International Assistance and State-University Relations in Indonesia

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(*) Including, most notably, Japan and the U.K., along with various smaller host countries.

(Source: UNESCO 1997, 2000)

While the table indicates increasing numbers of students studying overseas, it is noted that the relative share of student numbers supported by international assistance projects (on average 2,500 to 4,000 annually) has in fact been decreasing. Instead, unplanned yet self-paying students have taken up an increasing share of this market, and Australian and UK education policies in particular pursued explicit strategies to attract students from Indonesia in the framework of their own internationalization efforts in higher education (Zijlstra, 1998).

4. Case-studies

4.1 The World Bank and the Government of Indonesia: Nourishment of a “Special Relationship”?

After having excluded itself from World Bank assistance during the latter years of former President Sukarno’s turbulent reign134, Indonesia rejoined the World Bank in 1967. The Bank’s Resident Mission in Jakarta was the first of its kind and from the early start fostered a close relationship with Indonesian counterparts at various places in the Indonesian bureaucracy, specifically in economic planning (i.e. BAPPENAS135), but also in various line Ministries such as Education. Some have labeled the relationship between the Bank and the new order government a symbiotic one, adding that in the final analysis it has not been all that clear where the balance of influence lied (p.c. Dillon). This became especially apparent in the late 1980s, when Indonesia was exempted from the kind of ‘policy conditionality’ that many other countries were often forced to accept (Mosley, 1991: 105). According to a recent assessment by the Bank’s own evaluation department, Indonesia’s exemption status was based on “…an understanding that the Government’s prior actions were part of a medium-term program that would be implemented” (OED, Country Assistance Note, 1999: 15). This was not only relevant to the Bank’s adjustment loans136 but also affected lending in particular sectors, especially those having sector-wide goals and ambitions. The Bank’s appraisal report for the first time-slice HED project not only suggests an unusually high confidence in the Government’s willingness to implement “difficult policies”137, but also promises that “…the project will be followed by further Bank support of subsequent slices of the GOI higher education program.” (SAR, HEDP-I: 19).

By the early 1990s, Indonesia’s share of all IBRD debt outstanding and disbursed exceeded 10 %. The sectoral distribution of its lending to Indonesia over three decades underscores the particular growth of the share of social sectors, including education (Table 3).
Table 3: Sectoral Distribution of Bank Lending (Fiscal Years)


Million US$

























Urban/Water Supply & Sanitation






























Source: World Bank, OED-Country Assistance Note, 1999.

Except for its very early efforts in the 1970s138, Bank lending in education goes through its IBRD window and is not concessional. Soft loans are provided at close to commercial market interest rates (i.e. based on the inter-bank or LIBOR rate, around 7 % on average during that time period). The attraction for Indonesia lies in part in the extended terms available (15 plus years compared to the 5-7 year terms available on the market), the flexibility to select the currency denomination, and the technical assistance in project design, implementation and evaluation which is often offered along with the loans. In addition to its lending facilities, the Indonesian Government has made extensive use of Bank provisions for Economic and Sector Work (ESW), often funded with grants from bilateral donors. Well-known for its perceived policy impact both in Bank and Government circles is the Basic Education Study (1989), which opened the debate about refocusing attention, and project funds, to quality deficiencies in primary education139. Other ESW studies in education include an analysis of human resource shortages in Indonesia’s fast growing economy (1996), and, more recently, the post-crisis education sector report (From Crisis to Recovery, 1998).

Bank lending in education has been characterized by its massive size as well as by its diversity (OED, 1991, 1999). Its origin lies in the late 1970s, when broad agreement was reached with the Government on the priority of education in the Bank’s future lending strategy (cf. chapter 2). Within education, the Bank’s “comparative advantage” (p.c. Gilpin) at that time was perceived to lie in supporting higher education specifically. Already the government was investing heavily in ensuring universal access to primary education, and there was no apparent or expressed need for the government to lend money for foreign exchange components in that sub-sector. The higher education sub-sector, in contrast, was not only reported as being under-funded and subject to fiscal constraints, but also seemed in need of exactly the project inputs that could typically be offered in foreign loans, i.e. training, technical advice, equipment, management capacity building.

A review of educational lending to Indonesia by the Bank’s internal evaluation department mentions educational lending as its largest education portfolio in the world (OED, 1999: 18). Between FY69-98, 41 projects, totaling over US$2.6 billion, have been approved. Following a modest start during the 1970s, commitments for education averaged 11 % of the total through FY1998. Tables in annex show explosive growth and stabilization over time of the Bank’s total commitments to “Education and Training” broadly speaking, and as expressed by the dollar value of its loans. From relatively modest beginnings, Bank lending activity in only five years time jumped to the five-year average of 900 million US$ where it still stands. The graph also indicates that with the exception of the period 1986-90, the majority of its lending activity has been directed at the Ministry of Education and Culture. Further, Bank loans with DGHE increased sharply from 1980 to 1985, then decreased before stabilizing at a respectable five-year average of 200 million US$. The trend suggests that the “new game plan” that emerged in the 1990s and called for a reorientation towards primary education –partially reflected in the sharp increase of the share of “projects with MOEC (but not DGHE)”— did not lead to a noticeable reduction of Bank projects with the DGHE. Instead, it would appear that the substantial increase of lending activity in MOEC projects outside DGHE has largely been at the expense of training projects outside the MOEC involving large components of overseas training.

Using the same data set, chart 3 shows the development over time of the Bank’s lending activities related to higher education in the very broadest sense (including tertiary level related activities in other departments), separating out projects with DGHE from those in other departments. The chart underscores the sharp rise in Bank lending to higher education from the late 1970s up to the late 1980s, but it also indicates that within the broad category of lending to higher education projects there has been a marked decline of lending for projects in other departments. Projects in that latter category include the Science and Technology Training Project and the Professional Human Resource Development Project (I and II), all two of which set out to provide short term solutions to specific supply constraints in the domestic higher education system, notably by offering targeted programs for overseas graduate training140. From the mid-1980s through mid-1990s the Bank followed a two-track approach, on the one hand continuing its long-term investments, through DGHE, in Indonesia’s public higher education system, yet at the same time willing to support short-term solutions to manpower shortages in the State’s bureaucracy.

    1. Dutch Aid in Indonesia: High Intensity / High Context

While much smaller than the World Bank’s operations, Dutch assistance flows for most of the eighties definitely were in the top five of major donors to Indonesia. Bilateral assistance from the former colonial power steadily represented 10 to 13 % of ODA to Indonesia from 1981-1987 (OECD-DAC 1994: 21-22). At the same time, Indonesia on average used to represent around 10 % of the Dutch bilateral allocable aid budget in the mid-1980s. Table 4 calculates the Dutch Aid Intensity Index for Indonesia at different points in time, underscoring the strong commitment of this donor to assisting its former colony. Even at a time of decreasing aid budgets, and a gradually decreasing Dutch share in total assistance, this commitment seemed to remain consistently and exceptionally high.

Table 4: Dutch Aid Intensity Index for Indonesia

Fiscal year





Aid to Indonesia (in 1991 million $)





Dutch Share of Total ODA-Indonesia (%)





Total Dutch ODA





Dutch Share of Total ODA (%)





Aid Intensity Index





Source: Calculated from OECD data (OECD, 1994: 21)
This picture of an unusually strong commitment to Indonesia is further underscored by data on Dutch educational assistance in general, and in higher education specifically. Table 5 shows Indonesia’s share in Dutch assistance in education, by type of intervention (1990 data), indicating that:

  • Dutch bilateral assistance with Indonesia represented 25.0 % of all Dutch bilateral assistance;

  • Education assistance to Indonesia represented 20.4 % of all Dutch educational assistance;

  • HED education assistance to Indonesia represents 20.9 % of total Dutch assistance in that sector;

  • HED education assistance represents 37.0 % of Dutch educational assistance in Indonesia.

Especially notable have been the programs for university linkages (discussed in chapter 2), 30.3 % of which have been for links with Indonesian universities, fellowships and programs in the Netherlands (13.9 %), and country programs (75.7 %). To these assistance categories should be added part of the 6 million Guilders a year that are channeled into training in the Netherlands from the Dutch Ministry of Education and Training, but attributed to the cash ceiling for development cooperation. One third of this sum is spent on education in developing countries and the remainder on grants to students from developing countries who attend courses in the Netherlands. Indonesia reportedly is the main beneficiary with more than five sixths of the total.

Given these figures it should come as no surprise that Indonesia-watchers in the Netherlands have referred to the decision by President Suharto in March 1992 to stop all projects funded with Dutch aid as traumatic, as a blow to Dutch aid policy, and to its Minister for Development Cooperation in particular141. While the reasons for the rupture have been discussed elsewhere, its impact on Dutch assistance in general, and in higher education in particular, has been devastating. In one month’s notice, all on-going assistance efforts were virtually stopped: equipment was transferred into Indonesian hands; Dutch aid workers had to leave the country; fellows in The Netherlands (except for those sponsored with money from the Dutch Education Department) were sent back to Indonesia.
Table 5: Indonesia’s share in Dutch (Higher) Education Assistance Expenditures, by Type of Intervention, 1990 (1,000 Fl.)





University Linkages (partnerships)





Bilateral Support to Institutions





Fellowships and Programs in The Netherlands





Dutch Experts





Support and Innovation





Special Programs





Country Programs





Sectoral Programs





Emergency Aid










Other *





Total Higher Education Assistance*





As % of Total Education Assistance



Total Education Assistance*





As % of Total Dutch Bilateral Aid



Total Dutch Bilateral Aid*





Note*: Excluding Expenditures through International Organizations, and

Excluding Aid to Dutch Antilles and Aruba (But including assistance to Surinam)

II. The Political Economy of Higher Education in Indonesia

The domestic policy environment for international assistance resonates at a number of levels, including nationalist sentiment, fiscal imperatives and limitations, political and economic ideologies. This section sets out to demonstrate the intricate nature of the domestic policy context, i.e. the political-bureaucratic, regulatory, budgetary, and economic conditions that provided the institutional blackboard upon which international assistance efforts were pinned. Domestic variables not only provide context, but also contribute to the mutually reinforcing dynamic between domestic and assistance efforts. Donors invested not just in areas where they wanted to invest, they invested where domestic reformers were already planning new initiatives. Higher education in particular was a sector where reformers were plenty, and conscious of the fact that much needed to be done, and relatively influential in the bureaucratic polity. Both donors and reformers seemed aware from the early beginnings that the road to systemic reform would be long, hard and bumpy.

1. General Principles and Practices

General principles and practices are first identified and then applied in the context of external higher education funding. The data presented in that section and in the corresponding annex, suggests that:

  1. Quantitative expressions of international assistance efforts need to be further placed within the perspective of Indonesia’s domestic policy context, characterized by a growing and gradually diversifying political economy (slowly becoming less dependent on oil revenue), a tightly centralized and autocratic polity, and yet a fragmented bureaucracy and budget administration. The political economy of the new order regime hampered systemic change and instead seemed to ensure that domestic reforms would be gradual and incremental at best.

  1. In higher education specifically, fiscal constraints as much as political interference and bureaucratic restrictions did leave their mark on a system pressured to expand enrollments and to distribute domestic resources evenly across regions, institutions, social and ethnic groups. Considering priority needs at other levels in the education system, Indonesia’s governments have generally not been inclined to direct much of their scarce domestic public funding to higher education. Instead, they not only showed a high receptivity to foreign models and ideas, but also proved willing to invest in higher education development with external loans and counterpart funding up to the point even of disturbing balances between development and recurrent budgets in the mid-to-late 1980s. Meanwhile, institutions operated formally as ‘service units of the State’ but generally accommodated to the center’s attempts to standardize regulations with a variability of responses –ranging from negation to formal compliance— often depending on power and strength of constituent units. Under these conditions, international assistance provided not only a welcome source of funding and technical advice, but in many cases an academic and financial lifeline for many departments in dire need of opportunities to train staff, and to equip labs and libraries.

  1. While certain parallels can be shown between the country’s macro-economic policy and political institutional changes throughout the period of study (i.e. deregulation of selected economic sectors, gradual liberalization…) and decentralizing tendencies in education overall, there is little to a priori deny the potential influence of international efforts. Notably, the proposition has been advanced in the literature that State-society relations in Indonesia have been gradually transforming from an essentially patron-client type into a more differentiated and accountable working partnership. Nonetheless, and in spite of successive pushes to deregulate the economy, to decentralize the polity, and to increase pluralism within the bureaucracy, the evolving domestic context provided no guarantees that societal organizations, especially extra-or semi-bureaucratic ones such as State universities, would be accorded or would acquire greater institutional decision room. In other words, there was nothing inevitable in the polity of Indonesia’s “New Order” that could help predict Indonesia’s State universities to gain greater institutional autonomy vis-à-vis the State. Instead, the domestic context provided ample room for external resources and ideas to fully play their part.

  1. The domestic policy context has been particularly favorable for external investments in higher education development and reform. Not only were the needs of the sector high –structural under-funding was a major obstacle for the higher education sector in the late seventies— but the Indonesian counterparts at the same time showed an unusual openness to foreign models and international donors, especially seeking long-term relationships, funding, and technical advice.

2. Limited Bureaucratic Pluralism in Higher Education

The 1978-1985 period was characterized by a relatively strong connection between higher education and matters of internal security. Suharto’s quasi-military regime at the time exercised tight controls on who was appointed as Minister of Education, Rector or as Director General within the ministry. Surely, the massive student protests against Suharto’s third term, on (State) university campuses in 1978 were not lightly forgotten. In the Ministry of Education, 4 out of 9 DG’s in 1984 were known as former military men. In higher education, the President chose to appoint Nugroho Notosusanto, a titular general with long-standing Defense and Security ties, to become Rector of the UI in 1982, and Minister of Education the following year (Emmerson, 1983). Even though the influence from the military has decreased drastically since, leftovers of that period have affected the higher education system. Notably, with regard to higher education funding, decisions to increase tuition fees need to be approved by the local Governor, a Presidential appointee and for most of the time period under consideration typically a retired general.

In political terms, the New Order’s hallmark of ‘dynamic stability’ suggested a balance between military control of security sensitive parts of the bureaucracy, and a willingness to allow some degree of autonomy to growth-related departments such as education. A situation which Indonesia scholars have characterized as one of limited bureaucratic pluralism “…which means taking seriously the roles within the bureaucracy of relatively civilian organizations with characteristic policy positions that reflect programmatic mandates” (Emmerson, 1983: 1222). Limited bureaucratic pluralism also reflects in the 1980s, the differentiating forces of economic growth set in motion early in the life of the regime. Greater economic growth underscored the success of technocrats. However, at that time, the level of political differentiation did not provide any guarantees that organizations, especially extra-bureaucratic ones such as universities, would be accorded or acquire more autonomy or decision making room. In fact, according to key informants of the time, the influence of the regime on higher education policy making was felt at crucial stages of the system’s development: the liberalization of private universities, the establishment of the university expansion, and the introduction of financial autonomy in the Repelita 5.142

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