Indonesia's higher education system is changing rapidly: in 2010 there were about 5 million students, up from 2,000 in 1945. Effectively the tertiary system has four tiers, three of which are within the public sector. However, the system is increasingly private sector driven. The key themes of this paper on universities are rapid growth; overcoming the historical backlog; and the need for further fundamental reform. The quality of Indonesia's tertiary institutions is highly variable. Governance structures and incentives regimes within the state universities are complex and obscure. The government both over-regulates and under-regulates. Major reforms are under way and increasing financial resources are available. © 2012 Copyright Indonesia Project ANU.