All State-controlled universities in Malaysia are by definition statutory bodies and their setting up is governed by laws. Statutory bodies are established with the objective of implementing certain duties and responsibilities in line with government objectives. When statutory entities such as universities are incorporated the objectives of this exercise is different from the incorporation of other State body such as the National Electricity Board. In the case of the latter, the objective is to transform this entity into an independent commercial company. In the context of higher education services, in particular universities, incorporated universities, according to Bostock (1999), are expected to raise a much greater proportion of their own revenue, enter into business enterprises, acquire and hold investment portfolios, encourages partnerships with private business firms, compete with other universities in the production and marketing of courses to students who are now seen as customers, and generally engage with the market for higher education. But in the case of State-controlled universities it does not necessarily mean that these universities will be privatised eventually. At least this is true in the case of Malaysia. It is interesting to examine why the flirtation with the market, but the unwillingness to leave everything to the market.
Incorporation of State-Controlled Universities in Malaysia
The World Bank (see Wall 1998) and OECD (see Marginson 1997) are the two most influential supra national bodies that have had an influence on the incorporation of State-controlled universities in Malaysia. In the early to mid nineties the changes in the global higher education landscape have exerted new demands and pressures on Malaysia’s higher education system. In order to be competitive and relevant to the global and regional changes Malaysia’s state-controlled universities in particular have to respond accordingly, specifically to the emerging challenges arising from globalisation era and the internationalisation of higher education. Mok (2007, 440) reported that technocrats in the Ministry of Higher Education (MoHE) itself felt that the old higher education governance model would never prepare public universities for facing new challenges. Thus, the incorporation of State-controlled universities is meant to make them more proactive to changes and to do these they need more resources and a governance system that is quick in its response to changing needs and demands.
In this context, State-controlled universities in Malaysia were hard pressed to accept the impending reform, which was aimed at diversifying funding sources through a range of means, including the policy of incorporation. Another important development in Malaysia at that time was the apparent success of several corporate-style universities, operated by major state-owned companies in the areas of telecommunications, petrochemicals and electricity (UNESCO 2003). The reform is seen as an attractive proposition for these State-controlled universities, as presented by the State to them, in that they are allowed (albeit under strict treasury guidelines) to generate additional revenue through university-owned companies, which generate income for these universities through the sale of services and use of university facilities.
The Government has introduced corporate governance for State-controlled universities in 1996 by amending the University and University Colleges Act, 1971. This amendment allows for the incorporation of these state-controlled universities, which sets the tone for a new way in running universities in Malaysia. It is argued that with incorporation public universities should be operating as an efficient, transparent, and most importantly, financially able (if not independent) entity. It is now up to individual universities to face up to these challenges and generate revenue equal to thirty percent of their annual running cost. Neville (1998) appropriately observed that the Malaysian government has adopted a policy of incorporation, making universities more accountable for some areas of their operations, and seeking to increase entrepreneurial activities. He argued further that in this, universities are expected to adopt management systems similar to those of the corporate sector, although the government will still retain explicit control.
Universiti Malaya was the first state-controlled university to be incorporated in 1997/8. To date, all state-controlled universities, in particular the 4 more established ones, have (in line with incorporation objectives) established their private holding companies to generate income for the universities concerned through the sales of consultancy services, medical and health (private) services and joint venture activities with the industry. While active in commercial activities, to date none of these commercial arms of the incorporated State-controlled universities have managed to generate sufficient income to be financially independent from the State. But the issue here, will the State ever allow these universities to be independent? Will the World Bank, UNESCO and other supra agencies pressure the State to let go or follow the example of Japan where national universities have been incorporated and become very competitive.
Incorporation of State-controlled Universities: Will the State Let Go?
Neville (1998) noted that incorporated universities are expected to adopt management systems similar to those of the corporate sector, although the government will still retain explicit control. Arguably, in this sense, state-centrism in higher education policy is still strong in Malaysia, but at the same time neo-liberal policies are being implemented. At the core of this irony is the statement made by the then Minister of Education (now the powerful and influential Deputy Prime Minister and Prime Minister-in-waiting) that the Cabinet of Ministers has decided that the Government will still maintain control and autonomy over the public universities once they were incorporated (Bernama News Service for Malaysian Students 1995). The then Minister of Education was quoted as saying to the effect that incorporation means that the universities will remain non-profitable but will be managed as commercial and competitive entities. More importantly, he said that the Government would have the last say in the operation and administration of universities and its administrators would have to refer to the ministry before implementing any changes. There have been no significant statements from the government so far giving the incorporated universities a sense of ‘independence’ from the State.
Barr (1993) distinguishes between two main types of marketisation in so far as higher education is concerned: the introduction of performance-related funding mechanisms (quasi-market element) and the introduction of tuition fees and loans (the privatization of higher education). The incorporation of state-controlled universities gave rise to an interesting phenomenon in Malaysia’s higher education landscape: a financing mechanism for incorporated universities which tie public funds to specific targets (in particular student numbers at the undergraduate level). The government set the tuition fees for students at this level for all incorporated universities. This in effect means “using the logic of the market without actually letting the market in”. At the same time, all private higher education institutions and incorporated State-controlled universities offering postgraduate qualifications are allowed to set their own tuition fees. In this sense, the price mechanism begins to operate and this is when a market in higher education is in place.
In Malaysia’s case there is clearly the unwillingness on the part of the State to let go of state-controlled universities. This situation arises, and following Levidow’s (2002) argument, because universities represent the needs of the State. Morshidi and Abdul Razak (2008) have alluded to the “national interest’ argument in the case of Malaysia. It is in this connection that the Malaysian Government continues to support and finance incorporated universities. Under incorporation set-up university staff are supposed to be delinked from the civil servants scheme of service, but to this day university staff are still paid through state-funded emoluments. However, because of incorporation, they are allowed and are increasingly driven into entrepreneurial competition for external funds for research and extra income. Slaughter and Leslie (1997) rightly observed that under central government and university pressure, staff devise ‘institutional and professional market or market-like efforts to secure external monies’.
It is also interesting to relate and connect Levidow’s (2002) observation to the case of Malaysia in that beyond simply generating more income, higher education in Malaysia has increasingly become a terrain for marketisation agendas. This is particularly pertinent in relation to Malaysia’s ambition of becoming a regional education hub with education export accounting for a substantial figure in its national account. Since the incorporation of state-controlled universities in 1997 and more so beginning 2000, affected universities have been urged to adopt commercial models of knowledge, skills, curriculum, finance, accounting, and management organization. Strategic planning becomes an important instrument for charting university’s direction. More importantly, and there is a great debate on this, university education has become more synonymous with training for ‘employability’ at the local and international level. Marketisation policy of higher education in Malaysia is already in place in the system, but it is hidden under the heavy presence of State-centrism and control.
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