The Way to provide higher education to all at no cost to state while earning billions to the country.
Posted on June 28th, 2010

By Ian

It was my intention to discuss a solution to the teacher and facilities shortage in the education system. While postponing that to next week, I like to discuss my thoughts on the proposed private university bill.

Many are awaiting the changes to the University Act. I am sure many would say this is the right thing. But are we going to do it right? If done right in my view we can educate all that seek higher education in the future generations at NO COST to the state coffers while earning billions in foreign exchange. Here is the difference if right method and wrong method.

(a)    Countries like Australia educate their children at no final cost to the government and in addition earn approximately US$ 5 billion a year from foreign students. (This I believe is the right method)

(b)   Countries like Sri Lanka deprive 80% of its children of university education and in addition lose approximately US$ 500 million a year to overseas universities for kids of the privileged who end up not coming back to SL. (this believe is the wrong method)

(c)    Sri Lanka planning to have private universities mainly as branches as foreign universities that will perhaps cater to a PART of the students who go to overseas universities and also a part of the students who would not go due to many reasons. (this is a in the right direction but incomplete method)

It is pleasing to note that finally the government has come to realize this and is making some changes. Van we think this issue in totality rather than implementing a solution to a part of the problem?  Would that be enough or without reinventing the wheel can we adopt what countries like Australia have been doing for ages. YES WE CAN!

Shortcomings of the partial solution that is planned

–          Does not cater to students who cannot afford to send their children to fee paying universities in the absence of a fully integrated student loan system.

–          Does have a leakage of foreign exchange as the foreign universities will charge a premium to ensure that our dollars end up in their coffers. (They will overcharge for lecturers, licensing, exams, and also send the profits back home).

–          Monitoring will be difficult as they will not want to subject to UGC monitoring.

Benefits to the country if we copy the system such as in Australia. (Locally owned University system that is backed with a comprehensive student loan systems that is linked to the Inland Revenue system that ensures the recovery of the loans)

–          If fully implemented after some time the Government will not have to bear the costs of higher education.

–          The country will get additional foreign exchange from foreign students.

–          The current massive foreign exchange outflow on education in foreign universities will dry up.

–          The students of international schools that are not entitled to enter local universities gets an opportunity to be educated in Sri Lanka

–          The inequality where only the rich can send their kids for higher education will disappear.

–          With the increase in graduates the flow of BPO’s and KPOs to the country will bring in more foreign exchange.

–          Foreign remittances that we get will increase substantially as we will be “ƒ”¹…”exporting’ doctors, engineers, nurses, accountants rather than low skilled positions. (For example a Nurse could earn US$35,000 a year when a house maid makes only US$6,000)

–          Creation of jobs in large number in the universities and also in the surrounding areas.

–          The localities where universities are set up will develop due to demand for food, accommodation, entertainment, transportation etc.

–          With foreign students and their families, foreign faculty in the country or visiting the country, there will be a higher demand for the hospitality trade, air lines, food chains, entertainment trade.

–          The universities in the medium term will increase the research capacity of the country and there would be many pure and applied research carried out by the country. This will enhance the reputation of the country as a country of education excellence.

–          The simplest benefit for everyone would be reversal of the cycle where students chasing universities o universities chasing students to get in the best.

Way forward

(a)    Get the Sri Lankan state and private sector institutions to set up the universities. This will ensure that the money stays put in Sri Lanka rather than branches of foreign universities that would charge sun and the moon and repatriate the profits and as salaries of expatriate faculty.

(b)   The universities should be made to cater 66% of local students at a concessionary rate (subsidized rate equal to the student loan) and recover the shortfall and make profits by catering foreign students to fill 33% of the capacity. (Sri Lanka then can develop to a good higher education destination considering the security issues in India and higher living costs in USA, UK & Australasia).

(c)    Introduce the student loan scheme for local students like in Australia where the graduate pays back the cost by repaying 10% of his/her annual income. This will ensure that majority of the money spent come back to fund the education of future generations. There will be a point that the state will not have to fund the higher education of locals.

(d)   After some time brings state universities too under the same scheme so the state does not have to fund them and they are made free to increase capacities for local students and also free to cater to foreign students.

(e)   Once the new universities are in place impose a tax of 25% for use of foreign exchange for education purposes in overseas countries.

Setting up the universities

First step is to know how many higher education positions have to be created for local students. I assume that the country needs additional 100,000 new university seats a year. This will require approximately 100 new higher education institutions that can accommodate 1,000 students per year. As the courses will be for durations of 3-4 years in five years there will be 4,000-5,000 students in each university. As universities will be allowed to earn extra income from having 33% foreign students to subsidize local students the capacity should be 1,500 students a year.

It is important that these universities are scattered in all parts of the country and not limited to the western province. Therefore if there are going to be 100 universities each district will get 3-4. This will naturally bring immense development and job opportunities to all districts of the country.

Second step is to ensure that the new universities would maintain highest standards. For this purpose the University Grants Commissions (UGC) should develop documents on minimum standards on the faculty, curriculum, education, accommodation and other facilities, examination etc. 

Third step is to invite the major private sector and public sector institutions to set these universities up. For example Bank of Ceylon, Peoples Bank, National Savings Bank, Sri Lankan Telecom, Sri Lanka Insurance and other state sector large institutions can set up 5 universities each. Conglomerates like John Keels, Maharajah Group, Aitken Spence, Commercial Bank, Sampath Bank, HNB Bank, DFCC Bank, NDB Bank, Hayleys, DCSL, IOC etc. should be invited to set up 2-3 universities each.  All shortlisted parties to be given 10-25 acre plots (depending on the district) and 2 year time to complete the project.  The land should be given on lease with the government holding a golden share in the university. Each investor to produce Rs. 250 million in capital. Commercial or a Development banks could give another 250 million to investors on concessionary terms if the government can find a funder like ADB to do this. The new universities may be allowed to have maximum of 30% of foreign investment from reputed overseas universities. This may assist the new universities in curricula development, examination etc.

For the state and private sector companies who will get in to this will have the advantage in participating in major knowledge and resources up grading project while they could also source the good performing graduates for future employment in their companies.

 Faculty

At some point there should be a limitation of foreign faculty to 30%. This will give many opportunities for the staff and products of Sri Lankan universities to assume higher positions in the new universities. The academics of Sri Lankan origin that are settled in other parts the world may also consider this an opportunity to come back to the country. Each foreign faculty member to be approved by UGC based on the credentials as one step of maintaining the standards.  In the initial years there may be a shortfall of local people to assume to positions in the faculty. If this happens the restrictions on the foreign faculty could be eased for 2-3 years.

Monitoring

 The UGC should be the monitoring authority. Irrespective of the ownership of the university it should be a must that the board of the university to comprise of persons that are well versed with the functions and operations of higher education. UGC should have a member in each of the boards. UGC could use State universities to design the standards on curriculum and examinations etc. And use the same state universities to assist in the assessment of the maintenance of standards.

Fees

UGC has to determine the fees for local students. Fees are to be very low so that the amount of student loan that needs to be given and repaid remains low. The universities should be allowed to decide on the fees for foreign students. As a rule of thumb if the locals are educated at ½ of the costs of operation, and if foreign students pay 3 times the cost, at 66:33 ratio of local foreign students the university will make 33% of the cost of operations. Cap on increasing fees on local students to be limited to maximum of 5% YOY.  

Setting up the Student Loans scheme

A Higher Education Financial Authority to be set up under the Inland Revenue Department similar to HECS in Australia. The courses in the new universities have to be priced at a concessionary rate for local students. (Same as in Australia). The student to be given a tax file number at the time of the entry. The loan that corresponds to the value of the course the student has been selected to be given against this number. The payment is made directly to the university. At the time the graduate earns he/she will have to pay 10% of his income as payment of student loan along with the tax payment. If the graduate joins the state sector (where there is no income tax) then he will have to pay 10% of his salary to the tax department. Discounts can be offered for early settlement of the student loan. No payments due until the graduate gets employed or become liable to pay income tax on other sources of income or gets a tax free salary.

Almost all universities will grant full or partial scholarships to the students with high marks in AL, students with good sports performances etc.  Universities also grant scholarships on the performance after joining the university. In additional to this, philanthropists, Alumni of the universities, will introduce further scholarship positions once the time passes. Therefore almost all of the students who get in to universities now will get their education without a loan.

Student loans should only be given only for the recommended period of the course. This means if the student does not complete the curse in the required period he will have to find finances for the rest of the period. This will encourage students not wasting the resources on strikes, closure of universities, bad academic work etc.

Optional state scholarships to the number that get free higher education

One easy way to sell this to the public (that will be mislead by the false propaganda) is t offer state scholarships to the students who would have got free education on the current system but not selected to the scholarships from the universities. This will top end of the students who gets free education will get scholarships from the universities due to competition to get good students in. This will save money to the government.  The rest will get state scholarships. Student loan system will be there to cater vast number of people who wouldn’t have got higher education due to resource limitations.

Marketing Sri Lanka as an education destination

For this model to work for the universities and to the country the universities should attract at least 33% foreign students. If each university is going to spend on its own to market there will be a huge waste of resources of the country. Therefore there will be a requirement like the Sri Lankan Tourism to market the education destination. This will require some investment in the short term. The funding can be generated by each university contributing an agreed amount to a common fund. 

Financing

I estimate the course fee for a year to be between Rs. 150,000 to Rs. 600,000 year for a local student depending on the course he/she undertakes. (Note. Universities to be required to have a fee that is 50% of operational costs per student, from local students and fee of 3 times the cost to overseas students). Hence the amount required to finance the student loans for 100,000 students will be Rs. 37.5 Billion a year. The repayments will start only in the 5th or6th year. Hence the funding requirement during the first 4 -5 years would be Rs. 187 Billion. This may be seen as a daunting amount. This should be seen in this light.

–          Unlike now this will be the maximum that will be tied up as there will be repayments to finance the new loans from 4th or 5th year.

–          If this model works there will be 50,000 foreign students in the country who would be paying say US$ 15,000 a year as fees alone (there will be additional foreign exchange flow for accommodation and living costs). This works out to US$ 750 million every year. This is equal to Rs. 86 Billion a year. Unlike the fund requirement for loans that will reduce or stop after 4-5 years, foreign exchange income from foreign students will continue indefinitely.

–          Considering other factors such as additional foreign exchange income from foreign students, saving of foreign exchange waste on educating the kids of the rich in foreign countries who don’t come back, additional tax revenues due to additional jobs created in the country Rs. 37 Billion year for 5 years will be an investment that will pay back 500% year on year.

With regard to finance management in the universities there would be short term issues as they would be providing a service at ½ of the cost to the local students from day one but the foreign students who are expected to supplement the costs by paying higher fees than locals will only come in stages over a period of time.

I plead with the minister of higher education and the government to implement a TOTAL solution as done in countries like Australia. This would benefit the country in so many ways rather than adopting a partial solution by merely letting to establish private universities. Simply private universities will help the middle class who cannot afford foreign education. A comprehensive system backed with loans system as explained above will;

–          Will serve ALL segments of the society.

–          The state can recover the costs due to repayment of loans.

–          The country will get large number of universities that are locally owned and monitored by the UGC.

–          Country will get large number of students qualified in many fields that will have demand locally and in foreign countries.

–          Country will earn foreign exchange from overseas students and also increase in foreign remittances by qualified expatriates working aboard compared to low skilled.

 The writer is willing to provide more detailed versions of subjects discussed in the column without any profit, positions, perks or recognition. If any decision maker wants to discuss any issues in detail please contact the writer on lankan.ian@gmail.com.

2 Responses to “The Way to provide higher education to all at no cost to state while earning billions to the country.”

  1. Ratanapala Says:

    Bravo! At last somebody has spoken. What are our major resources? In the first place, the second place and in the third place – it is our human resource. We have good teachers, engineers, doctors – both traditional and western, accountants, architects – skilled personnel of all trades and vocations – you name it. Sri Lanka should ideally be a place of learning as the writer has suggested and a place for medical and healthcare.

    These are things that we excel in traditionally. We have the ability and temperament for these vocations. We need to have facilities for higher education as well as many more teaching hospitals and I suggest sanatoriums for healthcare, nursing and recuperation. These coupled with a healthy tourism industry Sri Lanka will be a choice destination for education, recuperation and travel. Most big hotels could be made to act as sanatoriums – where health rest and recreation can all be provided in one place.

    Endowed as we are with a beautiful country, wild life and pristine nature, and as a country steeped in history, tradition and culture we will be able to attract the best of clientele at premium rates.

    Sri Lanka has all the ingredients for putting all these facilities in place and to make our motherland the Miracle of Asia many times over. This way we will be able to keep our country green and beautiful as well – as there will be no necessity to plunder our land for her other resources. We have an in-exhaustable and renewable resource in our human resources. Put to good use with enlightened leadership we cannot fail.

    May those in power see the light and walk in the right direction. Our highest priority is not finding solutions to racist aspirations let alone grievances that will lead to division of our motherland, borders, and continued enmity. It is in finding solutions to our own self-sufficiency and dignity.

  2. KBS Says:

    I am a senior lecturer of a Sri Lankan university and I was really wondering why none of the intellectuals (including university lecturers) have not yet spoken or expressed their stand about the new universities. Sri Lanka is famous for doing what is necessary but in a wrong way. Privatisation of public transportation, allowing to setup international schools as business ventures, allowing to start private practices and private hospitals that charge exorbitant amount from patients, while the government hospitals are operating totally free and some time running without medicine are such examples. It seems that Sri Lanka is going to set another example under a leading student activist – Hon minister S.B. Dissanayake.

    To elaborate my view on this it is necessary to mention the present state of the government universities. I believe they are delivering their best while financially constraints in many ways. The teaching and laboratory equipment, library facilities and funds for research are far from ideal. Once private universities are started, the government universities has to work and compete with the private universities which can afford to have better teaching and laboratory and research facilities due to their higher income. They can attract good lecturers from the government universities too. There is a higher possibility that government universities will fail to maintain their standards at the presence of private universities due to lack of facilities and funds. If it happens, then those who can afford will go to private universities while the poor, who is at the moment partially benefited from free university education, has to enter to the struggling government universities. If the situation aggravated, this will make sure that none of the poor student will get quality education in the future.

    I agree what the above column letter expressed and I hope Hon Minister would draw his attention to the facts in the letter.

    I firmly believe that everybody who qualifies for university education should be allowed to enter a university. At the same time I think the university education in Sri Lanka is not free at all. It is free for those who enter to the university, but those who qualified but unable to enter, and the entire nation pay the cost. I think education, health, food, should not be given blanket free, because ultimately everybody has to bear the cost. The administration should be smart enough to devise methods such that poorer is benefited the most.

    As the recipients of free education are not responsible for what they have received, many easily go abroad and settle thanks to their good education leaving behind the entire nation. I deplore Hon Minister to do a survey to count the number of university students who remains in the country.

    As the above letter mentioned, the setting up a loan scheme for all the students who qualify for the university entrance is the most appropriate thing the government can do. Then let students to decide which university one should enter. At the same time allow private or public universities to charge the same amount from every student for their education. Then those who can afford would pay by themselves and others can get the loan and enter the university. The government could subsidise the local students’ fee from Mahapola and the annual government allocations. The government may make the payback period as 10-20 years, but still the system will self sustain and it will not burden or deprive any poor. As India is doing, the recipient of the loan would produce a guarantor or asset bond so that even one goes abroad; he has the obligation to fulfil.

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