Much has been written about NPM, both about its prescriptive recipes (see, e.g., Hughes 2003) and about their actual manifestation in administrative policy reforms throughout the world (see, e.g., Gray & Jenkins 1995). Although NPM practices differ strongly from country to country (Araújo 2001), the smallest common nominator seems to be the “focus on management, not policy, and on performance appraisal and efficiency” (Bevir et al., 2003b, 1). For Lane (2001, 14), “NPM is basically about focusing upon efficiency”. Since NPM assumes that “Competition squeezes slack out of slacky organizations” (Christiansen 1998, 283), it favors the governance mode of markets to the one of hierarchies (Jackson 2001). In other words, the guiding principle of NPM is efficiency, best served by competition (Hood 1991) as guiding governance mechanism and effectively supported by the leitmotiv of “getting prices right” (Jann 2002, 296). Typical policy instruments of NPM are the “marketization” or outsourcing of particular services, the market-testing of public agencies (i.e. public agencies compete with private enterprises), the privatization of state-owned firms (a rather recent phenomenon), and the further disaggregation of departmental structures into service agencies, each responsible for a specific product (Bevir et al 2003b, 13; Hood 1995, 95, 97)”. Reinhard Steurer, “Strategic Public Management as Holistic Approach to Policy Integration.

http://www.fu-berlin.de/ffu/akumwelt/bc2004/download/steurer_f.pdf

Unsurprisingly, with the number of developments included, the introduction of markets in HE has a variety of consequences for universities.

In terms of relations with governments, universities are now confronted with increased output steering, lump-sum funding and attempts to strengthen the relation between HE institutions and their environment, i.e. students, industry, etc. (Richardson et al. 1998). This development has longer-term implications for research. For one thing, institutions need to be able to satisfy multiple stakeholders, not just the state but also research councils and a host of different private parties (a diversified funding base; Clark 1998). This means that the management of research institution becomes more complicated. Moreover, if universities increasingly need to earn their money on markets, the content of research may be increasingly applied at the cost of more theoretical work. The latter is frequently mentioned as a major threat, in particular by academics, though other stakeholders such as industry and national governments appear to realize the importance of basic research, too (for innovative purposes).

The increasing number of private (research) institutions in combination with the fact that universities are earning a larger share of their money from contract research for third parties means an increased competition. This has consequences for the way in which research institutes must operate, which may be increasingly business-like. This may conflict with the public interest that universities are serving. How should private and public interests be balanced in a partly privatized university system? (Newman/ Couturier 2001). From a business-like perspective, for example, universities or their contractors may want to patent (or at least not freely distribute) the results of research, in which case these results are not benefiting the public interest. This development creates problems in the field of quality control as well. Private (for profit) HE institutions operate with considerable autonomy in most countries, simply because they receive little public funding and the government lacks steering mechanisms. But since knowledge important benefits, there is a definite public interest in overseeing these institutions. How much autonomy should private higher education have? Should quality be controlled? Should quality be measured as relevance or academic standards? Can quality control be left to the regulating forces of the market? (Altbach 2000).

International markets for HE have become important, and are likely to further grow in importance. In teaching international student mobility has increased and there is growing competition for top-level universities. Since top-level students are of essential importance for the future of research in a country this development has long-term consequences for research as well. In the second place, increasingly as a consequence of globalization, HE institutions are moving to foreign-markets, either through building local campuses, through distance education or through research contracts with third parties. This might create a situation in which HE institutions must compete for market shares on this international market or restrict themselves to being local or regional providers of HE and of research (Goedegebuure & van Vught 2000). Globalization is also a driver for international co-operation, as universities create large consortia that provide education and research on a global scale (Middlehurst 2000).

Source: Harry de Boer et al., “An analysis of trends and perspectives in higher education and research”, 2002.

http://www.awt.nl/uploads/files/as28.pdf

The reform agenda of the ‘90s, and almost certainly extending well into the next century, is oriented to the market rather than to public ownership or to governmental planning and regulation.  A market orientation implies:

• Tuition (as a significant source of revenue for the support of instructional costs), fees (as a significant, or even complete, source of revenue for the support of non-instructional costs such as institutionally provided room and board), and the sale of research and instruction via grants, contracts, and entrepreneurial training.

• The private sector, including both non-profit and proprietary providers of tertiary education, as found so prevalently in Latin America and much of East Asia.

• Regional decentralization or the devolution of authority from the central government to the regions, as is being attempted in Russia and China.

• Institutional autonomy or the devolution of authority from government, at whatever level, to institutions.

Underlying these orientations is the ascendance, almost worldwide, of market capitalism and the principles of neo-liberal economics. Elements of the reform agenda such as tuition, which shifts some of the higher education cost burden from taxpayers to students and parents, or more nearly full cost fees for institutionally-provided room and board, or more nearly market rates of interest on student loans all rely upon market choices to signal worth and true trade-offs. A greater reliance on market signals brings a shift in decision making power not just from government, but also from higher educational institutions—and especially from the faculty—to the consumer or client, whether student, business, or the general public. This shift may appear “conservative” in the conventional modern political terminology. But it is also “liberal” and even “populist” in an older lexicon. The system of university financial dependence solely on government, coupled with substantial university (meaning especially “professorial”) autonomy enshrined a system that was, by some accounts, elitist, self-serving, and insufficiently responsive either to the students it served or to the taxpayers who paid. The shift to reliance, even only in part, on tuition—and assuming financial assistance to maintain accessibility—shifts substantial influence from the faculty and the ministry to the student and family. And to many economists, shifting some of the cost burden from taxpayers to students and parents also reflects a reform in the direction of greater equity and a more reasonable alignment of those who pay with those who benefit.

Part of what may pass for “privatization” may also be little more than the good management practices that have always been more associated with private enterprise, with profit as the driver, more so than with the public sector, which has traditionally lacked rewards for difficult or risky or highly disruptive decisions. As universities and higher education systems pay more attention to e.g., good personnel practices, cash flow, market position, product diversification, and accountability, they will look more “private” than the stereotype of “public,” even if they remain state owned, substantially state supported, and avowedly “public” in their mission.

Much of what may look like the agenda of the neo-liberal economist may also be more opportunistic than ideological. With taxes increasingly avoidable and otherwise difficult to collect, and with competing public needs—e.g. basic education, public health, public safety, transfer payments, and public infrastructure—so compelling in all countries, an increasing reliance on tuition, fees, and the unleashed entrepreneurship of the faculty may be mainly the only alternatives to a totally debilitating austerity.

Source: D. Bruce Johnstone, “Worldwide Reforms in the Financing and Management of Higher Education”

http://www.gse.buffalo.edu/org/inthigheredfinance/textForSite/ReformsFinManHEdWor.pdf

Privatization in reference to higher education refers to a process or tendency of colleges and universities (both public and private) taking on characteristics of, or operational norms associated with, private enterprises. Although the term is not a precise one (any more than the distinction between a "public" and a "private" college or university), privatization connotes a greater orientation to the student as a consumer, including the concept of the college education as a "product"; attention to image, competitor institutions and "market niches"; pricing and the enhancement of net earned revenue; and aggressive marketing. Privatization also suggests the adoption of management practices associated with private business, such as contracting out, or "outsourcing" (i.e. turning to private firms to perform non-academic services such as printing, food services, bookstore operations, or general building maintenance), aggressive labor relations and minimization of payroll expenditures, decisive decision-making and "top down" management, widespread use of audits and accountability measures, and an insistence that each unit (department or academic program) contribute to profitability, or at least to the organization’s particular metric of "success." Proponents of more privatized higher education claim that it makes colleges and universities more responsive to the needs of students and employers alike, in addition to generating efficiencies that can enhance the institution’s goals, whatever they may be.

Movement in the direction of greater privatization may mean any or all of the following:

- Seeking greater autonomy from government, as in getting relief from state budget "line" or "billet" controls and moving toward "lump-sum" budgeting.

- Raising tuition (at least in the public sector).

- Putting considerable resources and managerial attention to marketing.

- Embracing the concept of "enrollment management," which limits financial assistance, or institutional "price discounts," to those students whom the institution most wants and who also require the least discounts to matriculate.

- Adopting a culture of service to the student as a client.

- Fund raising (to lower dependence on state taxpayers).

- Contracting out auxiliary enterprises (e.g. bookstore and food services) as well as certain administrative functions such as printing and maintenance—or at least putting such services "on their own fiscal bottoms" and making them compete with private providers.

- Trimming departments and other units that seem not to be attracting students or research dollars, or otherwise justifying them being "carried" by the units that do.

Privatization may best be viewed as a direction along the continua of several related yet distinct dimensions, shown in Table 1, below.

Source: Bruce Johnston

http://www.gse.buffalo.edu/FAS/Johnston/privatization.html

The perception of higher education as an industry primarily views public colleges and universities as quasi-corporate entities producing a wide range of goods and services in a competitive marketplace. A research university may be thought of as offering a very diverse product line, especially in the post-World War II era of Kerr’s (1995, orig. 1963) “multiversity”. Alternatively, an entire state’s public system of higher education may be seen as offering an even more diverse range of goods and services: community colleges offer degrees or one course at a time, in many fields, to people of all ages, while the flagship university offers many courses and levels of degrees across hundreds of fields of study, professes to serve national, state, local economic needs, and sells entertainment in sporting and cultural events to the local community.

Ideally, according to microeconomic theory, organizations are managed based upon values of economic rationality. The main services of teaching and research are variously supplied and priced to correspond to laws of supply and demand. Students, parents, state legislatures, employers, and research funders are seen as customers. Particular customers have different tastes and preferences. Other people, such as faculty employed by the organization, are presumed to participate out of calculative involvement. As such, they can be motivated to be more productive through the use of incentives and sanctions.

Major obstacles to maintaining the organization’s viability include: fixed costs and inefficiencies; competition and oversupply; uncertainty and imperfect information. Guiding principles for the organization’s managers are to know its liabilities and assets, to anticipate costs and benefits, to enhance efficiency and flexibility, and – as realized in the contemporary quality movement – to increase customer satisfaction (e.g., Seymour 1992).

The insights of this perspective focus on the harsh realities of market forces and the urgency of doing something to stay competitive, be it planning strategically, scanning environments, attempting to contain or cut costs, correct inefficiencies, or doing whatever it takes to maximize flexibility. Adjustments include changing product lines, substituting technology for labor, and reducing fixed costs through such means as outsourcing and privatizing as well as increasing the proportion of part-time and temporary personnel. Doing nothing is not an option. Such imperatives have been popularized in the reengineering movement in the 1990s, catapulted by variations on Hammer and Champy (1993).

Within this conceptualization, it is valuable to view higher education as having not just one major marketplace, as determined by type of student served, or geographic location, or degrees granted. Instead, we can see several types of markets at work simultaneously – not only for obtaining students, but for placing graduates, hiring and retaining faculty, obtaining research funding, establishing collaboration with industry, maintaining endowments, sustaining and extending alumni giving and other fundraising sources, and so on.

A contemporary feature of higher education markets is the increased presence of non-traditional providers in several markets, the most prominent being the emergence of virtual higher education aided by new telecommunications technologies and altering the competitive playing field by attracting students (Marchese 1998). The major barometer for managers is to read the market for constraints and opportunities relevant to the viability of their niche; if done well, a higher education organization can capitalize on untapped demand, allowing it to supply the educational product at a higher price. The decision to add an academic program could be seen as a strategy to position the college or university to attract new customers and thereby increase revenue. Similarly, an increase in tuition can be explained as appropriate due to increased demand or decreased supply of a particular educational product (for example, a professional degree in engineering, business, or law). Hence, programmatic changes can be seen as prudent market corrections.

All of this should sound quite familiar to observers of contemporary higher education management. The corporate metaphors of production in a competitive marketplace are omnipresent. Knowing one’s resources, comparative advantage, and strategy has become standard in the U.S. and increasingly in Europe (Keller 1983; Chaffee 1985; Hearn 1988; Hardy 1990; Cameron and Tschirhart 1992; Massy 1996; Peterson et al. 1997; Clark 1998). Of course, one might argue that these principles are rendered irrelevant for public higher education, given that the market is heavily regulated by state and federal government through several types of public subsidies, restrictions in pricing, regulated degree offerings and admissions standards. Yet the industry perspective and its dominant corporate metaphor have nonetheless acquired a certain resilience, due in part to their parsimony, to today’s uncritical acceptance of business and economic rhetoric, and to the very real complexity of today’s campus operations. (For example, see Duderstadt’s (1995) characterization of “the University of Michigan, Inc.,” which with an annual budget of over $2.5 billion would rank roughly 200th on the list of Fortune 500 companies.) In many ways, adopting business rationales with strategic management principles has become de rigueur for repositioning higher education organizations to compete within new economic realities.

Source: Patricia J. Gumport, “Academic restructuring: Organizational change and institutional Imperatives”. Higher Education 39, 2000.

http://www.stanford.edu/~gumport/publications/Gumport2000ARHigherEdRestructuring.pdf

As public and private institutions expand by providing education for students with limited educational backgrounds, without significant increases in human resources and equipment, they cannot maintain the high standards that are typical of well-endowed, elite institutions. Most private higher education in Latin America is like this, and there are reasons to question whether this kind of “low quality education” has any redeeming value. A recent paper from the Inter American Development Bank argues that it does (Castro and Navarro 1999, p. 57). For the authors, these courses perform important functions, since they add knowledge and information to students coming from very limited backgrounds, providing them with credentials that may open new opportunities or improve their standing in their jobs. They recognize that these course programs are often badly taught, and many students feel frustrated because they cannot get to the professions they where hopping to enter. However, they argue that the lack of correspondence between degrees and jobs is to be expected, since these courses work mostly as providers of general education, rather than of specialized competencies.

Their arguments are important to dispel the notion that there is only one type of higher education, and to call attention to the need for policy makers to pay more attention to the positive role private and public providers are playing in opening education opportunities for persons without conditions or access to enter more prestigious careers and institutions. This should not be taken, however, as an argument in favor of any kind of education, but as a plea to take more seriously the effort to learn more about what general and vocational education can actually be.

The Latin American experience suggests that we should not look at public and private education in polarized terms. They both perform useful and often complementary functions and both have problems and drawbacks. Governments have the responsibility to regulate and look for quality and relevance in both, but their ability to do so is more limited than it is commonly thought.

[…]

It is common to think on the private world as governed by market competition and the public as governed by normative principles and mandates. However, markets depend also on common values and institutions, which define the “rules of the game”, and assure the good faith of the players; while, in recent years, there has been a tendency for governments to create “quasi markets” for the distribution of public resources. Thus, science councils routinely establish competition among researchers for their grants; students compete for places in universities, and, later, for jobs in public institutions; and private companies dispute bids in procurement markets established by the public sector. It is not true, therefore, that competition is inimical to the world of science, culture, academic and public life; on the contrary, it is a very important part of it; and it is not true that markets are inimical to values and institutions.

It is also not true that education and profit are always geared by opposite goals and motivations. The current legislation in Brazil admits that private institutions can be for profit or not, depending on whether they are truly philanthropic, like some religious and community-based institutions. For-profit institutions have to pay taxes like any other private concern, the assumption being that they should behave as any honest business company, selling good, value-for-money education. In the public sector, an outdated legislation still requires that all academics should earn the same salaries, according to rules applied uniformly to all national institutions. This situation makes the universities unable to compete for talent, and to lose their best people to the private sector or institutions abroad. This extreme symmetry is compensated, in practice, by the ability of academics to increase their income through participation in research projects. More recently, in Brazil as well as in Mexico, the government created salary incentives to stimulate dedication to teaching and research in public institutions. Thus, the notion that people and institutions in public education and research should be financially rewarded according to their work, dedication and entrepreneurship, is also gaining ground.

My main proposition is that public and private higher education institutions are converging in many ways, and this is a positive trend. As higher education becomes more expensive, and as the private sector becomes the provider of higher education for large segments of the student population, the need to treat public education also as a private good (and therefore subject to tuition), and private education as also a social good (and therefore eligible for support), become stronger.

Public institutions are changing the ways they function, and becoming more entrepreneurial in their daily activities. Universities have to dispute resources with each other and with other social programs in the public sector. Besides, they have to look for other sources of resources and support, in the private sector, from other government agencies, from international donors. For this, they need to change the way they are organized, with more power going to management positions, or through decentralization into semi-independent business units, associated with academic departments and institutes. Private institutions, on the other hand, have to respond to public regulations and incentives, and, as they become more complex and bring in large staffs, they have to become more institutionalized, and cannot be ruled any longer as pure business concerns.

This convergence is far from being complete, and it is not likely that the differences between public and private institutions will disappear. On the contrary, we can expect that the range of institutional formats and motivations will continue to increase, together with the development of better policy instruments to make sure that they all work to the best interests of society.

Source: Simon Schwartzman, “Public and private higher education in comparative perspective”

http://www.schwartzman.org.br/simon/pdf/sapaper.pdf

Now there is a third player in the game, something called "the market". Nobody quite knows what a market is in higher education, but that doesn't keep anybody from talking about it. This construct of the market is an interesting new element in the discourse on higher education in Western Europe, and it is rapidly spreading, with the tender care of the World Bank and the Soros Foundation, to Central and Eastern Europe. It is pretty clear that it won't spread into the United States, because there it has been around already for some time.

For Europe, the interesting question may not be so much why the market has recently moved into such a prominent position in the debate about higher education, but why it took so long. After all, we have known about markets at least since Adam Smith wrote "The Wealth of Nations" over 200 years ago (1776). And we know how exasperated Adam Smith was when he incredulously took Colbert, the minister of Louis XIV, to task for daring "to regulate (industry and commerce of a great country) upon the same model as the departments of a public office" (quoted in Lindblom 1977, 33).

Somewhere along those 200 years, someone might have had the idea that there may be better ways to regulate higher education than "upon the same model as the departments of a public office". But apparently, until very recently, and with the exception of the U.S. and a few of its imitators, nobody did.

But now it seems to have happened. There is not only serious talk, but even some action in the direction of deregulating higher education, of performance-based models of resource allocation, of inter-institutional competition, of efficient management structures, of the development of specialized "products" of higher education, even of "privatization". And the arena of European, and even German, higher education, long a rather sleepy habitat, has all of a sudden become exciting, controversial, and lively.

Source: Hans N. Weiler, “States and Markets: Competing Paradigms for the Reform of Higher Education in Europe”. National Center for the Study of Privatization in Education Teachers College, Columbia University, Occasional Paper No. 16, 2001 http://www.ncspe.org/publications_files/850_OP16.pdf

The aim of this process is twofold. First, it is the adaptation of higher education to the new market driven socio-economic environment and second, it is the rationalization of the higher education system in the market sense. The main direction of the commercialization of higher education is the creation of the multi-level markets of educational and research services.

Ministry experts prepared two concepts of structural/economic reform of the system of education. The first concept, which stipulated a gradual approach to the reform and for an increase in the state, rather than market, influence on higher education, was rejected by the liberal Vice Prime-Minister Sysuev, who oversaw the preparation of the anti-crisis program for education (Startsev, 1998.) The second concept, which was more radical and market-oriented, was adopted as the guidelines for the third stage of the reform of the system of higher education.

This radical stage of the reform began with the appointment of Alexander Tikhonov, one of the authors of the second concept of the reform and Minister of General and Professional Education of the Russian Federation in the neo-liberal government of Sergei Kirienko. Tikhonov asserted that higher education would be able to survive and develop if, and only if, it were able to adopt market mechanisms of operation. In general, marketization in Russian higher education means:

• creation of the market of educational services and research as a subsystem of the labor market. Higher education should be seen as a commodity that can be voluntarily exchanged at a known price, determined by supply and demand;
• strategic orientation to the labor market;
• rationalization. For example, cost effectiveness, cost-benefit analysis of operations in terms of output measured against input;
• decentralization. Granting strong economic autonomy to universities;
• diversification of funding. Multi-level and multi-channel funding. Federal and local government subsidies, student fees, revenues from different non-budget activities, private investments and donations, moneys received from research contracts
• normative state funding;
• privatization, which is carried out under the name of “multi-funding of higher education institutions” (the state is not the sole funder of an institution);
• increase the ratio of instructors/students;
• educational insurance;
• support of new private higher education institutions;
• forging relations with business and industry;
• forming a new entrepreneurial structure and culture in the universities. Universities as commercial companies. Inter- and intra-university quasi-markets.

Source: Alexei Matveev, “Political Economy of Public Higher Education Policy Reform: The Case if Russia” http://unpan1.un.org/intradoc/groups/public/documents/nispacee/unpan005565.pdf

Following the idea that higher education is no longer a unique part of the public sector in Central and Eastern Europe, it is interesting to ask who the competitors of public higher education institutions are. The competitors are of a twofold nature: they are, first, the newcomers in the field of higher education and, second, other public institutions and public services provided by the state today. Other educational providers are, for instance, private national institutions, private foreign institutions, national and foreign corporate certification centers, national and foreign virtual education providers and mixed education providers. They are increasingly for-profit. Most probably, in an increasingly market-oriented social environment of CEE countries, prospective students will be increasingly market-oriented as well. The unreformed institutions will not be able to face the pressure, and either will be reformed on a day-to-day basis suggested by economic rationality, or will lose its student body to other market-oriented higher education providers. The second group of competitors are other public institutions and public services such as, for instance, primary and secondary education, pensions and care for the aged, basic healthcare, social insurance, law and order institutions, prison systems, public administration etc. The competition with other sectors of the public sector is a zero-sum game, though: some sectors win, others lose. At the same time the general amount of the public money received in taxes is likely to be smaller rather than bigger, following the trend in many OECD countries.

[…]

The question is whether the corporate culture, economic rationality and business practices will take over the major part of the academic world in the Region. The provisional answer to the above question would be – most probably yes, gradually, with the passage of time, they will. There is no reason to believe in the uniqueness of Central European higher education. It is following all global trends in terms of falling public trust, weakening public financial support, rapid universalization and new expectations of its main stakeholders. Here are three reasons to support a positive answer to the above question.

Firstly, worldwide trends meet right here (also owing to the intellectual and financial backup of supranational organizations) and the gradual “marketization” of higher education is already seen as a perfect response to its critical budgetary situation after 10 years of abandoned systemic reforms. The problems faced by CEE higher education are similar in nature, although different in degree, to problems faced in the Western world.

Secondly, to let (the major part of) higher education go “to the market” is for the state in the Region a relatively easy solution of the problem: as every deregulation, it requires tremendous institutional and systemic efforts at the beginning, and then the laws of the market/economic pressures begin to work. Polish lessons show that the state is very consistent in introducing strong market mechanisms in many domains of the public sector. And the dominating attitude in sectors already privatized is that of economic rationality. The unique character of higher education in general and of the university in particular in a set of traditionally public sector services is already lost, especially considering the rapid development of the private, for-profit and non-research institutions of higher education which changes radically the intellectual landscape in which public higher education is supposed to operate.

Thirdly, the times have changed: the abandonment of higher education public policy and leaving it merely at the mercy of market/economic forces would be unthinkable 10 years ago; in post-1989 countries higher education reforms were then generally left “to be done” soon. After ten years it is seen much more clearly that social and economic transformations will last for several decades and that higher education needs not only academic freedom and political autonomy but also huge financial support. Within a structure of ongoing social reforms, higher education is no longer a priority for CEE states. Now it may happen that – with shrinking public resources and other social needs growing – the corporate answer to the “higher education problem” could seem almost salutary to the majority of stakeholders.

Source: Marek Kwiek, “The Internationalization and Globalization in Central and East European Higher Education”. Society for Research in Higher Education International News, No. 47, November 2001

http://www.policy.hu/kwiek/SRHE2001.pdf 

In Asia, private institutions have long been a central part of higher education provision. In Japan, South Korea, Taiwan, the Philippines, and Indonesia, private universities enroll the majority of students—in some cases upwards of 80 percent. The large majority of Indian students attend private colleges, although these institutions are heavily subsidized by government funds. The private sector is also a growing force in parts of Asia where it has thus far not been active—such as China, Vietnam, and the central Asian republics.

In general, private universities are found at the lower end of the prestige hierarchy in Asia. There are a few examples of high-quality, private universities—such as Waseda and Keio (among others) in Japan, De La Salle and the Ateneo de Manila in the Philippines, Yonsei in Korea, and Santa Dharma in Indonesia. Generally, private institutions rely on tuition payments, receive little funding from public sources (although in Japan and several other countries limited government funding is available to the private sector), and have no tradition of private philanthropy, and as a result are unable to compete for the best students. However, the private sector plays a central role by providing access to students who would otherwise be unable to obtain academic degrees.

It is useful to disaggregate the Asian private higher education sector because of the significant differences among institutions and the divergent roles they play in society. As noted, there are a few very prestigious private universities in the countries in which a private sector operates. In some cases, these institutions are sponsored or founded by religious groups—largely, but not exclusively, Christian. Sophia and Doshisha in Japan, Yonsei and Sogang in South Korea, Santa Dharma in Indonesia, and De La Salle and Ateneo de Manila in the Philippines are examples. These universities are typically among the oldest in their countries and have a long tradition of training elite groups. Another category is the newer private institutions, often specializing in fields such as management or technology, that were established with the aim of offering a key but limited market high-quality academic degrees. The Asian Institute of Technology in the Philippines and its sister institution in Thailand are such schools. These prestigious private universities have been able to maintain their positions over time and rely largely on tuition payments for survival. Semiprivate, specialized business schools are being established in Singapore in collaboration with prestigious management schools in the United States and Europe.

Most Asian private universities serve the mass higher education market and tend to be relatively nonselective. The majority are small, although there are some quite large institutions—such as the Far Eastern University in the Philippines, which has a massive enrollment and was for a time listed on the Manila stock exchange. Some are sponsored by private nonprofit organizations, religious societies, ethnic organization, or other groups. Many are owned by individuals or families, sometimes with a formal management that masks the controlling elements of the school’s governance structure. This pattern of family-run academic institutions has received little if any attention from analysts, although it is a phenomenon of growing importance worldwide—even in countries that do not encourage the establishment of for-profit higher education institutions.

One of the most interesting private higher education developments worldwide is the rise of min ban (people-run) private institutions in China. There are already more than 1,000 min ban institutions, about 100 of which are accredited by the government. A new law regulating this sector will soon be implemented. The government is convinced that the new private sector is necessary to provide access to students who, largely because of low test scores, cannot qualify for the public universities. So far, most of the min ban schools offer vocational education and do not award bachelor’s degrees.

Many Asian countries have had considerable experience in managing large private higher education sectors, while others are still seeking to establish appropriate structures. These countries face the challenge of allowing the private sector the autonomy and freedom to establish and manage institutions and compete in a differentiated educational marketplace while at the same time ensuring that the national interest is served. In India, where the large majority of undergraduate students attend private colleges, these schools are largely funded by the state governments and are closely controlled by the universities to which most are affiliated. University authorities, for example, design and administer examinations, award academic degrees, set the minimum qualifications for entry, and supervise the hiring of academic staff. The universities are all public institutions, and they have key administrative and academic control over the privately owned undergraduate colleges. India’s pattern of public-private management and control is unique and worth studying.

Japan and South Korea have a long tradition of rigidly controlling private institutions—going to the extent of stipulating the salaries of academic staff, the numbers of students who can be enrolled, approving the establishment of new departments or programs, and supervising the appointment of trustees. In the recent past, these two countries have moved toward allowing private institutions more autonomy and freedom. Other countries have imposed less strict supervision.

As in other parts of the world, private higher education is expanding throughout Asia, and countries that are moving toward a large private sector would be well advised to look at the experience in Asia for guidance. China has a dramatically growing private sector, with more than 500 private postsecondary institutions, most of which are neither accredited nor approved by the government. Vietnam and Cambodia also have rapidly growing private sectors, as do the central Asian nations that were formerly part of the Soviet Union . These countries face the considerable challenge of ensuring that the emerging private sector is effective, well managed, and serving national goals. Asia shows a variety of patterns of sponsorship, management, ownership, and state supervision.

Source: Philip Altbach, “The Private Sector in Asian Higher Education”. Center for International Higher Education, Boston College, International Higher Education, No. 29, Fall 2002

http://www.bc.edu/bc_org/avp/soe/cihe/newsletter/News29/text006.htm

Owing to the numerous development projects competing for government funds, it is no longer possible to cater adequately to the needs of the higher educational sector. There are drastic cuts in spending on public higher education. Salaries of university workers are hardly ever paid. A lack of basic infrastructure for teaching/learning activities, research and administration, and the low morale of teachers lead to poor academic quality. Existing universities do not have the capacity to admit the thousands of candidates qualified for university education. African governments can no longer provide scholarships for university students, neither can they guarantee employment for university graduates.

[…]

Given the background that governments can no longer be the purveyor of higher education, the great question is: who will fund higher education in Africa in the new millennium? Distance education and lifelong learning programs, virtual, open and internet universities which may provide some of the answers to the main question, are dependent on information technology which is not easily accessible to over half of African’s nearly 330 public universities. The reality of the situation is that some universities in Africa still rely on the manual typewriter for their daily administrative and academic operations, as ordinary computers and even telephones are not available. Electricity and water are considered a blessing whenever they are available. How can such universities, with the best of intentions, deliver their programs to their clients in an age of globalization?

Perhaps as a more practical and realistic response to the issue of who should bear responsibility for providing access to and the funding of higher education in Africa in the new millennium, private universities are springing up in most African countries. This is a new phenomenon which is considered a welcome development. In fact a recent study conducted by the AAU (July 2000), reveals among other things that there are about 70 of such universities in all the regions of Africa, with 20 in West Africa, 22 in East Africa, 11 in Southern Africa, 10 in North Africa and 7 in Central Africa. They comprise private denominational, private nondenominational, open, virtual and gender universities. Some of the arguments advanced by the Presidents of these institutions for establishing private universities are:

• To bridge the gap between the few educated Africans and the millions who need higher education.

• To provide new and specialized educational programs geared towards self-employment.

• To tackle the problem/reality of who pays for higher education in the new millennium.

• To assist African governments in providing an environment conducive for learning needs in the higher education enterprise.

• To respond to the global call for privatization, free market economy and individual ownership of establishments.

• To help governments respond to the pressure on access to higher education by providing diversity, innovation and independence in the higher education sector.

• To provide quality education which will enable the individual achieve his/her potential through the introduction of modern teaching systems and the effective use of information technology.

Apart from the reasons articulated above, some of the Vice-Chancellors of the private universities interviewed claim that the actual background to the establishment of private universities is in response to a call by the wealthy class to provide quality education (the type provided by universities in the North) for their children. Some others quote the parents as saying that the rampant/incessant closure of public universities due to strikes and student unrest disrupts their educational plans for their wards, hence their request for private universities where there will be better assurance of academic programming, planning and graduation calendars. There is also the problem of ethnic pressures which allow only a certain percentage of applicants from a particular ethnic origin to be admitted to a public university of the candidate’s choice, thereby limiting access. Only a few of the Vice-Chancellors attributed the establishment of private universities to the falling standards in public universities. In consequence, parents and their wards want alternative universities with international connections so that the certificates issued will be recognized abroad. Some Vice-Chancellors, however, contend that Africa is already backward and should see the establishment of private universities as a positive development and an opportunity to improve her backward situation. Taken together, these observations constitute the African rationale for taking a bold step towards increasing access to higher education.

Other international factors/concerns seem to favor this development:

• The trend all over the world today is investment in all sectors of the economy to enable market forces to have a free rein.

• The philosophy behind privatization is that it encourages competition, provision and protection of quality goods and services in a better managed and coordinated manner.

• The principle of freedom of education implies the coexistence of public and private education, as neither of them can at all times provide the necessary quality and quantity of education.

The drastic cuts in the funding of public universities and the attendant decline, neglect and poor quality which have characterized them over the years, can only be countered by private universities which will provide education to the great number of learners in a knowledge driven and knowledge-dependent world. In many parts of the world, private universities are known to be innovative, to seek alternative financing strategies, to develop effective management structures and to introduce demand-driven courses.

One of the arguments of the new universities is that, with the falling standards in public universities, it is better to establish new universities with fresh mandates and missions than to attempt to ‘patch a rotten system’. The Presidents of these private universities argue that transforming an old university into a new one, with a staff that is used to implementing programs in a certain way, may require a revolution in which many staff members do not wish to participate. Revolutions often have disastrous consequences. In addition, people most often promise to change their old behaviour, to embrace new doctrines or even burn revolutionary documents with their hands, but end up carrying the revolutionary spirit in their hearts. Private universities have therefore the philosophical, social and moral basis or mission to exist and to succeed in their new undertaking of providing access to higher education in Africa. To achieve this they certainly need support in:

• research and knowledge creation

• improving facilities in information and technology

• meeting the challenges of globalization and internationalization

• building partnerships with universities of the North

• staff development efforts

As stated in the introduction, the issue of private universities and their mission of increasing access to higher education is of particular interest to the Association of African Universities (AAU) for obvious reasons. The transformation going on in the higher education sub-sector can lead to competition, the improvement of quality, increased access, relevance of course offerings and encourage cooperation between African universities. As African economies decline, the higher education sub-sector suffers and so is unable to meet its objectives. Improved facilities for teaching/learning, research and salaries in the new universities have the capacity to check brain drain to the North or to the private sector where the payment is better. The industrialized nations in the North are rapidly expanding their internet use in all spheres of university life, while ordinary telephones and computers are regarded as luxuries in many African universities. The new universities can provide the new technologies needed to improve the quality of teaching and learning in the universities. If the Vice-Chancellors of private universities indeed run their universities using only students’ tuition fees, then governments need to be persuaded to establish student scholarship/loan schemes to enable university entrants to pay the fees, since they are all citizens of the same country regardless of whether they attend public or private universities. Otherwise, private universities may end up being for children of the wealthy, a situation which will further limit access. While encouraging strategic planning and reform initiatives in Africa’s public universities, the AAU would like to encourage our European partners to collaborate with selected private universities in Africa, so they can become model universities in their various regions and localities.

Source: Chris Nwamuo, “Increasing access to higher education in Africa: emerging issues”

http://www.eaie.org/pdf/F31art7.pdf

Developing countries are currently under great pressure to meet increased demand for higher education, and many are finding it hard to keep up. They are becoming increasingly reliant on fee-based education and private, for-profit providers. In this environment education becomes more narrowly focused on providing a skilled labor pool for the immediate needs of the economy. Market forces predominate and the public benefits of – and responsibilities for – higher education recede from view.

Certainly, competition within the higher education sector can lead to higher standards and to significant benefits for individual students. In many developing countries, however, markets do not function well and this leads to a serious misallocation of resources. Access, for example, is limited by income, excluding potentially able students and diluting the quality of the student body. Poor market information dilutes competition, allowing weak exploitative institutions – some of them foreign – to survive and even prosper, and lessening the chances of dynamic new entrants.

Even when markets work well and students receive a quality service, private institutions may still fail to serve the public interest. For-profit institutions must operate as businesses, facing the market test and trying to maximize the return on their investment. It may not make good financial sense to invest in public-interest functions, leading to underinvestment in certain subjects and types of higher education, even if these are important to the well being of society as a whole. The public sector thus retains a vital and, in our opinion, irreplaceable role in the higher education sector.

This role can take many forms. Governments can be direct providers of higher education; offer finance for its provision; or do both. They can develop legal and regulatory institutions to promote and shape the higher education system, as well as to regulate individual institutions – even when these are privately chartered and funded.

But governments do not have an open-ended mandate in this area. They must act efficiently and on the basis of good information, in order to demonstrate that their use of resources provides benefits to the public over and above what the private sector can supply. Whatever their policies, however, they must be able to demonstrate that they are using resources in a way that offers society benefits that the private sector cannot supply. The public interest argument cannot be a cover for public sector waste, inefficiency, and lack of vision.

Source: Task Force, Higher Education in Developing Countries. Peril and Promise, 200

http://www.tfhe.net/report/readreport.htm

Policy prescriptions, particularly from the World Bank, have argued against the expansion of higher education, and for the exclusive focus on primary education. The unquestionable acceptance of the above has led to the overall neglect of higher education. Many developing countries have showed apathy towards higher education, deliberately ignored it, reduced public investments in it, allowed laissez-faireism, and even adopted policies towards marketization of higher education. Market forces have become very active, but since the markets in developing countries are incomplete, and imperfect, the outcomes are also far from perfect, and in fact, in some cases, the market forces produced disastrous consequences.

In this context, some of the developments in the arena of higher education policies are worth noting. The chronological developments of the recent period […] narrate a story of a steady drift in the development of higher education. The 1986 World Bank policy paper, that has clearly recommended reallocation of public resources in favor of primary education and against higher education, has a tremendous effect on educational policies in developing countries. Second, a major positive outcome of the 1990 Jomtien conference on Education For All was that basic education received serious attention of the national governments and the international community; but at the same time this produced an undesirable effect on other levels of education. It was widely felt that basic education goals could be reached only if the public attention is diverted rather completely away from secondary and more particularly higher education. Thirdly, the 1994 World Bank paper, Higher Education: The Lessons of Experience, reiterated the same much more eloquently. A few major developments followed that however, did not influence much the public policies in higher education in developing countries. One was the international conference on higher education that was organized by UNESCO in 1998, after realizing that in the context of global EFA activities, higher education was getting neglected. The second one was a report prepared by the Task Force on Higher Education and Society (2000), whose members include, inter alia, staff members of both World Bank and UNESCO. Both the International Conference and the Task Force have highlighted the need to pay serious attention to higher education. These ones and the World Bank’s (2002) strategy paper on tertiary education argued in a sense a serious u-turn in the policies of the World Bank and of the governments that discouraged growth of higher education in developing countries. But they attracted little attention of the governments, which are engulfed in a ‘continuing education crisis’ and governments in developing countries continue to show apathy towards higher education, which is reflected in public sector disinvestment in higher education, and corresponding growth in private higher education.

Either higher education was ignored in the policy planning exercises of the governments and of the international organizations, or special measures were initiated to reduce the intensity of public efforts in higher education or both. Many policy and plan documents, and public discourses on education policy tend to pay at best, some lip service to higher education and to focus on preparation of plans for literacy and primary education. If at all the growing demand for higher education is recognized, it is assumed by the governments that such a demand can be met either by distance education programs or by private sector, in neither of which governments have to invest any substantial resources.

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Further, the economic reform policies that include stabilization and structural adjustment, introduced in almost all developing countries during the last quarter century, required a drastic cut in public expenditures across the board, including higher education. In fact, these policies set the tone for drastic reforms in higher education; and on the whole, higher education suffered severely (Tilak 2002). Public expenditure on higher education declined - in terms of relative priorities (proportion of GNP or of total government expenditure that is allocated to higher education), and/or in public expenditure on higher education in absolute terms in real prices (and sometimes even in nominal prices) - total as well as per student. Noticeable cuts could also be noted in several countries specifically in public expenditure on quality and equity related inputs in higher education (e.g., research, and scholarships). Recovery of costs of higher education from the students (in the form of high and even full cost-equivalent fees) has been an important strategy adopted in most countries, along with raising of resources from othe