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During the global financial crisis and the slowdown of the world economy, Indonesia maintained relatively high GDP growth, averaging 5.9% between 2009 and 2013. The government recognises the importance of innovation for maintaining strong growth.

Hot Issues

Hot Issues are major national STI policy priorities, as self-reported by countries in their responses to the OECD STIO 2014 policy questionnaire.

Improving returns and impact of science

The role of universities and PRIs in supporting innovation has gained increasing attention, and the Ministry of Education and Culture has mandated universities to develop research plans based on national priorities, their existing resources and future development strategies. Excellence in basic and applied research is seen as essential and support for collaborative research is provided. In order to support universities’ research capacity, their autonomy has also been strengthened.

Strengthening public R&D capacity and infrastructures

In carrying out the Master Plan for the Acceleration and Expansion of Indonesian Economic Development (MP3EI), the Ministry of Research and Technology (RISTEK) has developed the Pusat Unggulan Iptek (Centres of Excellence) Programme. Its aim is to increase the capacity and capability of Indonesia’s leading research institutes by helping them improve their research infrastructures and by supporting strategic partnerships and networks and their contributions to the country’s innovation system. Many of the institutions involved have connections abroad; these are reflected in Indonesia’s indicator of co-authorship (Panel 1q). In 2013 leading Indonesian researchers joined the International Institute for Applied Systems Analysis.

Improving the governance of innovation system and policy

Indonesia’s STI governance is complex and many bodies are involved. Effective co-ordination is a major challenge, which the independent National Innovation Committee (KIN), established in 2010, seeks to address. In 2012, a new institution, the Lembaga Pengelola Dana Pendidikan (IPDP), was created to manage Indonesia’s education budget and the budget for research and related infrastructure development.

Targeting priority areas/sectors

The MP3EI has identified six economic sectors for development. Depending on the region concerned, the focus is on developing natural resource processing industries to extract greater value added, developing industry as well as tourism, or advanced agricultural industries. The plan contains the main direction to be taken for specific economic activities, including infrastructure needs, recommendations for changes in or revision of regulations, and initiatives for accelerating or expanding investments. Innovation is part of the overall planning, but has yet to play a dominant role.

Country Charts

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Selected Highlights

Universities and public research

The bulk of R&D in Indonesia is undertaken by PRIs, in particular in government institutions. However, by international standards the intensity of public investment in R&D is very low. A major policy objective is to ensure that outcomes from public research will serve the national development and innovation agenda. This requires overcoming the low level of collaboration between research and industry. To achieve this, an increasing share of government funding is now provided for collaborative research. In areas such as defence and health, this has effectively led to more collaborative research.

Technology transfers and commercialisation

Policy emphasis has recently shifted towards the contribution of public research to the country’s innovation system. Industry, state-owned enterprises in particular, is encouraged to seek opportunities for collaboration with the countries’ leading PRIs and universities. Indonesia is also investing in improving the quality of its intellectual property system, and is implementing support schemes that encourage researchers to patent. A law of 2002 mandated the creation of technology transfer offices in Indonesia’s public research sector. A 2010-11 assessment found, however, that even where they had been established, few were in a position actively to support commercialisation efforts. A major constraint on academia-industry collaboration is the fact that all revenue from publicly funded projects must be returned to the Ministry of Finance; researchers therefore have no financial incentive to commercialise products based on their research results. The rules concerning the research budget are a further obstacle: project funding is for short time periods, after which it must be returned to the funding agency so that funding does not cover the full product development life cycle.

Innovation in firms

Few firms are part of the R&D system, and BERD intensity was estimated at an insignificant 0.01% of GDP in 2008 (Panel 1d). In the past, policy support for R&D and innovation largely meant financial support through research funding, tax deductions and related instruments. To encourage innovation activities, more emphasis is now put on providing support services and on raising awareness of the importance of innovation among entrepreneurs and businesses. With an informal economy that employs more than 68% of the workforce, identifying opportunities for this large segment of the economy to be part of the country’s innovation system would be of critical importance. Seeking opportunities to develop innovation capacities related to the country’s rich natural resource endowment is also critical if Indonesia is to reach the R&D intensity target of 1% of GDP by 2014 included in the Second National Medium-Term Development Plan (2010-14) of the Vision and Mission of Indonesia’s S&T Statement for 2005-25.

Skills for innovation

The Second National Medium-Term Development Plan (2010-14) makes strengthening the skills base a key priority. While spending on education has increased substantially over the past two decades, the share of Indonesia’s spending on higher education relative to GDP is still very low by OECD standards (Panel 1s), and the poor performance of 15-year olds in science (Panel 1v) points to shortcomings in the quality and structure of the education system (Panel 1w). The expansion of technical and vocational education and training is a priority, and a National Education Strategy has been adopted to reduce disparities in access to education, to enhance teaching quality, and to improve the management and accountability of schools.