Trade & Investment Linkages in Higher Education Services in Malaysia

Trade & Investment Linkages in Higher Education Services in Malaysia Tham Siew Yean & Andrew Kam Bangkok 16-17 17 July 2007 ARTNeT Consultative Meeting on Trade and Investment Policy Coordination 1

Outline Introduction Evolution of Private Higher Education in Malaysia Trade & Investment Links Survey: Hypothesis tested and method used & Survey Results Conclusion 2

Introduction Motivations for study: Third Industrial Master Plan, national aspirations to be a global education hub; Objectives of study: Explore trade & investment links in private higher education in Malaysia, including the trade and policy coordination problems; and to identify trade & investment barriers in this sector 3

Evolution of Private Higher Education in Malaysia Growth of this sector: Domestic excess demand, corporate interest in in this sector as an alternative source of revenue; Development facilitated by the establishment of the Private Higher Education Institutions Act (PHEI) in 1996 and the National Accreditation Act in 1996; Emergence of AFC hastened the accelerated implementation of the Acts Nature of Industry: A large variety of players and programs 4

Trade & Investment Links: Coordination of Trade & Investment policies in Private Higher Education: MITI is coordinating agency for services; Ministry of Higher Education (MOHE) was established in 2004; MOHE s s main functions are to: - Formulate policies, facilitate, regulate & enforce all policies for this sector; - Consultative process with the relevant stakeholders and in view of best practices. 5

Trade & Investment Links: Mode 1: No data, three PHEIs that can conduct distance and e-learning e in Malaysia; Based on Ziguras (2001), this is a less popular mode of learning; Students prefer traditional mode of learning; Infrastructure support is inadequate in terms of dial-up Internet connections. 6

Trade & Investment Links: Mode 2: Traditionally an importer due to: - limited domestic supply; - perceived advantages of overseas education, especially in English; No published time-series data on export and import of education services; Imports: 1990 RM2 billion; 1996 RM2.2 billion; 2000 RM2.0 billion; 2005 RM3.6 billion 7

Trade & Investment Links: Mode 2: Outflows in terms of number of student: - drop from 117,297 (2000) to 56,609 (2005); Reasons for both fall in private and government sponsored students crisis and currency; Inflows: - Increased from 18,242 (2001) to to 40,525 (2005); - For PHEIs, increased from 13,472 (2001) to 33,903 (2005); - mainly from China, SEA especially Indonesia, and Middle Eastern countries 8

Trade & Investment Links: Mode 2: Inflows increased due to: - increase in the number of PHEIs from 354 in 1996 to 559 in 2005; - relevance as it offers demand-driven driven courses; - cost as completing a degree in an Australian campus in Malaysia can cost USD31,770 as opposed to USD87,189 in the Australian mother campus; - Living costs in Malaysia is one-third that of Singapore; - Quality assurance in the form of accreditation by National Accreditation Board (LAN) 9

Trade & Investment Links: Mode 3: Can be in the form of institutional or program mobility: Five branch campuses as of 2005; Types of transnational programs : - 3+0 Foreign University Degree Programs completed in Malaysia, - Foreign University s s External Degree Program leading to degree qualifications, - Split Degree Programs - Distance Learning Program Arrangement 10

Trade & Investment Links: Mode 3: Continued: Foreign equity is allowed up to 49%; Due to historical reasons (PHEIs were not allowed to confer their own degrees before 1996) led to program mobility that allows foreign presence without any foreign equity franchise programs, twinning programs etc; programs offered meets the demand of students (both local and foreign) for a foreign degree conducted in English; Since 2002, some colleges allowed to confer their own degrees 11

Trade & Investment Links: Mode 4: Number of foreign staff increased from 519 (2001) to 1,011 (2005) in the PHEIs; As percentage of total staff in PHEIs (6-8%); Growth of PHEIs has not caused a shift of staff from public to private providers; Local and foreign staff offered the same pay structure; foreign have some additional compensation in terms of housing and transportation; local staff may be more cost efficient. 12

Literature Review Nature of barriers in services differ from barriers in goods; Dee (2004) trade barriers in services are behind the door, non-price regulatory restrictions that may apply to both domestic and foreign suppliers; Two main types of trade restrictions: - restrictions on market access measures that restrict competition and activity without distinguishing between domestic & foreign supplier - derogations from national treatment measures that treat foreign suppliers less favorably from domestic suppliers 13

Literature Review Literature review shows the types of regulations that may affect trade in all four modes; Also shows research gap - very little work (both outside Malaysia and also in Malaysia) has been done in testing whether the regulations have impeded trade & investment in higher education services; 14

Survey Regulations that govern the PHEIs in Malaysia: National Accreditation Board Act 1996; Private Higher Educational Institutional Act 1996; Universities and University College Act 1972; Immigration laws based on web-site information Survey questionnaire constructed to test whether the regulations have restricted trade & investment in services for PHEIs. Survey is a perception survey; As of 2005, there are 27 PHEIs that can confer degrees, questionnaire was sent to them via the email, only eight responded; five were interviewed face-to to-face; In-depth semi-structured structured interviews were conducted with the MAPCU and officers from MOHE; 15

Survey Results Mode 1: Interviewed OUM and MMU; Main regulatory barrier is the optional establishment of regional centers as this would incur financial costs to the providers; Non-regulatory problems:- Infrastructure support in terms of broadband speed; Maturity of students who are more dependent and prefer the traditional mode of learning; Market for distance and e-learning e learning is meant more for matured life-long long learners and less for students fresh from high-school 16

Survey Results Mode 2: Restrictions on employment is not a problem for the PHEIs as they are catering mainly to undergraduates; Barriers:- Time taken to obtain student visas; E-pass system that was just implemented has increased the time taken for obtaining a student visa; Government initiatives such as the promotion is appreciated but there are concerns, private vs public; Non-regulatory issue is the recognition of Malaysian degree, reputation of country 17

Survey Results Mode 3 No. Process 1. Establish Company 2. Registering PHEI 3. Approval for Accreditation : - Provisional Accreditation - Full Accreditation Agencies Involved Companies Commission of Malaysia Various Local Authorities & MOHE LAN & MOHE 4. Offer to students MOHE & Immigration 18

Survey Results Mode 3: Continued 1. Accreditation of programs: Branch campuses exemptions since 2005/06; Barrier is the process of accreditation; Main problems: - type of course offered; - reputation of institution; - duration of accreditation; Non-regulatory barrier: government incentives 19

Survey Results Mode 4: Barrier is the processing time for obtaining a work permit; Non-regulatory barrier is the need to offer an attractive remuneration package for foreign staffs and this increases the costs for education service providers 20

Conclusion Growth of PHEIS due to: shortage of supply and emergence of institutional and program mobility; Various ministries & agencies govern the development of the service sector; MITI is coordinating agency; Trade & investment policies are under the jurisdiction of MOHE; MOHE formulates, regulates, facilitates and enforces policies; 21

Conclusion Mode 1: One of the main barrier is the broadband speed requires policy coordination between MOHE and the Ministry of Energy, Water and Communications; Mode 2: Implementation of policies requires policy coordination between various agencies; examples: - registering a PHEI; - students visas, e-pass e system and the Malaysian Edu-Tourism project 22

Conclusion Implementation problems due in part to shortage of staff for enforcement; Mode 3: problems with the accreditation process may be due to the large number of players, the variety of players and the number of programs; - Steps taken to improve the process with the establishment of the MQA in 2007; Mode 4 need to shorten the processing time for obtaining a work permit; Achievement of regional hub goal and the shift from teaching to research. 23