International Assistance and State-University Relations in Indonesia

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Table 4.3: Autonomy and change of legal status



Legal Basis: Law UU2/1989 and Regulation PP 30/1990

Public universities are service units of government. Private universities are service units of private foundations.

Legal basis: Law UU20/2003 and Regulation PP 61/1999

- PP61/1999 created the possibility of autonomous public higher education institutions as legal entity (BHMN179), responsible to a Board of Trustees. In 2000, four new government regulations were issued, changing the legal status of four selected universities (UI, UGM, ITB, IPB). Two more institutions (USU in 2003; UPI in 2004) were later added to the list of formally autonomous public institutions.

- UU20/2003 (basic education law) promises legislation that would establish independent legal status (BHP) for all education institutions, making them distinct from government agencies, independently holding and controlling assets.

Note: BHP institutions do not yet exist as legislation still needs to be passed (situation late 2006).

Financial autonomy:

- Investment funds and recurrent budget from government (based on line item financing).

- As service units of government, tuition (SPP) and extra-budgetary, self-generated resources (DRK) are governed by laws and regulations concerning the State treasury. In principle, self-generated income needs to be reported and consolidated centrally. In practice, sub-units (faculties, departments, research centers…) often fail to report such income whereas the institutional center lacks information on and control over financial accounts.

Financial autonomy:

        • Investment funds from government (based on assignment and competition), donations and accumulated margin

        • Recurrent budget from government (based on performance and assignment), tuition, donations and contracts and services

Note: Law 17/2003 on State Finance so far does not formally recognize block grant financing. There is no provision for government financing to BHMN institutions either. In practice, block grants remain limited to special projects, and autonomous institutions are funded as if still part of government.

Academic autonomy:

DGHE is responsible for approval or discontinuation of study programs.

DGHE determines 60% of the curriculum.
Quality assurance by national accreditation board.

Academic autonomy:

Board of Higher Education and academic senate are responsible of study programs

The Academic Senate of the institution determines 80% of the curriculum

Quality assurance by internal audit unit and academic senate (internal), and externally by national accreditation board.

Administrative autonomy:

Rector heads institution as a unit of the Ministry of Education and Culture.

Administrative autonomy:

The Rector heads institution as a distinct legal entity that is held internally responsible for its management to the Board of Trustees, and externally accountable to government and general public.

Autonomy in HR Management:

Centralized management of civil servants does not allow individual institutions to manage their own human resources. (Law 43/1999)

Autonomy in HR Management:

Increasing share of non-civil service staff (e.g. project or special study program staff funded with self generated income) will gradually allow for more autonomy in human resource management. Retention of existing teaching staff subject to civil service rules while at the same time creating a merit based structure on top of the existing structure has become a pragmatic solution at some institutions.

From the perspective of State-university relations it was striking to watch the close working relationship between the government agency and the donor representatives. Often it so seemed as if government documents were co-written by DGHE and Bank staff, even if there was sense of imposition involved. International reviewers were invited to critically comment on the documents and the procedures. Overall the critical point was that the State was submitting a selection procedure to a self appointed group of public institutions and invite them to demonstrate their readiness to become an autonomous entity. The image of the ‘evaluative State’ (Neave) as the omniscient gatekeeper, who will only let the “ready ones” through, and asks failing ones to come back better prepared springs to mind. It seemed as if the initial driving force had been the DGHE’s autonomy team (with support from the Bank) rather than a groundswell of support from university management and staff. A lot of socialization remained to be done for staff and students. In addition, one might of course also question the criteria and the choice for these particular four institutions to be invited to participate. The institutions concerned are relatively large, are very much decentralized internally (with strong and semi-autonomous departments and Faculties and hence strong opposition to be expected), and typically disposing of historically rooted practices that would not be likely to be easily dismantled. It was not clear either that the big would be best equipped in terms of financial management capacities. I will return to this question in the next section.

To conclude, outcomes at the system level suggest a further movement away from direct or centralized State control but at the same time introduce new and arguably more efficient levers for the State to influence higher education policy’ more effectively180. In other words, the model that emerges at the system level is that of State-supervision, or, in the wording of the New Paradigm, ‘autonomy within a hierarchical inter-strata relationship’. Typical in the introduction of autonomy in 1999 was that four top universities were selected by the State and chosen as guides for other universities to be transformed from government service units reporting to the Ministry of Education to State-owned and autonomous legal entities (BHMN) with their own Boards of Trustees. The decisions at the time implied an acknowledgment of the difficulties associated with the transition process, but at the same time suggested that the State knew best how to proceed, or at least considered itself competent to evaluate the ideas and proposals from the institutions themselves.

2. International assistance and the formative conditions in the university

Whereas the coalition of international donors and central government agencies has been instrumental to the process of creating enabling conditions for institutional autonomy, the bigger challenge without any doubt lies in assessing how the institutions responded to these changes. There is plenty of irony in the observation that the internationally inspired and centrally steered move towards autonomy for all intents and purposes was meant to be a move for greater “institutional autonomy”, implying that more decision-making powers and responsibilities are to be located at the institutional level. In a context where public universities and colleges were typically regarded as “service units” of the State bureaucracy, this is not a self-evident process, as it raises questions about the interest (i.e. why should institutions, their leaders and faculty be interested in the first place?), the existing loyalties and power balances within the organization, the capacity and commitment of the institutional leadership to carry the process to the next level etc.

In 2000, the Indonesian government chose to gradually grant legal autonomy to its State universities, in the longer run making each institution a non-profit State enterprise (see table 4.3 above). Since then, 6 of the country’s 52 public institutions were formally made autonomous. Nonetheless, as a result of many years of centralized management and oversight, institutions typically lack the managerial tradition and the broad institutional commitment required to effectively exercise their autonomy. In order to become effectively autonomous, institutions require capabilities of independent decision making in areas of financial management, human resource management, physical plant management, sufficient cost recovery, and at the same time be held accountable to their Board of Trustees and the general public.
The influence of international assistance in these particular areas is not easy to assess as the risk for broad generalizations is high, while at the same time the indirect effects of assistance are often not acknowledged. World Bank interventions in higher education, for instance, consistently receive particularly good ratings –“much better than for all education projects”- from their own evaluation department in terms of the institutional development impact of their projects181. However, the assessments are typically based on large-scale cross-sectional statistical analysis (i.e. country wide) and do not reach the level of the impact on particular institutions. At the same time, Bank evaluations tend to be restricted to operational project objectives, and fail to take into account the potential normative implications of the interactive and dynamic nature of the process of international assistance on the organizational behavior of institutions.

Instead, my assessment will be based on a relatively small number of site visits at six public institutions where I interviewed university administrators, and spoke with faculty and young undergraduate and graduate students at some of their departments. From these institutions I collected further documentation and program information, and in two cases (UGM and UI respectively) even reviewed their draft institutional strategy paper, which they were going to submit to DGHE as a first proposal to be granted autonomy status. Given the size of the country and its higher education system, my purpose here is not to be representative. The focus was on the universities that were short listed for the procedure to be granted legal autonomy (UI, UGM, ITB and IPB), to which I added two other institutions (UNSOED, UNILA). Without the ambition to be representative for the country, or even comprehensive for the institutions concerned, I was able to detect changes (e.g. cost recovery, diversification), dynamics (e.g. competition and conflict between ‘wet’ and ‘dry’ departments), organizational innovations (e.g. cross subsidizing) and tendencies (e.g. centralization) that typically match the picture of increasing institutional autonomy vis-à-vis the State. Some of these changes have furthermore been inspired and encouraged by specific features associated with donor interventions and mechanisms. At the same time, however, the existing organizational set-up at these university, in terms of governance, financial management, academic policy and human resource management, still seemed far removed from the idea of an institutionally autonomous university.

2.1 Increased centralization

The institutional level, or in the words of Burton Clark the “middle level” of the higher education system (Clark, 1983), has traditionally been the organizationally weakest link in the Indonesian system. University financial management was typically very much decentralized to powerful Faculties, departments and study programs (or research centres), and even up to the level of the individual faculty staff (especially the full professors or ‘guru besar’) who traditionally enjoyed a remarkable degree of ‘independence’ (if low civil service salaries). At the same time, there was little or no accountability for attendance and teaching, since individual faculty staff as well as the more successful departments and research centers rarely reported the ‘self generated income’ to central accounting or financial management services. It was not uncommon for individual study programs, departments or sub-units to participate in ventures and hold separate accounts from that of the university centrally, and some of these units even had been granted the authority to do so from the DGHE. The UI’s strategic autonomy proposal rather frankly acknowledges that “In order to minimize the effects of prevailing government accounting regulations182, much of the income generated by different parts of the university have not been declared. In this regard, it can be said that the University has been breaking the law for quite some period of time.” (UI, 2000, full proposal: 3). Another high ranking official at DGHE admitted that the academic community in general had been “remarkably successful in using their creative resources to bend the rules to its own advantage” (p.c. Pramoetadi). Statements such as these on the one hand provide an indication of the nature of the challenge of ‘granting autonomy’ to higher education institutions centrally (as the existing degrees of freedom enjoyed by staff and entrepreneurial departments and faculties will need to be decreased), yet at the same time question the depth of success of the centralized State control system.

At the time of the site visits, the New Paradigm, and the opportunities for increasing autonomy (and accountability) in particular, already started to put strong pressures on institutions and the units and staff within to centralize decision making and integrate management in a number of areas, from academic programs, human resources management, physical infrastructure and maintenance of facilities, but in particular in the field of financial management. All of the institutions that I visited struggled with the implementation of a unified or integrated financial management and information system, all encountered great difficulties and reluctance on the part of individual units to share information on revenue generation, let alone to integrate these resources within the central accounts of the university. Nonetheless, hot topics such as cross-subsidization between departments, consolidation of accounts, and demands for greater transparency and external auditing procedures for the first time were being debated in the open.

Whereas the majority of rectors and vice-rectors whom I interviewed strongly supported the government policy to increase autonomy at the institutional level, I also encountered hesitations and uncertainty. One informant, and former rector, suggested that “rectors are not used to discuss plans, and may be afraid of being burdened with the responsibilities and duties that go with autonomy. Some prefer the current system in which rectors have a high-prestige function, often with power and influence outside the institutions (e.g. in DGHE), and don’t have to bother with submitting plans but instead can count on a steady flow of government money” (p.c. Soekadji). Uncertainty also came with the ambivalent messages at the time (late 1999) regarding the government’s commitment to continue to finance autonomous universities at the same levels as before. In any case, the concern with centralizing financial management capacities at the university level started to preoccupy both the State and international donors more prominently than ever before. One persistent problem common to all institutions visited remains the lack of income reporting by departments and study or research programs within these institutions (p.c. Pak Bagyo). Non-tuition, self-generated income is typically under-reported because many of these individual units maintain their own separate bank account outside the centralized financial management authority of the institution. Even the ownership of the physical infrastructure is not by necessity centralized at the institutional level since in reality traditions of Faculty ownership of particular buildings (as reported by UI, but also present in UGM) continue to persist.

Outcomes and influences from international assistance in the area of centralized financial management at university level are mixed. Not many international donors explicitly invested in central university management improvement in the first place. Instead, much of the international donor efforts up to that point (late 1990s) were directed to the sub-unit level (i.e. the level of the individual study or research program, or department) within institutions. Bilateral donors such as the Dutch chose to steer away from the sensitive issue of central university decision making. The World Bank, in contrast, in its early interventions in the 1980s did effectively attempt to establish and improve central institutional management information systems, including financial management information, but failed to achieve significant results in that area. Lack of either knowledge of or confidence in central management capacities for a long time led the Bank to first concentrate investments on the level of study or research programs. Even the URGE project, which is regarded as the initiator project under the new paradigm flag (even though the new paradigm was not yet formally proclaimed at the time of inception, see earlier section), and later the QUE project, tactically chose to directly invest in individual research or study programs rather than on strengthening management or decision making processes at the institutional level (p.c. Sachi Takenada). It is only with the DUE project that the Bank again began to devise mechanisms (for instance, bottom-up planning procedures, increased participation of a young generation of staff, improved management information systems, etc.) explicitly geared towards a better equipped central management.

The implication of this strategy is not only that donors remained absent and were generally not well aware of what was going on at the institutional management level, but also that instead they encouraged policies to earmark investment funds to the level of units. In other words, the strategy leads to a situation in which the head of the study program becomes responsible for the use of the bulk of investment funds to either the government (possibly with money lent from donors) or to the donor directly, but in either case with not much control or interference from the institution. As the UI autonomy proposal complained: “Should the government extend such a policy in its new block grant funding system, it would effectively reduce university autonomy to allocate resources and to govern and control its own units.” (UI, 2000, finance section: 2).
From another perspective, however, international assistance efforts did effectively contribute to institutionally centralizing tendencies, albeit in another, more implicit fashion. Notably, the selectivity of international donor investments in specific departments (and not in others), contributed to a particular differentiating dynamic (see next section), which over the years led to a differentiation between so-called “wet” and “dry” departments, that in its turn fuels the need for corrective systems of cross-subsidization. To be sure, ample opposition to autonomy comes from the so-called “dry faculties and departments” (as opposed to the “wet” faculties), i.e. those that do not have the opportunities, capacities or willingness to generate income from extra budgetary sources. These faculties have to rely on a relatively constant stream of “easy money” (no reports or plans required) disbursed centrally in a standardized way. Also some of the “wet” faculties, in particular those that have already established a track record of generating their own income, regard the movement towards increasing autonomy as a threat to their relative independent status within the institution. Some key informants in this regard spoke of the already existing “autonomies within the institutions”. As a result, increasing autonomy at the institutional level at one point implies a consolidation of budgets, or at least an institutional consensus on how these budgets are to be distributed and managed. With the introduction of autonomy as legal separation, each of the selected institutions have been in the process of developing its own compromise of cross-subsidization, largely depending on the institution’s own culture and internal power balance between the ‘rich’ and the ‘poor’ faculties. The institutional documents and proposals seem to suggest that these institutions (i.e. UGM and UI) are taking into account some degree of decentralization to the department level as a way to keep everybody on board (p.c. Soekadji).

2.2 Winds of change: differentiation within, decentralized planning, resource diversification (self-finance), cost recovery, and openness to the world
International assistance is by definition intentionally selective. Donor resources are not spread at random, nor are they distributed equally across or within institutions. Apart from its contribution to the process of institutional differentiation at system level discussed earlier, international assistance over the years also planted seeds for an increased differentiation within. One of the most tangible outcomes of international assistance at the institutional level consists of the brick and mortar infrastructure, the hardware equipment, and research labs that have been literally constructed with loans or credits from donor agencies. The contrast between donor supported departments and other departments was physically visible at all of the institutions that I visited. But apart from the visible differences, and arguably more relevant to the subject of autonomy, Indonesian institutions also diversified programmatically, managerially and academically.

International assistance contributed to processes of internal differentiation, which, on the one hand, gave rise to the emergence of well furnished academic research and graduate teaching specializations in some fields and at some departments, but on the other hand, also left other disciplines and departments largely untouched. Overall, exact and/or applied sciences (i.e. agricultural studies, biotechnology, business, computer sciences…) received disproportionably more attention from donors than social or humanistic disciplines (i.e. philology, philosophy, social sciences, arts, and others), leaving a mark on opportunities to excel academically, but also to generate extra-budgetary income. The co-relationship between international assistance and internal differentiation, to be sure, is not necessarily one of linear causality. There are examples of departments that managed to excel and generate extra income without much foundational donor support from elsewhere (e.g. social sciences at UI, or arts at UGM), as there have been examples of heavily funded programs and departments that did not manage to attract durable attention or income. Nonetheless, international donors had a definite impact on the money flowed within the institutions where they were present. International assistance not only provided incentives for academic change at the study program, but also gave institutions extra leeway to experiment with alternative ways to reward or restructure study programs and departments internally.

In terms of planning and resource allocation mechanisms, international assistance introduced decentralized procedures, which have now been institutionalised and disseminated more broadly in the Indonesian higher education community. Notably, the introduction of block grant programs, associated with transparent, international standards of peer review selection, effectively changed institutional resource allocation procedures to the extent that many institutions distribute their own resources on the basis of review procedures similar to the ones introduced in donor support projects such as DUE or QUE, or in the government’s own clone programs supporting ‘semi-DUE’ and ‘QUE-like’ projects.

With regard to increased levels of resource diversification (i.e. increased self financing capacities) and cost recovery (i.e. the tuition share in the recurrent budget), the effective influence of international assistance was foremost indirect (for instance, contracts and services with industry, using donor funded equipment or trained staff) rather than direct, and outcomes more often have been the result of implicit rather than explicit donor objectives183. Adding difficulty to the assessment of outcomes is that, except for the tuition level, estimating the accurate figure of self-generated revenue at Indonesia’s public institutions remains a sensitive and difficult task at hand, given the fact that institutions and especially their sub-units (and individual faculty) often fail to report income (cf. supra). According to official figures for 1998-1999, the overall average percentage of self-generate income at public institutions stands at around 40% (in relation to total recurrent expenditures), allowing, however, for considerable variability between institutions, ranging from a low 5% to a high 78% (table 8 in annex). As already mentioned, the evidence of a relationship between these figures and the level of assistance by institutions (graph 4, p. 129, and table 7 in annex) is not necessarily directly causal. Even so, the top ten of high performers in terms of attracting extra budgetary resources corresponds surprisingly well with the top ten of receivers of international assistance (table 4.4).
Apart from extra budgetary sources of income raised from contracts and services, institutions also receive income from tuition fees and other special fees, which the students are charged with. Student fees at public universities in Indonesia have increased dramatically since the late 1990s and early 2000, when policy discussions about financial autonomy reached their peak (see section 2). In effect, the rapidly growing fees at the time strengthened the negative public image of then on-going reforms towards greater autonomy of State universities. Critics were quick to associate tuition hikes with ‘neo-liberal, IMF-inspired forms of privatization’. As a result of legislation transforming selected institutions to autonomous legal entities, these universities can now collect tuition fees directly from the students and may set their own tuition fee levels (previously set by the central government).
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