1. Key Challenges for the
International Higher Education
Sector
ISANA Annual New Zealand Conference 2009
Professor Nigel Healey
University of Canterbury

2. Overview
 Where have we come from? – a brief history of the
international higher education sector
 Where are we now? – the implications of the GFC
 Where are we headed? – the outlook for the
international higher education sector
 The coming challenges for New Zealand universities

3. Where have we come from?
Long term growth in the number of students enrolled outside their country of
citizenship
1975 1980 1985 1990 1995 2000 2006
0.6 M 0.8 M 0.9 M 1.2 M 1.3 M 1.9 M 2.9 M
Source: OECD Education at a glance, 2008

4. Where have we come from - demand vs supply
 Looking backwards from 2009 – a golden era of growth
 The ‘perfect storm’:
 rapid growth in the demand for international higher
education from developing countries
and
 supply-side response from higher education providers in
developed countries – especially the Main English-
Speaking Destination Countries (MESDCs)

5. Where have we come from - demand
 Drivers of demand for higher education in developing countries
are:
 per capita GDP growth
 income distribution (‘size of middle class’)
 knowledge economy
 population demographics
 Domestic higher education sector expansion is constrained…
 …so unsatisfied demand by those with the ability to pay “spills
over” into universities in the developed world
 Rapid GDP growth fuels both demand for higher education and
the ability to pay

6. Where have we come from – demand and per
capita GDP
Source: Price Coopers Waterhouse

7. Where have we come from – demand and
population pyramids

8. Where have we come from – supply (1)
 Why the supply-side response?
 Most universities publicly owned or funded; private universities
mostly not-for-profit
 Higher education is heavily regulated and central part of
government policy
 Traditional view of higher education:
 higher education = a ‘public’ (technically ‘merit’) good
 therefore higher education historically publicly subsidised, tuition
free in many countries
 foreign students - geo-political/development motives
 Problem: higher education is a ‘superior good’, participation
rates have increased from 5% in 1960 to 50% in OECD today

9. Where have we come from – supply (2)
 Massification challenges traditional view:
 private rate of return so high, no practical need for public subsidies
 public subsidies lead to regressive distribution of income
 governments have had to reduce real value of public subsidies as
participation has increased
 UK, Australia and UK first movers in introduction of tuition fees
 but domestic fees still regulated, even though public subsidies
inadequate
 fees for international student deregulated first
 differential incentive to recruit international students
 Government policy has encouraged recruitment of international
students to cross-subsidise research and domestic students

10. Where have we come from – the big players
Student mobility in tertiary education (2006)
%
20
18
16
14
12
10
8
6
4
2
0
Source: OECD Education at a glance, 2008

11. Riding the perfect storm – NZ higher education
in 2005
International Foreign
(non-resident) (non-citizen)
Australia 17.3% 20.6%
New Zealand 17.0% 28.9%
UK 13.9% 17.3%
Switzerland 13.2% 18.4%
France 10.8% -
Germany - 11.5%
USA 3.4% -
OECD average 6.7% 7.6%
Source: OECD Education at a Glance 2007

12. Riding the perfect storm – increase in
international enrolments to 2005 (2000 = 100)
1000
800
600
400
200
0
ali
a NZ UK rland ance any U SA CD
str ze Fr erm OE
Au wit G
S
Source: OECD Education at a Glance 2007

13. Where are we now – the global financial crisis
US housing Sub-prime
Initial Trigger
downturn mortgage losses
Pre-Conditions Booming credit markets New structured credit
products
Uncertainty about extent and location of risk
Impacts De-leveraging Movement to safe liquid
assets

14. Factors influencing demand to study overseas
 Cost of study abroad
 Ability to pay for tuition and living costs
 from savings
 by borrowing
 by students working in host country
 part-time while studying
 full-time on graduation
 Willingness to pay for tuition and living costs
 Uncertainty
 Public security
 racism exacerbated by recession

15. Exchange rates: an important driver of NZ
enrolments
2009
Source: Ministry of Education, RBNZ

16. Exchange rates: low end courses more price
sensitive in NZ
Source: Ministry of Education, RBNZ calculations

17. Where are we now – facing a bumpy ride
Cost of study abroad
Ability to pay from savings
Ability to pay by borrowing
Ability to pay – jobs in host country
Ability to pay – jobs on graduation
Willingness to pay – uncertainty
Public security

18. Where are we headed – the IDP vision (1)
Forecast Global Demand for Higher Education

19. Where are we headed – the IDP vision (2)
Forecast Global Demand for International Higher Education

20. Where are we headed – demand
 Developments on the demand side
 Rapid expansion of higher education sector in developing
countries
 Projects 211, 985, 111 in China
 Private sector providers in Asia, especially India
 New technologies and on-line learning
 Growing consumer sophistication (QS-THES/Jiao Tong)
 Growth in demand for international higher education
from spillover may slow
 Source markets likely to shift from undergraduate to
postgraduate

21. Chinese enrolment rates (%)
120
100
80 Primary
Junior Secondary
60
Senior Secondary
40 Tertiary
20
0
1990 1995 2000 2005 2006
Source: China Education Yearbooks

22. Where are we headed - supply
 Fiscal pressure will inevitably lead to deregulation of
domestic fees (with means-tested student support) in
first movers (UK, Australia, NZ)
 reduces attractiveness of international students
 Late movers – Continental Europe and Asia – forced to
introduce domestic fees, charge full-cost international
fees
 Bologna and spread of English as a medium of instruction
 New competitors in export education market, including
many former source countries

23. Where are we headed – the future shape of
international higher education
 US higher education as a model for global higher
education
 6,000 colleges and universities offering bachelors’
degrees
 Only state universities and major private schools offer
masters degrees
 Only elite schools offer PhDs
 Only rich and talented (scholarships) mobile at
undergraduate level
 Mobility increases at masters and PhD level
 Model for the future at global level?

24. The challenges for New Zealand universities –
the starting point
 Internationalisation has been rapid and opportunistic
 Rational response to unprecedented demand growth as a result of
public policy
 Skewed to major growth markets – especially China, Korea
 Unusually large role of key players
 Role of state schools as feeders to universities
 Role of agents in bringing international students to NZ schools
 Unplanned and (initially) unwilled expansion of numbers in
universities
 International offices not geared up to managing, and later
sustaining, international numbers
 Resistance to institutional adaptation to support
internationalisation

25. International student visas by sector
25000
20000
University
15000
Polytech
PTE
10000
School
5000
0
2000 2001 2002 2003 2004 2005 2006 2007
Source: Education New Zealand

26. The China effect: international visas issued to
China
12000
10000
8000
University
Polytech
6000
PTE
School
4000
2000
0
2000 2001 2002 2003 2004 2005 2006 2007
Source: Education New Zealand

27. Chinese visas as % of total
80
70
60
50 University
Polytech
40
PTE
30 School
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007
Source: Education New Zealand

28. Chinese students as % international tertiary
enrolments, 2005
60
50
40
30
20
10
0
Australia NZ UK US
Source: OECD Education at a Glance 2007

29. The challenges for New Zealand universities
 Good news:
 We have excellent, internationally connected and
benchmarked universities
 5 of 8 (62.5%) of NZ universities in THE Top 500
 Universities multinational, multicultural environments
 Bad news:
 Global faculty shortage – salaries falling behind
 Rising oil prices, environmental awareness may erode
multinational staff and student base
 The Bologna effect
 Asian universities upgrading capabilities very fast

30. The future for successful internationalisation
of New Zealand universities
 Understand our markets and the changing needs
 Understand our competitors
 Build long-term relationships built on mutual benefit, not
quick one-way gain
 Our differential advantage must be as a research-led,
postgraduate player
 Celebrate and embrace internationalism
 NZ small trading economy, need to be internationally
connected to knowledge economy
 Integrate international students – networks of the future
 Use student exchange to create genuinely multinational
learning environment
 Ensure curriculum is internationally benchmarked

31. Conclusions
 International higher education has been driven by a
perfect storm of demand and supply
 The global financial crisis has stalled growth
 Demand and supply factors are realigning to make the
future different from the past
 New Zealand universities has stumbled into
internationalisation – surviving in tomorrow’s global
market requires vision and commitment