expenditures increased again by 8.4 percent in 2005, followed by a dramatic 41.6 percentage increase in 2006.

**Table 2** National Public Expenditure on Education (Central + Province + District) for 2001-2007 _Rp trillion_

||**2001**|**2002**|**2003**|**2004**|**2005**|**2006***|**2007****|
|---|---|---|---|---|---|---|---|
|Nominal national education expenditures|40.5|48.2|64.8|61.8|74.0|118.2|135.4|
|National education expenditures (2001 prices)|40.5|43.1|54.3|48.8|52.9|74.9|80.7|
|Growth real national education expenditures (%)|40.3|6.4|26.2|-10.2|8.4|41.6|7.8|
|Education exp. (% total of national exp.)|11.4|14.3|16.0|14.0|13.9|16.9|17.2|
|National education exp. (% of GDP)|2.4|2.6|3.2|2.7|2.7|3.8|3.8|
|Total nominal national expenditures|353.6|337.6|405.4|441.8|531.7|698.2|785.4|
|Total real national expenditures (2001 prices)|353.6|301.8|340.0|348.9|380.0|442.4|468.3|
|Government size (total exp. as % of GDP)|21.0|18.1|19.8|19.4|19.5|22.4|22.2|

_Source_ : World Bank staff calculations base on MoF and SIKD data. _Note_ : * = preliminary realization of APBN and estimates for sub-national spending, ** = central government budget (APBN) and estimates for sub-national governments.

Due the recent increase in spending, Indonesian education expenditures rank almost on par with many other developing countries with a similar per capita income. It can be argued that nations with a larger government size (total public expenditures as percentage if GDP) tend to spend more on social sectors in absolute, but also in relative terms. This line of argument could justify, for example, why Indonesia’s education expenditures are lower than those in Malaysia, which has a significantly larger overall size of government (Table 3). However, Indonesia spends a significantly lower percentage of GDP on education relative to Thailand, which has a smaller government size. This low share of spending applies to almost all sectors in Indonesia because of the relatively small share of the government sector itself and also because of the large amount of current spending, particularly for subsidies.

**Table** **<u>3</u>** Education Public Expenditure in Indonesia's <u>Neighboring Countries</u>

||**Highest**|||**Lowest**|
|---|---|---|---|---|
|Education public expenditure % of total|Malaysia|Thailand|**Indonesia**|Philippines|
|expenditure|27.0|=<br>27.0|><br>**16.9**|><br>16.0|
|Education public expenditure % of GDP|Malaysia|Thailand|**Indonesia**|Philippines|
||8.1|><br>4.6|><br>**3.8**|><br>3.1|
|Total public expenditure % of GDP (size|Malaysia|**Indonesia**|Philippines|Thailand|
|of government sector)|29.7|><br>**22.4**|><br>19.6|><br>16.8|
|GDP per capita (constant 2000 US$)|Malaysia|Thailand|Philippines|**Indonesia**|
||4,290|><br>2,356|><br>1,085|><br>**906**|
|Population (million)|**Indonesia**|Philippines|Thailand|Malaysia|
||**217.6**|><br>81.6|><br>63.7|><br>24.4|
|Percent population aged 0-14|Thailand|Indonesia|Malaysia|Philippines|
||4.1|><br>3.5|><br>3.0|><br>2.8|

_Source_ : Data for Thailand, Malaysia, the Philippines are from the World Bank Development Indicators (latest year available); data for Indonesia are from the preliminary realization of central budget and estimates for sub-national spending for 2006 based on previous years (base data from Ministry of Finance).

Although it is common practice to make international comparisons of selected expenditure indicators, such as the one presented above, these figures often are not ‘comparable’ when other dimensions are taken into consideration. A variety of economic and demographic factors should be considered, however, when comparing education expenditures across countries. Factors that may bias a one-dimensional comparison include the size of the public sector, the size of the economy as a whole, the national income level, the level of government revenues, the publicprivate participation shares, the number of service beneficiaries, the prices of key inputs. Among many other studies, Verbina and Chowdhury (2002), Fernandez and Regerson (2001), Arze et al (2005), discuss the determinants of public education spending. Results from an estimation that controls for several determinants of education expenditure allocations, including population, population density, GDP per capita, the level of fiscal decentralization, and budget balance; Indonesia’s level of education spending could be expected to be around 17 percent of its overall 5