Key Challenges for the International Higher Education

Sector

ISANA Annual New Zealand Conference 2009ISANA Annual New Zealand Conference 2009

Professor Nigel HealeyProfessor Nigel Healey

University of CanterburyUniversity of Canterbury

OverviewOverview

Where have we come from? – a brief history of the international higher education sector

Where are we now? – the implications of the GFC

Where are we headed? – the outlook for the international higher education sector

The coming challenges for New Zealand universities

Where have we come from?Where have we come from?

Source: OECD Education at a glance, 2008

Long term growth in the number of students enrolled outside their country of citizenship

19750.6 M

19800.8 M

19850.9 M

19901.2 M

19951.3 M

2000 1.9 M

2006 2.9 M

Where have we come from - demand vs supplyWhere have we come from - demand vs supply

Looking backwards from 2009 – a golden era of growth

The ‘perfect storm’: rapid growth in the demand for international higher

education from developing countries

and

supply-side response from higher education providers in developed countries – especially the Main English-Speaking Destination Countries (MESDCs)

Where have we come from - deWhere have we come from - demandmand

Drivers of demand for higher education in developing countries are: per capita GDP growth

income distribution (‘size of middle class’)

knowledge economy

population demographics

Domestic higher education sector expansion is constrained…

…so unsatisfied demand by those with the ability to pay “spills over” into universities in the developed world

Rapid GDP growth fuels both demand for higher education and the ability to pay

WhWhere have we come from – demand and per ere have we come from – demand and per capita GDPcapita GDP

Source: Price Coopers Waterhouse

Where have we come from – demand and Where have we come from – demand and population pyramidspopulation pyramids

Where have we come fromWhere have we come from – s – supply (1)upply (1)

Why the supply-side response? Most universities publicly owned or funded; private universities

mostly not-for-profit

Higher education is heavily regulated and central part of government policy

Traditional view of higher education: higher education = a ‘public’ (technically ‘merit’) good

therefore higher education historically publicly subsidised, tuition free in many countries

foreign students - geo-political/development motives

Problem: higher education is a ‘superior good’, participation rates have increased from 5% in 1960 to 50% in OECD today

Massification challenges traditional view: private rate of return so high, no practical need for public subsidies

public subsidies lead to regressive distribution of income

governments have had to reduce real value of public subsidies as participation has increased

UK, Australia and UK first movers in introduction of tuition fees but domestic fees still regulated, even though public subsidies

inadequate

fees for international student deregulated first

differential incentive to recruit international students

Government policy has encouraged recruitment of international students to cross-subsidise research and domestic students

Where have we come from – supply (2)Where have we come from – supply (2)

Where have we come from – the big playersWhere have we come from – the big players

Student mobility in tertiary education (2006)

0

2

4

6

8

10

12

14

16

18

20%

Source: OECD Education at a glance, 2008

Riding the perfect storm – NZ higher education Riding the perfect storm – NZ higher education in 2005in 2005

International(non-resident)

Foreign(non-citizen)

Australia 17.3% 20.6%

New Zealand 17.0% 28.9%

UK 13.9% 17.3%

Switzerland 13.2% 18.4%

France 10.8% -

Germany - 11.5%

USA 3.4% -

OECD average 6.7% 7.6%

Source: OECD Education at a Glance 2007

Riding the perfect storm – increase in Riding the perfect storm – increase in international enrolments to 2005 (2000 = 100)international enrolments to 2005 (2000 = 100)

0200400600800

1000

Australia NZ UK

Switzerland

France

Germany

USAOECD

Source: OECD Education at a Glance 2007

New structured credit products

Movement to safe liquid assets

US housing downturn

De-leveraging

Initial Trigger

Pre-Conditions

Impacts

Sub-prime mortgage losses

Uncertainty about extent and location of risk

Booming credit markets

Where are we now – the globalWhere are we now – the global financial crisis financial crisis

Factors influencing demand to study overseasFactors influencing demand to study overseas

Cost of study abroad

Ability to pay for tuition and living costs from savings

by borrowing

by students working in host country

part-time while studying

full-time on graduation

Willingness to pay for tuition and living costs Uncertainty

Public security racism exacerbated by recession

Exchange rates: an important driver of NZ Exchange rates: an important driver of NZ enrolmentsenrolments

Source: Ministry of Education, RBNZ

2009

Exchange rates: low end courses more price Exchange rates: low end courses more price sensitive in NZsensitive in NZ

Source: Ministry of Education, RBNZ calculations

Where are we now – facWhere are we now – facining a bumpy rideg a bumpy ride

Cost of study abroad

Ability to pay from savings

Ability to pay by borrowing

Ability to pay – jobs in host country

Ability to pay – jobs on graduation

Willingness to pay – uncertainty

Public security

Where are we headedWhere are we headed – the IDP vision (1) – the IDP vision (1)

0

50

100

150

200

250

300

2000 2005 2010 2015 2020 2025

Mil

lio

ns

Forecast Global Demand for Higher Education

Forecast Global Demand for International Higher Education

0

1

2

3

4

5

6

7

8

2000 2005 2010 2015 2020 2025

Mil

lio

ns

Where are we headedWhere are we headed – the IDP vision (2) – the IDP vision (2)

Where are we headed – demandWhere are we headed – demand

Developments on the demand side Rapid expansion of higher education sector in developing

countries

Projects 211, 985, 111 in China

Private sector providers in Asia, especially India

New technologies and on-line learning

Growing consumer sophistication (QS-THES/Jiao Tong)

Growth in demand for international higher education from spillover may slow

Source markets likely to shift from undergraduate to postgraduate

Chinese enrolment rates (%)Chinese enrolment rates (%)

0

20

40

60

80

100

120

1990 1995 2000 2005 2006

Primary

Junior Secondary

Senior Secondary

Tertiary

Source: China Education Yearbooks

Where are we headed - supplyWhere are we headed - supply

Fiscal pressure will inevitably lead to deregulation of domestic fees (with means-tested student support) in first movers (UK, Australia, NZ) reduces attractiveness of international students

Late movers – Continental Europe and Asia – forced to introduce domestic fees, charge full-cost international fees Bologna and spread of English as a medium of instruction

New competitors in export education market, including many former source countries

Where are we headed – the future shape of Where are we headed – the future shape of international higher educationinternational higher education

US higher education as a model for global higher education

6,000 colleges and universities offering bachelors’ degrees Only state universities and major private schools offer

masters degrees

Only elite schools offer PhDs

Only rich and talented (scholarships) mobile at undergraduate level

Mobility increases at masters and PhD level

Model for the future at global level?

The challenges for New Zealand universities – The challenges for New Zealand universities – the starting pointthe starting point

Internationalisation has been rapid and opportunistic Rational response to unprecedented demand growth as a result of

public policy

Skewed to major growth markets – especially China, Korea

Unusually large role of key players Role of state schools as feeders to universities

Role of agents in bringing international students to NZ schools

Unplanned and (initially) unwilled expansion of numbers in universities International offices not geared up to managing, and later

sustaining, international numbers

Resistance to institutional adaptation to support internationalisation

International student visas by sectorInternational student visas by sector

0

5000

10000

15000

20000

25000

2000 2001 2002 2003 2004 2005 2006 2007

UniversityPolytechPTESchool

Source: Education New Zealand

The China effect: international visas issued to The China effect: international visas issued to ChinaChina

0

2000

4000

6000

8000

10000

12000

2000 2001 2002 2003 2004 2005 2006 2007

UniversityPolytechPTESchool

Source: Education New Zealand

Chinese visas as % of totalChinese visas as % of total

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007

UniversityPolytechPTESchool

Source: Education New Zealand

Chinese students as % international tertiary Chinese students as % international tertiary enrolments, 2005enrolments, 2005

0

10

20

30

40

50

60

Australia NZ UK US

Source: OECD Education at a Glance 2007

The challenges for New Zealand universitiesThe challenges for New Zealand universities

Good news: We have excellent, internationally connected and

benchmarked universities

5 of 8 (62.5%) of NZ universities in THE Top 500

Universities multinational, multicultural environments

Bad news: Global faculty shortage – salaries falling behind

Rising oil prices, environmental awareness may erode multinational staff and student base

The Bologna effect

Asian universities upgrading capabilities very fast

The future for successful internationalisation The future for successful internationalisation of New Zealand universitiesof New Zealand universities

Understand our markets and the changing needs Understand our competitors Build long-term relationships built on mutual benefit, not

quick one-way gain Our differential advantage must be as a research-led,

postgraduate player

Celebrate and embrace internationalism NZ small trading economy, need to be internationally

connected to knowledge economy Integrate international students – networks of the future Use student exchange to create genuinely multinational

learning environment Ensure curriculum is internationally benchmarked

ConclusionsConclusions

International higher education has been driven by a perfect storm of demand and supply

The global financial crisis has stalled growth

Demand and supply factors are realigning to make the future different from the past

New Zealand universities has stumbled into internationalisation – surviving in tomorrow’s global market requires vision and commitment