Higher education is essential for countries for a lot of reasons. It helps the countries in achieving higher levels of development. The quality and efficiency of higher education are necessary to reach a high level of country’s human capital. Each country uses a different higher education financing model with a different success rate. While some countries mainly rely on private sector financing, while others utilise public sectors. The public sector’s contribution of to higher education financing varies significantly in each country. As a result of developments in the field of higher education, the balance between the private and public sectors contribution levels to higher education financing has changed. The current study discusses the progress of education in Asian countries along with the different higher education financing systems and analyzes the contribution of different sectors participating in higher education financing.
The increasing importance given to education in a country leads to contribute both the improvement of its economy and socio-cultural structure and to increase the quality of service which is provided to its citizens by the government. The more the quality and sufficiency of education service increase, the more the development of the countryupgrades. So, higher education is an essential phase of education. It has a significant role on the development of new generation. One of the positive effects of higher education service is the considerable contribution to the improvement of a country’s human capital. With the increase in number of students attending colleges, the state and national income level also increase. So, it can be said that higher education increases the welfare level of people. One of the major problemsfaced by higher education is about its financing, which changes with time. It is known that mainly public or private sector finances higher education. Since the last two decades, especially, the participation of public sector has reduced in the countries where liberalization is prevalent in the state policies. Therefore, student and household participation rates have increased in such countries and at the same time higher education has started to be privatized.
However, it can be said that public sector continues to be effective in many countries. This study examines how much public or private sector participates in financing higher education in Asian countries. This paper also focuses on the alternatives that are being tried out to raise more resources from higher education and feasibility of trying out some of these options for Asian countries.
Higher education faces financing constraints and challenging priorities. It is the need of the hour that governments analyses new approaches to finance quality higher education, such as private sector partnerships, giving public higher education institutions greater freedom and more responsibility for raising funds.
It is believed that higher education has more private benefits and thus should be financed by the direct beneficiaries rather by the public sector. This move of promoting market operations in the economic sector had its impact in the higher education sector too. A major share of expansion in higher education taking place in Asia today is through private sector. There are several reasons for this trend. The public universities produced a large number of university graduates in the subject of liberal arts but the market demanded graduates of an education programme related to practical, applicable knowledge and knowledge-based technologies. The demand was for skills that could be developed through short-duration courses which may not necessarily lead to a degree. Public institutions could not provide such graduates and private institutions were willing to start non-university institutions focusing on skills development.
In the case of technical and vocational education and training, public financing can cover only a share of the costs. A feasible solution involves shifting the role of skills training away from government to the private sector while strengthening the public sector’s role in regulating technical and vocational education and training.
The private higher education institutes are not free from receiving financial support from the government. Private higher education institutes in some countries such as India receive public funding. More than 75 per cent of private higher education institutions in India receive government funding to cover more than 90 per cent of the operational costs. These private institutions, in fact, operate like public institutions managed by private individuals and agents. In Japan, the government gives subsidies to private institutions based on the quota of admissions. The private higher education institutes need to admit the agreed number of students to get the government subsidy. Indonesia gives subsidies to appoint teachers with higher qualifications (such as a doctorate, etc.) and this helps private higher education institutes to hire more qualified academic staff. Hong Kong has a matching fund scheme where the government invests an equal amount for each dollar invested by the private donor. The government funding is for not-for-profit private higher education institutes.
Even before the Great Recession, state governments faced serious challenges in financing their systems of higher education — challenges that are even more evident now: (1) state structural budget deficits have not been addressed by political leaders; (2) Medicaid in particular is taking up a greater share of state budgets and crowding out funding for higher education; and (3) financial pressures on families for many goods and services exceed growth in income.
As economic growth slowed during the Great Recession, state revenues plummeted, resulting in large cuts to public services. While many states are now reinvesting modestly in higher education, it is unlikely that this funding will rebound to the levels of the late 1990s. State budget problems vary depending upon the nature of each state’s economy and demographic shifts in the state’s population, as well as the political capital needed to address budget challenges. But increasingly, the long-term imbalance between state revenues and state expenditures — referred to as structural budget deficits — has contributed to the volatility of state budgets since the 1980s. Economists define structural budget deficits as the “chronic inability of state revenues to grow in tandem with economic growth and the cost of government’’. Several colliding trends cause these structural deficits, including: the shift from a goods to services economy in which many, if not most, services are untaxed; the growth of untaxed internet sales (at the expense of brick-and-mortar stores charging sales taxes); and the erosion of corporate taxes as the result of the easy movement of corporate headquarters to countries with lower tax rates, combined with spending and expenditure limitations passed in many states.
State structural budget deficits can potentially harm all public services, but the impact on higher education has been especially damaging, triggering cuts in institutional appropriations and often in state programs for student financial aid. Because higher education is one of the few public services that can generate its own revenue, state leaders often acquiesce to institutional pleas for tuition increases during economic downturns. Rarely, if ever, does tuition then decline in the face of economic recovery (although this year several states have announced tuition freezes as the result of growing public pressure in response to years of increases).
Until the early 1990s, there was little political concern about structural budget deficits, since economic growth usually rebounded after short-lived recessions, masking longer-term problems. During the current decade, many state budget analysts and think tanks called attention to the serious threat of structural deficits in terms of the long-term fiscal health of states, and the ability of states to continue to provide public services — particularly higher education.
An analysis by the Rockefeller Institute predicted that between 2005-2013, every state would face a potential budget deficit based on expected revenues (status quo tax policies) and expected expenditures (status quo spending policies), with about 30 states facing deficits as large as 5 percent or more annually. Since this analysis, the Rockefeller Institute has refrained from updating projections of state structural budget deficits. The challenges are developing reliable structural deficit projections as a result of the ongoing reduction in federal outlay to states, increased demands for Medicaid, and a slow recovery in the housing market in many parts of the country. However, confirming the analysis of previous projections, the National Conference of State Legislatures shows that while state revenues for 2014 are gradually recovering from the large declines experienced during the Great Recession, the recovery is not sufficient to keep pace with the spending required by Medicaid costs, pensions and other state obligations. This perspective is reinforced in a Report of the State Budget Crisis Task Force, in which co-chairs Paul Volcker and Richard Ravitch point out: “The conclusion of the Task Force is unambiguous. The existing trajectory of state spending, taxation and administrative practice cannot be sustained. The basic problem is not cyclical. It is structural.”
Asian Development Bank (ADB) is also well-positioned to provide leadership in the education sector in Asia. It is committed to achieving a flourishing, comprehensive, strong, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. It supports its members and partners by providing loans, technical assistance, grants and equity investments to promote social and economic development. With over $14 billion in loans and grants to the education sector for more than 50 years, ADB has a long track record in supporting its developing member countries in achieving the goal of quality education for all.
ADB provides finance and advisory help to its developing countries for education services to handle key challenges such as increasing enrollment (access) improving education outcomes (quality and relevance) reducing education inequality (equity and inclusiveness) reducing costs (finance and cost-efficiency). ADB has supported the decentralization of basic education in Nepal, Pakistan, and Uzbekistan; the modernization of secondary education in Indonesia, Sri Lanka and Vietnam; higher education projects in the Lao People’s Democratic Republic; distance education in South Pacific countries; and Open University systems in Bangladesh.
OTHER SOURCES OF FINANCING
- External resources used for financing education:
- This assures that the monetary assets needed to cover current expenses required for carrying out a project or a teaching economic or social activity is available. The institutes can avail the funding from banks as short, medium or long term loans.
- Self-financing in education:
- This method is based on own resources included in various categories ofincome (tuition fees, income from rental of buildings or land, income from training courses conducted by theteaching staff for the employees of various companies or enterprises).
- International institutions – of which the World Bank is the most important, as it provides finance for various types of educational projects, particularly for lower levels of education.
- Foreign Governments – which are particularly important for financing specialized courses in higher education, viz., language courses and literature based on these languages. It also includes various types of scholarships offered by foreign governments to scholars in India.
- International Private Agencies (NGOs) – of which Ford Foundation, Rockfeller Foundation, etc., are very important. These private trusts provide various types of liberal educational grants.
Policy Shift from Grants to Loans
Even though grant dollars have recently developed, it shows the general policy diversion over time from a dependence on grants to a dependence on loans, to pay for postsecondary education, taking into consideration all grant aid (institutional, state and federal). These trends are particularly ambiguous for low-income students: evidence suggested that students those who belong to low-income strata are discouraged by tuition increases, as they are afraid to collect large amounts of debt.
Loans obviously play a vital role in financial planning for educational institution. However, little is known about what level of debt is appropriate given educational costs for students at different income levels attending different types of institutions. Most limitation is the number of students who begin postsecondary education and fail to complete but are still saddled with debt without the benefit of an educational credential that might lead to higher earnings.
CONCLUSION:
The paper shows that there is a general debate in favor of increasing investment and expanding access to good quality higher education. There is lesser agreement on how financing for expansion will be organized and shared between public and private sectors, between domestic and external agencies, and between households and government. The market orientation in higher education helps to organise resources for the development of higher education. To what extent market operations are going to be extended needs to be examined. The government needs to reconsider its role to suit the changed situation. The optimal situation would have been full state funding. The state needs to assume other roles that are equally important, even when it is not in a position to finance all higher education activities. It needs to be more effective in developing the rules for establishing institutions, the mechanisms to assure quality, and the regulations to assure equity. The state should assume more of a regulatory and facilitative role rather than just a funding one. The paper has attempted to analyse the effect of globalization on the demand for higher education and the trends in the globalization of higher education as reflected through the cross-border mobility of institutions, students and teachers. Private and cross-border education is the most growing segments of higher education. The general argument of the paper is that there is a need for a laid-out regulation and framework to allow multiple providers to operate. The unregulated growth of institutions, whether private or cross-border, will not help in the long term development of the countries
Leaving the education sector to markets may signify that the long-term development contributions of education to nation building might be lost. Markets can be relied on to raise efficiency. However, their role in enhancing equity is yet to be proven. Since education is one of an essential determinant of earning differentials, it can become a source of intergenerational economic and social inequality, unless well planned. Furthermore, leaving the sector to international markets could lead to a reduction in national influence on deciding and designing content and curriculum that could have an adverse effect on national concerns and development.
