International Assistance and State-University Relations in Indonesia

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Table 2.1: World Bank Strategies in Indonesian Higher Education and State-university Relations




Bank Strategies & Projects
Manpower Planning

- to establish (Polytechnic project) or expand (1st University Development Project) higher education facilities at selected institutions

- to improve planning & management both at central (DGHE) and institutional level (Master Planning)

Institutional Capacity Building

- investments develop national capacity to train university teachers and researchers in strategic areas (UDP-II)

- investments in quality inputs (HEDP)

- resource diversification (HEDP)

- planning and management capacity building at central and institutional level (HEDP, UDP, Polytechnic)

- need for scientific and technologically trained personnel (S&T-Project)

Strategic Decentralization

- increased institutional autonomy as a way to enhance quality and relevance

- increased institutional responsiveness to external (accountability) and internal (participation/ownership) demands

- increased selectivity in public provision and funding, through use of competitive and alternative funding mechanisms

- to facilitate decentralized planning processes within universities

- to facilitate independent and transparent quality assurance mechanisms

Key-projects: URGE/DUE/QUE

Themes in State-university Relations


- expanded provision (new institutions)

- increased public funding

- standardized coordination/regulation

Attempts to centralize planning & decision-making at the institutional level (i.e. centralization)
Less direct State control:

- increased resource diversification

- decreasing budgets in real terms

- institutional differentiation

New State roles:

- growing selectivity and competition

- encouraging income generation

- supporting private sector development

- management and information system

At the institutional level:

- de-concentration

- creation of semi-autonomous intermediary bodies to advise government in accreditation, evaluation, selection, and policy

- selectivity through competition, block grants, and matching funds

- autonomy ‘within hierarchical system’ (Long Term Plan)

- enabling regulatory framework

At institutional level:

- decentralized planning

- tension between decentralizing and centralizing tendencies

Government Goals & Plans
Expansion (equity considerations)

- establishment of new institutions (incl. Open University)

- resource availability (oil revenue)

Centralized planning nationally (single system policy)


- 1st Higher Education Development Plan (1975-85)

Standardization at institutional level

- Regulation Nr. 5 (1980)

Consolidation (investments in quality inputs)

- stabilization of student population at state institutions vs. rapid growth of private institutions

- support for research and technology

- 2nd Higher Education Development Plan (1986-1995)

Budgetary constraints

- decreasing budget for recurrent expenditures

Legitimizing (financial) autonomy of HED institutions:

- REPELITA V, 1988-93 (Financial Autonomy)

- Basic Education Law 1989

- Regulation Nr. 30 (1990), Financial Autonomy

“The New Paradigm” (management reform)

Suggests increased autonomy to serve the following goals:

- improve quality (better performance)

- make universities (more) accountable

- increase efficiency (more results with same/less input)

- strengthen institutional management

- better balance local and global university functions

Its development “requires the willingness to deviate from a more centric management to more widely distributed centers” (Soehendro, 1996: 12)

- Third Higher Education Development Plan, 1996-2005

- Introduction of ‘DUE-like’ and ‘QUE-like’ projects

2.1 Manpower Development

Initial rationales for Bank investments in Indonesia’s higher education were rather strictly confined to the goal of developing skilled manpower to meet the country’s economic needs. Notably, the first Bank sub-sector project in higher education development (i.e. the IDA-funded first polytechnic project (1978-85)) drew explicitly upon manpower forecasts to justify its investment in training engineering technicians (World Bank, 1978). But even as manpower planning techniques later were to lose much of their attractiveness on both technical and policy grounds69, manpower development goals in a broader sense continued to provide guidance to the Bank’s work in higher education throughout the period of this study (World Bank, 1991). The Bank’s broader concern with graduate employability is evident in all of its higher education projects —from the manpower-planning-based investments in polytechnics up to the more recent projects under the Bank’s decentralization paradigm— and has conditioned its preference for specific fields and types of education (e.g. polytechnics, inter-university graduate schools). Nonetheless, significant differences are observed over time as to how the Bank’s changing concept of manpower development suggested varying degrees and different types of State involvement in higher education. The conceptual distinctions are here first briefly summarized, and are then further illustrated with case study material derived from specific Bank projects and documents:

  1. Manpower development as ‘manpower planning’ (forecasting) suggests broad acceptance, if not support, for an active State with the capacity to centrally ensure the provision, coordination, planning, and funding of higher education. It is generally sympathetic to a selective expansion or establishment of special types of public higher education, i.e. in fields for which there is a manifest need or shortage. At the institutional level, manpower planning suggests centralized management control in order to ensure effective coordination (e.g. institutions can be told how many students to train, in what fields, at what unit price). Lack of coordination, public under-funding (or, at the least, room for expansion), and market failure, provide the major rationales for manpower planning approaches.

  1. Manpower development as ‘institutional capacity building’ aims to improve selected institutions to self-generate and develop their own capacity to provide, plan, and fund activities that contribute to the development of manpower in strategic and centrally defined areas (e.g. in research). The strategy seeks to consolidate and to improve resources and facilities within existing institutions rather than to establish new ones. Instead of uniformity and standardization, it suggests increasing differentiation of institutional tasks and capacities within centrally determined parameters of funding, regulation, and provision. Controlled and stratified differentiation being its major thrust, the strategy suggests a less direct and different type of State control, relying less exclusively on public funds and provision, yet at the same time requiring increased capacity in government to develop mechanisms and criteria to select and evaluate programs or institutions. Budgetary or fiscal constraints, lack of institutional management capacity and financial autonomy, and market failure, are the most common rationales supporting institutional capacity building approaches to manpower planning.

  1. Manpower development under the ‘decentralized planning’ paradigm moves away from centrally determined manpower objectives, and instead focuses on the extent to which –and the process by which (i.e. bottom-up rather than top-down)— institutions are able to respond to manpower demands in society. At the State level, this approach suggests the capacity to devise public funding mechanisms that ensure maximum flexibility (e.g. block grants), choice (e.g. competition), and accountability (e.g. ex post evaluations). Specifically, public funding becomes an instrument of the State to sanction institutional performance on a range of evolving output criteria (e.g. employability of graduates) and indicators (e.g. salaries of graduates, time to find employment). At the institutional level, the strategy suggests increased competition for resources and status both within and among higher education institutions, public and private. It also suggests less dependence on the State for funding, provision, and planning purposes, and more room for autonomous decision making internally –in matters of finance, personnel, as well as academic matters— the expectation being that such would increase institutional responsiveness to manpower demands. Whereas budget constraints often provide further fuel to the call for increased decentralization, most common rationales include arguments of greater efficiency (i.e. in allocating resources), higher quality and better performance, and a perceived need to correct existing market failures. Apart from economic and educational rationales, however, the decentralization strategy in addition suggests a political rationale that seeks to extend the quality and number of units in society capable of autonomous action within the confines of the existing polity70.

The Bank’s higher education program in Indonesia provides ample documentation of each of these conceptual approaches71, and does so on a time scale that suggests broad correspondence with the three successive periods identified in table 2.1. The first higher education projects — ne involving the creation and later expansion of technical engineering programs (Polytechnic-I and II), the other supporting expansion of specific programs at three universities (UDP-I)— were negotiated at a time when the Indonesian government started to expand its public sector from a relatively modest basis72. Both projects were essentially based on manpower forecasts projecting shortages of skills in specific or fields, and both indeed were very explicit and particular in their advise and support for government in establishing, funding, and expanding the public resources for these types of training. The polytechnic project, notably, consisted of the construction and equipment of a previously non-existing system for training engineering technicians in three-year programs, whereas the UDP-I project sought to expand programs in science, agriculture, engineering and economics at 3 State universities. At least implicitly, the Bank in these instances endorsed the government’s position that these types of training should be provided at public institutions, and furthermore went along with the selection of project institutions73. Apart from providing the typical project rationale found in appraisal documents, persistent under-financing of higher education constituted represented a problem about which the Bank in those years expressed great concern (World Bank, 1982, 1991). While the Bank never formally endorsed unselective quantitative expansion of higher education facilities, it did advise government increase public spending levels throughout the 1980s on the basis of a “more systematic assessment of Indonesia’s future professional manpower needs and staff development” (World Bank, 1982: 109). Finally, and still fully consistent with the manpower planning strategy mapped out in table 2.1, the Bank’s early projects in higher education emphasized more effective central coordination and control at both national and institutional levels. Both the UDP-I project and the two polytechnic projects explicitly included major components to strengthen educational planning and management (for instance, introducing master planning procedures, or rationalizing university organization and staffing), thereby reaffirming and addressing systemic weaknesses (i.e. fragmentation of power, lack of effective management controls and planning procedures) identified in the 1975 sector report. One indication of the perceived importance of this project objective can be derived from the UDP-I completion report, which identifies “reinforced centralized control over a sprawling university system” (UDP-I, PCR: 3) (World Bank, 1990) as one of the project’s most significant accomplishments74.

In order to ensure that manpower plans could effectively be implemented, the Bank’s assessments early on included provisions highlighting the necessity to invest in central management capacity at different levels in the system (p.c. Gilpin). More effective if not increased State-control not only provided a better fit with the central features of the manpower-planning models in vogue at the time, but also seemed to respond best to the deficiencies of a system in search of greater policy coherence and in need of increased absorption capacity75. The latter two considerations (i.e. policy coherence and absorptive capacity) directly fed into the broader goal of institutional development that was to gain greater prominence in Bank operations from the mid-1980s onwards.

The second phase of the university development project (UDP-II), which started in 1985, illustrates the change of emphasis. While still broadly based on general manpower goals— the Staff Appraisal Report (SAR) even contains a projection of required supplies of manpower in a number of fields— its overall purpose was, specifically, “to develop Indonesia’s capacity to train its own university teachers and researchers” (UDP-II, SAR, 12) (World Bank, 1985). The project involved a massive staff development and upgrading plan, organized around 16 so-called Inter-University Centers (IUC) and 10 different fields, and at five different universities76. Rather than expansion and standardization, this project sought to increase quality, selectivity, and stratified differentiation, notably between institutions having research facilities and significant numbers of teachers with graduate degrees and those that don’t. Increased differentiation of institutional tasks and capacities in turn fit snugly with the Bank’s wider agenda of resource diversification and cost recovery, which at that time (1985/86) was getting increasing attention in sector work, also in Indonesia (cf. infra). UDP-II as well as later Bank projects (Annex) continued to explicitly emphasize manpower goals —otably in the identification of broad fields that deserved special consideration— but their realization was to depend increasingly less on central plans and State-control, and instead increasingly more on the capacity of institutions to pursue them.

More recent and on-going Bank projects have moved further away from centrally determined manpower goals, and instead are advocating decentralized approaches to ensure institutions’ responsiveness to society’s manpower needs. The focus has shifted towards new funding mechanisms and more competitive and decentralized incentive structures to help increase the relevance of higher education study programs on the job market. The latest Bank project, Quality of Undergraduate Education (QUE, 1997) —the third in a series of Bank initiatives closely associated with the implementation of the government’s management reforms in higher education (New Paradigm)— illustrates the change of emphasis in the Bank’s goal of manpower development. As earlier Bank loans, this initiative seeks to address persisting problems of quality and relevance in Indonesia’s higher education, specifically pointing to the perceived mismatch between the output of the universities and the needs of the economy. However, rather than setting central targets or investing heavily in equipment and infrastructure, its goal is “to promote a more cost-effective allocation of public funds by directing resources to high priority fields at both public and private universities” (QUE, SAR: 2) (World Bank, 1997). The project specifically sets out to do so by furthering the use of competitive grant schemes, performance indicators, and block grants (QUE, SAR: 10) (World Bank, 1997: 10). The implications of the decentralization goal to State-university relations go well beyond the promotion of specific approaches to manpower development, but these will be further analyzed later on.
2.2 Institutional Development

Manpower planning providing the initial drive, additional rationales for a more comprehensive involvement in the development of the higher education sub-sector began to build momentum when the Bank, through policy studies and related analyses in the mid 1980s77, started to engage itself more openly in the process of policy formulation. At that time, Bank staff for a number of reasons anticipated giving higher priority to investments in higher education78, while the government on its part seemed to express an increased willingness to borrow for higher education investments79. In this context, the Bank began to advocate a wider and longer-term policy perspective to the development of higher education, initially seeking mainly to build strong institutional capacity at targeted places (as in UDP-II), but later also ambitiously investing more broadly in government plans spanning the entire sub-sector. The Bank’s upstream sector analyses as well as its lending activities comprised two analytically distinct dimensions of institution building, each of which in a different way suggest a gradual movement away from the dominant pattern of State-control in State-university relations.

  1. Institutional development in a narrow sense pertains to the goal of “improving the ability of selected institutions to make effective use of the human and financial resources available” (Israel, 1987)80. In the Bank’s higher education program in Indonesia, the goal typically is reflected in activities seeking to strengthen management information systems, institutional planning, automation of central administrative functions (e.g. student administration), and management training. However, it may also support improvements in the educational process itself, for instance through staff development, research facilities, or library development. In State-university relations, institutional development explicitly advocates selectivity and suggests increased diversity of institutional capacities and missions. At the State level, the strategy presupposes capacity and resources to organize and manage an increasingly complex higher education system, involving different types of institutions (e.g. polytechnics, research centers, universities and ‘less-established universities’…) with divergent needs in financial (e.g. differential funding mechanism) and human resources (e.g. differential rewards or incentives). The goal of institutional development in principle does not necessarily include any particular preference for centralization or decentralization at the system level81. However, at the university level it does suggest at least the ambition to move to centralize management functions in a strong and autonomous institutional middle-level.

  1. Institutional development in the broader sense comprises the aspiration to reform or otherwise attempt to change existing policies in directions that enable universities to maximize and utilize the human and financial resource basis available to them. It suggests a revision of the normative framework —the ‘rules of the game’ (North, 1990)— in which universities operate, be this in funding, accreditation, planning and/or management. Notably, the Bank’s upstream activities and consecutive sector loans in Indonesia sought to introduce or support measures to stimulate the development of private universities, revise accreditation standards for public and private institutions, increase cost recovery and resource diversification, and expand managerial and financial autonomy at State universities. Advocated reforms in particular centered on the twin goal of maximizing income generation for higher education while ensuring greater quality and efficiency in the use of these resources82. In State-university relations, institutional development implies less direct State control in funding (i.e. decreasing share of budgetary sources) and provision (i.e. promotion of private sector development), and a different State role, especially in facilitating or supporting institutions. At the institutional level, the Bank supported government initiatives to increase the financial autonomy of institutions over the allocation and management of resources.

While conceptually distinct, the two dimensions of institutional development -at one level suggesting institutional differentiation, at another seeking to increase resource diversification- in actual practice became part of an emerging policy agenda increasingly at odds with the earlier model of uniformity and State-control. As a result of growing ambitions in institutional development, Bank documents were also becoming increasingly explicit in addressing State-university relations, especially where they concerned matters of higher education financing, sector planning, and managerial and financial autonomy (HEDP-I, SAR: 52). The Bank’s broader policy agenda in that area —notably including increased resource diversification and cost recovery, privatization, and decentralized management83— fit rather well with the financial and budgetary constraints that were then seriously affecting Indonesia’s resource basis for higher education84. But Bank goals of institutional development also matched with government plans to stabilize student population at State universities and instead concentrate further growth of enrollments predominantly in the private sector (p.c. Sukadji). Notably, the second Long Term Higher Education Development Plan (1986-95) identified ‘consolidation’ and ‘achievement of critical mass’—not ‘expansion’— as the government’s central policy targets with regard to the future development of State universities (Task Force for Management Reform and Consolidation of Higher Education, 1988: 6-10).

The achievement of critical mass in particular was the central institutional goal of Bank projects such as UDP-II, which developed centers of excellence85 at designated institutions and in selected fields (cf. supra), thus explicitly seeking to set these universities apart for specific missions in research and development. The reinforced emphasis on institution building in the mid-1980s also affected Bank goals regarding the then still ongoing Polytechnic project, involving the establishment of a new system of three-year technician training programs. Whereas initially the polytechnics were mostly housed within existing universities and operated under their administrative authority, the Bank at the close of implementation successfully advocated increased autonomy —later separation from host universities— of the polytechnics in budgetary and educational matters (Poly-II, PCR: 4). Both the UPD-II and Polytechnic project reflect goals (and efforts) of institutional innovations aimed at strengthened capacity, and ultimately increased differentiation of institutional missions. In the case of the IUC’s the aspiration was to improve the capacity of the leading public universities to provide graduate training and research, whereas in the case of the Polytechnic project the Bank moved to help establish, equip, and further develop an entirely new type of institution.
Broad agreement with the Indonesian government on the policy goal of consolidation and quality improvements at State universities boosted the Bank’s aspiration to affect the institutional policy framework of Indonesian higher education. Staff participating in the policy dialogue were encouraged in particular by the government’s “willingness to implement difficult policies” (HEDP-I, SAR: 10), notably by increasing tuition fees at State universities and liberalizing the private sector86. Not soon later, during the preparation of the government’s fifth five-year plan (1988-93), DGHE and BAPPENAS agreed to include an entry proposing to grant financial autonomy to the country’s State institutions87. The Bank’s explicit support for these policy changes and initiatives not only materialized in a sharp increase of Bank investments (cf. chapter 3), but was reflected most visibly in the introduction of a new type of loan, providing direct and sector-wide support to the DGHE development budget. Sector loans —or ‘time-slice loans’ because they financed a time slice of the government’s expenditure program (or part thereof)— were based on a broad agreement between Bank and borrower on a number of specified policy goals. The first Higher Education Development Project (HEDP-I, 1988) identified a program and action plan that covered policy objectives such as increased resource mobilization at public institutions, improved sector-wide planning (i.e. making enrollments contingent on available resources), and better management and Management Information Systems (MIS) at institutions as well as centrally. Both HEDP-I and HEDP-II, the follow-up project that was approved in 1991, included diverse sub-programs (e.g. in library development, university-based research, management training, growth centers to promote the development of private higher education, etc.) providing key inputs perceived (by the center) to be necessary to strengthen institutional capacity.
Although institution-building goals in many ways suggested relative movement away from the earlier pattern of State-control —characterized by standardization, and near-to exclusive dependence on public funding— the Bank’s program did not at that time fundamentally challenge the central role of the State in planning, providing, funding, or managing higher education. Instead, it carefully chose to operate within the boundaries of and in close alliance with the State-controlled system, while seeking out and exploring windows of opportunities, presented by the external environment (e.g. budgetary constraints) or by domestic reform agendas88. Rather than aspiring for ‘deep’ (i.e. implying a fundamental departure from existing norms) and ‘broad’ (i.e. affecting a large number of functional reform areas) institutional reforms at the system level, the Bank’s agenda focused on goals that were congruent with prevailing practice, and on areas of comparative advantage (e.g. financing)89. The agency continued to concentrate its resources overwhelmingly in public institutions, in particular the lead universities, while encouraging government to diversify and to facilitate growth of private institutions. At the institutional level, meanwhile, capacity building targets were concentrated at centrally designated places and in centrally determined areas90, whereas institutional planning and management information systems typically were designed to serve central planning and management purposes91. The Bank’s implicit goal of institutional differentiation therefore appears as mandated, input-based, and supply-driven, rather than as the desired outcome of a competitive or demand-driven selection process. Similarly, the goal of increased resource diversification was conditioned by the many a-priori’s of a financing system that essentially would remain firmly State-controlled for some time to come92. As long as institutions did not have the discretion to take key-decisions (e.g. in academic planning, personnel management, financial management, etc.), and were not being held accountable for them, financial autonomy to generate extra-budgetary income remained an empty promise.

By the early 1990s, at the time when UDP-II was coming to a close and HEPD-II had started operation, Bank staff had become increasingly “frustrated by the endemic structural problems in the organization and administration of higher education in Indonesia” (World Bank, 1991: 75). Discussions with government to identify follow-up interventions —first for UDP, later for HEDP— included reviews of broad sector policy goals as well as specific project approaches. The policy dialogue process now focused even more explicitly on a revision of the role of the State in higher education93.
2.3 Strategic Decentralization
Although manpower building and institutional development remained the overarching goals of the Bank’s higher education portfolio, there was growing recognition from the early 1990s onwards that the effective realization of these goals would require a profound modification of the incentive structure (political economy) of higher education planning in Indonesia94. Also, and importantly, the Bank had drawn sharp critiques since the late 1980s that it was ‘politically too close to the State’ (p.c. Ralph Harbison). In this context, the Bank explicitly started to advocate a critical revision of the role of the State in funding, providing, and coordinating higher education, at the same time identifying and supporting ways for institutions —and the units within—to take on greater responsibilities in planning and management.

I chose the concept of ‘strategic decentralization’ to summarize the overarching theme for a range of structural reforms for which the Bank in the course of only a few years time (1993-96) tried to muster support from reform-minded academic leaders and bureaucrats within government and at universities95. The term underscores the Bank’s growing preoccupation with the process of higher education planning and management —in contrast to the earlier emphasis on inputs and quantitative targets— but also indicates that its preference for decentralized decision-making is based on efficiency considerations more so than on normative a-priori’s. Its general thrust is to enable institutions to become more efficient and more directly responsive, and therefore better, operational units. Or, in keeping with the Bank’s own economic phrasing, its overall goal is to change from a “supply-driven, centrally managed, and sector-wide approach towards a more demand-driven, decentralized and focused approach” (SAR, DUE: 13).

Regarding State-university relations, the gradual refocus of Bank goals in general means that:

  • increased decentralization of decision-making power (i.e. in staffing, academic planning, and financial management) from the State to the universities (i.e. autonomy) is explicitly advocated as the most effective way to make institutions —nd the units within— more responsive to both external (i.e. accountability) and internal (i.e. ‘ownership’) demands. Specifically, autonomy is regarded as instrumental to enhance the quality and relevance of higher education programs, as well as to broaden participation in internal planning processes at the institutional level96;

  • the State is encouraged to become more selective in the provision and funding of higher education, notably through the development and application of performance criteria that center on educational outcomes, and by using alternative funding mechanisms (e.g. block grants, matching funds, competition based awards and incentives)97. It suggests that public funds should be allocated to areas where private financing or information is inadequate (i.e. market failure), where externalities (e.g. in research) are manifest, or social and political goals (e.g. regional equity) suggest specific attention;

  • the State is advised to put in place an enabling regulatory framework and climate that a) encourages less established institutions to define their own mission, develop their own (strategic) plans, and identify alternative ways to fund them, and b) provides oversight and transparency by way of ensuring independent quality assurance mechanisms and selection processes in which both public and private institutions participate on a more equal footing98.

While in theory, strategic decentralization appears to suggest a rather comprehensive reform agenda, if not a theoretical model99, in reality its major tenets emerged gradually in the context of an evolving dialogue with DGHE, BAPPENAS, and with academic leaders, that initially centered mostly on project-related concerns. Discussions to follow-up on loans that were coming to an end —and their particular timing100— helped create the momentum and platform from which the Bank was able to gain broad influence in the process of Indonesia’s domestic policy (re)-formulation.

At the System Level:

The Bank nonetheless steered away from imposing or even recommending specific reform packages —let alone from suggesting strategies of conditional lending— and instead would start to seek out targeted investment opportunities for incremental change within the framework a long-term strategy, which it did suggest DGHE to articulate101. The Bank’s parameters (‘minimum conditions’) of such a long-term policy perspective were well known to DGGE and prominently included the expectation of a stronger commitment from government to increase the autonomy and accountability of public institutions in order to better ensure sustainability of investments102. In effect, DGHE’s own reform strategy, as reflected in the “Paradigm” concept paper (July 1995) and later on in the Directorate’s third long term development plan (May 1996), was largely prepared in tandem with consultations with the Bank to identify new investment opportunities to follow up on the HEDP103. Not surprisingly, Bank staff at the time judged the paradigm to be “precisely in line with the Bank’s message” (Internal Memo, 7/2/95), anticipating that it would set the stage for future Bank projects to come.

Like before, the Bank first sought to reach broad agreement with the DGHE on sector-wide policies, and their implementation, before committing firmly to new lending operations. Like before also, Indonesian reform plans were first conceptualized and promulgated centrally only at a later stage to be ‘socialized’ to and within the institutions104. However, the paradox of the new paradigm was that its political thrust (i.e. to empower higher education institutions, and the academic units and people within them) seemed at odds with these centrally driven origins. While its message appeared to correspond well with the Bank’s own lessons of experience, in Indonesia as elsewhere, Bank staff was aware that its realization in practice would suggest a major overhaul of the ‘rules of the game’ in planning and operating higher education in Indonesia105. As one staff report noted, the new paradigm suggested not only a drastic revision of planning procedures or implementation mechanisms but also “a change in the mindset of policy makers and university representatives” (Back to Office, 06/20/95). Broad agreement with DGHE therefore no long was considered sufficient, but would need to be accompanied by broader and more direct participation from the targeted institutions in the design of new Bank-supported investment programs. The Bank began to advocate with DGHE a lending strategy that no longer would focus on centrally determined investment needs but on putting in place an incentive mechanism for institutions and individual academic units to determine, implement, and self-manage their participation in Bank-supported operations. Its strategy shifted away from supporting sector-wide loans to clearly targeted programs and operations set up according to centrally agreed policy objectives, criteria and performance indicators, but implemented in a decentralized fashion through the use of block grants106.

At the operational level:

The dialogue materialized in a new series of Bank loans, each pursuing the introduction and/or dissemination of decentralized planning and management mechanisms in different types of programs and institutions, including graduate programs (URGE, 1994), ‘less established institutions’ (DUE, 1996), and undergraduate programs (QUE, 1997). The URGE project, which was negotiated and appraised before the new paradigm concept paper was articulated, was the first to reflect the Bank’s new lending strategy for Indonesia. Discussions at an early stage centered on the lack of appropriate incentives both for universities and academic staff to ensure their long-term commitment to research and graduate programs. The Bank expressed concerns not only about the lack of appropriate career incentives to reward individual researchers and ensure their full-time commitment, but especially also about the mechanisms to select and fund programs that would be sustainable in the longer run. The successful experiences with competitive research schemes107, and the government’s plans to expand these, encouraged the Bank to use these particular initiatives as starting points to develop alternative (i.e. decentralized) models of planning and management.

All three projects have been explicitly designed to encourage broader changes in the incentive structure of State-university relations in Indonesia, with the twin goal of optimizing planning and management efficiency (both at State and institutional levels), and improving quality and responsiveness of higher education to society’s needs. While directed at different institutional audiences, they share a common perspective on State-university relations; one that encourages government to move away from central State-control, and instead advocates a type of governmental steering that allows for greater autonomy and accountability of State universities. At the same time, all three projects nonetheless do suggest a continued – albeit much more selective— State involvement in providing, funding, and planning public higher education108. Specifically, they favor targeted public investments in areas where markets fail (e.g. graduate programs), externalities are perceived to be manifest (e.g. basic research or quality improvements in undergraduate education), or where there is an agreement on social/political goals that require specific attention (e.g. regional equity). Moreover and contrary to what one might expect, these projects in many ways suggest a strong State. A State that has the capacity to develop and determine selection criteria and performance indicators, the expertise and information basis to select from competing proposals, to design new funding programs, to monitor operations, and, most of all, to evaluate outcomes109. Rather than to further political or bureaucratic models of decision-making, however, the approach reflected in these three projects has been one of promoting and actively supporting the establishment of independent bodies mixing academic (professional), bureaucratic and external loyalties. Agencies like the National Accreditation Board (PT-BAN), the University Research Council (URC), later integrated into the Board of Higher Education (DPT), and the DPT itself, are illustrations of this strategy110. At the system level, in other words, the Bank’s approach in these projects in many ways suggests further movement away from direct or centralized State control —a change, which the agency had started already to advocate in the mid-1980s— but at the same time introduces new and arguably more efficient levers for the State to influence higher education policy’111 more effectively. 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’ (DGHE, Ministry of Education and Culture, 1996; Soehendro, 1996)112.

At the Institutional Level:

At the institutional level, meanwhile, the Bank’s position, as reflected in these projects, indicates a marked movement away from promoting centralized university management towards more open and explicit support for decentralized models of internal planning and decision-making. The change of policy not only implies a major revision of the nature and extent of the Bank’s involvement in internal university planning, but at the same time may suggests a decreasing reluctance on the part of the government to let foreign agencies become involved with how institutions are run. In spite of its early emphasis on institutional management capacity building, echoed in the objectives of successive projects and activities (starting with the polytechnic project up to HEDP-II), the Bank, like many other donors, consistently steered away from the local political dynamics of institutional planning. Internal evaluations of the earlier Bank projects did seem to recognize the magnitude and political complexity of the tasks involved in university management development, but, as one informant notes, tended to accept them as part of the “political reality” within which donors in Indonesia –even the powerful ones— operated.

The already noted reluctance on the part of the government to let foreign agencies become involved in local institutions at least helps explain part of this donor hesitation. At the same time, however, the Bank’s initial optimism about the prospects and possibilities to bring about institutional changes through a top-down and government-led planning process also left its mark on the Bank’s own operations throughout much of the 1970s and 1980s. For instance, and as an indication of it’s own approach to institutions at the time, the Bank as late as 1990 credited the UDP-I project for having “reinforced centralized control over a sprawling university system” (UDP-I, PCR: 3)113. The same report goes on to note that at the time of appraisal “no explicit reference was made to the relative functional importance of academic, administrative, or financial authority within these institutions” (UDP-I, PCR: 4), thereby underscoring the donor’s earlier restraint in becoming involved in institutional politics. Later projects like HEDP-I and II tried to get around the politics of institutional planning by supporting the development of a system-wide management information system that was intended to serve both central and institutional planning needs at the same time114.

By the mid-1990, however, the Bank’s own assessment of this ‘de-concentration’ policy ultimately had become highly critical to the point of suggesting that that these earlier initiatives had been developed “…largely for, not with, the individual public universities” (HEDP-II, PCR: 11). While the Bank in principle continued to aim for improved planning at all levels, staff by then had become convinced that individual departments and study programs, more than central university management, were to be the most effective entry-point to influence content, planning, and ultimately management of higher education in Indonesia. In general, the Bank’s goal at the institutional level is to improve internal ownership, and to increase the commitment and participation of individual units – in particular departments and study programs — in academic planning as well as in management.

The area of graduate education and university research was to become the first case for the Bank’s new approach in higher education lending. The URGE project was explicitly designed not only to attract proposals originating from the academic units and individuals to which it was addressed –in this particular case in graduate education— but also to directly provide grants and other incentives (e.g. fellowships) to these units and individuals on a peer-reviewed basis. Joint Bank and government reviews had questioned the structural weaknesses of the Inter-University Centers, their relative insularity within the host universities, the selection of subjects, and the ‘project mentality’ that had become apparent in many of these centers115. In contrast to the existing system of officially designated IUC’s, the institutional dynamics of the URGE project is driven by competition –for funding as well as prestige— between and within academic units and individuals. Unlike in the earlier Bank projects, investments and awards are provided directly to the implementing academic units in the form of block grants, and these units in turn are held directly accountable to the central URC (within DGHE) based on their performance. Central university management is not directly targeted by the URGE-program, and its role instead is confined to one of monitoring and/or evaluating of specific projects116.

The practical and institutional significance of the new policy, however, was not to be restricted to the relatively privileged domain of advanced research and graduate education. The Bank’s project experience had led to the sobering conclusion that university level planning remained generally weak overall, and this in spite of many years of Bank investments in management training and information systems. When the time had come to identify a follow-up project for HEDP-II, staff visits to universities representing a wide range of institutional capacity indicated that university planning was feeble in all, including the prestigious, but that there was variability at faculty and department level (Back to Office Report, 06/20/95). Although the DGHE initially had set its mind on a comprehensive loan that would cover the development budget of many if not all public undergraduate institutions, the Bank this time held a firm grip on the number of institutions, and importantly, on the mechanism by which they would be selected. Furthermore, the Bank this time wanted to be able to better target specific objectives and possibly even specific types of institutions. After having conducted a series of workshops involving consultations with a wide range of audiences at a relatively large number of institutions117, it was agreed to generate two separate projects (Back to Office Report, 10/12/95). The first project directed to a selected group of regional universities outside of Java basis (i.e. the Development of Undergraduate Education, DUE), the other providing direct support to undergraduate study programs selected in an open competition (i.e. Quality of Undergraduate Education, QUE).

Both projects closely incorporate the core goals of strategic decentralization –and of the new paradigm— at the institutional level. Like URGE, the two initiatives are explicitly based on a competitive dynamic that seeks to selectively reward proposals that originate from within the universities (and not on institutional needs determined by the center). Specifically, the DUE project provides a framework for screening, selecting, and implementing (and evaluating) institutional investment plans, which initially are generated by teams (‘task forces’) of academics at targeted regional universities. The core goal of the project is that institutions are encouraged to develop plans for institutional improvement based on a transparent and participatory process of institutional self-evaluation and strategic planning118. The purpose of the procedure is to allow institutions to develop investment plans that can meet specific performance criteria in a sustainable fashion. Furthermore, and as part of their submitted plans, the selected universities are required to commit matching funds from their resources in order to demonstrate an institutional support from their central university management. The QUE project is driven by a similar project dynamic, which emphasizes competition and decentralized initiatives119.

In brief, the Bank’s more recent projects explicitly set out to promote increased participation and involvement of academic staff, in particular the younger generation of academics, in determining institutional choices, broader institutional commitment, and more openness and transparency overall in institutional decision-making. However, rather than attempting to influence institutions directly, the Bank’s intent seems to be one of strategically using new investments indirectly as a lever to encourage more effective and more participatory planning procedures (Internal Memo, 07/11/95). As in the case of system decentralization, the Bank’s position with regard to intra-institutional decentralization is not based so much on normative principles but instead seems to drive on the goal of facilitating investment decisions that correspond better to local needs and conditions. In this connection, the perceived failures of central university management at least implicitly are seen by many in the Bank as providing the dominant rationale for a more decentralized approach to planning. But whether at system-wide or institutional levels, the goal of strategic decentralization most of all suggests a further movement away from direct, State-controlled solutions.
3. Conclusion

The theme that emerges from our analysis of over twenty years of Bank involvement in connection to Indonesian State-university relations is that assistance goals have gradually but consistently and ever more explicitly pushed forward strategies suggesting less direct State control and more academic autonomy and decentralization in general. The shift was part of a broader development in the Bank’s thinking about the appropriate role of the State in education, in social sectors, and in macro-economics, involving a change of public-private roles in society, in introducing alternative, market oriented incentive regimes.

While the Bank’s initial approach to manpower planning at least explicitly seemed supportive of a stronger and more central State role in providing, funding, and coordinating higher education opportunities, its evolving goals instead suggest a pattern of ‘creeping decentralization’ broadly progressing in accordance with changing domestic policy configurations. The pattern identified suggests an incremental movement away from State-control, and its derivative goals prominently include growing diversity and institutional differentiation, increasing diversification of institutional resources, and, more recently, increasing decentralization of decision-making power to and within institutions. While responding to shifting domestic conditions, the reforms advocated by the Bank over time also resonate well with successive changes in the Bank’s policy agenda in higher education worldwide, which moved from a near exclusive focus on economic criteria to a gradual, albeit prominent inclusion of the political conditions for more effective decision-making at institutional and national levels. In the longer run, the Bank’s pattern of goals in Indonesian higher education suggests elements of change as well as continuity.

Not surprisingly perhaps, the change pursued by the World Bank has been of an evolutionary and not revolutionary nature. The agency never openly challenged the political contours of Indonesia’s higher education system, and instead consistently chose to collaborate directly and extensively with government institutions to expand its resource basis and to manage it more effectively. From the very start, the Bank’s program in higher education has revealed a consistent pattern of close cooperation with government –‘client relations’ in today’s parlor— reflected not only in an expanding lending portfolio but also and perhaps more importantly in an evolving policy dialogue with reformers in government. Both observers and participants have characterized the history of the Bank’s program in higher education in terms of symbiosis and pragmatism, rather than as the imposition or extension of an essentially external policy agenda. And while close government-Bank relations of course need not necessarily be interpreted as an indicator of success in any particular direction, they have overall suggested a relatively strong openness within government at least to some of the Bank’s ideas. The corollary has been that changes have been pursued gradually, oftentimes selectively, building on an emerging strategic alliance with the DGHE leadership and, to a lesser extent, BAPPENAS.

Nonetheless, good client relations have generally not prevented the Bank from taking increasingly explicit positions in the relationship between government and State universities. Specifically, whereas initially, the Bank’s position at least implicitly seemed to support direct State-control over “an unwieldy and under-funded sector”, it soon became the major platform from which windows of opportunity were explored at crucial stages of the system’s development, and responding to changing domestic conditions. These explorations notably included the introduction of more significant levels of cost recovery, later financial autonomy more broadly, and the development of the so-called new paradigm in the early- to mid-1990s. Given the nature of Indonesia’s domestic political system at the time, characterized in the literature as a ‘bureaucratic polity’, decentralization continued to represent an opaque theme for donors to tackle explicitly. One prominent witness characterized the Bank’s stance to policy in Indonesia in terms of “a parallel track approach”: whereas open conditionality never was an option, the Bank did not hesitate to use its influence to suggest reforms or at least to find ways not to invest in projects that went against its premises. Parallel track was an operative principle throughout the 1980s but became less viable from the early nineties onwards, when decentralization became an increasingly explicit theme, in Indonesia as elsewhere (p.c. Ralph Harbison).

The political paradox that appears from our analysis is that decentralization appears as driven predominantly from a governmental steering perspective. We have highlighted this development with concepts such as ‘State-supervision’, ‘strategic decentralization’, and ‘managed pluralism’. While representing alternative conceptualizations, their common element is that they suggest an increasing number of units capable of autonomous action, thereby implicitly challenging, if not undermining, the centralized nature of the bureaucratic polity.

III. Summary

1. Both cases suggest that donor goals have often indirectly facilitated and at times explicitly pursued changing patterns of State-university relations in a gradual movement away from direct State-control.
a) Implicitly, donor’s institution-building goals have challenged the norms, mechanisms, and assumptions of standardized State-control, even at times when their explicit purpose was to service the manpower or other development needs of the State. Assistance goals brought along increased selectivity, competition, and resource diversification, all of which were at odds with the dominant model of centralized State control. By increasing the institutional diversification of missions and capacities international donors in turn have complicated uniformity and instead have helped legitimize variation within Indonesian higher education.
b) Explicit donor support for institutional policy reforms, with the intent to bring about change in Indonesian State-university relations have been exceptional and has been confined mostly to the specific case of the World Bank. The Bank’s history of involvement and dialogue with the Indonesian government gave this donor a competitive edge to start exploring the constraints of central State-control, first by pushing for greater diversification of resources (i.e. cost recovery) but later also directly calling for structural reforms to accompany increased autonomy.

2. In spite of marked differences between the two agencies, both have been consistent in their emphasis on selectively supporting the development of academically stronger institutions. Whereas initially that goal notably included serving the interest of the State (i.e. in economic development, manpower planning, or ambitiously nation-building), academic capacity building has been the defining feature of the donor assistance in this study. It is reflected in goals and ambitions in staff development, academic organization, and institutional development.

3. Donor agencies have gradually adjusted their goals over time, and these in turn have broadly stayed in tune with increased institutional capacity and changing domestic political and economic conditions. By teaming up with domestic reformers, both at center (i.e. DGHE and BAPPENAS) and at targeted universities, international assistance at times has explored the boundaries of Indonesia’s bureaucratic polity albeit often implicitly more than overtly. One implicit political goals of international university assistance has been to increase the strength and the number of units in society that has the capacity for autonomous action.
4. The gradual change of focus in donor goals towards greater decentralization does not in general support the idea that donors were seeking to decrease the influence of the State. Instead, evolving international assistance goals are found to advance a different type of governmental steering in higher education emphasizing increased evaluative capacities and power at the center. Donor goals that either implicitly or explicitly inspire decentralization to and/on within institutions simultaneously promote reorientation and strengthening of the organizational capacity at the center, including the development of linkage mechanisms between various levels. Furthermore, both donors (and government) continued to acknowledge and even to support a central —albeit more selective— role of the State in provision, funding, and coordination.
5. At the institutional level both agencies to favor decentralized models of decision making, either because of 'natural' preference or restriction (Dutch aid) or out of frustration over attempts to achieve the alternative model of strong corporate university management (World Bank).

International Assistance and State-University Relations

in Indonesia (1978-1998)

Seeking Autonomy within a Bureaucratic Polity

Chapter III


“We should not forget one important advantage of the “annual IGGI fix”, namely that the money came directly and exclusively to the center and without any significant State outlays in the form of a tax-gathering apparatus. In other words, not only was the power of the State vis-à-vis society vastly enhanced, but within the State the center came decisively to dominate the periphery” (Anderson, 1982: 113)

Having identified the content of the play (policy goals) in chapter two, this chapter will focus instead on issues of stage (context), actors and their performances (efforts). Specifically, the purpose of this chapter is to analyze international donors’ policy instruments in Indonesia’s higher education, and to lay out in what way these have corresponded with changing domestic patterns of higher education financing in Indonesia. While the analysis will concentrate predominantly on resource flows (i.e. funding levels and their distribution within the system) , it will also review delivery modes and implementation procedures. The analysis suggests that both the size —certainly not “marginal” in the Indonesian case– and the form(s) of the donor interventions are indicative of a potentially influential role for international assistance in Indonesia’s higher education.

As in previous chapters, the terms ‘donor’ and ‘international assistance’ are used here in a broad yet distinctive sense. When referring to international donors, our discussion will include a variety of governmental, semi-governmental and intergovernmental organizations ranging from multilateral development banks to bilateral aid agencies of variable size and shape. Similarly, I use the generalist term ‘international assistance’ to cover a broad range of activities, investments, mechanisms and instruments, recognizing and taking into account the subtle and substantial differences between grants and loans, technical assistance and budget support, investments and policy dialogues. At the same time, by using the term “donor” and “assistance” (rather than ‘aid’ or ‘development cooperation’) the chapter’s topic stands apart from other forces of globalization (e.g. commercial, financial or trade flows). This interpretation furthermore conveniently follows the OECD-Development Assistance Committee’s functional definition of Official Development Assistance, which includes grants and concessionary loans “provided by the official sector with the promotion of economic development and welfare as the main objective” (OECD, 1999).

Evidence of donor efforts, it is noted at the outset, does not automatically imply a causal relationship between international assistance and particular outcomes in higher education development. The ‘evidence’ presented in this chapter therefore is of a circumstantial nature rather than conclusive. The theme of the chapter is that in spite of the intrinsically centralist inclinations of international assistance efforts120, donors have been critical in establishing the enabling conditions for both system-wide decentralization and institutional autonomy in Indonesian higher education. The chapter explores how international assistance efforts over the period of this study in various ways –quantitative and qualitative, implicit and explicit— have become a critical source of higher education funding and system building. The size, shape, and mechanisms of that effort, to be analyzed in this chapter and further documented in the dissertation annex, suggest a gradual but notable shift in State-university relations, as these (slowly) moved from uniformity and across-the-board approaches towards greater differentiation of institutional types and functions. Most of all, donor efforts shifted from physical inputs and investments towards newly styled interventions reflecting and at the same time recommending bottom-up planning procedures, performance based allocation of resources, and decentralized implementation mechanisms. These developments have furthermore paralleled certain qualitative changes in the structure of higher education funding, notably reflected at the institutional level in the changing relationship between development and recurrent budgets, and in the relative growth of extra-budgetary institutional income. Even before moving to outcomes (chapter 4), donor activities could be summed up here provisionally under the respective banners of institutional differentiation —some argue stratification– and resource diversification –some argue marketization or even privatization-. The chapter thereby contributes to the wider argument of the dissertation positing that international assistance has been instrumental in furthering decentralized State-university relations in Indonesia.

The chapter is subdivided into 4 separate yet interconnected subsections. Section 1 draws the broader picture of international assistance in Indonesia, identifies major donors and resource flows, and highlights their significance to higher education development in particular. Section 2 investigates the domestic policy environment in higher education and shows how it not only provided context to international donor efforts but also suggested, and in many instances determined, many of the donor’s choices as well as boundaries. Section 3 purports to document donor efforts in higher education in greater detail, specifically analyzing their overall and relative size, regional and institutional distribution, changing composition and mechanisms. Furthermore, this section will also explore the relationship between international assistance and domestic higher education funding patterns at the system level. Section 4, finally, examines the relationship between international assistance and funding patterns at the institutional level. Together, it is argued, these subsections reflect a mutually reinforcing interplay of domestic and external variables that helped push donor efforts forward towards greater decentralization at system and institutional levels.

  1. The Context of International Development Assistance in Indonesia

This section outlines the external policy environment of international aid to Indonesia from the late 1970s through the late 1990s. Sources of assistance are identified, as well as their relative positions, gradually and specifically zooming in on the portfolios of the two cases in this study. Tables and graphs concerning the broader external environment of international aid to Indonesia are reported in the annex. Data concerning the specific portfolios of the two cases are included as intrinsic parts of the main text.

The data presented in this section indicate that Indonesia over much of the time period of this study became an increasingly prominent recipient of international assistance flows from multilateral banks as well as from bilateral donors. Indonesia furthermore scored particularly high on the Aid Intensity Indices of its major donors, including leaders such as the World Bank, Japan, and the Asian Development Bank, but also the relatively smaller ones such as Australia, the Netherlands, or Germany, just to name these few. Apart from the quantitative increases of international flows, many of these donors have also significantly changed the nature of these inputs and the mechanisms involved. The following broad observations have been especially relevant to the theme of this dissertation, as they not only provide indications of the “resource environment”121 (Kreiner, 1984) of donor efforts in Indonesia, but also determined much of the context for international donor influence on State university relations:

First, donors in Indonesia typically did not “leverage” their assistance efforts heavily towards issues of governance or political reforms, but rather —and at times eagerly– stayed neatly within the political boundaries of Indonesia’s bureaucratic authoritarian regime, a strategy that seemed to offer benefits in terms of political stability as well as economic and social progress122. For a good deal of the 1980s, and well into the 1990s, Indonesia remained a “darling of donors”, that is, a country whose economic and social success story— not least in (basic) education– invited mostly international praise and seemed to ensure continuous flows of international donor investments (table 3.1 and graph 1 in Annex). Meetings of the Inter-Governmental on Indonesia (IGGI), transformed in 1992 into the Consultative Group on Indonesia (CGI), provided the broad institutional framework for donors to pledge their commitments and coordinate their intentions with the national planning board (BAPPENAS).
Also at the sector level, and even at the more operational level of project design, this money moving dynamic reflects the mutual interest of donor- and government representatives to maintain steady flows of funds. The dynamic also characterized donor efforts in higher education in particular during much of the 1970s and especially the 1980s. From the early years of the Suharto regime, the Indonesian government was in dire need of donors willing to invest in a comparatively under-funded higher education system. Whereas growing social demand for higher education was to be absorbed by the expanding private sector, the government was anxious to fund and develop an elite public system of higher education with international assistance. International donors, meanwhile, were willing to comply as they hailed the government’s broader development strategy in human resource development. The broader “resource environment” of international assistance in higher education, in other words, seemed not particularly conducive to processes of decentralization. Instead, it essentially suggests an orientation to the needs of the apparatus of the State bureaucracy. At the same time, however, the broader context created extraordinary space for international assistance to consult with key players (including the Ministry of Finance and BAPPENAS), to construct (i.e. buildings), and, even, to experiment (i.e. with ‘new’ types of institutions such as the Polytechnics or, later, graduate education and alternative funding mechanisms) and, in doing so, stretch the boundaries of a centralized bureaucratic system of higher education. Notable, in this regard, was the early willingness and atypical agreement of the Indonesian government to borrow large sums of money from multilateral development banks and, in addition, contribute significantly from its own budget for substantive loan projects (see table 3.4 in annex). And even though loans from the IBRD or ABD are typically concessionary in that they combine aspects of grants and market loans, they do contribute to the State’s debt and thus constrain or determine the ways in which the State can make use these funds.
Second, data indicate the changing sector distribution of donor funds, involving relative and consistent growth of international resources invested in the development of education, or human resource development more broadly, and at least initially (late 70s through mid 80s) in higher education in particular. Table 1 provides a quantitative indication of the relative growth of education’s share in international project aid, increasing from a sound 6.5% (1981-84 average) to a stiff 19.8% (1995-98 average) of total international project aid in Indonesia. Further, from the late 1970s onwards, and throughout the 1980s, both donor cases in this study invested their educational assistance predominantly in the development of higher education. Development here often meaning in the physical sense of physical infrastructure development (ie. campus development, equipment and buildings) but gradually also including information management. The relative focus on the tertiary level of education started to change drastically with the “new game plan” of educational assistance that emerged in the early nineties and which, among other elements123, consisted of a strong bias towards investments in primary education. The changing ‘resource environment’ would not remain without effect on the relative size and nature of donor interventions in the higher education sector. Notably, the World Bank, at that time the lead donor agency’ in Indonesia’s education, if not in size then certainly in policy conceptualization, explicitly moved away from massive and comprehensive sector-wide loans and instead started to put its weight on a series of more selective operations, all implying a new role for the State in its relationship to higher education. The gradual yet remarkable shift from input dominated donor efforts (e.g. infrastructure, equipment, training, TA…) towards process oriented types of support (such as program financing, block grants, tiered competitive schemes …), often involving new procedures typically designed to engage stakeholders in project development, monitoring, and results, was to become thematic in this new State-university relationship. Specifically, the introduction of competitive funding procedures, decentralized project management teams, and peer evaluation mechanisms on the one hand suggested selectivity and differentiation, yet on the other hand were explicitly designed to better equip the government’s steering capacities.

Third, marked differences between bilateral and multilateral donor efforts in Indonesia’s higher education –both in terms of size and with regard do types of assistance mechanisms— suggest a different position regarding possibilities to influence the State’s role in relation to universities. Specifically, multilateral development banks (i.e. the World Bank and the Asian Development Bank) not only invested massively in higher education development (in absolute terms well over a million USD over the two decades of this study, see table 3.4 in annex, but also in relative terms to the HED development budget of the DGHE, at times easily surpassing a 50% share) but did so mostly in the form of loans to the Government. Importantly, the lending instrument on the one hand provides ample opportunities for donors to leverage (e.g. through the articles of the loan covenant) on the country’s comprehensive policy regarding higher education, yet at the same time presupposes a willingness from the part of government to negotiate policy (including required legal reforms) and, often, a commitment to implementation and substantive counterpart funds. Bilateral agencies (including, for the US, the official USAID and the Ford Foundation), in contrast, typically put their money in grants, technical assistance or discretionary funding of academic partnerships or fellowships, thereby directing their assistance effort to the institutional or even departmental level rather the more comprehensive policy framework124.

1. Foreign Donors in Indonesia: Actors, Magnitude, and Shape of International Assistance to Indonesia

While overall there are well over 30 bilateral and multilateral donors present in Indonesia, over 80 % of development aid flows derive from only three donors, i.e. Japan, the World Bank, and the Asian Development Bank (Table 3.3 in annex). Both the World Bank and the Asian Development Bank have provided the bulk of their loans to Indonesia in the form of concessionary credit. The size and composition of the total donor effort in Indonesia has been significant not only for its dollar value in absolute terms (Tables 2 and 3 in annex), but also relative to the country’s capital inflows, and to its overall development budget (Graph 1 in annex).

Indonesia in turn also proved to be a popular target country for many of the donor agencies to which the country became both host and recipient. Measured by the Index of Aid Intensity –a scale that gauges the relative share of one donor’s aid to Indonesia but controlled for the size of that donor worldwide— aid to Indonesia was highly125 valued for the Asian Development Bank (371), Japan (208), Australia (169), and the World Bank (131). Up to the point when President Suharto severed bilateral aid ties (March 1992), Dutch assistance belonged to the same category of donors. Compared to the much lower values of other donors, notably including the UK (87), Canada (18), and the U.S.A. (8), these index values serve to demonstrate the strong degree of commitment to Indonesia by the country’s most important donors (Dillon, 1997, figures cited for 1993: 5).
The sectoral distribution of international aid to Indonesia (cf. table 1) indicates a marked shift in the composition of donor efforts, away from infrastructure related departments (agriculture, mining, transportation…) towards ‘soft sectors’ such as education, health, and social welfare. International project expenditures in education in particular jumped from a mere 6.52 % of total donor investments in the early 1980s to a massive 19.83 % in the late 1990s, thereby coming close to or even surpassing some of the traditional heavyweight sectors of donor spending, including mining and energy, and transportation. And these figures do not even take into account donor investments in training or even formal education programs in other sectors of the Indonesian system, including manpower planning, religious affairs, and science and technology126.

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