DEVELOPMENT OF HUMAN AND FINANCIAL RESOURCES IN RE- GIONAL HEIS OF LATVIA

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DEVELOPMENT OF HUMAN AND FINANCIAL RESOURCES IN RE- GIONAL HEIS OF LATVIA Dace Vīksne, Gunita Mazūre Latvia University of Agriculture The contribution of HEI to regional development is a theme that has attracted growing attention, as these institutions are increasingly expected not only to conduct education and research, but also to play an active role in the economic, social and cultural development of their regions. Regional HEIs are higher education institutions of an especial mission with the basic objective to implement scientific and research programmes necessary for regional development. The research aims at the study of regularities existing between the qualities of human resources and financial resources allocated for the development of HE system in Latvia. The research implies the use of following methods: monographic descriptive, analysis and synthesis, logical and constructive. Presently the science is not capable to ensure training of highly skilled specialists for the needs of society, as the age structure and of academic continue to deteriorate. Within the recent five years education in Latvia has been one of the state determined priorities, as the total amount of higher education funding increases annually. The comparison of the share of financing for education of GDP with the respective average indicator in the EU shows that generally in Latvia this indicator complies with the EU average figure. Key words: higher education, resources,, funding, expenditure. JEL classification: I22, R. Introduction 1 The contribution of higher education institutions to regional development is a theme that has attracted growing attention in recent years. Knowledge institutions are increasingly expected not only to conduct education and research, but also to play an active role in the economic, social and cultural development of their regions. The extent to which higher education institutions are able to play this role depends on several circumstances, like, the characteristics of the institutions, the regions they are located in and the policy frameworks (Arbo & Benneworth, 27). Human capital is thought to be an important factor for developing markets to increase their development level. Gary S. Becker has realised that education add to human capital just as other investments add to physical capital (Becker, 1993). Human and physical capital is considered to be determinants that stimulate economic growth and production output level. Generally transfer of national economy to modern technologies, science-based production, and production of products with high value added has just started in Latvia. Therefore the role of higher education, especially universities, as the producers, 1 Mg.paed., lecturer, Department of Accounting and Finances, Faculty of Economics, Latvia University of Agriculture Research field: education, regional development Mailing address: Faculty of Economics, Latvia University of Agriculture, Svētes iela 18, Jelgava, LV-31, Latvia E-mail address: Dace.Viksne@llu.lv 2 Dr.oec., assoc. prof., Department of Accounting and Finances, Faculty of Economics, Latvia University of Agriculture Research field: financial resources, rural and regional development Mailing address: Faculty of Economics, Latvia University of Agriculture, Svētes iela 18, Jelgava, LV-31, Latvia E-mail address: Gunita.Mazure@llu.lv promoters, and supporters of the mentioned transfer is very significant for the today s society. Undeniably academic and research activities are the most important factor to ensure quality of education. Guidelines on the Development of Higher Education, Science and Technologies for 22-21 envisage restructuring of universities into the main scientific centres of Latvia, where high level scientific research, mainly fundamental one, would be combined with high quality academic and professional studies in sufficiently wide sectoral aspect (Augstākās izglītības vadlīnijas, 21). The last 1 15 years have seen the onset of establishing regional institutions of higher education and branch campuses of existing institutions of higher education throughout Latvia. Although the term regional institution of higher education cannot be found in legislative and normative documentation, it is used to designate any institution of higher education that is not located in the capital city Riga. Regarding regional HEI, they are HEIs of an especial mission with the basic objective to implement scientific and research programmes necessary for regional development. In 26 the sector of HEIs comprised 18 higher education institutions and 2 research institutions integrated into HEI, where scientific research was being carried out. Six universities have a status of regional universities: Liepāja Pedagogical Academy (founded in 1954), Daugavpils University (1921), Rēzekne Higher School (1993), Latvia University of Agriculture in Jelgava (1863), Ventspils University College (1997) and Vidzeme University College (1996). However only 3 of them provide Ph.D. studies and grant doctoral s: Latvia University of Agriculture, Daugavpils University and Liepāja Pedagogical Academy. 28

Vol.3, No.2, 27 ISSN 1822-3346 Economics and Rural Development Fig. 1. Location of regional higher education institutions in the territory of Latvia Three of the mentioned HEIs are founded within the last 1-15 years: Rēzekne Higher School, Vidzeme University College and Ventspils University College. In compliance with the Law on Institutions of Higher Education (Augstskolu likums, 1995) regional HEI shall leave a significant impact on the development of a particular region. Regional HEIs provide a wide range of specialities to be acquired tourism organisation and management, business management, management, economics, philology, history, law, teachers education (Liepāja Pedagogical Academy); Daugavpils University, Rēzekne Higher School and other regional HEIs also have a broad range of study programmes. Logically these HEIs offer the specialities required by the particular region. It means the students have the possibility to study close to their place of residence, for example, 9% of students of Liepāja Pedagogical Academy come from Kurzeme, the region this HEI is located, 52% of students of Vidzeme University College come from Vidzeme region, 69% of Ventspils University College students come from Ventspils city and the adjacent districts, while 79% of the students at Daugavpils University are from Latgale region (Augstāko izglītību iegūt ne tikai Rīgā, 22). The research is developed based on the report Latvia in Bologna Process: Report on the reforms in Latvia s higher education on the way towards European Higher Education Area, Lisbon Convention, Bologna Declaration on higher education, several national and foreign publications (Rivža, CimdiĦš, Kasa, MeĦšikovs, Baumanis, Vīksne, Rauhvargers, Arbo, Brunner, Becker, Strehl, etc.), as well as the analysis of statistical and informative materials. Observations of the activities of the regional higher education institutions and analysis of the statistical data lead to the hypothesis that there are differences not only between Riga HEIs and regional HEIs, but also among regional HEIs as well. The study describes the regularities existing between the qualities of the academic-scientific and financial resources allocated for the development of higher education system in Latvia. Research results Number, structure and quality of academic and scientific The scientific and the quality of studies determine the impact of science and research on economic and social development of Latvia, therefore the research productivity in the global scale shall be juxtaposed with the growing European and global demands. The share of Ph.D. holders vs. the total of Ph.D. students characterise the scientific potential (Figure 2). 2 18 16 14 12 1 8 6 4 2 1998 1999 2 21 22 23 24 25 26 7, 6, 5, 4, 3, 2, 1,, Number of Ph.D. holders Number of Ph.D. students Share of Ph.D. holders Fig. 2. The dynamics of the of Ph.D. students and Ph.D. holders in Latvia between 1998 and 26 Source: Pārskats par Latvijas augstāko izglītību 26. gadā (skaitĝi, fakti, tendences). // Education and Science. http://www.izm.gov.lv 29

In Latvia this indicator is one the lowest in Europe, even in the Baltic states. In 25 only 112 scientists acquired a doctor s, while 135 in Estonia 135 (Ministry of Education, 25). According to Figure 2, during the last 7 years the of Ph.D. students in Latvia is insufficient, and particularly it regards the of Ph.D. holders. Thus it leads to the conclusion that the productivity of postgraduate studies is explicitly low. However there is a need to mark the tendency for the growth of new Ph.D. holders in recent 5-6 years, i.e., from 37 doctors in 21 to 112 in 25. Thus the following conclusions may be drawn: drastic decrease in the of persons having acquired Ph.D is observed in 2 and 21, which mainly coincides with the changes in the Regulations on the Procedure and Criteria of Ph.D. Thesis Defence and the necessity to adjust the thesis in compliance with the new requirements; though from 22 the of new doctors consistently increases by 18-2 persons or 5% on average per year; correspondingly the of Ph.D. students grows, in 26 it has increased by 824 students or 83.6% compared to the base year 1998; unfortunately the opposite tendency is observed in 26. An extreme concentration of higher education and science in the capital city is characteristic to Latvia: Riga possesses 77% of students and 78% of the academic ; consequently regional development is not promoted. Hence the implementation of postgraduate study programmes in regions is also a contribution to sustainable development of human resources. Presently only 4 regional universities implement postgraduate study programmes: Latvia University of Agriculture, Daugavpils University, Liepāja Pedagogical Academy and Ventspils University College. Ventspils University College has started the enrolment in the postgraduate study programme only in the autumn of 27 (Table 1). Table 1. Proportion of the of PhD students and the of new doctors in regional HEI Reg. HEi 21/22 22/23 23/24 24/25 25/26 26/27 LLU 163 7 142 5 139 12 172 19 211 13 2 11 DU 32 45 67 3 14 3 13 3 121 3 LPA - - - - - - 5 13 3 LLU - Latvia University of Agriculture, DU - Daugavpils University, LPA - Liepāja Pedagogical Academy. Source: Pārskati par Latvijas augstāko izglītību no 21. gada līdz 26. gadam (skaitĝi, fakti, tendences). // Department of Higher Education and Science, Ministry of Education and Science. http://www.izm.gov.lv Unfortunately only Latvia University of Agriculture can take pride in the training of new doctors, while Daugavpils University has only 3 new doctors on the contrary to more than 1 Ph.D. students. It serves mentioning that Liepāja Pedagogical academy has initiated a postgraduate study programme only in 24, therefore it is too early to discuss the results. Since the last 1 15 years have seen the onset of establishing regional institutions of higher education and branch campuses of existing institutions of higher education throughout Latvia, higher education institutions shall become centres for fundamental science promoting the development of modern and marketable applied researches, and providing high study quality in all the levels and spheres of studies. Therefore the academic and scientific potential is of great impact ensuring the quality of education and this impact is expressed through the relation between the total academic and the academic having a scientific (Table 2). The comparison between the total of academic and the academic having a scientific has fluctuated in the range of 7.7% (Vidzeme University College in 21/22) and 59.5% (Ventspils University College in 25/26). The small total of the academic mainly explains the sharp difference. The of academic decreases with the increase of the of students, however in regional HEIs the of academic has not decreased considerably; on the contrary it has increased by 3.7% compared to 21.The changes have occurred in individual regional HEIs, for instance, the of academic has decreased by 11.7% in Daugavpils University. 38

Vol.3, No.2, 27 ISSN 1822-3346 Economics and Rural Development Table 2. Full-time academic-scientific with a scientific in regional higher education institutions of Latvia between 21 and 26 Higher education institution Number of persons with a scientific by academic year 21/22 22/23 23/24 24/25 25/26 LLU 162 42.1 171 43.1 166 41.2 141 34.9 147 36.3 Rate of chain increase, % - 5.6-2.9-15 4.3 DU 72 35.1 78 36.8 72 39.8 82 45.6 76 42 RA 66 62.3 44 38.6 17 15.2 18 15.5 25 21.7 total 138 122 89 1 11 Rate of chain increase, % - -11.6-27 12.4 1 LPA 38 36.9 38 36.2 39 36.8 38 36.2 37 36.6 VeA 13 35.1 13 4.6 9 28.1 13 4.6 25 59.5 total 51 51 48 51 62 Rate of chain increase, % - -5.9 6.3 21.6 ViA 2 7.7 4 12.1 5 16.7 5 11.4 6 12 Rate of chain increase, % - 1 25 2 LLU - Latvia University of Agriculture, DU - Daugavpils University, RA - Rēzekne Higher School, LPA - Liepāja Pedagogical Academy, VeA - Ventspils University College, ViA - Vidzeme University College. Source: Pārskati par Latvijas augstāko izglītību no 21. gada līdz 26. gadam (skaitĝi, fakti, tendences). // Department of Higher Education and Science, Ministry of Education and Science. http://www.izm.gov.lv Similarly the of academic having a scientific has decreased in Latvia University of Agriculture and Rēzekne Higher School by 9.3% and 62% respectively compared to the study year 21/22. It is characteristic to observe the decrease of the of academic with a scientific in all regional HEIs, excluding Ventspils University College where the corresponding indicator has grown by 92.3%. In the study year 24/25 the academic with a scientific account for 46% of the total of academic in all HEIs compared to 5% almost 4 years ago (Ministry of Education, 25). Yet the situation in regional HEIs is crucial (Figure 3). VeA 59.5% LLU 36.3% ViA 12.% DU 42.% RA 21.7% LPA 36.6% Fig. 3. Full-time academic with a scientific in regional HEI in the academic year 25/26 Source: Pārskats par Latvijas augstāko izglītību 25. gadā (skaitĝi, fakti, tendences). // Education and Science. http://www.izm.gov.lv According to Figure 3, the largest share of academic having a scientific is observed in Ventspils University College, i.e., 59.5%, while only 21.7% in Rēzekne Higher School. Relatively small total of academic explains the high indicator of Ventspils University College, yet the average increase of total of academic by 8% explains the low indicator of Rēzekne Higher School. 31

The figures may differ depending on the methodology and data used for calculations, i.e., either the total of employed academic or only the of elected ones is viewed. At the same time inconsistency between the of academic and the of students is observed in regional HEI. The of students per one full-time employed academic unit increases, thus ranging between 3 and 65 students per one academic unit in state financed HEIs (Ministry of Education, 26). The situation in regional universities is relatively equal (Table 3). Table 3. Numerical proportion between students and academic in regional HEIs of Latvia Number of students per one academic unit 21/22 22/23 23/24 24/25 25/26 Average LLU 19 2 21 2 18 19.6 DU 19 2 28 26 22 23. LPA 33 35 32 34 28 32.4 RA 29 29 3 28 26 28.4 VeA 18 26 28 28 22 24.4 ViA 24 27 33 28 28 28. Average 23.67 26.17 28.67 27.33 24. - Source: Pārskati par Latvijas augstāko izglītību no 21. gada līdz 25. gadam (skaitĝi, fakti, tendences)// Department of Higher Education and Science, Ministry of Education and Science. http://www.izm.gov.lv During the period analysed the of students in regional HEI per one academic unit fluctuates between 19.6 students in Latvia University of Agriculture and 32.4 students in Liepāja Pedagogical Academy. According to the rector of Liepāja Pedagogical Academy, the HE has good scientific potential 8% of the academic are full-time employees, the only problems account for the persons having a doctor s they amount to 48% with the average age of 57 years. Insufficient financing is the main problem for attracting young lecturers, therefore the aging of academic continues. Similarly the age structure of the academic continues to deteriorate in all regional higher education institutions (Figure 4). 25 Number of persons 2 15 1 5 21/22 22/23 23/24 24/25 25/26 up to 3 y. 3-39 y. 4-49 y. 5-59 y. 6 y. and more Fig. 4. The age structure of the academic in regional HEIs between 21 and 26 Source: Pārskati par Latvijas augstāko izglītību no 21. gada līdz 26. gadam (skaitĝi, fakti, tendences)// Department of Higher Education and Science, Ministry of Education and Science. http://www.izm.gov.lv During the recent 5 years regional HEI have faced the decrease of the of academic under 3 years by 14% and the increase the of academic over 6 years by 21%. On the average 25% of the academic are older than 6 years. The academic year 25/26 seems to be the worst one, as the of young lecturers has decreased quite dramatically with the increase in the of elderly academic-scientific members. The lecturers of the age between 3 and 39 years slightly equalise the situation, as their share has grown by 22.7% compared to the study year 21/22. In regional HEIs only 17% of the academic are younger that 3 years, the in the age between 3 and 39 years slightly dominates with 23%. In the academic year 25/26 the share of the academic below 3 years was 19.75% and 7.92% for Latvia University of Agriculture and Liepāja Pedagogical Academy respectively. It means that the renewal and strengthening of academic is one of the most acute problems to be solved by each HEI individually and together with the Ministry of Education and Science and other science supporting institutions. 32

Vol.3, No.2, 27 ISSN 1822-3346 Economics and Rural Development Funding and expenditure of higher education State funding for higher education has always been heavily influenced by states' fiscal situation. State elected officials have often viewed support of higher education as more discretionary than funding for many other programmes. As a result, changes in state fiscal conditions are often multiplied in their impacts on higher education. When finances are tight, higher education budgets are often cut disproportionately. When financial conditions are good, higher education often receives larger increases than most other programs. These fiscal responses mean that the outlook for state higher education funding depends critically on the outlook for state finances overall. HEIs are primarily funded by the state: the funding proportion ranges from 2% to more than 9% of the total budget however the large majority lies between 6% and 9%. The importance and the amount of tuition fees differ according to the overall context of the individual countries. The roles of other funding sources also differ (research agencies, the EU, industry, business, property revenues and services to students), but are of increasing importance (Strehl et al., 27). The main features of the funding system of higher education in Latvia are: 1) state budget funding forms the smallest part of income in many state institutions of higher education; 2) tuition fee revenues are significant in the financing of study programmes in social sciences and humanities. The institutions of higher education define tuition fees themselves, but students have a free choice to choose an institution and study programme; 3) there are several state defined differences between state and private institutions of higher education in the management of financial and other resources resulting in inequitable operations of these institutions. Differences include accounting, real estate ownership, ing, purchasing procedures etc.; 4) state budget subsidy for research has been inadequate during the whole transition period to market economy. Assigning of funds by National Research Council is characterized by restrictions by research areas (certain areas receive no funding at all, like political science). Corporate ties can play a role as well. The cooperative ties between universities and the private business are inadequate and irregular. The researchers own personal initiative efforts are a key factor; 5) after entering the European Union, the share of funding from the EU budget at the institutions of higher education has increased radically (Krumins et al., 26). In 27 the planning and preparation for the next period of acquisition of the EU Structural Fund resources in 27-213 continues in Latvia. It is envisaged that the funding for education and science for the period between 27 and 213 would equal to EUR 88 898 14 which provides a total increase 6.6. times or 2.8. times annually on contrary to the period of 24-26 (Sīka, 27). One characteristic specific to the Latvian system of financing of higher education is the fact that state funding is channelled through six ministries Education and Science, Agriculture, Health, Interior, Defence and Culture. This has both advantages and disadvantages. One advantage is that the individual ministries have a say in implementation of new study programmes, another is the opportunity for higher education institutions to receive additional funding from the individual ministries. A disadvantage is the fragmentation of institutional and financial resources, which makes control and effective monitoring of financial resources more difficult. In addition, institutions of higher education have inequitable access to state funding because of the differences in financial resources between ministries. Within the recent five years education in Latvia has been one of the state determined priorities. The total amount of higher education funding increases annually (Figure 5). Mln. LVL 14 12 1 8 6 4 2,9,82,77,74,77 81,7 79,3,52 64 68,6 54,7 48,9 39,4 31,5 26,7 28 28,1 3,1 3,9 33,3 37,1 23,1 24,8 21,2,7,65,61 99,3,55 43,4 122,7 1995 1996 1997 1998 1999 2 21 22 23 24 25 Total financing, mln. LVL Government financing, mln. LVL Share of government financing in GDP, %,68 6,5 1,9,8,7,6,5,4,3,2,1 Per cent Fig. 5. Funding on higher education in Latvia for the period between 1995 and 25 Source: Pārskats par Latvijas augstāko izglītību 25. gadā (skaitĝi, fakti, tendences). // Education and Science. http://www.izm.gov.lv 33

However, during the recent years the increase is a result of growth of non-budget resources, thus, in 25 the revenues from non-budget resources surpassed budget funding and formed 59 higher education funding (Ministry of Education and Science, 26). During the period analysed the total funding on higher education has increased 4.6 times, while the government financing has grown only 2.9 times. The share of government funding in GDP has fluctuated between.52% in 23 and.9% in 1995. The priorities and amounts for budget allocation explain these discrepancies. Frequently funding and expenditure on higher education relies on the comparison with Gross Domestic Product, where the dynamics of the mentioned process shows certain trends in the government priorities. The following approach is applied in several researches, like, OECD and the World Bank (Table 4). Table 4. Comparative statistics on expenditure for education in different countries, 25 Country Expenditure on educational institutions Annual expenditure per student, tertiary public and private in public in % of private in % of education, USD % of GDP GDP GDP Australia 5.97 4.53 1.44 12 688 Belgium 6.36 5.97.39 11 589 Denmark 7.1 6.82.28 14 28 Finland 5.84 5.74.1 1 981 France 5.98 5.61.38 8 837 Germany 5.26 4.28.98 1 54 Greece 4.6 3.82.23 4 28 Ireland 4.49 4.14.35 1 3 Italy 5.31 4.87.44 8 347 Japan 4.63 3.47 1.15 11 164 Latvia 17.3 16.4.9 4 286 Netherlands 4.9 4.51.39 12 974 Spain 4.89 4.33.56 7 455 Sweden 6.46 6.25.21 15 188 United Kingdom 5.48 4.66.82 1 753 United States 7.34 5.8 2.26 22 234 Country mean 5.62 4.96.65 1 52 Source: OECD in Figures 25 edition The proportion of financial resources allocated of total national resources (GDP) and the state budget is the main indicator characterising this priority. The comparison of the share of financing for education of GDP with the respective average indicator in the EU (4.9%) shows that generally for the last three years in Latvia this indicator complies with the average figure in the EU member states. While the share of expenditure for education in the national consolidated budget (16.4%) is higher than in any EU country. The problem lies in the fact that the amount of GDP and state budget is much smaller than the respective figures for the EU countries. Thus financing for education is small in absolute values. As it was mentioned the term regional institution of higher education cannot be found in legislative and normative documentation, and it is used to designate any institution of higher education that is not located in the capital city Riga. In the opinion of the Ministry of Education and Science representative, municipalities should be encouraged to play a more active part in funding of regional institutions of higher education and ensuring training of well-qualified human resources for regional development. Individual municipalities do support their local institutions of higher education. For example, Ventspils City Council provides additional funding for Ventspils University College. A tendency to open branch campuses in various cities in general is viewed by interviewees as positive, but attention must be paid to quality assurance there. Based on the opinions of many stakeholders, there is lack of unified document describing the funding strategy of higher education in Latvia, namely, the amount of funding in relation to GDP. Funding issues is included as part of various policies and planning documents, that are not always in agreement with each other. The strategy also appears as part of budget redistribution among institutions of higher education, study levels and programmes (Krumins et al., 26). Figure 6 reflects the dynamics of funding of higher education in regional higher education institutions of Latvia. 34

Vol.3, No.2, 27 ISSN 1822-3346 Economics and Rural Development Tsdn, LVL 18 16 14 12 1 8 6 4 2 15511 8564 7354 781 4651 545 3278 3936 3217 283 1818 2451 2199 527 552 849 22 23 24 25 state budget study fee science funding other sources Fig. 6. Funding on higher education in regional HEIs in Latvia for the period between 1995 and 25 Source: Pārskats par Latvijas augstāko izglītību 26. gadā (skaitĝi, fakti, tendences). // Education and Science. http://www.izm.gov.lv Nevertheless the residential purchasing power is not high; the share of private financing is quite large in the system of higher education. According to Figure 6, the share of private financing in regional HEIs generally covered by the study fees, fluctuates between 24.8 % in 22 and 19.4 % in 25. The year 25 marks a vivid increase of the budget financing, which has grown by 81 % compared to the year 24. The allocation of budget resources for the most urgent specialities, like, engineering, sciences etc., explains the growth of government financing. Due to the lack of experience in fund raising and a resistance to donating on the part of donators and legislators, the establishment of private foundations is not so developed in Latvia, as it is in other EU countries. For example, in Austria in 22 a new model of financing was introduced envisaging also private foundations (Strehl et al., 27). The research leads to the development of knowledge and has always been a key objective of higher education. The figures of science funding, however, show that the state budget subsidy for research has been inadequate during the whole period. The year 25 marks positive trends in the research funding, when it has increased 3.8 times compared to the previous period. Conclusions 1. The scientific and the quality of studies determine the impact of science and research on economic and social development of Latvia, although the of the academic in regional HEIs having a scientific in contrary to the whole country has increased in the last years. The comparison between the total of academic and the academic having a scientific fluctuates in the range of 7.7% and 59.5%, where the small total of the academic mainly explains the sharp difference. 2. The age structure of the academic in regional HEIs continue to deteriorate, as the of under the age of 3 years has decreased (by 14 %) with the increase of the academic older than 6 years (by 21 %). The renewal and strengthening of academic is one of the most acute problems to be solved; however insufficient financing is the main problem for attracting young lecturers. 3. Within the recent five years education in Latvia has been one of the state determined priorities. The total amount of higher education funding increases annually. The comparison of the share of financing for education of GDP with the respective average indicator in the EU (4.9%) shows that generally for the last three years in Latvia this indicator complies with the average figure in the EU member states. While the share of expenditure for education in the national consolidated budget (16.4%) is higher than in any EU country. The problem lies in the fact that the amount of GDP and state budget is much smaller than the respective figures for the EU countries. 4. The research proves that the renewal and strengthening of academic is one of the most acute problems to be solved by each HEI individually and together with the Ministry of Education and Science and other science supporting institutions. Besides financial resources allocated for science at regional HEIs are considerably smaller than those at Riga or the capital based HEIs. 5. Observations of the activities of the regional higher education institutions and analysis of the statistical data lead to the hypothesis that there are differences not only between Riga HEIs and regional HEIs, but also among regional HEIs as well. 35

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