COLLEGE INC.: contextualizing the PBS documentary on for-profit universities, Wall Street, and government regulation

Link here for access to PBS’s COLLEGE INC., which was aired on 4 May 2010. RAINmedia, which produced the documentary for PBS’s FRONTLINE, describes the show this way:

Higher education is a multi-billion industry fueled by taxpayer money. One of the fastest-growing–and most controversial–sectors of the industry is the for-profit colleges and universities. Unlike traditional colleges that raise money from wealthy alumni and other donors, many for-profit schools sell shares to investors on Wall Street. But what are students getting out of the deal? Critics say a worthless degree and a mountain of debt. Proponents insist they’re innovators, widening access to education. FRONTLINE producer and correspondent Martin Smith follows the money to uncover how for-profit universities are transforming the way we think about college in America…

This show, which is currently generating ripples across the higher education and investment landscapes in the US, is also relevant for readers in other countries, most notably the UK, Chile and Mexico (where Apollo Global is particularly active), and Australia (e.g., see ‘Commercial campuses ready to fill gap‘, The Australian, 5 May 2010).

And speaking of topical news, it is noteworthy (but purely coincidental, re. timing?) that former US President Bill Clinton “accepted the role of Honorary Chancellor of Laureate International Universities, the global network of leading private universities” one week ago. This is a paid position, “honorary” title aside, though Laureate has refused to disclose the sums involved.

And is it purely coincidental that the show is being released amidst vigorous debates about forthcoming US federal regulations that, according to Bloomberg news:

may reduce the amount of federal financial aid flowing to for-profit colleges, cutting the companies’ annual revenue growth by as much as a third.

In response, the $29 billion industry and its supporters including Republican Senators have enlisted top Washington lobbyists and are courting black and Hispanic legislators to fight the proposed rules scheduled to be released as early as this month.

While these debates may seem US-centric at first glance, their outcomes will have implications at a much large scale for these firms are establishing global agendas and networks.

Kris Olds

The US – India ‘knowledge’ relationship: the sleeping giant stirs!

Editor’s Note: This entry has been kindly prepared by Tim Gore, now Director of The Centre for Indian Business, University of Greenwich, London, UK.  Prior to this, Tim was Director of Education at the British Council in India, where he was responsible for growing the knowledge partnership between India and the UK. Tim also led the establishment of the UK-India Education and Research Initiative (UKIERI) that is profiled in an earlier blog entry.

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How will President Obama’s ambitious plans for a new diplomacy translate into practical international relations and how will this impact on the education sector? An early example of this may prove to be relations with India and some clues may be in the newly released Asia Society Task Force report: Delivering on the Promise: Advancing US Relations with India.  

The high level rhetoric for the US-India relationship may not have changed that much after all President Bush declared ‘the world needs India’ on his 2006 visit to the Indian School of Business (ISB) – Hyderabad –  a school touted by the new report as an example of what can be done with good US-India cooperation. The School works in partnership with Wharton and Kellogg and prompted a Bush accolade ‘You’ve got a great thing going’!

However, the tone of the report is a substantial departure from the Bush years. Democratic colors are now firmly fixed to the mast and references to ‘reciprocity’ and ‘understanding India’ abound, while the ‘world needs India’ has changed to ‘the USA needs India as an ally in its foreign policy issues’.

The education agenda is a little buried in this report. It has been classified under the second track ‘Joint Public-Private Partnerships for Complex Global Challenges’. Is this code meaning that there will be little Government funding available (seed-corn funding is mentioned briefly)? After all, educational relations between the two countries have flourished over the years, despite a relative absence of visible policy and public sector involvement. There are over 80,000 Indians studying in higher education in the US every year and the US dominates the ‘market’ for doctoral studies. Also, many commentators (see, for example,  Anna-Lee Saxenian’s book The New Argonauts: Regional Advantage in a Global Economy) have pointed out the seminal role of talented Indian entrepreneurs in Silicon Valley and elsewhere and research links with the US are strong and growing.

There are also quite a number of US tertiary collaborations with India (although surprisingly bearing in mind the respective sizes of their tertiary sectors, not more than the number of UK collaborations). However, the use of ISB as a beacon of attainment highlights the key issue with US-India educational relations and the nuances of policy that the US will need to get right.

ISB is an exceptional institution, undoubtedly in the top tier of such institutions globally, in terms of how hard they work their students if nothing else! However ISB, with its powerful private sector Governing Board and influential international links (US presidents don’t drop into every management college with a foreign badge on the gate), is not accredited in India by the relevant regulatory body the All India Council for Technical Education (AICTE).

Similarly, the campus of the US Western International University run by the influential Modi family has no official status in India. If pressed, officials will say that it is ‘not legal’.

Australia, New Zealand and UK have a multilateral forum with India on quality assurance, regulation of cross border education and other issues of mutual interest, The US approach thus far has been to lobby for liberalisation of the sector. Alienating the Human Resources Ministry may not matter in trade relations, but it will matter in education and knowledge partnerships.

The report shows little understanding of the education sector. It claims that direct investment in education is not allowed in India. This is not really the case as a recent MoU to establish a campus of Georgia Institute of Technology in Andhra Pradesh (near the ISB) demonstrates. Regulation of foreign provision in India is unclear with the relevant legislation frozen in parliament but accreditation can be achieved. The UK’s Huddersfield University has both invested in, and achieved, official recognition of its joint venture in ‘Hospitality Management’ with the Taj Hotel Group in India.

Similarly, the report claims that the higher education sector is overwhelmingly public which is again not the case. Over 50% of higher education provision in India is private and the vast majority of audiences the US would like to address at secondary level will attend private schools which dominate the urban areas. This brings me to a second point.

The ISB example, while interesting, also misses the point raised, as the main way the US can build an educational relationship with India is claimed to be partnership in meeting the training requirements for India’s large population. ISB and similar Tier 1 institutions will never address this demand with their tiny elite intakes. More relevant are the 1800 engineering colleges with Tier 2 aspirations that are currently achieving less than 30% employability according to the IT industry body Nasscom. Here the community colleges and Tier 2 US institutions could play a bigger role (briefly touched upon in the report). And here, also, the private sector becomes very relevant with the enormous number of Tier 2 private institutions springing up all over India.

Finally, the potential of the partnership is less than fully explored here. The US already has a substantial knowledge partnership with India which transcends the main objective in the report; of helping India to produce its next generation workforce. The complex research and innovation links with US through entrepreneurs and highly qualified graduate technicians and scientists are of immense value to both countries but largely ignored in this report. The overall impression is of a hastily prepared report to encourage the new administration to focus on India.

Many of us have wondered what would happen if the sleeping giant awakes and the US take a more pro-active and coherent approach to its knowledge and education partnership with India.This report may be the alarm clock going off..!!

Tim Gore

‘Frontier markets’, the International Finance Corporation, and development

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.

Susan Robertson

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.

The ‘European Quality Assurance Register’ for higher education: from networks to hierarchy?

Quality assurance has been an important global dialogue, with quality assurance agencies embedded in the fabric of the global higher education landscape. These agencies are mostly made up of a network of nationally-located institutions, for example the Nordic Quality Assurance Network in Higher Education, or the US-based Council for Higher Education Accrediation.

Since the early 1990s, we have seen the development of regional and global networks of agencies, for instance the European Association for Quality Assurance in Higher Education, and the International Network for Quality Assurance Agencies in Higher Education which in 2007 boasted full membership from 136 organizations from 74 countries. Such networks both drive and produce processes of globalization and regionalization.

The emergence of ‘registers’–of the kind announced today with the launch of the European Quality Assurance Register (EQAR) by the E4 Group(ESU, The European University Association – EUA, The European Association of Institutions in Higher Education – EURASHE, The European Network of Quality Assurance Agencies – ENQA) – signals a rather different kind of ‘globalising’ development in the sector. In short we might see it as a move from a network of agencies to a register that acts to regulate the sector. It also signals a further development in the creation of a European higher education industry.

So, what will the EQAR to do? According to EQAR, its role is to

…provide clear and reliable information on the quality assurance agencies (QAAs) operating in Europe: this is a list of agencies that substantially comply with the European Standards and Guidelines for Quality Assurance (ESG) as adopted by the European ministers of higher education in Bergen 2005.

The Register is expected to:

• promote student mobility by providing a basis for the increase of trust among higher education institutions;
• reduce opportunities for “accreditation mills” to gain credibility;
• provide a basis for governments to authorize higher educations institutions to choose any agency from the Register, if that is compatible with national arrangements;
• provide a means for higher education institutions to choose between different agencies, if that is compatible with national arrangements; and
• serve as an instrument to improve the quality of education.

All Quality Assurance Agencies that comply with the European Standards and Guidelines for Quality Assurance will feature on the register, with compliance secured through an external review process.

There will also be a Register Committee – an independent body comprising of 11 quality assurance experts, nominated by European stakeholder organisations. This committee will decide on the inclusion of the quality assurance agencies. The EQAR association, that operates the Register, will be managed by an Executive Board, composed of E4 representatives, and a Secretariat.

The ‘register’ not only formalises and institutionalises a new layer of quality assurance, but it generates a regulatory hierarchy over and above other public and private regulatory agencies. It also is intended to ensure the development of a European higher education industry with the stamp of regulatory approval to provide important information in the global marketplace.

Susan Robertson