Making sense of the economic contribution of international students in Australia (up to 2008)

accesseconcover1The latest contribution to assessing the “economic contribution” of international students to Australia’s economy was released last week. The informative report, titled The Australian Education Sector and the Economic Contribution of International Students, was prepared by Access Economics on behalf of the Australian Council for Private Education and Training (ACPET).

The executive summary of the 35 page report notes, amongst other things, that:

  • Education services ranks as the third largest export category earner for the year 2007-08, behind coal and iron ore.
  • Each international student (including their friend and family visitors) contributes an average of $28,921 in value added to the Australian economy and generates 0.29 in full-time equivalent (FTE) workers. Overall, this sees international students, and the associated visitation from friends and family contribute $12.6 billion in value-added.
  • The share of education-related travel services has increased from around one per cent of total services exports in the early 1970’s to 27 per cent in 2007-08.
  • International student expenditure in Australia contributes to employment in the Australian economy. It is estimated to have generated just over 122,000 FTE positions in the Australian economy in 2007-08, with 33,482 of these being in the education sector. Total student related expenditure (spending by students and visiting friends and relatives) generates a total of 126,240 FTE positions.

I’ll paste in a sample of tables and graphs from the report below:

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Please keep in mind, as noted in our 24 June 2008 entry ‘Analysing Australia’s global higher ed export industry‘, that higher (tertiary) education is one of several contributing ‘education’ activities to producing export earnings:

  • Higher Education
  • English Language Intensive Courses for Overseas Students (ELICOS)
  • Vocational Education and Training (VET)
  • Schools
  • Other Awards Sectors (e.g., “bridging courses and studies that do not lead to formal qualifications”)

The development of capacity to assess the economic impact of foreign students is part and parcel of the denationalization and commercialization process. Capacity to analyze and hence constitute this new services sector – a fast growing ‘industry’ in the views of many stakeholders – is strikingly variable.  In my view Australia and New Zealand have gone the furthest down this path, and it is therefore worth understanding how the Australasians approach this issue from an analytical (economic impact assessment) perspective.

It is also important to understand which institutions are emerging as key knowledge brokers regarding the economic contribution of international students.  As the New Zealand (see ‘Measuring the economic impact of ‘export education’: insights from New Zealand‘) and Australian cases suggest, private consulting firms made up of economists (some of whom used to work for federal/national governments) are key actors. There is, thus, a symbiotic relationship between the state and the private sector when it comes to analyzing the evolving nature of the services sector of the economy; one becoming increasingly associated with, in policy and analytical senses, education institutions and development agendas.

In addition, as in this case, we see an association of private sector providers contracting out to have this report developed.  The ACPET is “the national industry association for independent providers of post-compulsory education and training, for Australian and international students”, including:

  • Higher Education
  • Vocational Education and Training
  • English Language Courses
  • Senior Secondary Studies
  • Foundation Studies
  • The ACPET Mission is to:

    Enhance quality, choice, innovation and diversity in Australian education and training for individual, national and global development. Work pro-actively and co-operatively with government, education and training providers, industry and community organisations, in order to ensure that vocational and higher education and training services provide choice and diversity, and well-targeted, appropriately delivered courses which are widely accessible and of high quality.

One proxy measure of ACPET’s make-up is its broad of directors, highlighting how non-university “post-compulsory education and training” actors are also becoming dependent upon foreign students in countries like Australia; a structural position that leads them to institutionalize and create an International Education Committee, which then coordinates the production of reports such as this via the expertise of Access Economics.

Given the dependency dynamic, reports such as these are both analytical devices, but also tools for lobbying.  Reports such as The Australian Education Sector and the Economic Contribution of International Students are increasingly available for downloading in PDF format, which enables wide circulation via email.  Traditional releases to media sources continue, as well: see, for example, ‘Learning boom amid the economic gloom‘ in The Australian.

As noted in the introduction to a recent guest entry (‘Measuring the economic impact of ‘export education’: insights from New Zealand‘), we are in the early stages of seeking a series of national viewpoints on how countries approach the export earnings issue. We would be happy to entertain proposals for guest entries on this issue, regardless of how well formed your own country’s capacity is to make sense of the data that is (and is not) available.

Kris Olds

Update: nanopolitan (‘Coal, iron ore, and education‘) makes the noteworthy point that “adjusted for population, Australia (21.7 million) hosts five times as many students as the USA (306.2 million)”. It might be worth adding that, according The Australian (‘Indian students boost the export economy‘, 2 April 2009) “Indian students now make up almost 18 per cent of Australia’s total foreign student population, the second largest group after China, which represents 23.5 per cent of the total foreign student body”.

Update 2: thanks to Brett for the links (see Comments) to two new news stories re. ‘Australian immigration launches probe on 20 colleges teaching international students for supply of fake education and work certificates necessary for the obtainment of permanent residency’.

New foreign student and export income geographies in the UK and Australia

I’ve been visiting the University of Warwick for the last two days and have noticed a serious level of international accent diversity at various campus sites, far more than was the case when I was a PhD student in Bristol in the mid-1990s. Not surprising, perhaps, given Warwick’s position as the third largest recipient of foreign students in the UK, as the Guardian coincidentally noted yesterday:

The universities with the largest numbers of international students.

2006-07 (latest figures)

1. Manchester University 8345
2. Nottingham University 7710
3. Warwick University 7435
4. Oxford University 6555
5. City University 6380
6. Cambridge University 6340
7. University College London 6135
8. London School of Economics 5980
9. Westminster University 5735
10. Birmingham University 5505

Grand total of international students in all years (ie not just in their first year) at all universities in the UK and including undergraduates and postgraduates was 351,470

A related graphic on the regional “hotspots” in the Guardian is here. Recall that the UK is the second largest recipient of foreign students in the world.

Meanwhile in Australia, the 5th largest recipient of foreign students in the world, Australian Education International just released an interesting Research Snapshot (May 2008) that captures some of the economic effects of receiving foreign students [note: if you click on the table a clear full screen version will pop up]:

This is a significant economic impact. The same snapshot notes:

Of the total export income generated by education services in 2007, $12.2 billion was from spending on fees and goods and services by onshore students, and a further $370 million was from other education services such as offshore students’ fees and education consultancy services3. Education services remains Australia’s 3rd largest export, behind coal and iron ore ($20.8 billion and $16.1 billion respectively), and the largest services export industry ahead of personal travel (tourism) services ($11.8 billion).

This said, there is a distinctive geography to the impact:

Thus, while aggregate data tables (e.g., from the OECD’s valuable Education at a Glance 2007) are important to assess, there is huge institutional and geographic variation regarding the integration of foreign students into any one nation, highlighting, again, the importance of breaking free of methodological nationalism.

Kris Olds

Competitive advantage and the mobile international student

Last week GlobalHigherEd featured a series of stories on the different players battling for market share in the global higher education market. We reviewed the recently published report by the Observatory of Borderless Higher Education (OBHE).

Today’s Inside Higher Ed also features a story from this report, drawing particular attention to the competitive advantages of the different players. These include whether students require a visa for short study visits, the cost of tuition (low or moderate), living costs (low or moderate), and whether there are programs available to foreign students to help them to prepare for study before they start classes – presumably language classes.

As we pointed out last week, France and Germany ‘scrub up’ well as possible study destinations – particularly for short periods. They have low tuition fees and moderate living costs, and their visa system would be present few problems for undergraduates wanting a short period of ‘study abroad’ . This might also be a useful tactic in luring back students to enrol in a graduate program, particularly if their experience is a positive one.

University of BristolBy comparison, the UK – a Major Player in the field like the US and Australia –scores only one tick in the competitive advantage box; that is, in their provision of programs to help students prepare for study. The downside for the prospective student is that the UK has a high living cost and high tuition fees. It does, however, have a relatively high brand image and ‘esteem’ value – something that Inside Higher Ed fails to point out.

As the market gets tighter, GlobalHigherEd agrees with Inside Higher Ed – that there are important strategic decisions to be made by institutions and countries if they want to not only stay competitive but increase market share. How might a nation go about making itself a desirable destination in this highly lucrative market? Alternatively, a country might currently be a desirable destination, but at present there are limited financial returns (aside from the not inconsequential returns through cost of living). The issue here for these low (or no) fee countries, such as Germany, France and Finland, is whether to respond to pressures to charge fees. Currently their figures of international students are multiplying rapidly – by more than 500% over the past five or so years. Will putting a fee structure into place for international students simply turn the tap off? This dilemma is likely to cause university administrators  more than a minor headache.

Susan Robertson

Battling for market share 3: ‘Evolving Destinations’ and international student mobility

This week GlobalHigherEd has been running a series of in-depth reports on the battle for market share of higher education. Our reports draw from a major study released last week by the Observatory of Borderless Higher Education (OBHE) on International Student Mobility: Patterns and Trends. The Observatory report identifies four categories: (1) Major Players; (2) Middle Powers; (3) Emerging Destinations, and (4) Emerging Contenders.

Today we look at the third category – ‘Evolving Destinations’.

Japan, Canada and New Zealand are viewed as evolving destinations with 5%, 5% and 3% respectively of market share. Between them, these 3 have around 13% (or 327,000 of the 2.7 million in total) of global market share (compared with 45% for the Major Players and 20% for the Middle Powers). The reason for the OBHE report locating these 3 countries into this category is that:

  • they have patterns of peak and decline
  • they rely on 1 or 2 source countries.

For instance, in Japan’s case, 63% of Japan’s international students come from China (74,292) with only a small distribution (aside from South Korea who send 15,974) from around the Asian region. In order to boost numbers and widen distribution, the Japanese government has tasked a subcommittee of the Education Rebuilding Council with the job of finding more than 1 million by 2025. Making Japan more attractive as a destination will be achieved by teaching more courses in English, a more flexible system of credit transfer system, and more funding for foreign scholars. No doubt Japan will also be intrigued by the Bologna Process as one strategy that Europe has pursued to this end.

Canada has 5% of market share, and rising, benefiting from the visa problems facing students entering the USA since September 11. Canada, however is dependent upon only a few source countries; for instance it recruits a high proportion of South Korean students (19% of total overseas enrollments). However, it has faced declining numbers of students coming from Japan, China and Hong Kong. It would interesting to follow this case more closely, as Canada has a very high standard of living and competitive student fees. There is a suggestion that the fact that there is not have a strong central (Federal) government initiative to position it as a global player, as in the case of Australia, is a strategic weakness (see also our recent report on Canada).

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New Zealand owns around 3% of market share and in the peak years, it has had as much as 10%. However, since 2004, NZ has experienced negative growth, fed by a decline in the numbers of students coming from China. What are the causes of the decline? The OBHE report notes:

In comparison with the rest of the major host nations, New Zealand has a limited higher education capacity with only eight publicly funded institutions and lower brand visibility …[and] with a rising exchange rate the country may not be the low cost destination it is at present.

In order to overcome problems of visibility and ‘brand’ recognition, the New Zealand government have developed their own brand images and marketing strategies – around what they call ‘Brand New Zealand’.

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What we learn from the case of these 3 ‘Evolving Destinations’ is that they have to operate in a very sophisticated and potentially volatile market. Diversifying the number of source countries is one strategy. However, this cannot overcome local issues of capacity (NZ), or problems associated with the organization of political systems (Canada).

However, it will be particularly interesting to see what happens to Japan’s higher education system over the next decade. One thing for sure is that while China is a major importer for the moment, any intentions that it has of reversing this and becoming an attractive destination itself will cause a major headache for most of the players in the global higher education field.

Susan Robertson

Battling for market share 2: the ‘Middle Powers’ and international student mobility

Yesterday GlobalHigherEd ran the first of 4 in-depth reports on battle for market share of higher education – on the Major Players. Our reports draw from a major study released this week by the Observatory of Borderless Higher Education (OBHE) on International Student Mobility: Patterns and Trends. The Observatory report identifies four categories: (1) the Major Players; (2) the Middle Powers; (3) the Emerging Destinations, and (4) the Emerging Contenders.

Today we look at the ‘Middle Powers’.

The Middle Players are Germany and France who share, with 20% of the total amount of all foreign students (compared with the Major players who have 45%). In contrast to the Major Players who attract students from all over the world, the Middle Players attract students from regional European countries, or those where there are strong cultural and historical ties – for instance in the case of France – Morocco, Algeria and Senegal.

Sciences Po, Paris, France

Sciences Po, Paris, FranceHowever, both Germany and France have also managed to significantly increase their numbers of students from China – one of the two major target destinations for recruiting – by around 500% over the past 8-10 years.

In 1997, Germany recruited 4980 students – by 2006 they had recruited 26,390. Similarly, France recruited a mere 1,374 students from China in 1999 – by 2005 its numbers had increased to 15,963. Compare this trend with the US – who in 1997 recruited 42,503 – increasing to only 62,583 in 2006. Only Australia and the UK have figures close to those of France and Germany in relation to an expanding share of the Chinese market. The OBHE also notes that these two Middle Powers have failed to target India, making them less strategic in their approach to the market.

However, the advantage that these Middle Powers have, at least for the moment, is their value for money (low fees and affordable living costs) and the move to teaching in English (see our report last week). The question is, how long that advantage might last? The European Commission is pressing its Member States to consider imposing or increasing student fees in order to augment flagging higher education budgets.

Given the above developments, GlobalHigherEd sees a tension emerging between (i) attracting talent for the knowledge economy (stream lined visa systems for retention, R&D infrastructures etc) , (ii) being an attractive destination for higher education (aka low fees, low living costs, high quality product), and (iii) getting a higher return to the institution and the economy by way of fees.

The question for these Middle Powers is how to become major global players, and what might be the costs and benefits in doing so.

Source: OBHE (2007) International Student Mobility: Patterns and Trends.

Susan Robertson

Battling for market share 1: the ‘Major Players’ and international student mobility

The battle is on for market share in the international student market. This week we reported on major study released by the Observatory of Borderless Higher Education (OBHE) on the players in the field, and market share – International Student Mobility: Patterns and Trends. The Observatory report identifies four categories: (1) the Major Players; (2) the Middle Powers; (3) the Emerging Destinations, and (4) the Emerging Contenders. Over the course of this week, GlobalHigherEd will report in more depth on each of these 4 categories, starting with the ‘Major Players’.

The Major Players are the US, UK and Australia, with 45% of the total amount of all foreign students, or 1.2 out of 2.7 million students. The US dominates the market, with a wopping 22% share. Its students come from all over the world, though Asia generates 58% of the total international student figure. However, of particular interest, says the Observatory Report, is that

…India, China, Japan and South Korea…make up around 70% of the per year regional total for Asia, and 40% of the total number of overseas students studying at US institutions.

While the overall share for the US is large, by comparison, the US’s performance is fading relative to levels of growth amongst some of the other Major Players and Middle Powers. Contrast these figures. During 1999-2005, overseas enrollments to the US grew by 17%. However, in the UK they grew by 29%, Australia 42%, Germany 46%, and in France 81%! Each country though, including France (see below), draws upon differential sources (apart from China) to support these growth rates.

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Source: OBHE (2007) International Student Mobility: Patterns and Trends.

The US can boast world class institutions and high brand visibility, but it cannot be complacent. September 11 has caused uncertainty about the US as a destination, and visa restrictions have made matters worse. While these are currently being addressed, there is little doubt that this has done considerable damage to the US’s overall position.

Nor can the UK feel confident about its own levels of growth (whose overall share is 12%), the Observatory Report notes. There has been decline in numbers of students coming from what were traditionally strong source countries, especially Malaysia. Some of the reason for this is the very high cost of living in the UK and creeping fees. Added to this, countries like Australia have targetted the Malaysian market, including setting up campuses in Malaysia. In response, UK universities have sought to target the Chinese market more directly, as GlobalHigherEd reported recently.

The third Major Player is Australia with 11% share of the global market. The Australian government has invested large sums in gathering high quality information about developments in the global higher education marketplace and strategically marketed its institutions (see our earlier posting on this theme). It is also, relative to the UK and US, affordable. However, it has become concerned by countries like Singapore, Malaysia, the Middle East and China–all important sending countries to Australia–taking lessons from Australia, and seeking to establishing themselves as regional hubs and major players in the field.

The Major Players cannot afford to lose their share in the jostle for a wider share, in large part as higher education institutions have come to depend on these sources of funding. Anything that destabilizes market share, as we saw with the US, will cause more than a ripple in the sector…

Susan Robertson