Indonesia achieved virtually universal primary school enrolment in 1988, and is currently well on the way to achieving universal secondary school enrolment. The net enrolment rate in secondary school increased from 56 per cent in 2003 to 68 per cent in 2008. As access to education continues to improve, policy makers are shifting their focus from lifting enrolment rates to improving the quality of the education students receive while at school.

There are two main reasons for this paradigm shift. The first is that enrolment rates are not in themselves an accurate indicator of the performance of a country's education sector. In a sense, the level of schooling that an individual has completed (primary, secondary or tertiary) merely reflects the amount of resources invested in the individual. In other words, it measures the input into an individual's human capital. Given sufficient investment, most individuals would be able to attain a particular level of education. Behrman and Birdsall (1983) argue that not taking quality into account is likely to bias the estimates of returns to schooling upward, because the weight given to an expansion of student numbers is likely to mask less impressive improvements in indicators of educational quality, such as the number of years of teacher training.

The second reason for the increased emphasis on educational quality – usually measured in terms of how students perform on standardised tests – is that it has a positive and causal relationship with economic growth and living standards (Hanushek and Woessmann 2008). This makes perfect sense. A high-quality education produces highly skilled individuals. Highly skilled individuals are able to earn higher levels of income over their lifetimes. In a review of several studies of the relationship between standardised test performance and earnings, Suryadarma (2010) finds that the relationship is positive, large and statistically significant in both developing and developed countries.

In an era of globalisation, firms that require highly skilled workforces – usually in capital-intensive industries – tend to invest in countries that can provide such workers. Countries that have higher-quality schools, and thus higher shares of highly skilled individuals, are therefore in a better position to attract such capital-intensive investments. This in turn translates into higher rates of economic growth for the country.