The University World News is carrying a report this week on a conference to be held (14-16th May, 2008) in Washington DC, hosted by a less well known outfit in the World Bank Group – the International Finance Corporation (IFC). Better known to most is the IFC’s cousin, the International Bank for Reconstruction and Development, generally referred to as the World Bank.
The conference, titled ‘Investing in the Future: Innovation in Private Education’ will invite participants to discuss what the IFC regards as the significant benefits for developing countries of engaging the (for-profit) private sector in delivering tertiary education.
The IFC is currently the largest multilateral agency funding private education in the world. One way of understanding the difference between the World Bank and the IFC is that while the World Bank finances projects with sovereign guarantees, the IFC finances projects without sovereign guarantees.
In other words, the IFC is primarily active in private sector projects, and in this respect it is a profit-oriented financial institution. Like a bank, IFC lends or invests its own funds and borrowed funds to its customers, and expects to make a sufficient risk-adjusted return on its global portfolio of projects.
Over the past decade, the IFC has taken a keen interest in the education sector. In 2001 the IFC published its Education Sector Strategy (with advice from the Education Sector of the World Bank). According to the IFC, the role of the private sector lies in both the provision and financing of education. This role is expected to grow, with increased pressure for more education as a result of the Education for All initiatives, and as human capital formation is advanced as a result of knowledge economy policies.
From 2000 to 2007, IFC provided $237 million in financing to 37 private education projects in 20 developing countries. The projects had a total value of $839 million.
However, rating agency Standard and Poor’s 2007 Annual Report on the IFC has suggested the most profitable and secure investments are likely to be in the higher education as opposed to the schooling sector.
Its current medium term investment strategy is to open up ‘frontier markets’ in Africa and the Middle East (Standard and Poor’s, 2007).
In an interview with the University World News, IFC Executive Vice-president Lars Thunell is quoted as saying:
Global spending on education has risen substantially over the past decade. There is a demand for more and better services, and governments are embracing private sector participation as a way to increase quality and efficiency. Nowhere is this felt more keenly than in the emerging markets, where demand is presenting significant opportunities.
Claims that for-profit private firms necessarily provide more efficient and better quality services, including in sectors like education is vague, and the evidence provided to date is thin.
However, the more important issue is that, like the World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) (see our recent report on the GATS), the IFC sees education as a ‘frontier market’ in the emerging economies, and is willing to lend funds to investors in order to advance this project. It is also ready to ‘up’ its levels of investment in order to help this project along.
We will likely see more of the IFC as efforts to advance the privatization of education move ahead and developing countries are seen to be ripe for the picking. What is crucial, then, is that we become better informed about actors, like the IFC, and their role in the global governance of higher education. This will enable us to see the very complex way in which this sector is not only developing but is being strategically progressed by actors that are often off the analytical radar of many people and institutions.
15 May update: see Inside Higher Ed‘s story ‘The private sector role in global higher education‘ for a report from Day 1 of the conference. See also this report on the conference by World University News.