The Financing of Education

Officially, the government is responsible for financing education. However, the education which is borne and carried out by the community is recognized as the responsibility of the institutions/individuals which/who administer the educational activities, although, in some cases, the government provides funds in line with the recognized regulations. Educational programmes’ activities founded by the government are mainly financed from the routine budget and the development budget. Other funding sources are international aid (loans and grants) and assistance from regional governments and the private sector.

The responsibility of the family in education is expressed in the form of a school fee paid to the State by each school to be reallocated back to the schools and educational institutions through the Education Funds Support. These funds provide the routine assistance for financing education at the middle and higher levels. Primary schooling is free and theoretically requires no fees.

Every educational unit is expected to manage its own admission process and finances. The participation of the local government, community and business in educational finance should be encouraged, in order not to burden the already limited funds of the central government. Government subsidies are playing an important role in balancing educational costs among universities and regions.

Viewed from the perspective of the Five-year Development Planning Periods (Repelita), the MONE budget expanded continuously. In the First Repelita (1969-73) it was 147 billion rupiah and by the Fifth Repelita (1989-93) the total had increased to 12.9 trillion rupiah. In the first year of the Sixth Repelita (1994-99) a total of 4.6 trillion rupiah was allocated. During the Fifth Repelita, 83.5% the routine budget of the MONE was utilized for salaries and expenditure related to employees. This concentration of the routine budget on employee-related expenditure resulted in limited availability of funds for goods procurement, administrative activities and educational facility development. Furthermore, only 2.1% of the total routine budget was allocated for maintenance.

During the Fifth Repelita, international loan assistance amounted to 51% of the total development budget. Assistance loans from the World Bank (International Bank for Reconstruction and Development) amounted to about US$457 million, and loans from the Asian Development Bank (ADB) totalled more than US$507 million. The World Bank is responsible for providing the largest assistance for developing education. The total amount of loans from the World Bank, utilized by the MONE during the First Twenty-five-year Long-term Development Plan—PJP I (1970-95), is US$1.54 billion. The total amount of loans from the ADB during the period 1975-95 is US$1.39 billion.