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Indonesia:Research & DevelopmentFinancing
Human DevelopmentEast Asia and Pacific Region
THE WORLD BANK
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THE WORLD BANK OFFICE JAKARTA
Indonesia Stock Exchange Building, Tower II/12-13th Fl.
Jl. Jend. Sudirman Kav. 52-53
Jakarta 12910
Tel: (6221) 5299-3000
Fax: (6221) 5299-3111
Published in January 2013
Indonesia: Research & Development Financing is a product of staff of the World Bank. The fi ndings, interpretation and conclusion expressed
herein do not necessarily refl ect the views of the Board of Executive Directors of the World Bank or the government they represent.
The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomination and other
information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any
territory or the endorsement of acceptance of such boundaries
Cover Photo by: World Bank
Indonesia:Research & DevelopmentFinancing
Human DevelopmentEast Asia and Pacific Region
Report No. 74619-ID
Indonesia: Research & Development Financingii
Acknowledgments
The team is grateful to offi cials and staff in the Ministry of Research and Technology, the National Innovation
Commission, and the Indonesia Academy of Sciences for discussions that initiated this report; and for various
inputs throughout the production of the report. We are particularly grateful to the Center for Science and
Technology Studies (PAPPIPTEK) at the Indonesian Institute of Sciences (LIPI), who provided key survey data, and
RISTEK colleagues who verifi ed key information. We thank all the participants at discussion workshops for sharing
with us their experiences and concerns about public support for R&D in Indonesia.
We thank colleagues at AusAid - Maesy Angelina, Benjamin Davis, Diastika Rahwidiati, Rivandra Yoyono, Scott
Guggenheim, and Hannah Birdsey - for their support throughout the production of the report.
The report is managed by a team comprising of Dandan Chen (Task Team Leader, Senior Economist); Jean-Louis
Racine (Senior Private Sector Development Specialist), Lawrence Kay (Consultant, main author of fi rst draft), and
Siwage Negara (Operations Offi cer). Dyah Kelasworo Nugraheni provided the most effi cient team support. The
preparation of the report was under the overall guidance and support of Luis Benveniste (Sector Manager, EASHE).
The production of this report was made possible through the generous fi nancial support of AusAid Indonesia.
Public Expenditure Review iii
Abbreviations, Acronyms, and Terms
ADB Asian Development Bank
AIPI Indonesian Academy of Sciences
ASEAN Association of South East Asian Nations
AusAID Australian Agency for International Development
BALITBANG Badan Penelitian dan Pengembangan (Ministry research centers)
BALITBANGDA Badan Penelitian dan Pengembangan Daerah (Ministry research centers in the regions)
BAPETEN Badan Pengawas Tenaga Nuklir (Nuclear Energy Regulatory Agency)
BAPPENAS Badan Perencanaan Pembangunan Nasional (National Development Planning Agency)
BATAN Badan Tenaga Nuklir Nasional (National Nuclear Energy Agency)
BIG Badan Informasi Geospasial (Geospatial Information Agency)
BMKG Badan Meteorologi, Klimatologi, dan Geofi sika (Center of Meteorology, Climatology and
Geophysics)
BPPT Badan Pengkajian dan Penerapan Teknologi (Agency for Assessment and Application of
Technology)
BSN Badan Standardisasi Nasional (National Standardization Agency)
DRN Dewan Riset Nasional (National Research Council)
EITI Extractive Industries Transparency Initiative
EU European Union
EITI Extractive Industries Transparency Initiative
GDP Gross Domestic Product
GERD Gross Domestic Expenditure on R&D
GNI Gross National Income
ICT Information and Communications Technology
IDR Indonesian Rupiah
Indonesia: Research & Development Financingiv
KEI Knowledge Economy Index
KEMENRISTEK Kementerian Riset dan Teknologi (Ministry of Science and Technology)
KI Knowledge Index
KIN National Innovation Committee
LAPAN Lembaga Penerbangan dan Antariksa Nasional (National Institute of Aeronautics and Space)
LBME Lembaga Biologi Molekular Eijkman (Eijkman Institute for Molecular Biology)
LIPI Lembaga Ilmu Pengetahuan Indonesia (Indonesian Institute of Sciences)
LPNK Lembaga Pemerintah Non Kementerian (Non-ministerial State Institutes)
MVA Manufacturing Value-Added
OECD Organisation for Economic Development
PER Public Expenditure Review
PhD Doctor of Philosophy
PUSPIPTEK Pusat Penelitian Ilmu Pengetahuan dan Teknologi (Science and Technology Research Center)
RAPID Riset Andalan Perguruan Tinggi dan Industri (University and Industry Research Collaboration)
R&D Research and Development
S&T Science and Technology
TFP Total Factor Productivity
UNESCO United Nations Educational, Scientifi c and Cultural Organization
UNIDO United Nations Industrial Development Organization
USD United States Dollars
USPTO United States Patent and Trademark Offi ce
Public Expenditure Review v
Contents
Acknowledgments ii
Abbreviations, acronyms, and terms iii
Contents v
Executive Summary vii
Introduction 2
R&D and Indonesia’s Economic Development 4
Indonesia’s R&D Performance 8
Government R&D Policy and R&D Financing 16
R&D Policy 16
Resource Mobilization 19
Resource Allocation and Utilization 23
Improving Indonesia’s R&D Public Financing for the Future 44
Bibliography 46
Annex 1: Organizations Involved in R&D, Divided by Type 49
TablesTable 1 Knowledge Economy Index Rankings, Select Countries, 2012 8
Table 2 Scientifi c and Technical Journal Articles, Indonesia and Select Countries,
1999–2009 9
Table 3 Scientifi c Papers and Citations of Authors from Select Countries, 1999–2009 9
Table 4 Publications by Major Scientifi c Field (percent), 2008 10
Table 5 English-Language Scientifi c Articles by Authors from Select Countries,
1998–2008. 11
Table 6 Number of Resident Patent Filings per Million Population, Select Countries,
2000–2010 11
Table 7 Indonesian Patent Applications at the European Patent Offi ce and
in the United States, 2002–2010 12
Table 8 Indonesian Patent Applications Granted at the European Patent Offi ce and
in the United States, 2003–2010 12
Table 9 High-Technology Exports as a Percentage of Total Exports, Indonesia and
Select Country Groups, 1988–2010 12
Table 10 Manufacturing Value-Added (MVA), Indonesia and Select Country Groups,
Assorted Years (percent) 13
Table 11 Indonesian Share of MVA and Manufacturing in World Output, Assorted Years 13
Table 12 Structure of Policies on Science, Technology, and Research 17
Table 13 Breakdown of the S&T Policy Approach in the Masterplan for the Acceleration
of Indonesian Economic Development (2011–2014) 18
Table 14 Indonesian GERD by Known Source of Financing (percentage), Available Years 22
Table 15 Indonesian GERD by Known Locus of Activity (percentage), Available Years 22
Table 16 R&D by Source of Financing (percentage), Selected Neighboring Countries,
1998–2008 23
Table 17 Private R&D Centers by Industry Sector 24
Indonesia: Research & Development Financingvi
Table 18 Organizations Involved in R&D, Divided by Type 25
Table 19 R&D Funding Distribution, 2006 and 2009 28
Table 20 Distribution of RAPID Grants, 2008–2012 33
Table 21 LIPI Social Science Research Projects by Type of Funding, 2010 34
Table 22 Distribution of Staff at the Seven LPNK, Most Recent Years 35
Table 23 Number of Researchers per Million Population, Select Countries, 1996–2009 37
Table 24 Public University Researchers by Field of Study, 2009 38
FiguresFigure 1 GDP Growth (annual percentage change) 2002–2010 4
Figure 2 Average Annual Growth Rate in the Number of Foreign Scholars in
the United States, 1997–2007 10
Figure 3 Resident Patent Filings per USD GDP, Select Countries, 2000_2010 11
Figure 4 GERD, Selected Regions, 1996–2009 20
Figure 5 GERD, Indonesia, Three Years of Comparable Data 21
Figure 6 GERD, Developing Countries, East Asia and Pacifi c Region, Most Recent Years 21
Figure 7 GERD, Selected Neighboring Countries, Most Recent Years 21
Figure 8 Total State R&D Funding by Source, 2006 27
Figure 9 Non-Higher Education Central Government R&D Funding
by Destination, 2006 29
Figure 10 BALITBANG Funding by Source, 2006 30
Figure 11 LPNK Funding by Source, 2006 30
Figure 12 LPNK Funding by Domestic Research Contracts 31
Figure 13 BALITBANGDA Funding by Source, 2006 31
Figure 14 Public Universities’ Funding by Source, 2009 31
Figure 15 Public Universities’ Funding by Source, 2006 and 2009 32
Figure 16 Distribution of LIPI Staff by Age Group, Assorted Years 36
Figure 17 Distribution of LIPI Researchers by Education Level, Assorted Years 36
Figure 18 LIPI Staff by Level of Seniority, Assorted Years 36
Figure 19 R&D Sector Researchers by Organization Type, Assorted Years 37
Figure 20 BALITBANG Funding by Type of Research, 2006 39
Figure 21 BALITBANGDA Funding by Type of Research, 2006 40
Figure 22 LPNK Funding by Type of Research, 2006 40
Figure 23 Public Universities’ Funding by Type of Research, 2009 40
Public Expenditure Review vii
Indonesia’s economy over the past decade has been on a sustained growth path. The economy grew within
a band of 4.5 percent to just over 6 percent between 2002 and 2010. Comparative strength in several sectors has
helped Indonesia to weather recent problems in the world economy. Production of commodities was especially
useful in this respect, as in 2010 it constituted 63 percent of total exports and 26 percent of annual value added.1
Furthermore, the country enjoys a large number of micro-, small- and medium-sized enterprises. One important
factor that highlights Indonesia’s growth potential are the recent increases in total factor productivity (TFP),
which has contributed more to recent economic growth than before the 1998 fi nancial crisis.2
Indonesia has also made fast progress in reducing extreme poverty. In 1984 around 65 percent of Indonesia’s
population lived on less than USD 1.25 a day (at purchasing power parity), while the fi gure was around 50 percent
in 2000. In 2010–2011 the level was less than 19 percent, or around the same rate as in China.3 By March 2011
these percentage falls meant that the number of people living below the poverty line had fallen to 30 million,
driven by economic growth, higher household incomes, and more jobs.4 However, large parts of the population
still have levels of income that suggest signifi cant deprivation.
There are a few risks that need to be managed for sustained economic growth and social development.
First are the threats generated by large capital fl ows into the country. While this has opportunities that Indonesia
can take advantage of, such as lower borrowing costs, job creation and exposure to foreign expertise, the infl ows
are often portfolio investments rather than foreign direct investment. Hence, quick withdrawals of capital can
aff ect domestic industries through fl uctuations in the exchange rate. In addition, large pockets of poverty remain.
Currently, 51 percent of the population still lives on less than USD 2 a day, suggesting that any shocks to the
economy and thus disruption in the small incomes of so many people could aff ect large parts of the population.
There are also large economic disparities between the regions.
However, Indonesia also enjoys many opportunities for greater economic growth and poverty reduction.
For example, in January 2010 the ASEAN-China Free Trade Agreement came into eff ect which, as a part of ASEAN,
Indonesia is party to. It eliminates tariff barriers on approximately 6,600 products in a variety of industries.5
According to analysis of the likely eff ects of the trade agreement on Indonesia, the country might enjoy benefi ts
of 1.2 percent of GDP over the long term as it reallocates resources towards industries where it has a comparative
advantage.6
This public expenditure review (PER) concentrates on one of Indonesia’s key opportunities for future
growth: research and development. R&D can lead to greater innovation and growth in human capital, which a
country needs in order to be fl exible in response to market changes and to capture larger amounts of value-added
throughout the value chain in the production of goods or services. In addition, the challenge of continuing the
momentum of poverty reduction also needs strengthening through R&D in the social science fi elds, to support
eff ective and evidence-based public policy making. This PER looks at what Indonesia’s R&D sector produces
relative to how much money is spent on it, and how. It will not only focus on the levels of spending on the sector,
but also the policy, institutional, and managerial framework. However, the report does not aim to describe how
the R&D sector might be transformed, but instead to focus on current fi nancing and institutional issues and how,
if necessary, these might be addressed.
Executive Summary
1 World Bank, Indonesia Economic Quarterly: Continuity Amidst Volatility, World Bank, June 2010, p34
2 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p34
3 World Economic Forum, The Indonesia Competitiveness Report 2011: Sustaining the Growth Momentum, World Economic Forum, 2011, p1
4 World Bank, Indonesia Economic Quarterly: Turbulent Times, World Bank, October 2011, p11
5 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p31
6 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p31
Indonesia: Research & Development Financingviii
Indonesia’s R&D sector has some way to go to gain global signifi cance. On the World Bank’s Knowledge
Economy Index, Indonesia ranks poorly compared to both its richer and poorer neighboring countries. The index
combines factors that concern the economic incentives available for researchers, the level of innovation and
adoption of technology, the quality of education, and the information technology infrastructure in place. In 2012
Indonesia ranked 108th in the world.
Indonesia also compares poorly in international comparisons of R&D output and quality. There are some
strong areas in Indonesian R&D, with the country’s scientists receiving 7.67 citations per paper between 1999 and
2009, which was more than their peers in countries such as Cambodia and Thailand. However, in 2009 Indonesia
published only 262 papers in scientifi c and technical journals, a level far behind places such as Malaysia (1,351) or
Singapore (4,187). This low level of activity also has eff ects on the technological advancement of the goods and
services produced by the economy. Regarding the output of the social sciences sector, a recent report found that
only 12 percent of peer-reviewed social science research publications on Indonesia are undertaken by authors
based in the country, where the average among a group of developing countries including the Philippines,
China, India, Thailand, Malaysia, and Brazil is approximately 28 percent.7
The lack of broad capacity in the R&D system is also revealed by Indonesia’s inability to innovate
signifi cantly, as shown by its low level of patenting activity. UNESCO has argued that the level of activity
since the turn of the century has shown very little growth.8 This is demonstrated by several diff erent international
comparisons. For example, between 2000 and 2006 the number of patents fi led by Indonesian residents grew
from only 0.74 per million population to 1.25 in 2006. This is a 59 percent increase, but from a very low base. By
comparison, in the same period, annual Malaysian patent fi lings rose from 8.8 to 43.41. Countries such as China
and Thailand also showed signifi cant progress in the same period.
The government has extensive plans to develop the quality and output of R&D in Indonesia. Since the
1990s there have been several government eff orts to support R&D in one way or another. After 2005 these were
mainly incentive programs for the pursuit of R&D and its use in industry. As government policy currently stands,
there is a National Long-Term Development Plan (2005–2025) that specifi es seven areas (food security; energy;
transportation technology and management; information and communication technology; defense and security
technology; health and medicine; and advanced materials) as needing greater R&D activity. This is supported by
other plans, such as the Medium-Term Development Plan (2010–2014), which are more specifi c in how greater
R&D activity will be fostered and used.
At the moment, the level of spending on R&D is too low to support the government’s plans for greater
R&D activity. According to the latest fi gures (from 2009) Indonesia only spends 0.08 percent of its GDP on
R&D, or less than one tenth of one percent. This is much less than even its regional developing peers such as
China, which spends 1.46 percent of its GDP on R&D. In one of the government’s main economic development
plans, the Masterplan for the Acceleration and Expansion of Indonesian Economic Development (2011–2025),
it is stipulated that there will be an increase in R&D funding to 1 percent of GDP by 2014 and 3 percent by 2025,
coming from a mixture of the state, state-owned fi rms, and the private sector.
Around three quarters of R&D funding in Indonesia comes from the government. The best data on the
activity in the sector suggests that the private sector conducts very little R&D. This is the opposite of normal
practice elsewhere, such as among OECD countries where fi rms account for around 70 percent of all activity. It is
likely that with such a balance there is little investigation of the most pressing commercial R&D questions.
The low level of state R&D spending is spread across a range of organizations. Each of the 22 government
ministries has a research arm (the BALITBANG), which is mostly used for short-term research that mainly constitutes
policy advice. There are then seven independent research institutes (the LPNK) that conduct longer-term research
7 Suryadarma D, Pomeroy J and Tanuwidjaja S, “Economic Factors Underpinning Constraints in Indonesia’s Knowledge Sector: Final Report,” AusAID, 7th June
2011, p3
8 UNESCO, UNESCO Science Report 2010, UNESCO, 2010, p451
Public Expenditure Review ix
in their given fi elds, which range from aeronautics and space to nuclear energy. The most reputable of these is
the Indonesian Institute of Sciences (LIPI). Among other assorted bodies are the public and private universities.
Only a few of these (in the public sector) have the research capacity to tackle long-term research questions.
Despite the importance of state funding of R&D, the administration of it currently has many weaknesses.
In two important ways the approach to state fi nancing has constraining eff ects on R&D because of the
investigative nature of research. Firstly, an emphasis on single-year budgeting makes it diffi cult for R&D institutes
that rely on government funding to plan. Without a multi-year view it is diffi cult to start a research project that
has unknown outcomes as the researchers do not know whether funding will be available for a second year if
the target discovery has not been made in the fi rst year. Secondly, the necessity to achieve a research outcome
within a given fi nancial year induces further caution over which research topics to pursue. Researchers may tend
to pick less signifi cant topics that are likely to produce some results in the budgeted timeframe.
State R&D funding is also characterized by its distribution by the center of government. Even if a state
provides the majority of funding for a given activity, it is not necessary that it be distributed to the fi nal recipients
by a central body. Agencies and arms-length bodies can be given the funding, which can be granted to various
researchers and contractors. In Indonesia, however, the funding is usually allocated within the government
departments and agencies where research activities are conducted. Not only does this make the public research
institutes and agencies such as the LPNK highly dependent on the state for their work, the internal allocation of
funding is also rarely competitive.
The insignifi cant role of contract funding would also suggest low usage of competitive fi nancing. Where
line-item funding is used, the demands of administering and tracking the fl ow of funds is likely to require high
levels of specifi cation as to where it is going and for what purpose – two characteristics of R&D funding in
Indonesia. By contrast, if funding is allocated to R&D and is then distributed by research contracts, it is sometimes
easier for that funding to take place through a competitive bidding process.
Compared with other R&D units and institutes, the funding for R&D at public universities appears to be
most diversifi ed. In 2009, while nearly IDR 1.2 trillion9 came from the Directorate for Higher Education, there
was also funding from other central government agencies, amounting to IDR 280 billion10. In addition, they also
received around IDR 205 billion from domestic research contracts. Approximately IDR 180 billion of this was from
government discretionary funds and only around IDR 21 billion from companies and suchlike.
The Directorate for Higher Education distributes its funding in several diff erent ways. Around 65 percent
goes to the public institutions under its remit through a mix of block grant funding and line-item budgeting. But
it also operates grant schemes. These schemes have recently been focused on university-industry collaborations,
but over the past 20 years, money has also been given for fundamental research. In 2012 the Directorate for
Higher Education made 4,297 grants worth a total of IDR 286 billion, with the vast majority going to the public
universities rather than the private ones, and the seven leading public universities in particular (Institut Pertanian
Bogor, Institut Teknologi Bandung, Universitas Airlangga, Universitas Gajah Mada, Universitas Indonesia, Universitas
Pendidikan Indonesia, Universitas Sumatera Utara). It is possible that this refl ects the balance of R&D expertise,
although this may also refl ect the preference given to the leading public universities.11
The low R&D human resource base is also a signifi cant constraint to the eff ective use of limited state R&D
funding. As of 2009 Indonesia only had around 89.6 researchers per million people, while its developed regional
peers had between 4,000 and 5,000. The LPNK receive around a quarter of the central funding that is given to
the BALITBANG but have double the amount of staff . Staffi ng at the LPNK is also infl exible, in that researchers are
obliged to join at the grade conferred on them by their level of education and receive tenure after one year in
Executive Summary
9 A trillion is 1 million million.
10 A billion is 1,000 million.
11 PT. Trans Intra Asia (TIA), Development of Strategies for University-Industry-Government Partnership, PT. Trans Intra Asia (TIA), August 2012
Indonesia: Research & Development Financingx
their post. There are also questions over the capacity of researchers in the universities, as in 2009 there were three
or four staff with a bachelor’s degree for every one with a PhD.
In order for Indonesia to achieve its high ambitions for R&D over the next decade or so, an increase in
public funding is needed. The Indonesian government has outlined a strategy for the country’s economic
growth and has identifi ed R&D and science and technology as important sources of future growth. Given
Indonesia’s current development this is the right approach. However, currently Indonesia spends very little on
R&D either in the public or private sectors, and is likely falling behind its peers in several ways as a result. The
commitment in the government’s Masterplan to increase GERD to 3 percent by 2025 goes some way to meeting
that gap. However, there are also issues in the public R&D sector that need addressing before an increase in
funding can be spent effi ciently.
There is a need to improve the state administration of budgeting and spending, which is aff ecting the
effi cient pursuit of R&D projects. There is a need to give special consideration to R&D projects where fl exibility
and predictability of funding are especially needed. There are signs that some of the main issues are being
addressed, but the emphasis on a single-year budget cycle is unlikely to be conducive to giving researchers the
time and stability they often need to pursue complex questions with unknown outcomes. This issue is further
exacerbated by the state-wide problem of delayed disbursing of public funds.
Second, there is a need to rethink fund allocation mechanisms in order to improve R&D output and
outcomes, and leverage private funding. Currently, Indonesia’s R&D funding is largely characterized as
“institutional funding”, through the public budget allocation system. Competitive R&D funding, a mechanism
that has been adopted in many countries to incentivize those R&D activities of the highest quality, is close to
non-existent in Indonesia. Greater use of peer reviews could also help with increasing the quality of research
outputs. In addition, the wide range of organizations that receive a public R&D budget suggests that resources
are distributed thinly. More importantly, the budget allocation lacks innate incentives for better R&D results. A
competitive funding pool for R&D can introduce a new approach to public fi nancing, stimulating and benefi ting
Indonesia’s scientifi c communities at large. In addition, innovative mechanisms can be put in place, such as
matching funds to leverage private fi nancing for R&D.
In order to eff ectively use public R&D funding, a range of institutional reforms at public research entities
should be considered. Institutional autonomy and accountability should be at the center of these reforms.
Most of the R&D agencies and units in Indonesia function as part of government offi ces and bureaucracies.
For example, the BALITBANG, which receive over three quarters of all government line-item funding, are under
the direct control of their respective ministries. The LPNK are relatively independent but cannot retain revenues
from private sector research contracts. While most of the accountability and autonomy reforms have started in
the leading public universities, regulations and operational guidelines for the new autonomy law need to be
prepared to guide the institutional reforms.
Strengthening the capacity and elevating the expertise of research staff is simply the foremost necessary
condition for Indonesia’s R&D sector to take off . The data on staffi ng levels and educational background
across the public R&D sector, and especially at the LPNK, showed that a given research body is likely to be bottom-
heavy, that is, to have a large number of staff with bachelor’s degrees and junior positions, and often likely to be
young. The corollary of this is that often only a minority of staff holds doctorates, meaning that research institutes
may only have a small pool of research expertise to draw on. Given the relatively weak postgraduate programs,
particularly at doctorate level, Indonesia still needs to rely on broadening international collaborations in order
to train fi rst-rate researchers and to gain critical mass in R&D fi elds, including building stronger postgraduate
programs in the long term. Strengthening human capacity has to go hand in hand with institution reforms
in order to adequately incentivize researchers to generate fi rst-rate outcomes and contribute to Indonesia’s
development eff ectively.
IntroductionI.
Photo by: Nugroho Nurdikiawan Sunjoyo
Indonesia: Research & Development Financing2
Introduction
How much Indonesia spends on R&D, where it spends it, and how it spends it, will aff ect the level of the
country’s growth for many years to come. Indonesia currently has the opportunity to consider the nature
of its economic growth and where state resources might be concentrated in order to foster expansion in new
areas. For the country to achieve growth that allows it to capture more value-added on the goods and services it
produces, it is likely that it will need to be more innovative. Equally important, to ensure the benefi t of the growth
is shared by the Indonesian people and contributes to poverty reduction, there is a need for eff ective public
policies. To become more innovative and eff ective in economic and social development, Indonesia will need to
make sure that its R&D eff orts, both public and private, are well-managed and suffi ciently funded.
This public expenditure review (PER) starts with examining Indonesia’s current R&D performance,
and then looks into the recurrent levels of spending on R&D, and how the spending is administered,
identifying key constraining factors that aff ect Indonesia’s R&D performance.12 With the available data
and knowledge of the institutional framework, an understanding of the R&D system is developed. With this
understanding it was possible to identify the constraining factors in Indonesia’s use of resources to produce R&D
outputs, development of innovative goods and products to capture higher levels of value added, and support for
social public policy formulation and implementation. This analysis will take place primarily against the background
of international comparisons and the government’s policy aims. For the most part this PER will concentrate on
the public R&D system, that is, the institutions and research funded with public money and operating under the
aims defi ned by the government. Finally, this PER is not an attempt to describe how the R&D system in Indonesia
might be overhauled or transformed. Instead, it deals with the current fi nancing and institutional issues and how,
if necessary, these might be addressed.
12 A PER is often be a large report that considers many aspects of state spending in a country. In this, much shorter, report, the principles are the same. The
purpose of a PER is to look at the purpose of government spendingon a policy, given the country’s economy; to fi nd out how much is being spent; to fi nd
out how the money is being spent; and then to assess the level of spending relative to targeted, reasonable and actual outcomes. In short, a PER looks at the
effi ciency of public spending.
R&D in the Context ofIndonesia’s EconomicDevelopment
II.
Photo by: Jerry Kurniawan
Indonesia: Research & Development Financing4
R&D in the Context of Indonesia’s Economic Development
Indonesia’s economic growth over the past decade has been satisfactory, even though it has not reached
the highs of the pre-1997 period. As shown in Figure 1, the economy grew within a band of 4.5 percent to
just over 6 percent between 2002 and 2010. The fi nancial crisis of 2008–2009 aff ected Indonesia somewhat,
although it carried on growing at a similar pace to previous years. This growth was in stark contrast to the 13.1
percent contraction that the economy underwent in 1998 during the Asian fi nancial crisis. It also compares well
to the performance of some of its regional peers.13 However, in the fi ve years prior to 1998, Indonesia recorded an
average growth rate of 7.1 percent, a level several percentage points higher than it has achieved in recent years.
Comparative strength in several sectors has helped Indonesia to weather recent problems in the world
economy. Production of commodities was especially useful in this respect, as in 2010 it constituted 63 percent of
total exports and 26 percent of annual value added.14 Indonesia is the world’s largest producer of palm oil while
also producing large amounts of oil and gas, for which it has enjoyed greater demand and higher prices over the
recent past.15 Furthermore, the country enjoys a large number of micro-, small- and medium-sized enterprises.
While suggesting the potential for future growth as fi rms expand, consolidate and pursue effi ciency gains, these
fi rms also tend to use internal or informal fi nancing methods, thus meaning that they are somewhat sheltered
from economic problems elsewhere.16
Source: World Bank data (http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG)
Figure 1 GDP Growth (Annual Percentage Change) 2002–2010
0
1
2
3
4
5
6
7
2002 2003 2004 2005 2006 2007Year
2008 2009 2010 2011
Pe
rce
nta
ge
ch
an
ge
13 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p22
14 World Bank, Indonesia Economic Quarterly: Continuity Amidst Volatility, World Bank, June 2010, p34
15 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p25; World Bank, Indonesia Economic Quarterly: Continuity Amidst Volatility, World Bank, June
2010, p37
16 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p22
Public Expenditure Review 5
R&D in the Context of Indonesia’s Economic Development
There are thus several reasons to be positive about Indonesia’s growth potential. One important reason
among several is that total factor productivity (TFP) has contributed more to recent economic growth than
before the 1998 fi nancial crisis.17 TFP helps to determine economic expansion because a country that is more
effi cient in the use of resources is a country that can produce more with the same level of inputs. Technological
advancement and richer human capital are often important in achieving higher levels of TFP. Prior to 1998, capital
accumulation and greater labor inputs were behind increases in potential output, with TFP contributing less than
20 percent before 1998. Between 2006 and 2009 the level was closer to 40 percent.
Indonesia has also made fast progress in reducing extreme poverty. In 1984 around 65 percent of Indonesia’s
population lived on less than USD 1.25 a day (at purchasing power parity), while the fi gure was around 50 percent
in 2000. In 2010–2011 the level was less than 19 percent, or around the same rate as in China.18 By March 2011 the
percentage falls meant that the number of people living below the poverty line had fallen to 30 million, driven by
economic growth, higher household incomes, and more jobs.19
Nonetheless, large pockets of hardship remain and the benefi ts of growth have been somewhat skewed
towards the already wealthy rather than the poor. 51 percent of the population still lives on less than USD
2 a day – a level above the extreme poverty of USD 1.25 a day but still refl ective of deep deprivation in many
households. This suggests that any shocks to the economy and thus disruption in the small incomes of so many
people could aff ect large parts of the population.20 Between 1996 and 2010 per capita consumption grew by
an average annual rate of 1.4 percent. However, the growth rates enjoyed by the bottom 60 percent of the
distribution were lower than the national average, and the poorest percentiles saw the smallest increases in their
consumption, while the 92nd percentile of the income distribution saw the largest.21
There are also large economic disparities between the regions. Poverty declined in all regions between
1996 and 2009, but some regions enjoyed a sharper decline than others. For example, Kalimantan saw its poverty
headcount fall from around 15 percent to around 8 percent in the same period. Areas such as Maluku, Nusa
Tenggara, and Papua suff er from rates of poverty that are approximately three times greater than in Kalimantan,
even though these areas are also home to only around 11 percent of the population.22
However, there are a few risks that need to be managed for sustained economic growth and social
development. First is the threats generated by large capital fl ows into the country. Changes in the external
economic environment are communicated to Indonesia through changes in demand for its goods and services,
the terms of trade and capital fl ows.23 With its recent strong economic growth, reasonably sound macroeconomic
environment, and prospects for more growth in the future, Indonesia, like other emerging countries, is attracting
capital from low-yielding advanced countries to its own, higher-yielding, assets. While this has benefi ts in that
it can reduce the cost of borrowing and sometimes bring with it expertise and job creation, if the infl ows are in
the form of portfolio investments rather than foreign direct investment, quick withdrawals of capital can cause
problems through, for example, quickly changing the exchange rate and aff ecting domestic industries. In the
second quarter of 2011, capital and fi nancial account infl ows reached USD 12.5 billion, a record high.24
17 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p34
18 World Economic Forum, The Indonesia Competitiveness Report 2011: Sustaining the Growth Momentum, World Economic Forum, 2011, p1
19 World Bank, Indonesia Economic Quarterly: Turbulent Times, World Bank, October 2011, p11
20 World Economic Forum, The Indonesia Competitiveness Report 2011: Sustaining the Growth Momentum, World Economic Forum, 2011, p1; Asian
Development Bank, Indonesia: Critical Development Constraints, Asian Development Bank, p55
21 World Bank, Indonesia Economic Quarterly: 2008 Again?, World Bank, March 2011, p32
22 Asian Development Bank, Indonesia: Critical Development Constraints, Asian Development Bank, 2010, p14
23 World Bank, Indonesia Economic Quarterly: Current Challenges, Future Potential, World Bank, June 2011, p1
24 World Bank, Indonesia Economic Quarterly: Turbulent Times, World Bank, October 2011, p5
Indonesia: Research & Development Financing6
One of the most signifi cant opportunities that Indonesia has is the growth and prospects of its region,
which give Indonesia substantial scope to profi t from greater trade to accelerate economic growth
and poverty reduction. Indonesia represents 40 percent of ASEAN’s GDP and population, and is its biggest
market.25 In January 2010 the ASEAN-China Free Trade Agreement came into eff ect. It eliminates tariff barriers
on approximately 6,600 products in a variety of industries.26 According to analysis of the likely eff ects of the
trade agreement on Indonesia, the country might enjoy benefi ts of 1.2 percent of GDP over the long term as
it reallocates resources towards industries where it has a comparative advantage. In particular, labor-intensive
industries would likely benefi t, as would the rice-producing sector, while the mineral-extraction, capital-intensive
and service industries would shrink.27
This PER concentrates on one of these key areas for future growth: R&D. R&D can lead to greater innovation,
which a country needs in order to be fl exible in response to market changes and to capture larger amounts
of value-added throughout the value chain in the production of goods or services. In addition, the challenge
of continuing the momentum of poverty reduction also requires strengthening R&D in social science fi elds,
to support eff ective and evidence-based public policy making. This PER looks at what Indonesia’s R&D sector
produces relative to how much money is spent on it, and how. It will not only focus on the levels of spending on
the sector, but also on the policy, institutional, and managerial frameworks.
Within the R&D fi eld this PER pays particular attention to state policy and its eff ects. As the purpose of a
PER is to consider the effi ciency of public spending, this is a natural consequence of the type of analysis. How-
ever, this should not be taken to mean that only state action matters. The report considers the R&D output of the
private sector and how the government might stimulate more of it, but there are also wider benefi ts of greater
R&D activity that need to be kept in mind. For example, a well-educated workforce that can use research fi ndings
from a variety of fi elds may be likely to drive economic development in ways that are unpredictable and beyond
the scope of government planning. How this happens is beyond the scope of this report, but is a key constituent
of the dynamic, high value-added economic growth that Indonesia aspires to.
R&D is not solely about science and technology (S&T). Much of this report discusses the role of discoveries in
scientifi c research and how discoveries made by scientists can stimulate economic growth. However, R&D in the
social sciences can often be just as important, albeit in ways that are more diffi cult to measure. For example, the
study of management is a social science and has helped many fi rms around the world make signifi cant effi ciency
gains in their operations – the “just in time” approach in manufacturing and logistics being a good example.
Policy-making can also benefi t from “innovations” (more knowledge) in fi elds such as economics and political
science, as through a richer understanding of the world around them politicians and bureaucrats can make
choices that are better informed.
25 World Economic Forum, The Indonesia Competitiveness Report 2011: Sustaining the Growth Momentum, World Economic Forum, 2011, p1; Asian
Development Bank, Indonesia: Critical Development Constraints, Asian Development Bank, p55
26 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p31
27 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p31
Indonesia’s R&D Performance
III.
Photo by: Athit Perawongmetha
Indonesia: Research & Development Financing8
Indonesia’s R&D performance
The R&D sector in Indonesia does not appear to be burgeoning. On measures of pure research output,
innovation, or contributions to economic development, it would appear that Indonesia’s R&D sector has some
way to go. On the World Bank’s Knowledge Economy Index, Indonesia ranks poorly compared to both its richer
and poorer neighbors (see Table 1). The index combines factors that concern the economic incentives available
for researchers, the level of innovation and adoption of technology, the quality of education, and the information
technology infrastructure in place. In 2012 Indonesia ranked 108th in the world. Among other things, this
assessment would appear to support the claim of the World Economic Forum that Indonesia currently possesses
only a limited capacity for innovation.28
Table 1 Knowledge Economy Index Rankings, Select Countries, 2012
Country Global
rankKEI KI
Economic
incentive regime
Innova-
tion
Educa-
tionICT
Australia 9 8.88 8.98 8.56 8.92 9.71 8.32
Cambodia 132 1.71 1.52 2.28 2.13 1.70 0.74
China 84 4.37 4.57 3.79 5.99 3.93 3.79
Indonesia 108 3.11 2.99 3.47 3.24 3.20 2.52
Japan 22 8.28 8.53 7.55 9.08 8.43 8.07
Korea, Republic of 29 7.97 8.65 5.93 8.80 9.09 8.05
Lao PDR 131 1.75 1.84 1.45 1.69 2.01 1.84
Malaysia 48 6.1 6.25 5.67 6.91 5.22 6.61
Mongolia 83 4.42 4.45 4.30 2.91 5.83 4.63
Myanmar 145 0.96 1.22 0.17 1.30 1.88 0.48
New Zealand 6 8.97 8.93 9.09 8.66 9.81 8.30
Philippines 92 3.94 3.81 4.32 3.77 4.64 3.03
Singapore 23 8.26 7.79 9.66 9.49 5.09 8.78
Thailand 66 5.21 5.25 5.12 5.95 4.23 5.55
Vietnam 104 3.4 3.60 2.80 2.75 2.99 5.05
Source: World Bank (http://info.worldbank.org/etools/kam2/KAM_page5.asp#c10)
A lack of dynamism in R&D is a problem because it means that Indonesia is missing out on the public and
private benefi ts that come with greater investigation and discovery in the natural and social sciences.
These benefi ts can be both public and private. The results from research into a fundamental question can, upon
being made publicly available, stimulate businesses to seek commercial applications. In turn, a fi nding that was
motivated by a desire for private gain can increase competition in a market, thus forcing other fi rms to invent
new things and increasing overall welfare. There is a broad debate on the eff ects of R&D on economic growth
and, in particular, whether research can be divided into diff erent types (basic, applied or experimental, see Box
1 for details) but it is clear that more R&D can help a country to achieve higher quality goods and services from
which it might be able to capture a large share of the sale value.
28 World Economic Forum, The Indonesia Competitiveness Report 2011: Sustaining the Growth Momentum, World Economic Forum, 2011, p24
Public Expenditure Review 9
Indonesia’s output of articles in scientifi c or technical journals is low. In 2009, Indonesian scientists published
only 262 articles in these fi elds (see Table 2). This speaks to some of the research capacity and funding issues
mentioned above. This may be a result of having comparatively few researchers with PhDs at the LPNK and public
universities. However, comparing the number of broad scientifi c papers published by Indonesia and a group of
select countries, and the frequency with which they were cited, research from Indonesia appears to be attracting
slightly more interest than that of its regional, developing peers.
Table 2 Scientifi c and Technical Journal Articles, Indonesia and Select Countries, 1999–2009
Country Name 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Australia 14,341 14,589 14,484 14,255 14,934 15,588 15,972 17,217 17,834 18,776 18,923
Cambodia 7 6 7 11 13 19 21 26 26 23 27
China 15,715 18,479 21,134 23,269 28,768 34,846 41,604 49,575 56,811 65,301 74,019
Indonesia 163 182 189 178 157 182 205 215 198 219 262
Japan 55,274 57,101 56,082 56,347 57,228 56,535 55,527 54,467 52,909 51,842 49,627
Korea, Rep. 8,478 9,572 11,007 11,735 13,401 15,255 16,396 17,910 18,469 21,091 22,271
Lao PDR 4 4 5 5 9 12 9 18 12 12 12
Malaysia 471 460 472 495 479 586 615 724 808 951 1351
Mongolia 12 12 19 16 18 20 22 21 22 27 42
Myanmar 10 7 6 7 6 9 11 16 13 10 10
New Zealand 2,915 2,851 2,851 2,740 2,800 2,825 2,987 3,082 3,176 3,323 3,188
Philippines 176 185 141 182 184 163 178 181 195 224 223
Singapore 1,897 2,361 2,434 2,632 2,939 3,384 3,611 3,838 3,793 4,069 4,187
Thailand 550 663 727 834 1,019 1,131 1,249 1,568 1,728 1,960 2,033
Vietnam 111 147 155 144 205 167 221 225 283 363 326
Source: World Bank
Table 3 Scientifi c Papers and Citations of Authors from Select Countries, 1999–2009
Country Name Paper Citations Citations per Paper
Australia 284,272 3,304,072 11.62
Cambodia 566 4,197 7.42
Fiji 633 2,955 4.67
French Polynesia 456 3,805 8.34
Indonesia 5,885 45,156 7.67
Malaysia 17,980 79,098 4.4
New Caledonia 950 7,780 8.19
New Zealand 55,253 575,803 10.42
Papua New Guinea 741 7,318 9.88
Philippines 5,370 44,295 8.25
Singapore 58,731 498,782 8.49
Thailand 26,896 188,759 7.02
Viet Nam 5,878 41,043 6.98
Thailand 550 663 7.27
Vietnam 111 147 1.55
Source: UNESCO, UNESCO Science Report 2010, p443
Indonesia’s R&DPerformance
Indonesia: Research & Development Financing10
Table 3 shows that between 1999 and 2009, Indonesian scientifi c papers attracted 7.67 citations per paper,
ahead of papers from countries such as Cambodia and Thailand. This supports the argument that despite there
being a low level of overall capacity there are some areas of strength in Indonesian scientifi c research. Finally,
what is being produced has tended to be concentrated in the fi elds of biology, biomedical research, and clinical
medicine, as shown in Table 4. Problems such as a low level of capacity have inevitable eff ects on the output of
the social sciences sector. Regarding social science fi elds, a recent report found that only 12 percent of peer-
reviewed social science research publications on Indonesia are undertaken by authors based in the country,
where the average among a group of developing countries including the Philippines, China, India, Thailand,
Malaysia and Brazil is approximately 28 percent.29
The picture of international collaboration over science research is mixed. UNESCO has argued that, despite
only modest increases in the output of academic papers, the growth that has occurred has been spurred by
international partnerships. According to UNESCO, Indonesian scientists collaborate mostly with their Japanese
peers, followed by those from the USA and Australia.30 This would again suggest that, despite low levels of overall
capacity, there is suffi cient quality to attract greater levels of international partnership.
Figure 2, showing the high level of growth in the number of Indonesian scholars in the United States, also
suggests that there is much greater potential to be exploited in the R&D system. Also see Table 5 for the number
of English-language scientifi c articles published by Indonesian scientists and their local peers.
Table 4 Publications by Major Scientifi c Field (percent), 2008
Country
Scientifi c Field
BiologyBiomedical
researchChemistry
Clinical
medicine
Earth and
space
Engineering and
technologyMathematics Physics
Indonesia 23.7 12.8 7.1 22.8 13.8 12 2.1 5.7
Source: UNESCO, UNESCO Science Report 2010, p443
Source: OECD, ‘Science and Innovation: Country Notes: Indonesia,’ in OECD, Science, Technology and Industry Outlook, OECD, 2010, p189
Figure 2 Average Annual Growth Rate in the Number of Foreign Scholars in the United States,
1997–2007
29 Suryadarma D, Pomeroy J and Tanuwidjaja S, “Economic Factors Underpinning Constraints in Indonesia’s Knowledge Sector: Final Report,” AusAID, 7th June
2011, p3
30 UNESCO, UNESCO Science Report 2010, UNESCO, 2010, p451
0123456789
10
India China Indonesia(1997-2004)
Brazil Total OECD(1997-2004)
Country
Pe
rce
nt
CzechRepublic
(1997-2004)
Estonia(1997-2004)
Russia Slovenia(1997-2004)
Public Expenditure Review 11
Table 5 English-Language Scientifi c Articles by Authors from Select Countries, 1998–2008
CountryYear
TotalGrowth
1998-
2008 (%)1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Australia 16,432 16,766 18,945 19,155 19,645 20,920 22,456 23,376 25,449 26,619 28,313 238,076 72.3
Cambodia 8 12 14 14 20 23 41 50 64 80 75 401 837.5
Indonesia 305 354 429 449 421 428 471 526 597 582 650 5,212 113.1
Malaysia 658 830 805 906 961 1,123 1,308 1,520 1,757 2,151 2,712 14,731 312.2
New Zealand 3,519 3,597 3,762 3,772 3,819 3,935 4,260 4,590 4,739 4,974 5,236 46,203 48.8
Phillipines 263 292 353 317 398 418 427 467 464 535 624 4,558 137.3
Singapore 2,264 2,729 3,465 3,781 4,135 4,621 5,434 5,971 6,300 6,249 6,813 51,762 200.9
Thailand 855 965 1,182 1,344 1,636 1,940 2,116 2,409 3,000 3,582 4,134 23,163 383.5
Viet Nam 198 239 315 353 343 458 434 540 617 698 875 5,070 341.9
Annual total 24,502 25,784 29,270 30,091 31,378 33,866 36,947 39,449 42,987 45,470 49,432
Annual growth 5.2 13.5 2.8 4.3 7.9 9.1 6.8 9 5.8 8.7
Source: UNESCO Science Report 2010, p441
Table 6 Number of Resident Patent Filings per Million Population, Select Countries, 2000–2010
Country of Origin 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Australia 100.66 112.66 120.30 121.54 127.14 125.28 137.07 128.98 131.22 113.61 107.89
China 20.07 23.62 31.09 44.06 50.76 71.71 93.30 116.14 146.89 172.07 218.98
Indonesia 0.74 0.98 1.07 0.91 1.01 1.03 1.25
Japan 3,028.30 3,010.76 2,865.58 2,804.49 2,883.63 2,879.79 2,716.58 2,610.13 2,584.96 2,315.14 2,276.03
Malaysia 8.80 11.31 13.13 15.00 20.40 20.00 19.97 24.77 29.74 44.15 43.41
New Zealand 379.23 455.61 465.75 458.13 399.02 457.92 514.51 447.46 294.22 360.30 362.88
Republic of Korea 1,549.33 1,556.56 1,607.87 1,887.06 2,190.93 2,538.29 2,598.01 2,656.04 2,615.14 2,611.77 2,696.78
Singapore 128.11 126.39 149.43 152.13 153.84 133.39 142.23 151.68 163.86 150.37 176.30
Thailand 8.88 8.36 9.51 12.27 12.40 13.36 15.46 13.94 13.21 14.92 17.56
Philippines 1.99 1.71 1.85 1.71 1.88 2.45 2.56 2.54 2.40 1.88 1.78
Mongolia 43.54 49.21 67.20 56.87 39.26 39.86
Source: WIPO
Source: WIPO
Figure 3 Resident Patent Filings per USD GDP, Select Countries, 2000–2010
Year
Resi
dent
pat
ent fi
lings
per U
SD G
DP
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Australia
China
Indonesia
Japan
Malaysia
New Zealand
Republic of Korea
Singapore
Thailand0
20
40
60
80
100
120
Indonesia’s R&DPerformance
Indonesia: Research & Development Financing12
The lack of broad capacity in the R&D system is also revealed by Indonesia’s inability to innovate
signifi cantly, as shown by its low level of patenting activity. UNESCO has argued that the level of activity
since the turn of the century has shown very little growth.31 This is demonstrated by several diff erent international
comparisons. For example, between 2000 and 2006, the number of patents fi led by Indonesian residents grew
from only 0.74 per million population to 1.25 in 2006 (Table 6). This is a 59 percent increase, but from a very low
base. By comparison, in the same period, annual Malaysian patent fi lings rose from 8.8 to 43.41. Countries such
as China and Thailand have showed signifi cant progress in the same period. Figure 3 refl ects this somewhat, as in
comparisons of the number of fi lings against GDP, Indonesia’s performance has been stagnant while that of, say,
China, has been improving signifi cantly.
Indonesian fi lings at specifi c patent offi ces also do not show any sign of signifi cant recent improvement.
Patents applied for and granted at patent offi ces abroad, particularly in the United States, are a good barometer
of science and innovation activity as they refl ect the degree to which a country is producing goods and services
that are unusual enough to require protection, and potentially valuable enough for the holder of the intellectual
property to bear the costs of applying for protection. Table 7 shows that Indonesian inventors and fi rms have
increased their patent applications in the United States since the early 2000s, but that the level of applications
remains low. This low level is also refl ected in the applications to the European Patent Offi ce. As for granted
applications.
Table 8 reveals that the success rate of Indonesian applications to the USPTO has fallen, and that between 2007
and 2010 only around fi ve patents were granted each year. Unfortunately, this refl ects poorly on the Indonesian
R&D system and suggests only a small ability to produce commercially viable inventions.
A lack of innovation is also revealed by the level of technology in Indonesia’s exports. By looking at the
output of academic papers, and at innovation as demonstrated through patent applications, it has been possible
to assess the productivity of Indonesia’s R&D system from several diff erent angles. By looking at it from another
position - the degree to which the country’s exports refl ect technical advancement - it is possible to judge some
of the direct economic eff ects of Indonesia’s R&D activity. Unfortunately, Table 9 shows that these eff ects are small
and possibly shrinking. In 2000, 16.4 percent of Indonesia’s exports were considered to be “high technology”.
Since then, the proportion has declined until, in 2010, the level reached 11.4 percent. This is not directly counter
to the experience of its region as a whole, but shows a much more precipitous decline. Table 9 reveals that in
the same period the same percentage in the East Asia and Pacifi c region fell from 33.1 percent to 26.4 percent.
Table 7 Indonesian Patent Applications at the European Patent Offi ce and in the United States,
2002–2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
European Patent Offi ce 3 3 3 2 1 6
United States 9 8 16 11 16 19 13 18 23
Source: WIPO
Table 8 Indonesian Patent Applications Granted at the European Patent Offi ce and in the United
States, 2003–2010
2003 2004 2005 2006 2007 2008 2009 2010
European Patent Offi ce 4 3 1 4 1 1
United States 9 4 10 3 5 5 3 6
Source: WIPO
31 UNESCO, UNESCO Science Report 2010, UNESCO, 2010, p451
Public Expenditure Review 13
Table 9 High-Technology Exports as a Percentage of Total Exports, Indonesia and Select Country
Groups, 1988–2010
Country/group 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
East Asia &
Pacifi c (all
income levels)
21.5 22.1 22.7 21.2 22.5 24.2 26.5 27.2 28.4 29.3 31.0 33.1 30.9 30.6 30.0 30.7 30.7 30.3 27.0 25.6 27.4 26.4
East Asia
& Pacifi c
(developing
only)
16.9 18.1 20.1 22.2 25.2 26.6 28.6 30.9 31.5 30.5 31.5 32.5 33.2 32.9 32.1 29.0 26.3 28.4 28.7
High income 15.1 19.0 18.9 19.4 19.2 20.2 20.5 21.1 21.4 22.8 23.3 23.9 25.7 24.2 23.1 21.6 21.4 21.3 21.5 17.6 17.1 18.4 17.4
Indonesia 1.5 1.6 1.9 3.1 4.5 6.7 7.3 9.0 11.6 10.4 10.4 16.4 14.2 16.7 14.8 16.4 16.5 13.5 11.0 10.9 12.9 11.4
Source: World Bank (http://data.worldbank.org/indicator/TX.VAL.TECH.MF.ZS)
Table 10 Manufacturing Value-Added (MVA), Indonesia and Select Country Groups, Assorted Years
(percent)
Indicator Year/Period Indonesia ASEAN Developing countries
MVA, average annual real growth rate (%)2000-2005 5.16 5.85 6.74
2005-2010 4.15 3.36 7.06
Non-manufacturing GDP, average annual
real growth rate (%)
2000-2005 4.58 4.72
2005-2010 6.28 5.3 5.88
MVA per capita, at constant (2000) US$
prices
2000 216.28 353.35 254.2
2005 258.19 426.44 322
2010 302.26 488.04 430.09
MVA as percentage of GDP, at constant
(2000) US$ prices
2000 27.75 27.97 19.47
2005 28.08 28.65 20.57
2010 26.4 27.24 21.66
Source: UNIDO (http://www.unido.org/index.php?ucg_EXT=1&id=4771&cc=INS&ucg_PATH=aHR0cDovLzE5My4xMzguMTA1LjU5L2RhdGEv
Z2VvZG9jLmNmbT9jYz1JTlMmbW9kZT1zdGF0cw==)
Note: Some years are UNIDO estimates.
Indonesia’s R&DPerformance
On the key issue of value-added in manufacturing, Indonesia’s performance is either weakening or
stagnating. One of the primary reasons for a government to encourage greater R&D is for it to try and make sure
that domestic fi rms capture more of the value in the production of a good or service. The World Economic Forum
divides countries into groups primarily according to whether they are capable of simply producing commodities
or if they can also produce high–quality products that depend on technical, intellectual inputs. At present
Indonesia is only showing small movements towards the latter group.
Table 10 shows that it enjoyed an annual average real growth rate in manufacturing value-added (MVA) of 4.15
percent between 2005 and 2010. However, this was down from the 5.16 percent between 2000 and 2005 and
way down on the developing country rate of 7.06 percent. This led to the shrinkage in Indonesia’s portion of
regional MVA between 2000 and 2010 (Table 11), from 27.38 percent in 2000 to 27.33 percent in 2010 among
ASEAN countries, and from 3.8 percent to 3.08 percent among developing countries.
Overall, Indonesia’s R&D performance is mixed. Judging by some of the diff erent ways of looking at the
output of its R&D sector, overall capacity is low but there are some strengths to draw on. For example, it would
appear that Indonesian scientists are not publishing a great many papers but, when they do, their work attracts
attention from their foreign peers. However, whether because of a lack of fi nance or capacity, R&D eff orts in the
country are struggling to produce many commercially viable goods or services.
Indonesia: Research & Development Financing14
While R&D in the social sciences is an integral part of a country’s overall R&D system, internationally
comparable data on performance is not well established beyond direct output measures such as
journal publications. R&D in the social sciences can greatly embellish the knowledge that a country has of
itself, and improve the quality of public policy. For example, sociology can help public policies to be customized
to the reactions of diff erent groups of people in Indonesia; economics can help with the development of an
understanding of Indonesia’s competitive advantages in some areas but not in others; and political science can
help strengthen the democratic system for reforms. Other areas, such as education and health policy research,
can directly contribute to building Indonesia’s human capital, which is critical for sustained growth and shared
prosperity.
Table 11 Indonesia’s Share of MVA and Manufacturing in World Output, Assorted Years
Indicator Year/PeriodIn total of
Indonesia ASEAN Developing countries
MVA (share in %) in constant 2000 US$
2000 27.38 3.80 0.79
2005 26.91 3.55 0.87
2010 27.33 3.08 1.00
Manufactured exports (share in %)
2000 11.72 3.55 0.83
2005 9.96 2.42 0.66
2010 11.78 2.50 0.82
Source: UNIDO (http://www.unido.org/index.php?ucg_EXT=1&id=4771&cc=INS&ucg_PATH=aHR0cDovLzE5My4xMzguMTA1LjU5L2RhdGEv
Z2VvZG9jLmNmbT9jYz1JTlMmbW9kZT1zdGF0cw==)
Government R&D Policyand R&D Financing
IV.
Photo by: Nugroho Nurdikiawan Sunjoyo
Indonesia: Research & Development Financing16
Government R&D policy and R&D financing
R&D Policy
Research, science, and technology have long been part of the development agenda set by the Indonesian
Government. Since the early 1990s there have been a variety of government programs that aim at
stimulating R&D, particularly S&T. A majority of these eff orts have concentrated on putting in place a variety
of incentive schemes. According to LIPI, between the early 1990s and 2005 there were 22 incentive programs
operated by the government. Since 2005, state incentive programs have been grouped into fi ve categories:
incentives for basic research; incentives for applied research; the use of S&T in industry; the diff usion of S&T; and
the S&T development of certain economic sectors as part of the government’s industrial strategy. In addition,
there have also been a variety of community-based and technology-specifi c development programs.32
Today, the Indonesian government has extensive plans for the advancement of R&D in the country. Since
the Asian fi nancial crisis and the transition to democracy, there have been several comprehensive economic
plans and pieces of legislation that have placed R&D at the center of Indonesia’s economic development. These
foundation policies on the pursuit of higher economic growth, greater innovation, and scientifi c output are
supported by short and medium-term plans that focus on strategic areas of R&D development. The most recent
guiding documents include the “Masterplan: Acceleration and Expansion of Indonesia: Economic Development
2011–2025”, which emphasizes seven steps towards the improvement of the innovation system; and the 2010–
2014 KEMENRISTEK Strategic Plan, which lays out medium-term results to be expected and actions to be taken.33
Table 12 lists a range of key relevant policy and strategy documents on R&D.
The National Long-Term Development Plan (2005–2025) focuses on seven areas of R&D. The seven areas
are: food security; energy; transportation technology and management; information and communication
technology; defense and security technology; health and medicine; and advanced materials. Each area has a set
of specifi c sub-objectives with activities and outputs defi ned. For example, in the energy sector, R&D is intended
for the development of ways of extracting energy from renewable sources such as wind and ocean currents.
There are also objectives to map new energy sources, to develop new technology to meet the demand, to
disseminate information on the industry to relevant parties, and to improve the effi ciency of energy use. Overall,
the National Long-Term Development Plan is meant to form one of the key foundations for other, more detailed,
policies on economic development and R&D.
The Medium-Term Development plan sets out explicit steps to implement the National Long-Term
Development Plan. It is meant to form the basis for strategies developed by agencies and government
departments, and regional governments when formulating their own development priorities. It also directly
references the constitution and National Long-Term Development Plan, and is intended to feed into the annual
government work plans and annual budgets. It is thus a key document for showing the government’s priorities.
Both the Medium-Term Development Plan (2010–2014) and the National Research Agenda are targeted at
the two goals of making the innovation system more vibrant, and improving the quality and application
of R&D.34 These targets are meant to be achieved through R&D institutions’ improvements, to the extent that
they can supply industry with required technology improvements. Specifi c policies for achieving this change
include enhancements in the capacity of public R&D institutes and similar bodies in order to increase the fl ow
32 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p58
33 Republic of Indonesia, Masterplan: Acceleration and Expansion of Indonesia: Economic Development 2011-2025, Republic of Indonesia, 2011, p 41; State Ministry
of Research and Technology [RISTEK], Strategic Plan 2010-2014, State Ministry of Research and Technology, p35 [English translation]
34 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011
Public Expenditure Review 17
of technology transfer to industries that need it; increases in R&D capacity within industry, as well as a greater
appreciation of innovation and creativity in society; a strengthening of national and international networks of
R&D personnel in order to increase the production and utilization of R&D outcomes; increases in the output of
applicable technology from R&D institutes; and growth in the use of technology within industry.35
Table 12 Structure of Policies on Science, Technology and Research
Policy type Key element/examples Approach
Structural policies The constitution
Long-term
policies
Masterplan: Acceleration and Expansion of
Indonesia: Economic Development 2011–2025
Functions as a legal framework following the enactment of
Presidential Decree No. 32/2011
National Long-Term Development Plan (2005–2025) Specifi es seven priority areas for the development of R&Da
Law No.18 (2002) on the National System of
Research, Development and Application of Scienceb
Seeks to increase S&T capacity in order to improve national
competitiveness
Medium-term
policies
Medium-Term Development Plan (2010–2014) Seeks to improve the national innovation system through
improving the quality of R&D and S&Tc
National Research Agenda Seeks to improve the national innovation system through
improving the quality of R&D and S&Td
Masterplan for Acceleration and Expansion of
Indonesian Economic Development (2011-2014)
Acceleration of improvements in R&D and technology
capacitye
Annual and other
policies
Presidential instructions and government
instructionsf
Writing of, and changes to, relevant legislation and guidelines
Departmental plans, annual work plans, and
thematic plans
Short-term plans for the application of longer-term policies
Sources:
a. Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p11
b. Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p1
c. Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p3
d. Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p3
e. World Bank, Indonesia Economic Quarterly: Current Challenges, Future Potential, World Bank, June 2011, p32
Notes:
f. Examples include Presidential Instruction No.4 of 2003 on the Strategic Policy Formulation and Implementation of National Science and
Technology Development; Government Regulation No. 20 of 2005 on Intellectual Property and Technology Transfer by Universities and
Research and Development Institutes; Government Regulation No.41 of 2006 Concerning Research and Development Permits for Foreign
Institutions; Government Regulation No.35 of 2007 on the Allocation of a Portion of Business Revenues for Engineering Capability Improve-
ment, Innovation and Diff usion of Technology; and Government Regulation No. 48 of 2009 on the Implementation of High Risk and
Dangerous Research and Development and Application of Science and Technology Activities. As quoted by Akil HA et al., Study on the
Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p9
The Masterplan for Acceleration and Expansion of Indonesian Economic Development (2011–2014) is a
new initiative and specifi es steps for improvements in the S&T and innovation systems, as well as levels
of spending. As a whole, the Masterplan is meant to increase the growth rate of the Indonesian economy to
between 7 percent and 9 percent and, in so doing, make sure that Indonesia becomes one of the world’s top ten
economies by 2025. The plan has three strategies: 1) the development of six economic zones, or “corridors”; 2)
establishment of stronger connections between all of the disparate parts of the country; and 3) eff orts to increase
outputs from R&D and technology.36 With regard to the third R&D strategy, Table 13 shows its constituent policies,
plus the planned increase in spending and what the 2025 policy objectives in the fi eld are.
35 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011
36 World Bank, Indonesia Economic Quarterly: Current Challenges, Future Potential, World Bank, June 2011, p32
Government R&D Policyand R&D Financing
Indonesia: Research & Development Financing18
Table 13 Breakdown of the S&T Policy Approach in the Masterplan for the Acceleration of
Indonesian Economic Development (2011–2014)
Funding Policies Industries subject to policy
attentionObjectives to 2025
Establishment of an R&D fund
equal to around 1% of GDP until
2014, with a gradual increase in
funds to 3% of GDP by 2025
Increase in funds to come from
the government, state-owned
enterprises and the private
sector
Introduction of an incentive
and regulation system that
emphasizes innovation and
the use of products made in
Indonesia
Improvement in the quality of
human resources as well as their
fl exibility
Development of innovation
centers to support small- and
medium-sized industries
Development of regional
innovation clusters
Improvement in the
remuneration system for
researchers
Improvement in the
infrastructure of the R&D system
Development of a funding and
funding management system
that furthers innovation
Basic industries such as food,
energy, and water
Creative industries such as
those concerned with culture
and ICT
Local industries, especially S&T
and industrial parks
Strategic industries such as
defense and transportation
Strengthening of intellectual
property rights in fi elds that
directly aff ect economic growth
Improvement in the
infrastructure of S&T parks to
international standards
Achievement of self-suffi ciency
in food, medicine, energy, and
clean water
Double exports from the
creative industries
Increase in the proportion of
advanced goods in production
and improve the value added
produced by the economies of
all regions
Achievement of self-suffi ciency
in the defense, transportation,
and ICT industries
Achievement of sustainable
growth and equitable
prosperity.
Sources: Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p6
There are several policies in the Masterplan that are particularly relevant to the funding, management,
and outputs from the public R&D system in the country. The fi rst of these is the drive to revitalize PUSPIPTEK
(Science and Technology Research Center) as an S&T park in order to try and foster a creative and connected
environment for small and medium enterprises (SMEs) involved with innovation. Fostering connections with
universities, researchers, and fi rms is a part of this vision. One of the main ways that the government hopes to
foster the development of the park is by making it a public agency. Here it should be noted that “science parks”
in Indonesia have long been used to agglomerate state-owned research labs rather than as a means to attract
private investment. The government’s plans for PUSPIPTEK and other parks would appear to be an attempt
to move away from the traditional approach. As for the economic clusters mentioned in the Masterplan, the
government wants to encourage regional governments to try and develop the innovation potential of particular
industries.37 Finally, among several other targets, the Masterplan also aims to increase the fl ow of people of
obtaining PhDs every year from 7,000 and 10,000 by 2014.38
The Science and Technology National Development Strategy, promulgated by the Ministry of Research
and Technology (KEMENRISTEK), is targeted at the development of science “for the welfare and progress
of civilization.”39 The strategy has two goals: 1) improvement of S&T both through research and utilization; 2)
increases in the capacity and eff ectiveness of S&T so that it can further the national aims of protecting Indonesia,
increasing welfare, and furthering the intellectual life of the country. The strategy states that these goals must
37 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p7 gives the examples of the agro-industry in East Java
Province; innovation programs to develop the palm oil, cocoa and fi sheries industries; and the energy innovation zone in East Kalimantan Province
38 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p7
39 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p1
Public Expenditure Review 19
Government R&D Policyand R&D Financing
be pursued on the principles of accountability, visionary strategic planning, innovation, and excellence through
all stages of policy development and implementation. The strategy has four main policies, which it is hoped will
achieve its aims:
1) to increase the capacity of the R&D system as a whole so that it becomes more productive;
2) to increase the capacity of public R&D institutes so that, in particular, more technology transfer can take
place;
3) to deepen networks of researchers both within the country and between national and international
researchers; and
4) to increase creativity and productivity, not least to supply more eff ective technologies to industry.40
Even though social science research has been an important dimension of R&D, in terms of setting
foundations for the social development agenda, and supporting public policy, there is no centralized
research agenda. R&D priorities in social fi elds have largely been set by the relevant sector Ministries, in pursuing
each sector’s own development agenda, which is usually set in each Ministry’s Medium-Term Development Plan.
The level of the government’s fi nancing of the R&D sector, as well as the way that the fi nancing is
administered, will play a signifi cant role in the achievement of these plans. The stipulation in the
Masterplan that funding will increase to 3 percent of GDP by 2025 signals the level of the government’s fi nancial
commitment in this area. However, the current levels of investments in the sector made by both the state and
private enterprise are low. The next section considers the recent levels of spending and what the eff ects of these
might be for the future development of the public R&D sector.
Resource mobilization
The amount of money that a country dedicates to its R&D is a reasonably good measure of its commitment
to creating and developing applications of new knowledge. Institutions and other factors also matter, but the
level of spending is likely to be a good barometer of the extent to which R&D is prioritized over other government
and private sector priorities. The main indicator for this is gross domestic expenditure on R&D (GERD). As the
Indonesian government has stipulated in its Masterplan, setting a target for the level of GERD is one tool that
policy makers can use to benchmark the amount of R&D and subsequent innovation in a given economy.41 For
example, in 2002 the European Union (EU) declared that it wanted GERD across the EU to be increased to 3
percent by 2010. The target was missed. Even with signifi cant increases, the EU’s share of world spending on R&D
shrunk. Between 1995 and 2008, total R&D investment rose by 50 percent, but over the same period the EU fell
from accounting for 29 percent to 24 percent of global R&D investment.42 This is actually unsurprising, given that
so many countries have increased their spending on R&D in the recent past. 19 of the 20 OECD countries with
the highest GERD in 1999 had increased their level by 2009.43 Between 1995 and 2008 the global increase was
around 100 percent, with Japan, South Korea, Singapore, and Taiwan combined registering a 75 percent increase
and China a level 855 percent higher.44 Figure 4 shows some of this growth.
40 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011
41 OECD, Science, Technology and Industry Scoreboard 2011, OECD, 2011, p76
42 European Commission, Innovation Union Competitiveness Report 2011: Analysis: Part 1: Investment and Performance in R&D – Investing in the Future, European
Commission, 2011, p46
43 OECD, Science, Technology and Industry Scoreboard 2011, OECD, 2011, p76
44 European Commission, Innovation Union Competitiveness Report 2011: Analysis: Part 1: Investment and Performance in R&D – Investing in the Future, European
Commission, 2011, p46
Indonesia: Research & Development Financing20
Indonesia’s GERD has only been growing insignifi cantly. From the available, comparative data, Indonesia now
spends more on R&D than it did at the turn of the century, but only marginally so. As shown by Figure 5 in 2009 (the
latest available data year), it spent just over 0.08 percent of its GDP on R&D, very little increase from 0.07 percent in
2000. The data from 2001, where the level slipped to below 0.05 percent, would suggest that the level has fl uctuated
over the recent past. However, it would seem unlikely that it has been much higher than the highest recorded levels
of 0.08 percent of GDP, despite the fact that some state bodies involvedin R&D fi nancing, such as the Directorate
for Higher Education, have increased their spending by large amounts in recent years (see Table 19). GERD is a
useful indicator in two ways: one, for comparing with how much other countries spend in a given year (the fl ow
of spending) and thus the level that Indonesia might target; two, for examining how much science, technology,
and other types of research might have benefi ted from the long-run accumulation of spending over time. This
diff erence is important to keep in mind as increases in the fl ow might, at least in the short-run, only compensate for
the lack of spending in the past, and R&D in general requires long-term investment.
Indonesia’s GERD level is low, compared even to its regional peers of several developing nations. Figure
6 shows a comparison between the known GERD levels of countries in the East Asia and Pacifi c Region that are
considered to be developing. The data are drawn from diff erent (but the most recent) years for each country.
Even compared to its peers, who have varying levels of human development and economic competitiveness,
Indonesia spends an extraordinarily low percentage of its GDP on R&D. For example, in 2010, Mongolia had a
gross national income (GNI) per capita of USD 1,870 but spent 0.24 percent of its GDP on R&D. In comparison,
Indonesia had a GNI per capita of USD 2,500 but, at 0.08 percent of GERD, dedicated fewer resources as a portion
of GDP to R&D.45 In the wider region, Indonesia is thus spending relatively less than even its poorer peers. It is
also, of course, spending much less than its burgeoning neighbor, China, which in 2008 spent 1.46 percent of
GDP on R&D activities.
Compared to its developed neighbors Indonesia’s GERD is tiny. It is important to keep in mind that diff erent
levels of development require diff erent spending priorities, but with such a big gap in spending between
Indonesia and nearly all of its neighbors – regardless of their level of development – it is reasonable to question
whether the country’s R&D sector will suff er in future years because of the lack of investment over the years.
In other words, current GERD levels in, say, the Region’s advanced economies (shown in Figure 7) may show
accumulated benefi ts over time. In several reasonable comparisons, Indonesia’s level of GERD is signifi cantly
lower than that of its neighbors and economic competitors.
Source: World Bank (see http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS/countries/1W?display=default)
Figure 4 GERD, Selected Regions, 1996–2009
R&D
Spe
ndin
g as
a P
erce
ntag
e of
GD
P(G
ERD
)
Year
1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 20092000
0,5
0,0
1,0
1,5
2,0
2,5
3,0
East Asia & Pacific
Europe & Central Asia
European Union
Latin America &
Carribean
High Income OECD
45 Source: World Bank (see http://data.worldbank.org/indicator/NY.GNP.PCAP.CD)
Public Expenditure Review 21
Government R&D Policyand R&D Financing
Source: World Bank (see http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS/countries/1W?display=default)
Figure 5 GERD, Indonesia, Three Years of Comparable Data
Source: World Bank (see http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS/countries/1W?display=default)
Figure 6 GERD, Developing Countries, East Asia and Pacifi c Region, Most Recent Years
Indonesia200920012000
GER
D
0.00
0.02
0.04
0.06
0.08
0.10
0.0
0.3
0.6
0.9
1.2
1.5
GER
D
Cambodia China Indonesia Lao PDR Malaysia Mongolia Myanmar Philippines VietnamThailand
Country
Source: World Bank (see http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS/countries/1W?display=default)
Figure 7 GERD, Selected Neighboring Countries, Most Recent Years
0.0
0.5
1.0
1.5
2.0
3.0
3.5
4.0
2.5
GER
D
Australia Indonesia Japan Korea, Rep New Zealand Singapore
Country
Indonesia: Research & Development Financing22
Table 14 Indonesia GERD by Known
Source of Financing (percentage),
Available Years
SourceYear
2000 2001
Government 72.7 84.5
Higher education 1.1 0.2
Business 25.7 14.7
Private non-profi t Unknown Unknown
Foreign Unknown Unknown
Other 0.5 0.7
Sources: UNESCO (http://stats.uis.unesco.org/unesco/TableViewer/
document.aspx?ReportId=136&IF_Language=eng&BR_Topic=0)
Table 15 Indonesian GERD by Known Locus
of Activity (percentage), Available
Years
SourceYear
2000 2001
Government 69.8 81.1
Higher education 3.9 4.6
Business 26.3 14.3
Private non-profi t Unknown Unknown
Foreign Unknown Unknown
Unknown Unknown Unknown
Sources: UNESCO (http://stats.uis.unesco.org/unesco/TableViewer/
document.aspx?ReportId=136&IF_Language=eng&BR_Topic=0)
In terms of the sources of its R&D fi nancing, Indonesia also diff ers substantially from many other
countries. Some of the latest data is unfortunately only from 2001, but it would appear that the Indonesian
government both funds and conducts the vast majority of R&D in the country. In 2001, 84.5 percent of all R&D
was conducted with government money and in the same year, government organizations were the loci for 81.1
percent of all GERD (see Table 14 and Table 15). This is unusual. Among OECD countries, the business sector is the
dominant player in R&D and accounts for around 70 percent of all R&D activities.46 Regarding fi nancing alone, the
proportion from government sources in Indonesia in 2009 was higher than any of the most recently recorded
levels found among the country’s neighboring developing peers, as listed in Table 16.47 For example, in China in
2009, the level of government fi nancing was 23.5 percent, the level of business fi nancing 71.7 percent, and the
levels of activities accounted for by both was 18.2 percent and 73.2 percent respectively.
46 OECD, Science, Technology and Industry Scoreboard 2011, OECD, 2011, p76
47 See Akil HA et al, Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011
Indonesia also has a skewed balance of R&D funding compared to its advanced neighbors. Table 16 shows
the balance between R&D fi nancing by the government and the private sector in the most advanced countries in
the East Asia and Pacifi c Region. Between 1998 and 2008, New Zealand had the highest proportion of government
fi nancing, with 50.6 percent in 1999. In contrast, the highest proportion of private fi nancing was 78.1 percent in
Japan in 2008. Judging by the high levels of knowledge discovery and R&D output seen in these countries, it would
seem that a high degree of private funding is necessary for greater R&D productivity in a given country.
Given the current low levels of spending on R&D and the plans to increase it substantially, the manner
in which the spending is administered needs to be carefully considered by the Indonesian government.
Judging by the data discussed so far, the Indonesian government spends very little on R&D, what is spent is
directed towards state agencies, and the private sector has historically shown a low level of interest in pursuing
the mooted benefi ts of R&D in the development of goods and services. Because this approach is signifi cantly
removed from the more common, and often successful, practice of the private sector pursuing a great deal of
R&D in a given economy, public spending mechanisms will likely determine the ability of the R&D system to
produce the benefi ts from higher spending that the government is now targeting.
Public Expenditure Review 23
Government R&D Policyand R&D Financing
Table 16 R&D by Source of Financing (percentage), Selected Neighboring Countries, 1998–2008
Source and
country
Year
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Government
Australia 46.8 45.5 41.1 40.2 37.5 34.9
Japan 19.3 19.6 19.5 19.0 18.3 18.0 18.0 16.7 16.1 15.6 15.6
New Zealand 50.6 47.0 43.7 43.2 42.6
Republic of Korea 25.9 24.9 23.9 24.9 25.3 23.8 23.1 23.0 23.0 24.7 25.4
Singapore 43 42.1 40.2 38.4 42.2 41.7 37.8 36.4 36.3 34.8 29.8
Business
Australia 45.8 46.2 50.6 54.6 58.0 61.4
Japan 72.5 72.1 72.4 73.0 74.0 74.6 74.8 76.1 77.0 77.7 78.1
New Zealand 34.1 37.8 38.2 41.0 40.1
Republic of Korea 69.1 69.9 72.3 72.4 72.2 74.0 74.9 74.9 75.4 73.6 72.8
Singapore 53.0 53.6 54.9 54.1 49.8 51.5 55.2 58.7 58.3 59.8 63.4
Sources: UNESCO (http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?ReportId=136&IF_Language=eng&BR_Topic=0)
Resource allocation and utilization
The multiplicity of government agencies and institutions involved in R&D is an important factor that
determines the patterns of resource allocation and utilization. The state bodies involved with public R&D
are arranged in a disparate manner. KEMENRISTEK coordinates the LPNK, discussed below, and sets a national
research agenda. The KEMENRISTEK minister receives advice from the National Research Council (DRN). The
sector Ministries then constitute a group by themselves. There are 22 of them and they follow a research agenda
for their sector. They also each have a research arm, some of which are quite small. There are also other important
advisory bodies, including the National Innovation Committee and the National Development Planning Agency
(BAPPENAS), which report directly to the presidential administration and do not have any other bodies under
their control. The Indonesian Academy of Sciences (AIPI), an autonomous body receiving state budget under the
Secretary of State Administration, is mandated to advise the nation on scientifi c matters.
For the seven independent research institutes (LPNK), each plays a specifi c role in the R&D system.
Several of the LPNK, such as the Indonesian Institute of Sciences (LIPI), have long-standing reputations. They
each concentrate on a research fi eld. The remaining six are the Agency for the Assessment and Application
of Technology (BPPT), the National Institute of Aeronautics and Space (LAPAN), the Geospatial Information
Agency (BIG), the National Nuclear Energy Agency of Indonesia (BATAN), the National Standardization Agency of
Indonesia (BSN), the Nuclear Energy Regulatory Agency of Indonesia (BAPETEN). Other institutes with a degree
of autonomy are the Eijkman Institute (for molecular biology), which is under KEMENRISTEK, and the Center of
Meteorology, Climatology and Geophysics (BMKG).
The universities account for a large amount of resources and activity in the sector. There have been some
signifi cant changes in government policy towards the higher education sector as a whole over the past decade,
particularly with regard to improving the quality and autonomy of leading institutions. Across the sector there
are 92 public universities with varying degrees of autonomy, and over 3,200 private institutions comprising
universities, academies, and religious higher learning institutes. With regard to R&D funding, each of the public
universities has a research function, but 50 of them have dedicated R&D institutes.48
48 Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p28
Indonesia: Research & Development Financing24
Some recent research has delineated the universities according to their status and quality of research.49
Only about fi ve universities (Universitas Indonesia, Institut Pertanian Bogor, Institut Teknologi Bandung, Universitas
Gajah Mada, Universitas Airlangga) are considered by the quality of their research to be “research-oriented”, or more
specifi cally to have the staff , range of subject expertise, and history of published work to suggest that they can
conduct research at a high level. There are then a small handful of polytechnic-type universities that concentrate
on teaching towards certain professions, providing experience for pupils in given fi elds or collaborating with
industry on projects. Several universities concentrate on the quality of their teaching rather than research, such
as the private Universitas Bina Nusantara and Universitas Surabaya. Finally, the vast majority of public universities
are categorized as being neither particularly strong in research nor outstanding in teaching, although many of
them aspire to excel in research.
The other arms of the state’s involvement in R&D consist of spending on science parks and state
corporations. Each of these has some involvement with S&T and the creation of new knowledge. There are
several science parks with the most prominent, PUSPIPTEK, having been discussed above.
There is also a range of private and not-for-profi t research centers. 65 fi rms are thought to have their own
research bodies across 15 sectors. These are in a range of sectors, with many involved with the manufacture of
wood, metal, and plastics products. The chemicals sector has by far the largest number with 21, although this still
only means that 9.5 percent of the companies in the sector have a specialized research unit. The quality of these
research centers is unclear, although it is likely that Indonesia will need many more such centers, achieving high
standards of research, as it grows. Table 17 shows the overall breakdown of research centers by sector.
The number of organizations in the public R&D sector suggests that it is organized in a disparate manner.
As suggested by Table 18, which lists all of the public organizations involved, R&D fi nancing and expertise is
spread through all of the government ministries, the LPNK, the diff erent planning and policy bodies, the regional
arms of any given R&D body, and the public universities. The complex structure naturally leads to the concern
that the small amount of available funding can be spread quite thinly.
Table 17 Private R&D Centers by Industry Sector
Sector Number of companies with
a research center
Percentage of sector companies with
a research center
Food products and beverages 6 2.0
Wood and wood products 2 2.6
Paper and paper products 3 7.1
Publishing, printing and recorded media 2 5.4
Chemicals and chemical products 21 9.5
Rubber and plastics 4 3.2
Other non-metallic products 4 7.7
Basic metals 3 8.6
Fabricated metal products 4 8.0
Machinery and equipment 7 5.9
Electrical machinery and apparatus 3 5.8
Radio, television and communication equipment 1 1.4
Motor vehicles and trailers 1 1.9
Other transport equipment 2 4.2
Furniture 2 3.0
Total 65
Sources: LIPI, “Chapter 1: S&T Policy and Development Strategy,” LIPI, 2010, p37
49 PT. Trans Intra Asia (TIA), Development of Strategies for University-Industry-Government Partnership, PT. Trans Intra Asia (TIA), August 2012
Public Expenditure Review 25
Government R&D Policyand R&D Financing
Table 18 Organizations Involved in R&D, Divided by Typea
Organization type Organizations Function
Umbrella organizations
Presidential administration Agenda-setting
Ministries Ministry of Research and Technology
(KEMENRISTEK)
Agenda-setting
Ministry of Finance Budget-setting
20 other ministries Departmental R&D
Agencies National Development Planning Agency
(BAPPENAS
Responsible for development planning and coordination in
the fi elds of economy management, budgeting, information
management, education and training, and other areasb
National Research Council (DRN)c Provides advice to the minister for KEMENRISTEK. Umbrella
body for the 31 regional research councilsd
Regional Research and Development Agency Umbrella body for 42 regional, and 27 provincial, research and
development agenciese
National Innovation Committee (KIN) An autonomous body responsible for advising the presidentf
Indonesia Academy of Sciences An autonomous body advising the nation on scientifi c matters
Government R&D
organizations (independent
of ministries, LPNK)
Seven institutes R&D
Ministerial R&D institutes
(BALITBANG)
22 ministries with R&D institutes R&D for the ministries
Higher education
Oversight bodies Directorate General of Higher Education Responsible for administering higher education institutions
Public universities 76 non-autonomous public universities and
institutes, and seven autonomous universities,
each with a research function, and 50 with a
dedicated R&D institute
Private universities Over 3,200 higher education institutes The great majority of the higher education institutes do not
conduct research and development
Private sector
Non-profi t national research
institutes
Six research institutes
Non-profi t international
research institutes
Five research institutes
Company research centers 65 companies with a research center in 15
diff erent sectors
Think-tanks R&D
State fi rms Unknown
Research bodies, groups
and consortia
Consortia Six research consortia R&D and collaboration
Research areas and science
parks
Science and technology parks Four science and technology parks Involved in scientifi c research
Agriculture technology parks Five agriculture technology parks Involved in the cultivation and processing of agriculture
technology
Educational parks One educational park Promotes academic and industry training among children and
young people in the surrounding area
National parks Forty national parks Conservation areas that act as places for scientifi c research
PUSPA IPTEKg Museum for science
Sources:
a. Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011. See annex 1 for a more detailed version of this table.
b. See http://translate.google.co.uk/translate?sl=id&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.bappenas.go.id%2F&act=url
c. See http://translate.google.co.uk/translate?sl=id&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.drn.go.id%2Findex.php&act=url
d. Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p35
e. Akil HA et al., Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p24
f. OECD, Science, Technology and Industry Outlook, OECD, 2010, p188 (see http://www.oecd.org/dataoecd/41/24/46664553.pdf )
g. See http://www.thebiggestsundial.com/
Indonesia: Research & Development Financing26
All of the organizations concerned with R&D exist within broader developments that the state
administration is undergoing. Indonesia’s public administration has signifi cantly improved in recent years,
but weaknesses still exist. On the World Economic Forum’s competitiveness index, Indonesia ranks 47th on
“eff ectiveness of government”, which puts it ahead of many developing countries. However, on several parts of
this measure the country still ranks poorly. For example, according to the same source, businesses in Indonesia
see the policy making process as not being transparent enough (rank 91), and the most cited problem for
business executives is “bureaucracy.”50
Public fi nancing both refl ects and exacerbates some of the broad issues in public administration. The
fi rst of the broad problems regards the ability of government departments to absorb budget allocations. For
example, between 2010 and 2011, spending allotted for capital expenditures increased by around 40 percent,
but by the middle of 2011 only around 10 percent of the budget had been spent.51 There are many reasons
for low disbursement of public spending. The frequent delay of budget confi rmation and execution until April
eff ectively shortens the execution period by four months each fi nancial year. There is also caution among
government administrators to commit to multi-year construction contracts as they face issues in guaranteeing
the availability of funds from one year to the next, as the government-wide focus on the single-year budget
cycle is so strong.52 Improvements in the capacity of personnel, especially local personnel, are also key issues.53
Overall, the inability to administer funds in an allotted time frame suggests that development in government
services and improvements in myriad policy areas do not solely depend on greater spending, but also on the
administration of spending. Furthermore, it suggests that there should be caution over spending increases being
prioritized over administrative reform.
The government is making eff orts to improve spending administration. In 2008 the government allowed
procurement procedures to start in the few months before the beginning of a new fi nancial year, thus allowing
more time for planning and expenditure. A presidential regulation was also recently signed which allows
greater room for multi-year contracting and expenditure in areas that are determined by seasonal factors,
such as planting and the supply of medicine. Also, budget execution documents are more likely to be issued
in January of the budget year, where before they might have been delayed by budget reviews conducted by
the given parliamentary commission. Finally, for the 2011 budget, the government introduced a “Medium-Term
Expenditure Framework” and the use of program-based budgeting, both of which it hoped would improve
planning, administration and output.54
The nature of R&D activities requires enabling funding arrangements. At the start of research it is often the
case that the outcome is uncertain, that is, the researchers do not know what they will fi nd, if anything, and the
time it will take to produce any new knowledge is unclear. This requires an approach to R&D funding that expects
worthwhile results on the whole, but is tolerant of uncertainty around the results and able to facilitate discovery
through a funding system that underpins the R&D process.
In two important ways the approach to state fi nancing has constraining eff ects on R&D because of
the investigative nature of research. Firstly, an emphasis on single-year budgeting makes it diffi cult for R&D
institutes that rely on government funding to plan. Without a multi-year view it is diffi cult to start a research
project that has unknown outcomes, as the researchers do not know whether funding will be available for a
second year if the target discovery has not been made in the fi rst year. This problem is further exacerbated by
50 World Economic Forum, The Indonesia Competitiveness Report 2011: Sustaining the Growth Momentum, World Economic Forum, 2011, p11
51 World Bank, Indonesia Economic Quarterly: Current Challenges, Future Potential, World Bank, June 2011, p13
52 There is a strict “use it or lose it” policy in place, which means that departments are under pressure to spend all of the money they receive in one year.
Administrative constraints, plus the risk of allocating spending from one year to the next, inhibit capital investment. See World Bank, Indonesia Economic
Quarterly: Current Challenges, Future Potential, World Bank, June 2011
53 OECD, OECD Economic Surveys: Indonesia, OECD, November 2010, p42
54 World Bank, Indonesia Economic Quarterly: Maximizing Opportunities, Managing Risks, World Bank, December 2010, p19-20
Public Expenditure Review 27
Government R&D Policyand R&D Financing
the fact that all unspent monies have to be returned to the Ministry of Finance (even if the original allocation was
received a few months into the fi nancial year as a result of disbursement issues), and it is diffi cult to buy expensive
equipment with a given budget if it is unclear whether it will be used for future research projects.
Secondly, the necessity to achieve a research outcome within a given fi nancial year induces further
caution over which research topics to pursue. The budgeting system requires that R&D institutes show what
has been produced for the money spent. It thus seems likely that this approach would induce caution among
researchers as to which topics they choose, that is, they might be more likely to pick less signifi cant topics that
are likely to produce some results in the budgeted timeframe rather than risk being deemed unsuccessful and
thus unable to attract follow-up support. Ensuring the eff ectiveness of public spending generally justifi es the
demand for results, but it hampers the uncertain, investigative nature of R&D.55 Again, a cross-sector issue with
state administration is aff ecting R&D in a manner specifi c to the nature of R&D.
The disbursement of funds for the R&D sector is also marked by a high degree of centralization. While the
issue of decentralization may come to aff ect the R&D sector more signifi cantly in future years, according to the
latest available data, a great deal of the money for R&D comes from spending items identifi ed in the state budget
rather than from private fi nancing or through other sources.
Table 19 shows a breakdown of IDR funding of R&D for two years, 2006 and 2009. Regardless of the destination
of the funds, the most striking feature is the extent to which funding is dominated by the central government,
including the Directorate for Higher Education. Of the IDR 2.3 trillion spent in the sector in 2006, around IDR 1.9
trillion came directly from these sources, with signifi cant amounts of it likely to have been distributed via line-
item spending. With regard to the overall levels of funding it should also be noted that the Directorate for Higher
Education increased its support for R&D by nearly eight times between 2006 and 2009. In 2006 a further IDR 460
billion was given to the sector in the form of contracts or grants. Figure 9 summarizes this.
55 Corruption is a signifi cant problem in Indonesia but is subject to several government attempts to reduce it. Indonesia has a rank of 100 on Transparency
International’s index of the perceived level of corruption in a country. Along with changes elsewhere, there is some suggestion that the “big bang”
decentralization reform may have allowed corruption to spread while new administrative practices were being worked out (Asian Development Bank,
Indonesia: Critical Development Constraints, Asian Development Bank, 2010, p37). In a 2007 survey of fi rms, 86 percent said that they had to make informal
payments and bribes to offi cials, and that these averaged 6.1 percent of fi rms’ annual production costs. The fi rms also said that visits by government offi cials
were frequent, with visits from policy and military offi cers particularly frequent. In recent years the government has dedicated more money to fi ghting
corruption and declared in 2009 that it would implement the Extractive Industries Transparency Initiative (EITI), and has now been accepted as a candidate for
membership of the EITI by the organization behind it. (See http://eiti.org/indonesia).
Source: LIPI
Figure 8 Total State R&D Funding by Source, 2006
Funds from Central Government
(The Directorate for Higher Education)
Funds from Central Government(Non-higher Education Sources )
Indonesia: Research & Development Financing28
Table 19 R&D Funding Distribution, 2006 and 2009
Year
Government (IDR)Higher education (public
universities only)(IDR)
2006 2006 2009
BALITBANG BALITBANGDA LPNKPublic
universities
Funds from central government
(non-higher education sources)
1,342,200,000,000 35,100,000,000 319,800,000,000 57,450,957,000 277,408,230,978
Funds from central government (the
Directorate for Higher Education)
145,642,883,000 1,153,388,724,795
Funds from other sources
Domestic research contracts 50,500,000,000 4,300,000,000 24,800,000,000 211,497,460,000 204,569,634,507
Government (discretionary funds) 7,200,000,000 4,300,000,000 12,500,000,000 171,278,506,000 180,727,384,916
Private/ industry 41,100,000,000 11,800,000,000 35,751,020,000 21,669,036,275
Not-for-profi t organization 2,200,000,000 500,000,000 4,467,934,000 2,173,213,316
Foreign research contracts 11,400,000,000 37,300,000,000 47,208,267,000 37,603,267,481
Foreign government 10,046,401,000 17,289,557,449
Private/industry 11,950,290,000 10,730,753,000
Multilateral/international org 20,063,351,000 7,577,775,432
Not-for-profi t 5,148,225,000 2,005,181,600
Domestic grants 56,791,041,000 61,835,137,472
Government (discretionary funds) 51,084,999,000 51,344,355,522
Private/industry 3,611,187,000 10,151,281,950
Not-for-profi t 2,094,855,000 339,500,000
Foreign grants 10,080,147,000 26,403,653,962
Government 3,420,504,000 8,339,871,560
Private/Industry 985,000,000 3,841,378,500
Multi-lateral/International 2,913,663,000 8,389,609,721
Not for profi t 2,760,980,000 5,832,794,181
Other 2,000,000,000 2,600,000,000 2,462,560,000 10,522,159,500
Total 1,406,100,000,000 39,400,000,000 384,500,000,000 531,133,315,000 1,771,730,808,695
Sources: LIPI, totals may not sum due to rounding
The spending data reinforce the impression that, overall, R&D funding is dominated by the state. They
show that, at least in 2006, there was very little interest from the private sector or foreign bodies in using even
the LPNK or the public universities for the investigation of research topics. Furthermore, because of the likely
heavy use of line-item funding it is not just that the vast majority of the money comes from the state, but that it
is distributed in the most specifi c manner.
Table 19 also shows that alternative funding is available, albeit small in amount. As with the role of the Directorate
for Higher Education, funds could be distributed by a given public or private body, in order to meet what might
be ad-hoc demands for knowledge. But, as shown by Figure 8, these approaches accounted for only just over a
quarter of funding in 2006. On top of the amount of funding being low, it is both dominated by the state, and in
a manner that is highly specifi c and not devolved to a dedicated body.
Public Expenditure Review 29
Government R&D Policyand R&D Financing
The insignifi cant role of contract funding would also suggest low usage of competitive fi nancing. When
R&D is funded by contracts rather than block grants or line-item funding, it is more likely to be conducted under
competitive terms. Where line-item funding is used, the demands of administering and tracking the fl ow of funds
is likely to require high levels of specifi cation as to where it is going and for what purpose – two characteristics
of R&D funding in Indonesia that were discussed above. By contrast, if money is allocated to R&D and is then
distributed by research contracts it is sometimes easier for that funding to take place through a competitive
bidding process that requires research bodies to show that they have the adequate expertise and track record to
carry out the research. The lack of complete information on this process in Indonesia, however, makes it diffi cult
to say for certain whether these contracts are all awarded based on competitive selection.
The budgets of the diff erent agencies involved in R&D refl ect, as would be expected, the dominance
of centrally distributed institutional funding. As shown by Figure 9, the BALITBANG receive over three
quarters of non-higher education central government research funding. The nature of the research they conduct
is discussed below but, at base, they account for an important portion of the most important source of R&D
funding. Interestingly, this would suggest that, on top of most R&D funds being administered very centrally, they
are also not distributed very far from central control. Each of the BALITBANG is under the direct control of its
respective Minister and is not often tasked with the basic scientifi c investigation or development and application
of knowledge that a pure scientifi c institute might be concerned with. In other words, R&D at the BALITBANG
is characterized by work driven by the requirements of the respective Ministry. This is contrary to the OECD’s
recommendation that public funding of R&D is likely to show greater returns if it is directed towards universities
rather than public institutes.56 However, any redirecting of research away from the BALITBANG and towards the
universities should take into account the diff erent strengths of the respective organizations. For example, it is
possible that the BALITBANG may be better at policy research where the aim of the work is already reasonably
well known, while the universities may have an advantage in projects that involve analysis and measurement
of, say, policy results, or do not have a particular research outcome in mind. Some of these respective strengths
might even be combined through collaborative work. However, based on the current distribution of funds it is
possible to conclude that, on top of the great majority of R&D funding coming from highly specifi ed, centralized
sources, a lot of it goes to the organizations in the R&D sector that are perhaps the least independent. This is
reinforced in Figure 10, which shows the dominance of BALITBANG R&D funding by central government. In other
words, most of the centralized funding stays central.
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 9 Non-Higher Education Central Government R&D Funding by Destination, 2006
LPNK
BALITBANG
BALITBANGDA
Public Universities
56 OECD, Governance of Public Research: Toward Better Practices, OECD, 2003, p22
Indonesia: Research & Development Financing30
The LPNK and BALITBANGDA also show the dominance of central government funding. The LPNK, because
of their status as being independent from KEMENRISTEK, might be expected to be able to attract a great deal of
their fi nancing from non-state sources. The exact level would depend on demand and other factors - the private
sector might be expected to commission the LPNK to conduct R&D, particularly in the development of goods
and services. The status of some of the LPNK, such as LIPI, would only be expected to increase this tendency.
However, the funding data shown in Figure 11 belies this expectation. The stipulations in the budgeting laws
are behind this, as any external funds collected by the LPNK must be sent to the Ministry of Finance as non-
tax revenue, only to be reclaimed through the annual budget process. Furthermore, even under the guise of
research contracts, state funding dominates. Figure 12 shows how half of all research contracts attracted by the
LPNK come from state discretionary funds. In 2006 the LPNK only managed to gain around IDR 12 billion from
independent, domestic sources. However, they also attracted nearly IDR 40 billion in foreign research contracts.
The BALITBANGDA (Figure 13), which receive all of their R&D funding from the government, also refl ect the
dominance of central government funding over other methods.
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 10 BALITBANG Funding by Source, 2006
ForeignResearch Contracts
Other
DomesticResearch Contracts
Funds fromCentral Government
(Non-higher EducationSources)
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 11 LPNK Funding by Source, 2006
Other
Funds from Central Government
(Non-higher Education Sources)
Domestic Research Contracts
ForeignResearch Contracts
Public Expenditure Review 31
Government R&D Policyand R&D Financing
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 12 LPNK funding by domestic research contracts
Non-for-profit Organization
Government(Discretionary Funds)
Private/Industry
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 13 BALITBANGDA Funding by Source, 2006
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 14 Public Universities’ Funding by Source, 2009
Funds from Central Government
(Non-higher Education Sources)
Domestic Research Contracts
Funds from Central Government(Non-higher Education Sources)
Funds fromCentral Government
(The Directoratefor Higher Education)
Domestic ResearchContracts
Foreign Research Contracts
Domestic Grants
Indonesia: Research & Development Financing32
However, the funding of public universities appears to be diff erent to that of other organizations that
receive public fi nancial support for R&D. The proportions accounted for by the diff erent funding streams
are shown in Figure 14. In 2009, funds from central government only accounted for around IDR 280 billion. In
contrast, nearly IDR 1.2 trillion came from the Directorate for Higher Education. There would appear to have been
some signifi cant changes in the budgeting for R&D at the public universities in recent years as funding from
central government and the Directorate for Higher Education combined increased from around IDR 200 million
to IDR 1.4 trillion between 2006 and 2009.
The largest proportion of funding for public universities’ R&D is funneled through the Directorate for
Higher Education, under the Ministry of Education and Culture. It is diffi cult to know whether this aff ects
the manner in which research projects are conducted, although it is nonetheless notable for it not being as
centralized as the funding for much of the rest of the sector. Nonetheless, the public universities still show the
same degree of reliance on state rather than private, or even foreign, funding. In 2009 they received around
IDR 205 billion from domestic research contracts. Approximately IDR 180 billion of this was from government
discretionary funds and only around IDR 21 billion from companies and suchlike.
The Directorate for Higher Education distributes its funding in several diff erent ways. Around 65 percent
goes to the public institutions under its remit through a mix of block grant funding and line-item budgeting. But
it also operates grant schemes. These schemes have recently been focused on university-industry collaborations,
but over the past 20 years, money has also been given for fundamental research. In 2012 the Directorate for
Higher Education made 4,297 grants worth a total of IDR 286 billion, with the vast majority going to the public
universities rather than the private ones, and the seven leading public universities in particular (Institut Pertanian
Bogor, Institut Teknologi Bandung, Universitas Airlangga, Universitas Gajah Mada, Universitas Indonesia,
Universitas Pendidikan Indonesia, Universitas Sumatera Utara). It is possible that this refl ects the balance of R&D
expertise, although this may also refl ect the preference given to the leading public universities.57
The “RAPID” research program is one of the Directorate for Higher Education’s grant schemes for
encouraging university-industry collaborations. The scheme makes awards in six areas: energy, ocean and
fi sheries, health, agriculture and food, information technology, and manufacturing. It was launched in 2007 and
is still ongoing. It is only a small part of the overall funding scheme.
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 15 Public Universities’ Funding by Source, 2006 and 2009
Year
RUP
(in B
illio
n)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
20092006
Funds from Central Government(Non-higher Education Sources)
Funds from Central Government(The Directorate for Higher Education)
57 PT. Trans Intra Asia (TIA), Development of Strategies for University-Industry-Government Partnership, PT. Trans Intra Asia (TIA), August 2012
Public Expenditure Review 33
Government R&D Policyand R&D Financing
Table 20 shows the total amount of awards between 2008 and 2012, and how some of the leading public
universities have been benefi ciaries, alongside some private ones, too. KEMENRISTEK also has some similar
schemes, including one that makes awards in the areas of food resilience, energy, information technology,
transportation, defense and security, health and medical technology, and advanced material, or the target areas
in the Long-Term Development Plan (2005–2025).58
Table 20 Distribution of RAPID Grants, 2008–2012
University Number of grants Average grant size Total amount awarded
Institut Teknologi Bandung 13 275,766,923 3,584,970,000
Institut Sepuluh Nopember 7 250,935,714 1,756,550,000
Universitas Negeri Semarang 6 246,416,667 1,478,500,000
Universitas Padjadjaran 6 214,870,000 1,289,220,000
Universitas Hasanuddin 5 256,230,000 1,281,150,000
Universitas Muhammadiyah Surakarta 5 235,100,000 1,175,500,000
Universitas Brawijaya 4 250,950,000 1,003,800,000
Institut Teknologi Telkom 4 232,425,000 929,700,000
Universitas Tadulako 3 269,873,333 809,620,000
Universitas Muhammadiyah Malang 3 263,333,333 790,000,000
Universitas Indonesia 3 236,000,000 708,000,000
Universitas Muria Kudus 3 234,166,667 702,500,000
Universitas Sumatera Utara 2 283,825,000 567,650,000
Universitas Sam Ratulangi 2 270,000,000 540,000,000
Universitas Widya Gama 2 266,666,500 533,333,000
Universitas Pendidikan Indonesia 2 262,500,000 525,000,000
Universitas Mataram 2 245,000,000 490,000,000
Institut Pertanian Bogor 2 239,850,000 479,700,000
Universitas Wijaya Kusuma 2 207,500,000 415,000,000
Universitas Gadjah Mada 1 299,650,000 299,650,000
Universitas Sebelas Maret 1 287,300,000 287,300,000
Universitas Jenderal Ahmad Yani 1 275,000,000 275,000,000
Institut Teknologi Adhi Tama 1 272,500,000 272,500,000
Politenik Manufaktur Bandung 1 272,100,000 272,100,000
Universitas Ciputra 1 270,760,000 270,760,000
Universitas Negeri Malang 1 270,000,000 270,000,000
Universitas Yogyakarta 1 270,000,000 270,000,000
Universitas Haluoleo 1 250,000,000 250,000,000
Sources: PT. Trans Intra Asia (TIA), Development of Strategies for University-Industry-Government Partnership, PT. Trans Intra Asia (TIA),
August 2012, p19
58 PT. Trans Intra Asia (TIA), Development of Strategies for University-Industry-Government Partnership, PT. Trans Intra Asia (TIA), August 2012, p19
Indonesia: Research & Development Financing34
There are questions over the quality of the research carried out in several parts of the public R&D sector.
The World Economic Forum assesses Indonesia as having poor research institutes (which it ranks as the 44th
best in the world). Furthermore, some reports have argued that LIPI is in a “critical condition” because its budget
is declining in real terms and an ever-greater portion of it is being dedicated to the remuneration of staff .59 As a
part of LIPI’s historically important status it has three tasks: 1) to conduct research in the pursuit of knowledge; 2)
to communicate its research fi ndings to its stakeholders, such as the government, private sector and universities;
and 3) to assist with policy problems. However, some assessments of it suggest that it might not be fulfi lling
some of these roles with great eff ectiveness, despite the fact that it is thought to be the only state body with any
signifi cant capacity in the social sciences or humanities.60
One of the key criticisms of LIPI is that the quality of its research has fallen. One of the reasons for this might
be that it has suff ered from reductions in government funding. For example, in 1998 LIPI subscribed to 1,600
foreign journals while today it has subscriptions to only six. Research produced by the organization appears to
be strong in certain areas but weak where money is needed to carry out fi eldwork or collect data. Furthermore,
linkages between LIPI and work conducted in its fi eld elsewhere are possibly hampered by the fact that its
reports are only published in Indonesian.
The type of funding that LIPI receives appears to be largely based on budget allocations rather than
competitively awarded contracts. For example, Table 21 shows the breakdown of the social science research
projects at LIPI by area of research and type of funding received. “Thematic” refers to budgeted, or allocated, funds.
In 2010 nearly half of LIPI’s projects were funded in this way. “Competitive” refers to money that is distributed
according to the abilities of the given researchers but is conducted largely through internal, rather than external,
competition. The most competitive funding is distributed by the Ministry of Education and KEMENRISTEK.
However, this last and most competitive method of funding only accounted for a smaller share of research
projects. It would thus seem that, as suggested by the overall fi gures on R&D funding, budget allocations are more
common than competition-based funding. Across the social science sector there also appears to be insuffi cient
use of peer reviews which, like competitive allocations of research budgets, help to increase research standards
through oversight and quality control.61 Finally, because of its status as a government-fi nanced institution, LIPI is
barred from bidding on research contracts on off er from the private sector.62
Table 21 LIPI Social Science Research Projects by Type of Funding, 2010
Funding type
Area of research
TotalPolitics
Culture and
societyEconomics Demography
Regional
resources
Thematic 9 10 10 6 7 42
Competitive 4 4 4 4 1 17
Special assignment 1 3 4
From Ministry of Education or RISTEK 10 14 6 4 4 38
Total 24 28 23 14 12 101
Sources: Oey-Gardiner M, “Study of the Role of the Indonesian Institute of Sciences (LIPI) in Bridging Between Research and Development
Policy,” AusAID, August 2010, p25
59 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p36
60 Oey-Gardiner M. “Study of the Role of the Indonesian Institute of Sciences (LIPI) in Bridging Between Research and Development Policy,” AusAID, August 2010, p12
61 Australian Aid (2011), Revitalizing Indonesia’s Knowledge Sector for Development Policy, draft design document, Australian Aid, 2011, p11
62 Oey-Gardiner M, “Study of the Role of the Indonesian Institute of Sciences (LIPI) in Bridging Between Research and Development Policy,” AusAID, August 2010
Public Expenditure Review 35
Government R&D Policyand R&D Financing
Table 22 Distribution of Staff at the Seven LPNK, Most Recent Years
LPNK
BIG BAPETEN BATAN BPPT BSN LAPAN LIPI
Overall staff 607 3334 2838 193 1320 4747
of which aged
<35 142 470 517 115 342 1543
36-40 52 262 431 28 142 655
41-45 105 614 638 13 223 598
46-50 151 893 616 14 274 910
51-55 146 924 527 14 273 821
56-60 11 143 95 9 45 172
61-65 0 28 14 0 21 48
Overall staff of which known researchers 270 386 2035 1182 152 658 1428
of which known education
Doctoral 10 10 106 170 3 32 245
Master's 56 92 299 567 22 152 409
Bachelor's 157 240 1185 422 113 419 689
Associate's degree/diploma 47 44 445 23 14 55 85
of which known responsibility
Research assistants 6 0 65 4 8 74 381
Young researchers 11 3 87 39 2 86 339
Researchers 24 7 194 137 4 89 390
Principal researchers 5 0 81 76 0 29 209
Active research professors 2 1 33 24 0 5 63
Note: This table is based on the best estimates made by World Bank staff according to the data provided.
Competition is also not commonly used to determine remuneration for LIPI researchers. Firstly, as the
institute is required to conform to government recruitment practices, researchers can only join the rank that is
predetermined by their level of education. After the completion of one year in the job, the person becomes a civil
servant, at which point tenure is also conferred. These practices would suggest that LIPI and the other LPNK are
likely to struggle to attract highly experienced or talented researchers if those researchers can only be remunerated
according to their predetermined grade. Also, given the low usage of competition for the awarding of research
contracts, it would appear that researchers at LIPI are not subject to particularly strong competitive pressures.63
The distributions of staff at the seven LPNK tend to be bottom-heavy. At LIPI, for example, there are a
large number of staff relative to the number of researchers (4,747 against 1,428, see Table 22), while youth and
education to only the level of a bachelor’s degree are more common than the opposite. Figure 16, for example,
shows that the number of staff (rather than just researchers) under 35 is just over 1,500 while the number of staff
in the age brackets most likely to have experienced staff , 46–50 and 51–55, is only slightly higher (1,731). This
is somewhat refl ected in the comparatively large numbers of junior researchers relative to senior researchers,
shown in Figure 18. Finally, there are only 245 researchers at LIPI with a doctorate, while there are 689 with just a
bachelor’s degree. Each of these patterns is somewhat replicated at each of the other LPNK, thus suggesting that,
broadly, the research skills of staff at the LPNK may not be as high as might be expected. Table 22 shows the data
available on the staff structures at all of the LPNK.
63 Oey-Gardiner M, “Study of the Role of the Indonesian Institute of Sciences (LIPI) in Bridging Between Research and Development Policy,” AusAID, August 2010
Indonesia: Research & Development Financing36
Source: LIPI
Figure 16 Distribution of LIPI Staff by Age Group, Assorted Years
Figure 17 Distribution of LIPI Researchers by Education Level, Assorted Years
Source: LIPI
Level of Education
Num
ber
0
200
400
600
800
Doctoral Master’s Associate’s Degree/
Diploma
Bachelor’s
Source: LIPI
Figure 18 LIPI Staff by Level of Seniority, Assorted Years
Level of Responsibility
Num
ber
0
100
200
300
400
Research
Assistants
Young
Researchers
Researchers Active Research
Professors
Principal
Researchers
Age
Num
ber
0
400
800
1200
1600
36-40< 35 46-5041-45 56-60 61-6551-55
The formal career path in the public R&D institutes also adds to the diffi culty in attracting staff . In the
early part of her career, a researcher must choose between a technical or an administrative path. A dilemma
arises in that the administrative choice off ers better benefi ts and remuneration than the technical path, even
though the researcher might have been trained for the latter. Many researchers are thus attracted away from the
technical career that they might have preferred in order to receive the greater fi nancial benefi ts in other posts.
This may go some way to explaining the staff distribution at the LPNK.
Public Expenditure Review 37
Government R&D Policyand R&D Financing
The funding and employment conditions at the LPNK and the public universities aff ect large portions of
the total number of researchers in public organizations.
Figure 19 shows the distribution of researchers (excluding staff ) across all of the public sector organizations
that are known to pursue R&D and employ researchers. The LPNK, while only receiving around a quarter of the
line-item funding that is given to the BALITBANG, have nearly twice the number of staff and account for around
25 percent of the total. This might go some way to explaining the funding squeeze with regard to LIPI that was
discussed above. However, the data also reveal that, while the public universities receive only a small portion of
line-item spending and nearly all of their money from the Directorate for Higher Education (see Figure 15), they
account for nearly 60 percent of the researchers in the sector. This suggests that, while centrally administered
funding going to somewhat centrally controlled organizations is the norm for state spending on the sector as a
whole, in terms of the number of researchers it is more a question of the majority being accounted for by more
independent university researchers.
Table 23 Number of Researchers per Million Population, Select Countries, 1996–2009
Country Name 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Australia 3332.0 3355.5 3444.0 3732.5 4038.6 4203.6 4258.5
Cambodia 17.4
China 446.9 475.6 388.7 421.7 547.7 581.2 630.3 666.5 712.2 855.5 930.9 1077.1 1198.9
Indonesia 210.8 197.6 89.6
Japan 4946.2 4999.9 5209.2 5249.0 5150.9 5187.1 4942.8 5170.0 5176.2 5385.0 5415.6 5408.9 5189.3
Korea, Rep. 2212.1 2269.8 2034.1 2190.4 2356.5 2950.3 3057.2 3244.1 3335.8 3822.2 4231.0 4672.2 4946.9
Lao PDR 15.8
Malaysia 89.1 153.0 274.3 291.9 495.1 364.6
Mongolia
Myanmar 7.6 7.6 11.5 12.7 18.4
New Zealand 2202.6 2296.9 3361.5 3935.1 4169.0 4323.7
Philippines 71.2 80.6 78.5
Singapore 2546.6 2643.7 3029.9 3276.8 4243.8 4205.1 4493.9 4900.5 5134.2 5576.5 5676.6 5954.6 5834.0
Thailand 100.2 72.4 166.9 277.2 277.1 307.4 315.5
Vietnam 115.9
Sources: World Bank
Source: LIPI
Figure 19 R&D Sector Researchers by Organization Type, Assorted Years
Organization Type
Nu
mb
er
of
Re
sea
rch
ers
0
5000
10000
15000
20000
25000
LPNK Universities BALITBANG Other
Indonesia: Research & Development Financing38
Apart from institutional capacity, the number of researchers in the country suggests that sector capacity
as a whole is low. Table 23 shows that in 2009, Indonesia had only 89.6 researchers per million population, while
a year earlier its developed regional peers had between 4,000 and 5,000. In the same year China had around
1,200.
Finally, the number and subject concentrations of the researchers with PhDs at the public universities
also suggests a need to increase capacity. Table 24 shows the breakdown of all researchers at the public
universities by subject fi eld. Agricultural sciences shows by far the highest level of expertise, with more PhDs
than the chemistry, life sciences, and physics fi elds combined. However, as with the level of expertise at the
LPNK, the staff structure appears to be weighted towards junior members. In the 24 fi elds listed in Table 24, the
number of researchers with only a master’s degree exceeds the number with a doctorate in all but three fi elds
(astronomy and astrophysics, earth and space sciences, and logic). Across the public universities the number of
the former was greater than that of the latter, at least in 2009, by 7,669. This appears to be a particular issue in two
of the social sciences, economic sciences and political science, where there are over three and four times more
researchers with bachelor’s degrees than PhDs respectively.
Table 24 Public University Researchers by Field of Study, 2009
Field of StudyPublic Universities (2009)
Bachelor Master’s Doctor Total
Agricultural sciences 302 2114 1111 3527
Anthropology 17 94 48 159
Astronomy and astrophysics 0 6 13 19
Chemistry 45 511 337 893
Demography 0 57 16 73
Earth and space sciences 15 104 126 245
Economic Sciences 116 1190 330 1636
Ethics 23 67 14 104
Geography 13 143 35 191
History 34 175 46 255
Juridical sciences and law 93 839 110 1042
Life sciences 47 655 302 1004
Linguistics 63 281 94 438
Logic 16 29 45 90
Math 123 602 229 954
Medical sciences 247 1625 914 2786
Pedagogy 151 982 237 1370
Philosophy 14 124 17 155
Physics 49 471 234 754
Political science 51 348 77 476
Psychology 14 237 65 316
Sciences of arts and letters 58 280 91 429
Sociology 61 452 141 654
Technological sciences 284 1582 703 2569
Other 7 74 38 119
Total 1843 13042 5373 20258
Sources: Pappiptek-LIPI, “State University R&D Survey,” 2007-2010, Pappiptek-LIPI
Public Expenditure Review 39
Government R&D Policyand R&D Financing
In economic terms, the quality of the research taking place and the positive eff ects it has for policy and
growth are two of the key measures of eff ectiveness. So far this PER has looked at the amount of money
being spent, the main ways in which that money is being spent, and the position of some of the organizations
that receive the money. Several comparisons have been made with Indonesia’s neighbors and accepted good
practice elsewhere. The defi ning characteristics of its public R&D system appear to be that funding is low, that
it is highly centralized in terms of both administration and fi nal destination, and that there are structural and
institutional questions over the quality of research and research bodies. However, the question of the fi nal use of
funds and their eff ect still needs to be explored a little further.
The balance of funding for basic and applied research among the public R&D sector research bodies tends
to refl ect their institutional focus. For example, at the BALITBANG (Figure 20), funding for applied research
predominates, as might be expected given that policy development is a core part of their remit. This is also
shown in the breakdown of BALITBANGDA funding, as shown by Figure 21. The LPNK, on the other hand, receive
nearly a quarter of their funding for basic research. Finally, the public universities receive around a quarter of their
funding for basic research and the rest for applied research or experimental development (Figure 23). However,
it should be kept in mind that these breakdowns only have descriptive value, as it is often diffi cult to know what
counts as basic, applied, or experimental development. The OECD has argued that while the distinctions are
worthwhile for statistical purposes, they lack value for policy makers. Furthermore, the OECD argues that it is
more important for public R&D to strike a balance between the demands of research and the needs of enterprise,
and that there are trade-off s over short-term and long-term research; the generation of knowledge versus its
application; and the respective benefi ts of diff erent types of funding.64
64 OECD, Governance of Public Research: Towards Better Practices, OECD, 2003, p100
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 20 BALITBANG Funding by Type of Research, 2006
Basic Research
Applied Research
Experimental Development
Indonesia: Research & Development Financing40
Figure 22 LPNK Funding by Type of Research, 2006
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Figure 23 Public Universities’ Funding by Type of Research, 2009
Source: Pappiptek-LIPI, “State University R&D Survey,” 2007–2010, Pappiptek-LIPI
Basic Research
Applied Research
ExperimentalDevelopment
Basic Research
Applied Research
ExperimentalDevelopment
Figure 21 BALITBANGDA Funding by Type of Research, 2006
Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006
Basic Research
Applied Research
ExperimentalDevelopment
Public Expenditure Review 41
Government R&D Policyand R&D Financing
Box 1 The Boundaries between Basic Research, Applied Research, and
Experimental Development
It is often diffi cult to defi ne diff erent types of research, although there are authoritative guidelines on how
to do so. The defi nitions and guidelines matter because whether a research project is meant to discover new knowledge about the foundations of the universe, or develop a good or product to make it more economically viable, can help to determine whether it receives funding. The OECD defi nes the three types of R&D as follows:
Basic research: “…experimental or theoretical work undertaken primarily to acquire new knowledge of the under-lying foundations of phenomena and observable facts, without any particular application or use in view.”a
Applied research: “…original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specifi c practical aim or objective.”b
Experimental development: “…systematic work, drawing on knowledge gained from research and practical ex-perience, that is directed to producing new materials, products and devices; to installing new processes, systems and services; or to improving substantially those already produced or installed.” c
The OECD defi nitions appear straightforward and easy for policy makers to use, but there is signifi cant
disagreement among scientists as to which defi nitions are most appropriate. A good example of this is that there does not appear to be a common understanding among scientists of what basic research is and how it diff ers from other types of research. Some defi ne it as research that is unpredictable in what it will fi nd, others that it looks at basic principles of how things work, while further views cite the place of the research or how its results are published as being the defi ning characteristic.d Delineating one type of research from another can also be diffi cult when a research program is ongoing and the same staff are working on diff erent aspects of it, some of which might be considered as basic research and the rest as applied research.e
One, highly debatable, way of delineating the types of research has been to argue that they follow each
other. This is known as the “linear model” and approaches works by saying that basic research will produce new knowledge of fundamental things, which can then be worked on in applied research and, fi nally, developed into a product or service. However, it is not clear that research works like this. For example, it has been claimed that the science of thermodynamics owes more to the steam engine, which came fi rst, than the other way round. In other words, the development of something practical, the steam engine, led to interest in its properties and thus thermodynamics – the opposite sequence of events to that predicted by the linear model of R&D.f
The unpredictable nature of research is ultimately what makes it diffi cult to defi ne into diff erent types and
thus for policy makers to manage. In funding R&D, a government might have several objectives, including the cultural benefi ts of knowledge, the greater welfare that might be gained for some members of a given society, or the fi nancial profi ts that might be produced by having goods and services that are derived from valuable dis-coveries. These are all legitimate aims, but myriad examples from R&D projects around the world suggest that it is diffi cult for governments to demand certain outputs. Instead, it is better if funding agencies require coherent proposals with some aims; for the research to be properly monitored; and for there to be tolerance and fl exibility in funding towards R&D that doesn’t produce the results that were hoped for, diff erent results from those that were expected, or might make a discovery with more time.
Source:
a. OECD, Frascati Manual 2002, OECD, p77
b. OECD, Frascati Manual 2002, OECD, p78
c. OECD, Frascati Manual 2002, OECD, p79
d. Calvert J and Martin BR, “Changing Conceptions of Basic Research?”, Science and Technology Policy Research, September 2001
e. OECD, Frascati Manual 2002, OECD, p79
f. Llewellyn Smith CH, “The Use of Basic Science,” European Organization for Nuclear Research (see http://public.web.cern.ch/public/en/
about/BasicScience1-en.html)
Indonesia: Research & Development Financing42
Improving Indonesia’sR&D Public Financingfor the Future
V.
Photo by: Curt Carnemark
Indonesia: Research & Development Financing44
Improving Indonesia’s R&D Public Financing for the Future
In order for Indonesia to achieve its high ambitions for R&D over the next decade or so, an increase in
public funding is needed. The Indonesian government has outlined a strategy for the country’s economic
growth and has identifi ed R&D and S&T as important sources of future growth. Given Indonesia’s current
development, this is the right approach. However, currently Indonesia spends very little on R&D either in the
public or private sectors, and is likely falling behind its peers in several ways as a result. The commitment in the
government’s Masterplan to increase GERD to 3 percent by 2025 goes some way to meeting that gap. However,
there are also issues in the public R&D sector that need addressing before an increase in funding can be spent
effi ciently.
There is a need to improve state administration of budgeting and spending, which is aff ecting the
effi cient pursuit of R&D projects. There is a need to give special consideration to R&D projects where fl exibility
and predictability of funding are needed. There are signs that some of the main issues are being addressed,
but the emphasis on a single-year budget cycle is unlikely to be conducive to giving researchers the time and
stability they often need to pursue complex questions with unknown outcomes. This issue is further exacerbated
by the state-wide problem of delayed disbursement of public funds. Second, there is a need to rethink fund
allocation mechanisms in order to improve R&D output and outcome, and leverage private funding.
Currently, Indonesia’s R&D funding is largely characterized as “institutional funding” through the public budget
allocation system. Competitive R&D funding, a mechanism that has been adopted in many countries to incentivize
those R&D activities of the highest quality, is close to non-existent in Indonesia. In addition, the wide range of
organizations that receive a public R&D budget suggests that resources are distributed thinly. More importantly,
the budget allocation lacks innate incentives for better R&D results. A competitive funding pool for R&D can
introduce a new approach to public fi nancing, stimulating and benefi ting Indonesia’s scientifi c communities
at large. In addition, innovative mechanisms can be put in place, such as matching funds to leverage private
fi nancing for R&D.
In order to eff ectively use public R&D funding, a range of institutional reforms at public research entities
should be considered. Institutional autonomy and accountability should be at the center of these reforms.
Most of the R&D agencies and units in Indonesia function as part of the government offi ces and bureaucracies.
For example, the BALITBANG, which receive over three quarters of all government line-item funding, are under
the direct control of their respective ministries. The LPNK are relatively independent but cannot retain revenues
from private sector research contracts. While most of the accountability and autonomy reforms have started in
the leading public universities, regulations and operational guidelines for the new autonomy law need to be
prepared to guide the institutional reforms.
Indonesia also needs to create a richer “enabling environment” for the conduct of R&D. The Indonesian
Government can adopt schemes that encourage fi rms, research bodies and universities to conduct R&D, but
there is also scope for these bodies to conduct their own research independently, especially with regard to
companies and their pursuit of commercialgain through discoveries that they can protect and sell. R&D should
not be dependent on public incentives. In fact, without private initiative it is much harder for any country to make
the discoveries that it might want to.
Public Expenditure Review 45
Improving Indonesia’sR&D Public Financingfor the Future
A good business environment allows and supports private R&D, and Indonesia will need to make
improvements in this areain order to encourage more spending by fi rms. According to the Doing Business
index Indonesia is one of the hardest places in the world in which to start a fi rm: out of 185 economies it ranks
166th. This is a sign that engaging in commerce in Indonesia is harder than it needs to be, thus, in turn, hampering
the appetite for private R&D in the country. Furthermore, on the Doing Business indicator that looks at how easy it
is for a fi rm to get credit, Indonesia also performs poorly, ranking 129th. This is likely to be a signifi cant impediment
to greater R&D output, because in developing their products and services fi rms often need to borrow money
against the future revenues that they expect from their investigations. Without being able to raise the money for
research less of it is likely to be undertaken.
For the most part, a better-educated and higher-skilled workforce also boosts innovation. There is a
broad literature on how increases in human capital can help fi rms to develop more complicated products and
thus encourage more sophistication in an economy.65 However, Indonesia would need to look in detail at how
this can be achieved. At the very least, given that Indonesia needs to start increasing its R&D output, it is likely that
a workforce with more skills would support that aim and, in turn, induce more demand for highly educated staff .
Indonesian universities and public research bodies may also need to become more commercially
orientated. Businesses in countries such as Indonesia tend to draw on research fi ndings from universities
and such like because they often lack the internal capacity to conduct R&D. As such, the more awareness that
publicly-funded researchers have of commercial needs and the potential economic value of their discoveries,
the more that they can stimulate economic growth and further advance knowledge of goods and services that
have a valuable, practical use. There several ways to do this, such as using research agreements between fi rms
and public research bodies, or the employment of commercially aware staff in universities that can identify
discoveries made by university researchers that have the potential to be commercialized.
Strengthening the capacity and elevating the expertise of research staff is simply the foremost necessary
condition for Indonesia’s R&D sector to take off . The data on staffi ng levels and educational background
across the public R&D sector, and especially at the LPNK, showed that a given research body is likely to be bottom-
heavy, that is, to have a large number of staff with bachelor’s degrees and junior positions, and often likely to be
young. The corollary of this is that often only a minority of staff hold doctorates, meaning that research institutes
may only have a small pool of research expertise to draw on. Given the relatively weak postgraduate programs
particularly at doctorate level, Indonesia still needs to rely on broadening international collaborations to train
fi rst-rate researchers, and to gain critical mass in R&D fi elds, including building stronger postgraduate programs
in the long term. Strengthening human capacity has to go hand in hand with institution reforms in order to
adequately incentivize researchers to generate fi rst-rate outcomes and contribute to Indonesia’s development
eff ectively.
Also, despite the emphasis in this report on R&D in the S&T sphere, Indonesia also needs to pay attention
to the funding needs of social science research. Innovations in management, economics and other fi elds can
produce signifi cant effi ciency gains in the ways that fi rms operate, and greater knowledge in many of the social
science fi elds give policy-makers a better chance of producing the outcomes that they are looking for. However,
as with funding for S&T Indonesia would need to make changes to the administration of funds while also encour-
aging improvements in the capacity of researchers and research institutions.
65 Toner P, Workforce Skills and Innovation: An Overview of Major Themes in the Literature, OECD, 2011
Indonesia: Research & Development Financing46
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Public Expenditure Review 47
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Public Expenditure Review 49
Organization type Organizations Sub-organizations Function
Umbrella organizations
Presidential
administration
Agenda-setting
National Economic Committee Advice to the president
Ministries Ministry of Research and
Technology (KEMENRISTEK)
Agenda-setting
Ministry of Finance Budget-setting
20 other ministries
Agencies National Development
Planning Agency (BAPPENAS)
Responsible for development,
planning, and coordination in
the fi elds of economy manage-
ment, budgeting, information
management, education and
training, and other areas67
National Research Council
(DRN)
31 regional research councils, which are the
Research Council of North Sumatra Province;
the Research Council of West Sumatra Province;
the Riau Provincial Research Council; the Jambi
Provincial Research Council; the Bengkulu Pro-
vincial Research Council; the Lampung Provincial
Research Council; the Research Council of South
Sumatra Province; the Banten Provincial Research
Council; the Research Council of Jakarta Province;
the Research Council of West Java Province; the
Research Council of Central Java Province; the DIY
Provincial Research Council; the Research Council
of East Java Province; the Research Council of East
Nusa Tenggara Province; the Research Council
of West Nusa Tenggara Province; the Research
Council of West Kalimantan Province; the
Research Council of Central Kalimantan Province;
the Research Council of East Kalimantan Province;
the Research Council of South Kalimantan Prov-
ince; the Research Council of the North Sulawesi
Province; the Research Council of the Central
Sulawesi Province; the Research Council of South
Sulawesi Province; the Research Council of the
South East Sulawesi Province; the Gorontalo Pro-
visional Research Council; the Research Council
of Moluccas Province; the Research Council of
Papua Province; the Research Council of the Yog-
yakarta Region; the Research Council of the East
Java Region; the Palangkaraya Urban Research
Council; the Research Council of the Regency of
Kutai Kartanergara; and IPTEKS (Coordinator for
Research, Development and the Application of
Science in Bali).68
Provides advice to the minister
for KEMENRISTEK. Umbrella
body for the 31 regional
research councils69
Annex 1:Annex 1: Organizations Involved in R&D, Divided by Type66
66 Akil HA et al, Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011
67 See http://translate.google.co.uk/translate?sl=id&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.bappenas.
go.id%2F&act=url
68 See http://translate.google.co.uk/translate?sl=id&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.drn.go.id%2Findex.php
%3Foption%3Disi%26task%3Dview%26id%3D7%26Itemid%3D2&act=url
69 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p35
Indonesia: Research & Development Financing50
References
Organization type Organizations Sub-organizations Function
Agencies Regional Research and
Development Agency
Umbrella body for 42 regional,
and 27 provincial, research
and development agencies70
Provincial Research and Development Agency
of Nangroe Aceh Darussalam
Provincial Research and Development Agency
of North Sumatra
Provincial Research and Development Agency
of West Sumatra
Provincial Research and Development Agency
of Riau
Provincial Research and Development Agency
of Jambi
Provincial Research, Development and Statistics
Agency of Bengkulu
Provincial Research and Development Agency
of South Sumatra
Provincial Research and Development Agency
of Bangka Belitung Island
Provincial Research and Development Agency
of Lampung
Provincial Research and Development Agency
of Banten
Provincial Research and Development Agency
of West Java
Regional Research and Development Agency of
Bandung
Regional Planning Agency of Jakarta
Regional Planning Agency of Yogyakarta
Provincial Research and Development Agency
of Central Java
Regional Research and Development Agency of
Pati, Central Java
Regional Research and Development Agency of
Magelang, Central Java
Provincial Research and Development Agency
of East Java
Regional Research and Development Agency of
Madiun, East Java
Regional Research and Development Agency of
Kabupaten Madiun, East Java
Regional Research and Development Agency of
Ponogoro, East Java
Regional Research and Development Agency of
Magetan, East Java
Regional Research and Development Agency of
Pacitan, East Java
Regional Research and Development Agency of
Ngawi, East Java
70 Akil HA etal, Study on the Status of Science and Technology Development in Indonesia, LIPI Press, 2011, p24
Public Expenditure Review 51
Organization type Organizations Sub-organizations Function
Agencies Regional Research and
Development Agency
Regional Research and Development Agency of
Kediri, East Java
Regional Research and Development Agency of
Kabupaten Kediri, East Java
Regional Research and Development Agency of
Blitar, East Java
Regional Research and Development Agency of
Kabupaten Blitar, East Java
Regional Research and Development Agency of
Trenggalek, East Java
Regional Research and Development Agency of
Tulungagung, East Java
Regional Research and Development Agency of
Nganjuk, East Java
Regional Research and Development Agency of
Malang, East Java
Regional Research and Development Agency of
Kabupaten Malang, East Java
Regional Research and Development Agency of
Batu, East Java
Regional Research and Development Agency of
Pasuruan, East Java
Regional Research and Development Agency of
Kabupaten Pasuruan, East Java
Regional Research and Development Agency of
Lumajang, East Java
Regional Research and Development Agency of
Bojonegoro, East Java
Regional Research and Development Agency of
Tuban, East Java
Regional Research and Development Agency of
Lamongan, East Java
Regional Research and Development Agency of
Surabay, East Java
Regional Research and Development Agency of
Mojokerto, East Java
Regional Research and Development Agency of
Kabupaten Mojokerto, East Java
Regional Research and Development Agency of
Gresik, East Java
Regional Research and Development Agency of
Jombang, East Java
Regional Research and Development Agency of
Sidoarjo, East Java
Regional Research and Development Agency of
Pamekasan, East Java
Regional Research and Development Agency of
Bangkalan, East Java
Regional Research and Development Agency of
Sampang, East Java
Annex:Organizations Involved in R&D, Divided by Type
Indonesia: Research & Development Financing52
Organization type Organizations Sub-organizations Function
Agencies Regional Research and
Development Agency
Regional Research and Development Agency of
Sumenep, East Java
Regional Research and Development Agency of
Jember, East Java
Regional Research and Development Agency of
Situbondo, East Java
Regional Research and Development Agency of
Bondowoso, East Java
Regional Research and Development Agency of
Banyuwangi, East Java
Provincial Research and Development Agency
of West Kalimantan
Provincial Research and Development Agency
of Central Kalimantan
Provincial Research and Development Agency
of East Kalimantan
Provincial Research and Development Agency
of South Kalimantan
Provincial Research and Development Agency
of South Sulawesi
Provincial Research and Development Agency
of South East Sulawesi
Provincial Research and Development Agency
of Central Sulawesi
Provincial Research and Development Agency
of Gorontalo
Provincial Research and Development Agency
of North Sulawesi
Regional Planning Agency of Bali
Provincial Research and Development Agency
of NTB
Provincial Research and Development Agency
of NTT
Provincial Research and Development Agency
of Maluku
Provincial Research and Development Agency
of North Maluku
Provincial Research and Development Agency
of North Papua
National Innovation
Committee (KIN)71
Advice to the president
Government R&D
organizations
(independent of
ministries, LPNK)
Indonesian Academy of
Sciences (LIPI)
R&D
Agency for the Assessment
and Application of Technology
(BPPA)
R&D
National Institute of
Aeronautics and Space
(LAPAN)
R&D
71 Oey-Gardiner M and Sejahtera IH, “In Search of an Identity for the DRN,” AusAID, August 2011, p19
Public Expenditure Review 53
Organization type Organizations Sub-organizations Function
Government R&D
organizations
(independent of
ministries, LPNK)
Geospatial Information
Agency (BIG)
R&D
National Nuclear Energy of
Indonesia (BATAN)
R&D
National Standardization
Agency of Indonesia (BSN)
R&D
Nuclear Energy Regulatory
Agency of Indonesia
(BAPETEN)
R&D
Eijkman Institute R&D
Center of Meteorology,
Climatology and Geophysics
(BMKG)
R&D
Ministerial
R&D institutes
(BALITBANG)
Ministry of Foreign Aff airs R&D for the ministry
Ministry of Internal Aff airs R&D for the ministry
Ministry of Defense R&D for the ministry
Ministry of Law and Human
Rights
R&D for the ministry
Ministry of Energy and Mineral
Resources
R&D for the ministry
Ministerial
R&D institutes
(BALITBANG)
Ministry of Industry R&D for the ministry
Ministry of Trade R&D for the ministry
Ministry of Agriculture R&D for the ministry
Ministry of Forestry R&D for the ministry
Ministry of Transportation R&D for the ministry
Ministry of Marine Aff airs and
Fisheries
R&D for the ministry
Ministry of Manpower and
Transmigration
R&D for the ministry
Ministry of Public Works R&D for the ministry
Ministry of Health R&D for the ministry
Ministry of National Education R&D for the ministry
Ministry of Social Aff airs R&D for the ministry
Ministry of Religious Aff airs R&D for the ministry
Ministry of Communication
and Informatics
R&D for the ministry
Higher education
Oversight bodies Directorate General of Higher
Education
Responsible for administering
higher education institutions
Public universities 76 non-autonomous
universities and institutes
and seven autonomous
universities
Teaching and some R&D
50 universities with a
dedicated R&D institute, which
are:
Bogor Agricultural University R&D
Annex:Organizations Involved in R&D, Divided by Type
Indonesia: Research & Development Financing54
Organization type Organizations Sub-organizations Function
Public universities Bandung Institute of
Technology
R&D
Sebelas Maret Institute of
Technology, Surabaya
R&D
Airlangga University R&D
Andalas University R&D
Bengkulu University R&D
Brawijaya University R&D
Cenderawasih University R&D
Diponegoro University R&D
Gadjah Mada University R&D
Haluoleo University R&D
Hasanudin University R&D
Indonesia University R&D
Jambi University R&D
Jember University R&D
Jenderal Sudirman University R&D
Khairun University R&D
Lambung Mangkurat
University
R&D
Lampung University R&D
Malikessaleh University R&D
Mataram University R&D
Mulawarman University R&D
Gorontalo University R&D
Jakarta State University R&D
Makasar State University R&D
Malang State University R&D
Manado State University R&D
Medan State University R&D
Padang State University R&D
Papua State University R&D
Semarang State University R&D
Surabaya State University R&D
Yogyakarta State University R&D
Nusa Cendana State University R&D
Padjadjaran University R&D
Palangkaraya University R&D
Pattimura University R&D
Ganesha University of
Education
R&D
Indonesia University of
Education
R&D
Riau University R&D
Public Expenditure Review 55
Organization type Organizations Sub-organizations Function
Public universities Sam Ratulangi University R&D
Sebelas Maret University R&D
Sriwijaya University R&D
Sultan Ageng Tirtayasa
University
R&D
Sumatera Utara University R&D
Syiah Kuala University R&D
Tadulako University R&D
Tanjungpura University R&D
Trunojoyo University R&D
Udayana University R&D
Private universities Over 3,200 higher education
institutes
Teaching and some R&D
Private sector
Non-profi t national
research institutes
Foundation of
Telecommunication and
Informatics, Jakarta
Research into
telecommunications and
informatics
Indonesian Society for Non-
Destructive Testing, Jakarta
Quality testing of materials
using non-destructive
techniques, such as
radiography and ultrasound
Centre for Strategic and
International Studies (CSIS),
Jakarta
Policy research into domestic
and international issues
Institute for Social and
Economic Research, Education,
and Information (LP3ES),
Jakarta
Operation of social and
economic development
programs; policy research
Laboratory of Development
and Environment (Lablink),
Bandung
Research into environmental
and developmental issues
Indonesian Center for
Biodiversity and Biotechnology
(ICBB), Bogor
Research into public
awareness campaigns
on biodiversity and
biotechnology
Non-profi t international
research institutes
Center for International
Forestry Research (CIFOR),
Bogor
Research into forest
management in developing
countries
Bremen Overseas Research
and Development Association
(BORDA), Yogyakarta
Operation of projects on
poverty alleviation, protection
of natural resources and social
issues
Research Triangle Institute
(RTI), Jakarta
Research into both science
and social policies
International Center for Re-
search in Agroforestry (ICRAF),
Bogor
Operation of projects on
deforestation and agro-
forestry
International Rice Research
Institute (IRRI), Bogor
Research into, and projects
on, social and environmental
issues in the production of
rice
Annex:Organizations Involved in R&D, Divided by Type
Indonesia: Research & Development Financing56
Organization type Organizations Sub-organizations Function
Think tanks (examples
include)
Center for Strategic
International Studies72
R&D
Institute for Social and
Economic Research73
R&D
Leimena Institute74 R&D
Habibie Center75 R&D
Company research
centers
Sector Food and beverage
manufacturing
Number of companies with a research center: 6
Wood and cork manufacturing 2
Paper and paper products
manufacturing
3
Publishing, printing, and
media
2
Chemicals and chemical
products manufacturing
21
Rubber and plastics
manufacturing
4
Non-metallic mineral products
manufacturing
4
Basic metals manufacturing 3
Fabricated metals (not
machinery and equipment)
manufacturing
4
Machinery and equipment
manufacturing
7
Electrical machinery and other
manufacturing
3
Radio, television, and other
communication equipment
manufacturing
1
Motor vehicle and trailers
manufacturing
1
Other transport equipment
manufacturing
2
Furniture manufacturing 2
State fi rms Unknown
72 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p39
73 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p39
74 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p39
75 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p39
Public Expenditure Review 57
Organization type Organizations Sub-organizations Function
Research bodies,
groups and consortia
Consortia Indonesian Ganoderma
Consortium
Specializes in preventing the
spread of the ganoderma
disease in the palm industry.
Includes industry representa-
tives, research institutes, and
the Ministry of Agriculture
Indonesian Biotechnology
Consortium
A group of research institutes
working in the fi eld of
biotechnology; Includes
research institutes, universities
and industry representatives
North Sulawesi Mira Bahari
Consortium
A collaboration between
government and non-
government bodies in the
maritime industry
Eastern Indonesia Knowledge
Exchange (BaKTI)76
Jaringan Peneliti Kawasan
Timur Indonesia (JiKTI)77
Operates as a network for
researchers
Indonesian Regional Scientist
Association78
Research areas and
science parks
Science and
technology parks
Center of Science and
Technology (PUSIPTEK-
Serpong)
Currently subject to a
development plan. Consists of
35 research laboratories and
works under the coordination
of LIPI, BPPT, BATAN, and
two laboratories under the
Ministry of Environment
Cibinong Science Center
(CSC-LIPI)
Consists of institutes
conducting biology research
Bogor Botanical Garden (LIPI) Conducts research under the
guidance of LIPI into tropical
plants
Cibodas Botanical Garden Branch of the Bogor Botanical
GardenPurwodadi Botanical Garden
Eka Karya Botanical Garden
Solo Techno Park (STP) Facilitates links between
companies, academics, and
the government for regional
development
76 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p17
77 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p17
78 Karetji PC, “Overview of the Indonesian Knowledge Sector: Milestone 8: Final Report,” AusAID, 30th September 2010, p40
Indonesia: Research & Development Financing58
Organization type Organizations Sub-organizations Function
Agriculture
technology parks
Agro Techno Park Palembang Involved in the cultivation
and processing of agriculture
technology
Agro Techno Park Bahorok Involved in the cultivation
and processing of agriculture
technology
Agro Techno Park Minahasa
Utara
Involved in the cultivation
and processing of agriculture
technology
Agro Techno Park 50 Kota West
Sumatera
Involved in the cultivation
and processing of agriculture
technology
Agro Techno Park Jimbaran
Bali
Involved in the cultivation
and processing of agriculture
technology
Educational parks Jababeka Education Park, Kota
Jababeka
Promotes academic and
industry training among
children and young people in
the surrounding area
National parks Forty national parks Conservation areas that act as
places for scientifi c research
Science Museums PUSPA IPTEK 79 Museum for science
79 See http://www.thebiggestsundial.com/
Printed on recycled paper