Business Updates | After the 2012 Higher Education Act; Where are the Foreign Universities?

Despite the introduction of a bill designed to facilitate the commercialisation and internationalisation of higher education, Indonesia’s tertiary education sector remains largely untapped by foreign universities. A history of government backtracking on similar initiatives when faced with opposition over what is a deeply politicised issue in Indonesia has many foreign universities playing the waiting game in making the decision to enter the market. Now two years removed from the passing of the Higher Education Bill in 2012, this hesitation, while understandable, is no longer advisable. With the door open to foreign universities to set up branches in Indonesia insofar as they collaborate with local universities and fulfil a handful of other requirements (See Indonesia’s Higher Education Act 2012), now is an opportune time to establish a foothold in a sector soon to be buoyed by an influx of 2.6 million high school graduates of university going age over the next decade (The British Council).

Uncertainty over the long-term implementation of educational reform continues to be the primary disincentive for foreign universities looking to set up campuses in Indonesia. Already wary of a repeat of the 2010 overturning of Law No. 9 of 2009, which sought to provide the licensing framework for educational institutions to evolve into independent corporate entities and thereby attract international institutions into the country, foreign universities’ motivation to enter Indonesia’s tertiary education sector was further dampened by speculation of the 2012 law being challenged in the constitutional court.

This need not be the case any longer. Having already taken its toll on the development of foreign university branches in Indonesia by delaying their entry, this challenge of the 2012 Higher Education Act has since been brushed aside. On 12th December 2013, Indonesia’s Constitutional Court rejected a judicial review put forward by a collection of students, firmly asserting that the entry of foreign universities would not result in a rise in the cost of higher education and setting a promising precedent for the bill’s long term prospects.

While this is a concrete step in the right direction and very much encouraging for foreign universities on the precipice of establishing a branch in Indonesia, it is important that institutions be mindful of the perspective of those fearful of increasing foreign influence on Indonesia’s higher education system. Beyond misgivings related to the potential for rising tuition fees that would limit a large subset of the population’s ability to attend university; much of the negative view towards foreign universities in Indonesia can be attributed to a fear that lessened state control over universities is the first step in the removal of nationalistic principles and religious values central to Indonesian culture from education. In truth, it is unlikely that such a drastic shift in educational policy will take place any time soon and the prospects for a further relaxation of government control over education are equally low. As such foreign universities should not expect that the evolution of Indonesia’s education system will follow a path similar to that of Malaysia – whose opening up of the higher education sector to allow for the establishment of foreign university campuses was indicative of a broader movement towards privatisation.

Another chief concern is that the entry of foreign universities will make it more difficult for local universities to attract talented faculty members. It stands to reason, however, that this unease can be allayed over the long term, in that the arrival of foreign universities will facilitate an increase in the number of PhD candidates qualified to lecture at high quality universities. At present, less than half of the country’s 220,000 lecturers have doctorate degrees (Times Higher Education); a fact which demonstrates a pressing need to both improve upon the standard of teaching at Indonesian universities and make available more PhD programs within the country.

Foreign universities interested in setting up branches within Indonesia are thus advised to do so at the advanced degree level to take advantage of the current bottleneck of young academics looking for avenues to pursue PhD programs but unable to find international standard courses in numerous fields of study in Indonesia. Moreover, with the present shortage of PhD qualified lecturers in Indonesia most apparent in the natural sciences and technology related courses – approximately 80% of PhD graduates in the country attained their degree in the social sciences (KADIN) – foreign universities are especially encouraged to set up joint programs with leading local universities to offer advanced degrees in these subjects. The Ministry of Education's target of an additional 52,000 PhD graduates by 2025 should ensure that resistance to the involvement of foreign universities in this subsector of higher education will be limited.

With regulation conducive towards the successful entry of international institutions seemingly here to stay and opportunities to serve a market with 72 million people under the age of 14 (The World Bank), the prospects of Indonesia’s higher education system to foreign universities are bright. As with any venture into Indonesia, parties entering the market must do so strategically and in areas presently underserved or with a lack of top quality choices. Given the political overtones of Indonesia’s education sector this is particularly true for foreign universities, who should seek out partnerships with local universities to implement advanced degree programs in areas such as engineering and renewable energy that require heavy investment and do not encroach upon potentially sensitive areas of the national curriculum such as the social sciences.

Global Business Guide Indonesia - 3rd February 2014

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Indonesia Education Snapshot

Number of Tertiary Education Institutions: 4,445 (2016)
Type: 91.5% Private, 8.5% Public
Students in Higher Education: 4,941,574 (2016)
Net Enrolment Rate in Tertiary Education: 22% (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.