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SpirE-Journal 2011 Q3

Private Education in Asia

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Private Education in Asia

Growing demand for internationally branded education is drawing international schools to Asia – either via transnational programs with local institutions or, increasingly, by setting up satellite campuses abroad. Asian countries are competing to draw these investments, with Malaysia and Singapore in favorable positions. Business opportunities abound.

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The Education Business comes to Asia

As the world economy globalized, so did most employers. Along with that shift, the most ambitious students in higher and tertiary education began to demand global exposure in their education, to better prepare themselves for the workplace of tomorrow. In some ways, this is not a new trend. The children of the global elite have studied abroad for hundreds, even thousands of years. In the ninth century AD, one of the Kings of ancient Cambodia studied in Java – the regional superpower – before ascending the Khmer throne. In the 20th century, wealthy families frequently sent their children to expensive boarding schools in Switzerland or the UK – the North Korean leader Kim Jong Il being one example of such a parent. But with economic globalization taking off, this trend has gone into over-drive – and crossed over into the mass market.

 
The Global Campus

Offshore campuses are mushrooming. Partly this is due to universities with global ambitions positioning themselves to meet the aspirations of the best students for a truly global educational experience. It is also being driven by universities and schools attempting to break out of their geographic confines to bring their brand of education to a larger market, in exactly the same way that companies seek export sales and FDI. Students all over the world can now attain a qualification from an internationally reputable foreign university from the comfort of their own country.

The Spire E-Journal has long argued that private education and healthcare are high growth industries for the decade of the 2010s, as Asian and Emerging Country public sectors cannot keep pace with the aspirations of their more affluent citizens. In the education space, the fulfillment of this prediction is increasingly conspicuous. Harrow School is one of England’s most famous fee-paying schools, with an impressive alumnus to its credit. They will open a new campus for 1,200 students in Hong Kong in 2012, to help satisfy a growing demand for ultra high-end schooling in Asia. Mark Hensman, the executive headmaster of Harrow International Schools, says the demand for internationally branded schooling has been driven by parents whose dreams for their children have risen in line with their incomes. “This result specifically in the need to learn English and gain qualifications that will facilitate access to Western universities.

The trend in recent years has been for the growth of international schools to be sustained by a rapidly increasing demand from local parents rather than from expatriate parents. Governments in these countries are struggling to meet these expectations in their local education system and so international schools are increasingly filling the vacuum.” In Singapore, the flag of the prestigious ‘Ivy League’ college circuit has been planted as Yale University prepares to set up the country’s first Liberal Arts College at the National University of Singapore. Australian universities have been particularly aggressive in leading the charge in Asia by setting up full branch campuses. Among the earliest was Western Australia’s Curtin University of Technology (now known as Curtin University) which established its first offshore campus, Curtin Sarawak, in 1999. On James Cook University’s choice to locate its third and only overseas campus in Singapore, Professor Sandra Harding, the university’s Vice-Chancellor, commented “Place is powerful. As a city-state, Singapore is arguably the most developed tropical nation in the world.”

Australian universities have been particularly aggressive in leading the charge in Asia.

 
Economic growth for emerging countries

For decades, some global universities have partnered with local institutions abroad to provide offshore degree accreditation. These programs are now evolving, in many cases, into foreign direct investment as universities set up campuses in other countries. Driven by progress in information and communication technologies and the relentless rise of English as the international language of business, higher education is trending towards the classic pattern of globalization in international business. In India, raising educational standards is seen as crucial to sustain the country’s rapid economic development. Many foreign universities have already engaged Indian business schools or engineering colleges. But the notion of locating offshore campuses in one of the world’s major emerging economies has attracted global interest. India’s political class has sensed this. Currently, a higher education Bill is moving through the Indian parliament that would require any foreign university wishing to open a campus in India to pay a hefty fee to the Government. Locating a global campus in an emerging country has come to be treated as a job-creating investment. Emerging country governments, at the national and state level, now compete for such investments.

 
Education Hub – Malaysia

For these Western institutions, what’s in it for them is a slice of the world’s biggest education market – Asia. Many have already teamed up with schools and universities in other Asian countries. But this is the first time so many have been persuaded to build replicas in another country. With that being said, the Malaysian government is bearing much of the start-up costs, mitigating their risks. Educity is spending about $100m on the infrastructure and buildings for these universities.

Educity is spending about $100m on the infrastructure and buildings.

 
The case of Singapore

The Singapore Economic Development Board (EDB) launched an attempt to become what it termed the Boston of the East a decade ago. It aimed to attract job-creating investments in campuses in Singapore, attracted by the potential multiplier effects on the Singapore economy. Termed the “Global Schoolhouse” initiative since 2002, the EDB sought to build up the Singapore education brand name by drawing world class universities to the city-state. Its successes included INSEAD, Chicago Booth Graduate School of Business, New York University’s Tisch School of the Arts and Las Vegas University. To date, Singapore is home to 16 leading foreign tertiary institutions and 44 pre-tertiary schools offering international curricula. One false start, however, was the University of New South Wales’ Singapore campus, which closed in 2007 in spite of generous EDB support at the set-up stage. The many institutions that have based themselves in Singapore are using the city-state for market access to students from the region – and in particular countries like Indonesia and Vietnam – who do not wish or cannot, afford to study in more distant countries. The University of New South Wales in Singapore, for example, stood to earn A$ 7.5 million in revenues from its initial intake of 148 students in Singapore.

 
Competitive Success Factors (CSFs) in the business of education

Today’s educational institutions face severe pressure to market their services, like vendors of any other product. Marketing initiatives in this space include road-shows, public talks, participation in education fairs and the appointment of local recruiters or agents. Mass media advertising is usually avoided – the industry tends to see as it as “cheapening” education brands. What are the make or break factors for educational institutions exporting their brands?

 
Educational standards set by different governments

The United Kingdom and Australia enforce government regulation in the higher education sector. This can be a selling point since it is meant to ensure that even the weakest institutions do not fall below a certain standard. In the United States, on the other hand, the government does not intervene in higher education, leaving the field open to self-regulation. This laissez-faire approach means there is less control over the weak links in the chain. But some would argue that it has enabled the peaks of American education to surpass anything else in the world.

Singapore is home to 16 leading foreign tertiary institutions and 44 pre-tertiary schools offering international curricula.

 
Living environment and costs

This is important as all students and their parents seek not only a safe and comfortable living environment but also one which “broadens the mind” and enriches their field of experience. Living costs are critical as well, as this affects affordability. In this regard, the recent weakness of the British pound has tended to boost UK education, while the strengthening Australian dollar has had the reverse effect.

 
Student visas

An onerous and opaque system for granting visas to foreign students limits overseas market access for schools in any country. After the September 11th attacks of 2001, US universities lost many students from Muslim-majority countries to Australia and New Zealand as the Department of Homeland Security tightened visa requirements almost overnight. The UK Border Agency recently slowed approvals for student visa applications from northern India, Nepal and Bangladesh after a drastic jump in figures.

 
Path to migration

It is common for international students to seek an education abroad with a long-term view to settling in the country of their alma mater. This has no doubt helped to fuel the influx of foreign students into the US, UK and Australia.

 
How does private education benefit business?

Companies that sell education related products and services stand to benefit from the growth in international education.

ICT companies: There is a constant need to update and upgrade Information and Communication Technology in an educational environment. This benefits product categories such as computers, operating and application software, large format printers, copiers and high-end devices for specialized training. Transnational and offshore campuses feed demand for video-conferencing solutions. Part-time courses feed demand for e-learning technology to enable students to combine studying with full-time jobs.

Equipment: Universities and other institutions are customers for capital equipment needed for specialized training. Examples of these include flight simulators for pilot training, clean rooms for engineering schools and medical diagnostic devices for teaching hospitals

Publishing: Demand for reading materials and academic journals is undoubtedly fed by rising enrolments from international education. The academic publishing industry is a high-margin business with heavy entry barriers. The advent of E–books is taking this demand in an interesting direction. School libraries may increasingly rely on E-books accessed by devices like the Amazon Kindle, or even on-site digital printing of new books and journal articles “just in time.”

 
 
Conclusion

Historically, international education has grown via the transnational business model, whereby a school accredits courses abroad by working with a local partner institution. Examples of such arrangements abound, with some having been established for decades. The recent rise in offshore campuses, however, has been driven by more than just market access concerns. Offshore campuses make a school more attractive to students in their home country or region. For example, INSEAD expects that enrolment at its Singapore campus may one day surpass that at Fontainbleau as European and global students seek exposure to a rising Asia.

The countries that have made the most of education exports are undoubtedly the US, UK, Australia and New Zealand – mainly due to the English language factor, which gives them a broader appeal than their counterpart institutions in, for example France, Germany, Japan or China. In fact, the desire to learn English is in itself a driver for the education business. The Walt Disney Corporation, for example, has established private schools in China using Disney characters to teach English. In the past, US universities were held back by their general refusal to appoint agents abroad. This has now changed, making the overseas education market tremendously more competitive.

The short-term future of private education in Asia is bright. In the longer-term, present economic trends continuing, the best Asian institutions may see net inflows of foreign students. The future may see the Indian Institutes of Technology or Shanghai Jiaotong University establishing overseas campuses in London and New York.

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