Indonesia - Spending More or Spending Better : Improving Education Financing in Indonesia

The report is divided into two parts. The first three chapters show that the vast increase in education resources has not been accompanied by a similar increase in learning outcomes, and thus highlight the urgent need to improve the quality of spending. Chapter one starts by describing the complex financing and governance systems. With this policy framework in mind, Chapter two focuses on the 20 percent rule, analyzing its consequences for budget planning and management and examining where resources went after this vast increase in spending. The chapter also provides some estimates of the cost of meeting future government objectives, in the context of discussions on expanding compulsory education, and broadening teacher certification. Chapter three looks at education outcomes, reviewing the significant improvements in access and equity, as well as the worrisome trends in learning outcomes. It points to improving the quality of education and expanding access to secondary and above (especially for the poor) as the main challenges in the sector. Given the cost of achieving these goals, and the fact that current expenditure patterns are unlikely to lead to improvements in learning outcomes, the chapter concludes that improving the quality of spending in education is now critical. The second part of the report focuses on how to improve the quality of spending in order to continue expansion and improve learning outcomes. In chapter four, the quality of spending issue is divided into two areas: i) reassigning or improving programs at the central level, and ii) improving management at the district and school levels. At the central level, this chapter analyzes the Scholarships for the Poor program (BSM) and recommends that it be expanded and improved. At the sub-national level, the report explores how a combination of more efficient teacher management and stronger support for schools can improve efficiency and learning outcomes, and what the central government s role should be in ensuring that these changes occur. Finally, chapter five summarizes these recommendations, providing a framework for improving the quality of spending and, ultimately, ensuring that this spending leads to an improvement in the quality of the Indonesian education system.