Indonesia

Indonesia Economic Survey and Education Policy Review Launch

 

Speech by Angel Gurría

Secretary-General, OECD

Jakarta, Indonesia

25 March 2015

(As prepared for delivery)

 

Your excellencies,  ladies and gentlemen,

 

Salamat Pagi!  [Good Morning!]

 

It is a great pleasure to be back in Jakarta to launch the 4th OECD Economic Survey of Indonesia and our first ever Education Policy Review – a fitting first, given that today we are also opening the OECD’s Jakarta office: our first ever in a Key Partner country!

 

Our key partnership with Indonesia, and this new regional office, are cornerstones of our efforts to ‘go global’ by reaching out to the most economically dynamic region on the planet. Minister Brodjenegoro and I have just come from the opening of the OECD’s second Southeast Asian Regional Forum, and we look forward to remaining an active supporter of ASEAN integration.

 

At the same time, the deepening of our bilateral work with Indonesia is part of a conscious effort to ‘go national’, providing timely and tailored policy advice to support reforms in our Member and Partner countries.

 

Political and economic transformation has been impressive, and self-reinforcing

 

Indonesia has undergone a remarkable transformation over the past two decades. After a period of break-neck growth, the country was hit hard by the 1997 East Asian crisis. The ensuing democratic transition and economic reforms laid the foundations for a decade and a half of solid, sustainable growth which has lifted tens of millions of citizens out of poverty.

 

The state must play a leading role in securing sustained, inclusive growth

 

But there is no room for complacency. To compete in the global economy, to benefit from ASEAN free trade, and to make the transition to higher income status, there remains a lot of work to be done.

 

Indeed, economic growth has been slowing and headwinds are mounting. Average growth between 2007 and 2012, at the height of the global financial crisis, was close to 6%. But it  slipped to only 5% in 2014 as reform momentum stalled. As we make clear in our 2015 Economic Survey, to put Indonesia back on a trajectory of stronger, sustainable and inclusive growth requires doubling down on fiscal and structural reforms.

 

For example, government spending needs to play a greater role in Indonesia’s development. At 15% of GDP, this is low even by the standards of countries at similar levels of development. In short - the public sector needs to belarger, but also better!

 

Efforts underway to root out the cancer of corruption need to be pursued vigorously, and I commend the government for their decisive action in this respect. Moreover, since decentralisation has devolved a lot of decision-making to regional and local governments, the central government needs to offer greater assistance to these lower levels of government to improve their administrative and policy execution, and to ensure effective coordination.

 

To help Indonesian firms compete globally, to attract value-addied Foreign Direct Investment and to ensure that prosperity can be shared by all regions, there is an urgent need to boost the quantity and quality of infrastructure on land and sea. Indonesia currently ranks among the lowest in the region in the World Bank’s Logistic Performance Index. To address this bottlekneck, Indonesia needs a twin-track policy agenda: more public resources, and an improved regulatory and business environment to mobilise private sector resources, for instance by helping make PPPs commercially viable. Indonesia also needs to prioritise investment in human capital, including education, skills and health.

 

To support such investments in inclusive growth, Indonesia first needs to create the necessary fiscal space by reprioritising existing spending and raising revenue. In this vein, I am delighted to see President Widodo already acting decisively to free up resources to tackle poverty and invest in education and infrastructure by cutting energy subsidies that favoured those who need them least. But, the government has further to travel on this journey. Expanding the tax base by making tax collection more effective and by tackling labour market informality should be the next port of call.

 

Continued investment in human capital is crucial

 

With a quarter billion citizens, and a young demographic profile, Indonesia’s people are its most precious resource. 43% of the population are under the age of 25, representing both an opportunity and a challenge.

 

Equipping young people with the knowledge and skills they need to seize job opportunities will allow the country as a whole to reap a demographic dividend. Helping Indonesia make the most of this window of opportunity is precisely the aim of the OECD’s Education Policy Review: Rising to the Challenge.

 

Progress has already been impressive. At the turn of the century, over 1.5 million children of primary school age were out of school. Today, Indonesia is close to achieving universal basic education. The rate of adult illiteracy has been halved in the last decade, enrolment in pre-primary school has more than doubled, and more and more students are moving on from secondary school to higher learning.

 

The challenge now is to consolidate these gains and develop an education system that better supports the needs of Indonesia’s emerging economy. The OECD’s Education Policy Review recommends that Indonesia concentrate its efforts in three areas.

 

The top priority is to raise the quality of education. Data from the OECD’s Programme for International Student Assessment (PISA) show that over 50% of Indonesian fifteen year-olds do not master basic skills in reading or mathematics. The average student in Indonesia is performing some three years behind the OECD average. Such low levels of skills hold back the country’s progress.

 

What is needed is nothing short of fundamental change to classroom teaching and school leadership. This will demand significant improvements in teacher training, professional development and accountability. It also requires wide-ranging reforms to the student assessment system.

 

The second goal must be to further extend participation. Not all regions and social groups have benefited equally from the expansion of educational opportunity in Indonesia. A concerted effort is needed to reach disadvantaged groups who remain out of school, who drop out early, or who are unable to learn because of malnutrition or lack of parental support. 

 

In a welcome move, the Indonesian government has made universal senior secondary education a central priority of its development plan for 2015 - 2019. Again, this will require sufficient public resources to effect the necessary changes.

 

Thirdly, and over-arching the parallel efforts to improve quality and widen participation, is the need to improve efficiency within the education sector, which accounts for a fifth of government expenditure.  This means building capacity at both regional and district levels to implement and monitor education reform. It also means instituting a more transparent and data-driven basis for assigning resources, and strengthening performance management.

 

Learning is a life-long process. Next year, we will release the first results from Indonesia’s participation in the OECD survey of adult skills, or PIAAC as it is known – a sister of PISA. This will provide further information on the level and use of skills in Indonesia. Based on our cutting-edge data and armed with the policy lessons learned by our Member and Partner countries, the OECD looks forward to accompanying the Indonesian government in its effort to forge an education system fit for the 21st century.

 

Your excellencies, ladies and gentlemen,

 

Indonesia has made great strides in improving citizens’ well-being in recent years, sustaining hight economic growth, but also sharing its fruits more equitably. Continuing this progress is a goal common to the reforms we recommend in both the Economic Survey and in the OECD’s Education Review.

 

It is with this goal in mind that we are proud to contine our work with your authorities to design, develop and deliver ‘Better Policies for Better Lives’ for all Indonesians.

 

Tarima Kasih!  [Thank you!]