Time to reform public universities

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Last May, Penang Monthly examined the condition of private higher education in the country. Now, we look at the challenges facing public universities.

It does look as if the momentum of reform in Malaysian higher education is gaining pace. The Malaysian Higher Education Blueprint (HEB)1 launched in April last year was quickly followed in September by the University Transformation Programme (UNiTP) Green Book. These provide guidelines for the better governance of public universities2.

Both documents present ideas for higher education in Malaysia to improve quality, increase access and address pressing strategic issues, including more stable finances. While providing an understanding of what the government wants to achieve, these documents also raise many questions, such as what is driving these changes, what are the consequences in terms of the raison d'être for higher education in Malaysia, and what are the financing and policy options available or necessary for fulfilling the new vision?

To answer some of these questions we need to take a step back from the policy documents themselves and reflect on the current state-of-play. Earlier research from Penang Institute has shown that the private higher education institutions face severe challenges, particularly in funding3. In this article we look at the public higher education institutions to see how they stand.

What’s pushing the reform agenda?

The drivers of reform are manifold. They include a push to raise the higher education student population from 1.4 million in the 2012 reference year to 2.5 million in 2025 – a total increase of 43%. Within this, enrolment in the private sector is expected to increase by 47.5% from 455,000 in 2012 to 867,000 in 2025.

Another key area of emphasis is in Technical Vocational Education and Training (TVET), where student numbers are expected to increase by 62.2% from 248,000 in 2012 to 656,000 in 2025. Again, the private sector is seen as a key resource with a 62.3% increase in TVET student numbers from 134,000 in 2012 to 355,000 in 2025.

Underlying these targets is the overall push to make Malaysia a high income economy by 2020. Higher student numbers are seen as a component of this in creating a better qualified workforce for higher value-added forms of economic activity.

Indeed, at the heart of the HEB is an insistence on improving employability and creating “holistic, entrepreneurial and balanced graduates”. In what is described as “The new higher education system,” the HEB defines graduates as moving from “job-seekers” to “job creators and balanced citizens with entrepreneurial mindsets4.”

In addition, higher education is seen as a shift from a “focus on university education” to a system in which “academic and TVET pathways (are) equally valued and cultivated.”

What are universities for?

This change in emphasis to create a “new higher education system” comes at a time when many new graduates in Malaysia struggle to find employment. As many as one in four graduates are unemployed in Malaysia, according to government figures5.

This has led to a clamour for universities to become more “industry-relevant”. This means that they should deliver “work-ready” graduates with skills-sets needed in the workplace. University-industry links should also benefit companies through industryrelevant curricula and training, easy access to research and responsive technical solutions designed to meet the needs of business.

The reality is that this view is gaining ground to the detriment of those who argue that universities have a higher purpose and should not be seen as “degree factories” that simply prepare people for the job market.

Source: “What would it take for higher education enrolment to be among the highest in Asean?” pp. E-8, Ministry of Education Malaysia, Malaysian Education Blueprint 2015-2025 (Higher Education), April 2015.

The first key concern is that in creating industry-relevant universities we do not replace intellectualism with vocationalism. Malaysian universities have tended to focus on teaching, research and collegiality. They are not in general vocational training centres nor are their faculties best placed to provide vocational training.

The second key concern is that many subjects, especially in the humanities, arts and social sciences, are often considered irrelevant for the workplace and are cut back or even abandoned altogether. Although these subjects continue to make up twothirds of the undergraduate intake in many countries around the world, in Malaysia they account for only eight per cent to nine per cent of enrolment in both public and private universities.

A third key concern is to reaffirm that traditionally accepted pedagogical priorities such as “critical, analytical thinking” are hugely valuable in the workplace and in great demand by employers. They must not be replaced by purely skills-based learning outcomes.

Making universities industry-relevant

Perhaps the most pressing practical concern is that many faculty members and university leaders are simply not ready for industry-relevant approaches. Most academics have no experience of work outside the university system. As such, they are not necessarily the people best suited to prepare students for employment.

Source: QS World University Rankings 2015 (www.topuniversities.com/qs-world-universityrankings).

This is a real challenge for change management in higher education institutions across the country. The traditional full-time professors and lecturers may need to be replaced with a new type of industry-experienced academic6. University managers will have to be more open to the new academics, especially at Vice Chancellor level.

Business leaders will also need to be more open and work with universities to create industry-focused curricula that define learning outcomes and reflect the skills suited to the world of work.

Developing programmes with professional bodies helps students to be accredited on graduation. They then do not have to study further to get professional certification at extra costs. Assessment processes can include industry-based assignments to gain these credits.

The Accreditation of Prior Experiential Learning (Apel) scheme run by the Malaysian Qualifications Agency (MQA) already exists to help students gain academic credit for work experience, volunteering or part-time employment. Sandwich degrees that allow students to spend time in work while studying would also need to be encouraged.

Can Malaysia create a world-class university?

The changes in focus for higher education in Malaysia are set in the context of a simultaneous drive to improve quality and to create world-class institutions on par with leading global and regional counterparts. So far this has proved challenging, as Table 2 shows.

Currently the best performing Malaysian universities are not even in the top 100 in global terms. Universiti Malaya (UM) is the highest ranked in the QS World University Rankings 2015 but only reached number 146. In Singapore, by comparison, the National University of Singapore (NUS) ranks 12th and Nanyang Technological University (NTU) ranks 13th.

Within Asia, Malaysia ranks better, but even then, only two Malaysian universities are in the top 50. Again Singapore outperforms with NUS ranking first and NTU ranking fourth in the 2015 QS Asia Rankings.

But take heart. There is some sign of improvement in international rankings. This is also mirrored in local rankings. For example, the 2014 Malaysian Research Assessment (MyRA) ranked six universities as 6-Star or “Outstanding,” which is an improvement from the 2011 rankings where only four were ranked as 6-Star7.

How to raise standards

The question now is, how can standards be improved for Malaysian universities? Some key elements in this process are:

Building the faculty: Malaysia’s best academics are spread throughout the system or across the world. Changes in university management are needed to create the right balance of high-quality teaching, generous research time and merit-based opportunities if world-class Malaysians are to be encouraged to continue their careers at home.

Creating a world-class ethos: Promoting the right ethos helps create institutional excellence. This involves a supportive environment that is open, tolerant and merit-based. World-class institutions are intellectually driven and balance challenging targets with appropriate rewards. International orientation is important and an active role in the global academy helps to create and nurture academic leaders.

Academic freedom: Organisational and professional freedoms with a wide scope for autonomy are essential. Accessible, transparent and accountable governance is a prerequisite, and academic freedom for faculty and students is sacrosanct. The freedom to challenge the conventional wisdom on merit without having to compromise one’s career is an essential component of this commitment. Active discourse within professional parameters without self-censorship must also be enshrined.

Good “back office” m a n a g e m e n t : World-class support systems are also needed. Well-focused, efficient and proactive administration to support the institutional mission is often missing. Making administrators more business-oriented and entrepreneurial goes hand-in-hand with the reforming of the universities.

World-class academic ecosystems: Having a world-class focal point can also create positive spill-over effects for nearby institutions, as in the case of NUS and NTU. NTU was inaugurated only 24 years ago but ranks first in the 2014 QS University Rankings: Top 50 under 50 years old. It has benefited in part from the spill-overs from NUS, including faculty trained there and shared approaches and ambitions. It has also shown that being a young university is not a barrier to attaining world-class status. In fact, 13 of the Top 50 under 50 universities are in Asia, each facing similar challenges and opportunities as Malaysian institutions.

Leadership and governance: The right form of leadership is important to deliver the key elements of a world-class institution. Open and transparent appointments of university senior management are lacking in the current system. World-class universities may not be delivered from the Chancellery alone but by the academic community as a whole. Nonetheless, good leadership is prerequisite.

Financing public universities

The reduction in government funding for public universities in the 2016 Budget came as a surprise. The overall allocation for higher education was cut by 15.2%, or RM2.41bil, from RM15.78bil to RM13.38bil.

The likelihood of cuts should have been expected because the HEB signalled clearly that financing in public universities was to be restructured8, but what has surprised many people is the size of the cuts.

When the number of students is taken into account, the cuts are even deeper. On average the allocation per student will be 15.2% lower in 2016 than in 2015. Eight universities had cuts in excess of 20% per capita, of which two had cuts greater than 30%. Six had cuts between 10% and 20% and only four saw increases, although in two cases this was because student numbers were estimated to be stagnant or falling9.

Malaysia’s leading university, UM, was hit hard with a 21.6% cut in allocation per student and a 17.1% cut in total budget. Penang’s USM saw a 13% cut in allocation per student and a 10.6% cut overall10.

Time for universities to pay their own way

In 2014, public universities were given a mandate to raise 30% of their income from alternative funding sources by 2025. With the cuts in public funding already announced, this mandate has become more urgent. Nonetheless, a number of options are available:

Student fees: Both the Higher Education Minister and the Deputy Prime Minister have insisted that universities be prohibited from using higher fees to cover falling income. The example of private universities in Malaysia, which depend heavily on fee income from loan-financed students, shows that around 46% face financial stress. The proposed 15% cut to PTPTN for private universities may cause as many as 70% to go into the red. So, fees alone do not offer a one-off solution.

Separate research has shown that 75% of Gen Y professionals aged 20-33 have at least one form of long-term debt and 37% have more than one. Around 40% of the debt is education loans. Increasing student fees will not help to ease this burden11.

One option is to create a higher education savings scheme, but so far such pre-emptive strategies have not been given much attention12. Indeed the HEB funding plans are still based on a loan system within an enhanced PTPTN shifting to incomecontingent loans. This is unfortunate given the already high levels of indebtedness among graduates.

Research and grants: Another primary source of academic income around the world comes from research grants and contracts. In 2014, Oxford University raised 40% of its income from research grants while Cambridge managed 25%. This can be a major source of funding, but it requires the creation of a research infrastructure and a culture of research-led academia, which is still lacking in many Malaysian universities.

Endowment income: The HEB highlights the use of endowments to provide stable sources of income. Harvard, for example, raises 35% of its income from its endowment and only 20% from student fees. This is unusual, however. Oxford and Cambridge have the largest endowments in the UK but raise only two per cent to three per cent of their income from this source13. To generate an income of RM50mil at a typical five per cent per year return, a Malaysian university would need an endowment of RM1bil14. This is a big target and must be balanced with the challenges of investment management. For universities, the likely risks and returns must also take into account ethical and socially responsible investment.

Grants for current use: More common forms of giving in Malaysia include one-off donations for specific purposes such as scholarships or sponsorships. While welcome, these forms of gift-aid do not offer a long-term solution and can be erratic as well as elusive. If they can be accumulated into endowments or investment portfolios then they offer greater returns over the long run, but unfortunately, donors are often more interested in the short-term public relations impact.

Diversified course offering: Teaching also offers universities a chance to draw on core functions to generate income. New vocational and short courses in continuous professional development, languages and specialist skills offer opportunities for commercial income. Some universities such as UM and USM already have welldeveloped activity in this area.

The “Three Rs”: One underused option is income generated by the university community from rental, retail and recreation activities. For example, if students pay on average RM500 per month for university accommodation, food and socialising with their friends on campus, this could generate a potential RM7.1bil from the total student population of around 1.4 million. University managers need to be entrepreneurial and create as many and as wide a range of outlets as possible on campus. They must also create attractive and enjoyable spaces for students to spend their normal day-to-day living allowance oncampus rather than off-campus.

Estate management: A potentially bigger source of income comes from land-use, utilisation of facilities and maximising income from space, buildings and rooms. Public universities are lavishly endowed with space, much of which is underused and some of which is not used at all. Selling land for development, renting buildings and space for private and commercial use and setting high occupancy and usage targets can all provide extra sources of income without undue pressure on resources.

Privatisation and commercial activity: An alternative to endowment income is often found in direct commercial business. Cambridge University, for example, gets 40% of its income from its international examination syndicate and the Cambridge University Press, one of the world’s leading academic publishers. In Malaysia, private and commercial activity is small but not unknown, and the three public university hospitals, for example, are already offering private medical care services.

Conclusions

Taken together with the aggregate financial figures, resource allocation per student in public universities is likely to be squeezed. If managed properly, however, this could result in a more balanced mix of university financing from different sources which reduces the burden on both students and the public purse.

It is important to understand that worldclass universities have mixed income models which generate resources from a diversified range of sources. They do not rely either on the government or students as their only or primary source of income. Instead, they have developed creative and resourceful









1 Ministry of Eduction Malaysia, Malaysian Education Blueprint 2015-2025 (Higher Education), April 2015.

2 Ministry of Education Malaysia, Enhancing University Board Governance and Effectiveness – University Transformation Programme Green Book, September 2015.

3 Dr Paul Lim and Dr Geoffrey Williams, “Crisis ahead for private higher education – and solutions,” Penang Monthly, pp. 30-36, May 2015.

4 Ministry of Education Malaysia, Malaysian Education Blueprint 2015-25 (Higher Education),”The new higher education system”, pp. E-7, April 2015.

5 In 2013, 25% of public university graduates, 27% of private university graduates and 26% of polytechnic graduates were unemployed compared to nine per cent of community college graduates and 18% of TVET graduates, according to ministry figures (Source: Ministry of Education Malaysia, National Education Statistics: Higher Education Sector 2013).

6 These would include visiting professors, visiting fellows, entrepreneurs-in-residence, inventorsin- residence, senior “C-level” managers, policymakers, scientists-in-residence, authors-inresidence, artists-in-residence and national figures.

7 The six 6-Star universities in 2014 are Universiti Kebangsaan Malaysia, Universiti Malaya, Universiti Putra Malaysia, Universiti Sains Malaysia, Universiti Teknologi Malaysia (5-Stars in 2011) and private university Universiti Teknologi Petronas (5-Stars in 2011) (Source: KPT Malaysia Research Assessment Instrument (MyRA) 2011 and 2014).

8 There is a whole chapter on the subject under Shift 5: Financial Stability, pp. 5-1 to 5-18. in Ministry of Education Malaysia, Malaysian Education Blueprint 2015-2025 (Higher Education), April 2015.

9 Removing special payments under the Direct Method, the overall allocation per student will be 19.6% lower in 2016 than in 2015. Eight universities had cuts in excess of 20% per capita, of which three had cuts greater than 30%. Nine had cuts between 10% and 20%.

10 Removing special payments under the Direct Method, Universiti Malaya (UM) had a 31.3% cut in allocation per student and a 27.3% cut in total allocation. Universiti Sains Malaysia (USM) saw a 19.3% cut in allocation per student and a 17.1% cut overall.

11 Dr Raymond Madden and Dr Wan Nursofiza Wan Azmi, “Finance Matters: Understanding Gen Y – Bridging the Knowledge Gap of Malaysia’s Millennials”, Kuala Lumpur, Asian Institute of Finance, 2015.

12 One example has been suggested in Dr Geoffrey Williams, “Start Saving Early for Higher Education,” New Straits Times, September 18, 2015.

13 The National Association of College and University Business Officers (NACUBO) in the US reports that on average, annual endowment funds accounted for 9.2% of academic institutions’ total operating budgets in 2014 (compared with 8.8% in 2013).

14 Returns on endowments are variable and subject to market conditions. The median return for large US endowments and foundations during 2015 was 3.6%, according to the Wilshire Trust Universe Comparison Service.

Paul Joseph Lim is a visiting fellow at Penang Institute and associate fellow at the ERCCT, University of Tübingen, Germany. He was co-founder of the European Institute for Asian Studies (EIAS) in Brussels and political adviser for Asia in the European Parliament.
Geoffrey Williams is a visiting fellow at Penang Institute, specialising in Higher Education management, and member of the Board of Studies of the Faculty of Industrial Management in Universiti Malaysia Pahang. He is founder and director of his own education company, the Academy of Responsible Management Sdn Bhd.



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