MALAYSIA
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Private universities at risk as foreign students stay away

Private universities and some foreign branch campuses in Malaysia, many of them barely viable before the COVID-19 pandemic, are fearing for their survival as foreign students have been restricted, decimating income from tuition fees, including at foreign branch campuses that make the country an international higher education hub.

According to some conservative estimates, 20% of private institutions in Malaysia risk closure and, earlier this year, experts calculated that around half of private universities were at risk of insolvency – unable to pay for their current liabilities, such as wages and bills.

But with prolonged lockdowns – known as Movement Control Orders – from 18 March onwards, and almost all universities and university colleges making losses, the number technically facing financial insolvency could be as high as two-thirds to 80% of private higher-education institutions in the country, according to a just-released estimate by Geoffrey Williams, an expert in Malaysian higher education management and finance.

The education ministry has said that almost half of all private higher education institutions were already making continuous losses over a three-year period from 2016.

According to the Malaysian Association of Private Colleges and Universities (MAPCU), based on information gathered from its members earlier this year, almost one in five of Malaysia’s 440 private higher education institutions are at risk of closure this year.

Speaking to local media, the association’s president, Parmjit Singh, said just before the beginning of the current academic year that the crisis faced by private institutions had become acute as foreign students have been unable to enter the country since June, on top of loss-making recent years.

MAPCU’s Singh told local media last month that about 100 private institutions could close this year. At least four had closed within a week in October, he said, without naming the institutions.

However, Williams, an economist at the Malaysia University of Science and Technology, believes the situation is dire after prolonged disruption due to COVID-19.

According to his latest calculations released this week, an estimated 97% of private universities and university colleges (not including private colleges) will make losses this year, up from his earlier estimate of 55% in April “when everyone was given the impression it would be a short lockdown and they [thought they] would be facing relatively small losses, not devastating losses,” he told University World News.

Williams earlier put the proportion facing insolvency at 51%. However, “due to the extension of the lockdown and suspension of high-school exams this year, my estimate for insolvencies will be between 64% and 81% among universities and university colleges without massive cost-cutting across the board.”

Big drop in foreign student enrolments

Malaysia’s 100 private universities and 340 private colleges enrol some 25,000 international students a year or 30% to 40% of all their students.

MAPCU said new foreign student enrolment has been about 7,000 in 2020 compared with 16,500 in 2019. Around 23,000 students graduating this year will mean income from their fees will end.

“Members [of MAPCU] are saying it is very tough. They are faced with losing two cohorts of students – an outgoing cohort and an incoming cohort, so they are only left with a third of the usual number of students,” Williams said.

Foreign students account for only around 14% of the total enrolment of private higher education institutions, but account for 40% of the total revenue for the sector as a whole, according to Williams.

“Taken together, this means that the foreign student population is estimated to drop to 52,000 students by the end of 2020 compared to 92,415 in 2018. My estimate is that revenue from foreign students will fall by 44%,” Williams said.

As well as the border lockdowns which stopped foreign students from entering Malaysia, the country’s lockdown was first imposed in March 2020 “right in the centre of the local intake period, causing mass deferral by local students into 2021. Second, the lockdown was extended across the second mass intake period in August 2020, which hit intakes again,” Williams said.

In addition, Malaysian high school exams were postponed until next year so school-leavers will not enrol this year.

And “because this is a worldwide problem, overseas institutions have become more competitive and [have] cut fees to attract foreign students,” including students from Malaysia, he said.

MAPCU’s Singh said last month that the effects of reduced foreign student intake and travel restrictions on private universities’ revenue streams could last at least three years – the duration of most degree courses, with recovery taking another few years.

A total of 92,415 foreign students were enrolled in private higher education in Malaysia as of September 2019, compared with 39,099 in public universities, according to the education ministry.

Multiple effects of pandemic

Williams’ earlier estimate of 97% of private higher education institutions making losses and 51% becoming insolvent was based on the impact of a 33% reduction in income, assuming no reduction in liabilities or staff cost.

Just a 5% drop in revenue would turn 70% of Malaysia’s private higher education institutions into loss-making entities, while a 10% loss of income would mean that all Malaysian foreign branch campuses would operate in the red. With a 15% drop, more than half of Malaysia’s private higher learning institutions would become insolvent, he said.

Williams says his estimates show “if there is a 50% cut in income, then 98% of private higher education institutions (excluding colleges) would make losses and 64% would be technically insolvent without drastic cuts in costs. If income falls by two-thirds then 81% would be insolvent without massive cuts in costs across the board, which will almost certainly mean cuts in jobs and salaries among staff.

“Those with a traditional on-campus model, especially if they have large on-campus international cohorts, have suffered most. All they can do is to try to pivot to online alternatives, and this is very haphazard and unsatisfactory in most cases.”

Degree-granting universities and university colleges that depend on foreign students coming into Malaysia and studying on-campus will suffer, he noted. “Those which have a large number of foreign students but work closely with overseas franchise partners or teaching centres will be hit less hard.”

These include universities that provide transnational degrees at centres in Malaysia or overseas.

“But, apart from these obvious effects, there has been a huge impact on the psychology of leadership, with university managers really unable to comprehend what is happening let alone respond positively.

“This has caused bad decisions on pivoting to online learning and cutting costs through downgrading pay and conditions for staff.

“The impact on finances has pushed the sector as a whole into financial crisis and there has been no specific help for private higher education institutions from the government,” Williams said.

How loss-making institutions cope

Many loss-making institutions are coping “by cutting staff, mainly temporary and part-time staff, cutting staff salaries often through so-called ‘voluntary pay-cut schemes’ which are not voluntary at all and making other cost-cutting exercises across the board. Senior manager salaries are not really being cut, of course,” he said.

“Some are drawing down on reserves but many do not have reserves or contingency funds due to long-term bad management, hand-to-mouth financing and waste of resources on marketing [as well as] debt payments, senior management salaries and dividends to owners, which I estimated accounted for 13% of revenues in 2018,” he said.

Some may be able to borrow or take advantage of government schemes for small businesses and wage subsidies, but Williams described these as “rather marginal and not at all long-term solutions”.

Foreign branch campuses and franchises are also at high risk “because they often rely on their reputation for recruitment of students, particularly foreign students. With overseas universities now competing for students, the foreign brand has less meaning. Why would you pay MYR100,000 [US$25,000] for online teaching at a franchise university when you can get a similar online degree from the main campus or equivalent for a similar price?” Williams said.

Many of the branch campuses already faced problems of poor long-term management, such as the UK’s Reading University’s branch campuses, while they and others such as Southampton and Newcastle universities’ campuses in Malaysia have low student numbers and high fees and high-cost models, he said.

Even before the pandemic, the University of Reading in Malaysia reduced staff numbers to less than half and closed masters courses and an undergraduate pharmacy programme last year after reporting losses to 2018 of around £27 million at its branch campus at EduCity Iskandar last year. It has been operating at the site since 2015, but reportedly had trouble attracting enough students.

Leaders of foreign branch campuses and franchises in Malaysia also often have a poor understanding of the local market, according to Williams.