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Financial management of universities in developing countries
Higher Education Policy 13 (2000) 125±130 www.elsevier.com/locate/highedpol
Financial management of universities in developing countries T.K. Gill*, S.S. Gill Department of Extension Education, Punjab Agricultural University, Ludhiana, Punjab, India
This paper focuses on ways to overcome the ®nancial crisis Ð raising of tuition fee, privatization of higher education, reducing the intake capacities of the system, attracting foreign students, compensation to universities by employers of the university graduates, linkages between industries and universities, universities to act like ®rms, compensation for brain-drain and change in attitude of people, students and employers. These strategies can enable the institution to face resource constraints. However the main responsibility lies with the government. Education, especially the higher education is an indispensable instrument for the development and transformation of a society. Though it was not necessary for survival in an agrarian society, but the man without education is lost in the modern developing and industrial society. Education was considered as an ornament in the agricultural civilization; a tool for economic development in the industrial era and has become today all pervasive resource, a resource, that can ®nd substitute for all other resources, but has not substitute for itself (Swamy, 1997). A nation's progress will stop if education fails to respond adequately to the emerging needs and challenges of a developing society. Universities are mainly responsible for providing higher education to society. Their output re¯ects the quality of human resource development programmes. But these institutions of higher learning face ®nancial constraints. A university does not exist for itself or even for science. It only exists for society or more especially because of its international responsibility for a given society, that is, for those who live in the region in which it is located (Thorens, 1996). There is wide recognition that universities' resource position and the quality of their functioning have reached the lowest ebb (Panchamukhi, 1996). The economic crisis facing * Corresponding author. Fax: +91-161-1400945 0952-8733/00/$20.00 7 2000 International Association of Universities. Published by Elsevier Science Ltd. All rights reserved. PII: S 0 9 5 2 - 8 7 3 3 ( 9 9 ) 0 0 0 1 8 - 5
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developing countries poses grave short- and long-term problems for education and human resource development (Mayor & Draper, 1990). State governments, central governments and other ®nancing agencies are imposing continuous cuts and have asked universities to raise their own resources. Qualitative and quantitative levels cannot be maintained during a state of ®nancial decline. Fiscal constraints on the universities threaten the national intelligence, academic future and also the competitive edge in the post-industrial world of the 21st century. UNESCO maintains that the correlation between investment in higher education and the level of social, economic and cultural development of a country is well established (Tunnermann, 1996). 1. Expansion of higher education and resources In developing countries, higher education has been the fastest growing education segment in the past twenty years, fostered by a high level of state subsidies, gratuity of services and until 1980, employment guarantee in some countries (Tunnermann, 1996). Early in the post-independence era, India had only 27 universities, their number has now increased to more than 200. But the share of universities in the total budget of the educational sector plan is decreasing constantly. It was 9% in the ®rst Five Year Plan, rose to 24% in Plan Holiday and 25% in fourth Five Year Plan, than sank to 22% in ®fth Five Year Plan, 19% in sixth plan and 12% in seventh plan. This approach of government was ill-founded, that is, ®nancing primary education in full whilst limiting that of higher education (Panchamukhi, 1996). UNESCO indicates that average per student expense on higher education in absolute terms is ten times lower in developing countries than in the industrialised world (Tunnermann, 1996). Some of the possible ways to overcome ®nancial stringency in universities are discussed here after. 2. Raising of tuition fee Twenty ®ve per cent of the total expenditure on higher education is met by the tuition fees in the universities in UK. It may account for even less than 5% of total expenditure in India (Rao, 1996). Panchamukhi (1996) suggested that universities may be allowed to adjust their own fee rates without the interference of vested interests and political pressures. But the raising of tuition fees to a level where the universities can maintain themselves will also take higher education beyond the reach of poor sections of society. Estimated cost of one IIT Engineering graduate is about Rs 400.000. In Arab countries, tuition fees became a great barrier to the democratization of higher education and encouraged the appearance of elitism where economic and ®nancial factors play an important role in screening students for higher education (Bubtana, 1992). In India, as directed
T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
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by government, universities are raising admission fees, tuition fees, cost of prospectus etc. But this is not without social consequences i.e. disparity in access to higher education between the poor and rich will increase. For raising tuition fees, a mechanism involving scholarships and soft loans for deserving students can be of use but this requires substantial resources. 3. Privatization of higher education Higher education has expanded drastically to meet growing social demands. The cost is also continuously increasing. Maintenance of acceptable level of quality is greatly aected as higher education in developing countries is mainly a public enterprise supported by government money. Privatization of higher education can be another alternative to maintain quality and to ensure ecient use of resources. It is a general observation that private enterprises are pro®table and the level of quality is better than public sector ®rms. There has been a dramatic increase in private higher education in Latin America and opportunities for higher education are comparable to those of many industrialized countries. The enrollment in universities has also increased ten times between 1960 and 1985. However, governmental expenditure has not increased at the same rate and has brought about a reduction on quality teaching at public universities (Tunnermann, 1996). In some countries like Sudan, Jordan, United Arab Emirates and Iraq development of private higher education institutions and their eective contribution to solve the expected ®nancial crisis has not yet been tested and in some, partial governmental ®nancing is still needed (Bubtana, 1992). 4. Reducing intake capacities of the system To reduce the expenditure, the ¯ow of funds to universities cannot be restricted, unless ¯ow of enrollment is similarly restricted. Reducing the intake capacities of institutions in Jordan and Sudan had certain negative consequences (Bubtana, 1992). It would be unwise and certainly unethical to promote enrollment at the lower levels of education, to close options for the completers of lower levels and to deny them university education. The aspirations of people for higher learning cannot be scuttled (Panchamukhi, 1996). Strict screening procedure should be adopted for admission. Only brilliant candidates having suitable aptitude for higher learning should be admitted rather than producing ill quali®ed graduates. The mediocre should be counselled to take up vocational courses. 5. Attracting foreign students India has achieved the status of fourth largest reservoir of scienti®c and technical personnel (Panchamukhi, 1996). Higher education imparted can compete
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T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
in the global market place of ideas. Thus India can be a major exporter of brainpower. Foreign students can pay higher or even the full cost of instruction by comparison with the local students. So attracting foreign students to the universities will add to ®nancial resources. In some Indian universities, this strategy has already been implemented. Certain places are reserved for Non Resident Indians. Such students pay higher fee (in dollars) than their local counterparts. However, admission requirements should not be relaxed. Merit should be the primary consideration to maintain the quality of education.
6. Compensation to universities by employers of university graduates Ultimate bene®ciaries of high quality education in the universities, are the employers, be it in the public or private sector. India, which has one of the largest systems of higher education, is producing a rich source of trained man-power. Many multinational companies in India and abroad are looking towards India for large scale recruitment of trained man-power. It is, therefore, suggested that the employers Ð the ultimate users of trained man-power produced by universities should contribute signi®cantly to the universities from which these graduates come. Contributions may be lumpsum at the time of recruiting the candidate or it may be yearly. Panchamukhi (1996) suggested what may be called a system of ``postponed fees'' i.e. employers may be required under covenant to contribute against all recruitment a percentage of salary of their educated employees to university education.
7. Linkages between industries and universities Educational systems of universities have diversi®ed in the modern era. Linkages between the productive sectors of industries and the universities can be established. Prominent industries should also adopt some universities and universities should have research and development units for industries. Industries should pay to universities for the technology being used by them.
8. Universities should act like ®rms It is a common assumption that universities are essentially spending institutions rather than earning institutions like ®rms. But there are many ways by which universities can run like ®rms and earn considerable sums. Some of these are: . . . .
Renting out the infrastructure the commercial complexes built by universities. Selling of products/technology. Services of computer centre. Research contracts.
T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
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. Consultancy by the faculty Ð sharing of earnings with the university. . Commercialisation of the printing press to accept outside contracts.
9. Compensation for the brain-drain Many graduates and post-graduates after completing their studies, go abroad. It is estimated that about Rs. 400.000 are spent per IIT Engineering graduate. In other disciplines it could be lower (Ramamurthy, 1997). So, a huge amount is spent on one student, but he goes abroad after completing his study. Under such circumstances, what has he paid back to his nation? Such persons should be allowed to go abroad only if they contribute to a fund in their alma mater to be used for supporting other deserving students. Panchamukhi (1996) also suggested that government may require such personnel (graduates and above) to contribute a percentage of their earnings to the university when they start earning.
10. Change in attitude of students, employers and people In addition, a change in the attitude of students and employers is required to contribute voluntarily to the universities since these institutions serve the nation's people. Government should frame policy by which the amount donated to universities should be fully exempted from income-tax.
11. Conclusion A nation dares not neglect its higher education, without heading towards stagnation and weakening of the nation's intelligence. Raising resourcing to a level where universities can sustain themselves is not possible under present circumstances. But suggested strategies and change in government policies may enable these institutions to face the resource de®cient to some extent. If industries can sustain by themselves and earn much money, universities can at least partially, take on the burden of their own expenditure. However, government cannot evade responsibility completely.
References Bubtana, A. (1992). Financing Arab higher education: a search for new alternatives. Higher Education Policy, 5(4), 21±22. Mayor, F., & Draper, W. H. (1990). Preface. In Investing in the future: setting educational priorities in the developing world. International Institute for Educational Planning: Unesco.
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T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
Panchamukhi, P. R. (1996). University ®nances in India. Journal of Educational Planning and Administration, 10(1), 15±24. Ramamurthy, V. S. (1997). The gaping gap. University News, 35(22), 13±14. Rao, P. H. S. (1996). Higher education in UK and India Ð current scenario. University News, 34. Swamy, K. (1997). The nature of education. University News, 35(19). Thorens, J. (1996). Role and mission of the university at the dawn of the 21st century. Higher Education Policy, 9(4), 267±275. Tunnermann, C. (1996). A new vision of higher education Ð International debate on higher education. Higher Education Policy, 9(1), 11±27.
Financial management of universities in developing countries T.K. Gill*, S.S. Gill Department of Extension Education, Punjab Agricultural University, Ludhiana, Punjab, India
This paper focuses on ways to overcome the ®nancial crisis Ð raising of tuition fee, privatization of higher education, reducing the intake capacities of the system, attracting foreign students, compensation to universities by employers of the university graduates, linkages between industries and universities, universities to act like ®rms, compensation for brain-drain and change in attitude of people, students and employers. These strategies can enable the institution to face resource constraints. However the main responsibility lies with the government. Education, especially the higher education is an indispensable instrument for the development and transformation of a society. Though it was not necessary for survival in an agrarian society, but the man without education is lost in the modern developing and industrial society. Education was considered as an ornament in the agricultural civilization; a tool for economic development in the industrial era and has become today all pervasive resource, a resource, that can ®nd substitute for all other resources, but has not substitute for itself (Swamy, 1997). A nation's progress will stop if education fails to respond adequately to the emerging needs and challenges of a developing society. Universities are mainly responsible for providing higher education to society. Their output re¯ects the quality of human resource development programmes. But these institutions of higher learning face ®nancial constraints. A university does not exist for itself or even for science. It only exists for society or more especially because of its international responsibility for a given society, that is, for those who live in the region in which it is located (Thorens, 1996). There is wide recognition that universities' resource position and the quality of their functioning have reached the lowest ebb (Panchamukhi, 1996). The economic crisis facing * Corresponding author. Fax: +91-161-1400945 0952-8733/00/$20.00 7 2000 International Association of Universities. Published by Elsevier Science Ltd. All rights reserved. PII: S 0 9 5 2 - 8 7 3 3 ( 9 9 ) 0 0 0 1 8 - 5
126
T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
developing countries poses grave short- and long-term problems for education and human resource development (Mayor & Draper, 1990). State governments, central governments and other ®nancing agencies are imposing continuous cuts and have asked universities to raise their own resources. Qualitative and quantitative levels cannot be maintained during a state of ®nancial decline. Fiscal constraints on the universities threaten the national intelligence, academic future and also the competitive edge in the post-industrial world of the 21st century. UNESCO maintains that the correlation between investment in higher education and the level of social, economic and cultural development of a country is well established (Tunnermann, 1996). 1. Expansion of higher education and resources In developing countries, higher education has been the fastest growing education segment in the past twenty years, fostered by a high level of state subsidies, gratuity of services and until 1980, employment guarantee in some countries (Tunnermann, 1996). Early in the post-independence era, India had only 27 universities, their number has now increased to more than 200. But the share of universities in the total budget of the educational sector plan is decreasing constantly. It was 9% in the ®rst Five Year Plan, rose to 24% in Plan Holiday and 25% in fourth Five Year Plan, than sank to 22% in ®fth Five Year Plan, 19% in sixth plan and 12% in seventh plan. This approach of government was ill-founded, that is, ®nancing primary education in full whilst limiting that of higher education (Panchamukhi, 1996). UNESCO indicates that average per student expense on higher education in absolute terms is ten times lower in developing countries than in the industrialised world (Tunnermann, 1996). Some of the possible ways to overcome ®nancial stringency in universities are discussed here after. 2. Raising of tuition fee Twenty ®ve per cent of the total expenditure on higher education is met by the tuition fees in the universities in UK. It may account for even less than 5% of total expenditure in India (Rao, 1996). Panchamukhi (1996) suggested that universities may be allowed to adjust their own fee rates without the interference of vested interests and political pressures. But the raising of tuition fees to a level where the universities can maintain themselves will also take higher education beyond the reach of poor sections of society. Estimated cost of one IIT Engineering graduate is about Rs 400.000. In Arab countries, tuition fees became a great barrier to the democratization of higher education and encouraged the appearance of elitism where economic and ®nancial factors play an important role in screening students for higher education (Bubtana, 1992). In India, as directed
T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
127
by government, universities are raising admission fees, tuition fees, cost of prospectus etc. But this is not without social consequences i.e. disparity in access to higher education between the poor and rich will increase. For raising tuition fees, a mechanism involving scholarships and soft loans for deserving students can be of use but this requires substantial resources. 3. Privatization of higher education Higher education has expanded drastically to meet growing social demands. The cost is also continuously increasing. Maintenance of acceptable level of quality is greatly aected as higher education in developing countries is mainly a public enterprise supported by government money. Privatization of higher education can be another alternative to maintain quality and to ensure ecient use of resources. It is a general observation that private enterprises are pro®table and the level of quality is better than public sector ®rms. There has been a dramatic increase in private higher education in Latin America and opportunities for higher education are comparable to those of many industrialized countries. The enrollment in universities has also increased ten times between 1960 and 1985. However, governmental expenditure has not increased at the same rate and has brought about a reduction on quality teaching at public universities (Tunnermann, 1996). In some countries like Sudan, Jordan, United Arab Emirates and Iraq development of private higher education institutions and their eective contribution to solve the expected ®nancial crisis has not yet been tested and in some, partial governmental ®nancing is still needed (Bubtana, 1992). 4. Reducing intake capacities of the system To reduce the expenditure, the ¯ow of funds to universities cannot be restricted, unless ¯ow of enrollment is similarly restricted. Reducing the intake capacities of institutions in Jordan and Sudan had certain negative consequences (Bubtana, 1992). It would be unwise and certainly unethical to promote enrollment at the lower levels of education, to close options for the completers of lower levels and to deny them university education. The aspirations of people for higher learning cannot be scuttled (Panchamukhi, 1996). Strict screening procedure should be adopted for admission. Only brilliant candidates having suitable aptitude for higher learning should be admitted rather than producing ill quali®ed graduates. The mediocre should be counselled to take up vocational courses. 5. Attracting foreign students India has achieved the status of fourth largest reservoir of scienti®c and technical personnel (Panchamukhi, 1996). Higher education imparted can compete
128
T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
in the global market place of ideas. Thus India can be a major exporter of brainpower. Foreign students can pay higher or even the full cost of instruction by comparison with the local students. So attracting foreign students to the universities will add to ®nancial resources. In some Indian universities, this strategy has already been implemented. Certain places are reserved for Non Resident Indians. Such students pay higher fee (in dollars) than their local counterparts. However, admission requirements should not be relaxed. Merit should be the primary consideration to maintain the quality of education.
6. Compensation to universities by employers of university graduates Ultimate bene®ciaries of high quality education in the universities, are the employers, be it in the public or private sector. India, which has one of the largest systems of higher education, is producing a rich source of trained man-power. Many multinational companies in India and abroad are looking towards India for large scale recruitment of trained man-power. It is, therefore, suggested that the employers Ð the ultimate users of trained man-power produced by universities should contribute signi®cantly to the universities from which these graduates come. Contributions may be lumpsum at the time of recruiting the candidate or it may be yearly. Panchamukhi (1996) suggested what may be called a system of ``postponed fees'' i.e. employers may be required under covenant to contribute against all recruitment a percentage of salary of their educated employees to university education.
7. Linkages between industries and universities Educational systems of universities have diversi®ed in the modern era. Linkages between the productive sectors of industries and the universities can be established. Prominent industries should also adopt some universities and universities should have research and development units for industries. Industries should pay to universities for the technology being used by them.
8. Universities should act like ®rms It is a common assumption that universities are essentially spending institutions rather than earning institutions like ®rms. But there are many ways by which universities can run like ®rms and earn considerable sums. Some of these are: . . . .
Renting out the infrastructure the commercial complexes built by universities. Selling of products/technology. Services of computer centre. Research contracts.
T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
129
. Consultancy by the faculty Ð sharing of earnings with the university. . Commercialisation of the printing press to accept outside contracts.
9. Compensation for the brain-drain Many graduates and post-graduates after completing their studies, go abroad. It is estimated that about Rs. 400.000 are spent per IIT Engineering graduate. In other disciplines it could be lower (Ramamurthy, 1997). So, a huge amount is spent on one student, but he goes abroad after completing his study. Under such circumstances, what has he paid back to his nation? Such persons should be allowed to go abroad only if they contribute to a fund in their alma mater to be used for supporting other deserving students. Panchamukhi (1996) also suggested that government may require such personnel (graduates and above) to contribute a percentage of their earnings to the university when they start earning.
10. Change in attitude of students, employers and people In addition, a change in the attitude of students and employers is required to contribute voluntarily to the universities since these institutions serve the nation's people. Government should frame policy by which the amount donated to universities should be fully exempted from income-tax.
11. Conclusion A nation dares not neglect its higher education, without heading towards stagnation and weakening of the nation's intelligence. Raising resourcing to a level where universities can sustain themselves is not possible under present circumstances. But suggested strategies and change in government policies may enable these institutions to face the resource de®cient to some extent. If industries can sustain by themselves and earn much money, universities can at least partially, take on the burden of their own expenditure. However, government cannot evade responsibility completely.
References Bubtana, A. (1992). Financing Arab higher education: a search for new alternatives. Higher Education Policy, 5(4), 21±22. Mayor, F., & Draper, W. H. (1990). Preface. In Investing in the future: setting educational priorities in the developing world. International Institute for Educational Planning: Unesco.
130
T.K. Gill, S.S. Gill / Higher Education Policy 13 (2000) 125±130
Panchamukhi, P. R. (1996). University ®nances in India. Journal of Educational Planning and Administration, 10(1), 15±24. Ramamurthy, V. S. (1997). The gaping gap. University News, 35(22), 13±14. Rao, P. H. S. (1996). Higher education in UK and India Ð current scenario. University News, 34. Swamy, K. (1997). The nature of education. University News, 35(19). Thorens, J. (1996). Role and mission of the university at the dawn of the 21st century. Higher Education Policy, 9(4), 267±275. Tunnermann, C. (1996). A new vision of higher education Ð International debate on higher education. Higher Education Policy, 9(1), 11±27.