74619 Indonesia: Research & Development Financing Human Development East Asia and Pacific Region THE WORLD BANK 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 findings, interpretation and conclusion expressed herein do not necessarily reflect 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 Report No. 74619-ID Indonesia: Research & Development Financing Human Development East Asia and Pacific Region Acknowledgments The team is grateful to officials 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 verified 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 first draft), and Siwage Negara (Operations Officer). Dyah Kelasworo Nugraheni provided the most efficient 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 financial support of AusAid Indonesia. ii Indonesia: Research & Development Financing 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 Geofisika (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 Public Expenditure Review iii 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, Scientific and Cultural Organization UNIDO United Nations Industrial Development Organization USD United States Dollars USPTO United States Patent and Trademark Office iv Indonesia: Research & Development Financing 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 Tables Table 1 Knowledge Economy Index Rankings, Select Countries, 2012 8 Table 2 Scientific and Technical Journal Articles, Indonesia and Select Countries, 1999–2009 9 Table 3 Scientific Papers and Citations of Authors from Select Countries, 1999–2009 9 Table 4 Publications by Major Scientific Field (percent), 2008 10 Table 5 English-Language Scientific 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 Office and in the United States, 2002–2010 12 Table 8 Indonesian Patent Applications Granted at the European Patent Office 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 Public Expenditure Review v 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 Figures Figure 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 Pacific 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 vi Indonesia: Research & Development Financing Executive Summary 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 financial 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 figure 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 significant 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 flows 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 inflows are often portfolio investments rather than foreign direct investment. Hence, quick withdrawals of capital can affect domestic industries through fluctuations 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 affect 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 effect 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 effects of the trade agreement on Indonesia, the country might enjoy benefits 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 flexible 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 fields, to support effective 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 financing and institutional issues and how, if necessary, these might be addressed. 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 Public Expenditure Review vii Indonesia’s R&D sector has some way to go to gain global significance. 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 scientific and technical journals, a level far behind places such as Malaysia (1,351) or Singapore (4,187). This low level of activity also has effects 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 significantly, 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 different international comparisons. For example, between 2000 and 2006 the number of patents filed 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 filings rose from 8.8 to 43.41. Countries such as China and Thailand also showed significant 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 efforts 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 specifies 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 specific 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 figures (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 firms, 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 firms 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 viii Indonesia: Research & Development Financing Executive Summary in their given fields, 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 financing has constraining effects on R&D because of the investigative nature of research. Firstly, an emphasis on single-year budgeting makes it difficult for R&D institutes that rely on government funding to plan. Without a multi-year view it is difficult 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 first year. Secondly, the necessity to achieve a research outcome within a given financial year induces further caution over which research topics to pursue. Researchers may tend to pick less significant 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 final 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 insignificant role of contract funding would also suggest low usage of competitive financing. Where line-item funding is used, the demands of administering and tracking the flow of funds is likely to require high levels of specification 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 diversified. 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 different 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 reflects the balance of R&D expertise, although this may also reflect the preference given to the leading public universities.11 The low R&D human resource base is also a significant constraint to the effective 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. Staffing at the LPNK is also inflexible, 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 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 Public Expenditure Review ix 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 identified 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 efficiently. There is a need to improve the state administration of budgeting and spending, which is affecting the efficient pursuit of R&D projects. There is a need to give special consideration to R&D projects where flexibility 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 financing, stimulating and benefiting Indonesia’s scientific communities at large. In addition, innovative mechanisms can be put in place, such as matching funds to leverage private financing for R&D. In order to effectively 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 offices 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 staffing 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 first-rate researchers and to gain critical mass in R&D fields, 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 first-rate outcomes and contribute to Indonesia’s development effectively. x Indonesia: Research & Development Financing I. Introduction Photo by: Nugroho Nurdikiawan Sunjoyo Introduction How much Indonesia spends on R&D, where it spends it, and how it spends it, will affect 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 benefit of the growth is shared by the Indonesian people and contributes to poverty reduction, there is a need for effective public policies. To become more innovative and effective in economic and social development, Indonesia will need to make sure that its R&D efforts, both public and private, are well-managed and sufficiently 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 affect 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 defined 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 financing 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 find out how much is being spent; to find 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 efficiency of public spending. 2 Indonesia: Research & Development Financing II. R&D in the Context of Indonesia’s Economic Development Photo by: Jerry Kurniawan 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 financial crisis of 2008–2009 affected 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 financial crisis. It also compares well to the performance of some of its regional peers.13 However, in the five 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. Figure 1 GDP Growth (Annual Percentage Change) 2002–2010 7 6 Percentage change 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year Source: World Bank data (http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG) 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 firms expand, consolidate and pursue efficiency gains, these firms also tend to use internal or informal financing methods, thus meaning that they are somewhat sheltered from economic problems elsewhere.16 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 4 Indonesia: Research & Development Financing 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 financial crisis.17 TFP helps to determine economic expansion because a country that is more efficient 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 figure 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 benefits 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 reflective 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 affect 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 suffer 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 flows 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 flows.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 benefits in that it can reduce the cost of borrowing and sometimes bring with it expertise and job creation, if the inflows 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 affecting domestic industries. In the second quarter of 2011, capital and financial account inflows 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 Public Expenditure Review 5 One of the most significant opportunities that Indonesia has is the growth and prospects of its region, which give Indonesia substantial scope to profit 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 effect. It eliminates tariff barriers on approximately 6,600 products in a variety of industries.26 According to analysis of the likely effects of the trade agreement on Indonesia, the country might enjoy benefits 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 benefit, 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 flexible 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 fields, to support effective 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 field this PER pays particular attention to state policy and its effects. As the purpose of a PER is to consider the efficiency 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 benefits of greater R&D activity that need to be kept in mind. For example, a well-educated workforce that can use research findings from a variety of fields 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 scientific 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 difficult to measure. For example, the study of management is a social science and has helped many firms around the world make significant efficiency gains in their operations – the “just in time” approach in manufacturing and logistics being a good example. Policy-making can also benefit from “innovations” (more knowledge) in fields 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 6 Indonesia: Research & Development Financing III. Indonesia’s R&D Performance Photo by: Athit Perawongmetha 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 Global Economic Innova- Educa- Country KEI KI ICT rank incentive regime tion tion 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 benefits that come with greater investigation and discovery in the natural and social sciences. These benefits 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 finding that was motivated by a desire for private gain can increase competition in a market, thus forcing other firms to invent new things and increasing overall welfare. There is a broad debate on the effects of R&D on economic growth and, in particular, whether research can be divided into different 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 8 Indonesia: Research & Development Financing Indonesia’s R&D Performance Indonesia’s output of articles in scientific or technical journals is low. In 2009, Indonesian scientists published only 262 articles in these fields (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 scientific 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 Scientific 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 Scientific 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 Public Expenditure Review 9 Table 3 shows that between 1999 and 2009, Indonesian scientific 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 scientific research. Finally, what is being produced has tended to be concentrated in the fields of biology, biomedical research, and clinical medicine, as shown in Table 4. Problems such as a low level of capacity have inevitable effects on the output of the social sciences sector. Regarding social science fields, 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 sufficient 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 scientific articles published by Indonesian scientists and their local peers. Table 4 Publications by Major Scientific Field (percent), 2008 Scientific Field Country Biomedical Clinical Earth and Engineering and Biology Chemistry Mathematics Physics research medicine space technology Indonesia 23.7 12.8 7.1 22.8 13.8 12 2.1 5.7 Source: UNESCO, UNESCO Science Report 2010, p443 Figure 2 Average Annual Growth Rate in the Number of Foreign Scholars in the United States, 1997–2007 10 9 8 7 Percent 6 5 4 3 2 1 0 India China Indonesia Brazil Total OECD Czech Estonia Russia Slovenia (1997-2004) (1997-2004) Republic (1997-2004) (1997-2004) (1997-2004) Country Source: OECD, ‘Science and Innovation: Country Notes: Indonesia,’ in OECD, Science, Technology and Industry Outlook, OECD, 2010, p189 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 10 Indonesia: Research & Development Financing Indonesia’s R&D Performance Table 5 English-Language Scientific Articles by Authors from Select Countries, 1998–2008 Year Growth Country Total 1998- 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 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 Figure 3 Resident Patent Filings per USD GDP, Select Countries, 2000–2010 120 100 Australia Resident patent filings China 80 per USD GDP Indonesia Japan 60 Malaysia 40 New Zealand Republic of Korea 20 Singapore Thailand 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year Source: WIPO Public Expenditure Review 11 The lack of broad capacity in the R&D system is also revealed by Indonesia’s inability to innovate significantly, 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 different international comparisons. For example, between 2000 and 2006, the number of patents filed 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 filings rose from 8.8 to 43.41. Countries such as China and Thailand have showed significant progress in the same period. Figure 3 reflects this somewhat, as in comparisons of the number of filings against GDP, Indonesia’s performance has been stagnant while that of, say, China, has been improving significantly. Indonesian filings at specific patent offices also do not show any sign of significant recent improvement. Patents applied for and granted at patent offices abroad, particularly in the United States, are a good barometer of science and innovation activity as they reflect 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 firms 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 reflected in the applications to the European Patent Office. 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 five patents were granted each year. Unfortunately, this reflects 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 different angles. By looking at it from another position - the degree to which the country’s exports reflect technical advancement - it is possible to judge some of the direct economic effects of Indonesia’s R&D activity. Unfortunately, Table 9 shows that these effects 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 Pacific region fell from 33.1 percent to 26.4 percent. Table 7 Indonesian Patent Applications at the European Patent Office and in the United States, 2002–2010 2002 2003 2004 2005 2006 2007 2008 2009 2010 European Patent Office 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 Office and in the United States, 2003–2010 2003 2004 2005 2006 2007 2008 2009 2010 European Patent Office 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 12 Indonesia: Research & Development Financing Indonesia’s R&D Performance 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 & Pacific (all 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 income levels) East Asia & Pacific 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 (developing only) 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) 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 firms 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 different 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 finance or capacity, R&D efforts in the country are struggling to produce many commercially viable goods or services. Table 10 Manufacturing Value-Added (MVA), Indonesia and Select Country Groups, Assorted Years (percent) Indicator Year/Period Indonesia ASEAN Developing countries 2000-2005 5.16 5.85 6.74 MVA, average annual real growth rate (%) 2005-2010 4.15 3.36 7.06 Non-manufacturing GDP, average annual 2000-2005 4.58 4.72 real growth rate (%) 2005-2010 6.28 5.3 5.88 2000 216.28 353.35 254.2 MVA per capita, at constant (2000) US$ 2005 258.19 426.44 322 prices 2010 302.26 488.04 430.09 2000 27.75 27.97 19.47 MVA as percentage of GDP, at constant 2005 28.08 28.65 20.57 (2000) US$ prices 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. Public Expenditure Review 13 Table 11 Indonesia’s Share of MVA and Manufacturing in World Output, Assorted Years In total of Indicator Year/Period Indonesia ASEAN Developing countries 2000 27.38 3.80 0.79 MVA (share in %) in constant 2000 US$ 2005 26.91 3.55 0.87 2010 27.33 3.08 1.00 2000 11.72 3.55 0.83 Manufactured exports (share in %) 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==) 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 different 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. 14 Indonesia: Research & Development Financing IV. Government R&D Policy and R&D Financing Photo by: Nugroho Nurdikiawan Sunjoyo 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 efforts 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 five categories: incentives for basic research; incentives for applied research; the use of S&T in industry; the diffusion 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-specific development programs.32 Today, the Indonesian government has extensive plans for the advancement of R&D in the country. Since the Asian financial 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 scientific 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 specific sub-objectives with activities and outputs defined. 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 efficiency 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. Specific policies for achieving this change include enhancements in the capacity of public R&D institutes and similar bodies in order to increase the flow 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 16 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing 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 Masterplan: Acceleration and Expansion of Functions as a legal framework following the enactment of policies Indonesia: Economic Development 2011–2025 Presidential Decree No. 32/2011 National Long-Term Development Plan (2005–2025) Specifies seven priority areas for the development of R&Da Law No.18 (2002) on the National System of Seeks to increase S&T capacity in order to improve national Research, Development and Application of Scienceb competitiveness Medium-term Medium-Term Development Plan (2010–2014) Seeks to improve the national innovation system through policies 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 Acceleration of improvements in R&D and technology Indonesian Economic Development (2011-2014) capacitye Annual and other Presidential instructions and government Writing of, and changes to, relevant legislation and guidelines policies instructionsf Departmental plans, annual work plans, and Short-term plans for the application of longer-term policies thematic plans 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 Diffusion 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 specifies 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) efforts 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 field 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 Public Expenditure Review 17 Table 13 Breakdown of the S&T Policy Approach in the Masterplan for the Acceleration of Indonesian Economic Development (2011–2014) Industries subject to policy Funding Policies Objectives to 2025 attention Establishment of an R&D fund Introduction of an incentive Basic industries such as food, Strengthening of intellectual equal to around 1% of GDP until and regulation system that energy, and water property rights in fields that 2014, with a gradual increase in emphasizes innovation and directly affect economic growth funds to 3% of GDP by 2025 the use of products made in Creative industries such as Indonesia those concerned with culture Improvement in the Increase in funds to come from and ICT infrastructure of S&T parks to the government, state-owned Improvement in the quality of international standards enterprises and the private human resources as well as their Local industries, especially S&T sector flexibility and industrial parks Achievement of self-sufficiency in food, medicine, energy, and Development of innovation Strategic industries such as clean water centers to support small- and defense and transportation medium-sized industries Double exports from the creative industries Development of regional innovation clusters Increase in the proportion of advanced goods in production Improvement in the and improve the value added remuneration system for produced by the economies of researchers all regions Improvement in the Achievement of self-sufficiency infrastructure of the R&D system in the defense, transportation, and ICT industries Development of a funding and funding management system Achievement of sustainable that furthers innovation 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 first 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 firms 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 flow 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 effectiveness 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 fisheries 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 18 Indonesia: Research & Development Financing Government R&D Policy and 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 effective 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 fields 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 financing of the R&D sector, as well as the way that the financing is administered, will play a significant 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 financial 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 effects 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 significant 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 Public Expenditure Review 19 Figure 4 GERD, Selected Regions, 1996–2009 3,0 R&D Spending as a Percentage of GDP 2,5 East Asia & Pacific 2,0 Europe & Central Asia (GERD) 1,5 European Union High Income OECD 1,0 Latin America & Carribean 0,5 0,0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: World Bank (see http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS/countries/1W?display=default) Indonesia’s GERD has only been growing insignificantly. 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 fluctuated 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 financing, 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 flow of spending) and thus the level that Indonesia might target; two, for examining how much science, technology, and other types of research might have benefited from the long-run accumulation of spending over time. This difference is important to keep in mind as increases in the flow 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 Pacific Region that are considered to be developing. The data are drawn from different (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 different levels of development require different 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 suffer 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 benefits over time. In several reasonable comparisons, Indonesia’s level of GERD is significantly lower than that of its neighbors and economic competitors. 45 Source: World Bank (see http://data.worldbank.org/indicator/NY.GNP.PCAP.CD) 20 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing Figure 5 GERD, Indonesia, Three Years of Comparable Data 0.10 0.08 0.06 GERD 0.04 0.02 0.00 2000 2001 2009 Indonesia 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 Pacific Region, Most Recent Years 1.5 1.2 0.9 GERD 0.6 0.3 0.0 Cambodia China Indonesia Lao PDR Malaysia Mongolia Myanmar Philippines Thailand Vietnam 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 4.0 3.5 3.0 2.5 GERD 2.0 1.5 1.0 0.5 0.0 Australia Indonesia Japan Korea, Rep New Zealand Singapore Country Source: World Bank (see http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS/countries/1W?display=default) Public Expenditure Review 21 In terms of the sources of its R&D financing, Indonesia also differs 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 financing 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 financing was 23.5 percent, the level of business financing 71.7 percent, and the levels of activities accounted for by both was 18.2 percent and 73.2 percent respectively. Table 14 Indonesia GERD by Known Table 15 Indonesian GERD by Known Locus Source of Financing (percentage), of Activity (percentage), Available Available Years Years Year Year Source Source 2000 2001 2000 2001 Government 72.7 84.5 Government 69.8 81.1 Higher education 1.1 0.2 Higher education 3.9 4.6 Business 25.7 14.7 Business 26.3 14.3 Private non-profit Unknown Unknown Private non-profit Unknown Unknown Foreign Unknown Unknown Foreign Unknown Unknown Other 0.5 0.7 Unknown Unknown Unknown Sources: UNESCO (http://stats.uis.unesco.org/unesco/TableViewer/ Sources: UNESCO (http://stats.uis.unesco.org/unesco/TableViewer/ document.aspx?ReportId=136&IF_Language=eng&BR_Topic=0) document.aspx?ReportId=136&IF_Language=eng&BR_Topic=0) Indonesia also has a skewed balance of R&D funding compared to its advanced neighbors. Table 16 shows the balance between R&D financing by the government and the private sector in the most advanced countries in the East Asia and Pacific Region. Between 1998 and 2008, New Zealand had the highest proportion of government financing, with 50.6 percent in 1999. In contrast, the highest proportion of private financing 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 benefits of R&D in the development of goods and services. Because this approach is significantly 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 benefits from higher spending that the government is now targeting. 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 22 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing Table 16 R&D by Source of Financing (percentage), Selected Neighboring Countries, 1998–2008 Year Source and country 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 scientific matters. For the seven independent research institutes (LPNK), each plays a specific 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 field. 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 significant 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 Public Expenditure Review 23 Some recent research has delineated the universities according to their status and quality of research.49 Only about five 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 specifically 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 fields 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-profit research centers. 65 firms 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 financing and expertise is spread through all of the government ministries, the LPNK, the different 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 Number of companies with Percentage of sector companies with Sector a research center 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 24 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing a Table 18 Organizations Involved in R&D, Divided by Type Organization type Organizations Function Umbrella organizations Presidential administration Agenda-setting Ministries Ministry of Research and Technology Agenda-setting (KEMENRISTEK) Ministry of Finance Budget-setting 20 other ministries Departmental R&D Agencies National Development Planning Agency Responsible for development planning and coordination in (BAPPENAS the fields 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 scientific matters Government R&D Seven institutes R&D organizations (independent of ministries, LPNK) Ministerial R&D institutes 22 ministries with R&D institutes R&D for the ministries (BALITBANG) 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-profit national research Six research institutes institutes Non-profit international Five research institutes research institutes Company research centers 65 companies with a research center in 15 different sectors Think-tanks R&D State firms 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 scientific 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 scientific 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/ Public Expenditure Review 25 All of the organizations concerned with R&D exist within broader developments that the state administration is undergoing. Indonesia’s public administration has significantly improved in recent years, but weaknesses still exist. On the World Economic Forum’s competitiveness index, Indonesia ranks 47th on “effectiveness 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 financing both reflects and exacerbates some of the broad issues in public administration. The first 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 confirmation and execution until April effectively shortens the execution period by four months each financial 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 efforts to improve spending administration. In 2008 the government allowed procurement procedures to start in the few months before the beginning of a new financial 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 find, 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 financing has constraining effects on R&D because of the investigative nature of research. Firstly, an emphasis on single-year budgeting makes it difficult for R&D institutes that rely on government funding to plan. Without a multi-year view it is difficult 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 first 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 26 Indonesia: Research & Development Financing Government R&D Policy and 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 financial year as a result of disbursement issues), and it is difficult 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 financial 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 significant 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 effectiveness of public spending generally justifies the demand for results, but it hampers the uncertain, investigative nature of R&D.55 Again, a cross-sector issue with state administration is affecting R&D in a manner specific 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 affect the R&D sector more significantly in future years, according to the latest available data, a great deal of the money for R&D comes from spending items identified in the state budget rather than from private financing 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 significant 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. 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 ) Source: LIPI 55 Corruption is a significant 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 firms, 86 percent said that they had to make informal payments and bribes to officials, and that these averaged 6.1 percent of firms’ annual production costs. The firms also said that visits by government officials were frequent, with visits from policy and military officers particularly frequent. In recent years the government has dedicated more money to fighting 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). Public Expenditure Review 27 Table 19 R&D Funding Distribution, 2006 and 2009 Higher education (public Government (IDR) universities only)(IDR) Year 2006 2006 2009 Public BALITBANG BALITBANGDA LPNK universities Funds from central government 1,342,200,000,000 35,100,000,000 319,800,000,000 57,450,957,000 277,408,230,978 (non-higher education sources) Funds from central government (the 145,642,883,000 1,153,388,724,795 Directorate for Higher Education) 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-profit 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-profit 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-profit 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 profit 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 specific 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 specific and not devolved to a dedicated body. 28 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing The insignificant role of contract funding would also suggest low usage of competitive financing. 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 flow of funds is likely to require high levels of specification 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 difficult to say for certain whether these contracts are all awarded based on competitive selection. The budgets of the different agencies involved in R&D reflect, 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 scientific investigation or development and application of knowledge that a pure scientific 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 different 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 specified, 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. Figure 9 Non-Higher Education Central Government R&D Funding by Destination, 2006 BALITBANGDA LPNK BALITBANG Public Universities Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 56 OECD, Governance of Public Research: Toward Better Practices, OECD, 2003, p22 Public Expenditure Review 29 Figure 10 BALITBANG Funding by Source, 2006 Domestic Research Contracts Foreign Research Contracts Funds from Central Government Other (Non-higher Education Sources) Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 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 financing 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 reflect the dominance of central government funding over other methods. Figure 11 LPNK Funding by Source, 2006 Domestic Research Contracts Foreign Research Contracts Other Funds from Central Government (Non-higher Education Sources) Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 30 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing Figure 12 LPNK funding by domestic research contracts Private/Industry Non-for-profit Organization Government (Discretionary Funds) Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 Figure 13 BALITBANGDA Funding by Source, 2006 Domestic Research Contracts Funds from Central Government (Non-higher Education Sources) Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 Figure 14 Public Universities’ Funding by Source, 2009 Domestic Research Foreign Research Contracts Contracts Domestic Grants Funds from Central Government (Non-higher Education Sources) Funds from Central Government (The Directorate for Higher Education) Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 Public Expenditure Review 31 Figure 15 Public Universities’ Funding by Source, 2006 and 2009 1.6 1.4 Funds from Central Government RUP (in Billion) 1.2 (The Directorate 1.0 for Higher Education) 0.8 0.6 Funds from 0.4 Central Government 0.2 (Non-higher Education 0.0 Sources) 2006 2009 Year Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 However, the funding of public universities appears to be different to that of other organizations that receive public financial support for R&D. The proportions accounted for by the different 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 significant 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 difficult to know whether this affects 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 different 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 reflects the balance of R&D expertise, although this may also reflect 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 fisheries, 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. 57 PT. Trans Intra Asia (TIA), Development of Strategies for University-Industry-Government Partnership, PT. Trans Intra Asia (TIA), August 2012 32 Indonesia: Research & Development Financing Government R&D Policy and 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 beneficiaries, 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 Public Expenditure Review 33 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 findings 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 fulfilling some of these roles with great effectiveness, despite the fact that it is thought to be the only state body with any significant 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 suffered 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 fieldwork or collect data. Furthermore, linkages between LIPI and work conducted in its field 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 figures on R&D funding, budget allocations are more common than competition-based funding. Across the social science sector there also appears to be insufficient 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-financed institution, LIPI is barred from bidding on research contracts on offer from the private sector.62 Table 21 LIPI Social Science Research Projects by Type of Funding, 2010 Area of research Funding type Total Culture and Regional Politics Economics Demography society 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 34 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing 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 reflected 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. 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. 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 Public Expenditure Review 35 Figure 16 Distribution of LIPI Staff by Age Group, Assorted Years 1600 1200 Number 800 400 0 < 35 36-40 41-45 46-50 51-55 56-60 61-65 Age Source: LIPI Figure 17 Distribution of LIPI Researchers by Education Level, Assorted Years 800 600 Number 400 200 0 Doctoral Master’s Bachelor’s Associate’s Degree/ Diploma Level of Education Source: LIPI Figure 18 LIPI Staff by Level of Seniority, Assorted Years 400 Number 300 200 100 0 Research Young Researchers Principal Active Research Assistants Researchers Researchers Professors Level of Responsibility Source: LIPI The formal career path in the public R&D institutes also adds to the difficulty 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 offers better benefits 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 financial benefits in other posts. This may go some way to explaining the staff distribution at the LPNK. 36 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing The funding and employment conditions at the LPNK and the public universities affect 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. Figure 19 R&D Sector Researchers by Organization Type, Assorted Years 25000 Number of Researchers 20000 15000 10000 5000 0 LPNK Universities BALITBANG Other Organization Type Source: LIPI 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 Public Expenditure Review 37 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 field. Agricultural sciences shows by far the highest level of expertise, with more PhDs than the chemistry, life sciences, and physics fields combined. However, as with the level of expertise at the LPNK, the staff structure appears to be weighted towards junior members. In the 24 fields listed in Table 24, the number of researchers with only a master’s degree exceeds the number with a doctorate in all but three fields (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 Public Universities (2009) Field of Study 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 38 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing In economic terms, the quality of the research taking place and the positive effects it has for policy and growth are two of the key measures of effectiveness. 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 defining 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 final destination, and that there are structural and institutional questions over the quality of research and research bodies. However, the question of the final use of funds and their effect 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 reflect 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 difficult 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-offs over short-term and long-term research; the generation of knowledge versus its application; and the respective benefits of different types of funding.64 Figure 20 BALITBANG Funding by Type of Research, 2006 Experimental Development Basic Research Applied Research Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 64 OECD, Governance of Public Research: Towards Better Practices, OECD, 2003, p100 Public Expenditure Review 39 Figure 21 BALITBANGDA Funding by Type of Research, 2006 Experimental Development Basic Research Applied Research Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 Figure 22 LPNK Funding by Type of Research, 2006 Experimental Development Basic Research Applied Research Source: KEMENRISTEK, “Governmental R&D Survey,” KEMENRISTEK, 2006 Figure 23 Public Universities’ Funding by Type of Research, 2009 Experimental Development Basic Research Applied Research Source: Pappiptek-LIPI, “State University R&D Survey,” 2007–2010, Pappiptek-LIPI 40 Indonesia: Research & Development Financing Government R&D Policy and R&D Financing Box 1 The Boundaries between Basic Research, Applied Research, and Experimental Development It is often difficult to define different types of research, although there are authoritative guidelines on how to do so. The definitions 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 defines 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 specific 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 definitions appear straightforward and easy for policy makers to use, but there is significant disagreement among scientists as to which definitions 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 differs from other types of research. Some define it as research that is unpredictable in what it will find, 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 defining characteristic.d Delineating one type of research from another can also be difficult when a research program is ongoing and the same staff are working on different 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, finally, 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 first, 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 difficult to define into different types and thus for policy makers to manage. In funding R&D, a government might have several objectives, including the cultural benefits of knowledge, the greater welfare that might be gained for some members of a given society, or the financial profits 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 difficult 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 flexibility in funding towards R&D that doesn’t produce the results that were hoped for, different 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) Public Expenditure Review 41 42 Indonesia: Research & Development Financing V. Improving Indonesia’s R&D Public Financing for the Future Photo by: Curt Carnemark 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 identified 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 efficiently. There is a need to improve state administration of budgeting and spending, which is affecting the efficient pursuit of R&D projects. There is a need to give special consideration to R&D projects where flexibility 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 financing, stimulating and benefiting Indonesia’s scientific communities at large. In addition, innovative mechanisms can be put in place, such as matching funds to leverage private financing for R&D. In order to effectively 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 offices 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 firms, 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. 44 Indonesia: Research & Development Financing Improving Indonesia’s R&D Public Financing for 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 firms. According to the Doing Business index Indonesia is one of the hardest places in the world in which to start a firm: 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 firm to get credit, Indonesia also performs poorly, ranking 129th. This is likely to be a significant impediment to greater R&D output, because in developing their products and services firms 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 firms 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 findings 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 firms 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 staffing 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 first-rate researchers, and to gain critical mass in R&D fields, 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 first-rate outcomes and contribute to Indonesia’s development effectively. 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 fields can produce significant efficiency gains in the ways that firms operate, and greater knowledge in many of the social science fields 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 Public Expenditure Review 45 Bibliography Akil HA et al. 2011. Study on the Status of Science and Technology Development in Indonesia. Jakarta: LIPI Press. Asian Development Bank. 2010. Indonesia: Critical Development Constraints. Asian Development Bank, Manila. 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World Economic Forum, Geneva. 48 Indonesia: Research & Development Financing Annex 1: Annex 1: Organizations Involved in R&D, Divided by Type66 Organization type Organizations Sub-organizations Function Umbrella organizations Presidential Agenda-setting administration National Economic Committee Advice to the president Ministries Ministry of Research and Agenda-setting Technology (KEMENRISTEK) Ministry of Finance Budget-setting 20 other ministries Agencies National Development Responsible for development, Planning Agency (BAPPENAS) planning, and coordination in the fields of economy manage- ment, budgeting, information management, education and training, and other areas67 National Research Council 31 regional research councils, which are the Provides advice to the minister (DRN) Research Council of North Sumatra Province; for KEMENRISTEK. Umbrella the Research Council of West Sumatra Province; body for the 31 regional the Riau Provincial Research Council; the Jambi research councils69 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 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 Public Expenditure Review 49 References Organization type Organizations Sub-organizations Function Agencies Regional Research and Umbrella body for 42 regional, Development Agency 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 50 Indonesia: Research & Development Financing Annex: Organizations Involved in R&D, Divided by Type Organization type Organizations Sub-organizations Function Agencies Regional Research and Regional Research and Development Agency of Development Agency 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 Public Expenditure Review 51 Organization type Organizations Sub-organizations Function Agencies Regional Research and Regional Research and Development Agency of Development Agency 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 Advice to the president Committee (KIN)71 Government R&D Indonesian Academy of R&D organizations Sciences (LIPI) (independent of Agency for the Assessment R&D ministries, LPNK) and Application of Technology (BPPA) National Institute of R&D Aeronautics and Space (LAPAN) 71 Oey-Gardiner M and Sejahtera IH, “In Search of an Identity for the DRN,” AusAID, August 2011, p19 52 Indonesia: Research & Development Financing Annex: Organizations Involved in R&D, Divided by Type Organization type Organizations Sub-organizations Function Government R&D Geospatial Information R&D organizations Agency (BIG) (independent of National Nuclear Energy of R&D ministries, LPNK) Indonesia (BATAN) National Standardization R&D Agency of Indonesia (BSN) Nuclear Energy Regulatory R&D Agency of Indonesia (BAPETEN) Eijkman Institute R&D Center of Meteorology, R&D Climatology and Geophysics (BMKG) Ministerial Ministry of Foreign Affairs R&D for the ministry R&D institutes Ministry of Internal Affairs R&D for the ministry (BALITBANG) Ministry of Defense R&D for the ministry Ministry of Law and Human R&D for the ministry Rights Ministry of Energy and Mineral R&D for the ministry Resources Ministerial Ministry of Industry R&D for the ministry R&D institutes Ministry of Trade R&D for the ministry (BALITBANG) 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 Affairs and R&D for the ministry Fisheries Ministry of Manpower and R&D for the ministry Transmigration 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 Affairs R&D for the ministry Ministry of Religious Affairs R&D for the ministry Ministry of Communication R&D for the ministry and Informatics Higher education Oversight bodies Directorate General of Higher Responsible for administering Education higher education institutions Public universities 76 non-autonomous Teaching and some R&D universities and institutes and seven autonomous universities 50 universities with a dedicated R&D institute, which are: Bogor Agricultural University R&D Public Expenditure Review 53 Organization type Organizations Sub-organizations Function Public universities Bandung Institute of R&D Technology Sebelas Maret Institute of R&D Technology, Surabaya 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 R&D University 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 R&D Education Indonesia University of R&D Education Riau University R&D 54 Indonesia: Research & Development Financing Annex: Organizations Involved in R&D, Divided by Type 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 R&D University 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 Teaching and some R&D institutes Private sector Non-profit national Foundation of Research into research institutes Telecommunication and telecommunications and Informatics, Jakarta informatics Indonesian Society for Non- Quality testing of materials Destructive Testing, Jakarta using non-destructive techniques, such as radiography and ultrasound Centre for Strategic and Policy research into domestic International Studies (CSIS), and international issues Jakarta Institute for Social and Operation of social and Economic Research, Education, economic development and Information (LP3ES), programs; policy research Jakarta Laboratory of Development Research into environmental and Environment (Lablink), and developmental issues Bandung Indonesian Center for Research into public Biodiversity and Biotechnology awareness campaigns (ICBB), Bogor on biodiversity and biotechnology Non-profit international Center for International Research into forest research institutes Forestry Research (CIFOR), management in developing Bogor countries Bremen Overseas Research Operation of projects on and Development Association poverty alleviation, protection (BORDA), Yogyakarta of natural resources and social issues Research Triangle Institute Research into both science (RTI), Jakarta and social policies International Center for Re- Operation of projects on search in Agroforestry (ICRAF), deforestation and agro- Bogor forestry International Rice Research Research into, and projects Institute (IRRI), Bogor on, social and environmental issues in the production of rice Public Expenditure Review 55 Organization type Organizations Sub-organizations Function Think tanks (examples Center for Strategic R&D include) International Studies72 Institute for Social and R&D Economic Research73 Leimena Institute74 R&D 75 Habibie Center R&D Company research centers Sector Food and beverage Number of companies with a research center: 6 manufacturing Wood and cork manufacturing 2 Paper and paper products 3 manufacturing Publishing, printing, and 2 media Chemicals and chemical 21 products manufacturing Rubber and plastics 4 manufacturing Non-metallic mineral products 4 manufacturing Basic metals manufacturing 3 Fabricated metals (not 4 machinery and equipment) manufacturing Machinery and equipment 7 manufacturing Electrical machinery and other 3 manufacturing Radio, television, and other 1 communication equipment manufacturing Motor vehicle and trailers 1 manufacturing Other transport equipment 2 manufacturing Furniture manufacturing 2 State firms 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 56 Indonesia: Research & Development Financing Organization type Organizations Sub-organizations Function Research bodies, groups and consortia Consortia Indonesian Ganoderma Specializes in preventing the Consortium spread of the ganoderma disease in the palm industry. Includes industry representa- tives, research institutes, and the Ministry of Agriculture Indonesian Biotechnology A group of research institutes Consortium working in the field of biotechnology; Includes research institutes, universities and industry representatives North Sulawesi Mira Bahari A collaboration between Consortium government and non- government bodies in the maritime industry Eastern Indonesia Knowledge Exchange (BaKTI)76 Jaringan Peneliti Kawasan Operates as a network for Timur Indonesia (JiKTI)77 researchers Indonesian Regional Scientist Association78 Research areas and science parks Science and Center of Science and Currently subject to a technology parks Technology (PUSIPTEK- development plan. Consists of Serpong) 35 research laboratories and works under the coordination of LIPI, BPPT, BATAN, and two laboratories under the Ministry of Environment Cibinong Science Center Consists of institutes (CSC-LIPI) 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 Garden Purwodadi 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 Public Expenditure Review 57 Organization type Organizations Sub-organizations Function Agriculture Agro Techno Park Palembang Involved in the cultivation technology parks and processing of agriculture technology Agro Techno Park Bahorok Involved in the cultivation and processing of agriculture technology Agro Techno Park Minahasa Involved in the cultivation Utara and processing of agriculture technology Agro Techno Park 50 Kota West Involved in the cultivation Sumatera and processing of agriculture technology Agro Techno Park Jimbaran Involved in the cultivation Bali and processing of agriculture technology Educational parks Jababeka Education Park, Kota Promotes academic and Jababeka industry training among children and young people in the surrounding area National parks Forty national parks Conservation areas that act as places for scientific research Science Museums PUSPA IPTEK 79 Museum for science 79 See http://www.thebiggestsundial.com/ 58 Indonesia: Research & Development Financing Printed on recycled paper