7/28/2013

INDONESIA EDUCATION SYSTEM : THE FUTURE BEGINS HERE

MBA McClure 2013/2014

Chan Zhi Hoe Muhammad Alief bin Hussaini Serena Sit Pei Shan Yalinirita Kanapathy

Executive Summary This report was commissioned to examine the education landscape in Indonesia compared with developing countries within the region, developed countries outside the region and through time. It recommends the area for the Ministry of Education to focus on and invest in for the next ten years in line with its priority to have postgraduates with strong analytical skills. Method of analysis includes exploratory analysis using summary statistics and visualisation and inferential analysis using confidence intervals and regression models. In the exploratory analysis, World Bank sources such as national, regional and global estimates of current and accurate global development data are extracted and cleansed. Different development indicators for different countries are examined. In the inferential analysis, a more in-depth investigation is conducted to provide insights that will help justify future expenditure. Findings There is a common understanding that the distribution of personal incomes in society is strongly related to the amount of education the population have had. This is evident from the data extracted from World Bank especially when we scrutinise the education performance measures in relation to economic indicators. It was also discovered that the level of education directly impacts the employment rates. The higher a persons education level is, the lower the chances of being unemployed. On the other hand, there is a low correlation between education funding compared to unemployment. Taking into account the social and economic indicators, unemployment is affected by other variables as well. Based on the analysis of education performance measures with other countries in the region, there is a strong correlation between public spending on education and GDP per capita. The positive trend implies the countrys development and growth rate increases at a constant rate as public spending on education. However, there are a few exceptions, such as when the 2008 financial crisis took place. Indonesias overall funding is relatively lower compared with other countries in the region as well to some developed countries. The quality of teaching and attention spent on a student affects the quality of students produced. The more attention spent on the students, the higher the quality of students produced. By examining the education landscape through time, this provides an understanding of what the future may hold for Indonesia and serves as the basis for future projections. After taking into consideration a five years time lag in the past patterns of the data, this provides a basis for us to justify our recommendations below. Recommendations Indonesia should consider maintaining the funding for primary and increase the funding for secondary level. It is important to build the basic foundation of the education system up to tertiary level in order to produce competent students who will eventually become high skilled employees.

In line with the Ministrys priority to have postgraduates with a strong foundation in different core subjects, such as engineering, biology, physics and computing supplemented with analytical skills, here is our recommendation: In an economy with a high GDP growth, the government should consider sending students abroad to study. This could be a short term solution. For a long term solution, the government should consider bringing teaching into Indonesia or develop courses within Indonesia. In an economy with low GDP growth, the government should consider establishing Centres of Excellence (COE) in partnership with foreign universities.

Part A 1.0 1.1 Introduction Country profile Indonesia is a country situated in Southeast Asia which consists of more than 12,000 islands surrounding it. According to the data retrieved from World Bank, Indonesia has a population of 242.3 million people as of 2011 (World Bank, 2013), with an estimated growth rate of 0.99% (CIA World Fact Book, 2013). In light of the demographical situation, Indonesia is the 4th most populous country in the world, behind the likes of China, India and United States. Rendering on the data extracted from World Bank, only 47.8 % of the total population are contributing to Indonesias GDP per Capita of US $ 3,464.90 in 2011. In 2008, less than 30 % of the 110.31 million labor force had secondary and tertiary education, which has and ultimate impact on Indonesias GDP growth.

INDONESIA
1.07

1.04

1.03

2008

2009

2010

2011

Figure 1: Indonesias Total Population According to a research conducted by McKinsey Global Institute (MGI) in 2012, Indonesia currently is the 16th largest economy in the world, and has the potential of becoming the 7 th largest economic powerhouse by 2030. With 45 million members of the consuming class, Indonesia is expected to grow their consumer base by 200 %, thus driving the growth of the global consuming class and subsequently complement their expectation to be one of the largest economic powerhouse in 2030. 1.2 Indonesia Education System Education in Indonesia falls under the purview of the Ministry of Education and Culture. The citizens are required to undertake a 9 years of compulsory education of which six years will be spent and elementary level and three at secondary level. On the other hand, 60 % of the tertiary education curricula are controlled by the government. There are almost 2.5 million students in tertiary education level, of which approximately 500,000 are in the state controlled tertiary education institutions (Idrus,

1.02

Nirwan. 1999). In Indonesia, education is defined as a tool to help students develop their potential to gain intelligence, behavior, creativity and consciousness for the nation. A major proportion of the population of Indonesia is less than 64 years old. Education is their passport to better jobs, promotion and therefore improved standard of living. In order to realize its potential of becoming an economic powerhouse by 2030, Indonesia has to look into improving its labour productivity, human development and other factors relevant to the economic growth. To fulfil these, it is imperative for Indonesia to elevate the efficiency and quality of its education system. In 2010, Indonesia recorded only 45.47 % of graduation rate at secondary upper level and only 13.48 % of graduation rate at tertiary level (Pearsons Country Profile) compared to the gross enrolment ratio of 77 % and 23.1 % for secondary and tertiary level respectively (Human Development Report, United Nations Development Programme, 2013). The government of Indonesia faces the on-going challenge of improving its inadequate education infrastructure. Major factors contributing to these challenges include the quality of the teachers and corruption. Based on an investigation carried out by Al-Jazeera in 2013, the teachers in Indonesia possess minimum qualifications to deliver the content of education properly and absenteeism among the teachers hangs at around 20%. Also, corruption is common within education institutes whereby parents often pay bribes for their children to pass examinations. With these set of challenges in hand, it will ultimately hinder Indonesias goal improve the quality of their economy and subsequently risking its opportunity to be the 7th largest economy in the world by 2030. 1.3 Research methodology: Constraints and Assumption The research is heavily influenced by the available data on the input, output and socio economic indicators vis--vis education system in Indonesia. While these data are retrieved from reliable sources, there are constraints and assumptions that are factored in to help formulate the decision making process of this research. Constraints Time Short period of time for the completion of assignment Extraneous data Overcrowding of irrelevant data Assumptions All the findings and source of data are deemed dependable and reliable.

1.4

Data preparation The amount of data available for analysis on Indonesia Education system is staggering. It is indeed a challenge to filter out excessive information and focus on information that is highly relevant. The steps taken for data preparation are as follows: Steps General research Identify indicators Reason To identify the internal or external factors that impacts on the education system. This requires a holistic understanding of the education system. Based on the factors identified above, we select the relevant indicators that represent them. For example, we understand that the teachers attention is very important to the student. Therefore, we identified the Pupil-teacher ratio as the indicator for this factor. To filter indicator with incomplete data or replace them with other relevant indicators. Alternatively, we extrapolate the data if they are deemed to be important for analysis.

Data filter

Reasonableness Charts are analysed to gauge the reasonableness of the data. Those data trends test which does not make sense or show erratic relationship are discarded.

By using the above methodology as a guide, we had filtered down the data for analysis as seen in Note 2.0 below. The justification for each indicator is as follows: 1.4.1 Education funding versus (vs) Economic indicators Education funding is represented by the public spending on education, as a total of GDP in %.This indicator is used as it is a good benchmark against other countries and it represent the level attention that the Government is giving to the education sector. The level of attention given can be assessed over the period and analysed the impact on economic indicators. Three economic indicators are used, namely Foreign Direct Investment, net inflow as a % of Gross Domestic Product (FDI/GDP %), GDP per capital (GDP/Capita %) and Unemployment rate as a % of total labor force in % (Unemployment/total labor force %). These three indicators are ratios by nature. They provide better comparison when assessed against other countries. Therefore, absolute GDP, FDI or unemployment numbers are not being used. In our analysis, we noted that the trend of public spending on education, total (% of GDP) correlate better when analysed against the trend of the three economic indicators above but with five years deferred interval. For example, the public spending on education, total (% of GDP) indicator in 2001 is compared against the Net inflow of FDI/GDP% in 2006. This analysis method is applicable from Note 2.1.1 to Note 2.1.3. Only five years of data is being analysed as the public education spending on education data is only available starting from 2001 onwards. Where else, the economic data is generally available up to 2010. Therefore, the optimum analysis of these variables is five years.

1.4.2

GDP growth volatility The yearly GDP growth rate of Indonesia is compared against the mean of four regional developing countries because these countries share similar population demographic and challenges of developing nations. The Regional developing countries consist of Malaysia, Philippines, Vietnam, and Thailand. However, in order to gauge the volatility of these growth rates, the data is further analysed to determine the Year on Year (y-o-y) changes of the growth rate. Lastly, a standard deviation is computed to this y-o-y growth rate. A ten years data is used in the analysis from the latest available data of 2012. Ten years of data is selected because it provides a trend sufficient for us to infer.

1.4.3

Teachers time with student Teachers attention on a student is represented by pupil-teacher ratio. It is common intuition that a student gets more attention from the teacher when there are lesser students in a class. Nevertheless, the students response towards the attention received might vary between different education levels. On the other hand, students success is represented by the completion rate of each education levels. For example, the primary completion rate is based upon the relevant age group i.e. primary aged population. The same applies to secondary level. However, it should be noted that secondary completion rate data is not available. Therefore, we had chosen the next best indicator which is gross lower secondary graduation ratio. Moreover, both data on tertiary pupil-teacher ratio and tertiary completion ratio are not available. Therefore, we had resorted to use the total number of tertiary teaching staff in public and private (Total tertiary teaching staff) as the replacement for tertiary pupil- teacher ratio. For tertiary completion ratio, we replaced it with total graduates in all programs (Total graduates). It is unfortunate that these replacement indicators are not complete. The missing data for both indicators are as follows: Indicator Total tertiary teaching staffs Total graduates Year 2006 2005, 2007 & 2008

Since these indicators form a crucial part of our analysis, we extrapolated the missing information by averaging the figure of the year immediate before and after the missing year information as follows: Indicator Total tertiary teaching staffs Total graduates Year 2006 2005 2007 2008 Replaced by Average of 2005 & 2007 Average of 2004 & 2006 Average of 2006 & 2009 Average of 2007 & 2009

The analysis for this factor is over 9 years from 2003 to 2011. Only 9 years of data is being analysed due to the availability of the data.

1.4.4

Benchmarking of pupil-teacher ratios The ten years data on primary pupil teacher ratio of seven countries are benchmarked against Indonesia. The countries are chosen as they represent developing and developed countries as follows: Developed countries Hong Kong Japan Singapore United Kingdom Developing countries Malaysia Thailand Vietnam

The mean is based on data from 2003 to 2012. The same assumption is applied to the analysis of secondary education level. However, due to unavailability of Hong Kong and Vietnam data, they are excluded from the comparison. 1.4.5 Education funding strategy Ten years mean of the Expenditure per student as a % of GDP/capita (Exp/Student Tertiary %) is used from 2003 to 2012. The analysis starts from 2003 due to the latest available data is in 2012. 1.4.6 Duration of compulsory education The nations are represented as follows: Developed nations Australia New Zealand Japan Singapore Hong Kong 1.4.7 Developing nations Malaysia Philippines Thailand Vietnam

Unemployment analysis A ten years mean is applied to all unemployment analysis from 2002 to 2011. This is due to the latest available data for unemployment is on 2011. Whereas the country selected for analysis are the common countries that are used as comparison in this report.

1.4.8

Labor force with tertiary education vs Economy The benchmarking of labour force with tertiary education is done via the mean of ten years % labour with tertiary education vs GDP per capital (current US$). The ten years period is from 2002 to 2011 with 2011 representing the latest available data.

2.0 2.1 2.1.1

Comparative analysis on Indonesia Education System Public spending analysis Education Funding vs FDI We know that return on investment would not come within the same year by common intuition. The trend that matches the most with the education spending is when there is a 5 years time lag between education funding vs FDI as seen below.

Public spending on education / GDP% vs FDI / GDP%

4.00 3.50 3.00 Axis Title 2.50 2.00 1.50 1.00 0.50 2001/ 2006
Indicator Name Public spending on education, total (% of GDP) Foreign direct investment, net inflows (% of GDP)

2.50 2.00 1.50 1.00 0.50 2002/ 2007 2003/ 2008 2004/ 2009 2005/ 2010 2006/ 2011
2003/ 2008 3.2180 1.8263 2004/ 2009 2.7485 0.9039 2005/ 2010 2.8728 1.9449 2006/ 2011 3.5997 2.1444

Public spending on education / GDP% FDI / GDP%

2001/ 2006 2.4600 1.3479

2002/ 2007 2.6457 1.6030

This is reasonable considering the education span of Indonesia is 5 years for each stage i.e. primary, secondary and tertiary. Students are required to complete the stages of the education in order to make meaningful contribution in the workforce.
In Indonesia education is centrally controlled by the ministry of national education. 6 years in primary school and 3 years in junior high school are compulsory. The primary phase follows on after optional pre-school playgroups that may commence in a childs third year. Most elementary schools are government controlled. Some offer accelerated programs that compress the phase to 5 years. As Islamic education system operates in parallel to this.

Source: http://www.classbase.com/countries/indonesia/education-system Besides, the dip of FDI/GDP% in 2009 is reflective of the economy crisis in that year. On the overall, the two trends seem to correlate well.

2.1.2

Public spending on education/ GDP% vs GDP per capita%

Public spending on education / GDP% vs GDP / Capita %

4,002 3,502 3,002 Axis Title 2,502 2,002 1,502 1,002 502 2 2001/2002/2003/2004/2005/2006/ 2006 2007 2008 2009 2010 2011
Indicator Name Public spending on education / GDP% GDP per capita (current US$) 2001/ 2006 2.46 1,586 2002/ 2007 2.65 1,859 2003/ 2008 3.22 2,172 2004/ 2009 2.75 2,273 2005/ 2010 2.87 2,952 2006/ 2011 3.60 3,495

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 GDP per capita (current US$) Public spending on education / GDP%

The chart above echoes the first analysis that there is a 5 years time lag between increasing education investment vs the impact on the economy. A deviation could be seen from the 2003 / 2008 data. The public spending on education/ GDP% is higher compared to the GDP per capita because of the 2008 financial crisis.

2.1.3

Public spending on education/GDP% vs Total unemployment%

Public spending on education / GDP% vs Total unemployment%

3.500 3.000 2.500 Axis Title 2.000 1.500 1.000 0.500 2001/ 2002/ 2003/ 2004/ 2005/ 2006 2007 2008 2009 2010 12.00 10.00 8.00 6.00 4.00 2.00 Public spending on education / GDP% Total unemployment%

Year Public spending on education / GDP% Total unemployment%

2001/ 2006 2002/ 2007 2003/ 2008 2004/ 2009 2005/ 2010 2.460 2.646 3.218 2.748 2.873 10.30 9.10 8.40 7.90 7.10

Using a 5 years time lag approach, it is noted that there is an inverse relationship between the educations funding vs unemployment rate. 2.2 GDP growth volatility This indicator measures the volatility of a countries economy. Indonesias economy has low volatility as compared to the regional countries as seen in the chart below.

Economy Volatility Benchmark

8.0 7.0 GDP Growth Rate (%) 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Regional developing countries average (excluding indonesia) Indonesia

Year Regional developing countries average Indonesia

2003 6.3 4.8

2004 6.9 5.0

2005 5.8 5.7

2006 6.0 5.5

2007 6.6 6.3

2008 4.4 6.0

2009 0.7 4.6

2010 7.3 6.2

2011 3.8 6.5

2012 5.9 6.2

The table above illustrates a significantly higher standard deviation of 327% in the regional average GDP growth volatility whereas Indonesia only records a Standard deviation of 15%.

GDP growth volatility (yoy%) Region average Indonesia

2003 18% 6%

2004 9% 5%

2005 -16% 13%

2006 4% -3%

2007 9% 15%

2008 -33% -5%

2009 -85% -23%

2010 1018% 34%

2011 -49% 4%

2012 57% -4%

Standard Deviation 327% 15%

2.3

Teachers time with student

Primary
25.00 Pupil-teacher ratio 20.00 15.00 10.00 5.00 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 110.00 105.00 100.00 95.00 90.00 85.00 Pupil-teacher ration 20.00 15.00 10.00 5.00 0.00

Secondary
100 80 60 40 20 0 2006 2007 2008 2009 2010 2011

Tertiary
350,000 300,000 250,000 200,000 150,000 100,000 50,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1,000,000 800,000 600,000 400,000 200,000 Teaching staff in total tertiary

Primary
Indicator Name Primary completion % Pupil-teacher ratio, primary 2003 96.07 20.29 2004 96.92 20.13 2005 96.45 20.41 2006 95.84 20.30 2007 100.35 18.82 2008 101.30 17.48 2009 104.52 16.61 2010 108.79 15.97 2011 107.80 15.94

Secondary
Indicator Name Gross lower secondary graduation ratio Pupil-teacher ratio, secondary 2006 65.84751 12.27 2007 70.5072 13.04 2008 69.29945 11.96 2009 67.39534 12.59 2010 75.53569 12.18 2011 85.4082 14.77

Tertiary
Indicator Name Total teaching staff in tertiary level Total tertiary graduates 2001 217,403 476,971 2002 251,542 506,124 2003 33,359 552,660 2004 271,540 612,975 2005 271,891 552,889 2006 268,709 492,802 2007 265,527 646,085 2008 286,127 722,727 2009 263,730 799,368 2010 271,067 811,455

As seen from the charts above, Indonesias primary Pupil-Teacher ratio has decline over the period. The trend has an inverse relationship with the primary completion rate. Common intuition dictates that teachers attention span is crucial for students success. For the first five year from 2003 until 2007, the pupil-teacher ratio remains constant with little variation. From 2007 onwards, there was a downwards trend. In 2007 and 2008, in particular, there is a steep decline in the number of pupils to a teacher at the primary school level. Besides, it is noted that there is low correlation between secondary Pupil-teacher ratios when it comes to secondary school. This might due to the fact that the students success in secondary level relies more on the students effort towards student rather than relying on individual attention by the teacher. As the student grows mature, the requirement for teachers supervision on the student diminishes. The trend continues to be reflected at Tertiary education level where the they do no seems to correlate anymore.
10 years mean of Pupil-teacher ratio, primary 10 years mean of Pupil-teacher ratio, secondary

25.0 20.0 15.0 10.0 5.0 0.0

25.0 20.0 15.0 10.0 5.0 0.0

When compared against other countries, it is noted that Indonesias pupil teacher ratio for both primary and secondary is on the high and low side of the benchmark respectively.

2.4

Education funding strategy

Education Funding Ratio in Asean Countries

100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00

Expenditure per student, tertiary (% of GDP per capita) Expenditure per student, secondary (% of GDP per capita) Expenditure per student, primary (% of GDP per capita)

Indonesia spent relatively low expenditure on both primary and secondary. This might explain the lack of competitiveness in the graduate level. Funding should be directed to these areas to build up the foundation of knowledge for student. Secondary student with strong education will excel in tertiary level resulting strong knowledge worker. Besides, focusing on both primary and secondary student will increase the literacy rate of the country. Indonesia is crucially in need to build its foundation in education prior to embarking in other strategies. 2.5 Duration of compulsory education

Duration of compulsory education

10 8 6 4 2 0 Developed Indonesia Developing nations nations Developed nations Indonesia Developing nations

Indonesia is doing comparably well in this area as their duration of compulsory education is closing to the average of developed countries of 9.4 years as compared to 7.5 years.

2.6

Unemployment analysis Education levels

Unemployment Comparison Based on Education Levels

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Unemployment with tertiary education (% of total unemployment) Unemployment with secondary education (% of total unemployment) Unemployment with primary education (% of total unemployment)

Indonesia has disproportionate level of unemployment at primary education level. This might reflect the shift in the countrys economy from labor intensive to service industry which requires higher level of skills. It also reflects the potential intense need for knowledge workers with tertiary education as most of these talents are absorbed into the work force. 2.6.1 Unemployment analysis Gender Analysis

Unemployment Comparison Male vs Female (Mean over 10 years)

25.00 20.00 15.00 10.00 5.00 -

Unemployment Comparison Male vs Female

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Indonesia has the higher unemployment as compared to countries within and outside the ASEAN region. Indonesia should focus on industry that can generate sufficient employment as a historical unemployment rate of approximately 20% would not bode well with the people. Indonesia has higher proportion of male unemployed as compare to other countries. Only Hong Kong has similar situation as Indonesia. This is reflected in a male dominated workforce. The unemployment

should be an indirect reflection of the workforce composition in any society. Nevertheless, the unemployment composition should be balanced up between male female as the society embrace more on gender equality.

Unemployment analysis based on gender and education level

Unemployment with Primary education, female% 25% 22% Unemployment with Primary education, male % Unemployment with Secondary education, female % Unemployment with Secondary education, male % Unemployment with Tertiary education, female % Unemployment with Tertiary education, male %

5%

3%

19%

26%

The pie chart above clearly shows a direct correlation between education standard and unemployment. Therefore, it is imperative for the education department to encourage enrollment and ensure the completion of each education level by the students. 2.7 Labor force with Tertiary education vs Economy

Mean % labour with Tertiary education vs GDP / Capita (current US$)

45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 -

Axis Title

GDP per capita (current US$) Mean % labour with Tertiary education

It is observed for developed countries such as Singapore, Hong Kong and Japan have high level of GDP per capita of the country. If that is taken as a benchmark for the developing countries, this means there

is ample of room for Indonesias GDP per capita to increase with its current mean % labour with tertiary education. Philippiness situation represents an Education Puzzle where the high level of educated citizen does not reflect in strong economy.
Labor force with Tertiary education vs GDP/Capita Growth% Mean % labour with Tertiary education vs mean FDI

50.0 40.0 30.0 20.0 10.0 0.0 Indonesia Malaysia Philippines Hong Kong

5.0 4.0 3.0 2.0 1.0 0.0

Singapore

Thailand

Japan

30.00 25.00 20.00 15.00 10.00 5.00 Mean % labour with 0.00
GDP per capita growth (annual %) Tertiary education

10.00 8.00 6.00 4.00 2.00 0.00

Mean % labour with Tertiary education Mean FDI

However, Indonesias economy continues to roar eventhough they have the lowest % of labor force with tertiary education. This might due to the fact that there are many areas of potential development. Nevertheless, the 10 years mean % labour with tertiary education does not show any correlation between higher number of graduates and FDI. 2.8 Number of graduate vs GDP per capita

Total graduates vs GDP/Capita (US$)

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Total graduates in all programmes. Tertiary. Total GDP per capita (current US$) Number of Graduates

The correlation between numbers of graduate vs GDP per capital is unclear. However, we can vaguely see upward trend for both indicators.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

3.0

Inference Please refer to Appendix A for the regression report generated from Excel for each sub note of Note 3.0 below.

3.1

Public Spending on Education vs Economy Indicators Public Spending on Education / GDP % vs. FDI / GDP % Public Spending on Education / GDP % vs. GDP / Capita % Public Spending on Education / GDP % vs. Total Unemployment % Correlation R2: 48 %, P-Value: 12% R2: 65 %, P-Value: 5 % R2: 35 %, P-Value: 29 %

The correlation between public spending on education versus foreign direct investments is only 48%, thus it implies that the relationship is not strong. This is because FDI is affected by other factors such as economy, regulations and others rather than education alone. Whereas, when compared against GDP/Capita, the test shows a strong correlation. A higher spending on education will assertively increase the quality of education deliverables, hence producing more quality graduates that will eventually help to boost the pool of skillful workers contributing to economic growth. This test also implies that investment in education should bear fruit in 5 years time. Nevertheless, there is a low correlation between public spending on education versus total unemployment. Unemployment is also motivated by factors such as politics, economy cycle and other social factors. Education is a part of the factors, but the test shows that it is quite insignificant towards unemployment. 3.2 Teachers attention on students for all education levels Indicators Pupil-Teacher Ratio, primary vs. Primary Completion Rate % Pupil-Teacher Ratio, secondary vs. Secondary Completion % Total teaching staff in total tertiary vs. Total tertiary graduates Correlation R2: 96 %, P-Value: 0.00046 % R2: 65 %, P-Value: 5 % R2: 54 %, P-Value: 9 %

As reflected in Note 2.3, the regression analysis shows a downtrend of correlation between teaching staff and the successful completion of each education level. 3.3 Exp / student vs Primary completion rate for all education levels Indicators Exp / student, primary vs. Primary completion % Exp / student, secondary vs. Gross lower secondary graduation ratio Correlation R2: 24 %, P-Value: 40 % R2: 84 %, P-Value: 2 %

The table above reflects the effectiveness of education spending on the completion rate. This implies that the secondary students is very receptive on the level of funding as compared to primary students. No analysis is available for tertiary education student on their receptiveness to education spending. However, we would be able to infer that the correlation should be higher than secondary students correlation of 84%.

3.4

Impact of number of graduates on the countrys standard of living (R2: 79%, P-Value: 0.78%) The number of graduates in Indonesia has high correlation with the standard of living. This is as reflected in Note 2.8.

4.0

Conclusions and recommendations Based on the detailed analysis above, we were able to synthesize the following conclusions and recommendations. No Conclusion 1 Education spending moderate impact on the economic success of the country. There is a 5 years time lag between spending and economic result 2 Indonesia economy is relatively less volatile 3 Effect of teachers attention on students success diminishes as education level goes higher Effect of education funding increases as education level goes higher Duration of compulsory is comparable to developed countries Relatively more male are unemployed The higher a persons education level, the lower the chances of unemployment The number of graduates correlate to high GDP/capita which implies higher standard of living Recommendation Increase education finding whenever possible for the economy prosperity of Indonesia

5 6 7 8

Education strategy should focus more on long term Consider to increase primary school teacher employment and maintain/reduce the secondary teacher Consider to maintain / reduce funding for primary while increase the funding for secondary and tertiary education Maintain the current duration of compulsory education Encourage more enrollment of male student Encourage enrollment and increase the various levels of completion rates to tackle unemployment issue

Part B 1.0 Introduction In the emerging economic market, education is the key to ensure skilled or knowledge workers are up to par with strong competency skills coupled with diversified exposure. The Minister of Education in Indonesia believes that for Indonesians to compete across a range of industries, Indonesia must ensure that postgraduates have strong foundation in different core subjects supplemented with analytical skills. The Minister has identified broad options going forward. To ensure the issues are addressed accordingly, the CAUSE framework that entails the objectives, alternatives, uncertainties, stakeholders and external factors. As part of the approach, the Minister has indentified four main stakeholders in this initiative which includes the government, industrial organisations, local colleges and students. Based on the discussion with the stakeholders, several key points were identified and tabulated below: Government Investment of cost and time depends on the options and tenure of the outcome Political issues may rise especially in choosing the college for Centre of Excellence Quality of education will change along with time Students might not return from abroad upon completing studies To ensure the project does not fail as it will tarnish the Ministers and governments image Colleges Bringing teachers to teach in colleges will enable larger students to be educated as well as knowledge transfer to the educators as well Centre of Excellence will be able to cater to local industries needs. Quality of education will improve in a long run. By having a Centre of Excellence, the college(s) will have good infrastructure that is comparable to overseas colleges. Colleges will be able to build the necessary competencies. Industrial Organisation By sending students to study abroad, more skilled/knowledge workers with overseas exposure Having a Centre of Excellence in Indonesia will ensure larger pool of skilled/knowledge workers with relevant local exposure-countrycentric Student Going abroad to study ensures exposure in different cultures and best practices There might be a tendency not returning upon completion as the opportunities abroad might seem attractive

Based on the key point presented by each stakeholder, the main criterions include the following: Quantity of postgraduates; Investment which encompasses cost and the duration taken to conceptualise the option; Flexibility; Quality of overseas and local postgraduates as well as the local education system; and Political risk and image

As there are various criterions, the problem was analysed by using multi-attribute value analysis (MAVA) which was supported by V.I.S.A. software. The analysis was done based on 2 different scenarios i.e with a high GDP growth and a low GDP growth in the country. 2.0 Scenario Analysis 1 High GDP growth Stakeholders view on the impact of high GDP growth: Government More graduates are needed to support the economic growth Funding would not be an issue Colleges High economy growth will enable knowledge sharing with foreign institutions which will increase local educators competency as well as quality Industrial Organisation More foreign companies will invest in Indonesia which will create higher demand for skilled workers Foreign organisation or local organisation expanding to foreign countries will prefer graduates with overseas exposure due to the quality of education Student Expectation to be sent abroad for studies is higher because government has sufficient funding

Figure 1: Decision tree Based on main criterions coupled with the stakeholders view on high GDP growth, a decision tree can be developed for the analysis of alternatives options. The figure above shows that 5 main criterions along with sub criterions were used to develop the decision tree.

Figure 2: Scoring

Figure 3: Score profile across tree Each criterions and sub criterions have been scored and weighted accordingly with the assumption that the Indonesia will be having a high GDP growth. The criterions are scored based on individual significant contribution. The scoring is based on 5 scale rating i.e between 0 to 100. The scores illustrates the impact of each criterion, 0-no impact, 25-minimal impact, 50-moderate impact, 75-significant impact, 100-maximum impact. The score profile across tree shows the scoring for each option of all bottom level criteria. Each option is represented with a colored line. Based on the score profile, the option of sending students to study abroad dominates the other options.

Figure 4: Decision tree with weightage After each criterion has been scored, weightage is applied to determine the relative importance of the criterion. The weightage was decided based on the scenario of high growth GDP. High weightage was placed on quantity of graduates and overseas exposure because with a high GDP growth, industrial organisations will be expanding locally and globally which will lead to increase in demand for skilled workers. To ensure the demand is fulfilled, the supply of graduates especially with analytical skills is essential.

2.1

Scenario Analysis 2 Low GDP growth Stakeholders view on the impact of low GDP growth: Government Colleges Negligible impact Industrial Organisation Organisations will not be expanding robustly therefore the need of skilled workers are limited Student Due to the restricted government funding, less opportunity to study abroad

Lesser graduates are needed due to the slow growth in the economy Funding will be restricted

Below is the decision tree that was created based on the discussion with the stakeholders:

Figure 5: Decision tree The decision tree for scenario 2, low GDP growth has the same criterions as scenario 1.

Figure 6: Scoring

Figure 7: Score profile across tree Both figure 6 and figure 7 shows the scoring and score profile across tree. The scoring for this scenario is as same as scenario 1. Therefore the dominating option is the option of sending student to study abroad. The differences are on the weightage applied on each of the criterions.

Figure 8: Decision tree with weightage The weightage is applied based on the importance of the criterions in the case of a slow GDP growth. Cost has the highest weightage because during a slow economy growth, government spending is crucial, the Minister should spend based on the importance and the impact of the outcomes. Criterion such as politic and quality of local education system remains the same because the difference in the GDP growth does not impact this criterion as much as the other criterion.

3.0

Sensitivity Analysis Scenario 1 High GDP growth

Based on the graph, it currently shows that developing courses within Indonesia is the most viable option with regards to the selected criteria - quantity of graduates. The graph also shows that in order to produce more graduates, sending students to study abroad may not be the best option as factors such as limited number of students that can be sent abroad may also impact the number of graduates.

Investment includes cost and time. The graph beside tells us that the higher the investment in being placed on education, the more students can be send abroad for studying. Develop courses within Indonesia has an inverse impact on the weightage, whereby the more weightage on investment, the movement of the graph will go even lower. On the other hand, bring teaching to Indonesia has a neutral effect on the weightage, hence any movement of weightage will not impact that option.

Quality consists of two sub criteria students exposure and the education system. As per the graph, increase in weightage for quality, the higher the option to develop courses in Indonesia. By creating a better education system in Indonesia will help to boost the local competency and the quality of education deliverables. Sending student to study abroad is a possible option during high growth GDP, as it may help build international exposure, however it does not necessarily improve the quality of the overall education system.

Scenario 2 Low GDP growth

Similar to high GDP growth graph, developing courses in Indonesia is the most feasible option during low GDP growth. The more weightage in quantity of graduates will motivate the option of developing courses in Indonesia to go higher. During a low GDP growth, sending students to study abroad may not be practical thus it will not stimulate the quantity of graduates.

Based on the given weightage, during slow GDP growth, sending students abroad results in high quality of graduates but if the weightage is shifted towards the right, developing courses within Indonesia will produce quality students and education as well. Quality has an impact if the weightage given is high.

There are certain criterions that will not impact the options by either increasing or decreasing the weightage. These criterions include flexibility and political challenge and image because either with a high or low GDP growth the weightage is the same because it is equally important in either economic conditions.

4.0

Overall result

Figure 9: Overall score chart for high GDP growth Figure 10: Overall score chart for low GDP growth Based on the overall analysis, the overall score chart for high GDP growth suggests that the option of sending students abroad to study is the best option and for the low GDP growth, the best option is developing courses within Indonesia. 5.0 Recommendation Based on the MAVA, if Indonesia has a high GDP growth in coming years, the Minister should consider the option of sending student to abroad to study and for a long term solution, the Minister can choose either to bring teaching into Indonesia or develop courses within Indonesia to set up the Centre of Excellence. If Indonesia foresees a low GDP growth, the best option would be to develop courses within Indonesia because with a low GDP growth, industrial organisations would not be expanding robustly, therefore the need for skilled workers will be limited. 6.0 Conclusion The decision on choosing the best option(s) depends on the economic trends for the coming years as well as the supply and demand for skilled/knowledge workers. High GDP growth requires prompt results, while a slow GDP growth requires a long term solution. Therefore the option of sending students to study abroad leads to a quicker outcome compared to developing courses within Indonesia. A combination of options will be more feasible for the short to long term solutions.