July 2006

A Tectonic Shift in Global Higher Education

John Daniel, Asha Kanwar and Stamenka Uvalic-Trumbic

From Change July/August 2006

Europeans lament that their universities are lagging behind those in the United States, while Americans worry that their academic leadership is threatened by complacency. Both groups, however, are missing the tectonic shift that will transform the map of higher education worldwide—the growth of universities in the developing world. Spreading connectivity, allied with the massive creation of educational resources based on open-source technology, may soon allow the radical reduction in costs necessary for higher education to serve the four billion people at the bottom of the world's economic pyramid.

For two decades, worldwide enrollment growth in higher education has exceeded the most optimistic forecasts. A milestone of 100 million enrollments was passed some years ago, and an earlier forecast of 120 million students by 2020 may be reached by 2010. If anything, enrollment growth is accelerating as more governments see the rapid expansion of higher education as a key element in their transition from developing to developed countries.

That is the situation in China, where enrollments doubled between 2000 and 2003. With 16 million students enrolled by 2005, China had overtaken the United States as the world's largest higher education system. Malaysia also illustrates the trend. It plans to increase enrollments in higher education by 166 percent in the next four years, from 600,000 to 1.6 million, to achieve college participation rates similar to those of developed nations. Mauritius has recently passed legislation to create a third university for its 1.2 million people, having added its second only five years ago.

Growth has been rapid in other developing countries as well, although those nations usually start from a very low base, which creates a massive disparity in the higher-education participation rates of students aged 18 to 23 (known as Age Participation Rates or APRs) across the world. Participation rates of around 50 percent now are the norm in developed countries, whereas in numerous countries in South Asia and Sub-Saharan Africa they languish below 10 percent.

Although mainly explained by lack of resources, the legacy of low APRs in poorer countries also reflects the attitudes of development agencies. The World Bank, for instance, has until recently discouraged countries from investing in higher education; instead it has urged them to focus their efforts on basic education, which the bank saw as having greater development benefits. Today such agencies generally acknowledge that an education system is an integrated whole, requiring attention at all levels.

This creates a major catch-up challenge for higher education in developing countries, where low college-participation rates are compounded by demographic profiles showing the median ages of their populations to be in the low twenties or even younger. The scale of change in higher education in the coming decades can be shown simply by applying the modest target of a 35 percent participation rate to the four billion people in the world's poorest countries. This would yield 150 million additional students, far more than today's global total. Undoubtedly, tens of millions of young adults in the third world will be seeking postsecondary education in the coming years.

How can developing nations respond to this massive demand? Will the patterns of providing higher education that have worked for industrialized countries suffice, or are new approaches needed? Since developing countries will soon account for the majority of enrollments in higher education worldwide, their answers to this question will effectively define the global profile of higher education in the 21st century.

By necessity, those nations are likely to seek a much greater role for private, for-profit institutions than is the case in the developed world. We predict that, seeing a massive market opening, for-profit institutions in the developed world will expand their cross-border provision of educational services, especially distance and e-learning. Establishing quality assurance mechanisms for such rapid expansion thus will be a major challenge for governments.

Public Good, Private Provision
Higher education is a private good, with direct benefits to those who participate, but it is also a public good. Having a fire brigade at hand if your house catches fire is a more obviously useful public service than having accessible higher education, but the proportion of people with higher education correlates well with a society's state of economic and civic development.

By tradition, governments control public goods like emergency services and defense in order to extend their benefits to all citizens. Private militias are a sure indicator of the breakdown of civic order. But how far should the principle of public control apply to education? We contend that practice, principle, and pragmatism all argue against our treating higher education as a public monopoly.

Past practice reveals that private bodies, notably churches and foundations, were providing higher education long before governments took an interest in doing so. The purpose of state involvement, when it came, was to make higher education truly a public good by widening access to it.

The challenge from principle concerns the proper role of government and holds that, apart from services like defense, government is most effective when it monitors and regulates the provision of public services by others, rather than controlling those services directly.

Demography and demand present pragmatic challenges. We mentioned the burgeoning numbers of young adults in the developing world and argued that an increasing proportion of them will want education at all levels. But in this era of lifelong learning, there is no way that governments can provide, at no cost, all the education that people will need throughout life. Governments have to focus their contributions.

Some years ago the World Bank briefly promoted the idea of having students pay fees for private education at the primary level, but it now believes that the goal of universal primary education will only be achieved if education at that level is free and compulsory. Yet no government has the resources to pay for basic education for everyone from the public purse and also fund all higher education as well. So a choice must be made between inadequate provision of higher education by a public-sector monopoly or meeting the demand by a combination of public and private for-profit institutions. This is a political dilemma for governments in many developing countries, which have relied solely on the first option but now realize that to do so is a serious drag on national development.

Comparisons are often made between pairs of countries such as South Korea and Ghana or Malaysia and Zambia, which had similar levels of gross national product 40 years ago, but which have developed very differently since then. There are, of course, numerous reasons why South Korea and Malaysia have developed more than Ghana and Zambia. However, part of the explanation is also that the Asian pair promoted the rapid development of higher education sectors with strong private-sector participation, while the African countries relied only on the state sector and kept tuition free.

How can governments in developing countries best take advantage of for-profit higher education? The answer boils down to achieving a balance between accessibility for students and assurance of quality, along with returns for the investor in for-profit institutions.

The Price of Higher Education
The heart of the issue is fees. In the United States, where all students in higher education pay tuition and fees, it is hard to appreciate what a hot issue they are in the rest of the world—and not only in the developing world. In the United Kingdom, the political scars that Britain's Prime Minister Tony Blair carries for raising university fees are as deep as those he earned by taking Britain into the war in Iraq.

Fees are a special problem for those countries that made higher education free—that is, totally subsidized by the state—in the days when only a tiny proportion of the population was expected to go to university. At that time, entry to higher education was highly competitive, but many citizens believed—and still believe—that the combination of competitive admissions and free tuition would produce equitable participation in higher education from all socio-economic groups. Abundant research now shows that this is simply not true. The socio-economic profile of students in countries that charge fees while providing scholarships and loans for poorer students is more broadly based than in those that do not charge fees. This is a very important finding, and one that governments are only gradually finding the courage to act on.

Take the case of Mauritius. As is common in many developing countries, the University of Mauritius charges no fees. However, the government of Mauritius has pulled off the remarkable coup of starting a second public university, the University of Technology of Mauritius, where fees are charged. None of the island's volcanoes erupted in protest, which means that the precedent of charging fees is set for future new universities.

This kind of move is important, because what the public sector does in relation to fees clearly constrains the for-profit private sector. Having a free public sector alongside an expensive for-profit private sector does not create an effective higher education system. As countries gradually introduce fees in the public sector, either because of a conviction that it is more socially equitable or because there is no financial alternative, the private for-profit sector finds itself on a more level playing field. This gives the for-profit institutions much greater latitude to set fees, which makes them more attractive as investments.

This in turn makes it easier for the private sector to build arrangements for need-based scholarships and loans into their fee structures. Obviously it takes time to build up enough scholarship funds for admissions policies to be truly blind to student or parental wealth, but if private for-profit institutions are to play a major role in the expansion of higher education, they must be able to attract a diverse student body. Only then can they truly claim that private investment in higher education is making its contribution to widening access and thus contributing to the public good.

In widening access, private institutions also foster good relations with governments and the public higher education sector, thereby gradually reducing the skepticism of many governments about expanding the private sector. The net result will be that within a decade or two, private, for-profit provision, already estimated at $350 billion worldwide, is likely to account for a larger proportion of higher education in the developing countries than it now does in the industrialized world.

How will the private for-profit sector in the developed world provide higher education to the developing nations? Much of it will likely follow traditional patterns of classroom teaching on locally owned campuses, but two other related forms of provision will have a much higher profile: cross-border offerings and distance learning.

Cross-Border Higher Education
The United Nations Educational, Scientific, and Cultural Organization (UNESCO) and the Organization for Economic Cooperation and Development (OECD), in their Guidelines for Quality Provision in Cross-Border Higher Education, describe cross-border higher education as "higher education that takes place when students follow a course or programme of study that has been produced, and is continuing to be maintained, in a country different from the one in which they are residing. Cross-border higher education may include higher education by private and/or for-profit providers.

Those providers include not just conventional or open universities but also media companies, multinational companies, corporate universities, networks of universities, professional organizations, and IT companies. Nearly all cross-border higher education is effectively for-profit in the receiving country. Even when the originating institution is a public institution in its home country, it must make "excess revenue"—or profit—on its operations in other countries in order to sustain those operations. Few governments want to subsidize another nation's students when they are having trouble meeting the educational needs of their own citizens.

The term 'cross-border' implies an acceptance of national borders, which in turn implies recognition of the roles and responsibilities of national governments within their jurisdictions, not simply for deciding whom to let into their country but also for overseeing the national higher education system.

National sovereignty over higher education has been reinforced by the General Agreement on Trade in Services (GATS) of the World Trade Organization. The agreement recognizes four modes of supply. First there is consumption abroad, where students travel to another country to study. Second, there is the presence of natural persons, which in academic terms means visiting scholars or teachers. Here, however, we are more interested in the other two forms of supply, defined by the agreement as cross-border supply and commercial presence, but better known as distance education and the establishment of branch campuses. Those are the forms of cross-border higher education of most interest to private for-profit providers.

Open and distance education are good ways of reaching out to large numbers of students. A good example is India, which accounts for a quarter of the developing world's population and has the third largest higher education system in the world. Today, 23 percent of all higher education enrollments in India are in distance education–specifically in 13 national and state open universities and 106 institutions, mostly public, that teach both on campus and by correspondence. The government's target is that by 2010, 40 percent of all higher education participation will take place using distance education.

Even so, India can only provide access to seven percent of its 18-to-23 age group, and it will not hit its target of 14 million students, or 10 percent participation in higher education, by the planned date of 2007-8 using current strategies. For India to catch up with its neighbors Thailand and Singapore, which have participation rates of 20 percent and 34 percent respectively, it has to find additional cost-effective mechanisms for expanding access.

Private cross-border provision must be part of the answer. Privately managed institutions, mostly locally owned, already account for over 75 percent of professional education there. Meanwhile, the number of cross-border providers in India increased from 27 in 2000 to 114 in 2004. But in light of India's potential student numbers, those providers' role is still negligible. Moreover, their quality is problematic: a third of the institutions are not recognized or accredited in their country of origin, and an equal proportion of their Indian collaborators are not part of the formal higher education system either.

Even when the foreign providers are universities, they are not in the premier league and have mediocre reputations in their own countries. Neither branch campuses nor franchise agreements have had much success, with the exceptions of 61 arrangements that allow students to go to the source country in the final year and stay on for employment purposes.

But the additional market of five million students should be tempting for major providers. We contend that in order to make a significant contribution here and in other countries of the developing world, they must address three challenges.

Affordability, Accessibility, and Appropriateness
Affordability is a major challenge. India, like many developing countries, is trying to transform higher education from an elite to a mass system aimed at the needs of a vibrant democracy. To succeed, cross-border providers must devise a business model that can take them beyond the elite to reach the masses, in order to realize the cost efficiencies associated with large numbers of students, as well as to address the nation's educational goals.

A series of developments in the ways that technology is used holds the promise of making the dramatic reduction in educational costs that is required for a radical widening of access.

New methods of education have always attracted private providers. When Britain introduced the penny post in 1840, Isaac Pitman almost immediately started offering a correspondence course in shorthand, and private providers subsequently dominated the correspondence education industry. The next wave of distance education, led by the large multi-media open universities, was dominated by the public sector. In addition to widening access dramatically in some countries, these institutions also showed that distance learning can be of higher quality, as well as less expensive, than conventional higher education because it has to be developed and delivered in a much more systematic way.

However, the current wave of distance learning, often called eLearning because of its extensive online components, seems once again to have a special appeal to the private sector. This is partly because it has a cost structure in which a higher upfront investment is rewarded by lower marginal costs when volume is achieved. For-profit institutions' access to capital markets makes them uniquely suited to make those investments.

Moreover, providers wishing to introduce eLearning now have available a range of open-source learning-management systems to support their operations. Even more importantly, a growing number of teachers and institutions around the world are creating and sharing learning materials and courses, known as open educational resources, for use on these platforms. This combination of expanding connectivity and the growing reservoir of open educational resources is potentially revolutionary.

But accessibility is not just a matter of cost. Higher education also requires access to the technology and allied infrastructure through which education is delivered. Internet connectivity is particularly important, but the proportion of people online is only four percent in India, one percent in Africa (half of them in South Africa), and 0.1 percent in Bangladesh. But the currently limited use of the Internet in Sub-Saharan Africa and South Asia can change quickly. Communication links are already beginning to alter the way that poor villages in the developing world function; as bandwidth costs go down, increased Internet connectivity will accelerate that trend.

Cross-border providers often fail the next test—that of appropriateness. Their subject offerings are limited, and liberal education is often a casualty of the demand for more market-driven programs such as business and information technology. Students from a variety of cultures and linguistic backgrounds follow the curriculum of the country that has developed the program, which may incorporate no recognition of social, cultural, and ethnic differences. Cross-border programs will become fully relevant only when they respond to the receiving country's priorities, which requires strong partnerships between the overseas provider and local institutions—not just in logistics, but also and more importantly in determining curricular content, its relevance, and the methods of delivery.

The small role that cross-border education now plays in the developing world will not prevent its playing a major one in the future. But to do so it must cut its costs and become more locally accessible and relevant. Emerging technologies could allow the for-profit private sector, in particular, to overcome these challenges.

Cross-border providers should be inspired by the findings of C.K. Prahalad in his book The Fortune at the Bottom of the Pyramid. Addressing himself to multi-national corporations, he points out that there are four billion poor people in the world who aspire to better lives. By making radical innovations in technology and business models and by creating highly distributed, small-scale operations married to world-scale capabilities, some companies are beginning to serve this huge market profitably. In doing so, they are "helping people improve their lives by producing and distributing products and services in culturally sensitive, environmentally sustainable and economically profitable ways."

What about quality?
We have argued that within two decades the global higher education enterprise could more than double in size, be predominantly based in what we today call developing countries, and present a greater diversity of both providers and means of delivery. The private for-profit sector will have a much larger role, a higher proportion of students will be engaged in distance learning, and higher education will increasingly operate as a borderless community.

How will higher-education leaders ensure the quality of such a vast enterprise? Specifically, how are governments to protect their citizens from fraudulent providers and bogus qualifications, especially when they emanate from another country? Online learning is even more attractive to unscrupulous operators than correspondence education because they can close down a website more quickly than a post-office box. Cross-border higher education makes students particularly vulnerable to scams. Can an international ethic of integrity and quality assurance be created?

As higher education expands, governments' role will increasingly be to monitor and regulate it, rather than to provide it. Many developing countries currently lack quality-assurance mechanisms, and where they do exist, as in India, they are not always properly equipped to cope with expanding types of educational providers. However, governments in most developing countries have robust views about the need for quality assurance and accreditation. Officials realize that even if it happens slowly, GATS has created an inexorable trend toward increasing the number of cross-border educational suppliers. Governments will best respond to this trend by building strong frameworks for regulation, quality assurance, and accreditation that cover all forms of higher education within their borders.

The challenge for UNESCO, the Commonwealth of Learning, and other intergovernmental organizations is to support national and regional and developments effectively. This is the context of recent UNESCO/OECD collaboration on Guidelines for Quality Provision in Cross- Border Higher Education. The guidelines arose from UNESCO's on-going work of reviewing the regional conventions on the recognition of traditional qualifications to adapt them to new realities. The guidelines address six stakeholder groups: governments, higher education institutions/providers, student bodies, quality assurance and accreditation groups, academic-recognition organizations, and professional bodies.

The guidelines recognize the importance of national authority and the diversity of higher education systems. They present higher education as a vital means for expressing a country's linguistic and cultural diversity, nurturing its economic development, and strengthening social cohesion. The effectiveness of the guidelines, though, largely depends on strengthening the capacity of national systems to assure the quality of higher education.

Conclusion
John Donne warned his parishioners "never send to know for whom the bell tolls; it tolls for thee." Does the coming tectonic shift mean that American academic hegemony is doomed? In light of the developments, current and future, that we have described in the developing world, what will be the role of American higher education? What should it do?

Its leaders should start by thinking ahead. We usually overestimate the short-term impact of tectonic changes like this one, while underestimating their long-term effects. In the coming decades, higher education will gradually expand significantly in countries of the global south where the large majority of people under 25 live. American colleges and universities —public and private, non-profit and for-profit—must treat these countries as partners.

Second, such partnerships will be forged in the context of a growing trend towards south-south collaboration, such as the activities of Malaysia and India in the Gulf States, for example. Sustaining more expensive north-south, cross-border higher education will require providers to develop a competitive edge. Costs will be critical. Only by targeting the massive numbers of people at bottom of the pyramid, not just the elites, will economies of scale be achieved.

Third, making open educational resources available to the developing world, as the Massachusetts Institute of Technology has done, will accelerate capacity development and create links with local institutions, yielding academic benefits.

Fourth, the growing availability of telephone and Internet connections is starting to unite the world's rich and poor and to transform the digital divide into a digital dividend.

As for hegemony, American colleges and universities might contemplate the following scenario. In previous eras, the use of technology in developing countries usually resulted in a transfer of wealth to the developed world: The rich got richer and the poor got poorer. Those days could soon be over. Because of their lower costs, developing countries may gradually reverse the direction of cross-border relationships so that their providers serve students in richer countries.

If this occurs, as more economic activity shifts away from the United States and into the emerging economies, American universities might find that their most important role is to shape those developments by exporting their research strengths and training many of the millions of new Ph.D.s required by a radically expanded global higher education enterprise.

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