Is a UK funding crisis an effective mechanism to spur on the ‘education as a global growth industry’ development agenda?

Amidst a discursive struggle this week over the state of finances for higher education and research in the UK, which reached a crescendo two days ago (e.g., see ‘Universities face meltdown – and all of Britain will suffer‘; ‘Higher education will be ‘on its knees’ after cuts‘), I could not help but note what Prime Minister Gordon Brown had to say in a speech (‘Education as a global growth industry‘) on 14 January:

Today, I also set out our commitment that, working in partnership with you, and our schools, colleges and universities, we will support a major expansion of their activities across the world.  Central to this is a new ambition, which I am setting today for Britain, that we double the value of our higher-education exports.

We will do this in four ways.  We will welcome students here to Britain on the basis of merit and ability – of course with all the proper checks in place.  We are determined to stamp out abuse of student visas and I announced last year we will shortly bring forth proposals on this.  I emphasise that all students that come here legitimately, to benefit from our UK education system, will be made welcome, because we are not prepared to put legitimate language courses, and schools and colleges out of business or set back our efforts to expand our educational trade.

Secondly, we want to reinforce and build on the international standing of our qualifications, by offering examinations and qualifications that are rightly highly regarded around the world.

Thirdly, we will work to develop partnerships between UK institutions and universities in many different countries around the globe.  Already over the last four years, we have promoted thousands of new partnerships across all sectors, from schools linking to post graduate research through our initiatives for international education.  In a global knowledge economy, we know we will thrive, not just by developing our own knowledge, but by taking knowledge and sharing it with the billions of people who understand that education is the key to survival and success.

Fourthly, we will use distance learning to build on the work of our excellent universities that are already making use of great and rapid advances in the relevant technology.  As I said, in our higher-education strategy, we welcome and support the work of the group chaired by Lynne Brindley.  This task force is looking at how we can expand and develop the use of IT and online learning, not only in the UK, but across the world.  Across higher education, we will want to ensure that we maintain and enhance world-class standards in everything we do in our international activities.

This is not about chasing money; it’s about leveraging our higher education system to offer the highest-quality opportunities across the world.[my emphasis]

This argument was matched, on the same day, by Peter Mandelson (the UK’s Universities Secretary) who suggested in The Guardian (‘Our universities are not under threat. Their income is at record levels‘) that:

The Russell Group can take much credit for the world-class standard of British higher education today. But the government inherited a badly underfunded university sector in 1997, which a former Conservative education minister described as “poorer pay, degraded facilities, less money to support the teaching of each student”. This government’s agenda for universities has included more state funding than ever before – an increase of over 25% since 1997. It is against this backdrop that British universities have developed into some of the very best in the world and are a critical part of our knowledge economy.

But this wasn’t simply on the back of state funding. In fact, while government spends £12.3bn on higher education today, total university income from all sources was over £23bn in 2007-2008. Government incentives have pushed universities to seek new forms of income from donations, international students and commercial engagement with industry. These are consistently rising. The decision to introduce tuition fees in England has also provided a new source of income. [my emphasis]

Mandelson carries on to note:

It is for universities themselves to identify where savings should be found, and they are as free as ever to focus on their research excellence and institutional strengths. The search for greater efficiencies should include more part-time courses and a greater range of one- or two-year degrees.

As I discussed earlier in GlobalHigherEd (‘Learning from London‘) the export earnings logic is already putting pressure on some UK higher education institutions, such that they are being driven the create new postgraduate [graduate degree] programs that have hundreds of Masters students supported by a small coterie of faculty.  And I subsequently heard, in response to my ‘Learning from London‘ entry, that some London-based Masters programs have faculty sign contracts with students denoting exactly how many hours of “contact time” students can expect (it was a shockingly small number of hours per degree…something like 5 hours for the entire MA, assuming they follow through with the promised hours).

Now, as we also noted in ‘Taking note of export earnings‘, this global growth industry agenda is underlain by an ideological shift:

We would argue that these numbers are being constituted, and debated about, in the context of an ideological transition – one that increasingly enables views to emerge of higher education as a driver of economic versus cultural-political change. For example, a decade or two ago, it would have been impossible to imagine creating tables such as the one profiled in Kate Geddie’s entry in GlobalHigherEd in which education is measured against ‘scrap plastics’ or ‘chemical woodpulp’. Thus, a new organising logic, to use Saskia Sassen’s phrase, is emerging: one that reframes higher education as an urban/national/global services industry, for good and for bad.

Assuming we are right (of course we might not be!), it is interesting to think about how effective a state-enabled fiscal crisis for higher education institutions (in the range of a 12.5% cut so far, then 6.3% in succeeding years over three years “taking the total to about 30%”) will be in propelling this export agenda along.  To be sure there is a broader fiscal crisis in UK public finances, but can it really be ameliorated on the backs of UK universities (and students, local and foreign)? All savings via higher ed cutbacks are significant, but in the big picture they are not that significant for the overall UK budget.  But the transformation of the values shaping higher education policy, including enhanced state control versus greater autonomy for HEIs, is much more significant, more noteworthy, and certainly worth deliberating about. And the function of the crisis – a “politically mediated moment of decisive intervention and structural transformation” to use Colin Hay’s words* – is also worth unpacking.

In the end, is a UK funding crisis an effective mechanism to spur on a quality-oriented ‘education as a global growth industry’ development agenda? Will it provide a defacto or by design opening for private sector providers into the UK ‘market’, as it is doing now in the US (e.g., see Changing Higher Education‘s ‘For-profit higher education moves to fill gaps left by state budget shortfalls‘)? And who gains and who loses in the process? For example, can those 16-17 faculty and 13 teaching fellows (3 with PhD) I profiled in ‘Learning from London‘ take on even more that the “almost 400” masters students they already have to cope with, support, mentor, and educate?  Something has to give, doesn’t it?

Kris Olds

* Hay, Colin (1999) ‘Crisis and the structural transformation of the state: interrogating the process of change’, British Journal of Politics and International Relations, 1(3): 317-344.

Measuring the economic impact of ‘export education’: insights from New Zealand

Editor’s note: this guest entry was kindly prepared by Dr. Adolf Stroomberge, Chief Economist, Infometrics. Dr. Stroomberge has a PhD in general equilibrium modelling and 25 years of experience in economic consulting, specialising in economic modelling, econometrics and public policy research in areas such as education, taxation, savings and retirement, energy and environment, trade and transport.  He has been a member of the New Zealand Advisory Committee on Economic Statistics since 1996 and was an Expert Reviewer for the IPCC Working Group II Fourth Assessment Report released in 2007.

This is the first of a series of entries, we hope, regarding the ways in which the state, often via the contracting out process to firms like Infometrics, begins to calculate the economic impact of an emerging industry (in this case, ‘export education’). In our research we have noted substantial differences, across space, regarding the nature of the calculative process.

In countries like New Zealand, Australia, and the UK, the state has a relatively clear understanding of the economic impact of the export of education services (e.g., see ‘Graphic feed: Australia’s dependence (2007-2008) upon foreign students‘, ‘International education activity in Australia up 23 per cent from previous financial year‘, and ‘Value of educational exports to the UK economy‘). This said there are clearly debates underway about which analytical models to adopt, and about the impacts of this development approach. Other countries have made relatively little effort, or progress, in calculating such impacts. The reasons for this are many, ranging from lack of capacity, inadequate data, ideological unease with the idea of thinking about (and especially speaking about, in public at least) education as an ‘industry’, and limited inter-governmental engagement about this issue within some countries.

At the multilateral scale, this entry should be read in association with debates about the trade in education services (e.g., see the series of UNESCO/OECD forums on trade in educational services), as well as GATS (see ‘GATS BASICS: key rules and concepts‘). And from a broader perspective, it is worth thinking about the power of numbers, and the role of the calculative process in assessing, and at the same time constituting, what is undoubtedly an emerging global services industry.

Our thanks to Informetrics (especially Adolf Stroomberge) for outlining how the analytical process works in New Zealand, and to the New Zealand Mission to the European Union for insights on this topic. Readers interested in this topic are advised to see this 2008 report (‘The Economic Impact of Export Education‘) by Infometrics, NRB and Skinnerstrategic which was prepared for Education New Zealand & the New Zealand Ministry of Education.  An earlier (2006) version of this report is available here.

Kris Olds

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It had been suspected for some time that the contribution of the export education industry to the New Zealand economy has seen impressive, if volatile growth, to reach around $2 billion in 2007/08.  Our research in 2008 sought to establish the truth of these suspicions.

Export education is a term used to describe the foreign exchange earned from delivering education to foreign fee-paying students.  In general the goods and services bought by foreign fee-paying students are consumed within the destination country – analogous to the situation with foreign tourists.  In addition though, some delivery of educational services takes place in students’ own countries, such as by distance education or through educational institutions establishing a presence in foreign countries.  For New Zealand, however, over 95% of the earnings of export education are earned in New Zealand.

There are two main areas of expenditure by foreign fee-paying students; tuition fees and living costs.

For New Zealand data on tuition fees is collected by the Ministry of Education from educational institutions, along with data on the number of foreign students and the courses taken.  Thus estimating total tuition income from foreign fee-paying students is relatively straightforward.  It was not always so.

In contrast, there is no official data on student spending on living costs. Our 2008 study (‘The Economic Impact of Export Education‘) was the first study in New Zealand that incorporated a dedicated and purposely designed survey of expenditure by foreign fee-paying students.

Collecting data on student spending might seem simple, but there are a number of obstacles to obtaining accurate data including:

1. Poor English on the part of respondents.
2. Memory recall errors.
3. Measurement of irregular expenditure as the survey takes place over a limited time period.
4. Under-sampling of short-stay students.
5. Allowing for earnings from employment whilst in New Zealand (which do not constitute foreign exchange income).

Summing up expenditure on tuition fees and living costs gives the direct impact on the country’s gross domestic product.  However, the net impact will be less than this as some of the foreign exchange earned by export education leaks out of the country as payment for imports of goods and services.  Some imports such as petrol may be consumed directly by foreign students, while other imports are consumed indirectly.  An example is clothing made from imported fabric.

Economic impact multipliers are used to estimate the direct and indirect consumption of imports of goods and services.  Each dollar spent on the output of one industry leads to output increases in other industries, or to an increase in imports.  For example for a university to deliver education services to a foreign student it requires inputs of books, energy, communication services and so on.  Part of the tuition fee is used to cover the cost of these items.  Another part covers the cost of the buildings and equipment (spread over their useful lives) and there is a large portion for staff wages and salaries.

The supplying industries such as energy require inputs themselves, pay wages and salaries, and so on.  The effect on these supplying industries is known as the upstream or indirect production effect and is commonly measured by a number called a Type I multiplier.  In essence the indirect upstream effects is just a representation of the process whereby the expenditure and income sides of the national accounts equilibrate.  No additional value-added is created from this effect.

The supplying industries pay wages and salaries which are used to purchase household consumption goods, some of which are imported.  This generates flow-on effects in an analogous manner to the original increase in export earnings and therefore generates an additional gain in gross domestic product.  The effect is generally known as the downstream or induced consumption effect.  Again the effect may be measured by a multiplier known as a Type II multiplier.

Multipliers are typically calculated for different measures of economic activity such as gross output, value-added and employment, but gross output multipliers lead to double counting.  For example the value of food and drink supplied at a restaurant is counted as part of the gross output of both the Food and Beverage Manufacturing industry and the Restaurant industry.  If one’s aim is to measure overall business activity this double counting may be useful, but from the perspective of economic contribution it is value-added or gross domestic product that is of interest.

While very useful, economic multipliers have limitations.  For example they do not include the effects of increases in government consumption made possible by higher tax revenue, or the effects of changes in investment that may be required to expand output.  It is also implicitly assumed that all factors of production are in excess supply and that that there are no price changes (such as if a factor is in limited supply) which may lead producers to change inputs, thereby altering their production structure and hence the associated economic multipliers.

All of these limitations have the potential to undermine the result of multiplier analysis – the wider the attempted coverage of indirect and induced effects, the greater is the potential for miscalculation and error.  Rather like a stone thrown into a pond; the more the ripples spread out, the more likely they are to encounter some form of obstacle – ripples from another stone, a cross current, the embankment.

A superior, but more costly approach is to use a multi-industry general equilibrium model.  These types of models incorporate all of the key inter-dependencies in the economy, such as flows of goods from one industry to another, plus the passing on of higher wage costs in one industry into prices and thence the costs of other industries.

Our estimates show that in 2008 the economic impact of New Zealand’s export education industry was $2.1 billion, implying a four-fold increase since 1999.  Few industries would be able to claim an average growth rate of 16% pa for almost a decade.

Adolf Stroomberge

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

The ‘other GATS negotiations’: domestic regulation and norms

In our previous entries (here and here) in GlobalHigherEd we introduced the World Trade Organization (WTO) and explained the content and implications of the liberalization negotiation within the General Agreement on Trade in Services (GATS). The liberalization negotiation is the most well known activity within the scope of GATS. In fact, very often the GATS and education literature restricts the content of the agreement to its liberalization disciplines (that is, market access and national treatment).

However, other negotiations that are equally relevant to the future of higher education are also taking place, and specifically the negotiations on Domestic Regulation (DR) and Norms.

Discussion on these topics takes place as the logical consequence of the fact that the GATS is an incomplete agreement. In the Uruguay Round, the GATS was designed and signed, but member countries did not reach a consensus in sensitive issues, such as Domestic Regulation (Article VI) and the so-called Norms (Articles X, XIII and XV). So, after Uruguay, two working groups – composed by all WTO member countries – were established with the objective of concluding these articles.

Domestic regulation negotiations
Article VI establishes that the national regulation cannot block the “benefits derived from the GATS” and calls member countries to elaborate disciplines and procedures that contribute to identify those national regulations that states’ impose on foreign services providers that are ‘more burdensome than necessary’. The regulations in question include those associated with:

• qualification issues (for instance, certificates that are required by education services providers),
• technical standards (which can be related to quality assurance mechanisms), and
• licensing requirements (which, in some countries and sectors might refer to conditions and benchmarks on access to the service).

One of the procedures that is being discussed in the framework of the Working Group on DR is a polemical ‘necessity test’. If this instrument is approved, Member States will have to demonstrate, if asked, that certain regulatory measures are totally necessary to achieve certain aims, and that they could not apply any other less trade-restrictive alternative.

Rules
In the framework of the Working Group on Rules, three issues are being discussed:

• Emergency Safeward Mechanisms (Article X): These mechanisms, when settled, would permit to countries to retrieve some liberalization commitments – without receiving any sanction – in case that it can be demonstrated that the liberalization experience has had very negative effects. Southern countries are more interested in the achievement of strong mechanisms, while developed countries pushes for softer disciplines.
• Government procurement (Article XIII): The Working Group examines how government procurement could be inserted in the GATS framework. Therefore, transnational services corporations could become public procurement bidders in foreign countries. Developed countries are most interested in strong disciplines in relation to this rule.
• Subsidies (Article XV): In this case, Members are elaborating disciplines to avoid the “distortion to trade” provoked by subsidies.

DR and Rules negotiations are different to the liberalization negotiations in the sense that the former are not developed progressively (i.e. round after round). On the one hand, once each country reaches an agreement, consecutive negotiations on these areas will not be necessary. On the other hand, DR and Norms affect all sectors indiscriminately because, in contrast to liberalization negotiations, they are not negotiated sector by sector.

The outcome of the Working Groups on DR and Rules will thus modify the balance between the legitimate capacity of the states to prosecute certain social objectives (for instance, in relation to the access and quality of public services such as education) and the obligation to guarantee a free trade environment for transnational services providers.

Given the importance of these ‘other’ negotiations in the GATS, our view is that the education community should make sure that they also keep a watchful eye on them. GlobalHigherEd readers might find the information in the periodic publication TradeEducation News, launched by Education International, a useful way of doing this.

Antoni Verger and Susan Robertson

GATS BASICS: key rules and concepts

We recently announced a series of entrances in GlobalHigherEd on the World Trade Organization’s two controversial trade agreements launched in 1995 – the General Agreement on Trade in Services (GATS) and the Trade Related Intellectual Property Services (TRIPS). The series explores the relation between these two agreements and Higher Education sector. Our first entrance focused on the history of the World Trade Organization, and the GATS and TRIPS.

This entrance introduces some of the language and concepts used to describe the processes and instruments in order that readers might develop a better understanding of the GATS’ content and architecture.

The GATS is one of the main agreements of the WTO. In fact, this agreement has been described by the WTO itself as:

the most important event in the system of multilateral trade since GATT came into force in 1948.

In the preamble of the Agreement it is established that the core aim of the GATS is to promote trade liberalization of all kind of services. Specifically, the GATS contemplates the liberalisation of twelve services sectors, among which we find educational services.

Educational services are, in turn, divided into five sub-sectors:

• primary education;
• secondary education;
• higher education;
• adult education; and
• other educational services.

One of the reasons for the complexity of GATS is related to the technical difficulties associated with the commercialization of services. We should take into account that services are usually consumed where they are produced and are both produced and consumed simultaneously.

So, how is it possible to ‘export’ services?

To solve these dilemmas, the agreement contemplates four modes of commercializing services (instead of the unique mode of trade in goods). These are:

1. cross-border supply: provision of a service at a distance. In the case of education, this mode materializes in e-learning or, in general, in distance learning programs;
2. consumption abroad: the consumer (in our case the student) travels to another country to access to the service;
3. commercial presence: the service company sets up a subsidiary abroad. For example, a university sets up a branch campus in another country;
4. presence of natural persons: a professional travels to a foreign country to provide a service.

All WTO member countries are supposed to adopt liberalization commitments on services by means of successive negotiation rounds (such as the Uruguay Round 1986-1994, and the Doha Round 2001-?). In these rounds, countries negotiate trade opening in relation to the different services sectors, to the different modes of supply and, more importantly, in relation to two main regulatory areas: National Treatment and Market Access.

The acquisition of commitments on liberalization in terms of National Treatment means accepting that foreign companies benefit from treatment ‘not less favorable’ than that given to domestic companies.

It implies that foreign suppliers cannot be discriminated against in relation to national providers and to certain policies such as subsidies, qualifications, licenses, standards and so on.

Image courtesy of Lorelyn Medina

The commitments on Market Access mean the elimination of barriers embedded in the national regulation of the sector that hinder the entrance of foreign service providers in the domestic market (for instance, limitations on the number of services suppliers which are allowed, specification of the legal personality of the providers suppliers or the percentage of foreign capital allowed).

Additionally, there are a series of general principles that are not subject to negotiation and that, consequently, have to be respected by all the countries. Probably, the most important one is the Most Favored Nation principle. This principle stipulates that each member will immediately and unconditionally assign service suppliers of a foreign country a treatment no less favorable than that given to service suppliers of any other WTO member country.

On paper, the GATS only obliges member countries to participate in negotiations; it does not oblige them, in the process of such negotiations, to establish liberalization commitments. It is also important to take note of the fact that once the countries have adopted liberalization commitments, they are very difficult to withdraw. The Agreement is viewed by some observers as a means of constitutionalizing pro-market and pro-trade rules in a binding set of rules which affects education and other services sectors at the supra-national level.

In following entrances we will deal with other basic GATS rules, the implications of liberalization commitments in the framework of the GATS, as well as with the passionate debate it has generated in the higher education field.

Toni Verger and Susan Robertson

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.

By 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).

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’.

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.

However, 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.

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