The Great Inertia of Indonesia’s Bureaucratic Reform

A recommendation for the new administration to solve one of the nation’s most stubborn challenges

For every hi, there’s a good bye.
For every leader, there’s a problem of their time.
One that would mark their regime in history books.

• Jokowi’s was all about building infrastructure;

• SBY’s was poverty alleviation and global diplomacy;

• Megawati’s was her handling of terrorism and regional autonomy; etc.

What would be Prabowo’s?

Here’s our pitch: bureaucratic reform, or systematic change to governance to significantly improve performance. The “impossible frontier” that leaders after leaders have attempted to do but nobody has ever succeeded. 

As Prabowo dreams of: (1) 8 percent economic growth, (2) a zakenkabinet consisting of competent expert ministers, and (3) putting Indonesia on the center of the global stage; a bureaucratic reform is prerequisite to achieve all of the above. 

How? Here’s our recommendation.

Pipes vs. Water

“If public policy is ‘water’ then bureaucracy is the network of ‘pipes’ that deliver it to the people. Hence, the pipes determine the quality and quantity of the water that gets to the people,” said a friend who is a governance expert.

When people turn on the tap, they expect the water to come out clean. But the pipes may rust, clog, and leak overtime. And so does bureaucracy; it can be broken and outdated. 

Sure, there are efforts to clean up, expand, and modernise the pipes. But as there are still corroded parts, the water continues to be tainted. Until we fix these pipes—our bureaucracy—the water we consume will always be subpar.

Indonesia’s bureaucratic reform (or lack thereof) has been in a long period of inertia. It hasn’t moved, or changed form, years after years. Of course! For there hasn’t been any remarkable ‘external force’ acting upon it. 

Inertia

For context: As of 2023, there are 4.4 million civil servants (ASN) in Indonesia—equivalent to 16 civil servants per 1000 people, or less than 2 percent of the population. This is lower than the 2020 OECD average of 63.3 civil servants per 1000 people.

Everyday in Think Policy, we work with dedicated bureaucrats from different ministries. They remind us that we are never short of well-meaning, forward-thinking reformists, analysts and echelons alike, who are spearheading countless reform initiatives in all sectors, originating from their idealism.

But they are all facing the same ‘walls’ in their way: a rusty pipe, inefficient procedures, low productivity, and lack of transparency and accountability. The effort to destroy these walls, to clean these pipes, however, have been on the backburner for so long.

What is causing this inertia? What is stopping the government from employing ‘external forces’ to push bureaucratic reform forward?

There are at least three key challenges:

• competency and skill gap, 

• structural and cultural problems, and 

• the lack of incentives structure.

Let’s address these challenges one by one. 

1. Competency and Skill Gap

The National Civil Service Agency (BKN) ranks civil servants performance to four categories:

1. Star

2. Workhorse

3. Trainee

4. Deadwood

The bottom rank, deadwood, quite literally means they are dispensable. However, many of these underperforming bureaucrats are in charge of critical issues such as energy transition, land reform, or digital transformation. According to the then-BKN acting head, in 2022, about 35 percent (1 out of 3) bureaucrats are considered deadwood. 

The civil service workforce spans 4 generations—Baby Boomer, X, Y, and Z. According to BPS 2023, Gen Y forms the majority of the workforce (although skewed by the younger PPPK (contract) recruits, while the majority of PNS (permanent) are over 40). In this mix, Gen Y and Z have a higher appetite for learning and to adapt to digital tools, while it is not the case for older generations.

Such data paints a disturbing image. Haven’t our civil servants recruitment undergone major reforms? 

Indonesia now operates under a centralised selection process for its career-based civil service system. Recruitment primarily occurs at the lower levels (‘fresh blood’) of the hierarchy, and the competition is fierce. In 2024, there are 3,9 million applicants (this may connect more to the bad job market, but let’s discuss that separately). 

Meanwhile, top positions are almost exclusively selected through promotions drawn from within the existing pool of civil servants. This approach leads to higher up posts (except for ministers appointed politically) being held by bureaucrats with decades of experience.

On the one hand, career bureaucrats have a profound ‘pipe’ knowledge – the ins and outs of public policy implementation. On the other hand, the public policy landscape faces more challenging hurdles everyday, which need agility and updated competence. So what can we do?

The good news is, civil servants now have ample access to education opportunities, notably through scholarship programs such as LPDP (ASN makes up 25 percent of the program’s alumni as of 2022). While infrastructure for civil service training is fairly well-established via institutions like BKN, LAN, Corporate University, and various ministry training centres, the effectiveness of these programs remains uncertain, as there hasn't been a comprehensive evaluation of their impact on job performance. 

Law No. 20/2023 mandates the budget allocation for competency development, including capacity-building activities like technical guidance and training programs, setting it at 0.34 percent for provincial governments and 0.16 percent for district and city governments. Although, some regional governments have not met this commitment. 

The Law has also shifted the paradigm of competency development for government employees. Previously considered a right, competency development is now a mandatory obligation for all permanent (PNS) and contract (PPPK) civil servants.

2. Structural and cultural problems

Meet Kanea, a civil servant who just finished her LPDP-funded masters at a top global public policy school. Upon learning about best practices to improve the public sector, she is eager to implement it. Yet, her colleagues and higher-ups aren’t exactly keen on this. After all, if it had worked before, why wouldn’t it today and tomorrow, said her boss. 

Water, zero. Dirty pipe, one.

Many civil servants (notably younger ones) still feel that they are not given ample room to implement grand ideas, or even worse, compelled to ‘obey’ their superiors without question due to the hierarchical culture in public service.  

This work environment often leads to high performers (‘star’ ASN) who advocate for reforms or innovative ideas being overlooked or, even worse, encountering resistance, as their efforts challenge the status quo.

A reform-defiant culture often hinders public sector innovation, reducing the chances for new ideas to flourish. 

Audit-terrified environment

Many believe the public sector hesitates to embrace change due to a fear of risks, with audits seen as a significant barrier.

While audits—both external and internal—are essential for building trust and guiding improvement, they can sometimes stifle creativity. As projects develop and new insights emerge, rigid risk assessments can hold back innovative efforts.

As a result, when innovation does occur, it’s usually in response to crises or changing priorities rather than a strategic initiative. 

Meanwhile, several audit offices and functions in other countries are recognizing the value of public sector innovation as a key driver for improved outcomes. These offices are taking steps to ease the inherent tension between innovation and auditing. For example, in 2015, Brazil’s Federal Court of Accounts launched Colab-i, an innovation lab dedicated to fostering creative solutions.

Corruption

Meanwhile, this toxic work environment often leads to corruption. On the extreme,  we can see the case of Former Minister of Agriculture Syahrul Yasin Limpo (SYL), who extorted money from civil servants–especially the upper echelons–within his Ministry. The extorted funds were collected through various means, including cash, bank transfers, and goods or services, with monthly amounts ranging from USD 4,000 to USD 10,000 (around Rp 62-156 million). 

Beyond nurturing a corruption-normalising environment, this dynamic could create a fear of being seen as neglecting duties, especially since performance evaluations often prioritise meeting superiors’ expectations (formalised in PermenPAN-RB No. 6/2022).

However, true loyalty for ASN (Law No. 20/2023) should be to the Constitution, Pancasila, and the state—not blind obedience to superiors. 

3. The lack of incentives structure

Aren’t our civil servants already well-paid? In 2022, Indonesia allocated 14.62% of its national budget to government employee compensation, which includes salaries, social security, and pensions. This is notably higher compared to nations of similar size, like the United States, which spent 8%, and Brazil, at 9.3%. 

But the compensation is not well spread.

Beyond their state salary, bonuses, and perks associated with their positions, civil servants can earn extra external income. When civil servants derive a significant portion of their income from outside activities—particularly from interest groups seeking government favours—they are more inclined to prioritise the needs of oneself. These led to questionable riches by officials that remain hidden from public scrutiny–remember Rafael Alun’s case?

Effective talent management in the civil service hinges on a genuine commitment to valuing public servants fairly and adequately. To attract and retain top talent, civil servant salaries should at least match those in the private sector for equivalent qualifications.

But, jacking up the salary alone is not the solution, especially when they are not tied to performance. As the saying goes, “If performance isn’t being measured, it isnt being managed.” To this end, clear performance indicators must be established before implementing any salary and allowance schemes. 

Currently, the system often faces a common pitfall: various allowances are not tied to actual performance achievements. Instead, they are typically determined by factors such as family size, length of service, and seniority—criteria that undermine the principles of professional merit.

For instance, the initiative to double teachers’ salaries through tunjangan sertifikasi (certification allowance) did not translate into enhanced educational outcomes. Why? Because it is not tied to a measurable goal.  

An important takeaway from this situation is the necessity of implementing strategies to assess the effectiveness and cost-efficiency of performance-based incentives over time, including any potential unintended effects. This ongoing evaluation is crucial for informing policy decisions about whether to continue, modify, or expand these incentive schemes.

Another side effect of this lacklustre incentives structure is the existence of the so-called Kementerian Sultan, or Ministry of the Riches—which connotes the underlying disparity in performance allowances (tukin) between Indonesia's ministries and agencies, as well as between national and local governments, leading to perceived inequality among civil servants. 

While the Ministry of Finance (MoF) defends its higher tukin due to its “strategic” role, other essential ministries viewed less critical responsibilities, like the Ministry of Religion (MoR), receiving far less. 

This is despite the fact that the MoR is allocated a bigger budget than MoF. This imbalance in compensation should raise fairness concerns and calls for a systematic review of the tukin structure to ensure all public servants are valued equally for their contributions.

Incentives must also be tailored and pilot-tested for specific contexts to prevent unintended negative behaviours or manipulation of the system. Furthermore, management practices should empower public sector employees with more autonomy and discretion to encourage better performance without leading to corruption or adverse outcomes.

Non-financial incentives can also be deployed to effectively motivate government employees, especially when rigid civil service salary structures limit financial rewards. These incentives might include social recognition for high achievers, performance-based promotions, or in-kind benefits like subsidised housing.

A good practice

Let’s see one of the good practices: the Gorontalo Provincial Government is setting a standard in developing civil servant skills through a range of innovative initiatives.

They actively send employees to prestigious Indonesian universities like UGM and ITB, ensuring they gain advanced knowledge and expertise. Tailored training programs address specific skill needs, while performance-based incentives reward outstanding work. 

To further enhance motivation, special welfare packages are offered to educators, fostering a supportive environment. The focus on local competencies through area-based education ensures that the workforce is aligned with community needs. 

Performance assessments based on productivity not only encourage efficiency but also drive improvement. These collective efforts are not just about training; they aim to build a motivated and skilled public service dedicated to serving the community effectively.

A message to our new President

Mr. President, let’s hear from the reformist civil servants, who are in the frontlines of the movement to push forward the bureaucratic and governance reforms in Indonesia. Let’s finally make the significant changes needed to achieve all the optimistic vision of your administration.

Learn about how Think Policy help push reforms forward: thinkpolicy.id

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Writer:

Daffa Argada

Editor:

Nea Ningtyas

,

Afu Utami

Advisor: Prasetya Dwicahya