For middle-income countries, like Indonesia, to move away from unsustainable industries and exports - such as extractive industries - towards a knowledge economy, the government needs to consider and make important policy choices.
A knowledge economy is one based on the creation, sharing, and use of knowledge to enhance growth and development. Human capital theory puts knowledge at the centre of the development process during the 1960s. Today, in a technology-driven and interconnected world, the speed of creation and dissemination of knowledge makes it even more central to economic growth than it was 50 years ago.
According to the World Bank, successful knowledge economies are built on public policies that support science and technology research, innovation, education, and lifelong learning.
These are also the foundations of the knowledge systems that provide policymakers with the evidence and research needed to inform policy decisions, and budget allocations to shift the economy towards a stronger knowledge base.
In Indonesia, as well as other middle-income countries, policymakers struggle to develop these knowledge systems and capabilities. There’s a lack of political will to support science and technology research. Many public servants are yet to be trained in developing evidence-based policies. At the same time, there are limitations in the regulatory frameworks.
Additionally, international development programs tend to focus on the capacity to produce research by think-tanks and policy research organisations rather than government agencies’ capabilities to demand and use knowledge to inform policy.
I am the co-editor and co-author of Knowledge, Politics and Policy Making in Indonesia. One of the points we make in the book is that the knowledge produced and shared by think-tanks and public/private research organisations is necessary. But it is not sufficient to contribute to designing policies that enhance the social and economic potential of Indonesia. Strong capability to demand and use knowledge is as important.
Our research shows that the Indonesian public sector has some challenges to overcome.
Public sector workforce
Data from the National Civil Service Commission show that in 2016, just over 6% of Indonesia’s 4.5 million civil servants – including over 1.7 million teachers, as well as health workers and other technical roles – have a master’s degree, while 0.3% have a doctorate.
Some ministries have a high concentration of advanced degrees (for example, the Ministry of Education and Culture, the National Development Planning Agency and the Coordinating Ministry for Economic Affairs). But overall within the civil service there is a research skills gap. This makes it hard for various government agencies and administrations to independently identify what kind of research they need to support policymaking and assess the research and studies they commissioned.
A structured policymaking process
In Indonesia, the two main policy processes taking place at the national level are the long- and medium-term development planning and the development of laws and regulations.
All development planning is the responsibility of the Ministry for National Development Planning/National Development Planning Agency (Bappenas). Overall, the planning process defines the background work needed to inform the policy process.
The staff of Bappenas draw on background studies that are conducted internally or commissioned externally to inform the development planning process. However, the funds for these studies are limited and have to be used within the financial years on a set number of studies that cannot be changed. Due to this regulatory rigidity, government agencies rely on international donors to fund research and studies that they have the resources to fund but not the flexibility to procure.
Pre-defined research formats
With regard to legislation, the formulation of laws and regulations requires the use of academic papers (naskah akademik) in all policy formulation processes. These papers follow a tightly specified format that outlines the legal need to address the problem, the theoretical and empirical background, and an analysis of existing laws and regulations. Conversely, existing regulations do not place a sufficiently strong emphasis on designing research and evaluation to assess which development programmes and policies work, which do not, and why.
More knowledge or better capabilities to use knowledge?
Indonesia has cut the poverty rate by more than half since 1999, to 10.9% in 2016. Its economy is projected to become the 4th largest by 2045. The government is designing strategies to move towards a greater emphasis on knowledge and innovation as pillars of economic growth.
In this near future, government agencies are likely to be flooded by data, research and analysis coming from development programmes, projects, and multilateral organisations. Moreover, data innovation exponentially increases the amount of data and analysis that government agencies can produce through digital technologies.
What matters for policymakers is the capability to identify and acquire the knowledge they need, at the right time. These skills and capabilities will become increasingly important as middle-income countries such as Indonesia develop they knowledge economies and enter the fourth industrial revolution.