Editions : January-March 2015

JOURNAL | POINT OF VIEW By: Budiati Prasetiamartati , Fred Carden , Judith Ascroft

According to the World Economic Forum’s annual Global Competitiveness Report, Indonesia is improving. From 54th place between 2006 and 2007, the country today ranks 34th. At the same time, as the forum and others have noted, the country is lagging behind its regional counterparts in education, public health, labor market skills, infrastructure and other key indicators. So, while poised to be a major international player and one of the world’s leading economies, Indonesia faces the risk of a serious decline.

At the same time, Indonesia must be ready to enter the Asean Economic Community by 2015. The AEC sets out key goals: (a) a single market and production base; (b) a highly competitive economic region; (c) a region of equitable economic development; and (d) a region fully integrated into the global economy. Is Indonesia ready for this?

The central government in Jakarta recognizes the requirements for a competitive Indonesia. It requires high-quality human resources, an economic structure that is based on competitive advantage, advancement in science and technology, improved infrastructure and legal and bureaucratic reform. We argue in this essay that these building blocks require a systemwide approach to fostering a knowledge-based economy. Research can make practical contributions and be directed to the goal of producing evidence to be used by policy makers and industry to increase national competitiveness.

The purpose of having a stronger economy is to improve the well-being of the Indonesian people. But well-being is not only about poverty reduction; it is also about reducing inequality. The good news is that poverty is declining in Indonesia. But inequity is high and increasing. Few countries have come up with effective solutions to the social, political and economic problems created by inequity. Knowledge can play an important role in innovation, giving Indonesia the tools to address this challenge.

The largest economies in the 21st century are driven by a pool of highly skilled workers who are able to innovate both new products and approaches to working and managing work. Countries foster innovation by supporting new ideas, which can lead to competitiveness. In a 2013 study of research funding in Indonesia, Brodjonegoro and Green argued that there were many Indonesian scientists, researchers and engineers who could contribute to the nation’s competitiveness if the opportunities were greater and the systems supportive.

Building a knowledge economy is a systemwide challenge that requires strong vision and leadership from the administration of President Joko Widodo, as well as changes and innovations in a number of areas. Critical among these changes are a clear knowledge agenda at the national level that focuses on research for development as a critical priority; increased funding for research from both the public and private sectors; building a stronger base of knowledge workers through an increased focus on research skills within Indonesian universities; and changes in laws, policies and practice to support these moves.

A clear knowledge agenda

Clear leadership and direction from the government gives an impetus to address the systemwide issues that inhibit the use of evidence in decision-making and in making the shift to a knowledge economy. Developing a national knowledge agenda presents an opportunity to make a clear statement of support for the importance of research in building a strong and competitive nation. A national knowledge agenda will support innovation at all levels: in the public and private sectors and at the national and subnational levels.

Indonesia has a number of building blocks in place for a strong research system, but all of them, whether they be government or independent research agencies, are seriously underfunded and lack capacity. Attention is needed to identify the strategic knowledge needs of the government as well as the public, to foster both public and private engagement. A clear knowledge agenda would give focus to what changes are needed and direction for moving forward.

Funding for research

Research is seriously underfunded in Indonesia. On par with Lithuania, it stands at 0.08 percent of gross domestic product. This is in contrast to 2 percent in Singapore and 1.7 percent in Malaysia. In other middle-income countries, Brazil spends 1.21 percent of gross domestic product on research and India spends 0.81 percent. Increasing funding and the diversity of research organizations receiving funding will enhance both the value and utility of research. Funding through both the Indonesian government and independent research institutes increases both the range of options open to the country in decision-making and the potential for innovation and economic growth in new areas.

In most economies with heavy research spending, about two-thirds of resources come from the private sector. In Indonesia, the private sector’s contribution is less than 15 percent. Increasing research funding must also build on strategies for more effective private sector participation in research production.

Building a knowledge work force

Pumping in more money for research without attention to the pool of knowledge workers and knowledge institutions is not the answer, as money will go unspent or be poorly spent. Well-trained researchers are critical to building a strong research system. The new administration has already declared its view of the importance of education for all and of improving education delivery. It is crucial that this priority reaches up to and includes the post-secondary level. 

Building the community for a knowledge economy will require increasing the research skills of university graduates. This requires that priority be given to research within Indonesia’s university system and a higher status placed on research as a profession. Building on the strengths of both public and private universities to create research universities would enhance the capacity of research centers and think tanks to provide high-quality advice to policy makers and the wider community. It would enhance opportunities for innovation and multiply the options for employment generation and improved governance.

Knowledge workers make up the pool of talent that can provide effective research, whether as government employees, university faculties or on the staff of policy research institutes and civil society organizations. Strengthening the pool of researchers should complement efforts going on now through a range of collaborations between the government and international donors. As one example, the Knowledge Sector Initiative in Indonesia, which is jointly implemented by the governments of Indonesia and Australia, supports policy research institutes and civil society organizations to enhance the quality of their policy research and their ability to communicate that research effectively to policy makers and policy advocates, as well as supporting efforts to ensure the sustainability of these organizations. 

Addressing barriers

All of the changes advocated here are underpinned by the need to address the laws, policies and practices that currently inhibit the use of research. These include legislation that unnecessarily constrains the procurement of research by the government, taxation rules that do not support contributions to research and lack of incentives within universities to build research capacity and to carry out research. When research is funded, whether by government or donors, it is often underfunded, which detracts from the sustainability of research centers. Researchers within government organizations are rewarded for peer-reviewed publications, not for ensuring that the research is both relevant to policy needs and presented in ways that are helpful to policy makers. 

The private sector has a strong and abiding interest in regulations and policies that support business development (for example, research on regional variations in the investment climate can support improved policies on investment). In Indonesia’s highly decentralized economy, evidence is needed at both the national and subnational levels to support building a strong business investment climate, whether to expand the tourism industry, manufacturing and indeed many other sectors. 

Stronger knowledge systems

Indonesia needs stronger knowledge systems to support the use of evidence.

Systematizing the storage of evidence, to ensure both open access and ease of use, is critical to promoting the use of evidence. Complementing a stronger research system is the need for stronger knowledge management. 

It is a common complaint that past research cannot be found and access to evidence is restricted and poorly organized. The need for better storage and access to research that has already been conducted is urgently required in Indonesia. New information technologies make this easier than it was in the past, but careful thinking on structure and access issues is crucial. The systems that are put in place should make evidence available where it is most needed and will be used. A range of users and uses should be considered: planners, national and subnational governments, policy analysts, researchers and communities. Increasing skills to use evidence in identifying and defining solutions is an important complement to the development of better systems of storage and access.


Jokowi’s administration is rightly focused on building the infrastructure Indonesia needs to strengthen its economy, whether it be roads, ports, railways, connectivity or a host of other major projects. The evidence that can support these undertakings also needs infrastructure – of qualified human resources and support systems at the national and local levels.

This is not a short-term set of problems that are easily and quickly resolved.  But for Indonesia to be globally competitive and a major economic player, it is critical that it invest now in building the knowledge infrastructure of well-qualified knowledge workers, stronger systems for integrating evidence into policy and innovation, and more accessible pools of evidence. These are essential ingredients for a sustainable and competitive economy in the 21st century.

Building a knowledge-based economy cannot be achieved by merely addressing one of these challenges. Rather, it calls for systemwide approaches that stimulate debate and action on multiple fronts. The Knowledge Sector Initiative is one such contribution to building a strong knowledge-based economy that assists Indonesia in fulfilling its potential as a leading economy in the 21st century.



Budiati Prasetiamartati, Fred Carden and Judith Ascroft are with the Knowledge Sector Initiative, a program by the governments of Indonesia and Australia to improve the lives of Indonesians through quality public policies that make better use of research, analysis and evidence (www.ksi-indonesia.org). The views expressed are the authors’ alone.

Please login to leave a comment

Related Articles

The News, But Shorter, Delivered straight to your inbox

By signing up, you agree to our Privacy Policy. And agree to data transfer policy.