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Monday, 17 July 2017 | MYT 12:00 AM

Financing for public higher education

BY the first week of September, another cohort of our children would have started their higher education studies at public universities and colleges.

Higher education is a big-ticket item in terms of the cost incurred in providing it. We may need to pay from as little as a couple of thousand to the hundreds of thousand ringgit.

The cost of higher education is related to basic amenities, services and the learning process. Infrastructure for classes and administration, accommodation and related activities such as sport and transport need to be paid for.

As for services, these include utilities, security and health. The most expensive item is the human resources required for the learning process.

The total cost depends on the bundle of facilities and services provided to students. This differs according to the content of the bundle and on their usage.

We pay less for consuming higher education at public institutions compared to private Institutions. The difference is very substantial. Having our children study engineering at public universities may cost RM2,000 per year for tuition. In a private university, it would cost at least 10 times more. This is because we are paying the full cost of education at private institutions while it is subsidised by the government for public universities.

In 2010, the government of Austria, Belgium, Denmark, Finland, Iceland and Sweden provided 90% of the financial requirements at system level, similar to that provided for Malaysia’s public universities.

Countries like Australia, Canada, Japan, the United Kingdom and United State provided less subsidy. Government grants contribute 25%, 34%, 36% and 46% in the UK, Japan, US and Australia respectively.

The level of subsidy differs according to the country’s policies on higher education and its tax structure. Many European countries view higher education as a public good and thus provide high subsidies through income from tax revenue.

On the other hand, in countries with low taxation rate and where the government believes that higher education largely benefits the consumers, students are expected to pay a bigger portion of the cost of higher education.

Many countries have moved beyond the elitist model where access to higher education is less than 15% of the university-going age cohort. Many countries, Malaysia included, are now implementing the mass model where access is between 15% and 50% of the cohort. A number of countries implement the universal model where access involves more than 50% of the cohort.

Initiatives to restructure the governance model and funding formula for higher education in Malay­sia started in early 90s.

Known then as the corporatisation of public universities, it was meant to inject corporate management practices in the governance of public universities. Parallel to this initiative, six Acts of Parliament were passed in 1996, including The National Council of Higher Educa­tion Act, 1996.

In 2010, audits were performed on public universities on their readiness to be given autonomy. Many public universities secured the status but their operations continue to be closely linked with the Government.

In 2008, Professor Morshidi Sirat and his research team analysed three scenarios for Malaysian universities. The creation of a commission of higher education was proposed. Public universities were expected to truly operate as corporatised entities based on corporate principles. The commission would serve primarily to consolidate the financing requirements system-wide.

But corporatisation entails decentralisation, flexibility for diverse consumers’ needs and ability of institutions to effectively fulfil the requirements in a speedier and more cost-effective manner.

The initiatives yielded many positive results. Three Malaysian public universities were recently listed in the top 300 QS World University Rankings 2016/2017, and more places are now available in the public higher education system.

However, the governance practices and financing formula remain similar to that in the early 90s. The financing formula reinforced the gap between the two sectors of higher education.

Authority of the public university is yet to be devolved and financing requirements are still decided in the same way as that of government departments.

Systemic changes are required to enhance the provision of higher education in Malaysia both qualitatively and quantitatively. There must be better understanding of financial needs and practices, and prevailing revenue streams of universities must be accurately identified.

As observed in the higher education systems of developed countries, revenue streams from investment, business activities and endowment are limited. Public universities in the US secured only 0.8% of their revenue from endowment income and 5.1% from private gifts, grants and contract for the financial year 2000-2001. Tuition-related revenue still made up the lion’s share of the revenue stream. In the US, the share of government grants in the revenue of public institutions gradually changed from 62.2% in 1980-1981 to 51.8% in 2000-2001.

Malaysian public universities must change in line with current imperatives and the needs to meet nascent demands of higher education. Also required are changes at the system level, such as the structure and functions currently associated with the Higher Education Ministry.

Flexibility, speed, efficiency and effectiveness are the required attributes for the Malaysian higher education system. These could be achieved through high-value creation processes and deployment of appropriate technologies.

The net result would be an enhanced system that’s able to meet the diverse, current and future needs of students, employers and the country.


Universiti Teknikal Malaysia Melaka