Diversification of sources and the role of privatization in financing of higher education in the Arab States region

Transcription

1 Workig documet i the series: IIEP Cotributios - No. 30 Diversificatio of sources ad the role of privatizatio i fiacig of higher educatio i the Arab States regio Bikas C. Sayal A paper copy of this publicatio may be obtaied o request from: iformatio@iiep.uesco.org To cosult the full catalogue of IIEP Publicatios ad documets o our Web site: Published by: /UNESCO Co-operatio Agecy 7 (Sida) - 9 rue has Eugèe-Delacroix, provided fiacial assistace Paris for the publicatio of this bookle UNESCO 1998

2 Icluded i the same series: 1. New strategies for fiacig diversified forms of educatio ad traiig, Sylvai Lourié 2. Educatioal plaig: reflectig o the past ad its prospects for the future 1, Jacques Hallak 3. Educatio for all: high expectatios or false hopes? 2, Jacques Hallak 4. Educatioal plaig for the year , Fraçoise Caillods 5. Partership i educatio: the role of uiversities i the Pacific Rim, Bikas C. Sayal 6. Educatio policies i a comparative perspective: suggestios for a research ageda, Jacques Hallak 7. Staff maagemet i Africa uiversities 2, Bikas C. Sayal 8. Maagig schools for educatioal quality ad equity: fidig the proper mix to make it work, Jacques Hallak 9. Educatio i a period of chage ad adjustmet: some iteratioal perspectives, Bikas C. Sayal 10. Capacity buildig for educatioal plaig ad admiistratio: IIEP s experiece, Gabriel Carro 11. Excellece ad evaluatio i higher educatio: some iteratioal perspectives, Bikas C. Sayal 12. Maagemet of budgetary deficits i higher educatio istitutios: curret iteratioal experiece ad practice, Igor V. Kitaev 13. L exclusio : ejeux et défis pour la plaificatio de l éducatio, Jacques Hallak 14. Academic staffig ad staff maagemet i Wester Europea Uiversities: curret situatio ad emergig issues, Michaela Marti 15. Les pouvoirs publics et l éducatio, Jacques Hallak 16. Higher educatio maagemet i a period of trasitio with special referece to the Russia Federatio, Bikas C. Sayal 17. Profile ad treds of cotiuig educatio i Frace, with special referece to compay traiig ad higher educatio istitutios, David Atchoarea 18. Commuicatio techology for learig 1, Jacques Hallak; Mioko Saïto 19. Negotiatio with aid agecies: a dwarf agaist a giat 2, Jacques Hallak 20. The use of computerized iformatio systems to icrease efficiecy i uiversity maagemet, Bikas C. Sayal 21. Maagemet of fracophoe ad aglophoe uiversities i Africa: a comparative aalysis 2, Bikas C. Sayal 22. Achievig basic educatio for all: the role of higher educatio ad ew iformatio techology 3, Bikas C. Sayal 23. Educatioal challeges of the 21st Cetury: the visio of quality, Jacques Hallak 24. Fiacig vocatioal educatio: cocepts, examples ad tedecies, David Atchoarea 25. Public educatio authorities: reewig legitimacy 2, Jacques Hallak, Muriel Poisso 26. Educatio ad globalizatio 2, Jacques Hallak 27. New strategies for fiacial maagemet i uiversities: the experiece of OECD member coutries ad Lati America coutries, Bikas C. Sayal, Michaela Marti 28. Maagemet of higher educatio with special referece to fiacial maagemet i Africa coutries, Bikas C. Sayal, Michaela Marti 29. Strategies for higher educatio i Asia ad the Pacific i the post-cold War era, Bikas C. Sayal 1. Also published i Frech ad Spaish. 2. Also published i Frech. 3. Also published i Portuguese.

3 IIEP Cotributios No. 30 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio Bikas C. Sayal This documet was prepared for the Arab Regioal Coferece o Higher Educatio held i Beirut, Lebao from 2 to 5 March, 1998, as part of the preparatio for the World Coferece o Higher Educatio (WCHE), Paris, 5-9 October Paris 1998 UNESCO :

4 The desigatios employed ad the presetatio of material throughout this documet do ot imply the expressio of ay opiio whatsoever o the part of UNESCO or IIEP cocerig the legal status of ay coutry, territory, city or area of its authorities, or cocerig its frotiers or boudaries. The publicatio costs of this study have bee covered by a grat-i-aid offered by UNESCO ad by volutary cotributios made by several Member States of UNESCO, the list of which will be foud at the ed of the booklet. This volume has bee typeset usig IIEP s computer facilities ad has bee prited i IIEP s pritshop 7-9 rue Eugèe-Delacroix, Paris UNESCO May 1998 IIEP/sl

5 Cotets 1. Itroductio 7 2. Chagig patters of fiacig higher educatio 14 i the Arab States regio 3. Chagig patters of fiacig higher educatio: 20 three coutry cases 4. Diversified sources of fiacig higher educatio Privatizatio: defiitio ad developmet Differet modes of privatizatio Argumets i favour of privatizatio Argumets agaist privatizatio The strategies for privatizatio i higher educatio 39 Refereces 42

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7 IIEP Cotributios No. 30 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio by Bikas C. Sayal 1. Itroductio After the Secod World War, durig the period of rapid ad massive expasio of higher educatio, the state had take the resposibility of providig the ecessary resources i most of the coutries aroud the world o the grouds of both equity ad efficiecy. The role of the private sector dimiished sigificatly. By the ed of the seveties, higher educatio was mostly a publicly provided service except i the USA, Japa, the Republic of Korea ad the Philippies. I the coutries where the private sector had a sigificat role, the cotributio of the state, direct or idirect, was also ot egligible. There were three argumets i favour of the domiace of the state role. First, durig the post-coloial period may former coloies had to replace the expatriates by suitably qualified atioals ad the states eeded to ifluece ad cotrol the machiery that were to prepare the idividuals for leadig positios i may walks of life. The same argumet was applied also to coutries which were ot coloized (icludig the coloizig coutries), durig the post-war recostructio period ad the period of the ecoomic boom, which eeded high-level mapower. The secod argumet was a ecoomic oe. It was believed that although higher educatio would result i higher returs, there was ucertaity i these returs at the idividual level. It was uderstood that to achieve a socially optimum amout of ivestmet i higher educatio, the state, represetig all citizes, must play a active role. I the 1960s it was observed that a large umber of studets, potetially capable of 7

8 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio cotributig to their coutries developmet, were ot cotiuig higher educatio, to the detrimet of themselves ad of their coutries. At about the same time, the Robbis Report came out i the Uited Kigdom, with recommedatios for massive expasio i higher educatio, with domiat participatio of the state. May govermets aroud the world followed that argumet i formulatig their higher educatio policies. The third reaso for the state s domiat role i higher educatio was the equity argumet. I the welfare-domiated post-war period, it was argued that uless the state subsidized highly expesive higher educatio, may people would be uable to beefit from it ad higher educatio could remai the moopoly of the rich ad the elites of the society. So the state s role i fiacig higher educatio icreased rapidly ad whatever role the private sector was playig, especially i the former coloies i the developig world before their idepedece, dimiished, at least relatively. Oe observed the same pheomeo i the Arab States regio of the world. Durig the sixties ad seveties, resources for higher educatio all aroud the world, i geeral, were eough to justify the domiace of academic criteria to decide o resource allocatio. Gareth Williams (1992) explaied the pheomeo, i the case of the Uited Kigdom, as follows: The iteral dyamics of disciplies ad subjects rather tha exteral ecoomic or social pressures determied patters of academic activity. Icremetal block grats ad detailed lie-by-lie budgets were the basis for allocatio of fuds. Icremetal block grats led to highly developed collegial forms of maagemet i British uiversities ad lie-by-lie budgets led to the bureaucratic form of resource allocatio to esure efficiet resource use, respose to chagig eviromet ad maiteace of quality. Most of the Member States of the Arab States regio faced the same pheomeo. Whe resources are scarce, the collegial model of resource allocatio based o cosesus of the academia may degeerate ito protectio of vested iterest, 8

9 IIEP Cotributios No. 30 creatig difficulty i itroducig ay iovatio. Uder the same circumstaces, the bureaucratic model of resource allocatio requirig a rigour of accoutability geerates a sese of alieatio of the academic staff from the bureaucracy of the fudig agecies. Resources for higher educatio i the Arab States regio depeded o the overall ecoomic situatio of the coutries i the regio. The Arab States regio covered by UNEDBAS had 4.4 per cet of the populatio of the world with oly 1.6 per cet of the total world wealth as measured by Gross Domestic Product (GDP). However, it had to absorb 5.1 per cet of the world s higher educatio populatio (UNESCO, 1997; World Bak, 1997), (See Table 1). Table 1. World populatio ad Gross Domestic Product i 1995 World Arab States (1) Ratio (%) Populatio 1995 (millios) GDP 1995 (millios) Populatio i Higher Educatio (%) 5.1 (1) Member States of the Arab States regio covered by UNEDBAS by sub-regio are as follows: Sub-regio I (Maghreb Coutries): Mauritaia, Morocco, Algeria, Tuisia, Libya Arab Jamahiriya Sub-regio II (Hor of Africa ad the Nile Valley): Egypt, Suda, Djibouti, Somalia Sub-regio III (The Arabia Peisula, or the Gulf States): Yeme, Saudi Arabia, The Sultaate of Oma, U.A.E., Qatar, Bahrai, Kuwait Sub-regio IV (The Middle-East): Iraq, Jorda, Syria, Lebao, Palestie Sources: UNESCO: UNESCO Statistical Yearbook, World Bak: World Developmet Report,

10 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio The ecoomic growth of the regio has bee disappoitig over the years. Amog 16 coutries of the regio (for which data could be collected o Gross Domestic Product (GDP) per capita) seve had a egative average aual growth rate durig the period A additioal three coutries had a average aual growth rate of less tha 1 per cet (UNDP, 1997), (See Table 2). Table 2. GDP per capita ad average aual growth rate Coutry GDP per capita i $ 1994 Source: UNDP: Huma Developmet Report, Average aual rate of growth (%) Bahrai Uited Arab Emirates Kuwait Qatar NA NA Libya Arab Jamahiriya Lebao NA NA Saudi Arabia Syria Tuisia Algeria Jorda Oma Egypt Morocco Iraq Yeme NA NA Mauritaia Suda Djibouti Somalia 150 NA Palestie I spite of ecoomic weakess, the regio cotiued to expad its higher educatio facilities. Gross erolmet ratios (erolmet as a percetage of 10

11 IIEP Cotributios No. 30 the age-group populatio) icreased from 13.7 per cet i 1985 to 14.5 per cet i Although the relative growth was less tha that for the whole developig world, its higher base called for a stroger effort i icreasig the ratio (see Table 3). Table 3. Erolmet ratio ad public expediture: compariso betwee the Arab States ad all the developig coutries Category Gross erolmet ratio (p.c.) Arab States Developig coutries World total Public expediture o educatio as % of GNP Arab States (1) Developig coutries World total Public expediture o educatio per capita (US$) Arab States (1) Developig coutries World total (1) Refers to Source: UNESCO: UNESCO Statistical Yearbook, 1997, Tables 2.10 ad What is strikig is the fact that this icrease occurred i spite of a decrease i the share of public expediture for educatio i the Gross Natioal Product (GNP) from 5.8 per cet i 1985 to 5.5 per cet i 1994, ad a more severe decrease i public expediture o educatio per capita from US$ 122 i 1985 to US$ 112 i I both cases the Arab States regio had lost, whereas the whole developig world had gaied sigificatly, i relative terms, especially i the allocatio of resources per capita (see Table 3). Most strikig is the decrease i the share of allocatio to higher educatio i the total allocatio for educatio. Out of eleve coutries of the regio for 11

12 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio which UNESCO could provide statistics for two comparable periods of time, seve had lost their share over time (see Table 4). This shows a further loss for the higher educatio sector i respect of its fiacial situatio. Table 4. Tred of the share of public expediture i higher educatio i total public educatioal expediture (percetage) Coutry Year Percetage Djibouti Egypt (1) 35.7 Iraq Jorda Kuwait Mauritaia Morocco Oma Saudi Arabia Syria Tuisia (1) The expediture for the uiversity hospitals is icluded i these figures (accoutig for 50 per cet of the total credits of some uiversities). These expeditures should be regarded as fuctioal, for health expeditures. Source: UNESCO: UNESCO Statistical Yearbook, 1997, Table

13 IIEP Cotributios No. 30 I additio to geeral ecoomic reasos, the higher educatio system faced fiacial shortfalls due to several other reasos, give below. 1. Demad for higher educatio was icreasig at a faster rate tha the govermet could cope with fiacially. 2. Priorities for lower levels of educatio were icreasig, especially for primary educatio, which was beig recogized as a basic huma right for the people. 3. Demad for higher educatio was becomig more ad more customized (differetiated demad) because of chagig labour market eeds, o the oe had, ad diversified clietele, o the other, requirig additioal resources. 4. Rapid obsolescece of skills because of kowledge explosio ad acceleratig techological developmet which called for more fiacial resources. 5. Emphasis o scietific ad techological research ad developmet called for more fuds. 6. Priority to improve quality of teachig ad research was becomig more importat. To eable the higher educatio system to educate as may studets as possible, several policies could be adopted: (i) improvig efficiet utilizatio of resources; (ii) ecouragig icome geeratio; (iii) adoptig cost-recovery policies icludig itroductio of a discrimiatory fee-payig system; ad (iv) ecouragig privatizatio. All these policies would require a chage i the two resource allocatio models metioed earlier. As a alterative to the collegial ad bureaucratic 13

14 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio models of resource allocatio the market approach was beig proposed by the ecoomists, which would follow market forces of demad ad supply ad emphasize the process of establishig priorities. I this process, the academics, who would provide the expertise, the istitutioal maagers, who would provide broader trasdiscipliary viewpoits, the govermet, who represets the society ad studets, ad their employers, as cosumers of the academic scieces the stakeholders will play their respective roles (Williams, 1992). 2. Chagig patters of fiacig higher educatio i the Arab States regio The state bears the major burde of fiacig higher educatio i most of the coutries i the Arab States regio. I the Maghreb regio (sub-regio I) the ivestmet fuds are etirely provided ad cotrolled by the state. The operatioal budget, i.e. the salary bill, the repair ad maiteace cost ad the social expeses of the studets, is also bore pricipally by the state. The istitutios geerate very little resources o their ow. Very rarely do the istitutios co-operate with the productive sector. However, there are exceptios. I spite of the domiace of the public sector, Egypt ad the Suda (sub-regio II), the Uited Arab Emirates ad Bahrai (sub-regio III), Lebao, Jorda ad Iraq (sub-regio IV), have supported developmet of the private sector. Palestie s (sub-regio IV) whole uiversity system is private. Although the America Uiversities of Beirut ad Cairo are very old private establishmets, ew private istitutios are emergig i the other coutries. However, most of those emergig i the poorer coutries deped heavily o the state for fiace. Very few coutries have ratioalized tuitio fees. I most cases this is oly symbolic ad cotributes very little to the overall fiace. I certai cases, this is paid directly to the Miistry of Fiace. 14

15 IIEP Cotributios No. 30 Few coutries of the regio use cost aalysis for fiacig the operatio of a programme. Most of them follow lie-item budgetig which is rigid ad very ofte leads to wastage because of restrictios o carry over. However, the coutries are ow uderstadig the eed for chagig fiacial maagemet procedures as a whole, especially i the method of mobilizatio of ew fiacial resources so as to reduce the state burde, as will be observed from the examples give below, coverig the four sub-regios. Sub-regio I: Tuisia I a effort to improve maagemet of fiace i higher educatio, Tuisia has itroduced a ew system of resource allocatio called system of aalysis ad maagemet of higher educatio (Système d aalyse et de gestio de l eseigemet supérieur SAGES). The system uses a set of idicators for resource allocatio coverig academic ad support staff ad operatioal activities. Norms, such as studet/staff ratio, space per studet, space utilizatio, utilizatio of staff time, are beig costructed i the SAGES system to facilitate ratioalizatio of resource allocatio amog istitutios ad regios. I a effort to diversify sources of fiacig higher educatio, the coutry has ow allowed the istitutios of higher educatio to develop co-operatio with idustry ad the commuity ad geerate icome through: (i) traiig o a cost-recovery basis; (ii) research cotracts; (iii) expert service. I Tuisia, these icomes have to follow state rules. However, the authorities have begu to appreciate the eed to itroduce more flexibility i the rules for icome-geeratig activities of the istitutios so as to provide icetives for diversificatio of fudig sources. 15

16 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio I additio, the govermet is ow ecouragig the role of the private sector i higher educatio. I the words of the Director-Geeral of Fiace of the Miistry of Higher Educatio: The ecouragemet of the participatio of the private sector is becomig idispesable ad alog with it the preparatio of a legal framework for private higher educatio so as to respod to the eed for pedagogic ad fiacial diversificatio (Baouadi, 1997). Sub-regio II: Egypt Erolmet of higher educatio i Egypt has icreased at a much faster rate tha its fiacial resources. For example, i the case of the Uiversity of Masoura erolmet icreased from 74,310 i to 237,873 i i its 17 faculties. Similar icreases could be observed i the other uiversities of the coutry. The state s share of fiace reduced to 85 per cet i for the uiversity, the remaiig 15 per cet beig geerated by the uiversity i the form of: 1. Tuitio fees ad other fees: the uiversity applied a system of compulsory doatio for trasferrig a file of applicatio from oe faculty to aother for admissio. This was abadoed i I recet years, a ew system of admissio to the faculties of Law, Commerce ad Arts allows a less qualified studet to obtai a place o a admissio fee of 360 LE (Egyptia Poud) whereas the aual tuitio fee is a meagre 10 LE. The icome from these fees is cotrolled by the faculty followig the system ad distributed as follows: 55 per cet goes to the faculty which applied this system; 20 per cet goes to the other faculties; the rest is give to the studets of modest meas for their fees ad/or purchase of books, etc. 16

17 IIEP Cotributios No Icome geerated by specialized cetres from: (a) (b) (c) (d) (e) (f) (g) co-operatio with idustry; patet rights; provisio of cotiuig educatio to idustrial employees; access to laboratory ad scietific equipmet; maufacturig itermediate idustrial products; extesio services; ad laguage istructio. These cetres do ot have to follow traditioal fiscal restrictios imposed by the state. 3. Private doatios, especially for studet fellowships. With the agreemet of the Supreme Coucil of Uiversities, as of , 240 specific cotracts have bee agreed betwee the public uiversities of Egypt ad the idustrial cocers. I all public uiversities a post of Vice-Rector has bee created to develop ad maage co-operatio with idustry ad the commuity (Dowidar, 1997; Moussa, 1997). Sub-regio III: The Gulf States With the exceptio of Bahrai, formal higher educatio is etirely paid for by the states. For Bahrai, the fiacig comes from the studets fees ad the govermet budget. I Kuwait, higher educatio has a special budget with reasoable autoomy ad flexibility. I Saudi Arabia, although the state does ot charge ay tuitio fees, there is a private sector of higher educatio which is self-fiacig. Higher educatio is offered by private eterprises such as Saudi Airlies, Petromi, Aramco, Sabic, etc. I the Sultaate of Oma, ruig parallel to the state sector, there are private istitutes ad specialized colleges belogig to idividuals or private compaies which ru their fiacial affairs themselves. I oe third of studets studyig abroad fiaced their ow studies. 17

18 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio The geeral situatio is that the state is resposible for the major share of fiacig higher educatio i the Gulf States. Foreig studies are fuded partially by the studets themselves. The traiig programmes orgaized by the trasatioal corporatios are self-fiaced, i.e. the state does ot bear ay cost for these programmes. Oe ca observe a icreasig tred of the settig up of programmes by the state, o the oe had, ad the private sector, especially multiatioals, o the other. This applies to both traiig ad research. Sub-regio IV: Jorda (the case of Yarmouk Uiversity) The Yarmouk Uiversity of Jorda was set up i 1976 ad reorgaized i 1986, with the separatio of the College of Sciece ad Medicie ito a secod uiversity, amed the Jorda Uiversity of Sciece ad Techology. The uiversity has a diversified system of fiacig its activities as follows: 1. Cetrally collected taxes. A iovative method applied by the Miistry of Fiace, Kigdom of Jorda, is to collect a uiversity tax o each sigle sale, by or through idividuals or corporatios i the coutry. The reveue is distributed amog five semi-state uiversities by the Coucil of Higher Educatio accordig to four basic categories of weights based o: (i) the umber of studets; (ii) developmet eeds; (iii) total budget; ad (iv) ew programmes. 2. Tuitio ad fees. The secod largest source of reveue for higher educatio is studets tuitio fees ad other lump-sum fees paid by studets for their services. The uiversity also receives fees for its services provided for the commuity ad private eterprises, commissioed studies, fees from local ad regioal istitutios, ad for cosultatios ad traiig. 18

19 IIEP Cotributios No The govermet subsidy. Based o the recommedatios of the Coucil of Higher Educatio ad the decisio by the Cabiet, the Miistry of Fiace allocates this subsidy for each uiversity ad trasfers the amout every three moths. 4. Doatios. Its mai source is the private sector. Idividuals, local, regioal or iteratioal istitutios make doatios o special appeals from the uiversity. 5. Ivestmet fuds. The uiversity ivests its assets i stocks ad real estate. The returs are sometimes used for fiacig icome-geeratig projects. 6. Loas. This is a exceptioal source of fiacig deficit, usually provided by the cetral govermet o a ad hoc basis or by the baks guarateed by the govermet. Table 5 below gives the evolutio of differet sources of fiace for the period (Adwaa, 1995). The patters of fiacig higher educatio i the coutries of the regio demostrate to a certai extet the symptoms observed i the idustrialized coutries. Cited below are cases which have bee ifluecig the patters of fiacig higher educatio i may developig coutries of the world, icludig some i the Arab States regio. I additio aother case will be metioed for its very special ature. 19

20 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio Table 5. Distributio of reveue sources for i Yarmouk Uiversity, Jorda Source % 1994 Govermet subsidy Tuitio School tuitio (1) Cosultatios Taxes Others (Doatios) Capital returs Deficit Total reveues (1) Tuitio received from istitutios/eterprises receivig traiig. Source: See Referece (Adwaa, 1995). 3. Chagig patters of fiacig higher educatio: three coutry cases The Uited Kigdom I the Uited Kigdom, the iitial impetus to chage the fiacig mechaism of higher educatio was give by the 1985 Jarratt Committee to ivestigate uiversity efficiecy, which made the followig recommedatios: more busiess-like structures for the uiversities; a strog cetral executive authority resposible for strategic plaig at the istitutioal level; a Vice-Chacellor actig as a chief executive ad havig received maagemet traiig; 20

21 IIEP Cotributios No. 30 small high-level plaig ad resource committees; the use of performace idicators; staff appraisal ad developmet; greater devolutio of fiacial maagemet to departmets. Subsequetly, i 1988, a atiowide project fuded by the govermet to computerize key areas of maagemet iformatio was begu. Istitutios were required to collect core statistics which icluded data o studets, staff, capital assets, equipmet, fiacial resources, ad maagemet iformatio, so as to give proper support to academic departmets i devolved budgetig. Sice the early 1980s, govermet policy has bee domiated by a umber of factors, icludig the followig: the cocer to reduce public expediture per studet i higher educatio; the eed to icrease efficiecy by ecouragig uiversities to ear icome ad also to be much more strictly accoutable for grats received, a requiremet which has become much more importat i the 1990s. The first roud of cuts i the early 1980s raged from 6 to 30 per cet, depedig o the istitutio. Some special arragemets mitigated the worst effects, such as early retiremet compesatio ad the protectio of priority egieerig ad techical programmes. Subsequetly, strategies focused o separatig resources for teachig ad research ad makig fudig coditioal o delivery. The 1988 Educatio Reform Act gave greater autoomy for resource maagemet of istitutios, but set stricter accoutability measures. It was expected that resources would be used more effectively if those resposible for educatioal services were give maximum discretio to deploy them i respose to local eeds. 21

22 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio The Uiversities Fudig Coucil (UFC), which later became the Higher Educatio Fudig Coucil (HEFC), implemeted a system of fudig whereby istitutios put i bids for certai umbers of studet places by broad bads of disciplies. I practice, uiversities were reluctat to bid too low ad thereby force dow the uit of fudig eve more. As a result, i 1991 the UFC abadoed the system ad set oly provisioal targets. As of 1992, it was decided that for the ext two years uiversities would be guarateed oly the umber of fuded studet places allocated for Ay decisios o icreases were to be based o the proportio of studets at a uiversity above the fuded umber. I 1996, it was proposed that istitutios should bid for additioal umbers o the basis of quality, demad, atioal ad regioal eed. Bids were to be assessed by review paels established to reflect the broad geographical distributio of istitutios fuded by the Coucil. I short, the govermet had foud a way of securig expasio at low margial cost ad higher educatio istitutios were obliged to accede i order to obtai their fuds. Public spedig per graduate i the Uited Kigdom is ow lower tha i most other Europea coutries. The HEFC has published a code of practice for both iteral ad exteral uiversity audit, ad supervises the fiacial health of istitutios. This restructurig of the mechaisms for fudig the uiversities imposed great strais o the maagemet of istitutios with a umber of results: may of them devolved budgets to the departmetal level, either icludig or excludig staff salaries; most istitutios also appoited or icreased the umber of seior officers cocered with fud raisig, idustrial liaiso ad overseas studets; more iformatio was made available withi the istitutio for accoutability ad decisio-makig purposes; 22

23 IIEP Cotributios No. 30 the quatity ad quality of comparative iformatio was improved, particularly with the aual publicatio Uiversity maagemet statistics ad performace idicators, which obliges istitutios to ask questios ad seek reasos for variace, thereby makig it possible to compare expediture o cetral admiistratio, libraries, computers ad premises; programme budgetig has bee geerally adopted ad the cost per studet per aum by disciplie is ow compared amogst uiversities. Most uiversities have adopted some type of formula fudig i allocatig resources iterally by usig weightig (for example, 1 Ph.D. = 3 udergraduates for the purpose of staff, library ad laboratory allocatios), as well as orms ad ratios. Some maitai cetral cotrol over the establishmet of staff positios. Others allocate all fuds, after takig off the resources ecessary for cetral admiistratio, to faculties to be shared by cosesus amog the departmets. Thus there is a ew emphasis o the departmet as a performer ad the pressure of competitio betwee departmets. Maagemet of fiace is cosidered to be oe of the critical tasks for the ext decade. The role of fiace officers i the Uited Kigdom uiversities is becomig icreasigly importat. There has bee a rise i the eed for professioal admiistrators with the skills ecessary for effective maagemet withi a rapidly chagig higher educatio system, with ew fudig structures ad ew pealties. I 1995 the HEFC reduced govermet cotributio further. The fudig these days is based o a set of parameters: percetage of academic staff, umber of studets, umber of graduates, percetage of studets o cotiuig educatio, quality of traiig ad research. These measures have reduced expediture by 15 per cet ad are expected to reduce it further. Most recetly, i July 1997, the govermet aouced the impositio of tuitio fees for all levels of uiversity studets as from 1998 (Sayal ad Marti, 1997). 23

24 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio Frace I Frace, the Miistry of Educatio geerally prescribes budgets, studet admissios ad fees, buildigs ad size of staff. The Miistry also validates courses ad sets the formal structure of uiversity maagemet. Iitiatives to improve efficiecy therefore usually come from the govermet. There are exceptios, ad some relatively autoomous istitutios do exist. Notable examples are the grades écoles which are, i some cases, privately fuded ad are admiistered by directors ad represetatives of the fudig authority ad of the studets. The extet of cetralized cotrol i Frace is decreasig, as has bee show by recet developmets. I 1989, the Miistry of Educatio iitiated ew procedures for joit plaig by the Miistry ad the higher educatio istitutios. They have to prepare ad implemet a istitutioal developmet project for a four-year period. This procedure is iteded to stregthe the autoomy of the istitutios, the cosistecy of their developmet policies ad the role of the head of istitutio. Withi the framework of overall atioal guidelies, the state ad the istitutios commit themselves to certai objectives ad meas laid dow i a cotract to be siged by the state ad the istitutios. Higher educatio istitutios receive a part of their fiacial allocatio (aroud 10 per cet) o the basis of their commitmets ad their iteded activities, as stipulated i the cotract. However, the majority of the resources are still allocated o the basis of criteria liked to the fulfilmet of the basic missio of the istitutio, which is teachig ad research. More recetly, withi the framework of a atioal policy towards decetralizatio, called the State-Regio Pla, the regioal ad local authorities also cotribute to the fiacig of higher educatio istitutios, i particular with regard to ew ifrastructural projects ad the reovatio of buildigs ad equipmet. 24

25 IIEP Cotributios No. 30 I Frace, the state provides the majority of fiacial resources. Several systems for the allocatio of fiacial meas have bee used successively. I the past, core fudig was allocated by meas of orms distiguishig betwee three types of allocatio: teachig, recurret expediture ad developmet. The teachig allocatio was calculated o the basis of teachig hours ot covered by the statutory assigmets of the existig academic staff. Sice 1993, the SANREMO system (Aalytical system of fiacial allocatio) has bee i operatio. Its objective is to take ito accout the real recurret costs ad differeces amog groups of disciplies with regard to studet costs ad to ease out differeces i staffig levels existig amog istitutios. Studet/staff ratios, differetiated by level of study ad group of disciplie, have bee defied. It is iteded to redeploy academic staff from those istitutios with excessive staffig levels, to those which lack staff. With regard to the fiacial difficulties of the State, ad i the light of ever growig studet umbers, istitutios have bee tryig to icrease their private icome. I 1994, per cet of total icome was other tha govermetal fudig. Additioal reveue came from sources such as: studet fees: 9.95 per cet; cotract research for private ad public eterprises: 6.06 per cet; subsidies i kid, or i ature, from local or regioal authorities: 4.92 per cet; traiig tax (1.5 per cet of the salaries to be paid by the eterprises): 2.34 per cet; cotiuig educatio: 7.99 per cet; cotracted studies: 6.41 per cet; iterest rates: 1.65 per cet; commercializatio of products ad publicatios: 3.80 per cet; others: 4.72 per cet. 25

26 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio The fiacial autoomy of istitutios allows for the establishmet of fiacial reserves from ed-of-the-year surpluses. They are also allowed to carry over parts of the core fudig ad to sped it o ivestmet ad equipmet items. Withi certai limits, istitutios may also ivest i the public capital markets ad gai icome from iterest. Studet fees ad fees for examiatios form part of the private icome; however, the amout is determied by the atioal admiistratio. Istitutios have the right to set studet fees for uiversity diplomas which are ot accredited by the Miistry, ad for all other services they offer withi the framework of their basic missio (Sayal, 1997). Chia Chia, a socialist coutry, makes a iterestig case for developig coutries to observe the pheomeo of diversificatio of sources of fiacig higher educatio trascedig ideological barriers. Higher educatio i Chia was almost exclusively fuded by the govermet util the begiig of the 1980s. Durig the 1980s, as part of the overall ecoomic reform, the cetral govermet delegated fiacial resposibilities to provicial govermets ad lie miistries i fiacig higher educatio. The reform replaced the lie-item budget with a block grat allocatio from the state to the uiversities ad gave the higher educatio istitutios the autoomy to decide how to sped the moey. The state retaied the audit ad supervisory fuctios while holdig uiversities accoutable for the appropriate utilizatio of public resources. The uspet amout could be retaied by the uiversities. The block grat was based o a formula with the umber of full-time equivalet studets as the major allocatio parameter. Allocatio for special items ad capital outlay was based o erolmet ad other ad-hoc cosideratios. The uiversities were ecouraged to geerate their ow reveue. I the case of some key uiversities such o-govermet reveue exceeded 50 per cet. The State Educatio Commissio recogized 22 private higher educatio istitutios ad more tha 1,000 o-state istitutios were approved by provicial educatio departmets as of 26

27 IIEP Cotributios No. 30 November 1996 (Zhou Nazhao, 1997). Table 6 shows the evolutio of the share of fudig from differet sources i Chia from 1978 to 1992, as estimated by a World Bak missio (World Bak, 1997). Four pricipal sources of icome are: uiversity eterprises; commissioed traiig for eterprises; research ad cosultacy services; ad doatios. I additio, the uiversities are ow ecouraged to charge tuitio fees. As of 1995, for most uiversities, the tuitio-fee level was set aroud Y1,300 ($1.00 = Y8.6) for studets i the State pla. For some subjects the fee level ca be as high as Y2,700. However, studets i teacher traiig istitutios are ot charged ay fee. Chia had set a goal to recover 20 per cet of the cost of higher educatio by 1997 from tuitio. Table 6. Percetage distributio of fudig higher educatio from differet sources i Chia Source Total budgeted allocatio from govermet Allocatio for recurret expediture Allocatio for capital expediture Total uiversity-geerated reveue Total of 2.1 ad Net icome from uiversity-fuded activities, amog which: icome from uiversity eterprises icome from commissioed traiig icome from educatioal services icome from research ad costacy icome from logistic services (diig halls ad guesthouse, etc.) icome from other fuded activities Doatios ad others Studet tuitio ad fees Total Source: World Bak: Chia Higher Educatio Reform,

28 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio 4. Diversified sources of fiacig higher educatio It has bee observed i the previous examples that, with less state support ad limited opportuities to impose or icrease fees, may uiversities have had to become ivolved i a wide spectrum of icome-geeratig activities. Various routes have bee followed to diversify fudig sources. Traditioally, icome is geerated by udertakig traiig, research ad service cotracts o behalf of public ad private compaies. The returs o services such as cosultacies ad developmetal work are expected to cover all costs ad ideed to provide the istitutio with a et icome. I some coutries of the regio, public istitutios are free to make use of these earigs, but i Tuisia, for example, it has bee ecessary to amed the regulatios goverig the fiaces of istitutios, or to make other special provisios to eable them to retai their outside earigs. However, it is obvious that coutries which are predomiatly agraria or have a small moder idustrial sector (Mauritaia, for example), have limited scope for service cotracts. However, Chia has idicated, eve for these coutries, how to go about this. Aother traditioal way of raisig fiacial support from idustrial ad commercial firms is i the form of grats or scholarships for specific academic or professioal programmes. As far as developig coutries are cocered, direct doatios have bee strog i the Arab States, where the establishmet of foudatios offerig fiacial support for studets has bee commo. Private foudatios, for istace, play a importat role i several coutries of the regio. The followig is a exteded list of possible sources of fiace for higher educatio: private studets ad orgaizatios icludig religious orgaizatios ad busiess eterprises; 28

29 IIEP Cotributios No. 30 variatios of tuitio fees; examiatio fees; residet fees; cotracts for research, courses ad cosultig (usually a percetage of reveue eared goes to the departmet cocered); itellectual property rights (patets ad books); commercial activities (pritig, book shops, retal of facilities); ivestmets i productive areas; edowmets; foreig aid. The market approach to fiacig higher educatio should be adapted to the modalities of a particular higher educatio system. The icome-geeratig activities, i particular, should be demad orieted ad locally specific. I additio, they should be tested by meas of a experimetal phase. Williams has formulated three mai propositios i support of the market approach, emphasizig the role of the private sector. Oe is the belief that the private sector ca relieve govermets of some of the cost burde. The secod is that may of the beefits of higher educatio accrue to private idividuals ad they should be prepared to pay for them. The third premise is that both exteral ad iteral efficiecy improve if govermet agecies buy services from uiversities rather tha make grats to them (Williams, 1992, pp ). We shall deal with the process of privatizatio i the followig sectio. 29

30 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio 5. Privatizatio: Defiitio ad developmet From the above discussios, oe ca observe the process of trasfer of the role of the govermet i fiacig ad admiisterig higher educatio programmes to o-govermet agecies ad to idividuals as private etities. The pheomeo of the trasfer of owership ad cotrol from the state sector to the private sector, be it a idividual, orgaizatio, eterprise or commuity, is defied as privatizatio. Privatizatio is a process. Privatizatio does ot exclude public fiace. A public istitutio ca also have a private programme or activity ru privately. Several reasos have bee idetified for the developmet of the private sector i educatio (James, 1991). First: excess demad for higher educatio whe the absorptive capacity of the public system (free or subsidized) is less tha the demad for places. Oe could observe this pheomeo i may developig coutries from Brazil to Chia ad the Philippies. Secod: differetiated demad to respod to heterogeeity i people s prefereces about educatioal cotet ad method because of religious, liguistic, cultural ad ethic reasos, o the oe had, ad the eed for special skills amog eterprises, o the other. Political ideology played a importat role i the developmet of the private sector i higher educatio durig the coloial period i Idia. Sectaria istitutios of higher educatio are very commo i all cotiets of the world. Istitutios of higher educatio set up by eterprises to meet the eeds for special skills is a relatively recet pheomeo. I additio to the demad factors, supply forces also play a importat role i the developmet of the private sector. Use of istitutios of educatio as a mechaism for shapig values, ideologies ad socializatio has iflueced the developmet of the private sectors. Govermet policies also have shaped the developmet of the private sector, e.g. by restrictig public spedig, provisio of public subsidies to private istitutios, legislatig corporatizatio ad privatizatio, eve allowig, i some cases, busiess orgaizatios ad private agecies to set up istitutios of higher educatio for profit. We shall discuss below the differet modes of privatizatio. 30

31 IIEP Cotributios No Differet modes of privatizatio Privatizatio ca be implemeted i a variety of ways. Lieberma (1989) has listed the followig: 1. Cotractig out of public services to o-govermet etities to provide or help to provide public services without the help of public employees. May support services of the istitutios of higher educatio are ow beig cotracted out, e.g. caterig ad pritig facilities which are eeded by the istitutios. 2. Vouchers, ordiary pieces of paper give by the govermet that ca be used like cash or as a credit for receivig educatio i a istitutio of the cliet s choice. 3. Load sheddig refers to state withdrawal from both fudig ad providig a educatioal service. It is beig observed i may coutries aroud the world ow, especially i residetial or caterig services for educatioal purposes. The legislatio allowig the establishmet of private istitutios of higher educatio is a corollary to this pheomeo. 4. A frachise a arragemet whereby a private orgaizatio is awarded moopoly privileges to provide a service where the studets may or may ot have to pay the cost. For example, a computer-maufacturig firm to operate the computer cetre of a istitutio. Both frachise ad load sheddig are direct icetives towards the establishmet of private istitutios. 5. Volutary service, which provides educatio ad related services performed by voluteers. For example, religious orgaizatios ad ogovermetal orgaizatios ru higher educatio istitutios for reasos metioed earlier, ofte o a volutary basis. 6. The sale of govermet assets, trasferrig property rights to tagible assets from govermet to the private sector for a agreed-upo price (this is happeig ow i Malaysia i respect of the public uiversities). 31

32 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio 7. Leaseback arragemets are the costructio ad purchase of public educatioal ad related facilities by private parties, who the lease these to the public sector uder mutually agreed-upo terms. For example, a coferece cetre required by a istitutio may be costructed by a private orgaizatio ad leased to the istitutio at a retal amout agreed upo prior to costructio. Whe a public istitutio is workig for a private eterprise or idividual for traiig, research or ay other service uder cotract, the owership ad cotrol of the activity is also lost to some extet to the sposor. It is happeig more ad more, as we have oted before, i the research ad cosultacy services, traiig for eterprises, etc. We ca also observe the same pheomeo whe studets, as private idividuals, are charged full fees o a cost-recovery basis for their tuitio. The public istitutio i that case has to cater for their special eeds ad bed their rules with loss of cotrol, to some degree at least. Although these pheomea are ot explicitly icluded i the above list, these are also pheomea of privatizatio. Whatever is the mode of privatizatio, except i exceptioal circumstaces the users of educatio have to bear the cost. Most of the above modes are applicable to the Arab States regio. I reality it is already happeig, especially i the Gulf regio, where a parallel system of higher educatio is beig maitaied by the trasatioals ad other ogovermetal agecies for the purpose of their ow specific eeds. Lebao, Jorda, Iraq, the Uited Arab Emirates, Bahrai, Suda, amog others, are ow ecouragig the developmet of privatizatio. 7. Argumets i favour of privatizatio Privatizatio i educatio is becomig a major ecoomic ad political tred aroud the world today, trascedig political ideologies, as ca be oted i commuist Chia, o the oe had, ad the Uited Kigdom ad Frace, o the other. There are several reasos, which are give below. 32

33 IIEP Cotributios No Private istitutios cost less per studet, especially i excess demad situatios. Private uiversity expeditures per studet were per cet of public i Brazil, Japa ad the Philippies. Several explaatios have bee put forward. These are discussed below. 1 (a) Low cost may result from low-quality iputs per studet, as show i Table 7. Accordig to Estelle James, Recruitmet of low-quality academics with iadequate qualificatios at a low salary also reduce the cost of educatio at the cost of quality. For example, i Japa teacher cost per studet was four times higher i public uiversities tha i private, ad i the Philippies teacher salaries i public uiversities could be as high as 2.5 times that of private uiversities. I spite of these limitatios, oe study suggests that the value added by private schools is higher tha that i public schools. (James, 1991). Table 7. Iputs i higher educatio Coutry Faculty per studet Books per studet Teachig hours of faculty per week Japa Private Public Philippies Private Public Brazil Private.33 Public.11 Source: Based o James (1991). 1. I the absece of data for the Arab States regio, we cite examples from coutries where such data are available. 33

34 Diversificatio of sources ad the role of privatizatio i fiacig higher educatio i the Arab States regio These explaatios gave the political ratioale for itroductio ad icrease of public subsidies to private uiversities of Japa; (b)less costly product mix: teachig as agaist research, udergraduate programmes, as agaist graduate programmes, huma ad social scieces as agaist sciece ad egieerig; ad (c) efficiecy argumet: ecoomic efficiecy is soud if idividuals or private etities pay directly for the services they receive. Disciplie of the market (competitio ad desire for profit maximizatio) forces private uiversities to operate more efficietly tha public uiversities. I may private istitutios, admiistrative costs have bee lowered by proper utilizatio of staff time, thereby reducig admiistrative ad support staff. They have also reduced academic staff cost by hirig them o a part-time basis or after retiremet with a toppig-up salary. The efficiecy argumet also exteds itself to relevace, i that fee-payig private istitutios are obliged to ru programmes which are useful to the day s labour market ad more employmet orieted, with a built-i mechaism for survival. 2. I differetiated demad situatios, private istitutios would appear to be superior i quality i some importat respects because they are freely chose whe less costly public alteratives are available. Oe recet example is from Pakista, where a sectaria teacher traiig istitutio shows how a private istitutio ca do better tha a public istitutio just by icreasig the motivatio of the staff ad the studets ad improvig work ethics (Scheider, 1997). Scarcity ad rigidity of public service has bee cited as a impedimet to improvig the work performace of the academic staff. However, more studies are eeded to prove this pheomeo. 3. Equity issue. We have argued before that the govermet should take over the fudig of higher educatio so that the istitutio of higher educatio could be equitable, thus ecouragig the participatio of studets with low socio-ecoomic status. However, later studies show that the equity argumet is ot that simple. James argues that: 34