Indonesia: Public Disclosure Authorized Research & Development Financing Human Development East Asia and Pacific Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized THE WORLD BANK THE WORLD BANK OFFICE JAKARTA Indonesia Stock Exchange Building, Tower II/12-13th Fl. Jl. Jend. Sudirman Kav. 52-53 Jakarta 12910 Tel: (6221) 5299-3000 Fax: (6221) 5299-3111 Published in January 2013 Indonesia: Research & Development Financing is a product of staff of the World Bank. The fi ndings, interpretation and conclusion expressed herein do not necessarily refl ect the views of the Board of Executive Directors of the World Bank or the government they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomination and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement of acceptance of such boundaries Cover Photo by: World Bank Report No. 74619-ID Indonesia: Research & Development Financing Human Development East Asia and Pacific Region Acknowledgments The team is grateful to offi cials and staff in the Ministry of Research and Technology, the National Innovation Commission, and the Indonesia Academy of Sciences for discussions that initiated this report; and for various inputs throughout the production of the report. We are particularly grateful to the Center for Science and Technology Studies (PAPPIPTEK) at the Indonesian Institute of Sciences (LIPI), who provided key survey data, and RISTEK colleagues who verifi ed key information. We thank all the participants at discussion workshops for sharing with us their experiences and concerns about public support for R&D in Indonesia. We thank colleagues at AusAid - Maesy Angelina, Benjamin Davis, Diastika Rahwidiati, Rivandra Yoyono, Scott Guggenheim, and Hannah Birdsey - for their support throughout the production of the report. The report is managed by a team comprising of Dandan Chen (Task Team Leader, Senior Economist); Jean-Louis Racine (Senior Private Sector Development Specialist), Lawrence Kay (Consultant, main author of fi rst draft), and Siwage Negara (Operations Offi cer). Dyah Kelasworo Nugraheni provided the most effi cient team support. The preparation of the report was under the overall guidance and support of Luis Benveniste (Sector Manager, EASHE). The production of this report was made possible through the generous fi nancial support of AusAid Indonesia. ii Indonesia: Research & Development Financing Abbreviations, Acronyms, and Terms ADB Asian Development Bank AIPI Indonesian Academy of Sciences ASEAN Association of South East Asian Nations AusAID Australian Agency for International Development BALITBANG Badan Penelitian dan Pengembangan (Ministry research centers) BALITBANGDA Badan Penelitian dan Pengembangan Daerah (Ministry research centers in the regions) BAPETEN Badan Pengawas Tenaga Nuklir (Nuclear Energy Regulatory Agency) BAPPENAS Badan Perencanaan Pembangunan Nasional (National Development Planning Agency) BATAN Badan Tenaga Nuklir Nasional (National Nuclear Energy Agency) BIG Badan Informasi Geospasial (Geospatial Information Agency) BMKG Badan Meteorologi, Klimatologi, dan Geofi sika (Center of Meteorology, Climatology and Geophysics) BPPT Badan Pengkajian dan Penerapan Teknologi (Agency for Assessment and Application of Technology) BSN Badan Standardisasi Nasional (National Standardization Agency) DRN Dewan Riset Nasional (National Research Council) EITI Extractive Industries Transparency Initiative EU European Union EITI Extractive Industries Transparency Initiative GDP Gross Domestic Product GERD Gross Domestic Expenditure on R&D GNI Gross National Income ICT Information and Communications Technology IDR Indonesian Rupiah Public Expenditure Review iii KEI Knowledge Economy Index KEMENRISTEK Kementerian Riset dan Teknologi (Ministry of Science and Technology) KI Knowledge Index KIN National Innovation Committee LAPAN Lembaga Penerbangan dan Antariksa Nasional (National Institute of Aeronautics and Space) LBME Lembaga Biologi Molekular Eijkman (Eijkman Institute for Molecular Biology) LIPI Lembaga Ilmu Pengetahuan Indonesia (Indonesian Institute of Sciences) LPNK Lembaga Pemerintah Non Kementerian (Non-ministerial State Institutes) MVA Manufacturing Value-Added OECD Organisation for Economic Development PER Public Expenditure Review PhD Doctor of Philosophy PUSPIPTEK Pusat Penelitian Ilmu Pengetahuan dan Teknologi (Science and Technology Research Center) RAPID Riset Andalan Perguruan Tinggi dan Industri (University and Industry Research Collaboration) R&D Research and Development S&T Science and Technology TFP Total Factor Productivity UNESCO United Nations Educational, Scientifi c and Cultural Organization UNIDO United Nations Industrial Development Organization USD United States Dollars USPTO United States Patent and Trademark Offi ce iv Indonesia: Research & Development Financing Contents Acknowledgments ii Abbreviations, acronyms, and terms iii Contents v Executive Summary vii Introduction 2 R&D and Indonesia’s Economic Development 4 Indonesia’s R&D Performance 8 Government R&D Policy and R&D Financing 16 R&D Policy 16 Resource Mobilization 19 Resource Allocation and Utilization 23 Improving Indonesia’s R&D Public Financing for the Future 44 Bibliography 46 Annex 1: Organizations Involved in R&D, Divided by Type 49 Tables Table 1 Knowledge Economy Index Rankings, Select Countries, 2012 8 Table 2 Scientifi c and Technical Journal Articles, Indonesia and Select Countries, 1999–2009 9 Table 3 Scientifi c Papers and Citations of Authors from Select Countries, 1999–2009 9 Table 4 Publications by Major Scientifi c Field (percent), 2008 10 Table 5 English-Language Scientifi c Articles by Authors from Select Countries, 1998–2008. 11 Table 6 Number of Resident Patent Filings per Million Population, Select Countries, 2000–2010 11 Table 7 Indonesian Patent Applications at the European Patent Offi ce and in the United States, 2002–2010 12 Table 8 Indonesian Patent Applications Granted at the European Patent Offi ce and in the United States, 2003–2010 12 Table 9 High-Technology Exports as a Percentage of Total Exports, Indonesia and Select Country Groups, 1988–2010 12 Table 10 Manufacturing Value-Added (MVA), Indonesia and Select Country Groups, Assorted Years (percent) 13 Table 11 Indonesian Share of MVA and Manufacturing in World Output, Assorted Years 13 Table 12 Structure of Policies on Science, Technology, and Research 17 Table 13 Breakdown of the S&T Policy Approach in the Masterplan for the Acceleration of Indonesian Economic Development (2011–2014) 18 Table 14 Indonesian GERD by Known Source of Financing (percentage), Available Years 22 Table 15 Indonesian GERD by Known Locus of Activity (percentage), Available Years 22 Table 16 R&D by Source of Financing (percentage), Selected Neighboring Countries, 1998–2008 23 Table 17 Private R&D Centers by Industry Sector 24 Public Expenditure Review v Table 18 Organizations Involved in R&D, Divided by Type 25 Table 19 R&D Funding Distribution, 2006 and 2009 28 Table 20 Distribution of RAPID Grants, 2008–2012 33 Table 21 LIPI Social Science Research Projects by Type of Funding, 2010 34 Table 22 Distribution of Staff at the Seven LPNK, Most Recent Years 35 Table 23 Number of Researchers per Million Population, Select Countries, 1996–2009 37 Table 24 Public University Researchers by Field of Study, 2009 38 Figures Figure 1 GDP Growth (annual percentage change) 2002–2010 4 Figure 2 Average Annual Growth Rate in the Number of Foreign Scholars in the United States, 1997–2007 10 Figure 3 Resident Patent Filings per USD GDP, Select Countries, 2000_2010 11 Figure 4 GERD, Selected Regions, 1996–2009 20 Figure 5 GERD, Indonesia, Three Years of Comparable Data 21 Figure 6 GERD, Developing Countries, East Asia and Pacifi c Region, Most Recent Years 21 Figure 7 GERD, Selected Neighboring Countries, Most Recent Years 21 Figure 8 Total State R&D Funding by Source, 2006 27 Figure 9 Non-Higher Education Central Government R&D Funding by Destination, 2006 29 Figure 10 BALITBANG Funding by Source, 2006 30 Figure 11 LPNK Funding by Source, 2006 30 Figure 12 LPNK Funding by Domestic Research Contracts 31 Figure 13 BALITBANGDA Funding by Source, 2006 31 Figure 14 Public Universities’ Funding by Source, 2009 31 Figure 15 Public Universities’ Funding by Source, 2006 and 2009 32 Figure 16 Distribution of LIPI Staff by Age Group, Assorted Years 36 Figure 17 Distribution of LIPI Researchers by Education Level, Assorted Years 36 Figure 18 LIPI Staff by Level of Seniority, Assorted Years 36 Figure 19 R&D Sector Researchers by Organization Type, Assorted Years 37 Figure 20 BALITBANG Funding by Type of Research, 2006 39 Figure 21 BALITBANGDA Funding by Type of Research, 2006 40 Figure 22 LPNK Funding by Type of Research, 2006 40 Figure 23 Public Universities’ Funding by Type of Research, 2009 40 vi Indonesia: Research & Development Financing Executive Summary Indonesia’s economy over the past decade has been on a sustained growth path. The economy grew within a band of 4.5 percent to just over 6 percent between 2002 and 2010. Comparative strength in several sectors has helped Indonesia to weather recent problems in the world economy. Production of commodities was especially useful in this respect, as in 2010 it constituted 63 percent of total exports and 26 percent of annual value added.1 Furthermore, the country enjoys a large number of micro-, small- and medium-sized