The number of places available within Indonesia’s leading academic institutions is severely limited with only 20% of applicants finding places. With the rising income of Indonesia’s middle class, increasing numbers of parents are choosing to send their children abroad for higher education with an estimated 40,000 Indonesian students abroad in 2010 according to the Deputy Minister of National Education with 17,000 of those in Australia. Parents who can afford the fees send their children abroad for them to receive not only good quality education, but also to learn English within an international environment.
Studying abroad is out of reach for the majority considering the cost of tuition and living expenses and it can be a cultural upheaval in a country where being close to the family and community is still of great importance. There is therefore an opportunity for international universities to set up branch campuses that offer the same level of education and resulting qualifications. Other countries have been very active in attracting foreign universities to set up such branches such as in Qatar and Malaysia where incomes are far higher than Indonesia but where student numbers are a fraction of Indonesia’s total tertiary education population.
Foreign universities have faced a challenge to set up in the country in obtaining the necessary licenses and have been discouraged by the National Education Law that prohibits foreign owned, for profit educational institutions. Only a handful of foreign universities can be found in Indonesia including Australia’s Monash University and the Melbourne Institute of Business and Technology. In lieu of the publication of the Negative Investment List in April 2010, it was hoped that changes would be made to the laws governing investing in education to encourage more foreign universities to set up in the country and bring Indonesia closer to meeting its WTO-GATS commitments, namely the fourth mode of delivery of borderless education through ‘commercial presence’. The Law 09/2009 created the BHP form that all universities had to take which was designed to turn educational institutions into independent, corporate entities. It was also intended to attract foreign universities to the country which brought mixed reactions from the academic community. This law was overturned in March 2010 and the Negative Investment List had to be amended to meet this. Therefore, the way in which universities can set up is still limited as part of the country’s efforts to encourage partnering with existing local universities.
Universities can set up as a non profit institution subject to a special license, and can do so with 100% foreign ownership as per the 2010 revisions to the Negative Investment List. To offer commercial, for profit services; such institutions can set up a company with a local partner that provides services to the education sector such as teacher training, research and academic advisory.
Investment opportunities can be found in non formal education that offer specific concentrations such as language schools, ICT and hospitality training. Language schools in particular for English and Mandarin Chinese are in high demand. The Negative Investment List has increased the permitted foreign ownership in non formal education by up to 49% from 45% previously.
Partnering with a local institution is the most effective way of entering the Indonesian higher education market and has been the preferred method in the past by numerous centres of higher learning from all over the world. It is also arguably the most beneficial way for Indonesian universities to reap the benefits from higher standards of teaching and absorb the best practices implemented by foreign counterparts.
The education sector in Indonesia offers attractive opportunities for investment given the limited number of places available in the state universities and the growing trend of private universities. This trend has not been seen as strongly within primary and secondary schools as the government’s education strategy and spending have been more focused towards education at this level and is in theory free of charge. The private primary and secondary schools that have been set up have mainly been to cater to expatriates in the form of international schools, as opposed to the local market. Higher education presents the most attractive opportunities for investment as the market is comfortable with paying for private education at the tertiary level and the enrolment level is still comparatively low at 23.5% in 2009. However setting up as a single entity in the form of a foreign university or branch campus is a challenge in light of non-profit form that universities must take so joint degree and twinning programs are preferred.
The Negative Investment List 2010 as detailed below illustrates how foreign investors can engage in the education sector. For any form of formal education, a special license is required and must be obtained from the National Education Ministry.
Extract of Negative Investment List 2010
The 2003 Law 20 on the National Education Sytem 
Global Business Guide Indonesia - 2012
Number of Tertiary Education Institutions: 4,445 (2016)
Type: 91.5% Private, 8.5% Public
Students in Higher Education: 4,941,574 (2016)
Net Enrolment Rate in Tertiary Education: 22% (2014)
Relevant Law: Higher Education Law No. 12 of 2012 provides universities with the autonomy to set their own tuition fees and authorising the set up of foreign universities in partnership with Indonesian institutions.
Education in Indonesia: Overview
Business Education in Indonesia
Cooperating with Industry on Education & Research
Addressing the Brain Drain in Indonesia
Islamic Finance & Business Education
Ensuring Quality over Quantity in Higher Education
Creating World Class Universities
Understanding the Negative Investment List
digg
