and class size. There is a clear need for teacher educational attainment to be improved in Indonesia. For primary and junior secondary levels, only about 55 and about 73 percent of the teachers have the minimum qualifications required by the Ministry of National Education (MoNE).<sup>5</sup> The GoI is tackling the problem with its recent law on teacher certification (December 2005) by providing a new form of incentives for all teachers to obtain certifications. These additional incentives will significantly increase teacher base salaries. The increases could translate into higher learning achievement if adequate mechanisms and institutions of performance control (i.e. teacher attendance and teaching quality) are implemented. Furthermore, strong accountability is a required precondition for effective performance control. Effective accountability mechanisms in other countries have combined top-down accountability (from schools to districts-provinces) with bottom-up accountability (from schools to constituents and parent committees).<sup>6</sup> Deteriorating classroom quality is another serious problem for the Indonesian education system, particularly at the primary level, where only 44 percent of classrooms satisfy the minimum standards set by MoNE.<sup>7</sup> In the past, the government’s education strategy has favored access at the expense of quality. Finally, although the studentteacher ratio is low, the fact that there are large numbers of part-time and absent teachers still leads to a high student-class ratio.

Moreover, the Indonesian education system does not produce enough students with the knowledge and skills required to work in economic sectors with high growth potential. Indonesian newspapers report frequently on the gap between what schools offer, and the needs of civil society for an engaged electorate, as well as the demands of the enterprise sector for employees and entrepreneurs with imagination and problem-solving skills. The results of the 2002 examinations show that out of a possible 10 points for each subject area, the more than 2.2 million students from nearly 20,000 schools who took the tests averaged scores of 5.79 for math, 5.11 for Bahasa Indonesia, and 5.29 for English. Figures for 2005/2006 indicate a significant increase in scores, now averaging 7.13 for math, 7.46 for Bahasa, and 6.62 for English.<sup>8</sup> The reliability of the test results is debatable however, and comparing test-scores across years is only valid if the test-designs do not change substantially.

# **2. Public Expenditures in Education**

_General trends_ Since the mid-1990s, Indonesia has built an upward trend in real government expenditures on the education sector.<sup>9</sup> The only two exceptions were a temporary decrease during the crisis and a slight dip in 2004. The decrease in spending in 2004 was jointly caused by low budget execution and a crowding-out effect in most social sectors due to increasing fuel subsidies. The relative size of education expenditures is expected to peak in 2007, with approximately 17.2 percent of overall national expenditures (Table 2).<sup>10</sup> After the slight negative real growth in 2004, education

> 5 Ministry of National Education, Indonesia: Educational Statistics in Brief 2004/2005.

> 6 A widely praised example of community participation bottom-up accountability is that of the EDUCO in El Salvador.

> 7 Ministry of National Education, Indonesia: Educational Statistics in Brief 2004/2005.

> 8 Ministry of National Education, Data from the Assessment Center.

> 9 In this chapter education spending for central government is defined following the sectoral budget classification. And from Sector 11: Education, National Culture, Belief in God Almighty, Youth and Sports Sector, the sub-sectors 11.1 Education, and 11.2 Official and Informal Education sub-sector are included in the analysis, which together account for 98 percent of the sector total.

> 10 In 2004, total national spending increased by approximately 4 percent; however, the share of education expenditures decreased to approximately 14 percent. Education expenditures as a share of GDP also decreased in 2004 relative to 2003–from about 3.2 percent to about 2.8 percent–as did the ratio of overall national expenditures to GDP–from 19.9 percent to 19.6 percent.

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