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Keeping your faculties intact

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Keeping your faculties intact

On the face of it, Australia’s international tertiary education sector is booming. Education recently surpassed tourism to become the third largest export after steel and coal, creating about $12.5 billion in income.

On the face of it, Australia’s international tertiary education sector is booming. Education recently surpassed tourism to become the third largest export after steel and coal, creating about $12.5 billion in income. Yet behind this apparent success, the transformation of university education from a government supported right for eligible Australian students to an export industry like any other has created tensions.

Phillip Bobbitt, professor of law at the University of Texas, comments that the shift towards seeing education as a business is part of a wider trend towards what he calls the “market state”: states in which functions formerly undertaken by government are given over to commercial entities. “Business has traditionally relied on government for infrastructure, education and maintaining peace. They are things business simply takes for granted.”

Not any more. Australia has aggressively moved towards export-driven tertiary education and it entails some (often unacknowledged) strategic decisions about national economic development. By viewing education mainly as an industry that has to succeed in the market, there is inevitably less focus on considerations about how government can shape the market – or manage the “human capital”, to use the economic jargon. If education is aggressively marketed to overseas students then it is, by definition, less focused on providing nationally distinctive advantages to local students. To some extent this is just part of the apparently ineluctable processes of globalisation, but there is nevertheless a decision being made about Australia’s economic direction and strategy.

The shift towards market driven education is on in earnest in Australia. Some imperatives of business, such as protecting a brand, work well enough. Paul Monish, consulting partner in Deloitte’s Australia Higher Education Group, says Canada and Australia have the highest growth rates in education provision.

“The US had no growth last year, and the UK had 2 per cent growth. Canada and Australia had 5 per cent growth and NZ had minus 10 per cent. If you look at Australia in the broader international community, it stacks up extremely well and it has a tremendous story to tell. Number one would be the quality aspect, second would be the branding and third would be almost two decades of history [in exporting education].”

The fastest growth is coming from TAFEs, which have set up relationships with partner institutions throughout the Asia Pacific. Rebecca Biazos, director of the TAFE’s National Secretariat, says there are over 30,000 students enrolled in Australian qualifications offshore. She says last calendar year the number of inbound students for tertiary education grew at 4 per cent, while the number for TAFE grew at 46 per cent. Last year vocational education and training (VET) enrolments exceeded 100,000 onshore international students.

The growth appears strong, but business practices can sit uneasily with the habits of traditional education. At the very least, the relationship with the “customer” (student) is unusual. Instead of the customer deciding what quality is, as is usually the case in most consumer products businesses, it is the provider who is required to decide what quality is, at least in the first instance.

Viewing students as customers also means seeing them in terms of a one to one, transactional relationship. When education is seen as a government-funded civic investment, there is typically a more collective perspective. When education is operated purely for business purposes, questions such as, “Is this educational outcome beneficial for the wider society?” tend not to be asked. The only issue of importance is whether it is of value to the paying customer.

Such tensions are inevitably causing repercussions in the Australian education sector. “Nationally, the sector is going through some tremendous change,” says Monish. “[There is a recognition that the sector needs] to reform itself to become more efficient in how it delivers its services to its students and its stakeholders. Also, there has been a gradual but very real reduction in government funding for the sector.”

“Fifteen years ago, 80 per cent of funding used to come from the Federal Government. It is now down to about 43 per cent. What that has done is make unis, in particular, explore ways of diversifying their revenue base and obviously that is where the international market has come into its own,” says Monish.

“There is a far greater reliance on international revenue plus other revenue sources. The sector continues to go through a redefining phase. Slowly but surely there are more professional, experienced staff moving from the corporate world into the university sector and that is starting to bring that commercial edge,” adds Monish.

By far the biggest market is inbound education. At first glance, education would seem to be a service industry that can readily be exported because its value is largely defined by its labour force (educators), which can be relocated. But the reality is more subtle. The perception of value is defined in part by geographical location.

It is not just a matter of being taught by Australian teachers, it is also a matter of coming to Australia to spend time. Famous universities like Oxford or Cambridge are places; and a sense of place has value.

Monish says that of the $12.5 billion in export revenue last year from the sector, only $370 million was derived from offshore student fees and educational consultancy services. “It is tiny. If you look at the bulk of the revenue, it is onshore students which are on your own campus, with your own quality guidelines and accreditation guidelines. When you go overseas in those offshore environments, firstly the revenue base is very, very small. Then you have those other additional risks that have to be worked through. That is not to say that there aren’t rewards for it – there absolutely are. But in the whole scheme of things, that’s where universities are starting to ask questions,” says Monish.

Michael Fay, associate director of corporate advisory group Asean Focus, says attempts to create Australian offshore education projects began in the mid-1990s. “Some people who went in in the early days got their fingers burnt and didn’t go back. Others learned lessons and continued and refocused.” And increasing numbers of other providers from the private and TAFE sectors have taken up the challenge and gone into China. Fay says there are “literally hundreds” of Australian-linked courses being offered in China by various parts of the Australian international education sector.

“I think there’s a gradual expansion,” says Fay. “It has been through boom and bust periods. There’s a growth in transnational delivery in Australian linked courses and the number of institutions that are targeting more complete engagement. James Cook University in Singapore and Curtin University’s proposed plans to enter the Singapore marketplace in partnership with Navitas are two examples.”

The revenues may be small, but developing offshore operations can be a useful form of on-the-ground marketing. Monish says enhancing offshore activities is part of the diversification process for universities. “That’s what it comes back to – overall positioning so that they can then continue that growth trajectory.”

International activities can also become a form of risk management. Janelle Chapman, manager of international business at the Southbank Institute of Technology, says her organisation engaged in partnering for reasons of self-preservation. “It was around the time of the SARS outbreak, and Asia was our major client base. Obviously it affected our business because people couldn’t get out of the country. We looked at other ways of minimising risk to our revenue streams.

“[With offshore enrolments,] if students can’t get out we are still delivering and getting a revenue base that way. Just like every other institution we get less profile funding every year, so we need to be increasing our commercial revenue and [going] international is a big part of that”, says Chapman.

One of the consequences of globalisation is that the pool of unskilled labour available to companies has more than tripled over the last two decades to about 800 million people, according to  the International Monetary Fund. The pool of skilled workers that are available to the global labour market has remained relatively flat, at less than 100 million. The lesson for developed economies is clear: it is becoming progressively more difficult to compete on wage costs, but a skilled and highly educated workforce is likely to continue to be competitive.

Australia’s aggressive participation in the global education market has benefits in terms of enhancing international economic links. Relationships formed at tertiary institutions, especially with students from Asia, have often had later benefits. But by reducing the proportion of government funding, there is a risk that the degree of control over national skills formation may be weakened.
The growing pressures of globalisation make such decisions hard to avoid, however. Tertiary education has become a global industry, and Australia has developed some considerable experience in its commercial imperatives. Margaret Gardner, vice chancellor of RMIT says: “What Australia has developed over the last few years has been a capacity to think about education beyond its borders and we shouldn’t underestimate how valuable that can be to a small country.”