Financing Education in Indonesia

1
Financing Education in Indonesia

• Presentation for International Conference on
• Governance Accountability in Social Sector
  Decentralization
• Intergovernmental Finance of Education
• Thursday, 19th February 2004 (Session 5a)
• Kai Kaiser, PRMPS

2
Context

• Diverse Archipelago
• 171,000 public primary schools / 1.4 million
  teachers
• 31,000 secondary schools / 0.68 million teachers
• 1997/8 Economic Crisis
• 2001 Big Bang Decentralization
• 400 Districts
• 30 Provinces

3
Challenges

• Equity
• Inter-regional
• Quality Issues
• Governance Accountability
• Leakages
• Expenditure Assignments

4
Pre-Decentralization Financing Flows

• Decentralized Earmarked Transfers
• Recurrent Subsidies (SDOs)
• Capital Grants (Inpres)
• Deconcentrated Expenditures
• Kanwil DIP/DIK-DAs

5
Post-Decentralization Funding

• Decentralized Expenditures
• Block Grant (DAU)
• Revenue Sharing (Natural Resource/Other)
• Own Revenues
• Conditional Grant (DAK)
• Central Expenditures
• DIPs
• Deconcentrated Agencies (Kanwils) Abolished

6
Post-DecentralizationMultiple Flows
Source WB Education Sector Review 2004
7
Post-Decentralization Center and Regions Finance
Source WB Education Sector Review 2004
8
District Wage Pressures versus Expenditure Levels
9
Challenges for Equitable Service Delivery

• District/Provincial Funding
• DAU Equalization
• Design versus Political/Transitional Constraints
• Decentralized Education Allocations
• Local Preferences/Accountability
• Minimum Standards/Obligatory Functions
• Deconcentrated Expenditures
• Equalization vis-à-vis Decentralized Expenditures
• Parental Contribution

10
Challenges for Financing Instruments

• Minimum Standards
• Definition/Proliferation
• Affordability
• Implementability
• Earmarked/Conditional Financing
• DAK (Capital Grant versus Conditional Grant)
• Decentralizing Deconcentrated Financing
• Central Teachers
• 196K Central Teachers for Regions 2003/4

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Challenges of Decentralization ME

• Central ME Systems
• Collapse as regions no longer have incentives to
  report
• Local Budget Reporting
• APBD-SIKD
• Central Budget Allocations
• Limited Transparency

12
Conclusion

• Continued tensions between decentralized and
  centralized financing models
• Uncertainly about resource composition and
  accountability at the facility level
• Too early to determine decentralization impacts
  on service delivery outcomes
• Increased heterogeneity