International Assistance and State-University Relations in Indonesia



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Table 1: Sectoral Distribution of International Project Aid* (1984-1998, 3 Year Average Percentages)





1981-84

1995-98

Agriculture and Industry

12.11%

2.94%

Mining and Energy

34.29%

20.39%

Transportation and Tourism

17.39%

13.29%

Manpower and Transmigration

3.46%

1.23%

Regional Development

0.09%

4.89%

Education

6.52%

19.83%

Science and Technology

na

2.26%

Religion


na

1.74%

Health and Social Welfare

1.73%

9.95%

Housing, Human Settlements, & Water Supply

4.54%

12.45%

General Public Service (Civil Service, Justice)

7.36%

4.14%

Government Capital Participation

4.59%

na

Other (e.g. Media, Environmental Planning, Trade, Finance, Enterprise Development…)

7.03%

6.89%

Source: BAPPENAS, 2000

(*): Percentages calculated on the basis of the total project cost, including local costs but not including technical assistance provisions outside of projects (e.g. feasibility studies, sector reviews, program evaluations…).

The Inter-Governmental Group on Indonesia (IGGI) was formed in 1966 at the request of the Indonesian Government, and was initially chaired by the Netherlands. Its name and chairmanship were changed in 1992, when it became the Consultative Group on Indonesia (CGI), presided by the World Bank. Throughout the 1980s, and into the 1990s, the donor group’s meetings provided a forum for the Indonesian Government to submit the country’s needs and development plans, and for donors to pledge their commitment to Indonesia’s national development in tangible dollar amounts. As part of the government’s formal system of reviewing foreign aid, BAPPENAS prepares a “Blue Book”, which lists all external development project proposals. Each of the line agencies concerned, including the Ministry of Education and Culture, review their priorities each year in light of modification of or additions to the “Blue Book”.

This process in effect facilitated top-down planning of donor efforts –which at times represented well over half of the country’s discretionary development budget– as pledges were translated into donor portfolios (and government counterpart funds), and from there to line agencies’ budgets, project implementation units, and further down to target beneficiaries. While centralized project planning seemed to fit snugly with the Government’s own internal planning process (cf. infra for higher education), reports of lagging project implementation or donors being caught in the quicksand of Indonesia’s complex bureaucracy are not entirely uncommon for this period (IEES, XI-29). Smaller donors indeed very often explicitly sought to avoid the domestic planning process as much as possible (p.c. Veenkamp) instead effectively limiting their contacts with the bureaucracy to lobbying for inclusion of the names and amounts of their small scale projects in the “Blue Book”. Given their typically higher local cost component, the effectiveness of project investments from large bilateral or multilateral donors, however, is typically contingent on effective implementation management capacity within the government bureaucracy, as well as in target institutions. At the same time, staff in these donor agencies often faces internal pressures to meet set targets with new project investments (i.e. commitments), and at the same time ensure a high project implementation (i.e. disbursements) rate. Higher education assistance in particular provides ample examples of the boundaries of this money moving dynamic, as will be indicated in sections 3 and 4.

2. Turning Points in Foreign Assistance to Indonesia, 1978-1998
While acknowledging the complexity of the historical process, the purpose of this sub-section is limited to identifying those turning points in two decades of international donor presence in Indonesia that bear particular relevance to international assistance in higher education. Notably, the descriptive aid statistics collected in tables 2 and 3 in annex indicate the following:

2.1 Regardless of the measure used, it appears that the years 1978-80 mark the start of a period of consistent growth of international aid flows to Indonesia. EDA loan disbursements grew particularly rapid, easily surpassing total ODA. In other words, throughout the 1980s, which have been characterized by many as the “IGGI-heydays” (Hill, 1994), Indonesia to an increasing extent became a borrower of loans instead of a recipient of aid. Whereas in 1979 the ratio of loan disbursements to ODA stood at 1:1, in 1995 the ratio was 4:1. Furthermore, the decreasing grant element in these loans (on average 23 % in 1978; 10.6 % in 1995) suggests that Indonesia was lending at conditions that came increasingly close to commercial practice. The development was paralleled in educational assistance patterns, where the prominence of large American foundations (including Ford and Rockefeller) and bilateral donors (including the Netherlands) was gradually replaced by high profile lending operations of multilateral banks. In higher education in particular:


  • the Indonesian government in the early 1980s started to support its development most prominently with investments from international development banks, as will be indicated in greater detail in the next sub-section. The government, in other words, early on seemed to accept the view expressed by the DGHE leadership that international borrowing for the development of higher education was to be seen as an investment in building the country’s human capital. Following Buchert’s categorization of educational assistance models (cf. chapter 1), ‘human capital development’ conveniently conformed to the economic growth oriented strategy of the World Bank in particular and would become the cornerstone of its efforts in higher education for years to come127. Bank efforts in higher education consistently played the card of increasing cost-effectiveness of the sector at large, and early interventions (i.e. Polytechnic I, UDP I) in particular sought to improve planning capacities at institutional and system levels128. Project implementation not only required agreement from the State, but also typically depended on a strong and tangible commitment from the government agencies involved (usually expressed in government counterpart funds);


  • bilateral donors such as the Netherlands, in contrast, continued to concentrate discretionary funds and in-kind contributions into academic programs (e.g. overseas training, academic partnerships) at selected institutions and units. Still according to Buchert’s categorization, Dutch efforts were guided by a ‘human capacity development model’, involving partnerships and experiments highlighting higher education’s role as agent of social change129. Within this model, universities are considered to expose the critical societal functions addressing issues of regional development and relevance, social and gender equity, community building etc. Much unlike the multilateral efforts, bilateral efforts in higher education consisted predominantly of grants –the majority of which consisted of in-kind contributions (e.g. overseas training, equipment, visiting consultants/professors)– and did not in general require the same level of commitment from Indonesian policy makers. In fact, Dutch project coordinators typically sought to avoid Indonesian politics and policy making as much as possible –both at institutional and system levels130- instead relying on the informality of the partnership arrangement, and the interpersonal relationship skills (or the lack thereof) of the Dutch project managers and their Indonesian counterparts.

2.2 Starting from 1984 multilateral loans start to surpass the bilateral loans, reflecting the increasingly prominent role of international and regional financial institutions. As from 1989 bilateral loans become more prominent again as a result of Japan’s increasing share in the lending department. With the exception of the ODA measure, in which bilateral donors represented the bulk share131, these three donors continued to dominate the international aid flows to Indonesia throughout the period under review. The donor top three is paralleled in education assistance where the same three donors (i.e. the World Bank, Asian Development Bank, and Japan) have been responsible for over 80 % of the money flows. Dominance, however, does not necessarily imply uniformity in either policy goals or instruments. In higher education specifically, donors differed in their selection of target audiences within the system, and in the types of intervention they would support. Differences, in turn, affected the position these donors took regarding the role of the government in higher education and the implied the relationship between the State and the different types of institutional providers. Notably, the World Bank, by targeting its efforts almost exclusively132 to State institutions seemed to reflect an explicit recognition the role of the State as a provider (‘demiurge’) of higher education. At the same time, however, it put the bulk of its effort into strengthening the State’s capacity to take on a steering role, making institutions more responsive to their audience and more accountable to the country’s needs. Efforts by the Asian Development Bank, in contrast, stayed more closely attuned to the instrumental role of higher education vis-à-vis the labor market.

2.3 Graph 1 and table 2 in annex indicate the relative stability of international project aid as a source of external income for Indonesia, and hence as a way to finance the State’s Development Budget. In higher education, fiscal constraints in the early to mid 1980s the oil shocks in 1980, 1983, and 1986 revealed the systemic under-funding of the sector, followed up by heavy donor investments in the development of that sector by multilateral banks. Fiscal constraints in the early to mid 1980s (cf. oil shocks in 1980, 1983, and 1986) reveal a systemic under-funding of the higher education sector in particular, leading to an increasing requests for donor investments in the development of the sector. Indonesia’s public higher education at the time operated in an environment of rising enrolments, constrained budgets, and minimal cost sharing. The national political economy determined much of the margins for efficiency improvement. The Ministry of Finance used the pressure of difficult macroeconomic circumstances to restrain the higher education budget, in particular its recurrent expenditures. The World Bank at one point struggled hard with this incompatibility as it had invested heavily in capital goods and infrastructure (i.e. Polytechnics, first and second UDP project) without any assurance that the Government would be able (or willing) to contribute its share in recurrent expenditures for operations and maintenance.

2.4 From 1993 to 1995 data suggest a gradual end to the aid-boom, at least in quantitative terms. The period coincides with increasing international and domestic confidence of the Suharto regime133, reflected i.e. in the open political conflict with the Netherlands on aid, Indonesia’s decreasing dependence on income from oil, and the widely reported climate of donor fatigue in donor’s domestic constituencies. In education assistance nonetheless, donor investments continued to flow. Specifically basic education, following the decision to expand from 6 to 9 years boost that would only show in relative figures later. In higher education in particular, donors seemed to be growing impatient for a perceived lack of sustainability on the ground and started to experiment with alternative mechanisms and types of assistance.

2.5 In the wake of the Asian financial crisis that erupted in July-August 1997, many donors increased their commitments to Indonesia’s devastated economy (cf. the re-emergence of program aid), but at the same time started to question and revise their own strategies to include much greater emphasis on governance issues. Notably, the World Bank’s introspection concludes that it had been too soft on Indonesia’s political economy: “Where we failed was in not pushing harder the message that sustainable development requires not only good economic policies, but good institutions as well” (Country Assistance Strategy Progress Report, 1999: 8). The same report further announces a more aggressive program of reform, which, in education specifically, would seek to “create accountable and financially sustainable service delivery arrangements through greater decentralization of education management and increased autonomy of schools” (Ibid.: 13).
3. Overseas Training
In addition to the fluctuations and changing composition of foreign aid, assistance in higher education has been a prominent, albeit relatively decreasing, provider in the broader market of overseas training. Table 2 provides an indication of the massive rise in the numbers of Indonesian students who received their tertiary level training abroad.
Table 2: Third Level Students Studying Abroad (selected years)


Country of Study

1970

1976


1981

1986

1992

1995

1998

USA

662

1,090

4,070

8,115

11,670

12,429

12,142

Germany

1,201

3,543

3,185

2,260

2,200

2,140

1,948

Australia

285

529

880

1,083

2,709

4,835


5,393

Netherlands

382

Na

613

530

140

179

44

Other (*)

976

1,713

2,209

2,128

3,234

4,351

4,233

Total

3,497

6,875

10,057

14,156

20,839

23,450

23,760


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