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
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Financing Education in Indonesia

2. Financing Education in Indonesia
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
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Financing Education in Indonesia

3. Financing Education in Indonesia
Challenges
Equity
Inter-regional
Quality Issues
Governance & Accountability
“Leakages”
Expenditure Assignments
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Financing Education in Indonesia

4. Pre-Decentralization Financing Flows
Decentralized “Earmarked” Transfers
Recurrent Subsidies (SDOs)
Capital Grants (Inpres)
Deconcentrated Expenditures
Kanwil DIP/DIK-DAs
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Financing Education in Indonesia

5. Post-Decentralization Funding
Decentralized Expenditures
Block Grant (DAU)
Revenue Sharing (Natural Resource/Other)
Own Revenues
Conditional Grant (DAK)
Central Expenditures
DIPs
Deconcentrated Agencies (Kanwil’s) Abolished
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Financing Education in Indonesia

6. Post-Decentralization Multiple Flows
Source: WB Education Sector Review 2004
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Financing Education in Indonesia

7. Post-Decentralization: Center and Regions Finance
Source: WB Education Sector Review 2004
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Financing Education in Indonesia

8. District Wage Pressures versus Expenditure Levels
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Financing Education in Indonesia

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
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Financing Education in Indonesia

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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Financing Education in Indonesia

11. Challenges of Decentralization M&E
Central M&E Systems
Collapse as regions no longer have incentives to report
Local Budget Reporting
APBD-SIKD
Central Budget Allocations
Limited Transparency
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Financing Education in Indonesia

12. Financing Education in Indonesia
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
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Financing Education in Indonesia